Q4 2020 National Health Investors Inc Earnings Call
[music].
Yeah.
Greetings and welcome to the fourth quarter of 'twenty and 'twenty conference call. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time and if you have a question and please press the one followed by the for and your telephone if and.
And anytime during the conference you need to reach and operator. Please press Star Zero. This conference is being recorded Tuesday February 23, 2021, and now would like to turn the conference over to Dana Hambly. Please go ahead.
Thank you and welcome everyone to National Health Investors Conference call to review the company's results for the fourth quarter of 2020 on the call with me today are Eric Mendelsohn, President and CEO, Kevin Pascoe, Chief Investment Officer, John Spaid, Executive Vice President and Chief Financial Officer, and David Travis Chief Accounting Officer. The result.
And as well as notice of the accessibility of this conference call and I'll listen only basis were released yesterday after market close and a press release, that's been covered by the financial media.
As a reminder, any statements and this conference call, which are not historical facts are forward looking statements NHI cautions investors that any forward looking statements may involve risk or uncertainties and are not guarantees of future performance.
All forward looking statements represent nhi's judgment as of the date of this conference call.
Investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in Nhi's form 10-K for the year ended December 31 2020.
Copies of these filings are available on the SEC's website at SEC Gov or on Nhi's website at NHI REIT Dot com.
In addition, certain terms used in this call are non-GAAP financial measures reconciliations of which are provided and nhi's earnings release and related tables and schedules, which have been filed on form 8-K with the SEC.
Listeners are encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release I'll now turn the call over to Eric Mendelsohn.
Hello, and thanks for joining us today.
We hope that everyone is staying healthy and hopeful that 2021 will be better for our industry then 2020.
Despite the unprecedented challenges created by the COVID-19, pandemic NHI performed well and 2020.
We increased <unk> per share by three 7% <unk>.
Increase the dividend per share by 5%.
And maintained our fiscal discipline with leverage below five times net debt to EBITDA and and <unk> payout ratio below 85%.
We're also pleased to note that we deployed.
$226 9 million and real estate and note investments during 2020, and our pipeline for 2021 looks promising.
We were also able to access the capital markets to bolster our balance sheet using our ATM and more recently through the issuance of our first public bond offering in January and a very favorable rate.
As we discussed last quarter the impact of the pandemic has been uneven across our portfolio as the entrance fee and skilled nursing communities, which generate more than 50% of our cash revenue had been more resilient than our free standing assisted living memory care and.
<unk> living tenants.
Government assistance through the cares act has been effective and bridging the gap to a more stable operating environment.
We are hopeful that more assistance is on the way from the provider relief fund as well as the one nine trillion dollar American rescue plan.
As most and the senior housing and skilled nursing industry has continued to struggle with declining occupancy and increased staffing and testing and PPE costs.
Despite the hardship our monthly collections remained strong throughout 2020, and thus far into 2021, which is a testament to the tireless efforts of our operators and their mission to keep our senior sales.
But the pandemic has obviously placed a considerable burden on our tenants, which clouds the visibility and the weeks and months ahead, and we will make 2021 and more challenging year.
Fortunately the rollout and the vaccine to over 94% of our communities is having a positive impact with the number of active resident cases down by approximately 65% since peaking in mid December.
However, this.
And this has not yet translated into occupancy gains and so the road to recovery looks too uncertain for us to forecast with a high degree of confidence. Therefore, we're not providing guidance at this time that may change if clarity improves.
As we have previously discussed we have been working diligently with bickford and prospective lenders on the sale of nine properties, which would improve their cash flow by approximately $3 million annually.
We're still moving forward with a closing currently targeted and March how.
However, the rapidly changing underwriting process for these buildings makes valuation for the lenders more difficult. So we're working along multiple paths with our bickford.
Partners to create a long term solution that makes them a stronger company, while improving our coverage metrics.
We are not disclosing specifics as the discussions are ongoing but we hope our track record of transparency tells you that we will share more details as soon as possible.
As the pandemic unfolded, we expected that there would be more deferrals heading into 2021.
We said last quarter that we believe the challenges presented by the pandemic are temporary.
And that we would be hesitant to make long term decisions and the heat of a crisis that is still very much. The case. So we are willing on a tenant by tenant basis to address their individual needs.
Fortunately with the early success of the vaccine clinics, we see some light at the end of the channel and expect to see occupancy gains this year, which puts us in a better position to make decisions that have a more lasting impact on the company.
While 2021 will be a difficult year NHI is well positioned to weather the storm with multiple levers at our disposal to preserve our conservative capital structure and set the company up for longer term growth.
While this pandemic has had a disproportionately negative impact on operators carrying for the senior population. We do not believe the damage is permanent and remain steadfast in our positive outlook for the great growth opportunities and health care real estate.
With that I'll turn the call over to John.
Thank you, Eric and Hello, everyone.
Our triple net leases and served us well through 2020 as the pandemic reached our year end 2020 results are a testament to our triple net strategy and we continue to believe this strategy and will serve us well throughout 2021.
However, as.
As we near the end of February many of our operators continue to experience operating stresses due to the continued occupancy declines and increased pandemic expenses.
And the vaccine rollout is very encouraging, but we still see a great deal of uncertainty with respect to eventual senior housing occupancy and operator NOI recovery.
The result of those lingering uncertainty means we will not be providing you with our normal annual guidance today.
And we're engaged in discussions with a number of our operators, who may need additional rent default and 2021, and we cannot meaningfully assess the timing or amount of further default in light of many factors, including operating resources and additional federal relief.
Our strategy for 2021 will be to continue to work with our customers to stabilize our operations and then assess our ability to recover from the Pandemics effect with.
We continue to believe that our current and.
And then a future rent for also will be temporary.
And not indicative of permanent changes and our operators performance.
For our leases with them.
We expect to have more clarity this year and when we do we will endeavor to provide you guidance.
And we'll endeavor to provide guidance to you that.
I'll now turn to our results for 2020.
Beginning with our net income per diluted common share for the year ended December 31, 2020, we achieved $4 14 per diluted common share and net income attributable common stockholders compared to $3 67 for the same period and 2019.
Which is reflective of $21 3 million and gains from gains for real estate dispositions, partially offset by $6 9 million and deferrals and $3 9 million and loss and early debt retirement and associated with the payoff of our headlines during the fourth quarter.
For the quarter ended December 31, 2020, we achieved 83 per share and earnings.
Which sequentially is down from 95 from the third quarter and compares to <unk> 95 for the same period and 2019.
Earnings were negatively impacted by $4 3 million and tenant default and a loss recorded for the early retirement of the HUD debt.
For our three <unk> performance metrics per diluted common share for the year ended December 31, 2020 compared to the prior year NAREIT <unk> increased to <unk>.
To $5 51 from.
And from $5 49.
And the prior year.
Normalized <unk> increased one 8% to $5 60.
And adjusted <unk> increased two 7% year over year to $5.29 from $5 10.
Reconciliations for our pro forma performance metrics and we found in our earnings release, and 10-K filed yesterday afternoon at SEC Gov.
Cash NOI is the metric we use to measure our performance.
A reconciliation of any size cash NOI can be found on page 19 of our Q4 2020 SEC filed supplemental.
For the quarter ended December 31, cash NOI decreased 73 to $73 8 million, a decline of 2% and one 4% compared to 2023rd quarter and the prior year's fourth quarter respectively.
The decline reflects approximately $4 $3 million and rent deferrals incurred and the fourth quarter.
For the year cash NOI increased four 2% for $302 $8 million.
Turning to the balance sheet.
Our debt capital metrics for the quarter ended December 31 for net debt to annualized EBITDA for <unk> nine times.
Weighted average debt maturity at two years, but for six years on a pro forma basis adjusted for the recent bond issuance.
And our fixed charge coverage ratio at six four times.
We ended the quarter with $1 5 billion and total debt of which 94% with unsecured.
And for the quarter ended December 31, our weighted average cost of debt was $2 91%.
And over on a pro forma basis adjusted for the recent bond issuance illustrate two five per se.
On January 26th Gen. Hei entered the public bond market with an inaugural issue of 400 million and 3% senior notes due in 2031.
The bonds were sold and an initial yield of 394% and <unk>.
Proceeds were used to pay off for a $100 million term loan due this year and to reduce the revolver balance and.
At January 31, we had $520 million and availability under our $550 million revolver, and $37 2 million and unrestricted cash.
In addition, during the third during the fourth quarter, we sold 456835 shares NHI stock through our ATM program and an average price of $66 47 per share raising approximately $30 million and net proceeds.
For the year, we sold 535990 shares and an average price of $66 30 per share raising approximately $35 million and net proceeds which leaves approximately $465 million under our existing shops.
And mid December we declared our fourth quarter dividend of.
From a $1 10, and a quarter, which was paid on January 29 2021.
I am pleased to report to you that we were able to pay our dividends for the year with <unk> and <unk>.
And out ratios for 82, 3% and 81, 2% respectively.
So in conclusion.
Kevin will talk about and more detail in a moment.
2021 rule requires to balance a number of competing financial factors from additional rent deferrals to new investments to continuing to fulfill our existing commitments to our customers and from capital recycling due to dispositions and mortgage repayments.
And decisions moving forward will be focused on maintaining our financial policies for both leverage and dividends as the COVID-19 crisis begins to resolve itself in 2021, and we're able to begin the return back to normal.
With that I'll now turn the call over to Kevin Pascoe to discuss our portfolio Kevin.
Thank you John.
Starting with an update on Covid, which is based on results from our February 9th by Weekly survey.
We are very encouraged by the rapid rollout of the vaccine to our operators that began in late December.
As Eric mentioned over 94% of our communities, including 100% of our Smiths have completed at least the first round and we expect that nearly 100% of our communities will have completed both rounds by the end of the first quarter.
Participation for residents is at approximately 80%.
And the staff participation rate is at 46%.
Both rates increased from the prior survey and we're working with our operators on initiatives to drive higher participation, particularly for staff.
Active resident cases have declined by 70% and our senior housing portfolio and by 64% and our sniff portfolio since peaking and mid to late December.
The active cases represent less than 1% of our unit capacity, which is the lowest level since early October.
The early positive results from the vaccine rollout and have not yet translated and the occupancy gains, but and in addition to move and restrictions. We think this is more reflective of seasonality as the winter months typically are the worst from an occupancy standpoint.
We are hopeful that as the vaccine is more widely distributed to the general population that visitation rights will improve and we will see occupancy pickup and the summer and fall months.
Turning to collections.
We received 93, 9% of contractual cash due in the fourth quarter core.
Quarter to date, we have collected approximately 97%, which reflects the previously disclosed deferrals of 750000 per Vicksburg, and 450000 and for another tenant.
At this time, we have not reached agreements with any operators on future concessions.
But the length and severity of this pandemic is clearly pressuring many tenant operating margins.
Therefore, absent a quick upturn and occupancy or significant government support our internal forecasts incorporate some additional rent deferrals.
Turning to the performance of our different asset classes and larger operators.
Our needs driven senior housing operators, which account for 32% of our annualized cash revenue generally experienced stable occupancy trends through much of the third quarter, but were not able to sustain that momentum into the fourth as Covid cases started spiking again in early November and peaked in late December.
Phase II of the provider relief fund provided some needed short term financial relief and several of our operators are still waiting for phase III distributions, which are smaller.
But further help shorten the GAAP to a more normal operating environment.
Big for our largest assisted living operator, representing 15% of annualized cash revenue experienced a 280 basis point sequential decline and for.
Fourth quarter average occupancy, which compared to an 80 basis point decline and the.
And prior quarter comparison.
Big for December occupancy was the lowest month of the fourth quarter at 76, 7%.
And further declined by 110 basis points and January to 75, 6%.
Despite the continued drop in occupancy we have been encouraged with the recent increase and leads and new sales.
New sales conversion rates and dip below historical levels, but still suggests that the near term outlook for occupancy is improving as we head into a seasonally stronger period for new resident move ins.
As Eric noted, we're working along multiple paths with bickford and have the dual goal and putting them in better financial shape and to improve our coverage metrics.
Operationally, we are very pleased with how big for it initially respond to the crisis and do their diligence throughout to keep the residents and employees safe.
Our entrance fee communities, which account for nearly a quarter of our annualized cash revenue has been more resilient and driven by factors. We have discussed in the past, including a longer average length of stay and are generally younger healthier resident population.
But like our needs driven tenants for the fourth quarter occupancy trends declined more so than what we saw and the third quarter.
Timber ridge has been a bit and exception.
And as occupancy has been consistently and the mid 90% range.
Senior living communities, which represents 15% of our cash revenue had fourth quarter average occupancy of 77, 3%, which was down 170 basis points from the third quarter.
We are encouraged by Slc's January occupancy, however, which increased 110 basis points sequentially to 77, 3%.
January entrance fee sales were below expectations, but February sales have been strong as our expected March sales.
Our rental independent living communities, which account for 13% of our annualized cash revenue has experienced a more pronounced occupancy decline than our needs driven and CCR C assets.
Holiday retirement, which represents 11% of annualized cash revenue.
Had average occupancy of 77, 2% and the fourth quarter, which was down 240 basis points sequentially.
This followed sequential declines of 390 basis points, and the third quarter and 380 basis points and the second.
January occupancy declined another 150 basis points from December to 75, 3%.
As part of our lease restructuring with holiday in 2018, you'll recall that we required and meaningful equity infusion into the holiday tenant, which they've been using for working capital needs and we have a $10 6 million security deposits that provides some cushion until holiday starts to recover.
On a more positive note we are happy to report that holiday, despite being predominantly independent living.
Scheduled to complete at least the first vaccine clinic and each of the NHI owned communities by the end of the month.
Okay.
The skilled nursing portfolio, which represents 27% of annualized cash revenue is anchored by two strong tenants and and HC and the insight and group, who contribute 13% and 8% of annualized cash revenue respectively.
EBITDAR coverage for the trailing 12 months ended September 30 was two nine and four times.
Which improved from two nine times reported and the prior quarter.
This coverage is inclusive of funds received from the cares act for those that accepted the funds.
The government support for the skilled industry has been tremendous and we wouldn't be surprised if there's not more forthcoming given sniffs vital role and the health care continuum.
Turning to our business development activities, we announced $226 9 million of investments and 2020.
During the fourth quarter, we originated a development loan for $22 2 million at a rate of eight 5% and the.
And the proceeds for the construction of the courtyard of Sussex, and 110 unit senior housing community and Sussex, Wisconsin, which will be operated by 41 management and growing partnership of ours that now includes eight properties.
NHI has an option to purchase Sussex upon stabilization.
Since the pandemic began there really has not been a shortage of deals to evaluate the quality is not generally met our standards, which is why we've been fairly quiet and deploying capital and recent quarters.
Further the uncertainty caused by the pandemic made is understandably more cautious.
We continue to be cautious, but with our balance sheet and good shape capital recycling events and the near future and signs that the pandemic impacts will start to dissipate in the coming quarters, we expect to have an active year of investments.
The pipeline includes triple net opportunities and shorter term higher yielding products like mezzanine debt and development financing.
Currently we have approximately $200 million and border prove investments subject to further due diligence and underwriting.
With that I'll hand, the call back over to Eric.
Thank you Kevin.
We're proud of the results that NHI and was able to achieve and 2020, despite all of the Covid disruption.
And while we believe that the industry will begin to recover in 2021. The next several months will be difficult for our operators as they continue to deal with the pandemic aftermath.
As they start to rebuild.
That said the vaccine is clearly having a beneficial impact and indicates that we are much closer to finding the bottom. Then we were just weeks ago, we look forward to updating everybody on the progress.
Operator, we will now open the line for questions.
Thank you for like the rest of your question. Please press the one followed by the for on your telephone and you will hear a three ton prompt to acknowledge your request.
For your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three once again Thats one for to register for a question.
And we do have a question from day line of Jordan Saddler with Keybanc capital markets. Please go ahead. Your line is open.
Thanks, and good morning.
I wanted to pick up Kevin I think you touched on typical seasonality and sort of some optimism.
Can you maybe discuss the seasonality you've typically seen in your portfolio in terms of.
Move ins and move outs sort of maybe give us some guideposts.
Sure.
As we see and the winter months, especially as you get around the holidays, we just see lead traffic and.
And then also move outs.
Yeah.
This year has been no different as we think about some of our operators like big for when we're looking at there and move out rates through.
Through the course of the year.
We see a few more.
Looking at on a regular basis, we're seeing a few more.
On average each week.
There is not any specific underlying issue to point to as we've talked about.
The vaccine clinics have gone very well.
Mt.
Covid related incidents has gone down so the move outs that we see we don't believe are related specifically to COVID-19, though there has been some and the past but.
And the time of year, where there is still.
We've not seen a ton of it but there is still some flu that comes around and there's still other issues that crop up and seniors and winter months that are brought on about the change of seasons are having a cold weather and youre seeing again.
Influenza or other things like that that would you'd see people expire from.
So that is kind of seasonally it's something that we do see.
This year has been no different.
Mentioned, though just on the flip side.
Now that the vaccine is out we are starting to see some more lead traffic, it's not back to historical levels, but the amount of sales that we're seeing has improved those need to convert to move ins.
And also sandwich and a ton of nasty weather and other incidents going on around the country. So that's probably going to.
Keep people from being able to move in.
But it is something we're still watching very closely and think those are going to translate into those sales are going to convert.
And just.
It seems like now and there needs to be a little more education and handholding and this is a big decision.
For any family and especially at a time.
Like this so they're going to continue the education process do what they can from a tour process to get people comfortable and get them to take possession of those units once they get those sales.
And just specifically as it relates to holiday.
And some of the commentary and recruitment for it.
<unk> has been holding up reasonably well, we saw that previously and December lease.
Negligible move outs relative I think.
But january and kind of picked up and I wonder how we should be thinking about that was it was that a catch up for a lag or.
Sort of D. A.
Moving to sort of point to and drove net two and.
Bigger slippage for them in January.
I don't think the story there and then a different you have received the seasonally higher move outs as it relates to.
So all senior housing.
And then also people just are not moving in.
Generally speaking again around the holidays.
As we get into spring, though we see people start to move around a little more.
See where their loved one may need some additional care and encourage them to go to a setting where they have more community based setting.
Setting like.
Holiday community.
So we would.
We're looking forward and expect that there should be some increase and re traffic and hopefully and that translates into move and volumes, we've seen a little bit of that with them as well other lead volume has started to tick back up but again that needs to.
Convert to sales and moving.
<unk>.
Great and then lastly, I think you said the board approved and investments that are teed up did you say $240 million and if any color you can offer and mix that'd be it for me.
$200 million is what has currently been worked through.
And again those are still in various stages of.
Vince and underwriting, but there are things that we at least had.
The confidence and.
And you wanted to go ahead and make sure. They were approved as we continued our confirmatory due diligence and making sure we want to continue with the investment.
And but at least we did have the.
Enough.
Conviction around them for at least take him to our board and show them that we want to make these investments.
Are those mostly seniors housing triple net investments.
It's a smattering of different types of investments.
I think in this environment, everybody has been challenged to find creative ways and new ways to invest so youll see some senior housing just kind of down the fairway from us Youll see some.
As we continue to look at some of these investments some loans.
Some other just different opportunities for us to invest whether it's in.
Any other asset classes that we've talked about before.
And your housing skilled nursing behavioral and then again leases loans mez all of it is on the table for us and things that we think are.
Value add for the company.
Thank you.
Thanks Jordan.
Our next question is from the line of Daniel Bernstein with capital one. Please go ahead.
Hi.
Morning.
Just following up on Jordan's question on the pipeline.
Are you looking at adding new tenants or you bring being brought.
Fuels from your existing tenant pipeline.
It's really both.
That's exactly what our business model has been is to cultivate new relationships and have them come back for repeat business, which we think is a very high complement so.
From just.
Customer standpoint, again, I think youll see both types, we continue to work with all of our existing operators, but we want to continue to build new relationships and <unk>.
And have them continue to come back for additional business as well.
Okay.
And then I just wanted to.
And just understand a little bit better about what are the.
The issues I guess, Tony and the Bickford transaction and kind of like what are you running into.
In terms of due diligence or what are the lenders.
You can talk about it and.
And what issues or are you kind of running into for lenders.
In terms of.
Good evening day transaction just curious.
Hey, Dan This is Eric I'll take that one.
This has probably been the most challenging environment to get.
Our secured loan.
The irony is throughout all of this the credit markets have seized up and frozen.
John and his finance Department, we're able to do for.
$400 million bond it.
Crazy low interest rate.
But the world of secured lending is a little different and.
Lenders are definitely spooked by Covid impacts and.
And not being able to do live in person due diligence visits.
So everything just takes longer.
And.
And I would also say that alone this size and.
$50 million size is usually syndicated.
And some banks have dropped out during the term of the.
Fitting and that is.
Meant that you had.
Replace that slug of capital with a new lender.
So.
Youre absolutely right it is taking longer than expected and.
And it's frustrating on our end.
Can you fill the role of providing.
Lending or just filling and the GAAP there for what.
With the banks for doing syndicated side of the business and in other words, instead of being a and <unk>.
$50 million loan and to $25 million loan and you're providing the other 25%.
And just kind of lender financing is that something that's on the table.
To get the deal done.
Mechanically certainly we could do that.
And you run into some accounting issues.
When you end up loaning too much money on a sale.
And then it turns out it's not really a sale.
So we're trying to be mindful of that and make it.
Legitimate transaction.
Okay.
And then just one last question from me here.
Have you had any feedback from your operators.
In terms of the type of rising and that's moving and to seniors housing.
Older Frailer or we've seen a we've seen delays and then.
And try and also just for this is leading.
And are we seeing delays because of.
Work from home or some kind of hybrid work model and.
And kind of how are you thinking about.
And now.
The future of demand for it for the industry.
Well this is Kevin and I would tell you that.
Anecdotally there has been some discussion around the delay of moving and I don't think Thats, a new discussion that we've been having a dependency and clearly as I think has delayed that discussion a little bit further mainly because it's as we've talked a little bit about and my comments, which is visitation.
Moving your loved one and somewhere where you're not sure when or if youre going to be able to see them as very difficult. So with that in mind. There is an element of.
People with higher needs for people that are that need health right now they are the ones that are.
Coming to find services generally speaking thats, what the trends you've been seeing and.
Licensed.
License and buildings anyway.
But probably a little more pronounced right now.
Just because of that visitation issue now and we're hopeful that as the vaccine clinics.
Continue to rollout and everybody is feeling a little more confident that we will change consumer behavior and also need regulators to acknowledge that boost vaccination clinics have happened and therefore reduce or kind of roll back some of these restrictions on.
Visitation and how operators can conduct their business and that should start to help from a move in sales and moving perspective.
And again with the clinics, we have started to see a little bit of spur and activity there, but its not back to where it needs to be and we need to kind of the rest of this equation to follow through so.
There is that change in behavior and confidence.
Alright, I appreciate all the color and taking the time this morning.
Sure. Thank you.
Quick question from Rich Anderson with <unk>. Please go ahead your line is open.
Hey, Thanks, good morning.
Alright so.
Good morning so.
When you talk about rent deferrals.
What we're hearing and other property sectors, perhaps is that they are being recognized in the quarter. They were supposed to be paid because unless they're deemed to be uncollectible. Then it's bad debt. It doesn't sound like youre accounting for it that way for <unk>.
Are you some cases and not in other cases I'm just I'm just trying to understand how this rent deferral process might.
No.
The modeled into the future if youre going to sort of then recognize rent that wasn't paid and then on top of that as being paid hopefully a few quarters from now if youll kind of have a doubling up scenario is that the right way to think about it.
Yes.
And as John Rich, Let me, let me just clarify.
We're not recognizing any of the deferrals into our revenues at all.
So they are and agreement.
To be paid back to us at a future day.
But only upon that day.
When theyre payback for it.
And then recognize them into revenues, including whatever yield we might also achieve on them at that time, so it could be highly accretive.
And once things improve and those those deferrals then.
Tenants are able to start paying back those deferrals.
So you'll be superimposing previous deferrals with real time line and you.
Yes.
<unk> growth out of that is that right.
That's right did you have did you have.
Full latitude to account for it that way could you have.
We're going to we're going to recognize this and in the quarter. It was supposed to be received if we have if we have a good sense that that's going to be paid and the future or.
How did that go because that's the way other folks or are handling it and other sectors of the real estate.
World right.
And there was a special.
Sort of accounting standard issued and the middle of the year.
And sometimes commonly referred to as the faqs.
So not odd name for them, but.
And it did give some leeway and.
If you had a high degree of certainty and you know and Theyre going to be collected and then you can do that.
But no one likes to have accounts receivables that are two years old one years old and.
And I think you've got a.
Yes.
You've got other lives by your financial policies and when you do that so.
And Sir.
So is there a written agreement about a payback or is it a handshake or how is that being handled.
Yes, they are all and writing that's correct okay.
As far as.
You said go and tenant by tenant addressing needs clearly.
Part of that decision is reasonable relationship building.
Because these are these are folks that are you going to grow with hopefully in the future.
And is your attention being paid to those that really look to be strong players.
Going forward or are you even willing to come to the rescue for weaker operators that may not be a big part of the story.
A couple of years from now.
Hey, Rich this is Eric.
Sure.
I think what youre getting at.
And also include strength of character and.
And I would say right now.
We're trying to help all of our clients.
And as best we can and help them get through this crisis.
But we're definitely taking notes on people's behavior and ability to live up to the spirit of the agreements.
Is that a like a note pad or a large novel of notes.
And I'll have to answer that question.
Less.
Last question for me.
I appreciate the the reason the rationale behind not issuing guidance, but.
Maybe if I put it this way that fourth quarter could very well, perhaps D. D. The trough of all of this right. If we continued.
And have progress like Kevin and everybody there was talking about.
And.
Would it be would it be a reasonable sort of if we were to have a low end of our guidance range to just take this fourth quarter annualized I mean is that it would you would you consider that a reasonable way to think about modeling and a kind of a vacuum at the moment.
No I can't let you do that.
And so.
This year. This year has a lot going on as I may as I. This is John again, as I mentioned and my comments.
Later this year, we will have.
And some capital that we'll need to recycle the.
The principal numbers they are.
Acadia Trust point transaction.
And that was mentioned in our case we've received.
And I noticed that they're going to execute on their purchase option there so that'll occur.
And most likely in the beginning of the third quarter.
And we're getting.
Good results come in from our Sage what transaction and that was a result, and a mortgage loan repayment that might come in a little faster and we expected as high yielding capital will have to recycle.
And it is as we do have these investments in front of us that Kevin talked about.
And a little bit of a tiny and will occur when those happened versus when we can recycle some of this capital and finally, yes, deferrals and the time and those deferrals and when they occur is still unknown.
So.
As you can see occupancies declined somewhat more and the first quarter. So I'm not sure you can completely concur.
Conclusion, and the fourth quarter was the bottom, but we're getting close.
Okay fair enough.
Thanks folks.
Thanks Rich.
We have a question from John Kim with BMO capital markets. Please go ahead. Your line is open.
Thank you.
Rich just took my last question.
Ask it in different way, but so and.
And in the fourth quarter, you had 94% rent collection and Youre in discussions right now for.
Additional deferrals are you implying that.
The potential for 2021 deferrals could be greater than $6 $9 million and grants and last year.
Yeah, Let me take on and this is John.
We're just telling you that.
Way too uncertain, and it's just going to really depend on stabilization and how quickly occupancy can recover.
So you can draw scenario, one scenario could be would be greater.
And other scenarios it could be less particularly at the recovery results.
And in a situation, where we can start recovering.
For our grass, because it's going to be.
And the customers are induced to pay those deferred rents sooner rather than later.
Yield kind of and encourage them to do that.
And so.
If you could drive that either way.
And then finally I just would like to point out we're still waiting to see what's going to be and the provider relief funds.
Alright, okay.
It just sounded like some of those items you mentioned are all upside.
To the fourth quarter and for run rate.
They could be.
But I'm talking about the entire year here right and so.
And the near term you probably are going to see things that look a little more like higher stress.
And situation, but and then it's a question of how quickly can things recover moving forward after that.
And you now have for different tenant purchase options that are open and what are your expectations there.
And these getting exercise.
For us this.
And sorry, Jonathan Kevin as we mentioned, we expect the Acadia.
Option to be exercised.
The rest of these are in various levels of discussion I'll say with our operating partners to see if there's a way for us to find some other momentum solution.
Those things could be I mean, the outcomes could be they sell it go away it could be that we help them finance their purchase and we actually retain some of that income for a period of time it could be like we did with one of our other operators.
And a year before last where we are actions against it at the beginning of last year.
We were able to extend out that option or and the case of what we did with.
With ensign as to buyout the option from the prior customer and lease it to somebody else. So all of those things are still top of mind for us.
So we've given you certainty where we know.
One of them will be where we expect one to be paying off this year.
And the rest of them run and still various levels of discussion. So it's hard to say with certainty, which round is going to go but I think youre going to see a mixed bag of of all the things that I just mentioned whether thats us.
Either selling it or if we do sell it we can still.
Health and finance the purchase and retain so net income or push out that option. So all things we're still working on.
John you might even say Kevin likes to kick the can down the road creatively.
That's a good one.
And the title.
Eric you were named to the board this year, which I have to admit was surprising.
I thought you already on but so now you are the only insider on the board and HD conversing and three board seats.
Is this something that the company would reconsider at this point I know you have a longstanding history with them, but they are now your third largest tenant and you do have a large <unk>.
Negotiation ahead of your and if their exploration and for years.
What is your view on this.
If I understand your question correctly, you're asking.
Half two board members, who.
Our three board members, who are affiliated with NH C and isn't that a conflict when a lease renewal.
Occur with NH C is that your question yes.
Yes, it is okay.
We have had discussions about that and certainly discussed it prior to the two new board members being appointed last year.
And typically.
You would isolate those board members with the conflict and they would not be a party to the negotiations or the discussions.
So well interest.
This is the case now this is John John and anytime we have a transaction or any kind of modification requires board approval.
We have a set of independent directors with respect to MHC that act on these sort of issues.
So that'll be the case moving forward and of course management is incentivized to look out for the very best interest of NHI.
Well I mean outside of the conflict is three board seats are.
Affiliated with and and you can see is that.
<unk> Board competition that the company can have at this point.
Well I will say that the two new additions have deep experience and senior housing and skilled nursing.
And I can personally attached to them being.
Helpful and informing and their comments based on our experience.
Got it okay. Thank you.
We have a question from the line of Conor Seversky with Wehrenberg. Please go ahead. Your line is open.
Yes.
Hi, everybody. Thanks for having me on the call today.
On occupancy looking at SLC and particular here it seems to be one of the rare instances, where occupancy is actually jumped up from December to January where the rest of theirs and the rest of the space has reported the opposite it seems.
And I'm, just wondering what kind of dynamics might be at play here for Ya.
See that permeating through the rest of your tenant base and just any any kind of color there is appreciated.
Sure and counter to this is Kevin.
What you've seen with SLC or what we've seen with them is.
More and the entry fee model has held up pretty well and we've talked about and our comments you have a different profile of resident that is choosing a different lifestyle choice.
These are much more independent.
Individuals that are making a lifestyle choice and they can still essentially come and go with a pleased so they're not they don't have the same kind of restrictions and some of the other communities might.
So, they're essentially buying another home and making a lifestyle choice here further.
Furthermore, we have seen and.
And both the memory care and skilled nursing segment occupancy increase some there which has helped their overall occupancy those are smaller pieces to their campus, but those.
Maybe going back to an earlier comment about some of the more needs driven and we've started to see a little bit of a rebound and those.
Needs driven as it relates to just SLC specifically.
I do think though that.
Again kind of pointing to our overall comments talking about lead traffic and <unk>.
Sales volumes.
It's a good leading indicator.
People are starting to move around a little bit more of they are starting to make some of those purchasing decisions.
Needs to translate into overall occupancy.
<unk> done a really nice job there to be able to make those conversions happen and I believe our other operators are positioning themselves to be and a similar dynamic, but it's got a roll through and we've.
Not seeing that on the rental side, just yet, but we again have started to see some of those leading indicators.
So just high level is it reasonable to assume that SLC or portfolios similar to SLC.
And could be a sustainable trend as we work through the next couple of months.
I would say this past year. This is probably beat and those words.
And my vocabulary.
And make light of it I think it is something that.
All of our operating partners are looking to for.
For the balance of this year, especially once we get past this spring and into the summer and fall months to be able to continue some occupancy improvement so I think.
As a group that's everybody's expectation.
And we're just being cautious on calling it a trend just yet because.
We still need that trend to form again at this point, we just kind of have the leading indicators.
And again SLC has done a remarkable job of starting to build occupancy first so to speak out of our operators that we're publishing and information on.
And we think that will trickle through a flow through to the rest of the operating partners based on what we're seeing so far.
And the trend needs to still kind of formalized.
So this is just helpful.
And just once again point out that.
The entire industry can't be paint it with one brush and.
Kevin pointed out in his comments about how well our entrance fee community to timber ridge transaction.
<unk> performed this last year and continues to be and all.
And upward so over 90% occupied and we're seeing good good effects and the Sage Woods.
Development, and we have $180 million, while and commitment on as well so.
Each product is affected by Covid differently.
No. That's helpful. Thanks for that and then one more and I know Eric had mentioned some of the complications on.
The underwriting process related to the Bickford assets and then just at a high level I'm wondering if.
These similar dynamics are permeating through transactions and the rest of the space.
Do you foresee any meaningful changes and pricing throughout the year.
Just would like to get a sense on how you think transactions will progress through the end of the year.
I think what everybody is looking for right now and sorry. This is Kevin.
Everybody is looking for right now is to make sure or to find bottom. That's what everybody wants to know that we're at a place where things are getting better from here.
And to kind of jump on to what Eric was saying earlier and that's where.
Any bank not specific to bickford, but any bank just wants to make sure that the loan that theyre, making.
Has is based on again, some foundation and that there is a different trajectory from here on out again, I think we're starting to see that but we've already seen the banks tighten up in terms of their lending requirements, we've referred to it anecdotally or jokingly and our.
Prior calls about Retrans in terms of deals that keep coming back around and we're seeing a number of those right now just because they can't get financing or people or are those valuations arent quite.
Holding up so I think you're right there may be some opportunity and thats something we continue to look for is there. Some some value buys out there some some way for us to partner with our existing operators, where they can get a reasonable value and create some value and we can find some ways to incentivize them or get additional cash flow into there.
Enterprise.
Above and beyond the lease so.
Those are the things that we're looking for now.
We continue to evaluate several opportunities.
Along those line, so something and stay tuned for one thing I guess I will say, though is.
<unk> been looking for elements of distress and while we've seen some of it I wouldn't say that we've seen a ton of distressed buys and not as much as I, probably would've otherwise expected. So far so there is some.
Some floor so to speak on pricing that we're seeing.
But it is difficult to get transactions done right now.
Alright, and I appreciate the comments and I'll leave it there. Thanks.
And we have a question from Amato Okusanya with Mizuho. Please go ahead.
Hi, yes, good afternoon, everyone.
Yeah.
Eric.
Hi, you brought up the point about and get all the leg just trying to figure out with.
And then get the bottom so they can get comfortable with underwriting and.
And I think you've been in your press release, you did kind of call.
Cautiously about potentially seeing an inflection point this year.
Good day.
Or the.
What are you looking at anecdotally to kind of give you that.
That that optimism cautious optimism that we do see some type of inflection later on this year and.
Post <unk>.
And what.
Do you kind of pick.
Pick up kind of going forward based on the level of demand youre seeing today.
So this is Eric.
The data that I'm looking at is two things <unk> one is.
The progress of the vaccine clinics, and our portfolio and the industry in general.
The optimism.
And acceptance of our.
Providers.
Seems to be improving is that vaccine is being administered.
So that's the first thing the second thing and I'm looking at.
Is what they call sales leads and that is someone who takes a tour or visits and building online virtually however, and.
And makes a commitment to move in.
Whether or not that person moves and is a different metric that's called a move in.
And you might expect but we are seeing.
And.
A higher level of lead volume and.
And that is encouraging.
Okay.
And that lead volume and.
Based on historical.
Conversion rate.
And to give you a sense of.
We will pick up occupancy pretty quickly and so it's kind of a slow and gradual line that.
Yes, I knew you were going to go there and.
And I would say, yes, I would say if you asked me that question a year ago I would have a handy metric and I would be able to give you and industry percentage of number of leads sales and move ins, but that has all gone out the window.
And with Covid and frankly with the last two weeks of weather.
We've seen that this storm will creep.
Create havoc so it's been kind of a double whammy.
But the leads are up and the sales are up and that that is encouraging.
Okay.
And one more from me if you don't mind anything that you're hearing from the government and either from.
Youre lobbying groups or what have you about yen.
The senior housing and get a piece of this one nine to $1 is it going to be more.
Got a piece from what leftover from the carriers.
Like is there any kind of a real sense of what could happen next.
Yes.
Sadly I don't have anything to report many of us are participating in industry lobbying and calls.
And.
We spend a fair amount of money.
Supporting that effort.
And a lot of us are on.
Lobbying.
Zoom calls to legislators and.
And we don't have anything concrete yet so that that if you go back and look at Johns comments earlier about why no guidance. That's another part of the equation.
And last year there was.
The provider relief fund and that that helped with our operators.
Being able to continue to stay open and offer services. So we don't know what that looks like this year, yes, and it and to put a button on that Tayo. This is John again.
And have operators, who are owed money under prior programs that are still waiting on funding for that plan.
Gotcha Alright.
And I appreciate the color. Thank you very much gentlemen, thanks tayo.
And there are no further questions at this time.
Thanks, everyone and we'll look forward to seeing you at our virtual conference soon and a real conference and the future.
That concludes our call for today, we thank you for your participation and ask you. Please disconnect your line.
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Okay.
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