Q4 2020 CareTrust REIT Inc Earnings Call
Okay.
Okay.
Ladies and gentlemen, thank you the buy and walk us through the current trust REIT fourth quarter 2020 earnings conference call at the time, all participants are in a listen only mode.
After the Speakers' presentation there'll be a question of is exactly the.
I asked the question at that time for Sars.
And then one on your touch tone telephone.
As the amount of my conference call is being recorded.
I would now like in the comp with your help with the warm Beall senior Vice President of the counting of the controller of catch my free.
Dan you may begin.
Thank you and welcome take care of Trust REIT fourth quarter of year end 2020 earnings call participants should be aware of this call is being recorded and listeners are advised that any forward looking statements made on today's call are based on management's current expectations assumptions and beliefs about care trust business and the environment in which it operates these statements.
The projections regarding future financial performance dividends acquisitions investments return financings and other matters and may or may not referenced other matters affecting the company's business or the businesses of its team, including factors that are beyond our control such as natural disasters pandemics such as COVID-19.
Governmental actions the company's statements today and the business generally are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied herein lift.
Listeners should not place undue reliance on forward looking statements and are encouraged to read you'd characterize the SEC filings for a more complete discussion of factors that could impact results as well as any financial or other statistical information required by SEC regulation G.
Except as required by law characteristic REIT and its affiliates do not undertake to publicly update or revise any forward looking statements where changes arise as the result of new information future events changing circumstances or for any other reason.
During the call of the company will reference non-GAAP metrics, such as EBITDA. That's S. O S. A D for Fad and normalized EBITDA S. F O E M E D.
When viewed together with GAAP results of the company believes these measures can provide a more complete understanding of its business, but cautions that they should not be relied upon to the exclusion of GAAP reported.
Characteristic yesterday filed its form 10-K, and accompanying the press release and its quarterly financial supplement each of which can be accessed on the investor Relations section of the characteristic website at Www Dot care Trust REIT Dot Com a replay of this call will also be available on the website for a limited period.
With me on the call. This morning are Bill Wagner, Chief Financial Officer, Dave Sedgwick, President and Chief Operating Officer, Mark Lamb, Chief Investment Officer, and Eric Gillis, Vice President of portfolio management and investments I will.
Now I'll turn the call over to Greg Stapley Care Trust, REIT, Chairman and CEO the St.
Thanks, Lauren and good morning, everyone.
The 2023 NAV to be a very busy year for care trusts when might think that with the M&A and our asset classes virtually shut down for most of the year the health care REIT like ours might've had little to do.
The thanks to our conservative balance sheet for cockpit operators, especially the outstanding teams of improves to work with here.
Capital never dried up in the few deals that were out there did cross our desk.
Anticipating some potential dislocation in the markets as we recover from the pandemic the team worked harder than ever to find smart ways to deploy the extensive dry powder, we carefully accumulated over the years.
And the reference we're rewarded with 105 million the new assets helped our stock price and related cost of capital recovered quickly.
To be sure of hundreds of 5 million as of late year for care Trust.
Thrilled to be reporting that we actually grew both assets and shareholder value in the face of unprecedented headwinds this last year.
When the pandemic growth, we firmly believe that our outstanding operators must find a way to navigate through the challenge.
This gave us the confidence to maintain both of our dividend and guidance that confidence proof will place. This care Trust collected 99, 3% of contract rents in 2020 and experienced no rent leakage in connection with the one operator change we've made during the year.
These results and the ongoing performance by our tenants under some of the most difficult circumstances of imaginable have proven once again the value of our operator first investment discipline.
Saying that I don't want to downplay the importance of government measures, especially of those aimed at helping the skilled nursing industry to weather the Covid storm.
Cares act funds for those who needed them and the waiver of the three day qualifying stay have both been huge the.
The hope you see that as clearly as possible. We've once again provided enhanced disclosure around the relief funds and this quarter's supplemental.
We hope that the government will see the obvious value in continuing the way for beyond 'twenty 'twenty, one and the they need additional relief funding will be sufficient to help those who needed to achieve the soft landing for health care heroes and their employers deserve.
So in spite of everything that's going on characteristic remains well positioned to continue expanding reducing our cost of capital and solidifying our spot as the leader in the market.
For example on the credit front in case, you didn't see it. This morning fifth published the BB plus radio and cared for US today, one notch below investment grade with the stable outlook.
After a lengthy conversations with them, we feel confident that the understand our business fairly well, including some of the key things to make us different and better.
This marks another important step in care trusts ongoing evolution and growth.
Finally speaking of evolution of growth maybe the most exciting thing to happen. This year. We've made some significant personnel moves. So we believe will set us up to take care of trust to the next level and beyond.
First congratulations go out to Dave who was named President and Chief operating officer by our Board. This week. Most of you know, Dave well you won't be a bit surprised by that move in.
In his expanded role day will be taking even greater responsibility for leading our investing financing asset management portfolio management and Investor Relations efforts.
This will free me up to spend more time on strategy and relationships that will further strengthen an already solid team.
The second along the overdue grabbed congratulations goes out the Lauren Beale, who was promoted to senior Vice President and controller of this week.
Loren has been with us almost since the beginning and has pulled the laboring war in everything from setting up our accounting systems to designing and implementing our internal controls over financial reporting the Henley audit and overseeing S ESG reporting and more.
She has been a huge contributor and we couldn't be happier to have her on the team.
Finally, we feel like we sort of major kun persuading James calls for one of the best known and most well respected attorneys in the health care REIT World to join US as General Counsel and Secretary.
James has been with us as outside counsel from the beginning and bringing them in house will allow us to involve him and his deep expertise at higher levels and the day to day workings in the growth of the company.
We're grateful to happen.
As is the case with our operator first investment philosophy.
For the team here, it's all about the people and it is a real privilege for me to work alongside so many amazing and talented professionals, who all share the same goal to make care Trust the health care REIT of choice for operators capital suppliers and investors.
So with that I'll turn it over to Dave for some more color on what's happening out there mark.
Mark will jump in with the pipeline of Bill will finish off the financials. Then we'll open it up for Q&A, Dave Alright, Thank you and good morning.
Today I'd like to address three interrelated areas of focus for the company for.
First I'll briefly address vaccine participation second I will update you on occupancy and third I'll dig into our latest lease coverage disclosure and speak to the question of runway for our key operators first regarding vaccines. We have recent data from all but two of our operators.
And based on those direct reports.
As of February fish.
Resident participation is coming in at 67, 6%.
For some context for their the CDC report skilled nursing residents participation.
Ranging widely from nominal too.
100%.
With the median at 77, 8%.
As for staff participation, we're coming in at 42.6% so far.
Again for context, the CDC reports skilled nursing employees median participation at 37.5 per cent.
We've been looking to the vaccine can be an effective catalyst for a return to normal life, which will in turn be a catalyst for.
For a return to normal hospital discharge patterns and recovering sniff occupancy trends.
Next let me report on occupancy.
I have noted on past calls the simultaneous decline in overall occupancy in our skilled nursing facilities, coupled with an increase in skilled mix.
Fortunately the revenue loss from the overall census drop is being significantly offset by the increased skilled revenue.
In Q4, our operators reported a sequential decline in sniff occupancy of 154 bps.
However, comparing Q3 skilled mix to queue for skilled mix, we saw another increase of 270 bps.
I can't underscore enough the importance of the waiver of the three night qualifying hospital stay as a lifeline for both the patients who are able to avoid risky and traumatic transferred to the hospital.
And for the operators themselves.
For seniors housing occupancy the first two quarters of Covid showed remarkable resilience Q3 seniors housing occupancy was at about 82, 5%.
In Q4, our operators reported occupancy of 84%.
As the skilled nursing, we have some facilities gaining ground and others who has slipped.
Remember our sample size for seniors housing is relatively small here.
Going from 82.5% down to 80.4% is the result of each seniors housing location dropping by only one and a half residents on average.
While occupancy is certainly central to the plot.
The elevated expenses and soft costs associated with the pandemic are also very important.
Which leads me to my third area of focus lease coverage.
You see in yesterday's posted supplemental of continuation of our enhanced Covid era of disclosure.
And we try to be as transparent and helpful as possible by reporting lease coverage on an EBITDAR and EBIT darn basis.
Both excluding cares act funding and amortizing the cares Act funds received to date through June of this year.
From our perspective, there werent really any surprises.
Stripping out the cares act funds, we saw overall portfolio coverage hold steady just down two bps to two point of seven times.
Look to be anywhere near two times coverage without cares Act funds. This deep into the pandemic is remarkable and a testament to the quality operators in the portfolio.
On the other hand, there are of course, some areas in the portfolio that have absolutely needed the HHS funds.
We spent a lot of time modeling, what we referred to here as runway for those few operators.
Making a couple of assumptions around run rate performance in the baseline minimum one times lease coverage ratio.
We are cautiously optimistic about the runway they have to make a soft landing back to pre pandemic fundamentals.
One note on asset management, we welcome Noble senior services and operator, we've worked with since 2019 to our top 10 list last quarter.
Noble stepped into our existing Virginia seniors housing assets under a new triple net lease with no loss in rent.
You've done a great job with the assets the transition for us in 2019.
And both we and they are excited about their prospects in the Virginia portfolio.
From our first earnings call since the pandemic started we.
We've maintained guidance, because we could see a reasonable path for that guidance to be achieved.
We acknowledge the several uncertainties that will likely remain throughout this year, but when we take what we have experienced so far and way of the existing headwinds with the regulatory and financial support given to the industry.
We continue to see a reasonable path for this year.
With that I'll pass the call over to Mark to talk about investments Mark. Thanks.
Thanks, Dave and Hello, everyone, we wrapped up Q4 and the year with two investments. The first in November we closed on the Texas for portfolio, which we bought with existing leases in place with enzyme the.
The value for US was both the blue chip, operator, and a portfolio of that covers well above two times on an EBITDAR basis we.
We paid $47 6 million for the portfolio and receipt of annual rent of just under $3 8 million.
Later in the month, we made of $15 million of mezzanine loan at a rate of 12% in the next healthcare on a portfolio of they purchased in the mid Atlantic region. This was our first investment alongside net and we hope to grow our relationship with them over the coming years.
We finished the year with a total of $105 3 million of new investments.
Deal flow continues to be light in Q4 as Covid spiked operators continue to keep their heads down in both underwriting and diligence were complicated by the pandemic.
However, we have seen an uptick in deal flow over the past few weeks and based on conversations we are having with the brokerage community. We anticipate an increase in opportunities over the coming months as operators navigate their way out of the latest COVID-19 slides.
Deal flow today is largely composed of one off non stable seniors housing assets with smaller portfolio of opportunities scattered over several states.
On the flip side, we continue to picture largely broken and challenged assets to find opportunities that work for our operators.
That being said, we expect 2021 to be an active year as we believe more and more smaller operators will look to exit the business as we get COVID-19 further behind us.
For watching this closely as another spike in Covid push out this time line further into the back of the year and into 2022.
As we sit here today the pipe continues to hover in the $125 million to $150 million range, which is in line with the historic with our historical range.
It is primarily made up of singles and doubles, but there are leased the couple of small portfolios that we hope to pair with our existing tenants and a couple of new ones that we would love to welcome to our core of the best in class operators.
The composition of the pipe of the mix between sniffs and seniors housing assets.
And for each deal we are carefully pursuing of customized transactional structure designed to help our operators as they face remaining COVID-19 related uncertainties and bowls or the initial 12 to 24 months. After acquisition. Please remember that when the linked quarter pipe. We only quote deals we are actively pursuing the under our current underwriting staff.
And then only if we have a reasonable level of confidence that we can lock them up and close them in the relatively near term.
And now I will turn it over to Phil to discuss the financials. Thanks.
Thanks, Mark for the quarter normalized <unk> grew by 5% over the prior year quarter to $34 2 million or <unk> 36 cents per share of normalized Fad grew by 5% to $35 7 million or <unk> 37 per share.
Even though we raised our dividend significantly in early 2020 and maintain debt. Despite the pandemic our payout ratio remains REIT, where we like it at approximately 69% of normalized <unk> and 68% of normalized.
Average continues to be at all time loans at a net debt to normalized EBITDA ratio of three three times, our net debt to enterprise value was 20% as of quarter end and we achieved a fixed charge covered ratio of eight times in Q4.
Last year, we saw no reason for guidance as rents continue to come in.
In 2021, we plan on taking the same approach as long as rents continue to be collected we will continue offering our best estimates of where we think the year is headed.
So as of right now, we expect normalized <unk> per share of $1 40 to $1 42, and normalized fad per share of $1 49 to $1 51.
This guidance includes all investments and dispositions made to date of share count of $95 6 million shares and also relies on the following assumptions.
Non.
No additional investments or dispositions, nor any further debt or equity issuances this year.
Two inflation based rent Escalations, which account for almost all of our escalators at an average of 1.25%.
Our total rental revenues for the year again, including only acquisitions made to date are projected at approximately $175 million, which includes less than 80000 of straight line rent.
Three interest income of approximately $1.8 million.
For interest expense of approximately $23 million and.
In our calculations, we have assumed a LIBOR rate of 15 deaths.
And of grid based margin rate of 125 bps on the revolver and 150 bps on the unsecured term loan.
Interest expense also includes roughly 2 million of amortization of deferred financing fees.
And five we are projecting G&A of approximately $17 5 million to $19 4 million.
The G&A projection also includes roughly 7 million of amortization of stock comp. This.
This range is up approximately 1.2 to $3 1 million over 2020 due to our newly structured long term performance plan, causing us to recognize more and new stock compensation expense in 2021 and.
And roughly $3 2 million more than in 2020.
Additionally, and as we recently disclosed we have brought on a new general counsel. He used to work primarily on investments for us in the past while at his outside legal firm now that he will be working for us and even though his duties aren't materially changing the accounting rules require us to expense these costs instead of capitalizing the cost.
The new investments so while its cash neutral to us it does negatively impact G&A in <unk> NAV per share.
Our leverage and liquidity positions remain strong we did not sell any shares under the $500 million ATM that we put up last year and the outstanding balance on our 600 million dollar revolver currently sits at $50 million and we have approximately $19 million in cash.
In addition, the cash collections for January came in at 100% and are currently at 98% for February February but we expect.
That number to go to a 100% shortly.
With that.
I'll turn it back to Greg.
Thanks Bill.
Again, we hope this discussion has been helpful to you and we thank you again for your continued interest and support and with debt, we'll be happy to answer questions Valerie.
Thank you again, ladies and gentlemen, if you like to ask the question.
For the fourth Star then one on your head count of telephones.
One of Macquarie.
Our first question comes from Jonathan.
The Raymond James Your line is open.
Hey, good afternoon.
Dave could you give us some more details and background on the operator transition in the quarter and then maybe also talk about noble's progress on the 2019 properties they took over.
Yeah I'll go I'll go in reverse order.
The stepped into our portfolio back in 2019 of seven facilities across four states.
It was the beginning of our relationship with them.
And.
And they've done a very good job of.
Of stabilizing those assets and increasing occupancy there in <unk>.
Even in a couple of the buildings that had historically been fairly challenging.
They're one of those seven actually has been closed this entire time and so once the and is about to come on line.
Down in Fort Myers, So once that comes on line and they are able to fill that up.
Their performance and that lease will the.
The do exceptionally well.
Because of their performance there we felt.
The confident in turning to them for these Virginia assets.
The.
The the operator.
With that.
That exited.
Essentially.
<unk> felt like.
They would be these assets would be in better hands.
With somebody else in terms of the ability to meet the rent obligations going forward.
And so.
Lynn.
When noble took a look at them they saw a lot of potential as they did with the original seven.
And we're excited to step in at the at the current rent.
Okay.
That's helpful. So just to clarify on the noble coverage that's shown in the <unk> does that include one property debt effectively.
I mean, they are paying rent on but it's not generating any EBIT darkens close of that right.
Right.
Okay.
Maybe one for Mark here on the.
The the deal pipeline and external growth, but you mentioned you're offering customized structures on some deals can you.
Kind of expand on that what you what you mean by that.
Yes.
I think I think in this in this age of of Covid I think there are.
Don't think we're the only ones that are that are Julian I think really it's more a function of <unk>.
Uncertainty around occupancy and where revenue is and kind of getting the necessary for.
Protections and safeguards in place.
Sure the occupancy or.
Revenue.
The prior to our operator, taking over so.
I mean, whether that's the form of a holdback or.
Other creative ways to make sure of that our operators.
We are not going to be harmed as of day.
As they take over as you know.
Sometimes as you have operators exiting.
The portfolio they tend to take their foot off the gas and so we just need to make sure of that.
Occupancy levels.
Overall cash flow levels.
There is a catch up or more of a look back mechanism to make sure of that.
That our operators from the coverage perspective are not are new.
Harmed by that.
Okay. So maybe like after a couple of years of things recover and stabilize the reset feature in there to be able to capture some of that upside that you are giving them leeway on in the near term.
No it's more of a function of the outgoing the outgoing operator of the outgoing owner of the assets.
Yes.
Theres, a ketchup feature to the directly to our operator.
Depending on how quickly the recovery takes place with the new incoming operator.
Getting the.
Building or buildings back to from call it pre COVID-19 levels.
Okay.
Maybe I'll follow up offline, but I wanted to ask one more.
For Bill I want to leave the Al can you talk about the.
Stock comp guidance and the new performance and incentive plan. It is of a noticeable increase so any color there on how that package has changed.
Would be helpful.
Well you know what Jonathan it's Greg I'll take that one.
Quite simply we've just switched to more conventional type of long term incentive plan debt.
Is different from what we've been using since what we've been using the sort of backend loaded and we took the expenses later now.
Using a more conventional plan theres the issuances upfront debt has to be the.
The best over time.
And for this year and I anticipate only this year, we will sort of have of double stock expense so to speak.
And.
But I think it's I think it's better overall I think the the.
The shareholder Advisory services.
Others are going to like the plan better and we will publish more about it in the upcoming proxy.
Yeah.
Okay, Alright, thank you very much for the time appreciate it.
Thank you. Our next question comes from Steven Xylophone of.
Sir your line is open.
Great. Thanks, Hello, everybody thanks for taking the.
So first question the trend of the improving EBITDA rent coverage ratio is among many of your leading sniff operators during.
During the first six or nine months out of the Covid pandemic version of the pre Covid baseline for the is pretty remarkable I guess I'm just.
Curious to hear more about some of the fundamental drivers within the snap of operations that are driving the improving EBITDA or I'm not sure. If the combo of a lot of things, whether it's improved skilled mix or just treating higher acuity patients.
Also as snips are just treating more and more COVID-19 patients.
The COVID-19 patients ultimately turning out to be fairly profitable.
Patients for snacks, either based on reimbursement bonuses or other factors I'm, just curious to get your thoughts around all of those as far as.
The improving fundamentals within the staff.
Post COVID-19.
Thanks for your question, Steve Yes, it has been it has been.
Remarkable trend to see.
And in your question you sort of answered it by by talking about the main drivers and you are right. It really is the skilled mix that has offset the drop in overall occupancy significantly.
A couple of other things just a little bit more color on that.
We saw the.
PDP M kick in just in time.
For the this pandemic I think the picture that we'd be seen here would be different.
If we were still on the old rugs program that was largely driven by volume of therapy minutes.
But the fact that reimbursement is now <unk>.
On the clinical characteristics of these patients.
And.
As matter to what we'd see.
PDP, our Medicare rate go up quite a bit.
Because of PDP M.
And then it goes up.
After Covid starts we see that tick up just a touch more.
The the Covid patient.
It does require a lot more in terms of.
Cost.
And those those characteristics of the Covid patient are captured under PDP M. When captured appropriately under PDP M. Those costs are reflected in the in the reimbursement.
So.
Right now we have.
A lot of our operators well not just now but from the get go some of our operators realized that they needed to be part of the solution and.
And so they created wings in their facilities that would specialize in COVID-19.
And became sort of that that COVID-19 facility of choice in their markets and debt that trend has continued and is largely the reason for the increased the performance there.
Okay, Great that's definitely helpful.
One other quick question.
The fact that probably could've tried to on the answer to this the sometimes it's hard to keep track of all of the individual transactions taken place amongst the operators, but it looked like.
And sorry, maybe acquired some additional properties in the fourth quarter over and above the for Texas facilities that CPRE also press release I wasn't sure. If there is just some variables that determine when CRE is involved in <unk>.
Facilities being acquired by your largest operator, when youre not for maybe Theres. Some other nuances there I think the acquired from California properties, but maybe they were just the.
The circumstances I just want to hear more about the.
Some of the.
When youre involved the when you are not.
That particular operator.
Yes. This is this is market my understanding is is those.
Those were a transition of of the.
Another California operator.
And there was another there was another landlord involved it was just the.
For the transfer of the of the operations for for those three Cal.
California based assets debt.
The <unk> touched on.
Just to be clear this is Greg this is.
The assets that we took over in November.
We're in the dining assets those we just bought from another landlord with ensign leases already in place had been in place for some time.
And the <unk>.
And with respect to any additional work that we do with them we show them.
The deals from time to time and work.
We'd be happy to have more of.
To grow our relationship with them.
Anytime of Everytime, it makes sense to do so.
Okay. That's helpful. Okay, great. Thanks.
Thank you. Our next question comes from Jordan Sadler of Keybanc capital market. Your line is all of them.
Thank you.
Hello, gentlemen.
Oh boy.
The.
Curious about the.
The CPI escalator assumptions.
Through one quarter into the number.
What is the impact of every 100 basis points of CPI.
So the.
For the.
Atkins question.
Some of them you might alcohol.
Let's see well, it's going to impact 2021.
A little differently, because some of our leases the.
The renewal dates are throughout the year, our biggest Illinois.
Yes, the biggest renewal, which is enzyme hits on June 1st.
And let's see that would be if we.
It's about Florida.
Out of panning.
For the year.
On the CPI increases.
So I would say, it's one quarter or for just for every 100 basis points or just the one of the quarter Your guide.
For the one in a quarter.
Okay.
Okay, and then there is some incremental contribution across the rest of the portfolio.
Correct.
That's okay.
The one penny.
For 2021 is one 5% on all leases.
Okay.
The Penny is 125% for all leases that's all of the impact okay.
Yes.
Justin.
And in terms of.
The.
Sort of the acquisition pipeline, Mark you talked a little bit of while I'm curious.
The appetite on seniors housing I mean, you did.
The pipe include the mix local corporates and seniors housing channel just curious how youre thinking about sort of of pricing coverage the art.
Keep in the required.
As you underwrite of the volatile.
Yes, so I think the the first variable is.
Theres going to be which which of our cash.
Small.
Stable of.
Of seniors housing operators are looking to grow at this point.
Also kind of keenly focused on the outgoing operator and.
Kind of how strategic the.
Asset or assets are to them, how much low hanging fruit on the expense side.
Is there for our operators to kind of come in and make some day one changes.
Certainly on the on the on the occupancy side.
It's going to be.
Net of a bit of a mixed bag obviously the.
Pending on the area some.
Some occupancies have held up better than others.
So I.
I think from an underwriting perspective, we always we're kind of in the always not one one to the.
102, five on the EBITDAR basis.
But really it's kind of like.
As we kind of view sniff opportunities.
Where's the low hanging fruit, maybe occupancy has been.
Has has been held down because of the existing the operator.
Didn't want to admit didn't really have the REIT infection control protocols in place so.
So yes, I mean, there is some seniors housing in our in our.
Piet.
And we feel comfortable with where the where the buildings kind of.
Performed over time, and we think that our operators are going to get in.
I actually kind of.
The increase.
Occupancy fairly fairly quickly.
And.
So it really is.
It's kind of on a on the asset by asset basis.
Mostly you'd be.
For a leaseback of it sounds like with the new operators.
That's right.
Okay.
The coverage, we're talking about the one to one two price debt.
Going in.
For upon stabilization.
You know I would say.
When you underwrite any deal you can sort of sign the PSA and has have coverage at one two or $1 15 of our $1 30 and that number will inevitably move around I think we would expect.
The coverage upon stabilization to to kind of be above 125.
Where we're at.
Where we ultimately end up going in is going to be a function of us when we close on the transaction. So I would expect it to probably be anywhere covenant.
And the 110 to.
The 125 of range just.
Really kind of dependent upon how.
The COVID-19 impacts specific facilities and where we are when we when we actually close on the portfolios relative.
To how the operators are doing.
That was part of the prepared remarks in terms of.
We're structuring so that the operators if we sign a deal of it one to five.
Our structure will allow us to rollout.
With our operators.
The kind of catch up or to get.
Made of whole to an extent on some of the cash flow debt day have maybe half of them have had to put out so.
So we felt very comfortable about.
In the particular assets that we currently out of the month.
And the portfolio of.
How we've structured for coverage.
We're giving them the runway to get to where they need to be on a stabilized basis.
Alright, Thank you and then lastly, the.
Congrats on the promotion but.
A little color maybe on some of the tenants who seem to be any of the most pressure.
And the portfolio, we already discussed really noble.
From a coverage standpoint, but maybe back on premier.
Trillium kind of off the top pair of list so.
And kind of range.
Some of these guys.
Have not received.
We're seeing the HHS provider relief fund.
Yes the.
Thank you Anne.
Regardless of the seniors housing guys like Premier and noble you're right the.
The HHS funds have been.
Anemic.
If any.
And so they've been kind of fighting the headwinds without debt support.
And doing and actually.
Pretty strong job.
Compared to the rest of the seniors housing sector.
In terms of an update there is really not much of an update to give over the last couple of quarters.
It's it's just more of the same.
In terms of there.
Navigating the challenges that debt Covid presents difficult as you can imagine too.
To be in a situation.
Before COVID-19 that was challenging and trying to make that turn and then to continue to try to make that turn during COVID-19.
<unk>.
Trillium on the skilled nursing side is like many of our other operators of pad.
A bit of a roller coaster with Covid they've had some pretty.
Pretty hard hits on the.
On the occupancy front.
And the the expenses expenses for skilled nursing half of increased quite a bit I think our opex.
PPD has gone up.
By 9% because of Covid as the.
Largely because of staffing costs age.
<unk> agents needing agency costs as people have to be quarantined for COVID-19 and things like that.
So.
While it's been a pretty.
Steady quarter for us.
We don't want to don't want to convey that all of those all of those nice 'n easy out there are operators are definitely still slaying dragons.
<unk>.
And there are several markets.
Is there anybody who we are.
Worried about here is not current on rent or.
Yes.
No.
Yeah like Bill said.
We expect to be at 100% rent for this month like last month.
Yes, there is.
In spite of in spite of the Dragons that Theres play and they really do have a lot of runway and so for the foreseeable future. We feel like the liquidity is there to help them bridge.
The bridge the gap.
Well thank you.
Welcome.
Thank you again, ladies and gentlemen would like to ask the question. Please press Star then one.
Our next question comes from day Arden of.
RBC capital markets. Your line is open.
Hey, guys I wanted to ask a question on maybe what you're hearing from your operators or what your own expectations are.
For I guess, what the remaining duration of the emergency health period.
Would be or what you would expect it to be.
And when should we be started thinking about the HHS supports beginning to phase out.
Well.
We've got some good news on on the government funding as you know the emergency has been.
Extended through the end of this year, which means that sequestration and F mapped and the three new qualifying stay all very important.
Supports for the industry.
Should stay in place now through the end of this year.
There is still.
Somewhere around $27 billion.
Of us from previously passed stimulus money that has that has not been allocated yet.
And so.
It's too it's too early to sort of true.
Dick.
The degree of the recovery slope.
And when that really starts.
We think that overall, it's going to be fairly uneven.
Throughout our portfolio and throughout the country as a whole for.
We're encouraged to hear anecdotally some from our operators that where theyre seeing Covid Wayne.
We're starting to see an increase in.
And their overall skilled nursing census.
But that's that's.
That's the color that we have right now on the government funding as it relates to and as that relates to a recovery.
Got it Okay, and then the balance sheet today is pretty well positioned I know you guys have some room for additional leverage also of the ATM available. So I guess, how should we think about the targeted range of four to five times and where you guys sit today and maybe how youll be funding.
Acquisitions in the future.
I think you'll see us continue to.
The value stock price kind of stays where it adds we like to match fund the deals as we go.
If large deals come up.
We would look to maybe doing overnight for the high yield market is wide open with very very attractive pricing, we could tap that as well.
But I would expect over time, even though we love the leverage where it's at right now it is a tad bit low so.
The slight call.
Call it a slight uptick in it.
Got it and then last one for me.
I know the investment volumes have been pretty light through the pandemic, but are you seeing any larger portfolio start to come to the market obviously you've completed the.
The for property acquisition this quarter, but are they still mostly onesie twosies coming to the market or anything bigger.
Yes.
Everything's kind of onesie twosies. The obviously, there's been some announcements from our REIT rather than us.
Some 500 million dollar plus deals.
A couple of large snip portfolio as of the closed last year.
Down in the southeast.
So at this point to our knowledge there isn't really.
Anything that that's kind of of that magnitude.
At this point in time.
But we are tracking a couple.
Larger portfolios that we know the operators want to want to exit at some point.
But they obviously want to make sure that their numbers are kind of back.
To pre COVID-19 levels, so that they can get the valuations that day, one but as we sit here today there isn't anything that is.
<unk>.
Chunky orders significantly transform transformative.
Got it thanks.
Yes.
Okay. Thank you.
Our next question comes from.
Daniel Bernstein of capital one line of open.
Hi, good morning, I guess kind of half.
Afternoon and.
Congratulations David.
I guess.
On one of your when we were talking to your peer of Omega on their earnings call day.
Theres a debate as to how fast the skilled nursing occupancy can come back and weather.
Kind of home health.
Permanently taken some market share from the skilled nursing business. So just wanted to kind of get your thoughts on on.
Yes.
How much of home health and pack of your portfolio.
And maybe whether there is a permanent change in discharge pattern.
As a result thanks.
Hey, Dan this is Dave.
Home Health has historically been a very close second to skilled nursing for Medicare post acute discharges.
Given the circumstances of Covid I don't think anybody's surprise that home health is from.
Bounce back faster than skilled nursing, but I'd say that the narrative around home health permanently taking share from patients from skilled nursing is is.
Is mistaken.
Hum.
Now given the impending demographic surge it wouldn't be a bad thing if they were able to take more share over time.
Because as you project 510, 15 years, we're going to have.
Going to have the capacity problem, but.
Before during and after the pandemic.
Essentially all residents and patients in skilled nursing facilities need to be there.
And structurally home health has the same ceiling on how high it can climb the acuity scale as they did before and just some just some home health context there on in.
Average over a 60 day period.
Our home health patient will be visited.
By a nurse eight times.
They'll get about they'll get on average 18 visits from the home health agency of mix of nurses and therapists and others, but the.
Nurse who's going to visit on average eight times over 60 days.
In a skilled nursing setting a Medicare patient must be seen by of nurse multiple times every day.
The very different type of patient.
And those patients.
Well before the pandemic.
<unk>.
Have already largely been.
Going home if at all they had that ability to do it.
So we believe that with time the balance of discharges to skilled nursing and home health will will recalibrate.
Okay.
Okay.
I appreciate the the answer.
And I experienced exactly what you said firsthand with the parent.
Coming home.
C N of nurse twice a week for a couple of weeks and that was it.
Yes.
One other thing on the 10 it was talking we talked recently with the just a little anecdote.
Spoke with a fairly large regional home health operator in the Midwest.
Take care of about 1400 lives of day.
And then in the for.
Fourth quarter the.
<unk> told us that day diverted 30% of all of their new patients to skilled nursing facilities due to acuity needs.
So, yes, you might be seeing quite a bit more going to home health out of the hospital, but.
But in this case, 30% of those current stay in home health of the head to go straight to of skilled nursing facility.
Okay. Okay.
And then the.
And the other question I had was just going back to ensign.
They had split out their real estate.
Is it different.
I guess part of their business and.
And I didn't know if you had.
And any thoughts of whether there was an opportunity to Tim.
So maybe help them monetize the real realize the value of debt real estate in some form or fashion.
Okay.
And of open ended question.
But I just thought I was curious debt.
Good day, and so I had to split out.
The real estate within its financial state.
Statements.
Of note if there was an opportunity therefore you.
Hey, Dan its Greg you know that was an interesting move and we haven't actually kind of an opportunity to chat with them about that so.
We know exactly as much as you do about the thinking behind that.
Again, they're a great operator, and and of great tenant for us and as I mentioned before we'd love to do more with them from the opportunity arises.
Alright, good enough.
Take care and kind of good ones.
The two.
Okay cool.
Our next question comes from sales of the fleet of Wells Fargo. Your line is open.
Hey, guys. Good afternoon, congrats on the promotion.
Thank you.
All of our questions have been answered, but we wanted to ask some questions around tenant purchase options. It looks like a portfolio of seven properties are up for tenant purchase option starting here in Q1.
Just wondering if you could talk about any conversations you've had on that front and if they if they did choose to exercise how much notice of time elapses typically until those transactions are completed.
Yes at this point, we don't expect them to exercise that option this year.
There is.
We have good day.
<unk> going with all of our operators and.
I think we would have.
Quarters before of window opens we're going to start kind of having that conversation with those guys to see how what their plans are.
So at this point, we don't expect.
And the options to be exercised this year.
Okay, great. Thanks that makes sense and.
In general it looks like most of the tenant purchase options, we see for leases expiring in 2030 and beyond.
Are these legacy kind of agreements and have you included the tenant purchase options in your more recent deals.
Yes, so look we're sure to growth.
Not shrink.
However.
There has been a handful of times, where we provided purchase options in order to.
Sweeten the risk reward assessment.
For operators, when usually when taking over existing operations.
And allowing us to maintain the.
The rent where it is.
But.
It's not something that we are.
We do as a matter of course occasionally there will be of new investment that has.
Of particular building or two that in order for the operator to.
To engage.
To sweeten the deal for them, but most of what you see here.
As a result of some.
Our restructuring work and re tenant team in.
Given given the incoming operator's the incentive to step in and take some.
It takes them.
The higher than the normal risk and taking over some buildings that need some turnaround.
That all makes sense. Thanks, a lot the as I appreciate it.
Okay.
Yeah.
Thank you our net.
All of them.
Okay.
Zero.
Okay.
Yes, good afternoon, everyone Dave Congrats.
Also a good quarter good a good guidance.
In regards to government regulation going forward.
Can you hear me.
Yes, we can.
Perfect.
The regulation going forward.
And the I appreciate the commentary about.
F map and.
And sequestration being extended to the end of the year any comment around what the potential new happened with TD.
<unk>.
Embarrassment.
Sure.
From the typical spring period, when it's kind of the need for the next fiscal year would be helpful and the comment around maybe here advanced payments and an extension of the payment.
It would also be helpful. If there's anything out there.
Well thank.
Thank you by the way, but I am not sure.
We have much more of than some sophisticated speculation to share.
On those fronts.
With PDP M. When it first came out I think there was a general.
Our expectation that.
Some period after the seasoning of a brand new program that the Medicare would would reevaluate and potentially recalibrate the.
The algorithm.
To make sure that they're the right is doing what it expected.
What we saw in the previous administration was I think an indication that the.
And any attempt to recalibrate was going to be put on hold until the pandemic was behind us.
I think our I think most folks in the industry expect that.
Debt position to maintain under the new administration.
So.
But again, it really is the guests and nothing better than that debt.
It's likely not going to be tinkered with this year.
But it certainly could next year with the assumption debt next year, we're going to be living in a.
Post COVID-19.
World at some stage.
Hum.
So as far as the new Medicare advanced payment platform.
Yes, I think I think we had.
One.
Of our operators, who who participated in debt.
But I'll have to double check on that for Ya and I don't have any new information about the government's plans on unchanging the goalposts there ex.
Except for the fact that they continue to the moved the goalposts out further.
So I wouldn't be surprised if that were to take place.
Great. That's helpful. And then one quick follow up again, a lot of positive commentary on the call about the acquisition outlook, but yet you're specifically don't put acquisitions in the 'twenty 'twenty one guidance.
And the reason why and.
And again it seems like the can be potential upside for guidance, but just from the guys doing accretive deals give me your new leverage.
Yes, Tayo. This is Greg we've never put acquisitions.
On to our guidance simply because we think that imposes a sort of a.
And artificial disciplined honest, it's not real.
We would hate to tell you that we're going to do ex $100 million of of.
Deals this year and then fall short.
Or worse.
<unk> farther than we should.
Hit that number if the market's not there for us.
We will let you decide what you think we can do in a year and we will just report the deals.
As they come in.
Alright, im going to stick to $1 billion in the model.
Sure.
Alright, well done thank you.
Thank you.
Thank you I'm showing no further questions at this time I'd like to turn the call back over to Greg. Thank you for any closing remarks.
Thanks, Valerie and thank you everybody for being on the call today, it's been it's been good to chat with you again in the as always if you of any other questions or anything else. We can help you with do not hesitate to call take care.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all total.
You may now disconnect have a great day.
[music].