Q3 2021 CareTrust REIT Inc Earnings Call

Good day and thank you for standing by welcome to they can't Trust REIT third quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one.

On your telephone.

I would now like to hand, the conference over at your speakers today Lorin Bill care trusts senior Vice President and controller.

Please go ahead.

Thank you and welcome to <unk>.

Third quarter 2021 earnings call participants should be aware that this call is being <unk>.

Listeners are advised that any forward looking statements are based on management.

Great expectations assumptions I believe.

And the environment in which it operates.

These statements may include projections regarding future financial performance.

Acquisition investment returns financings and other matters and may or may not referenced.

The company's business or businesses of its tenants.

Factors that are beyond our control such as natural disasters pandemics, such as COVID-19, and governmental actions.

The company's statements today and its business generally are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied herein.

You should not place undue reliance on forward looking statements.

Average to reduce your interests and 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.

Its affiliates do not undertake to publicly update or revise any forward looking statements where changes arise as a result, because new information future events changing circumstances or for any other reason.

During the call the company will reference non-GAAP metrics, such as EBITDA <unk> and LTE.

Or fad and normalized EBITDA S F L E D.

When used together with GAAP results. The company believes these measures can provide a more complete understanding of its business, but cautions that they should not be relied upon completion of GAAP reporting.

Earlier. This morning characters filed its Form 10-Q, and accompanying press release and quarterly financial supplement each of which can be accessed on the investor Relations section of <unk> website at Www Dot characteristically dotcom.

A replay of this call will also be available on the website for a limited period.

On the call. This morning are Dave metric, President and Chief Operating Officer, Bill Wagner, Chief Financial Officer, Mark Lamb, Chief Investment Officer, and Hercules Senior Vice President of portfolio management that investment.

I'll now turn the call over to Greg Stapley, <unk>, <unk>, Chairman and CEO Gregg, Thanks, Lawrence and good morning, everyone.

Last quarter, we were concerned about the near term effects of the rising wave of Delta variance infections and the possibility of a stall in the census recoveries. It was just getting underway.

Fortunately those concerns were short lived and we can report the occupancy gain to steadily continued in most markets with a few.

<unk> actually having fully recovered incentives, while we're still far from pre pandemic occupancy overall.

<unk> trajectory of the census recoveries consistent with our expectations so far.

These gains on the census, and revenue front are welcome news, but only half of the equation the shortage of qualified workers and the sharp rise in labor cost is a growing challenge, especially as patient and resident census rises set.

Several of our tenants report turning some patients away simply because they lack the necessary staff to care for more.

In spite of the challenges still facing both the skilled nursing and seniors housing industries pricing for assets and skilled assets in particular has been unusually strong as.

As Mark will explain more fully in a moment our disciplined underwriting approach is dictating that we forgo some opportunities while we wait for pricing to rationalize but that happens and it always does.

<unk>, we expect to benefit from heavy lots of dry powder on hand.

We believe that the value of that discipline is more evident than ever in our portfolio today.

With the exception of one small short term deferral, our tenants have been able to pay their rents right along this year. Despite the effects of the pandemic.

While the industry is not yet out of the woods I would be remiss if I did not note for the record that we do see some encouraging indicators of strength emerging in our portfolio independent of the provider relief.

Dave will talk more about that in just a moment.

That said, we're very pleased with the quarter, we posted double digit normalized <unk> growth of 13% over the same quarter last year and normalized <unk> growth of 15, 1%.

We collected 96, 2% of contract rents in Q3, and 96, 1% thus far for October with the shortest being the one deferral that we disclosed last quarter, which we still expect to collect by 12 31 to bring us to a 100% of rent to thus far this year.

We grew the portfolio with $32 5 million in new investments in the quarter, bringing our total capital deployment. This year to over 140, <unk> hundred $84 million and if things come together as planned we're maybe not quite done.

We paid down our revolver following the acquisition and held leverage steady at a comfortable net debt to EBITDA of three seven times at quarter end.

And as Bill will discuss in a moment, we are raising our 2021 guidance today.

Cap it off we got together with most of our operators last month at our annual operator conference, which was held in person here in Laguna Beach, I think you'd look to everyone.

And who came really invigorated and better prepared to tackle whatever comes next.

So we are constructive on the long term future of our portfolio and characterize remains well positioned to continue pursuing our mission of pairing great operators with meaningful opportunities to transform individual opportunities for the better with that I will turn it over to Dave.

Greg and good morning, everybody so.

Let me begin this quarter by thanking all of our skilled nursing operators for joining us at our recent annual operator conference that Greg just mentioned.

Speaking for all of our secure trust bumping fists hearing real time updates from Mark Parkinson of the American Health Care Association and sharing best practices for a few days was incredibly energizing and informative.

We're so proud of our association with a group of operators that we considered to be among the best in the country.

And the conference we spent a lot of time sharing what's working best to address the current COVID-19 and labor challenges.

Virtually all of our operators agreed that their occupancy recovery has slowed because of tight labor.

The flip side of that is that is that our operators.

But for us and our operators is that the question at the beginning of the year about sniff demand has been answered demand is high and the recovery would be much further along if not for the tight labor market.

Nevertheless, we are seeing some operators and some facilities hitting either record occupancy numbers are close to them.

We continue to be impressed by those who are managing this latest challenge well, let me share with you just a few examples of the progress we're seeing and hearing in the portfolio, but Greg just referred to some encouraging indicators of strength.

Ensign our largest tenant reported four sequential quarters of occupancy growth and enjoys lease coverage north of three times, we cannot overstate, how exceptionally well they've performed through this pandemic.

Priority management group has grown its occupancy six seven percentage points since its low in December.

<unk> has improved its coverage during COVID-19, excluding all provider relief funds.

Trillium has slashed agency costs by over $400000 a month since the summer.

And staff turnover from 60% down to 20%.

Trio healthcare has vaccinated, 100% of its employees and is nearing record high occupancy and skilled mix.

Covenant care Slash the agency usage from a February high of around $1 million, a month to under $100 a month right now.

And momentum created a special secure unit to access and care for the large county hospitals difficult to place patients growing occupancy and earning some valuable goodwill with the referral sources along the way occupancy is 13 five points higher than last summer.

I could go on.

These are the types of successes that we don't get to read about in the news, but are happening throughout the portfolio.

Again, let me say, thank you to all of our operators and their teams for the extremely heavy lifting they've been doing these last 21 months.

These positives don't mean that many of them won't need or benefit from the next round of provider relief funding.

We believe all of our operators have applied for phase four except for Ensign and pennant does not needed or accepted relief funds from the beginning we.

We will find out how much the phase four funds extend the runway for each operator is funding amounts are determined and checks are received in late November and December.

But it's great news for our operators skilled and assisted living alike, who have needed those funds so far.

Occupancy growth will also be critical in Q3, our skilled nursing operators reported continued occupancy recovery from the prior quarter, resulting in a projected return to pre pandemic levels sometime next summer.

While at just under 20% of our skilled nursing facilities are still operating below 80% of their pre pandemic occupancy. The majority almost 60% are back above 90% of pre pandemic occupancy.

And on the skilled mix front the delta surge appears to have actually given a balance to some of our operators in the regions most affected.

Overall portfolio skilled mix remains about 300 bps higher than the pre pandemic levels, but the higher reimbursement rates that offset some of the overall occupancy loss.

Of course this projection assumes that qualified labor is available and that no new headwinds such as a new variant or wave of infections intervenes.

For seniors housing occupancy overall occupancy.

And our relatively small al portfolio remains unchanged from Q2 in spite of the fact that admissions are significantly up the.

The treadmill here with Al occupancy is really a result of one of our operators electing to discharge a host of residents for various reasons.

Now that Thats largely done we expect to see our seniors housing occupancy begin to recover more quickly from hereon.

Turning now to lease coverage with few exceptions overall coverage remains very healthy both with and without provider relief fund.

A couple of our operators have really needed those firms to extend their ability to survive and ultimately recover from the impacts of COVID-19.

Our top 10 operators coverage, which accounts for over 80% of revenue continues to be strong at two two times for property level, EBITDAR and 276 times of EBITDA.

Our relatively transparent coverage disclosure will prompt questions around individual operators. So let me go ahead and address three of them right here.

First last quarter, we talked about noble senior services, one of our seniors housing operators in their request for some flexibility in paying a few months of rent.

You will have noticed both the investment total and rent numbers increase for noble soup last quarter.

As a result of transitioning the second of two premier facilities to noble in Wisconsin.

Around this time last year, we began talking to premier about transitioning their two Wisconsin facilities, which were outliers for premier.

<unk> top performing facility was nearby and at the time again last year noble as a whole was performing a little bit ahead of their expectations in spite of COVID-19.

We saw this transition as a win win for both operators.

Two buildings transitioned this year the first in March and the second in July as regulatory approvals, where required and took some time.

We're happy to report that Noble's admission rates have really picked up lately.

As I noted a moment ago their discharge rate has also been unusually high primarily due to an internal review that led to discharge and a number of residents that were not best served in those settings.

Discharges represented 12 five percentage points of their overall occupancy.

We think thats essentially done now but of course it has led to significant holding their nurture near term revenues.

They hadn't received provider relief funds previously, but they have applied for and expect phase for assistance.

So in September we agreed to defer approximately 90 days of rent under an arrangement for them to pay it all back plus the rest of their 2021 rent by the end of this month.

Their obligations under the agreement will be funded from the proceeds of our pending acquisition of their two memory care facilities in New Jersey.

That arrangement, which is only dependent now on the imminent receipt of regulatory approvals appears to be on track.

After that they still have a ways to go to get to positive lease coverage, but the phase four provider relief funds and other government assistance will be immensely helpful. In the meantime, and perhaps more importantly for the long term as I noted, we believe that the discharges are over now and with the increasing pace of admissions there occupancy number should finally gets <unk>.

<unk>.

Second.

Covenant care is a sniff operator, who is month over month occupancy and coverage is actually trending really positively in recent months.

We are in a minority piece, we're a minority piece of their overall portfolio and our corporate credit is very good as their other facilities are reportedly performing well we're optimistic that their recovery trend will continue.

Finally, let me talk about base Shire senior communities Theyre seniors housing and skilled nursing operator that took over two of the four beautiful large campuses in California, We acquired early in the year plus another in Central California.

The base hire team is a positive momentum in those three assets and we expect them to near stabilization soon.

So we remain very constructive on both the near and especially the long term prospects for our skilled nursing and seniors housing portfolio.

The combination of steadily recovering sensus and continuing relief funding, especially for the al operators bodes well for them, even though it's no guarantee of success for the most challenged we will continue to monitor and report.

With that I'll pass the call over to Mark to talk about investments Mark.

Thanks, Dave and good morning in Q3, we executed on a $32 $5 million acquisition of.

Two skilled nursing facilities in Austin, Texas that we concurrently we're used to operating affiliates of the enzyme growth with two assets are well located and practically brand new and then it'll be exciting to watch ensign ramp them up over the coming months. The acquisition brought our total investments in 2021 to $184 4 million.

From a market perspective on the skilled side, we continue to see one off deals with mostly non strategic and struggling facilities.

As you would guess deal flow for stabilized assets has been very light a stabilized assets are understandably harder to come by for the moment.

With respect to value add assets the ongoing government support of the sniff industry has kept homeowners afloat owners that we would have normally seen selling their assets as property level economics turned negative.

Deal with challenges of reduced occupancy and higher labor costs.

With stronger than usual demand for fewer than usual assets on the market pricing for skilled nursing has surprisingly spike.

We thought there might be a couple of this goal.

In fact on a price per bed basis.

Most have been trading at all time top Alt.

Time highs, including many assets with little to no cash flow in other words, yes, Virginia, there is a fair.

Cause for Smiths dollars this year.

Seniors housing is its own story.

There's a large range of assets on the market from class eight o'clock and everything in between.

A lot of those assets and certainly miss priced as well, although we have seen a few more reasonable numbers from the mid market product that we typically pursue.

We are looking hard at some opportunities where we see.

Can get risk adjusted returns youre accustomed to seeing from us.

I will remind everyone that we've consistently reassure the market that at any point in the real estate cycle, where pricing becomes unsustainable.

Due to our underwriting discipline to ensure that we keep our portfolio healthy and well positioned for the long term coverage growth.

So we continue to tap our extensive industry contacts for our property and priced opportunities, which is why we've been able to close $184 million and largely off market deals year to date.

And as Greg mentioned, there may be more for the year is done.

But we will not chase mispriced assets.

Our tenants, an untenable situation, where their rents and the annual escalators.

Coverage to a sustainable.

Looking to 2022 and 2023 investment sales community continues to expressed an expectation that a wave of deals will be covenant.

Based on the record number of broker opinions of value are deal fees that are being asked to issue by prospective sellers.

We can't predict exactly when.

We expect that pricing will eventually settle at the Chengdu next subsides supplying supply chain issues are resolved interest rates rise.

Scanners negatively.

In that environment, we will be ready to use our consistently conservative balance sheet to grow more aggressively with quality assets in good markets and above all with best in class operators.

In the meantime, we continue to eye every deal out there for opportunities that might fit us and our operator partners.

We believe we'll get our fair share.

Our current pipe system of $125 million to $150 million range. While pipe is made up of singles and doubles with a couple of solid smaller portfolio opportunities that we believe are a good fit.

We're operators.

Type of split roughly evenly between Smiths in senior housing facilities.

Please remember that quarter pipe and look for deals that we are actively pursuing under our current underwriting standards.

And then only if we have a reasonable level of confidence that we can lock them.

Relatively near term.

And now I'll turn it over to Phil to discuss the financials. Thanks.

Thanks, Mark for the quarter normalized <unk> grew by 13% over the prior year quarter to $36 7 million and normalized Fad grew by 15, 1% to $39 million.

On a per share basis normalized <unk> grew by 11, 8% over the prior year quarter to 38 per share and normalized <unk> grew by 11, 1% to <unk> 40 per share.

Sure.

Moving onto guidance, we plan on issuing guidance for 2022, when we released 2021 year end results.

For the remainder of 2021, we are raising our previously released guidance by one penny on the low end of the range to normalized <unk> per share of $1 49 to $1 50, and normalized <unk> per share of $1 58 to $1 59.

This guidance includes all investments and dispositions made to date.

Share count count of $96 5 million shares and relies on the following assumptions.

One no additional investments dispositions or rent deferrals cuts of reserves, nor any further debt or equity issuances. This year.

<unk>.

Inflation based rent Escalations, which account for almost all of our escalators at an average of 2%.

Total rental revenues for the year again, including only acquisitions made to date are projected at approximately $186 million, which includes less than $40000 of straight line rent.

Three interest income of approximately $2 million.

For interest expense of approximately $23 8 million in our calculations, we have assumed a LIBOR rate of 15 bps and a 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.

Not included in interest expense was $10 8 million charge that we recorded in Q3 related to our Q2 bond refinancing.

$10 8 million was made up of $7 $9 million of redemption fees and a $2 9 million write off of deferred financing fees.

And five we are projecting G&A of approximately $19 6 million to $21 5 billion. This range is consistent with what we discussed last quarter. Our G&A projection also includes roughly 7 million of amortization of stock comp.

Our liquidity remains extremely strong with approximately $23 million in cash $520 million available under our revolver and we produce roughly <unk> <unk> in cash per quarter after paying the dividend.

Leverage also continues to be strong at a net debt to normalized EBITDA ratio of three seven times today.

Our net debt to enterprise value was 25, 1% as of quarter end and we achieved a fixed charge coverage ratio of eight five times.

Lastly, cash collections for the quarter came in at 96, 2% of contractual event in October came in at 96, 1% I would expect November to be much light October based on the color given today on this call.

As Greg mentioned, we do however expect to collect a shortfall before year end and with that I'll turn it back to Greg. Thanks Bill.

We hope this discussion has been helpful. For you. We certainly appreciate your continued interest and support and with that we're happy to open it up for questions Sandy.

Yes, Sir and ladies and gentlemen, if you would like to ask a question. Please press star and the number one on your telephone again, if you would like to ask a question press star one on your telephone we'll pause for just a moment to compile the Q&A roster.

For our first question we have.

Hawaiian Penumbra from BMO.

Hi, Thanks for the time, just hoping to spend a little bit more time on noble.

The two assets that you guys are moving just curious on if those were.

EBITDAR negative and door.

Coverage enhancing for noble.

And <unk> the rent that staying with those assets staying in place with noble or just curious on how we should think about that and are there risks for rent on those two assets being lower than what we subscribe to it under the prior lease just a little bit more color on that piece would be helpful.

The buildings were not covering so theyre under one times coverage.

We're sort of chronic underperformers for premier.

And one of the things, we really liked about putting them into noble's hand last year. When we were looking at it.

Was that noble's say their.

Their top performing facility is in Wisconsin nearby.

These two premier assets their strongest local leader and most consistent operators. So this created the opportunity for them to build on that strength form a nice little cluster.

And and we felt like it gave those two buildings a better chance to get back to stabilization then than they were in Premier agreed.

So the rent came over at the same amount to noble.

But theres some work to do there to get those.

Sure.

To be performing.

Since the transition happened.

They have under Noble's care improved slightly on a coverage perspective, but they still have.

Some ways to go to get North of one times coverage.

Okay, and just to clarify.

Theres not assets being taken out from noble.

Given to a new operator.

I was just reading over the 10-K, there was a little confused about.

Maybe another two assets are those the same two assets.

So theres two groups of two assets.

So I understand why there is some confusion.

The reason the reason why I talked about these two Wisconsin buildings that were added to noble is to address the question of why noble has actually increased and investment size and rent.

In terms of our relationship with them.

It's because of that because they took over those two assets from premier that we started negotiating last year and has finally took place this year.

The other two assets that we've been talking about for renewable one is one building in Fort Myers, Florida, which has been offline since they stepped into the lease back in 2019.

For major renovations and getting that back ready to go that's still a ways out from being ready and and license.

The other one is a building in Baltimore, Maryland, that's actually being actively marketed right now for sale.

So those are those are the probably the other two buildings that you are thinking about from the queue.

And so once those buildings are carved out.

Coverage enhancing or do you have a sense of what the pro forma coverage.

Yeah.

Ticket.

Pro forma number.

I don't have a pro forma number at my fingertips, but it absolutely when Fort Myers is removed and Baltimore is remove those will be significantly coverage improving for noble.

Okay, and then just switching gears to the pipeline.

What could say the confidence I guess that prices.

Stay where they are cap rates lower.

Price per unit is high and that we've seen significant cap rate compression in other asset classes with low rates.

Who is to know where interest rates. So just curious if.

What you see changing or.

Or what are what do you think youre not willing to match versus some of the other buyers out there in terms of our underwriting. It's just the speed of the recovery or is it the underlying.

If the assets that may or may not change just curious if you could provide a little bit more color on that.

Well I think this is mark.

I think just talking to the to the investment sales community in.

Understanding that.

Essentially the spigots going to get turned off so I think we feel.

Hi.

Pricing at some point, we'll rationalize.

So I think over the next probably 12 months, we'll start to see more.

More and more opportunities so.

Answering your question is a question why are we seeing pricing will grow will go south.

Yes, yes.

Normalized and are aware of your different I guess in the underwriting versus the peak.

Who are winning the bid because it just there are more.

Aggressive on the timeline of a recovery or just.

I see a greater value on the underlying real estate ops.

I think it's I think the.

Folks that are winning.

Are making some assumptions on.

Certain states.

Typically states that have CMI based on Medicaid rates.

And are assuming pretty aggressive increases in Medicaid rates, and that's not something that necessarily willing to underwrite going into door what operators continue day one.

Certain insurance costs.

Or.

Very easy low hanging fruit that changes will take that into consideration, but getting on an operator.

Increased our CMI, which then increases the catering.

Which would increase coverage there are some nuances.

Yes.

Give us a whole lot of numbers there are operators that are willing to.

Let's take that risk.

We'll move off of those assumptions.

Thank you.

Sure.

And for our next question, we have Jordan Sadler from Keybanc capital markets Jordan. Your line is open.

Right.

Thanks.

Good morning, guys.

One conclude to go get a little bit more on mobile.

Good morning, Greg.

Third group of two assets, which are the two assets that we purchased for one New Jersey an amendment.

Yes.

More confusing and repair.

Can you give us a little bit more color on those two assets and how that transaction is going to come into the fold.

So maybe how material co and what the value of <unk>.

Yes, so those two assets are owned by noble.

There's just some regulatory one last regulatory hurdle to pass and then we can execute that that purchase which we think will do.

And this month, if all goes according to plan.

Those are two.

Mark.

About 40, 45 bed facilities for memory care in New Jersey that have been empty for quite some time being renovated they had been renovated will probably once we acquire them put a little bit more into it to get them really beautiful and ready to.

Go.

The process in New Jersey takes a little bit longer than other states to get license. Once you. Once you have certificate of need.

So we're likely going to start.

Collecting rent on that some time in.

First half of next year, hopefully first quarter.

But sometime in the first half of next year.

We are likely going to have a different operator run those and knowable.

We are currently marketing the facilities, having really good conversations with.

As a host of interested operators, we're going to be touring the facilities with them soon and we have some time because of licensing to get that lined up but theres been a lot of interest in them for operators that are already in and around New Jersey.

The.

Purchase price on that is around $12 million for those two buildings.

And then Youll put in how much additional.

TBD, but probably.

Under quarter million.

Smaller okay.

And then those will be leased to somebody else to that.

The yield that we would expect.

Yes.

That's right most likely.

The ramp, but because they are empty and theres going to be a bit of a ramp in that rent. So once once it gets stabilized then we will land at sort of that normal yield that you expect from us.

Okay.

And then just clarifying on the two that are well.

Baltimore Fort Myers, It sounds like Baltimore will be sold.

I'm curious there what the sale price might be and then how the credit with the right credit would be.

On a yield basis relative to the value back to noble.

And then maybe if you could clarify what's happening with Fort Myers.

Yes, so with Baltimore, we will find out what the market says about the price for <unk>.

Baltimore.

Don't want to.

I don't want to whisper number to the market, while it's it's being actively marketed at this time.

But we will take those proceeds and hit it with kind of a.

And what you might expect our rent yield to be for that.

And adjusted the rent Accordingly, and Fort Myers.

There have been some.

Since that building went through a full rent.

Renovation.

As it's gone through licensing with the fire authority, they've they've discovered some.

Some shortcomings that they'd like us to shore up before we reopen it and theyre pretty extensive and so thats whats caused the delay there.

But we have.

Our director of construction services has been boots on the ground there very recently talking face to face with their fire authority.

In collaboration with noble to try to move that along.

Okay. That's helpful last one maybe get marketing conversation here it sounds like Youre not closing the door on the two.

250 to 300 million of acquisitions, you guys have been historically.

So a little bit of a ways to go.

The right cadence, we should be coming away with.

Yes, I mean, it's obviously getting late in the year and then I think I think what we have kind of teed up in the pipeline.

Thank you.

But again, it's quite tough.

Maybe the historical.

Remember that you saw pre COVID-19.

But what we do have in the pipeline.

We're pretty excited about and so just be a function of us.

How quickly we can get through diligence and get operators signed up.

Yes.

Okay. Thank you.

Our next question, we have Amanda Sweitzer from Baird your.

Your line is open.

Great. Thanks for taking the question.

Alaska by Nobel here, but do you have Nobel currently has any got against the two assets that you're acquiring that you could pay off or should we really think about that purchase price of those assets is that one for one cash infusion for noble.

They have some debt that will be paid off from the proceeds.

The largest amount of the proceeds will go toward <unk>.

Paying off the deferral in prepaid rent.

Other obligations for us.

Okay. That's helpful and then on staffing.

Staffing for the operators that you mentioned, where you are seeing those lower agency costs are you also seeing like occupancy restrictions or those operators generally trading agency labor per full time staff and are still been facing staffing constraints overall.

So thanks for asking because I think it gives me a chance to correct something.

When I was talking about covenant care.

Somebody I was nudged here at the table that said.

Said that their costs went from 1 million a month down to $100 a month, but that's really a 100000.

For Covenant care.

So as it relates to our operators in general.

Most of them are saying that there is some limitation on how much they for the skilled side not so much for the senior housing side, but for the skilled side, how much stake and admin because of tight labor.

Theres really two ways to approach that.

You can continue to admit.

And staff with the agency.

Which takes a big a big cut to your margin.

Or you can stay with lower occupancy and keep agency out we have operators that are basically approaching it in both of those those ways.

And there's pros and cons to both of those approaches.

So I'm not sure if that answers your question, but thats.

How they're approaching it now.

No. That's helpful. And then last question following up on your senior housing portfolio and pennant improved trends Youre seeing there can you quantify how big the occupancy uptick that you've seen quarter to date.

Unfortunately, I can seniors housing occupancy quarter to quarter really has remained flat.

Okay.

Okay.

I appreciate the time.

Okay.

Our next question, we have Michael Carroll from RBC capital markets. Michael Your line is open.

Yes, Thanks, Doug could you go back and talk a little about the internal review that you were highlighting about noble I guess, what drove that internal review and where were those residents where did they move to what was the better setting.

Well I think.

Yes.

Yes.

The overall question the overall concern was appropriateness.

<unk>.

Of care. So in other words, there's really kind of two things.

That led to pools of concern one was appropriateness of care and the second was payer source. So.

So it's one thing to admit residents.

But if they are.

Arent able to pay over time, then you have a problem and you kind of have Phantom revenue there.

So that was an issue and the other was just the appropriate newness of care.

Most.

Common.

Around either acuity or behavior things like that so there is.

What prompted it was management finally.

Coming to grips with some lingering issues.

<unk> taken a hard look at what they had in their hand.

And a handful of their facility is really a couple of new buildings, where they had kind of persistent problems and as they dug into it. They realize that there were collection issues in those collection issues were not unrelated to some of these behavioral issues as well.

And <unk>.

Finally, just made some policy decisions around the types of residents that they can.

Really appropriately take care of them.

So that 12, 5% drop was that how many communities alright, and I guess out of hot money within their portfolio and where they move to what behavioral health facilities or skilled nursing facilities or those types of assets.

They would be I didn't we didn't really keep track of where they went so I can't give you specifics on what percent went where but you are right, that's where people would go or other assisted living facilities that specialize in behavioral health.

Health as well so within our seniors housing you have all sorts of specialties.

The buildings that they had just didn't have that capability to take care of that population.

It was concentrated at a couple of the buildings.

And that 12, 5% occupancy drop that was at the whole portfolio or just the flexibility.

Their whole portfolio.

Okay, So where is occupancy for noble for their portfolio today.

Okay.

Yes.

We can get back I might have to get back to you on that one Mike.

Okay.

That'd be helpful. And then can you talk a little bit more about premier I know their coverage ratio has been pretty low over the past few years I mean, moving those two assets to noble out of that portfolio.

Where does coverage ratio go is it closer to two one times.

Yes. It is it's creeping up.

We've been receiving we just saw.

Premier at a conference. This last week had a really good conversation with them have a good relationship with those guys. They are starting to see some traffic pickup and their Michigan portfolio.

They expect more move ins net net increases by the end of this year.

They've applied for the phase four funding in rural funds as well so.

Things are are actually a little bit better and stronger premier today than they have been in a long time.

Moving the two Wisconsin facilities.

It has helped them.

So when you say, it's moved up a little bit I think it was around eight times last quarter and obviously they fell out of our top 10. So I don't believe its in its most recent report but is it back up to <unk> nine times.

Or how much is does that removing those two assets really help them.

Can we take them off the watch list does it help them that much.

No I don't think were going to.

Let me take Premier off the watch list until they're comfortably north of one times.

And they still have a ways to go I think their coverage in the quarter.

It was fairly consistent with what it was.

Order before maybe a little bit down.

What I was referring to is more real time information that we have.

In Q4, just looking at their occupancy and talking to them about their their costs.

We expect that its starting to creep up right now.

Okay.

And then just my last question for Bill can you talk a little bit about the CPI rent escalators within the company's leases I believe you have 2% guidance and CPI has been well ahead of that I guess, what CPI should we typically look at for those and is it above 2% or is that.

Really going to be a 2022 event versus 2021.

Yeah, Hey, Mike.

CPI most of our leases contain CPI <unk> and CPI you. It is.

For the last few.

And as you know R R.

Leases contain floors of zero and caps most of them have caps enzymes capped at two 5%.

CPI came in for them above two 5% on June one, but we still raise them by two 5%.

The other caps go up to like I think its three and a half and CPI has been well above two and a half so.

So our assumption of 2% in guidance for the rest of the year, which we only have a few tenants with bumps in Q4 isn't really material. If it goes from 2%, if I use 2% or two 5% or 3%.

Okay. So if we're looking to 2022, it's safe to assume that we're probably closer to that two and a half range, given where CPI has trended.

Correct, yes.

Okay, great. Thank you.

Okay.

For our next question, we have Steven fairly quick.

From Barclays Steven Your line is open.

Hello, everybody. Thanks for taking the question.

Actually a couple of questions here really on the.

And the decision by Ensign group, an announcement from a week or two ago about starting a captive REIT within their company.

I guess for the near term and long term, maybe just break up the question that way I guess I am curious in the short term.

With the slowdown the pipeline of deals that you that you've done with them.

Yes, I mean, they had a lot of positive comments on their call about continuing to do.

Transactions with existing.

Re partners et cetera, but maybe I'll just pause for a second get your high level thoughts on ask a few follow ups on this topic is finally going to start get your thoughts around any implications for you guys short term or long term and that will go from there.

Sure This is Greg.

Look I don't think it changes things very much for us.

We have.

We have good relationship with them and you saw in our.

Deal with them in the quarter to do the two Austin facilities net case, we brought those facilities to them, having tied them up previously and I really think thats, probably the only way that we will be we would have.

We would be doing deals with enzyme in the future. It's really the only way we've done deals with them.

Their cost of capital has always been good enough their availability of capital has been good enough. If they found a deal they could finance the deal and they've done their own deals and they've done a very very very well.

That said.

With their with their captive REIT amongst next sure what theyre going to be looking at.

If they continue to look at the same kind of distressed assets that have been their bread and butter historically.

Don't think theres going to be a ton of overlap but to us.

Really just represent another another player.

A large.

Marketplace with lots and lots and lots of players that we compete against and I don't think we're too worried about whether we will get our fair share of the deals that <unk>.

To answer your question, Yes. That's helpful. Maybe just two quick follow ups on the same study is one of them sort of half answered already but yes.

If we look at Ensign group and pennant combined I think your total number of properties.

Combined back in 2014 was <unk> 94, and that would be 106 currently between the two so if you've added a couple of properties per year under that combined relationship it sounds like.

You were bringing those <unk>.

<unk> and transactions to them as opposed the other way around so something going forward that that will still be the case.

Based on what you said I just want to confirm that.

Yes, actually actually what happened was we bought a four building portfolio with an enzyme lease in place last year.

And then we did this deal with them. This year I can't think Mark we don't do anything else with them.

But we did a covenant care tack on.

Building with them.

Again, one building we brought to them.

And they grew a little bit when they acquired five Oaks, which is a smaller operator of ours. That's right. They bought they bought one of our operators.

Just stepped into the lease that was already there. So so those are the kind of deals that we deal with them again.

They have they're a great operator, they have superior cost of capital.

<unk>.

If they source of deal Theyre going to do that deal themselves every time I would.

Okay.

And just a sanity check on.

Just the expiration date of your master lease with Ensign group right now and then when you own the real estate side I'm guessing, there's really no risk of losing.

Any of your current lease property arrangements with them, but maybe just long term is there something should we assume that's all with stay in place.

<unk> long term or as or is there a risk long term, that's something changes as far as the.

Size of the relationship are nonexistent.

Yes, that's a good question I'm glad you brought it up it gives us a chance to remind everyone that when we set those leases up in 2014 as eight master leases and they are all they all have staggered maturities.

With various 235 year extension options and design can exercise and they are all well diversified in terms of geography asset class and asset quality.

Or that was done so that.

We would be able to have the expectation that this is a very high likelihood that those would be renewed as those renewal options come up.

Okay, one last real quick one.

Did you know that this strategy was coming from them for a while or is this maybe catching you by surprise a little bit as far as their decision around this I'm. Just curious if you have any high level response to that.

No I don't think anybody should have been surprised.

<unk> has been telegraphing to the market literally for years that they wanted to do something like this without saying exactly what it was going to be but I think everybody has known that they have.

Sizable real estate portfolio that they have built since the since the 2014 characterize spinoff they've done a terrific job with it and.

And I think it's I think it's a good solid logical step for them in.

In terms of just making sure that they get credit for the value of the.

Excuse me the real estate equity that that they continue to create and buildup in that portfolio just as they did with the portfolio that we started with they're doing a great job.

Got it okay. That's all very helpful. Thanks.

You bet.

Our next question, we have Daniel Bernstein from capital one Danielle Your line is open.

Hi, Thanks for taking my call here for my questions here.

Wanted to go back to the skilled mix that you noted which has been increasing so I wanted to kind of understand a little bit more about how you think about the sustainability of that increase in skilled mix.

And maybe how much of that was related to maybe to PDP EM versus.

The uptick of Covid and <unk>.

Okay.

Hey, Dan I'm not sure that we could attribute.

Skilled mix.

The increase or decrease or any movement, there to PDP and necessarily.

We've always compared the numbers pre pandemic to post and we had about six months of <unk>.

<unk> in those pre pandemic numbers.

Roughly we are at about 15, 5% for.

For skilled mix on our skilled nursing portfolio.

For pre pandemic.

We've seen it go as high as 25, 5% in December.

Of last year.

It kind of came down too.

In June.

Hi, 16%.

Slowly each backup to a September number of 18, 5%.

I think thats largely because of the <unk>.

The Delta variant.

And we will see.

A lot depends.

It depends on how long the three day qualifying stay waiver stays in place.

That is a key element of course to these numbers.

Whether or not that is a permanent change.

Very well.

Is anybody's guess, but probably not something that it's worth putting a lot of money on.

So.

I think when the dust settles on Covid, and we could say that.

As far in the rearview mirror, we probably get back down somewhere closer to those pre pandemic skilled mix levels.

Okay Alright.

Alright.

And then on the pipeline.

Obviously with with some of your operators and the high lease coverage.

And so I give it back to Prs funds.

You don't need that but it seems like maybe from an industry level.

The industry continues needs continued prs funds or other federal state support so as that.

Kind of playing into the idea that you're going to get a pickup in.

And acquisitions and better pricing down the road.

Yes.

That funding maybe goes away next year, and then well maybe we'll see some more distress or I don't know if distressed the right word, but youll see more assets come to market.

Operators need.

Financing or way out financially.

Dan This is mark Yeah, that's exactly.

Think the way we view it.

We've already seen some smaller operators head for the hills.

We're currently working on a transaction.

Right now were.

That was the case, we closed the deal in North Central and then this year with Shire for the sale.

Same type of situations. So yeah, I think when the when the Prs funds get turned off.

Public health emergency eventually expires.

<unk> funding stops flows.

That I think we will start to see a significant amount of transactions come to market and I think at that point.

<unk> going to go.

Going to outstrip demand and I think that's been the price of that will start to fall.

Okay.

And then one last question on the Labor side I think you noted.

Maybe some easing up of the labor pressures that some of your operators.

As a matter of increasing wages or are they actually seeing.

Increased job applications more people more people coming back to the market.

To work I'm, just trying to understand maybe the dynamic there.

Giving you some green shoots on labor.

Dan It's really a combination of both we do see.

Higher wages across the board to very varying degrees.

On the other hand with the <unk>.

Unemployment benefit lapsing in people.

Burning through there.

Savings from Covid.

There are people coming back to work as well.

What we've seen is and the operators that have had the most success.

Those who.

Bring that same tenacity and follow up.

<unk>.

<unk> response that they have around admissions from the hospital to applications.

Combined that.

Tenacity and intensity with.

Our focus on culture and providing.

A great place to work and.

And we do see operators that are able to move the dial in a significant way in the face of an otherwise difficult macro environment.

Okay, so better operators are.

Having better better better performance, I guess or better or worse issues on the labor side.

Thank you.

Yes.

Go ahead.

Okay. So that's all I ask all the questions I had but.

Okay.

And again if.

He would like to ask a question. Please press star one on your telephone.

For the next question, we have from Jordan Sadler from Keybanc, sorry, Dan Your line is open.

Hey, guys just a quick follow up on.

The repurchase option.

Looping and just as a reminder.

And.

Any of the enzyme properties have purchase options or any of those master leases rather.

No just the just Texas four that we acquired but none of the original.

Properties.

Can you remind me remind us when the Texas four opens up.

Okay.

2027.

Yes.

And then coming back to purchase options.

The disclosures on page 13 of the deck.

It looks like the first group of purchase options are probably with noble Im guessing just because it's.

It says one of the properties as held for sale at September 30.

Is that sort of the right assumption.

Because I would assume that were the case.

It will be unlikely, we'll be exercising that fare.

That's fair.

We think thats pretty unlikely at this point as well.

Okay.

The next couple.

Down on that list their snaps.

One opened up January one.

Kind of a bigger chunk can you sure who that is and what the expectations are around that.

So Jordan.

Let me correct, what I said about the Texas four with Ensign Thats actually.

That option open the end of 2024.

And then the next Guy in line.

As a sniff operator.

In the Midwest and we also based on their current performance, we'd say that it's pretty unlikely that the.

Are in a position to.

Exercise, but.

We can.

We can't know for sure until.

We get closer.

Can you share what the cap rate is on the fixed cap rate on that lease revenue grew share.

Sure what that is.

I don't think at six months.

Let's see.

Thanks.

Let me get back to you on that Jordan.

No worries.

Thanks, guys.

Okay.

And for our next question, we have Steve <unk> from Stifel.

Your line is open.

Steve Your line is open.

With like Steve's off.

Is there anyone else eight.

We don't have any further questions at this time you may continue.

Great. Thanks, Eddie well. Thank you everyone once again for being on today.

If you have additional questions you know, where we are we're happy to engage anytime and we look forward to hearing from you and hopefully seeing you accomplished soup. Thanks, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you all for participating you may now disconnect.

Sure.

[music].

Okay.

Yes.

[music].

[music].

[music].

Good day, and thank you for standing by welcome to the Coeur trusts Freak third quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on.

Your telephone.

I'd like to hand, the conference over at your speakers today Lorin Bill care trusts senior Vice President and controller. Thank you. Please go ahead.

Thank you and welcome to the care Trust REIT third quarter 2021 earnings call participants should be aware that 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 our dress business and the environment in which it operates these statements.

This may include projections regarding future financial performance dividends acquisitions investments returns financings and other matters and may or may not reference other matters affecting the company's business or businesses of its tenants, including factors that are beyond their control such as natural disasters pandemics, such as COVID-19, and governmental action.

The company's statements today, and it's been generally are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied herein listeners.

Listeners should not place undue reliance on forward looking statements and are encouraged to review current trends and 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 for Threet and its affiliates do not undertake to publicly update or revise any forward looking statements where changes arise as a result of new information future events changing circumstances or for any other reason.

During the call the company will reference non-GAAP metrics, such as EBITDA <unk> and <unk>.

<unk> or fad and normalized EBITDA S. F O S. A D. When used together with GAAP results. 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 reports.

Earlier. This morning character filed its Form 10-Q, and accompanying press release and its quarterly financial supplement each of which can be accessed on the investor Relations section of <unk> website at Www Dot <unk> Dot com a replay of this call will also be available on the website for a limited period.

On the call. This morning are Dave Sedgwick, President and Chief Operating Officer, Bill Wagner, Chief Financial Officer, Mark Lamb, Chief Investment Officer, and Eric <unk> Senior Vice President of portfolio management and investments.

I'll now turn the call over to Greg Stapley, Joseph <unk>, Chairman and CEO Gregg, Thanks, Laura and good morning, everyone.

Last quarter, we were concerned about the near term effects of the rising wave as delta variance infection and the possibility of a stall in the census recovery that was just getting underway.

Fortunately those concerns were short lived and we can report the occupancy gain to steadily continued in most markets with a few.

Facilities actually having fully recovered in census.

We're still far from pre pandemic occupancy overall.

Continuing trajectory of the census recoveries consistent with our expectations so far.

These gains on the census, and revenue front are welcome news, but only half of the equation the shortage of qualified workers and the sharp rise in labor cost is a growing challenge, especially as patient and resident census rises.

Several of our tenants report turning some patients away simply because they lack the necessary staff to care for more.

In spite of challenges still facing both the skilled nursing and seniors housing industries pricing for assets and skilled assets in particular has been unusually strong.

As Mark will explain more fully in a moment our disciplined underwriting approach is dictating that we forgo some opportunities while we wait for pricing to rationalize.

That happens and it always does eventually we expect to benefit from heavy lots of dry powder on hand.

We believe that the value of that discipline is more evident than ever in our portfolio today with.

With the exception of one small short term deferral, our tenants have been able to pay their rents right along this year. Despite the effects of the pandemic.

While the industry is not yet out of the woods I would be remiss if I did not note for the record that we do see some encouraging indicators of strength emerging in our portfolio independent of the provider relief.

Dave will talk more about that in just a moment.

That said, we're very pleased with the quarter, we posted double digit normalized <unk> growth of 13% over the same quarter last year and normalized <unk> growth of 15, 1%.

We collected 96, 2% of contract rents in Q3, and 96, 1% thus far for October with the shortage being the one deferral that we disclosed last quarter, which we still expect to collect by $12 31 to bring us to a 100% of rents to thus far this year.

We grew the portfolio with $32 5 million in new investments in the quarter, bringing our total capital deployment this year to over 140, <unk> hundred $84 million.

And if things come together as planned we're maybe not quite done.

We paid down our revolver following the acquisition and held leveraged steady at a comfortable net debt to EBITDA of three seven times at quarter end.

And as Bill will discuss in a moment, we are raising our 2021 guidance today.

The capital we got together with most of our operators last month at our annual operator conference, which was held in person here in Laguna Beach, I think you'd look to everyone, who came really invigorated and better prepared to tackle whatever comes next so.

So we are constructive on the long term future of our portfolio and characterize remains well positioned to continue pursuing our mission of pairing great operators with meaningful opportunities to transform individual opportunities for the better with that I will turn it over to Dave.

Thanks, Greg and good morning, everybody.

Let me begin this quarter by thanking all of our skilled nursing operators for joining us at our recent annual operator conference that Greg just mentioned.

Speaking for all of our secure trust bumping says hearing real time updates from Mark Parkinson of the American Health Care Association and sharing best practices for a few days was incredibly energizing and informative.

We're so proud of our association with a group of operators that we considered to be among the best in the country.

And the conference we spent a lot of time sharing what's working best to address the current COVID-19 and labor challenges.

Virtually all of our operators agreed that their occupancy recovery has slowed because of tight labor.

The flip side of that is that is that our operators.

It is for us and our operators is that the question at the beginning of the year about sniff demand has been answered.

Demand is high and the recovery would be much further along if not for the tight labor market.

Nevertheless, we are seeing some operators and some facilities hitting either record occupancy numbers are close to them.

We continue to be impressed by those who are managing this latest challenge well, let me share with you just a few examples of the progress we're seeing and hearing in the portfolio, but Greg just referred to some encouraging indicators of strength.

Enzyme our largest tenant reported four sequential quarters of occupancy growth and enjoys lease coverage north of three times, we cannot overstate how exceptionally well they performed through this pandemic.

<unk> management group has grown its occupancy six seven percentage points since its low in December.

<unk> has improved its coverage during COVID-19, excluding all provider relief funds.

Trillium has slashed agency costs by over $400000 a month since the summer and staff turnover from 60% down to 20%.

Trio healthcare has vaccinated, 100% of its employees and is nearing record high occupancy and skilled mix.

Covenant care Slash the agency usage from our February high of around $1 million, a month to under $100 a month right now.

And momentum created a special secure unit to access and care for the large county hospitals difficult to place patients growing occupancy and earning some valuable goodwill, but their referral sources along the way occupancy is 13 five points higher than last summer.

I could go on.

These are the types of successes that we don't get to read about in the news, but are happening throughout the portfolio.

Again, let me say, thank you to all of our operators and their teams for the extremely heavy lifting they've been doing these last 21 months.

These positives don't mean that many of them won't need or benefit from the next round of provider relief funding.

We believe all of our operators have applied for phase four except for Ensign and pennant does not needed or accepted relief funds from the beginning we.

We will find out how much the phase four funds extend the runway for each operator is funding amounts are determined and checks are received in late November and December.

But it is great news for our operators skilled and assisted living our lives who have needed those phones so far.

Occupancy growth will also be critical in Q3, our skilled nursing operators reported continued occupancy recovery from the prior quarter, resulting in a projected return to pre pandemic levels sometime next summer.

Well just under 20% of our skilled nursing facilities are still operating below 80% of their pre pandemic occupancy. The majority almost 60% are back above 90% of pre pandemic occupancy.

And on the skilled mix front the delta surge appears to have actually given a balance to some of our operators in the regions most affected.

Overall portfolio skilled mix remains about 300 bps higher than the pre pandemic levels, but the higher reimbursement rates that offset some of the overall occupancy loss.

Of course this projection assumes that qualified labor is available and that no new headwinds such as a new variant or wave of infections intervenes.

For seniors housing occupancy overall occupancy.

And our relatively small al portfolio remains unchanged from Q2 in spite of the fact that admissions are significantly up the.

The treadmill here with Al occupancy is really a result of one of our operators electing to discharge a host of residents for various reasons.

Now that Thats largely done we expect to see our seniors housing occupancy begin to recover more quickly from here on.

Turning now to lease coverage with few exceptions overall coverage remains very healthy both with and without provider relief fund.

A couple of our operators have really needed those firms to extend their ability to survive and ultimately recover from the impacts of COVID-19.

Our top 10 operators coverage, which accounts for over 80% of revenue continues to be strong at two two times for property level, EBITDAR and 276 times of EBITDA.

Our relatively transparent coverage disclosure will prompt questions around individual operators. So let me go ahead and address three of them right here.

First last quarter, we talked about noble senior services, one of our seniors housing operators in their request for some flexibility in paying a few months of rent.

You will have noticed both the investment total and rent numbers increase for noble since last quarter.

As a result of transitioning the second of two premier facilities to noble and Wisconsin.

Around this time last year, we began talking to premier about transitioning their two Wisconsin facilities, which were outliers for premier.

<unk> top performing facility was nearby and at the time again last year noble as a whole is performing a little bit ahead of their expectations in spite of COVID-19.

We saw this transition as a win win for both operators.

The two buildings transition this year the first in March and the second in July as regulatory approvals, where required and took some time.

We're happy to report that Noble's admission rates have really picked up lately.

But as I noted a moment ago their discharge rate has also been unusually high primarily due to an internal review that led to discharge and a number of residents that were not best served in those settings.

These discharges represented 12 five percentage points of their overall occupancy.

We think thats essentially done now but of course it has led to significant holding their nurture near term revenues.

They haven't received provider relief funds previously, but they have applied for and expect phase for assistance.

So in September we agreed to defer approximately 90 days of rent under an arrangement for them to pay it all back plus the rest of their 2021 rent by the end of this month.

Their obligations under the agreement will be funded from the proceeds of our pending acquisition of their two memory care facilities in New Jersey.

That arrangement, which is only dependent now on the imminent receipt of regulatory approvals appears to be on track.

After that they still have a ways to go to get to positive lease coverage, but the phase four provider relief funds and other government assistance will be immensely helpful. In the meantime, and perhaps more importantly for the long term as I noted, we believe that the discharges are over now and with the increasing pace of admissions there occupancy numbers should finally get some track.

<unk>.

Second.

Covenant care is a sniff operator, who is month over month occupancy and coverage is actually trending really positively in recent months.

We are in a minority piece, we're a minority piece of their overall portfolio in the corporate credit is very good as their other facilities are reportedly performing well we are optimistic that their recovery trend will continue.

Finally, let me talk about base Shire senior communities Theyre seniors housing and skilled nursing operator that took over two of the four beautiful large campuses in California, We acquired early in the year plus another in El Centro, California.

The base hire team is a positive momentum in those three assets and we expect them to near stabilization soon.

So we remain very constructive on both the near and especially the long term prospects for our skilled nursing and seniors housing portfolio.

The combination of steadily recovering sensus and continuing relief funding, especially for the al operators bodes well for them, even though it's no guarantee of success for the most challenged we will continue to monitor and report.

With that I'll pass the call over to Mark to talk about investments Mark.

Thanks, Dave and good morning.

In Q3, we executed on a $32 $5 million acquisition of two skilled nursing facilities in Austin, Texas that we can currently leased to operating affiliates of the enzyme growth with <unk>.

<unk> assets are well located and practically brand new and then it'll be exciting to watch ensign ramp and Bob over the coming months. The acquisition brought our total investments in 2021 to $184 4 million.

From a market perspective on the skilled side, we continue to see one off deals with mostly non strategic and struggling facilities as.

As you would guess deal flow for stabilized assets has been very light a stabilized assets are understandably harder to come by us at the moment.

And with respect to value add assets the ongoing government support in the sniff industry has kept homeowners flow owners that we would have normally seen selling their assets as property level economics term negatives, while they deal with challenges of reduced occupancy and higher labor costs.

So with a stronger than usual demand for fewer than usual assets on the market pricing for skilled nursing has surprisingly spike.

Just when you thought there might be a pivotal trial.

In fact on a price per bed basis.

Most have been trading at all time high all time highs, including many assets.

No cash flow in other words, yes, Virginia, there is a Santa Claus for small sellers this year.

Seniors housing is its own story.

There's a large range of assets on the market from class eight o'clock and everything in between.

A lot of those assets appear to maintenance priced as well, although we have seen a few more reasonable numbers for the mid market product that we typically pursue we are looking we are looking hard at some opportunities where we see.

Can get risk adjusted returns Youre accustomed machine from us.

I will remind everyone that we've consistently reassure the market that at any point in the real estate cycle, where pricing becomes unsustainable.

Due to our underwriting discipline to ensure that we keep our portfolio healthy and well positioned for the long term coverage growth.

So we continue to tap our extensive industry contacts for appropriately priced opportunities, which is why we've been able to close $184 million and largely off market deals year to date.

And as Greg mentioned, there may be more for the year is done.

But we will not chase mispriced assets, our place our tenants and the untenable situations, where their rents and the annual escalators lease.

These colors to a point that is sustainable.

Looking at 2022 like screening tool fleet investment sales community continue to expressed an expectation that a wave of deals will be coming to market.

Just on the record number of broker opinions of value or <unk> that.

They are being asked to issue by prospective sellers.

We can't predict exactly when.

But we expect that pricing will eventually settle it pertain to next subsides supplying supply chain issues are resolved interest rates rise and credit standards and negatively.

In that environment, we will be ready to use our consistently conservative balance sheet to grow more aggressively with quality assets in good markets and above all with best in class operators.

In the meantime, we continue to eye every deal out there for opportunities that might fit us and our operator partners and we believe we'll get our fair share.

Our current pipe system of $125 million to $150 million range. The pipe is made up of singles and doubles with a couple of solid smaller portfolio opportunities.

Believe are a good fit for our operators.

Split roughly evenly between Smiths in senior housing facilities.

Please remember that one quarter pipe for lending flow deals that we are actively pursuing under our current underwriting standards.

And then only if we have a reasonable level of confidence that we can lock them.

Relatively near term.

And now I'll turn it over to Phil to discuss the financials. Thanks, Mark for the quarter normalized <unk> grew by 13% over the prior year quarter to $36 7 million and normalized Fad grew by 15, 1% to $39 million.

On a per share basis normalized <unk> grew by 11, 8% over the prior year quarter to 38 per share and normalized <unk> grew by 11, 1% to <unk> 40 per share.

Yeah.

Moving onto guidance, we plan on issuing guidance for 2022, when we released 2021 year end results.

For the remainder of 2021, we are raising our previously released guidance by one penny on the low end of the range to normalized <unk> per share of $1 49 to $1 50, and normalized <unk> per share of $1 58 to $1 59.

This guidance includes all investments and dispositions made to date.

Share count count of $96 5 million shares and relies on the following assumptions.

One no additional investments dispositions or rent deferrals cuts of reserves, nor any further debt or equity issuances. This year.

<unk>.

Inflation based rent Escalations, which account for almost all of our escalators at an average of 2%.

Total rental revenues for the year again, including only acquisitions made to date are projected at approximately $186 million, which includes less than $40000 of straight line rent.

Three interest income of approximately $2 million.

For interest expense of approximately $23 8 million in our calculations, we have assumed a LIBOR rate of 15 bps and a 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.

Not included in interest expense was $10 8 million charge that we recorded in Q3 related to our Q2 bond refinancing.

$10 8 million was made up of $7 $9 million of redemption fees.

And the $2 $9 million write off of deferred financing fees and <unk>.

Five we are projecting G&A of approximately $19 6 million to $21 5 billion. This range is consistent with what we discussed last quarter. Our G&A projection also includes roughly 7 million of amortization of stock comp.

Our liquidity remains extremely strong with approximately $23 million in cash $520 million available under our revolver and we produced roughly 12 billion in cash per quarter after paying the dividend.

Leverage also continues to be strong at a net debt to normalized EBITDA ratio of three seven times today.

Debt to enterprise value was 25, 1% as of quarter end, and we achieved a fixed charge coverage ratio of eight five times.

Lastly, cash collections for the quarter came in at 96, 2% of contractual rents in October came in at 96, 1% I would expect November to be much like October based on the color given today on this call.

As Greg mentioned, we do however expect to collect a shortfall before year end.

That I will turn it back to Greg Thanks Bill.

Everyone. We hope this discussion has been helpful. For you. We certainly appreciate your continued interest and support and with that we're happy to open it up for questions Sandy.

Yes, Sir and ladies and gentlemen, if you would like to ask a question. Please press star and the number one on your telephone again, if you would like to ask a question press star one on your telephone we'll pause for just a moment to compile the Q&A roster.

For our first question we have.

All lines and Abra from BN.

Capital markets. Your line is open.

Hi.

Thanks for the time, just hoping to spend a little bit more time on unknowable.

The two assets that you guys are moving just curious if those were.

EBITDAR negative and door.

Coverage enhancing for noble.

And <unk> the rent that staying with those assets staying in place with normal or just curious on how we should think about that and are there risks for rent on those two assets being lower than what we subscribe to it under the prior lease just a little bit more color on that piece would be helpful.

Yes, the buildings were not covering so theyre under one times coverage.

We're sort of chronic underperformers for premier.

And one of the things, we really liked about putting them into noble's hand last year. When we were looking at it.

Was that noble's.

Their top performing facility is in Wisconsin nearby to these two premier assets their strongest local leader and most consistent operators. So this created the opportunity for them to build on that strength form a nice little cluster.

And and we felt like it gave those two buildings a better chance to get it back to stabilization then than they were in Premier agreed.

So the rent came over at the same amount to noble.

But theres some work to do there to get those.

To be performing.

Since the transition happened.

They have under Noble's care improved slightly on a coverage perspective, but they still have.

Some ways to go to get North of one times coverage.

Okay, and just to clarify.

Theres not assets.

Taken out from noble.

Given to a new operator.

I was just reading over the 10-K, there was a little confused about.

Maybe another $2 five assets are those the same two assets yes.

So theres two groups of two assets.

So I understand why there is some confusion.

The reason the reason why I talked about these two Wisconsin buildings that were added to noble.

To address that.

<unk> of why noble has actually increased and investment size and rent in terms of our relationship with them.

It's because of that because they took over those two assets from premier that we started negotiating last year and is finally.

Took place this year.

The other two assets that we've been talking about for renewable.

One is one building in Fort Myers, Florida, which has been offline since they stepped into the lease back in 2019 for major renovations and getting that back ready to go that's still a ways out from being ready.

And license.

The other one is a building in Baltimore, Maryland, that's actually being actively marketed right now for sale.

So those are those are the probably the other two buildings that you are thinking about from the queue.

Sure.

So once those buildings are are carved out.

<unk>.

Coverage enhancing or do you have a sense of what the pro forma carpets or features to.

To give us a pro forma number.

I don't have a pro forma number at my fingertips, but it absolutely when Fort Myers is removed.

Baltimore is removed those will be significantly coverage improving for noble.

Okay, and then just switching gears to the pipeline.

What could say the confidence I guess.

This is Paul.

Stay where they are cap rates lower our price per unit is high and that we've seen significant cap rate compression in other asset classes with low rates.

Who is to know where interest rates. So just curious if.

What you see changing or.

Or what are what do you think youre not willing to match versus some of the other buyers out there in terms of our underwriting. It's just the speed of the recovery or is it the underlying.

The value of the assets that may or may not change.

Curious if you could provide a little bit more color on that.

Well I think this is mark.

I think just talking to the investment sales community.

And understanding that.

Eventually the spigot is going to get turned off so I think we feel.

Why.

Rising at some point, we'll rationalize and so.

I think over the next probably 12 months, we'll start to see.

More and more opportunities so.

I answering your question is a question why we think pricing will grow will go south.

Yeah, Yeah, why will it normalize and are aware of your different I guess in the underwriting versus the people who are willing to because it just there are more aggressive on the timeline.

Recovery or just.

Placing a greater value on the underlying real estate ops.

I think it's I think the.

Folks at our winning bids I think R. R.

Are making some assumptions on.

Certain states, specifically states that have CMI based on Medicaid rates.

And are assuming pretty aggressive increases in Medicaid rates.

That's not something that we're in.

<unk> volumes to underwrite going into door, what operators continue day, one whether there's certain insurance costs.

Or kind of very easy low hanging fruit amyloid changes will take into consideration but.

On an operator.

Increased our CMI, which then increases the indicators.

Which would increase coverage there are some nuances.

Yes.

It will give us a whole lot of comfort and there are operators that are willing to.

To take that risk.

To move off of those assumptions.

Thank you.

Sure.

And for our next question, we have Jordan Sadler from Keybanc capital markets Jordan. Your line is open.

Thanks.

Good morning, guys.

One group that goes up a little bit more unknowable.

Good.

There's a third group of two assets, which are the two assets that youll be purchasing in New Jersey and amendment core assets just to make that as more confusing and repair.

Can you give us a little bit more color on those two assets and how that transaction is going to come into the fold.

So maybe how material.

The value of <unk>.

Yeah. So those two assets are owned by noble.

There's just some regulatory one last regulatory hurdle to pass and then we can execute that that purchase which we think will do.

And this month, if all goes according to plan.

Those are two.

Mark.

About 40 45.

<unk>.

Facilities for memory care in New Jersey that had been empty for quite some time being renovated they had been renovated will probably once we acquire them put a little bit more into it.

To get them really beautiful and ready to go.

The process in New Jersey takes a little bit longer than other states to get license. Once you. Once you have certificate of need.

So we're likely going to start.

Collecting rent on that some time in.

First half of next year, hopefully first quarter.

But sometime in the first half of next year.

We are likely going to have a different operator run those and knowable.

We are currently marketing the facilities, having really good conversations with.

As a host of interested operators, we're going to be touring the facilities with them soon and we have some time because of licensing to get that lined up but theres been a lot of interest in them for operators that are already in and around New Jersey.

The.

Purchase price on that is around $12 million for those two buildings.

And then Youll put in how much additional.

TBD, but probably.

Under quarter million.

Okay.

And then those will be leased to somebody else.

The yield that we would expect.

Yes.

That's right most likely.

The ramp, but because they are empty and theres going to be a bit of a ramp in that rent. So once once it gets stabilized then we will we will land at sort of that normal yield that you expect from us.

Okay.

And then just clarifying on the two that are well.

Baltimore Fort Myers, It sounds like Baltimore will be sold.

I'm curious there what the sale price might be and then how the credit with the right credit would be.

On a yield basis relative to the value back to noble.

And then maybe if you could clarify what's happening with Fort Myers.

Yes, so with Baltimore, we will find out what the market says about the price for <unk>.

Baltimore.

Don't want to.

I don't want to whisper number to the market, while it's it's being actively marketed at this time.

But we will take those proceeds and hit it with kind of a.

And what you might expect our rent yield to be for that.

Adjusted the rent accordingly, and Fort Myers.

There have been some.

Since that building went through a full rent.

Renovation.

As it's gone through licensing with the fire authority.

They've discovered some.

Some shortcomings that they'd like us to shore up before we reopen it and theyre pretty extensive and so thats whats caused the delay there.

But we have.

Our director of construction services has been boots on the ground there very recently talking face to face with their fire authority.

In collaboration with noble to try to move that along.

Okay. That's helpful and last one maybe get marketing conversation, you're it sounds like youre not closing the door on the.

$250 million to $300 million of acquisitions, you guys have been historically.

But a little bit of a ways to go yet.

The right cadence, we should be coming away with.

Yes, I mean, it's obviously getting late in the year I mean, I think I think what we have kind of teed up in the pipeline.

Thank you.

But again, it's quite tough.

Maybe the historical.

Remember that you saw pre COVID-19.

But what we do have in the pipeline.

We're pretty excited about and so just be a function of how quickly we can get through diligence and get operators signed up.

Yes.

Okay. Thank you.

Our next question, we have Amanda Sweitzer from Baird Amanda Your line is open.

Great. Thanks for taking the question I'm, sorry, I'll, Alaska, but no long here, but do you have Nobel currently has any got against the queue assets that you're acquiring that you need to pay off or should we really think about that purchase price of those assets is that one for one cash infusion for noble.

They have some debt that will be paid off from the proceeds and the.

The largest amount of the proceeds will go toward paying.

Paying off the deferral in prepaid rent.

The other obligations for us.

Okay. That's helpful and then on staffing.

Staffing for the operators that you mentioned, where you are seeing those lower agency costs are you also seeing like occupancy restrictions or those operators generally trading agency labor per full time staff and are still been facing staffing constraints overall.

So thanks for asking because I think it gives me a chance to correct something.

When I was talking about covenant care.

Hi.

I was nudged here at the table that said I said that their costs went from 1 million a month down to $100 a month, but that's really a 100000.

For Covenant care.

So as it relates to our operators in general.

Most of them are saying that there is some limitation on how much stake for the skilled side not so much for the senior housing side, but for the skilled side, how much stake and admin because of tight labor.

Theres really two ways to approach that.

You can continue to admit.

And staff with the agency.

Which takes a big a big cut to your margin.

Or you can stay with lower occupancy and keep agency out we have operators that are basically approaching it in both of those those ways.

And there's pros and cons to both of those approaches.

So I'm not sure if that answers your question, but thats.

How they're approaching it now.

No. That's helpful. And then last question following up on your senior housing portfolio and pennant improved trends Youre seeing there can you quantify how big the occupancy uptick that you've seen quarter to date.

Unfortunately, I can seniors housing occupancy quarter to quarter really has remained flat.

Okay.

Okay.

I appreciate the time.

Okay.

Our next question, we have Michael Carroll from RBC capital markets. Michael Your line is open.

Yeah. Thanks, Dave can you go back and talk a little about the internal review that you were highlighting about noble I guess, what drove that internal review and where were those residents where did they move to what was the better setting.

Well I think.

Yes.

The the overall quest the overall concern was appropriateness.

Yes.

<unk> care so in other words, theres really two things that.

That led to pools of concern one was appropriateness of care and the second was payer source. So.

So it's one thing to admit residents.

But if they are.

Arent able to pay over time, then you have a problem and you kind of have Phantom revenue there.

So that was an issue and the other was just the appropriate ness of care.

Most.

Common.

Around either acuity or behavior things like that so there is.

What prompted it was management finally.

Coming to grips with some lingering issues.

<unk> taken a hard look at what they had in their in our in.

And a handful of their facility is really a couple of new buildings, where they had kind of persistent problems and as they dug into it. They realize that there were collection issues in those collection issues were not unrelated to some of these behavioral issues as well.

And <unk>.

Finally, just made some policy decisions around the types of residents that they can.

Really appropriately take care of them.

So that 12, 5% drop was that at how many communities with alright, and I guess out of hot money within their portfolio and where they move to what behavioral health facilities or skilled nursing facilities or those types of assets.

They would be I didn't we didn't really keep track of where they went so I couldn't give you a specifics on what percent, where but you are right.

People would go or other assisted living facilities that specialize in behavioral type health as well so within our seniors housing you have all sorts of specialties.

The buildings.

They just didn't have that capability to take care of that population.

There was concentrated at a couple of the buildings.

And that 12, 5% occupancy drop that was at the whole portfolio or just the flexibility.

Their whole portfolio.

Okay, So where is occupancy for noble for their portfolio today.

Okay.

Yes.

We can get back I might have to get back to you on that one Mike.

Okay.

That'd be helpful. And then can you talk a little bit more about premier I mean, I know there are coverage ratio has been pretty low over the past few years I mean, moving those two assets to noble out of that portfolio.

Where does coverage ratio go is it closer to two one times.

Yes. It is it's creeping up.

We've been receiving we just saw.

Premier at a conference. This last week had a really good conversation with them have a good relationship with those guys. They are starting to see some traffic pickup and their Michigan portfolio.

They expect more move ins net net increases by the end of this year.

They've applied for the phase four funding in rural funds as well so.

Things are.

We're actually a little bit better and stronger premier today than they have been in a long time and.

Removing the two Wisconsin facilities.

Has helped them.

So when you say, it's it moved up a little bit I think it was around eight times last quarter.

Obviously, they fell out of your top 10, so I don't believe its in its most recent report but is it back up to <unk>.

Nine times.

How much is does that removing those two assets really help them.

Can we take them off the watch list does it help them that much.

No I don't think we're going to.

Probably take premier off the watch list until they're comfortably north of one times.

And they still have a ways to go I think.

Coverage in the quarter.

Was fairly consistent with what it was the quarter before maybe a little bit down.

What I was referring to is more real time information that we have.

In Q4, just looking at their occupancy.

And talking to them about their their costs.

We expect that it's turning to creeped up right now.

Okay.

And then just my last question for Bill can you talk a little bit about the CPI escalators within the company's leases I believe you have 2% guidance and CPI has been well ahead of that I guess, what CPI should we typically look at for those in it.

Is it above 2% or is that really going to be a 2022 event versus 2021.

Yeah, Hey, Mike.

CPI most of our leases contain CPI <unk> and CPI you. It is.

For the last few.

And as you know R R.

Leases contain floors of zero and caps most of them have caps enzymes capped at two 5%.

CPI came in for them above two 5% on June one, but we still raise them by two 5%.

The other caps go up to like I think its three and a half and CPI has been well above two and a half so they.

So our assumption of 2% in guidance for the rest of the year, which we only have a few tenants with bumps in Q4 isn't really material. If it goes from 2%, if I use 2% or two 5% or 3%.

Okay. So if we're looking to 2022, it's safe to assume that we're probably closer to that two and a half range, given where CPI has trended.

Correct, yes.

Okay, great. Thank you.

Okay.

For our next question, we have Steven fairly quick.

From Barclays Steven Your line is open.

Hello, everybody. Thanks for taking the question.

Actually a couple of questions here really on the.

And the decision by Ensign group, an announcement from a week or two ago about starting a captive REIT within their company.

I guess for the near term and long term, maybe just break up the question that way I guess I am curious in the short term.

With the slowdown the pipeline of deals that you that you've done with them.

Yes, I mean, they had a lot of positive comments on their call about continuing to do.

Transactions with existing.

Re partners et cetera, but maybe I'll just pause for a second get your high level thoughts on ask a few follow ups on this topic is finally going to start get your thoughts around any implications for you guys short term or long term and that will go from there. Thanks.

Sure This is Greg.

Look I don't think it changes things very much for us.

We have.

We have good relationship with them and you saw it in our.

Deal with them in the quarter due to two Austin facilities net case, we brought those facilities to them, having tied them up previously and I really think thats, probably the only way that we will be we would have.

We would be doing deals with enzyme in the future. It's really the only way we've done deals with them.

Their cost of capital has always been good enough their availability of capital has been good enough. If they found a deal they could finance the deal and they've done their own deals and they've done a very very very well.

That said.

With their with their kept degree next sure what theyre going to be looking at.

If they continue to look at the same kind of distressed assets that have been their bread and butter historically.

Don't think theres going to be a ton of overlap but to us.

Really just represent another another player.

A large.

Marketplace with lots and lots and lots of players that we compete against and I don't think we're too worried about whether we will get our fair share of the deal.

That answer your question, yes, yes. That's helpful. Maybe just two quick follow ups on the same side, just wondering if you're sort of half answered already but yes.

If we look at Ensign group and pennant combined I think your total number of properties.

Combined back in 2014 was <unk> 94, and that would be 106 currently between the two so if you've added a couple of properties per year under that combined relationship it sounds like.

You were bringing those <unk>.

<unk> and transactions to them as opposed the other way around so it sounds like going forward that that will still be the case.

Based on what you said I just want to confirm that.

Yes, actually actually what happened was we bought a four building portfolio with an ensign lease in place last year.

And then we did this deal with them. This year I can see Mark we don't do anything else with them Covenant care.

But we did a covenant care tack on.

Building with them.

Again, one building we brought to them.

And they grew a little bit when they acquired five Oaks, which is a smaller operator of ours. That's right. They bought they bought one of our operators.

Just stepped into the lease that was already there. So so those are the kind of deals that we do with them again.

They have they are a great operator, they have superior cost of capital.

<unk>.

If they source of deal Theyre going to do that deal themselves every time I would.

Okay.

And just a sanity check on just the expiration date of your master lease with Ensign group right now and then when you own the real estate I'm guessing, there's really no risk of losing any of your current lease property arrangements with them, but maybe just long term is there something should we assume that's all would stay in place.

For long term or as or is there a risk long term, that's something changes as far as the size.

The size of the relationship and nonexistent.

Yes, that's a good question I'm glad you brought it up it gives us a chance to remind everyone that when we set those leases up in 2014 as eight master leases and they are all they all have staggered maturities.

With various 235 year extension options and design can exercise and they are all well diversified in terms of geography asset class and asset quality.

And.

That was done so that.

We would be able to have the expectation that this is a very high likelihood that those will be renewed as those renewal options come up.

Okay, one last real quick one.

Did you know that this strategy was coming from them for a while or is this maybe catching you by surprise a little bit as far as their decision around this I'm. Just curious if you have any high level response to that.

No I don't think anybody should have been surprised landline has been telegraphing to the market literally for years that they wanted to do something like this without saying exactly what it was going to be but I think everybody has known that they have.

Sizable real estate portfolio that they have built since the since the 2014 characterize spinoff they've done a terrific job with it and.

And I think it's I think it's a good solid logical step for them.

In terms of just making sure that they get credit for the value of the.

Excuse me the real estate equity that that they continue to create and buildup in that portfolio just as they did with the portfolio that we started with so they're doing a great job.

Got it okay. That's all very helpful. Thanks.

You bet.

Our next question, we have Daniel Bernstein from capital one Daniel Your line is open.

Hi, Thanks for taking my call shared with my questions here.

I'll have to go back to the skilled mix that you noted which has been increasing so I wanted to kind of understand a little bit more about how you think about the sustainability of that increase in skilled mix.

And maybe how much of that was related to maybe to PDP EM versus.

The uptick of Covid and <unk>.

Okay.

Hey, Dan I'm not sure that we could attribute.

Skilled mix increase.

The increase or decrease or any movement, there to PDP and necessarily.

We've always compared the numbers pre pandemic to post and we had about six months of <unk>.

<unk> in those pre pandemic numbers.

Roughly we are at about 15, 5% for.

For skilled mix on our skilled nursing portfolio.

For pre pandemic.

We've seen it go as high as 25, 5% in December.

Of last year.

It kind of came down too.

In June.

Hi, 16%.

Slowly back up to September number of 18, 5%.

I think thats largely because of the <unk>.

The Delta variant.

And we will see.

A lot.

It depends on how long the three day qualifying stay waiver stays in place.

That is a key element of course to these numbers.

Whether or not that is a permanent change.

Very well.

Is anybody's guess, but probably not something that it's worth putting a lot of money on.

No.

I think when the dust settles on Covid, and we could say that.

Far in the rearview mirror, we probably get back down somewhere closer to those pre pandemic skilled mix levels.

Okay.

Alright.

And then on the pipeline.

Obviously with with some of your operators and the high lease coverage.

And so I give it back to Prs funds.

They don't need that but it seems like maybe from an industry level.

The industry continues needs continued prs funds or other federal state support so as that.

Kind of playing into the idea that you're going to get a pickup in.

And acquisitions and better pricing down the road.

Yes.

That funding maybe goes away next year, and then well maybe we'll see some more distress or I don't know if distressed the right word, but youll see more assets come to market.

Operator, which need.

Financing or way out financially.

Again this is mark yeah, that's exactly.

Think the way we view it.

We've already seen some smaller operators head for the hills.

We're currently working on a transaction.

Right now were.

That was the case, we closed the deal on a central element of this year with Shire for the sale.

Same type situations. So yeah, I think when the when the Prs funds get turned off.

Public health emergency eventually expires.

<unk> funding stops flowing.

That I think we'll start to see a significant amount of transactions come to market and I think at that point supply is going to is going to outstrip demand and I think that's one type of that will start to fall.

Okay.

And then one last question on the Labor side I think you noted.

Maybe some easing up on the labor pressures that some of your operators.

As a matter of increasing wages or are they actually seeing.

Increased job applications more people more people coming back to the market.

We're just trying to understand maybe the dynamics there thats <unk>.

Giving you some green shoots on labor.

Dan It's really a combination of both we do see.

Higher wages across the board to very varying degrees.

On the other hand with the <unk>.

Unemployment benefit lapsing in people.

Burning through there.

Savings from Covid.

There are people coming back to work as well.

What we've seen is and the operators that have had the most success.

Those who.

Bring that same tenacity and follow up.

<unk>.

<unk> response that they have around admissions from the hospital to applications.

You combine that.

Tenacity and intensity with.

Our focus on culture and providing.

A great place to work and.

And we do see operators that are able to move the dial in a significant way in the face of an otherwise difficult macro environment.

Okay, so better operators are.

Having better better better performance, I guess or better or worse issues on the labor side.

Thanks, Jamie.

Yes.

Go ahead.

Okay. So that's all that's all the questions I had but.

Okay.

And again if.

He would like to ask a question. Please press star one on your telephone.

For the next question, we have from Jordan Sadler from Keybanc, sorry, Dan Your line is open.

Hey, guys just a quick follow up on.

The repurchase option.

Looping and just as a reminder.

And.

Any of the ensign properties have purchase options or any of those master leases rather.

No just the just Texas four that we acquired but none of the original.

Properties.

Can you remind me remind us when the Texas four opens up.

Thanks.

2027.

Yes.

And then coming back to purchase options.

The disclosures on page 13 of the deck.

It looks like the first group of purchase options are probably with noble Im guessing just because it's.

It says one of the properties as held for sale at September 30.

Does that sort of the right assumption.

Because I would assume that.

That wasn't the case.

It will be unlikely, we'll be exercising that fare.

That's fair, Yes, we think thats pretty unlikely at this point as well.

Okay.

The next couple.

Down on that list their snaps.

One opened up January one.

Kind of a bigger chunk can you sure who that is or what the expectations are around that.

So Jordan.

Let me correct, what I said about the Texas four with Ensign Thats actually.

That option opens at the end of 2024.

And then the next Guy in line.

As a sniff operator.

In the Midwest and we also based on their current performance.

Say that it's pretty unlikely that they are in a position to.

Exercise, but.

We can't know for sure until.

We get closer.

Can you share what the cap rate is on the fixed cap rate on that lease revenue grew share.

Sure what that is.

I don't think.

Right.

Let's see.

Thanks.

Let me get back to you on that Jordan.

No worries.

Thanks, guys.

Okay.

And for our next question, we have Steve <unk> from Stifel.

Your line is open.

Steve Your line is open.

With like Steve's off.

Is there anyone else eight.

We don't have any further questions at this time you may continue.

Great. Thanks, Eddie well. Thank you everyone once again for being on today.

If you have additional questions you know, where we are we're happy to engage anytime and we look forward to hearing from you and hopefully seeing you accomplished soup. Thanks, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you all for participating you may now disconnect.