Q3 2024 Strawberry Fields REIT Inc Earnings Call
Music
Ali: Good morning, my name is Ali and I will be your conference operator today.
Ali: At this time, I would like to welcome everyone to the Strawberry Fields REES 3rd Quarter 2024 Earnings Conference Call.
Ali: All lines have been placed on mute to prevent any background noise.
Ali: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, you have to press the star key followed by the number one on your telephone keypad.
Speaker Change: I would now like to turn the conference over to Jeff Beutner, our Chief Investment Officer. Sir, please go ahead.
Jeff Beutner: Thank you, and welcome to Strawberry Fields REIT's third quarter 2024 earnings call. I am the Chief Investment Officer of the company, and I focus on acquisitions of new deals, growing our operator base, and investor relations.
Jeff Beutner: On the call with me today are Marish Gubin, our Chairman and CEO, and Greg Flamian, our CFO. On Friday, the company issued its 2024 third-quarter results, which is available on the company's Investor Relations website.
Jeff Beutner: Participants should be aware that this call is being recorded and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions, and beliefs about Strawberry Field's REITs business and the environment in which it operates.
These statements may include projections regarding future financial performance and
Jeff Beutner: Dividends, acquisitions, investments, returns, financings, and may or may not reference other matters affecting the company's business or the businesses of its tenants, including factors that are beyond its control.
Jeff Beutner: Additionally, references will be made during this call to non-GAAP financial results.
Jeff Beutner: Investors are encouraged to review these non-GAAP financial measures as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the non-GAAP measure reconciliation page in our investment presentation. And now on to discussing Strawberry Fields REIT.
Jeff Beutner: While there are many current shareholders on the call, we also have new and prospective shareholders and I'd like to share a little bit of background about the company. The story began 21 years ago when Mike Schubin, our chairman and CEO, and Michael Blesko, one of our directors, purchased their first skilled nursing facility in Indiana.
Jeff Beutner: Once they found success with that first facility, they quickly bought a second and a third. Over the next nine years, they grew from that one facility to 33 facilities in Illinois and Indiana.
Jeff Beutner: In 2015, with those 33 facilities, Strawberry Fields REIT was created, and the company has grown significantly since then.
Jeff Beutner: As of September 30th, the company owns and leases 114 facilities in nine states with over 12,800 beds.
Jeff Beutner: And as we get closer to year-end, we look forward to growing this number.
Jeff Beutner: As it relates to this past quarter, I wanted to share some key highlights.
Jeff Beutner: The company collected 100% of contractual rents. In July, the company filed a registration statement on Form S-3 with the Securities and Exchange Commission.
Jeff Beutner: In August, the SEC declared the registration statement effective and the company established an ATM program.
Jeff Beutner: Through this program, the company began selling shares to the public for the first time, as we initially went public through a direct listing. These shares will be sold at the company's discretion, and the ATM program is expected to provide the company with additional financing flexibility by increasing the stack's liquidity and facilitating growth.
Jeff Beutner: In August, the company completed the acquisition for two skilled nursing facilities with 254 licensed beds near San Antonio, Texas.
Jeff Beutner: The acquisition was for $15.25 million. The facilities are leased to the Tide Health Group, a new third-party tenant and consultant. These properties will increase the company's annual base rents by $1.525 million and include annual escalators of 3%.
Jeff Beutner: In September, the company completed the acquisition of a property near Nashville, Tennessee comprised of an 83-bed skilled nursing facility and a 23-bed assisted living facility.
Jeff Beutner: The acquisition was for $6.7 million. The property was added to an existing Tennessee master lease and will increase the company's annual rent by $670,000. As part of this deal, the company issued the sellers $3.1 million in Strawberry Fields REIT stock as consideration for the deal.
Jeff Beutner: Subsequent to Quarter End, the company acquired an 86-bed skilled nursing facility in Indianapolis, Indiana, marking our 115th facility. The acquisition was for $6 million. The facility was added to an existing Indiana master lease and will increase annual rents by $600,000.
Jeff Beutner: The company also entered into a purchase and sale agreement to acquire eight skilled nursing facilities with 1,111 licensed beds located in Missouri for $87.5 million. The facilities are currently leased under a master lease agreement to a group of third-party tenants.
Jeff Beutner: Lastly, our Board of Directors authorized a cash dividend of $0.14 a share, which is an increase of $0.01 a share from the prior quarter's dividend.
Jeff Beutner: The dividend will be payable on December 30th, 2024 to shareholders of record on Monday, December 16th, 2024. This dividend will be our ninth consecutive quarter of paying dividends, and in that time will be our fourth increase. This represents a philosophy of the company to teach the market that our dividends can be reliable.
Speaker Change: I would now like to have Greg Flamian, our Chief Financial Officer, discuss the quarterly financials.
Greg Flamian: Thank you, Jeff. Good morning and welcome again to the Strawberry Field's third quarter earnings call. Starting off, we will discuss a quarterly comparison of the balance sheet as of September 30, 2024 versus the balance sheet as of the prior quarter, June 30, 2024.
Greg Flamian: Total assets are $661.5 million, which is $25.7 million or 4% higher than June 30, 2024.
Greg Flamian: This increase is driven by real estate investments from the five properties we acquired during the quarter as well as higher cash balances from the Series A bond raise that occurred in August 2024.
Greg Flamian: This was offset by a lower right of use assets as well as lower restricted cash and equivalents.
Greg Flamian: Liabilities are $606.3 million, which is an increase of $21.1 million, or 3.6% from the prior quarter.
Greg Flamian: The increase is due to the Series A bond raise that was mentioned earlier.
Greg Flamian: The liability increase was offset by lower accounts payable and lower operating lease liabilities.
Greg Flamian: Equity for the quarter was $55.2 million. This is a 4.6 million or 9.4% higher than the previous quarter.
Greg Flamian: The increase is due to the higher third quarter net income and the sale of additional common stock offset by third quarter dividend distributions.
Moving to our next comparison, we are
Greg Flamian: analysis of the balance sheet as of September 24 versus September 2023.
Greg Flamian: Total assets are $31.7 million or higher, or 5% higher than the prior year. This increase is due to the cash and cash equivalents, as well as higher goodwill, other intangible assets, and lease rights.
Greg Flamian: The lease rate increase is due to the purchase of the Indiana Mashed Lease II lease rights in February of this year.
Greg Flamian: Liabilities increased $30.4 million or 5.3% from September 30th, 2023. The higher liability balance is driven by an increase of 46.6% in net bonds.
Greg Flamian: offset by lower notes payable and other debt as well as lower accounts payable and accrued liabilities.
Greg Flamian: Equity is $55.2 million as of September 2024. This is 1.3 million or 2.5% higher than September 30th, 2023. The increase is driven by higher net income, a net increase in common stock.
Greg Flamian: And these increases were offset by higher dividend distributions and negative foreign currency related adjustments.
Greg Flamian: Moving on to the next comparison, we are now discussing the quarter-to-date income statement comparison of Q3 2024 versus Q2 2024.
Greg Flamian: The third quarter net income is $6.9 million, which is marginally lower than the net income from the prior quarter.
Greg Flamian: Third quarter revenues and expenses were mostly in line with the second quarter, however, the quarterly change is due to a slightly higher interest expense that was offset by lower G&A expenses.
Greg Flamian: Moving to the to the year-to-date P&L comparison, September 24 year-to-date net income is $19.9 million, which is 5.5 million or 37.8% higher than the year-to-date net income in September 2023.
Greg Flamian: This increase is driven by higher revenue due to new properties acquired in the trailing 12 months, offset by higher operating expenses and higher interest expenses.
Speaker Change: This concludes the review of the financial statements in the presentation. Jeff Batner will now discuss our current investment strategy. Jeff?
Well, actually, I'm going to...
Speaker Change: It's Moshe. Thank you, everybody, for joining us today. This is being our second time doing this earnings call. We're still working on our kinks. We're beating potatoes, folks, as most of you that know us know about us.
Speaker Change: And so, this presentation that we put on our website would have been sent out to everybody that you guys would have been following along on a screen.
Speaker Change: So I just want to walk everybody through the presentation that you can find on our site.
and we're probably going to publish it today.
Speaker Change: The one thing to note, our financial statements are in GAAP financials, and on the GAAP financials you're at lower historical cost of the product or market, which undervalues, it doesn't put our assets at the proper value. Our enterprise value today is probably about $1.2 billion. Like Greg said, our assets on GAAP are about $661 billion, that's after depreciation and everything.
Speaker Change: We expect that in the fourth quarter to close on about another $110 million of assets and that should bring us to about $1.3 billion in enterprise value. And right now, we have enough – we have –
We have a lot of cash.
Speaker Change: And we continue to do the ATM and bring in more cash under that, and that actually helps bring in more shareholders and helps the institutions get a little bit more shares. And I'm thinking in the long run for managing the stock price, the ATM's gonna be a useful tool for us.
Speaker Change: with the help of the investment bankers that are part of our world.
Speaker Change: The next slide I want to go to is just talking about financial statements of the revenue. Our revenue was basically the same and that makes sense, we have straight line rents.
Under straight-line rents, you take the total lease.
Speaker Change: for a 10-year because most of our leases are 10-year leases or two five-year enrolls.
Speaker Change: So under 10-year leases, you add up all the years, then you divide it by the periods, and it's the same number month over month over month.
Speaker Change: So you can expect stability, so our current numbers should stay stable with an increase of the new assets being bought. That'll pick up to about $31 million, which through four quarters we expect that to be about $125 million next year. That's assuming we do no deals in 2025, and the likelihood of us doing no deals is very slim.
Speaker Change: Our expenses remain relatively flat, I think we're managed less expensively than most of the other REITs that are out there. Our total overhead that we between salaries and everybody and our total overhead for running the business I think is less than two million dollars annually.
Bye. Bye.
And we expect that to stay relatively similar.
Speaker Change: Our expectation for net income, like I said, our top line number.
Speaker Change: is probably about $125 million next year based on when we currently expect to close this year. And with that, our FFO, which is the metric we use...
Speaker Change: And so therefore, we raised it a penny and we kept chugging along. If you go to the page where the map is, you can see where most of our stuff is, mainly in the Midwest.
Speaker Change: We're adding to the footprint today by buying homes in Missouri, buying homes in Kansas, and we're buying more homes in Texas and Oklahoma to help fill in the spots.
Speaker Change: Our basic investment strategy is we like to have master leases, so we either add more assets to a master lease.
Speaker Change: Or we buy a big enough portfolio for us to add a new location.
Speaker Change: Everything that we're buying is third party operators unless it's an asset that fits currently into a master lease that's with an affiliate of myself.
Speaker Change: If you look at the FFO growth, there's been a 13% growth rate in our FFO. Very proud of that. Like I said, from $30 million in 2019 to $57 million in 2024, and next year we should break probably $75.
Speaker Change: Our base rent also went from $72 million in 2019, and now we should end up with a number around $125 million.
Speaker Change: It's quirky because we're all accountants here, Jeff, myself, Greg, and your financials are in gaps.
Speaker Change: And under GAAP accounting, you know, in a real estate company, the financials get a little wonky because you're taking depreciation and you look like, you know, it doesn't look right. The reality is, is our assets maintain value, the tenants, you know, they're all triple net leases.
Speaker Change: Our tenants are forced to take good care of the properties.
Speaker Change: and the buildings are in great shape. They look good. We visit the properties twice a year, minimally, and we have good constant contact and relationships with all of our operators, the owners of the operators, as well as...
you know, mid-level managers that are managing the properties.
Speaker Change: I'm super proud of our, we haven't done anything crazy about the dividend, like I talked about a little bit before. I'm super proud of the fact that we're only doing a 47% payout ratio, which signifies about 100% of our net income.
Speaker Change: I mean, we're transforming, we're getting known to the marketplace, even some of the new people on the call today, you know, are analysts that, you know, I've been handling for years and now get their feet wet understanding who we are and what we're doing. We're a very...
Speaker Change: We're a very clean ran company and we continue we continue to do what we do. I just
Speaker Change: I expect that once we get really treated like everybody else in the market, you know, traded at a multiple, that's...
that works.
Speaker Change: then I could do more stock sales and then lower the debt load even more than where we are.
Speaker Change: I mean, equity at the dividend rate is really our cheapest form of capital today.
Speaker Change: That being said, you know, I'll do whatever we have to do, which every action we're making is for the shareholders, and that should be accretive to our stock and accretive to our story and what we're doing. So, super proud of the payout ratio being below 47.
Speaker Change: And altogether we expect, you know, it's it's the real the share growth is probably we're looking at a 12% growth rate and so overall we were
Speaker Change: We have a really good return for our shareholders. I know some people just care about what the dividend is and others care and they understand the stock price should go up as we make more money and the share becomes worth more money. And if you look at that, if you look at the next slide, if...
Speaker Change: I mean, I might be the only one looking at this stuff is at $10,123, the stock price was $6.33, and the stock price at $10.01 was $12.69.
Speaker Change: So somebody that's owning the stock, the stock has gone up, now mind you, that's an inordinate amount because that's just getting up to where our stock price should be trading. But in the long run, if the stock's trading consistently at a certain multiple, the fact that we make more money with the same amount of shares because we're using the excess cash
and not necessarily diluting anybody and we're buying more assets.
Speaker Change: It should make each share worth more and therefore the stock should go up.
Speaker Change: We're super proud as well of our debt, like we just talked about, where we have.
Speaker Change: We have a bunch of our money sitting in HUD debt, 40-45% of our debt altogether.
Speaker Change: It's sitting with HUD debt, which is long-term money. We have plenty of other loans that we expect in the queue to be able to move over to HUD in basic loan terms, about 35 to 40 years at 10-year plus 175, straight by M. That's a good piece of business for us.
Speaker Change: And again, our debt today, our leverage ratio is right around 50%, and that depends on where you want to assess a cap rate on our assets.
Speaker Change: Right now that's based on like 10 and a quarter cap rate, if you put it at an eight and a half, you know, probably in the 40s as far as leverage. And that is all from this presentation that I have. I want to thank everybody for coming and we're gonna open the floor for questions.
Speaker Change: The confirmation tone will indicate your line is in the question queue.
Speaker Change: And you may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stir keys.
One moment, please, while we pull for questions.
Speaker Change: Thank you. Our first question is coming from Barry Oxford with Colliers. Your line is live.
Great, guys. Thanks for taking my question. When you're... ...
Speaker Change: You guys had mentioned a 10% cap rate. I was wondering if there's any spread differential in cap rates versus the region, i.e. Midwest versus the Sunbelt region. Is there kind of a difference in cap rate or are the cap rates kind of pretty close to each other regardless of whether it's a Midwest or Sunbelt?
Speaker Change: Thank you, Barry. I appreciate you. Thanks for joining us today and I appreciate the question.
This is Moshe, I'll answer that.
Speaker Change: So, I guess one of the things that differentiates us from our peers
Speaker Change: I'm the founder, my partner Michael founded the company with me.
21 years ago.
And because of that...
I've been relatively, I wouldn't say risk-averse, because we've grown.
Speaker Change: consistently, but we've been very regimented and disciplined on how we buy.
And so our 10 cap purchase.
Speaker Change: It's either feast or famine. Some years we don't do any deals, some years we do plenty of deals.
Speaker Change: You know, our math is the same, we're basically looking at, you know, last three years financials, you know, with certain ad backs being that the background, our background is nursing home operators.
Speaker Change: And no matter where the home is, whether it's in the Sunbelt or whether it's in the Rust Belt or...
Speaker Change: anywhere else in the country, we're looking at the math to make sure that we're coming in day one with the tenant making a one-and-a-quarter coverage of their rent.
and where we're making 10% of our money unleveraged.
Speaker Change: and then we add leverage and we manage our balance sheet. So, yeah, we don't see a difference because we don't do what we generally.
Speaker Change: You know, we run this company similar to the way I run my bank, OPHC, and that is, we don't make many policy exceptions. We treat this like loan committee when we come in front of investment committee.
Speaker Change: And it's presented with, you know, 20, 30, 40 pages of material, and we don't make policy exceptions. And our policies dictate that on day one, tenants making money, and we're making our 10%.
Speaker Change: And, you know, the clean deal and all the boxes are checked. And we've been consistent with that. And you might ask a better question, should we change it? And that question was good maybe a year or two ago when their interest rates were on the rise and where someone said to me that, you know, you're getting squeezed.
Speaker Change: And my answer was, well, you know, I don't, I don't...
Speaker Change: I don't worry about that because we're a long game. So even if day one, the...
You know 10% margin
Speaker Change: unlevered is what we get, and then we're not able to lever at such a great rate because of interest rates.
Speaker Change: It doesn't matter because we plan on holding that asset for a minimum 10, 20, 30 years and we should be able to get it refinanced at some point with the HUD debt and we manage our balance sheet effectively.
Speaker Change: So that's what we do, and we've been consistent in how we do that.
Speaker Change: Perfect, no, appreciate the color on that. Fundamentals also within the industry seem to, you know, be fairly robust. You guys had, you know, gains in occupancy at 70.4.
Speaker Change: How do you see that in 2025? Can you continue to push occupancy much above this level or – look, Barry, there's a point where frictional vacancy starts to happen.
Speaker Change: No, I think our portfolio, there's two sides to our portfolio. You have the, you know, you have the, you know, the big cities like the Chicago and to a lesser extent, you know, like Indianapolis, Louisville, Little Rock.
And those homes after corona, they bounced back.
because they have the volume of patients and...
Speaker Change: and, you know, people don't want to care for people at home.
In the bigger cities, it's harder to find.
Speaker Change: you know, the nice wife that's willing to take care of your mother.
Speaker Change: Not to judge anybody in the world, but that being said, in our portfolio, a lot of our stuff is like in farmland. We're in the middle of...
Speaker Change: you know, like it's beautiful, it's Smoky Mountains or, you know, somewhere that when Corona came along and you had long-term people that were living in the facilities, you know, for many years, and you lost that population.
Speaker Change: that has been slower to come back. So if you look at our occupancy in the city, our occupancy is higher than it was before Corona. And that's, you know, almost near probably somewhere, you know,
Speaker Change: Blended is probably 80 to 90 percent everywhere else and then you got farmland that's probably stuck at
60 something.
Speaker Change: that buildings are making money, but they're still slowly, slowly building because they don't have the amount of volume.
of admits and discharges.
Speaker Change: And so the answer to you is yes, I mean I think that the census, occupancy, tenant operators, financials are going to continue to do better and now with the new administration.
Speaker Change: One of the first things that happened after the president-elect became elected is CMS eliminated their...
Speaker Change: They push it off and it's going to get eliminated a staffing mandate. That was going to that was going to totally clobber the nursing home business I mean subject to the you know, the state's giving more more revenue, but
Speaker Change: But yeah, I mean, occupancy totally could go up. I mean, the tailwinds in our tenants' business are great. I mean, really, really, really great. Baby boomers and with a red government.
Speaker Change: Red government usually is not so great for social programs, but from the points of regulation, the last bunch of years, the current administration has been really, really aggressive, and I think it's the most fines.
that industry-wide, that the nursing homes have had
Speaker Change: And the amount of aggression that's been negative to the nursing homes has been the worst. I've been in this business since I graduated college as an accountant. I started as an accounts payroll bookkeeper.
Speaker Change: Literally in 1998, this is the industry that I spent all of my time on.
Speaker Change: most of my time on, I can't say all, for the last, whatever that is, 27 years. And I could tell you...
Speaker Change: I can tell you this past four years were probably four of the worst, I mean with Corona and everything else, probably some of the worst years in the industry collectively.
But now it's you know
God willing, there's a positive.
Speaker Change: change that's going to be occurring and again from our point of view we just want to collect our rents and we want our tenants to take care of their residence and that's that's really but you know the more money they make the easier it is for them to take care of the residents when they're tight and really really tight it's harder for them you know because then they have to choose between this or that when they only have X amount of dollars to spend
Speaker Change: Perfect. No, all of that makes sense. Going to the dividend, 47% payout you alluded to that it's, you know, 100% of that income.
Speaker Change: Is it fair to say that going forward you're going to have to move the dividend at basically a growth rate of the FFO or not necessarily?
Thank you.
Speaker Change: No, that's exactly right. My, my, my intention, my, my intention. And again, I, we act with good governance. So I, you know, I'm not a dictator. Um, we, we take into consideration.
Speaker Change: Cash flow, we take into consideration attracting shareholders and what we have to do for the shareholder base.
Speaker Change: and the like. And yeah, I mean, it's most likely that as our FFO increases, I mean more than most likely, I don't know how you say it, I can't say definite because you never know what's going to happen in the future, but most likely.
Speaker Change: We will see as the FFO grows, so will the dividend at minimum. I mean, it also could be that at some point...
Speaker Change: At some point we get large enough, you know, and the capital is that good
Speaker Change: That that I could I you know, I could raise money at a good at a good at a good rate You know not not not debt but equity, you know I at that point I I could raise And we could do similar to the other guys and the other guys are like are doing a payout ratio of like 90% you know, I I
Speaker Change: I've been, you know, against that thought, but then again, I'm learning as we grow, you know, new things, but I like the idea of.
Not necessarily.
Speaker Change: I mean, I separate the fact of adding shareholders because that's what I want, you know, we want to be widely held, we want there to be liquidity in the stock price.
Speaker Change: But I separate that from the financial metrics of the business, meaning if I could get the money from cash flow and I don't need to sell equity and not dilute the earnings per share.
Speaker Change: I'd rather not sell the stock, but the stock price is doing that well.
Speaker Change: Then it makes sense to sell the stock as long as I can put the money out to use and get a good return and have it be accretive to earnings. The earnings accretion is the hardest thing to do. Everything else is accretive to book.
Speaker Change: But book nobody cares about that's not a metric that's used really on when you're determining to buy something
Speaker Change: Really, we need to buy something that's on the forward-looking cash flow.
Speaker Change: And if the forward-looking cash flow per share gets diluted because they sell more stock,
Speaker Change: You know, I'm very cognizant of that and I want to make sure that...
Speaker Change: You know, my shareholders, I'm looking for adulation. I'm soft inside and I want people to like me and think I'm doing a good job. And so I need to, you know, and I go out there to aim to please, you know, and that's what we're doing every day.
Speaker Change: Well, when you look at your stock price and you look at your 10% cap rate, doesn't the math pencil out accretively?
Yeah, yeah, yeah, we're selling stock above NAV.
Speaker Change: But it's not I'm talking about in terms of EPS, accretive EPS. If I don't get that money out the door in a you know Instead of it I need to I need to put that money out the minute I get it either by paying down debt or buying another asset with cash
It's going to be a drag on earnings by definition.
Speaker Change: Yeah, exactly, exactly. And I want to make sure that the marketplace understands what I'm doing and I'm cognizant of it because at the end of the day, to attract a new shareholder, when they're going to see what we did, they're not necessarily
Speaker Change: You know, everybody looks at stocks differently, but I like to think that we're a lot different, you know, because of the risk factors that we have are, I think, are less.
Speaker Change: then, you know, we don't really suffer from economy, you know, and interest rate risk and really economy risk because, you know, we're a business that are, that's not, that's not, that's not a decision that you make because you want to make. You make a decision because you have to make.
Speaker Change: And this is a business, you know, people, to your mother, God forbid, needs a nursing home. You're putting her in a nursing home. You're not thinking, well, it's expensive. Nobody thinks that way. They think, I gotta take care of my mother.
Speaker Change: And so we're in a business that the demand is going to continue to be there and it's not like people are going to choose
Speaker Change: you know, we'll keep her at home, you know, it's like, it's not, I mean, there may be, you know, cases of that, of course, but so we have a business that, that, that, you know, and it's always financing for relatively inexpensive costs.
and there's always a social need for the product.
Speaker Change: And so we like to think that a shareholder that's going to listen to us is going to understand that.
Speaker Change: You know this might be more risky from the thought process of you don't understand it But it's not more risky when it comes to if you're putting your money in a read
Speaker Change: Right multifamily something can happen with the rental market office same thing like we've seen you know nursing homes You don't see that the nursing homes continue to travel long And they pay their rent and we get like we said we were collecting 100% of our rents And we've done that year in year out for about 20 years
Speaker Change: I tell people, if we had an accounts receivable person, it's the easiest job in the book because we get all of our rents wired in on the first of the month, we're not hounding people down to collect rent, they pay us and that's the end of it.
Thank you.
Speaker Change: Yeah, I think I don't remember what the question was, but I think I answered you. No, you did. You did. I appreciate the time, and I'll go ahead and yield the floor.
Thanks, guys. Thanks, Barry.
Thank you.
Speaker Change: Our next question is coming from Gaurav Mehta with Alliance Global Partners. Your line is live.
Speaker Change: Good morning. Thanks for taking my question. I wanted to ask you on the portfolio that you have on the contract, just to clarify, the consultant on the portfolio is not Infinity but another third party?
Speaker Change: Correct. Ingvar, thank you. Thank you for your time. Thank you for joining us today. Thank you for following us. We appreciate you. We appreciate your firm.
Speaker Change: That being said, yeah, this is, like, our philosophy today is every...
Speaker Change: New deal that's in new places are completely non related party This is no different. This is a decent operator. That's been running nursing homes for 30 years Lives in he lives in Creve Coeur
Speaker Change: And, yes, completely arm's length, third party, good coverage ratios, day one, strong sponsor support.
Speaker Change: But, yeah, it's a good deal, and it adds a new operator and a new state completely unrelated to me.
Okay.
Speaker Change: I think in your prepared remarks, you mentioned a number, $75 million of AFL-4, is that for next year, 2025, that you're expecting?
Yes. Okay.
Speaker Change: Okay, and that includes all the 4Q acquisitions that you expect to close, right?
Speaker Change: Yeah, we have currently we didn't announce we didn't announce a bunch of deals But we have we have this 87 and a half million dollar deal Missouri. We have about a 24 million dollar deal in Kansas
Speaker Change: We got a $5 million deal in Oklahoma and I'm not sure, I think we, I don't know if we have anything else, but we had that stuff up, we should end the year strong.
Speaker Change: And that's the 75 is generated off of that for next year. And again, we'll probably exceed that because we'll probably buy, I'm sure we'll find something to buy next year as well.
Speaker Change: Okay. Great. And maybe last one. Okay. Great. And maybe last one. Okay. Great.
Speaker Change: Earlier in your remarks, you touched upon some of the changes you're expecting from the new administration. I was hoping if you could maybe talk about your view on any impact you're expecting on Medicaid reimbursements or any other reimbursements, any expected impact on your business.
Speaker Change: Well, so over the years, and as part of doing non-deal roadshows for so long that I've been doing this, I've spent a lot of time trying to educate.
Speaker Change: shareholders, analysts, whoever wants to listen to me on our business, you know, the Title 17 and Title 18 of the Social Security Act basically has the government
on their Medicaid.
having to reimburse the costs of running the nursing home.
Speaker Change: So now the thing is, as time goes on, and what happened with COVID is a once-in-a-lifetime event. Hopefully it never happens again in our lifetime.
But in that example, the reimbursement
Speaker Change: some states are so far behind and you saw in 20, in 2024 towards the end of the year, Kentucky finally improved, Ohio finally improved, and I think, and I think Tennessee, not Tennessee, but
Thank you.
Speaker Change: I don't know if there's something in Texas maybe will improve, but, you know, but otherwise, you know, the cost-based reimbursement has had, has had Indiana, Tennessee.
Speaker Change: and other states, Arkansas increased their rates from, you know, a year later after the expenses occur.
Speaker Change: So as far as Medicaid goes, really that program should always be in line to what it's doing. So I don't have a thought on that. The Medicare side of things also has been relatively consistent over the last
Speaker Change: you know, other than a couple of hiccups in the middle when they change reimbursement here and there.
Speaker Change: We expect that to be relatively status quo, 3, 4, 5% annual increases.
for the nursing homes and Medicare.
Speaker Change: And that's that, and again, the Medicaid is a little bit more of a story. Anyone that wants more color and they really want to hear about it, I'm glad to fill people in.
Speaker Change: I could go on and on about this. This is really my...
Speaker Change: This is what's in my bones, this is what I've done for many years.
Speaker Change: I'm not an operator for a bunch of years, but it's still, I'm a study of the business and so if anyone wants some color afterwards, I'm glad to talk to anybody.
Speaker Change: All right. That's all I have. Thanks for taking my questions.
Thanks, Gaurav.
Thank you.
Speaker Change: Okay, as we have no further questions in queue at this time, I'd like to hand it back to Mr. Goubin for any closing remarks.
Yeah, I appreciate everyone taking time out of their lives.
Speaker Change: certainly at the open of the market to spend with us.
Um...
Speaker Change: In the long run, our stock will make you all proud. We're slow and steady, doing stuff consistently.
Speaker Change: and continue to chugging along, making money, and growing our net income and growing our.
Our FFO for share.
And God willing, we'll continue to prove that.
Speaker Change: Quarter in quarter out. So thank you for your time and have a very nice day
Speaker Change: Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time and have a wonderful day and we thank you for your participation.