Q2 2023 Sabra Health Care REIT Inc Earnings Call
Yes.
Good day, everyone. My name is Juan deepen and I'll be your conference operator today at this time.
I would like to welcome everyone to the Sabra second quarter 2023 earnings call all lines will be placed on mute to prevent any background noise.
The speaker's remarks, there will be a question and answer session.
Like to ask a question. During this time simply press star followed by number one on your telephone keypad, if you'd like to withdraw your question press the pound key I would now like to turn the call over to Lukas Heart, which S. BNP Finance. Please go ahead, Mr Erhart, which.
Disposition and investment plans.
Forward looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results or 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 investors are encouraged to review these non-GAAP financial measures as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the financials page of the investors section of our website at Sabra health Dot com.
Our Form 10-Q earnings release and supplement can also be accessed in the investors section of our website.
With that let me turn the call over to Rick matrix, CEO , President and chair of Sabra Health care REIT. Thanks, Luca and good day, everyone, who start off with reimbursement so as everybody knows the final Medicare market basket was 4% up from three 7% of the proposed rule importantly, though this is a second and last year the parity.
Adjustments without the parity adjustments the increase would have been six 4%, indicating that the formula is capturing increased operating cost, which bodes well for next year's market basket.
I'm on the Medicaid side of the business, we're seeing increases well above historical averages.
I recall, probably for 10 years or more before the pandemic Medicare.
Medicaid in the aggregate.
Was averaging about a point and a half percent increase a year, we're anticipating now.
In the aggregate for Sabra portfolio the increases for this year will be over 5%, we got in a number of the rates already in place.
A more kind of on the way so.
Over 5%, we think is a good number and we would also remind everybody because of the lag time and the cost report process. As we look forward to next year's rates, we expect them to be even stronger so.
Yes, some really nice tail winds on the reimbursement side there.
Moving on to operations, our coverages continue to improve broadly occupancy is increasing and our skills and our al portfolio is labor is slowly getting better all leading to margin improvement in our primary asset classes. None of this is happening quickly, but it is happening.
As much as the coverage improved and with what we reported our trailing three.
EBITA coverage for skilled has improved three quarters in a row and now is at 1.68, excluding prs, so actually quite a bit higher than even what the trailing 12 shows occupancy occupancy continues to move up beyond the quarter and that along with the declining labor expenses.
Have contributed to that coverage.
We have significant upside with the transition of what were the 11 wholly owned and live it.
And memory care buildings, two in spirit, the transition happened more quickly than we anticipated.
It was very cooperative it went really well no frictional costs.
And that portfolio has underperformed the space for reasons that I think everybody is aware of and I would remind everybody that prior to the pandemic that portfolio was in the mid ninety's from an occupancy perspective.
So at 76% or so occupancy today, there's really pretty dramatic upside there and given the size of our managed portfolio will have.
A disproportionate impact.
As we look at earnings going forward.
While we do not provide guidance given the specificity, we're looking for relative to timing on the recovery of the managed portfolio facility transitions. We now have enough visibility to provide a bridge back to earnings growth that we provided in the supplemental and in the investor deck that we released.
<unk> filed yesterday, and while Theres no timeframe associated with that it is a reasonable timeframe and serves as a blueprint that will help us as we get closer to 2024 and put out 2020 for guidance.
Current acquisition pipeline is light and as we've said given our current cost of capital we wouldn't expect to do much at this time, but that earnings upside demonstrates that.
There is an opportunity for us to get very active again as we move into 2024 that said all of the factors I cited that is strengthening the portfolio providing earnings growth as we look forward to 2024, we do believe just to emphasize a point that it will result in the cost of our equity.
Improving and with that I will turn the call over to tell you. Thank you Rick.
I will first address the results of our managed senior housing portfolio and then provide a brief update on our behavioral health investments. Our wholly owned managed senior housing portfolio continues to recover with cash net operating income and margin as well as reservoir trending up over the past five quarters. The headline numbers for the wholly owned managed portfolio.
The same store basis, excluding non stabilized assets in government stimulus are as follows occupancy for the second quarter of 2023 was 79, 9% a 50 basis point decrease over the second quarter of 2022 quarterly occupancy in our assisted living portfolio continued to increase improve.
120 basis points over the prior quarter and 250 basis points over the second quarter of 2022.
Revpar in the second quarter of 2023 increased by 7% over the second quarter of 2022, driven by continued rate increases achieved in our larger portfolios, which have targeted 10% for anniversary.
Anniversary increases strong rate growth persists, among all its sabra operators, although realized increases were 5% to 7% in the quarter rather than the 9% to 10% we saw in the prior quarter.
Excluding government stimulus funds cash net operating income for the quarter was slightly off of the prior quarter, but 24% higher than in the second quarter of 2022, driven by continued margin recovery, particularly in our wholly owned and lightning portfolio, which benefited from strong operating leverage that portfolio was transitioned to.
Spirit's senior living shortly after the start of the third quarter, excluding three communities that were impacted by specific events, such as leadership turnover and renovation.
<unk> same store holiday communities posted year over year cash NOI growth of 17% in the second quarter of 2023. Following 2020, following 22% year over year cash NOI growth in the prior quarter, excluding those three properties <unk> wholly owned managed portfolio.
It would have achieved nearly 31% year over year NOI growth this past quarter.
Our now at least stabilized senior housing portfolio has seen a full recovery to pre pandemic occupancy and improving EBITDA coverage occupancy growth has outpaced our managed portfolio largely because the net lease portfolio was mostly assisted living and memory care community. In addition, we have transitioned a few.
Lesser performing lease that communities to the managed portfolio, which allows us to participate in their financial recovery.
Beginning this past June the holiday portfolio has had two consecutive months of positive net occupancy growth with July being exceptionally strong and then mentum carrying over into August .
<unk> implemented a renovation program across the holiday portfolio in line with what other owners are doing while only two projects have been completed so far we expect that these improvements once completed will support accelerated occupancy growth continued strong leasing results and ongoing positive leasing spreads should boost <unk>.
Operating results across the holiday portfolio.
Comparing second quarter 2023 in the second quarter of 2022, excluding government stimulus or U S communities have outperformed the Canadian assets on cash in a way NOI and margin Revpar and expense growth, although our Canadian communities have had significant growth in revenue and occupancy the factors impacting expense.
Gross in particular labor has lagged the recovery trends in the U S. But are now moving in the right direction. We continue to invest in our behavioral health portfolio, primarily through the conversion of existing owned properties. This is a granular process and takes time at the end of the second quarter of Sabra investment in behavioral health included <unk>.
17 properties and two mortgages with a total investment of just over $800 million.
And with that I will turn the call over to Michael Costa Fabrice Chief Financial Officer.
Thanks Tanya.
For the second quarter of 2023, we recognize normalized <unk> per share of <unk> 33.
Our normalized <unk> per share of <unk> 34.
These results are consistent with the expected normalized <unk> and normalized <unk> run rate of between 33 and 34 cents per share that we have shared over the last several quarters.
Also as of June 32023, our annualized cash NOI was $458 5 million and our sniff exposure represented 55, 7% of our annualized cash NOI.
100 basis points from the first quarter and down 500 basis points from a year ago. Our portfolio is the most diversified it has ever been with our sniff concentration, reaching its lowest point in our history.
Additionally, our sniff concentration will decrease further as we realize the embedded upside opportunities in our portfolio.
In both our supplement and our Investor presentation that we released yesterday, we have included a table, which illustrates the upside opportunity in our portfolio from the recovery in our managed senior housing portfolio as well as the stabilization of our previously disclosed property transitions and behavioral conversions.
Once realized this increase NOI will not only provide meaningful further future earnings growth, but also naturally diversify our portfolio further and delever our balance sheet.
During a time, where accretive external growth is challenging due to our elevated cost of capital proactive management of our existing portfolio has been and will continue to be the best source of earnings growth now.
Now turning to the balance sheet.
Our net debt to adjusted EBITDA ratio was 561 times as of June 32023.
As we have noted the last several quarters there have been some notable decreases in our earnings run rate, namely the burning off of the Genesis excess rents the transitioning of the portfolio, formerly operated by North American to Ensign and <unk> and the impact of transitioning facilities to new operators and new operating models.
These items have created a drag on near term earnings and likewise increased our net debt to adjusted EBITDA ratio.
Accordingly, the increases we have seen in this ratio over the last few quarters were expected as a result of these factors and we expect leverage to continue increasing slightly over the next several quarters as the full impact of these changes make their way into our trailing 12 months EBITDA. Importantly, however, this leverage impact is short term in nature and the upside.
As I discussed earlier, we will have a positive impact on our leverage up to.
Two a half turn of improvement in leverage once realized.
We remain committed to our long term average leverage target of five times and because of the embedded upside in our portfolio together with the proceeds from any potential future disposition activity. We are confident that we can achieve that target over time without needing to access the capital markets.
As of June 32023, we are in compliance with all of our debt covenants and have ample liquidity of over $926 million.
Consisting of unrestricted cash and cash equivalents of $27 million and available borrowings of $899 million under our revolving credit facility.
We have no material near term debt maturities. Our next material debt maturity is in the second half of 2026 and our weighted average debt maturity is currently at six years.
Excluding our revolving credit facility, which makes up just four 1% of our total debt we have no floating rate debt exposure and our cost of permanent debt is 394% as of June 32023.
Finally on August seven 2023, our board of directors declared a quarterly cash dividend of 30 <unk>.
<unk> share of common stock.
The dividend will be paid on August 31, 2023 to common stockholders of record as of the close of business on August 17, 2023, the dividend represents a payout of 88% of our normalized <unk> per share and with that we'll open up the lines for Q&A.
Yes.
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, we'll pause for just a moment to compile the Q&A roster.
Okay.
Your first question comes from the line of want Sam Barilla from BMO capital markets.
Line is open.
Hi, good morning.
I was hoping you could talk a little bit about the shop portfolio and what you're seeing.
Hey al versus IL.
Expectations for.
What cash flow shifting out of it.
What the transition is going on in that live and should we expect further degradation from our live it.
With the transition or is the next step up before it.
Rather than going down.
Yes, and as I said in my opening remarks, we don't expect any downside there at all.
The transition has happened it's been a month everything is going really well there. So we expect to only upside as long as just a matter of how quick it gets there, but that's why I put out the.
Pre pandemic occupancy as a benchmark in terms of what we're looking forward to over time.
Could you just comment on the relative performance at al versus IL and that same store pool.
Sure So it's tonya.
We've talked about how in the past I think for every quarter for quite a while how they've performed differently IL didn't go down as far it hasnt come up hasn't hasn't bounced back as as quickly.
It's just the amplitude of the change has been different.
Say on the bulk a lot of our our IL and Canada isn't has performed.
Also with sort of similar dampened amplitude in terms of how it went down.
Occupancy and therefore the rebound.
And that's driven by the whole aspect of being a needs based I think the the other PC equation really goes to some of the opportunities for renovation to the extent that we haven't been able to get in and renovate.
Holiday assets during the pandemic, whereas we're in catch up mode. As they are altogether, I think landlords and owners at this time and that's a meaningful factor because those assets are not being five years old they're they're older and there is an opportunity there to really improve them.
And the only other thing I'd add one just to remind everybody I also very different operating model. It's optional even though there has been some acuity create but it's not needs based.
It doesn't have the same labor needs or issues that have affected the other asset classes through the pandemic and its started out pre pandemic.
The margins at holiday in our portfolio were 40% or better. So it started out with much higher margins to begin with so.
I really think that business I know, it's hard for folks everybody is locked a lot of things to pay attention to but I really think that business is different enough that it really needs to be assessed kind of on its own and not always being compared to al.
And just going forward should.
We expect further transitions or or do you think at this point.
From what you know now where we're kind of through that part of the equation either on the shopper the triple net side I guess for that matter.
I think we're pretty close to through I mean, other than the occasional ordinary course of business stuff that probably not even notice.
Okay.
Thank you.
Okay.
Our next question comes from the line of Austin worse Schmidt from Keybanc. Your line is open.
Great. Thank you.
First off any known additional offsets to the $42 million of NOI upside that you highlighted this quarter.
What are the remaining capital requirements to achieve that $42 million.
Yes, so in terms of offsets I mean, nothing notable comes to mind on that.
I mean, those are just going to naturally occur over a period of time as those facilities stabilize.
As the senior housing managed portfolio continues to recover as it has been.
So nothing notable offsetting that.
To point out in terms of additional capital I mean, the capital for those specific items on the conversion side as we've talked about in the past.
There is capital that we would need to be invested in those but it's really small dollars in the grand scheme of things far far smaller than buying something in the market.
To renovate a wing or to put some dollars into our property.
So again nothing material that we foresee in terms of capital needs that would need to be.
In order to realize that.
And then just absent I guess any big improvement in the senior housing managed and I realize you're not giving guidance, but it's 33% to 34 cents still be appropriate quarterly run rate and then these other.
Elements of when the 40, some portion of the 42 million hits could be incremental upside from here.
Yeah, I mean, the 33 to 34 set run rate is still a good run rate to use you know I would say for the next quarter and then we'll have to reassess it at that point once we see how performance is shaping up in terms of the timing of getting to that upside.
It's going to depend on again when we've.
When when you believe that the senior housing space is going to return to pre pandemic performance.
That's really the largest driver of that number.
We don't think its three years away necessarily but we don't think it's going to be by the end of this year either.
No. That's fair and then just last one for me you guys did a roughly 20 million of dispositions. I think you had said 50 million through year end is that still the right figure is that you know.
Some of that concentrated with some of the call. It less core assets are leased to signature.
And that's it for me.
That's not related to a signature.
And in terms of what we expect to dispose of yes, we have some more that we're looking at again, it's not going to be of the size of what we completed earlier this year or anything like that and there is always going to be some sales in the normal course of business, but in terms of our.
Larger dollar disposition activity.
Most of that is behind us.
Understood. Thank you.
Our next question comes from the line of Vikram Malhotra from Mizuho. Your line is open.
Thanks for taking the question so just Claire.
Clarifying on that on that your comments around the long term goal.
$42 million.
You know some of your peers have outlined.
Similar sort of thought the waves and given occupancy and margin targets I guess that at the end of it all do you mind, just giving us a flavor I think I know you referenced the 90 occupancy upside, but just specifically to get to that 42 million whats the shop occupancy and the margin embedded in that.
Yeah. So that's actually we footnoted in that table there. So what we've highlighted is the occupancy.
And margin as it is.
Sits today.
And effectively what that assumes that upside assumes is just getting back to where its at pre COVID-19, which was I'm trying to pull up the exact number I think it was like 87% occupancy pre COVID-19 and 33% margin pre COVID-19.
It assumes nothing beyond that and we do think given the demographics there is definitely a.
An opportunity to exceed those numbers in time.
So again, we're just we're just modeling out to get back to those pre COVID-19 levels and up and above that.
And just to clarify your comment about one not one year not three years. So let's just take two weird that just is that assuming the current occupancy gain you've seen this year. Just continues it would seem like that but just wanted to clarify.
Oh, that's what you're assuming in terms of getting back to the pre COVID-19.
Tricks.
Yes, I think Thats, a fair assumption vikram.
Okay.
And then just I wanted to also I wouldn't I wouldn't split debate between one and three years either.
Yes.
Okay fair enough I'll leave it at one to three.
Just to clarify so on the run rate.
Could you give us a little bit more color on the benefits you may be starting to see from all the transactions you did I want to say a year ago or a completed a couple of quarters ago. There's 20 assets us all 15 that but how is that starting to impact the the earnings run rate and then based on that.
The transition you've just did what's.
What's the put here what are the puts and takes to the run rate based on the prior transition and the one you just did.
So the transition so in that table. We note. The previously disclosed 25 properties that were transitioned those of the same 25 properties, we talked about last year at this time.
And if we recall, we were estimating somewhere around $10 million of upside.
And that cable last year, and now we're showing $5 million of upside. So it's safe to assume that we were already realized about $5 million of that upside in our current numbers and there is $5 million left to be attained there.
And sorry, just to clarify so 5 million will hit at some point in the next few quarters, but then is there an offset to that or that's just additive to the run rate right now.
Additive to the run rate.
Thank you.
Your next question comes from the line of payout.
From Barry Bergman.
Your line is open.
Hey, good morning, Rick Kutani could you provide some color on the <unk> transition during spirit. It sounds like it was down faster than you expected I think you also transition to triple net senior housing assets to the same operator, because I think both hanging shop now how do you. The conversation came up on and why did you pick that particular operator.
Can you also talk about if there are any meaningful changes to the management contract there.
Sure so.
We have known the CEO of in spirit.
Yes.
We bought those two leased assets because he was he was basically.
How does that how does that company that operated those he ended up going out on its own.
And.
Wendy.
Existing tenant decided they wanted to exit the business and actually put their other assets up for their owned assets up for sale, we decided to transition as well and since we knew Dave and we knew and.
And we knew he with his knowledge base of those assets and see random for years it made complete sense.
The <unk> assets, we looked at several operators.
<unk> focused on in spirit, because this fit incredibly well with our geography, and we had a very good.
Sense of.
There are.
Level of focus and ability to execute within that geography.
So we went and salmon. So that's how that's how that came to be it was kind of fortuitous they happened sequentially in that way.
In terms of management agreement.
The terms are not materially different than what we have in place are slightly different from what we had within <unk>, but not anything material.
Got it thanks for the details.
My follow up is on rate expectations, I think Rick I heard you talking about next year's rate being stronger just to clarify is that on Medicare or Medicaid and could you also talk about the shelf regret poor expectation I think you can lie.
And as single coming up in October just curious in terms of resetting expectations. There. Thank you.
Yeah. So I was talking about Medicare and Medicaid that's why I gave the example of.
This year's rate market basket for Medicare in last year's was suppressed because of the parity adjustment from a couple of years ago. So that goes away next year that was actually a pretty big hit it's a difference between a 4% market basket this year and a six 4% market basket this year.
Medicare is a little bit more current on capturing inflation than a lot of the state Medicaid systems. So we would anticipate next year's rate.
Being quite strong as well, both because it'll be capturing inflation and then the fact that we won't have a parity adjustment on Medicaid. There's just always a lag on the cost report systems and so by the time, we get to next year's rates Bill fully capture in most every state.
22, which was the highest point of inflation that we've had.
Obviously, it's come down since 2022, there is one of the reasons that the rates are so strong for this year is there are a number of states that decided to sort of override the formula because the formula it wasn't reflecting.
More current inflation and so some of those states received better rates, we saw that in Ohio, We saw that in Washington, and Oregon, We saw that in Kentucky, We started a number of places so.
So I think in that.
That's always been one of the takeaways from what happened during Covid is sort of a newfound awareness on the part of a lot of states that Medicaid has been underfunded. So that's why we anticipate rates being even stronger next year than they are this year.
It's formulaic.
And then questions on shop report.
So we exit so I think I told you were.
<unk> achieved results.
<unk> half or slightly lower this quarter than before.
Specifically on the in line portfolio I believe you were focused on.
The expectation is that the October increases will happen.
I don't have a sense yet of what that rate increase is going to be but I would expect them to be 5% or higher. So there is still on the higher side of things given the inflationary environment, but.
Not probably not as high as some of the 10% increases we had seen several months ago.
We will keep you posted.
That's fair thank you.
Our next question comes from the line of Michael Griffin from Citi. Your line is open.
Great. Thanks, just almost no sales this quarter could you quantify maybe a cap rate perspective, or valuation kind of where assets are trading in the market. These days.
Yeah in terms of those sales there the cap rate on those and I guess defined cap rate.
We look at the yield comparing.
Comparing the rent that we were getting on those assets.
Impairing that to the proceeds you received it's in that high single digit range.
We've been talking about the last several quarters, so pretty consistent with that.
Great.
Okay.
Sorry, and then just go into thoughts about the minimum staffing requirement I'm curious if any conversations you've had with industry participants I think thats.
No secret how this might end up shaking out, but any thoughts you have on minimum staffing and expectations for the back half of the year.
So pretty much the same as you've heard from our peers. During this earnings season and that is.
Implementation has been delayed again.
And our expectation well a couple of things one the fact that this keeps getting delayed we view as a positive because.
CMS is really listening to all the concerns of the industry has and the need to give the industry time to recover more and just.
Fact that you can required everywhere require but if people don't exist they don't exist to be hired.
So.
So I think that.
This is going to be phased in over some period of time.
In the phase it won't start for quite some period of time. So that's about as much as I think I know at this point.
So certainly nothing.
That would reflect the concerns we have on this first when this first came up.
Great. That's it for me thanks for the time.
Thanks.
Your next question comes from the line of Joshua <unk> from Bank of America. Your line is open.
Yeah.
Yeah, Hey, guys I appreciate the time.
I. Appreciate you guys are just staying more disciplined on that.
External growth side.
But if when you when you get to a point, where you want to resume at what where are you seeing the most kind of attractive opportunities as a behavioral Smith senior housing something else I'm just curious.
Oh boy, it's a little tough to answer that I think for us right now.
Acquiring things had a reasonable acquiring assets at a reasonable price with sustained earnings potential is the most critical piece.
Frankly in the senior housing space that is hard to find unless youre right were going to buy something that is going to yield a three or a four today may require capital and maybe over time will get you into more of an <unk>, which is really more of an IRR play. So there's not a lot that sits in the box that we'd really like.
Right now we are seeing a bit in the skilled space.
That's that could make sense for us we occasionally see opportunities in senior housing.
But we're being extremely picky I think as we get further into this year and certainly next year, we will see kind of a more normal flow of assets coming into the pipeline sellers that have been holding off.
As the recovery continues for both in senior housing and skilled I think will be more amenable to.
Putting their assets up for sale so.
It's still sort of not a normal kind of slow that we've historically seen but I think.
That should get there and then we'll have more opportunities to take a look at and hopefully our cost of equity be better at that point as well.
I want to add one other thing right now the assets we're seeing marketed.
On the far less interest in the assets, we're seeing on an off market basis.
I think that's that's not that different from other <unk>.
<unk> okay.
Okay, Yeah, no I appreciate the color.
Mike just wanted to follow up on your leverage comment I appreciate it's ticking higher business.
None of those.
Things worked through.
To get back down to five times it sounds like.
Didn't need equity I guess whats the timeframe.
I guess, how should we think about like the peak.
Then that drift back down to five times.
Yes, so that timeframe.
Theres going to be driven by how how quickly we.
We see that upside materialize.
You know as we've said the trends continue up continue to be upward. So as we continue to realize some of that upside thats going to incrementally help our leverage out to get to that full realization.
Again, it's not going to be this year, but we don't think it's going to be three years either.
Taken Rick's comments from earlier, we think it's going to be closer to maybe by the end of next year, where we will see that upside realized and that's going to impact our leverage in a very positive way.
To the extent there are any future sales.
We do in the normal course of business, that's just going to be additive to that.
Okay I appreciate that thanks, guys.
Yes.
Your next question comes from the line of Steven Valiquette from Barclays. Your line is open.
Great. Thanks for taking the question.
I guess, just a follow up on the earlier discussion on the IL performance you guys mentioned that you've been flagging, a little slower recovery in IL for a little while now and your own managed portfolio.
It seems like this is the first quarter in some time, where suddenly several Reits and operators in the overall industry are talking about some unexpected level of softness in IL. So I guess I'm just curious from your own perspective should we should investors. Just concluded is just maybe just a bit more price sensitivity.
Among IL residents because it's less needs base that you mentioned or is there anything else you can point to just from your own perspective that would.
Exacerbate the overall IL industry softness in <unk> specifically.
Yes.
Yeah, I don't think that there is anything specific I think we've got certain things in our portfolio.
Renovations that had been.
Delayed because of the pandemic that are happening now that has impacted occupancy sound, but thats, all going to bode well for the future.
Our holiday portfolio is a little bit different than some of the others because about one third of the assets and at our assets at holiday had acquired in are not sort of a blueprint holiday.
The holiday assets. So there is some different markets. So we actually feel good about the portfolio.
The fact that it isn't need space. We think certainly has had the biggest impact.
And we can talk about some of the specific things like.
Move outs from pent up demand a couple of years going all of that kind of stuff, but I think just the fact that it is not needed space.
Is.
As a primary driver.
Pricing is pretty reasonable for most products.
Like all pricing with all the various levels of care and all of that so.
I, just think people want to stay home as long as I can sale.
Okay got it okay. Appreciate the extra color. Thanks.
Your next question comes from the line of John Pawlowski from Green Street. Your line is open.
Thanks, That's all I have a follow up question on the new transaction market commentary.
Syed what yields do you think you can sell and buy at today, if it's a substantial volume of properties traded hands.
Yeah.
Nashville time.
Okay.
This is like a multipart clears here.
So I would say that a.
We'd be buyers.
Probably at a nine and a half plus.
So anything so it's nine or below we'd be a seller.
[laughter] connect what can I say I think people are I think are I think you've heard other each talk about fine.
Nine plus yield so that's in line with what we are seeing some opportunities and we're focused on making sure that everything is accretive.
If we're going to do anything.
And then yes I think.
<unk> buying from us.
I think Mike mentioned earlier, it's they're often buying real estate and operations, which is it can vary different equation from the one that we have so they could easily be buying is not.
Nominal 12% yield or even less.
Which for us looks like.
And it could.
It could be a five or a.
Seven alright, even maybe even an 8% yield on the real estate only.
The only other thing I'd add is pre pandemic.
But your eight handle deals on skilled when it was really high quality stuff or larger portfolios, where there was sort of a premium that went along with larger portfolio, but I think given the pandemic and how many operators are kind of put out of business.
And really separated.
In terms of how good how good day, where and what.
Work pre pandemic doesn't really necessarily work now so I think our thinking is at.
Really it's nine handle this call you said or higher it's hard to.
It's hard to rationalize at this point, where the industry is in.
There is still improvement to be had.
Start doing acquisitions with an eight handle on the skilled space.
Alright, Okay, all right I appreciate it but we'll see.
Sell it that way right and we have been but that's different.
Yes, I appreciate the comments last one for me.
I'm just trying to wrap my arms around a kind of capex profile. The senior housing managed portfolio over the next three to five years post COVID-19 environment, but could you give us any any color on what you think a reasonable annual run rate of Capex per door capex as a percentage of NOI. However, you want to frame it but whats the reasonable annual.
Spend level for your senior housing managed portfolio over the next three to five years.
Other than some of the catch up I mentioned on a small number of the holiday properties. So we don't see as being different than what it's historically been.
So.
We can spend some time with you offline if you want to capture some of those older numbers, but we don't see anything dramatic changing there.
We've got our portfolio right.
Those are just to give you a sense those renovations are really.
And sort of an update of the fit and finishes and the furniture, so chandelier lighting paint things like furniture as I said because.
As units apartments turnover, they get refreshed and renovated every cup. So so that's not the core piece of it it's really the common spaces.
Okay. Thank you.
Our next question comes from the line of one Sam Bria from BMO capital markets. Your line is open.
Hi, Thanks for the time on the follow up just a couple of questions I guess just shop in general are you seeing any greater.
Price competition.
It's because of distress or other factors.
Across any of the businesses al IL, either discounting or a rent concessions and such.
I haven't heard any operator talk about that actually.
Okay and then just.
Okay.
And then just one quick follow up if I look at the supplemental the same store shop disclosure.
It looks like the IL and al Revpar at those changed in the low 6% range I'm not sure.
Yes.
But is there any sort of mix or other issues to think about as to why the total grew 7% versus the pieces each grew.
6%.
Just the mix.
It's just the mix.
Okay I'll follow up offline. Thank you.
Again, if you'd like to ask a question.
<unk> then the number one on your telephone keypad.
Okay.
We do have a question from the line of Alex <unk> from Baird. Your line is open.
Yeah.
Hey, good morning, Thank you for taking my question.
I'm kind of curious on the $17 9 million paid an additional considerations related to the two senior housing managed communities.
But what are the performance metrics achieved and how many more contingent consideration costs do you expect for the rest of this year or in 2024.
Yeah in terms of future contingent consideration, we don't have any outstanding at this time.
In terms of that actual payment, yes that was that.
That was related to a few properties, we took down from our development pipeline.
Several quarters ago, and because of the performance the outperformance of those facility subsequent to our purchase their earn out arrangement in there which was what drove that additional payments. So it's actually a good thing right. Those those portfolios have outperformed our expectations and resulted in us making incremental investment there.
Yes.
Thank you for the color good luck in the second half.
Thank you Keith Thank you.
There are no further questions at this time.
I turn the call back over to Rick matrix.
Thanks, everybody for your time today, we appreciate it as always we're available for any follow up look forward to talking to you and look forward to seeing you some of the conferences.
After labor day take care.
This concludes today's conference call you may now disconnect.
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