Q2 2024 National Health Investors Inc Earnings Call

Operator: It's basically a 3%. Good morning, everyone, and welcome to the National Health Investors second quarter 2024 earnings webcast and conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Dana Hambly. Sir, the floor is yours.

Operator: Good morning, everyone, and welcome to the National Health Investors second quarter of 2024 earnings webcast and conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation.

Speaker Change: It's basically a three-person group. Good morning, everyone, and welcome to the National Health Investors' second quarter 2024 earnings webcast and conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation.

Dana Hambly: It is now my pleasure to turn the floor over to your host, Dana Hambly. Sir, the floor is yours.

Dana Hambly: Thank you and welcome to the National Health Investors conference call to review results for the second quarter of 2024. On the call today are Eric Mendelssohn, President and CEO; Kevin Pascoe, Chief Investment Officer; John Spaid, Chief Financial Officer; and David Travis, Chief Accounting Officer. The results, as well as notice of the accessibility of this conference call, were released after the market closed yesterday, and a press release has been covered by the financial media.

Speaker Change: It is now my pleasure to turn the floor over to your host, Dana Hambly. Sir, the floor is yours.

Dana Hambly: Thank you, and welcome to the National Health Investors Conference Call to review the results for the second quarter of 2024. On the call today are Eric Mendelson, President and CEO, Kevin Pascoe, Chief Investment Officer, John Spaid, Chief Financial Officer, and David Travis, Chief Accounting Officer.

Speaker Change: Thank you and welcome to the National Health Investors Conference call to review the results for the second quarter of 2024. On the call today are Eric Mendelson, President and CEO , Kevin Pascoe, Chief Investment Officer, John Spaid, Chief Financial Officer, and David Travis, Chief Accounting Officer.

Dana Hambly: The results, as well as notice of the accessibility of this conference call, were released after the market closed yesterday in a press release that was covered by the financial media. Any statements in this conference call which are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call.

Speaker Change: The results, as well as notice of the accessibility of this conference call, were released after the market closed yesterday in a press release that's been covered by the financial media.

Dana Hambly: Any statements in this conference call which are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the day of this conference call.

Speaker Change: Any statements in this conference call which are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance.

Dana Hambly: Investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-K for the year ended December 31, 2023, and Form 10-Q for the quarter ended June 30, 2024. Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhiread.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules, which have been furnished on Form 8K to the SEC. Listeners are encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release. I'll now turn the call over to our CEO, Eric Mendelson. Thank you, Dan.

Dana Hambly: Investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-K for the year ended December 31st, 2023, and Form 10-K for the quarter ended June 30th, 2024. Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhir.com.

Speaker Change: All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI and its periodic reports.

Speaker Change: filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-K for the year ended December 31, 2023, and Form 10-Q for the quarter ended June 30, 2024.

Speaker Change: Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhireet.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules which have been furnished on Form 8K to the SEC.

Dana Hambly: In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules, which have been furnished on Form 8-K to the SEC. Listeners are encouraged to review those reconciliations provided and the earnings release together with all other information provided in that release.

Speaker Change: Listeners are encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release. I'll now turn the call over to our CEO , Eric Mendelson.

Eric Mendelssohn: I'll now turn the call over to our CEO, Eric Mendelsson. Thank you, Dana. Hello, and thanks everyone for joining us today. The second quarter exceeded our forecast and represents the fourth straight quarter of outperformance relative to our expectations. The drivers of the strong performance have been consistent as we once again had stable cash collections, steady deferral repayments, improving operator fundamentals, shop occupancy and revenue growth, and no unexpected rent concessions. While the recent outperformance has been driven primarily by organic measures, we're very excited about the recent investment activity and our growing pipeline. Year to date, we've closed on 56.6 million of investments at an average initial yield of approximately 8.4%.

Eric Mendelson: Thank you, Dana. Hello, and thanks to everyone for joining us today. The second quarter exceeded our forecast and represents the fourth straight quarter of outperformance relative to our expectations. The drivers of the strong performance have been consistent, as we once again had stable cash collections, steady deferral repayments, improving operator fundamentals, shop occupancy and revenue growth, and no unexpected rent concessions. While the recent outperformance has been driven primarily by organic measures, we're very excited about the recent investment activity and our growing pipeline.

Eric Mendelson: Thank you, Dana. Hello and thanks to everyone for joining us today.

Eric Mendelson: The second quarter exceeded our forecast and represents the fourth straight quarter of outperformance relative to our expectations.

Eric Mendelson: The drivers of the strong performance have been consistent, as we once again had stable cash collections, steady deferral repayments, improving operator fundamentals, shop occupancy and revenue growth.

Eric Mendelson: and No Unexpected Rent Concessions.

Eric Mendelson: While the recent outperformance has been driven primarily by organic measures, we're very excited about the recent investment activity and our growing pipeline.

Eric Mendelson: Year-to-date, we've closed on $56.6 million of investments at an average initial yield of approximately 8.4%. In addition, we have sourced investment opportunities totaling more than $1.8 billion. Of this amount, we have board-approved, signed LOI investment opportunities of $155.4 million that we expect to close this year. We're also evaluating a pipeline of approximately $270 million. These investments target senior housing assets and fee-simple real estate, and loans with purchase options.

Eric Mendelson: Year-to-date, we've closed on $56.6 million of investments at an average initial yield of approximately 8.4%.

Eric Mendelssohn: In addition, we have sourced investment opportunities totaling more than 1.8 billion. Of this amount, we have board-approved signed LOI investment opportunities of 155.4 million that we expect to close this year. We're also evaluating a pipeline of approximately 270 million. These investments target senior housing assets and fee simple real estate and loans with purchase options. We're also pursuing several large portfolio deals, including RIDA deals, which are not included in our pipeline. We've patiently spent multiple years positioning our company to return to the level of acquisition growth we experienced prior to the pandemic. With ample drive power and improved cost of capital and more realistic seller expectations, we expect that external investment activity will be a significant driver of cash flow growth in the foreseeable future.

Eric Mendelson: In addition, we have sourced investment opportunities totaling more than $1.8 billion. Of this amount, we have board-approved, signed LOI investment opportunities of $155.4 million that we expect to close this year.

Eric Mendelson: We're also evaluating a pipeline of approximately $270 million. These investments target senior housing assets and fee-simple real estate and loans with purchase options.

Eric Mendelson: We're also pursuing several large portfolio deals, including RIDEA deals, which are not included in our pipeline. We've patiently spent multiple years positioning our company to return to the level of acquisition growth we experienced prior to the pandemic. With ample dry powder, an improved cost of capital, and more realistic seller expectations, we expect that external investment activity will be a significant driver of cash flow growth in the foreseeable future. Regarding our quarterly results, compared to the second quarter of 2023, normalized FFO per share and total dollar FAD increased 11.4% and 16.1%, respectively. We received a $2.5 million deferral repayment in the quarter, which is a testament to our strategy allowing us to recapture NOI that would otherwise be lost.

Eric Mendelson: We're also pursuing several large portfolio deals, including RIDEA deals, which are not included in our pipeline.

Eric Mendelson: We've patiently spent multiple years positioning our company to return to the level of acquisition growth we experienced prior to the pandemic.

Eric Mendelson: With ample dry powder, an improved cost of capital, and more realistic seller expectations, we expect that external investment activity will be a significant driver of cash flow growth in the foreseeable future.

Eric Mendelssohn: Regarding our quarterly results, compared to the second quarter of 2023, normalized FFO per share and total dollar FAD increased 11.4% and 16.1%, respectively. We received a $2.5 million deferral repayment in the quarter, which is a testament to our strategy allowing us to recapture and a why that would have been otherwise lost. The April 1st Bickford rent step-up also contributed nicely to our growth, as did their revenue-based 1.3 million deferral repayment. Including Bickford, we have 19.6 million in net deferral balances tied to senior housing operating revenue goals. The senior housing operating portfolio or SHOP NOI increased by 39.9% year-over-year to approximately 3 million.

Eric Mendelson: Regarding our quarterly results, compared to the second quarter of 2023, normalized FFO per share and total dollar FAD increased 11.4% and 16.1%, respectively.

Eric Mendelson: We received a $2.5 million deferral repayment in the quarter, which is a testament to our strategy allowing us to recapture NOI that would have been otherwise lost.

Eric Mendelson: The April 1st Bickford rent step-up also contributed nicely to our growth, as did their revenue-based $1.3 million deferral repayment. Including Bickford, we have $19.6 million in net deferral balances tied to Senior Housing Operating revenue goals. The Senior Housing Operating Portfolio, or SHOP, NOI, increased by 39.9% year-over-year to approximately $3 million. While the NOI result was slightly below our internal expectation, we're encouraged that occupancy continues to move higher, and we remain confident in our guidance growth rate for the year and the longer-term upside potential of this portfolio.

Eric Mendelson: The April 1st Bickford Rent Step-Up also contributed nicely to our growth, as did their revenue-based $1.3 million deferral repayment.

Eric Mendelson: including Bickford, we have $19.6 million in net deferral balances tied to senior housing operating revenue goals.

Eric Mendelson: The Senior Housing Operating Portfolio, or SHOP, NOI, increased by 39.9% year-over-year to approximately $3 million.

Eric Mendelssohn: While the NOI result was slightly below our internal expectation, we're encouraged that occupancy continues to move higher, and we remain confident in our guidance growth rate for the year and the longer-term upside potential with this portfolio. Given the strong quarterly results and good visibility into the second half of the year, we're once again raising our 2024 guidance. Our updated guidance represents midpoint normalized FFO per share growth of 4.8% and a midpoint FAD growth of 7% when compared to 2023. The increased guidance continues to be broad-based, with several factors contributing to the improved outlook compared to our original February guidance.

Eric Mendelson: While the NOI result was slightly below our internal expectation, we're encouraged that occupancy continues to move higher, and we remain confident in our guidance growth rate for the year and the longer-term upside potential of this portfolio.

Eric Mendelson: Given the strong quarterly results and good visibility into the second half of the year, we're once again raising our 2024 guidance. Our updated guidance represents midpoint normalized FFO per share growth of 4.8% and midpoint FAD growth of 7% when compared to 2023. The increased guidance continues to be broad-based, with several factors contributing to the improved outlook compared to our original February guidance. Our growth profile is multifaceted, both internally and externally, and is supported by an increasingly bullish demographic environment characterized by favorable supply-demand dynamics.

Eric Mendelson: Given the strong quarterly results and good visibility into the second half of the year, we're once again raising our 2024 guidance.

Eric Mendelson: Our updated guidance represents midpoint normalized FFO per share growth of 4.8% and a midpoint FAD growth of 7% when compared to 2023.

Eric Mendelson: The increased guidance continues to be broad-based, with several factors contributing to the improved outlook compared to our original February guidance.

Eric Mendelssohn: Our growth profile is multifaceted both internally and externally and is supported by an increasingly bullish demographic environment characterized by favorable supply-demand dynamic. We believe that we position the company to succeed through all stages of the business cycle and are therefore generally agnostic to the short-term ripples in the economy. Well, we have a long history as a public company. We're excited about the future as we have ever been, and we are convinced that we're in the early days of exceptional growth for several years to come.

Eric Mendelson: Our growth profile is multifaceted, both internally and externally, and is supported by an increasingly bullish demographic environment, characterized by a favorable supply-demand dynamic.

Eric Mendelson: We believe that we position the company to succeed through all stages of the business cycle and are therefore generally agnostic to the short-term ripples in the economy. We're excited about the future as we have ever been, and we are convinced that we are in the early days of exceptional growth for several years to come. I'll now turn the call over to Kevin to provide more details on our operations.

Eric Mendelson: We believe that we position the company to succeed through all stages of the business cycle and are therefore generally agnostic to the short-term ripples in the economy.

Eric Mendelson: While we have a long history as a public company, we're excited about the future as we have ever been, and we are convinced that we're in the early days of exceptional growth for several years to come. I'll now turn the call to Kevin to provide more details on our operations. Kevin.

Kevin Pascoe: I'll now turn the call to Kevin to provide more details on our operations.

Kevin Pascoe: Kevin. Thank you, Eric. Last quarter, we said that we were starting to see more actionable deal activity, and the volume of new inquiries had significantly increased in the last several months across asset classes and financing solutions. That is all still true, and we're happy to refine that communication as we have now closed on 56.6 million in year-to-date investments at an average yield of 8.42%. The size of our signed yellow wise as well as the actionable pipeline of other investment opportunities has increased significantly from what we described. Further, I'll add that the deals we are looking at are primarily focused on senior housing assets and more skewed to fee-simple real estate deals as opposed to the 50-50 mix of fee-simple and loan opportunities we described in our first quarter call.

Kevin Pascoe: Last quarter, we said that we were starting to see more actionable deal activity, and the volume of new inquiries had significantly increased in the last several months across asset classes and financing solutions. That is all still true, and we're happy to refine that communication as we have now closed on $56.6 million in year-to-date investments at an average yield of 8.42%.

Kevin: Thank you, Eric. Last quarter, we said that we were starting to see more actionable deal activity, and the volume of new inquiries had significantly increased in the last several months across asset classes and financing solutions.

Kevin: That is all still true and we're happy to refine that communication as we have now closed on 56.6 million in year-to-date investments at an average yield of 8.42 percent.

Kevin Pascoe: As Eric noted, the size of our signed LOIs as well as the actionable pipeline of other investment opportunities has increased significantly from what we described last quarter. Further, I'll add that the deals we are looking at are primarily focused on senior housing assets and more skewed to fee-simple real estate deals as opposed to the 50-50 mix of fee-simple and loan opportunities we described in our first quarter call. As always, with these loan opportunities, we are looking for a path to real estate ownership.

Kevin: As Eric noted, the size of our signed LOIs as well as the actionable pipeline of other investment opportunities has increased significantly from what we described last quarter.

Speaker Change: Further, I'll add that the deals we are looking at are primarily focused on senior housing assets and more skewed to fee simple real estate deals as opposed to the 50-50 mix of fee simple and loan opportunities we described in our first quarter call.

Kevin Pascoe: As always, with the loan opportunities, we are looking for a path to real estate ownership. For example, we close on the acquisition of a newly constructed senior housing community in Sussex, Wisconsin, for $32.1 million, which is operated by an existing partner on-forcing your living. The purchase price was partially funded with the satisfaction of a construction loan we had previously provided to Omotayo. We have originated two other mortgage loans so far this year with new operators. These both have purchased options, and we are already speaking with these partners about potential new opportunities.

Speaker Change: As always, with the loan opportunities, we are looking for a path to real estate ownership.

Kevin Pascoe: For example, we closed on the acquisition of a newly constructed senior housing community in Sussex, Wisconsin, for $32.1 million, which is operated by an existing partner on 4 Senior Living. The purchase price was partially funded with the satisfaction of a construction loan we had previously provided to OnBoard. We have originated two other mortgage loans so far this year with new operators. These both have purchase options, and we are already speaking with these partners about potential new opportunities.

Speaker Change: For example, we closed on the acquisition of a newly-constructed senior housing community in Sussex, Wisconsin for $32.1 million, which is operated by an existing partner on 4 Senior Living.

Speaker Change: The purchase price was partially funded with the satisfaction of a construction loan we had previously provided to Encore.

Speaker Change: We have originated two other mortgage loans so far this year with new operators.

Speaker Change: These both have purchase options, and we are already speaking with these partners about potential new opportunities.

Kevin Pascoe: Turning to asset management, we had another strong quarter with positive year-over-year adjusted NOI growth across our asset classes. EBITDA coverage continued to improve, and we did not provide any unexpected rent concessions. Bigford's occupancy declined by 50 basis points to 85.4% from the first quarter of 2024 to the second. This was entirely the function of a change in assets as we sold two mature buildings and added two recently constructed properties with much more upsized potential. We estimate approximately $1 million in quarterly Bickford repayments for the second half of 2024. Including Bickford, we still have $24.3 million in net deferrals, which we expect to realize, repayments, and other value-creating transactions.

Kevin Pascoe: Turning to asset management, we have another strong quarter with positive year-over-year adjusted in a wide growth across our asset classes. Epidorm coverage continued to improve, and we did not provide any unexpected rent concessions. The need driven operators again had positive coverage trends with Epidorm at 1.38 times, representing the ninth straight period of sequential growth. The improvement was driven primarily by Bigford at 1.67 times. Adjusting for the April 1st rent increase, the Bigford coverage would have been a healthy 1.45 times. Bigford's occupancy declined by 50 basis points to 85.4% from the first quarter of 2024 to the second.

Speaker Change: Turning to asset management, we had another strong quarter with positive year-over-year adjusted NOI growth across our asset classes. EBITDA coverage continued to improve and we did not provide any unexpected rent concessions.

Speaker Change: The knee-driven operators, again, had positive coverage trends with Ipaderm at 1.38 times, representing the ninth straight period of sequential growth.

Speaker Change: The improvement was driven primarily by Bigford at 1.67 times.

Speaker Change: Adjusting for the April 1st rent increase, the vapor coverage would have been a healthy 1.45 times.

Speaker Change: Bigford's occupancy declined by 50 basis points to 85.4% from the first quarter of 2024 to the second.

Kevin Pascoe: They experienced a decline early in the second quarter, which flattened out and started turning positive near the end of the quarter. Their third quarter is off to a good start as average July occupancy increased 60 basis points from June to 85.20%. The need driven coverage, excluding Bigford, dips sequentially to 1.15 times from 1.16 times. This was entirely the function of a change in assets as we sold two mature buildings and added two recently constructed properties with much more upside potential. For all repayments total 4.7 million during the quarter, which included 1.3 million from Bigford and a 2.59 million dollar repayment from a cash basis tenant.

Speaker Change: They experienced a decline early in the second quarter, which flattened out and started turning positive near the end of the quarter. Their third quarter is off to a good start, as average July occupancy increased 60 basis points from June to 85.8%.

Speaker Change: The need-driven coverage is excluding BIFRA dips sequentially to 1.15 times from 1.16 times.

Speaker Change: This was entirely the function of a change in assets as we sold two mature buildings and added two recently constructed properties with much more upside potential.

Speaker Change: Referral repayments totaled $4.7 million during the quarter, which included $1.3 million from Bigford and a $2.5 million repayment from a cash basis tenant.

Kevin Pascoe: Bigford's repayment declined from 1.5 million in the first quarter as we adjusted the repayment formula in conjunction with the rent reset. We estimated approximately 1 million in quarterly Bigford repayment for the second half of 2024. Including Bigford, we still have 24.3 million in net deferrals, which we expect to realize and repayments and other value creating transactions. Our discretionary senior housing portfolio primarily includes our entrance fee portfolio, which has performed above our expectations since the pandemic began, and that continues to be the case. The coverage improves sequentially to 1.6 times from 1.54 times, driven by improvements at both SLC and our other entrance fee operators.

Speaker Change: Bigford's repayment declined from $1.5 million in the first quarter as we adjusted the repayment formula in conjunction with the rent reset.

Speaker Change: We estimate approximately $1 million in quarterly Vickford repayments for the second half of 2024.

Speaker Change: Including Bickford, we still have $24.3 million in net deferrals, which we expect to realize in repayments and other value-creating transactions.

John Spaid: Our discretionary senior housing portfolio primarily includes our entrance fee portfolio, which has performed above our expectations since the pandemic began, and that continues to be the case. The coverage at NHC improved to 3.96 times from 3.8 times. During the second quarter, we completed the process of transitioning one SNF to Wisconsin to Champion Care, which has a much greater presence in that state. Lastly, in the shop, momentum continues to build throughout the portfolio.

Speaker Change: Our discretionary senior housing portfolio primarily includes our entrance fee portfolio, which has performed above our expectations since the pandemic began, and that continues to be the case.

Speaker Change: Coverage improved sequentially to 1.6 times, from 1.54 times, driven by improvements at both SLC and our other entrance fee operators.

Kevin Pascoe: The SNF and specialty hospital portfolio reported solid coverage at 2.98 times, which improves sequentially from 2.83 times. A coverage at NHC improved to 3.96 times from 3.8 times.

Speaker Change: The SNF and Specialty Hospital portfolio reported solid coverage at 2.98 times, which improved sequentially from 2.83 times.

Kevin Pascoe: As we reminded listeners last quarter, NHC's report of coverage represents a corporate fixed charge coverage and is not comparable to the epidarm coverage reported for all other asset classes and operators. During the second quarter, we completed the process of transitioning one sniff to Wisconsin to champion care, which has a much greater presence in that state. The cash lease revenue is unchanged, and the new operator has a purchase option on the property beginning in 2031, which will result in a 12% IRR if the operator exercised.

Speaker Change: The coverage at NHC improved to 3.96 times from 3.8 times. As we reminded listeners last quarter, NHC's reported coverage represents a corporate fixed charge coverage and is not comparable to the EBITDARM coverage reported for all other asset classes and operators.

Speaker Change: yeah

Speaker Change: During the second quarter, we completed the process of transitioning one SNF to Wisconsin to Champion Care, which has a much greater presence in that state.

Speaker Change: The cash lease revenue is unchanged, and the new operator has a purchase option on the property beginning in 2031, which will result in a 12% IRR if the operator exercised.

Kevin Pascoe: Lastly, in shop, momentum continues to build throughout the portfolio. Second quarter NOI increased 39.9% year over year to $3 million. Residents fees increased by 13.5% year over year, driven by occupancy improvement to 87% from 75.5%, and contributed to 420 basis points of margin expansion to 22.1%. Compared to the first quarter of 2024, occupancy improved by 170 basis points, while the margin declined slightly by 10 basis points. The slight sequential margin decline was below our expectations, but occupancy continued to improve throughout the second quarter, ending on a high note at 87.7% in June. The preliminary July occupancy showed another uptick to 88.2%.

Speaker Change: Lastly, in SHOP, momentum continues to build throughout the portfolio.

Speaker Change: Second quarter NOI increased 39.9% year-over-year to $3 million.

John Spaid: Resident fees increased by 13.5% year-over-year, driven by occupancy improvement to 87% from 75.5%, and contributed to 420 basis points of margin expansion to 22.1%. Compared to the first quarter of 2024, occupancy improved by 170 basis points, while the margin declined slightly by 10 basis points. The preliminary July occupancy showed another uptick to 88.2%. I'll now turn the call over to John to discuss our financial results and guidance

Speaker Change: Resident fees increased by 13.5% year over year, driven by occupancy improvement to 87% from 75.5%, and contributed to 420 basis points of margin expansion to 22.1%.

Speaker Change: compared to the first quarter of two and twenty-four occupantscy improved by one hundred and seventy basis points while margin declined slightly by ten basis points

Speaker Change: the slight sequential margin decline was belower expectation but occupancy continuue to improve throughout the second quarter ending on a high noted eighty-seven point seven percent in june

Kevin Pascoe: As occupancy gets closer to 90%, we expect to start reducing move-in incentives, which should lead to an improvement in margin given the significant operating leverage in the independent living model. Our current guidance for year-over-year shop in NOI growth is unchanged at 25% to 30%. As is our long-term view that this portfolio can generate NOI dollars in the high teams on margins in the mid 30% range.

Speaker Change: The preliminary July occupancy showed another uptick to 88.2 percent.

Speaker Change: As occupancy gets closer to 90%, we expect to start reducing move-in incentives, which should lead to an improvement in margin given the significant operating leverage in the independent living model.

Speaker Change: Our current guidance for year-over-year shop NOI growth is unchanged at 25% to 30%, as is our long-term view that this portfolio can generate NOI dollars in the high teens and margins in the mid-30% range.

John Spaid: I'll now turn the call over to John to discuss our financial results in guidance.

John Spaid: John. Thank you, Kevin, and hello, everyone. The focus of my remarks today will be around our improving revenues, which this quarter exceeded our expectations and positively impacted our net income, FFO, and FAD metrics. Kevin and Eric touched on our collection at the FIRD rents, but this quarter, we also benefit from recent activity under our capital expenditure program, which increased the lease maturity for our existing leases with senior living communities and will also lead to additional rent as those capex dollars are funded. Finally, our improving outlook in our updated guidance reflects the additional contributions we expect this year from our other second quarter activities, including the recent transition property lease with a new operator, the new $9.5 million mortgage investment with Compass Senior Living, and a recent loan conversion to lease investment with Encore Senior Living.

John: i'll now turn the call over to john to discuss our financial results and guidance john

John: Thank you, Kevin, and hello everyone. The focus of my remarks today will be around our improving revenues, which this quarter exceeded our expectations and positively impacted our net income, FFO, and FAD metrics.

Kevin: Kevin and Eric touched on our collection at Deferred Rents.

Speaker Change: But this quarter, we also benefited from recent activity under our capital expenditure program, which increased the lease maturity for our existing leases with senior living communities and will also lead to additional rent as those CapEx dollars are funded.

Speaker Change: Finally, our improving outlook and our updated guidance.

Speaker Change: reflects the additional contributions we expect this year from our other second quarter activities.

Speaker Change: including the recent transition property lease with a new operator, the new $9.5 million mortgage investment with Compass Senior Living, and the recent loan conversion to lease investment with Encore Senior Living.

John Spaid: While our guidance doesn't reflect the future pipeline activity that Eric and Kevin just discussed, we feel confident that our pipeline will result in future investment activity.

Speaker Change: While our guidance doesn't reflect the future pipeline activity that Eric and Kevin just discussed, we feel confident that our pipeline will result in future investment activity.

John Spaid: So I'll talk more about our capital plans as we look to meet all our needs for 2024 and 2025. Finally, I'll talk about our guidance, which we're very pleased to raise for the second time this year.

Speaker Change: So I'll talk more about our capital plans as we look to meet all our needs for 2024 and 2025. Finally, I'll talk about our guidance, which we're very pleased to raise for the second time this year. But first, our results for the second quarter.

John Spaid: But first, our results for the second quarter. Our net income for diluted common share for the quarter-ended June 30, 2024, was 81 cents compared to 92 cents for the same period last year and sequentially up 14.1% from the first quarter. Our name-read and normalized FFO results for diluted common share increased 12.4% and 11.3% to $1.18 and $1.18, respectively, for the quarter-ended June 30 compared to the prior year's second quarter and were sequentially up 7.3% and 5.4% compared to our first quarter's results. FAD for the quarter increased 16.1% to $51.8 million from $44.6 million in the prior year's second quarter and was sequentially up 1.6% compared to our first quarter's results.

John Spaid: While our guidance doesn't reflect the future pipeline activity that Eric and Kevin just discussed, but first, our results for the second quarter. Our net income for diluted common share for the quarter ended June 30, 2024, was $0.81 compared to $0.92 for the same period last year and sequentially up 14.1% from the first quarter. Our NAREF and normalized FFO results for diluted common share increased 12.4% and 11.3% to $1.18 and $1.18, respectively, for the quarter ending June 30 compared to the prior year's second quarter, and were sequentially up 7.3% and 5.4% compared to our first quarter's results.

Speaker Change: Our net income for diluted common share for the quarter ended June 30, 2024, was $0.81 compared to $0.92 for the same period last year, and sequentially up 14.1% from the first quarter.

Speaker Change: Our NAREP and normalized FFO results for diluted common share increased 12.4% and 11.3% to $1.18 and $1.18, respectively, for the quarter ending June 30, compared to the prior year's second quarter.

Speaker Change: And we're sequentially up 7.3% and 5.4% compared to our first quarter's results.

John Spaid: FAD for the quarter increased 16.1%, to $51.8 million from $44.6 million in the prior year's second quarter, and was sequentially up 1.6% compared to our first quarter's results. Our FAD results for the six-month period into June 30, 2024 are up 11.3% compared to the same period last year.

Speaker Change: FAD for the quarter increased 16.1% to $51.8 million from $44.6 million in the prior year's second quarter and was sequentially up 1.6% compared to our first quarter's results.

John Spaid: Our FAD results for the six-month period and the June 30, 2024, are up 11.3% compared to the same period last year.

Speaker Change: Our FAD results for the six-month period into June 30, 2024, are up 11.3% compared to the same period last year.

John Spaid: We'll be very pleased with these results. Let me go into a little more detail. Compared to the first quarter in 2024, cash rent recognized for the second quarter was up approximately $2 million. The improvement was primarily due to the higher deferred and other rents received from our cash faces tenants during the quarter. Net of the annual MHC percentage revenue went true up recognized in the first quarter. As I touched on earlier, straight line lease revenue improved $1.5 million as compared to the first quarter and improved $700,000 after excluding the straight line receipt over write-off recognized in the first quarter.

John Spaid: Compared to the first quarter of 2024, cash rent recognized for the second quarter was up approximately $2 million. The improvement was primarily due to the higher deferred and other rents received from our cash basis tenants during the quarter. Net of the annual NHC percentage revenue rent drawdown recognized in the first quarter. As I touched on earlier, straight-line lease revenue improved $1.5 million as compared to the first quarter and improved $700,000 after excluding the straight-line receivable write-off recognized in the first quarter.

Speaker Change: We're very pleased with these results, so let me go into a little more detail.

Speaker Change: Compared to the first quarter in 2024, cash rent recognized for the second quarter was up approximately $2 million.

Speaker Change: The improvement was primarily due to the higher deferred and other rents received from our cash basis tenants during the quarter. Net of the annual NHC percentage revenue went true up, recognized in the first quarter.

Speaker Change: As I touched on earlier, straight-line lease revenue improved $1.5 million as compared to the first quarter and improved $700,000 after excluding the straight-line receivable write-off recognized in the first quarter.

John Spaid: We'll call that the first quarter straight line write-off was for a transition property that's now under a new lease, which commenced during the second quarter. The senior living communities lease modification under our capital expenditure program was a primary contributor to the quarter of a quarter of increase in straight line lease revenue. But the full revenue impacts from the other second quarter lease activities are included in our updated guidance. NOI from our shop portfolio was flat for the second quarter compared to the first quarter, but represents a 39.9% improvement in NOI compared to the prior year quarter.

John Spaid: Recall that the first quarter straight-line write-off was for a transition property that is now under a new lease which commenced during the second quarter. The Senior Living Communities Lease Modification under our Capital Expenditure Program was a primary contributor to the quarter-over-quarter increase in straight-line lease revenue, but the fall revenue impacts from the other second-quarter leasing activities are included in our updated guidance. NOI from our shop portfolio was flat for the second quarter compared to the first quarter, but it represents a 39.9% improvement in NOI compared to the prior year quarter. During the quarter, we placed one property in assets held for sale, resulting in impairment, and increased the loan loss reserve on another property's loan, resulting in loan and realty losses of approximately $1.1 million.

Speaker Change: Recall that the first quarter straight-line write-off was for a transition property that's now under a new lease which commenced during the second quarter.

Speaker Change: The Senior Living Communities Lease Modification under our Capital Expenditure Program was a primary contributor to the quarter-over-quarter increase in straight-line lease revenue, but the fall revenue impacts from the other second-quarter leasing activities are included in our updated guidance.

Speaker Change: NOI from our shop portfolio was flat for the second quarter compared to the first quarter, but represents a 39.9% improvement in NOI compared to the prior year quarter.

John Spaid: Cash GNA expense, which is our GNA expense excluding non-cash stock compensation expense, increased $700,000 compared to the first quarter, primarily due to increases in business development and proxy-related expenses incurred during the quarter.

Speaker Change: CAST G&A expense, which is our G&A expense excluding non-CAST stock compensation expense, increased $700,000 compared to the first quarter, primarily due to increases in business development and proxy-related expenses incurred during the quarter.

John Spaid: During the quarter, we placed one property in asset health or sale, resulting in a permanent and increased loan loss reserve and another property's loan resulting in loan and realty losses of our approximately $1.1 million.

Speaker Change: During the quarter, we placed one property in assets held for sale, resulting in impairment, and increased the loan loss reserve on another property's loan, resulting in loan and realty losses of approximately $1.1 million.

John Spaid: As we announced last night, our board of directors declared a 90% for shared dividend for shareholders of record, September 27, 2024, and payable on November 1, 2024. If you've been closely following us, then you've noticed that today we disclosed the significant increase in our pipeline activities since our May earnings cost. We've closed on $41.6 million in transactions during the second quarter, and we now have over $155 million in signed L.O.I.s plus an even larger pipeline fund.

John Spaid: As we announced last night, our Board of Directors declared a 90 cent per share dividend for shareholders or records on September 27, 2024 and payable on November 1, 2024. If you've been closely following us, then you may have noticed that today we disclosed a significant increase in our pipeline activities since our May earnings call. We closed on $41.6 million in transactions during the second quarter, and we now have over $155 million in signed LOIs plus an even larger pipeline fund.

Speaker Change: As we announced last night, our Board of Directors declared a 90-cent per share dividend for shareholders or records September 27, 2024 and payable on November 1, 2024.

Speaker Change: if you've been closely following us then you've noticed there today we disclosse the significant increasingin our pipeline activities since our may earnings call

Speaker Change: We've closed on $41.6 million in transactions during the second quarter, and we now have over $155 million in signed LOIs, plus an even larger pipeline fund.

John Spaid: So let me discuss some more detail how we are approaching our capital needs. Our balance sheet ended the quarter in great shape. Our net debt to adjusted EBITDA ratio was 4.2 times. We have stood at approximately 39%. Should the Fed lower interest rates soon, we stand to immediately benefit.

John Spaid: So let me discuss in more detail how we are approaching our capital. Our balance sheet ended the quarter in great shape. Our net debt to adjusted EBITDA ratio was 4.2 times, well within our stated four to five times leverage policy. While we have the option to access equity, we also have the option to deploy over $200 million in additional debt, and investment yields just over 8% at our incremental borrowing costs, so just over 6%, without exceeding our stated leveraged financial policy.

Speaker Change: So let me discuss in more detail how we are approaching our capital needs.

Speaker Change: Our balance sheet ended the quarter in great shape. Our net debt-to-adjusted EBITDA ratio was 4.2 times, well within our stated 4 to 5 times leverage policy.

Speaker Change: We ended the quarter with $500 million in available ATM capacity.

Speaker Change: And at the end of June , we had $455.5 million in available capacity under our revolver.

Speaker Change: Our variable interest rate debt stood at approximately 39%. Should the Fed lower interest rates soon, we stand to immediately benefit.

John Spaid: We have one maturity this year, a 75 million dollar private placement loan, due at the end of September, which we will retire with revolver proceeds. Our capital plans are focused on meeting our liquidity needs for our upcoming maturities this year and next year, in addition to providing capital for our increasing pipeline. We are also focused on our average debt maturities. Subject to changing market conditions, we continue to review all our capital options to meet our ongoing liquidity needs. We're reviewing our bank credit facility options, public debt, as well as equity options. While we have the option to access equity, we also have the option to deploy over 200 million dollars in additional debt, and investment yields just over 8% at our incremental bar and cost, so just over 6% without exceeding our stated leverage financial policies.

Speaker Change: We have one maturity this year, a $75 million private placement loan due at the end of September , which we will retire with revolver proceeds.

Speaker Change: Our capital plans are focused on meeting our liquidity needs for our upcoming maturities this year and next year, in addition to providing capital for our increasing pipeline.

Speaker Change: We are also focused on our average debt maturities.

Speaker Change: Subject to changing market conditions, we continue to review all our capital options to meet our ongoing liquidity needs.

Speaker Change: We're reviewing our bank credit facility options, public debt, as well as equity options.

Speaker Change: While we have the option to access equity, we also have the option to deploy over $200 million in additional debt and investment yields just over 8% at our incremental borrowing costs of just over 6% without exceeding our stated leveraged financial policies.

John Spaid: We expect to execute only some of our options before the end of the year and not rely entirely on our revolver liquidity.

John Spaid: We expect to execute on at least some of our options before the end of the year and not rely entirely on our revolver liquidity. Recall that for our leases, with minimum rent escalators, when we either enter into additional such leases, or we modify our existing leases, increasing rents, or extending maturities. So once again, thank you all for joining our call today. That concludes our prepared remarks. So with that, operator, please open the lines for questions.

Speaker Change: We expect to execute on at least some of our options before the end of the year and not rely entirely on our revolver liquidity.

John Spaid: Let me now turn to our full year 2024 guidance. Our updated guidance today, as compared to our May 2024 full year guidance, reflects an improved midpoint for Navy FFO and normalized FFO of 13 cents and 14 cents, or 3% and 3.2%, respectively. FAD increased at the midpoint $3 million or 1.5%. As I previously mentioned, our improved Q2 revenues and our recent transactions are having meaningful impacts on our guidance. We call that a four-hour leases with minimum rent escalators when we either enter into additional such leases, or we modify our existing leases, increasing rents or extending maturities, and the results will positively impact our future gap revenue expectations, all other terms and conditions unchanged.

Speaker Change: Let me now turn to our full year 2024 guidance.

Speaker Change: Our updated guidance today, as compared to our May 2024 full-year guidance, reflects an improved midpoint for NARE FFO and normalized FFO of 13 cents and 14 cents, or 3% and 3.2% respectively.

Speaker Change: FAD increase at the midpoint, $3 million or 1.5%.

Speaker Change: As I previously mentioned, our improved Q2 revenues and our recent transactions are having meaningful impacts on our guidance.

Speaker Change: Recall that for our leases with minimum rent escalators, when we either enter into additional such leases or we modify our existing leases, increasing rents or extending maturities, then the results will positively impact our future gap revenue expectations, all other terms and conditions unchanged.

John Spaid: As we noted, our updated guidance released last night maintains unchanged our year-over-year shop NOI growth range, which includes effects from additional rent confessions, confessions, asset dispositions, and from continued deferred rent repayments and does not include the impacts from our pipeline.

Speaker Change: As we noted, our updated guidance released last night maintains unchanged our year-over-year SHOP NOI growth range, includes effects from additional rent concessions, asset dispositions, and from continually deferred rent repayments, and does not include the impacts from our pipeline.

Operator: So once again, thank you all for joining our call today.

Operator: That concludes our prepared remarks.

Speaker Change: So once again, thank you all for joining our call today. That concludes our prepared remarks. So with that, Operator, please open the lines for questions.

Operator: So, with that operator, please open the lines for questions. Certainly, everyone at this time be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time.

Operator: Certainly. Everyone will be conducting a question and answer session at this time. If you have any questions or comments, please press star 1 on your phone at this time.

Speaker Change: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time.

Operator: We do ask that, while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone.

Speaker Change: We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.

Juan Sanabria: Your first question is coming from Juan Sanabria from BMO. Your line is live.

Speaker Change: Once again, if you have any questions or comments, please press star 1 on your phone.

Speaker Change: Your first question is coming from Juan Sanabria from BMO. Your line is live.

Juan Sanabria: Hi, this is Robin Hanoi. I'm sitting here with Juan. Just on blue prints. We'll look at potential, look at replacement tenants or NHC as part of their work. Could you repeat the question, please? You're breaking up. It's curious on the blue prints. Are they going to look at potential replacement tenants or NHC as part of their work? That's certainly within their scope of work. Keep in mind that NHC has an absolute right to renew the lease at a market rate. So we're primarily concerned about determining what is a market rate. Okay, I'll chalk items. The second house implies growth into high single digits.

Robin Hanelan: Hi, this is Robin Hanelan sitting here with Juan. Just on Blueprint, will they potentially look at replacement tenants for NHC as part of their work?

Robin Haendel: Hi, this is Robin Hanelan sitting here with Juan. Just on Blueprint, will they potentially look at replacement tenants for NHC as part of their work?

Speaker Change: Could you repeat the question, please? You're breaking up.

Juan Sanabria: I'm curious, on Blueprint, are they going to look at potential replacement tenants for NHC as part of their work?

Kevin Pascoe: That's certainly within their scope of work. But keep in mind that NHC has an absolute right to renew the lease at a market rate.

Speaker Change: That's certainly within their scope of work. Keep in mind that NHC has an absolute right to renew the lease at a market rate. So we're primarily concerned about determining what is a market rate.

Kevin Pascoe: On shock items, the second house implies growth in the high single digits. Just curious what the main assumptions are and what is driving the expected deceleration.

Speaker Change: On shock items, the second house implies growth in the high single digits. Just curious what the main assumptions are and what is driving this expected deceleration.

Juan Sanabria: It's curious what the banana assumptions are and what it's driving to expect the deflation. Well, I think we talked about it on the call. We're having a lot of improvements in terms of all the portfolio optimization work we've done. It's primarily coming through cash basis tenants, but we continue to think that we'll see some level of growth in SHOP NOI. We've told you what that range is for the year, but compared to last year, if that's what you're asking me, we're continuing to forecast improvements over the prior year. We've got it on the yellow wife.

Speaker Change: Well, I think we talked about it on the call. We were having, you know, a lot of improvements in terms of all the portfolio optimization.

Speaker Change: work we've done. It's primarily coming through cash basis tenants, but you know we continue to think that we'll see some level of growth in shop NOI. We've told you what that range is for the year.

Kevin Pascoe: But compared to last year, if that's what you're asking me, we're continuing to forecast improvements over the prior year.

Speaker Change: But compared to last year, if that's what you're asking me, you know, we're continuing to, you know, forecast improvements over the prior year.

Kevin Pascoe: Got it. On the LOIs, are they included in guidance at this point, and could you maybe discuss timing and magnitude?

Juan Sanabria: Are they including guidance at this point? Could you maybe discuss timing and magnitude? Well, remember guidance doesn't include any of the effects of those LLIs. We've just included in our guidance what we've announced in terms of closed transactions. Timing is difficult for us to determine right now, and if we had a more definitive answer on timing and the expected closing, we might have considered concluding that; but generally, that's not our policy to do. Kevin, just keep in mind from a timing perspective, a lot of acquisitions, particularly if we're going through a lease scenario, it'll include a change of ownership or a chow, so the licensure.

Speaker Change: On the LOIs, are they included in guidance at this point and could you maybe discuss timing and magnitude?

Speaker Change: Well, remember, guidance doesn't include any of the effects of those LOIs. We've just included in our guidance what we've announced in terms of

Kevin Pascoe: And, you know, if we had a more definitive answer on timing and... Kevin, just to keep in mind.

Speaker Change: closed transactions. Timing is, you know, difficult for us to determine right now. And, you know, if we had a more definitive answer on timing and the, you know, expected closing, we might have considered concluding that, but generally that's not our policy to do.

Speaker Change: This is Kevin. Just to keep in mind, from a timing perspective, a lot of acquisitions, particularly if we're going through a lease scenario, it'll include a change of ownership or a chow, so the licensure will dictate timing a bit.

Juan Sanabria: We'll dictate timing a bit, so something we have to keep in mind. Got it. Thank you.

Speaker Change: Hopefully we have to keep them on.

Rich Anderson: Thank you. Your next question is coming from Rich Anderson from Wedbush. Your line is live.

Rich Anderson: Your next question is coming from Rich Anderson from Wedbush. Your line is live. Hey, thanks. Good morning and a nice quarter, of course.

Speaker Change: Thank you.

Rich Anderson: Hey, thanks. Good morning and a nice quarter, of course.

Rich Anderson: Thank you. Your next question is coming from Rich Anderson from Wedbush. Your line is live. Hey, thanks. Good morning and a nice quarter, of course. So, in terms of the guidance, you mentioned 7% FAD growth is the new guidance.

John Spaid: So, in terms of the guidance, you mentioned 7% FAD growth as the new guidance, but is it fair to say, in terms of, you know, the future of your FAD sort of cadence is a bit of a moving target because you have a fair amount of rent deferral repayment in that that is lumpy? Or do you think that you'll be able to sustain that level of rent deferral from cash-based tenants so that your fat is growing, but maybe some of the growth this year will be replaced by external growth, accretion next year? I'm not looking for 2025 guidance unless you want to provide it, but I'm just wondering about the recurring elements of the guidance that you're presenting to us today.

Rich Anderson: So, in terms of the guidance, you mentioned 7% fat growth as the new guidance, but is it fair to say in terms of the future of your fat sort of cadence? is a bit of a moving target because you've a fair amount of rent deferral repayment in that that is lumpy or do you think that you'll be able to sustain that level of rent deferral from cash-based tenants so that you're fat is growing but also maybe some of the growth this year will be replaced by external growth accretion next year. I'm not looking for 2025 guidance unless you want to provide it, but I'm just wondering about the recurring elements of guidance that you're presenting to us today.

Rich Anderson: But is it fair to say, in terms of, you know, the future of your FED sort of cadence?

Speaker Change: is a bit of a moving target because you, you know, you've a fair amount of rent deferral repayment in that that is lumpy, or do you think that

Speaker Change: You'll be able to sustain that level of rent deferral from cash-based tenants so that your fat is growing, but also maybe some of the growth this year will be replaced by external growth.

Speaker Change: accretion next year. I'm not looking for 2025 guidance unless you want to provide it, but I'm just wondering about the recurring elements to guidance that that you're presenting to us today.

John Spaid: Well, let's just go through all of the items that are helping us continue to, you know, quarter after quarter, beat our expectations. So we have, you know, a variety of organic opportunities that we're trying to execute on. SHOP is one.

Rich Anderson: Well, let's just go through all of the items that are helping us continue to, you know, quarter after quarter, you know, be, you know, our expectations. So we have, you know, a variety of organic opportunities that we're trying to execute on. Shop is one. We keep talking about this CAPEX program. The timing of those investments are still a little uncertain, so there's not a lot in guidance about that. So that's another upside. You know, we've talked a great deal in the past about the ability to reset rents in the future on several of our tenants.

Speaker Change: Well, let's just go through all of the items that are helping us continue to, you know, quarter after quarter, you know, beat our expectations.

John Spaid: We keep talking about this CAPEX program. The timing of those investments is still a little uncertain, so there's not a lot in guidance about that, so that's another upside. You know, we've talked a great deal in the past about the ability to reset rents in the future for several of our tenants. That's all going to depend on their ability to improve their NOIs. We also have the ability, in about 33%, 34% of our communities to benefit from percentage revenue rents, which includes the NHC, and that was one nice surprise.

Speaker Change: So we have, you know, a variety of organic opportunities that we're trying to execute on.

Speaker Change: SHOP is one. We keep talking about this CAPEX program. The timing of those investments are still a little uncertain, so there's not a lot in guidance about that, so that's another upside.

Speaker Change: You know, we've talked a great deal in the past about the ability to reset rents in the future on several of our tenants.

Rich Anderson: That's all going to depend on their ability to improve their analyze. We have the ability also in about 33 34% of our communities to benefit from percentage revenue rents, which includes the NHC, and that was one nice surprise. So, you know, we can't really give you a lot of information there. You know, I would just say keep an eye on, you know, NHC's public revenues. That might be a place that might give you some clues.

Speaker Change: That's all going to depend on their ability to improve their NOIs. We have the ability also in about 33, 34 percent of our communities to benefit from percentage revenue.

John Spaid: So, you know, we can't really give you a lot of information there. You know, I would just say keep an eye on, you know, NHC's public revenues. That might be a place that might give you some clues.

Speaker Change: RANTS

Speaker Change: which includes the NHC, and that was one nice surprise. So, you know, we can't really give you a lot of information there. You know, I would just say keep an eye on, you know, NHC's public revenues. You know, that might be a place that might give you some clues.

John Spaid: And then, just exactly as you said, we're now pivoting towards external growth at the same time. So, you know, the future is looking very good for us.

Rich Anderson: And then, and then finally, just exactly as you said, we're now pivoting towards external growth at the same time. So, you know, the future is looking very good for us. Okay. So, you mentioned, I think it was mentioned that you're assuming a million dollars a quarter from Bigford in terms of repayment of deferrals. Do you have a bigger number for the entirety of the portfolio of what you're assuming in from a rent deferral repayment perspective? Yeah.

Speaker Change: And then finally, just exactly as you said, we're now pivoting towards external growth at the same time.

John Spaid: Okay, so you mentioned, I think it was mentioned that you're assuming a million dollars a quarter from Bickford in terms of repayment of deferrals. Do you have a bigger number for the entirety of the portfolio of what you're assuming from a rent deferral repayment perspective?

Speaker Change: So, you know, the future is looking very good for us.

Speaker Change: So you mentioned, I think...

Speaker Change: It was mentioned that you're assuming a million dollars a quarter from Bickford in terms of repayment of deferrals.

Speaker Change: Do you have a bigger number for the entirety of the portfolio of what you're assuming from a rent deferral repayment perspective?

Rich Anderson: So, let's unpack that, Rich. I know this has been difficult for everybody. So, part of the deferral repayments are included in our gap revenue stream. Those are the scheduled repayments for our cruel tenants. We'll continue to, you know, collect on those in a variety for a variety of relationships. The Bigford component that Kevin discussed, those are not, you know, in our gap revenues. Those are just, you know, cash revenues that are, you know, determined based upon their percentage revenue equation. But then we have some others as well that we're hoping to, you know, try to, you know, execute upon and increase that.

Speaker Change: Yeah, so let's unpack that, Rich. I know this has been difficult for everybody.

Speaker Change: So part of the deferral repayments are included in our gap revenue stream. Those are the scheduled repayments for our accrual tenants. We'll continue to, you know, collect on those in a variety, for a variety of relationships.

Speaker Change: The Bickford component that Kevin discussed, those are not in our gap revenues, those are just cash revenues that are determined based upon their percentage revenue equation.

Speaker Change: But then we have some others as well that we're hoping to, you know, try to, you know, execute upon and increase that. But, you know, for in terms of your, your.

Rich Anderson: But in terms of your analysis, you know, what Kevin used is sort of the incremental sort of non-GAAP, sort of cash faces deferral recoveries that we have in our guidance. Okay.

Speaker Change: Your analysis, you know, what Kevin used is sort of the incremental sort of non-GAAP sort of cash basis deferral recoveries that we have in our guidance.

Rich Anderson: In terms of your cost. of Capital, you talked about dry powder on the debt, but if you kind of just kind of back into a AFFO yield or a FAD yield, seems like your cost of equity is cheaper than your cost of debt. Am I right about that, or just curious how you're thinking about future capital activity when you take what has happened to your stock, which is outstanding this year, into account? No, we recognize that this is sort of an interesting time where our cost of equity is kind of revolving around pretty closely, our incremental long-term cost of debt, so we recognize that.

Speaker Change: Okay.

Speaker Change: In terms of your cost of capital, you talked about dry powder on the debt. But if you kind of just kind of back into an AFFO yield or a FAD yield.

Speaker Change: It seems like your cost of equity is cheaper than your cost of debt. Am I right about that? Or I'm just curious how you're thinking about future capital activity when you take what has happened to your stock, which is outstanding this year, into account.

Kevin Pascoe: Now, we recognize that this is sort of an interesting...

Speaker Change: Now, we recognize that this is sort of an interesting time where, you know, our cost of equity is, you know, kind of revolving around pretty closely our incremental long-term cost of debt. So, we recognize that.

Rich Anderson: Ok, last for me, the 1.8 billion of sort of line of sight and small portion of that, you're actually really considering, but where is that coming from? Are you just scouring the planets for anything, and you came up with 1.8 billion, or is there a reverse inquiry component to this that people are coming to you with options? I'm just curious, what's the makeup of that 1.8 billion? Thanks.

Speaker Change: Okay, last for me, the 1.8 billion of sort of

Speaker Change: Line of sight and you know a small portion of that you're you're actually considering, but where is that coming from? Are you just scouring the planet for for anything and you came up with 1.8 billion or either? Is there a reverse inquiry component to this that people are coming to you with with options? I'm just curious. You know, what's the makeup of that 1.8 billion? Thanks

Kevin Pascoe: Sure, Richard, and Kevin. I mean, the $1.8 billion is the universe of things that we're looking at at the moment. Some of that stuff will get screened out pretty quickly. There is an element of, in the last few years, we never were dark. We were out there building relationships, meeting with people, trying to understand their needs. I think now we just have a confluence where capital is looking better for us, and the opportunities are looking better where people are able to, I guess, explore sales.

Kevin Pascoe: Sure, this is Kevin. I mean, the 1.8 billion is the universe of things that we're looking at at the moment. Some of that stuff will get screened out pretty quickly. There is an element of, over the last few years, we never were dark. We were out there building relationships, meeting with people, trying to understand their needs. I think now we just have a confluence where capital is looking better for us and the opportunities are looking better where people are able to, or I guess, exploring sales. And then, in addition to that, we do have the broker community that we have good relationships with.

Speaker Change: This is Kevin. I mean, the $1.8 billion is the universe of things that we're looking at at the moment.

Rich Anderson: Some of that stuff will get screened out pretty quickly. There is an element of, over the last few years, we never were dark. We were out there building relationships, meeting with people, trying to understand their needs. I think now we just have a confluence where...

Speaker Change: Capital is looking better for us, and the opportunities are looking better where people are able to, I guess, exploring sales. And then in addition to that, we do have...

Kevin Pascoe: And then, in addition to that, we do have the broker community that we have good relationships with. It's a mix of operator relationships that we've been building, real estate sellers that we've been working on over the last year or two, and then just seeing what's in the market right now. We refine that down, and we talk about what we think is a more actionable number than the $1.8 billion. But I think deal flow has been pretty strong over the last few quarters. It continues to remain robust, and I feel good about our prospects.

Rich Anderson: So, it's a mix of operator relationships that we've been building, real estate sellers that we've been working on over the last year or two, and then just seeing what's in the market right now. And then we refine that down, and we talk about it much more, what we think is a more actionable number than the 1.8. But I think deal flow has been pretty strong over the last few quarters. It continues to remain robust, and we feel good about our prospects. Okay. Thanks very much. Thanks, Rich.

Rich Anderson: Thanks very much.

Speaker Change: the broker community that we have good relationships with, so it's a mix of...

Speaker Change: operator relationships that we've been building, real estate sellers that we've been working on over the last year or two.

Speaker Change: and then just seeing what's in the market right now and then we refine that down and we talk about it much more what we think is a more actionable number than the 1.8

Speaker Change: But I think deal flow has been pretty strong over the last few quarters. It continues to remain robust.

Speaker Change: We feel good about our prospects. Okay. Thanks very much.

John Gilchowski: Thank you. Your next question is coming from John Gilchowski from Wells Fargo. Your line is live. Thank you. Could you talk about or just help us understand the break out of the 270 million of investments that you're looking at today in terms of just what's fee simple versus loans and how that's been progressing in the top of the air? Sure.

John Gilchowski: Thank you. Your next question is coming from John Gilchowski from Wells Fargo. Your line is live.

Speaker Change: Thanks, Rich.

Speaker Change: Thank you. Your next question is coming from John Kilchowski from Wells Fargo. Your line is live.

John Kilchowski: Thank you. Could you talk about or just help us understand the breakout of the 270 million of investments that you're looking at today in terms of just what's fee simple versus loans and how that's been progressing throughout the year?

Kevin Pascoe: Hey, John, this is Kevin. As we talked about on the call, you know, last quarter, it was more 50-50 in nature. Now, it's definitely more skewed towards fee simple, and we didn't give a direct percentage. But, you know, it's probably 70-ish percent or more is more fee simple in nature. There are still some loans out there where we think it would be a good opportunity for us to convert into long-term real estate ownership. So we're keeping that line of business open. Our preference is always going to be tough. and I think that's, again, as we talk about skewing that way, it's more knee-driven senior housing in nature.

Kevin Pascoe: As we talked about on the call last quarter, it was more 50-50 in nature. Now, it's definitely more skewed towards fee simple. We didn't give a direct percentage, but it's probably—

Kevin Er: Sure. Hey John , this is Kevin. As we talked about on the call, you know, last quarter it was more 50-50 in nature. Now it's definitely more skewed towards fee simple and we didn't give a direct percentage but, you know, it's probably...

Kevin Er: 70-ish percent or more is more fee simple in nature. There are still some loans out there where we think it would be a good opportunity for us to convert into long-term real estate ownership.

Kevin Er: So we're keeping that line of business open. Our preference is always going to be to own.

Kevin Er: And I think it's, again, as we talked about, skewing that way. It's more need-driven senior housing in nature. That said, we're looking at all asset classes right now, including.

Kevin Pascoe: That said, we're looking at all asset classes right now, including specialty hospital, behavioral, you know, some more independent type communities, so it's a good mix for us right now and skilled, for that matter, too. Okay.

Kevin Er: specialty hospital, behavioral, you know some some more independent type communities so it's it's a good mix for us right now and skilled for that matter too.

Kevin Pascoe: And then just kind of circling back to the last question on just the 1.8 billion line there. What differentiates those assets, and maybe does that include some larger portfolio deals, or maybe is it more lever towards the shop side? And I guess, you know, what keeps you from putting it in the 270 bucket is just the ability you think you have to transact on it, but you’re interested in them. Is that the right way to think about it? I think that's fair. You know, one point is, again, more the universe of what we're looking at right now.

Kevin Er: Okay.

Speaker Change: Okay, and then just kind of circling back to the last question on just the the 1.8 billion line there.

Speaker Change: What differentiates those assets, and maybe does that include some larger portfolio deals, or maybe is it more levered towards the shop side? And I guess, you know, what keeps you from putting it in the 270 bucket? Is it just the ability you think you have to transact on it, but you're interested in them? Is that the right way to think about it?

Kevin Pascoe: I think that's fair. You know, one point is again the universe of what we're looking at right now. Some of it, again, will be screened out. It might not be the market we're interested in or

Speaker Change: I think that's fair. You know, one point is, again, more the universe of what we're looking at right now. Some of it, again, will be screened out. It might not be the market we're interested in or

Kevin Pascoe: Some of it again will be screened out. It might not be the market we're interested in, or it might have negative cash flow, and, you know, it's not a newer building or something where we have the right operator, so that'll screen it out. Those are the things that we certainly work on and make sure that they fit or not. It does include any of the joint venture type of relationships. We're looking at which tend to be bigger portfolios. So we don't want a signal that we're doing, you know, a lot of new business without having better line of sight to its execution.

Speaker Change: It might have negative cash flow and, you know, it's not a newer building or something where we have the right operators, so that'll screen it out. Those are the things that we still need to work on and make sure that they fit or not. It does include any of the joint venture-type relationships we're looking at, which tend to be bigger portfolios.

Speaker Change: So we don't want to signal that we're doing.

Kevin Pascoe: Rudy is a new business line for us in some respects. We have the shop portfolio now, but we want to make sure we get it right, which we've talked about before. So if we're going to take a big swing like that, you know, it takes a little extra scrutiny. Okay.

Speaker Change: you know, a lot of new business without having a better line of sight to its execution. RIDD is a new business line for us in some respects. We have the shop portfolio now, but we want to make sure we get it right, which we've talked about before. So if we're going to take a big swing

Kevin Pascoe: Okay, and then last one for me here on the shop side, you know, I understand the strategy, we're talking about hitting that 90% occupancy number before you start to really drive rents here, but I guess how should we think about it relative to your peers who are reporting some pretty strong pricing power and the ability to drive occupancy here? Have you been testing out those waters, or have you not? Like, is there a reason why we're seeing that rent decline other than you're not even testing it?

John Gilchowski: And then last one for me here on the shop side, you know, I understand the strategy. We're talking about hitting that 90% occupancy number before you start to really drive rents here. But I guess how should we think about a relative to your peers who are reporting some pretty strong pricing power and the ability to drive occupancy here. Have you been testing out those waters, or have you not? Like, is there a reason why we're seeing that red port decline, other than you're not even testing it? Like, I guess, sorry, try to synthesize this here.

Speaker Change: like that, you know, it takes a little extra scrutiny.

Speaker Change: Okay, and then last one for me here on the shop side.

Speaker Change: I understand the strategy. We're talking about hitting that 90% occupancy number before you start to really drive rents here. But I guess, how should we think about it relative to your peers who are reporting some pretty strong pricing power and the ability to drive occupancy here?

Speaker Change: Have you been testing out those waters? Or have you not? Like, is there a reason why we're seeing that red port decline other than you're not even testing it? Like, it is, I guess...

Kevin Pascoe: Like, it is, I guess, sorry, try to synthesize this here. Do you think you have pricing power, but you're not testing the waters because you're just trying to get to 90% occupancy? Or have you tried to realize that you're having trouble then getting to 90% occupancy and hoping that you'll have a little bit more room there to push?

Kevin Pascoe: Do you think you have pricing power, but you're not testing the waters because you're just trying to get to 90% occupancy, or have you tried to realize that you're having trouble then getting to 90% occupancy and hoping that you'll have a little bit more room there to push. I think the pricing power aspect is going to be market by market. There are somewhere you're just not going to have as much capacity as and others. That said, the strategy has been, let's get to 90%. We are starting to see some individual buildings get to that level, and the incentives are falling off.

Speaker Change: Sorry, I'm trying to synthesize this here. Do you think you have pricing power, but you're not testing the waters because you're just trying to get to 90% occupancy? Or have you tried to realize that you're having trouble then getting to 90% occupancy and hoping that you'll have a little bit more room there to push?

Kevin Pascoe: I think the pricing power aspect is going to be market by market. There are some where you're just not going to have as much capacity as in others. That said, the strategy has been to get to 90%. We are starting to see some individual buildings get to that level, and the incentives are falling off. It's a handful of, you know, probably three or four buildings are there.

Speaker Change: I think the pricing power aspect is going to be market by market. There are some where you're just not going to have as much capacity as in others.

Speaker Change: That said, the strategy has been, let's get to 90%. We are starting to see some individual buildings get to that level, and the incentives are falling off. That's a handful of, you know, probably...

John Spaid: That's a handful of, you know, probably three or four buildings are there. Good news for us, though, is all of our shop buildings are at 80% or more. So we've made significant progress there. So we would expect to see, once those get, you know, kind of mid 80s, closer to 90, to see those incentives start rolling off. And then we should expect to see, but we would expect to see margins jump a bit more again as we stop offering some of those incentives and some of the short-term incentives fall off. So we wanted to stay with strategy.

Kevin Pascoe: The good news for us, though, is that all of our shop buildings are at 80% or more. So we've made significant progress there. So we would expect to see, once those get kind of into the mid-80s, closer to 90, those incentives start rolling off. And then we should expect to see, well, we would expect to see margins jump a bit more again as we stop offering some of those incentives and some of the short-term incentives fall off.

Speaker Change: 3 or 4 buildings are there. Good news for us, though, is all of our shop buildings are at 80% or more. So we've made significant progress there.

Speaker Change: So, we would expect to see, once those get, you know, kind of...

Speaker Change: closer to 90 to see those incentives start rolling off

Speaker Change: But we would expect to see margins jump a bit more, again, as we stop offering some of those incentives and some of the short-term incentives fall off. So, we wanted to stay with the strategy. I think it's been effective for us. Our operating partners will be.

Kevin Pascoe: So we wanted to stay with the strategy. I think it's been effective for us. Our operating partners will be pushing the market where they can on rates, but we've been just kind of dedicated to the strategy first.

John Spaid: I think it's been effective for us. Our operating partners will be, you know, pushing the market where they can on rates. Police, but we've been just kind of dedicated to the strategy first.

Speaker Change: pushing the market where they can on rates, but we've been just kind of dedicated to the strategy first.

John Spaid: Hey John, this is John Spaid. Can I just add to that question that you're comparing apples and oranges a little bit because our portfolio is independent living, and if our portfolio was like a lot of our peers who are more AL memory care, I don't know that we would be pursuing quite this same strategy because of the care component.

Speaker Change: Hey, John . This is John Spaid. Can I just add to that question that you're comparing apples and oranges a little bit because our portfolio is independent living, and if our portfolio was like a lot of our peers who are more AL memory care, I don't know that we would be pursuing quite the same strategy because of the care component.

Operator: Thank you, once again, everyone. If you have any questions or comments, please press star, then one on your phone.

Underssaid: Understood. Thank you.

Austin Wurschmidt: Your next question is coming from Austin Wurschmidt from KeyBank Capital Markets. Your line is live. Great, thanks. Good morning, everybody. I just want to go back to some of the right day opportunities in the investment pipeline and just curious what the economics are of the deals that you're underwriting and kind of where they are and their recovery from an occupancy and margin perspective and kind of giving your comment on being selective and sensitive to how much, I guess, you know, how much are you willing to take on at any given point in time because it sounds like there's a mix of both singles and doubles as well as maybe some portfolio opportunities in front of you.

Speaker Change: Thank you. Once again, everyone, if you have any questions or comments, please press star, then 1 on your phone. Your next question is coming from Austin Wurschmidt from KeyBank Capital Markets. Your line is live.

Austin Wurschmidt: Great, thanks. Good morning, everybody.

Austin Wurschmidt: Just want to go back to some of the RIDEA opportunities in the investment pipeline and just curious what the economics are of the deals that you're underwriting and kind of where they are in their recovery from an occupancy and margin perspective, and kind of giving your comment on being selective.

Speaker Change: and sensitive to how much, I guess, you know.

Speaker Change: How much, you know, are you willing to take on at any given point in time, because it sounds like there's a mix of both singles and doubles, as well as maybe some portfolio opportunities in front of you. Thank you.

Kevin Pascoe: Thank you. Sure, I'll start with maybe the kind of profile of the communities, and then let John kind of weigh in on the capacity piece. But as it relates to what we're looking at, generally speaking, they're going to be not quite stable but approaching stable. We want something where there is good line of sight to cash flow with some growth. Similar to John's prior comments about healthcare delivery and pricing for that. What we've been looking at is a little more skewed towards the need-driven senior housing side. We think there's good pricing power there as it relates to the needs-driven side.

Kevin Pascoe: Sure, I'll start with maybe the... Similar to John's prior comments about health care delivery and pricing for that, what we've been looking at is a little more skewed towards the need-driven senior housing side. We think there's good pricing power there as it relates to... The margins, I think, are a little lower than what we've seen in prior years, but that also gives us meaning to 2019 and before, which gives us the thought that there is still some upside here, but we're also entering in at a good entry point where we're not paying a huge price per unit, mid-single-digit cap rates on some of these

Speaker Change: Sure, I'll start with maybe the kind of...

Speaker Change: profile of the communities and then let John kind of weigh in on the capacity piece. But as it relates to what we're looking at, generally speaking they're going to be

John Kilchowski: Not quite stable, but approaching stable. We want something where there is good line of sight to cash flow with some growth.

John Kilchowski: Similar to John's prior comments about healthcare delivery and pricing for that, what we've been looking at is a little more skewed towards the need-driven senior housing side. We think there's good pricing power there as it relates to

Kevin Pascoe: The margins I think are a little lower than what we've seen in prior years, but that also gives us meaning kind of 2019 and before, which gives us thought that there is still some upside here. But we're also entering in at a good entry point where we're not paying a huge price for unit. In margins, right, three people level that have fully stocked labor numbers with again power to increase over time. I think that's really going to be the profile deal that we're looking at; again, a little more stable in nature. We're not looking for big value ahead, and the other thing that I think is the differentiator for us now and our interest in Radea is just a few years ago they were looking at, you know, mid single digit cap rates on some of these portfolios.

John Kilchowski: The needs-driven side.

Speaker Change: Thank you.

Speaker Change: The margins, I think, are a little lower than what we've seen in prior years, but that also gives us meaning kind of 2019 and before, which gives us thought that there is still some upside here, but we're also entering in at a good entry point where we're not paying a huge price per unit.

Speaker Change: and Mars is really a pretty cool level to have.

Speaker Change: I think that's really going to be the profile of the deal that we're looking at, again, a little more stable in nature. We're not looking for big value-add, and the other thing that I think is a differentiator for us now and our interest in...

Speaker Change: Rodea is just a few years ago they were looking at

Kevin Pascoe: Now we believe we can purchase that are rate that is in excess of our cost to capital and not just rely on growth to get to what would be a reasonable yield, so we can enter in at a much better yield today and still have a little bit of upside over time. So Austin, in terms of capacity, you know, there's all kinds of things that we're looking at out there. But if you go look at our history in the past, you can see that where we've executed on, you know, multiple hundreds of millions of dollar portfolios in the past.

Kevin Pascoe: Now, we believe we can purchase at a rate that is in excess of our cost of capital and not just rely on growth to get to what would be a reasonable yield, so we can enter in at a much better yield today and still have a little bit of upside over time.

Speaker Change: You know mid single-digit cap rates on some of these portfolios now We believe we can purchase at a rate that is in excess of our cost of capital and not just rely on growth to get to what would be a reasonable yield so we can enter in at a much better

Kevin Pascoe: So, Austin, in terms of capacity, there's all kinds of things that we're looking at out there, but if you look at our history in the past, you can see that we've executed on, you know, multiple hundreds of millions of dollars of portfolios in the past. So some of these larger transactions we're looking at, you know, some of them come with, you know, secure debt that we could assume. So we've been very mindful to, you know, manage our transactions on some of these larger deals.

Speaker Change: yield today and still have a little bit of upside over time.

Austin: So, Austin, in terms of capacity, you know, there's all kinds of things that we're looking at out there, but if you go look at our history in the past, you can see that we've executed on, you know, multiple hundreds of millions of dollar portfolios in the past. So some of these larger transactions we're looking at.

John Spaid: So some of these larger transactions were looking at, you know, someone will come with, you know, secure debt that we could assume. So we've been very mindful of, you know, manage our debt capital structure so we could absorb secured debt without, you know, creating issues on our investment credit rating. Some of the properties, you know, we'd like to enter into joint ventures. So there's an equation there regarding non-controlling interest that we have to properly think through. So there's a lot of things that goes into these idea structures that we're thinking through that are all very different, but in terms of capacity, we feel like we have quite a better capacity to...

Austin: Some of them come with secure debt that we could assume, so we've been very mindful to manage our

Austin: debt capital structure so we could absorb secure debt without, you know, creating issues on our investment rating, credit rating.

Austin: Some of the properties, you know, we'd like to enter into joint ventures. So there's an equation there regarding non-controlling interest that we have to...

Austin: properly think through. So there's a lot of things that goes into these idea structures that we're thinking through. They're all very different, but in terms of capacity, we feel like we have quite a bit of capacity to transact on some of these larger deals.

John Spaid: Transactions on some of these larger deals?

Kevin Pascoe: And maybe just, you know, we've talked a little bit about this in the past, but from a corporate infrastructure perspective, I mean, can you take on a good bit more of RIDEA and still have the people you need in-house to, you know, monitor and sort of, you know, help build out the RIDEA portfolio?

Eric Mendelssohn: And maybe just, you know, we've talked a little bit about this in the past, but from a corporate infrastructure perspective, I mean, can you take on a good bit more of the right day and still have kind of the people you need in house to, you know, monitor and sort of help, help build out, you know, the right day in portfolio? That's a fair question, Austin. This is Eric. Eric, no doubt that if we execute on the larger pipeline, we'll need to hire some extra accounting and asset management force power, and we're always on the lookout for new talent to help with that.

Speaker Change: And maybe just, you know, we've talked a little bit about this in the past, but from a corporate infrastructure perspective, I mean, can you take on a good bit more of the right day and still have kind of the people you need in-house to, you know, monitor and sort of...

Speaker Change: and Dana Hambly. Thank you.

Speaker Change: to help build out the Rydea portfolio.

Speaker Change: That's a fair question, Austin. This is Eric. No doubt that if we execute on the larger pipeline, we'll need to hire some extra accounting and asset management horsepower, and we're always on the lookout for new talent to help with that.

John Spaid: And then just last one for me, John, you know, in the balance sheet, certainly in great shape today, but you know, how are you thinking about managing leverages? The pipeline continues to build, and you continue to see more deals come your way. I mean, you will end to kind of go below the lower end of that range. If your cost to capital continues to improve and even though, you talked about the Fed and the benefit of, you know, the cost of your variable rate that coming down, but would you pay some of that down ahead of time if you could and just build additional debt capacity that you can use, you know, down the line if need be.

John Spaid: And then just last one for me, John, on the balance sheet, certainly in great shape today, but, you know, how are you thinking about managing leverage as the pipeline continues to build and you continue to see more deals come your way? I mean, are you willing to kind of go below the lower end of that range? If your cost of capital continues to improve, and even though you talked about the Fed and the benefit of, you know, the cost of your variable rate debt coming down, would you pay some of that down ahead of time if you could and just build additional debt capacity that you can use, you know, down the line if need be?

John Kilchowski: And then just last one for me, John , you know, on the balance sheet certainly in great shape today, but you know, how are you thinking about managing leverages that the pipeline continues to build and you continue to see more deals come your way? I mean, you willing to kind of go below the lower end of that range if your cost of capital continues to improve and even though, you know,

Speaker Change: You talked about the Fed and the benefit of, you know, the cost of your variable rate debt coming down, but would you pay some of that down ahead of time if you could and just build additional debt capacity that you can use, you know, down the line if need be?

John Spaid: Well, let's just approach it this way. We try not to allow our balance sheet to be a headwind for any of our transactions. So we try to stay well ahead of what we need to do to take care of our liquidity needs and maintain our investment grade credit rating. So we just really work hard to make sure that we're ahead of the game here. In terms of our liquidity right now, it's in great shape.

John Spaid: Well, let's just approach it this way. We try not to allow our balance sheet to be to be a headwind to any of our any of our transactions. So we try to stay well ahead of, you know, what we need to do to take care of our liquidity needs to maintain our investment-grade credit rating. So we just really work hard to make sure that, you know, we're ahead of, we're ahead of the game here. In terms of our liquidity right now, it's in great shape. We have ample sources from our ATM capacity as well as our revolver, but you know, we've got a lot of things, you know, getting better for us, and we also have to be mindful that I do have maturities.

Speaker Change: Well, let's just approach it this way. We try not to allow our balance sheet to be a headwind to any of our transactions. So we try to stay well ahead of, you know, what we need to do to take care of our liquidity needs.

Speaker Change: to maintain our investment grade credit rating.

Speaker Change: So, we just really work hard to make sure that, you know, we're ahead of the game here. In terms of our, you know, liquidity right now, it's in great shape. We have ample...

John Spaid: We have ample resources from our ATM capacity as well as our revolver. But we've got a lot of things getting better for us, and we also have to be mindful that I do have maturity. So, you know, there's just a lot of things that we're going to try to stay ahead of. And that's why, in my prepared remarks, I said that we're not going to rely entirely on a revolver. And it's just going to be a market-driven decision as we move forward.

John Spaid: Understood. Thanks for taking the question.

Speaker Change: sources from our ATM capacity as well as our revolver but you know we've got a lot of things you know getting better for us and we also have to be mindful that I do have maturities.

Operator: So, you know, there's just a lot of things that we're going to try to stay ahead of, and that's why in my preparable marks, I said that we're not going to rely entirely on our revolver, and it's just going to be a market-driven decision as we move forward. Understood. Thanks for taking the questions. Thank you.

Speaker Change: So, you know, there's just a lot of things that we're going to try to stay ahead of and that's why in my prepared remarks I said that we're not going to rely entirely on a revolver and it's just going to be a market-driven decision as we move forward.

Operator: There are no further questions in the queue. Thank you.

Speaker Change: Understood. Thanks for taking the questions.

Speaker Change: Thank you. There are no further questions in the queue.

Operator: Thanks everyone for your time and attention today, and we'll look forward to seeing you at Navy to or some other conference. Thank you, everyone.

Speaker Change: Thanks everyone for your time and attention today and we'll look forward to seeing you at NARIT or some other conference.

Operator: This concludes today's event.

Operator: You may disconnect at this time and have a wonderful day. Thank you for your participation.