Q2 2020 Welltower Inc Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Q2 2020, Welltower Inc. earnings Conference call. At this time, all participants are in to listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During this session you would need to press star one on your telephone please be advised that today's conference is being Rick.

Got it.

If you require any further assistance please press star zero.

I'd now like to hand, the conference over to your speaker today to Mr., Matt Mcqueen General Counsel. Thank you. Please go ahead Sir.

Thank you and good morning, and as a reminder, certain statements made during this call may be going forward looking statements in the meaning of the private Securities Litigation Reform Act.

The wells are believes any forward looking statements are based on a reasonable assumptions. The company can give no assurances that projected results will be a tight factors that could cause actual results to differ materially from those in the forward looking statements are detailed in the company's filings with yes.

And with that I'll hand, the call over to Tom for his remarks, Tom Thanks, Matt.

First and foremost I hope that all of you and your families are safe and healthy during these difficult times.

When we last spoke with you in early May welltower within the mix of the most challenging period in the company's history.

Many of our senior housing and post acute care operators had implemented admissions bands to prevent or control the spread of coded within their communities critical personal protective equipment and testing kits were difficult to procure and labor challenges left many of our operators short staffed.

However, I am pleased to report that significant progress has been made on all of these fronts and that most of our properties have reopened with appropriate staffing levels and requisite ERP and testing kits.

This was accomplished through careful planning and precautionary measures taken by our operators.

In fact in just a few months, 95% of our senior housing operating communities are now accepting new residents.

And this is significant because our communities are a critical component to the care continuum.

It is imperative that seniors have access to residential settings in which professional care is offered to meet their everyday needs, including safety nutrition hygiene and medication management.

It is important to remember that this is a need driven asset class.

Well towers traditional assisted living portfolio is skewed towards higher acuity settings, which are built for seniors who have exhausted the ability to be cared for in a conventional home setting.

We continue to show a debt of gratitude to the frontline workers in all of our properties, who braved extraordinary obstacles to put the care of their residents above all else.

While I'm encouraged by our progress by no means our we signaling the all clear.

We are acutely aware of the heightened level of risk, which continues to exist, particularly as the number of Kobin cases in the US continues to rise.

As Sean can Tim will describe in greater detail the toll from code that on our business has been and we'll continue to be pronounced. However, the does the decisions we have made.

Since the beginning of the pandemic and the steps we've taken over the past five years to strengthen our enterprise have put us in a position to whether this store.

These decisions white, often difficult are rooted in data and always executed with the long term interest of our shareholders in mind.

This management team has earned reputation for taking on both opportunities and issues in a proactive manner and coated 19 has not changed that.

One of the strongest examples of this approach relates to our recent efforts to further strengthen our balance sheet.

As financial condition to begin to detect began to deteriorate at the outset of the pandemic.

Our team did not panic.

Instead through a thoughtful and deliberate process, we obtained a 1 billion dollar term loan providing us with ample flexibility in the event of a prolonged market downturn.

As conditions improve in subsequent months, our team waited for an opportune time, which to return to the public market and in June we issued 600 million of unsecured debt at just 2.75% the lowest coupon on 10 year notes in well.

Towers history.

These actions are a reflection of Tim Mchugh and his teams responsible stewardship of our balance sheet.

And the confidence from investors and our banking partners in the Welltower platform.

Another major achievement was the disposition of two large portfolios of seniors housing and outpatient medical assets with a combined total value of $1.3 billion.

These sales were executed during a time in which few real estate assets trade it and when the ability for senior housing to withstand the impact of co bit was called into question.

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Most notably our billion dollar transaction with Kayne Anderson provided significant and immediate liquidity to welltower in a period of under 45 days and was executed valuation levels, which were only modestly below pre coded pricing.

Again, we were not back into a corner to complete these deals the valuation we achieved demonstrated the appreciation for the long term growth prospects for healthcare real estate by astute investors and the strong liquidity, which exists for our asset class.

I applaud our investment teams for their perseverance and completing these deals under the most extenuating circumstances.

As the year progresses.

You should expect to see more of those.

Following the completion of our capital markets activity in portfolio dispositions, our near term liquidity stands at $4.3 billion.

The company is extremely well positioned to address all near term capital obligations and has ample capacity to execute on accretive opportunities as they arise our team will continue to explore all avenues through which to create value for our shareholders.

And regardless of how strong our liquidity position is today, our underwriting discipline will not be compromised.

Many questions remain unanswered after the duration and ultimate impact of Cobot 19.

However, what we can say with great certainty is that the long term drivers of our business remain firmly intact.

The population is growing older the need for value based healthcare is as important as ever and addressing social determinants of health will only grow in relevance.

While it's often difficult to see past the next week or next quarter.

Rest assured that well towers long term value proposition has not changed.

There will be challenging times ahead, but we are confident that the company is positioned to navigate through these choppy waters and emerge as the continued leader in delivering the real estate that will enable more efficient and cost effective.

Healthcare and wellness.

With that.

I'll turn the Mike to Tim.

Thank you Tom.

My comments today will focus on our second quarter 2020 results the impact of Coven 19 their business observe this quarter, our capital activity in the quarter and finally, a balance sheet and liquidity update.

The second quarter Welltower reported normalized FFO of 86 cents per diluted share.

These results include a total of 37 million or approximately nine cents per share of property level cost in our senior housing operating portfolio associated with cobot 19 pandemic.

As we indicated last quarter Welltower, let's not normalize these cobot related expenses both normalized.

FFO and same store results.

Now turning to our individual portfolio components.

First our triple net portfolios as a reminder, our triple net lease portfolio coverage and occupancy stats reported a quarterly readers leased fiftyx reflects a trailing 12 months any threethirty, one 2020, and therefore only reflect a partial impact and coven 19.

In the quarter reflect a 98% of cash rents due on these portfolios and as of last nights release, we reflected 97% of cash rents due in July which is in line previous months collections at this time.

First our senior housing Triple net portfolio delivered 1.4% positive year over year same store growth as a difficult comp combined with an increase bad debt accrual drove growth below original expectations.

Occupancy was down 50 basis points sequentially and EBITDAR coverage increased 0.01 turns on sequential basis in this portfolio.

Our senior housing Triple and operators have experienced similar headwinds as our day operated during the second quarter and we expect these coverages and occupancy stats reflect that go forward.

Next our long term post acute portfolio generated positive 2.1% year over year same store growth and even our coverage decline 0.04 times sequentially.

And lastly, health systems, which comprised of our HCR Manorcare joint venture with from Africa.

And our annualized growth of positive, 1.375% year over year, and EBITDAR coverage declined one basis points sequentially to 2.13 times.

Turning to medical office.

Outpatient medical portfolio delivered positive 1.8% same store growth.

As a significant year over year decrease in parking revenue caused by national shelter in place orders during the quarter, along with an increase in bad debt accrual was slightly offset by better than expected tenant retention.

New leasing velocity remains uneven as result of cobot.

The second quarter ambient be covance budget by 104000 square feet, but the GAAP again to narrow.

June and July with new leasing ceding budget by 44000 square feet in July.

During the quarter reflected approximately 87% of cash rent will approving 12% of rents for two months the barrel plan.

Well the slower than expected reopening of certain regions than our portfolio cost more to portals and them into May June period, and we had anticipated when we reported our first quarter numbers. We are encouraged by the momentum of the rebound in tenant openings that accelerated in the back half of June in July driving cash collections to 95% July.

We've also had strong deferred rank collection in June July as our two months deferral plant began repayment, we collected 96% of what would do over this period.

We're extremely proud of the Welltower outpatient medical employees, both onsite and working from home who have kept our platform running smoothly. During these extraordinary time.

Before reviewing this quarter senior housing operating portfolio results I want to briefly summarize outlook. We provided back in May when uncertainty was at its peak.

That time, our expectations, where that occupancy would be down between 500 600 basis points.

From April Onest through June Thirtyth.

The rest for be flat on a year over year basis.

That expenses were increased by 5% sequentially, driven primarily by labor costs.

Before turning to how things actually turned out in the quarter like the first point out that our same store pool is now represent of 91% of our total senior housing operating in a lot ally and this will continue to increase in the year end.

In the quarter occupancy declines in our same store portfolio by 490 basis points Maple first the June thirtyth.

Our same store expenses declined 10 basis points sequentially.

And our same store Revpar declined 20 basis points year over year.

The net result, this the second quarter same store NOI declining 24.5% from the previous year and 23.3% from the previous quarter.

These results were a function of widespread admissions bands that were in place to most the quarter. The limited move ins as well as extraordinary cobot related expenses totaling 34.2 million in the same store portfolio.

Resulting in significant margin compression in the quarter.

As a reminder were not normalizing any these cobot related costs for same store.

Looking forward in the third quarter and starting with the July data, we've already observed we experienced a 70 basis point decline in occupancy in July we start to finish.

And we expect that finished third quarter, approximately 125 to 175 basis points lower than we ended the second quarter.

We expect overall show expenses remained relatively flat sequentially as continued reductions in koby related spend will be offset by increased costs related to reopening of communities seasonal utility costs and increased insurance costs.

Now in the capital market activity.

In June we issued a 600 million dollar unsecured bond with a 10 after tenor at 2.75% and as Tom mentioned, the lowest tenure coupon the company's history.

We are able to tender for $425 million of our two outstanding 2023 bonds.

Increasing the weighted average years maturity to 9.2 years were unsecured bond borrowings in further de risking maturities through 2023.

Finally tender activities, which closed in July approximately $1.3 billion in cash and cash equivalents and the bulk capacity of our undrawn $3 billion unsecured revolving credit facility.

Totaling 4.3 billion of near term liquidity as of July 30 Onest.

Moving to investment activity.

The second quarter, we invested 124 million almost entirely in our development pipeline.

On the disposition front, we completed 949 million of pro rata dispositions at a five seven cap rate.

At quarter end, we closed the second tranche of the MLB portfolio sale, we announced that Navy for proceeds of 173 million at a five core yield.

And we expect a third and final tranche closed in third quarter for $89 million additional proceeds at a five three yield.

Sean will speak to later on we feel very good about liquidity for all property types and a high quality portfolio and fewer private cost of capital a significantly better priced in our public costs. This turn time.

As a result, the success of this positions the quarter. We ended the quarter at 6.36 net debt to adjusted EBITDA.

43 basis point increase in last quarter, despite approximately 13.5% decline sequentially EBITDA.

Going to substantially increase variance in or near term EBITDA in consequently, we have done everything in our control to counter that and maintain a strong cash flow based leverage profile. Despite our currently depressed property level cash flows.

We've also been acutely focused on managing within our control to maximize retention of cast is pandemic.

This has been focused on three main areas DNA capex in the dividend.

On June eight respected finished the year between 120 530 million a corporate DNA, implying a run rate a little over 30 million a quarter for the remainder of the year and representing a $10 million plus decreased lumpy initially guided due for the year.

Our capex reduced capex spend by 12 million or 18% sequentially.

With our growing liquidity profile in our buildings opening backup we expect spend to increase over the next two quarters, but still expect to finish the or approximately 16% below where 2019 levels where.

And as we announced last quarter, our dividend reduction, which has created approximately 110 million of quarterly cash flow savings.

The result of these actions along with many others was that we were able to retain a significant cash flow before investment activity. Despite the substantial negative impact of covert 19 had on our second quarter results.

While these decisions, particularly the dividend decision were difficult you felt strongly into that give us greater control as we navigate through the pandemic.

Retaining cash flow is by design difficult in the re contract and so when analyzing near term impact of cobot 19 on our cash flows.

Was not this analysis of what we might return to breakeven levels of cash flow Theres question of how long that depth that would last.

And the timing would take more retained cash flow to reach a level that allows for the accumulations of that deficit to be repaid.

Today's dividends would need to be paid but tomorrow's cash flows.

As a duration of the deficit period increases as compounding impact on the debt repayment needed to return the balance sheet to pre filled at levels.

Ultimately this has a dual impacted not only amplifying business strains caused by the pandemic, but also destabilize the balance sheet.

Disposing of assets are selling equity offset this increase leverage only increased the payout deficit by either eliminate any cash flow from dispose asset or adding dividend paying shares to our share count.

Our asset sales this quarter demonstrated by reducing the dividend to level below current cash flows was made by our management team.

As we were able to make a decision to sell assets based solely upon the value received in the stabilizing effects. These retain proceeds of had in our balance sheet.

We believe these decisions have removed dependent on a quick recovery, allowing us to decrease downside risk they continue to make capital allocation decisions with a long term focus.

And with that I'll hand, the call over to Sean.

Thanks, Jim Good morning, everyone.

I will now provide additional color on the operating performance that Tim discussed and discuss our capital allocation strategy in this challenging it rapidly evolving times.

As we reflect back on the frenzied pace of activity over the last few months, our focus has been and we'll continue to be the safety for residents and staff.

Communities.

Frontline heroes and these communities have done a tremendous job of improving the safety and quality of life of the residents from the Ali as deals of this crisis.

For example, industrial portfolio reported residential bid cases over a trailing two week period peaked at 510 cases in the first week of me and since then our down to 98 cases in presenting a 80% decline from the peak.

This is despite the fact that operators tested nearly 100000 residence and employed so far while covance cases have spiked across the nation. The prevalence of cases across our portfolio has remained relatively flat so far.

Moving to drill into debt, which peaked during the last week of April are down 92%. Since then and have so far I remain relatively stable in July despite his spike in nationwide cases.

These remarkable improvement, though far from being completed has allowed our operating partners to cautiously open doors to new prospects.

In the last week on April 42% of our communities had official admissions than.

That number today is 5%, including 3% partial events.

Movements were down sequentially from Prequaled mid February peak to April when you had the first full month of coded, but almost 77%. Since then move into up 174% from April low to the July move outs have peaked in March and sequentially down.

27% in July relative to March however, we still have multiple louder than move ins as the results of this occupancy loss in our shop business has narrowed from down 60 basis points. During the last week of April and first of domain to Don Honda and Toyota to down 10.

Basis points each off last three week build these improvement is encouraging we are cautious about the overall environment at spike in Colby cases in our markets a real and they can impact our communities at any time.

We have been seeing is steady increase of lead inquiries and deposits due to the need driven nature of our business. The total number of leads in the system, which declined 55% from February to improve trough since bounced back 60% in June from that trough.

It is approaching Prequaled mid February numbers in July however, move in a trailing as those leaving activities due to the hesitation in the psychology of the consumers as the juggling between the difficulty of taking care of the elderly loved ones and the fear related to national headlines around.

I think with cases.

So far we have been positively surprised by our operating partner in villages with scale expenses to a rapidly declined in occupancy. So far we saw great held up slightly better than what we thought in assisted living and memory care segment, which is up 1.7% the occupancy was hit much.

More pronounced here down 6.2% year over year.

While occupancy off our I O segment held up relatively better down 2% year over year rate growth declined 10 basis points year over year. Additionally, the entrance often lower price point senior notes apartment portfolio to same store pool in Q2 impacted though was mixed reviews.

Seeing Dalton reported same store for growth by 40 basis points for the quarter.

Clearly given how colby this spread the larger coastal markets have been impacted significantly during the quarter more than other markets. Finally, we're starting to see some differentiation in operate our performance that can be explained by whole bird our value add not just location product dive on acuity.

As I mentioned last quarter correlation pad on completely broke down in March and April and we're happy to see it improving through June and July.

On capital allocation front.

We discussed on last quarters earnings call. It two distinct mental model short on defense on long term often were glad to inform you that during the quarter. We have largely completed our efforts on the defensive side and have now shifted our focus on the often were extraordinarily proud offer execution.

During the second quarter in both public and private markets and it is important to remember and understand these two one interconnected set of decisions and not distinct actions for example, our exceptional execution with Dave and his team at Kayne Anderson in record time.

With our senior housing and will be portfolio disposition, Alan we started execution to secure a term loan with our banking partner both to flee doing their dog days on March These gave us confidence to be patient in accessing public bond market, rather than issuing bonds when credit spreads, whereas the peak.

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If we went to issue bonds during those days, we would be looking a coupon close to five 5% north 2.75% that we issued data in the quarter that would have come at a cost from shareholders of hundred and cooking million dollar over the life of the bond.

We believe our execution in private markets speak to the significant demand of stabilize assets, both in senior housing and medical office assets classes.

And middle up other transactions that are premature to discuss at this point, but needless to say, we feel very strongly about the demand of our assets more to come as we progress for the year.

Notably these robust interests and pricing are nowhere to be found enacted data not in them and love the fair.

Such that those deals with broken capital structure sub optimal alternative they'll come in at least of assets or generational handover of companies and assets to name a few.

Fundamental to determine cash growth and asset price is a multiple off that same cashman. These variables, usually inversely correlated with opportunities to invest at the highest momentum uncertainty in other words when fundamentals the great asset pricing is high expected return to low.

When fundamentals have bad asset pricing is low expected returns at high we're seeing that playing out in many parts of senior housing sector today.

Were starting to see signs of distress across the spectrum of them issues I mentioned.

These situations not only did quite capital, but they also requires operator, guys, who are otherwise well where loans with a demand helped at a time given whats happening within their communities and that when we come in with our toolkit.

As well as are we think our value proposition in three interrelated group capabilities culture and capital we leave without capability, we execute with our cause our partnership and we get the ball across the finish line throughout it moves into right resolute check with.

Matt speed and structural creativity.

When we introduced our ideas for your business model to a few brick alignment with our operated as many of you asked if welltower will eat welltower will be available to retain its content our partnership to which we responded the Bruce will be in the footing. We are seeing approved today, we're working with our operate.

Pardon us very closely in identifying assets in our backyard through our data analytics platform and tailor made to the model based on size acuity vintage demographic and Psychographic criteria. These algorithmic approach narrows the opportunity set to a manageable number which.

Feedback to succeed for our operating partners to dive in and help us underwrite.

Our offered US an deal teams and connect with their fellow operators and owners to run through our thoughts on pricing our evolution to close and exit goods on offer to transfer agreement on an expedited basis, we are either getting as quick yet and jumping on the execution, our we're getting a switch mill and moving into the next opportunity for.

For example, one of our partners in Midwest 40 point, we have identified hundred 27 distinct communities in seven states that fits that criteria and we're going to the list of opportunities with the stories one team one asset at the time. These states have more than 2800 senior living properties that I assume.

Friendly impossible to hone in on an impractical basis, the job of the algorithm is to bring our partners and our view teams to focus at the highest probability last mile effort.

We remain fundamental value investors were focused on bottom up underwriting basis relative to replacement cost and structural protection.

Another example, we have or in process of executing on three premium opportunities with our partner Brandywine extraordinary locations, such as Princeton, New Jersey, and some in New Jersey, and another example, where price is proud to execute on an extraordinary opportunity in Fisher Hill sub market of Brookline.

On an existing land and structure that used to be a college.

That sounds ships and the people of Brookline has given us in critical support and zoning approval, even doing cobiz 19 to create an iconic hundred 60 unit senior living project.

Were underwriting several more transactions with balco in their home markets of Colorado as well as a new home in Boston I can sites. Many other examples with other operators, but I would retain those for future call.

But I hope you walk away from this call understanding that we have never been more excited about the opportunity to invest capital in the senior housing space because of the pricing that we have seen.

Were buying communities in our core, California, and New Jersey market for less than $200000 unit why the replacement cost in those locations.

Nick this about half a million dollars unit targeting the enhancement or development plus return without the majority of the development risk.

Gross site lease up we believe in this business long term. We also understand the near term is going to be uncertain and challenging. Please note that uniqueness of these very challenged ease what squeezing a once in a duration opportunity right before the multi ticket upturn in the demand cycle.

On the same time.

At the same time, the supply is coming to us screeching halt, meaning if you will follow these data has seen stocks are down to Q1 of 2009 level and we are likely to see this trend continue.

Construction activity across all real estate asset classes is down significantly, which is creating softness in soft and hard costs land prices are starting to show crack as well in this environment, we're standing by our operating partner shortness of shorter when tortoise capital is clean that space.

And that is attracting more and more operator and development partners to Welltower highly thing the approved in their relationship putting.

I am optimistic we'll be able to create significant value for our long term shareholder in next 18 to 24 month by allocating smart capital leveraging our operating platform with that we're watching itself.

Thanks, Sean.

Before we begin the today's session I wanted to call your attention to a press release for last week announcing the appointment of Diana read to our board of directors.

Diana is an accomplished in highly respected executive with 38 years of experience across the financial services and commercial real estate industries.

She most recently served as executive Vice President of the PNC Financial services group and executive of the banks commercial real estate business. She has also held leadership positions in many prominent organizations, including the mortgage Bankers Association commercial real estate Finance Council, the urban land Institute and real estate round table.

All of Welltower stakeholders will benefit from Diana has extensive experience in insights and we are extremely fortunate to have somewhat of her caliber join our board.

I'm also pleased by the fact that with Diana's appointment, 88% of our independent directors are women and minorities.

As I've said in the past the diversity of our employee base.

Our leadership team and our board continue to be a priority at Welltower.

This is not only a key component of good governance.

But it is a proven driver of higher returns to shareholders.

And with that I will turn the Mike back to dilemma to open up the line for your questions.

Thank you Sir.

As a reminder to ask a question you would need to press star one on your telephone.

So which are your question press the pound cake.

Due to the essence of time, we ask that you. Please limit yourselves to one question and re queue for your follow up question.

Sure first question comes from the line of Steve Sakwa from Evercore ISI. Please go ahead.

Thanks, Good morning, I guess, both Tom and charge you guys spent a fair amount of time talking about the investment opportunities and Tom It sound like you alluded to some other potential sales coming down the Pike I guess, how do we sort of think about our way.

The sale of assets that may be stabilized in chock it sounds like you're looking at buying some broken assets.

And just sort of the dilution short term versus how the long term gain in the high growth and maybe the high IR potential.

Is there just is there sort of an amount of short term dilution you are willing to take to get long term growth.

Additives.

Transactions.

Steve that's a very good caution in fuel testing through our pleased sort of the mental model that we have slipped fundamentally looking to sell at this point assets that we teamed achieves prequaled and pricing.

Or.

Precluded IR, if we have sold those days our need for liquidity you know that we had obviously or what we wanted to achieve in March as you. All know achieved at this 0.2 are looking for email.

Leasing capital from asset that we think is a testament of their long term value.

With that were looking to buy assets are deployed capital whether thats acid.

Or any other available opportunities such as our stock unless we think that substantially higher odd that can be achieved so.

So thats how were thinking about it we are long term value investors.

And you know, we're not focused on quarter to quarter dilution.

You might have point noted that the sale that we executed in the quarter had two cents of dilution in the quarter, but we still think that achieved extraordinary.

Pricing as well.

For the shareholders, but Steve I'd add that we're not stellars under duress. There are many quality sources of capital institution investors that see the long term value of this space and are very interested if theres an opportunity to buy assets high quality assets from us or part.

Her in a joint venture structure with us so.

There are very active dialogues going on and Thats why I mentioned you should expect.

More of this at the year progresses.

I never want to say that definitively but.

We're pretty optimistic at this point.

Thank you I sure. Our next question comes from the line of Nicholas Joseph from Citi. Please go ahead.

Thanks, Michael Bilerman here with Nick.

You can come a little bit time talking about the senior housing operating environment, and whether you're seeing any differences in between operators of their pricing strategies, whether summaries in concessions for summer holding rate.

How different operations like different healthcare Reits are approaching the market in different ways I assume your operators are as well. So if you can go through that it would be helpful. Thank you.

Yes so.

We are obviously.

As I mentioned in my prepared remarks that we are seeing different strategies, but you know sort of.

More I will just described that as it tweaking our pricing strategy has done a wholesale changes in pricing. We believe we provide an exceptional value to customers and for which you know we need to attract as second level of staffing for which is new pricing. So we're not interested in compromising.

The pricing were rather compromised on occupancy. So if you look at as I mentioned, our assisted living and memory care portfolio.

Revpar was up 1.7% even during this quarter now if you think abroad as you lose occupancy and you will not building occupancy news community fees, that's obviously impacts that number pretty meaningful way.

However, we're not seeing any decrease of life to life pricing in our communities just reported number Michael was impacted by bringing the lower pricing are lower price points Venus apartment into the pool. If you exclude that we would have reported revpar increase of 20 basis point increase appointed.

Basis points relative to flat.

What Tim described last call.

I would just add to that Michael that.

From charge point.

At this point, who you are seeing move in as you've seen movements pick up a really going to be in most needs based resident so.

The value proposition from high quality care, which and then reputation which is where our operators sit within these markets.

Is probably never been higher there could be a point.

When things actually start to pick up and you see that incremental demand come back or pricing comes in that equation.

Just given where how suboptimal occupancy is across most markets, but at this point.

Pricing in what's driving incremental occupancy is not driving the marginal customer man.

It's truly really it needs based clients coming in.

Thank you.

Our next question comes from Rich Anderson from SMBC. Please go ahead.

Hey, Thanks, good morning.

No.

You know, obviously kind of commitment long term senior housing.

I wonder.

And shop I understand you know you're not to sell or you know unless you get obviously reasonably priced pretty cope with value.

Arsenal breast.

How would you.

To rise the future from an asset allocation perspective for Welltower.

In light of skilled nursing and.

Post acute assets and medical office.

If you had your way you've got the pricing that you want it could senior housing almost the entire story here five or 10 years from now or or is it more just growth at senior housing and you'll continue to.

Thanks came some exposure to those other asset classes so rich.

We have mentioned and pretty much have recall, our asset allocation and his strategy or really a capital allocation strategy is driven by price in that scenario that reach you described that every asset class that we play in remains particularly over price for rest of 10 years.

And senior housing remains possibly underprice for next and unit then yes. The description that you get that it's possible that is rarely how things happen, obviously right in momentum opportunity in that when you see in capital markets, where capital come in and out of sector for various reasons you see this morning.

Most of opportunity and Thats, what we believe we're seeing so near term capital allocation, we will obviously, you're going to see a significant increase in senior housing, but we love all of our asset classes will make we love all of our children.

There is no cushion that we won will remain interested in playing all different asset classes are incremental capital allocation strategy is a function of price not functional off our love called one asset versus other right. Now today, we have never seen a better opportunity invested senior housing as in Africa.

Thank you.

Our next question comes from Jonathan Hughes from Raymond James. Please go ahead.

Hey, good morning.

My question is on the rate outlook can you did touch on it a bit in Michael's question earlier, but was hoping you'd share some thoughts on the trajectory of reception of rate increases in a world where amenities I have been taken away from resonance of of course have been taking away for their safety.

Social interaction aspect is what attracts a lot of residencies properties in that might not be back to normal for for some time so.

How does this removal of the socioeconomics factor and impact the rates your operators are able to achieve today for both new residents and existing resident rate increases. Thanks, Jonathan that is a greater portion which is why you are seeing them lower acuity models.

Were.

With me, though providing healthcare and social determinants of health is lower you're seeing rates not as pronounced rate increases as we have described to you that we saw a slight decrease of rate on the other Han where the social aspects of business is very important social aspect of the leaving as they employ.

But more important is taking care of other health issues.

Honestly, that's ways to increase the rate. So it's the interplay between all the aspects to off the services that we provide where do you have more need driven.

Obviously resident they will have less impact on rate in this kind of environment, where you have more lifestyle driven residents you will see more impact or it just because of what you just described right. Jonathan It's what I said earlier, you know our portfolio is skewed towards the higher acuity. So these are truly.

People that are moving in this environment.

Up.

Have really exhausted other options. So the social part of the senior housing model is not as important to them.

They need to make sure that east seniors are getting their daily.

Care they can't.

That cannot be done in by many families today in the world we're living at it becomes impossible, particularly if someone has dimension. So that is that flow file generally of who's moving in today, they're not as concerned about the social aspects of the senior.

The living model.

But as things start to come back to.

To normal yes that once again will become more important attribute to the consumer but today, it's really all about safety and care.

Thank you.

Our next question comes from Michael Carroll from RBC Capital markets. Please go ahead.

Yes, thanks chunk or Tom can you talk a little bit about how the second coated wave or maybe the continuation of the first could wave has impacted your operators I guess, particularly in California had they been forced to re shutdown or delay reopening some of those facilities or or what's the thought process behind that.

Thank you Mike This is really really good cost and frankly, I'm extremely encouraged and positively surprised.

By the example, you just.

Brought it up and of course, and I was going to use that.

California is probably the only place where you can see there's a true second wave right. There's a lot of other states, where you are seeing sort of the first big wave.

I'm happy to tell you. This is why also encouraged by the performance of lost three weeks.

We haven't seen is significant.

Admissions ban or lack of performance in California, and lost three weeks that really surprised me we reported as you can see in our presentation.

Sort of 10 basis points of occupancy decreasing last week. Those are obviously rounded numbers might let you just followed the real numbers there were down 14 basis points down 10 basis points in last two could was on seven basis point, given California, Southern California is our largest market.

Q in California is obviously impact to those numbers you would have seen a much much worse and worse.

Worsening impact not an incrementally better numbers going forward.

Well I wanted to add to that I'm I'm not going to named the operator, because one operator in particular, who was very quick to shut the door during the first wave in California.

And.

What I would tell you is.

In the second wave they are taking new residents so they.

Needed to.

Adjust to this cold environment and they did that by really.

Well by should effectively shutting down.

And now when Colby comes back there they are in a position to safely admit new residents. They have the right protocols and procedures in place that are enabling them to.

Again.

Neat.

The demand for this quality of care in a residential setting in markets, where the headlines are pretty scary, but.

I think thats, a good indicator and it helps us explain.

Some of the stats that you see in our in our deck.

So why the number of cases are while our not spiking in our portfolio like they had back in April and May when one of the operators were blindsided at not just our operators when we all blindsided by cobot.

And so.

Yes, so again this could change Mike but.

It's an interest in California is an interesting data point for us.

Thank you.

Your next question comes from Jordan Sadler from Keybanc capital markets. Please go ahead.

Good morning will follow up on the investment cadence.

Within the current quote schools.

What's going on cash flows and leverage.

Are you guys that are to buy for that sell right now Theyre words.

Sales and purchases be more balanced here going forward and offset lower level.

Terms of volume.

No I cannot sitting until you that I know our have any idea I will only tell you that is dependent on one thing and Thats price unexpected return out of those by until you find.

Opportunity to deploy capital that it an extraordinary basis and return we'll buy more if we think that we're better off selling because the market is providing us great value for our assets.

That's sort of see through these uncertain times than we'll sell.

On a practical basis, there's going to be a combination of both.

You know obviously as you think through how acids, how did get surprised eventually the stress to debt service coverage hub that stress is obviously equity it takes time.

But we're very encouraged by what we're seeing already seeing today.

But I cannot tell usage sitting here on any given quarter.

How those.

Sales versus buy volumes, whether they will even sort of cancel each other one would be higher than until I can tell you that is just purely price dependent.

Thank you.

Our next question comes from the line of Vikram Malhotra from Morgan Stanley. Please go ahead.

Taxing the question.

Maybe both.

Tom and Sean you've obviously talked a lot about.

Exciting acquisition opportunities.

Across the across.

Spectrum more so seniors housing Im just wondering seniors housing specific.

Can you talk about those opportunities in context off kind of job geographies, meaning the UK and Canada as well.

Product type.

And then maybe even something that you've talked about in the past the affordable product so what.

What are you looking at in terms of potentially getting a little bit more aggressive out on in terms of building the portfolio from you.

So let me from we're looking at opportunities across the board.

All three countries.

Obviously, just given the population and numb our product, we're seeing more opportunities in us.

New distress are rather more favorable pricing. So far we see you know across the board not necessarily one product versus other but probably more in high high acuity and ill memory care, probably there is more distressed.

Because you saw the occupancy fall the most in that.

And that's pretty much I can tell you, we're seeing as I mentioned listing across coast.

East Coast West Coast, we're seeing extorting, we've seen some extraordinary pricing in both coasts, we're seeing a lot of opportunities in Midwest Wissing opportunity, Texas.

We are in it I would view team, which is our legal team or investment teams and all the teams that support them have never been busier wide, whether we will be able to what we execute on will be a function of as I said pride and needs to be reflective of the environment that we find ourselves today.

Thank you.

Our next question comes from Tayo Okusanya from Mizuho. Please go ahead.

Yes, good morning, everyone.

Morning.

I just wanted to focus a little bit on the comments around the improvement.

In the.

Well improvement in new rate of decline as it pertains to occupancy senior housing.

Again clear that most of your facility opened it sounds like.

Virtual tourism things happening well can you just talk a little bit more about.

That's really Don is neither occurring on the ability of the of the of the direct to the if you will do to still kind of get nitrosomine.

Bye.

Cool or whatever have you.

Yes, so I think we touched on this.

Little bit, but as you can think about our portfolio.

Primarily our us and UK portfolio is high acuity, it's a need driven portfolio right. So that is again you can only push off the demand. So much. So we're seeing as I mentioned that just if we think about leading indicators is just pick leads.

And I mentioned those in my prepared remarks, usually rapid decline of leads a prequel refresh my last month of Prequalified is February.

Significant decline, 55% decline sort of to the trough of May April and by June It was up 60% in July now actually in month of July's approach the prequalified numbers off.

February but if you kind of Peel back the only on and you will see there are the majority of the people are more need driven.

Then just lifestyle driven and it just is done due to the fact that they can only four shaw.

The need that much into the future. So thats why we think we're seeing it the other thing I would tell you we have given you the absolute number not just.

Percentages number of what is going on in our community from the perspective of Corbett I Hope you think given how lifestyle. Our portfolio is how many units available versus a number of people in the cobot, which we mentioned 98 cases that is a remarkable testament to the quality of care that's provided.

Buyout offer that in those places and that presentation does matter and that you cannot see the same thing about the industry as a whole, but our operating partners have that reputation to believe running on that their position and thats, what attracting new resin one of the think thats going to add to that tie our as you know the decision has changed today its.

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Can you number one is their co bid in the building can you take my mother or father are you have the able to take them in what how are you going to protect that.

And Thats and can you meet their needs that that is the decision.

Our chain today, because so many people have exhausted.

Their ability to care for that so that relatives.

And.

Have been in many cases in many markets. They had no options, but just to take care of them at home or in their home and if you think about it a lot of these residents or incoming residents.

Their lifestyle is being shut into a room at our house or their living by themselves in an apartment with some limited.

Either family care or home health care, so in a sense the lifestyle component.

Doesn't change too much for that individual except there is much more security and consistency around their care program that then can be achieved in conventional hauled unless you are extremely wealthy.

Thank you.

Our next question comes from the line of John Kim from BMO Capital markets. Please go ahead.

Thanks, Good morning.

So your operated more syndication.

As a positive for your company in the performing.

But when you look at some of the larger tenants and the sequential decline looking at Sunrise or Rivera.

Pretty significant underperformers within your portfolio I'm not sure. If you can comment on these operated specifically or not overall the ability for some of your private pay senior housing operators and their ability to handle that kind of performance in the absence of government assistance.

So our orszag due to an answers that operates just point out.

Thank you you know that's been in place NOI.

The annualized the quarter, so sequential changes or just more pronounced so.

You are taking the entire sequential change in your multiply it by for.

So that it wasn't a line number.

But regardless John you make a point there's no question that some of our high acuity offered a tough definitely underperform and if you add high acuity with Costco location that is definitely some in some operators we have some seem some significant.

Performance decline, but that just why you have a diversified portfolio rate without getting into the specific names, but if you follow through the coastal markets and then you add acuity was we saw the most decline it is not difficult to find out who would have performed.

Relatively better or worse.

But as Jim pointed out that you should not take one quarter when unwind declines 25th staggering, 25% multiplied by that for you going to get very very different results.

Thank you.

Our next question comes from the line of Nick Yulico from Scotia Bank. Please go ahead.

Thanks, So just wanted to turn back to them move the move in.

Issues, so I mean move ins have improved but they're still down 45%.

In July versus last year, and so I guess I'm wondering do you have any data on.

Hi, customers or delaying move ins and particularly if you have any fuel for the timeframe is that delay or people, telling you I just want to wait three months, they're going to wait a year, they're going to wait until there is a vaccine.

And I guess I know you talked about leads but it would be helpful. Understand instead, if you had any sort of backlog of deposits you can point to thanks.

Correct.

Chris is let me answer your second part repercussion deposit activity is extraordinarily strong.

I wanted out that Movings activity, which has been obviously improved pretty meaningfully is not matching the deposit activity as people are spreading out there moving data that's what I think you're asking about and I pointed out in my.

Prepared remarks.

I think the other part of your question was ease moving down from last year absolutely. It is if you think about what we're trying to get to at least what most analyst investor Soskin.

They are trying to get to a point I understand the run rate earnings power of the company sequential gives you that year over year is a function of what happened yesterday sequential gifts you what is going to happen tomorrow, and I think thats, what sort of we are pursuing were eager to figure out the exact same.

And to anyway, what is our run rate EBITDA.

What is moving down from last year. There's no question of course, you see we have lost 500 basis funds occupancy in one quarter. So you are not at the same level of activity and it is going to take some time to come back to the thing level activity, Nick I want to add something to that up what you see is people.

As far as Sean mentioned the deposit activities is good.

The move ins or delayed whats delaying that move and I think was your question.

In some cases it's.

You if I can visit right now.

On a regular basis I can visit mom or dad on a regular basis I'm going to wait till there's some visitation take visitation model before I move demand so they've secure to place, but they are delaying until perhaps there is some of again we've seen visitation.

Allowed in many states.

And again under very strict.

Protocols.

Bob Hope some cases in some states it's the.

Test that it's bad I don't want my mom to be Cascade to be poked and prided twice a week, so I'm going to wait till that settles down so it's it's.

It's elements like that.

These are people that need to come in safe secure to place with the deposit, but they're waiting to the conditions.

Might meet their needs a bit better if the situation is in desperate, but I need today I need to move my dad today I cannot take care of him any more in the situation is and so it's it's individual it's specific to the family and the individually, but it's things like that that our core.

Rising that delay and Nick Thats why were not you know, giving you our best guess scenario, our best guess that occupants will be up next quarter right given them onto activity and demand that we've seen the in assistant.

You'd think that.

Just from that we will be indicating that documents will be up we're not because we wanted to see that hesitation.

So good.

At least for next three months, we want to see how that plays out.

Before we tell you that we feel that the consumers are coming back and holds we're not saying that wanted to see how that plays out.

Thank you.

Our next question comes from Joshua Dennerlein from Bank of America. Please go ahead.

Yes, thanks for the question and good morning, everyone.

Im curious on operator expenses going forward. There, obviously was a lot of extra co bid costs.

What should we kind of look for in Threeq two and.

In many of the ability for labor Labor day, waxes occupancy has come down in marketing budgets.

Thanks.

Yes, so I think the way I would think about that is.

Just within the quarter looking at kind of coded cost the biggest piece of it sitting by cobot caution roughly 20% of that kind of pp and cleaning and that is likely going to be.

Around until vaccine or the the pandemic is come down a lot in saying that I'd say the cost of pp still likely inflated so.

The cost of acquiring.

Acquiring income that quite a bit from the certainly March April area, but it's still in many years, probably thats two to three X or it should be when supply change can.

And completely kind of normalized but just picking it kind of current pricing.

Repeat cleaning make up about 20% of that and then a piece of it then that is dietary and that dietary piece from delivering meals.

Rooms, instead of running.

The the common communal dining areas that will start to come down just see some normalization of internal activities.

And then lastly to labor piece and labor piece makes up the large majority of the cost care and labor piece actually it's probably fair to think about in our the deck. We put out last night, we've got a our trailing two week KOVA cases, and you see the peak on May eight and Thats.

Actually probably very good indicator of when our labor costs are tied to cobot, Pete So April and May both at pretty high Covanta related labor costs the came down.

Considerably into.

June.

That will earn off obviously dependent on the pandemic in the prevalence of covert 19 in our facilities, but as that come down that labor pieces illness is almost burned off entirely at this point so going forward I think its right to think about just that kind of pp in cleaning costs being a dominant force and then.

And labor will be dependent on actual prevalent to the of the the virus.

Thank you.

Our next question comes from the line of.

Steve.

A quick from Barclays. Please go ahead.

Great. Thanks, Good morning, Tom and shocking Tim Martin Kumar a couple of questions here. When do you mean touched on this a little bit already but just that comment on slide 17 that their recent rising Sobi cases may result in near term increases mission demand.

Okay sounds like your operators are now generally want to be offensive move in.

I guess, if there are potential new admission bad this out that they would be more mandated by state government as opposed to voluntary bands and make sure that we're thinking about that the right way.

And then maybe the bigger question overall shock you kind of touched on this for Threeq you, but the way. It stands right now is that your expectation that in calendar 20 that Welltower, we'll cross that threshold and shop, where the move ins will exceed move outs that occupancy will start to increase at some point this year or is that still up in the.

Right now the way it stands as when they get clarity around the calendar 20 thoughts around that thanks.

Thanks, Dave is taking I'll start with your question on moving than in and knocking answers that question.

I think I'd, just kind of really characterize your comment on our operators being on the offensive I think our operators being very smart about the way that there.

Admitting residents and I think you're correct in what we'll call it kind of outright admissions bands and Tom kind of at this point about California with one of our operators are kind of voluntarily move to emissions and the first wave the second wave they are meeting.

Vince, but certainly the admission protocol is extremely heightened and that gets a little bit Tom's point on even some of the idling of that protocol being pardon me to me, you're not seeing people choose to move in.

But I think part of what we've seen so far is as you've seen the cases spike nationally again, you've seen cases than our facilities move up a stay very controlled and start to come back down last two weeks and I think thats actually it's symbolic of the.

I mentioned protocols working very well so do I think the actual admissions bands you're correct that will be driven more so by.

Probably state and local municipalities and then obviously the building itself. When there is an actual case of co bit but.

The building that the operator themselves I think are just being very cautious about admitting so that that's playing a role here.

But the actual bands will be more will be more driven by.

Governing bodies.

Due to its second portion.

Two we are we hear to sit down and predict when moving them move outs with cross the where it will absolutely not you tell us.

How you think of it will play out and we will tell you how that will translate into a numbers were only telling you. What we have seen until yesterday, we're not going to sit here and predict what might happen tomorrow given.

Uncertainty of this environment. We're encouraged by what we have seen were also in obviously, telling you that were very cautious that things can change anytime. So, we'll obviously not going to sit here and predict when those two in crossword, but we have it we are very when credit that it came very close last.

Yes, the one thing we do know Steve is that the operators no what they're dealing with today.

In March April May.

They were.

Again.

Trying to figure out what was happening.

And out were unprepared.

As we all work so I think that the positive today is that they do have the right policies procedures.

In place to manage a very difficult situation, but things can change on a dime. So.

Again, reiterating why we're not.

Yep.

Being what we try to predict what's going to happen through the rest of the year.

Thank you.

Our next question comes from Lukas Hartwich from Green Street Advisors. Please go ahead.

Thanks, There's a lot of focused on the potential for government support for senior housing here in the U.S. I was hoping you could provide some color on that discussion in Canada in the UK.

Well in the UK.

Yes, it's a very it's a very different story Lucas.

This there is much government support for the senior housing industry in the UK.

And our unlike in the US it did not become a target.

Of hysteria around co bit.

What's interesting in the UK that frontline workers in the senior care business are considered heros like the people who work in hospitals in the United States.

That's not the case.

Thats a shame because.

The healthcare workers in the senior living in post acute care spaces.

Have.

Hello.

Been subject to the same conditions that as healthcare workers and hospitals.

They faced a lot of the same challenges.

And like our healthcare workers and hospitals, they're doing the best and cat to meet the needs of their population.

So.

Im hoping that will change in the us.

But in the UK, it's a different end it there's certainly more government support for the senior living industry in the UK in Canada remember our business is really more of an independent living business.

The higher acuity models in Canada, our government provided so our job today I can't comment on on government support in Canada coming into the independent living model.

In the into the independent living sector, I really couldn't comment on that.

They are both.

Obviously, both countries are very different healthcare system that the United States.

Thank you.

Our next question comes from the line of.

Daniel Bernstein from capital one please go ahead.

Good morning.

A quick question.

Look back at zero nine.

Ill retention change went up.

Acuity went up margins went down like to stay went down.

When you're looking at the opportunities that.

Sean generational how are you thinking about the underwriting of the long term.

Fundamentals of business I know that may be very difficult, but.

Are you concerned about.

Maybe the long term upside down or why the business was a little bit lower.

For is done its has been in the past.

Thanks.

I am not only can concern on paranoid about everything that changes investment returns.

So that's why you know in this uncertain environment the price needs to reflect that uncertainty.

Right, but I do seem the industry is coming to a point, where you can underwrite different scenarios.

And then price that in.

The end of the B, we deployed capital to make money for our shareholders. These non guaranteed return if we wanted guaranteed return will be buying government bonds.

But we do thing that.

Today as opposed to 90 days ago sector is reaching a point where you can underwrite.

And you can pricing uncertainties.

The various things that you mentioned.

So we'll see how it plays out but we do believe that at the end of that the if you know the revenue characteristic that cash flow characteristic not just revenues that cash flow characteristic of an asset comes down what we'll do with that will depress returns and obviously that means that when depressed.

Future developments there is no returns develop us on the taste assets and ultimately demand and supply was balanced that is true for any capital intensive business.

So lumpy any different here.

As well, but youre raising some very very good points and we are not only concerned were also passionate about those things and we're trying to do the best we can from top down sort of data analytics approach to bottom out in a value investing approach and I sort of described I'm not prepared remark however, bringing those together.

Yes.

Thank you.

Our next question comes from Sarah Tan from Jpmorgan. Please go ahead.

Hi.

Well Mike.

One question.

How much can coupons.

Yes.

Thank you.

Can you see that how much of the to implement rent I can hear the.

But how much of yours.

Person.

Hello.

Right.

And I think there Youve I think you said something how much of our answer our risk of a rent reset.

Matt.

Yes, so as I said in my prepared remarks the.

Triple net business everyday business, our senior housing in two different and different structures and so the headwinds and I've been felt pirated businesses certainly being felt on the triple nets out there is some differences given different products mix and location, but what I said last quarter more repeat again is that the economics long term have to support the rent.

Yes.

That being said something we've talked about a lot on calls last two years, we restructured a lot of these renting out ahead of some of this is that.

Operators see the long term opportunity this asset class and.

I want to remain in these buildings and in control the buildings and so the thought of there being kind of a rent reset based just on current economics I think is somewhat misplaced.

So and you look at rent collection and it remains very strong in this space as well so I think in general.

Theres no we're not here to say that the the economics underlying these properties and challenge and.

There will be certainly conversations around how the economics in the rental line.

And we were prepared to have those.

But at this time last.

Yes, we can do is continue to see where rents go and collection stay high and.

We'll continue to observe that report to the market.

And then says you think through we're not obviously going to speculative, but as Tim talked about Thats, how we think about it.

New thing through our numbers and tried to.

Get to your best guess, just remember our reported numbers.

Still include a very large tenant that we have already restructured and announced to the street, which is capital Simeon that's still in those numbers there would be out to next two quarters, but that has already happened.

Thank you.

Last question comes from the line of Tayo Okusanya. Please go ahead from Mizuho capital.

Yes, just a quick follow up on the health systems platform.

Understand that this point I know, there's a lot going on.

And skilled nursing and on government funding, but can you just help us understand specifically, what you'd expect to kind of happen next summer government funding perspective on what you're kind of hearing also publicity about Medicaid funding just given all their budgets are pretty stretched right now because of the whole competition.

So we're reading the same things that you are reading is this is inappropriate for us to speculate on what additional government funding might be or might not be coming to the space. So we'll just leave that for a future discussions.

But we're encouraged by the support that post acute in this you have seen so far.

What about on the state that was our given a lot of them as setting the budgets right. Now are you kind of hearing anything of any feedback that next that they have a good point of what the Medicaid funding for the place.

Thank you for trying to will remain the same and said that it is an inappropriate than for us to speculate on.

The future state government action as well.

Yes.

Thank you I show no further questions in the queue at this time this concludes our Kevin a session.

Thank you conclude today's conference call. Thank you for participating you may all disconnect.

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Ladies and gentlemen, thank you for standing by welcome to the Q2 2020 Willpower Inc. earnings Conference call.

At this time.

Well listen only mode. After the speaker presentation, there will be a question and answer session to ask a question. During the session you would need to press star one on your telephone.

Please be advised that today's conference is being recorded if you require any for the rest of the that's please press star zero.

I like the had a conference over to your speaker today.

Matt Mcqueen General counsel. Thank you. Please go ahead Sir.

Thank you and good morning.

Hi, there are certain statements made during this call may be deemed forward looking statements in the media.

<unk>.

Although wells hardly any forward looking statement.

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To give no assurance that that's projectors.

Factors that could cause actual results.

Early.

Statements Turkey.

Yep.

With that.

Our first remarks.

Thanks, Matt.

First and foremost I hope that all of you and your families are safe and healthy during these difficult times.

Well I spoke with you in early May well tower within the last of the most challenging period in the company's history.

Many of our senior housing and post acute care operators had implemented admissions bands to prevent well control the spread of coded within their communities.

Nicole personal protective equipment and testing kits were difficult to procure.

And labor challenges left many of our operators short staffed.

However, I'm pleased to report that significant progress has been made on all of these fronts and that most of our properties of reopened it appropriate staffing levels and requisite P P and testing kit.

This was accomplished through careful planning precautionary measures taken by our operators.

In fact in just a few months, 95% of our senior housing operating communities are now accepting new residents.

And this is they never get because our communities.

Our a critical component to the care continuum.

It is imperative that seniors have access to residential settings in which professional care is offered to meet their everyday needs, including safety nutrition hygiene and medication management.

It is important to remember that this is a need driven asset class.

Well towers traditional assisted living portfolio is skewed towards higher acuity setting.

Which are built for seniors, who have exhausted the ability to be cared for in a conventional home setting.

We continue to show a debt of gratitude to the frontline workers in all of our properties grave extraordinary obstacles to put the care of their residents above all else.

Well I'm encouraged by our progress by no means our we signaling the all clear.

We are acutely aware of the heightened level of risk, which continues to exist, particularly at the number of Kobin cases in the U.S. continues to rise.

As shocking Tim will describe in greater detail.

The toll from co that our business has been and we'll continue to be pronounced.

However, if the decisions we have made since the beginning of a pandemic and the steps we've taken over the past five years to strengthen our enterprise.

Put us in a position to whether this store.

These decision why off is difficult are rooted in data and always executed with the long term interest of our shareholders in mind.

This management team has earned a reputation for taking on both opportunities and issues in a proactive manner and coven Nike has not changed that.

One of the strongest examples of this approach relates to our recent efforts to further strengthen our balance sheet.

At financial conditions begin to get to deteriorate I'd be outside of the pandemic our team did not panic.

Instead through a thoughtful and deliberate process, we obtained a 1 billion dollar term loan providing us with ample flexibility in the event of a prolonged market downturn.

As conditions improve in subsequent months our team waited for an opportune time, it whats to return to the public market and in June we issued 600 million unsecured debt at just 2.75% a lowest coupon on 10 year notes and welcome.

Hours history.

These actions are a reflection of Tim Mchugh and his team is responsible stewardship of our balance sheet.

And the confidence from investors and our banking partners in the Welltower platform.

Another major achievement, what's the disposition of two large portfolios of seniors housing and outpatient medical assets with a combined total value of $1.3 billion.

These sales were executed during a time in which few real estate assets trade it and when the ability for senior housing to withstand the impact of coal that was called into question.

Okay.

Most notably our billion dollar transaction with Kayne Anderson provided significant and immediate liquidity to welltower in a period of under 45 days and was executed valuation levels, which were only modestly below pre call that pricing.

Again, we were not back into a corner to complete these deals the valuation we achieved demonstrated the appreciation for the long term growth prospects for healthcare real estate by astute investors and the strong liquidity, which exists for our asset class.

I applaud our investment teams for their perseverance in completing these deals under the most extenuating circumstances.

At the year progresses.

I would expect to see more of this.

Following the completion of our capital markets activity in portfolio dispositions, our near term liquidity stands at $4.3 billion.

The company is extremely well positioned to address all near term capital obligations and had ample capacity to execute on accretive opportunities as they arise.

Our team will continue to explore all avenues through which to create value for our shareholders.

And what car, what's up how strong our liquidity position is today.

Our underwriting discipline will not be compromised.

Many questions remain unanswered after the duration and ultimate impact of Coven 19.

However, what we can say with great certainty is that the long term drivers of our business remain firmly intact.

The population is growing older the need for value based healthcare is as important as ever and addressing social determinant of health will only grow and relevance.

While it's often difficult to see past the next week for next quarter.

Rest assured that well towers long term value proposition has not changed.

There will be challenging times ahead, but we are confident that the company is positioned to navigate where these choppy waters and emerge as the continued leader in delivering the real estate that will enable more efficient and cost effective.

Healthcare and wellness.

With that.

Ill turn the Mike to Tim.

Thank you Tom.

My comments today will focus on our second quarter 2020 result, the impact of Coven 19 their business observe this quarter our capital activity in the core finally, a balance sheet that liquidity update.

The second quarter Welltower upward normalized FFO of 86 cents per diluted share.

These results include a total of 37 million or approximately nine cents per share a property level cost in our senior housing operating portfolio associated with opened 19 endemic.

As we indicated last quarter Welltower, let's not normalize these cobot related expenses both normalized.

About and same store results.

Now turning to our individual portfolio components.

First our triple net portfolios as a reminder, our triple net lease portfolio coverage in occupancy status report a quarter Where's the statistics reflect the trailing 12 months any 331 2020, and therefore only reflect a partial impact and coven 19.

In the quarter reflect a 98% of cash rents due on these portfolios in the last nights release, we've looked at 97% of cash rents due in July which is in line previous months collections at this time.

First our senior housing Triple net portfolio delivered 1.4% positive year over year same store growth at a difficult comp combined with an increase bad debt accrual drove growth below original application.

Occupancy was down 50 basis points sequentially and EBITDAR coverage increased 8.01 turns on sequential basis in this portfolio.

Our senior housing triple in operators have experienced similar headwinds as everyday operates on the second quarter. We expect these coverages occupancy stats reflect that go forward.

Next our long term post acute portfolio generated positive 2.1% year over year same store growth and EBITDAR coverage decline points airport nine sequentially.

And lastly, health systems, what is comprised of our HCR Manorcare joint venture with Promedica.

And I know I NOI growth of positive 1.375% year over year EBITDAR coverage declined one basis point sequentially to 2.13 times.

Turning to medical office.

Patient medical portfolio delivered positive 1.8% same store growth.

As a significant year over year decrease in parking revenue caused by national shelter in place orders during the quarter, along with an increase in bad debt accrual the slightly offset by better than expected tenant retention.

New leasing velocity remains uneven in results cobot.

In the second quarter, and the I'll be covering budget by 104000 square feet, but the GAAP again to narrow.

June and July, but new leasing seating budget by 44000 square feet in July.

During the quarter reflects approximately 87% of cash rent well approving 12% of rents for two months the barrel plant.

Well the slower than expected reopening of certain regions in our portfolio cost more to portal and the May June period, and we anticipated when we reported our first quarter numbers. We're encouraged by the momentum on the rebound opening the accelerated in the back half of June July driving past great questions to 95% July.

We've also had strong deferred rank collection in June July as our two month apparel plant began repayment, we collect 96% of what would do over this period.

We're extremely proud of the Welltower outpatient medical employees, both onsite and working from home who have kept our platform running smoothly. During these extraordinary time.

Before reviewing this quarter senior housing operating portfolio results I want to briefly summarize outlook. We provided back in May when it certainly was at its peak.

Thats high expectations, where that occupancy would be down between 500 600 basis points.

From April 1st through June Thirtyth.

Revpar be flat on a year over year basis.

Expenses would increase by 5% sequentially, driven primarily by labor costs.

Before turning to how things actually turned out in the quarter like the first point out that our same store pool is now represent of 91% of our total senior housing operating in a lot ally and this will continue to increase in the year end.

In the quarter occupancy decline in our same store portfolio by 490 basis points Maple first the June thirtyth.

Our same store expenses declined 10 basis points sequentially.

And our same store Revpar declined 20 basis points year over year.

The net result, this the second quarter same store NOI declining, 24.5% the previous year and 23.3% from the previous quarter.

These results were a function of widespread admissions band there were in place to most the quarter limited move in as well as extraordinary cobot related expenses totaling 34.2 million in the same store portfolio.

Resulting in significant margin compression in the quarter.

As a reminder were not normalizing any this probably related cost for same store.

Looking forward to the third quarter and starting with the July data, we've already observed we experienced a 70 basis point decline in occupancy in July we start to finish.

I'd like to finished third quarter, approximately 125 to 175 basis points lower than we ended the second quarter.

We expect overall show expenses remained relatively flat sequentially. That's continued reductions in koby related spend will be offset by increased costs related to reopening of communities seasonally utility gos and an increased insurance costs.

Now on the capital market activity.

In June we issued a 600 million dollar unsecured bond with a 10 after center at 2.75% and as Tom mentioned, the lowest tenure coupon the company's history.

We're able to tender for 425 million of our two outstanding 2023, Bob.

Increasing the weighted average years maturity and 9.2 years for unsecured borrowing further de risking maturities through 2023.

Finally center activities, which closed in July we have approximately $1.3 billion in cash cash equivalents and the whole capacity of our undrawn $3 billion unsecured revolving credit facility.

4.3 billion of near term liquidity as of July 31st.

Moving to invest in activity.

The second quarter, we invested 124 million almost entirely in our development pipeline.

On the disposition front, we completed 949 million a pro rata dispositions at a five seven cap rate.

At quarter end, we closed in the second tranche of the MLB portfolio sale, we announced that Neely for proceeds of 173 million at a five for yield.

We expect the third and final tranche closed in third quarter Brady 9 million of additional proceeds at a five three yield.

Sean will speak to later on we feel very good about liquidity for all property types and high quality portfolio and view, our private cost of capital significantly better priced in our public costs. This paradigm.

As a result, the success of this this is the quarter. We ended the quarter 6.36 net debt to adjusted EBITDA.

43 basis point increase in last quarter, despite approximately 13.5% decline sequentially EBITDA.

Over to substantially increase variance in or near term EBITDA.

Consequently, we've done everything in our control to counter that and maintaining a strong cash flow based leverage profile. Despite are currently depressed profit level cash flows.

We've also been acutely focused on managing what is in our control maximized retention of cast is pandemic.

This has been focused on three main area DNA capex the dividend.

On June eight we expect the finished the year between 120 530 million a corporate DNA, implying a run rate a little over 30 million a quarter for the remainder of the year, representing a $10 million plus decrease Levine initially guided to for the year.

Our capex reduced capex spend by 12 million or 18% sequentially.

With our growing liquidity profile in our buildings opening backup we expect spend to increase over the next two quarters, but still expect to finish the or approximately 16% below our 2019 levels work.

And as we announced last quarter, our dividend reduction, which has created approximately 110 million of quarterly cash flow savings.

The result of these actions along with many others was that we were able to retain significant cash club before investment activity. Despite the substantial negative impact of Covance 19 at our second quarter results.

Well these decisions, particularly the dividend decision were difficult we felt strongly that give us greater control as we navigate through the pandemic.

Retaining cash flow is by design difficult in the re contract and so when analyzing near term impact of cobot 19 on our cash flows.

It was not as analysis of what we might return to breakeven levels of cash flow.

The question of how long that depth that would laugh.

And the time I would say were retained cash flow to reach a level that allows for the accumulations of that deficit be repaid hi, today's dividends would need to be paid but tomorrow's cash flows.

As a duration of the deficit Jared increases as compelling impact on the debt repayment even to return the balance sheet to pre filled at levels.

Ultimately this had the dual impacted not only amplifying business strains caused by the pandemic, but also destabilize the balance sheet.

Disposing of assets are selling equity offset this increased leverage only increased the payout deficit by either eliminate any cash flow from dispose asset or adding dividend paid shares to our share count.

Our asset sales this quarter demonstrated while reducing the dividend to level below current cash flows was made by our management team.

As we were able to make a decision to sell asset based solely upon the value received the stabilizing effect. These retain proceeds of had in our balance sheet.

We believe these decisions have removed dependent on a quick recovery.

Ill now discuss the decrease downside risk they continue to make capital allocation decisions with a long term focused.

With that I'll hand, the call over to shock.

Thanks, Jim Good morning, everyone.

Ill provide additional color on the operating performance that Tim discussed and discuss our capital allocation strategy in this challenging yet rapidly evolving time.

As we reflect back on the frenzied pace of activity over the last few months.

Our focus has been and we'll continue to be the safety off a resident and staff in our communities.

Frontline heroes and these communities have done a tremendous job of improving the safety and quality of life of the residents from the Ali as days of this crisis.

For example, industrial portfolio reported resident quoted cases over a trailing two week period peaked at 510 cases in the first week of May and since then our down to 98 cases, we're presenting a 80% decline from the peak.

This is despite the fact that operate.

Tested nearly 100000 resident and employee so far while Cobiz cases have spiked across the nation. The pre balance of cases across our portfolio has remained relatively flat so far.

He wasn't related debt, which peaked during the last week in April I doubt, 92%. Since then and have so far I remain relatively stable in July. Despite his spike in addition wide cases.

These remarkable improvement so far from being completed has allowed our operating partners to cautiously open doors to new prospects.

In the last week of April 42% of our communities had no official admissions than.

That number today is 5%, including 3% partial event.

Movements went down sequentially from Prequaled late February Pete to April when you had the first full month of cold, but almost 77%. Since then moving up 174% from April to the July.

Moving to have peaked in March and sequentially down 37% in July relative to March. However, we still have more who loves then move Vince as the results of this occupancy loss in our shop business has narrowed from down 60 basis. One during the last week of April and for.

Took a may do down Honda intent to down 10 basis points.

Each of last week the lease improvement is encouraging we are cautious about the overall environment as spike in Colby cases markets are real and they can impact our communities at any time.

We have been seeing is steady increase of lead inquiry and deposits due to the need to venture off our business. The total number of lead in the system, which declined 55% from February to April trough since bounced back 60% in June from that trough.

It is approaching Prequaled mid February numbers in July however, well then a trailing as those leading activities due to the hesitation in the psychology of the consumer as juggling between the difficulty of taking care of the elderly loved ones and the fear related to national headlines around.

I think all with cases.

So far we have been positively surprised by our operating partner it related to scale expenses to a rapidly declining occupancy. So far we saw a race held up slightly better than what we thought in assisted living memory care segment, which is up 1.7% the occupancy was hit much.

Well pronounced here down 6.2% year over year.

While occupancy off our Io segment held up relatively better down 2% airway red grow declined 10 basis points year over year. Additionally, the entrance offer lower price point senior notes apartment portfolio to same store pool in Q2 impacted the overall mix review.

Thing Doorbell reported same store revpar growth by 40 basis points for the quarter.

Clearly given how quickly to spread the larger coastal markets have been impacted significantly during the quarter more than other markets. Finally, starting to see some differentiation in operate our performance that can be explained by Alberta value add not just location product I acuity.

As I mentioned last quarter correlation pad completely broke down in March and April and we're happy to see improving through June and July.

On capital allocation front.

We discussed last quarter earnings call two distinct mental model short on defense on long term often were glad to inform you that during the quarter. We have largely completed our efforts on the defensive side and have now shifted our focus on the often what extraordinarily proud offer execution.

During the second quarter in both public and private markets and it is important to remember and understand. These two are one interconnected set of decision not distinct action for example, our exceptional execution with Dave and his team at Kayne Anderson in record time.

With our senior housing and will be portfolio disposition Allen with our execution to secure it Tom along with our banking partner both to flee doing the dark days on March These gave us confidence to be patient in accessing public bond market, rather than issuing bonds when credit spread whereas the.

Yes.

If we went to issue bonds during those days, we would be looking a coupon close to file 5% not 2.75% that we issued data in the quarter that would have come at a cost of shareholder of 100 and could be million dollar or the life of the bond.

We believe our execution in private markets speak to the significant demand to stabilize acid, both in senior housing and medical office asset classes.

When midla other transaction that a premature to discuss at this point, but needless to say, we feel very strongly about the demand of our asset multiplicom as we progress for the year.

Notably these robust interest and pricing are nowhere to be from enacted data not in the middle of the fair such that those deals with broken capital structure sub optimal operators, they love mentally sub acid or generational handover to our company and assets to name a few.

Fundamentals determining cash flow and asset price is a multiple off that same cash flow. These variable usually inversely correlated with opportunities to invest at the highest momentum on 70 in other words when fundamentals the great asset pricing is high expected return so low.

When fundamentals have bad asset pricing is low expected with us at hot were seeing that playing out in many parts of senior housing sector today.

We're starting to see signs of distress across a spectrum of them issues I mentioned.

These situation not only did what capital, but they also requires all because otherwise over our vote was that demand at that time, given whats happening within the community and that when we come in with our tool kit.

As well as are we think our value proposition in three interrelated group capabilities.

Sure and capital we leave without capability, we execute with our cause our partnership and we get the ball across the finish line throughout it believes it will write resolute check with unmet speed and structural creativity.

When we introduced our idea through your business model PSC BRCA on meant with our operated at many of you off it was our will equal to our we'll be able to retain its caused our partner should do which we responded the bruce within the putting we are seeing approved today, we're working with our offering.

I think part not very closely in identifying assets in our backyard through our data analytics platform and tailor made to their model based on site acuity vintage demographic and Psychographic criteria. These algorithmic approach narrows the opportunity set a manageable number was.

Feedback to succeed for our operating partners to dive in and help us underwrite.

Our offered US an deal teams and connect with their fellow operator, and I want to do run through our thoughts on pricing our evolution to CLO and execute on operating a transfer agreement on an expedited basis, we are either getting as quick yet and jumping on execution. Our we're hitting if we know and moving into the next opportunity for.

For example, one off our partners and Midwest 40 point, we have identified 127 distinct communities in seven states that fits that criteria and we're going to the list of opportunities with its always one team one asset at a time. These days had more than 2800 senior living properties that I assume.

Finally impossible to hone in on a practical basis the job of the algorithm is to bring our partners and our view seems to full said at the highest probability last mile effort. We remain fundamental value investors, we're focused on bottom up underwriting basis relative to replacement cost and structural protection in and.

Example, we have are in process of executing on three premium opportunities with our partner Brandywine extraordinary locations, such as Princeton, New Jersey, and some in New Jersey in another example, where price is proud to execute at an extraordinary opportunity in Fisher Hill Submarket Brookline.

On an existing land and structure that used to be a college.

That sounds shift and the people of Hook line has given us in critical support and zoning approval, even doing cobiz 19 to create an iconic hundred 60 unit senior living project, where underwriting several more transactions with balco into how much is the Colorado as well as a new home in Boston.

Yes sites. Many other examples with other operators, but I would retain those for future call.

I Hope you walk away from this call understanding that we have never been more excited about the opportunity to invest capital in the senior housing space because of the pricing that we have seen.

Were buying communities in our core, California, and New Jersey market for less than $200000 unit why replacement cost in this location.

Excess of half a million dollars unit targeting the Hoffman or development blocks return without the majority of that they'll have Madrid.

Thanks, Lisa we believe in this business long term. We also want list in the near Tom is going to be uncertain and challenging. Please note that uniqueness of these very talented ease what squeezing a once in a duration opportunity right before the market to get upturn in the demand side.

On the same time.

At the same time, the supply is coming to us screeching halt. Many of you will follow these data have seen stocks are down to Q1 of 2009 level and we are likely to see this trend continue.

Construction activity across all the real estate asset classes is down significantly which is getting softness in soft and hard costs land prices are starting to show crack as well in this environment, we're standing by our operating partner shorter and shorter when tortoise capital is playing that space.

And that is extracting more and more operator and development partners to Welltower highly thing the pool in the relationship putting.

I am optimistic we'll be able to created significant value for our long term shareholder to enact 18 to 24 month by allocating smart capital leveraging our operating platform with that we'll let you know.

Thanks, Sean.

Before we begin the today's session I wanted to call your attention to a press release from last week announcing the appointment of Diana read to our board of directors.

Diana is an accomplished in highly respected executive with 38 years of experience across the financial services and commercial real estate industries.

She most recently served as executive Vice President of the PNC Financial services group and executive of the banks commercial real estate, yes. She's also held leadership positions in many prominent organizations, including the mortgage Bankers Association commercial real estate Finance Council Urban land Institute and real estate round table.

All of Welltower stakeholders will benefit from Diana has extensive experience and insights and we are extremely fortunate to have somewhat of her caliber join our board.

I'm also pleased by the fact that with Diana's appointment, 88% of our independent directors are women and minorities.

As I've said in the past the diversity of our employee base.

Our leadership team and our board continue to be a priority at Welltower.

This is not only a key component of good governance.

But it is a proven driver of higher returns to shareholders.

And with that I will turn the Mike back as Glenn to open up the line for your questions.

Thank you Sir.

As a reminder to ask a question you would need to press star one on your telephone.

So which are your question press the pound cake.

Due to the essence of time, we ask that you. Please limit yourselves to one question and re queue for your follow up question.

Sure first question comes from the line of Steve Sakwa from Evercore ISI. Please go ahead.

Thanks, Good morning, I guess, both Tom and chance you guys spent a fair amount of time talking about the investment opportunities and Tom It sounds like you alluded to some other potential sales coming down the Pike I guess, how do we sort of think about our way.

The sale of assets that may be stabilize and chock it sounds like you're looking at buying some broken assets.

And just sort of the dilution short term versus kind of a long term gain in the high growth and maybe the high IR potential.

Is there just is there sort of an amount of short term dilution you're willing to take to get long term growth.

Additives.

Transactions.

Steve That's a very good question. If you just think through at least sort of the mental model that we have.

Fundamentally looking to sell at this point asset that we think achieves prequaled and pricing.

Or.

Precluded IR, if we have sold those David our need for liquidity you know that we had obviously our what we wanted to achieve in March as you. All know achieved at this point. So we're looking for you know.

Leasing capital from asset that we think is a testament of their long term value.

With that were looking to buy assets are deployed capital whether that's acid.

Or any other evitable opportunities such as our stock.

Unless we think that substantially higher odd that can be achieved so.

So thats how were thinking about it we are long term value investors.

And so we're not focused on quarter to quarter dilution.

You might have point noted that the sale that we executed in the quarter had two cents of dilution in the quarter, but we still think that achieved extraordinary.

Pricing as well.

For the showed us that Steve I'd add that were not stellars under duress. There are many quality sources of capital institution investors that see the long term value in this space.

And are very interested if theres, an opportunity to buy assets high quality assets from us or partner in a joint venture structure with us so.

Well there are very active dialogues going on and Thats why I mentioned you should expect.

More of this at the year progresses.

I never want to say that definitively but.

We're pretty optimistic at this point.

Thank you I sure. My next question comes from the line of Nicholas Joseph from Citi. Please go ahead.

Thanks, Michael Bilerman here with Nick.

Maybe you can talk a little bit time talking about the senior housing operating environment, and whether you're seeing any differences in between operators of their pricing strategies, whether summaries in concessions for summer holding rate.

Just how different operations like different healthcare Reits are approaching the market in different ways I assume your operators are as well. So if you can go through that it would be helpful. Thank you.

Yes so.

We are obviously.

As I mentioned in my prepared remarks that we are seeing different strategies, but you know sort of more I will just described that as a tweaking our pricing strategy is done at wholesale change in pricing. We believe that we provide an exceptional value to customers and for which you know we need to.

Trucks as second level of staffing for which is the pricing. So we're not interested in compromising on their pricing or rather compromised on occupancy. So if you look at as I mentioned, our assisted living and memory care portfolio.

Revpar was up 1.7% even during this quarter now if you think about as you lose occupancy and you will not building occupancy you lose community fees, that's obviously impacts that number pretty meaningful way.

However, we're not seeing any decrease of life to like pricing in our communities just reported number Michael was impacted by bringing the lower pricing are lot Pricepoints unit apartment into the pool. If you exclude that we would have reported.

For increased 20 basis point increase up 20 basis points relative to flat.

What Tim described last call.

I would just add to that Michael that.

From Johns point.

At this point, who you are seeing move in as you've seen move ins pick up a really going to be in most needs based resident so.

The value proposition from high quality care, which and reputation which is where our operator sit within these markets.

It's probably never been higher.

There could be a point.

When things actually start to pick up and you see the incremental demand come back or pricing comes into that equation.

Just given where how suboptimal occupancy is across most markets, but at this point.

Pricing it and what's driving incremental occupancy is not driving the marginal cost or man.

It's truly really a needs based client that's coming in.

Thank you.

Your next question comes from Rich Anderson from SMBC. Please go ahead.

Hey, Thanks, and good morning.

No.

You know obviously you got a commitment long term senior housing.

I wonder.

And shop I understand you know you're not to sell or you know unless you get obviously reasonably priced pretty cope with value.

Criminal breast.

How would you.

To rise the future from an asset allocation perspective for Welltower.

In light of skilled nursing and.

I wish to post acute assets in medical office.

Okay. If you had your way you got the pricing that you want it could senior housing almost the entire story here five or 10 years from now or or is it more just growth in senior housing and you'll continue to.

Maintain some exposure to those other asset classes so rich.

We have mentioned and pretty much have recall, our asset allocation strategy or really a capital allocation strategy is driven by price.

In that scenario that means you described that every asset class that we plan remains particularly over price for rest of 10 years and senior housing remains possibly underpriced for next and unit then yes. The description that you get that is possible that is rarely how things happen obviously right in momentum.

Opportunity in that you know when you see in capital market or capital come in and out.

Our sector for various reasons you see these moments of opportunity and Thats. What we believe we're seeing so near term capital allocation. You are obviously, you're going to see a significant increase in senior housing, but will level off our asset classes will make we level of our children.

There's no question that we want will remain interested in playing all different asset classes are incremental capital allocation strategy is a function of price not functional off our love called one asset versus other right. Now today, we have never seen a better opportunity invested senior housing as in Africa.

Thank you.

Our next question comes from Jonathan Hughes from Raymond James. Please go ahead.

Hey, good morning.

A question is on the rate outlook can you did touch on it a bit in Michael's question earlier, but was hoping you'd share some thoughts on the trajectory of reception of rate increases in a world where amenities I have been taken away from residence of course isn't taking away for their safety.

So show interaction aspect is what attracts a lot of residencies properties and that might not be back to normal for for some time. So.

How does this removal of this socioeconomics factor impact the rate your operators are able to achieve today for both new residents and existing resident rate increases thanks, Jonathan that as a greater portion, which is why you're seeing the lower acuity models.

Okay.

The needle, providing health care and social determinants of health is lower you're seeing rates not as pronounced rate increases as we have described to you that we saw slight decrease of rate on the other hand, where the social aspects as business is very important social aspect of the leaving is.

Important but more important is taking care of other health issues, obviously thats ways increase the rate. So it's the interplay between all the aspects off the services that we provide where do you have more need driven.

Obviously resident they will have less impact on rate in this kind of environment, where you have more lifestyle driven resident you'll see more impact or just because of what you. Just described right. Jonathan It's what I said earlier, our portfolio is skewed towards the higher acuity. So these are truly.

People that are moving in this environment.

Have really exhausted other options. So the social part of the senior housing model is not as important to that.

They need to make sure that these seniors are getting their daily.

Care they can't.

That cannot be done in by many families today in the world we're living at it becomes impossible, particularly if someone has dimension. So that is the profile generally of who's moving in today, they're not as concerned about the social aspects of the senior.

Living model.

But as things start to come back to.

To normal.

That once again will become more important attribute to the consumer but today, it's really all about safety and care.

Thank you.

Our next question comes from Michael Carroll from RBC Capital markets. Please go ahead.

Yes, Thanks, Chuck or Tom can you talk a little bit about how the second coated wave or maybe the continuation of the first call. Good wave has impacted your operators I guess, particularly in California had they been forced to re shut down or delay reopening some of those facilities, there or what's the thought process behind that.

Thank you Mike that's a really really good question frankly, I'm extremely encouraged and positively surprised by the example, you just.

Brought it up and of course, and I was going to use that.

California is probably the only place we conceived as a true second wave right. There's a lot of other states, where you are seeing sort of the first big wave.

I'm happy to tell you. This is why also encouraged by the performance of lost three week, we haven't seen a significant.

Admissions ban or lack of performance in California, and last week, that's really surprised me reported as you can see in our presentation.

Sort of 10 basis points of occupancy decrease in lost three week. Those are obviously rounded numbers might but if you just followed the real numbers. There were down 14 business lines down 10 basis points and lost or could was down seven basis point, given California, Southern California is our largest market.

Given California, obviously impact to those numbers you would have seen a much much worse and.

Worsening impact not an incrementally better numbers going far Mike what I wanted to add to that I'm I'm not going to named the operator, because one operator in particular, who was very quick to shut the door during the first wave in California.

And.

What I would tell you is.

In the second wave they are taking new residents so they.

Needed to.

Adjust to this cold environment and they did that by really.

Well I should effectively shutting down.

And now when Colby comes back there they are in a position to safely admit new residents. They have the right protocols and procedures in place that are enabling them to.

Again.

Neat.

The demand for this quality of care in a residential setting in markets, where the headlines are pretty scary, but.

I think thats, a good indicator and it helps us explain.

Some of the stats that you see in our in our deck.

So why the number of cases are while our not spiking in our portfolio like they had back in April and May when one of the operators.

Blindsided at not just our operators mean, we all blindsided by covet.

And so.

Yes, again, this could change might but.

It's an interesting.

California is an interesting data point for us.

Thank you.

Next question comes from Jordan Sadler from Keybanc capital markets. Please go ahead.

Thanks, Good morning follow up on the investment Kate.

Within the current quote schools, what's going on.

Cash flows and leverage.

[music].

Are you guys better to buy word itself right now the other words.

Sales and purchases the more balanced here going forward and offset lower level.

Terms of volume.

Well I cannot sit here and tell you that I know or have any idea.

I will only tell you that is dependent on one thing and Thats price and expected return out of those buy and sell it to find opportunities to deploy capital that it an extraordinary basis and return we'll buy more if we think that we're better off selling because the market is providing us go.

Great value for our assets.

That's sort of seasonal these uncertain times than we will sell.

On a practical basis, there's going to be a combination of both.

You know obviously as you think through how acids, how did get surprised eventually the stress to debt service coverage, how that stress is obviously equity it takes time, but.

But we're very encouraged by what we're seeing already seeing today.

But I cannot sell usage sitting here on any given quarter.

How those.

Sales forces by volumes will there be willing sort of cancel each other one would be higher than until that can tell you that it's just purely price have been.

Thank you.

Our next question comes from the line of Vikram Malhotra from Morgan Stanley. Please go ahead.

Thanks thing the question.

Maybe both.

Tom and Sean.

Obviously talked a lot about.

Exciting acquisition opportunities.

Cross across.

Spectrum more so seniors housing Im just wondering.

Seniors housing specific.

Can you talk about those opportunities in context off kind of job geographies, meaning the UK and Canada as well.

Product type buyer and then maybe even something that you've talked about in the past the affordable product.

What.

What are you looking at in terms of potentially getting a little bit more aggressive out on in terms of building the portfolio from you.

So let me from we're looking at opportunities across the board.

All three country.

Obviously, just given the population and numb our product, we're seeing more opportunities in us.

You know distress are rather more favorable pricing so far we see.

Across the board not necessarily one product versus other but probably more in high high acuity and al memory care, probably there is more distressed because you saw the occupancy for the most in that.

[music].

And that's pretty much.

I can tell you we're seeing as I mentioned listing across cost.

East Coast Wesco Us, we're seeing extraordinary we've seen some extraordinary pricing both coasts, we're seeing a lot of opportunities in Midwest Wissing opportunity, Texas.

We are in it I would view team, which is our legal team or investment teams and all the teams that support them have never been busier.

Whether we will be able to what we execute on will be a function of as I said pride and needs to be reflective of the environment that we find ourselves today.

Thank you.

Next question comes from Tayo Okusanya from Mizuho. Please go ahead.

Yes, good morning, everyone.

Morning.

I just wanted to focus a little bit on the comments around.

Movement.

In the.

Well improvement and the rate of decline as it pertains to occupancy senior housing.

Yeah, it's clear that most of your facility.

Sounds like.

Virtual tours things happening well can you just talk a little bit more about.

That slowdown is neither occurring on the ability of the of the of the directors of yield.

As of yet no interest.

Bye.

You know colgate or whatever have you.

Yes, so I think we touched on this side a little bit, but as you can think about our portfolio.

Primarily our us and UK portfolio. It high acuity, it's a need driven portfolio right. So again, you can only push off there is demand.