Q1 2021 Omega Healthcare Investors Inc Earnings Call
Good morning, welcome to healthcare Investor first quarter, 2021 earnings conference call.
All participants will be in listen only mode should you need assistance. Please signal the conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask the question. Please.
Please note that this event is being recorded I would now like to turn the conference over to Michele Reber. Please go ahead.
Thank you and good morning with me today are Omega C. E O Taylor Pickett C O O Dan Booth, CFO, Bob Stephenson, Chief Corporate development Officer, Steven and soft and Megan Kroll Senior Vice President of operations.
It's made during this conference call that are not historical facts may be forward looking statements such as statements regarding our financial projections dividend policy portfolio of restructurings rent payments financial condition or prospects of our operators contemplated acquisitions dispositions or transitions and our business and portfolio outlook generally.
These forward looking statements involve risks and uncertainties, which may cause actual results to differ materially. Please see our press releases and our filings with the Securities and Exchange Commission, including without limitation and our most recent report on form 10-K, which identifies specific factors that may cause actual results or events to differ materially from those described.
And forward looking statements during the call today, we will refer to some non-GAAP financial measures such as NAREIT F. F O. Adjusted after I thought the Fad and EBITDA.
Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles as well as an explanation of the usefulness of the non-GAAP measures are available under the financial information section of our website at Www Dot Omega healthcare Dot com and in the case of NAREIT SFO and adjusted SFO and our recent.
We issued press release in addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega I will now turn the call over to Taylor.
Thanks Michelle.
And thank you for joining our first quarter 2021 earnings conference call.
Today, I will discuss our first quarter financial results, the COVID-19, pandemic and various industry issues and the vaccine rollout.
We're very pleased with our strong first quarter results on.
Our adjusted <unk> of 85 per share and our funds available for distribution of 81 per share of.
Allowed us to maintain our quarterly dividend of <unk> 67 per share the payout ratio of 79% of adjusted <unk> and 83 per cent of funds available for distribution.
<unk> for the first quarter and in April we collected virtually all of our contractual Rs.
Over the last six months, we've issued $1 $4 billion and bonds and we've recast our one and a half billion dollar bank credit facility with a four year maturity in 2025.
Our liquidity and our debt maturity ladder has never been stronger as we move forward facing the uncertain timing of pandemic recovery.
I again want to thank our operating partners and their staff of care for tens of thousands of the residents within our facilities I would also like to recognize and thank the federal government and the states for their support on the skilled nursing and assisted living communities.
The allocation of distribution of additional government funding along with the communication and evolution of clinical protocols and that's been critical and protecting of saving lives as we combat this unprecedented deadly pandemic.
Looking forward the key to our industry recovery is the return of occupancy to pre pandemic levels.
Although we have seen occupancy stabilized and increased slightly as vaccines have rolled out is not clear that the pace of occupancy recovery will be sufficient to avoid industry level cash flow issues within.
With an estimated 24 and a half of $1 billion for remaining of the provider relief funds and the likelihood of provider funding request well in excess of this amount, we expect certain providers and the industry may have shortfalls.
And are more although many states of provided meaningful support there are many states, where additional support will be necessary to avoid the Saudi financial stress and potential closures.
We continue to strongly believe and the positive long term prospects for our operating partners, while acknowledging the possibility of near term stress that some skilled nursing and senior housing providers may face.
Turning to the vaccine rollout.
We continue to gather vaccination data from our operators and can report the following.
As of April 30th all three clinics have been conducted at substantially all of our facilities.
Based on operators, representing over 90% of our facilities reporting in the vaccination rate for residents there's approximately 81%.
The vaccination of rate for staff and approximately 49%.
This is a vast improvement off of what we reported last quarter of 69% at 36 per cent for residents and staff respectively.
I will now turn the call over to Bob.
Thanks, Taylor and good morning, turning to our financials for the first quarter of.
NAREIT S S. Though for the quarter was $170 million or <unk> 71 per share of one of diluted basis as compared to $181 million or <unk> 77 cents per share for the first quarter of 2020.
Our adjusted <unk> was $204 million for 85 per share for the quarter and excludes several items as outlined in our adjusted <unk> reconciliation of net income down and our earnings release, and our supplemental and also on our website.
Revenue for the first quarter was approximately $274 million before adjusting for nonrecurring items.
The revenue for the quarter included approximately $12 million of noncash revenue.
We collected over 99% of our contractual rent mortgage and interest payments for the first quarter as well as for the month of April.
Our G&A expense was $10 $4 million for the first quarter of 2021 in line with our estimate of quarterly G&A expense of between $9, five and 10 of and a half million dollars.
Interest expense for the quarter was $56 million.
Our balance sheet remains strong and we continue to take steps in 2021 to improve our liquidity capital stack and maturity ladder.
In March we issued $700 million of 3.25% and senior notes. Due April 2033 are new issuance was leverage neutral as proceeds were used to repurchase through a tender offer of $350 million.
The 4.37, and 5% notes due in 2023 and to repay LIBOR based borrowings as a result of the repurchase we recorded approximately $30 million and early extinguishment of debt cost.
At March 31st we had $135 million and borrowings outstanding under our 1.25 billion dollar credit facility, which matured and of the month and $50 million and borrowings under a term loan facility that had a maturity in 2022 when April 30th the closed a new 1.4 of five.
Billion dollar unsecured credit facility and a $50 million of unsecured term loan facility at both mature in April of 2025.
We have no bond maturities until August 2023, and.
In March of 2020, we entered into $400 million of 10 year interest rate swaps at an average swap rate of 0.867 and 5% the.
Swaps expire in 2024 and provide us with significant cost certainty when we refinance our remaining 2023 bond maturity.
The repurchase of 50% of our 2023 bonds and the completion of the credit facility and term loan transactions and extended our debt maturities improved our overall borrowing cost and reinforced our liquidity position.
And the first quarter, we issued 2 million shares of common stock through a combination of our ATM and dividend reinvestment and common stock purchase plan generating $76 million and cash proceeds.
While we believe our actions to day provide us with flexibility to weather of potential prolonged impact of COVID-19 on our business. It also provides significant liquidity to fund potential acquisitions in 2021, we plan to continue to evaluate any additional steps that may be needed to further enhance our liquidity.
At March 31st approximately 97% of our 5.5 billions of dollars and debt was fixed and our funded debt to adjusted annualized EBITDA was approximately five two times and our fixed charge coverage ratio was four five times when adjusting to include a full quarter of contractual revenue for new investments completed during the quarter.
As well as the eliminating revenue related to assets sold during the quarter, our pro forma leverage would be roughly five one times.
I'll now turn the call over to Dan.
Thanks, Bob and good morning, everyone.
As of March 31, 2021, Omega had an operating asset portfolio of 954 facilities with over 96000 operating beds.
These facilities were spread across 73rd party operators and located within 41 states and the United Kingdom.
Trailing 12 month, operator, EBITDAR and EBITDAR coverage for our core portfolio as of December 31, 2020 stayed relatively flat for the period at 1.86, and one five times, respectively versus $1 87, and $1 five one times, respectively for the trailing 12 month period ended September 30.
2020.
These numbers were negatively impacted by a number of external factors as a direct result of COVID-19, including a significant drop and patient census, and the dramatic spike and operating expenses, particularly labor costs and personal protective equipment. The.
These negative results were more than offset throughout 2020 by the positive impact of federal stimulus funds, which were distributed in accordance with the cares Act.
During the fourth quarter, our operators cumulatively reported approximately $115 million and federal stimulus funds as compared to approximately $102 million recorded during the third quarter.
Trailing 12 month, operator, EBITDAR and EBITDAR coverage what are the decrease during the fourth quarter of 2020 to 1.38, and one point O four times, respectively, as compared to 1.53 and $1. One eight times, respectively for the third quarter when excluding the benefit of the federal stimulus funds.
EBITDAR coverage for the stand alone quarter ended 12, 31, and 2020 for core portfolio was 133 turns including federal stimulus and 0.78 times, excluding the $115 million of federal stimulus funds.
This compares to the Standalone third quarter of 144 times, and <unk> 97 times with and without the $102 million and federal stimulus funds respectively.
Cumulative occupancy percentages for our core portfolio were out of pre COVID-19 rate of 84% in January 2020.
While they flattened out to around 75 per cent throughout the fall months. They subsequently fell to 73, 3% in December and further and January to 72, 3% before starting to show signs of recovery at 72, six percentage of February and $73 one per cent in March.
Based upon what Omega has received in terms of occupancy of reporting for April to date occupancy has continued to improve averaging approximately 70 344 per cent.
We are cautiously optimistic that the rollout of vaccines, which began in late December of 2020 and continued in earnest throughout the first quarter of 2021, who will provide a much needed catalyst for improving occupancy statistics as of infection rates continue to decline and visitation restrictions continue to ease.
Turning to new investments as previously announced on January 20th of 2021 Omega closed on the purchase of 'twenty for senior housing facilities from health Big for $510 million.
The acquisition included the assumption of and in place Master lease with Brookdale senior living the leading operator of senior living communities throughout the United States.
The portfolio, primarily consists of assisted living independent living and memory care facilities with a total of 2000 and 552 units located across 11 states.
The master lease with Brookdale will generate approximately $43 $5 million and contractual 2021 cash rent with annual escalators of two 4%.
Additionally, during the first quarter of 2021, Omega completed and $83 million purchase lease transaction for six skilled nursing facilities in Florida the <unk>.
These were added to an existing operator's master lease for an initial cash yield of $9, two 5% with 2.25% annual escalators.
Omega is new investments for the quarter totaled $610 million inclusive of $17 million and capital expenditures.
Turning to dispositions during the first quarter of 2021, Omega divested 24 facilities for total proceeds of approximately $188 million.
I will now turn the call over to Megan.
Thanks, Dan and good morning, everyone.
The previously mentioned Theres, approximately $24 $5 billion locked and the provider relief fund.
Additionally, $8 $5 billion with allocated for rural providers with the passing of the American Rescue Act on March 11 2021.
All of it is likely the net.
We'll see some funds out of these remaining amount of our operators are really looking to their states for new or increased stimulus given the substantial amount of funding the states.
And Rusty locked.
This would be on a dozen king or is the continuation of Offlap increase the previously.
The allocated by state.
Our hope is that those states. The previously not made any allocation for the sector well reconsider based on the name of availability of funds.
With large outbreaks of experience across the country, and therefore, and the long term care space and the fourth quarter and on January the preliminary results of the vaccine rollout, which Taylor mentioned earlier have been a sign of hope.
It was full of substantial reduction on resident and employee cases, the rollout with our credit reporting as of last week showing off the 550 cases resident and employee across left from 250 of our building, which the low numbers have not been seen since April of last year.
Likewise, we were extremely pleased last week to see revived C. D. C recommendations, both on the visitation and testing from <unk>.
We're moving the regular requirements of Taft already vaccinated employees and less symptomatic or during the outbreak will go a long way and reducing the cost burden associated therewith and the.
Relaxation of visitation restrictions, including the reduced need for social distancing and mask wearing and certain circumstances for visitors and residents have been vaccinated.
Well not only benefit the mental health of the current resident population, but it will also removed the disincentive previously in place for family members to want to place their loved ones and the long term care setting.
While the height of the infection battle, maybe somewhat behind us and despite these welcomed revised C. D. C recommendations the industry itself and with what will likely be a long drawn out recovery.
Francis will take time to rebuild and reduction and expenses will be gradual over time, all while the ability to scale and place will be reduced with far less COVID-19 cases.
Specifically as it relates to expenses labor shortages continue to be a huge concern for our operator base.
Pre pandemic operators for face with shortages due to low unemployment rate.
During the pandemic the issue has been exacerbated by employees, leaving the long term care space growth.
Permanently and temporarily as the.
The environment is understandably much tougher since the onset of COVID-19 and unemployment benefits and increased substantially.
This expected slow long term recovery means that continued financial support of both federal and state governments is critical and we hope that they will be mindful of that as they determine how to spend any remaining or newly allocated stimulus funds.
I will now turn the call over to Steven.
Thanks, Megan and thanks to everyone on the line for joining today and.
Conjunction with Maplewood senior living and late March we completed license and opened our Alf memory care High rise at second Avenue and 93rd Street in Manhattan, We think the New York State Department of health for their time and attention and the licensing process given the challenges they face with the ongoing pandemic.
The final project cost is expected to be approximately $310 million lease up momentum has been solid with 35 move ins through April the first full month of operations for <unk>.
COVID-19 pandemic poses certain challenges unique to senior housing operators, including increased costs and the challenges of managing COVID-19 positive patients and meaningful practical limitations on admissions while the very much appreciate the help they have received private pay senior housing operators have not seen the level of government support provided to other areas of senior care. We saw continued challenge.
As to our senior housing occupancy throughout the fourth quarter with variations tied to win and where COVID-19 outbreaks were encountered.
However, we have seen evidence of stabilization and strengthening of census, and certain markets. By example, our maplewood portfolio, which is concentrated in the early affected Metro New York and Boston markets. Some meaningful census erosion early and the pandemic with second quarter census, hitting a low of 84% and early June.
That said the portfolio occupancy level had returned to 85, 6% and the month of November census has plateaued at this level for the time being as COVID-19, driven census challenges and select buildings offset further occupancy increases and the remainder of the portfolio, including the land and CIP at the end of the first quarter Omega senior housing portfolio.
<unk> totaled $2 $2 billion of investment on our balance sheet.
This total includes our recent Brookdale investment, which closed during the first quarter all of our senior housing assets are and Triple net master leases, including our of 'twenty for recently acquired Brookdale assets. Our overall senior housing investment comprises 156 assisted living independent living and memory care assets and the U S and UK this portfolio.
Excluding the 20 for Brookdale properties on a standalone basis had its trailing 12 month EBITDAR lease coverage for a four basis points to one point of wait times and the fourth quarter of 2020.
With COVID-19 outbreaks, having effect of different markets at various times. This decrease and performance was to be expected rising vaccination rates amongst residents and staff are of critical step to restoring occupancy and performance.
While we remain constructive about the prospects of senior housing. The COVID-19 outbreak has warranted a far more selective approach the development, while we make further progress on our existing ongoing developments, we continue to work with our operators on strategic Reinvestments on our existing assets, we invested $16 $8 million and the first quarter and new construction and strategic reinvestment.
$9 $4 million of this investment is predominantly related to our active construction projects. The remaining $7 4 million of this investment was related to our ongoing portfolio Capex reinvestment program I will now open up the call for questions.
We will now begin the question and answer session to ask a question you went for STAAR.
And then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question Press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question is from Jonathan Hughes from Raymond James Go ahead.
Hey, good morning.
Taylor you talked about government support for skilled nursing earlier and that we could see some shortfalls and operator ability to pay obligations. If they don't get more assistance and my question is how long can your your operators continue paying the rent without more direct government support the there is.
Still billions of cares act money left.
Meg and said earlier and some of that could be allocated the sniff, but instead they were to get none of that and and no support from the states how long would they house yes.
And Jonathan just to be clear some of them.
My comments reflect what we've already seen from the industry.
L P C, having the Texas portfolio of re file.
So I think some of this is industry related.
As we look at our operators obviously the paid through April.
There is still a pretty good shape from liquidity perspective, but with no more funding.
You see that stress start to hit on.
Operators and the back half of the year.
But I think youll see industry wide.
Net.
That issue of rice earlier and.
And that's part of what I wanted to highlight.
From our perspective, we're fairly certain that the industry overseas.
So that $24 5 billion and that will be helpful.
And then it really comes back to the timing of the occupancy of recovery.
Yes.
The offset to all of us.
Okay.
Helpful color I appreciate that.
And then there has been a lot of talk about inflation fears lately and I'm curious, if if CPI based leases or.
Something you find attractive if we do in fact, the inflation creep up these next several years.
Yeah, we've got pretty much to.
Virtually 100%.
Fixed escalators and the.
The average of two three for <unk> three.
And that was a shift of years ago. The industry was predominantly CPI based on caps.
And we moved away from that for a variety of reasons. So.
I don't see the.
I don't see of shifting back and just be of different piece of the negotiation and there'll be other components that would be negotiated and our leases and when you think about.
Long term duration of our leases and those relationships.
I don't think you see changes there.
Okay Fair enough and then just one more from me any update on skilled nursing external growth opportunities and and pricing you. Obviously did a deal on the quarter, but that was kind of with an existing partner.
And curious if you can get any kind of give any comments on any opportunities, you're seeing and pricing or if it's kind of still limited and we won't see anything until really the back half of the year or even into 2022.
So I mean, we did obviously have some activity and the first quarter with 600 plus million of.
Acquisitions.
Only a small portion of that was snaps and I don't think its.
Opportunistic at this time, we haven't seen a lot of distress snap on the market. We've seen some stress the system, let me, but not it doesn't go on for distressed price and so I can tell you that.
And then sniff pricing, it's remained and kind of on the lines between nine and.
Given the high nines.
I don't I don't expect that to go down anytime soon and were up anytime soon.
Okay.
And Thats it for me thanks for the time share.
Yeah.
Our next question is from Nick you Nico from Scotiabank go ahead.
Thank you so just turning back to the occupancy day that you gave for the first quarter and and into April.
And you just gave us the feel for you know how much of that occupancy.
Pick up off the bottom.
Was you know of long term care versus the shorter term stays.
Uh huh.
And that's a hard one to pin down because it's not terribly material.
<unk>.
The 90 bps on the last two and a half months.
So it hasnt been a large uptick but.
It's.
Long term I think makes up the lion's share of and even though you might have a lot more admissions and up and the short term.
The short term for rolling over every.
15% to 25 days of long term staying and for the for year on year and a half.
Okay.
How many people are being admitted and track conditions.
Okay got you and I, but I think I mean, I think you've said previously right that you know the the decline in occupancy and and the eventual rebound was going to be driven more by improvements on the long term care side is that right. As we just think about the pace of facilities reopening and people going back.
Back into.
And I believe.
Yeah, I think it's a little bit of both Nick the.
The rapid decline we saw on occupancy for the pandemic started.
All of Medicare.
And so and.
That the stabilized, but it really hasn't come back fully so I think we may see.
Leg up there, but to your point.
And the long term care side of the house, which will take time to build just like it would in the senior housing to Dan's point of view.
One year plus for us.
Okay, and until or I guess, just going back to.
And the commentary you talked about about the industry and may be facing some more pressure weighted this year, depending on how are you know of future government funding pans out.
Assuming this is why you're continuing to not provide earnings guidance for the year and I guess as we're thinking about you know potential outcomes of getting farther along and the year you know how how should we think about prospects of the right now.
Youre looking at your tenants and sort of trying to figure out whether they can pay rent for the rest of the year, how we should think about potential rent deferrals.
Versus the need for a permanent change and lease terms.
Yes.
And they happen.
I would say that.
From our perspective, there is certainly the potential for rent deferrals and it's.
Yes, just the intersection of everything we've talked about occupancy recovery government support.
Current state of balance sheets.
And so you're going to have the whole spectrum.
Various levels of risk within our portfolio and then I look outside of our portfolio of the industry and I C.
Even greater risk and so I think again, we may get splashed with Inc.
Industry issues before we have to face them ourselves and to answer your question.
<unk> of how we think about it.
We think about support in the form of deferrals, because we think this is all ultimately sort of.
Work itself out.
Over time, and it's just a question of that.
12 months of 24 months or longer.
I don't think it goes longer but just on them.
Okay. Yeah. That's helpful. I guess just last question on this is is there any way for you to frame out the potential magnitude right now of if we are looking at rent deferrals for your tenants right. I mean, I know your sector was a little bit of unusual and that you didn't have to give rent deferrals, yet, whereas most of the other REIT sectors.
So I mean, maybe you could frame out the yeah of the magnitude of potential rent deferrals as of as a percentage of your tenants.
Yes.
And so many assumptions that have to go into that Nick.
It really would be unfair for I think other than to say, there's the risk out there.
And you can think about the.
Dan talked about the coverages were seeing without federal support at sub one.
But thats the <unk>.
And at occupancy levels, where they sit and.
That's the reference point you have to use it and you make some.
Everybody has to make assumptions about how fast the occupancy comes back how much government support and it will be forthcoming and.
A lot of that is just timing driven.
And so.
Good afternoon and share to go beyond that.
Okay. Appreciate it thanks Tony.
Yes.
Our next question is from of my <unk> Okusanya from Mizuho go ahead.
Yes, and you guys hear me.
Yes, Phil.
Perfect and could you just talk about and really solid quarter acquisitions Y and one Q could you kind of talk about what youre seeing out there of booked in regards to skilled nursing and senior housing and how would you think about acquisitions for the rest of the year.
Tayo I don't think it differs from obviously 2020 was of weird year, but I don't think I think it's a little bit more normalized but.
Which is normalized the us is choppy right.
It's hard to predict.
The deal flow.
We're seeing a fair number of them sort of what I would call of the small to mid size deals.
We're not right now we're not.
We're not involved or are seeing any really really big chunky deals.
The net side.
On the assisted living side, you know we've made an effort to look for potentially.
Potentially distress prospects and quite frankly, those and not.
And out we just we've seen some distract the.
The activity but.
There is a lot of money out there chasing those deals.
Got it.
And and how about your underwriting these transactions right now and just given all of the uncertainty and route and NOI growth.
That's a good question.
The myriad of different things because we can't look at just our normal trailing 12 months because you have COVID-19.
The results from all of the.
Stimulus money and everything else. So you really look too.
What happened pre 2000, 2019 results and and yet.
For the operators and their 2020 Warner and.
Most instances, our 2022 budgets and where they expect to be.
And that's it.
Little bit bigger buffer from the normal for your coverages.
Gotcha.
The other day, one more jonathan's comments earlier on about the kind of reimbursement could you just talk a little bit about together again, and if youre not getting much some of the C from the from the federal government, what really has to happen at the state level.
And make you feel that your tenants on.
Going to be all right at the end of the soul.
Well.
Some of it is just the continuation of the state support and we've already see and.
The possibility for expansion of that.
And the vast majority of the states have debt.
Very willing to be supportive of the industry, Michigan.
The California.
The only state, where we have a big presence where there hasnt been.
A lot of state support to day.
Slot.
So that would be an example, where we'd be hopeful that we see the state of Florida.
Step up with some of the the.
The money the Meg had mentioned earlier.
From the rescue Act.
And support the industry so.
And we're really looking for a continuation and then some.
So I'll make some places.
And initiation of support.
Gotcha. Thank you.
Yes.
Our next question is from Rick.
And are sent from S. M. B C go ahead, and hey, Thanks, Good morning folks.
So question.
On CMS and some.
The discussion around PD P M.
And.
Pulling back some of the revenue generation from that program.
Skilled operators I'm curious, how kind of bummed your C that and if it kind of makes you nervous about just the general.
And of mindset in terms of reimbursement.
The reimbursement going forward what is your expectation in terms of how that may play out in terms of period of time, knowing we have.
2020, being a really tough year to.
The figure that out off of I would think.
Yes, so it's interesting rich if you read the rule.
CMS spent 15 pages.
Looking about PDP and the options and their calculation around it.
And I'll contrast that to rux for.
Which was just the different environment.
And.
It was much more accommodating in terms of how to think about.
What they are required to do which is to make it revenue neutral.
And so I feel pretty good about the options that they laid out and those 15 pages, which included the possibility of the deferral of rate changes for a year, possibly two.
<unk> phase in for a combination and so I think that.
That opens the door for comments on the proposed regulation.
And I am sure Youll see the industry talk about a combination of deferral and of Faison.
And based on the language and the proposed rule I would expect that we will get something like that which should get us to where we need to be okay fair enough and then.
The second question on the vaccine acceptance I recognize the improvement versus previous quarter, but do you see any.
Geographical sort of and <unk>.
Factors at play here.
And so in terms of people being red or blue and.
And and having a certain feeling about vaccines and that does seem to be a part of the reality of the political side of the vaccine rollout or is it somewhat of a uniform around the states.
It's not 100% uniform, but its a pretty tight band.
The coast tend to be just a little bit more.
And the uptake rates on just a little bit higher, but I don't I wouldn't say, it's significant enough that you'd highlight that.
And last for me is yet a lot of moving around in terms of.
And your capital.
Capital, raising and and and so on swaps do you have on it.
Thought in mind about where interest expense could sort of run rate to given all of the movement that happened and the first quarter.
And its Bob here.
No.
If you look at the.
The $700 million, we issued we paid off three of $50 million.
And of savings of about 100 basis points, but we also paid off 350 million of LIBOR based borrowings that were a 100 basis points left and it should even out for.
Barring any credit facility borrowings to do the deal or something.
Pretty close to where it is now.
Good enough that's all I got thank you thanks rich.
Our next question is from Nick Joseph from Citi Go ahead.
Thanks, and maybe just staying on the the capital front as you think about the acquisition pipeline going forward. How are you thinking about funding that obviously you did some ATM.
ATM equity and the quarter.
How do you expect.
Capital funding and leverage levels to try and going forward.
Yes are we ended the fourth quarter at five times debt to EBITDA and this quarter at five point of little over five one times, we would expect if possible the fund acquisitions, a little heavier on the equity side.
Our ATM and assuming the currency holds up there our goal would be to reduce our leverage sales five times, which is our state of goal. So we're slowly working on that.
Thanks.
Our next question is from Daniel Bernstein from capital One go ahead.
Good morning.
Just wanted to touch back on the sense of side and maybe if you've had some feedback from the.
The sniff operators on discharge patterns, obviously theres been a lot of.
<unk> talked about home health may be taking some share and what the discharge patterns, but look like post COVID-19 is.
Have you seen any changes to those just share discharge patterns are they look and kind of normal.
Just trying to get a sense of maybe a better sense of of what.
Debt census, uptick might be and the next couple of quarters.
I think as you look at the hospital discharge and as Youre looking at you know they were much slower than they had been historically and so there had been sort of a little bit of a shift home health.
And so we're hoping that the the admissions become higher and hospitals.
Lack of surgeries come back, but it starts coming back to the nurse and warm and history.
Okay.
And.
Okay.
And then I think the the other question and I was going to ask.
Which was just to ask on the capital markets.
<unk>, Inc.
The acquisitions going forward so.
And I'll just switch gears on on that and just ask about.
The.
You know in terms of.
Pricing and in skilled nursing what is.
And you don't seem to think that pricing is going to move up at all but there still seems to me at least from your comments.
Financial distress.
What is keeping and the cap rates from.
Moving to <unk>.
Initial yields moving to 10% of our higher versus the 995% that youre getting now.
And just trying to think I mean, obviously, the seniors housing and or is that wall of money there.
The suppressing cap rates, but whats the competition that youre facing on skilled nursing for acquisitions.
And it's pretty much the same I mean, we're just seeing a lot of private equity a lot of dollars out there in general.
Obviously, they have a focus on assisted the nurse adjacent sniff deals we've seen it time and time again, so there's a ton of money and it will keep at least on the short run it's kind of keep GAAP rate is pretty low.
Okay.
That's all I had thanks.
Our next question is from Lucas how quick from Green Street Advisors. So go ahead.
Thank you. So there was a little more churn the normal on the property count by the operator.
Curious, if there's anything worth pointing out on that.
No I don't think so Lucas.
And just sort of the normal movement.
The <unk> buckets.
Okay.
And then can you talk a little bit about the moving pieces and the non consolidated and JV. It looks like you sold something that was a game and there was also on the hormones and.
So a lot of that that line.
Yes look it's we have a 15% stake in a JV debt sold I think five facilities for a large gain and our share of that was about $10 million for.
$14 million, but they also of about $4 million of impairments, so thats the incremental $10 million change.
Got it and then the the $5 million of nonrecurring revenue, what was that and where does that show up on the income statement and it.
It's part of revenue.
And it actually hits lease revenue.
It's really two operators that.
And we're.
Transition for <unk> sold.
And it's in place of lease liability. So you have to once you move that you have to record the revenue related to it.
Typically amortized over the life of the lease now it's you write it off of it or in this case.
The pickup.
Great. That's it for me and thank you.
Thank you.
The next question is from Josh Right, then and her line from Bank of America go ahead.
Yeah, Hey, guys hope everyone's doing well.
Because when I speak about it and look big picture it feels like the the big kind of key whether or not youll. After.
The rent relief and the future of really there's going to be determined by kind of fundamentals coming back.
How are you guys thinking about maybe the recovery and occupancy going forward.
And then and on cost as well for a sniff operators.
Yes.
In terms of occupancy recovery.
One thing I'd say is.
The last few months I wouldn't think about that is.
But the trend I think.
It is just the beginning of the reaction of the vaccine and we're hopeful that we'll see occupancy has gone up a little more rapidly as summer approaches.
But that's the question no one knows we've never been through it.
There are some folks who think it's the 12 month recovery of some of the arguments of 24 and you could make the case for either.
Either set of of <unk>.
Logic, and then in terms of cost and you want to talk about.
The big issue.
And the big one and obviously is labor.
Obviously, just impacting senior housing and <unk>.
<unk> everyone.
Minimum wage going up unemployment benefits coming out, it's all making employment that much more difficult inside of snap.
And so.
There's been a lot more turnover that I've seen lately there having the IRR on bring on a lot more agency, which is more expensive.
So they're just they're having a difficult time it was difficult environment before the pandemic and.
It's actually become more difficult at this point so that's the big challenge on on the expense side.
Interesting.
I think you mentioned two like the Sandboy day.
And it people, leaving the industry and you just.
Where the wood.
Is that driven by the unemployment benefits being high or maybe just.
Tap here and it's decided and.
And I think enough for them.
And it's a combination I mean, I think people maybe just exited.
The nursing industry or you do have.
At this point and time excellent unemployment benefits of some people and just doing the math and taken advantage of that.
Okay. Okay.
And then you guys opened and spire and just wait late March and I remember correctly from the press release.
Curious to see how the filling up with that building has been going where you stand on occupancy and kind of where you expect it to stabilize at or when rather sorry.
Stephen can you take the yes, I'd be happy to.
The early the early returns are encouraging.
So we said and our prepared remarks.
We've got well into the mid thirties and terms of residents and the building.
We had always sort of underwritten the project to be a three year stabilization.
And we have really no reason to come off of that at this point, there's just too many variables out there market and receiving the property well, but you can appreciate the fact, we are living in interesting times. So we're still comfortable with that projection.
Awesome.
Got it thanks guys.
Thank you.
Yeah.
And then if you have a question. Please press Star then one.
Yeah.
At this time, we have no more questions. So this concludes our question and answer session I would like to turn the conference back over to Taylor Pickett for closing remarks.
Thanks, everyone for joining us this morning, and as always please feel free to reach out to the team and have any follow up questions.
Yes.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.