Q3 2020 LTC Properties Inc Earnings Call
Good day and welcome to the LTC properties third quarter 2020 conference call.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone too.
To address a question. Please press Star then too.
Before management begins its presentation. Please note that today's comments, including the question answer session.
Include forward looking statements are subject to risks and uncertainties that may cause actual results and events to differ materially.
These risks and uncertainties are detailed in LTC properties filings for the Securities Exchange Commission from time to time, including the Companys. Most recent 10-K did at December 31st 2019.
Ltcs undertakings.
No obligation to revise or update these forward looking statements to reflect the events one circumstance circumstances. After the date of the presentation.
Please note this event is being recorded.
I would now like to turn the conference over to Wendy Simpson.
Thank you operator, and good morning, everyone welcome to Ltcs Twentytwenty third quarter Conference call. Joining me today are Pam Kessler, our co President and Chief Financial Officer, and Clint Malin co President and Chief investment Officer.
I'm excited that we also have Mark Parkinson from the American Health Care Association with us to discuss how our industry is responding to the COVID-19 crisis [laughter].
Well, yes, it relates to the cares air and government support in the seniors housing and skilled nursing space.
Before I begin my business review I want to again, thank our operating partners for all of their efforts to keep their patients residence and employees safe during the pandemic. It bears repeating that we could not be more in their responses to the extraordinary challenges they have faced over the last many months.
And we know they will Dahlia Lee face several months to come as some areas experiencing resurgence of cases, and we enter the winter and flu season.
I would also like to quickly update you on the story, we told you last quarter about Mary Danielle the waste of in Alzheimer's patient at one of our communities Mary.
Mary took a part time dishwashing job so that she could spend time with her husband amidst visitation restrictions.
The Governor of Florida recently eased covert related restrictions for senior housing.
And Karen visitation.
Married completed her professional dishwashing career and can now visit her husband that will adhering to all proper safety protocols of course.
[laughter] community Rose Castle, Deerwood, which is operated for us by LG Senior has maintained close ties with Mary She continues to be active in the media speaking positively about Roes castle as well as advocating for families across the nation, who are trying to find ways.
Good to see and visit their loved ones, we wish Merry and Steve's nothing but the best.
Unfortunately, there has not been a consistent meaningful decrease in coal, but 19 cases around the country.
Fact, many states and regions are seeing spikes in new cases.
State, however have been able to flatten the curve with several easing restrictions as they pertain to senior housing and care.
Well our industry continues to face cost challenges related to supplies testing and staffing I believe our operating partners now have better tools and a much better understanding of how to manage in the world of coping.
Oh Tc is continuing to provide support where we are needed.
For example, we're in the process of Rolling out a new program called Smart design, which was conceived by our executive Vice President and managing director of business development, Doug Korey.
And our vice President marketing and Investor Relations Mandi Hogan.
This initiative comes from L.P.C.S desire to assist operators.
Grading their buildings for state of the art infection control protocols.
Well some of the biggest operators in the country. They have the resources to take on such projects on their own smaller regional operators often don't have the same bandwidth with.
With that in mind, we are partnering with Avenue development to assist our operators with turnkey and customized retrofitting options.
Features of Smart design include air filtration, including bipolar I and the station you'd be sanitation devices custom dividers, and Texas equipment among others.
The new will be responsible for the retrofitting all LTC will work with our partners to finance implementation of the program into current leases or providing a line of credit with attractive rates and flexible terms okay.
Oh, good was the catalyst for the program. We believed the benefits will serve us well over the long term by helping ensure our portfolio includes safer more updated assets.
Mark is going to spend his time talking about government initiatives and relief for our industry. So I'll comment just briefly.
After a considerable lobbying effort private pay operators are now receiving government aid they along with skilled nursing operators also received point of care testing equipment from the government.
Most recently the government released phase three of its cares Act, which includes an additional 20 billion in funds earmarked to help cover lost revenue to health care providers.
Herman support has been and will continue to be vital for our industry Mark will provide more insight in greater detail.
Moving now to more LTC specific discussion well.
While the quarter did not include significant new investments.
Our focus on structured finance opportunities resulted in us committing nearly $20 million in preferred equity.
Mobile, which has already been funded and the remainder of which is expected to be funded in the fourth quarter has.
Pam and Clint will provide additional details.
Although restrictions regarding visits to care facilities are starting to loosen in some parts of the country. We are cognizant of the fact that the fall and winter could bring surgeons of the virus and with that restored or additional constraints. We look forward to ramping up our engagement with potential acquisition targets Wednesday.
Safe and as restrictions are lifted.
Market remains challenging, but I firmly believe that LTC has built a strong reputation as a creative financing partner too in the seniors housing and care space thinking outside of the <unk> Fox to create solutions that provide our operating partners with the financing need to help grow their business.
Yes.
Reputation will serve us well over the long term.
Moving to rent deferrals and abatements, we collected 94% of third quarter ramped, excluding senior lifestyle, which I'll discuss in a moment.
Third quarter rent collected was 97%.
The rent deferrals and abatements for granted two private pay operators.
I believe I have mentioned my dislike of the GAAP requirement to recognize straight line rent.
Subsequent to our reporting second quarter results Genesis reported that they had a going concern issue debt.
Dennis This is current on runs with us and they have not requested any rent deferrals still.
Still LTC has had to report a reduction in this quarter's revenue for the straight line rent write off related to this lease.
Another operator, not in our top 10, who has been a go to operator for challenging properties and has historically performed well.
Has been adversely impacted by cope with 19 and began short paying rent in the third quarter and requested deferrals.
Right receiving government financial support this operator is reluctant to actually use those funds to pay rent for fear that there may be a government pay back provision.
As a result, we put them on the cash basis and wrote off their straight line balance addition.
Additionally in support of this operator, we agreed to close an assisted living facility in Florida that had drawn the attention of certain plaintiffs attorneys and was damaged by one of the recent Florida storms.
This closure required us to record a realization reserve of $941000.
We have not really the operator of the obligation to pay contractual rents going forward and I believe we will eventually recover our deferred rents and contractual rents. The Pam tells me my belief is not gap.
I'll now provide a quick update on our senior lifestyle portfolio.
As I mentioned last quarter, we placed the portfolio.
On a cash basis due to a shortfall in may and June rent payments.
At that time, so recent rent payments are trending up.
Senior lifestyle remains in arrears.
For the 2023rd quarter.
We received rent payments of approximately $3.3 million against their quarterly contractual rent obligation to LTC of approximately 4.6 million.
At September Thirtyth senior lifestyle owed us $3.8 million for second and third quarter reps.
2.5 million of which is recorded in our financial statements and is covered by an undrawn letters of credit, which we hold.
In October we received rent of approximately 1.3 million against senior lifestyles contractual rent obligation for the month of approximately 1.6 million.
In cooperation with senior lifestyle, we are actively working to make changes to the 23 property portfolio, which may include bringing in new operators pursuing sales of some of the buildings are retaining senior lifestyle in a few of the properties we.
We are currently in negotiations with several parties and expect to have resolution for the majority of the portfolio in the first quarter of 2021.
As we discussed previously transitioning this portfolio provides LTC with the opportunity to build relationships among several different regional operators.
<unk>, who will be new to LTC, and others with whom we have an existing relationship as.
As a result, we will further reduce portfolio concentration one of our key strategic focuses.
With respect to guidance, we are not providing it at this time due to ongoing cobot related uncertainties.
Now I'll turn the call over to Pam.
Thank you Wendy total revenue decreased 8.9 million compared with last year's third quarter, primarily resulting from the $5.5 million write off that when you discussed a result of transitioning to leases to cash basis accounting as of September Thirtyth 2020.
Can you just disclose since most recent 10-Q that there were substantial doubt about its ability to continue as a going concern multi.
LTC continues to collect all contractual rent due from Genesis. However, the level of certainty regarding the collectability of future rent from Genesis through lease maturity does not meet the threshold required to maintain it on an accrual basis.
The other operator did not pay its full contractual rent for the third quarter of 2020 due to COVID-19, and we wrote off their straight line rent balance during.
During the quarter, we provided this operator with rent support in the form of deferrals and abatements totaling 756000 as.
As with Genesis the level of certainty regarding the Collectability of this operator's future rent through lease maturity does not meet the threshold required to maintain it on an accrual basis.
Decreased rent from preferred care, resulting from the sale of that portfolio earlier this year lower rent from senior lifestyle deferred Intubated ran kinda reduction in property tax revenue also contributed to the decline in total revenue.
Offsetting these reductions were contractual rent increases increases related to acquisitions and completed development projects and higher rent payments from anthem.
Interest income from mortgage loans increased 244000, due to the funding of expansion and renovation projects.
Interest and other income decreased 535000 due to the partial pay down of an outstanding mezzanine loan as well as a reduction in miscellaneous income.
Income from unconsolidated joint ventures decreased 704000 in the third quarter due to the repayment of a mezzanine loan accounted for as a joint venture and the dissolution of our preferred equity investment in a joint venture with an affiliate of senior lifestyle, which occurred in the second quarter.
Interest expense decreased 466000, due to lower outstanding balances and lower interest rates under our line of credit in Threeq, you 2020, partially offset by the sale of 100 million of senior unsecured notes and for Q 2019.
Property tax expense decreased 919000, due to preferred care property sales and our senior lifestyle portfolio offset by increases related to acquisitions and completed development projects.
During the third quarter, we recorded a $941000 impairment charge related to the close assisted living property in Florida.
We also received 373000 in insurance proceeds for roof damage related to a property we sold in the first quarter of this year.
Net income available to common shareholders for the third quarter of 2020 decreased 15 million, primarily due to the straight line rent write off and the decrease threat from preferred care and senior lifestyle that I discussed earlier.
Deferred and abated rent the impairment charge lower income from unconsolidated joint ventures, and a 6.2 million dollar gain on sale in last year's third quarter also contributed to the decline.
The offsets included increases due to acquisition and completed development projects contractual rent increases and an increase in anthems rent lower interest expense and the gain from insurance proceeds.
Every f. AFFO per fully diluted share was 58 cents for the 2023rd quarter compared with 77 cents last year.
Excluding the nonrecurring items already discussed in the current period AFFO per fully diluted share was 71 cents this quarter compared with 77 cents for last years third quarter.
The six cents decrease in FFO, excluding nonrecurring items resulted from lower revenues related to property sales reduced rent from senior lifestyle deferred and abated rent and lower income from unconsolidated joint ventures, partially offset by lower interest and property tax expense.
Funds available for distribution, excluding the 373000 nonrecurring insurance proceeds gain decreased 2 million due to senior lifestyle and deferred unabated rents in the third quarter of 2020.
During the third quarter, we invested 6.3 million of preferred equity to develop and own and assisted living and memory care community. This investment earns an initial cash rate of 7% increasing to 9% in year four until the IR reaches 8% after.
After achieving an 8% IR the cash rate dropped to 8% within IR are ranging between 12 and 14% depending on the timing of redemption.
The investment is accounted for as an unconsolidated joint venture.
We also entered into a preferred equity agreement to invest 13 million to develop and own and independent and assisted living community. We expect to fund. This investment after certain conditions are met the deadline for which is December 1st.
It will earn an initial cash rate of 8% and an IR are 12% <unk>.
This investment is also accounted for as an unconsolidated joint venture.
I'll discuss these transactions in greater detail shortly.
In the third quarter, we also funded 3.9 million and development and capital improvement projects on properties, we own 1.6 million under mortgage loans and pay 22.4 million in common dividends.
During the quarter the development of our 90 bed skilled nursing center in Missouri was completed under budget by 1.3 million.
We anticipate funding the remaining $3.1 million of project costs in the 2024th quarter.
Initial yield on our investment is 9.25% escalating annually by 2% we.
We currently have remaining commitments under mortgage loans of 2.3 million related to expansions and renovations on four properties in Michigan.
We received 2.6 million in a 2023rd quarter related to the partial pay down of an outstanding mezzanine loans.
At September 30, we had 22.8 million in cash we also had more than 510 million available under our line of credit and 200 million under our ATM program, providing LTC with ample liquidity of approximately 733 million.
Our long term debt to maturity profile remains well matched to our projected free cash flow, helping moderate future refinancing risk and we have no significant long term debt maturities over the next five years.
At the end of the 2023rd quarter, our credit metrics compared favorably to the health care industry average with net debt to annualized adjusted EBITDA for real estate, a 4.6 times.
In annualized adjusted fixed charge coverage ratio of 4.7 times and a debt to enterprise value of 32.9%.
The effect of the economic fallout from COVID-19 on the real estate capital markets has resulted in our debt to enterprise leverage metric being higher than our long term target of 30%.
However, at 4.6 times, we are still comfortably below our net debt to annualized adjusted EBITDA for real estate target of below five times.
I'll finish my comments with a brief discussion of rent deferrals and abatements.
As Wendy mentioned, we collected 94% that's third quarter rent.
Of the rent not collected 690000 related to rent abatements.
326000 related to rent deferrals, and 1.3 million related to delinquent rent from senior lifestyle.
During the second and third quarters of 2020 rent deferrals and abatements totaled approximately 1.4 million net of 502000 in deferred rent repayments were 1.8% of contractual rent for the period.
In October rent deferrals were 566000 abatements were 120000 and delinquent rent was 264000.
Additionally, we received deferred rent repayments of 51000 in October.
As a reminder, our rent deferral agreement generally require the deferred rent to be paid within six to 24 months.
Now I'd like to turn things over to Clint.
Thanks, Sam I'd like to start saying, we'll go to recent investment commitments totaling nearly $20 million first.
First as Pam mentioned, we invested $6.3 million in preferred equity in an entity that will develop and own 95 unit assisted living and memory care community in Arlington, Washington suburban Seattle.
I know your place at Smoky point is being developed by fields senior living in conjunction with RJ development, both of whom you have successfully worked with in the past.
Yields will operate the community, which.
Which is currently scheduled for completion by the first quarter of 2022 Lincoln.
Incomplete LTC will have five investments fields, two in California, two in Oregon, and one in Washington.
Okay fees investment represents approximately 15.5% of the total $40.8 million estimated project cost.
The second transaction is a $13 million preferred equity commitment Pam discussed.
Located in Vancouver, Washington University ability, just Salmon Creek is an independent living and assisted living communities with a total of 267 units being developed by kills communities.
From an operating partner.
She is also working with RJ development.
Those will operate the community, which is currently scheduled for completion by the end of 2022.
I've completion, LTC will have three investment Charles two in Texas and one in Washington.
Ltcs initial investment represents approximately 11.6%.
Of the total $112.3 million estimated project cost.
In the current environment, we have focused our efforts on deploying capital in structured finance projects and these preferred equity deals and fields in chose demonstrate our ability to successfully transact in this market.
We are continuing to identify additional investment opportunities, including mezzanine loans bridge loans and Unitranche loans.
In this environment, we like their shorter duration and what we believe to be better risk adjusted returns.
Moving now to our developed projects.
Joint venture project field senior living for weather record in Medford, Oregon.
Again, except to residents in September after putting infection control protocols in place.
On October 23rd occupancy was 10%.
As a reminder, this community includes 78 assisted living and memory care units. It is adjacent to weatherly in independent living community. The joint venture acquired in 2018.
Our development project, but with ignite medical resorts for ignite medical resorts Blue Springs in independence, Missouri received licensure and begin welcoming patients in early October.
On October 20, Threerd occupancy was 23%.
<unk> is a 90 bed property in is one of the two Kansas City area skilled nursing centers, we own but our operating by ignites.
Before getting to the portfolio numbers I'd like to provide some additional visibility into rents upward we have committed from November through the first quarter of 2021.
There are three private pay operators in our portfolio for whom we are providing or their rent deferrals or abatements.
One of these operators, we have provided two months of deferred rent totaling $280000 or 140000 in December and a 140000 in the first quarter of next year.
Well the second we have provided abated rent for November and December and the amount of $120000 per month.
Which is 50% of contractual rose.
Third operator was provided the ability to defer rent as needed subject to cash flow through March 31st.
This operator's rent obligation is approximately $430000 per month.
Some buildings in our portfolio. These offers release up before the pandemic begin.
These properties were making progress pre coated but the pandemic negatively impacted operations.
We believe that the path to stabilization.
We'll remain elongated, especially when compared with pre Colby timetables.
Additionally, given new government relief efforts that include private pay as money is made available through the provider relief fund, we could see more repayments of outstanding deferred rent.
Next I'll discuss our portfolio numbers, given the pandemic and the challenging environment. It has created we don't believe coverage is a good indicator of future performance at this time and we are focused on occupancy trends, which I'll discuss shortly.
Due to trailing 12 month, EBITDARM and EBITDAR coverage using a 5% management fee was 1.27 times and 1.06 times, respectively for our assisted living portfolio.
These metrics are the same with and without stimulus funds as no operators allocated these funds to their PML statements.
Putting senior lifestyle from our assisted living portfolio, EBITDARM and EBITDAR coverages would increase to 1.41 times and 1.18 times.
For our skilled nursing portfolio EBITDARM and EBITDAR coverage was 1.85 times and 1.38 times, respectively, including stimulus payments made available through distribution of the provider relief fund allocated and reported to us by our operators, but specifically excluding PPD.
Funds.
If those stimulus payments are excluded.
EBITDA arm and EBITDAR coverage was 1.64 times and 1.19 times respectively.
I'd now like to update you on some occupancy trends in our portfolio, which is as of October 16.
As a reminder, for our private pay portfolio occupancy is as of that date, specifically in for our skilled portfolio occupancy is the average for the month to date.
Those are our partners have provided October data to us on a voluntary an expedited basis before the month is closed the information. We are providing includes approximately 71% of our total private pay units and approximately 80% of our skilled nursing beds.
Or additional context, we're also sharing comparative information about occupancy as of June Thirtyth 2020, and September Thirtyth 2020.
For the same population use for the October data.
Private pay occupancy was 78% at June 37.
77%.
At September Thirtyth, and 76% October 16.
For skilled nursing or average monthly occupancy for the same time period, respectively, well, 72%, 70% and 70%.
We are actively continuing to build and enhance operator relationships. So that we can return to more standard acquisition and development investments when the time is right and when those investments meet our underwriting criteria.
We've always been interested in creating and enhancing gross orange and partnerships with strong regional operating companies and that has not changed.
With the market remaining constrained we are not sure when those opportunities will present themselves, but we are confident in ltcs ability to actively sourcing new deals are.
Our ability to complete smaller one off deals by providing flexible solutions to our operators changing needs is a competitive advantage will.
We will be ready to strategically deploy capital as soon as practical and beneficial for LTC and for our shareholders.
Now I will turn the call back to Wendy for closing comments.
Thank you Pam and Clint.
Despite the write offs, we have experienced so far and Twentytwenty, we continue to see signs of progress within our portfolio and throughout the industry as a whole.
Our operators have learned a lot during the last several months and I believe they understand the steps required to safely expand visitation and accept new admissions, while still focusing on the care of their residence patients families and staff.
Again, we owe all senior care operators, our sincere thanks for all of the hard work they have done and we'll continue to do.
I also want to express my gratitude to the LTC team, which has seamlessly transitioned to a virtual workplace that allows our employees and their families to remain safe without missing a beat relative to their duties and responsibilities to LTC.
The population is aging and their need for care is growing.
<unk> is a constant that will not change for years to come.
As we look forward to the time when there is greater sense of normalcy I am confident in ltcs ability to build our portfolio and our diversification of investments and more importantly generate new opportunities to further secure our long term path as a recap done differently.
With that I am honored to welcome Mark Parkinson to today's call Mark.
Mark is currently CEO and president of the American Health Care Association, the nation's largest association of long term and post acute care providers.
Okay has long advocated for quality care and services for the frail and elderly Americans and has played a large part in lobbying the government for the much needed COVID-19 aid.
Earlier in his team Courier Merck was the governor of the state of Kansas.
After remarks presentation, we will open the lines for questions.
Welcome Mark.
Thanks, Wendy and I appreciate the opportunity to make some comments about the sector in general.
By way of background Im the president and CEO be American Health Care Association, and the National Center for a sister building, which.
Which is the long large long term care trade association in the country.
We represent 10500 skilled nursing facilities, almost 70% of them across the country.
And another 4000 assisted living buildings.
And in addition to my political background my professional background is that my wife and I.
Built developed owned and operated.
So it will be some assisted living facilities.
In the Midwest.
We did make some comments about the whole cobot situation, the DC response, and where I see this headed.
In the future.
Got the outset, it was very clear eight months ago.
The cobot crisis presented both the most significant challenge.
The most significant business channel one.
But the sector has ever faced.
The clinical side, we have never faced a virus or disease process.
Killed, 15% to 20% of our residents who become affected.
Infected.
Literally hundreds of thousands of people many of them will be in long term care facilities. It is a clinical challenge that we have never faced before and on the business side.
We knew that we had our hands full consumers to Kirkland incident occurred and we saw what happened there first on the sensors side than on the regulatory side and then as cases started spreading across the country, we knew that from.
From a business perspective, this was going to be an enormous challenge.
There were many unanswered questions back in March with the sector collapse.
Residents fully the buildings with the employees fully the buildings and what we now know eight months later is that the answer to all of those questions is no. The system didn't collapse. The facilities held together certainly faced enormous challenges, but unlike facilities in some parts of the world, where the employees which will.
We did fleet and the residents were forced to fend for themselves.
Our long term care system has held it.
Together.
There were also a multiple on answering questions about the business side of this and about the congressional response would we received the funding that we needed to keep going how bad would the census situation and again from the business side.
With this completely collapse and while it has certainly been bumpy over the last eight months the answers to all of those questions have for the most.
Been favorable yes.
Yes, there has been a devastating business impact that will talk about here in just a few minutes, but for the most part.
Assistance, both from the federal and state level has still been the gaps for many of the providers and allowed the business side, although quite bumpy has allowed the business side to continue there were clearly times.
As the markets were trading in March and April were investors were betting on a collapse of the entire system and that clearly did not occur. So what I'm going to talk about today is I'm going to talk about three different areas that I think you may be interested in pursuing to talk about the DC response on the skilled nursing side.
Were it has put the sector right now secondly, I'm going to talk about the DC response on the assisted living side were assisted living standards and then finally I'm going to talk about what are the things look like for the future for upcoming months post election getting into 2021, where is this whole thing headed.
Let's first of all talk about on the skilled nursing side I think on the skilled nursing side there.
Report would be all good the response at the federal level has really probably surpassed what most people thought would occur.
Only on that help.
Was there, but really not material some.
Some of the first things that happened for example was a lifting of the federal sequester the 2% comp. Thanks.
The facilities all providers incurred about eight or so years ago that 2% cut was taken away through the end of this calendar year in a normal year that would be a big deal but.
On a pandemic year, 2% really is not a material number the.
The next thing that occurred started to get close to material help and that was when in the second stimulus Act. The government provided some additional Medicaid money to the states through the map match, which is just kind of a DC way of saying that that you're giving the states more money for Medicaid now the states.
Given discretion on how to spend those funds and in some of the states. There were material amounts of those funds that were provided to skilled nursing facilities and in some states. There was no help at all so whether the Medicaid increase in the F. map increased help the facility is completely dependent upon the state that it was in but in some beer.
Reward states like.
Like Texas, and California, and Florida. There has been help provided unfortunately in states like New York, and New Jersey, Theres been very little help so whether the Medicaid increase was hoping or not is very much a.
A business by business type.
Question and its completely dependent on the state that they are in if you're in California, if you're in Texas. It's extremely helpful. I think it's important for you to know that this f. map increase will continue as long as the public health emergency is in effect. It is tied to the public health emergency public.
Health emergency is declared but circuitry HHS. They only have the authority to declare for 90 days at a time. It was set to expire on October 22nd, but Fortunately, we were able to get.
HHS Secretary is or to extend it is now extended to January 22nd.
In the map increases actually tied to the end of the quarter.
When the public health emergency. So if for example, the public health emergency ends on January 22nd the map increase will continue until the end of the first quarter.
We're pretty confident that we're going to be able to get the public health emergency extended again in January until April which means that this map extension would occur at least through the second quarter of 2021.
After those two things. There then began some things that are code that we're in or very material to the SEC.
One is that we received yet another rate increase on Medicare and there were no changes made to PDP.
We received that news on May one and that rule has now been finalized which means that there's been another.
2.3% increase in Medicare payments, but probably more important than the inquiries is the fact that PD PM was not adjusted and as you may recall coming into the pandemic PDP and was working well for providers and giving all of US a lot of hope about the future.
The next thing that occurred was that.
CMS waived three day stay requirement that's necessary in order to secure a resident to a Medicare payment under.
Under the normal rules as I'm sure you will where a person has to stay into hospital for three days and then get discharged to facility before they can become a Medicare resident.
CMS waived the three day stay requirement, which has allowed providers.
Skilled people without sending them to the hospital, it's been extremely important as folks who have been diagnosed with coated we haven't had to send them to the hospital to skilled them under a Medicare rate and what it's done for many providers is that even though they have had a decline in census in their.
General population.
As we've had the ability to skill Medicaid residents into a Medicare rate, we've been able to keep their heads above water.
Three day stay waiver is also tied to the public health and we can see so when we got that extended to January 22nd. We also got the three day stay waiver extended to January 22nd and we are optimistic that we will be able to get extended another 90 days to April 22nd as we approach 2021.
The final two things that I'm going to talk about have been the most material help to the sector. The first is the decision by HHS to allow people to receive a Medicare advanced payment HHS and CMS have the authority to provide every Medicare provider with a three.
Months advance on their Medicare payments, it's a material amount of money to any provider in virtually all skilled nursing providers took advantage of this in March and April that immediately saw the cash problem that any provider would have suddenly having in your bag three months Medicare cash.
So it's a heck of a lot of problems now the challenge is that this is not a grant its alone and under the normal rules. This would have had this been start being repaid in August of 2020, a few months ago.
Fortunately, we were able to get that extended so that the repayment now does not start until April of 2021, and when it does start the repayment comes back on a pretty favorable basis.
We believe that we will be able to get Congress to food go away the repayment of those funds and there is even a possibility that's being widely discussed of Congress waving the repayment of part of the advance not just for skilled nursing facilities, but for other Medicare providers, most notably hospitals, who were also.
While being very hard on this issue.
And then the final area of health has been the most helpful and Thats been the Cures Act funding. The most significant lobbying victory, we had actually wasn't any specific grant money. It's when we were able to convince Congress on the first stimulus bill that the so called $100 billion hospital fun shouldn't just be for hospitals it should be for all price.
Riders that was really the pathway that we've had to the success that we have subsequently achieved and the subsequent success has been a multiple rounds of money out of that cures Act for skilled nursing facilities now totaling over $12 billion and we believe that there is more to come on those.
Those payments that had been made out over time.
Have solved a lot of the cash flow issues that providers normally would have experienced and we continue to receive those funds.
Next week for example on Monday will be the first payment of $2 billion in additional payments that are being paid out to providers, who are particularly successful in keeping cobot out of their buildings you.
When you add up all of these things.
That has occurred for skilled nursing facilities, whether it's the estimate Medicaid money. The sequester the carriers that are funding. The three day stay waiver you add it all up and we believe that there is that over $20 billion in relief to the skilled nursing sector, what does that mean well it means that those that thought that the sector was going to disappear back in March and April were wrong.
It has not collapsed and in fact, the cash position of most providers is as good as it would have been on prior to the pandemic I think that for the overwhelming number of providers. When you add up all of the things that are.
They are in a pretty good cash position heading into 2021 and feel I think pretty comfortable that if we can get a vaccine in early 2021, and sensus can rebound that they're going to be okay. Now there are still a number of providers. It's a minority but it is a it's sometimes a visible.
And the basic profile of those if they fall into two categories and often or unfortunately for them hit both the first our companies that were struggling financially coming into the pandemic and this appears to be particularly the case or folks that were highly leveraged.
They they were struggling coming into the pandemic.
It is probably exacerbated their problem over the last eight months and secondly facilities that happened to be in the northeast, which was particularly hit hard by cobot early on at a time when there was virtually no PPD virtually no testing their mortality rates were very high doses.
Those providers are struggling.
You have experienced a loss it grow.
Greater than the national average of 10% or so and so you will hear about some folks that are out there and some of them are highly visible.
That are continuing to struggle.
But I don't think it's representative of the vast majority of the sector and my belief is that if we can get a vaccine by the end of or get folks vaccinated in January and February consensus can rebound.
Overwhelming part of the sector is going to make it through this.
Now, let's secondly, now talking about assisted living the news is not as good.
And what I mean by that is we haven't been able to achieve the kind of lobbing success for assisted living that we had been for skilled nursing.
I do think though.
Important breakthroughs recently and that there will be more successes down the road I.
I think a lot of people wonder why in the Hell because the system will be not received funding that skilled nursing has.
And it's not because HHS doesn't like assisted living.
Philosophically doesn't think that private pay should be reimbursed, it's not because they believe that it's just a good folks don't have needs and don't have the same kind of problems that people that live in nursing homes habits really none of those things at all.
When it comes down to is that the federal government doesn't regulate assisted living it doesn't know very much about assisted living HHS provides no federal funds to assisted living and certainly doesn't regulate the.
The women HHS was given the assignment to pass out what ended up being a $175 billion in funds. It started working with the groups and the providers that it was used to working with which did not include assisted living so as we were counting the door to say hey, assisted living needs help as well they were really saying well let's get.
Your first and then we'll we'll hear what you have to say and they did that they made some initial Medicare payments and then they let us make our case and we were successful we were able to eventually convinced the policymakers that assisted living needed help as well, but then we ran into a very unique problem because they don't regulator.
Just of weathering them, because they don't pay a little bit.
Hey, we don't even know who the assisted living providers or we don't have a list of companies to send funds too and so at that point all of the long term care Trade Association ours, and others went to work and developed a database of all the assisted living companies in the country, but the buildings that taxpayer I'd.
Numbers et cetera, and we didn't began working with HHS and it worked but it took a long time it wasn't until September seven the first funds went out to assisted living when the decision was made that both for folks that take Medicaid waiver and for straight pure private pay until they will all have received 2% or 20.
19 revenue now that's not the nature still much greater but it opens the door now to us pursuing additional really and so as we talked today the third phase of the HHS funds or under application, what they're calling the phase three portal, where they have specifically.
Said that assisted living can apply.
They are trying to figure out how to hand out an additional $20 billion assisted living providers again can apply in or a part of that so we are hopeful and optimistic that as the weeks and months continue now that we kind of broken through with assisted living will be able to have greater success down the road.
Now, let me talk a little future, what's next and as investors you know what should we be looking at him wearable, we're as all of us had it.
Well, let's talk about the election, obviously, it's right around the corner and it will have enormous implications on everything including long term care.
I believe first of all it will have an impact on the go.
The last what was going to be the last stimulus Bill obviously did not pass before the election and folks through up their hands. This week and said look let's come back after the election, but.
The conventional view in DC and I agree with it is that there is a 100% chance that there will be another stimulus bill. So the outcome of the election is irrelevant, but there will be a build there will be a bill either way where it is relevant to is the size of the bill if Republicans repaying one part of the apparatus, whether it's the presidency or the same.
Got it.
The stimulus bill is very likely to be of the size that was being discussed when the discussions fell apart. This week somewhere around 1.8 to 2.2 trillion dollars an hour that significant additional funds will be added to the cures Act funding that would then be available for both.
Skilled nursing and assisted living on the other hand that the Democrats win every time it's.
It's possible that there won't be a stimulus bill and the way they may want to wait until they take over.
But when ever there is a stimulus bill the Democrats take over it will be larger than the 1.8.
For Q4, two trillion dollars it will be more like the three trillion dollar bill.
That they passed back in August and that May just be the beginning they are clearly wanting to spend significant amounts of money to stimulate the economy.
You defy covert so it's not really a question of whether there will be a stimulus bill. It's just a question of how large will the Dolby and there will be important things in the bill that will help both skilled nursing and assisted living so first thing to look forward to his you know some pretty good additional relief in the form of stimulus.
Okay.
The whole discussion of vaccines.
You know you're probably following the science on vaccines, the drug companies seem to be making really really good progress as much as we failed on the public policy side to contain coated the scientists have done a spectacular job on therapeutics and it looks like on the backs.
The good news is that we've been able to convince the policymakers that not only should assisted living and skilled nursing be a priority for the vaccine they've actually created a turnkey program for us to distribute the vaccine and you probably read about the agreement with Walgreens and Cvs to provide vaccinations.
For assisted living buildings, and all skilled nursing buildings across the country. In fact, we have a vaccine that is approved by the end of the year I think there is a possibility that all of our residents and all of our staff will be vaccinated in January and in February and it will take this wonderful time that I'm certainly looking forward to.
Where we will be able to say to people safest points than the country for an older person right. Now you said in one of the long term care facilities that are out there.
The third thing that I would talk a little bit about is testing testing.
Testing is continuing to get better and it's getting cheaper and we are being prioritized for it so.
So when you kind of look at where are we headed over the next month I think over the next few months there will be robust testing a clear understanding in or in the long term care buildings, who has cobot and who doesn't and corn team and safety and containment and all of that and then hopefully we will get into the vaccine phase will get people vaccinated.
As all of this is going well continue to receive the funding that we need from the state and federal level to keep our heads above water now there are two remaining questions that I'm sure or at the forefront of your thoughts as you think about investing in this space.
The first is a liability situation.
And the answer to whether or not there will be a federal liabilities solutions highly tied to the election.
As long as the Republicans maintain one part of the federal apparatus, whether it's the presidency or the Senate I believe that they will continue.
I think that the Republicans will continue to maintain that any future stimulus bill needs to have the kind of liability protection that all health care providers need to function going forward. If there is a democratic sweep next Tuesday, there is the possibility that this liability discussion will be set by set aside now there is another.
School of thought and the other school of thought is that if the Democratic sweep every time they.
They have an understanding that for the economy to move forward, there's got to be some kind of liability protection. So there are some who believe that the Democrats when everything that in the lame duck, they will want to get out of their way a smaller stimulus bill to be followed up by a bigger one in January or February but as.
Part of the smaller stimulus bill would be some level of liability protection long story short, we'll know after the election, whether or not liability protection.
Possibility or not and if it is what it will look like and then secondly, the whole issue of the business case of long term care.
The good news on census is that although it initially declined about 10% on the skilled nursing side it hasn't collapsed any further.
The bad news is it hasn't gotten any better.
The conventional part among the operators and I talk with every single day is that once we get a vaccine and people feel more comfortable coming into buildings will be able to rebuild the senses. If that's true we will be okay and that is because the federal funding will be sufficient enough to get us to a vaccine.
Once we get to a vaccine we can start rebuilding census half a percent.
4% a month.
The numbers work out on the other hand, if we get to a vaccine and census doesn't recover we got a real problem and so I think you know everybody is aware that it's all about census, and our belief and our hope that it will gradually.
Once we get past the vaccination and finally I'd just remind the folks that are on the call. It something that you are clearly or wherever you wouldn't be interested in this space at all and that is that the demographics are finally on our side. We went through this demographic trough in the 20 tens where the number of people between 80 and 85 really wasn't inquiries.
Scene in the U.S. well, we're past that now we got past that in 2017 and the pandemic hasn't ended that there will continue to be dramatic growth of the population group that needs or services at the same time.
Pandemic will lead to a discouragement of new investment there will be less new capacity out there and you combine those two together.
Well I think the key.
Nice medium and long term care.
Can be made for the space I'm not here to tell you you should absolutely continue to invest in the space, what I am saying that I am continuing to invest in this space I continue to believe in this space.
And as horrific as this looked back in March.
We're in a much better spot right now so with that I'll end my comments and look for any questions that people have.
I would like turn the call back over to Wendy.
Thank you Jordan and thank you Mark that was that.
A lot of wonderful and understandable yes.
Termination Jordan will now start taking calls from people on the call.
We will now begin the question answer session to ask a question you May Press Star and then one on your Touchtone phone.
We are using a speakerphone please pick up your headset for pressing the keys if.
Hey, Tom Your question has been addressing you would like to withdraw your question. Please press Star then two at this time pause momentarily to assemble our roster.
Our first question comes from Kwan Santa Maria.
BMO capital markets. Please go ahead.
Hi, Thanks for the time.
Just wondering on on the political discussion that the three day stay waiver.
We're not tremendously beneficial.
What's the probability Mark in your view point that that it gets permanently where do you think that's unlikely.
Great question, because you're absolutely correct as you dive into the financials of these providers.
It's been a really important thing.
And keeping revenue for some companies are 29 team levels, even though census has dropped 10% or so.
I feel confident that we're going to be able to continue to extend it along with the public health emergency for at least the next couple of quarters. So its currently set to expire on January 22nd I'm confident that whether its president Trump or president Biden, but that will then be extended another 90 days I think probably.
Will you another 90 days beyond that so that gets US pass the first half of 2021, and hopefully past the worst of the pandemic. There is a growing appetite among providers to cut at the absolute top of our lobbying west for 2021, a permanent elimination of the three day stack. So.
Yes, absolutely on the west, but it's too early at this point to give any sort of public.
Probability it will be connected to whether or not we can succeed with that it's going to be really interesting to go into the numbers as we're able to look at the last quarter or two to see what the financial impact in cost is to the government.
And but we'll certainly be making a case for it it's too early to know whether or not we're.
We're going to be able to get it changed or not I think that it probably increases the likelihood.
I'm getting the rule change that observation days don't count for purposes, a three day staying I think we're probably improved our chance to get rid of that brutal but.
But too early yet to handicap complete elimination.
Great and then for the LTC team this new kind of troubled tenant that had payments in deferrals was there any permanent a bit.
In other words, the direct changed going forward of what was previously struck or is your expectation that once things normalize it does.
Revert back to the previous month structure.
You could just give a little bit more color there.
Sure Hi, one sequence. So we did not change as Wendy mentioned in our comments, we did not change the rent going forward, what we address was rent.
Through August as far as the abatement of into September and then the deferred rent that we provided for.
Going forward, so no no change to the contractual rent.
Our next question comes from Jordan Sadler with Keybanc. Please go ahead.
Thanks, and good morning, and thank you Mark for all your time, a couple quick ones for you hopefully.
Going back to.
The.
Three day.
Rule or waiver are.
Are there any metrics around the number of beds that have been converted or that you've seen converted the skilled and so how.
Much providers are taking advantage of this.
And how pervasive is generally because it seems like a potential area of risk in a sense on the other side. So I'm just curious your thoughts there and then.
The <unk>.
Just coming back to the census issue.
The thousand yes.
So basis point, your 10% of loss expenses.
Where is it your sense that the patients are going essentially that residents are going mostly that.
That they'd have to be sort of pulled.
Pulled back from.
Sure.
So first on the Threed I say, we don't have any visibility on the total number of skilled beds pre pandemic versus post pandemic my guess would be that it would be roughly the same.
That the the three day stay waiver is neutralizing the decline that would have occurred without it.
And so we're seeing blush folks come in from the hospitals for a variety of reasons could that I'll talk about just the second because it ties into your senses question.
But that's being made up for.
People that are being skilled employees and net net I don't think that there will be an addition.
That will though how what would be a provider by provider issue. There are clearly some providers that are very aggressively going people and then there are other providers that that either aren't aware that they have the ability to do that or have made the decision not to and.
So the overall impact for them as much less but I think Matt Matt we're going to see that it's it's a neutralizing factor to the decline in the normal post acute census, I'm, all about though speculation and anecdotal just based upon me talking with providers, we don't have any data yet.
In terms of in terms of census.
Oh, I think that the the hope is that census will turn on several different branch first.
It would do it will hopefully turn once we get it back saying and so once folks feel a little more comfortable with having loved ones and facilities.
Because of the vaccine it will turn at that 0.2nd there appears to be a relationship and I think this is probably particularly true in the l. space, but.
Tween visitation and census.
People don't want to move into a facility.
I don't think they can have any better service at all so part of the slowdown I think in move ins has been on the restrictions on visitation and.
And obviously, it's dependent making ends.
Those will go slowly go away and then finally, there has been an impact on sensors because of the decline in.
Elective surgeries that occur in hospitals, a lot of the post acute.
Admissions are directly from hospitals as a result of elective surgeries and.
No so stopped and that started up again on our stopping again because of the spread of the virus.
Parameter, we are having a real problem. There. So I think you know where the people going people that aren't in our buildings right now it's a combination of things first sadly its because of Dallas.
If you think about the fact that there have been 50000 plus people that have died in skilled nursing facilities and we Havent you know an average occupancy of a little over a million on the long term care basis, that's close to 500 basis points right. There a second a second factor is that we're not getting the elective folks because they're just hold.
First off on doing those surgeries third.
Third factor is she took some hospitals are directly sending post acute people to home health for their rehabilitation.
Issue is are those temporary phenomenon also or they are permanent and our hope is that they are what they are kemper.
Thank you for that and then maybe just one quick one for a hoax LPC just the on it.
SLC any.
Any guideposts you guys can offer in terms of the net impact of transitions that you might see as we look forward to the front half of 21.
Sure Drew me say net net impact referring to timing of transfer. Okay. So so your original face rent was let's say $20 million.
With SLC and right now I think you're booking that you know you're assuming 900000, a month you actually receive 1.3 million in October I'm trying to understand like.
Essentially any any kind of range is it somewhere between the 10 million in the 20 million that you ultimately expect to receive on a run rate basis. Upon transition of these properties in one Q 21.
Or is it narrower are wider how do we think about it.
I think at this point Jordan, we are we're actively engaged in the process of re leasing and looking at selling some of the building. So I think as we have more visibility as we're making more progress as we mentioned in our prepared remarks of having majority the transitions are completed by first quarter.
And our next call have more visibility on what that looks like but we're actively in negotiation process. So.
It will be hard to give you the details right now, but I think in a quarter that we'll be able to give you more clarity on that but one thing I can tell you is that what will likely happen is there will be phase in of rents overtime over a period of probably.
Two to three year appears as rents are stepped up overtime.
And how much did you record from them in the quarter.
You 0.3.
Yes.
Three point.
3.3 million Okay. Thank you guys.
Well thank you.
Next question comes from Michael Carroll.
RBC capital markets. Please go ahead.
[noise], Michael you might be muted.
Next question comes from Daniel Bernstein with capital one. Please go ahead.
Hi, Good morning, I appreciate all the comments from Marc [noise].
Two questions one for LTC and one for Mark.
LTC question, you know a number of Friedson operators.
Been noting higher move outs in seniors housing in the last few weeks or months or so.
Have you seen that in your portfolio and kind of what are your thoughts on the.
On that phenomenon at this point and maybe the causes for the on how systemic it is versus short term.
Sure Dan.
No because on the tablet side were always getting information you know in arrears from operators and going into our I'll call. We're getting updates from operators on census, which I provided.
We have not had any operators express more concern recently over.
Move out so that it just seems like the deceleration of the occupancy occupancy declines that's decelerating, but haven't.
I haven't had.
Significant concerns have been communicated to us about them.
Okay.
Okay I'm sorry go ahead.
Yeah, Hi, good I think at this point, it's it's too premature to speculate on that decrease in October because that is at that point in time and it.
He could not move and snack come in toward the end of the month and it would be back up to 77% Mike. It was at September Thirtyth. So I I would be we knocked then can read anything into that.
Okay at the okay.
And then Mark you know.
We haven't heard much about bundled payments lately that was.
Somewhat of a hindrance to this SNF industry.
Prior to the President Trumps administration, if we have a changeover and administration.
Our concern is the industry about bundled payments and and some of those other items that had kind of been put on the backburner by the Trump administration.
It seems like that what might be an issue going forward.
Sure well you know both the Obama administration and the Trump administration had.
Yes, a choice to make as it relates to post acute payments, which as to whether to go towards a full blown bundle type payment or whether to work with the per diem type payment.
And the decision was really made even though there was a lot of talk about bundling. The decision was really made by both administrations, but obviously clearly by the Trump administration.
The head away from bundling and finalize PDP.
Yes, So you know PDP, which we talked a lot about coming into the year and we haven't talked about it at all because of the cobot crisis PDP Emmis worked pretty darn well I think people that have had a chance to look at it on the policy side think hey, this was pretty smart.
And so I think it's unlikely that they would be a radical departure, Intel PDP and was allowed to fully mature and work its way for good probably three to five years at the same time the health policy people. When abide administration are basically going to be the same health policy people that were there in an Obama administration.
And they all you know to a person very much like the idea of value based purchasing a bundle payments et cetera.
So I think they're going to spend their first year, assuming BYD wins, just kind of boat fighting the cobi crisis and try to get through Cody and I think you'll see our Ria.
Re attention to things like bundled payments et cetera, but it's going to take a while and we don't view it as a threat at this point. We also think that on a bundled world you know sophisticated operators can actually do quite well in a bundled world.
So there's not nearly the fear about that maybe there was in the sector five or so years ago [noise].
[laughter].
I appreciate that I.
Having quite dollar and thought about it in that way so.
That's all I have I'll hop off thank you.
Thanks, Dan.
Again, if you would like to ask a question. Please press star and then one.
Our next question comes from Ana Tayo Okusanya with Mizuho. Please go ahead.
Ah Tony might be muted.
Hello, Danny.
Yes.
Oh, perfect I'm, sorry about that Mark. Thanks, again for the insightful comment I had two quick ones for you. If the assisted living industry does end up being hit test then getting decent government aid is there any risk that it gets increasingly regulated.
What form of regulation could that potentially take.
It's a very good question and it's a question that I think the boards of all of the assisted living associations asked themselves prior to making the decision to lobby for the palms.
And ultimately the decision was made but the need for the funds outweighed any risk of potential additional regulation.
I think you're I think you're 100% right, we opened up the door to a discussion about it by by accepting the funds now I still think that even with a complete democratic sweep, which would bring in a bunch of folks that are more interested in regulation and the Republicans.
I still think that in that scenario, a full blown regulation of assisted living what anywhere near like what skilled nursing is regulated under is unlikely I don't think that that will occur I think at the margins there will be some discussions about whether for example stage should have some minimum level.
Deletion, whether there should be perhaps some regulations relating specifically to infection control like all buildings, having to have some sort of rockpile, a PE or all buildings, having to have some sort of infection control program I think you're absolutely correct. In your question it increases the discussion on.
And increases the probability, but I don't think that there will be the kind of regulatory scheme that nursing homes have separate vendor for so long.
That's helpful. And then you also brought up a point of summer is that even post the wrapping that center, where they you know senior housing skilled nursing and not necessarily go up.
What kind of scenario that would create that and how do you kind of think about the risk of that actually happening.
Well I think the first of all there I don't want to overstate.
The risk I don't think that's going to happen I think consensus will recover slowly and a couple of years from now we'll be back to where we were pre pandemic, maybe even a little better because of a contraction.
In new development.
But this just specific situation that would create a problem would be yes.
Discharge patterns from hospitals were permanently changed sort of hospitals decided hey.
We're able to send people home and get them post acute in home setting as opposed to a skilled nursing sorry that would be a significant problem. It just depends depending upon the numbers on how big of a phenomena that was.
That would be the problem, so thats probably to the guest.
Single biggest risks that we face at this point, it's just a change in discharge patterns.
The whole notion of whether people will feel comfortable on buildings that's important.
It's also important to remember that people come into our buildings because they have to they are quite old they have significant.
Launches.
And they just can't make the discretionary decision not to come into our building. So I'm not really worried about that is that as much as I am about folks just decided that they're going to try to do rehab at home.
Great. Thank you very much.
Our next question comes from Michael Carroll of RBC capital markets. Please go ahead.
Yes, Thanks, I want to talk a little bit of bounce I guess senior lifestyle I'll make sure I understand this correctly. So the tenant is that behind on about $3.8 million of Brian.
But you have only a $2.6 million receivable and then you have about 1.3 million of delinquent right. What's the difference between the receivable in the adult delinquent right balance.
So you'll recall that last quarter, we put them on non accrual basis. So the I'm not reflected on the balance sheet as from the second quarter, but they were delinquent on 1.3 million of rent this quarter, but it it's not on the balance sheet.
Because we stopped accruing it but it is owed to us.
Okay and then what is how has the EBITDA our trended on on that portfolio now is about well I think it was you gave us the junior analyzed but we're hasn't trended since I guess through September has it gotten better or worse.
It's been trending up.
Okay and like what is it in line with how much right you're collecting is that what they're basically paying you or is are they kind of taking money from their pocket to kind of pay for that some of that a better rent trends since I'm in threeq.
No, it's it's commensurate with what they're paying us.
But Mike It doesn't include any it doesn't include yet any government funds. They perceived right are well received.
Yes.
Not reflected in the numbers.
Okay, and then can you talk a little bit about what happens is if you do decide to transition senior lifestyle out are they do they still qualify for.
I guess the funds from the HHS, Sir if you do transmission transition, Matt you kind of run the risk of losing those.
I guess like is always the potential you could run the risk that right now phase two it was already been approved and being allocated actively right now so as I mentioned transitions wouldn't occur until Q1, and even right now I think on phase three as that's actively being outstanding with the November.
Sex deadline to submit applications and maybe Mark you could speak to this but it sounds like the it's likely that would be allocated funded you know in 2020, we.
We wouldn't risk that so I don't know Mark if you have any thoughts on the timing of that and whether.
Any transition of operators that you're aware of from phase three would affect whether or not operators would get money or not.
Well the phase three quarter closes next Friday it closes on November six and at that point. They are going to do an accounting of how much money has been applied for and make some decisions about trying to get the money out with the goal of trying to get it out by the end of the year.
But we can't.
We can't commit to that because that's their goal and and there have been times when they haven't been able to achieve their timelines, but the goal is to get that money out by the end of this year.
Okay, Great and then Mark is there a risk if theres transitions of an assets that you would lose potential additional funds.
I know that they've been doing a basing a lot of those funds on prior revenues levels I'm, assuming that has to be the same operator to be able to achieve that.
[noise] I think theres, an administrative risk and the administrative risk is that the people that have had a change of ownership had really been challenged.
In giving funds in some cases, not because philosophically HHS doesn't think that the new owner should get the money, but just because it's hard to explain day to check what a child with and who the new owners and where the checks ought to be getting sand et cetera. So I think it could slow down.
The receipt of the funds, but I don't think the fundamentally HHS would take the position that the new ownership and get the funds.
Okay, great. Thank you.
This concludes the question answer session I would like to turn the conference back over to Wendy Simpson for any closing remarks.
Thank you Jordan and again. Thank you so much Mark you provided so much insight to our analysts and our and our investors and certainly to LTC to and thank you everybody who has been on the call. We look forward to talking to you about year end results, they safe and have a good Thanksgiving.
Hi.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.
[noise].