Q4 2021 National Health Investors Inc Earnings Call
Greetings and welcome to the National Health Investors fourth quarter conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the.
Four on your telephone.
If at any time during the conference you need to reach an operator, Please press star zero.
I would now like to turn the conference over to Dana Hambly. Please go ahead.
Thank you and welcome to the National Health Investors Conference call to review the company's results for the fourth quarter of 2021.
On the call today are Eric Mendelsohn, President and CEO , Kevin Pascoe, Chief Investment Officer, John Spaid, Executive Vice President and Chief Financial Officer, and David Travis Chief Accounting Officer, the results as well as the notice of the accessibility of this conference call on a listen only basis were released after the market closed yesterday in our press release.
Has been covered by the financial media.
As a reminder, any statements in this conference call, which are not historical facts are forward looking statements.
<unk> cautions investors that any forward looking statements may involve risks or uncertainties and are not guarantees of future performance.
All forward looking statements represent nhi's judgment as of the date of this conference call investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission.
Including the risk factors and other information disclosed in Nhi's Form 10-K for the year ended December 31 2021.
Copies of these filings are available on the SEC's website at SEC Gov or on Nhi's website at NHI reap dot com and.
In addition, certain terms used in this call are non-GAAP financial measures reconciliations.
Got it in Nhi's earnings release, and related tables, and schedules, which have been filed on form 8-K with the SEC.
Listeners are encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release.
I'll now turn the call over to our CEO Eric Mendelsohn.
Hello, and thanks for joining us today.
It has been less than a year since we announced to the market that we were ready to make more lasting decisions to fundamentally transform NHI into a stronger health care REIT by pruning underperforming assets transitioning properties to new tenants restructuring leases with partners with whom we can grow.
So in venturing into new revenue streams, including shop structures.
To that end, we have completed the sale of 23 properties through January for net proceeds of approximately $244 million, which includes 19 underperforming senior housing properties for $195 million.
The NOI cap rate on the senior housing dispositions was two 4% with.
With EBIT to arm coverage of five one times.
And our November call, we identified an additional 21 senior housing properties for disposition from that group. We completed the sale of three properties transitioned three properties to new operators and decided to retain three properties under triple net leases.
We expect that the repositioning of the remaining 12 will be completed in the first and second quarters.
Since November the board has approved the sale of four additional underperforming properties. We expect that these dispositions will close later this year and in total we currently target 16 housing property dispositions with estimated net proceeds of 125.
Million, representing an approximate 9% cap rate on contractual rent, but a very low single digit NOI cap rate.
Shifting our focus to our bickford relationship.
We are disappointed that the pace of restructuring has slowed since we last reported results. This has been driven primarily by headwinds caused by omicron that have weighed on bickford enterprise cash flow and impaired progress.
We're evaluating scenarios in which more short term financial assistance may be needed.
That said, we are confident that our restructuring efforts with bickford will create a more focused portfolio that significantly improves coverage creates excess cash flow to service deferral balances and enhances the overall quality of our relationship.
You can see the results on page six of our supplemental which details the improving coverage ratios following dispositions.
We also continue to work diligently on the transition of the legacy holiday portfolio into a shop joint venture with Merrill Gardens in discovery.
Since our November update we disclosed that we have filed a lawsuit against well tower. So the timing of the transition has been delayed while the legal proceedings play out.
We do have good dialog with the existing manager Atria and believe that we'll be able to move quickly on the transitions as soon as allowable. We believe this will expand our avenues for long term growth.
Timing also looks optimal as industry fundamentals start turning in a more favorable direction, allowing us to capture meaningful NOI upside loss due to the pandemic.
Our skilled nursing and <unk> portfolios, which currently account for nearly two thirds of cash revenue are performing well under challenging circumstances and it provided stability as we have been working to restructure other parts of the portfolio.
The balance sheet is in great shape, as we reduced debt by over 250 million during 2021 and maintain leverage within our target range of four to five times net debt to adjusted EBITDA.
This is despite granting over $28 million in rent concessions and 11 4 million and holiday nonpayment.
Given our favorable financial position, we see little need to raise new equity to fund our growth in the near term.
We understand that there are many moving pieces, which crowd visibility into our NOI growth the timing of the holiday transitions and the headwinds caused by omicron led us to postpone giving guidance at this time.
But the timing of our strategic actions has been elongated that overall strategy to reposition NHI has not changed we believe that we are at an earnings trough and look forward to better days ahead as the effects of the pandemic Wayne and our repositioning strategies are fully implemented.
I'll now turn the call over to John .
Thank you, Eric and good day everyone.
Beginning with our net income per diluted common share.
For the fourth quarter ended December 31, 2021, we achieved 14 compared to 83 for the same period in 2020.
For the full year, our net income per diluted common share was $2 44.
Compared to $4 14 and 2020.
The year over year 12 month decline in net income per diluted common share was due primarily to $51 8 million impairment charges.
$28 million in rent concessions are $1 4 million and five months of holiday rental non payments.
$5 4 million increase in non cash stock based compensation expense.
These amounts were partially offset by $11 2 million in gains from the sale of real estate during the year.
For <unk> metrics per diluted common share for the quarter ended December 31, 2021 compared to the prior year NAREIT <unk> decreased 21 to $1 seven from $1 28, and normalized <unk> decreased 31 to $1 six per share from $1 37.
For the quarter ended December 31, 2021, our normalized fad.
Declined by $13 1 million year over year, and by $5 3 million sequentially to $45 9 million.
The year over year and sequential quarterly decline in Fad was similarly, driven by lower holiday rent additional rent concessions and dispositions.
Conciliations for our pro forma performance metrics can be found in our earnings release, and 10-K filed yesterday at SEC Gov.
As Eric mentioned, we're not providing guidance today.
We're disappointed with this result, but the largest reason for today's decision continues to be the unknowns around the wall tower litigation and holiday portfolio NOI commencement date.
We do have a hearing this Friday and we do believe that after the hearing we will have more we'll have more clarity around these unknowns.
It is our intention to provide guidance as soon as we're able.
As detailed in our supplement at the end of January we have unfunded commitments totaling approximately $109 million.
Which have an average yield of approximately eight 5%.
We expect to fund the majority of these commitments during 2022.
Our fourth quarter dividend of <unk> 90 per share.
It was paid on January 31, 2022.
And represents a normalized <unk> payout ratios to 84, 8% and 89, 9% respectively.
As announced yesterday, our board declared our first quarter dividend of <unk> 19 per share for shareholders of record on March 31.
And payable on May 6th.
Turning to the balance sheet for the quarter ended December 31, we.
We reduced our debt by approximately $43 million, including $18 million in secured debt and $25 million on our 2022 term loan.
Our net debt to annualized EBITDA leverage ratio was four nine times.
While still within our stated financial policies, we expect to see immediate improvements in our in our leverage ratios as soon as we are able to transition existing holiday portfolio to new operators and recommence receiving NOI from those facilities.
On January 31.
$10 million outstanding under our $550 million revolver, and $16 $4 million in cash.
We did not issue any equity through our ATM program during the fourth quarter and do not expect to issue equity during the first quarter.
We continue to have approximately $416 million available to us under our ATM program.
Our $800 million revolver and term loan credit facility.
In August of this year.
We're in the syndication process for a new $700 million revolver, and we're targeting closing the facility in March.
With that I'll now turn the call over to Kevin Pascoe to discuss our portfolio Kevin.
Thank you John .
As Eric noted, we see better days ahead, but we are not out of the woods, just yet and expect that our first quarter rent concessions will be comparable to the fourth quarter.
We're fortunate to be in a strong financial position that helps us withstand these headwinds.
But we're more interested in and encouraged by the growth prospects, we see coming out of our optimization.
Yes.
In discussing nhi's portfolio I'll start with our entrance fee communities and SLC.
The <unk> in our portfolio, which account for 30% of our annualized cash revenue net of deferrals have consistently outperformed our he's driven and freestanding independent living communities since the start of the pandemic.
EBITDAR coverage for our non <unk> properties.
We're comfortable at 175 times and improved from 166 times in the prior year period.
Senior living communities is our largest operator at approximately 20% of annualized cash revenue.
The SLC team deserves special recognition as they admirably kept the disruption of the pandemic to a minimum and are well positioned for continued growth.
<unk> average fourth quarter occupancy of 81, 7% was up 130 basis points from the third quarter occupancy remained flat in December and January at 81, 7%, which are great results and are also above pre pandemic levels.
Our need driven senior housing portfolio of 101 properties has experienced the most disruption from the pandemic.
This group, which accounts for approximately 29% of our annualized cash revenue net of deferrals generally experienced occupancy occupancy gains throughout the fourth quarter.
Occupancy growth slowed towards the end of the quarter and into the first month of this year, which we attribute to normal seasonality as well as the more recent surge in new Covid cases.
Fortunately our operators have not reported any significant impact to resident health and safety as a result of Omaha.
However, this has had an impact on labor and has resulted in the use of overtime and agency staffing, which is up 4% to 500 basis points from the last couple of months.
EBITDAR coverage for the group was eight four times, but declined to <unk> 76 times when excluding bickford.
The needs driven asset that's clearly been the focus of our restructuring and disposition activities. So we expect that coverage metrics will improve as a result, given that the targeted dispositions are typically at five times or less.
On a positive note.
As we discussed last quarter residents and their families had been sympathetic to labor issues. So we are seeing rate increases in the mid to high single digit range with little impact on occupancy, which should help maintain NOI margins in 2022.
Bickford, our largest assisted living operator, representing 13% of annualized cash revenue net of deferrals increased quarterly occupancy by 90 basis points sequentially to 81, 3% and was relatively stable at 81% in January .
We are in the process of selling five underperforming victory properties and transitioning another to a new operator and are on track to complete our restructuring with bickford in the second quarter.
As noted the pace of restructuring has been slowed but we're still confident that the NOI generated from our right sized portfolio will be sufficient to cover $28 million of annual cash rent.
Turning to our independent living communities. This group accounted for only 2% of our annualized cash revenue net of deferrals as our 17 holiday properties did not pay rent during the quarter.
We are in the process of selling one additional holiday property and transitioning the remaining properties to Merrill gardens in discovery.
NOI margins have declined significantly throughout the pandemic from the mid 40% range to the mid 30% range currently.
Occupancy has declined by over 1000 basis points.
We view this as our opportunity to capture significant upside as these properties begin to recover.
We estimate annualized NOI from the portfolio is currently in the low to mid teens and that there is an incremental $6 million to $8 million of upside over the next several years as the portfolio has achieved stabilized levels.
The skilled nursing portfolio, which represents 35% of annualized cash revenue net of deferrals is anchored by NFC and the Ensign group, who contributed 16% and 10% of annualized cash revenue respectively.
Same store sniff EBITDA coverage was 285 times, including 394 times at an H C and 196 times for our other operators.
While MHC, an ensign have delivered solid performances throughout the pandemic some of our other smaller operators have been stressed due primarily to much discussed labor issues.
This may result in some form of financial assistance, though no decisions have been made at this point.
Okay.
Turning to our business development activities, we announced over $125 million of investments at a weighted average yield of nearly 9% in 2021.
Activity with our partners at Montecito has picked up recently and we funded over $10 million of new investments during the fourth quarter. We believe we will fully fund the $50 million commitment within two years.
We also announced a new construction loan with Oncor senior living formerly known as 41 management for $28 5 million.
This is a strong and growing relationship that now includes non investments in the Midwest.
The pipeline remains active across multiple asset classes and product types, but it has been a better sellers market, which is certainly work to our advantage this past year.
As we conclude our disposition program, we expect to be more active rebuilding the pipeline in 2022.
As John mentioned, we currently have commitments of approximately $109 million with a weighted average yield of eight 5%.
With that I'll hand, the call back over to Eric.
Thank you Kevin.
When we last reported in November and presented a detailed framework for the most significant aspects of our portfolio optimization plan, we did not specifically anticipate a lawsuit against the legacy holiday tenant for the impact of Omicron, We did however understand that unforeseen.
Events have been the norm since the pandemic started and I am proud of the way our team has responded under the circumstances.
Our cautious tone, sometimes is mistaken for lack of enthusiasm.
That couldnt be farther from the truth.
And we wouldn't have pursued such an aggressive restructuring if we didn't believe that the result would create a jewel box portfolio with the best operators position to participate in our long term growth of senior housing and skilled nursing.
Our portfolio optimization efforts will be largely completed in the next couple of quarters and we believe that the most difficult quarters will soon be behind us.
We know that that recovery will take time and require that NHI continue to provide more support for operators.
But we expect that progress will be steady and we're excited by both our internal and external opportunities as we pivot back to growth in 2022.
Operator, we will now open the line for questions.
Thank you so much sir to queue up for a question. Please press the one followed by the floor on your telephone you will hear a sweets unprompted commentary request. If your question has been answered and you would like to withdraw your registration. Please press one three.
One moment please for the first question.
Once again to queue up for a question. Please press one four on your telephone keypad.
The first question comes from the line of charges Sadler Keybanc capital markets. Please go ahead.
Thanks, guys.
Wanted to just touch base.
On the guidance here, so or lack thereof.
I know.
As you mentioned the holiday portfolio is.
Significant uncertainty going forward and on a run rate basis.
The predict but.
I don't believe there was really any contribution from the fourth quarter related to holiday. So.
Could could would you say that the fourth quarter.
It would be a good jumping.
Jumping off point or run rate.
Holiday notwithstanding.
Jordan This is John .
Yes, you can start there.
I think you heard Kevin talk a little bit about expectations for deferrals in the first quarter.
Keep in mind that all of our swaps.
The matured so we're going to have some benefit on the interest expense side.
No.
A lot about what's going on.
In terms of other expense items, which are which are up like legal.
So you have to think about that.
And we are continuing to kind of dispose of a few properties, which will have both.
Impact on on debt lowering debt and then also a loss of NOI.
But.
As of this <unk>.
Situation with our holiday assets.
We're in the middle of.
Taking control of things and control is a very sort of esoteric GAAP discussion.
And we could end up with some interesting results and we just don't have a definitive resolution on that just yet.
And what I mean to say when I say that is.
We could come to the conclusion that we have control while the assets are still in the hands of <unk>.
<unk>.
So it's really difficult for us.
To give.
Give you a really good guidance right now that doesn't have to some massive amount of swing in it.
Got it.
What are the implications of you guys having control.
Well, it's a consolidation question and then of course, then we have to have the information to pull into our financial statements.
And then at the end of the day the NOI.
Who does it belong to.
Does it belonged to the Noncontrolling Party in this case while tower.
Or does it belongs to us so we've got some big questions there and we've got some big questions about that.
That date and what moves forward from that date and then of course, then we have really an unknown regarding the outcome of this friday's hearing so.
As I said in my prepared remarks, we expect to have a lot of clarity after that hearing.
That will be able to come back and provide to you.
And NOI.
I think Kevin alluded to it.
Did he say.
Low to mid teen millions right now on an annual run rate basis with $8 million of upside.
Hey, Jordan, Yes, that's correct. This is Kevin.
Okay.
And then one other for you John Wiley have yet.
There was an additional lease amendment.
It was announced I think on January <unk>.
And.
That amendment.
Sure.
I think effective in November where we basically $5 million of deferral or abatement, and then dropped stepping down to $4 million starting next November its upcoming November .
Can you give us any additional color on number one on that tenant meaning.
How big was that reduction as a percentage and what type of tenant was that.
And then are there any other additional lease amendments contemplated.
So Jordan this is Kevin.
That would be for senior housing.
So that was the nature of.
The underlying product type that we're dealing with.
As you can see with our.
Disclosures, where we're seeing coverages. So we're trying to get people back to a level where they're at.
<unk>, a one times coverage that was.
Justification for it we do have some dispositions that were working on which will help.
And specific case help that customer get back to.
The one times or better approaching it so.
I think you can probably you can probably go into the estimate maybe do some math in there and estimate the order of magnitude there but.
The goal then is to try and get them back to a place where like Big Ford.
Approaching a one O cover and then as cash flow improves again, they can start to payback any deferral balances that we have with them. So it was a similar.
Process that we went through there.
Yes.
Okay.
I don't know what I would apply that math to only have the $5 million reduction I don't know that I have the starting and ending coverages.
Well, we're just using the we Havent announced.
Outside of our top three customers individual coverages, but you can look at what I was saying is you can look at the portfolio.
Coverage.
We're not at all.
Our non big four customers are.
And use that as kind of a proxy.
Gotcha Gotcha.
Thanks, guys.
Our next question comes from the line of John Kim with BMO Capital markets. Please proceed with your question.
Thanks, Good afternoon.
I know you didn't provide.
Guidance for the year, but where do you think investment activity will be this year versus the $121 million.
Thank you George last year.
So what we're looking at.
New business perspective, we've talked about we have a lower $100 million in commitments that we expect to fulfill and then last year, we had even in kind of what I'd call a very tough year still did $100 million of investment.
While we havent set very specific goals around new investment I'd like to think of.
The lower watermark for us and Thats something like that is achievable.
I feel like we have a good handle on the market right now and are seeing the prospects that are out there as we talked about it's been a better sellers market and between that and the repositioning of the holiday assets Thats been on the forefront for us, but we do expect to get back to growth and would think that if you look at that as kind of.
A lower watermark for us those are things that we expect to deploy the the unfunded commitments.
Some level of investment in line with that.
Yes.
And John I'll give you my second question a lot of it's going to say you can get a lot of detail about what those investments look like and as I said in my prepared remarks.
We expect to fund the majority of those during this year and you can see what the rate is on them and what the amounts are remaining to make some assumptions here.
My second question is on <unk> and I know you <unk>.
Partnering with your with your operator.
Then.
But I'm wondering if it's been contemplated internally about just.
Kind of moving on from them.
It's been.
Been a multi year drag on coverage.
And more recently earnings and it's not really clear how strong they are going to come out of this month and go through the restructuring I'm just wondering how serious questions were internally.
Yes.
Hey, Jonathan this is Eric.
Good question Fair question.
There is an old banking phrase that says if you lend somebody a little bit of money. There are customer if you lend them a lot of money, they're a partner.
And I would put bickford and the partner category.
We.
<unk> certainly tried to make bickford and more independent organization. They have other capital partners now they have a portfolio that is funded by bank debt.
They have a stand alone pharmacy operation that we're not involved with that is very profitable.
And certainly we have been.
Selling building some back to them some to third parties.
And we have a purchase option.
That is a conduit for new stabilized product.
That were reconsidering.
To lessen our exposure. So at this point I would say that we're in the category of lessening, our exposure and limiting future business.
We have not looked at selling the entire portfolio that's.
In my opinion, they're good operators.
<unk>.
May have gotten in over their heads and some markets and we believe that if we help them financial engineer a solution that they can get back.
Being a good operator and a profitable company.
And then some of the transitions that.
You've discussed how confident are you the new operator will manage them more effectively versus.
The assets that might have their own.
Individual.
Challenges.
Good question.
We're actually selling the majority of the Bickford buildings.
We're.
Disposing of there's really only one or there's really only one that's transitioning to a new operator.
In Pennsylvania the.
The rest are being sold to third parties. So.
You're on the right track there.
Got you okay. Thanks, a lot.
Thank you.
Our next question comes from the line of Tayo Okusanya with Credit Suisse. Please go ahead.
Hi, yes, good afternoon.
Moon <unk>.
I wanted to go back to Jordan's question, which Eric you kind of answered 80% of <unk>.
80% of it there, but I think.
The one thing he was asking about was it does feel like over the past few quarters.
There's always kind of been like this some new tenants that also requires help so I think we kind of started this process with like.
Two tenants in there it seems like there are like five of them that are receiving deferral.
Back to this question when you guys press test the portfolio today.
Again kind of given some of the lower rent coverage to have on the on the need side.
How confident I know you guys don't get yet another tenant.
That you have to kind of help us it's one thing to keep giving help to you.
Current group of tenants that have been identified but what about again.
Another new tenant to another new tenants showing up on the list is good news.
Hey, Tayo. This is Eric that's a good question.
<unk>.
I'd like to say that Theres always part of our portfolio that needs assistance.
To say it was 5%, but these days it seems to be more and every year. It's a different 5%. So a couple of things. We're dealing with are different tenants have received different types of government assistance.
Different tenants have exhausted their personal resources or deposits and other tenants are.
Dealing with.
The labor difficulties in different ways in different markets. So.
I'm not here to tell you that we're done offering assistance I said in our prepared remarks, there still could be some resistance.
Assistance as we work our way out of the effects of the pandemic.
But I'll also say this tayo it is hard to find competent operators and you can see that in the landscape of operators that are disappearing I would point to eclipse.
Which closed for business last year.
A very large operator with a very large portfolio all of that had to be transitioned a lot of operators are feeling stress and pressure.
And you never know, where it's going to where it is going to show up the other issue we're dealing with the other issue we're dealing with is character.
People under stress do interesting things and we have to deal with that as well and then finally I'll tell you is senior housing will come back we're seeing.
We're seeing that in select markets, where buildings are full and running without any difficulty there margins are lower but people are coming back to senior housing and I believe 2022 is going to be.
Turning point in.
In our recovery.
Gotcha, Okay. That's helpful and then.
Going back to the comments about holiday.
And the <unk>.
<unk> on Friday.
I guess.
What do you guys kind of see again as a positive outcome from that hearing and what would you consider kind of a negative outcome from that happening.
Sure. This is Eric again, a positive outcome would be a ruling in our favor and negative outcome would be a ruling against us.
Yes, yes, but when you say a ruling in your favor does that that's kind of like the final.
A decision around this thing a ruling in favor mean that.
While tower on the hook for the missing rents on all of that is you would get finality to that nature on Friday.
Now now that the.
Nature of the ruling on Friday is our ability to foreclose on the membership interests of the tenant entity and therefore control the transition of the buildings and Thats.
When we issue.
At controversy on Friday.
The conversation around control of the buildings on Friday, Okay.
Alright Thats helpful. Thank you.
Thank you.
Our next question comes from the line.
Rich Anderson with <unk>. Please proceed with your question.
Thanks.
<unk>.
Where is the money right now physically from the holiday portfolio, that's been collected from residents and so on.
I don't know that we can answer that definitively, but we've got some information that says that exists.
And that's in the form of some some financial statements that we've been given.
Okay.
It's mysterious.
The other question is hoping rich and this whole thing has been mysterious to US you've got you got you got to realize.
Three days four days after we.
Gave consent to close this transaction and the other side of the party said well we have a different.
We're going to have in a different direction that pay anymore and.
Come back and re trade you so.
This whole thing has been sort of that way right.
Yeah. It doesn't doesn't look great I will say that for the record.
So.
As far as the timing of the lawsuit.
Would it not have been a better.
Process to complete the transition to mineral and discovery and get the process done with and then pursue legal action is there a reason why you wouldn't.
In front of that or maybe you can't comment I'm not sure.
Well, it's not that simple rich you need a lot of cooperation from the other side. The transition of building you need information and you need someone to payout vacation pay on employees you need to.
Transfer property tax escrow accounts you can't just.
You know do a one sided transition without the other parties cooperation so.
I can't really talk about more but.
Now that wasn't possible and the timing.
Was carefully.
Analyzed and strategic.
It's certainly not my field of expertise.
I'll Trust you on that one.
It's hard I think Kevin did you say sort of from one from fourth quarter to first quarter, just to sort of get our bearings about the future of this year.
It's sort of a wash from a concession in deferral in abatement perspective is that is that the expectation for first quarter.
That's correct, we said that the first quarter would be in line with the fourth quarter in terms of the deferral amounts.
Okay. So I got it thanks.
Thanks Rich.
Yeah.
Our next question comes from the line of Daniel Bernstein with capital One. Please go ahead.
Alright.
I just wanted to ask occupancy in January was seized.
Seasonally strong I would say.
So I just wanted to kind of understand kind of your outlook for occupancy of those top three tenants for 2022, or maybe you want to talk about it on an industry level and then what kind of rate increases were pushed through in January for those.
For those operators.
No.
On an annual basis or are they kind of on a rolling basis for rate increases.
Sure Hey, Nancy Kevin.
Occupancy as I mentioned, we saw a hole.
Relatively speaking from December to January we did see a little bit of degradation above 30 basis points with Victor it on a month over month basis saw some with the holiday buildings, we do attribute most of it to seasonality and some of it to <unk>.
So I would say that.
It's not out of the norm to see a little bit of degradation right now looking to see our operators build back there.
Lead and tour volume pipelines still a little bit low at this point.
So.
Where we go from here I think that there where we have good selling months coming up.
April May June generally generally is pretty good so it's getting a bridge from here to that point, so where we can start to get some more people move around come out of winter and a little more.
<unk> sales volume.
And then as we mentioned.
We did see it hold flat at SLC, which is good news and above pre pandemic levels.
As it relates to rates, we saw it in the mid single digits to even high single digits. We heard some people passing through double digits, we didn't really see that with our operating partners as much.
I would tell you it's in that probably 5% to 8% range that did get pass through with relatively small pushed back some of that was done at point in time, a lot of it is done on anniversary dates of.
Of the resident so it's going to take a full year to hit.
Implemented in some cases.
And then other people that have been in there for less than a year.
<unk> experienced the full rate increase so again, it's going to take a full year to get that implemented I think youll see that help on the margin side. If nothing else preserve margin I'd also tell you, though that these rate increases really are only helping stem the impact of the overtime and agency.
General wage increases so I'm not expecting to see a bunch of expansion, but it should help offset those increased costs, but again, it's going to take a little bit of time to roll through.
Okay.
And then.
Some of your REIT peers have converted or maybe or been looking to convert some of the struggling assets they have and to behavioral assets.
As well as reinvest the sales proceeds and debate into the behavioral space. So kind of wanted to get your thought on behavioral and are you looking at any anything in your pipeline, whether its redevelopment or acquisitions.
For 2022.
Sure. This is Kevin again.
We've been very vocal about our interest in behavioral and will continue to explore those avenues.
A pretty good size deal with vision, a new partner for hours with FERC NHI last year and looking at opportunities with them in several others as well.
We will continue to look at that Avenue and expect to have some more deal flow.
As it relates to behavioral least investigating it in terms of conversion, we've not done a ton around that we've investigated at some but I would say some of our dispositions had been for that where theres, a behavioral customer where it makes sense for them to convert a building from assisted.
And I think we've heard publicly about skilled is the same so those are avenues, we've looked at from a disposition standpoint, and making sure we're catching those groups as a part of the marketing process.
You would look at it in the right circumstances for if we found a good customer and there was an overlap of their product offering versus where we have a fit like that a geographical need.
Haven't really found that to date, so it's not off the table, but.
I do think it's a space you will see us continue to invest in.
Okay.
And then one last question I have I guess I'm still a little unclear.
On the timeline to potentially transition of legacy holiday assets to new operators into the joint ventures.
So, let's say you get a positive.
Yeah.
Positive results here on the hearing on Friday.
What would what potentially could be the timeline to transition the assets one quarter two quarters three quarters.
Just trying to get a better handle on that maybe you can't answer it but just trying to understand.
What you see is what might be a reasonable timeline.
Ideally this is Erik ideally Dan it would be within 30 days of that.
That hearing so same quarter okay.
Okay.
Okay, everything Thats set up everything's ready to go.
What would be the holdup.
If you get to what would be the holdup.
Let's say you get a positive again result in that hearing what would be the hold up on that.
Stretched at 30 days to 60 days or something.
There is a million things that could happen.
So I'd rather not speculate.
Okay.
Alright.
<unk> color. Thanks.
Thanks, Dan.
We have a follow up question from the line of Rich Anderson of <unk>. Please go ahead.
Yes, I'd like to ask the dogwood question.
Available sorry.
Yes.
He is under behavioral health apparently.
One block if we get out of this to bark.
Hey.
What is what is plan b if you.
Friday does not go to fruition, where.
Where does not turn out well for NHI.
Is that just mean, a much longer delay or what is what is that.
What is the outcome there if you don't win.
Rich, we still have options I'm not going to speculate on an earnings call.
Our adversaries are certainly able to to listen, but we have options.
Okay.
Thanks.
Alright.
Once again, please press one floor to queue up for a question one moment. Please.
We do have a question from the line of Chardan Sadler Keybanc capital markets. Please go ahead.
A quick follow up on.
Holiday.
Payment I think.
You previously released that you would.
Recognize the security deposit in the first quarter.
Can you just remind us.
That's still.
Still going to happen and what the math is exactly.
Hey, Jordan This is John again, yes, that's our intent.
It's.
Meaning sort of reviewed for audit lets put it that way and the amount of $8 8 million.
But right now don't see any reason why that won't happen.
Okay and that would be booked into income.
Yes.
Okay. Thank you.
And we have no further questions on the phone lines I will turn the call over back to you.
Thanks, everyone for your interest in attending and we'll see you all at NAREIT.
Or one of the many conferences we are attending.
That concludes today's call. We thank you for your participation and ask you to please disconnect your lines.
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Yeah.