Q3 2023 Omega Healthcare Investors Inc Earnings Call
Greetings and welcome to the Omega healthcare investors third quarter 2023 earnings conference call.
Speaker 1: Greetings and welcome to the Omega Healthcare Investors Third Quarter 2023 earnings conference call. At this time, all participants are on a listen only mode. After...
At this time all participants are in a listen only mode.
After todays presentation, there will be a brief question and answer session.
Speaker 1: If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded.
Speaker 1: I would now like to turn the conference over to Michelle Reber. You may begin.
I would now like to turn the conference over to Michelle Reiber, you may begin.
Speaker 2: Thank you and good morning. With me today are Omega CEO Taylor Pickett, COO Dan Booth, CFO Bob Stevenson, and Megan Kroll, Senior Vice President of Operations.
Thank you and good morning with me today are Omega CEO Taylor Pickett C O O Dan Booth.
Bob Stephenson and Megan Kroll senior Vice President of operations.
Speaker 2: Comments made during this conference call that are not historical facts may be forward looking statements, such as statements regarding our financial projections, dividend policy, portfolio restructuring, rent payments, financial condition or prospects of our operators, contemplated acquisitions, dispositions or transitions, and our business and portfolio outlook generally. These forward looking statements involve risks and uncertainties which may cause actual results to differ materially.
<unk> made during this conference call that are not historical facts may be forward looking statements such as statements regarding our financial projections dividend policy portfolio restructurings rent payments financial condition or prospects of our operators contemplated acquisitions dispositions or transitions and our business and portfolio outlook generally.
These forward looking statements involve risks and uncertainties, which may cause actual results to differ materially. Please see our press releases and our filings with the Securities and Exchange Commission, including without limitation. Our most recent report on Form 10-K, which identifies specific factors that may cause actual results or events to differ materially from those described.
Speaker 2: Please see our press releases and our filings with the Securities and Exchange Commission, including without limitation our most recent report on Form 10K, which identifies specific factors that may cause actual results or events to differ materially from those described in forward-looking statements.
Forward looking statements during the call today, we will refer to some non-GAAP financial measures such as NAREIT F. F O adjusted <unk> Fad and EBITDA reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles as well as an explanation of the usefulness of the non-GAAP measures are available.
Speaker 2: During the call today, we will refer to some non- GAAP financial measures such as Navy FFO, adjusted FFO, FAAD, and EBITDA.
Speaker 2: Reconciliation of these non- GAAP measures to the most comparable measure under generally accepted accounting principles, as well as an explanation of the usefulness of the non- GAAP measures , are available under the financial information section of our website at www.omegahealthcare.com In the case of Navy FFO and adjusted FFO, in our recently issued press...
Under the financial information section of our website at Www Dot Omega health care Dot com and in the case of NAREIT SFO and adjusted <unk> in our recently issued press release. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently.
Speaker 2: In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega. I will now turn the call over to Taylor.
Verified by Omega.
I will now turn the call over to Taylor.
Thanks Michele good.
Speaker 3: Thanks, Michelle. Good morning and thank you for joining our third quarter 2023 earnings conference call. Today I will discuss our third quarter financial results and certain key operations.
Morning, and thank you for joining our third quarter 2023 earnings conference call.
Today, I will discuss our third quarter financial results and certain key operating trends.
The third quarter Fad funds available for distribution.
Speaker 3: 68 cents per share was better than expected. Modestly exceeding our 67 cents per share dividend. The FAD dividend power...
A <unk> 68 per share it was better than expected modestly exceeding our 67 cents per share dividend.
Fad dividend payout ratio is 99%.
The decrease in fat from the second quarter is due to the reduced red from cash basis operators with V as expected paying $9 million less in cash rent in the third quarter compared to the second quarter.
Speaker 3: The decrease in FAD from the second quarter is due to the reduced rent from cash basis
Speaker 3: would Levy as expected, paying $9 million less in cash rent in the third quarter compared to the second quarter. The November 1st Levy Assets in.
The November 1st levee asset sales have significantly reduced our levee exposure.
Speaker 3: The remaining Lavie portfolio is expected to cover above 1.0 times, and therefore, Lavie should no longer be in the below 1.0 times EBITAR coverage. <expletive> it going full.
The remaining levee portfolio is expected to cover above 1.0 times, and therefore Levine should no longer be in the below 1.0 times EBITDAR coverage bucket going forward.
Speaker 3: We continue to have a handful of cache basis operators, including Maplewood, that will impact our go for
We continue to have a handful of cash basis operators, including Maplewood.
It will impact our go forward <unk> and Fad.
Speaker 3: making fourth quarter 2023 and first quarter 2024 FAD difficult to predict.
<unk> fourth quarter, 2023, and first quarter 2024, fad difficult to predict.
Speaker 3: However, longer term we believe all of these assets, but in particular maple
However longer term, we believe all of these assets, but in particular maplewood.
Speaker 3: are well positioned to generate reliable and growing cash flows.
Our well positioned to generate reliable and growing cash flows and related Brett.
Speaker 3: Turning to the under 1.0 times EBIT dark coverage operators, which represent 20.
Turning to the under 1.0 times EBITDAR coverage operators, which represent 27, 5% total rent.
Speaker 3: You can break the 27.5% into a handful of
We can break the 27, 5% into a handful of buckets operators, representing six 2% of the 27, 5% are sitting on an extremely strong balance sheets, and therefore payment of rent should not be an issue.
Speaker 3: Operators representing 6.2% of the 27.5% are sitting on extremely strong balance sheets and therefore
Speaker 3: Operators representing 6.2% have second quarter EBITDA coverage above 1.0 times. Operators representing 1.3% are benefiting from July state rating.
Operators, representing six 2% half second quarter EBITDAR coverage above 1.0 times and operators, representing one 3% are benefiting from July state rate increases that have resulted in above 1.0 times coverage on a go forward basis.
Speaker 3: that have resulted in above 1.0 times coverage or go forward base.
Speaker 3: 8.4% represents Levy, which I have already discussed.
Eight 4% represents will be which I have already discussed 1.3% represents one operator that has already transitioned to performing credits.
Speaker 3: 1.3% represents one operator that is already transitioned to a performing credit.
Speaker 3: That leaves operators representing 4.1% of which operators representing 1.2% are in active restructuring or recently transitioned, which leaves a balance of 2.9% representing 8 small operating relationships. I will now turn the call over to Bob.
That leaves operators, representing 4.1% of which operators representing one 2% are in active restructurings or recently transitioned which leaves a balance of 2.9%.
Representing eat small operating relationships.
I will now turn the call over to Bob.
Thanks, Taylor and good morning.
Turning to our financials for the third quarter.
Revenue for the third quarter was $242 million before adjusting for certain nonrecurring items compared to $239 million for the third quarter of 2020 to the.
Speaker 4: for adjusting for certain non-recurring items compared to $29 million for the third quarter of two-
Speaker 4: The year-over-year increase is primarily the result of timing related to operator-restructuring.
The year over year increase is primarily the result of timing related to operator restructurings revenue from new investments completed in 2022, and 'twenty three and short term investment income partially offset by asset sales completed during that same time period.
Speaker 4: short-term investment income, partially all set by asset sales completed during that same time.
Speaker 4: Our May Read FSO for the third quarter was $161 million or 63 cents per share as compared to $159 million.
Our NAREIT S. S O for the third quarter was $161 million or <unk> 63 per share as compared to $159 million.
Speaker 4: or 65 cents per share for the third quarter of 2022.
<unk> 65 per share for the third quarter of 2022, our adjusted <unk> was $182 million or 71 cents per share for the quarter and our fad was $174 million or <unk> 68 per share and both excludes several items consistent with historical practices.
Speaker 4: Our adjusted FFO was $182 million for 71 cents per share for the quarter.
Speaker 4: And our FAD was $174 million or $60.8 per share and both excludes several items consistent with historical practices and outline in our Navy FFO, adjusted FFO, and FAD reconcilations to net income found in our earnings release. And our FAD was $174 million or $60.8 per share and both excludes several items consistent with historical practices and outline in our earnings release.
And outlined in our NAREIT at that though adjusted after that though and sad reconciliations to net income down in our earnings release as well as our third quarter financial supplemental posted to our website.
Speaker 4: as well as our third quarter financial supplemental posted to our web
Speaker 4: Our 68 cents of bad was two cents less than our second quarter fad of 70 cents.
<unk> 68 cents of Fad was two cents less than our second quarter Fad of 70 cents.
As Taylor mentioned, the two cent decrease compared to the second quarter was primarily the result of lumpy.
Speaker 4: 2 cent decrease compared to the second quarter, which primarily the result of Levy, cash-based operators, and the impact of additional weighted average shares, partially all set by the incremental short-term investment.
Cash based operators and the impact of additional weighted average shares partially offset by the incremental short term investment income.
Speaker 4: Our fourth-quarter fad will be impacted by a number of items, including...
Our fourth quarter Fad will be impacted by a number of items, including the timing of payments received from cash basis operators and their availability of security deposits.
Speaker 4: timing of payments received from cash-based operators and availability of security to-
Speaker 4: full quarterly impact of rent and interest on new investment.
The full quarterly impact of rent and interest on new investments.
Speaker 4: the third quarter repayment of the $105 million dollar seller note.
The third quarter repayment of the $105 million seller's note and other asset sales.
Speaker 4: restructuring or releasing of a few small cash-based portfolios.
Restructurings or re leasing of a few small cash based portfolios.
Speaker 4: short term or overnight interest income earned. Unbalanced.
Short term or overnight interest income earned on balance sheet cash.
Speaker 4: Interest expense related to the term loan all set by Bond and Hudridge.
Interest expense related to the term loan offset by bond and HUD repayments.
Speaker 4: and the weighted average shares outstanding impact at by potential equity issuances.
And the weighted average shares outstanding impacted by potential equity issuances.
Turning to the balance sheet.
Speaker 4: This is another quarter where we continue to strengthen our liquidity capital stack, maturity ladder, and help protect our overall cost.
This is another quarter, where we continued to strengthen our liquidity capital stack maturity ladder and help protect our overall cost of debt.
Speaker 4: We started the quarter with approximately $350 million of cash from the balance sheet. During the quarter, in addition to paying our 67 cents dividend,
We started the quarter with approximately $350 million of cash on the balance sheet. During the quarter. In addition to paying our 67% dividend and making regular bond interest payments, we paid off a $350 million bond that matured in August.
Speaker 4: We paid off a $350 million bond that matured in on.
We entered into a $428 $5 million term loan.
Speaker 4: it into a $428.5 million term.
Speaker 4: That has a two-year maturity with two one-year extensions at our option, effectively a four-year term.
That's a two year maturity with two one year extensions at our option effectively a four year term loan.
Speaker 4: We swapped the term loan rate from floating to fixed at just under 5.
We swapped the term loan rate from floating to fixed at just under five 6% and lastly, we issued 4 million shares for $126 million of equity to continue to Delever.
Speaker 4: And lastly, we issued 4 million shares, or $126 million of equity to continue to de-laven.
Speaker 4: total we ended the quarter with over $550 million of cash on the
In total we ended the quarter with over $550 million of cash on the balance sheet.
Speaker 4: 99% of her $5.3 billion in debt was at fixed rates.
99% of our $5 3 billion and debt was at fixed rates and our net funded debt to annualized adjusted normalized EBITDA was 5.01 times and our fixed charge coverage ratio was 4.0 times.
Speaker 4: and our net-funded debt to annualize adjusted normalized EBITDA was 5.01 times. And our fixed charge coverage ratio was 4.0.
Speaker 4: looking forward, based on the current capital markets or pipe
Looking forward based on the current capital markets our pipeline and.
Speaker 4: and April 1, 2024, $400 million bond maturity. We expect to continue to be.
And in April one 2020 for $400 million bond maturity, we expect to continue to be opportunistic in the equity market, while targeting leverage below five times.
Speaker 4: the equity market for targeting leverage below five times.
Speaker 4: In summary, consistent with the commentary provided last quarter, we still expect our fourth quarter fad per share to approximate our 67 cent dividend. However,
In summary, consistent with the commentary we provided last quarter, we still expect our fourth quarter fad per share to approximate our 67 cent dividend. However, as Taylor mentioned, it's hard to predict given the number of items I've laid out that may impact sad.
Speaker 4: It's hard to predict, given the number of items I've laid out, that may impact FAD.
I will now I will turn the call over to Dan.
Speaker 5: Thanks, Bob, and good morning, everyone. As of September 30th, 2023, Omega had an operating asset portfolio of 883 facilities with approximately 86,000 operators.
Thanks, Bob and good morning, everyone.
As of September 32023, Omega had an operating asset portfolio of 883 facilities with approximately 86000 operating beds. These facilities were spread across 65 third party operators and located within 42 states and the United Kingdom.
Speaker 5: These facilities were spread across 65 third party operators and located within 42 states and the United King.
Speaker 5: Trailing 12 month operator EBITDAR coverage for our core portfolio as of June 30, 2023, increased to 1.15 times versus 1.1 times for the trailing 12 month period in March 31, 2020.
Trailing 12 month, operator, EBITDAR coverage for our core portfolio as of June 32023 increased to 1.15 times versus one one times for the trailing 12 month period ended March 31 2023.
Speaker 5: During the second quarter of 2023, our operators came to the bill and recorded approximately $13.2 million in federal stimulus funds. As compared to approximately $5.8 million, recorded during the first quarter. Trailing 12 month operator, EBITDAR coverage, would have increased during the...
During the second quarter of 2023, our operators Kimberly it'll bleed recorded approximately $13 $2 million and federal stimulus funds as compared to approximately $5 8 million recorded during the first quarter.
Trailing 12 month, operator EBITDAR coverage.
Would've increased during the second quarter of 2023 to 1.17 times as compared to one point or two times for the first quarter when excluding the benefit of any federal stimulus funds.
Speaker 5: compared to 1.02 times for the first quarter, one excluding the benefit of any.
Speaker 5: EBITDA coverage for the standalone quarter ended June 30, 2023, for a core portfolio was 1.21 times, including federal stimulus, and 1.15 times, excluding the $13.2 million of federal stimulus.
EBITDAR covered for the stand alone quarter ended June 32023 for our core portfolio was one point to one times, including federal stimulus and 1.15 times, excluding the $13 $2 million of federal stimulus funds. This compares favorably to a standalone first quarter of 1.1.
Speaker 5: This compares favorably to standalone first quarter of 1.18 times and 1.18 times
Eight times, and 1.15 times with and without the $5 $8 million in federal stimulus funds respectively.
Speaker 5: with and without the $5.8 million in federal stimulus funds.
Speaker 5: Occupancy for our overall core portfolio has continued to recover from a low of 74.6% in January of
Occupancy for our overall core portfolio has continued to recover from a low of 74, 6% in January of 2022% to 81% as of mid October 2023, based upon preliminary reporting from our operators.
Speaker 5: 80.1% as of mid-October 2023, based upon preliminary reporting from our operators.
Turning to portfolio matters.
As previously discussed Omega Luby have continued our process of restructuring their portfolio by transitioning certain underperforming facilities, mostly located in the state of Florida.
Speaker 5: restructuring their portfolio by transitioning certain underperforming facilities, mostly
Speaker 5: during the course of the restructure. Omega has transition 48.
During the course of the restructure Omega has transitioned 48 facilities 46 through outright asset sales and two through Retentivity, including 29 facilities that were sold on November one 2023 for gross proceeds of $305 million.
Speaker 5: 46-through outright asset sales and two-through retiniting, including 29 facilities that were sold on November 1st, 2023, for gross proceeds of $305 million. We are now
We are now down to six remaining transition facilities, including two in Florida, and four in Louisiana, which we are hopeful to transition in the near term.
Speaker 5: including two in Florida and four in Louisiana, which we are hopeful to transition in the near term. Post these recent sales, and in anticipation.
Most of these recent sales and in anticipation of closing our six remaining transition facilities Omega portfolio with will be will include a total of 31 facilities, which include 13 facilities in North Carolina, two in Virginia, nine in Pennsylvania, six in Mississippi, and one in Florida.
Speaker 5: Omega's portfolio with Lobie will include a total of 31 percent.
Speaker 5: which include 13 facilities in North Carolina, two in Virginia, nine in Pennsylvania, six in Mississippi and one in...
Speaker 5: during the third quarter and to the month of October of 2023, Lavie paid partial rent of approximately $2.5 million per month.
During the third quarter and for the month of October of 2023, Levine paid partial rent of approximately $2.5 million per months.
Maplewood in the third quarter and for the month of October of 2023, Maplewood continue the short pay its contractual rent by $1 million per month. We currently are working with Maplewood, India state of brake Smith to address these shortfalls.
Speaker 5: In the third quarter and for the month of October of 2023, Maplewood continued to short pay its contractual rent by $1 million per month.
Speaker 5: We currently are working with Maplewood and the estate of Greg Smith to address
Speaker 5: in anticipation of January 2024 rate increases and improved occupancy at the 2nd Avenue facility amenity.
In anticipation of January 2024 rate increases and improved occupancy at the second half of the facility in Manhattan. Maplewood believes there is a pathway forward to meet its full contractual rental obligations.
Speaker 5: Maplewood believes there is a pathway forward to meet its full contractual rental obligations. However, the timing at this point is unknown. To date, including October , we have applied $4 million dollars.
However, the timing at this point is unknown.
To date, including October we've applied $4 million of the $4 $8 million security deposit to cover the rent shortfalls.
Speaker 5: Guardian. On Omega's first quarter of 2022 earnings call, Omega announced that we had entered into a restructure agreement with Guardian Healthcare after agreeing to sell 12 facilities, eight in Pennsylvania and four in Ohio and successfully releasing
Guardian on Omega first quarter 2022 earnings calls Omega announced that we'd entered into a restructure agreement with Guardian healthcare after agreeing to sell 12 facilities eight in Pennsylvania, and four in Ohio and.
And successfully re leasing eight facilities all located in Pennsylvania.
In may of 2022.
Speaker 5: Guardian resumed making full contractual rent and interest payments on its remaining portfolio of $16,000.
Morning, resume making full contractual rent and interest payments on its remaining portfolio of 16 facilities.
Speaker 5: Subsequently, in May of 2023, Omega sold 10 additional guardian facilities, leaving only six remaining facilities, one in West Virginia and five in Pennsylvania.
Obsequent late in May of 2023, Omega sold 10, additional guardian facilities, leaving only six remaining facilities, one in West, Virginia and five in Pennsylvania.
Recently in the third quarter of 2023 Guardian informed Omega that they intend to exit the nursing home industry entirely and needed to transition the remaining facilities with Omega.
Speaker 5: Guardian informed Omega that they intend to exit the nursing home industry entirely and needed to transition their remaining facilities with a
At that time, Gordon cease making its contractual rent payment of approximately $1.5 million per month.
Speaker 5: At that time, guarding cease-making its contractual rent payment of approximately 1.590.
Speaker 5: Since that time, Omega has been using Guardian's $7.3 million security.
Since that time Omega has been using guardian $7 $3 million security deposit to cover rent.
Speaker 5: Here the deposit will be substantially depleted after applying full contractual rent to December of this year. Since becoming aware of this situation, Omega has sought to reach...
The security deposit will be substantially depleted after applying full contractual rent to December of this year.
Since becoming aware of this situation Omega has sought to re tenant the remaining six facilities.
With a goal of concluding the transitions by year end.
Speaker 5: point omega is in discussions with a potential new tenant with the goal of a year-end close subject to the normal due diligence.
At this point Omega is in discussions with a potential new tenants with the goal of a year end close subject to the normal due diligence satisfactory documentation and regulatory approvals.
Speaker 5: In addition to the aforementioned restructurings and transitions, Omega is working with several other relatively small operators on various restructurings.
In addition to the aforementioned restructures and transitions Omega is working with several other relatively small operators on various restructurings.
Turning to new investments.
Speaker 5: On August 29, 2023, Omega closed on a sale-lease bank transaction for one facility in Virginia for $16 million. The facility was added to an existing operator's master list.
On August 29, 2023, Omega closed on a sale leaseback transaction for one facility in Virginia for $16 million.
The facility was added to an existing operator's master lease with an initial cash yield of 10% with 2% annual escalators.
Speaker 5: September 8, 2023, Omega closed on a $40 million sale lease back transaction for 14 care homes in the U.K.
On September eight 2023, Omega closed on a $40 million sale leaseback transaction for 14 care homes in the U K.
Speaker 5: And currently with the acquisition, Omega entered into a master lease for the care homes with a new operator with an initial cash yield of 10.2% with 2.5% annual escalators.
Currently with the acquisition Omega entered into a master lease for the care homes with a new operator with an initial cash yield of 10, 2% with 2.5% annual escalators.
Subsequent to the third quarter Omega closed on two additional transactions.
Speaker 5: Specifically, on October 2, 2023, we'll make a provided $38 million in mortgage loans to a new operator to purchase two assisted living facilities.
Specifically on October <unk>, 2023, Omega provided $38 million in mortgage loans to a new operator to purchase two assisted living facilities in Pennsylvania.
The loan bears a blended interest rate of nine 3%.
And if terms that range from three to five years.
Additionally on October 2nd of 2023.
Speaker 5: Additionally, on October 2, 2023, Omega closed on a purchase lease transaction for 1 of the SOTA Maryland for 22.5 months.
Omega closed on a purchase lease transaction for one facility in Maryland for $22 $5 million the.
Speaker 5: So he was added to an existing operator's master lease with a natural yield of 10%.
The facility was added to an existing operator's master lease with a natural yield up 10% with two 5% annual escalators.
Speaker 5: During the third quarter, Omega closed on a total of $106 million in new investments, including $24 million.
During the third quarter Omega closed on a total of $106 million in new investments, including $24 million in capital expenditures.
Speaker 5: As of September 30th, 2023, Omega has closed on $418 million of new investments, including 53 million dollars.
As of September 30th 2023, Omega has closed on $418 million of new investments, including $53 million in capital expenditures.
Turning to dispositions during the third quarter of 2023 Omega received $99 million in proceeds related to facility sales.
Speaker 5: During the third quarter of 2023, Omega received $99,000,000 in proceeds related to
Speaker 5: As of September 30th, 2023, Omega has divested 27 episodes for a total of $161 million in
As of September 30th 2023, Omega has divested 27 facilities for a total of $161 million in gross proceeds.
Speaker 5: And as previously mentioned, on November 1, 2023, Omega sold 29 LeBee facilities for total gross proceeds of 305 minutes.
And as previously mentioned on November one 2023, Omega sold 29 Labeet facilities for total gross proceeds of $305 million.
I will now turn the call over to Megan.
Thanks, Dan and good morning, everyone from an occupancy.
Speaker 6: From an occupancy perspective, the slow positive trends have continued. With the number of core facilities now recovered at 37%, up slightly from the 35% reported in the...
Vinci perspective, the slow positive trends have continued with the number of core facilities now recovered at 37% up slightly from the 35% reported in the first quarter.
Speaker 6: Additionally, 26% of core facilities that have not yet fully recovered are at or above 84%.
Additionally, 26% of core facilities that have not yet fully recovered or at or above 84% occupancy.
Speaker 6: While the staffing shortage situation continues to ease slowly, there is still large variation by market, and occupancy is still believed to be improving.
While the staffing shortage situation continues to ease slowly there's still a large variation by market and occupancy is still believed to be impacted.
As noted last quarter in June aka released the results of a survey of 425 nursing home providers results, which showed that 52% are still limiting new admissions due to staffing shortages.
Speaker 6: As noted last quarter in June , DACA released the results of the Surrey of 425 nursing home providers. Results of which showed that 52% are still limiting new admissions due to staff.
Speaker 6: Agency expense on a per-patient day basis for our core portfolio for second quarter
Agency expense on a per patient day basis for our core portfolio for a second quarter 2023 dropped to four times, where it was in 2019 in comparison to the five times, we reported last quarter.
Speaker 6: Drop to four times where it was in 2019 and compare it to the five times we reported.
Speaker 6: Despite the continued staffing limitations in the industry, as expected, CMS moved forward with releasing a proposed staffing mandate.
Despite the continued staffing limitations in the industry as expected CMS news portal, it's releasing a proposed stopping mandate on September six.
Speaker 6: And while it was not as onerous as it was believed it might be, it is certainly not palatable given the current state of...
And while it was not as onerous as it was believed it might be it is certainly not palatable given the current state of play.
Speaker 6: included in the proposal as a requirement for an RN to be on site 24-7, along with required RN hours per resident day of .55, and required nursing eight hours per resident day of 2.5.
And the proposal is a requirement for an RN to be onsite 24, seven along with required RN hours per resident day of 0.55.
And required nursing eight hours per resident day of 2.45.
Speaker 6: And while the 24-7 RN requirement is a two-year delayed implementation for urban facilities, three years for...
And while the 24 seven RN requirement is a two year delayed implementation for urban facilities three years for rural.
Speaker 6: And the required hours per resident day for RNs and nursing aids is a delayed implementation of three years for urban facilities, five year for work.
And the required hours per resident day per our ends and nursing needs is a delayed implementation of three years for urban facilities five year for rural.
Speaker 6: that the industry still in flux post pandemic, predicting out where the state of staffing will be at that time is difficult at best. The comments.
With the industry is still in flux post pandemic predicting out where the state of staffing will be at that time is difficult at best.
The comment period for this proposal is open through November six.
Speaker 6: When Acha has been bringing to light some of the difficulties with the proposed mandate, most importantly the fact that it is...
And AGA has been bringing to light some of the difficulties that the proposed mandate. Most importantly, the fact that it is currently unfunded.
Speaker 6: Well, it is too soon to tell what the ultimate outcome of this proposal will be. We hope that if a final mandate is indeed imposed.
While it is too soon to tell what the ultimate outcome of this proposal will be we hope that if a final mandate is indeed imposed.
Speaker 6: CMS will hear the voices of the industry and implement a fair, balanced mandate that is realistically achievable by whatever delayed time frame is ultimately set.
That CMS will hear the voices of the industry and implement a fair balanced mandate that is realistically achievable by whatever delayed timeframe is ultimately sat.
I will now open the call up for questions.
Speaker 1: Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session.
Thank you, ladies and gentlemen at this time well be conducting a question and answer session.
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Speaker 1: We ask that you please let me hear questions to one question and one follow.
We ask that you. Please limit your questions to one question and one follow up.
Speaker 1: Our first question comes from the line of Jonathan Hughes with Raymond James. Please receive with your question.
Our first question comes from the line of Jonathan Hughes with Raymond James. Please proceed with your question.
Hi, good morning, Thanks for the time.
Speaker 7: Hi, good morning. Thanks for the time. Could you share some more details or background on what happened at Guardian and their decision to exit the skilled nursing business? I recall they had, I think some issues last year and they were restructured, seems like maybe operations got better and then worse. Is it maybe a real estate issue there with that portfolio rather than an operator issue? Is there any color that they'd be?
Could you share some more details or background on what happened at Guardian and their decision to exit the skilled nursing business I recall they had.
I think some issues last year and they are restructured it seems like maybe operations got better or worse is it may be a real estate issue there with that portfolio rather than an operator issue.
Any color there that'd be great.
Yeah.
Speaker 5: Yeah, the, um, we've gone through a couple of reconstructions with guardian over the last couple of years. The, um, their decision to exit the industry in its entirety was kind of quite a surprise. Um, I think it's a mirror out of issues, but I think that the management there is.
<unk>.
We've gone through a couple of reconstructions with Guardian.
Over the last couple of years.
And our decision to exit the industry.
Its entirety was quite a surprise.
I think it's a myriad of issues, but I think that the.
The management there is.
Speaker 5: AJ decided to exit the business quite frankly. They've got a lot more facilities than just hours, but yeah, they've been struggling as of late. They had deep liquidity issues and they've decided to exit. And we're looking to replace them as operators.
D J.
The business quite frankly, they've got a lot more than just the hours but.
They had been struggling as of late and where they are.
Deep liquidity issues and they've decided to exit.
We're looking to replace them as operators.
Okay.
And then Taylor in your.
Speaker 8: and then Taylor in your prepared remarks.
Prepared remarks, you mentioned, a $2 nine almost almost 3% of operators are in that.
Speaker 7: 2.9 almost 3% of operators are in death.
Speaker 7: The sub one time the Bidar coverage bucket and I don't think those have been restructured. None individually are that impactful, but together they're almost a top 10 tenant. You know, what's the expectation for each of those? I understand them out of strong balance sheets or other businesses don't pay with rent, but some are actually negative in the Bidar coverage. I guess you know, should we take a more conservative approach there in terms of rent looking forward?
The sub one times EBITDAR coverage bucket.
And I don't think those have been restructured none individually or that impactful, but together there almost a top 10 tenant you know whats your expectation for each of those.
<unk> strong balance sheets or other businesses and start paying rent, but some are actually negative in EBITDAR coverage I guess should we take a more conservative approach there in terms of rent looking forward.
Hum.
Speaker 3: I feel pretty comfortable with that <expletive> is Jonathan that it's
I feel pretty comfortable with that Jonathan.
Speaker 3: Every one of those eight credits has a slightly different story, but in terms of looking at it as a whole
Every one of those <unk> credits has a slightly different story, but in terms of.
Looking at it as a whole.
Uh huh.
Speaker 3: any type of discount will be minimal. We're not particularly worried, and if you look historically, that's the type of percentage we've had in the under one bucket for many, many years. Typically those things work themselves out over long periods of time, I've expected this to be exactly the same.
Any type of discount will be minimal.
So we're not we're not particularly worried and if you look historically that's.
That's the type of percentage, we've had in the under one bucket for many many years.
Those things work themselves out over long periods of time, <unk> expect us to be exactly the same.
Yes.
Speaker 7: Okay, and then one more for me if I can see what's the investment pipeline look like today in terms of size and yield and I realize deals.
Okay.
And then one more for me if I can sneak one in what's the investment pipeline look like today in terms of size and yield that I realised deals.
Speaker 7: take time but when you think we could see more robust, be simple. So on, on diverse loans, acquisition.
Take time, but when do you think we could see more.
Robust fee simple.
So on Poland versus loans acquisition activity.
Speaker 5: You know, we could go back years and we could state that the pipeline is choppy. I would say that it's borderline robust at this point, Bill choppy. Um, you know, we're still seeing a lot of deals in the UK. We're seeing a fair amount of deals in the US.
You know we could go back years, and we can state that the pipeline is choppy I wouldn't say that it's borderline robust at this point still choppy.
We're still seeing a lot of deals in the U K, we're seeing a fair amount of deals in the U S.
Speaker 5: And the size is, you know, is shopping. So I can't predict what we're going to see in 24 at this point, but I think it would be similar to what we've seen so far in 23, you know, which we've done just under, I guess, the availability and new investments in the year today.
Yes.
As you know it's choppy so I can't predict what we're going to see a 24 at this point, but I think it would be similar to what we've seen so far in 'twenty three.
Which we've done just on your I guess I have a billion of new investments in the year to date.
Yeah.
Okay, Alright look forward to hearing more.
Speaker 7: All right, before we're hearing more in a couple weeks. Thanks, everybody.
Thanks have a great weekend.
Speaker 1: Our next question comes from the line of the grandma Holtro with Mizzouho. Please be sure to be the question.
Our next question comes from the line of the Grandma culture with Mizuho. Please proceed with your question.
Speaker 9: Hi, this is Georgie on For Vikram. Just on La Vie and Nape Wood, like from a cash flow perspective, how should we think about the range of outcomes in 2024?
Hi, This is George on for Jeff.
Just I love the neighborhoods like from a cash flow perspective.
Should we think about the range of outcomes in 2024.
Speaker 3: So I think for Levy, it's worth just taking a little half step back at that whole
So I think for a levee, it's worth just taking a little step back.
At that whole restructured.
Speaker 3: So to date, the 46 assets that have been sold generated 515 million proceeds, the six assets that still need to be transitioned a little bit of wood left to chop for Dan, are likely to be sold, and we're looking at a price point north of...
So to date, the 46 assets that have been sold that generated $515 million proceeds.
The six assets that still need to be transition a little bit.
Wood left to chop for Dan.
Are likely to be sold and we're looking at a price.
North of $40 million.
Speaker 3: So call it 565, 560 million a sales proceeds from Lovie.
So call it $555 560 million of sales proceeds from Avi.
Speaker 3: two assets that were released were released for $2 million.
Two assets that were re leased for release for $2 million.
Speaker 3: And then we have the balance that Dan mentioned are an extremely strong states. North Carolina, Virginia, Mississippi, to a lesser extent, Pennsylvania, that will generate on their own an enormous amount of cash flow, supporting a lot of red.
And then we have the balance that Dan mentioned earlier extremely strong States, North Carolina, Virginia, Mississippi to a lesser.
Extend Pennsylvania.
That will generate on their own.
An enormous amount of cash flow.
Porting a lot of rent.
Speaker 3: But as we said, we're still chopping the wood with louvets. So where that ultimately falls is a positive.
But as we said, we're still chopping the wood with movies so.
Where that ultimately falls is a positive.
Speaker 3: timing not predictable over the next couple quarters.
Timing not predictable over the next couple of quarters that Maplewood is a little more predictable.
Speaker 3: Then maybe what is a little is more predictable, or have rate increases, normal, rate increases in January .
If rate increases normal rate increases in January.
Speaker 3: That covers a big part of the gap, but you can continue to have expense pressures in this industry. And we continue to look at the film of Second Avenue, which is hugely important on an incremental basis. And that's really the driver, but as Dan mentioned,
That covers a big part of the gap.
But you can continue to have expense pressures in this industry.
And we continue to look at the film of second Avenue, which is hugely important.
On an incremental basis, and thats really the driver, but as Dan mentioned.
<unk>.
Speaker 3: We can map that out, principally driven off of the occupancy fallup in second avenue. And at some point in 24, maybe it was going to have sufficient catch flow to pay the contractual red. But that timing's a little bit questionable as well. Longer term, we're really comfortable with both sets of <expletive> .
We can map that out principally driven off of the occupancy fault in second Avenue and at some point in 'twenty four maybe it was going to have sufficient cash flow to pay the contractual rent.
Timing is a little bit questionable as well longer term, we're really comfortable with both sets of assets.
Great. Thank you that's helpful and just a SEC.
Speaker 9: I think you'd have to help one. Just a second question. Can you provide more color what has seen on the labor side? And how states are preparing for the minimum staffing? And if you can't highlight any states that have the potential to increase Medicaid rates or address minimum staffing with funding, that'll be very helpful.
Question can you provide more color on why it hasn't seen on the labor side and how states are preparing for the minimum staffing and if you can highlight any states that have.
The potential to increase Medicaid rates or like you know address mineral stuffing with funding that that'd be very helpful.
Speaker 6: Yeah, I mean, look, I don't know that any states are really addressing the minimum staffing at this point, because it's a little too soon to tell what's going to happen there. Comment period is up next week. And so we're just waiting to see when ends up coming out of it. As you know, there's a delayed implementation for most of it, but certainly the rural areas are going to be hit a little bit harder than the urban areas once it does kick out.
Yeah, I mean look I don't know that any states are really addressing the minimum staffing at this point because it's a little too soon to tell what's going to happen there.
Sure. It is up next week.
And so we're just waiting to see what ends up coming out of that as you know theres a delayed implementation for most of that but.
Certainly the rural areas, we're gonna be hit a little bit harder than the urban areas. So it's a desk.
<unk>.
Speaker 10: In terms of rates, sitting again, none of these rates are impacted by the staffing mandate at this point, but we do watch, especially our top 10 states, really carefully, and have seen positive things over the last several months, kicking in in July and October . Talked a little bit about Florida and Texas.
In terms of rate setting again, none of these rates are impacted by the staffing mandate at this point, but we do watch, especially our top 10 states fairly carefully.
You know has seen positive things over the last several months kicking in in July and October talked a little bit about Florida and Texas.
Speaker 10: Last quarter, we did hear from one of our operators that the California 10% SMAP increase is going to continue until they have a rebasing of that rate, which typically happens in January , but might be a little bit delayed. And North Carolina's SMAP got put into their rate as well. So feeling decent on the reimbursement perspective, but still too soon to tell what's happening with the staffing mandate.
Last quarter, we did hear from one of our operators at the California, 10% ethanol increase that's going to continue until they have a re basing of that rate.
But as typically happens in January but might be a little bit delayed and north Carolina that snapped up put into their rate as well. So feeling he sent on a reimbursement perspective, but still too soon to tell whats happened with the stock lending.
Alright, Thank you for taking my questions.
Speaker 1: Our next question comes from the line of Michael Griffin with Fiddy. Please proceed with your question.
Our next question comes from the line of Michael Griffin with Citi. Please proceed with your question.
Speaker 3: Good morning, this is Avery on from Michael Griffin. Question on the Levy sales. Why don't you give us a sense of the per bed valuation on those sales and how many more of the Levy assets are targeted for sale if any?
Good morning. This is <unk> on for Michael Griffin.
Question on the levee sales I'm wondering if you can give us a sense of the per bed valuation on those sales and and.
How many more of the levee assets are targeted for sale if any.
Speaker 5: So as I mentioned, we've got six more assets targeted for sale, either sale or release. And the price per bed over the course of the 48 that we talked about is in a range of between 90 and 100 per bed.
So as I mentioned, we've got six more assets targeted for sale either sale of release.
The price per bed over the course of the.
48.
It's about.
In a range of between 90 and 100 permits.
Great. Thank you and just a follow up how are you guys thinking about future equity issuances to fund investment activity versus continuing to tap at that market. I know you want to keep leverage below that five times. So just how are you thinking about funding needs for investment opportunities.
Speaker 11: Right, thank you. And just to follow up, how are you guys thinking about, you know, future equity issuances to fund investment activity versus continuing to tap at that mark? And I know you want to keep leverage below that five times, just how are you thinking about funding needs for investment opportunities?
Yes.
Speaker 4: Yeah, you know, we sit down and we take an 18 month approach looking at the capital markets in our needs. So as I said, we have over.
We sit down and we've taken 18 months.
So looking at the capital markets and our needs. So as I said, we have over $2 billion and look current liquidity.
Speaker 4: $2 billion in current liquidity with the combination of the 600 million and cash on our balance sheet, as well as the untapped credit facility. We have access to the ATM, and again, we don't look at it any day by day, but we have a longer term approach looking at that. We know we have two debt majority coming up, one in April of 24, early in 25, so.
But the combination of the 600 million of cash on our balance sheet as well as the untapped credit facility, we have access to the ATM and again, we don't look at it any day by day, but we have a longer term approach looking at that we know we have two debt maturities coming up one in April 'twenty Forum early in 'twenty thought so.
Speaker 4: We will be opportunistic if it calls for that.
We will be opportunistic.
It calls for that.
Great. That's helpful. That's all for me. Thank you.
Our next question comes from the line of Conor Seversky with Wells Fargo. Please proceed with your question.
Speaker 1: Our next question comes from the line of Connor Sversky with Wells Fargo. Please receive any questions.
Speaker 12: Good morning out there. Thanks for having me on the call. Broadly speaking on acquisitions external activities. So we've seen a lot of activity in the past three weeks or so and some transactions have been received better than others. And at the same time, we're fielding a lot of questions.
Good morning out there thanks for having me on the call.
Broadly speaking on on acquisitions external activities. So we've seen a lot of activity in the past three weeks or so and some transactions have been received better than others and at the same time, we're fielding a lot of questions.
For some reach with the cost of capital on the margin of generating accretion of whether it's whether or not they kind of take the jump here and continue to invest.
Whereas O H I doesn't have that problem in your cost of capital is very strong.
Do you look at the current environment as an opportunity to really get aggressive and chase acquisitions or do you look at something like the minimum staffing requirements and work on those parameters of risk in your underwriting framework and try to be more cautious given what youre seeing right now.
Speaker 3: So it's a little bit of it. It's a great question. It's a little bit about, right? We um
So it's a little bit of a it's a great question is a little bit of both right.
Yes.
Speaker 3: We were prepared to allocate as much capital as...
We were prepared to allocate as much capital as possible to our existing operators and opportunities.
Speaker 3: possible to our existing operators and opportunities.
Speaker 3: But the underwriting has to include some risk adjustment for a variety of things, including minimum staffing.
But the underwriting has to include some risk adjustment for a variety of things, including minimum staffing, but from my perspective, we don't take our foot off the pedal.
Speaker 3: But if that's from my perspective, we don't take our foot off the pedal.
Speaker 3: It's just incorporating those risks into how we think about allocating capital. As Dan mentioned.
It's just incorporating those risks into how we think about allocating capital.
As Dan mentioned.
Speaker 3: We're close to half a billion year to date. And the fight line's pretty robust. So we'll continue to look at very opportunistically at what's out.
We're close to half a billion dollars year to date.
And the pipeline is pretty robust. So we will continue to look at very opportunistically and what's out there.
Yeah.
Speaker 12: Okay, and then just to follow up on that point, so earlier in the call, Megan mentioned that the labor environment remains more challenged in the rural areas versus the urban areas. I mean, does this also...
Okay, and then just a follow up on that point. So earlier in the call Meghan mentioned that the labor environment remains more challenged in the rural areas versus the urban areas. I mean does this also.
Speaker 12: imply unwillingness of per OHI, maybe to sell out of those rural assets in favor of concentration and urban.
Imply a willingness for OE side, maybe to sell out of those rural assets in favor of.
Concentration in urban areas.
Speaker 13: Well, you've seen us sort the portfolio pretty actively for a number of years and obviously through COVID, we've done a lot of that.
Well, you've seen us sort the portfolio are pretty actively for a number of years and obviously through COVID-19, we thought a lot of that.
Speaker 3: I would say that there's not a whole lot more to do, but when you think about much of our disposition activity, it has followed that pathway. A little more rural, a little more labor challenged.
I would say that there's not.
A whole lot more to do.
But when you think about much of our disposition activity. It has followed that a little more a little more labor challenged.
Speaker 13: So I don't have an expectation of big dispositions, but we'll continue to sort of work for all the allies we always have.
So I.
I don't have the expectation of big dispositions, but we will continue to short portfolio as valleys.
Okay.
Got it thank you for the time.
Speaker 1: Our next question comes from the line of Juan Sanabreo with BMO. Please proceed with your question.
Our next question comes from the line of Juan Sanabria with BMO. Please proceed with your question.
Yeah.
Yeah.
Juan Your line is live.
Speaker 1: Our next question comes from the line of Michael Carroll with RBC Capital Markets. Please receive a new question.
Our next question comes from the line of Michael Carroll with RBC Capital markets. Please proceed with your question.
Speaker 4: yet thanks i think that circle back on on guardian and how much interest did you receive when those assets kind of came to the market and i mean did you mean it sounds like you have one specific operator you're pretty far along with right now but did you want to process or did you target if you operate the operator's it gets how did that that initially work
Yeah. Thanks, I just wanted to circle back on on Guardian, I mean, how much interest did you receive when those assets kind of came to the market. I mean did you I mean, it sounds like you have one specific operator, you are pretty far along with right now, but did you run a process or did you target a few operators I guess, how did that that initially work.
Speaker 5: Yeah, so we have existing operators in the state of Pennsylvania, and then of course we know other operators in the state. So, um, and also in the state of West Virginia. So we reach out to operators that we know, um, first and foremost that we do business with and also operators that we know are in the state of Pennsylvania and still doing business. So it's a pretty broad net that we throw out there looking for new operators and it just doesn't matter of narrowing it down to the right one.
Yeah. So we have existing operators in the state of Pennsylvania, and then of course, we know other operators in the state so.
And also on the state of West, Virginia, So we reach out to operators that we know first and foremost that we do business with and also operators that we know are in the state of Pennsylvania, and still doing business. So it's pretty broad net that we throw out there looking for new operators and then just as a matter of narrowing it down to the right one.
Okay.
Speaker 4: And I guess how much interest when you started offering up those assets, the potential operators, how much interest were they in those properties? And then kind of off of that, I mean, could you provide some color on how those assets are performing today and will these new operators be willing to step in at a stabilized rent rate or do you need to have some type of ramp up as operations kind of stabilized and improved?
And then I guess, how much interest when you started offering off those assets to potential operators, how much interest where are they and in those properties and then kind of off of that.
Provide some color on how those assets are performing today and will these new operators be willing to step in at a stabilized run rate or do you need to have some type of ramp up as operations kind of stabilize and improve.
So those are the discussions that we're having as we speak it's a good question.
Speaker 5: Those are the discussions that we're having as we speak. It's a good question. Those facilities are not performing exceedingly well. And I would say there was interest, but it wasn't an overwhelming amount of vids that were put in at the end of the day.
Those those facilities are not performing exceedingly well.
And I would say there was interest, but it wasn't that nova overwhelming amount of.
Bids that were put in at the end of the day.
Okay, great. Thank you.
Yeah.
Speaker 1: Our next question comes from the line of Nicholas Euliko with Scotiabank. Please receive a dear question.
Our next question comes from the line of Nicholas Your Leeco with Scotiabank. Please proceed with your question.
Oh, hi, Thanks, Bob I guess, maybe just going back to the cash on the balance sheet.
Trying to get a better feel for how we should think about how much of that could be earmarked for investments versus you did talk about that.
Debt maturities you do have and.
In April.
Speaker 4: Yeah, and then again, it take a big picture approach to that. I mean, because the gas is vulnerable. We're sitting with 600 million today. If we could deploy that, the pipeline's choppy. It's robust, but choppy. We could deploy it right away in acquisitions. That would be the first dollar spent. Absolutely.
Yeah, Nick again.
Take a big picture approach that amicus gaseous fungible, where we're sitting with 600 million today, if we could deploy that the pipeline's choppy, it's robust the shelf that we could deploy it right away in acquisitions that would be the first dollar start absolutely, but again, we will sit down and look based on the pipeline and based on that.
Speaker 4: But again, we'll sit down and look based on the pipeline and based on that.
Speaker 4: Jet maturity coming up, how we want to fund it. I mean, right now, we'd have the cash and we have the availability and we do have the ATM.
The debt maturity coming up how we went to funded right now.
We have the cash and we have the availability and we do have the ATM.
Okay. Thanks, and then second question is just going back to levee and if we think about you've now moved through most of the transitions or asset sales.
Speaker 14: Okay, thanks. And then second question is just going back to Levy. If we think about you've now moved through most of the, you know, transitions or acid cells, what?
What.
Speaker 14: Do you have a sense for, you know, I know there's still, I guess some reinvestment that could happen with proceeds, but, you know, as we think about,
Do you have a sense for I know there is still I guess, some some reinvestment that could happen with proceeds but.
When we think about prior rents on would be when it was sort of fully paying versus now what you're going to get in terms of new rack right equivalence is there any like percentage number you can give us a rough feel about you know.
Speaker 14: on Levy when it was sort of fully paying versus now what you're going to get in terms of new rent, rent equivalence. Is there any like percentage number you can give us on a rough feel about, you know, how that played out? Is it going to be 70, 80 percent? I think you said 80 percent in the past about sort of a recapture rate on operators going through a, you know, transition and asset sales like this.
How that played out or is it going to be 70%, 80% I'd say I think you said, 80% in the past about sort of a recapture rate on.
On operators going to trends transition in asset sales like this.
Yeah.
Yes, Youre exactly right, we were pretty conservative in our thinking there Nick.
Speaker 13: You're you're exactly right. We were pretty conservative and aren't thinking there. Nick. I think when this is resolved, we'll be pushing 90% or North.
When I think when this is resolved, we'll be pushing 90% or north.
Great. Thanks, everyone.
Yeah.
Speaker 1: Our next question comes from the line of Alec, Seigen with Robert W. Baird. Please wish you be a question. Hi, thank you for taking.
Our next question comes from the line of Alex It's Adrian with Robert W. Baird. Please proceed with your question.
Hi, Thank you for taking my question.
Speaker 3: Question on the Guardian, assets, what's the historical timing of releasing those senior housing assets?
Just a question on the Guardian assets, what's the historical timing of releasing those senior housing assets.
Speaker 5: Do you mean just in general or specific to guardian? I mean, you know, in general.
You mean, just in general or specific the Guardian.
And in general.
Thanks.
In general it can take anywhere from three to 12 months, it's pretty wide range, depending on whether it's a fail in the sales being financed or whether it's.
Speaker 5: General could take anywhere from 3 to 12 months. It's pretty wide range depending on whether it's a sale and the sale being financed or whether it's just a retenin.
Just to re tenant.
Okay.
Thank you and second one is.
Speaker 15: have labor costs, flash shortages, actually got them better, or it would just stop getting worse.
We have labor costs flash shortage has actually gotten better or has it just stopped getting worse.
Speaker 10: I definitely think it's getting better from what we hear from our operators. I mean, we are seeing agency come down quarter over quarter, which is a good sign. And operators are definitely feeling less tension there, but it still exists, right? So it's going to take some time before that rights itself. I definitely think it's improving.
I definitely think it's getting better from what we hear from our operators I mean, we are seeing agency come down quarter over quarter, which is a good sign.
And operators are definitely feeling less tension there, but its still exist right. So it's going to take some time before that that writes itself.
I definitely think it's improving.
Thanks.
Speaker 15: And last one, and how much is your guys buy the LVS-S4? And what's that? Close up you guys.
And last one how much did you guys buy the lumpy assets for and what wasn't.
Uh huh.
Yeah.
Some of those assets stayed back soon.
Speaker 5: You know, 1995, I think, 1998. I don't know what that meant. There's some of those assets that have been on a balance sheet for over 20 years.
$19 95, I think 1998.
I don't know.
Some of those assets have been on our balance sheet for over 20 years.
Okay.
Thank you for the time today.
Speaker 1: Our next question comes from the line of John Polowski with Green Street. Please receive your questions.
Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.
Speaker 15: So the time, Megan, question for you on just sector wide occupancy. Just curious, why occupancy, you think, hasn't seen a bigger benefit from just the cumulative closures of facilities for the last several years?
Thanks for the time Megan question for you on just sector wide occupancy I'm just curious why occupancy you think hasnt seen a bigger benefit from just the cumulative closures of facilities or last several years.
Speaker 10: You know, I think, look, we've seen a large percentage of our portfolio actually recover. So it is very specific to the region that you're in. And if you look at, you know, Florida, for instance, the staffing issues there, just so strong that that's why the occupancy hasn't recovered. So I think when you look at different places, you're gonna have a different story there.
You know I think look we've seen a large percentage of our portfolio actually recover. So it is very specific to the region that you're in.
If you look at Florida for instance.
Staffing issues. There are just so strong that that fly the occupancy hasn't recovered. So I think when you look at different places it can have a different story there.
Yeah.
Speaker 16: as a month and years row long again with just supply being down. It would suggest, you know, kind of almost a structural change in demand.
Okay.
10 years, we're all along again with just supply being down.
It would suggest.
Kind of almost a structural structural change in demand.
Speaker 16: significant amount of regions are back to pre-COVID occupancy, which again should be adjusted higher for closure. So we ain't currently more concerned about it. It's broader than just labor issues delaying the recovery and occupancy.
Significant regions are back to pre Covid occupancy, which again should be adjusted higher for a closure so incrementally more concerned about it it's broader than just the labor issues delay in the recovery in occupancy.
Speaker 10: Now, I mean, look, I think it's going to get there. We've got demographics on our side that's coming into play and quite frankly, at some point as those demographics come back into play, we're going to have maybe a shortage of nursing homes and certain areas.
No I mean look I think it's going to get there we've got demographics on our side, that's that's coming into play and quite frankly at some point Athens demographics come back into play we're going to have maybe a shortage of nursing homes in certain areas.
Okay last question from me.
Speaker 16: Okay, last question from me. Just curious, whether you think Guardian could be a leading indicator for other operators that may just be fatigued and then staring out at a burdensome labor mandate, do you see other operators? Do you see this being, this, a beginning of a wave of additional operators actually in the business?
Just curious.
Whether you think guardian it could be a leading indicator for other operators that may just be fatigued, and then staring out at a burden themselves.
Labor mandate do you see other other operators you see this be is this a beginning of a wave of additional operators accident in the business.
Speaker 3: Now I think guardians really idiosyncratic, very unique. If you look through the rest of the portfolio, it just doesn't have similar issues. I will say that the state of Pennsylvania in general, has become a little bit more difficult operating environment. And so there's a bit of that, and we do have a decent presence in the state of Pennsylvania.
No I think guardians really idiosyncratic.
Very unique.
You look through the rest of the portfolio.
It doesn't have.
Similar issues.
I'll say that the state of Pennsylvania in general has become a little bit more difficult operating environment, and so theres a bit of that and we do have a <unk>.
Decent presence in the state of Pennsylvania.
Speaker 3: But most of that is with operators in big master leases where a little bit of pressure with their family in Pennsylvania is offset by really good results in other geographies. So now I don't, it may be a little bit of an indicator in Pennsylvania for Pennsylvania only operators, but we really don't have that as an issue. So I'm fortunate enough to have been on all that to be able to originate all these 250
But most of that is with operators in big Master leases were a little bit of pressure. They are feeling in Pennsylvania is offset by really good results in other geographies. So no I don't.
It may be a little bit of an indicator in Pennsylvania for Pennsylvania, only operators, but we really don't have that issue.
This shift.
Okay I can take that.
Speaker 1: Our next question comes on the line of Juan Sanabria with BMO. Please proceed with your question.
Our next question comes from the line of Juan Sanabria with BMO. Please proceed with your question.
Juan Your line is live.
Speaker 1: Our next question comes from the line of I.O. off-usana with Deutsche Bank. Please proceed with your question. I ask him.
Our next question comes from the line of Io. After you saw that with Deutsche Bank. Please proceed with your question.
Hi, Yes, good morning, everyone.
Speaker 14: So the question I have is it sounds pretty much like fundamentals are kind of all moving in the right direction at this point.
So the question I have is it sounds pretty much like fundamentals are kind of all moving in the right direction at this point.
Speaker 14: And I guess again, there's still some tenants that the margin are still having issues. So I'm trying to understand thematically.
And I guess again, there's still some tenants that are on the margin are still having issues I'm trying to understand the medically.
Speaker 14: you know, where the pressure points still remain, and whether indeed, you know, all this is slowly behind us and things will be hunky-dory going forward, or if there's still kind of issues out there that could still persist.
Where the pressure point still remain and whether indeed all of this is slowly behind us and things will be hunky dory going forward or if there's still kind of issues out there that could still persists.
Speaker 14: for longer than anticipated. It sounds like part of it is occupancy and just kind of labor, constraints making it very hard to drive occupancy higher. Curious if any of it is just, as Medicare Advantage continues to grow, the pressure it's putting on profitability. I'm just kind of curious where else?
For a longer than anticipated and it sounds like part of it is occupancy.
And just kind of labor constraints, making it very hard to drive occupancy higher curious if any of it is just you know as Medicare advantage continues to grow the pressure, it's putting on profitability I am just kind of curious where else you know there could be some potential.
Speaker 14: you know, there could be some potential, you know, fundamental issues one has to worry about, you know, in terms of just operator profitability.
Fundamental issues, one has to worry about.
In terms of just operating profitability.
Yes tayo.
Speaker 13: I think the short answer is what you said in the beginning. The fundamentals are all strong. And the...
I think the short answer is what you said at the beginning the fundamentals are all strong.
And the.
Speaker 3: The residual cleanup that we have now is just that. We've been in the business for three decades and you're always gonna have certain issues that come up in this business.
The residual cleanup that we have now is just that.
We've been in the business for three decades, and Youre always going to have certain issues.
They come up in this business.
Speaker 3: But I think that's what we're gonna be looking at in the back half of 2024, just sort of normal way business. Medicare advantage, it's been around forever. I don't see, it really no incremental pressure there. I think the market's really sorted itself well in terms of operators.
I think that's what we're going to be looking at.
In the back half of 2024, just sort of normal way business Medicare advantage, it's been around forever I don't see it as really no incremental pressure there and I think the market's really sorted itself well in terms of operators.
Speaker 3: that can provide the clinical care for the advantage providers that works effectively and we're aligned with most of our big operators who are already aligned with those organizations. So I feel good about all of that.
That can provide the clinical care for the embedded providers that works effectively and we're aligned with.
Most of our big operators are already aligned with those organizations. So I.
I feel good about all of that.
Speaker 13: And look, we've said pretty transparent, we've solved.
And look we've we said pretty transparent salt.
Speaker 3: dozens of issues were down to a handful. And I think we have a lot of visibility around.
Dozens of issues, we're down to a handful and I think we have a lot of visibility around that.
Speaker 14: That's helpful. And then just one other quick one, did you discuss the cap rate or the NOI associated with the love these sales in November ? That's $2,000,000 and $5,000,000.
Okay. That's helpful. And then just one other quick one did you discuss the.
The cap rate or the NOI associated with the love the sales in November to 27 5 million.
Speaker 3: Now, as Dan mentioned, really it's per bed sale prices, which hover that is between $9,000 and $1,000 of beds where floors traded. Those facilities all have some turn around component in them, so the cap rate is really.
Now as Dan mentioned.
Really it's per bed.
Sale sale prices, which Hubbard that is between 90 to 100000, a bed is where Florida trade it.
Those facilities all have turnaround component in them. So the cap rate is really.
No it doesn't mean it might be.
Speaker 14: Okay, give us a thumbs up what NOI kind of disappears from you guys as a result of those sales
But can you give us a sense what.
Oh, why kind of disappears from you guys as a result of those sales.
Speaker 13: Yeah, it goes back to the last couple of, the last part of the restructuring and Dan's working through that, which is disposing of the six properties that remain to us, Laura, and former Louisiana. And then the appropriate rent around the retained portfolio, which that portfolio has a very substantial cash flow. So I think there'll be a lot of value there. But that is a TBD that Dan's working through. the guys, thanks.
Yes, It goes back to the last couple of.
And the last part of the restructuring and Dan as we're working through that which is disposing of the six properties that remain two in Florida and four in Louisiana, and then the appropriate brand around the retained portfolio, which.
That portfolio has a very substantial cash flow, so I think there'll be a.
A lot of value there, but.
That is a that is a TBD dancing TBD.
Fair enough. Thank you.
Okay.
Speaker 1: There are no other questions in the queue. I'd like to hand the call back to Taylor Pickett for closing remarks.
There are no other questions in the queue I'd like to hand, the call back to Taylor Pickett for closing remarks.
Yeah.
Speaker 3: Thanks, Doug. Thanks, everyone, for joining today. As always, please reach out to the team with any file questions you may have. Have a great day.
Thanks, Doug and thanks, everyone for joining today as always.
Please reach out to the team with any follow up questions you may have.
Great day.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Speaker 1: Ladies and gentlemen, this does include today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.