Q4 2022 Sabra Health Care REIT Inc Earnings Call
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Good day, everyone. My name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to the Sabra fourth quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session if you'd like to ask a question during.
This time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press the star one.
Now I'd like to turn the call over to Lukas Hart Senior Vice President Finance. Please go ahead, Mr Hart, which.
Thank you and good morning, before we begin I want to remind you that we will be making forward looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position and results of operations, including our expectations regarding our tenants and operators and our expectations regarding our acquisition.
<unk> disposition and investment plans.
These forward looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially including the risks listed in our Form 10-K for the year ended December 31 2022.
As well as in our earnings press release included as exhibit 99, one to the form 8-K, we furnished to the SEC yesterday.
We undertake no obligation to update our forward looking statements to reflect subsequent events or circumstances and you should not assume later in the quarter that the comments, we make today are still valid.
In addition references will be made during this call to non-GAAP financial results.
Astor's are encouraged to review these non-GAAP financial measures as well as the explanation and reconciliation of these measures to comparable GAAP results included on the financials page of the investors section of our website at Sabra House Dot com.
Our Form 10-K earnings release and supplement can also be accessed in the investors section of our website.
And with that let me turn the call over to Rick nature, CEO , President and chair of Sabra Health care REIT.
Thanks, Luca and good day, everybody. Thanks for joining us we appreciate it.
First I just want to comment on our asset recycling program. We've got a couple of transactions that were hoping to close over the next couple of months or so.
That will pretty much be the end of the program. After that we'll continue to have disposition, but it's more coordinated course of business dispositions. So we're looking forward to that.
Quick comment on the North American transition.
As you put out earlier.
<unk> closed effective.
February 1st as we anticipated.
The operations held up really well throughout the trend throughout the period prior to the transition and continue to do so in addition to the.
Improvement in credit quality that we get from replacing North American with Ensign I did want to point out that for Avenir and will strengthen their portfolio as well as the four facilities that avalere is picking up or has picked up in Washington State densify key market for them, which is allowing them to earn.
Turning to managed care contracts that should help both occupancy and revenue overall.
That particular market.
Next there's been a lot of talk about <unk> recently and I just wanted to remind everybody that sabra got a P. L. R. In February of 2020, right before the pandemic hit and that came shortly after we convert the holiday portfolio from Triple net to managed allowing us to have Holly.
Alright, Dan its structure, we want.
More important we've had some internal discussions about what.
Anything else relative to management because at the time.
Yes.
So not sure environment relative to what fortress was going to do with the portfolio.
But after atria wound up taking over the portfolio, we decided that we were.
Just Keith.
That is an option as optionality for us going forward, we've been really pleased.
With <unk> to start with the portfolio would happy to collaborate with them operationally.
And as I said provide some optionality for us going forward, but we don't anticipate doing anything different with it.
At this time.
Moving on to the operating environment occupancy held steady over the holidays with some scale operators up in some slightly down so overall, a better outcome than we anticipated we've had very little impact if any from flu RSV.
Or COVID-19, so that's been helpful as well.
Our sequential quarterly performance on the skilled space showed improved occupancy and skilled mix labor pressures persist or has slowly been improving but that's still going to take quite some time.
Our sequential occupancy for our senior housing Triple net portfolio was up materially by 240 basis points and over the fourth quarter moved up very nicely as well not quite at that pace, but it is a pretty healthy clip.
We currently don't have any discussions ongoing with any tenants.
Relative to lease restructurings.
Our coverage in our skilled portfolio was down primarily due to the quarter dropping off having lower labor costs than the one coming hard so.
We anticipated that and I think most everybody else did as well our skilled nursing exposure is now down to 58%, that's 1% higher than our all time low we will continue to drop as they will continue to drop this year, resulting in the most diversified by asset class the sabra portfolio has ever been.
Don't anticipate at any point that it would drop below 50%, because we still anticipate doing skilled nursing acquisitions.
Right.
We like being in a different place relative to the level of diversification.
Portfolio.
Our investment pipeline is lighter than historical we're starting to see some skilled opportunities and continue to see behavioral opportunities. The bulk of what we're seeing continues to be senior housing.
As everybody knows.
She expired or is expiring effective may 11, there is no real impact.
<unk> places become negligible as acuity is normalized post COVID-19 breakouts, that's not to say that we would've liked.
Got to stay in place, but it just doesn't seem to be in the cards at this particular point in time.
The increase of six 2% is no longer attached to the PHA and is unaffected by the may 11th date.
We're not issuing guidance.
It appears that there is some consternation about the fact that we are still not issuing guidance.
Sure.
We issued guidance in 'twenty one.
We see some of our peers.
Particularly when you have a managed portfolio really impossible to project.
He is velocity.
The recovery.
So we have a little bit more clarity there.
Don't want to be efficient when we put a number out and then we have to change it again, which is what we see happening throughout so Michael.
Michael talk a little bit more about that in his talking points and hopefully at some point. This year, we will be able to put guidance out generally speaking, we expect a relatively quiet year as our asset classes continue to recover and we do expect based on all the initiatives we've embarked on.
The asset sales that we've done the transitions.
We've talked about and the general recovery of the managed portfolio all too.
<unk> and <unk>.
Earnings growth for us as we look at 2024 and with that I'll turn the call over to Italian.
Thank you Rick Let me turn first to the results of our managed senior housing portfolio, including our joint venture investments in Canada, and then try and update on our investment activity and behavioral house.
Our wholly owned managed senior housing portfolio continued its recovery throughout 2022 with revenue increasing through a combination of materially higher revpar and growing occupancy as operators have worked diligently to recruit hire and retain staff and reduced agency to pre pandemic levels and even zero expenses have plateaued and began.
To decline, allowing for cash net operating income to grow significantly and margins decline the headline numbers for the wholly owned managed portfolio on a same store basis, excluding government stimulus alright follows occupancy for the fourth quarter of 2022, excluding non stabilized assets was 81 eight.
Driven by a two 4% percentage point increase in our assisted living communities over the prior quarter comparing fourth quarter 2022, <unk> fourth quarter 2021 occupancy increased five nine percentage points in our assisted living communities and 90 basis points.
Our independent living communities Revpar for the fourth quarter, excluding non stabilized assets was 6608 in our assisted living portfolio.
Five three percentage point increase over the prior quarter and an eight 9% percentage point increase.
All of our fourth quarter 2021, driven largely by the October 1st annual rate increases in our <unk> portfolio Revpar for the period, excluding non stabilized assets was 2751, and our independent living communities, a one 6% increase over the prior quarter and a six 6% increase over fourth quarter 'twenty.
'twenty one we anticipate the rate increases in 2023 will be in the same 5% to 10% range as those seen in 2022.
Excluding government stimulus funds cash NOI for the quarter was 22, 9% higher than the prior quarter. Similarly cash NOI margin in the fourth quarter grew 26 to 26, 9% from 22, 7% in the prior quarter and 20% in the fourth quarter of 2021.
As top line increases the active expense management.
Impacted the bottom line.
Senior housing operators continued to drive revenue to offset materially higher cost by raising rates or focusing on more efficient customer acquisition. The investment in digital marketing that began during the pandemic has continued to produce better qualified leads with more move ins than other sources moving rates are above pre pandemic levels.
I'll move out levels seemed to have stabilized with expenses under greater control. Our wholly owned managed portfolio had nearly 50% growth in cash NOI in the fourth quarter of 2022 compared with the same quarter in 2021.
If we compare the fourth quarter same store revenue occupancy and Revpar results of our wholly owned managed portfolio by country, excluding government stimulus.
Canadian assets outperformed our U S communities relative to the fourth quarter of 2021, and those same periods occupancy in our Canadian portfolio rebounded by seven 2% with revenue growing 19% compare to our U S portfolio, which show up which the occupancy growth of 1% and revenue growth of 10%.
However expenses in the Canadian portfolio rose, 14% in that period, while staying flat in the U S. Both portfolio saw significant growth in cash NOI with our domestic portfolio are outpacing our Canadian portfolio by combining significant cost controls with high Revpar glass.
Sovereigns and consolidated joint ventures in Canada, now 15 communities in Ontario, Saskatchewan come back our 50 50 joint venture with Sienna Senior living which includes 12 properties has performed well house with closing midyear 2022 with occupancy and revenue continuing to rise steadily as part of the effort to significantly.
Agency spending we incurred additional employee costs in the fourth quarter of $200000 U S dollars at share to higher incentivize and retain employees at those communities with share there is to illustrate that availability and cost of labor and the early post pandemic economy is not limited to the U S market.
Turning to our behavioral health portfolio at the end of the fourth quarter as Congress investment in behavioral House included 17 properties into mortgages with a total investment of $784 million at the end of the fourth quarter.
Intend to invest an additional $53 million of capital to complete the conversion of six of these properties and an additional identified property all of which have been leased to operators during the fourth quarter, we entered into a lease on one of these properties with an experienced operator that is new to sabra.
As part of our ongoing initiatives to recycle assets, we continue to review opportunities to convert more of our properties into higher yielding assets that will deliver the types of care needed most in our communities.
That I will turn the call over to Michael <unk>, Chief Financial Officer.
Thanks Tanya.
For the fourth quarter of 2020 to be recognized normalized <unk> per share of <unk> 37.
Normalized <unk> per share of <unk> 37.
Compared to the third quarter of 2022 normalized <unk> per share increased <unk> and normalized <unk> per share increased <unk> <unk>, primarily due to increased triple net NOI due to the timing of rent from leases accounted for on a cash basis, which we highlighted on last quarter's call.
This accounted for a little over 1% of additional normalized <unk> and normalized <unk> per share this quarter that is not expected to reoccur.
In addition, normalized <unk> normalized <unk> per share were higher this quarter as a result of increased NOI from our senior housing managed portfolio.
These increases were partially offset by lower NOI from than live in joint venture and higher interest and G&A costs.
Normalized <unk> normalized <unk> for this quarter included $1 $2 million up excess rents paid by Genesis pursuant to the memorandums of understanding entered into in 2017. When we began the disposition of a majority of our Genesis exposure.
As we noted last quarter. These brands had a burn off period of just over four years from the date. The properties were sold and are now reaching the end of that burn off period.
We expect the amount of excess Genesis ramps, we recognized in earnings to decrease to $1 1 million in the first quarter of 2023 and declined to approximately $200000 per quarter for each of the five quarters after that.
When the excess rent amount steps down in the second quarter of this year, we expect it to result in a reduction to our quarterly earnings run rate of just under one seven per share.
During the quarter, we successfully completed the transition of the portfolio, formerly leased to North American healthcare to ensign and have them here.
As noted on last quarter's call the earnings impact from this transition is expected to result in a reduction to our quarterly earnings run rate of just under one seven per share.
As of December 31, 2020 to less than 5% of our NOI is below one times EBITDAR coverage, which is in line with previous quarters.
Also as of December 31, 2022, our annualized cash NOI was $456 2 million.
And our state's exposure represented 58, 1% of our annualized cash NOI down 190 basis points from the third quarter and down 330 basis points from a year ago.
We expect this percentage to continue moving lower throughout 2023 as a result of our recently completed sniff sales and further earnings recovery in our senior housing managed portfolio.
G&A costs for the quarter totaled $10 9 million comp.
Compared to $9 $7 million in the third quarter of 2022.
The majority of this increase is due to adjusting our estimates for compensation that is based on 2020 to annual performance cash G&A for the quarter was $8 8 million compared to $7 6 million in the third quarter. After factoring in the adjustment and estimates that I noted cash G&A is basically flat sequentially.
Now turning to the balance sheet.
On January four 2023, we amended and restated aircraft facility, improving our debt maturity profile, while keeping capacity and pricing consistent with our prior credit prior credit facility.
As a result, we have no material debt maturities until 2026.
Shortly after amending and restating our credit facility, we entered into a series of current and forward starting interest rate swap agreements that cover the entire five year duration of the term loans under our credit facility.
Because these hedging activities are term loans totaling $547 million will have an average fixed rate of approximately 4% over the next five years, providing us with significant cost certainty and eliminating any long term exposure to floating rate debt.
The earnings benefit of this proactive approach to managing our interest expense is meaningful.
Annual interest expense would be over $12 million higher if our term loan debt remains floating at today's rates.
We are in compliance with all of our debt covenants and our liquidity as of December 31, 2022 totaled 852 million consisting of unrestricted cash and cash equivalents of $49 million and available borrowings of $803 million under our revolving credit facility.
Subsequent to December 31, we received approximately $159 million of gross proceeds from the sale of assets and repayments and the net proceeds were used to repay borrowings under our revolving credit facility further increasing our liquidity.
These asset sales and repayments are expected to reduce our quarterly earnings run rate by approximately <unk> <unk> per share.
As of December 31, 2022, and pro forma for the investment and disposition activity. Subsequent to December 31, our leverage was 538 times a sequential decrease of one two times.
We expect our leverage to further improve in future quarters. As a result of continued recovery in our senior housing managed portfolio and from any potential future asset sales. We continue to focus on strengthening our balance sheet and portfolio without having to access the capital markets until the cost is more favorable and we are well positioned to do just that.
On February one 2023, our board of directors declared a quarterly cash dividend of <unk> 30 per share of common stock the dividend will be paid on February 28, 2023 to common stockholders of record as of the close of business on February 13th 2023.
The dividend represents a payout of 81% of our normalized <unk> per share of <unk> 37.
Lastly, as Rick noted, we did not hit your guidance. This quarter. We continued to closely monitor the operational recovery of our portfolio and we are encouraged by the progress we continue to see on the occupancy cost side.
With that said labor pressures and operating headwinds still remain and visibility is limited to one of these factors will normalize in a way that would allow us to confidently estimate our earnings over the next several quarters. However, when you aggregate the various moving pieces I highlighted earlier and assuming all else remains equal the run rate for fourth quarter normalized <unk>.
<unk> per share will be between three to four cents lower than the reported number.
And with that we will open up the lines for Q&A.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from the line of Michael Griffin from Citi. Your line is open.
Hello. This is <unk> retires on for Michael Griffin My first question's on just the labor environment I mean, what are your expectations around labor.
Portfolio and any additional color you can provide on what your operators are seeing on the ground.
Yes look it's still a slug.
Better than it was and it continues to show some improvement, but it's really slow.
Is that the operators are most looking forward to to help them out on the labor side is very positive expected market basket on Medicare come October one before that.
Obviously this depends on the state you're in but we expect to see in July and August better than historical Medicaid rates.
No. There is of course, a core process in each state and there's a lag time before the actual core costs get reflected.
New rates and this summer, we'll start seeing that reflected really for the first time.
Next summer.
Or will it be reflected even more but we do expect some outsize Medicaid rates. This summer so that's going to help the operators quite a bit.
Other than that.
It's impossible to project.
<unk>.
Sort of the pace of this thing getting any better.
That's helpful. Thank you.
A follow up question is little bit on the transaction market.
What are you seeing in the transaction market in terms of investor appetite for skilled assets I know the capital recycling program is largely complete but.
I mean, what are your thoughts and any additional color there would be helpful.
I'll I'll take that.
The limiting factor is the availability and cost of bridge to HUD financing above all allows so the interest is there.
And I think we will continue to see.
Q of deals.
With various sellers.
But its all taking longer because that debt is.
It's just tougher to procure at the levels.
Amounts.
That people are easily able to obtain six months ago.
That's really the challenges is taking I think longer for for various sellers various buyers to get their deals done and that applies to all of the sellers out there are narrow money.
That's very helpful. Thank you that's all for me.
Your next question comes from the line of Juan Sanabria from BMO capital markets. Your line is open.
Hi, good morning.
Follow up question or a question for my question to say with regards to.
Can you kind of gave a run rate. So I was hoping you could maybe break.
The major pieces.
Point over at the very end of your prepared remarks, just to get a better sense of how we should.
Thinking about the model forward.
So I mean, the major pieces are like I like I said in the prepared remarks, we had cash basis rents, there's a timing difference, which I talked about on the third quarter call, where we received some ramps from tenants on a cash basis in the fourth quarter.
That should come in in the third quarter.
Broad third quarter down lower than it should have been about fourth quarter have higher than they should have been so just to normalize for that it's a little over a penny per share.
Per quarter, you also have the sales all the dispositions we completed throughout the fourth quarter and subsequent to the fourth quarter, that's going to be another one penny per share reduction.
And then the combination of the North American transition.
As well as <unk>.
Sorry on the second quarter, you have the Genesis excess rent stepping down.
But altogether and that's how I come up with a 3% to 4% reduction in run rate.
Okay. Thanks, and then just.
On the dispositions transitions.
Yes.
What is left dollar wise to sell and or.
To transition their that's left that you guys have done a lot here in the fourth and the early 'twenty three to start the year, but just curious the quantum of what's contemplated that's left at this point.
So we haven't disclosed what we have left the only thing I will say is that what's left is substantially less than what we just disclosed that we got done post year end.
Okay.
Thank you.
Your next question comes from the line of Vikram Malhotra from Mizuho. Your line is open.
Thanks for taking the questions maybe just to start off can you clarify.
You had some comments on collection, but I just wanted to make sure is there a number you can give us in terms of <unk>.
Collections in the quarter and then is there any percent of the tenant.
The skilled nursing denim based that is on that partially paid in the quarter.
Yes, so I mean in terms of rent collection, that's been pretty steady.
As it has been throughout the pandemic and the high 90 percentile range.
The hard part about using that number vikram is that because we have a percentage of our portfolio call. It 5% to 6% that's on a cash base truly on a cash basis, where the amounts we receive every months very.
It's going to jump around a little bit, but again, it's a small percentage of our portfolio that has remained consistent.
Okay. So there are no new tenants that are kind of were largely being in the quarter.
Not put any tenants on cash basis this quarter okay.
And then just to clarify so the <unk> run rate given the 3% to 4% that you mentioned I think you reported if im not wrong 34 cents.
And 37 cents, an adjusted 34.
Is without you redeploying the proceeds you have for new acquisitions is the is the right run rate somewhere in the low thirties as at 31.
In that range.
Well our normalized number is 37, so I think you would take that.
We make those adjustments as you deem fit.
Okay.
And then just last one any any broader comments you can give on a potential mandate around.
<unk> staffing and even anecdotally if what you've heard from us from a federal perspective, any specific states you would call out and what the impact periodically could be on operator financials. Thank you.
Yes, Vikram, it's really impossible to say now those discussions are still ongoing.
There isn't a whole lot of specificity to them.
The lobbying effort on the part of the trade Association and operators is really twofold, one anything that youre going to do needs to be paid for.
Certainly those discussions have occurred with CMS and seems too.
Acknowledged that that would be important.
I don't want to speak for them, but that was kind of our take on that but the other is.
Well I would just put a mandate in place.
When they are simply arent nurses out there.
So.
There was one state.
I believe it was Missouri, but I might be off on that.
Yes.
And this is very recent that did come out with staffing mandate. However, they worked with the industry and the industry actually.
Date was supportive of it because the mandate itself number one was reasonable number two there were incentives.
For being able to meet the mandate and qualifications around.
The effort being made to two.
Two procure new staff so in other words.
Our staffing shortages, but operators were able to demonstrate to the regulators.
A real good faith efforts has had that documented that they wouldn't be penalized for it.
So as a result of that in that state. It got operator support so thank you.
This work.
But it would have to be I think along those lines, but at this point, we have no idea, where it's going to fall.
Okay. Thanks for the color.
Yes.
Your next question comes from the line of Rich Anderson from NBC. Your line is open.
Good morning out there.
Okay.
It was said that youre expecting rate growth.
Of the 5% to 10% in your senior housing portfolio.
Does that hold true and it's.
Where it shows up in your portfolio, so whether it's a joint venture with TPG or.
Your managed wholly managed assets or even your triple net is it all of that in that 5% to 10% range or is it more or less in some of those buckets.
I can say affirmatively.
Our managed portfolio that Thats the case.
And even now more narrowly.
All of the operators within our wholly.
Wholly owned same store.
Numbers, that's very much the case because that is actually.
That information comes from.
It is.
It is yes, I think thats a reasonable range for the rest of the for the rest of the portfolio as well.
Hey.
Do you have any concerns around the country about future nursing strikes. We know we've had some of that going on in New York.
And.
In the conventional acute care hospital system, but is that something when you think about unionization of nursing around the country that youre keeping an eye on it and it has has keeps you up at night it will to a degree.
Well definitely doesn't keep me up at night.
I would say the answer is no one those strikes happened.
In states that are pretty fully utilized so not just in our space, but in other spaces.
We don't have a whole lot of exposure.
Thanks.
Sort of.
So it's a union environment.
So no it.
It really doesn't it really doesn't concern us.
State of California, New Orleans is strong in the north what's so strong in the south.
Our entire California portfolio, we have three facilities that are unionized.
Okay.
Last for me is I know you're going to kind of.
Keep it quiet or however, you wanted this year and sort of get your portfolio back into shape.
Return to growth next year to what degree are you missing.
By taking that path.
Is there anything going on transaction wise that if you were a little bit more active you could actually get more stuff done or is.
He is a convenient time to be quiet because not a lot going on anyway. So.
Kind of works it works out for Ya timing wise.
Yes, no. It's a fair question that we do actually a lot of transactions last year. It was a really healthy year for us.
Lot of those transactions or operations that are also improving the recovery over the course of the pandemic that are going to be accretive to earnings next year. This year I think there are a couple of factors one yes.
The activity is kind of light out there the debt markets change things.
Hello, you talked about.
Skilled nursing comment.
So it's just it's light in terms of opportunity.
And secondly.
Cost of capital is an issue.
We don't think until.
Phil.
All of the investment community believes that the industry really recovered or it's gotten a lot closer.
We think most everybody is going to trade relatively sideways.
So we wanted to be cognizant of that.
As well and if we did it.
But again, it's all because we feel really good about where we're going to be next year based on all the activity that we've done as we've said on past calls rich.
For us a lot of the focus of the pandemic has been to better position sabra to grow as we come out of the pandemic.
Between all of the initiatives with the transitions in the asset recycling all the balance sheet.
The new credit facility.
And the overall quality of the portfolio improving as a result of all these activities.
I, just think we're going to be much much stronger.
Coming out of the pandemic.
Sounds good thanks, Rick Thanks, everyone.
Thanks Rich.
Your next question comes from the line of Joshua <unk> from Bank of America. Your line is open.
Yeah, Hey, guys. Thanks for the time, Hey, Joe.
I guess I just wanted to follow up on a comment you mentioned in your opening remarks, Greg about.
Guidance sounds like you might issue. It later this year.
What are you waiting to see as far as like reinstating it Tony.
Kind of curious given your comments.
It's primarily a trajectory that we actually think it's predictable on senior senior housing.
So that's really the main thing we've seen when we experienced the <unk>.
Inability to project.
Well, we're actually we're giving guidance.
And with some of our peers, who have chosen to give guidance where in the next quarter. They have to make some changes on it it's just really difficult.
We've kind of jokingly said, but it's true.
And for me.
My decades in the business.
Ever been is wrong in terms of predicting as Ive been these last three years. So we just want a little bit more certainty in terms of the rate of the velocity of recovery.
Okay. Okay.
And then you brought up the public letter ruling we received in February 2000.
Yes.
20, I think.
Yes.
Curious why you brought that up and does it apply to any other assets or just the holiday assets just kind of given up.
It applies to the independent living assets in the states, which for US is primarily holiday.
Quarter, it up because it's gotten a lot of attention since willpower.
Received theirs and so.
It is something that's really good to have from an optionality perspective, even if you do.
To us the way they have this time, although it did allow us to put his transition holiday.
Right there is structure.
So I just wanted to.
Remind everybody because it feels like it's been longer than three years that we actually have a private letter ruling as well and I believe that we were the first in our space to house one.
Had that had that.
Outcome.
Okay.
There's a lot of us are not thank you.
Okay.
Your next question comes from the line of Steven Valiquette from Barclays. Your line is open.
Great. Thanks, Hello, everyone. Thanks for taking the question.
So I think a lot of the operational assessment covered so far but one thing just on the.
Kind of interest expense and balance sheet, you guys renewed extended the credit facility in early January closing dispositions, obviously things are already improving this year.
Despite those favorable developments amongst some of the health care REIT today, given 23 guidance one of the trends seem to be that an interest expense headwinds for 'twenty three have been greater than what was reflected in street consensus at least for a few companies. So.
Given 23 operational guidance, but im wondering if you can at least just talk Directionally, just where you think interest expense might shake out for <unk>.
<unk> three versus $105 million just reported for 'twenty two just directionally just based on the variables that you're aware of today just to make sure one yes.
Sure Yes.
The two variables there would be any variable rate debt pardon the pun.
So we have in our portfolio going in right before we did the credit facility all of our variable rate debt, excluding our credit.
Our revolver balance was.
<unk> effectively fixed we had already swaps in place I mean, as I mentioned in my prepared remarks, we entered into additional swaps and.
Current sorry to enforce our swaps to lock in that interest for the next five years. So if you look at the predominance of our debt that's outstanding it's all fixed rate between our public bonds and our term loans and we have a little bit of mortgage debt as well, it's all fixed rate.
The only variability you would experience with that we would experience from from the debt side would be on our revolver balance, but we've paid that down significantly subsequent to year end and we'll continue to look to pay that down through available cash flow if theres additional sales proceeds.
We generate more earnings out of our senior housing managed portfolio, that's all going to help reduce that balance down even further.
To then reduce whatever exposure, we may have to variable rates.
Okay got it.
Okay. One other kind of random question here you talked about.
The <unk>, obviously, that's for independent living and kind of just for data structure overall, but.
I guess I'm kind of curious on if you do believe that there is a potential turnaround in the sniff sector longer term.
Does it make sense at some point to explore even doing the data structure for skilled nursing. Yes. There are some other reits that are involved in that and wondered if that's ever crossed your mind or if that's something you want to steer away from for other reasons, just curious to get your high level thoughts around that.
Yeah. So.
You will have people will say never say never this is like never ever.
Will it happen.
There's only one rig out there thats done that the private non traded REIT.
No I think the the liability is tremendous it's different with skill.
The skilled nursing space there is a national database called nursing home compare and that's where the trial attorneys go they go into that database and they go fishing and they look for facilities that have had.
Certain numbers of efficiencies your issues with the regulators its right there for the takeaway put classes around that so.
Whereas in senior housing the private pay industry with no federal regulations that doesn't exist.
So.
To me that's huge huge liability risks there and this has come up on occasion over the years.
Just won't do it.
Just not going to happen.
Alright I appreciate it.
Yes, sure and the other thing I would.
Just point out it wasn't Missouri that has the state mandates and some industry supported its state of Virginia. So I just wanted to clarify that.
Your next question comes from the line of Tayo Okusanya from Credit Suisse. Your line is open.
Hi, Yes, good morning out there I just wanted a clarification on the Enlightenment J b.
I think Mike you made commentary that the JV.
Net contributions to your bottom line this quarter than last quarter, which again seems contrary to what's happening in your wholly owned portfolio. So can we just talk a little bit about kind of the outlook for the alignment JV and maybe any.
Date on topped with TPG about a potential sale.
So the sale process is ongoing and you are right about the trends there are counter to what we're seeing elsewhere in the portfolio, which we've seen some really great gains on the al side and the issue really is.
For anybody that's ever taken the company to a sales process.
So a lot of uncertainty in the sort of a.
Very big distraction for management in this case.
Sale process was supposed to start after labor day of 2021, which is why we had to make an announcement on our second quarter call of 'twenty one.
So it's going to happen and we had to address it.
In terms of the write down as well so.
Then they decided not to start the sale process at that point in time can you just kind of 18 months now or in the form of hangover ahead of the portfolio.
And it's created problems, there's been a lot of attrition.
It's been a big distraction for the management team and I give the management team there a lot of credit for essentially being able to sort of hold steady.
We will pull process.
It is being marketed now.
<unk>.
No.
From our perspective.
Don't expect much.
Yeah, and the only thing I would add to that in addition to what Rick said on the operating performance. If you recall, that's a pretty high highly levered portfolio, so debt service costs eating away at <unk> as well.
Got you Okay. That's helpful.
Yes, and yes.
With occupancy down.
You talked about you continue to kind of trend down versus the rest of your portfolio, that's improving or can you give us a sense of are we going to do what.
It's happening.
This was flat.
Slide it's just not it's not going up it's not going down and Thats why.
So.
Basically holding serve and I give them credit for that given everything that they've gone through but the other thing I want to remind everybody that relative to the support payments that had been ongoing for the operating company, we don't contribute anything to those.
Yes.
Some of that comes from Sabra.
Okay. That's helpful. Thank you.
Yes.
And again, if you would like to ask a question Press Star then the number one on your telephone keypad. Your next question comes from the line of John Pawlowski from Green Street. Your line is open.
Thanks, and maybe just a follow up to that last question.
Assuming the credit markets remain challenging Rick would you expect or do you expect to have to invest additional capital into that JV with TPG can't find a seller.
No buyer.
No we.
We don't have that expectation, we've made that clear.
TPG as well so.
We haven't been investing anything and we don't intend to divest anything.
The debt is nonrecourse.
We actually could just walk.
If we think that's the right thing to do.
Okay understood.
One for you tell you with respect to your mortgage loans and preferred equity investments can you give me a sense for how well cover the debt service costs are today.
And if you are becoming incrementally more concerned about just credit behind.
Any of the properties.
There's only one.
Loan that's really more substantial.
And that is our bond to RCA, which is collateralized by six assets.
And.
Their operations are improving.
So we're not we're not really concerned those are core assets to their operations.
And be there.
They are on the upswing from an occupancy and EBITDA and coverage perspective, so we have a degree of confidence there.
Okay and on the <unk>.
Third equity side and any concerns there.
No. It's that's a pretty small amount of money at this point.
No.
Sure.
Hello.
Okay.
Okay.
Thank you.
Rob I think we're done then.
Well, thanks, everybody for their participation today, we appreciate it we are available as always for any follow up.
Have a great day. Thank you.
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