Q4 2020 LTC Properties Inc Earnings Call
Good day and welcome to the LTC properties fourth quarter, 2020 analyst and Investor Conference call. All participants will be in a listen only mode. So do you need assistance. Please signal conference specialist by pressing the Star T followed by zero after today's.
Invitation there'll be an opportunity to ask questions to ask a question.
You May press Star then one on your Touchtone phone to withdraw your question. Please press Star then two before management begins its presentation. Please know that today's comments, including the question and answer session may include forward looking statements subject to risks and uncertainties that may cause actual results.
And events to differ materially these.
These risks and uncertainties are detailed in LTC properties filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated December 31 of 2020 L.
L. T C undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances.
After the date of this presentation. Please note. This event is being recorded I would now like to turn the conference over to Wendy Simpson. Please go ahead ma'am.
Thank you operator, and good morning to everyone. Welcome to LTC is 2024th quarter Conference call. Joining me today are Pam Kessler co president.
<unk> and Chief Financial Officer.
And Clint Malin co President and Chief investment Officer.
I'd like to start off today's call by offering our sincerest. Thanks for 2020 coming to an end and to again, thank our operators for all they have done and keep doing to keep their patients.
Patients residents and staff safe it continues to be a somewhat uneasy road, but our partners have shown amazing resilience and grace.
Operating through the pandemic has been different from any other cycle in the history of our industry.
During the O eight O nine financial crisis.
Certain levers could be pulled while waiting out a return to normalcy.
Similar levers do not exist in this current cycle.
By now you've read news reports or hurt earnings calls so if other health care Reits, citing squeezed margins.
Moving challenges.
Labour exhaustion decreasing length of stay home health care growth and holds on elective surgeries, all creating challenges to operators.
We do believe that the industry census is close to or has hit bottom.
As the current vaccines and hopefully a third from Johnson.
<unk> and Johnson become more widely available and utilized visitation opens up communities from facilities continue to aggressively market their services and consumer confidence in these settings improves we should see the current census, stabilize and even improve however visibility to these.
Johnson remains slow so we can't predict when that might happen or when the industry will be able to fully recover from the effects of the pandemic.
Because LTC has built a conservative foundation with a strong and flexible balance sheet. We can continue to provide support to our operators if needed and take advantage.
Events investment opportunities as they arise without placing undue strain on LTC.
The need for senior care hasn't abated and states in which we have some of our highest concentration of properties are also states with the highest projected increases in the 80 plus population cohort over the next 10.
Each of them.
Government support for our industry remains vitally important and our industry associations have successfully lobbied and are continuing to lobby for much needed ongoing aid and support.
With the new administration likely comes more spending on and attention to the Covid.
And year prices it remains to be seen how much additional aid and with it additional governmental regulation will be forthcoming and when it will arrive. We believe this extra support is necessary last month, the federal public health emergency declaration related to the Corona pandemic was.
Extended through April 20th keeping in place the temporary six 2% increase in federal Medicaid matching funds, including the three day hospital stay waiver.
We believe a further extension is likely.
Additionally, a bipartisan bill was drafted to help ensure that.
That senior care communities and facilities can maintain adequate staffing levels by allowing temporary nurse AIDS to retain their certification status. After the COVID-19 emergency declaration has been lifted.
In addition to the new stimulus package being negotiated about 30 billion.
<unk> of prior earmarked aid remains unallocated, which will hopefully provide some incremental support to operators in the industry.
Moving now to more LTC specific discussion I'll start with rent deferrals, and abatements fourth quarter rent and mortgage interest income collections were strong.
Strong at 98 per cent.
As previously disclosed we provided partial relief to all eligible operators in the form of reduced 2021 rent Escalations. We thought it was prudent to proactively offer relief to our partners. So that they had additional funds early.
Early in 2021.
The rent credit is expected to have an approximate $530000 impact on our 2021, GAAP revenue and an approximate one 3 million impact on our 2021 Fad.
As we noted when we announced this program our.
Our board discussed various ways for LTC to provide support while balancing our fiduciary responsibilities to shareholders. So while fad will be reduced we are focusing efforts on replacing the funds with accretive transactions this year.
We will evaluate requests for additional support from operating.
Operating partners as we receive them and we'll review them on a case by case basis with careful evaluation of each operator's ongoing operations rent coverage corporate financial health and liquidity Pam will provide additional color shortly.
Next I'll discuss our senior lifestyle.
Style portfolio, which is currently a main area of focus for us as we work to transition the 23 communities. They have operated for LTC.
So far in the first quarter, we have transitioned 11 assisted living communities to operators.
One operator is new to LTC and.
And the other is an existing partner.
And our goal is to complete all S. LC related transitions by the end of the second quarter core.
We'll spend some time on the specifics.
The M&A market remains challenging for the industry. While there are deals being done we do not plan to relax our underwriting.
<unk> standards opting instead to wait until we can complete deals that provide accretive growth for our shareholders. We do not expect to engage in any large transactions for the foreseeable future, but we are seeing interesting opportunities to participate in growth through structured finance deals with reduced risk.
Underwriting files and strong returns, especially for development projects that are not dependent for success on immediate lease up or current census, when the market begins to open up we plan to use our considerable balance sheet to provide a wide range.
Of regional operating partners with the financing they.
<unk> pro to help grow their businesses.
Until then we will continue to develop new relationships and solidify existing ones. So that we're ready to act when we see appropriate opportunities.
Right now we see too many uncertainties in 2021, and we feel we cannot.
They need simply provide guidance at this time.
Now I'll turn the call over to Pam. Thank.
Thank you Wendy total revenue declined 190000, compared with last year's fourth quarter.
Impacting our results were abated delinquent and deferred rent granted in 2020, a reduction in property tax revenue and.
Rental revenue from the sale of the preferred care portfolio in 2020.
Additionally, in the fourth quarter of 2019, we collected past due rent from senior care.
Partially offsetting the decline was rent from acquisitions and completed development projects higher rent payments from anthem and contractual rent increases.
Mortgage interest income increased 226000 due to the funding of expansion and renovation projects.
Interest expense decreased 490000, due to lower outstanding balances and interest rates under our line of credit in the fourth quarter of 2020 and scheduled principal payments on our senior unsecured notes.
Lower operating tax expense decreased 809000, primarily due to the timing of senior lifestyle property tax escrow receipts and payment of related taxes.
G&A expense increased 675000, compared with the fourth quarter of 2019 due to the reimbursement of legal fees from senior care.
Prior year period, as well as the timing of certain expenditures.
Income from unconsolidated joint ventures decreased 270000 due to a dissolution in 2019 of a preferred equity investment in a joint venture offset by two preferred equity investments we made in 2020.
And during the fourth quarter of 2020, we recorded a $3 million impairment charge associated with a memory care community in Colorado operated by senior lifestyle.
The impairment related to our relief efforts of this property during.
During the fourth quarter of 2019, we recognized a $5 5 million impairment charge.
Related to the senior lifestyle joint venture.
The four properties comprising the JV were sold in the second quarter of 2020.
Accordingly, we received liquidation proceeds of $17 5 million and recognized a loss on liquidation of unconsolidated joint ventures of 620000 <unk>.
During the fourth.
Quarter of 2020, we recognized an additional loss of 138000 related to the final liquidation of this on consolidated joint venture.
In the fourth quarter of 2019, we recognized a $2 1 million gain from insurance proceeds related to a closed skilled nursing center in Texas. This.
Charged pretty sustained hurricane damage and rather than rebuild it we sold it and two other properties in the fourth quarter of 2019, resulting in a cumulative loss of $4 6 million.
We provided senior lifestyle deferred rent in the amount of 394000 in April of last year, while this amount has since.
This profit we repaid they failed to pay full rent during the second quarter of 2020.
As a result, we wrote off a total of $17 7 million of straight line rent receivable and lease incentives related to this master lease and transitioned rental revenue recognition to a cash basis effective July 2020.
<unk> during the fourth quarter of 2020, we applied their letter of credit and deposits totaling $3 7 million to accrued second quarter 2020 rent receivable of $2 5 million and notes receivable of 125000 with the remaining $1 1 million to third and fourth quarter of 2020.
Yeah.
At December 31, 2020, senior lifestyles unapproved delinquent rent balance was $1 million.
Net income available to common shareholders for the fourth quarter of 2020 increased by $5 million, primarily resulting from acquisitions and completed development projects rent increases.
<unk> lower interest expense the prior year's loss on sale in the fourth quarter of 2019, $5 5 million impairment charge.
Offsets included the 3 million impairment charge decreased rent related to the preferred care properties sales abated and deferred rent net of repayment.
<unk> a decrease in property tax revenue the 2019 receipt of 2018 past due rent from senior care and the fourth quarter of 2019 gain from insurance proceeds.
NAREIT <unk> per fully diluted share is 78 cents in the fourth quarter of 2020 and 81 cents in the prior.
The fourth quarter.
Excluding the gain from insurance proceeds in the fourth quarter of 2019 <unk> per fully diluted share was 76 cents.
The two cent increase in SFO, excluding the gain was due to lower weighted average shares outstanding in 2020, resulting from the purchase.
Prior your shares in the first quarter of 2020 under our share buyback program.
Moving now to our investment activity during the fourth quarter of 2020, we invested 5 million under our previously announced $13 million preferred equity commitment related to the development of a 267 unit.
Independent and assisted living community in Vancouver, Washington, Our investment earns an initial cash rate of 8% and a 12% IRR.
We expect to fund our remaining $8 million investment before the end of the first quarter of 2021.
On the preferred equity investment is accounted for as an unconsolidated.
Joint venture.
We also funded $6 3 million in development and capital improvement projects at a weighted average rate of 8% on properties, we own and paid $22 4 million in common dividends.
Our 2020 Fad payout ratio was 77%.
We currently.
Have remaining commitments under mortgage loans of $1 7 million related to expansions and renovations on three properties in Michigan.
We also paid $7 million in regular scheduled principal payments under our senior unsecured notes.
Subsequent to the end of the quarter, we borrowed 9 million under our unsecured line of credit.
Including this borrowing we have $7 8 million in cash $501 1 million available on our line of credit under which $98 9 million is outstanding and $200 million under our ATM program, providing LTC with liquidity of approximately $709 million.
As a reminder.
We have no significant long term debt maturities over the next five years.
At the end of the 2024th quarter, our credit metrics remained favorably compared with the healthcare REIT industry average with net debt to annualized adjusted EBITDA for real estate of four three times and annualized adjusted fixed charge coverage.
Ratio of five three times and a debt to enterprise value of approximately 30%.
I'll conclude my remarks, with a discussion of rent deferrals and abatements, we collected 98% of fourth quarter rent and mortgage interest income, including the application of senior lifestyles letter of credit and deposit.
Of the rent not cold.
360000 related to rent abatements, and 369000 related to rent deferrals net of repayments, which were provided to three private pay operators Clint mentioned on our previous earnings call.
As I mentioned earlier senior lifestyle remains delinquent in their 2020 contractual rent.
<unk> 1 million and they have paid no rent so far in 2021.
For all of 2020, we collected 98% of contractual rent, including the application of senior lifestyles letter of credit and deposits of the 2%. We did not collect 0.7% was abated, 0.7% with net deferred.
But and the remaining 6% west delinquent.
To date, so far in 2021 rent deferrals total 689000 net of 14000 of deferred rent repayments. These deferrals relate to the same three private pay operators previously mentioned.
Excluding the rent credit related to the.
<unk> escalation reduction already discussed abated rent to date in 2021 is 360000, we.
We did receive rent from the operators, who transitioned warmer SLC operating communities to date Clint will provide more detail now I'll turn things over to Clint. Thanks.
Thanks, Pam I'll start my discussion with senior.
The rent to go.
Wendy said earlier, thus far in the first quarter of 2021, we have transitioned to 11 23 assisted living communities under their master lease.
Six of these communities were transferred to Randall residence, a current LTC operator and.
And five were transitioned to oncor senior living and operator new to us.
Your line rental communities five of which were located in Ohio, and one on Illinois, who transferred on January one.
Combined these communities contained 344 units.
First began working with Randall on 2019, when we acquired two properties in Michigan from here now.
On the operator of LTC properties.
Randall already operating properties in Ohio, and Illinois and has a strong regional presence in the upper Midwest the.
The six properties were added to an existing master lease with Randall.
In terms of the amended master lease was extended by one year with nine years remaining incremental cash rent under the amended lease is $2 seven.
For the first year.
$3 7 million for the second year, and $3 9 million for the third year escalating by 2% annually thereafter.
On February 15th we transferred five communities all in Wisconsin for a total of 374 units to Oncor senior living.
Encore founded.
2011, as a major player on the Wisconsin market on.
Operating 34 locations before assuming these communities.
The new Master lease covers a 10 year period with three five year renewal options.
Cash rent under the lease is $2 6 million from the first year $3 3 million for the second year.
Founded in $3 4 million for the third year escalating by 2% annually thereafter.
Partnering with regional operators is an important part of LTC as long term strategy and expanding our relationship with Randall while building a new one with encore are great. Examples of our ability to partner with operators, who have a solid presence.
<unk> in their local markets and regions.
There are now 12 buildings remaining in the senior lifestyle portfolio.
Of those we will be transferring five and selling three and continue to evaluate options for the remaining four properties.
I'll define that will be transferred four are expected to be transferred.
By the end of Q1 and the fifth by the end of Q2.
The three properties, we intend to sell are under contract with an expected closing at the end of the second quarter subject to timely completion of due diligence.
The full remaining properties have been net book value of approximately $4 5 million.
One of those properties is being closed and will be sold for an alternative use and we are evaluating our options for the remaining three.
Now I'd like to quickly update you on our most recent developed projects to come on line one.
The court, which is located in Medford, Oregon and operated by fields senior living began accepting.
Residents last September.
As of February 15th occupancy was 23% up from 10% on October 23rd.
The opening of this community was delayed due to depend on it as a.
<unk> of the delay in because as a newly opened properties.
<unk> was not eligible for government.
<unk> stimulus money, we have agreed to provide them $1 3 million of additional free rent.
Ignite medical resorts in Blue Springs.
Which is located in independence, Missouri began on welcoming patients last October.
At February 15th occupancy was 64% up from 20.
Government sent on October 23.
Last quarter, we discussed Genesis and its disclosed out regarding its ability to continue as a going concern.
Genesis remains current on all of its lease obligations to LTC.
Operating six properties for us five in new Mexico, and one in Alabama.
Brookfield Master lease matures on December 31, 2021, the first renewal option is for a four year period.
The notice period for the renewal option began on January one 2021 and ends on April 30 of 2021.
In 2020, we extended a $4 million capital commitment to Brookdale.
Three.
Which is available through December 31, 2021 at a 7% yield.
To date, we have funded $2 million of this commitment.
Of note.
Aside from the Brookdale lease renewal, we have only one other lease that expires in 2021.
The sniff operated under this lease.
<unk> is under contract for sale with closing expected in the second quarter.
Next I'll discuss our portfolio numbers.
As a reminder, given the pandemic and the challenging environment that has created we don't believe coverage is a good indicator of future performance at this time.
And our focused mainly on occupancy trends.
<unk>, which I'll discuss shortly.
Q3, trailing 12 month, EBITDA arm and EBITDAR coverage using a 5% management fee was 114 times and <unk> 94 times, respectively for our assisted living portfolio.
These metrics are the same with and without stimulus.
It is no operators allocated these funds to their P&L statements.
Excluding senior lifestyle from our assisted living portfolio, EBITDAR and EBITDAR coverages with increased 2125 tons and 1.04 times respectively.
For our skilled nursing.
This fund portfolio EBITDAR and EBITDAR coverage was 185 times and 139 times respectively.
Excluding stimulus funds EBITDAR coverage was 158 times and EBITDAR coverage is 113 times.
Now for some argument.
Occupancy trends on our portfolio, which is as of January 31.
As a reminder, for our private pay portfolio occupancy is up that date, specifically and for our skilled portfolio occupancy as the average for the month.
Because of our partners have provided January data to us on a voluntary and ex.
<unk> basis. The information we are providing includes approximately 71% of our total private pay units and approximately 93% of our skilled nursing beds.
Private pay occupancy was 79% at September 30.
72% at December 31.
71.
1% on January 31.
Our skilled nursing average monthly occupancy for the same time periods, respectively was 70%, 66% and 66%.
We cannot predict when occupancy might begin trending upward.
Regarding 2021 growth.
When we are confident that we can complete deals at the right price for the right return, we will use our liquidity to provide strong regional operators with the growth capital they need.
Until that time, we will focus on smaller investments with what we believe to be a better risk reward profile using vehicles such as mezzanine.
Preferred equity financing, while building, new and existing relationships that will serve us far into the future.
Referred equity transactions, we announced last quarter validate our ability to successfully transact in this market.
With that I'll turn the call back to Wendy for her closing remarks. Thank.
Thank you Pam and Clint.
And per pandemic has caused considerable disruption within our industry and we can't determine exactly when things will begin to return to pre pandemic levels that rollout of the Covid vaccines, a new administration that is focused on getting the country through the pandemic and an industry that is working hard to stabilize.
<unk> occupancy and restore consumer confidence give us hope that things are starting to turn and we'll continue to get better.
As a company that has always viewed its operators as partners and a company that has worked hard to build a balance sheet capable of withstanding the very type of crisis.
Through which we have been managing LTC is ready and able to continue enhancing its portfolio diversifying its investments and generating new opportunities to allow us to continue to serve as a growth partner of choice as a REIT done differently.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two and at this time, we will pause momentarily to assemble our roster.
Okay.
And the first question will come from Juan Sanabria with BMO. Please go ahead.
Hi, Good morning, I hope everybody is doing well.
Good morning, Kurt.
Just thank you just wanted to dig a little deeper on senior lifestyles.
On your transition to elaborate on the 23, you've given us some numbers on.
On the go forward rents on the assets that are transition, but I guess holistically are you planning to keep those assets that had been transition those 11 assets or are those potentially per sale.
And could you give us a sense of.
All of those.
Of the EBITDAR that the asset Holistically youre looking to solar generating system from rough guideposts as to maybe how to think about the go forward run rate.
Around senior lifestyles.
Hey, Juan this is Clint.
<unk>.
Right now as we're in the midst of these transitions on a few sales, which I, which I mentioned in my remarks, it's hard to give specific guidance right now.
Going forward we.
Provided the detail to date of what's happened.
With the transition of the 11 buildings.
And we do anticipate having.
All transitions and sales completed by the end of Q2, which at that time, we'll be able to give.
Numbers, but as we said last quarter I think one thing to expect is because of the impact of COVID-19 on the performance not only to these buildings, but in our portfolio and other.
Buildings.
Across the country, there's going to be a ramp up in rent over time, which you've seen.
In the information we provided with these two operators as you can see that the rent staggers.
Over and builds up over a two to three year period.
Can you provide maybe the total units under those 23 assets and maybe how.
How you think about asset values on a per unit basis given that.
Maybe.
Not really meaningful at this point.
On a per unit metric right now I, just don't think it's a relevant number.
But as far as the units I'll get the I don't have the exact units on the 'twenty three but I'll get them for your interest.
Okay, and maybe just on Genesis.
Can you give us a sense of what the discussions are going on what discussions may be going on there on how involved you are that's really being run by the two main creditors at this point at any Inc.
Insights into the discussions happening there would be helpful.
Sure I mean, we have you know we're a very small part of Genesis overall portfolio, we have a long term relationship with Genesis and we have active discussions with them regarding.
<unk> performance.
Do property inspection, so there's a dialogue and we've been interacting with them, but again, we're a small piece.
So the overall portfolio.
Not aware of any.
Discussion center going on from a restructuring or anything like that so if you're asking are we part of the discussion of a restructuring or on a.
Reorganization, we haven't been.
Invited into if there are any.
Any of those discussions going on and as a reminder, we restructured our lease.
Last year, I guess 20, I guess 2019 now so a couple of years ago, we restructured our lease so.
We don't believe that weird.
Part of their their problems and one thing we've seen and as we've talked about on previous calls.
Five of the buildings are in new Mexico in New Mexico has had a Medicaid rate increases over the last couple of years with a provider tax as well as just the flat.
Medicare rate increase so they've seen some substantial increase rate or increase it as.
Revenue on the Medicaid side, which has been positive for the portfolio.
Great just one last one from me for Brookdale on what's the sense of whether they'll renew or not and could you give us a sense of their coverages to.
To help us think about how they might be thinking about that that lease option.
I'm.
I'm not going to hazard, a guess on what they will or will not.
Renewable.
I think it's encouraging that they asked for.
Our capital commitment last time bending and Theyre spending it as I mentioned, we have $2 million. We funded to date. So I think that's a positive sign and that's a positive sign that even if brookdale chooses not to renew this theres been capital that's been put into.
On the buildings, which is a positive.
<unk>.
Performance has been strong in the Brookdale portfolio. It has come down a little bit obviously in a pandemic, but overall on that portfolio has done fairly well.
I think you'd probably be more of a strategic decision for brookdale to the extent they want to renew or not.
The buildings, we have with them are.
Multiple states.
On the product type, we have with them is a core product in our portfolio. So it's not like we have assets that are that differ from what day ARPA.
Operate on a larger basis in the company so.
At this point, we are in contact with Brookdale and.
Our next.
So we should know that.
On a decision they'll be making on that I do have the number one on the units for senior lifestyle.
It's a 1456 units.
That's correct.
I appreciate the time. Thank you guys. Good luck. Thank you.
The.
The next question will come from Jordan Saddler with Keybanc. Please go ahead.
Thank you good morning, everybody.
So wanted to just kick off where one left off on our Brookdale, if I could for a second just.
Can you offer up any additional color.
Carl warning the.
Renewal options, so renewal option one.
Window is open to April 30 years, and I think that's a four year renewal.
Pension.
And then so what so if they don't exercise, let's say by April 30 ex can you just.
Explained options two and three.
Hey.
If they don't renew by are there then we will go through on releasing initiatives too.
No it's fine.
Additional operators to take over those properties.
And they basically have to let you know they say they have to let you know by April 30th.
Whether or not they're renewing them for 12 31 2000.
One.
The leases.
Surround Jordan, we actually moved forward the renewal time to April 30th and the previous leases. It was June 30th.
Gained a couple of additional months to facilitate transfers if needed.
Okay, but.
So essentially whether or not they renew from four years or five years or 10 years 10 years or what have you.
They have to let you know by April 30th.
That is correct.
Okay.
Thanks for clarifying and then separately as it relates to.
SLC some helpful color there.
Can you.
There's quite.
That is not yet complete and so I understand the sensitivity there can we just focus in on 11 of the 23 for a second maybe give us a sense of what the effect is.
Year, one rent reduction is on those 11.
Are you just.
Quite a bit apply the pro rata.
Reductions.
Jordan. This is Pam since those are in our master lease with senior lifestyle, we don't allocate rent so.
However for your model, However, you want to allocate it.
[laughter] would be.
Just sort of.
Just the.
The best way.
Is there anything that I mean, obviously, so I mean with a pro rata <unk>.
Allocation not be appropriate for any reason.
Well.
No.
You have to do some sort of proration.
We're still in the process of.
Working with senior lifestyle on what the wind down analysis looks like and what cash would be coming back to LTC in 2021 for rent and that would be the best number to use but we're still working on.
I get now.
So I don't have that for you, but as soon as we do we'll update you.
Okay, That's fair and then on.
On the remaining.
Are others that are scheduled to be transferred can you just run me through those dates again.
On.
So on the 12.
That right bring five and does your expected transfer for those by the end of <unk> and one by the end of <unk>.
Yes.
And are those to a new operator or existing.
One will be to an existing operator.
There'll be another new operator.
Transfer portfolio.
Okay, and then and then lastly on the.
The the the ones that are being.
Sold.
Well actually let me just let me ask you this.
After two hours.
The coverages that the 11.
Or sort of underwritten too.
I wouldn't say we have.
We've targeted low year one's a little challenging because of their stimulus.
Covid expenses its little hard to look at year, one we're going on.
Got.
So basically we provided coverage we've looked sort of long term with us to be able to include coverage.
These new operators have basically to give us the credit support.
Going forward. So that's how we've looked at.
The re leasing aspect is setting the rents where there is coverage for the operators.
<unk>.
It would be new leases are adding into their existing lease related to these assets.
Okay Lastly, just.
Senior lifestyle I know they haven't paid January February what's the how.
How do you guys think about I know you guys sort of.
Fully utilize the line of credit debt and.
Our letters of credit.
On the deposits how do we think about.
Likelihood or ability to pay anything incremental.
From here.
We're hopeful there'll be additional rent.
Coming from this and I think from senior lifestyle standpoint, they look at this a little bit.
Similar to the joint venture that we did a wind down with them previously.
Net.
We're trying to not be exposed from a liability standpoint get a management fee.
In turn the additional funds over to us so as Pam mentioned theyre going through a wind down analysis right now to see what those are.
The liabilities are.
So we are hopeful that there'll be some additional rent once that analysis is complete by senior lifestyle.
To see what the cash position is.
And do you have additional recourse either personal or corporate.
We have the letter of credit.
Credit, which was the security in some deposits, but this is.
Senior lifestyle has been cooperative in this process facilitating.
The transition of the sales and that's our general understanding of how this would be unwound.
And the economics.
That would reside in to.
To the extent there is positive cash flow.
From operations or from additional stimulus funds, but those funds would come to LTC.
Okay. Thank you.
Thank you.
The next question will come from Connor Silver Sky, what's bearing Baird. Please go ahead.
Good morning.
Morning, everybody and thanks for having me on the call. Today first question just high level on kind of asking this in reference to whats going on in the Midwest right now with the weather.
I'm just wondering if those kind of from worst case scenario you you've made for occupancy take up in the coming months and from what that looks like.
I mean, I think it's a crystal ball.
Net.
There's not a lot of visibility on that and that's why we haven't given guidance.
So.
We would be speculation.
Pertaining to that but when you look at some of the positives out there regarding.
The vaccine Rollouts Johnson.
Incident Johnson, there was some news out today regarding pfizer's.
Vaccinations about the effectiveness of our single dose as.
As well as I guess, apparently the studies provided that the vaccines can be stored.
Not the extreme temperatures that initially.
Where indicated so theres some positives.
<unk> from the vaccine rollout and the acceptance from.
From a resident populations that hopefully provides.
Some stability.
So, but those are anecdotal in and.
This is unfolding as we're all watching this on a quarter by quarter basis, Yes, Nick put out some data that showed.
That layered on cases in I think it is senior housing and skilled nursing on top of.
The vaccine rollout and I think that was encouraging for the industry showing a.
Sharp decrease in new cases, coinciding with the vaccine rollout so that that is.
I think a positive.
If that continues that would mean hopefully that we've trough here in occupancy, but we're not quite willing to call that yet well.
Clinton I were on a call yesterday with the operator, who is taking three or four three of the senior lifestyle building.
Buildings.
And.
There was only one incident and I think it was an employee who had COVID-19. So those three buildings are COVID-19 free so that as you know that is a great.
Touch point for for the industry.
That's helpful. I appreciate the color there and then one line.
Last one from me excuse me if I missed this.
For the $12 four per cent of rental income maturing in 2021.
Part of that is brookdale part of that I believe is the skilled nursing facility that Quintin mentioned and then put up other operator on that other lease can you provide any color as to what the coverages and how conversations may be progressing on that day.
Sure well, it's actually been it's more simple as just brookdale and the one building we have per sales. So that's all of the renewals in 2021.
Just two liters of Brookfield beliefs, and then a thing a single asset lease, which as I mentioned is under contract for sale.
Great. Thanks for clarifying that is all from me.
Thank you.
The next question will come from Michael Carroll with RBC capital markets. Please go ahead.
Yeah. Thanks can you provide some color or Pam on the the wind down of the senior lifestyle, I guess portfolio and I know you were talking about is that youre going to expect to.
Get some rent when Thats completed I guess, what's the timing of that or what has to go into to get that completed.
Well, we were hoping it was yesterday.
Is this the processing or the EBIT look at any trade payables are theirs.
Yeah, they've got PTO to account for as far as going through the transition there is.
Lease equipment things like those if that if a new operator doesn't assume those leases there can be termination costs, there's insurance aspects to consider so senior lifestyle has been working on that and I think at this point, we're expecting the initial look at that next week to see where that is so we should have more color on our.
Paul.
Regarding additional rent if any from stimulus funds to okay.
Okay.
Was there.
Yes within or is it should we expect that there could be some rent payments in the first quarter of 'twenty, one or do all of these transitions and door sales need.
Need to be completed and that needs to be complete and buttoned up before.
Do you start to see some more rent coming in from the legacy senior lifestyle on assets that they had.
There is one only one asset that we have with senior lifestyle will be transferring.
Whereby there would be a single asset wherever there would be.
Effectively support no rent and in year, one of the single asset lease, but everything else has rent associated with it.
I guess on my question relates to US is how long does it take debt to finish. This I know you said you are getting at your initial look next week should we expect that youre going to receive some rents come.
Once this wind downs completed in the first quarter or do we need to see all of the assets transitioned to new operators before they have the final numbers and are willing to start paying that back day that rent.
Our hope is that we'll see it come in on a current basis.
Okay.
And then can you talk a little bit about the other operator that you disclosed that you agreed to defer rent as needed through the first quarter of 'twenty. One I know there was about a 355000 balance at the end of the year.
What's the status of that operator and was there additional rent deferred.
Third in January February from them.
There was some additional rent deferred in January and February which Pam.
Discussed on those numbers. So it did relate to that operator, but we're also encouraged last in Q4 on that operator payback.
Some of the deferred rent that they had.
Taken.
<unk>.
There is some lease up assets on our portfolio and that's what.
It was part of the costs, we've seen this in our portfolio buildings that had lease up.
Our value add as far as trying to increase sensus they solved with the.
The pandemic so.
This is what happened to this operator.
<unk>.
689000, net deferred net deferred rent I mentioned in the first quarter of 2021.
560000 related to that operator, so the majority of on net majority.
Okay.
And then just last one from me back to senior lifestyle real quick and I know that.
There are some.
Certainty on what you can provide on the breakout I mean could you break out what percent of the EBIT darn from that asset from that portfolio related to those 11 communities or is that something you can provide.
We haven't provided that information now with Covid expenses and.
Yeah, some stimulus funds.
<unk>.
<unk> hard metric to look at so we have not provided that information.
Okay. I mean could you provided based off of this to say that 2019 run rates of pre COVID-19.
Or is that non comparable anymore.
That's probably not comparable at this point to be honest.
Okay, great. Thank you.
Thank.
On the next question will come from Rich Anderson with MVC. Please go ahead.
And good morning out there.
On the on the.
The rent credit.
The $1 3 million Fad impact that all happens in the first quarter.
The majority of it yes.
Yes.
And it's the way it works it it's essentially your debt.
Credit totaled $1 3 million, but then you you recalculate the straight line and that's why the GAAP revenue was a lower impact is that correct.
Yeah, Yeah, essentially for those that are on a GAAP basis yeah.
Are on accrual basis, Yeah, we haven't adjusted that.
I understand okay, great and then as far as the process goes there is no change to the actual escalators right I know, we've kind of talked about this on a kind of get on record. It's just that's how you kind of came up with the rent credit, but going forward. The escalations will continue off the.
The original rent level.
That is correct, okay, Okay, just want to make sure.
The.
Glen you said don't want to talk too much about coverages.
A reflection of current times and of course, I get that but 1.13 times on skilled nursing excluding stimulus is quite good.
Good I would say you should be perhaps quite proud of that relative to other numbers that I've heard.
That being said it was it was calculated on a quarter in arrears of course.
So you're about 400 basis points lower occupancy do you do you have a math.
It at your fingertips that would say well you know.
For 400 basis points lower on occupancy and we were starting at 1.13 were probably around parity now or is it not that dramatic of an impact.
Yeah, we haven't done that analysis right now rich, but one thing that we have anecdotally heard from operators and we've seen a little bit of this on our portfolio that you know the skilled mix has trended up now.
That may change with cases of Covid going down.
So I think it's hard to speculate on what that what the.
<unk> would be.
We have seen that this the occupancy between December and January stayed relatively the same and you've heard the reduced incidence of Covid cases and building.
<unk>.
Increased vaccinations as far as going through the through clinics. So hopefully those are all positive with with occupancy.
Stabilizing okay.
Last question from me is do you guys do you guys know what the employee the health care worker vaccine right is has there been a hesitancy.
See because we've been hearing that the patients and the residents are accepting it but not so much on the on the health care provider side are you hearing the same thing do you do you do you have a do you have knowledge of what the rate is in your portfolio.
Do it anecdotally, we've heard that across the board that staff acceptance is less than.
Our resident acceptance so when we gathered information from our operating partners for the occupancy data we provided from January.
We requested information regarding the clinics and vaccine vaccination rates.
So we had.
For example from thinks we had about.
70%.
60 to 70 per cent of our operators provide information about the clinics and with our about.
70% of our skilled portfolio reporting 100% of those had gone through the first clinic, which was encouraging.
And about 55%.
Sent about reporting it gone through the second clinic.
But assistant.
Acceptance on the on the stuff around the resident level based on.
What's more operators and the staffing.
The low forties, both for skilled and low system.
Okay.
Yeah, hopefully that picks up because that's an important part of the important variable I think last question. When do you said you.
You know you're not looking to change your underwriting metrics and it's a lot of uncertainty out there as it relates to external growth and of course, that's clearly understood but are you.
In reverse inquiries at all I Wonder I'm, just taking the temperature of the market. If people are coming to you and saying you know on offering up assets or that you know, perhaps on an interesting to you, but it would be interesting to know if theres a motivated seller pool out there that's perhaps waiting to happen eventually when we have more visibility.
We have had packages. We've spent we've looked at some packages recently that.
Are you know really in the.
First stage of looking at them. So I think we are going to be seeing some assets coming.
Coming to the market.
In the spring and in the summer so we're looking forward to being able to.
Spend some of the money that we'll be creating by selling some of the.
Senior lifestyle assets.
Okay, Great. That's all I have thanks very much.
Thank you.
The next question.
<unk> will come from Daniel Bernstein with capital one. Please go ahead.
Hi, good morning.
Just following up I just wanted to I guess go back over kind of the investment philosophy that do you have to have.
These new investments have to be accretive on day one.
For you to consummate.
I mean, when you think about kind of like the restructuring and the leases. The rents are set lower and then theres high bumps in year two year three thereafter.
Would you take on deals that our structure of like that where you don't have a lot of return on day, one or year one.
But you could see the upside in year two year three.
From a lease standpoint.
I think we look at that on on.
Onesie, twosies basis, and probably profitable working with existing operator, so we can put into an existing master lease.
And in markets, where they have a presence and they understand the dynamics in the market and have a strong.
<unk> ability.
To be able to move.
We've actually looked at a couple of deals with existing operators ultra.
Ultimate didn't work out, but where people about deals to us.
To try to underwrite they got the <unk>.
Deals got pulled off the market, probably a function of just pricing.
But we would we would definitely consider those on a one off basis.
But but probably within more.
More of your existing operator pool in.
Where there is already some credit protection okay.
Okay.
<unk>.
And then.
Going back as well from some of the comments from your peers in terms of.
As leading indicators.
On tours move it now moving as yet but the tours.
<unk>.
Leads things like that.
Have you heard from any of your operators.
About those leading indicators.
Where those trends may be heading.
Anything that would give us some confidence that seniors housing occupancy.
Could be rebounding in the second.
Quarter on second half of this year.
Yeah.
I would say that it's been a little bit muted and you've seen that the fourth quarter was a little bit challenged and there was on.
With the incidence of Covid over.
After the holiday season, a lot of focus is a lot of focus was on that so I do.
Think debt.
Operators have been very nimble in looking at virtual tours and trying to gain traction regarding lead generation. So we have on a case by case basis.
Both with some operators that do see trending upward others have been flat. So it's anecdotal information in different parts of the country. It varies.
Okay.
And then kind of turning back to skilled nursing.
Kind of the same question of how are you thinking about the.
The census of the industry, you know theres been a lot of talk as to whether.
Home health is permanently taken any market share from from skilled nursing.
That might mean.
Do you have any kind of you or Eric or sense of.
Of what that might look like going forward now that COVID-19 cases are coming back down.
You mean elective surgeries or maybe going back up.
Do you have an expectation that census will improve.
In skilled nursing.
And what that thing or is that just a little bit too soon to tell.
Yes.
Yes, we do have that expectation Dan on you know as elective start to get scheduled here I know a lot were put on hold during the surge, but as those start to come back.
I think it's too early to say whether.
Skilled nursing home health has become.
I'm on a permanent solution certainly there would be those higher acuity cases that it that it's not a permanent solution on and maybe those are some of the majority of the electives that had been postponed because you could have a really high acuity.
Discharge you know, it's going to be high acuity and you postponing it because you know that debt.
On patient can't go to home health that they won't recover this thing they need 24 hour care. So I think it's too early to determine if the discharge patterns have been permanently altered right now.
On the conventional wisdom is it will trend back to normal pre COVID-19 that also David that think of the reimbursement model through PD P. M.
That has migrated to look at carrying for more complex.
Oh care for.
For patients so.
Skilled should be seeing by large just more complexity.
So I think those those are probably not payable discharges going into home care.
Okay. Okay. That's all I have thank you.
Thank you Dan.
The next question will come from Oh, Matteo Okusanya with Mizuho. Please go ahead.
Oh, yes, good morning, everyone.
And I just wanted to go back to.
So Jordan trial once prior question around Brookdale.
On.
Give us a sense of again, what the current rent coverage.
So everything from kind of get a sense of interest kind of resetting.
You know market.
So that EBITDA and EBITDA coverage ratios because of kind of get a sense of even if we knew what the percentage change in rent would be.
Hey, Kyle this is Pam so they have its just as a straight renewal option there theres no rent reset there.
They do have the.
Option to take the rent credit that we've offered should they renew so they would get.
Per cent reduction in their 2021 escalator like.
The majority interest of our portfolio. So there is no there would be we would not anticipate a change in rent on.
Okay.
Okay, that's actually very helpful Clark.
Thank you.
Good thing is what when do you think in your opening comments.
No you did kind of talk about the need for the government support.
Just kind of talk a little bit about the sense of.
Additional a government regulation.
Any sense at this.
What simple form that could take even if it nothing nothing stone yet kind of maybe what the lobbyists are asking for.
From the federal government on any kind of insight would be helpful.
So we believe that there'll be a stimulus core.
<unk> for the senior.
Health care industry on that'll come out of the $30 billion that was not allocated yet.
I don't believe at the industry is looking for an addition.
Specific allocation from the one nine trillion.
However in the one nine trillion that is currently being.
<unk> discussed there is a lot of money for the states.
So.
Depending on how the states will use that money to support their residents in the state it might certainly help the skilled nursing industry.
So.
I think theres, a good chance relative to the 30 billion that hasnt been allocated to have some stimulus come out.
And I think theres still some.
Level three phase III money that hasn't been spent on and is expected to be sent out later this month.
So there is there is probably up.
Yep.
Better opportunity to get some of the 30 billion. Then there is specifically to get from the one nine trillion.
Gotcha.
That's helpful. Thank you.
Thank you.
The.
Question will come from Todd Stender with Wells Fargo. Please go ahead.
Hi, Thanks, and Clinton not to.
Not to spend too much time on the Brookdale master lease, but are we talking about four facilities I know your blended four separate leases together, but how many assets are actually in that master lease 30.
35 properties on Okay got it.
And for the capital you've committed to date are you generating a return on that capital Youre getting the 7% right away or is that has to get rolled into the new lease once that renews.
No the capital clear always weighted them to be existing term.
Term and its current pay yields.
Understood. Okay on my other questions have been answered thanks, so much.
Hey, Joe.
This concludes our question and answer session I would like to turn the conference back over to Wendy Simpson for any closing remarks. Please go ahead ma'am.
Thank you. Thank you all for attending and listening to our presentation.
As always if you have additional questions. Please give us a call have a great day stay safe and most of us stay warm.
Bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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