Q4 2021 Sabra Health Care REIT Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to the Sabra Health care REIT fourth quarter 2021 earnings call I would now like to turn the call over to Lukas hard, which SVP finance. Please go ahead Mr. <unk>.
Thank you and good morning, before we begin I want to remind you that we will be making forward looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position and results of operations, including the expected impacts of the ongoing COVID-19 pandemic our expectations regarding our tenants.
And operators and our expectations regarding our acquisition disposition and investment plans.
These forward looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially including the risks listed in our Form 10-K for the year ended December 31, 2021, as well as in our earnings press release included as exhibit 99, one to the form.
One 8-K, we furnished to the SEC. This morning, we.
We undertake no obligation to update our forward looking statements to reflect subsequent events or circumstances and you should not assume later in the quarter that the comments, we make today are still valid in.
In addition references will be made during this call to non-GAAP financial results investors are encouraged to review these non-GAAP financial measures as well as the explanation and reconciliation of these measures to comparable GAAP results included on the financials page of the investors section of our website at Sabra Health Dotcom.
Our Form 10-K earnings release and supplement can also be accessed in the investors section of our website.
And with that let me turn the call over to Rick nature of chair and CEO of Sabra Health care REIT.
Thanks, Lucas and thanks, everybody for joining us today.
Opening song Heroes is dedicated to the staff the facilities.
Let me start with updating everybody on our current trends.
In terms of vaccination uptake are the sales force is now up to 87% Baxter, which is really fantastic.
Residents are at about 92% approximately half of our operators have mandated vaccines.
Moving on to occupancy for occupancy 25, 5% of our operators are now at pre COVID-19 occupancy levels.
The last week of January about 41% of the staff returned to work and being out due to <unk>. We are just huge numbers of staff out that was really impacting occupancy so with staff coming back really in droves is having a direct impact on occupancy. The last two weeks. Our managed portfolio showed improved occupancy of 46 basis points.
And our top seven skilled operators have shown improved occupancy of 149 basis points from the last two weeks, which is as big a jump in that timeframe as we've seen since the pandemic started.
Additionally, I would note that.
There was obviously a lot of concern over coverage and things like that as omicron hit <unk>.
Skilled mix from the first of the year was up 360 basis points due to acuity and skilling in place and that really helped mitigate some of the financial impact overtime.
Moving onto reimbursement phase for funding that money is still coming in so we don't have solid numbers yet on what the total is.
We'll update as soon as we have that do.
Do you want to spend some time today, though on Medicaid because most of the focus understandably has been on all the assistance from the federal government, but theres really been tremendous assistance from the states, which is going to go beyond the federal government and so I would just want to highlight a few things. There. We took a look at 2014 states that represent 73.
Percent of our skilled assets in most states is a two to three year time lag before increased cost are captured however, most states will use an annual market basket to adjust for inflation, which provides an opportunity for sooner recognition of increased costs that inflationary increase has a specific labor component.
That area of our 80% of our states have provided a temporary dedicated add on.
There is a common misconception that is phe and continue the public health Emergency Act.
That <unk> funding goes away, but that's actually not the case that states have discretion as to whether they want to keep those Medicaid add ons in place and we are optimistic that a number of the states will have that in place. So from a lobbying perspective. The focus has really shifted from defense to all the individual states.
After phase four theres not much left in the fund and we're certainly not betting on us getting new money and this congress or the focus is really going to be.
On the states and all of the Medicaid assistance that we've gotten there.
What am I Couldnt comment on <unk> I know that's been out there.
I just want to point out that.
That negotiation, we think we're really well we look forward to the ability to recapture which and we fully expect that we will see some upside there. We have no additional restructuring is being contemplated there is no ongoing discussions with any of the tenants about restructurings.
I also want to comment on <unk>, the Canadian deal, which Tom will talk more about these very high quality new assets with a trusted operating partner and.
Strong growth prospects. So we're really pleased to finally after years of making the effort see additional growth in Canada.
Our acquisition pipeline currently it stands at about $1 4 billion, while it's still primarily senior housing we are starting to see more skilled nursing opportunities and opportunities in the behavioral and addiction space. We're also seeing more deal flow in Canada, We certainly we're seeing more deal flow anyway.
But the announcement of the Canadian deal has increased that deal flow even more so.
In terms of the balance sheet, Michael spend a lot more time on that but leverage continues to be well within target range and it should be expected to fluctuate and it really that's really the primary message that we wanted to convey to everybody that if we hit five times. It doesn't mean, we're going to access the equity we've got plenty of room.
To five five times at deal flow happens.
Leverage can be expected to fluctuate up and down we will have some natural deleveraging events with with.
With.
The portfolio, improving particularly advantaged portfolio and EBITDA, improving we've got asset sales still that will be ongoing. So we're in really good shape from a balance sheet perspective in terms of the fact that we don't need to access access the.
We are issuing guidance and while we did issue guidance at least for periods of time last year the impact of omicron, particularly on the managed portfolio makes it impossible right now to predict the degree and the rate of recovery.
Hopefully, we'll be in a better position to do that.
I doubt by the timing of first quarter exceptionally it's about six weeks away, but hopefully after that and if we are able to we will do the first quarter, but I think it's unlikely.
At this point in time, if we had strictly a triple net portfolio would be in much better shape and have a high degree of confidence relative to issuing guidance and with that I will turn it over.
Thank you Rick.
We recently announced that Sabra in joint venture with Sienna Senior living has entered into an agreement to acquire 11 senior housing communities in Ontario, and Saskatchewan digital nearly doubled <unk> investment in Canada, given the vintage of the assets on average six years old and the timing of the acquisition there is a clear path to increase occupancy.
Across the portfolio as well as the one community and lease up substantial expansion opportunities exist at Florida community is providing for an additional avenue of growth.
As Rick said transaction activity in Canada has increased significantly in the last 12 months and we believe that sabra is well positioned both financially and operationally to pursue assets there, including through our joint venture with Sienna.
Now, let me turn to our managed senior housing operating results in the fourth quarter Sabra wholly owned managed senior housing portfolio continue the momentum on top line growth seen in private in prior quarters. This was offset by higher labor costs and contract labor expenses that have been challenging in the healthcare industry since the middle of the third quarter.
With the emergence of first the Delta and then the <unk> variance of COVID-19 early indicators point to the dissipation of the Omnicom variant and rising employment rates as we speak which will result in lower community spread fewer infections, among staff greater availability of labor and lower utilization of contract.
Labor.
Continued move in rates at or exceeding pre pandemic levels and normalizing move out rates point to the strength of demand for senior housing, which along with the return of this of the workforce will create the equation for ongoing recovery of senior housing barring another highly contagious variants of the virus.
Demand for senior housing communities remains resilient and somewhat price insensitive after a sustained lift in occupancy following the vaccine rollout occupancy dipped in the fourth quarter, but gross move ins have remained in a range between even with 2019 and 10% higher.
In higher acuity communities, particularly memory care gross move outs have been impacted by higher gas rates, resulting from the omicron variant.
We have heard from our operators is it 5% to seven 5% rate increases.
Have gone unquestioned by residents and their families. While at the same time, our operators are seeing move ins coming from competing communities, where aggressive pricing has changed residents view of value.
The headline numbers for the wholly owned managed portfolio are as follows.
<unk> been seeing the fourth quarter of 2021, excluding non stabilized communities was 79, 4% compared with 78, 8% in the prior quarter, a 60 basis point increase revpar, excluding non stabilized communities was $3303 and Revpar has remained stable.
Over the past five quarters assisted living has shown increasing pricing power with the same revpar, increasing five with same store revpar, increasing 5% from the first quarter to the fourth quarter of 2021, despite pandemic surges from two variants and labor shortages.
Cash net operating income declined by nine 9% sequentially and margin decreased to 21%, 2.6% lower than the prior quarter.
Virtually no Kobe Grant income was received in the fourth quarter and none was received in the third quarter contract labor costs, <unk> assisted living and memory care properties drove this decline.
<unk> wholly owned managed assisted living portfolio experienced a dip in occupancy following the third quarter and began to recover late in the fourth quarter and into 2022.
From September 21 to October 2021 occupancy declined 126 basis points from October to November 2021 occupancy declined 43 basis points and from November 21 to December 2021 occupancy increased 28 basis points from December 2010.
One to January 2022, occupancy increased 108 basis points, making up most of the decline in the fourth quarter. There are signs of positive momentum in February with occupancy me alive and portfolio, increasing 80 basis points from January to mid February .
The downward occupancy trends was driven by our communities caring for memory care residents, where move outs increased due to the deaths related to surges of the omicron variant in the general community. Because these residents are generally frailer unless able to comply with mask wearing and other infection control protocols. They are more vulnerable to COVID-19.
Well, while revenue in our wholly owned assisted living portfolio grew one 8% quarter over quarter cash NOI margin compressed to nine 7% compared with 15, 1% in the third quarter nearly the entire increase in operating expenses is attributable to increased contract labor.
Cost in our wholly owned <unk> portfolio.
Sabra wholly owned managed independent living portfolio experienced less occupancy loss in the assisted living portfolio and its recovery has been more gradual.
Throughout the duration of the pandemic, we have seen more move outs driven by the need for higher cure as residents have stayed in place longer and we continue to see that this quarter from September 2021 to October 2021 occupancy increased 44 basis points.
From October to November 2021, occupancy declined 34 basis points and from November to December 2021 occupancy increased six basis points from December 21 to January 22.
Occupancy decreased 119 basis points, but there is a clear distinction between our Canadian portfolio, where occupancy increased by 73 basis points in this period and occupancy in our U S portfolio declined by 165 basis points.
While revenue in our wholly owned independent living portfolio grew one 8% cash NOI was flat quarter over quarter end cash NOI margin decreased slightly to 27% compared with 28, 3% in the previous quarter as a whole the independent living portfolio had been less vulnerable to accelerated.
Move outs and labor challenges contributing to that result is that eight of the 30 properties are in Canada, where the impact of COVID-19 has not been the same as in the U S.
Despite high vaccination rates among residents in our holiday communities. There was a rise in active COVID-19 cases, among both residents and staff starting in late December and through January which began to decline in February at the same time labor shortages that emerged during the holiday season, and drove higher labor costs due to overtime began to trend down.
After the new year.
Our Sienna retirement home portfolio had few and largely minor COVID-19 outbreaks during the surge of the omicron variant in BC and Ontario.
Where there was a partial lockdown of Ontario during the through the end of January while moving slowed during this period residents were safe given the mid 90% vaccination rates in these retirement homes.
That I will turn the call over to Mike Costa Sovrans, Chief Financial Officer.
Thanks Tanya.
For the fourth quarter of 2021, we recognize normalized <unk> per share of 39.
And normalized <unk> per share of <unk> 37.
For the year, our normalized <unk> per share totaled $1 57.
And our normalized <unk> per share totaled $1 54.
Both of which hit the midpoint of our 2021 earnings guidance.
As we noted in our earnings release added mirrors December rental obligation of $3 6 million or <unk> <unk> per diluted common share was paid in January 2022 since.
Since avid mirrors leases accounted for on a cash basis. This amount will be reflected in our results for the first quarter of 2022.
Compared to the third quarter of 2021.
Normalized <unk> per share increased <unk>, primarily due to lower rental revenues from cash basis tenants, namely Adam here and lower <unk> from both our wholly owned managed portfolio and enlivened joint venture as a result of higher labor costs.
These decreases were partially offset by higher interest income primarily from the funding of the <unk> mortgage loan during the quarter.
Compared to the third quarter of 2021 normalized <unk> per share increased one Penny decrease was noted for normalized <unk> were offset by sequential reductions in both deferred taxes and the <unk> joint venture and stock based compensation.
Cash NOI for the quarter totaled $109 2 million.
Compared to a $116 $5 million in the third quarter included in cash NOI for the fourth quarter is $7 $4 million of payments made to enliven from our joint venture support them as they dealt with persistent labor pressures from the impact of the <unk> operations.
Excluding the support payments cash NOI was effectively flat sequentially.
As of December 31, 2021, our annualized cash NOI was $452 $4 million and our sniff exposure represented 61, 4% of our annualized cash NOI.
G&A costs for the quarter totaled $8 2 million compared to $8 7 million in the third quarter of 2021.
G&A costs for the quarter include 900000 of stock based compensation expense compared to $2 $4 million in the third quarter.
Recurring cash G&A costs of $7 $2 million were six 6% of cash NOI and in line with our expectations.
We were in compliance with all of our debt covenants as of December 31, 2021, and continue to maintain a strong balance sheet.
During 2021, we fortified our balance sheet by meaningfully extending our weighted average maturity.
Improving our debt ladder in and lowering our reliance on term debt through the issuance of our $800 million.
Senior notes due 2031, while only increasing our fourth quarter cash interest expense by less than $200000 to $22 $7 million.
As of December 31, 2021, our leverage was 498 times, which is in line with our long term leverage target of five times and well below our maximum of five five times from time to time, our leverage may tick up above our target of five times, particularly as we make investments, but we would expect.
Leverage to come down naturally over time as performance in our managed senior housing portfolio recovers from the pandemic and as we recycle capital.
Our liquidity as of December 31, 2021 totaled approximately $1 1 billion.
Consisting of the full $1 billion of availability under our revolver and $112 million of unrestricted cash and cash equivalents.
On February one 2022, our board of directors declared a quarterly cash dividend of <unk> 30 per share of common stock.
The dividend will be paid on February 28, 2022 to common stockholders of record as of the close of business on February 11 2022.
The dividend represents a payout of 81% of our normalized <unk> per share of <unk> 37.
Lastly, I want to comment on guidance.
Given the uncertainty around the timing of a recovery in occupancy continued labor pressure and the resulting impact of these items on our financial performance, we will not be providing 2022 earnings guidance. At this time, we will continue to evaluate the circumstances in future quarters to determine if we can confidently provide meaningful earnings guy.
And with that we will open up the lines for Q&A.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Nick Joseph.
Citi. Your line is open.
Thank you.
Have any other tenants come to you after the announcement.
Given the clinically structure and the ability to recapture some of the rent reduction.
Nutwood.
Is that is that surprises are obviously out of the mirror was in a bit of a unique situation, but just given kind.
Given the math both in terms of near term liquidity, but also kind of <unk> ability to participate in the upside.
Is that a roadmap for future future tenant restructurings.
No I think look we've got really good rapport.
If they don't need if they're not coming to us we talk with them all the time.
We're here to help us it's necessary so they're not going to take advantage of a situation like this if they don't need it.
Thanks.
Thank you. Our next question comes from Steven Valiquette with Barclays. Please go ahead.
Alright, Thanks, Hello, everyone.
So just a question here around.
Just health care Reits in general with skilled nursing asset this quarter I think its broader pretty wide array of strategic updates from the various companies.
One of your peers is talking about some high demand and elevated valuations for sniff assets and wanted to sell some underperforming assets into that strength and that breakout is cop out your comment, saying that you're seeing more SNP opportunity showing up in the deal pipeline from your perspective.
Yes, I am curious whether what you are seeing are assets that are you also more on the distress side or more on the side of originally valued assets.
And.
That was described in one of your peers. So just curious how your view of that overall market.
Hi, It's Todd Yeah, Let me, let me take a stab at answering your question. So first of all I think.
There is no conflict and what what you just described.
There has been skilled nursing sales active transactional activity and it's and it's really in mostly off market.
And.
If anything the publicly traded health care REIT.
Gold or tried certainly tried to sell into that into that bid.
We are seeing a small amount of skilled nursing facilities.
Frankly, there theres nothing consistent in terms of quality, both high or low.
In what we're seeing.
But we're not seeing a lot of skilled nursing.
And and part of that is because there are other groups bid.
Bidding for assets that where they are pricing more than what we would price in other words theres incremental NOI that they're valuing.
The other thing I would add is.
Some of the pricing that you see out there is a little bit misleading because these are private groups of private capital in our private equity and they own other kinds of businesses.
The Smiths business opportunity.
Opportunities for them to generate revenue in their ancillary businesses whether that pharmacy.
Our therapy or whatever so.
It's a bit of a different picture right and then also the operators are typically affiliated in some fashion with a real estate landlord. So again, they are able to capture more of the essentially different different parts of the income stream.
Not the same as what we were able to capture and I think thats Thats why youre seeing a fairly limited.
Sniff ask with transactions being bought by the publicly traded health care REIT.
Okay got it okay. That's helpful. Thanks.
Yeah.
Thank you. Our next question comes from Vikram Malhotra of Mizuho. Your line is open.
Thank you thanks for taking the questions.
Two quick ones for me one.
Can you just remind us your latest thinking on sort of the recovery path for both skilled nursing and senior housing versus sort of pre COVID-19 levels. What are you sort of baking in in your internal projections.
In terms of occupancy.
Games.
And then second just on the regulatory front you mentioned S map kind of may vary quite a bit in terms of states may be re looking both.
Matching that goes away, but can you just talk about other regulations you are monitoring whether it's waivers.
Attention going away or additional capital for labor that Smith may receive just anything on the regulatory front would be helpful. Thanks.
Sure so.
On the <unk>.
On the Medicaid piece in addition to F map, we're keeping a close eye on the 30 day waiver show Skilling in place.
It's important at certain points in time, so I want to make too big a deal out of it one.
When <unk> got an active value, that's really affecting us the way overcrowded the skilling.
Skilling in place was really important because that increase in skilled mix really helped mitigate some of the other financial impact from the virus, but we also saw.
Normalized <unk>.
And even with Delta because delta wallet was more serious wasn't anywhere near as contagious.
Our skilled mix was back to pre COVID-19 levels. So that one is.
Nice to have and we'd like to see that actually stay in place long term, we already know sequestration is going away.
So essentially.
It's really skilling in place and all the Medicaid add ons from the various states and as I said most of that most of that dialogue has been positive so far.
And your first question I'm, sorry, if I can.
Just the recovery path.
So we bought.
Yeah, So caveat obviously.
Prognostication is no better than anybody else's.
We think we're about a year away on skilled.
And either being closer at pre Covid levels.
Probably the latter part of 2023.
For senior housing.
Don't want to make too much of the fact that we just had a huge increase in skilled occupancy the last two weeks.
<unk>.
Is it just some pent up demand.
And so I think part of that is because of that but if we could get back to.
The rate of recovery that we saw.
From January of 'twenty, one say through the fall before Delta hit which was 50 to 70, <unk> Hello think we'd be really happy.
Happy with that.
Okay, Great and then if I could just clarify.
You mentioned no additional.
I'll get into that come for relief or anything kind of full staff EMEA.
I guess just some of your peers have mentioned the ex <unk>.
Anticipate seeing additional request, whether it's deferrals or its actual rent relief.
Can you just kind of your underwriting for the year are you anticipating additional tendon.
Issues and skill.
We're not in our underwriting.
Our internal forecasting but.
A cautionary note I would put out there is that if you think about late spring or the summer.
Federal assistance has kind of played out.
And maybe there has been quite enough recovery, it's certainly possible that we may need to defer.
For some folks, but that's a temporary kind of issue.
And not not a longer term restructuring issue.
Thank you.
And let me let me just one more point on your previous question.
The add on to Medicaid rates are part of the waivers along with the nursing assistant waivers that are helping helping labor. So you might recall that there was a relaxation of certain rules to help staffing and the facilities and those add onto the Medicaid rates are part of that.
And.
As Covid subsides admission restrictions will subside as well so.
Are you starting to see that.
Great. Thanks for the clarification.
Yes.
Thank you. Our next question comes from Rich Anderson of SMB Suite. Please go ahead.
Good morning out there so like you said.
The triple net.
Portfolio was entirely triple net it'd be easier to produce guidance.
So maybe we can get some triple net guidance out of you. So.
If we go forward.
Good try good drivers, that's not going to fly.
Let me just can you hear me out so fourth quarter is what it came in and then you have a couple of payments coming in from out of a mirror to make whole for December and January . So if we were to just sort of normalize that out going forward shouldnt the triple net portfolio.
Fairly predictable if there's nothing else going on from a an abatement perspective, or any kind of lease negotiations, which it should be pretty that that should be a pretty fair run rate shouldnt. It for the remainder of 2022 barring any sort of update.
New Covid.
Spread.
Hey, rich, it's Mike Yeah, I think Thats, a fair way to look at it you you hit one of the key points on the head, which is the timing of that Adam your rent payment in the first part of the of this quarter that's going to skew. If you are looking at our Q4 2021 numbers as a run rate that's going to skew it a little bit, but you're right I mean absent.
Any shortfall like Rick was alluding to between government assistant in recovery.
And us, giving you kind of temporary deferrals or anything like that for tenants.
It's a good way to look at what our Triple net run rate would be for 2022, okay. Good.
Hum.
Second question.
Guys have been fairly active lately with your external investments I'm wondering.
You mentioned $1 4 billion pipeline I'm wondering how.
How much of the recent pace is.
Something that we could expect going forward in light of the stock had a tough year last year, you want to keep an eye on your balance sheet.
Do you expect to perhaps a more.
The slower pace of activity.
From an external growth standpoint going forward net there happened to be just a bunch of things going on at once lately or Tim can you actually see an acceleration through the year. Despite kind of all the challenge is still going on.
So I'd say a couple of things one we're going to take advantage of the opportunities out there, but philosophically because we're a REIT and we invest for a long period of time.
We don't look at just today's stock price when we look at our underwriting we are making an assumption that there is going to be recovery.
And you'll note last year.
Before Delta here.
Everything was recovering pretty nicely occupancy was increasing the stock by August had gone back up to $19, which makes everything that we're looking at very doable and that's not even getting back to pre COVID-19 .
<unk> levels were in the 20 or so.
So yes, we do make an assumption that we're not going to be.
Stuck at 2014.
For a long period of time.
Yeah, I think the other comment I'd add there is to the extent that we can structure our investments in a way that allows us to ride the recovery up of the investment.
That becomes a real positive so even if the entry point is like in our Canadian portfolio.
Around 6% there is and there is upside and we'll participate in that upside to the investment that again as opportunity an opportunity for us.
Go back to Rick's point over the long term.
Okay, and then last question, perhaps for Mike debt to EBITDA below five by a hair.
No. It's an adjusted EBITDA that I think assumes the full annual impact of investment activity.
First of all correct me, if I'm right about I'm wrong about that but assuming I'm right. How do you underwrite those in that calculation. So that you know.
When the day comes in.
They underperform expectations because of everything that's going on in the World do you haircut those numbers. So that when you calculate your leverage metric there that you don't sort of missed missed the number you know when the real number start to come in.
Yes, youre right in that we do pro forma any acquisitions or dispositions for that matter into that number and if you look at kind of a larger pro forma adjustments to get there for Q4.
The biggest by far adjustment is going to be related to our RCA mortgage loans. So don't expect much if any volatility in that number. So I think that the risk of you pointed out is is correct just not necessarily.
For our fourth quarter.
Leverage calculations, but on a go forward basis Youre right. You know we're looking at it based on an annualized expected NOI and to the extent that there is a potential that it doesn't reach that that could cause some variability in our in our leverage numbers going forward, but.
Well, we're focused on is keeping it around in the ballpark of that five times on a long term basis.
Will it get to a five O two possibly.
We will get to 498 like it was this quarter, yeah, that's going to happen to it's going to be hovering around there.
And we want to give ourselves enough room for from our maximum of five five times such that if there are some blips or some.
The timing is off by a quarter on any of that performance that we underwrote is not going to create an issue for us from a balance sheet perspective.
Okay fair enough thanks very much.
Yeah.
Thank you. Our next question comes from one Santa Maria BMO Capital. Your line is open.
Hi, good morning.
On the <unk>.
Deferrals watch list or whatever you want to call. It but is there any other tenants, where you're using a security deposit to help pay for rents.
No.
Gordon, we're pretty transparent one so.
No.
Okay, that's good to hear.
And do you think.
Sure.
We think so we've been we've had a remarkably stable portfolio relatively speaking to this whole pandemic.
Just looking at I wanted to go back I think Mike said, something about a $7 million plus.
Support payment.
Wanted to get more details around that if that was to the joint venture with TPG I thought there was had already been a top up and that was.
Those will be the last of it so just wanted to check.
Understand what that was about.
Yeah, no that the original one wasn't the last of it.
You should expect that to continue from TPG.
As we noted.
On our second quarter call, Australia, which I know it seems like a lifetime at this point.
One of the reasons that we opted not to.
On the other 51% was because TPG decision to exit Opco Opco has got a pretty big bleed and we didn't want to be in a position of both having to write a check if you lever and to.
To support the Opco bleed so until it's finalized there is a bleed there and so from time to time, because TPG over 100% of Opco. They are going to provide some support to that we did participate last June and a little bit of that support we've talked about in the past.
It was about two and a half million dollars, but we're not participating at this at this point so you.
You should expect that the sales process.
There are some parties that theyre talking to there isn't a full blown sales process yet.
One of the things that we're seeing out there for large portfolios as everybody's kind of waiting until things subside enough that there is some recovery that people can project offered.
There was a.
A huge portfolio that.
Was did go through a marketing process about 25 billion in senior housing it didn't happen Theres a private portfolio. That's about 1 billion, two 1 billion and a half out there that's pretty high quality and.
They're holding off as well, there's another portfolio as well so I think until there is a little bit more traction on recovery.
I'll give you a full blown full blown process having.
Individual discussions.
Thank you and then just one last one.
Can you quantify how much agency costs are flowing through to shop numbers to help us think about how that.
Hopefully moderates a simpler forward and what that could represent in terms of growth.
No we actually don't have that number.
It peaked around November then it came down and then it went up because of the <unk> and it's coming down again, and so we would actually like to have a little bit more rather than kick a moment in time, because it's been so volatile.
We prefer just to wait a little while and see get a little bit closer to where it's normalizing towards which should be a relatively small number the other point I'd make is.
In aggregate number isn't particularly meaningful because we.
Is it clear disparity that we see between our operators in the individual facilities not just the operators that really better said the individual facilities by market is huge I mean, there's nothing that resembles a bell curve, so coming up with one number.
No.
Just doesn't make any sense. If people are just going to run with it and extrapolate from it and make the assumptions that I think are correct.
Fair enough. Thank you.
Yep.
Thank you. Our next question comes from Connor Seversky Bear in Burke Your line is open.
Apologies there you just took my last question I'll leave it right there. Thanks. Thanks Gunnar.
Thank you our next question.
It comes from Tayo Okusanya of credit Suisse. Your line is open.
Alright, good morning out there.
So a question around the acquisition outlook going forward.
Pipeline, you guys talked about $1 4 billion it looks very healthy.
You've done some really good deals year to date and buying senior housing and kind of six to six and a happy when sometimes close a seven cap when your peers are buying portfolios in the fives, which is all great, but when I still kind of think about your cost of equity today, given where the stock is trading.
Kind of curious how you guys kind of think about funding.
Acquisitions going forward, especially kind of given some of your leverage target.
Yeah, I'll take that real quick.
So in terms of funding in the short term. There's a couple of sources that we would look to first we have quite a bit of cash on hand that would be one.
We have full availability on our line of credit, but we also have some capital recycling that's occurring throughout.
Throughout the year and this is not even.
Including being live it.
Sales proceeds.
So we have some sales some capital recycling that we have expected throughout the year that will help finance some of those.
Acquisitions without having to without putting our leverage in a place where we would have to think about raising equity.
Gotcha, but you, but you would fully expect to use the availability on the ATM, which basically is an equity issuance right.
Well, if we if we had to go there, but what I'm, saying is that with the cash on hand.
And using a little bit on the line of credit plus sales proceeds like the.
Canadian portfolio that we just announced we wouldn't have to hit the ATM.
To keep our leverage in check we we'd be comfortable with where our leverages that with the sales proceeds and everything on the cash on hand.
That's an important message tayo because you know last year as we were really focused on delevering. The balance sheet, we were pretty aggressive as you'll recall with the ATM and I think.
Certain sensitivity about how quickly you might be willing to use it but we got to where we needed to get and as Mike said, we've got a number of tools available to us now so.
We are at a much better place.
That's very helpful. Thank you.
Yeah.
Thank you. Our next question comes from John Pawlowski of.
Green Street. Please go ahead.
Hey, Thanks for the time, maybe just a follow up on that last question. There could you give us a sense for the disposition volume of range of disposition volumes, we could potentially see come to market. This year.
Yeah, I mean, I don't really want to be given disposition guidance on the earnings call I mean, we have.
It's going to be of a similar level that you've seen over the last couple of years in terms of volume.
I am not going to be given cap rate guidance either on this call but.
But like I said, we have we have a bit in the pipeline just your normal.
Pruning of your portfolio and recycling of our capital.
And then putting into new investments and I'll leave it at that the only thing I would add is to the earlier discussion about what some of these private buyers are paying.
We may be willing to look at some additional dispositions again to Mike's point, it's not going to be major.
But it could be slightly more than just the day to day stuff that we normally do.
We think folks are willing to pay us pay a valuation that we think is working.
We're considering.
Okay.
Rick could you give me your latest thoughts on the size of the mortgage loan and preferred equity book $400 million right now does it grow meaningfully from here.
Stable just help us think through the kind of two to three year trajectory of that book.
I'll make one comment and turn it over to tell you philosophically that it's not.
Direction that would go into strategically its more relationship oriented with operators.
And the ability to be a good capital partner and grow with those operators.
We don't expect it to be substantial and it's not a strategic thing that we are pursuing that's right on the mortgage side, that's exactly right.
On the preferred equity.
We've been doing preferred equity.
At various points in the in the real estate and financial cycle. Since we started sabra and I think you'll see us continuing to do that as.
The very specific as to which project and what and the timing of the.
Where we are in the cycle, it's an opportunity for us to have.
A small amount of capital deployed.
With a relatively high rate of return.
And Optionality typically on a long term ownership in the future. So that's something we like and it also lets us.
B in the front row of of proppant capsid might otherwise not be willing to be.
Be able to buy.
On a stabilized basis on a fully marketed process.
Understood. Thank you for the time.
Thank you. Our next question comes from Joshua Darlene Bank.
Bank of America. Your question please.
Hey, everyone.
Sorry, if I missed this but are there any.
States, where you're more or less kind of PAH.
Positive on operators, who are receiving more state funds or maybe even like changes to kind of maybe ease some of the pain points that they have.
Actually most of the states that we're in have been really good so the.
The biggest surprise really was Texas, which as everybody knows has historically has one of the worst Medicaid systems in the country.
But David really terrific.
Operator so.
I am <unk>.
Happily surprised by the fact that by far the majority of the states have been really helpful.
And I think it bodes well for the future as well.
We're in good shape from a budget perspective.
The pandemic has affected their view of Medicaid and how underfunded with certain safety today doesn't mean that we're going to get big increases, but certainly the tone of the dialogue has changed and the fact that so many of the stepped up where they could have just think that.
I think it's a good is a good sign.
Okay Awesome and then.
There was some.
And just a follow up on the potential dispositions.
Would there be kind of like a more of a weighting one way or the other to a certain asset class or is this kind of.
Yes.
So I would say.
Mike noted that our skilled exposure is down to about 61%, which is as low as it's been in a really long time and we'd like to see that below 60%. There seems to be kind of this thing out there where as soon as we hit 60, where sniff REIT.
So.
But with that said our primary focus is to get back to growth between.
Paul the Genesis sales in the senior care center sales and the pen.
Delek.
<unk>.
We've got declining earnings these last several years and so that's our primary focus is getting back to growth.
So we're not going to bypass doing a skilled deals or do a number of them simply because we're trying to get at with skilled exposure under 60, depending on where we swing so.
Number one its growth.
Earnings growth over 2000, and the portfolio of both earnings growth comes first.
Thank you.
Thank you again to ask a question. Please press star one and you touched on telephone again star one on your Touchtone telephone to ask a question.
We have a follow up from Juan Sanabria of BMO capital. Your line is open.
Alright, thanks for allowing me to come back in the queue. Just a question on the lease explorations <unk> got three 5% of rents expiring this year.
Any color on how we should be thinking about that in.
Tangentially is there any purchase options, we should be thinking about as well in the portfolio over the next year or so.
Yes.
Over the next year or so there is no purchase options that stand out to me.
For the lease that's maturing this year, that's a tenant.
Tenant that we've talked about for a while now it's one of our cash basis tenants.
Portfolio called White Oak.
We've talked about it for several quarters now that expires at the end of the year and we're in the process of putting in a long term lease with that for that portfolio and hopefully should have been announced for the end of the year.
One other comment let me make two follow up on some of the Medicaid stuff was.
The states all the states that we received money from the fed.
And as I said, the majority of states have in passing that onto the skills to the skilled nursing industry. If states will spend the money they have to return it so.
That should create good tailwind for our operators as the federal assistance tails off.
Mike could you just give us a bit more on that exploration.
Yeah.
But the coverage user are they are they essentially paying one times.
Yes, there is.
Yes, they've been on our cash flows cash flow sweep for several years now.
It was a portfolio that we transitioned to one of our best operators Kt of their top 10, operator, they took over that portfolio a couple of years ago.
And there's really two portfolios as the stabilized portfolio that we do with <unk> back in 2011, one of our first deals in one of our best deals that we've done and then they took over that wild portfolio. A couple of years back in as they were looking to one reopen one of the facilities that I've got shut down and just reposition the portfolio. There we put them on a cash flow sweep and that was a short term leasing.
Five year lease at the time, so that five years is coming up now and now we're gonna be looking to put it on a more.
Fixed a fixed level of rent and some of that is just going to be.
Yeah.
Not on a cash flow basis and more steady.
Great and just one last one for me.
Any.
Guidance or color you can provide on G&A $35 million in 2021.
Okay.
I know there is some uncertainty as to what the TV budget would be but any color would be appreciated.
Yeah, I mean, we had our our run rate for the quarter was $7 2 million in the year end numbers always the fourth quarter numbers I should say are always a little bit on the higher side you have some.
Hum.
Some tax payroll tax issues and you have an applications of apparel tax.
Acceleration that happened in the fourth quarter with like stock comp and things like that.
But I think that $7 million seven.
Call it between seven and seven 5 million is probably a decent run rate to assume on a quarterly basis for our cash G&A.
Thank you.
Yes.
Thank you at this time I'd like to turn the call back over to CEO , Rick Metros for closing remarks, Sir.
Thanks, everybody for joining us today and hopefully we are through the worst because I know we've said it before.
I think the fact that.
87% of the Workforces now vaccinated.
Clearly bodes well going forward, so put some positivity out there. Thanks, everybody talk to you all soon.
And this concludes today's conference call. Thank you for participating you may now disconnect.
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