Q4 2022 LTC Properties Inc Earnings Call
and lease the properties back to the same entity under a master lease with a purchase option. Interest income from mortgage loans increased by $1.5 million primarily due to mortgage loan originations in 2022 and in the fourth quarter of 2021.
Interest and other income increased by $858,000 from last year's fourth quarter, mainly due to a 2022 first-quarter mezzanine loan origination and working capital originations partially offset by loan payoffs.
interest expense increased by $1.9 million from last year's fourth quarter, primarily due to the origination of term loans in the fourth quarter of 2021, the issuance of $75 million in senior unsecured notes in the second quarter of 2022, and higher interest rates partially offset by scheduled principal paydowns on our senior unsecured notes.
Our provision for credit losses decreased by $888,000, mainly due to a greater number of mortgage originations in the fourth quarter of 2021 than for the same quarter in 2022.
As a reminder, upon origination, we record a loan loss reserve estimate equal to 1% of the loan balance. This reserve is amortized as the loan principle is paid down.
GNA increased by $527,000 compared with the 2021 fourth quarter, primarily due to higher incentive compensation and increases in overall costs due to inflationary pressures.
During the fourth quarter, we recorded $2.1 million of impairment losses as a result of our recoverability analysis related to a 70-unit assisted living community located in Florida and a closed memory care community located in Colorado.
Net income available to common shareholders increased by $5.1 million, primarily due to the net increase in rental revenue I previously discussed, higher revenues from loan originations, and a decrease in provision for credit losses, partially offset by higher interest expense, the $2.1 million impairment charge, and increased G&A expense.
Fully diluted near-read FFO per share for the 2022 fourth quarter was $0.72 compared with $0.56 for the 2021 fourth quarter. Excluding non-recurring items, FFO per share was $0.72 compared with $0.59.
The increase in FFO, excluding non-recurring items, was due to the net increase in rental revenue, higher revenues from loan originations, and the decrease in provision for credit losses partially offset by higher interest and G&E expenses.
We received rent of $3 million in the fourth quarter related to the 11 properties we transitioned to HMG in line with our expectations.
One million of the rent received from HMG in the fourth quarter relates to prior periods and should not be included in a rental run rate for them. We anticipate receiving 8 million in rent from HMG during 2023.
For all of the other transition portfolios with market-based rents, we received $120,000 in the fourth quarter, also in line with our expectations, and expect to receive $480,000 in rent during 2023.
During the year, we will work to either sell all or some of these assets or set negotiated rents.
During the 2022 fourth quarter, we provided $670,000 in rent abatements to the same operator for whom we have been giving assistance.
At this point, we expect to receive 300,000 in rent in 2023 from this operator.
We paid $5 million in regular scheduled principal payments under our senior unsecured notes in the 2022 fourth quarter at a weighted average rate of 4.27%.
We also repaid $21 million under our unsecured revolving line of credit at a weighted average rate of 5.14%.
and paid $23.3 million in common dividends, as Wendy mentioned.
We sold 757,400 shares of common stock for $29.2 million in net proceeds under our ATM program and used those net proceeds to temporarily pay down our revolving line of credit. We then subsequently used our line of credit to fund our investment in 12 assisted living and memory.
Our only floating rate debt is our line of credit. Our balance sheet remains solid with no looming debt maturities and no secured debt.
As I mentioned earlier in the fourth quarter, we received repayment of Anthem's temporary rent reduction in the amount of 1.5 million, collecting 10.8 million from Anthem in 2022, which represents their full agreed upon rent for the year.
We anticipate receiving 10.8 million and rent from Anthem again in 2023.
We were active subsequent to the end of the fourth quarter, including $128 million of investments with an affiliate of an existing LTC operating partner. That will provide additional details shortly.
Subsequent to December 31, 2022, we received $4.5 million from a mezzanine loan prepayment, which included a prepayment fee and the exit IRR totaling $190,000 related to a 136-unit independent living community in Oregon.
We also received notice of intent to redeem our $13 million preferred equity investment in a joint venture to develop a 267 unit independent and assisted living community in Washington.
We anticipate receiving $1.7 million of additional income in the 2023 first quarter associated with the redemption, representing a 14% IRR.
Lastly, also subsequent to December 31, 2022, we borrowed $162.7 million under our unsecured evolving line of credit, primarily for investments in 2023, and repaid $7 million in schedule principal paydowns on our senior unsecured notes at a weighted average rate of 4.5%.
Presently we have approximately 42 million of cash on hand, 107 million available on our line of credit with 293 million outstanding, and 131 million available under our ATM. This gives us total liquidity of approximately 280 million.
We have no significant long-term debt maturity over the next five years.
At the end of the 2022 fourth quarter, our credit metrics remain solid with a debt to annualize adjusted EBITDAF for real estate of five times, and annualize adjusted six charge covers ratio of 4.4 times, and a debt to enterprise value of 34.2%.
As with our FADPayout ratio, these metrics benefited from the non-run rate items already discussed.
which represent the anthem repayment and rent receipts from H&G related to prior periods.
While we expect these metrics to go back up over the short term, our long-term target remains below five times.
Now I'd like to turn things over to Clint.
Thank you, Pam. As Wendy discussed, we have been busy strengthening our portfolio, certifying relationships with existing operators, and building relationships with operators with whom we have yet to work.
We are being adaptive to the marketplace by listening to operators.
and offering products that best suit their needs while sourcing new investments that fit our CRO strategy in conservative financial management.
Subsequent to the end of the first quarter, as Pam mentioned, we entered into a $121.3 million joint venture with an affiliate of a current LTC operating partner.
The transaction included $117.5 million joint venture for the purchase of 523 units across 11 assisted living and memory care communities in North Carolina.
The communities are being operated under a 10 year master lease.
with two five year renewal options.
The initial cash yield of 7.25% increases to 7.5% in year 3.
and then escalates their app, based on CPI, subject to a floor of 2% and a ceiling of 4%.
The lease also includes a purchase option to buy up to half of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the fixed lease year with an exit IRR of 9%.
Purchased assets are being presented as a financing receivable on our balance sheet, since the JV acquired the communities through a sale-least-backed transaction subject to a lease that contains a purchase option.
We expect to record consolidated gap in cash interest income from this financing receivable during 2023 of $9.7 million and $8.8 million respectively.
The investment also included the origination of a $10.8 million mortgage loan secured by a 45 unit memory care community located in North Carolina.
The interest-only loan carries a two-year term with a rate of 7.25% and an IRR of 9%.
In 2023, we expect to record GAP and cash interest income from this loan of 943,790,000 respectively.
It is interesting to note that this major regional operator has typically not utilized fleet financing.
which is a testament to the deep relationship we have built with them.
Within the next few days, we also expect to close the $51 million investment related to an independent living, assisted living and memory care community in Georgia with an existing LTC partner.
We will provide additional details when the transaction has closed.
After closing this investment, we will have eclipsed last year's investment total early in 2023.
In addition to our investments...
I'd like to briefly touch on our capital recycling plans.
which remain active. Last quarter, I mentioned that over the last 10 years, we have averaged approximately 35 to 40 million per year in divestitures.
In the first quarter of this year, we expect to receive map proceeds of approximately 32 million from property sales.
Accordingly, we anticipate a $3 million reduction in gap rent.
We intend to use the sale proceeds to pay down our revolving line of product.
A quick word about 2020 release maturities.
Brookdale remains within the renewal period, which ends on February 28.
We recently extended a master lease underlying two properties for an additional five years at the contractual rate provided for in the lease and we are currently in discussions on the remainder of the expiring leases.
We'll be next to our portfolio numbers with the usual caveat that we don't leave coverage is currently a good indicator of future performance at this time given the challenging environment created by the pandemic.
These metrics exclude properties transitioned on or after July 1, 2021.
Q3, trailing 12-month EBITDAARM and EBITDAAR coverage as reported using a 5% management fee was 1.02 times and 0.8 times respectively for our assisted living portfolio.
excluding stimulus funds received by our operators.
Coverage was 0.91 times and 0.69 times respectively.
For our skilled nursing portfolio, as reported, EBIDAR coverage was 1.95 times and 1.49 times respectively.
Excluding stimulus funds received by operators, coverage was 1.47 times and 1.01 times respectively.
I'd also like to share some recent general occupancy trends, which are as of January 31, 2023, and are for our same store portfolio.
As we previously stated, our operators give this data to us on a voluntary and expedited basis.
So the information we are providing today includes approximately 66% of our total same-store private pay units and approximately 90% of our same-store skilled nursing beds.
Private Pay Occupancy was 79% in January 31, 2023.
compared with 81% at September 30, 2022.
and 79% in June 30, 2022.
For our skilled nursing portfolio, average monthly occupancy was 73% in January 2023, the same as in September and June 2022.
As a reminder, our private pay occupancy in 2019 was approximately 87% and our average skilled nursing occupancy was approximately 80%.
I'll end my remarks with a brief pipeline discussion.
As we've detailed today, 2022 and 2023 thus far have been very productive and our pipeline remains robust.
As we move through this year, we plan to be judicious capital allocators.
Currently, banks that are lending are lending at higher rates making LTC's creative financing structures more competitive.
This strategy is paying off as evidenced by a strong end to 2022, continuing into 2023.
We are currently reviewing potential transactions for this year, all off-marked, tolling approximately 150 million, including the transaction I discussed that we expect to close shortly, in scanning a variety of financing vehicles and property types.
Now I'll give the mic back to Wendy for her closing remarks.
Thank you Pam and Clip.
We have substantially stepped up our investment activity and have successfully divested assets that are underperforming or are no longer core to our portfolio. 2022 was a solid year as we navigated through many challenges outside of our control.
So far in 2023, we have proven our ability to put capital to work to benefit all of our stakeholders.
As we continue to move through the year and beyond, we will prudently utilize our solid balance sheet to drive future growth and further strengthen our portfolio. Importantly, we will continue to deepen our relationships with strong regional operators with whom we can grow for the long term.
Operator, we're ready for questions from the audience.
Certainly. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one.
As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question comes from the line of Austin Werschmidt with KeyBank Capital Market.
Austin, your line is now open.
Appreciate some of the detail around the one-Q guide, you know, getting us the bridge from 4Q to one-Q, but I was curious what's holding you guys back from providing annual FFO guide and fit this point.
Well, this is Pam. There's still some uncertainties that we're working through that we discussed in our prepared remarks. We would like to be able to set more permanent rent on the transition portfolios, and we're still evaluating some of those for possible sale, and I think until we get more...
clarity in that. Any guidance that we gave would be predicated on that being a certain thing and we're just not at that point yet.
So I don't see us giving annual guidance until those uncertainties are resolved, which hopefully will be later in the year, but at this point, you know, we don't have visibility into that.
I understood. It was a little bit choppy during some of your prepared remarks and difficult to hear you. But Clint, maybe could you clarify the update you provided on the Brookdale negotiations and outcome? It sounds like you made some progress on apportionable
Can you just clarify that detail and maybe remind us what portion remains outstanding in still in negotiation?
So right now, as we disclose in our supplemental, Brookdale represents 75% of GAAP income for 2023 that has a lease renewal. The lease that we did renew, it represents 8% of the 2023 GAAP rent for leases that are expiring.
So, you know, we continuously have discussions with Brookdale. We've provided capital improvement allowances to them. You know, last year we committed an additional $4 million of which they have put to work just over $3 million to date.
So we're encouraged to see continued capital improvement in the Brookdale portfolio. You know, their window does remain open and they have until the end of the month to be able to exercise that renewal, which they have unilateral right to exercise. And just to clarify, Austin, that lease that was renewed, that represented the 8 percent that...
Clant was referring to that was not Brookdale. That was another operator. Got it, understood. I guess what sort of the, I mean, are you still running sort of a plan A, plan B optionality to the extent that things don't move forward with Brookdale or or you know some portion doesn't move forward what are sort of the possible.
something not specific to Brookdale's portfolio, that's just something we do as an active asset management process.
Got it. And then just from a funding perspective, you highlighted 35 to 40 million of the vestures. It sounds like you've got one in the works now to cover a sizable portion of that. But leverage ticked up a little bit on a pro forma basis. Subsequent to year end. And just curious how you're thinking about funding.
investments at 70% equity, 30% debt. And that target has not changed.
I think we're ready for our next question.
Our next question comes to the line of Juan Sanabria with DMO. Juan, your line is now open.
All right, thank you for the time and good morning. Just curious on the transition portfolio.
and correct me if I'm wrong, but it sounded like...
You're expecting a similar run rate from the fourth quarter cash runs received.
or 2023. Just curious why that isn't and why there isn't any growth there.
Is that basically the senior lifestyle portfolio?
If you could just give us an update on that, that would be helpful.
Yeah, that is correct. It is the fourth quarter run rate. And as I've mentioned before to Austin, is we're looking at the remaining transition portfolios and determining what we're going to do if we're going to set a permanent rent or if we're going to sell them. We haven't provided rental guidance on that portion.
Okay, so you're not collecting cash flows per se and your rental income wouldn't necessarily go up if performance improves?
No, it's correct that we are not currently collecting rent on those transition properties. If performance improves, we would, we would, because they're market-based reset, so we would collect rent.
And also one thing on that is that in 2022, obviously there was elevated expense and a lot of the rate growth and rate increases had not been implemented. Now going into 2023, that there has been implementation of rent increases, which Wendy spoke about in her prepared remarks. So we know.
Hopefully we will see some traction over the course of 23, but we'll evaluate the portfolio during the course of 2023 and make assessments if it's better to look at selling certain assets or if rent can be increased.
Okay, so it sounds like that could be a source of upside, but too soon to say.
Yes, that is correct.
Okay. And then just on the investment pipeline, just curious on…
The $150 million.
kind of bucket.
Is that mainly equity or is it still tilted towards that? What type of asset touches is it favoring? And any yield color you could provide?
Sure. Right now most of it there is some equity involved in this but there also is some loans and structured finance as well. So it is diverse regarding that and it is all off market transactions. So we're very encouraged by that.
You know, it depends on the type of asset, but I would say, you know, on the the loans or structured finance, you're probably in the, you know, eight and a half plus percent all in, depending on property type, obviously skilled being higher. And, you know, a little being a little bit lower, but it is a combination and
the diverse set type of investments. Okay, great. And then just...
on the tenant that's still receiving a datement, the $6,700,000.
What's the latest there? How should we think about that going forward?
Is that part of the disposition bucket or any commentary around that would be helpful?
Currently, it's not part of the disposition bucket and we've talked about this operator over the past 12 months. We are evaluating that debt.
that portfolio and we did give a little bit of rent guidance on it for this year. So we're still working through that.
Okay, thank you.
Our next question comes from the line of Steve Valakette with Barclays.
Steve, your line is now open.
Hi, this is Amin Jazeary on Firste Valakatt. Thank you for taking the question.
Would you be able to provide any additional color for
Specifically potential acquisitions for the rest of the year. How are you viewing that given the current rate environment?
Well, we think that in the current rate environment, as you mentioned in our prepared remarks, for the bank star lending, they are lending at higher rates and, as we understand it, lower LTVs. So it does make LTC more competitive in the marketplace. And also within B
you know, with refinancing the execution, because we don't put property specific debt on, can provide better certainty of close. So we do think it provides this environment as an opportunity for us to be able to execute on, you know, acquisitions. So we are, we're encouraged.
by what we see in the general environment in 2023, but we're going to be very disappointed how we approach that. We've been fortunate to be able to do the amount of investments we have to date already, Eclipse in 2022, but we think it's going to lead to opportunities for LTC.
Great. Thank you for taking the question.
Thank you.
Our next question comes from the line of Rich Anderson with SMBC.
Right here, your line is now open.
Thanks, good morning out there. So, let's see if I can help you with 2023 guidance here. So you do, you take the first quarter and you annualize it, that's $2.70. You mentioned transition and I appreciate and respect the reason why you want to hold off, but it seems like there's more potential upside than downside from that portfolio.
from that, is that a reasonable way to look at it or am I missing something?
I would say that's reasonable.
Okay.
Second question is, no, no, I know, I know.
I'm not putting you on the spot here, or at least I don't intend to.
Next question. Okay. Okay. Okay.
I'm sorry we're talking over one other one. You go first. Alright, you reverse engineer and we say we want to get to our 80%.
Dividend coverage in.
Had a different handle.
13 cents a month? 11 cents a month.
19 cents a month.
what's nine cents among friends
Yeah, I see. So, so you take the dividend, you target 80% pay out and you kind of can kind of come after the number from two directions is kind of the way you're saying it. Is that right? At this point in reality, that's right.
Okay, fair enough. Second question is on the joint venture. Clint, you said something about the purchase option. Did I hear you right that they were somehow inherited or were they negotiated into this transaction?
They were negotiated as part of the transaction. Okay, I thought that was the case. So the reason why I'm bringing it up is, you know, LTCs finds itself in potentially a better competitive position for the reasons you mentioned, you know, in terms of bank lending and so on. Do you feel like purchase options as a negotiating tool?
our preference would be not to include purchase options. But in looking at each individual transaction, we have to look at the circumstance and what the specific deal is. And this deal is obviously negotiated in 2022. The lending environment has continued to evolve and change since then.
But it's really working with operating partners and what they want to achieve out of this. And in this case, purchase options and the ones we did last year made sense for that specific operator. Our intent is to build these relationships, grow them, and lead into additional investments beyond this. And these programs can provide flexibility
and how we're approaching these investments, and we think that it gets solid growth for future business for those operators.
Okay, is there anything more?
beyond the joint venture and the mortgage with this operator that is upside or that you see in terms of a relationship here, either with them or maybe just in the state of North
I mean we do see the potential of more business, although as we're growing and increasing concentration we're also cognizant of that with any individual operator. So we'll manage that. But I do think that we have the ability to do additional investments, not obviously as large.
at this investment, but yes, I think we have the opportunity to do more.
investment but yes I think we have the opportunity to do more. Okay that's all I have thanks very much.
Thanks Rich.
Our next question comes from the line of Michael Carroll with RBC.
Michael, your line is now open.
Yeah, thanks. I have a few clarifications. So the skill nursing facility lease that was renewed, is it fair to assume that the contractual cash friend is the same on that renewal?
I think it was a two and a half percent.
increase. It was a contractual increase. It was whatever the stated increase was, which generally is about 2.5%.
Jason. Okay. And is it?
Does the gap rent on that change given that now you have a five-year renewal? Are you straight-lining that over the next five years compared to the prior lease or is it unchanged?
Yeah, they are straight lined, so it would increase. It's going to reset for five years, so that's the math.
Okay and then related to Anthem I know we've been kind of on this same rental rate for them. I mean are we getting closer to setting a new contractual rent from them or are we there's still a potential upside from this current level?
And we would like to go ahead and set contractual rent as I'm sure Anthem would at some point, but at this point where we're at, we'll see where 2023 goes, but that is our objective as well as Anthem's to get into that actual contractual rental amount.
When we do that, that'll still to be determined, but there's a goal on both parties' parts to be able to do that.
Okay, so I have more of like a 2024 event as you kind of hit more of a stabilized type of environment.
Realistically, yes. At this point, I'd say probably early 24.
Okay, and then related to HMG and then that $8 million that you expect to be paid, is that based off of their current performance? I mean, is there upside to that potential number if they perform better than you expect or they expect?
We do have a structure where we have market-based resets and given that you know working with HMG and their budgets this was a number that we were both comfortable with looking forward as to what it could be but we do have the ability to reset rents contractually based on the market-based reset but also it is a goal between us and HMG because this is a short
shorter term lease right now to roll us into a longer duration lease and set rents permanently. So that's something that we will be active or inactive discussions with HMG to accomplish that or if we stay in the current market based rent structure, then there is the possibility that could increase over time. But really our goal is to put this into a longer term lease and set permanent rent.
Well I mean it's definitely taken longer I think than both parties expected from when we initially transitioned but I mean they've done a lot of work as far as doing capital improvements, working on staffing, leadership, so at this point we'll be coming near the 24 month mark this October .
which has really given them the runway to be able to put their processes in place. So I think at this point they've got the platform to be able to improve operations and right-size expenses and with the capital improvements hopefully be able to continue to make improvements. A lot of this also is just
working on relationships with hospitals and managed care providers as well to be able to grow symptoms.
And then we have the rate increase in Texas that's being discussed in the legislature right now. That is still, I think the session ends probably at mid to end of May. And so we'll have to see where that rate increase, or if a rate increase comes about, if everyone is hopeful.
that will happen in Texas, but we won't know for certain until the legislative session ends in, like I said, mid-May till the end of May. And that's not included in our projections? Correct. That would be an upside.
Okay, great. Thank you.
Our next question comes from the line of Taya Okusanya with Credit Suisse.
Taya, your line is open.
Yes, good morning up there. Kind of fortunate to be on the call right now because you guys just mentioned Texas. Just kind of curious again how things are shaping up at this point if there's any insight. I'm second of all if there any other thing.
that you have exposure to that you would consider, you know, an increase in Medicaid rates this year, absolutely critical for the success of the operators is that that that I in those days.
Well, as far as states, I mean states for LTC that have a large concentration of skilled nursing is Texas and Michigan.
So we just talked about Texas. Michigan is going through a rebasing process. So there will be a positive increase in rates for our operator in Michigan. They're expecting probably a nine percent rate increase in October . That would be retroactive as well given the rebasing of the cost report. So there's a big benefit and plus.
last year or so, that already occurred.
Okay, that's helpful. And then again, generally, you know, why your portfolio is in great shape, you know, most of your...
drug leader.
When you kind of think about the industry at large though...
I mean, how are you feeling about skilled nursing practice, specifically how you think things ultimately evolve for the industry? Is it the case of just kind of going into pain, and then we kind of saw some of what went on with Omega with their top tenants. Is that your call of going into pain before things get better?
Do you kind of feel like things have inflected on the skilled nursing side? Just kind of curious your overall viewpoint of the industry at this point.
I think it depends on what portion of skilled nursing you're referring to. Right now, census and long-term care has been more challenged than it has been in shorter stays. And so, I think that in skilled nursing, it's a very important part of our lives.
Taking on higher acuity patients, especially now with the implementation of PDPM that's been beneficial for the industry through the pandemic I think you see you know reaching up into higher acuity is where a lot of operators are going So that's an area and that's reflective of the investments we made last year
both with Ignite Medical Resorts as well as Pruitt in Florida. You know, operators are focusing on that higher acuity model and being able to take on patients that are in hospitals or other higher acuity settings. We think that has traction.
The longer term care side has been more challenged with home care and assisted living Medicaid waiver programs.
Gotcha. Thank you.
Our next question is a follow-up question from Juan Sonabria with BMO. Juan, your line is now open.
All right, just a couple follow-up questions.
Is there any backstory to the Florida impairment we should be aware of the ?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
That's the story there.
That was a building that was part of a transition portfolio that we did last year. And it's a one off building from the others and that portfolio sell really just identifying buyers for that asset and the impairment was a result of that. So nothing, nothing other than that.
Okay. And then you mentioned $32 million of dispositions. Were those rent paying or what was the rent that was booked?
In the fourth quarter is it relates to that $32 million.
Goffals bunny.
I'm sorry Juan, it was very hard to hear you. Would you mind repeating the question?
Sure. The 32 million of dispositions you referenced, I think, in your prepared remarks, what kind of yield should we expect relative to what was booked in the fourth quarter?
Do you mean that we said there'd be a $3 million gap decrease in rent due to the sales? Is that your question?
Yeah, I guess is that a full year 23 number or a fourth quarter annualized.
That was a full 23 number.
full 23 number. So just pull that out of your model.
Okay, okay. And then just the last one, this one is maybe a little harder, but on the occupancy front you gave us the numbers for January for both SNFs and seniors housing.
Why haven't those really improved over the last...
those really improved over the last six plus months.
What do you think the issue is?
Well, like anything, you can't paint a broad brush and occupancy increases coming out of the pandemic have not been linear. There's been pockets of short-term, what we view as short-term setbacks. And the reasons are varied across the board.
You know, you've got leadership changes at some communities, and we all know we're undergoing a crucial change in the way that we wonderful about did we started our department how everyone felt
not a staffing, you know, issues and their seasonality. There's always a seasonality that's reflected. And so you see in senior housing in particular, and you know, the fourth quarter and beginning of the first quarter, occupancy dips as...
families are reluctant to make changes during the holidays. So typically coming out of the first quarter, your seasonality, it goes to the upside.
hoping that that will be the case again for these. But I think as you look, we still have a seven or 800 basis point needed for recovery, back to pre-pandemic occupancy levels. I think we should expect to see it to be, continue to be a bumpy road. I don't think it's going to be a straight shot upward.
But with everything, we're looking at our portfolio and if it's these short-term reasons that we think are recoverable, we'll continue to stay invested in those assets. And for those that we think the market has turned or for some reason that area, the demographics or the market is not supporting.
the product, then we would look to exit those investments. And one other thing, Juan, that we've heard from some operators, and again, it differs by market, by state. Lead generation has been really strong for the most part. In some markets, conversions have been lagging.
And so it's really understanding in certain markets why there's been a lag and conversions in sales in some markets. But the positive is lead generation seems to be strong. And that's what I've heard in some other earnings calls for this quarter as well. That lead generation across the board has been very strong. So just...
Operators have to focus on that conversion into closing. Appreciate the car. Thank you.
Thank you. Thank you for your question. There are no further questions leading at this time, so as a brief reminder it is star one on your telephone keypad. Thank you everyone for joining us and we look forward to talking to you very shortly.