Q2 2021 National Health Investors Inc Earnings Call
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Yeah.
Greetings and welcome to the National Health investors second quarter 2021 conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the 1 followed by the 4 on your telephone.
And if at any time during the conference you need to reach an operator, Please press star zero.
As a reminder of this conference is being recorded Tuesday August 10th 2021. It is now my pleasure to turn the conference over to Dana Hambly. Please go ahead.
Thank you Jennifer and welcome to the National Health Investors Conference call to review of the company's results for the second quarter of 2021 on the.
The call today are Eric Mendelsohn, President and CEO, Kevin Pascoe, Chief Investment Officer, John Spaid, Executive Vice President and Chief Financial Officer, and David Travis Chief Accounting Officer, the results as well as notice of the accessibility of this conference call on a listen only basis were released after the market closed yesterday in the press release.
Thats been covered by the financial media.
As a reminder, any statements in this conference call, which are not historical facts are forward looking statements NHI cautions investors that any forward looking statements may involve risks or uncertainties and are not guarantees of future performance.
Forward looking statements represent Nhi's judgment as of the date of this conference call investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in Nhi's form 10-Q for the quarter ended June 30.
2021 copies of these filings are available on the SEC's website at SEC Gov or on Nhi's website at NHI re dot Com. In addition, certain terms of used in this call are non-GAAP financial measures reconciliations of which are provided in nhi's earnings release and related <unk>.
<unk> and schedules, which has been filed on form 8-K with the SEC listeners are encouraged to review of those reconciliations provided in the earnings release together with all other information provided in that release I will now turn the call over to Eric Mendelsohn.
Thank you Dana Hello, and thanks for joining us today.
It's been a busy 2021 and the breakneck pace won't be slowing anytime soon we announced last night that we have a non binding letter of intent to sell 9 holiday properties to an institutional buyer for $129.8 million and were in negotiations on the remaining 17 <unk>.
Properties, which could result in a lease restructuring re tenant the RIDEA structure or further asset sales.
We have said that we are motivated by this crisis to transform into a stronger company and we are making steady progress on that front, we've completed or announced nearly $220 million in dispositions year to date and we have concrete plans for additional sales that will get us to the higher end of our.
Our $250 million to $400 million range.
We expect that this will be substantially complete by the end of this year.
As a result, we will have plenty of capital to redeploy as we start to build back our NOI.
Considering that lease coverage for many of the senior housing asset sales. We are contemplating is significantly below 1 times, we are seeing a nice arbitrage opportunity in selling assets with an effective yield in the low single digits and replacing them with investments at yields in the mid <unk>.
To high single digits we.
We expect to have near full capacity available on our revolver and limited need to issue equity, which should return NHI to its more historic NOI growth profile.
We also believe that we can participate in the recovery of the senior housing industry through the repayment of rent deferrals, which also enhances of this growth story.
Turning to our results our collection rate was approximately 87% for the second quarter compared to 94% in the first quarter.
The second quarter was negatively impacted by higher deferrals, which increased to $9.9 million compared to $4.2 million in the first quarter.
The general theme continues to be that the entrance fee skilled nursing and hospital segments, representing close to 60% of our annualized cash revenue net of deferrals are performing well, while the free standing assisted living memory care and independent living segments have.
It's more of a significant occupancy and margin pressure driven primarily by industry wide staffing shortages that is pushing hourly rates and agency costs to unprecedented levels.
We made the hard decision to reduce our quarterly dividend by 18%.
But we believe this is proving to be the right decision as our operators continue to recover.
We expect that we will continue to provide some level of support as occupancy and margins continue the rebound by right sizing the dividend, we have sufficient capacity to assist our partners through the recovery, while maintaining our balance sheet strength.
As we rebuild NOI, we expect to return to dividend growth.
Despite the near term industry challenges, we remain encouraged by the steady occupancy growth experienced across the senior housing portfolio since the March lows.
Cell C is near pre pandemic levels and we're very pleased with the progress that bickford is making as they have improved occupancy by 500 basis points since March.
The recent surge in Covid cases, obviously has the potential to become a headwind, but we have not experienced any meaningful disruption. So far the resident vaccination rates are high and appear to be effective.
We will continue to provide a high level of transparency as our transition progresses.
There are still many moving parts. So we're reluctant to provide guidance at this time.
Our visibility is improving though and we remain optimistic on the longer term fundamentals that drive our growth for years to come.
I'll now turn the call over to John.
Thank you, Eric and Hello, everyone.
Beginning with our net income per diluted common share for the second quarter ended June 32021, we achieved 85 compared to 99 for the same period in 2020.
The decline in net income between Q2.2021 in Q2.2020 is due largely to $9.9 million in the second quarter 2021, deferrals, partially offset by $6.5 million in gains on real estate sales.
For our <unk> metrics per diluted common share for the quarter ended June 30 of 2021 compared to the prior year.
NAREIT and normalized <unk> decreased 30 to $1.16 from $1.46.
For the quarter ended June 30 of 2021, our normalized EBITDA declined by $8.1 million year over year and by $6.7 million sequentially to $52.8 million.
The year over year and sequential declines were driven primarily by higher deferrals of $9.9 million and $5.7 million respectively.
Reconciliations for our pro forma performance metrics can be found in our earnings release, and 10-Q filed yesterday afternoon of FCC Dot Gov.
As Eric mentioned, we are well on our way to making all of the necessary decisions to reduce the uncertainty in our earnings and return to growth.
The announcements made thus far means we will be delevering, our balance sheet from this point forward.
Which will position the company. So we can redeploy capital without the need for additional equity to maintain our leverage policies.
We're not providing guidance today, because we are not yet finished with our restructuring which may include additional dispositions and rent adjustments.
But we are closing in on the final stages, which we certainly expect to accomplish before year end.
It is our sincere desire to reduce our earnings uncertainty and to return to providing guidance as soon as possible.
In mid June we declared our second quarter dividend of 90 per share, which was paid on August 6.2021 and.
And represents normalized <unk> in the second quarter total dollar payout ratios of 77, 6% from <unk> 78, 1% respectively.
As announced last night, our board declared a third quarter dividend of <unk> 90 per share payable on November 5.2021.
The timing of the dividend announcement, Inc.
In conjunction with our quarterly earnings release.
Consistent with Nhi's prior practice.
The prior to the pandemic and is indicative of an improved visibility.
Turning to the balance sheet, our debt capital metrics for the quarter ended June 30, net debt to annualized EBITDA of 5.1 times fixed charge coverage ratio of 5.5 times and weighted average debt maturity of approximately 4.5 years.
We ended the quarter with approximately $1.4 billion of total debt of which 93% with unsecured.
For the quarter ended June 30 of our weighted average cost of debt was $3.2 8%.
On July 31, we had $25 million outstanding under our $550 revolver and subsequent to the end of the second quarter. We further reduced borrowings under our 2017 term loan from $225 million to $175 million.
Our $2017.800 million revolver and term loan credit facility is approaching maturity.
And we intend to re syndicate our facility in early 2022.
We have more to report on this in our third quarter filings.
We did not issue any equity through our ATM during the second quarter. So we continue to have approximately $417 million available under the program.
With that I'll now turn the call over to Kevin Pascoe to discuss our portfolio Kevin.
John.
Starting with an update on Covid, we announced in early July that our operators reported only for active resident cases across the entire portfolio.
As cases have been climbing throughout the country, we have been checking with our operator regularly.
Fortunately they have only reported a modest increase in the number of new cases.
And we have not experienced any significant outbreaks in the portfolio.
We are monitoring this closely and could resume our regular monthly surveys if needed.
Turning to the performance of our different asset classes and larger operators.
Our needs driven senior housing operators, which accounts for approximately 25% of our annualized cash revenue net of deferrals generally experienced occupancy gains throughout the quarter, which continued into July.
Vicksburg, our largest assisted living operator, representing 9% of annualized cash revenue net of deferrals.
Increased approximately.
240 basis points from the first quarter to the second.
The momentum has continued into the third quarter as average July occupancy increased 140 basis points sequentially to 79, 6%.
We're also encouraged the bickford reservoirs remained steady as they have not had the employee extensive discounting which is an outlier in the industry.
Still labor expenses of our major hurdle to restoring NOI margins. So we expect the Bickford will continue to need assistance with the EBITDA coverage below 1 times.
We continue to work diligently to optimize the relationship with Bickford and have multiple levers, including further asset sales and lease restructuring.
We expect to have more to announce in the coming quarter.
Our entrance fee communities, which account for 26% of our annualized cash revenue net of deferrals continues to outperform other senior housing asset classes.
EBITDA coverage for the trailing 12 months ended March 31, and excluding SLC was a healthy 165 times.
The <unk> second quarter average occupancy of 78, 5%, which was up 80 basis points from the first quarter and further improved to 79, 9% in July of this.
This is just 60 basis points below slc's pre pandemic occupancy in March 2020.
EBITDA coverage through the first quarter and excluding grant funds was 113 times, which was up from 1 point over 6 times of the prior year period and flat sequentially.
Okay.
Our rental independent living communities, which account for the 13% of our annualized cash revenue net of deferrals have experienced the larger occupancy decline and our needs driven and <unk> assets.
Holiday retirement, which represents 11% of annualized cash revenue had average occupancy of 73, 8% in the second quarter, which was down 30 basis points sequentially.
So it has been trending positively in the last 4 months and was 74, 9% in July which is an increase of 140 basis points from the more flow.
As announced last night, we of a non binding letter of intent to sell non holiday properties for $129.8 million, which generated approximately $11.6 million in annual revenue with the trailing 12 months EBITDA coverage through March 31 of approximately <unk> 8 times.
Through this pending disposition of holiday properties, we believe we have a stronger portfolio of assets, but as Eric mentioned, we are still considering multiple options for the remaining 17 communities with a variety of outcomes possible, including further asset sales <unk> <unk>.
For the of structure or lease restructuring.
The skilled nursing portfolio, which represents 30% of annualized cash revenue net of deferrals is anchored by 2 strong tenants and in HCC and the Ensign group, who contributed 14% of 9% of annualized cash revenue respectively.
Sniff EBITDA coverage for the trailing 12 months ended.
March 31 was 286 times.
The government support for the industry has been critical and we received positive news recently on a 1.2% Medicare rate update as well as the delay in the 5% cut related the PDP M.
However, occupancy remains well below pre pandemic levels.
Which is exasperated by the severe labor shortages. So we are hopeful that more support from the provider relief fund is forthcoming.
Turning to our business development activities. We are pleased that we have been able to announce over $120 million of investments in 2021 at a weighted average yield of nearly 9%.
We've added 2 new partners in modest Sito medical envision health and we have expanded our relationship with Navient.
That said seller expectations remain high so we continue to be patient in the near term until we find investments that make the most sense for our shareholders with that I will hand, the call back over to Eric.
Thank you Kevin we.
We have accomplished much this year, but we know we have so much more to do.
We look forward to updating you on our progress as we position NHI to emerge as a stronger company headed into 2022, we remain optimistic that industry fundamentals will recover soon.
And we are well positioned to thrive given our healthy balance sheet, our strong reputation as an exceptional capital provider and our long history of accretive growth.
With that operator, we will now open the line for questions.
Thank you if you would like to register for a question. Please press the 1 followed by the 4 on your telephone.
Tier 3 ton prompt technology request. If your question has been answered and you would like to withdraw your registration. Please press the 1 followed by the 3.
And our first question comes from the line of Jordan Saddler with Keybanc capital markets. Please go ahead.
Okay. Thank you.
1 of the jumped right into it Eric I appreciate I appreciate the way you them trade into it today.
Prepared remarks.
But on holiday and the sales I know this is something you are considering.
The recent transaction announcements and the sale of holiday to atria inform your decision to sell the assets or to.
Monetize your transition the remaining 17.
Hey, Jordan good question.
Obviously with the the atria and well tower transaction.
Announcements coming in the middle of our portfolio review.
That that definitely had an impact on our decision making.
And we had already negotiated a subset of buildings that we could sell with holiday and our previous lease restructure from 2 and a half years ago.
So these buildings, we've had our eye on selling these buildings for a while.
And.
As I said at the beginning of the year. This this crisis prompted us to take.
Drastic measures that otherwise may not have been taken so.
<unk>.
So that's.
That's the Genesis of this transaction.
Okay.
And the expectation.
Any sort of color you could offer around sort of the 9 that are being sold year of Boise.
<unk> 17.
Sure we came up with that list in conjunction with holiday.
And the <unk>.
As you examine each building each markets.
And.
Each regional team.
Just felt that that those buildings would be better off in other hands, whether or not whether because they need extraordinary capital expenditure.
Whether they need a different operator, whether the needs.
Whether the market in our opinion was not to our liking.
Those are typically the reasons 1 would identify of building for sale.
Okay and then.
Just moving over to.
The aid would loan.
We're pushing on debt was repaid.
During the quarter.
Is there any.
The increment any expectation of the incremental repayment or was there anything else repaid from that I think that was an SBA loan.
Post quarter end or the.
A year.
Hey, Jordan. This is John yes, there'll be a little bit more of that that particular note that will be repaid totaled $60 million. It wasn't 100% funded so there'll be some maybe additional fundings under that note followed by some repayments and then we have another note.
There'll be some additional fundings.
Net debt to come.
As of closing on the completion of the project.
Little bit of a lag between final fundings, where theyre trying to fund the.
Retainers and things like that but.
But for the most part they're through most of the repayments.
Alright, Thanks, John while I have you just on coverages.
The the coverages reflect the impact of the rent deferrals in.
In the quarter.
<unk> is.
The rent in the.
EBITDAR coverage calc reduced by the deferrals.
No.
Is that what youre, asking youre asking of whether or not our coverage ratios are.
Are the rents actually paid as opposed to the rents that are scheduled.
And the schedule of brands.
Scheduled debt, Okay Thats correct. Thank you Sir.
Youre welcome.
Thank you. Our next question comes from the line of Juan Sanabria with BMO. Please go ahead.
Hi, good morning.
Eric I think you said in your prepared remarks.
Pablo.
And correct me, if I misheard that youre running towards the higher end of the disposition guidance for the year the 200.
Millions of 400.
If I heard correctly, so does that assume that you would sell the remaining holiday assets are not necessarily of those other call.
Pools of assets that could be sold to get you to that level.
Hey, 1 of 2 part question. So the first part are we running towards the higher end of our disposition estimate yes.
That looks like that's the case.
And the remaining holiday buildings.
In my prepared remarks, I mentioned a variety of options.
They could be sold they could be.
Re tenanted, they could be remaining with atria or they could be turned into RIDEA.
Which is not a term that we usually bandy about here.
So everything's on the table.
And obviously, the well tower atria transaction.
Adds a couple of more complexities to that decision.
And we're digging into that.
Currently.
Okay and then when you talk when you talk about.
The various options for holiday sales were turning green.
Et cetera.
Got it.
The same goes for the quarter Thats just a holiday.
And could you give us any sensors.
The pros and cons in your mind between those various options.
Sure.
Youre absolutely right 1 we're performing the same analysis with Bickford.
<unk>.
Probably less skewed towards RIDEA.
And I'll tell you that.
Our thoughts on RIDEA are heavily impacted by accounting and staffing and asset management needs. It's a very different conversation to convert and independent living portfolio, which really only has 1 line of business and no levels of care.
Then it has to have a RIDEA that includes assisted living or memory care, which has multiple lines of business in multiple levels of care.
So that's a factor in thinking through.
Our willingness to do RIDEA.
Bickford of course is assisted living and memory care in many of their buildings.
And then.
And thinking about Bickford bickford unlike holiday.
It does not have institutional or private equity partners.
Of the most part we are either the majority capital partner.
So the.
The number of tools in the toolbox is different.
And as.
As we think about their portfolio, we consider selling buildings back to them, we consider selling buildings to third parties.
With them staying on as manager and we consider selling to third parties with them not staying on as manager in the universe of options.
As well as restructuring.
The lease I mentioned that in the prepared remarks, not our favorite thing to do here.
And typically when we restructure of lease we want something in return.
We're taking a commercial approach to lease restructurings I would point to the holiday lease restructuring, where we got roughly $60 million of cash and buildings and returned for lowering the range and the consideration was roughly equal to the present value.
<unk> of the rent reduction.
Okay, and then just 1 last 1 from me.
You mentioned the provider obese and that seem to be more.
<unk>.
The important for skilled nursing.
Whatever reason incremental funds don't flow from the cares Act.
The roaming funds.
So has that changed.
The downside risk either for our Super seniors housing and skilled nursing.
Before I guess asked another way of are you, assuming any sort of incremental government of Bristol.
Since we're not necessarily as we look at what.
You are trying to accomplish the topic by year end.
Hey, Juan it's Kevin.
Yes, we didnt mentioned, the specifically as it relates to skilled nursing, mainly because we have not seen occupancies rebound they've been very well supported and of course, we of 2 very strong tenants there and sign an H C. So we feel comfortable with the exposure, but we do feel like the industry will need some help as it relates.
2 assisted living and memory care.
As we've gone through our analysis, we're assuming no further help.
<unk>.
We are still hopeful that it will come but at the end of the day I think we need to make decisions absent that we saw some.
Some lagging payments get made in the first quarter as it related to like the last tranche of the provider relief funds and we haven't seen anything else get concretely announced so anything there would be incremental and helpful. But again, that's something that we're planning on which is why we're going down these pads of optimizing the portfolio through sales.
The <unk> or potential restructures or doing things, where we're finally.
At a place where we're seeing a little bit of recovery can start to look at some longer term decisions that get our operators back to stabilization.
Thank you very much guys. Good luck.
Thanks Juan.
Thank you. Our next question comes from the line of Rich Anderson with S. M. D. C. Please go ahead.
Hey, thanks, everybody.
So.
I mentioned the.
The holiday will tower transaction influenced.
Decision with with holiday I guess I'm not sure why well tower buying.
That portfolio influences. The I can I, certainly can see why atria buying holiday would influence the switches.
Situations. So can you just triangulate that from me explain.
What you are suggesting there and also if you are talking about re tenant in some of the holiday.
Assets does it doesn't have to sign off on that so it doesn't that make that proposition somewhat more difficult to accomplish.
Hey, Rich this is Eric.
Good question the.
The the atria purchase of holiday of the manager is the primary complication okay.
But think about this imagine an org chart and imagine that previously the Org chart was.
NHI the landlord fortress, what we call in our business the operator.
And then below that the operator hires the manager.
All of day.
So now on that Org chart holiday becomes holiday slash atria, but guess who the operator is.
Well tower.
Oh, I see okay, so technically and I'm using air quotes here technically well tower is our tenant.
I understand.
So that complicates things.
And then.
As you might imagine we had to give consent for holiday to be bought by atria as part of our lease restructuring $2 of half years ago, We got some additional approve.
The approval rights.
Because the holiday was perennially being marketed I can say that now.
And.
We have the ability to cancel the management fee as it stands with 30 days notice.
Okay.
Okay. Good so.
When you when you.
Look back in history at some of the transitions that you've done.
Have a history of those things working out I know when we when people talk about all of them were transitioning an operator.
And some might just assume that that's the magic.
No.
The silver bullet or whatever and things just suddenly get better but.
I can't imagine that transitioning as always.
In effect of answer to fixing operations does that is that of is that a fair kind of observation of the history and your opinion of absolute absolutely fair.
Rich and I will.
I'd describe it is a mixed bag.
With may be of 50% <unk>.
<unk> success rate.
You can take a look at our.
Our transition properties I'm not happy with how they've been performing of course, we have the pandemic to deal with so the.
The performance metrics and.
The make it a little fuzzy, but I can tell you that in my prior life at the operator of emeritus.
Transitioning portfolios was.
The riskiest type of activity and <unk>.
Often times when the portfolio was being transitioned by a REIT the outgoing operator would not be happy and would not cooperate with the transition and that would complicate things.
Exponentially.
And they of course had no.
Reason not to take their best employees, the best marketing people with them. So oftentimes you'd be left with the building that was short on staff and short on.
Quality employees.
So yeah, it's difficult and not our favorite thing to do.
Okay.
Feel like in your in your case, you feel the kind of checked off some of those boxes of risks.
Obviously wouldn't be proceeding if you felt like it was going to fail I guess.
Yes, that's correct and I want to remind everyone out there in conference call land that we do have the.
The remaining an $8.8 million dollar deposit with holiday.
That can be put towards things like new signage.
New marketing collateral.
And capital expenditures that that might be needed. So there is oftentimes on of transition that is of very helpful. Lubricant.
Okay. Okay and then my last question is I think think about the skill space.
B of 2 pretty quite high quality situations, there and you said the business.
Performing better relative to others.
Obviously getting its share of stimulus as health is helping but do you have a different view about.
Skilled nursing specifically as of May be a larger component to your story on a go forward basis because of what you've experienced here and I ask that with the sort of the commentary that these are for profit operators that.
Depending upon.
The sources of the reimbursement that have a balance of the budget mandate. So it seems like there's a little bit of a disconnect between what the operators want to do and in the.
Those that finance them, so I wonder if you.
Have given that any thought.
Broadly speaking about skilled nursing, becoming larger or perhaps smaller on a go forward basis.
Good question Rich and.
I think you've heard us say for years that we would like to increase our exposure to skilled nursing.
The the problem now is the market has paid a lot of attention to the government support that just happened.
And in.
Instead of assessing.
Stroke of the pen risk because it's called where regulation changes in skilled nursing suffers they've seen the opposite they've seen subsidies that have helped.
<unk> the risk that skilled nursing encountered during the pandemic.
And as a result.
The value of skilled nursing properties has increased and made our mission harder in terms of finding properties that fit our underwriting.
Interesting okay. Thanks very much.
Thank you. Our next question comes from the line of Conor Seversky with Baron Capital markets. Please go ahead.
Sure.
Hey, everybody good morning over there.
Maybe just 1 question from me and 3 parts first on the dispositions for the end of the year you had mentioned that the pricing was in yields.
Low to mid single digits I'm wondering if you can apply some kind of.
NOI number to that just from modeling purposes.
And once we once we exit 2021 is capital recycling with some of the senior housing operators is that something you would look to continue to do maybe you can to fortify the balance sheet or kind of from these further acquisitions from 2 maybe new segments and then 3.
Following up to what Richard just asked we had spoke a little bit about skilled nursing back at NAREIT, but if the pricing there doesn't shake out.
Do you look to redeploy capital that does it go back into operating senior housing or do you make another push into something like medical office buildings, just any kind of color there is appreciated.
I will take your questions in reverse order.
So.
The skilled nursing.
Yes harder to find and.
You know.
If we can figure out of way to do more business with with ensign or MHC or someone like them trilogy comes to mind.
We'd be willing to adjust our lease rates.
And pay a higher or lower cap rate.
Because of the better credit or better operating metrics.
But otherwise you're absolutely right the market seems to be shifting.
And making it harder to do a deal that makes sense.
Your second question about capital recycling.
And new Senior's housing.
Think about this if if the buildings were selling.
Not covering their lease payment and based on the sale amount the.
The.
The cash flow from that building is only producing 2 or 3% return.
Then by selling the building and investing it in.
5678, yielding new investment.
Immediately accretive in.
And by the way with little or no leverage because because we've had these sales.
We have a lot of cash on hand, John but little or no equity new equity, yes little of equities yeah. So it is.
It reminds me a little bit of what this company looked like.
In 2008, and 2009, where we had a lot of cash on our balance sheet and no debt.
Obviously, we have some debt now, but the debt we have is incredibly.
Uh huh.
The linked rate low rate long term.
So.
That gives us a lot of opportunity you mentioned other segments you noticed we did a mezzanine debt loan with Montecito there.
Medical office building aggregator, we found a way to play in that field with.
Higher yielding product that made sense for both of us.
So we're happy about that.
But if when the capital is recycled if our cost of capital is.
<unk>.
Say 2 or 3%.
Because of no leverage then.
Of that gives us a world of opportunity doesn't it.
And then finally your first question.
I'm not sure how to think about that how the dispositions.
You stated I think this is John kind of I think of your state of exactly right.
These low yielding NOI can be.
More quickly turned into higher yielding and.
It isn't lost on us that there's a lot of headwind on senior housing, we're still committed of senior housing but.
There's both still supply issues as well as labor issues.
Confronting the occupancy growth.
So.
1 question becomes are there better quality NOI is out there that we can more immediately transfer into and I think the answer that we've concluded is yes, that's where we're headed.
Okay. That's all very helpful I think.
2% to 3% number from Eric was what I was looking for.
I'll leave it there thanks al.
Thank you once again as a reminder, if you would like to register for a question. Please press 1 for our next question comes from the line of Daniel Bernstein with capital..1. Please go ahead.
Hi.
Just going back to the comments.
I guess, the opening statements about RIDEA and.
Having to add additional asset management of it almost sounds like you.
<unk> been hamstrung by the size of the company and so ex once you.
The complete all of these restructurings.
How do you think of balance of strategic.
Size of the company going forward you need to be larger so that you have more options and more arrows in the quiver.
Going forward.
Get your thoughts on net.
Interesting question Dan.
Sure.
The short answer is yes, we would we would need to add a couple of accountants and a couple of asset managers, that's not insurmountable.
So.
I don't I don't see that as an impediment.
I know that.
Doing of radio with other lines of business, just adds a level of complexity and the seasonality.
At our Investor base is not used to seeing so there would be some adjustment there as well.
Okay.
But they're not.
I go back to.
Do you think about capturing the upside in senior housing I know, there's obviously some near term headwinds of labor.
And actually.
It's a separate question I have 1 on whether you think thats near term headwinds our long term the many of your peers have.
You've kind of suggested maybe its transitory.
But.
So maybe that's a separate question but.
Yes.
What is.
And when we took the capturing the upside of.
The of seniors housing.
And the cycle I mean, how are you thinking about structuring.
The weakness when you restructure holiday the restructure bickford.
How are we going to recapture that and maybe the timing of the.
Youre down the road.
Just just trying to get a better sense of debt.
Sure. Good question, Dan we can capture the upside in 2 ways the.
The structure, we have in place now with the deferrals allows us to.
Increased collections.
As occupancy and margins improve.
And as things get back to normal anything above the existing lease rate would.
Would be fair game for the deferrals. So that is that is 1 way to.
To capture the upside.
Other way would be some sort of lease reset where.
If we decide that it's going to be 12 or 18 months before.
Our property reaches stabilization.
We reset the lease of the coverage ratio that makes sense, including.
The capital expenditure and management fee.
And then a period of time afterwards.
Reset the.
The lease higher presumably as things improve so you could capture that upside.
And I Couldnt help noticing the LTC is doing just that on a number of their underwater leases.
Okay.
I guess I can rephrase the question.
How are you thinking about the timing of recapturing those deferrals as at the 22 event.
'twenty 3 I guess, maybe this is maybe a broader question on how youre thinking about the pace of recovery within the seniors.
Sure Hey, Dan is of Kevin I think as we're thinking about it the deferral of payments largely start.
The first part of next year.
All of those are continue to be under review as we watch this recovery happen.
So we think that it's going to be over the course of the next.
Call it.
18 to 24 months that will be participating in the deferrals being paid back all of that of course depends on how fast cash flow comes back we're watching.
Where operators are able to do their leases currently for new incoming residents and also the pressures that they're seeing on agency over time. So those are things that we're monitoring closely debt have been.
Little bit of a headwind as they've recovered occupancy.
So again still something we're watching but we are still seeing that recovery happening you see it in our occupancy numbers.
But by and large we expect to start seeing some of that the beginning part of next year and should occur over the.
Throughout 2022 and <unk>.
Likely into 2023.
Alright.
Alright.
I'll hop off thanks for the from the color guys.
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The.
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