Q3 2024 CareTrust REIT Inc Earnings Call
Prilla: Thank you for standing by. My name is Prilla and I will be your conference operator today. At this time, I would like to welcome everyone to Care Trust Week 3rd Quarter 2021 earnings conference call. All lines have been based on the Interprevent and a background noise.
Prilla: Authorities need your homework, you'll be a question and answer session.
Prilla: If you would like to ask a question during this time seems to press a star, followed by the number one on your telephone keypad. If you would like to appoint your question, be stressed a star, followed by the number one again. Thank you. I would like to turn the conference over to Lauren Beale as VP Controlor these to get.
Lauren Beale: Thank you and welcome to CareTrest Reef, 3rd quarter 2020 Fort earnings call.
Lauren Beale: We will make forward-looking statements today based on management current expectations, including statements regarding future financial performance, dividend, acquisition, investment, financing plans, business strategies and growth process.
Lauren Beale: He's forward-winged statement, our subject to written an uncertain piece that could cause actual results and it's here really good for tomorrow's presentation.
Lauren Beale: He's written, Arden Sets in Kertras, which was frequent form of NTA and NQ-Firing with the FCC. We do not undertake a duty to update or revise these statements, except is required by law.
Lauren Beale: During the call of the company will reference non-yap metrics such as EBITDA, FFO, and FAP or SAD.
Lauren Beale: A Reconciliation of these measures, the most comparable gas financial measures, is available on our earnings correctly, and Q3204 non-gas reconciliation that are available on the investor-relation section of CareTrans website at www.trotrestreeth.com.
Lauren Beale: A replay of this call will also be available on the website for a limited period.
Speaker Change: On the call this morning, our date settwick, president and chief executive officer, Phil Watter, Chief Financial Officer, and James Callister, Chief Investor Officer.
Speaker Change: All now turn the call over to Dave Sedgwick, Care Trust, Reef President and CEO. Dave? All right, hello everybody and thank you for joining us. The flywheel started to pick up speed a year ago and it is now racing.
Speaker Change: At the end of last year, we recognized that 2024 could be a historic year for growth and the company recalibrated the team and the balance sheet to capitalize on that opportunity. I am so proud of their relentless work to make this year extraordinary.
Speaker Change: As you may know, yesterday we announced that we entered into a material contract to acquire a portfolio of 31 skilled nursing assets around Tennessee.
Speaker Change: for a purchase price of $500 million investing $442 million at an estimated yield of 9%. Expect to declose by year-end.
Speaker Change: This deal will continue to expand the influence of some of the country's very best operators.
Speaker Change: who have a proven ability and commitment to caring for their employees, residents, patients, and communities.
Speaker Change: James will provide additional color in a minute.
Speaker Change: We also announced yesterday that we expect to acquire 57 million of skilled nursing facilities in the northeast next month.
Speaker Change: We don't normally announce transactions before they close but due to the size of the Tennessee deal and the imminent timing of the Northeast deal we decided to announce these along with earnings.
Speaker Change: So now as we round third on the year we are equally excited for next year's potential to diversify and grow the business significantly.
Speaker Change: Thus far, in 2024 we have delivered the following.
Speaker Change: First year over a year market cap growth of 123%.
Speaker Change: Second, record setting investments of approximately 917 million out of average stabilized of 9.4%.
Speaker Change: Third, we announced pending acquisitions of approximately 500 million.
Speaker Change: has skilled nursing facilities with a 9% stabilized, expected yield to close during the last two months of the year.
Speaker Change: The combined year-to-date investments and announced pending deals.
Speaker Change: Produced Projected 2024 Investments of over 1.4 billion at an average stabilized yield of 9.3%.
Speaker Change: Forrest.
Speaker Change: Equity issuance of approximately 41 million shares for gross proceeds of $1.1 billion.
Speaker Change: and fifth, I met that to Eva Da, of 0.08 times.
Speaker Change: On last quarter's call, I commented on how two things are equally remarkable.
Speaker Change: Not only this year's growth, but also the sense that momentum was actually building. Now you know at least partly what I was referring to.
Speaker Change: As we sit here today, our pipeline, including these two pending deals is 700 million, almost all of which are real estate acquisitions.
Speaker Change: A quick comment on the makeup of this year's investments.
Speaker Change: including the pending November and December deals I referenced.
Speaker Change: We will have closed on the following, over 1.4 billion, approximately 825 of that, 825 million of that, are real estate acquisitions and 590 of dead investments.
Speaker Change: or roughly 60-40 acquisitions to loans all at a blended estimated stabilized yield of 9.3% after any rent ramps take effect.
Speaker Change: Allow me to give you some more color on the return on investment we've achieved, on the targeted loans we've made over the past few years.
Speaker Change: For a few years now, we have been executing a strategic approach to lending that includes at the very least a handshake with the borrower, J.V. Partner, or Operator that they will bring us real estate acquisition opportunities in the future. And at best.
Speaker Change: The debt investment activity also includes more than a handshake. Either alone, too, on, or alone, and on, a part of the portfolio.
Speaker Change: This approach has been incredibly successful for us. As our friends in the industry have made good on their word and brought to us a deals, many of which are off market that we would not have otherwise seen nor one.
Speaker Change: We made a total of approximately 200 million of dead investments from 2022 to 2023.
Speaker Change: Looking at this year's 1.4 billion of expected deals.
Speaker Change: Approximately 780 million of acquisitions.
are a direct result of these strategic debt relationships we fostered over the past couple of years.
Speaker Change: Our underwriting discipline has not changed. We do not grow for growth sake.
Speaker Change: and we are driven by our mission to expand the positive influence of operators who improve and dignify the care communities that they serve.
Speaker Change: and that's the nice segue to the portfolio. Last week we had our operator conference, where are we brought renowned experts in policy, staffing, reimbursement, mental health and healthcare AI to educate our operators on what is best in class and what's to come.
Speaker Change: It's one way we try to add value and show how grateful we are to them. I cannot tell you how energizing it is for our entire team to rub shoulders with leaders who are engaged in the noblest of professions day in and day out.
Speaker Change: We're proud to associate with them and proud to report that they continue to provide superior star ratings and quality ratings compared to the industry nationally and the states that they operate in.
Speaker Change: Well, there's no perfect way to measure quality care and skill nursing, medicare's star ratings do provide some tea leaves.
Speaker Change: As of September's ratings, I'm pleased to see our operators achieve an average of three stars versus 2.8 stars in the states of the operating.
Speaker Change: Our Operator's Quality Measures Performance is even stronger with an average of four stars versus three point four industry stars.
Speaker Change: As former operators ourselves we have an absolute conviction that sustainable financial success can only be achieved after clinical success.
You will see in the supplemental lease coverage continues to show tremendous strength and security overall.
Speaker Change: Property-level EVID-DAR with a 5% management fee.
Speaker Change: and Emit Darm, coverage was reported to increase 2.23 times and 2.85 times respectively.
The scale of underperforming operators remains small and manageable. We have a couple transitions underway in a handful of assets for sale that wind transition and or sold will result in higher revenues next year since they have not been rent producing this year.
I'm very pleased to report that the Midwest skilled nursing portfolio with negative lease coverage that we've talked about for over a couple years was sold in the quarter.
These transitions and dispositions taken together will effectively deal with all of the properties that have underpaid this year.
Speaker Change: Finally, three observations. First, I'm very proud again of the Care Trust team and extraordinary year like this doesn't happen without a talented team, a strong culture and sacrifice.
Second, I want to again recognize the tireless pursuit of quality care and performance by our operators.
We are truly blessed to work with some of the finest operators in the country and proud to report superior leaf coverage, quality measures and star ratings.
Speaker Change: Third, we are at the start of demographic tailwinds that should last for decades to come.
Speaker Change: James will now provide you with color on the investment landscape and reloaded pipeline.
Good morning everyone. During the third quarter, as previously announced, we closed on approximately 441 million of new investments.
Largely consisting of a $260 million loan and a $43 million preferred equity investment in connection with the borrowers acquisition of a large portfolio in the Northwest including 37 skilled nursing and assisted living facilities could be operated by a failure to the Pax Group.
Speaker Change: Since quarter-end, we have closed our approximately $89 million of additional investments.
Speaker Change: including the acquisition of a four facility 396 licensed bed, Gil Nursing portfolio located in the minute-lannick for approximately $75 million. The facilities have been mastered these to a new hand-in-relationship for caratrust, with an initial term of 15 years.
with two five-year extension options and a year one contractual lease yield of approximately 9.3% inclusive of transaction costs and with annual CPI based escalators.
In addition, yesterday we announced an updated investments pipeline of $700 million which includes the announcement of a care trust affiliated joint venture, having entered into binding agreements to acquire 31 skilled nursing facilities.
for an aggregate purchase price that approximately 500 million exclusive of transaction costs.
Care Trust is expected to contribute approximately 442 million to the venture, and an exchange will allow 100% of the preferred equity ownership ventures to the venture and 50% of the common ownership ventures.
Speaker Change: The portfolio consists of a total of 3,290 license beds with 30 of the facilities located in Tennessee and one in Alabama.
Completion of the acquisition is subject to customary closing conditions.
and has expected to close in two phases during December of 2024. A majority of the facilities will be operated by existing caratrust tenant relationships.
Speaker Change: including affiliates of the Insign Group, Pack Group Pink and Links Health Care Group. Initial annual base rent to the venture is approximately $44.4 million.
The company's initial contractual yield on its combined preferred and common equity investments in the venture is expected to be approximately 9% after estimated transaction costs.
Speaker Change: The announcement of this transaction should provide a fantastic way to finish out what has been an extraordinary growth year for care trust and set the stage for continuing the momentum into 2025.
Please remember that when we quote our pipe, we only quote deals that we have a reasonable level of confidence we can close on within the next 12 months.
Speaker Change: Now quit note on the current transaction environment.
Speaker Change: As the updated pipeline indicates, the skilled nursing transactions market remains active, with geofloving consistently strong. We continue to see regional owner operators and smaller independent owners looking to sell as they seek to capitalize and improve operating conditions.
Speaker Change: The buyer pool continues to be somewhat narrow, the buyers who bring certainty of closing continue to have it a distinct advantage.
Speaker Change: With respect to assisted living, there remains a good amount of distress deaths coming across our desks.
With that said, we are seeing improvement in operating metrics, including occupancy, and we are seeing an increase in the number of buyers looking to potentially transact. Senior housing assets that have an AL Medicaid waiver component are drawing strong rentress from buyers, including for middle market acquirers.
Speaker Change: So while the acquisition market remains competitive, we continue to leverage our relationships and our disciplined investment approach. To identify opportunities that offer appropriate risk adjusted returns and that match the right operators with the right assets.
With demographic trends in our favor and an ongoing supply and demand advantage for post-accuten senior care, we are confident that the sector provides significant runway for future growth.
With that, I'll turn the time over to Bill.
Bill: Thank you, James. For the quarter normalized depot Boeing, increased 66% over the prior quarter to 60.9 million, and normalized.
Bill: FAD increased by 60% to 61.9 million. On a per share basis, normalized FFO increased resents to 38 cents per share and normalized FAD increased to 309 cents per share.
Speaker Change: And again, this quarter, because of our replenishing and robust pipeline, we continued to take advantage of our ATM and issued 500 million of equity under the ATM during the third quarter, resulting in us having 377 million of cash on the balance sheet of quarter end.
Since quarter-end, we have used roughly 89 million foreign investments and have approximately 230 million of cash on hand as we sit here today.
Speaker Change: We will use 57 million to fund the investment that will close in November, leaving us with roughly 175 million
Speaker Change: In yesterday's press release, we updated and raised our guidance for this year from normalised FFO per share of $1.46 to $1.48.
To a new range of $1.49 to $1.50 and for an normalized FAD, per share from a $1.50 to $1.52 to a new range of $1.53 to $1.54.
Speaker Change: This guidance includes all investments made today, including the one that will close in November, a diluted weighted average share count of 152.6 million shares, and also relies on the following assumptions.
1. No additional investments other than the announced pending $57 million deal closing in November, nor any further debt or equities this year.
Speaker Change: 2 CPI rent escalations of 2.5%.
Speaker Change: Our total cash rental revenues for the year are projected to be approximately 216 to 217 million.
Not included in this number is the amortization of a below market lease intangible that will total about 2.9 million, but this will be in the rental revenue number as required by GAP.
Speaker Change: 3, Interest Income Over Approximately 65 Million. The 65 Million is made up of 50 Million from our loan portfolio and 15 Million is from cash invested in money market bonds.
Speaker Change: 4, Interest Expensive Approximately 30 Million. Interest Expensive also includes roughly 2.5 million of amortization of deferred financing fees.
and 5, DNA expensive approximately 26 to 20 million and includes about 5.8 million of deferred stock compensation.
If the announced acquisition does closing Q4, it will trigger one time short-term incentive compensation that will acquire us to accrue additional expense in Q4 that is not included in this range.
Our liquidity continues to remain strong and we have approximately 230 million cash today and our entire six-harm million dollar.
Available Under our Reballer. As announced, we're working to upsize our revolver to 1.2 billion.
Speaker Change: I believe that this mount is already committed by her lead banks as we begin the syndication process.
Leverage hit an all-time low with a net depth, normalized Eva D'Auracial 0.08 times. Our net depth enterprise value was 0.4% as a quarter end and we achieved a fixed...
George Covered ratio of 9.7 times.
Lastly, as long as the price of our equity relative to the current cost of a long-term debt issuance remains pretty comparable. We continue to believe that it makes much better sense to continue to fund this replenishing pipeline with equity. But given the strength of our balance sheet, we love having all options on the table.
and with that I will turn it back to Dave.
Alright, thank you guys. Let me conclude the call with four things first.
Our projected total 20-24 investments of 1.4 billion equals over six years of growth compared to our life-to-date average annual growth rate.
Second, we have a balance sheet that provides enormous flexibility and historic capacity.
for both the near-term and the term third, looking at next year.
A full year impact of this year's investments should produce meaningful FFO share, for share growth without any additional investments.
Speaker Change: and for us, if you look at consensus growth projections over three years from 2023 through 2026.
We have the lowest multiple amongst healthcare reads today.
Speaker Change: We hope the report has been helpful to you and thanks for your continued support, happy to take some questions.
Thank you, we will not begin the question and answer session. If you have dialed in, would like to ask a question, if you've received a star one on your telephone keypad to raise your hand and join the queue.
If you would like to adore your question, please press a star one again.
Speaker Change: If you are called to plant a osteo-requestion and are listening by a loud speaker in your device, please speak up your handset and ensure that your phone is not on mute when asking your question. Again, these verses start one to join the cue.
Speaker Change: Your first question comes from the line of Jonathan use with Raymond James Beale's grid.
Speaker Change: Hi, I'm Lauren Gawson here. Great to see the recent investment activity in the pipeline.
I was hoping you could talk about the trade-off between investment volume and deal structure. Many transactions this year have come up with your preferred or a JV or a multi-year stabilization period which is a little more complex than historical investment activity.
So are those more complex structures necessary to get these transactions through the finish line and if you were to have done the more simple deal structure and what that activity has been lower.
Speaker Change: Great question and I think the answer is clearly yes, if
Speaker Change: We would certainly always prefer the Nilla.
TripleNet deal with no string attached and no...
Speaker Change: No partners attached, however you look at these deals that have had the added complexity, they have largely come to us only through a relationship.
Speaker Change: and most of it has been off-market completely. So folks are out there tying up deals and the friends of ours who do that know that they've got a great partner and us to help them transact.
Speaker Change: and because for the last couple of years we've made it pretty clear that there's got to be true long-term real estate economics for us.
That conversation is becoming much more efficient and productive than called a couple years ago.
and very helpful. Thank you for that. And then just thinking what's the pipeline, I think there's 200 million outside of the depending transactions. And when I look at those, I think the implied yields are
Speaker Change: and double digits pushing maybe nearly 11% maybe what's the mix of that called 200 million or so between kind of the the own and the loan or the loan investments.
Hey, Drew, I've been to James.
The vast majority of it is definitely owned. Eal pushes a little higher based on some structuring stuff with the deals, but it's nearly all real estate acquisitions. Very little loan activity is in the remainder of the pipeline after you take out the Tennessee deal in the $57 million North East deal announced.
Speaker Change: The New York Times, the New York Times, and the New York Times.
Speaker Change: Yes.
Okay, that's up on the just one more for me. There was a...
A peer of yours recently talked about moving into the Rodea or senior housing operating structure in there.
and James you just talked about more seniors housing opportunities in the transaction market. Obviously you're...
Call 90% field nursing and Dave, I know that's your background and that's where the core focus of the company is to curious us to your views or interest in radi opportunities.
Yeah, so I'd say for the about the last.
18, 24 months.
As we've been getting that question, answer really hasn't changed and it's a compelling, interesting opportunity.
for the right opportunity. We're not...
We're not going to do it just to do it, but if we can find sort of that goldy-locks opportunity where it's a sufficient size that it matters.
and it comes with some great people that are experienced in the Redea format.
Speaker Change: and it comes with exceptional operators.
If we can, if you know that, give us a call, but that's, that's kind of what we would be open to doing. So I would say, yeah, it's very interesting. We're open to it. We certainly have plenty on our, on our, on our, on the traditional, triple net business, though.
Speaker Change: Alright, thanks for the task. Thanks Jonathan.
Your next question comes from the line of John Kelly-Chalski, weird, well-spargo please go ahead.
Thank you.
I'm just going to the portfolio deal here. I don't know if you've announced this before ever given this information, but maybe you could just talk about the coverage of these assets in particular and then also kind of dive into the links relationship. I know that on your coverage sheet they don't have anything because a lot of their stuff is pre-stabilization, but maybe what the assets of this portfolio look like.
Yeah, so hey John, this is James. The essence and the portfolio very abit by Kenneth, but overall I would say they covered just shy of what one going in, but each of the tenants has a...
Speaker Change: Dave Lies, a pro-former that probably puts it at like a 1-5 and so we're excited about that and we're excited about the tenant mix. Links is performing fairly well based on...
The transaction we did with them a couple of years ago, we can kind of expect that up, we're trying to continue with them. They've been doing a great job and I think that there.
Deaf looking at this transaction and these facilities was really impressive to us. They dug in all the way and we feel really confident about their ability to, you know, really exercise on these facilities and be a great part of the overall portfolio with the other tenants.
Speaker Change: The End
Got it, S.
Speaker Change: James, if I could follow on one from your opening remarks, just about the acquisition environment or the transaction environment.
How do we think about...
Competition, eventually re-entering the market. It sounds like, you know, obviously given the numbers you're able to put up that you found a vertical that you can really compete on your own in.
But at one point, do you worry that this opportunity that gets competed away or private capital comes back or do you feel like you've kind of developed a boat here giving your cost of capital and that you're seeing capital not really likely to re-enter this space anytime soon.
It's interesting because while the virus is somewhat narrow and it's still incredibly competitive. It's a very active, private money and other buying for the same deals, right? And so...
I don't know what, you know, how much of an impact.
Others re-intering may really have. It really is very competitive already. There are a lot of buyers out there who's outside at times scenes scenes in Saceable. And so I don't know, new buyers coming in is really going to change that much at all for us.
God it, well thank you, I could grab on the quarter.
Speaker Change: Thanks for watching.
Your next question comes from the line of Austin Worshmit with K-Bank, please go ahead.
Austin Worshmit: Great, thank you and want to just go back to the portfolio deal and was hoping Dave maybe you could just provide some additional detail on
You know, the nature of this structure for the joint venture and the kind of preferred common interest and curious if there's any, you know, ability for you or right or first refusal for you to take down the remaining common interest over time
Y'all, let James talk to that.
Speaker Change: and Osnia So, you know.
Speaker Change: The breakout really is the preferred equities.
The vast majority of what we would be putting in, be close to 425 million of it. And that's not a preferred equity that comes back or has a term on it or anything like that.
So it stays out there forever and we do a couple of periods during the investment, you know, horizon.
We do have a call right.
and the JV partner has a putt right so we do look forward to you know.
Having the opportunity to acquire the entire venture ourselves down the road and still have it be accreted to us, which is kind of what we structure the football the way we did.
Can you give us a sense how far out that call rate is?
Speaker Change: between one year's 130, not kidding. It's been about four and seven, Colin.
and how long did it really take for you to get the deal to this point? I mean, was this one of the...
Speaker Change: You know, earlier large portfolio transactions that was presented to you
from the time I want to say, you know, 12, 15 months ago that you started kind of discussing the investment pipeline, lost large potential portfolio deals, just any fellow there would be helpful.
Austin Worshmit: Now, I think this came around Callister April the June is when it kind of first started percolating Austin.
Speaker Change: and has there been any strategic focus to expand the geographic footprint or the deals would you say taking you to these new markets? Just curious kind of the chicken and the egg there.
Speaker Change: Really, it's the deal that takes us to the new market. Do we have areas we like and we like to grow insure, but we really take it on a deal by deal. It has to be the right deal first before we really focus on exactly where might be in terms of targeted growth and this one fit but we're looking for as a deal first.
Very helpful, thanks for the time.
Austin Worshmit: Thanks, Austin.
Speaker Change: Your next question comes from the line of Michael Carl with our BC Capital Market to do ahead.
James, I wanted to follow up on an earlier question where you talked about coverage ratios with this portfolio transaction.
Michael Carl: I mean, I believe you said that the going in coverage ratio was one going up to one five. I guess first is that an EBITDAAR coverage ratio in second what's driving that improvement is it something that these new operators are doing differently to drive that type of uptick or I guess what's actually driving that better pro forma expectation.
Yeah, that is an even dark coverage.
Speaker Change: Michael and I think each of the sub-portfulness is a little different but I would say it's
There's some uproarment in occupancy, the Medicaid rate has gotten better in Tennessee and in these operators abilities to really operate efficiently and reduce costs in particular with some of the insolers and whatnot. So that's kind of where the growth is going to be coming from from the operators.
It was our big Medicaid rating crease so that the trailing numbers doesn't include that Medicaid rating crease, but now it does, is that what you said.
Speaker Change: The training does include part of it, yeah.
Speaker Change: Okay. And then are these new leases that you have with N-Sign Packs or in-Links, or are they going to be included in your existing master leases?
Speaker Change: Because they're real estate of me owned by the venture, and I think they got to be new master leases, but they're on consistent terms.
Speaker Change: with what we have.
and then the type of transaction chains that you're looking at. I mean are there more stabilized deals just given the improvement that we've seen in this net space?
and what type of coverage ratios are you comfortable with on the stabilized deals that you're targeting? Like all the stuff that you acquire, I mean, a similar...
Speaker Change: Cap rates that are coming in or leaf rates. Are we seeing like the 1, 4, 1, 5 coverage ratios on most of these transactions?
I mean, Stabilized, yeah, I think historically you're still seeing a really wide range that based on a lot of things in terms of where that portfolio operator is in terms of recovery. Also, the geography that they're in, right? I mean, there's a huge correlation between perfect pricing and the Medicaid rate in that state.
So, really depends on the portfolio, but stabilize, you know, we're generally still underwriting to 1, 4, 1, 5, and the least yields, you know.
As you get into higher, you know, bigger size portfolio deals, you're going to make a trade a little bit for, you know, little or yield for a little higher coverage. And that's a trade will do a lot, you know, that works for us. You can get a little higher yield on smaller deals still, but that's kind of what we're seeing.
Okay, cool, great thanks. Thanks, mate.
Your next question comes from the line of once in a rear with BMO Capital Market's Dees Go ahead.
Hi, this is Robin Hale, I'm sitting at the Juan. Just curious on the Tennessee Exition. Could you maybe have to elaborate a little bit on the background of the deal? It was usually take four to five months to take down a deal of the size.
Speaker Change: and Vith Curious, why were you needed given that end sign has the same sort of captive of the lead and it was stellar.
Well, some of those questions, we've really answered as much as we can at this stage, so, but in terms of the deal itself.
Speaker Change: Yeah, it's one that we tied up and brought to these different operators, not vice versa. So that's why it made sense for, for Ensign to do it with us as opposed to, by themselves.
and it's the deal of the good news because it's a little late in the year or what can impact and can be assumed by Iran.
Yeah, I mean if you...
If you just put in the type of accretion that is likely from that
Speaker Change: Looking at next year.
Speaker Change: Skinner.
will wake up on January 1st in double digit FFO Prasher growth with this deal in the rest of what we've done this year.
Of course, you need it.
and the real guidance for 2025 will come in our next Remains call.
Order any other portfolios out there where you feel like you might have an insight challenge to land the deal of this ice?
Speaker Change: Yeah, when we quote our pipe, we sort of made a point this year to give the number that we feel is very conservative.
Very doable at least at an L.O.I. stage somewhere between L.O.I. to tie to a plot with a purchase agreement.
and it has about 12 months for us to execute on. But we've also made a point to say that number, because it's fairly conservative, does not include everything that we're looking at.
and that's certainly true today. With that $700 million pipeline number that we gave, that does not include some larger portfolio deals that we continue to evaluate.
and what was the year-long on them? We're collecting in a rent there, is there an expectation for rent collection on the remaining eight assets held for sale?
I'm sorry, could you repeat the question?
Jerry Ayes, curious on the specificions in the quarter where you're collecting any rents there and is there any rent expectation on the remaining age?
Speaker Change: Oh, the answer is no end no.
Speaker Change: Thank you. You better.
Your next question comes from the line of West Galade with Beale, please go ahead.
West Galade: Hello everyone, you've essentially doubled the size of the company this year or close to it. Here's how you're thinking about staffing for next year.
You know, I think this time last year, like I alluded to in my prepared remarks, we...
Speaker Change: We were looking forward to what we thought could be a historic year and
made some improvements. I think I used the word recalibrated the team a bit.
which included adding some people.
Speaker Change: We are still a very lean group and
I think as we sit here today, looking at next year we have a similar outlook for 2025, in the end, in so...
Our approach to that is to get ahead of it.
Speaker Change: So that we can execute as far as possible.
So we could certainly be adding incrementally to the team as we head into next year.
Speaker Change: Getting into this one quick follow up, I think Bill made a comment. If portfolio closed this year, there might be a one-time run GNA. You have an approximate estimate of that.
The New York Times, the New York Times, and the New York Times.
Speaker Change: is asking you. No, I don't have an approximate estimate of it. Just yet.
Okay, thank you.
And once again, if you would like to ask a question, you can give us a star, follow the right number one on your telephone keypad.
Your next question comes from the line of rich Anderson with Red Bush please go ahead. Hey thanks and good morning out there. So on the portfolio of the 500 million, what's the mechanism to get these?
in the hands of enzyme packs and links. Is that a...
Happens simultaneously with the closed or is there a period of process that is going to kind of create some lag effect into 2025 in terms of getting to that stabilized coverage.
Speaker Change: The New York Times,
There would be a period of time where they'll need to get in and ramp up and get to the stabilized coverage. It's not going to the store or cover, but men will take some time for them to put into place. The levers they want to pull to get the coverage to.
You know, they're projected stabilization levels, but
Speaker Change: Dukesum Traum Yang
and you can't comment on the current operator.
I mean, in terms of who it is.
I think we probably can't, I think they've released them and I think it's American healthcare partners Excuse me, I didn't, I didn't, I miss that at Paul Trust
and I'm here with the partners. Okay.
Speaker Change: Bigger picture, you guys have been growing impressively this year.
Sometimes growing at that pace we've seen it happen in bound problems occur.
and ultimately you know we've got some issues to resolve in the aftermath. I hate to be a cynic here but you know how do you how do you
Speaker Change: Manage those types of risks, you know you know your own portfolio but you don't necessarily know what you're buying as well
What gives you the confidence that you're not going to have some 10% of everything that you bought this 1.4 billion is going to require some attention in the aftermath. You know, it wonder if you could just comment on that process.
Yeah, it's saying that what gives us confidence is that our underwriting discipline has not changed. From B1, we have always said and lived by the mantra that we do not grow for brosake.
and we have taken advantage of a really special window of opportunity that we're in right now. But we haven't done it in a way that in any respect deviates.
from our culture or our operating discipline. And so when you, in this business,
When you're underwriting decisions starts and ends with who is that operator?
and is this the right match.
Speaker Change: or this deal.
You're able to take advantage of an opportunity like you're seeing us do right now.
Let me ask you this way. We've had outsized growth in Medicare reimbursement and Medicaid in many of the states.
Perhaps a recapture of inflate not perhaps, a recapture of inflation of the past several quarters and years.
What would you say to the fact that maybe the thrills gone here and skilled nursing?
and that we're going to start moving back to a more normal pace of reimbursement and then you start saying, okay, well, what's the escalator, what's the reimbursement rate and what does that do to coverage over the next few years if we get back to more like a 2%-age type of number on both the Medicare and Medicaid front.
on a GoFore basis. Maybe you could comment on where you think we are in that part of the skilled nursing cycle today. Thanks. Yeah, thank you. I'd say that what?
The benefit that we have.
Particularly here at Caratrust is that we've been in the skilled nursing business for over 25 years.
So we've seen ups and downs and right now we're in a situation where I would call the operating environment very stable, very steady.
and if we can be in a steady state environment with Medicare and Medicaid, wherever we're back to kind of his story.
Speaker Change: Expectations.
or moderate.
Speaker Change: you know, cost-eleaving type adjustments year and year out.
and we go to sort of that pre-pandemic environment. We would be thrilled and we are thrilled with it. The excitement over here has not started waning at all because the difference is we're going back to a steady state environment but the difference between this steady state environment.
and the study state environment that we've been used to excluding COVID for the last 25 years.
is that now we're on the very beginning.
of a demographic wave that is inevitable.
So you've got call it 2% increases on Medicare and Medicaid going forward.
but you're in an inevitable.
occupancy, increase situation because these demographics.
R with the R.
So as you go into next year or the year after that, five years out, ten years out.
Speaker Change: We're real super excited about both skilled nursing and senior housing. What is your optimal rent escalator using that mentality in your history? Is it 2% is that the new...
The new normal or is it something higher than that, just so you don't lose credit over time.
Yes, we've always, almost all of our leases are done.
Speaker Change: and the way that we think is optimal on that CPI-based.
So they've got a ceiling, relatively low ceiling, and a floor of zero. And that, that hedges against, you know, those escalators out running what those increases are for Medicare Medicaid.
and there are no further questions at this time. I would like to turn it back to Dave Sedgwick for closing remarks.
Well, we're just really excited and grateful for your support and interest and I hope you have a great rest of the day. Thank you.
Speaker Change: Thank you and this concludes today's conference call. Thank you all for participating in the meeting. I mean now this can are.