Q4 2020 Welltower Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the Q4, 'twenty and 'twenty Well Tower, Inc. Earnings Conference call at this time, all participants on a listen only mode and.
After the speaker presentation, there will be a question and answer session to ask a question. During this session and you would need to press star one on your telephone. Please be advised that today's conference is being recorded.
And you require any further assistance please press star zero.
Oh and I like to hand, the conference over to your first speaker today to Mr. Matt Caris.
Thank you Joanna.
And good morning, everyone. As a reminder, certain statements made during this call maybe deemed forward looking statements and the meaning of the private Securities Litigation Reform Act, although well tower believes any forward looking statements are based on reasonable assumptions. The company can give no assurances that its projected results will be attained.
Factors that could cause actual results to differ materially from those and the forward looking statements are detailed in the companys filings with the SEC.
And with that I'll hand, the call over to Sean for his remarks, Sean.
Thank you, Matt and good morning, everyone.
First and foremost I hope that all of you and your families are safe and healthy during these extraordinary times.
And the spirit of this year and call I would like to review 2020, the most challenging in our history and discuss different paths of growth long term value creation for our continuing shareholders on our share basis.
We came into 'twenty and 'twenty prepared for perhaps a plain vanilla business cycle downturn, we pushed out our maturities and Q4 of 2019 sold and lot of short duration asset bought a lot of longer duration assets and continue to upgrade our portfolio operators management contract and.
And talent.
And we're hopeful that with the continued decline in senior housing deliveries and start on one hand, and the aging on their population finally picking up on the other hand, the 'twenty and 'twenty would Saar and inflection point in the funds for the fundamental after decades of weak demographic resolve.
Moving from the aging of the baby bust generation.
And then once a century pandemic happened that will turn out to be particularly devastating for our business.
The back half for first quarter second and third quarter. We're all about long term value preservation, we enhanced our liquidity profile dramatically by selling assets in record time at or near pre Covid pricing more importantly avoided mistake of raising long term dilutive capital and <unk>.
<unk> team for managing the company for continuing shareholder on a per share basis.
We started during the dark days of March and April.
By selling a 1 billion of asset and a great prices and record 43 days from signing a confidentiality agreement to receiving cash. We continue this journey during Q2 and Q3 and eventually executed on $3 7 billion of disposition and extraordinary prices to be.
And unprecedented war chest.
Things, particularly surprised me during these times and the resilience of our team during our including our extended team up and operating partners and the liquidity off on asset not that we didn't have doubts our failures, but we continue to move forward in spite of them with a steady hand on the wheel.
And and unwavering belief that we'll get to the other side.
Our team's strength resilience and reminded me every day of Winston Churchill's famous quote that success is not final failure is not final. It is the courage to continue that comps in those moments of reckoning I realized how privileged and I was to be part of this team that.
Didn't Miss a beat and Blaze new trails.
For years, I have hard that healthcare oriented real estate deserves the discount for the to say, it's shiny tower in middle of a large gateway city due to the lack of liquidity and smaller ticket side, especially during down cycles and I hope that during the worst down cycle for an asset.
Plus this debate has been finally settled as demonstrated by our execution and debt off our colleague that help peak.
And therefore, we pivoted again from defense to offense as we started underwriting and shaking hands on new acquisition. It is important for you to understand that we don't see can and finding excuses to walk on chip away.
If we shake hands and we closed our handshake and this business is what gold and we only enhanced our long term reputation during this pandemic.
And last quarters call I discussed the $1 billion of deep value opportunities and I'm delighted to report that we have closed roughly $700 million of acquisition since the start of fourth quarter and a significant discount to replacement cost and our acquisition pipeline has grown meaningfully and as I sit here today.
And I'm optimistic this year is shaping up to be a year of net acquisition by half significantly still.
At that time.
At the same time I will remind you that were non driven and incentivize by volume up acquisition, but the value of it asset price is the ultimate determinant of how it will behave.
In this moment of confusion and ambiguity I indulge you to focus on four distinct pillars of long term value creation for wall tower.
Operating fundamentals and Tim will get into the details of what happened last quarter and what might happen next quarter, while operating fundamentals is awful right now with little near term visibility. We are optimistic about the vaccine rollout as 90% of our assisted living and memory care.
Facilities have conducted their first vaccination clinic with virtually all resident and taking the shot while I would not expect this to be a source of value creation in the very net time I'm hopeful about the second half of the year.
Normalization of operating performance remains the largest source of value creation for our shareholders. It is too early to comment on exact timing of the trough and the shape of the recovery, but we'll keep you posted frequently intra quarter. So that you can see what we see our focus remained on upholding.
The reputation of our communities and maintaining the safety on all operate on staff and resident we spared no expenses and have already spent in excess of $80 million on Covid related expenses two day doing everything we can within our control to support there will be due to the great reputation of our operators.
And the extraordinary value they provide rates are holding up in 2020 lift for was up 2% in al memory care, and 1% and independent living and for 4% and our seniors apartment business. This growth occurred despite the headwinds, resulting from large community fees driven by.
It declined and moving activity number two.
For the platform enhancement management contract leadership and system enhancements and building local scale on some other examples of this let me highlight two specific tier a sunrise.
We're delighted by the appointment of Jack Allison as the CEO of Sunrise living our largest operating partner Jack will bring much needed attention to operating excellence within operations first culture. We are also negotiating a new management contract that will align the interest of Sunrise and one tower and.
The owner of the asset we're diligently working with the management of Rivera Sunrise as majority owner to enhance sunrise disposition, so that in pit and can emerge from this pandemic and the leading operator buys for his talent and growth B building local scale, if I can for Charlie Munger the advance.
Page of local scale of ungodly important to this business, we have and will continue to scale. Our most important strategic partner as we expand our senior housing footprint to name a few in alphabetical order bound for Brandywine Clover coffee and frontier.
Sales to see both Kitco Oakmont story point I've, just some of the examples of the partners we have grown significantly during this pandemic and.
What is common amongst them that you can fill and operators and their market. They have great leadership, there and disciplined yet courageous and they have and aligned relationship with Wal tower, we rise and fall together. This list is expanding with a significant opportunity set that I mentioned for a moment ago.
Number three capital deployment opportunity.
I have already commented on the acquisition opportunity on the deep value style and the risk of sounding like a broken record I would remind you that's where it on IRR buyer with an incredible focus on basis, operator and structure.
Our opportunity set is rising rapidly and I hope to provide you with more specific color and net 60 to 90 days.
This comment is obviously focused on the current opportunity let me provide some color on and a related topic, but on future opportunities. We had well tower had never been in a more advantageous position as a partner of choice for <unk>.
And here, we have focused on growth strategy, driven by our relationship based and non wind for cost structures and data analytics platform, rather than prioritize on cost and access to capital advantage. After all not all capital is equal.
We never imagine that we'd encountered today's extreme strength, but as you can see we stood by our operators. During this difficult time, not only to preserve their businesses, but also to grow it significantly.
It's cheap but action is not for this reason we are inundated with requests for the partner of choice from all asset classes, we play and as much as they like zoom calls and we have been on road throughout this pandemic meeting with prospective partner this is bearing meaningful fruit.
We have executed more partnerships and pipeline deals and not nine months, then all part and five preceding years combined.
We expect to deploy 10 plus billion dollar per capital in these opportunities and next few years and.
In other words, we are not only executing on these value on recycle opportunities, but also laying a strong foundation of growth for the entire cycle when inevitably the significant price disturbances. After day will be gone to give you. An example, we recently re upped.
Our master development agreement, but five years with skills to see both our largest and will be tenant we're looking to stock approximately 600000 square feet on 100% pre lease development in 'twenty and 'twenty, one and 2022.
Number for talent opportunity.
I touched on this last call, but let me elaborate for those of you who are focused on long term.
We're seeing and incredible interest and a platform from seasoned professionals to aldi carrier applicant.
We have taken advantage of recent disruption and brought in 41, new professionals and 'twenty and 'twenty, we expect at least as many if not more to join our team in 'twenty and 'twenty one.
In addition to new talent, our existing talent pool is taking.
On more responsibilities and reaching new Heights as a result, we had 50, new promotions and flow tower.
Through this through this.
On some.
Though these sports on oddly pressure on G&A, which is partially offset by law and we can be from we think this is this incredible talent pool is equivalent of a coiled spring, which will manifest itself in a meaningful growth for the farm speaking on talent pool, and how is the mood inside today and.
Sidewall tower.
What I described for you at the historic resilience last year has transformed into and environmental offices optimism and unbridled passion. This year I want to make it abundantly clear we have no crystal ball about the near term operating fundamentals.
What we are doing meaningful work that matter, we have meaningful relationship and we're seeing a new level of positive energy of people, who wants to be part of this team internally and externally to create meaningful value and make a disproportionate impact with that I'll pass the microphone two.
Tim Tim.
Thank you Sean.
My comments today will focus on our fourth quarter, 'twenty and 'twenty results and performance of all our investment segments and the quarter, our capital activity and.
And finally, our balance sheet and liquidity update and our first quarter outlook.
The fourth quarter was a tough and do a very challenging year and the on.
And the impact of coronavirus and accelerated meaningfully in the back half for the fourth quarter and and at the beginning of 2021.
The visibility for large parts of our business beyond the next 90 days, you mean, very limited and very dependent on virus related variables such as unpredictable path of growth the rollout efficacy on the vaccine and the continuation of population Lockdown mandates and.
As a result of this uncertainty we decided to provide our first quarter outlook. This morning in place on the full year outlook, we would normally provide and our fourth quarter call.
And as we've done over the last year, we will continue to disclose and update information on a frequent basis.
And with the intention and providing a more complete outlook as soon as the variance the virus related variables moderate to a level that allows for liable for casting.
Now turning to the quarter.
Well on Tau reported net income attributable to common shareholders of 39 cents per diluted share and normalized funds from operations of 84 cents per diluted share.
Normalized on a BOE was sequentially flat from third quarter, and a decline and senior housing operating earnings and dilution from dispositions closed over the last two quarters was offset by recognition of HHS funds lower G&A lower interest expense and initial returns on our invested capital.
Now turning to our individual portfolio components.
First with our Triple net lease portfolios as a reminder, our triple net lease portfolio coverage and occupancy stats on reported a quarter and arrears.
So these statistics reflect the trailing 12 months and a 930 'twenty and 'twenty and therefore only reflect a partial impact from COVID-19, and importantly, our collection rate remained high and the fourth quarter, having climbed to 97 per cent of triple net contractual rent during the period.
Starting with our senior housing Triple net portfolio same store NOI declined two 7% and year over year and leases that were moved to cash recognition and prior quarters continuing to comp against prior full year contractual rent received.
Occupancy was down 260 basis points sequentially consistent with the average occupancy drop from Q3, Q and Arbor day and portfolio and.
And EBITDAR coverage to the Creek 0.01 times and on sequential basis, and this portfolio to one point your one times.
During the quarter, we transitioned our U K development portfolio from Triple net Jordana transitioned 14, former triple net capital senior assets to new operators every day and structures and disposed of one asset.
For the net impact of increasing coverage I 0.03 times.
Consistent with my comments and the past our senior housing Triple net lease operators and experienced similar headwinds and every day operators over the past nine months and we expect reported lease coverage status to continue to reflect these challenges is more of a pandemic periods reflected in EBITDA going forward.
That being said and resilience of this portfolio as reflected by the continued high cash collection rate and encouraging.
And as I described last quarter, we entered into agreement with capital senior and beginning of 'twenty and 'twenty, which allowed for an early termination of CSU leases on 24 wall tower owned assets and exchange for full rent being paid in 'twenty and 'twenty and cooperation with transitioning the operations on these assets.
We transitioned 14 properties operated by CSU to new operators and the fourth corner and addition to five there were transition during the third quarter and anticipate the remaining assets be transitioned to new operators and the first half of 'twenty 'twenty one.
As a result, and the continued COVID-19 backdrop. The initial expected dilution from these conversions expected to be approximately for per share and 'twenty 'twenty one.
Additionally, the conversion of and development portfolio and the U K from Triple net for Dan is also expected to be negatively impact normalize up about my four cents per share and 2021.
The combination of these two transitions is expected to result, and the sequential roll down roll down for a little over <unk> <unk> per share on a normalized doesn't flow from Q4 to Q1.
Next on long term post acute portfolio generate two per cent and year over year same store growth.
However, EBITDAR coverage declined by 0.012 times sequentially to 1.0 times, which was almost entirely due to deterioration on our largest long term post acute tenant Genesis healthcare.
As we noted last quarter Genesis healthcare, which makes them approximately half for long term post COVID-19 exposure raised concerns around the ability to continue as a going concern and second quarter financials filed on August 10 and <unk>.
Result of this concern well tower began recording revenue and cash basis and third quarter. Furthermore, we wrote down our unsecured loan exposure and then by $80 million and fourth quarter similar to our Genesis lease income we've been recognizing all interest on our unsecured loans on a cash basis.
This impairment does not change income recognition on these loans.
Genesis has remained current on all financial obligations to well tower through January.
And lastly, health systems, which is comprised of our probiotic as senior care joint venture with the pro manga health system.
We had same store NOI growth and positive $2 seven per cent year over year and trailing 12 month EBITDAR coverage was 227 times.
Turning to medical office outpatient medical office portfolio and delivered positive two 1% and year over year same store growth modestly below long term trends.
Growth continues to be negatively impacted by reserves for uncollected rent. The large majority of what you're resulting for lease enforcement moratoriums, and several California jurisdictions, which we have a sizable footprint.
And as I described last quarter and these moratoriums expire we expect rent collection to approve from and $98 five per cent received and the fourth quarter.
Looking back and 'twenty and 'twenty, our outpatient medical platform displayed incredible resilience and a truly challenging year, which include periods of time, which basic medical appointments and procedures were flat out and not permitted yet we still managed to grow same store NOI and average a positive one seven per cent.
During the fourth quarter, we continued to observe improvements and several key operating trends as business continue to normalize, notably a pick up and our leasing pipeline, which should start to reflect and occupancy positive occupancy pick up towards the back half of 2021.
Now turning to our senior housing operating portfolio.
Before getting into this quarter's results I want to point out that we received approximately $9 million from the department of health and Human services Cares Act provider relief fund and post quarter, we received and out of the $34 million delivering $8 million and $31 million a night expected proceeds and our share.
We are recognizing these funds on a cash basis until they were flow through financials, and the quarter, which and which they receive.
And we're normalizing these H H S funds on our same store metrics. However, along with any other government funds received that are not matched to expenses incurred in the period. They were received.
For the fourth quarter, and approximately $11 million 8 million and reimbursement normalize out of our same store senior housing operating results, mainly time day to adjust program and the U S.
Now turning to results for the quarter same store NOI decreased 33, 8% as compared to fourth quarter 2019, and decreased 11, 3% sequentially from the third quarter.
Starting with revenue sequential same store revenue was down two 4% and Q4, driven primarily by 160 basis point drop in average occupancy.
As a reminder, we started the fourth quarter with relative optimism on the occupancy front with improving year over year, moving volumes and relatively low prevalence of COVID-19 within our communities.
However, these positive trends rapidly reversed and the exponential rise in global Covid cases in November and December, but the city and state wide Lockdowns and admissions bans across many of our key msas, particularly in the U K, and California, which together comprised 34% on Marshall portfolio NOI.
This was 180 basis points of occupancy loss from November through year end.
And they started on and as I stated on our third quarter call. The path of Covid will dictate our business trends and the fourth quarter non seasonality and not and the seasonal flu and that has proved quite true over the past three and a half months.
Turned around port and the quarter.
Total shell Rab for.
Total show portfolio Revpar was down one 2% year over year and flat sequentially, but as I described last quarter mix shift and restored and the true picture of rent growth metrics and standalone year over year Revpar growth for our active adult independent living and assisted living segments were positive three seven.
One five and one 1% respectively.
The combined total portfolio metric is being impacted by considerable changes, Inc, and composition of occupied units and a year over year portfolio and lower acuity properties independent living and senior departments have held up considerably better on the occupancy front since the start of Covid. We just had the mathematical impact of having a higher portion of our total portfolio occupied units being.
Lower acuity and therefore lower rent paying units.
The point being rental rates are proving more resilient across our portfolio and what appear and or aggregate reported statistics.
And lastly expenses total same store expenses declined $2, one per cent year over year and increased 50 basis points sequentially.
I'll focus on the sequential since it changes and more relevant to trends and the current operating environment.
The 50 basis point increase and operating costs was driven mainly by higher sequential COVID-19 costs as a result of the surge in cases and the fourth quarter.
The decline and topline combined with these expenses expense pressures had a meaningful impact on our operating margins, which declined 220 basis points sequentially and 22.3 per cent.
And as I noted earlier on the call. We are not include government reimbursement that was not tied to period expenses and peer expenses and their same store results and therefore, COVID-19 expenses negatively impact same store by $18 9 million and the quarter.
And we will stay consistent with this treatment and Q1, we've already where we've already received a net $31 million nature just funds they would likely turn COVID-19 expenses into a net benefit and if included in our same stores and offset.
Looking forward for the first quarter and starting with 'twenty and 'twenty one year to date data. We have already observed we've experienced 180 basis point decline and occupancy through February 5th.
Given there's still heightened presence of Covid and we expect average occupancy to be down 275 to 375 basis points from fourth quarter and first quarter.
Note that we are providing the average occupancy as opposed to spot occupancy and the former better ties to our reported financials.
And therefore 260 basis points of our expected 275 to 275 basis point decline is already baked given the swift drop for mid November to date and occupancy.
We expect monthly revpar to be down 20 basis points sequentially, although it should be known and that actual rent per unit is up two 1% sequentially.
With mix shift with which I mentioned earlier and two fewer days in the quarter SKU and reported revpar versus actual rent ground.
Lastly, we expect total expenses to be effectively flat as higher sequential COVID-19 costs are offset by less labor utilization due to lower occupancy levels.
Turning to capital markets activity throughout 2020, and we took a series of actions that will difficult resulted and our ability to retain significant cash flow and ultimately gave us greater control and navigate through the pandemic.
It's worth highlighting that despite the stress and dirt buyer business, we've avoided as destabilization of the balance sheet by borrowing to pay the dividend or being forced and raising equity or selling assets and on attractive valuation.
Given where we sit today with $2 1 billion of cash and over $5 1 billion and bill of available liquidity. We are pleased with our course of actions being the most prudent way to maximize balance sheet stability and positioning us to take advantage of attractive capital deployment opportunities.
In addition to shoring up the balance sheet, we undertook a series of actions to optimize spend and maximize retained cash flow by reducing our corporate overhead and tighter cost controls and fine tuning and capital expenditure plans.
We also made the decision made to reduce our quarterly dividend by 30% given.
Given the uncertainty surrounding the pandemic timeline and severity.
Despite the pandemic substantial negative impact on our business our actions throughout 2020 removed on independents on a quick recovery and also afford us the opportunity to be patient with respect to the transaction market and take advantage of attractive private market valuations relative to public markets.
Also highlighting and institutional demand for our high quality portfolio.
Over the course of the year, we sold $3 7 billion of pro rata assets, and a blended and five point and 4% yield, including $1 3 billion and senior housing operating assets and a price per unit of 332000 per bed.
Most recently during the fourth quarter, we sold a portfolio of senior housing operating properties operated by North Bridge for 200 million, representing a four 9% cap rate on March trailing 12 month, NOI and $395000 per unit.
Also on the fourth quarter, we announced a new joint venture partnership with certain investment vehicles managed by walk from the joint venture comprised a portfolio of 20 for outpatient medical properties previously majority owned by Wall Tower.
Many of these transactions were completed in the midst of significant disruption and real estate and capital markets for the long term viability of our senior housing assets in particular, we're being called into question.
While we are pleased with execution on the disposition front. We are excited to now be executing on the acquisition side with financial flexibility and ample liquidity and.
On our third quarter earnings call shock describe and $1 billion acquisition pipeline and since the start of the fourth quarter, we closed on $657 million at a blended initial yield of four five per cent.
With an expected stabilized yield over seven five per cent.
Lastly, moving to our first for outlook.
Last night, we provided an outlook for the first quarter of net income attributable to common stockholders per diluted share of 24 to 29.
And normalized <unk> per diluted share of 71 to 76 per share the midpoint of our guidance 73, and a half cents per share represents a sequential decline from approximately 10 and a half cents per share from the fourth quarter.
The 10 and a half cent decline is composed of and eight cent decline and senior housing operating results driven by six tenths of fundamental decline and two cents of increased COVID-19 costs.
A three <unk> per share sequential decline and triple net senior housing and Hawaii.
A little over two cents of which is related to the capital senior and signature U K transition as mentioned earlier with the remainder due to fundamental decline on cash recognition leases.
A two cent per share decline related to net investment activity in Q4 and Q1.
And three cents related to a combination of other items, mainly made up of increased G&A income tax and a slight decline in interest income.
These declines were offset by a five 5% increase and pro rata and HHS funds received to date and the first quarter.
As a reminder, we only guide and HHS funds, we've already been that have already been received as of today's call.
And with that I'll hand, the call back over to Sean.
Thank you, Tim I Wonder and with two things before we open it up for questions first I'm excited about the collaboration that is and marched between our peers and.
We have worked diligently with healthy Ventura and Omega to address operator, and industry issues and towards mutual and mutually beneficial transactions.
For example, it was an absolute pleasure to work with Tom Herzog and his team on two separate transactions.
<unk> hundred $70 million.
And I am positive we are embarking on a new era of collaboration amongst other public companies in our space second and.
In spite of challenges being faced by our industry today and our confidence in our business has not changed and I'm hopeful that my comments. This morning have provided you with a framework for.
For how we intend to create long term value for all of our stakeholders.
We're grateful to be part of your portfolio as our shareholders personally. This management team has established a highly concentrated position and well tower in fact, neither Jim nor I have sold a single share of the stock that we have received on a post tax basis since we have come on board.
Few years ago, which should be on indication to you our fair share fellow shareholders off our conviction and personal stake we have and this business.
As Buffett taught us diversification may preserve wealth, but concentration bill as well.
This does not mean that path forward will be without challenges.
But it is clear that we're all in.
On this company and that our alignment with you our shareholder a strong and significant.
With that we'll open the call Apocalypse shifts.
Thank you Sir.
As a reminder to ask a question you would need to press star one on your telephone service.
On your question press the pound key.
And in order to allow everyone to ask a question. We ask that you. Please limit yourselves to one question and re queue with any follow ups. Please stand by while we compile the Q&A roster.
I show. Our first question comes from the line of Juan Sanabria from BMO capital markets. Please go ahead.
Hi, good morning, and thank you for the time.
Just on the acquisition for you guys talked about the $1 billion pipeline and.
Cockpit and on more opportunities and I was hoping you could provide.
A little bit more color on.
What the focuses.
And so on the kind of day, the value opportunities and seniors housing buying it.
And a great basis and.
And if that's the case or more generally if you can give color on.
The timeline for stabilization from the low cap rates.
Going in.
What we should expect in terms of when you get those stabilized yields.
Thank you on and good morning.
That is our focus is to buy and near term.
At least in the near term basis value opportunities that are at significant discount to replacement cost, where we can bring and the right operators or buy with the right operator and.
If it is owned by some other capital partners of our operator.
And so we're focused on basis, we're focused on all prego, we're focused on structure.
Interestingly, we are starting to see some opportunities where they need shell yield is not as much of a drag that just a coincidence. We're not focused on that we're focused very much on basis and structure and operators and I expect that our blended yield on the.
Opportunities when you talk about next quarter will actually be dragged up overall by this set of opportunities, but I can tell you that is not our focus were purely focused on basic structure and operator.
And any color on on timeline to get to the stabilized deals.
And just generally ties ties to the overall length of the recovery interest.
It is it is I appreciate it.
One is it is purely dependent on the shape of the recovery and when he troughs, which I already said that I'm not going to comment on right now.
Uncertain environment that is precisely why debt, we're buying deep value opportunities. So that we don't have to be dependent on that right. So if we had a perfect sense of what the shape of the curve looks like and when and perfectly troughs and then we would have to buy everything we possibly can which we're not we're very focused on it.
And discount to replacement cost for debt very reason.
But you know again, we need more time to give you a general sense of what that looks like but it depends on assets to assets. We're buying assets that are 82% occupied we're buying assets at a 22% occupied so it's very hard to make a general comment on when and what we think is sort of the shape of that accretion looks like.
Thank you.
Our next question comes from the line of speed Sochua from Evercore ISI. Please go ahead.
Thanks, Good morning, I'm shocked and and Tim I know you can't really comment on sort of the exact bottoming and timing of the recovery, but you know maybe talk about sort of the move ins and you know the conditions that you think you need to see within your facilities kind of and the macro in order to ultimately start to drive.
And volume given what we've seen and on the decline.
Yeah, Thanks, Steve So.
I think that first and foremost what we've seen and learned over the last 10 months as debt.
One cases nationally and cases and our buildings have very much marry each other and the viruses presents itself is pretty challenging.
And keep out of anywhere so I. Thank you and talk about the macro and being cases, where kind of speaking to both those the same time, but we've seen both the negative and positive case counts rise and fall start to impact our business, 3% to 45 days afterwards, and that makes sense, given thinking about kind of the sales cycle and.
On average had 30 days of a kind of a start of a lead to a close so what we need to see is the direction. We're seeing right now and case counts to continue and we need to see slightly the vaccinations and that are going on on a national level and our buildings and then allow for that to be and our health and a low level and where.
Seeing those things take place now.
But as of today's call. We are still very much on an elevated level of cases nationally and are building. So.
I think what we need to see for this current level.
We're actually and continue the low level to sustain itself and we'll start to see some early indicators of that.
And if that direction continues over the next month or so and the fundamental impact on our business would come and they said kind of 30 45 days after that so I think it comes down to you know simply.
On the path of the of Covid and it's.
The big region of kind of the outlook being one quarter here and not the full year, because I think any full year outlook for it.
Essentially be just a more of a guidance on where and the path of the virus goes which is something that we don't think we've got a better view on and.
And those of you on the market. So it really comes down and just just COVID-19.
Yeah.
Thank you on.
Next question comes from the line of Conor and Stefanski from Baird. Please go ahead.
Good morning, everybody. Thanks for having me on the call I appreciate the detail on the prepared remarks.
I'm looking at lease maturities and specifically as it relates to the post acute care portfolio and 2021 and I'm just wondering how those conversations are progressing and if theres any kind of expectation for renewal rates.
Okay.
And I'm, sorry say it again.
And so.
Which leases.
So the lease maturity is related to the post acute care portfolio and then how those conversations are progressing.
So kind of on the conversation with all tenants and it's the same right.
And if a tenant wants to focus on what is the right near term fundamentals right now and for.
Project debt as the future then I don't think that's alright tenant.
Right and we have two you cannot think about this business.
And what is happening right now and market lease to market on that basis.
On today's fundamentals, that's just not how we think about it I laid out the whole free.
And Mark of how we think about leases.
On a previous call I'm not gonna have bore you with the detail.
But the conversations are always the same what is the and a.
<unk> cash flow of our business, what does that mean from.
From a value as well as the last dollar basis of debt leaf the leverage and fact right. So that's how we think about leases that flow into leases new leases.
On renewal leases and that's all going to move forward and if we think that you know.
Our tenants and US we can't agree on what is the long term value of our real estate is then we have to move forward with a different operator.
Values and the real estate and we know how to preserve it.
Thank you.
Our next question comes from the line of Michael Carroll from RBC Capital markets. Please go ahead.
Mr. Carlos you have your phone on mute please on mute your line.
I didn't sorry.
Ken with regard to the seniors housing triple net portfolio and your prepared remarks can you kind of provide some color on what percent of the operators are being recognized on a cash basis and I guess what are they paying today versus their contractual rents and interest real quick off of that and that payment.
Payment and coverage stratification heat map that you have on this.
That coverage ratio reflected on their contractual rent or is that reflected on the rent that they're currently paying today.
Yeah. Thanks, Mike.
So it's a little over 5% of our Triple net NOI is reflected as cash and on its contractual rent.
And on the heat map and things moved to cash their remove from the heat map because they essentially at that point or a one for one in you know relative to what's being reflected in our earnings and what's being received and cash and.
Debt kind of is not relevant to the actual contractual and also can end up kind of inflating.
And coverages. So we if it moved to cash essentially what it is we move it off because at that point earnings is reflecting exactly that cash.
And I'd say, just as kind of relative to areas of of where we've seen cash recognition, where EBITDA is kind of fallen relative to rents and it's kind of probably been and.
0.5 to seven five times.
Coverage areas.
Thank you on.
Next question comes from the line of Derek Johnston from Deutsche Bank. Please go ahead.
Hi, everybody and good morning.
Spot occupancy stands at 74.4 per cent for show and with Covid cases declining and most of your residents likely vaccinated by the end of first quarter is this 275 to 375 basis points, a further decline in occupancy that you're guiding it.
And this year estimate up well towers pandemic trough occupancy given what we know today.
Okay.
So what we're estimating and our and our actual first quarter guidance with my prepared remarks, I alluded to this but if we were to be if today's occupancy was be held.
From here through quarter, and we ended up at an average occupancy decline from for Q2 <unk> of 260 basis points.
And our guidance is for 325 basis points of decline from for Q2, <unk>. So our expectation is that given the heightened COVID-19 cases, and on a national basis that declines and occupancy continue and we're not making a call on the direction of of Covid, and which would therefore impact on.
Occupancy and.
And so in short no. We're not we are not calling today's occupancy trough.
Thank you.
Our next question comes from the line of Jordan Sadler from Keybanc capital markets. Please go ahead.
Thanks, and good morning.
I know that you guys are have some optimism because.
Sort of transition from defense to offense and.
And and buying assets again, so I just wanted to get a little bit of.
Have a sense of what your thinking is as you're underwriting these assets and terms and in seniors housing specifically.
In terms of and the pace of potential lease up and so on the other side of it.
And this spike in and Covid.
How do you think about.
And what and maybe you can give us some brackets for what lease up.
Occupancy might look like during the peak leasing season late April to September.
Thanks Jordan.
So.
And I can put some brackets around it just thinking through kind of pre COVID-19 occupancy levels, we've talked a bit this year.
Looking at move ins and.
And as a percentage of pre COVID-19 levels and do you have an idea of not only how much net declines at the start of COVID-19, but kind of where they sit relative to levels in 2019.
If you were to look at kind of move and levels from April to September.
2019, and compare that to move out levels, we saw on the fourth quarter of this year.
So just the most recent experience which.
It is a bit heightened relative to historical.
But as you can see and our stat certainly is not not spiking, you would see and 100 per cent to back that back and pre COVID-19. The demand levels 90 to 110 basis points of occupancy increases and on a monthly basis and.
That's really a product of again.
Demand coming back quite a bit like a january of 'twenty and 'twenty, one and we're at 50%.
Of prior year move ins, so thinking about that 50% to back to pre COVID-19 levels, that's quite a climb from here.
But another way to look at it and we likely have to get back to kind of 65%.
Pre COVID-19 demand levels to get to breakeven on occupancy and then from there build to start to gain and.
And just putting that in context.
When Covid did come down in the late summer early fall of 2020, we did see.
And.
Demand as measured by move ins move back to kind of 70% prior year. So we've seen them and move back in that range.
During COVID-19 pre vaccine.
But certainly we're well below that now so.
Current trends and moving side have gotten worse, but hopefully that gives you an idea of where that could move to if demand really comes back to pre COVID-19 levels and the short term and also where we kind of need them to get to just see some stabilization on the portfolio Jordan and does not mean that we're underwriting.
And this April to sort of the early summer to lift fall leasing season, and we're going to see that kind of occupancy increase if we did that we would buy every product that we can possibly buy and the market.
So I wanted to remind you that we are not we're focused on basis.
And our value creation is not dependent on our ability to pinpoint a shape of recovery and is purely dependent on what it takes to build a building and and who can buy at a significant disk on that too.
Two things will happen right you can wait for that demand to come back and if you can't make money at a obviously at a 50% 60% discount to replacement cost and no one will build a new building and the replacement costs because they have to charge a lot more than you so ultimately and any capital heavy.
The asset class like real estate.
Assuming your overall demand is increasing.
Ultimately the demand supply well balance if I can make money.
On a discount to replacement cost you will not be able to make money by building a new one accurate placement cost. This is a particularly interesting phenomena. This cycle and most cycles. What you see is replacement cost I mean, the cost to build goes down whenever recession hits because housing is why Todd replacement cost.
And actually spiking through this particular cycle that keeps the even if they got GAAP as we think through a cycle.
Thank you.
I show on next question comes from the line of Nick Joseph from Citi. Please go ahead.
Okay, it's like a bond and here with Nick.
Just two part question shelf just in relation to partners and relationships that you talked about during your opening comments.
You talked about a $10 billion pipeline of opportunities.
As you've executed more partnerships over the last nine months and we did and the five years prior.
And you mentioned, a 600000 prelease M O B can you just step back and sort of break down that $10 billion and a little bit more detail about what comprises it what sectors and the timeline and then the second part of sort of the relationships you talked about this new collaboration with your fellow healthcare.
For a REIT.
And what drove that change and those relationships.
And I think it's definitely a positive it's nice to see but what was the drivers.
I think you've been a little bit more critical overtime and I just wanted to know what sort of led.
And two these new power and positive relationships.
Okay. Let me take the first one for the second one first because that's the easy one I don't believe that I've ever been critical.
Sure.
Denise.
And what led to the collaboration.
And I reached out to my fellow Ceos, and we absolutely are.
And grief that we need to work on this industry issues and operator issues together and I got a very warm reception.
So that's just that's just very simple right I mean it just.
It is true that we have to work on this and.
There was a power and bigger numbers and web based smart companies and our space run by very competent and smart management team.
Only and our interest to work together to solve these bigger issues than Mark alone. So that's a simple one.
I'm not going to get into the first portion I will tell you that we are creating as I said.
We're very much focused on from an acquisition side on two things right Ali cycle opportunities that obviously, we're executing and it will be very pleased at the progress where debt will shake out, but we're very very much cognizant of the fact that aldi tackle opportunities eventually that will be gone. So if we.
Start walking on and then what will eventually be comments and normal cycle opportunities too late.
So we have never stopped and it is also pretty much from bofa advantages position.
To be a large company in our space and the largest company and a space, which we're expanding food and rapidly and we didn't bat and I lead and stopped and.
Because we believe and the business as I laid out we are you have to think about it. This is a very interesting business, where you have to work with other people and you have to work with operators you have to work with developers.
In many cases and one on the same and to grow and create value together not at the expense of each other that alignment is extremely important and these slides 910 months has given us the opportunity to.
And to work with more of our operators and frankly speaking as you can see.
Being aligned with well tower.
Has created significant and is continue to create significant value for our our operators who as you know if you think about if you are not aligned with and capital source that has the capability and the fees resolved to deploy capital to this kind of disruption.
And then ultimately as I said, you would come to the other end of the cycle and it's too late.
So I'm not going to get into what that looks like and this gives you. One example.
600000 square feet to a 100% pre leased and will be.
Michael you can do the math and think about how much value creation and debt is not a pipeline that is just the stocks that were sitting here today between 'twenty and 'twenty, one and 2022.
Thank you.
I share. Our next question comes from the line of Jonathan Hughes from Raymond James. Please go ahead.
Hey, good morning.
Can you talk about your underwriting assumptions on the recent sharp acquisitions at a mid three yield and the reason I ask is because using some of the assumptions laid out in the December 2018, Investor day, and like exit price and 7% IRR requirements and implies a high single digit NOI growth CAGR for the next decade.
I know you won't comment on the gross and net recovery trajectory, but maybe some of those other assumptions like exit price and changed versus two plus years ago. So any details or thoughts about how you underwrite shop and compare to perhaps now higher yielding but more stable and slower growing medical.
Office buildings would be helpful. Thanks, and.
Johnson.
Defense, obviously every asset is different where you buy that and what basis do buy the assets is completely different when we made debt presentation. We never thought we will be able to buy assets and meaningful discount to replacement cost. If you look at pre pandemic health care real estate, particularly on the senior housing.
Usually treated at his miles to modest premium to replacement cost because the health care income has a multiple non real estate multiple but it's still a multiple right so and asset classes, where you're starting a bob some level of replacement cost.
Moving to keep your pricing power really strong for the whole cycle and the next BARDA and analyst day. So you have to think about your next virus and liked it and the next buyer has to also believe that will continue.
That's all that.
By implication you are buying above replacement cost and he was telling about for the basement cost or you're making a bet that the NOI growth.
If youre not NY growth will meaningfully outstrip the cost of construction increase right. So and both side you are at some form of above replacement cost that equation changes completely when you can buy at a significant discount to replacement cost.
And if you by 50 cents on the dollar and at some period of normalization use and it sell it at 100 cents on the dollar you are still at a significant discount to the previous case when your next by analysis, it's much much easier and nothing has changed except the price and that price.
You why we're so excited about it today.
Thank you.
Our next question comes from the line of Amanda suites for from Baird. Please go ahead.
Great. Thanks for taking the question.
And you kind of think about building occupancy post pandemic how're you thinking either about changing service levels are where and how you invest capex if at all and what are tracking you run for them.
Okay. So.
This is a question that has a I don't want to be too long winded and give you an answer.
It depends on the price is really the service level of the assets inside those buildings today, and we don't increase the occupancy our operating partners to and we've worked with our operating partners and service levels Capex needed and everything but this is a collaborative process and I don't want to.
And so stitcher and tell you that this is we have the operating expertise to do that I'm, assuming you're asking a sharp question.
We have the best operators and the business. They are very very good of what they do and their local dominance in the marketplace, obviously as well as this particular service area is very much of a.
Very much of what we are depending on having said that we have worked diligently with our operators on.
Paris and provider integration.
And this is or isn't as I said this is a very long answer to of course, and we're happy to take this offline and have you talked to Mark Shaver.
Who leads this obviously this process.
And our shop, but the pricing question. The service portion is more of an operator question and then it was tower question Capex costs, and it's definitely something that we work together, having said that the payer and provider integration is something that we are leading and our operators are collaborating with us, but that's a long discussion.
And we will take this up offline. If this is of interest for you.
Thank you.
I show on next question comes from the line of Rich Anderson from F. N. B C. Please go ahead, thanks, and good morning, and you know just a comment the olive branch, you're extending your peers and day to you and us.
Red meat to me so happy to happy to hear about that type of collaboration and the space and speaking of collaboration one other things. The gaming sector has has noted gaming REIT sector has noticed and ability to expand margins post pandemic and some lessons learned about what was.
And a wasteful and their and their four walls and and you know perhaps a better.
Product at the other side of this question is on shop I know, there's a lot of talk about margins going down of course. These days, but do you envision that there will be some positive lessons learned from all of this and that ultimately part of your your interest and senior housing and shop, specifically is that there was and margin expansion.
And sort of thesis down the road here, maybe two three years down the road perhaps that.
And that will come out of this or should we not be thinking along those lines.
So Richard.
That's a very good question and when we've talked about actually with our operators through and less players and kind of last six months.
I think I'll answer in two ways and the first is on lessons learned.
Absolutely. This has made our operators look at their cost construct and a more critical way than they probably ever heard of imagine just given the pressures on occupancy and getting back to levels that for a lot of them looked like they haven't been and since at least up somebody's asset two years ago.
Well, we've had feedback from operators.
And large platform, saying they found ways to do things for on the labor front, just a lot more efficiently and given the feedback you know ahead of time to what you were speaking to that when you start to see the business come back and you think there is significant cost savings and the.
And maybe the labor model.
As far as getting a bit more leverage off it and the margin side I would hesitate to kind of speak to that from a margin expansion story, just driven purely by that as of yet as you know there is cost and the structure right now that are being added because of COVID-19.
We feel pretty confident a lot of these things are temporary and.
But given that there's two things to speak now of kind of on margin expansion story, well, having those cost and <unk>.
And the current business and having and unclear picture of when and how the kind of the virus moves away from our business I think it would be a bit aggressive, but I do think.
The margin expansion story and thinking about it relative to even where we were pre pandemic.
And we think Theres and occupancy lift story and this space just given the demand story and that the thing that makes it still keeps us very positive and the spaces.
That long term demand story hasnt changed from the pandemic and certainly has been a very.
Very impactful last nine months 12 months and need to continue to be in the near future, but in the long term demand story stands.
And that's going to lift occupancy and there's a lot of operating leverage on this business even without changes.
And the structure, so youre going to see and.
And kind of industry occupancy lift up over the next three to five years. Thank you are going to see margins move above where they were pre pandemic, even without those operating efficiencies being put into the model, which I will just add two things one is that we obviously and.
Encourage you and.
And our team would be happy to send it up to talk to Mark Shaver and our team with what we're doing on the payer provider side and.
And which should help margins as well second lessons learned I would say on a margin point, but the separate point is one of the lessons learned and shop to not just this pandemic, but for last few years is that you should not lend money to and entity or.
Or any type of entity, where you are not willing to take the keys right as a REIT, we're not allowed to obviously on an operating company and more than 35%. So we should not and lend money to operating companies.
We're not able to take over the assets today, we're only focused obviously in the last few years and through the cycles for the pandemic. We're only focused on if we write a credit check we only right.
If we are completely able to take all of the assets and we're very happy on out of the asset on the last dollar exposure that we have.
That is the big lessons learned inside our shop and.
And a good one for the long term value accretion for shareholders.
Thank you I show on next question comes from the line of Nick <unk> from Scotia Bank. Please go ahead.
Thanks, Good morning, everyone. So a couple of questions just here on the vaccine rollout.
And that's important in terms of getting moving activity back and so I was hoping to get.
Some stats on what the adoption rate has been of the vaccine.
And by residents and staff members. So far and then I'm also wondering you know we saw an announcement from atria, which was very vocal saying that they were requiring staff members to get vaccinated by may.
And we haven't seen anything from Sunrise and so I guess I'm wondering you know is a part on are there and Sunrise and you guys are pushing for that policy and maybe you can just give us an update on kind of what that policy is in regards to staff members across your operators and and our assisted living for thanks.
Nick I'll answer the second question and Mark will answer the first question.
We have tremendous and want to respect for joined Moore and his team and atria, we do not comment on the vaccine policy of different operators and we work with our operators and supportive of their different policies. I can tell you everybody's focus is to get to the right place how they get there is the decision that the management teams and the field of <unk>.
Specific operators to take that we do not push for one or the other but I can tell you that everybody is focused on the same outcome mark.
So just to give some stats and the relationships the operators have with Cvs and Walgreens has worked quite positively we've seen over 120000 vaccinations and across the platform as of earlier this week.
About 90% of our communities have completed their first clinic and <unk>.
Are you actively working through the second clinic, we feel by the end of February 1st week of March.
Most if not all of the second clinics will have taken place.
With regards to adoption and consent.
90, plus percent of residents have consent or received the vaccination 55%.
Staff across the portfolio that varies from operator to operator have consented to receive the vaccination.
We're not going to get into specifics on number of vaccines by individuals. Some of this is skewed you may be aware that if there was active COVID-19 or the active COVID-19 diagnosis and the prior 2008 days and individuals have to wait to delay that so we're focusing really on consent and the percentage of.
Vaccinations that have occurred across the communities, but happy to provide additional color, but those are the highlights.
Thank you.
I show. Our next question comes from the line of Mike Mueller from JP Morgan. Please go ahead.
Yeah, I'm curious how are the yields on the various new developments, you're looking at compared to what underwriting would've been and pre pandemic.
Yeah.
Our target yields Mike have not changed market conditions have changed still obviously or even more critical thinking and board.
The cost as well as the land price and ultimately how much it takes to obviously how long it takes to get to that stabilization and the working capital loss and between right. So our focus again as I said you have to imagine this thing the long term, we think about at least the development that we're interested in.
You were talking about a five six year cycle. So you have to really really think hard about when do you start when it actually finishes when you get your approval and just for an example, as you know that for last few months of last year or so we have walked on.
And new development project in Brooklyn, and is one of the hardest place to build and the country right. You can you can change your view, depending on how you're feeling and Bob your occupancy today, that's a 5% to 70 of process and.
And so our return thresholds have not changed clearly what we take sort of the trend. It yields the trending has changed given what is going on and the business today, and we still need to make money on and Untraded basis to start. These development. So that's how we're thinking about it.
Got it okay.
Thank you.
Sure. Our next question comes from the line of Todd Stender from Wells Fargo. Please go ahead.
Thanks, Your data analytics team has been instrumental in and having you guys drill down on Msas.
Just for senior housing for of course, but can you share the recommendations that they are providing now just in light of lingering new supply.
Al migration for more urban cities due to Covid, maybe any specifics you can you can share.
And Todd.
We have the ability to tell you today first is they are not just focused on senior debt.
Housing the team has built the platform has been enhanced pretty meaningfully in last few quarters. So we have the ability to do well well beyond what you have seen and senior housing into medical office and our.
Other housing businesses, such as active adult weighted play.
Pretty heavily.
One other questions that you raised which is the migration pattern you can do we have a team and tech team, which has been working on this data scientists.
Today I'm glad to tell you that we have the ability to do pinpoint that out migration our integration on a weekly basis, not just focused on the longer term data such as Acs and IRS data, but also a cell phone data and other more near term or more instantaneous.
And sort of data I don't mean instantaneous and right at this point, but we can tell you on most on a weekly basis not almost starting with <unk> as we can tell you on a weekly basis, where people have moved out on <unk>.
And that is very much we're flowing through our models as we're making investments as you know debt with very very focused on making new investments on all the asset classes, we deal in and it's definitely a big part of why we're seeing.
Today, the attractiveness of us as a capital has enhanced in last few months or few quarters, because we are still standing here and taking advantage of the disruption and the marketplace, but also debt huge predictive analytics platform that we have built over many years.
And that our partners are attracted to.
Thank you.
I show on the next question comes from the line of Steven Valiquette from Barclays. Please go ahead.
Oh, Thanks, and good morning, everybody. So a couple of questions here I guess first regarding our Rab for it was encouraging to see the positive year over year trends and <unk> 'twenty and a L.
L a and senior apartments, and that 1% to 4% range and your walk through of the F. F O sequentially and <unk> 21.
Mentioned that six and hit from a fundamental decline and senior housing.
Curious, what's the Revpar assumption within that does that stay positive year over year or does that start to decline.
Yeah, that's it for.
Good question, Steve So.
And when you're thinking about on a sequential basis and at <unk>.
And that moves from for two <unk>.
Effectively and so thinking about like Revpar and occupancy decline and combining it to your revenue.
Revenue changed sequentially, our Revpar is down 20 basis points, but that's driven by two things.
40% of our senior housing revenue and the fourth quarter is actually from.
Operators that receive rent on a daily basis, which is pretty common and the higher acuity side of senior living and so just moving from the fourth quarter. The first quarter you lose two days ago from 92 days and 90 days.
So with Revpar being an approximation of monthly rent and your rent and would go down and two 2% just from that so there's a headwind from that on a.
Sequential Revpar basis, and then you've got this continued mix shift where the occupancies and mix shift the makeup of revenue and the fourth quarter and.
Versus first quarter again, youre seeing a higher occupancy fall off and the higher acuity segments of our portfolio, which pay higher rent so and combination of those two things and.
On the Revpar from how that impacts kind of total revenue was down 20 basis points, but if you look at on a per day per unit and rent for up to two 1% in the fourth quarter relative to the first quarter and it's actually pretty strong sequential growth and is driven mainly by roughly half bar operators also have.
Jan one.
Increases. So there was increase was pushed through on Gen. One and that has helped kind of rent growth.
Thank you.
As shown on next question comes from the line of look it's hard for which from Green Street. Please go ahead.
Thanks.
So on in the past you've talked about well towers and difference between the Shin and shop for them that is structured correctly.
I'm curious on the teams are evaluating that question for the existing portfolio is both acquisitions and this environment because.
Clearly, there's a lot more uncertainty in the near term fundamentals, but.
Covering and the trajectory potential long term impacts on the senior housing business for a lot of moving pieces relative to history there.
Well I think you just coined and new time Im assuming youre asking about the difference between.
Senior housing Triple net senior housing operating.
And look.
Given where the cycle is.
I want to be and majority being the equity position in the RIDEA side.
But there are opportunities for us deploy capital in the senior housing and a triple net side. If you have asked us debt stabilized and you can buy it cheap enough that the last dollar of that lease is still and it plays what other operators can make money and we can make money. There. Obviously you can create a lot of built on <unk>.
And then what the operators have a second bite at the Apple.
So there's ways you can create that alignment, but remember.
Simplistically think about RIDEA is and equity exposure and.
And at least as more of a credit exposure you can create value.
And from our side if the buildings are stabilized on near stabilization and.
And.
And you buy a cheap enough that your last dollar is still a pretty low rent relative to what the cash flow of the buildings look like and you can create value, but that's how we think about it that's so.
Our operators think about it and so we have on two opportunities to do leases. If we do find more opportunities, we'll do it but I can tell you that the industry is moving away at least we're moving away from very tightly covered leases today, we're thinking about there should be even more margin of safety on <unk>.
When we find opportunities.
Buying so cheap that we can and that's one way going for it.
Thank you.
I show on next question comes from the line of Joshua <unk> from Bank of America. Please go ahead.
Hey, good morning, guys I just wanted to follow up on your <unk>.
Comment on your opening remarks about.
Hiring and it sounds like he and I think you said 41.
Last year I'm curious just what area of the business or are you guys hiring and attitude.
Yeah.
Pretty much across the board I mean, if you think about it we have added a lot of people.
Our investment teams and we have hired a lot of people on our data analytics team. We're at a lot of hiring people on our infrastructure teams or accounting tax and I.
Can I don't have the background and I can tell you that we have seen and incredible resurgence of interest and are in our asset and our company today.
From both sort of.
Externally and internally and what I mean externally as an operator developers and tunneling ads.
Prospective employees.
For both experienced employees that we're hiring there is a lot of talent and the market for obvious disruption also a lot of our Lee carrier employees.
Debt, we're seeing I'll just tell you just one small debt and.
Interesting one doesn't change really for anything we do we hire east coast West Coast and Midwest, We hired top seven schools for NBA candidate this year, we got.
More than 1400 applications for really for five positions, we hire so that sort of tells you the interest and our business.
And the amount of incredible talent, we're seeing both on the other liquid side as well as Super and experience side and we'll see some really good hires this year and as well this year.
I expect that we will add 40 to 50 professionals across the board and.
And the company.
Acquisition is not just as I said I want you to think about Josh acquisition and this kind of <unk>.
Market, which is so disruptive and three ways one obvious one right and we're doing value opportunities that we can add at a discount to replacement cost be acquisition of <unk>.
Partnership and operator relationship and develop a relationship that's B C is employees were in a business of talent and given the amount of disruption that's in the marketplace that we see and what do we think this business will become as we think about three years five years 10 years from now.
We're very much adding and incredible level of talent that we have sort of never seen in the marketplace.
Great I appreciate the color.
Yes.
I show on next question comes from the line of Tayo Okusanya from Mizuho. Please go ahead.
Yes. Good morning, everyone first of all sunk and Tim I just wanted to give you our entire team.
Credit for such strong.
Transparent disclosure on your business updates that were small and the appears to be doing that and all.
Also I regard for Paul My Hope for is doing well.
First question really is around government support.
Could you just talk a little bit about kind of post the fees.
Our balance and then kind of what you see and the pipeline at this point and what you're seeing.
Seeing on what the potential news flow for.
And the.
Government and we need for your operators.
So let me take let.
Let me take your question and see what it can get there I'm not going to comment on sort of what might happen. There is too much uncertainty we have a new administration.
And by CTO and tried to comment on what might happen and I will be so much outside and my zone up confidence, which I think you know that I focus very much on the talk about confidence.
And being a lifelong buffett and munger.
I'm not going to venture debt.
But I will tell you that Tom is doing well.
And I talk to them pretty frequently it's been an incredible mentor and a friend and continues to help me think through a lot of issues and.
He is definitely doing well if you reach out to him and who apply to you.
He is definitely doing well and it remains a great supporter of the company and he is helping and.
And he can.
Thank you.
I show on next question comes from the line of Daniel Bernstein from capital. One. Please go ahead.
Hey, good morning, I appreciate you staying on and taken them closer.
It seems to me that the initial acquisitions you've done here on me.
Clearly just construction youre buying at below replacement cost.
But theyre not really truly distressed sales. So just trying to understand what youre seeing and the marketplace in terms of lenders bankers kind of exercise and covenant and enforcing more distressed sales and the remainder of this year, especially.
Given your comments on a strong pipeline and.
If you could talk difference between debt distress and seniors housing and skilled nursing and thanks.
Uh huh.
Like beauty distress is also something that lies in the eyes of there'll be holder I can tell you. Dan we are we're buying assets in core markets of New Jersey, Seattle, California for less than $200000 per unit, where replacement cost is 400 500 about $500000.
Unit.
You don't think that's a deep value opportunity.
And I really don't know how to answer to that so I guess, we just have to obviously think about it different way. We are if you just always remember.
Price relative to what it takes to build that GAAP is what creates the strength.
Just wanted to look at purely on a price for pone and does it look cheap.
Just wait for a few.
As I said 60 to 90 days I can tell you more about some of those opportunities that we're seeing but I think we're executing on some very significant.
Sort of discount to replacement cost opportunities. Some we have reported and if you look at what those assets are and dig into what it takes to build if you will understand that.
So going back to the banks look I have no idea when the banks will obviously push more towards.
Sort of pushing that.
So this whole pipeline of new construction that happened between 15 and 19 from there.
For.
Their books, but I can tell you that we have been working diligently with many of our banking partners.
Just yesterday, we executed on one such loan.
You know look we're here open for business, we have a sense of what the value is we have a sense of how we can create value not just at the buy but also with our operating partners and we're executing but I can't sit here and tell you when the banks will peak debt books that just no way to say that.
Thank you.
Our next question comes from the line of Vikram Malhotra from Morgan Stanley. Please go ahead.
Thanks again for this.
Picking on just to go back to.
And sort of the potential inflection I know you can't give.
And.
On your near term prognosis on when that's going to happen, but just in terms of early indicators both on move ins and.
Move outs and my phone and your comment that 65% needed for stabilization interesting I'm just wondering.
In the different geographies given the Covid cases has.
And it somewhat differently and that has a correlation to the move ins any early signs youre seeing on monitoring debt, which suggests moving and move outs kind of can turn the other way.
So there is not I think.
As far as early indicators, we haven't seen enough to notice and the trend I'd say, you certainly have seen operators, where you've seen.
And Sir tours or initial inquiries move up you've also seen as your question goes and you've seen it move down and geographies and which you've had essentially the last six to eight weeks has been.
Shut off and a lot of ways. So not enough of a trend on the initial indicators are first movers to say that there is.
There's something there I do think part of what I was getting out earlier is what we've seen in the past you follow some of the.
First indicators being inquiries and request for tours et cetera, you've seen that kind of lag.
Cases, and that kind of 30 to 45 day range. So what we've seen in cases, and fact that there is still very high maintenance time, a bit different as far as how much time and takes posted it but just thinking about it and mid January and kind of peak and cases.
You would likely if things continue on this trend and the positive trend and we're seeing and can you start to see towards the middle to the end of the month, maybe some of those first indicators move and a more portfolio wide basis.
And so he can provide some more questions or some more color on that.
And as we update the market over the next month or two but right now it's a little too early to speak to it.
Thanks.
Thank you.
Our next question comes from the line of on my Tayo Okusanya from Mizuho. Please go ahead.
Yes. Good morning, Thanks for continuing to go on my question really ties into what from those tests.
And then in <unk>.
And what trends have been getting better over the past week, you guys kind of talk about a 45 day lag.
And it does seem to indicate you think that things could get better and the back half of the quarter, but yet you know you'll have 206 basis points of average occupancy dip.
Decline baked into day, but the guidance range for <unk> and Sony $5 55 for guidance.
And things actually get worse and about half of a quarter versus better.
So just hoping to quantify that yet.
And I appreciate the questions just to clarify that a bit.
We're saying if the trends were to continue and I think you were saying the same you would start to see some improvement and the latter part of the quarter the trends getting better from here and are staying the same as the part that we're not taking a position on and so.
And.
And certainly if that continues that way that's when we start to see some improvement our guidance doesn't take a position on on Covid and the path of it it's <unk>.
Even today, despite where we've come off of.
Case counts and every way share perform or higher than at any point, we've given our forward look and the past.
Nine months. So today still has a lot of uncertainty and certainly feels better than it did three or four weeks ago.
But what's baked into guidance and our view is not a and attempt to.
Call for a better on a continued improvement and its more of a current state holding or and is also tayo as Tim pointed out before majority of that decline and on an average basis is already baked in right and if you see the improvement that you are hoping for it which we're not hoping for.
We're not guiding for.
And therefore more impact the second quarter than the first quarter.
Thank you.
Ladies and gentlemen, this concludes the Q&A session and today's conference call. Thank you for participating you may all disconnect at this time, everyone have a good day.
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And.
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