Q2 2020 Omega Healthcare Investors Inc Earnings Call
[music].
This conference call.
Today, all participants will be in a listen only mode should you need assistance during today's call. Please signal freight car French specialists by pressing the starkey followed by zero.
After today's presentation, there will be an opportunity to ask questions. Please note. The today's event is being recorded.
At this time I would like to turn the call over to Michelle LIBOR.
Please go ahead.
Thank you and good morning.
Today are Omega CEO Taylor Pickett CFO, Bob Stephenson CEO Dan.
Chief Corporate development Officer, Stephen installed and Megan Cool senior Vice President of operation.
Comments made during this conference call that are not historical facts may be forward looking statements.
The statements regarding our financial projection dividend policy portfolio restructuring rent payments financial condition of prospects of our operators contemplated acquisitions dispositions or transactions and our business I'm portfolio out will generally.
These forward looking statements involve risks and uncertainties, which may cause actual results could differ materially.
You see our press releases that our filings with the Securities Exchange Commission, including without limitation. Our most recent report on form 10-K, which identified specific doctors that may cause actual results or events to differ materially from those described in forward looking statements.
During the call today, we will focus a non-GAAP financial measures such as they reduced FFO adjusted EPS, So bad an EBITDA.
Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles.
Well, it's an explanation of the usefulness of a non-GAAP measures are available under the financial information section of our website at Www Dot Omega health care Dot com and in the case of <unk> FFO and adjusted EPS I felt in our recently issued press release.
In addition, certain operator public and financial information that we discuss is based on data provided by our operators that have not been independently verified by Omega.
I'll now turn the call over killer.
Thanks Michelle.
Good morning, and thank you for joining our second quarter 2020 earnings conference call.
First and most importantly, like due to our operating partners and their staff, who cared for the thousands of residents within our facilities.
That reality of this prolonged definitely pandemic is that the daily dedication and break free of the correct character averse, it's too often overlooked.
Yeah correctly saving lives every day trying for particularly fragile wrap it up.
Turning to our financial results.
We're very pleased with our second quarter results. Our adjusted fell 81 cents per share our funds available for distribution of 76 cents per share lots to maintain our quarterly dividend up 67 cents for sure.
Payout ratio further improved to 83% how much after that for fell 88% of funds available for distribution.
Actually for July we collected virtually all of our contractual rights.
Later in the call we will provide details related to the impact of covered 19 owner operators.
I will provide a couple of somebody bullet points.
Yeah, that's the federal government mistakes I provided meaningful ongoing a central regulatory and financial support the skilled nursing facility industry to have allows operators to fund payrolls, hey vendors in spite of significant declines in occupancy and increasing costs.
Operator portfolio occupancy has declined by 8% since February.
Operator expenses have increased an average of $18 per patient day.
And although occupancy levels have appeared to stabilize remains uncertain with occupancy will return to pre coverage levels.
I'll now turn the call over to Bob.
Thanks, Taylor and good morning, I like to start by also thinking our operators and their employees for their heroic efforts three this pandemic as Taylor said they are saving lives every day and they are providing essential care <unk> portion or elderly population.
Turning to our financials.
<unk> I thought, though when a dilutive basis was $186 million or 80 cents per share for the quarter as compared to $157 million or 71 cents per diluted share for the second quarter of 2019, our adjusted EPS that though was $190 million were 81 cents per share for the quarter and exclude.
Several items as outlined in our adjusted I thought, though reconciliation to net income found in our earnings release in our supplemental and also on our website.
Revenue for the quarter was approximately $256 million first took $25 million for a second quarter 2019, with the increase primarily resulting from incremental revenue from a combination of over $1.7 billion of new investments completed capital renovations meet or facilities since the second quarter of 2009.
Team as well as lease amendments made during that same time period.
At one time revenue comprised of operator late fees the acceleration of straight line revenue related to the transfer of in place leased assets and the collection of security positive by LP unit holders, so to a mega upon the sale or termination of certain facilities.
The increase in revenue was partially offset by reduced revenue related to asset sales transitions and loan repayment instead of occur throughout 2019, and 20 and the timing of cash receipts related the operators want to cash basis.
The $256 million a revenue for the quarter includes approximately $10 million of non cash revenue $3.2 million, a onetime favorable revenue and a 1.2 million dollar reduction of revenue related to the write off of straight line receivables associated with the assets that were transferred during the quarter.
We collected over 99% of our contractual rent mortgage interest payments for the second quarter and also for July of 2020, excluding of course payments due from DAYBREAK, which is Henri forbearance agreement and there's not been making Brett payments in 2020.
Our DNA expense was $9 million for the second quarter 2020, approximately a half a million dollars less than our estimate what the savings associated with cobot 19 related mandate, such as restricted or no travel and no conferences.
We continue project quarterly DNA expense of nine and a half dependent a half million dollar for the remainder of 2020.
Interest expense for the quarter, when excluding noncash deferred financing cost was $52.8 million with a 4.4 million dollar increase over the second quarter of 2019, resulting from higher outstanding borrowings.
In September 2019, we issued $500 million, a free and five <unk> senior notes due October 2029, and in December 2019, we assumed $389 million in HUD debt related to a 735 million dollar acquisition.
Our balance sheet remains strong and throughout 2020, we continue to take steps to approve our liquidity.
Based on the uncertainty in the credit markets that existed in March resulting from cobot 19, and in an abundance of caution we borrowed approximately $300 million under our revolving credit facility provides additional balance sheet liquidity during the second quarter based on collections, we repaid to $300 million and borrowings.
On July 31st 2020, we had $180 million outstanding borrowings under our 1.25 billion dollar credit facility and had approximately $20 million in cash cash equivalents.
We have no significant bond maturities until August 2023 in.
In March we entered into $400 million, a penny or interest rate swaps at an average swap rate <unk>, 0.8675%.
These swaps expire in 2024 and provide us with significant cost certainty when we refinanced our 2023 bond maturity.
Well, we believe we're actually today provide us with significant liquidity and flexibility to whether a potential pronounced the prolonged impact to our business. We will continue to evaluate any additional steps that may be needed to maintain adequate liquidity.
At June Thirtyth, approximately 87% of EUR $5.3 billion in debt was fixed and our net funded debt to adjusted annualized EBITDA was 5.32 times and our fixed charge coverage ratio was 4.2 times. It's important to note EBITDA and these calculates is does not include any revenue where.
Related to construction and process associated with five new build schedule to become operational within the next 12 months.
When adjusting to include a full quarter of contractual revenue for acquisitions completed in the quarter and the five Newbuilds and then eliminating revenue related to assets sold during the quarter, our pro forma leverage would be roughly 5.16 times.
Well July 15th our board of directors declared a common dividend 67 cents per share to be paid August 14th the common stockholders of record as of the close of business on July 31st.
As we stated in our press release or historical dividend announcement date is the 15th day in the first month of each quarter with a payment date approximately one month later or to 15th day of the mid quarter month, depending of course on business days.
Starting with our next scheduled dividend, we will continue to adhere to our historical mid quarter payment date. However, we plan to change the dividend announcement date to correspond with pre schedule Board and audit Committee meeting dates for October and for the 2021 calendar here.
This change will extend our dividend announcement date by approximately one week with no impact to the scheduled to payment date.
Want to be very clear the change in the announcement date is purely to coincide with pre schedule Board meeting date.
I'll now turn the call over to Dan.
Thanks, Bob and good morning, everyone.
Well, perhaps not touted enough our operators have always been a make its biggest asset.
Their continued resiliency drought quote normal times has always been inspiring as they battle through the myriad of challenges and the ever changing requirements, but to find a long term care industry.
The cobot 19 pandemic.
Well escalating those challenges to Unprecedent, a new heights has also shown to spotlight on the tremendous compassion the tireless dedication and the heroic efforts shown by Omegas biggest asset our operators.
Turning now to our portfolio.
As of June Thirtyth 2020.
I had an operating asset portfolio of 959 facilities.
With over 96000 operating beds.
These facilities were spread across 69 third party operators and located within 39 states in the United Kingdom.
Turning to operator coverages.
Trailing 12 month, operator, EBITDARM and EBITDAR coverage for our core portfolio increased during the first quarter up 2020 to 1.68, and 1.32 times, respectively versus 1.64, and 1.29 times, respectively. The trailing 12 month period ended December 31st.
2019.
These numbers were only slightly impacted by cobot 19 as confirmed cases had just begun to appear in a small number of facilities by the end of March.
Operator performance is expected to be significantly affected in the second quarter of 2020 and beyond as occupancy has declined and operating expenses have escalated significantly.
However, we're hopeful that the overall results will remain relatively consistent.
Occupancy declines and expense increases were materially offset by an overall increase in quality mix.
Medicaid and Medicare rate increases and the recognition of stimulus money, which began to be distributed in April as a result of the cares Act.
As previously described the virus has taken an unprecedented toll owner operators and the residents in the span of a very short time.
On March 15, 2020, we had zero known cases in our facilities.
Our first quarter earnings call on the fit the May we reported 4136 confirmed cases, including both residents and employees within 250 facilities.
As of July Thirtyth. The number of current confirmed cases had risen to 6133 within 415 facilities.
These numbers had reached a high point in mid June then began to drop off modestly in late June in early July and I've, just recently begun to increase, particularly in Texas and Florida.
As David mentioned occupancy in our portfolio dropped approximately 8% from February through approximately mid July as reported by our operators.
July occupancy is substantially unchanged from the month of June.
Perhaps signaling an occupancy floor.
Conversely quality mix increased approximately 1% from February through mid July primarily as a result of our operator's ability to skill in place.
Expenses in April were up approximately $18 per patient day from February.
We are hopeful that expenses will moderate going forward, depending on the level of future outbreaks.
It is important to note that the variability in both occupancy and operating expenses is closely correlated to the number of confirmed code residents within a given facility.
Turning to new investments.
On June Thirtyth 2020.
Well may get completed the 7 million dollar purchase lease transaction for one skilled nursing facility in Ohio.
He was added to an existing operators master lease for an initial cash yield of 9.5% with 2% annual escalators.
Also on June Thirtyth, 2020, Omega provided $43 million of mortgage financing to the same operator.
The loan secured by two nursing facilities in Ohio, and bears an interest rate of nine and a half person.
Year to date, Omega hasn't made new investments totaling approximately $140 million, including $71 million for capital expenditures.
Turning to dispositions during the second quarter of 2020.
They can divested seven facilities via four separate transactions for total proceeds of $38 million.
Year to date as of June Thirtyth Omega has the best of the total 13 facilities for $56 million.
For the foreseeable future Omegas investment appetite will be modest focusing on our existing operators capital needs and any potential new investment opportunities they may source.
Lastly, I would once again like to applaud, our operator selfless efforts, particularly employees on the front line.
As many of you are aware, we have numerous facilities situated along the Gulf coast and the Atlantic Seaboard.
As the Hurricane season is now in full swing and the fact that Tobin 19 virus affects many of our southern facilities.
Operators have had the institute significant new protocols for sheltering in place.
More challenging is the prospect of evacuations, particularly the Saudis with Coben 19 resonance.
Seemingly daunting task, we believe our operators remain unwavering in their commitment to the health and welfare of our nation's bone spring well and vulnerable elderly population.
I'll now turn the call over to Megan.
Thanks, Dan and good morning, everyone.
The coated 19 pandemic continues to create one up it's not the most challenging environments. The long term care industry has ever experienced.
Our operators continue to adopted this new normal by adopting new infection control procedures, along with establishing highly restrictive environment.
Certain challenges faced early on at east with personal protective equipment easier to source and coming down in price.
Nothing becoming more accessible along with a recognition by the state and federal government of its necessity as a preventative tool.
Rather pay moderating as operators are able to proactively implement hazard pay protocols as opposed to pay yet on a reactive basis.
That said new challenges exist as they relate to states easing restriction both for the general population and in some cases per limited nursing home visitation as well.
Operator can prevent their employees from going back to their normalize outside of work and therefore, the risk of additional outbreaks persist.
Like the most stringent of infection control procedures.
It was easing of restrictions in some areas come at a time when certain sunbelt states are starting to see surges in cases.
And actually have learned there's an inherent lag time between a surge in the general public a surge in the long term care facility as its primarily employees that bring the virus into the building.
Without a vaccine and facing a virus that spreads ace systematically.
Testing is most critical tooling controlling the spread of Koby 19.
Many states have provided baseline testing of entire buildings. However that represents only a point in time and as we've learned things can change quickly.
Yeah massive recommended weekly testing of employees with statements that this will become a mandate and certain hot spot date sometime in near future.
After that can be extremely costly as access to private testing continues to come at a cost $75 to $150 per test based on location.
Most of the recommendation CMS is therefore implemented a program of sending out onsite rapid result, tough machines, the nursing homes with a limited supply of free time.
And access to additional tests a cheaper pricing.
The first that 635 tests machine started to go out last week and of those Omega facilities are slated to receive 30.
He is tough machines are antigen testing, which can produce some low level false negative which means that in certain circumstances follow up molecular tests may need to be performed.
That said antigen tests are one of the many tools necessary and providing a complete diagnostic testing program critical to controlling the virus.
It is unclear how long it will take for tough machines to get out owners in the United States.
We applaud. These recent efforts of the enough on the testing front and its continued efforts to provide much needed financial support to the nursing home industry. During these troubling time.
Since our last earnings call additional support is still provided by the cares.
In late April 100 billion dollar health care upon the supplemented by $75 billion and as part of the overall fund third pay out with made starting may 22nd of approximately $4.9 billion.
Lead skilled nursing facilities that Medicare certified bad.
Payout provided for 50000 per facility with $2500 per certified bad and equated to greater than $250 million for the Omega portfolio.
On June nine HHS announced that $15 billion would be earmark for those providers participating in Medicaid and chip program. So we're not eligible under the previous payout.
It impacted relatively few omega facilities I.
Additionally, it teach outs announced on July 22nd that another 5 billion dollar payout was going to be earmarked specifically again from Medicare certified nursing homes with a determination of how the funds will be allocated not yet made but certainly with an eye towards hard hit building.
Many additional state governments, including Texas have also stepped up by providing rate announcements during the state of emergency based on the 6.2% I've not boosted the cares that however, there are many more who have not yet acted.
With approximately $50 billion remaining under the health care fun, yet to be allocated and the potential for another stimulus, though based on current negotiations in Congress. We're hopeful that the supported the industry continues and that assisted living facilities receive some level of financial support in the future as Bob.
I cannot stress enough how critical it is the government support to continue in order to maintain the viability of this industry, which cares for our vulnerable elderly population.
Throughout this pandemic a long term care industry has continued to persevere and just swiftly adopted ever changing landscape. We are proud of our operators and their employees and everything that they are doing to ensure the safety of their residents I will now turn the call over to Steven.
Thanks, Megan and thanks to everyone of the line for joining today in conjunction with Maplewood senior living we have substantially completed work on our else memory care high rise It second Avenue, where 90 Threerd Street in Manhattan.
The cobot 19 pandemic 'cause pose challenges to the scheduling cost of the project.
The project will cost approximately $310 million, an exact final cost will be difficult to determine what do we have a better clarity on an opening date. The opening date will be driven by the timing of licensure by the department of health.
The covered 19 pandemic pose a certain challenges you need to senior housing operators, including increased cost the challenges of managing 'cause it positive patients and meaningful practical limitations on admissions.
Well census was strong in our senior housing portfolio through most of the first quarter, we saw a 1% to 3% per month occupancy reduction once buildings were subject to touring visitation bans. However, we have seen stabilization in census in markets, where bans have been lifted.
Additionally, senior housing operators to the extent their private pay and our large employers had been offered little help to date from the various federal fiscal stimulus programs.
Including the land and see IP of our New York City project at the end of the second quarter Omega Senior housing portfolio totaled 1.6 billion of investments on our balance sheet.
All of our senior housing assets or Triple net master leases.
Excluding our investment in our New York City development, approximately one third of our investment isn't maplewood assets, which including New York City are in one master lease.
One third isn't the UK with two master leases, one for Goldcare assets and one for health care home assets respectively.
A third is intermixed with SNF assets in various master leases.
Our overall senior housing investment comprises 130 assisted living independent living in memory care assets in the United States in UK.
Well this portfolio on a standalone basis had EBITDAR lease coverage of 1.21 times in the first quarter 2020, recent events will highly likely put downward pressure on that number.
Well, we remain constructive about the prospects of senior housing the covert 19 pandemic warrants and ongoing evaluation of our development pipeline.
This analysis may take several fiscal quarters as we have an opportunity to see how market demand in facility cost structures adjust.
Well, we make further progress on our existing ongoing developments, we continue to work with our operators on strategic reinvestment in our existing assets, we invested $31.4 million in the second quarter in new construction and strategic reinvestment $15.5 million. If this investment is predominantly related to our active construction projects.
The remaining $15.9 million at this investment was related to our ongoing portfolio Capex reinvestment program.
Thanks Steven.
I will now open the call up for questions.
We will now begin the question answer session.
To ask a question you May press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
We will pause momentarily at this time to assemble a roster.
Today's first question will come from a corner.
The first ski with bear in Berg. Please proceed.
Good morning, everybody. Thank you for having the on the call. So I know these metrics are lagging but saw that rent coverage in the requisite buckets showed some signs of improvement through the end of Q1.
I'm wondering if it's reasonable to assume that this is due to some of the positive impacts from ppm and then if so can you identify some of the areas for the operators were benefiting under the new payment model.
Talked about Italy, we had an expectation of improved coverage.
Seven basis points.
<unk>.
It appears that that's where it's coming in we only have two quarters.
Obviously, the second quarter is skewed by all.
[laughter].
The early indication is a small increase on the revenue side.
And.
Some of the expense cuts that we expected although.
They did a little bit delayed in terms of.
Station in Q4, Q1 and frankly.
Now you can't do grouping.
There's no way.
Okay, and then a quick follow up to that so.
Generally speaking how does P.P.M. look in the current environment. I mean, you mentioned group therapy is this something that may be permanently written into framework already or just any thoughts there appreciate it.
Well.
[laughter] you know revenue enhancement.
Our acuity patients so a lot.
For instance.
Once they go in isolation units there.
Thank you Sir.
Oh, I'm quite as far as expected savings.
Therapies.
Pardon.
Major driver that doesn't exist everybody's isolated in there.
And what other therapies.
[noise] that.
Thank you.
Away.
Okay. Thanks for that and then on the recently announced it was 5 billion dollar allocation from the cares act or is there any sense yet how these funds will be distributed among skilled nursing facilities are long term care facilities in general.
Yeah, I think they pointed out there.
Did not have a good idea, how that's going to be allocated.
We think that a lot of it will be.
Focus toward high coated.
But that that's about a guesstimate at this point.
Okay, and then you know last one from me Bob touched on this before give a two part question I mean, how do you feel that the dividend through the end of year as your calculus changed at all you know maybe from what you were looking at in in May or June with pretty strong rent collections, thus far.
And then in a similar vein I mean, how are you looking at <unk> acquisition opportunities at the moment or you're seeing anything loosen up.
<unk> is pricing still its pricing still the same on both the private and public side of things just any color there appreciate it.
Yeah, so or the dividend.
Obviously to evaluate it every quarter.
But.
The toggles that we look at in terms of the dividend our collections.
The prospects, we see from our operators, but those will be the same things that we look out so.
I would expect that.
We continue to see collections at the rate we've seen.
And there's no other indication of a change in the environment that we would continue to pay.
In terms of the acquisition environment. They really just isn't much out there we've seen some one off opportunities.
Well continue to support our operators as Dan mentioned.
I don't and in terms of pricing, there's just not a lot of there's just not enough out there.
Okay. That's all for me thanks for the time.
Yeah.
The next question comes from Jonathan Hughes with Raymond James. Please proceed.
Hey, good morning, thanks to their prepared remarks in the efforts from your partners geared universe.
In the past six months.
I.
I was hoping you could tell us what percentage of rents are on a cash basis and our any operators on the threshold of may be going from accrual to cash basis today.
Hey, John.
Roughly 2.5% Oh.
Oh mortgage and lease revenue for the second quarter.
Oh Boy Kathy.
And right now there's no way on that threshold.
I could change tomorrow.
[laughter].
Right.
No one.
Okay, and the two and half percent is that that's not just one operator I mean, that's a group of operators that right.
Floating they forget seven additional operators.
Okay.
That's helpful and then.
A one more for me just related to the extra any growth in I know you just talked about that Taylor and Dan you mentioned earlier, but.
Yeah as we look ahead.
Increase litigation risk incentivize you any operator, if you own their buildings to separate the real estate from operations via sale leaseback as a way to to reduce the size of their balance sheet.
Making them, a little less susceptible to potential lawsuits and in turn lead to more consolidation in acquisition opportunities I realize that's very high level, but love to hear any any thoughts you have on that front.
You know that is it's a possibility if not it wouldn't be the first time in this industry that we've seen that dynamic.
Florida was a great example, two decades ago. So.
You know I think that's all.
Down to.
Is there immunity how fast it is it.
What do these losses look like.
But you know again, we've seen it so that's certainly a dynamic that we could see moving forward.
Okay.
That's it from me I'll jump off thanks for the time.
Okay.
The next question comes from Nick Yulico with Scotia Bank. Please proceed.
Hi, Good morning, just a question on.
You know occupancy and skilled nursing I think you said it was a flat.
July versus June was flat. So it's operators really aren't seeing that benefit yet of discharges from hospitals. Even if you know hospitals have returned to more elective procedures utilization rates are going up for the public hospital. Operator, So now what do you what do you guys hearing from your tenants about.
You know why occupancy is not increasing.
And you know it any visibility into what point they should start to get some more.
You know resins coming in from a post acute standpoint, because of you know the hospital system in the U.S. coming back closer to a pre coven levels.
No [laughter] have opened up hospitals to elective surgery, but.
We really haven't feed a lot of people going forward with elective surgeries to be honest with you on their southern just hasn't been.
Certainly gone back to what it was.
So they're just not seen <unk> they were.
Before I think that's still going to take some time to see more people.
That are prepared to go into hospitals, whether its baby.
Oh.
Become what goes from electrodes are really or whether they just get comfortable with.
[laughter] themselves.
<unk>.
Potentially a skilled nurse.
After that so.
I think that's going to be a little bit more time.
So far we've gotten a lot of.
Discharges from elective surgeries.
Okay, and so I guess the follow up to that would be you know you know what what what lease discussions all with your operators or any of them asking for.
Yeah, some sort of rank deferral or or change in lease terms because the this issue and I guess, how are you guys thinking about the.
The level of government aid has been given to the sector.
Yeah, how long does that give operators a lifeline if occupancy is not coming back.
Yes. It is.
It is the question.
My question.
From our perspective, the government funding spend.
Ben.
Fishing carry us through.
August in all likelihood I think there's.
Pretty high likelihood that that funding takes us.
Oh towards the end of the here.
And.
I think that's the view of the operators because we haven't had operators coming back to us.
Discussions, but everyone is looking at you know when do we see occupancy bounce back.
It does it bounced back.
And you know.
In time for us not to have a funding but current view is that there is no gap at this point in time and probably not for the foreseeable future meeting towards the end of this year.
No discussions today, one of the comment I think about occupancy is.
We talk about our overall portfolio, but has data mega both batches.
The geographies.
Differences within each geography, as we have certain geographies, where occupancy is up and a much less impacted.
<unk>.
I think that bodes reasonably well for what happens.
Vaccine, we come out of this period of time, I think we see things bounce back relatively quickly.
Okay, and just a follow up to that.
The question was asking about the cash cash accounting, but besides those tests that are on cash accounting <unk> are there I have there been any deferrals that had been giving to tenants.
So far.
No.
Okay. Thank you too.
Thank you.
The next question comes from Daniel Bernstein with capital one. Please proceed.
Hey, guys good morning.
Well I don't know congested earlier hopped on late.
So I don't want to be negative on a very good quarter in collections, but well be concerned about state budgets and the future of Medicaid I don't know.
If you guys have any thoughts on that particular states that are concerning obviously Medicaid rolls are going up health care costs for the states are going up all revenues are going down. So I I don't know give any references back nine or previous recessions, but how kirk how concerned should we be about.
The potential for Medicaid cuts.
Skilled nursing.
I would not be concerned about cuts and I think you're right to look.
Back in history, where are we seeing state budgetary pressure.
And because of the way Medicaid funded where states past certain portion, but then there's a federal match oftentimes is to access the state level of funding.
When it gets down to it the map of a cut actually doesn't work.
So what we've seen historically is where your budget issues states will hold rate flat.
We did a.
Great scenario.
But it gives you tied to a Josh So I think history is exactly what you look at in terms of state budget pressures, how it impacts Medicaid.
What we've seen in those environments is.
What Medicaid.
Okay [laughter].
And then you know obviously in the short term I know there were few questions around your belt.
Return of elective surgeries and occupancy on the Medicare side, but.
At same time, the industry seems to have been going towards normally to stay higher acuity anyhow, particularly with P. P M.
You know so is it some of the shortfall in occupancy could that be viewed just temporary and as soon as operators continue to change your mix towards complex patients. Maybe that's that's going to come back whether elective surgeries come back or out or not I know if that's the right way to think about it maybe over time.
But I'm just trying to think about what if elective surgeries don't come back you know can can skilled nursing occupancy improved from here.
Yeah I think.
If you look at.
Our occupancy for Q1, so essentially.
It was 83.6% so we seem to trend.
Oh.
That's in the face of all the dynamics you just talked about so I don't know that what we're going through now really impacts anything.
I think you on occupancy is the right baseline to look at four.
Okay.
That's hopefully where we start on normalize occupancy, but we continue to you know the demographics, just so powerful that.
Our view.
Can you just see.
March upward.
Even with all the dynamics you talked about which is actually existed for a decade plus.
Right.
All right. That's that's all God they can be much selman.
<unk>.
[noise]. Today's next question comes from Nick Joseph with Citi.
Please proceed.
Thanks, just going back to the transaction market are you expecting more product to come to market and then if so would you expect any kind of distressed crises.
Yes so.
I think that well I think this.
So hard to transact in this environment I mean, it's hard it's difficult due diligence difficult property tours.
So it's really slowed the mark down in terms of doing deals.
We fully expect to come back once the pandemic.
People can go and.
Back in the buildings and.
But you know for the foreseeable future I seem to be slow.
And then for any deals that actually do transact how would you think about pricing relative to pre pandemic level.
Oh.
It's really hard to pricing deal right now on the other component right.
<unk> expenses up in occupancy down.
<unk> gross margins and a whole different.
Category so.
You just have to.
I'm very very select I would say one.
At a price these transactions and.
As we indicated we're really just doing deals at this point existing operators, where we wouldn't be talking.
Hi facility.
<unk>.
And that's really.
Where there is already existing credits so.
Really that's the only way we can look at this point in time.
Thank you.
The next question comes from Rich Anderson with S. M. B C. Please proceed.
Hi, Thanks, and good morning.
So my question first question is how does this environment opens your eyes to anything about your portfolio that baby needs a permanent change to some store, whether it's a geographical change or operator change I'm, just curious if sort of the behaviors or.
Or the cadence of the portfolio relative to one another within the portfolio has caused you to rethink.
Anything about your Pie chart.
No I you know well.
What it does it reinforces the importance of picking the right operators.
Team.
Credible work.
Difficult environment so.
We feel very good about it but I will say just to be clear.
We have.
20 fewer operators today than we had three years ago. So we spent a lot of time working through.
Part of our portfolio over the last three years.
I think we're at a point, where you feel very good about our operators but.
It is important just highlights how important that is.
Right.
Right.
In terms of coverage I understanding you're a year or I'm, sorry quarter in arrears.
Obviously coverage or will come down when you have to second quarter perspective.
Well that assuming that there will be stimulus and those numbers as it is it fair that you might.
Sure bifurcate coverage with and without stimulus. So we can get a sense of how much into that rescue money has 250 million for your portfolio how that has affected.
And offset the average decline.
Yeah, we talked a lot about how how to think about coverage.
And when you think about the cares Act money.
Sexually trying to create a status quo.
The prove out that you use that money.
Offset increased costs and your loss of revenue on the occupancy side. So theres a matching of those dollars and if there was a reconciliation to the government is going to require so.
Basically create the status quo coverage.
That being said I think will we get to shoot you coverages and our discussion about that.
I will provide the amount of stimulus money that in our calculation coverage. So it is easy to do the math.
Terms of pulling that money out to see what coverages without the stimulus money.
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Just.
Talk back through in terms of how we present export.
That's a great idea. So thank you for that and then lastly.
Sort of related to my first but more broadly do you think there or anything in terms of long term consequences.
Of this a pandemic either positively or negatively.
On your portfolio that perhaps will not be just you know for this point of time.
And and a corollary to that as it relates to senior housing obviously, you know you're taking a deeper dive look into.
Evaluating the pipeline development pipeline, but.
The senior housing as you know a sort of it jumped.
I wanted to the portfolio starts to become less.
Oh, the need for you and could you see yourself dialing down in the senior housing asset class specifically.
Yes so.
So I think long term.
Well, we're going through ultimately be beneficial.
Yes.
In terms of the clinical protocols around infection control the will ultimately benefit all of our residents Uh huh.
In terms of senior housing our focus has always been high end high acuity senior housing and I don't think that changes you know, it's still dramatically needs driven and.
I don't think that gets Disintermediated homecare.
But but in terms of how we think about senior housing our emphasis is still going to be very high end of that acuity.
Great that's sort of.
Kinda right juxtaposed next to school nursing from a standpoint.
Well being of your residents that kind of way to think about it's like the next step down.
Yes.
Did I confuse you without question.
Oh, I'm, sorry, I forgot.
Okay.
[laughter] that's all.
[laughter] [laughter].
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The next question comes from Lukas Hartwich with Green Street Advisors. Please proceed.
Thanks, Hey, guys. That's just one left for me it sounds like you're pretty optimistic about the near term support that's still nursing industry and the government I'm just thinking.
Little bit last longer than people think you know several quarters, maybe even years out do you think that the government I'll just keep re upping that support or is there Chris there.
I think government.
Support that we've seen to date.
As a reflection of the need based nature this business.
So I would expect that.
The government is not going to view it as.
And after.
Supporting this industry this point.
To allow the industry to fail because there isn't sufficient supports us wouldn't make.
Thank you.
At this time I'm showing no further questioners in the Q citizen ends the question and answer session. At this time I would like to turn the conference back over to Taylor Pickett for any closing remarks.
Thanks for joining our call today, please feel free to reach out to.
Matthew with any questions.
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