Q1 2022 Omega Healthcare Investors Inc Earnings Call
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I'd now like to turn the conference over to Michele Reber. Please go ahead.
Thank you and good morning with me today are Omega CEO Taylor Pickett C O O Dan Booth, CFO , Bob Stephenson, and Megan Kroll Senior Vice President of operations.
It's made during this conference call that are not historical facts may be forward looking statements such as statements regarding our financial projections dividend policy portfolio restructuring rent payments financial condition or prospects of our operators contemplated acquisitions dispositions or transitions and our business and portfolio outlook generally.
These forward looking statements involve risks and uncertainties, which may cause actual results to differ materially. Please see our press releases and our filings with the Securities and Exchange Commission, including without limitation. Our most recent report on Form 10-K, which identifies specific factors that may cause actual results or events to differ materially from those disk.
Scribed in forward looking statements during the call today, we will refer to some non-GAAP financial measures such as NAREIT F. F O adjusted <unk> Fad and EBITDA reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles as well as an explanation of the usefulness of the non-GAAP measures.
Are available under the financial information section of our website at Www Dot Omega health care Dot com and in the case of NAREIT <unk> and adjusted <unk> in our recently issued press release. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been.
Tenant leave verified by Omega I will now turn the call over to Taylor.
Thanks Michelle.
Good morning, and thank you for joining our first quarter 2022 earnings conference call.
I will discuss our first quarter financial results.
Skilled nursing facility industry trends, operator, restructurings and our share repurchasing activity.
Our first quarter adjusted <unk> 74 per share.
And funds available for distribution or <unk> 65 per share.
We have maintained our quarterly dividend of 67 cents per share.
Dividend payout ratio is 91% of adjusted <unk> and 103%.
<unk> available for distribution.
We believe that the elevated fad payout ratio is temporary.
Based on the fact that 14.5% of our contractual rents and interest are involved in restructuring discussions and 12, 3% of contractual rents were not paid in the first quarter and therefore are excluded from fad.
Successful sale of the Gulf Coast portfolio and imminent completion of the Guardian restructure provide us with strong momentum to eventually return to comfortable fad payout ratios.
Turning to skilled nursing facility industry trends.
Fortunately the December and January pause and facility occupancy improvement reversed in February and March with preliminary mid April Omega core occupancy levels at 77, 9% up 300 basis points since January 2022.
Unfortunately.
Staffing shortages and elevated costs continue to pressure operating cash flows and the ability to admit new residents.
At this point it is impossible to predict how quickly industry occupancy will fully recover.
Or how rapidly the current labor force pressures will subside.
Turning to operator restructurings.
Dan will provide detail regarding specific operator restructurings in general. These efforts include one or more of the following actions one rent deferrals to asset sales or transitions to a new operator.
Three in certain cases rent resets with other amended lease provisions. Examples include elimination of purchase options future upward potential rent resets lease extensions or revisions of renewal rights and collateral enhancements adjustments or usage.
As we have discussed in the past the strength of our portfolio of assets generally allows us to work through operator restructurings with limited long term cash flow downside.
The golf coast portfolio net proceeds of over $300 million offset the lost golf coast contractual revenue.
While Guardian, which is still in process will result in a very modest stimulation in value from the pre restructuring contractual rents and no diminishing in value from our origination yields.
Turning to share repurchasing activity.
We have repurchased $133 million of our stock utilizing a portion of our asset sale proceeds.
The share repurchase program as an efficient tool that has allowed us to harvest capital non dilutive way.
Finally, I again, thank our operating partners and in particular, the frontline caregivers and staff, who have cared for the tens of thousands of residents within our facilities.
I will now turn the call over to Bob.
Thanks, Taylor and good morning.
Turning to our financials for the first quarter.
Our NAREIT <unk> for Q1, 2022 was $171 million or 69 cents per share on a diluted basis as compared to $170 million or <unk> 71 for the first quarter of 2021.
Our adjusted <unk> was $184 million or <unk> 74 per share for the quarter.
It excludes several items as outlined in our adjusted <unk> reconciliation to net income down at our first quarter earnings release.
A supplemental and also on our website.
Revenue for the first quarter was approximately $249 million before adjusting for nonrecurring items compared to $274 million for the first quarter of 2021.
The year over year decrease is primarily the result of revenue recorded in Q1 2021 related to golf coast of GMO and Guardian, all cash based operators as well as revenue related to asset sales that occurred after our Q1 2021.
In our last earnings call I provided revenue adjusted <unk>, and Fad commentary or golf coast at Gmail Guardian, and an operator, who indicated it would not be paying its first quarter rental obligation.
I wanted to provide an updated revenue status in Q2 2022 outlook. When these operators Dan will provide contractual and operational updates on these tenants in his prepare talking points.
First regarding golf coast and.
In Q4, 2021, we recorded $7 $4 million of adjusted SSO and Fad based on our ability to offset any unpaid rent against the balance of the sub debt obligation owed by Omega.
At December 31st for sub debt balance was fully exhausted and therefore, we did not recognize revenue related to golf coast in Q1 2022.
On March 31st all but two of the Gulf Coast assets were sold for over $300 million in net proceeds.
Looking at Gmail, and Q4, we recorded $4 $6 million of adjusted <unk> and Fad is a GMO paid one month of rent and interest.
For Q1 2022 at Gmail did not make any contractual payments nor does it make any payments in April Q.
Q2, 2022, contractual rent and interest of approximately $15 million will only be recognized to the extent of GMO makes any payments as they are on a cash basis.
Turning to Gordian and.
In Q4, 2021 Guardian was placed on a cash basis, and we did not record any revenue as we did not receive any cash during the quarter.
In Q1, 2022 Guardian failed to make any rent for interest payments and as a result again no revenue was recognized.
In April we received $944000 from Guardian and based on the sign restructuring agreement, we're expecting to record approximately $5 $2 million in Q2. However, as Guardian is on a cash basis, we will only recognize a F F <unk> and fad to the extent payments are made.
As noted in the Q4 earnings release in January and operator, representing $8 $3 million of quarterly revenue or three 4% of Q1 contractual annualized rent and mortgage interest revenue did not pay its January contractual rent and ask for a short term forbearance this off.
Greater did not make any rental payments during the first quarter. However, it remains on a straight line basis for revenue recognition based on our conclusion that the contractual rent is fully collectible over the term of the lease.
During Q1, the operator did pay its full Q1 interest obligations of $360000.
A S. A thorough purposes, we included $8 $3 million of Q1 revenue related to the operator's lease and interest obligations. However, we recognize only the $360000 of cash received in our Fad calculation.
In Q2 2022. This operator paid April contractual obligation of $2 $8 million and we expect this operator to continue paying its full contractual obligations.
In Q2. This operator also borrowed an additional $1.8 million when it's $20 million credit facility with Omega.
Lastly, as noted in our April one 2022 press release, an additional operator, representing $5 $9 million or two 4% of our Q1 contractual annualized rent and mortgage interest revenue did not pay its marched contractual amount under its lease agreement and.
In April the lease with this operator was amended to allow the operator to apply its $2 million security deposit to its March 2022, contractual rental payment and allow for a short term rent deferral for the month of April with regular rental payments required to resume in may.
For Q1, 2022, we recorded $5 $9 million for both adjusted <unk> and Fad purposes.
If the operator does not make its may or June rental payments and remains on a straight line basis for revenue recognition. We would include $5 $9 million of revenue for Q2 for <unk> purposes. However, we will only recognize fad based on cash receipt.
The $249 million of revenue for the quarter includes $3 $2 million related to the write off of straight line receivables associated with fixed facilities transition to a new operator and also included $1 $2 million of one time revenue both of which are excluded from a F F O and bad cat.
<unk>.
Moving to our balance sheet.
It remains strong thanks to the steps we've taken during 2021 and the first quarter of 2022 to further improve our liquidity capital stack maturity ladder and overall cost of debt.
In Q1, we repurchased 981000 shares although mega common stock for $27 million.
At March 31, we had $355 million of outstanding borrowings on our revolving credit facility and we also had $491 million in cash primarily due to the March 31st sale of the Gulf Coast portfolio and.
In April a portion of the balance sheet cash was used to repay $255 million of credit facility borrowings and repurchased three 9 million common shares of our stock for $106 million.
At the end of April we had approximately $170 million of cash on hand at March 31 over 92% of our $5 $7 billion in debt was fixed after the April credit facility repayment, 97% of our $5 $4 billion of debt is fixed at March 30 <unk>.
First our net funded debt to adjusted annualized EBITDA was five three times the same as Q4 2021, and our fixed charge coverage ratio was four one times, it's important to note.
At NAREIT SSO, adjusted <unk> and Fad.
EBITDA in these liquidity calculations includes our ability to apply collateral and recognize revenue related to operator nonpayment as previously discussed however, if the collateral is exhausted a decrease in EBITDA will impact our liquidity ratios.
The actions taken to date provide us with significant liquidity and flexibility to weather. The continued impact on our business, primarily driven by COVID-19.
I would now turn the call over to Dan.
Thanks, Bob and good morning, everyone.
As of March 31, 2022, Omega had an operating asset portfolio of 938 facilities with approximately 94000 operating beds.
These facilities were spread across 64 third party operators and located within 42 states and the United Kingdom.
Trailing 12 month, operator, EBITDAR and EBITDAR coverage for our core portfolio as of December 31, 2021.
Decreased to 148, and 1.14 times, respectively versus 1.52, and 1.18 times respectively.
For the trailing 12 month period ended September 32021 during.
During the fourth quarter 2021, our operators Chimera recorded approximately $47 million and federal stimulus funds as compared to approximately $26 million recorded during the third quarter.
Trailing 12 month, operator, EBITDAR and EBITDAR coverage would've increased during the fourth quarter of 2021 to 1.26, and 0.93 times, respectively as compared to one point to one end 0.88 times, respectively for the third quarter when excluding the benefit of any federal stimulus funds.
EBITDAR coverage for the stand alone quarter ended December 31, 2021 for our core portfolio was 1.19 times, including federal stimulus and <unk> 98 times, excluding the $47 million of federal stimulus funds.
This compares favorably to the stand alone third quarter of 1.04 times, and <unk> 92 times with and without $26 million in federal stimulus funds respectively.
Occupancy for our overall core portfolio continued to slowly trend up throughout 2021, reaching a high of 75, 8% in December up from a low in January of 2021 of 72, 3%.
In January of 2022, the portfolio saw a dip in occupancy to 74.9% due to the omicron search but has since trended up based upon preliminary results increasing to 75, 3% in February <unk>.
96, 5% in March and 77, 9% as of mid April .
Turning to our senior housing portfolio today, our overall senior housing investment comprises 182 assisted living independent living and memory care assets in the U S and the UK.
This portfolio on a pure play basis at its trailing 12 month EBITDAR lease coverage decreased to <unk> 94 times at the end of the fourth quarter as compared to the end of the third quarter, which covered at point 97 times.
Based upon preliminary results occupancy for this portfolio has trended up steadily during the first quarter of 2022, increasing from 82, 3% in January to 82.7% in February .
And 83, 1% in March.
Turning to portfolio matters Gulf.
Gulf Coast on March 31, 2022, Omega completed a fee simple sale and transition of 'twenty to Gulf coast facilities for net proceeds in excess of $300 million and simultaneously released one facility to an existing Omega operator, the one remaining Gulf Coast facility, which is currently closed as expected.
It to eventually be sold along with its existing licensed beds.
The sale and release of these 23 facilities. Excluding the closed facility effectively concludes our restructuring efforts with Gulf Coast, our ultimate rent equivalents based upon net proceeds of $300 million.
On a nine 5% cap rate effectively equal Gulf coast pre restructured 2021 contractual rents taking into account the offset which the company is entitled to under the terms of its subordinated notes.
Guardian on April eight 2022, Omega entered into a restructuring agreement with Guardian and health care.
Agreement, which was made retroactively effective January one 2022 provided for amongst other provisions that one guardian would be allowed to defer certain rents provided those rents would be repaid overtime based upon certain cash flow thresholds to guardian would consent and actively cooperate and the transition of 20 existing.
Cities, either through sales to third parties or re leases and three rent wouldn't resume post deferrals beginning in April of 2022 two.
To date Omega has sold or released 13 facilities. The remaining seven facilities are expected to be transitioned to the second quarter of 2022, Although there is no assurance that these transactions are all either close or close on a timely basis.
At Gmail.
We continue to be an ongoing discussions with the GMO on a restructuring agreement, which is expected to involve the sale of a material portion of the gene was existing Omega portfolio.
We will continue to provide updates as discussions progress.
Other operators.
As of today, we have two other operators that failed to make payments in the first quarter as it relates to the first operator on March 14th 2022, Omega entered into a letter agreement, which provided for the deferral of January February and March rent that referral is due in a lump sum on December 31, 2022, this operator pay.
April rent in full.
As it relates to the second operator on April 29, 2022, Omega entered into a fourth amendment to an existing master lease whereby we agreed to use an existing security deposit to pay more Trent and defer April rent.
Rent is expected to resume in full in May.
At this time no further action is underway with either of these two operators.
Turning to new investments.
As previously announced on January one 2022.
Completed an $8 million purchase lease transaction for one skilled nursing facility in Maryland.
Also as previously announced on January 31, 2022.
<unk> completed an $8 million purchase lease transaction for one care homes in the U K.
For both transactions the newly purchased facilities were added to an existing operator's master lease with initial yields of $9 five and 8% respectively.
On March 16, 2022, Omega completed a $5 million purchase lease transaction for one care home in the U K and on March 23rd 2022, Omega closed on a $100 million purchase leaseback transaction for 27 care homes in the U K.
Concurrent with these acquisitions Omega entered into a master leases for the care homes with two new U K operators.
Both new Master leases bear an initial cash yield of 8% with two 5% annual escalators.
Omega is new investments for the quarter totaled $142 million inclusive of $20 million in capital expenditures.
Turning to dispositions.
The first quarter of 2022, Omega divested 27 facilities for total proceeds of $333 million.
I'll now turn the call over to Megan.
Thanks, Dan and good morning, everyone.
As expected the Covid case count since the height of Omicron in January have fallen exponentially.
While that fact, coupled with the search itself not resulting in a high hospitalization and death rates experienced pre vaccine is welcome news, given where we were a year and a half ago. It should not detract from the fact that the industry continues to face challenges.
I think shortages continued to persist with a heavier reliance on agency aka estimates of loss of 241000 nursing home employees or 15, 2% of the workforce since February 2020, including an additional 2500 jobs in March 2022.
And because of those shortages nursing and agency expense continues to be elevated.
The expense on a per patient day basis for our core portfolio for fourth quarter 2021 with more than six times, what it was in 2019.
This in turn continues to have an impact on occupancy with self imposed admission bans due to staffing shortages delaying it even better occupancy recovery.
The good news is that as mentioned earlier, we are starting to see traction on the occupancy recovery front. Despite these staffing challenges.
And as of February 2020 to approximately 25% of core facilities have now recovered from an occupancy perspective.
Unfortunately on the federal stimulus front no new releases from the provider relief fund had been announced and there still remains approximately $3 $5 billion of phase four payments yet to be released as H H S continues to review applications submitted last year.
While additional federal stimulus would be welcome given continued elevated expenses and occupancy that hasn't fully recovered.
Now more than ever it is critical that the states step up to ensure that rates keep pace with the persistent increased expenses, including posed to public health emergency linear increase in ethanol will no longer be in effect.
Finally, while the number of cases and deaths and nursing home during the pandemic, that's put somewhat of a regulatory target on the back of the industry of late it.
It is important to note that individual's in nursing homes, wherein the demographic and clinical state most vulnerable to the virus and therefore, it should not have an unexpected that they would experience the largest impact.
The prioritization of the vaccination efforts to this population was a clear recognition of that fact.
Hope that while the administration contemplates modifications to regulatory oversight that recognizes the nuances of the industry with extreme staffing challenges increased expense pressures and the tremendous after it the industry has made for over two years and adapting to care of the elderly during an unprecedented pandemic.
I will now open the call up for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you were using a speakerphone please pick up the handset before pressing the keys to withdraw your question. Please press Star then two please limit your questions to one with a single follow up.
Our first question comes from Jonathan Hughes with Raymond James. Please go ahead.
Hey, good morning.
Thank you for all the details on the moving parts of revenues back in the first quarter and into the second quarter I guess just to simplify it for US listening could you maybe give us that net change from <unk> to <unk> from revenues that are not expected to be collected in revenue that is expected to.
Come back.
Yes, Jonathan so and I'll look at it from that perspective, so the Fad was $161 9 million in Q1, I would expect based on what.
My talking points to the Gulf out 11 to 11 5 million increase.
Okay. So.
So I guess I mean barring any more.
Operator issues and realizing it's still a very challenging environment for skilled nursing. So that's still a very real possibility.
And obviously, if a gmail and Guardian and others do pay some rent in the second quarter that are currently on a cash basis that I assume are not in that.
Or are you just gave us I mean have we effectively found the bottom in terms of cash flow paid to you by your operators.
Just a couple of comments Jonathan.
Bob does have guardian as part of that Q2, Fad number but to your point, a GMO, which essentially state not no no rent.
If they were to pay that would be upside.
I think in terms of calling the bottom.
It's fair to call the bottom as it relates to the operators were talking about.
I still need to be.
We are the <unk>.
Next couple of quarters.
I would point out.
Got it.
Prepared comments talked about.
South America is still weak.
You asked about the revenue side of the equation for our operators.
When the health the health emergency is an extended beyond July .
That will create some additional pressure so.
We feel good about the resiliency of <unk>.
Portfolio workouts.
Team has been able to.
Walk through.
Right.
I'm still.
I would still.
Stress that we're not through this.
But in terms of these operators I think we're pretty good shape.
Okay. Thank you for clarifying that I appreciate it.
Just sneak in one more.
Just on the buybacks.
We used consensus NAV Thats basically you purchased those shares at a mid 8% implied cap rate and honestly there is no underwriting uncertainty there but.
Can we expect maybe more buybacks with the expected sales proceeds for the 26 properties under under held for sale or would you prefer to deploy those into new assets like U K care homes. Thank you yeah yeah.
Sure Jonathan step one for us as a supplier.
Oh for our capital.
New assets.
Our existing off.
But to the extent that there is not enough.
Volume there in the pipeline that we will certainly continue to look at that.
Stock repurchases as well.
Okay.
Great. Thanks for the time.
The next question is from Sam Choe with Credit Suisse. Please go ahead.
Hi, guys I'm on for Tayo and think thank you for taking my question.
Just wanted to go back to the Guardian portfolio restructuring regarding the eight released.
<unk> just curious as to what the expected rents are and are the timing of when those will start.
So when you say eight.
We had a total of 20 facilities that we had teed up to either sell or re lease.
And to date, we have.
Transitioning 13 of those so we are actually seven left.
And when we're all finished which we hope will be in the second quarter.
2022, but I want to caveat that.
The structure is not complete yet but based upon.
What we have to date and what we have in process.
It looks like our total ramp rent equivalents for those 20 facilities in total will equal about $8 million.
Got it and what will that start like maybe <unk> and into <unk>.
<unk> is that the expectation.
So yes.
The ones that we've already transitioned.
Well, depending on the timing of those transitions will start paying rent.
Immediately as will the seven remaining.
Got it okay, just shifting gears to 'twenty six if facilities are classified as held for sale I know some of that's Guardian could you kind of talk about the remainder of that held for sale facilities and it.
Maybe the cap rates that you're expecting on those.
Yeah, So you're right.
But that is the seven Guardian.
I talked about and disclosed in the press release.
There's one operator that we're looking to after the.
Paul Yeah, we've been.
Held for sale for a number of quarters that represents about 13 additional asset and then we have foreclosed assets and as you know every quarter, we go through our portfolio.
And look to sell those assets if we have those.
And a total on our books.
$90 million to $93 million of net book value, we're hoping to get an excess.
Around $120 million of proceeds and we booked in the first quarter of $2 million.
Revenue related to those assets.
Got it great color. Thank you so much.
The next question is from Nick Joseph with Citi. Please go ahead.
Hey, This is Michael Griffin on for Nick I'm curious just to touch base on the tenant side beyond the currently non paying.
Tenants can you quantify maybe a percentage that might be on like a future of watchlist.
Yeah.
I can't quantify a percentage there are some smaller operators that are struggling that we've had discussions with.
Theres no operators of any real scale.
That were having issues with from my perspective.
It's hard to predict out into the future as we've said there are still challenges out there.
And a number of things on the horizon, including.
I'll come back and occupancy in the labor costs, all the things that we've discussed.
We're still.
Still remain challenges for our sector.
You know, we'll have to sort of navigate the next few quarters going forward, but.
What percentage that is that that would be throwing darts yep, no totally understand and just shifting to the regulatory side I'm curious to get your thoughts on the recent CMS proposal for the rate cuts kind of how you expect this to impact your tenant base.
And if you expect any changes during this 60 day comment period.
Oh, well, it's just it's a little disappointing there wasn't.
More discussion from CMS about phasing in.
The PDP.
Jocelyn.
Which was.
Yes.
16 pages of last year's proposed Reg about ways to phase it in but that would be helpful. Given that the environment. This year isn't.
Any better than it was last year.
So.
We're hopeful that over the next 60 days.
Perhaps there is a shift and the adjustment is it just all of it.
Once in service.
We have a negative rate.
That being said we know it's eventually coming so.
Our operators pursue what they've always done.
Card around that but it is just that much just another piece of pressure that we'll be doing it.
Got you that's really helpful. Thanks, I appreciate the time.
The next question is from Conor Seversky with Burberry. Please go ahead.
Good morning out there thanks for having me on the call and appreciate the detail.
Remarks, I'm, just thinking back to the context of deploying capital whether that's in buybacks or.
Deploying in real assets I mean, what is the opportunity.
<unk> set look like in the U S and the U K I mean are you seeing the action of the seller's market cool off at all and do you expect do you see more opportunities for <unk> through the end of the year.
So.
It still is a seller's market in the U S. We're seeing more opportunities in the UK, obviously based upon our acquisitions to date.
And Thats couple of it's not just opportunistic in the U K. It's also coupled with the fact that occupancy in the U K was not hit near as hard as our counterparts in the U S under Covid.
And therefore, the recovery has been swifter and therefore the stability.
And a lot more stability.
Across the pond, and we arent year. So once again, it's opportunistic but I do expect we'll continue to look at transactions in the U K as well as in the U S. But most of the deals that we're doing in the U S. Right now are not big portfolios Theyre more source for our existing operators on our more regional or smaller in nature.
Okay. Thanks for that and then quickly on Guardian apologies if I missed this before but in these re leasing activities or are you looking to place new operators in these facilities or are they already on the tenant roster for the most part.
No. We've got a couple of new operators that have gone into the east it's always.
Most of them are involves sales to be honest with you, but we do have a couple of new operators that are going into these buildings.
Okay I appreciate the color. Thank you.
Yeah.
The next question is from Rich Anderson with S. M. B C. Please go ahead.
Good morning.
On the call you said 12, 3% of rents.
Interest not paid in the first quarter.
All of that would be reflected in your fad number how much of that.
Actually shows up in SFO meeting those that are still on a GAAP accounting basis.
So.
You have the one operator to three 4% of that absolutely shows up at the operator, I've said, we kept on a cash basis, but did not record fad.
The total percent.
I don't have the total in front of me that I can call you back on that.
It's around.
I'm just trying to.
Connect the dots and the cadence between <unk> and Fad and how to.
You know sort of move that forward you know based on all the moving parts.
The best way I think.
Offline call you and walk through the model, but the best thing I think I'd take that Fad number of that $1 62, and then add back the numbers. We said today or you know is around 11 11 $5 million of additional bad because we have a couple of operators.
Well at least that one operator, and that's on a cash or a straight line basis right.
Right right. Okay got it yeah. That's fine second question is.
You mentioned I think you said this you know youre talking about traction appearing to materialize on the occupancy front and then I think you said something more than 20% of your facilities have kind of had the full occupancy recovery did I first of all did I hear that right.
Yes about 25% of the facilities have recovered from an occupancy perspective, okay. So.
Is there any is that a geographical observation is it a operator observation is there some common knitting to that 25% that informs the.
The rest of the portfolio.
No there really isn't that we've dug into it quite a bit there is a little bit of a geographic concentration in Florida and Texas those are.
<unk> that we're heavily concentrated in any way.
So we continue to China.
You know any sort of.
Sort of way to look at it to.
Garner something as to what's going on but we haven't been able to find anything.
Okay.
Sweet Thanks.
The next question is from John Pawlowski with Green Street Advisors. Please go ahead.
Yes.
Thanks for the time, making can you just give us a sense how pervasive.
A number of facilities that are restricting emissions is today versus call. It the end of last year.
Yeah I mean.
If it's significant enough to be causing an issue with with occupancy clearly I think you know just anecdotally with operators. Some operators are feeling like things are maybe not getting worse, but it Lee.
But it's hard to sort of figure out day to day, how many believes an admission ban because it really is so fluid that's stopping calling calling out and then not being able to admit they can change on a daily basis.
Okay. So the restrictions really having gotten much better in the last three months or so.
I wouldn't say so no.
Okay.
Our last question from me following back to the the Medicare cuts.
Have you had have you seen it have an observable impact on the bidding tents for assets you have for sale right now.
We have not.
Okay.
Alright, thank you.
The next question is from Nick <unk> with Scotiabank. Please go ahead.
Oh, Thanks, just going back to you know all the details you provided Bob's, California operators.
Yes. My question is if you you know can you remind us what is the trigger to put these operators on a cash basis versus you know keep them booking keep booking GAAP revenue because you know I think for those two other operators right the three 4% and the 2.4% those exposures.
Right they didn't fully pay in the quarter.
Yet you're you're booking revenue, you're assuming some revenue GAAP revenue in the second quarter. So I'm just trying to understand you know, what's the what's sort of the delta there about what would put those on cash basis versus keeping them in the U F O b.
Have you looked at the long term collectability of the total rental obligation over the life of the lease.
You feel you're going to collect it and you keep them on a straight line basis.
And there's all the other facts and circumstances that come into play, but that's the big picture.
Okay, and then I guess, you know fault there would be at this point why not provide some provide some quarterly guidance. I mean, you got you booked revenue for these operators you have some visibility as to what you're thinking you're going to get in the second quarter, you know why not provide.
Quarterly guidance and even if you could also maybe just give us a feel for as we think about like this quarter from a you know from a normalized F O number.
You know like whether that's first quarter run rate is a good one to start easing off for the second quarter I mean any perspective, there would be helpful. Because I think you know from a modeling standpoint, it gets pretty tricky about whether these companies are on cash whether they're on GAAP revenue and it also it looks like some of the.
Election of that treatment for the operators in the first quarter created will look like a you know a beat.
And so that's where I think it would be helpful to understand you know what going into the second quarter, Okay, well what are we dealing with now.
Yeah from our perspective, Nick it's just.
I think we've been pretty clear about the uncertainty around.
Cash collections.
Yeah.
We're hopeful that a couple of operators.
That have resumed paying.
We will continue but.
It's just impossible to know.
Yes.
So I think but to your point.
I get it that you have tried to connect.
<unk> and fad dots can be.
Complicated.
And the best we can do is just give you as much data as possible I would just encourage you to continue to talk to Bob about.
Specifically how were recorded.
Right. Okay, alright, thanks, guys, Yeah, I guess from the cash collection I get it but you know from a GAAP revenue standpoint, I mean, just understanding you know you booked it in the first quarter, Okay, well, we're going to definitely have this in the second quarter, which sounds like that I mean that is the case right that you are assuming that for the three point.
4% operator of the 2.4% operator, right the Guardian, you're assuming as well just to be clear full revenue GAAP revenue.
In the second quarter is that correct for those three.
That's correct, but I remember guardians cash basis. So you don't have any straight line component there but.
But yes that is correct going into Q2.
Okay. Thank you helpful.
Yes.
The next question is from Steven Valiquette with Barclays. Please go ahead.
Great. Thanks, good morning, everybody.
So obviously theres a lot of moving parts right now within the portfolio of disclose and not disclose the operators I.
I guess as we look at that table with a list of operators with EBIT.
EBITDAR rent coverage ratio that's sub one on page six of the supplement.
Can you just give us any sense for how many of those 21 operators on that list are currently paying around versus how many are not paying rent.
We can Bob looking at it right okay.
Three of the math question and then all of the call there.
[laughter].
Let me say if I can ask a follow up that I wanted to ask just a just given where the total portfolio.
Coverage ratios shut out at 12 31 that you just put in the supplement as we think I had one additional quarter or is there any preliminary directional view today on whether those coverage ratios will improve or deteriorate further for the core portfolio. When you report the <unk> 'twenty two coverage ratio next quarter that'd be the follow up thanks.
I think to the extent that.
Occupancy is such a major driver of.
Cash flow and coverage.
We saw occupancies improve.
Additional inclination was the savage.
Just to improve but.
That was a grain of salt I mean until we have the numbers.
Well and you also had you know the primary and kicking in January Greg.
No.
A little bit too soon to tell.
Occupancy.
Absolutely.
Latter part of the quarter.
Great.
Okay. That's helpful.
And getting back.
Getting back to your question is that the bottom of page six there you can see everyone's current on their except the ones that footnote five and that represents 14, 2%.
But if you read the note there.
Pursuant to the forbearance reshuffling.
Yeah.
The two new ones that were added to that list are they paying well I guess I can see where from there.
Yeah. The details are there everyone I'm good.
Thanks for the color I appreciate it.
The next question is from George He didn't cough with Mizuho. Please go ahead.
Hey, Good morning, George has been going on for Vikram Malhotra I'm just curious how do you think about phe going away and what impacts do you expect.
So with the public health emergency goes away.
You, obviously lose the benefit of asthma.
So the states will be stepping up as much as I would have heard some states trying to take some of that.
Some of that some of what they were giving an aftermath and trying to put it into their permanent rates at least pieces of it.
You're also going to have the ability to scale in place that three day stay waiver.
Which is really helps so stirring during outbreaks.
Right now.
Health emergency runs through July .
We hope that that ends up getting pushed out through the year end, but there's no way to tell me what's going to happen.
Okay, great. Thank you and just a follow up on top of where our new deals being struck in terms of EBITDAR coverage.
Okay.
It hasn't changed I mean, obviously the.
The lion's share of our deals have been in the U K and there's still one three to one four coverage out the gate.
Okay, great. Thank you that's what that is for me.
The next question is from Joshua <unk> with Bank of America. Please go ahead.
Yeah, good morning, everyone.
I'm, assuming most of your share repurchases were done before the CMS came out with your with their reimbursement proposal for the next fiscal year is that proposal change your appetite at all for further buybacks near term.
No the proposal it really wouldn't be a linchpin FERC buyback decision is really.
Where we harvested harvested capital we can think about where we are.
Where we deploy capital on a leverage neutral basis.
And obviously, we did a bunch of U K and we bought back stock.
Take cash.
Leverage neutral.
So effective way to just manage our balance sheet.
Okay, and then I saw that it looks like you issued some shares via the dividend reinvestment program.
It just seems weird to be buying back shares and then also we're showing them that way just kind of curious what the rationale was there.
Yes, we have a plan in place and so that was early in the first quarter with the drip.
Turning it on it.
These are for really the mom and pop investors out there reinvesting it in our shares we didnt feel it right turn at all at this time.
Okay. Okay.
That's it for me thanks, guys.
Yes.
Again, if you have a question. Please press Star then one.
The next question is from Michael Lewis with Truest. Please go ahead.
Okay. Great. Thank you my questions are kind of bolt ons took questions that were asked earlier.
About the coverages on at the bottom of page six.
Just to be 100% clear that footnote five does that mean that those tenants are currently not paying under an agreement to temporarily not pay or does that mean, they were restructured in a way that perhaps makes those coverages.
It makes those coverage is better or different than they than they show here.
I think you've got a combination of both in there.
You've got.
Some tenants that are under forbearance agreements and some that are restructured.
Okay.
And then.
Along these same lines you know somebody asked earlier about.
Your optimism I suppose on some of these low coverage ratios when we look at that with you know almost a third of the portfolio below one time.
Again kind of Directionally I mean do you know.
Do you see a path for a lot of these guys to kind of get back to where the rents are or do you think this is a portfolio that that really just just about everybody here needs to be restructured or maybe there's some percentage of them between I imagine.
Oh, it's predominantly driven by occupancy recovery.
And so.
If you assume occupancies will recover to pre pandemic levels at 84%.
No vast majority of those operators climb back out of that.
Debt under one coverage scenario and we should be in decent shape.
But that's why there's so much focus on.
The velocity of occupancy recovery and ultimately.
Who knows what that will be we feel highly confident demographic small eventually drive us there, but is it eight months or 24 months.
No the answer to that yet.
Okay, and then if I if I could break the rules and ask a third one I imagine that might be left in the queue anyway.
As you know I don't know if you can answer this but do you think you know when I looked at this whole page and I look at the coverages and what's happening with occupancy I mean do you think this is indicative of of the industry overall or do you think your portfolio is either either outperforming or maybe this experience.
Cause us to reexamine the portfolio in a specific way so like somebody asked about geography before kind of other things so.
Anything you could comment on them.
And that line of thinking.
Yeah I mean.
It's hard to compare to.
The world as a whole, but I would say our portfolio is.
Doing as well if not better than the other portfolios that we see and the other operators outside of our world.
Okay, and you don't see any like area, where you would focus to to improve any theme that kind of runs through this that ran into more trouble than others nothing like that.
Well.
There was a geographic challenges certainly in Texas and Florida.
So, but I think Florida, hopefully as fixed a good bit of that and where you hope to see some better results going.
And on board.
Okay, great. Thank you guys.
Yes.
This concludes our question and answer session I would like to turn the conference back over to Taylor Pickett for any closing remarks.
Thanks, everyone for joining us this morning.
As we went through a lot of details please feel free to.
All the team for modeling and other purposes.
Good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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