Q1 2022 Deciphera Pharmaceuticals Inc Earnings Call
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Good day and welcome to the.
Operator: Good day and welcome to the Diversified Healthcare Trust First Quarter 2022 Earnings Conference Call. During today's call, all participants will be in a listen-only mode.
Diversified health care Trust first.
First quarter 2022 earnings conference call.
During today's call all participants will be in a listen only mode should you need any assistance during todays call. Please signal for a conference specialist by pressing the star key followed by zero.
Operator: Should you need any assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.
Today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad. If you would like to withdraw your question. Please press Star then two please note that today's event is being recorded I would now like to turn the conference over to Michael Kurdish.
Operator: If you would like to withdraw your question, please press star then two. Please note that today's event is being recorded. I would now like to turn the conference over to Michael Kodish, Director of Investor Relations. Good morning and welcome to the Diversified Healthcare Trust Call covering the first quarter 2022 results. Joining me on today's call are Jennifer Francis, President and Chief Executive Officer, and Rick Seidel, Chief Financial Officer and Treasurer. This call will include a presentation by management, followed by a question and answer session. I would like to note that the transcription, recording, and retransmission of today's conference call are strictly prohibited without the prior written consent of Diversified Healthcare Trust or DHC.
Director Investor Relations. Please go ahead Sir.
Good morning, and welcome to diversified Health care Trust call covering the first quarter of 2020 to resolve.
Joining me on today's call are Jennifer Francis President and Chief Executive Officer, and we're excited out Chief Financial Officer and Treasurer. Today's call includes a presentation by management, followed by a question and answer session.
I would like to note that the transcription recording and retransmission of today's conference call are strictly prohibited without the prior written consent of diversified health care Trust or D. H D.
Michael Kodish: Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These four forward-looking statements are based upon DHC's present beliefs and expectations as of today, Wednesday, May 4th, 2022. The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call, other than through filings with the Securities and Exchange Commission, or SEC.
Today's conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and other securities laws.
These forward looking statements are based upon the HCS present beliefs and expectations as of today Wednesday may 4th 2022.
Company undertakes no obligation to revise or publicly release the results of any revision to the forward looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC.
Michael Kodish: In addition, this call may contain non-GAAP numbers, including Normalized Funds from Operations or Normalized FFO, EBITDA, Net Operating Income or NOI, and Cash Basis Net Operating Income or Cash Basis NOI. Reconciliations of net income or loss attributable to common shareholders through these non-GAAP figures and the components to calculate AFFO, CAD, or FAD are available in our supplemental operating and financial data package found on our website However, actual results may differ materially from those projected in any forward-looking statement.
In addition, this call may contain non-GAAP numbers, including normalized funds from operations or normalized <unk> EBITDA net operating income or NOI and cash basis, net operating income or cash basis NOI.
Reconciliations of net income or loss attributable to common shareholders to these non-GAAP figures and the components to calculate <unk> CAD or fad are available in our supplemental operating and financial data package found on our website at www Dot the agency REIT dotcom.
Actual results may differ materially from those projected in any forward looking statements.
Information concerning factors that could cause those differences is contained in our filings with the SEC.
Michael Kodish: Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.
Youre cautioned not to place undue reliance upon any forward looking statements now I'd like to turn the call over to Jennifer. Thank you Michael and good morning. Thank you for joining us on today's call.
Jennifer Francis: Thank you, Michael, and good morning. Thank you for joining us on today's call. Following the joint venture transaction completed in January, our portfolio today continues to consist of diversified, high-quality, and well-located healthcare assets. At the end of the first quarter, the size of our consolidated office portfolio was approximately 8.7 million square feet, and our entire senior living portfolio is comprised of 264 communities with over 27,000 units. Given the impact that the COVID-19 pandemic had on our senior living communities over the past two years, our NOI remains disproportionately skewed toward the office portfolio.
Following the joint venture transaction completed in January our portfolio today continues to consist of diversified high quality and well located health care asset at the end of the first quarter. The size of our consolidated office portfolio is approximately $8 7 million square feet and our entire senior living portfolio was comprised of 200.
64 communities with over 27000 units.
Given the impact that the COVID-19 pandemic had on our senior living communities over the past two years.
NOI remains disproportionately skewed toward the office portfolio.
Jennifer Francis: Over the next several quarters, we expect senior living segment NOI to increase as we deploy capital to rejuvenate and stabilize our shop segment, see renewed operator focus on occupancy rates and community level EBITDA growth, and as we continue to deliver exceptional leasing results in our office portfolio segment, as we've done since the onset of the pandemic. Meanwhile, we're eager to reduce debt and accelerate earnings growth. Within our office portfolio segment, leasing velocity in the first quarter remained approximately in line with the three-year quarterly average, highlighting the continued demand for high-quality medical office and life science space. During the first quarter, we executed 27 new and renewal leases totaling over 200,000 square feet with an average roll-up in rents of 8.2% and a weighted average lease term of 7.4 years.
Over the next several quarters, we expect senior living segment NOI to increase as we deploy capital to rejuvenate and stabilize our shop segment see renewed operator focus on occupancy rate and community level EBITDA growth and as we continue to deliver exceptional leasing results in our office portfolio segment as we've done since the onset of the.
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Meanwhile, we're eager to reduce debt and accelerate earnings growth.
Within our office portfolio segment leasing velocity in the first quarter remained approximately in line with the three year quarterly average highlighting the continued demand for high quality medical office and life Science space.
During the first quarter, we executed 27, new and renewal leases totaling over 200000 square feet with average roll up in rents of eight 2% and a weighted average lease term of 7.4 years.
Jennifer Francis: As a result of this activity, same property occupancy during the first quarter increased 10 basis points from the previous quarter in this portfolio. Looking ahead, approximately 760,000 square feet, or 8.7% of our annualized rental income in this segment, comes from leases that are expiring during the remainder of 2022. Our leasing pipeline is generally in line with the fourth quarter of 2021 at almost 900,000 square feet. On a square footage basis, approximately 40% of the pipeline is for new tenants that could absorb close to 400,000 square feet of vacant space.
As a result of this activity same property occupancy during the first quarter increased 10 basis points from the previous quarter and this portfolio.
Looking ahead, approximately 760000 square feet or eight 7% of our annualized rental income in this segment comes from leases that are expiring during the remainder of 2022.
Our leasing pipeline is generally in line with the fourth quarter of 2021, and almost 900000 square feet.
On a square footage basis, approximately 40% of the pipeline is for new tenants that could absorb close to 400000 square feet of vacant space.
Jennifer Francis: The RMR Group has an expert team of leasing professionals that do a great job getting ahead of renewals and leasing vacancy as we get space back. As a result, we feel confident about keeping this portfolio well occupied, as we've done historically. We're pleased with the success of our recent redevelopment deliveries and are excited to announce additional redevelopment opportunities in this portfolio. On previous calls, we discussed the redevelopment of a medical office asset located in a strong suburb of Atlanta. The property sits on a prime corner in the historic district of downtown Decatur and is walkable to numerous food, service, and retail options, as well as MARTA, Atlantic City's public transportation system.
The RMR group has an expert team of leasing professionals that do a great job getting ahead of renewals and leasing vacancy as we get space back as a result.
We felt confident about keeping this portfolio well occupied as we've done historically.
We're pleased with the success at our recent redevelopment deliveries and are excited to announce additional redevelopment opportunities in this portfolio.
On previous calls we discussed the redevelopment of the medical office asset located in a strong strong suburb of Atlanta.
The property sits on a prime corner and the historic district of downtown Decatur, and it's walkable to numerous foodservice and retail option as well as the Marta Atlantic public transportation system.
Jennifer Francis: With the addition of several on-site amenities, we believe this redevelopment elevates its leasing prospects and will help limit any downtime. We recently began construction and expect to deliver the asset later this year. In Irving, Texas, we have a 94,000-square-foot medical office building that we're repositioning from a single-tenanted building to a multi-tenanted building. It's located within the Las Colinas area of Dallas, a historically desirable sub-market for medical office space.
With the addition of several onsite amenities. We believe this redevelopment elevates its leasing prospects and will help limit any downtime. We recently began construction and expect to deliver the asset later this year.
In Irving, Texas, we have a 94000 square foot medical office building that we're repositioning from a single to multi tenant building.
It's located within the La Scalenus area of Dallas, historically desirable sub market for medical office space.
Jennifer Francis: Upon its delivery, the property will host various collaborative features, refreshed common areas, and move-in ready suites. We're also in the early stages of a redevelopment opportunity in Washington, D.C., which will convert a medical office building into a mixed-use property. We expect design entitlement and permitting to take place in 2022, while construction is likely to begin next year. Finally, on the last call, we discussed the likelihood of a tenant in suburban Boston downsizing from two buildings to one, and plans are underway toward a potential redevelopment of the building that's being vacated into LEED-certified GMP lab-ready space. Design and permitting are expected to take place this year, with delivery anticipated early next year.
Upon its delivery the property will have various collaborative features refreshed common areas and move in ready suites.
We're also in the early stages of redevelopment opportunity in Washington, D C, which will convert a medical office building into a mixed use property.
We expect design entitlement and permitting to take place in 2022, well construction is likely to begin next year.
Finally on the last call we discussed the likelihood of a tenant in suburban Boston downsizing from two buildings to one and plans are underway to whatever the potential redevelopment of the building that's being vacated until LEED certified GMP lab ready space.
Design and permitting is expected to take place this year with delivery anticipated early next year.
We have an active leasing pipeline for these development and look forward to providing updates on our activity in future quarters.
Jennifer Francis: We have an active leasing pipeline for these developments and look forward to providing updates on our activity in future quarters. Moving to our shop segment, early this week, Alaris Leif, the manager of 120 Communities in our Shop segment, announced a change to its senior management and appointed Jeff Lear as interim president and chief executive officer.
Moving to our shop segment.
Earlier this week, along with life. The manager of 120 communities in our shop segment announced a change to its senior management and appointed Jetblue as interim President and Chief Executive Officer.
Jennifer Francis: With this change, Alaris Life also retained the healthcare consulting group within Alvarez and Marsal to conduct an operational review of the company, and they are expected to make recommendations to the Alaris Life board by the end of the second quarter. We believe that their review and findings and the resulting plan will accelerate the improvement of the performance of the communities that Five Star manages on our behalf. In the first half of last year, the senior living industry experienced tremendous occupancy declines, and while occupancy has modestly improved since then, the pace of the recovery has been more measured than anticipated.
With this change Soliris also retained Atlantis life also retained the health care consulting group within Alberta send marsal to conduct an operational review of the company and they are expected to make recommendations to the Atlantis life Board by the end of the second quarter.
We believe that their review in finding and the resulting plan will accelerate the improvement of the performance at the communities that touch our managers on our behalf.
In the first half of last year, the senior living industry experienced tremendous occupancy declines and while occupancy has modestly improved since then.
Pace of recovery has been more measured than anticipated.
Jennifer Francis: That being said, and though it has been only a few months since the 107 community transitions were completed, our new operators have had more time to assess their respective communities and are now executing their business plans. We're pleased to begin seeing some of the plans materialize in our operating results this quarter. Occupancy in this portfolio increased by approximately 100 basis points from the prior quarter, with 8 of the 10 new operators reporting an increase.
That being said, though it has been only a few months since the 107 community transitions were completed our new operators have had more time to assess their respective communities and are now executing their business plan where.
We're pleased to begin seeing some of the plans materialize in our operating results. This quarter occupancy in this portfolio increased approximately 100 basis points from the prior quarter with eight of the 10, new operators reporting an increase Additionally, seven of the 10, new operators raised rates this quarter, resulting in non same property revenue growth.
Jennifer Francis: Additionally, 7 of the 10 new operators raised rates this quarter, resulting in non-same property revenue growth of $4.5 million, or 5.8% compared to the fourth quarter. Following the completion of these transitions, we believe we have the right operator mix and are starting to see the benefits from both our capital spend and from the investment our operators are making in their communities and in their corporate and marketing teams. In our same property shop segment, which is comprised of the 120 communities managed by Five Star, occupancy was flat for the fourth quarter, but same property revenues increased 4.3% sequentially as rate increases took effect during the quarter and concessions began to dissipate. Generally speaking, our operators have not seen significant pushback from residents on rate increases.
$4.5 million or five 8% compared to the fourth quarter.
Following the completion of these transitions, we believe we have the right operator mix and are starting to see the benefits from both our capital spend and from the investment of our operators are making in their communities and in their corporate and marketing teams.
And our same property shop segment that is comprised of the 120 communities managed by five star occupancy was flat for the fourth quarter, but same property revenues increased 3.443% sequentially as rate increases took effect during the quarter and concessions began to dissipate.
Generally speaking our operators have not seen significant pushback from residents on rate increases as the media coverage of inflation. It's widespread in the alternatives to our senior living communities, such as homecare and competing senior living communities are also increasing rates.
Jennifer Francis: As the media's coverage of inflation is widespread, and the alternatives to our senior living communities, such as home care and competing senior living communities, are also increasing rates, looking ahead, we're seeing that our operators are now largely using concessions as a closing tool and, at most, offering one month of free rent to help drive occupancy. Labor is the biggest challenge facing the senior living industry today, but we're pleased with how our operators managed through these headwinds during the first quarter. Same property wages and benefits decreased approximately $800,000 or 1% from the fourth quarter, largely driven by lower agency costs.
Looking ahead, we're seeing that our operators are now largely using concessions as a closing tool and at most offering one month of free rent to help drive occupancy.
Labor is the biggest challenge facing the senior living industry today, but we're pleased with how our operators manage through these headwinds during the first quarter.
Same property wages and benefits decreased approximately $800000 or 1% from the fourth quarter, largely driven by lower agency costs.
Jennifer Francis: While we're encouraged by this level of cost containment in the quarter, we note that the competition for labor remains elevated. Looking forward, we expect wages and benefits to increase as our operators look to compete for and retain team members. We continue to encourage our operators to perform extensive care level assessments and to make market price adjustments where needed as part of a broader effort through 2022.
Well, we're encouraged by this level of cost containment in the quarter, we know that the competition for labor remains elevated looking forward, we expect wages and benefits to increase as our operators look to compete for and retain team members.
We continue to encourage our operators to perform extensive care level assessments and to make market price adjustments where needed as part of a broader effort through 2022.
Jennifer Francis: Our manager, the RMR Group, continues to make significant investments in its Senior Living Asset Management Team, which is focused on high-impact deliverables targeted to improve operations at underperforming assets and optimize results elsewhere. As our teams identify areas of opportunity to prioritize and deploy revenue-enhancing capital, we remain confident of the shop segment's path toward stabilization. In total, we currently have 58 major capital projects that the RMR Group's project and asset management teams are working with Alaris Life to complete or kick off in 2022.
Our manager the RMR group continues to make significant investments in its senior living asset management team, which is focused on high impact deliverables targeted to improve operations at underperforming underperforming assets and optimize results elsewhere.
As our teams identify areas of opportunity to prioritize and deploy revenue enhancing capital.
We remain confident of the shop segments path towards stabilization.
In total we currently have 58 major capital projects that the RMR group's project and asset management teams are working with the Lewis liked to complete our kickoff in 2022.
Jennifer Francis: These include 8 sizable projects that are either underway or in permitting, another 14 that are in the design phase, and we have another 29 projects that are building refreshes that will be complete by year end. In total, these projects combine for a budgeted spend within the same property portfolio of approximately $110 million in 2022. The teams are also working with our new operators on capital improvement projects at some of the 107 communities that transitioned to new operators last year. Finally, we're proud of the progress we continue to make to strengthen DHC's corporate governance. In March, we welcomed David Pearce as the newest member of our Board of Trustees.
These include a sizable projects that are either underway or in permitting another 14 that are in the design phase and we have another 29 projects that are building refreshes that will be complete by year end.
In total these projects combined for a budgeted spend within the same property portfolio.
Approximately $110 million in 2022.
The teams are also working with our new operators on capital improvement projects at some of the 107 communities transitioned to new operators last year.
Finally, we're proud of the progress we continue to make to strengthen DH six corporate governance.
Rick Seidel: David has more than 30 years of healthcare industry experience, and we look forward to drawing on his perspective to create value for DHC shareholders. I'll now turn the call over to Rick to provide detail on our financial results. Thanks, Jennifer. And good morning, everyone.
In March we welcomed David Pearce as the newest member of our board of Trustees, David has more than 30 years of healthcare industry experience and we look forward to drawing on his perspective to create value for DHT shareholders.
I'll now turn the call over to Rex whereby T tail on our financial results.
Rick Seidel: For the first quarter of 2022, we reported net income attributable to common shareholders of $240.4 million, or $1.01 per share, which included a $327.5 million gain on the joint venture sale of 10 office portfolio assets that we discussed during our last earnings call. We have a 20% ownership in two ventures that combine for 2.2 million square feet of medical office and life science space that is 98% occupied and generated approximately $5.2 million of EBITDA for us during the first quarter.
Thanks, Jennifer and good morning, everyone.
For the first quarter of 2022, we reported net income attributable to common shareholders of $244 million or $1 one per share, which includes a $327 $5 million gain on the joint venture sale of 10 office portfolio assets that we discussed during our last earnings call.
We have a 20% ownership in two ventures that combined for $2 2 million square feet of medical office and life Science space that is 98% occupied and generated approximately $5 $2 million of EBITDA for us during the first quarter.
Rick Seidel: Our supplemental package includes additional detail regarding our joint venture investments on pages 16 and 17. Our consolidated same property cash basis NOI increased 10.3% compared to last quarter, largely driven by a $6.6 million increase in same property shop NOI. Our general and administrative expenses decreased approximately 15% from last quarter to $7.3 million as a result of lower business management fees paid to RMR.
Our supplemental package includes additional detail regarding our joint venture investments on page 16 and 17.
Our consolidated same property cash basis, NOI increased 10, 3% compared to last quarter, largely driven by a $6 $6 million increase in same property shop NOI.
Our general and administrative expenses decreased approximately 15% from last quarter to $7 $3 million as a result of lower business management fees paid to RMR.
Interest expense decreased approximately $6 $4 million from the fourth quarter, primarily due to $620 million of debt secured by the Boston Seaport asset that was deconsolidation following the joint venture transaction completed in December .
Rick Seidel: Interest expense decreased approximately $6.4 million from the fourth quarter, primarily due to $620 million of debt secured by the Boston Seaport asset that was deconsolidated following the joint venture transaction completed in December. Aggregating these results, we reported normalized FFO of negative $21.9 million, which reflects roughly break-even results in our shop segment and interest expense. Normalized FFO was approximately $5 million lower than we reported last quarter, due to approximately $2 million of percentage rent recognized in the fourth quarter and to the impact of the joint venture sale.
Aggregating. These results, we reported normalized <unk> of negative $21 $9 million, which reflects roughly breakeven results in our shop segment and interest expense.
Normalized <unk> was approximately $5 million lower than we reported last quarter due to approximately $2 million of percentage rent recognized in the fourth quarter and to the impact of the joint venture sale.
We believe it's important to note that while normalized <unk> was negative DHT ended the quarter with approximately $1 $5 billion of cash available to repay debt and make investments in our portfolio and had total outstanding debt of $3 $6 billion.
Rick Seidel: We believe it's important to note that while normalized FFO was negative, DHC ended the quarter with approximately $1.5 billion of cash available to repay debt and make investments in our portfolio, and had total outstanding debt of $3.6 billion. Net debt was equal to just 25% of gross assets, and our next meaningful debt maturity is not until January of 2024, which gives us time for the shop segment to recover. As a reminder, the proceeds from the joint venture transactions that we completed at a blended 4.7% cap rate have not yet been deployed.
Net debt was equal to just 25% of gross assets and our next meaningful debt maturity is not until January of 2024, which gives us time for the shop segment to recover.
As a reminder, the proceeds from the joint venture transactions that we completed at a blended four 7% four 7% cap rate have not yet been deployed our nine and three quarter percent senior notes become callable in June and we expect to be in a position to reduce our interest expense at that time.
Rick Seidel: Our 9.75% senior notes become callable in June, and we expect to be in a position to reduce our interest expense at that time. In the first quarter, we spent $60.4 million on capital expenditures across our portfolio, which included approximately $36 million of CapEx within the shop segment, and $24 million of capital was deployed in the office portfolio. We continue to review and prioritize our capital spend on a property-by-property basis for its overall potential NOI impact. As Jennifer mentioned, we're excited about our capital program and the impact it'll have on our results. I'll now turn it back over to Jennifer. Thank you, Breck.
In the first quarter, we spent $64 million on capital expenditures across our portfolio, which included approximately $36 million of Capex within the shop segment and $24 million of capital was deployed in the office portfolio.
We continue to review and prioritize our capital spend on a property by property basis for its overall potential NOI impact.
As Jennifer mentioned, we're excited about our capital program and the impact it'll have on our results.
Now I'll turn it back over to Jennifer.
Thank you back.
Jennifer Francis: We're pleased with some of the progress made this quarter in our shop segment and are optimistic that our operators will continue to perform as industry fundamentals recover. Our financial position provides us the flexibility to reduce debt and lower interest expense and affords us the opportunity to continue investing in our portfolio, which we expect will accelerate the stabilization of our shop segment and maximize the value of our office portfolio segment. That concludes our prepared remarks.
We're pleased with some with some of the progress made this quarter in our shop segment and are optimistic that our operators will continue to execute as industry fundamentals recover.
Financial position provides us the flexibility to reduce debt and lower interest expense and affords us the opportunity to continue investing in our portfolio, which we expect will accelerate the stabilization of our shop segment and maximize the value of our office portfolio segment.
Jennifer Francis: Operator, please open the line for questions. We will now begin the question and answer session. As a reminder, to ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
That concludes our prepared remarks, operator, please open the line for questions.
We will now begin the question and answer session.
As a reminder to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.
With dry your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Operator: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Brian Marr with B. Reilly Securities. Please proceed. Good morning, Jennifer and Rick.
Today's first question comes from Bryan Maher with B Riley Securities. Please proceed.
Brian Marr: A couple of questions. On the JV sales, you know, with the two that you've completed at this point, are you done with that? Or do you think we can see more of that over the balance of the year? We're not looking at adding any of our existing properties to those JVs.
Good morning, Jennifer and Rick a couple of questions on the JV sales you know with the two that you've completed at this point are you done with that or do you think we could see more of that over the balance of the year.
We're not looking at adding any of our existing properties into those jb's.
Jennifer Francis: So we haven't assembled any additional portfolios. Okay, and then as it relates to the billion dollars in cash and the billion dollars callable this June, can you elaborate on the thought process there, whether it's, you know, pay it all down, pay down half, and refinance half? Where's management thinking about taking that? It's a good question, Brian.
So so we you know we haven't assembled any additional portfolios.
Okay, and then as it relates to the 1 billion by the cash and the $1 billion callable.
Yeah.
Can you elaborate on the thought process there whether it.
Pay it all down pay down half refinance half, where where is management thinking about taking that.
Rick Seidel: We definitely expect to prepay some portion of the nine-and-three-quarter notes, but as you said, we do need to be thoughtful, and we need to continue to assess our investments and liquidity. The key thing for us is to make sure that we're investing in the portfolio and positioning ourselves to grow earnings so we can get a more normal dividend in place. But all that being said, we definitely expect to call out some portion of the nine-and-three-quarter notes.
It's a good question Bryan we definitely expect to prepay some portion of the nine and three quarter notes, but.
As you said, we do need to be thoughtful and we need to continue to assess our investments and liquidity.
Key thing for US is to make sure that we're investing in the portfolio and positioning ourselves to grow earnings. So we can get a more normal dividend in place.
But all that being said, we definitely expect to call. Some portion of the nine and three quarter notes.
Rick Seidel: I think last year, maybe it was in the first quarter, I forget. You issued some debt, and I think the interest rate was maybe in the fours. Given what's going on with interest rates now, if you had to refinance some of that debt, how much higher do you think the interest rate might be? It's a good question, Brian.
I think last year, maybe it was in the first quarter I forget you issued some debt and I think the interest rate was maybe in the fours yeah, given what's going on with interest rates now if you had to refinance some of that debt how much higher do you think the interest rate might be.
It's a good question, Brian Youre right, we were below four and a half on that on that last issuance.
Rick Seidel: You're right. We were below four and a half on that last issuance. Interest rates have come up a bit, but to be honest, I haven't been as focused on where we would issue debt. We're sitting on a billion and a half of cash. When we look at, you know, our total debt, net debt to gross assets is just 25%.
Interest rates have come up a bit but I took.
To be honest I haven't been as focused on on where we would issue that we're really you know we're sitting on a billion and a half of cash.
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When we look at our total debt net debt to gross assets is just 25%. So we're.
Rick Seidel: So we're not really looking to issue more debt right now. The key is, again, focusing on the performance of the portfolio and getting EBITDA back up to where it should be. Okay. And then, Jennifer, I think you mentioned, and we would concur, that it appears that, Yeah, the shop occupancy is not, you know, kind of recovering in the past several months, maybe not as fast as we had thought. Do you think that the first quarter really was, you know, Omicron?
We're not really looking to issue more debt right now.
The key is again focusing on the performance of the portfolio and getting EBITDA back up to where it should be.
Okay, and then Jennifer I think you mentioned that we would concur.
Is that it appears that.
Jennifer Francis: Do you think it was maybe rate increases and maybe a little bit of pushback there? What are your thoughts on the first quarter? And how are you thinking the rest of this year plays out? You know, I think that the recovery in senior living is more heavily weighted toward needs-based. And so we've seen more occupancy growth in our needs-based communities than in our choice-based communities, and so our same-store portfolio is definitely more heavily weighted to independent living.
Yeah. The shop occupancy is not you know kind of recovering in the past several months, maybe as fast as we had thought you think that the first quarter really was you know omicron do you think it was maybe rate increases maybe a little bit of pushback there.
What are your thoughts related to the first quarter and how are you thinking the rest of this year plays out.
Yeah, I think that the recovery in senior living is more heavily weighted toward needs based and so we've seen more occupancy growth and our needs based communities that don't have our choice based communities and so our same store portfolio is it's definitely more heavily heavily weighted to independent living so I think that.
Jennifer Francis: So I think that that is some of the issue. We are seeing some... increases. We've seen increases in leads, increases in qualified leads, in the fourth quarter. It increases in tours. And so I think the key is converting those is having the operators and really the folks out in the communities convert those tours to move in. So really, they're all very focused on training the sales force. You know, in the first quarter, Aleris Life saw the lowest percentage of voluntary move-outs since Q1 2020. So it's, you know, it's not as much a move-out issue or a voluntary move-out; it's really turning the tours into move-ins.
That is some of the issue.
I mean, we are seeing some.
Increases we've seen increases in lead increases and qualified leads over the fourth quarter increases in tours and so I think the key is converting those as having the operators and then really the folks out in the communities convert those tours.
Jim move in so really they're all very focused on.
Training the sales force.
And in the first quarter of layoffs lifestyle, the lowest percentage of voluntary move outs since Q Q1, 'twenty 'twenty. So it's you know it's it's.
It's not as much the move out issue our voluntary move outs, it's really converting the tourists to to move ins.
Okay, and maybe shifting gears.
Brian Marr: Okay, and maybe shifting gears, Rick, you did touch upon CAPEX for 2022. I think you said $110 million for the Five Star Associated shop portfolio, but can you give us a total CapEx breakdown for the year between MOB, you know, full year shop, full year, including the new operators, you know, what are you thinking along those lines? Certainly.
You did touch upon Capex for 2022.
You said 110 million in.
The five star associated shop portfolio, but can you give us a total capex breakdown for the year between the M.
M O b full year shop full year, including the new operators what are you thinking along those lines.
Rick Seidel: So yeah, Jennifer mentioned the $110 million that we're actively working to deploy throughout the AlarisLife 5-star portfolio. You know, overall, we are expecting CapEx for this year to be close to that $400 million number we spoke about previously. The breakout there, there's a couple of different ways to split it.
Certainly so yeah, Jennifer mentioned, the $110 million that we're actively working to deploy.
Deploy throughout the Atlantis life flashed five star portfolio, but.
Overall, we are expecting capex for this year to be close to that $400 million number we spoke about previously.
Rick Seidel: I would say, you know, probably $125 million or so is in the office portfolio, while the rest is dedicated to retail. And then, depending on how you slice it, I mean, the recurring versus redevelopment, and repositioning capital is a split that we're asked about somewhat regularly. And I would say of the $400 million, it's probably a little over $100 million on the recurring side, and then a little under $300 million on the redevelopment side.
The break out there there's a couple of different ways to split it I would say you know probably a $125 million or so is in the office portfolio. While the rest is dedicated shop.
And then depending on how you slice it I mean, the recurring versus redevelopment repositioning capital.
There is a split that we're asked about somewhat regularly and I would say of the 400, it's probably.
A little over $100 million on the recurring side and then a little under three.
<unk> $300 million on the redevelopment side, so Brian just to clarify the number that I was talking about is the number that the RMR project management group is deploying the operators are also as Rick mentioned are also doing kind of that the lighter capital projects on there.
Rick Seidel: So, Brian, just to clarify, the number that I was talking about is the number that the RMR project management group is deploying. The operators are also, as Rick mentioned, also doing kind of the lighter capital projects on their own. Okay, maybe I'm a little confused.
Okay.
Jennifer Francis: So 400 million total, 125 is going to be MOB, and 275 is going to be shop. Potentially, yes. If we can get it all deployed. There are still supply chain issues that are slowing us down in some cases, but the team is making great progress. And are you done at that point, or are we going to have some spillover into 2023 and 2024? There'll definitely be continued spending in 2023. You know, our goal was to spend a great deal of capital last year and the year before, and it really got delayed because of the pandemic.
Maybe I'm a little confused so 400 million total.
<unk> 25 is going to be M O B and $2 75 is gonna be shop.
Potentially yes, if we can if we can get it all deployed there is still supply chain issues that are slowing us down in some cases, but.
The team is making great progress.
Okay.
And are you done at that point or are we going to have some spillover into 2023 and 2024 they'll definitely be continued spend in 'twenty. Two 'twenty. Three you know our our goal was to spend a great deal of capital last year and the year before and it really got delayed because of the pandemic and so we will it will not.
Jennifer Francis: And so it will not be as elevated next year as it is this year, but it will still be a pretty heavy capital year. Okay, and maybe one more if I might on the expense side of the equation, and maybe you could break it out between shop and MOB. Can you tell us where your biggest concerns are and what the trend might be in shop? And then my guess would be on MOB; it's a combination of taxes and utilities that's going to drive that higher. Can you give us just a little bit of color on that?
Might be as elevated next year as it is desk, but it will still be at a pretty heavy capital year.
Okay, and maybe one more if I might on the expense side of the equation and maybe you could break it out between shop and M O B.
Can you tell us what are your biggest concerns are and what the trend might be in shop, and then my guess would be on M. O B. It's a combination of yes taxes and utilities, that's going to drive that higher can you give us just a little bit of color on that.
I think it's.
Jennifer Francis: You know, labor is obviously a big issue. We saw an increase in salaries and benefits in our office portfolio segment this quarter, and we will continue to see it in senior living. Utilities are up, I mean, all the things that people are talking about; there's a lot of discussion about the cost of food in senior living. So, you know, this quarter, we saw increased snow removal in the first quarter, but that's just seasonal and really depends on how much it snows from quarter to quarter.
Labor is obviously.
It's a big issue, we saw an increase in salaries and benefits in our in our office portfolio segment. This quarter and we will continue to see it and in senior living utilities are up I mean, it's all the things that that people are talking about there is theres a lot of discussion about the cost of food and senior live.
So you know this quarter you know in the first quarter, we saw increased snow removal, but that's just a seasonal just really depends on how much it snows from quarter to quarter, but utilities salaries and benefits are really.
Jennifer Francis: But utilities, salaries, and benefits are really going to... going to be a push. Okay, thank you. That's all for me. Thanks. Again, if you do have a question, please press star then 1 on your touchtone phone. At this time, there are no further questioners in the queue, and I would like to turn the conference back over to Jennifer Francis for any closing remarks. And thank you all for joining our call today. The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect. The Bulletproof Executive 2013, [music]
Got it.
Cannot be a push.
Okay. Thank you that's all from me.
Thank you Brian .
Again, if you do have a question. Please press Star then one on your Touchtone phone.
At this time there are no further questioners in the queue and I would like to turn the conference back over to <unk>.
Jennifer Francis for any closing remarks.
Thank you operator, and thank you all for joining our call today, we look forward to seeing many of you in person at NAREIT in June operator that concludes our call.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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Right.
Uh huh.
Hum.
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