Q2 2019 Earnings Call
Good day and welcome to the LTC properties second quarter, 2018 analyst and Investor call.
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Before management begins its presentation. Please know that todays comments, including the question and answer session May include forward looking statements are subject to risks and uncertainties that may cause actual results and events to differ materially.
These risks and uncertainties are detailed in LTC properties filings with the Securities and Exchange Commission from time to time, including the Companys. Most recent 10-K dated December 31st 2016.
LTC undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances. After the date of this presentation.
Please note that this event is being recorded.
I would now like to turn the conference over to Ms., Wendy Wendy Simpson Chief Executive Officer. Please go ahead.
Thank you operator, and welcome everyone to LPC 2019 second quarter Conference call.
Joining me today are Pam Kessler, our CFO and Clint Malin, our chief investment Officer.
After a few introductory remarks, I'll turn the call over to Pam, who will discuss our financial results.
[laughter], who will discuss our portfolio operator performance.
Yeah the pipeline.
I'll come back to conclude our prepared remarks for the question and answer session.
[laughter] LTC has made significant progress.
Solving the challenges we've discussed.
We are confident that at the end of the year.
The challenge is under our control will be behind us putting LPC in a great position to devote more focus on future growth from a base of a strengthened portfolio.
I'll provide a brief update on senior care centers right.
We have been and preferred care.
I'll end my comments with guidance.
I'll start with senior care centers, which is the one issue over which we have the most limited control as they continue to work through the bankruptcy process.
Senior care centers recently filed the motion to assume the LTC lead.
And we filed and they just show shortly thereafter.
In the interim senior care centers remain current on their 2019 route and escrow mold.
Coverage in the senior care portfolio was essentially flat on a quarter over quarter trailing 12 month basis.
Moving to drive the entire portfolio has been successfully transitioned as previously disclosed we transition three of the six properties on June 1st [laughter] and completed the transition of two additional properties on July Onest.
The final property has been transferred August 1st and Clint will talk more about this transition later.
No I have to ask them.
Their operations continue to improve and they are meeting our increased current expectations as reflected in our 29 teams guy.
As we have said before I mean, it's not appropriately established formalized contractual rent levels associated with the anthem portfolio going forward.
And so we can realistically calculate rent once all of the properties have been stabilized for a period of time as a result, it will likely be late next year before we have greater visibility on future stabilized right.
I'll finish my portfolio discussion with preferred care, which operates 23 properties for us.
As discussed last quarter, we have been working to reduce the number of LTC owned properties under their operation. We are in active negotiations for all of these properties. These negotiations continue to include both possible sale and lease it.
Before I turn the call over to pay off.
I'll discuss guidance for 2019, which we are maintaining at $3 in two cents to $3.04 for the year.
Although we are receiving higher rents from the transition to our property.
Sooner than originally anticipated as well as income from new investments.
We are lowering our projections for income from unconsolidated joint ventures.
Due to the non accrual status of our preferred equity investment that Pam and Clint will discuss in their comments.
Additionally, the timing relative to transitions around preferred traffic is not yet certain.
Well, we have not included any sales assumptions in our portfolio guidance. It is possible that we will sell some or all of the preferred her portfolio prior to year end.
As we will have more visibility into the timing of net sale proceeds outdoor future growth.
From this process next quarter, we are postponing an uptick to guidance until that time.
Now I'll turn the call over to pay off.
Thank you Wendy.
Since our last earnings call. The FASB has allowed two approaches for recognizing recoveries of previously written off straight line rent under the new lease accounting guidance.
Accordingly, we no longer show a contra expense for recovery of previously written off straight line rent all such recoveries are in rental income, which increases the compare ability and transparency of our result.
Revenues increased 4.8 million for the 2019 second quarter compared with a year ago 3.9 million of the increase was due to property tax revenue recorded in accordance with the new lease accounting guidance that requires us to record the property tax asset growth, we collect from our cabinets that's revenue with a corresponding expense.
Accordingly, 2019 revenue includes property tax income well 2018 does not.
The remaining 900000 dollar increase is due to revenues from acquisitions mortgage origination completed development projects and capital improvements increased threat from Amazon and a decrease in leasing <unk> amortization, partly offset by decreased trend from thrive in 2019 and properties sold in 2018.
Maybe a FFO was 75 cents per diluted share for both the 2019 and 2018 second quarter net income available to common shareholders decreased 48.3 million from the prior year quarter between higher gain on sale of 47.8 million in last years second quarter. A decrease in income from unconsolidated joint ventures of 598500, 92000, higher depreciation expense and 194000 higher transaction costs, partially offset by the 900000 increase in revenue previously detailed.
Income from unconsolidated joint ventures decreased 598070, 7000 of this decrease was due to a mezzanine loan that paid off last quarter and 521000 of the decrease was due to a preferred equity investment converting to non accrual status.
In the second quarter and affiliate senior lifestyle did not make the whole contractual preferred return payments to us and became 60 days past due.
During the third quarter, we received most of the remaining preferred return we had accrued but as yet we have not received second quarter amounts do so they remain on non accrual basis.
Glenn will provide more detail on this investment.
In the second quarter, we recognized $500000 gain on the receipt of escrow deposits related to the 2018 sale of six senior housing community previously operated by Sun life.
Both interest expense and Gionee were comparable between the two periods. We currently estimate that GSK will be in the $4.6 million to $4.7 million range per quarter through the remainder of this year.
During the second quarter of 2019, we funded 7.5 million of additional proceeds under an existing mortgage loan with an affiliate of prestige healthcare secured by two skilled nursing centers totaling 205 beds in east Lansing, Michigan.
The additional proceeds bear interest at 9.41% for two years, increasing 2.25% thereafter.
We also funded 6.9 million in development and capital improvement projects. Some properties to me on 781000 under mortgage loans and continue to find L.P.C.S 19 cents per share must be dividend for a total of 22.6 million and dividend payments.
At June Thirtyth, we own one property under development, which remaining commitments totaling 10.2 million and two properties under renovation, but remaining commitments of 4.6 million.
We also have remaining commitments under mortgage loans at 14.9 million related to expansions and renovations on seven properties in Michigan and 1.7 million remaining under a preferred equity commitment.
Subsequent to June Thirtyth, we borrowed 12 million under our line of credit and we paid eight and a half million in scheduled principal pay downs on our senior unsecured notes.
In keeping with our philosophy, we are maintaining a strong balance sheet to provide us with ample flexibility and capacity to fund current and long term growth initiatives.
We currently have 441.1 million available under our line of credit.
105.5 million under our shelf agreement with Prudential and 200 million under our ATM program, providing LTC with total liquidity of approximately 746 point sixmillion.
Our long term debt maturity profile remains well matched to our projected free cash flow, helping moderate future refinancing risk and we have no significant long term debt maturities over the next five years.
At the end of the second quarter, our credit metrics remained well matched to the health care meat industry average debt to annualized adjusted EBITDA for real estate of 4.5 times, an annualized adjusted fixed charge coverage ratio of 4.8 times any debt to enterprise value of 27.1%.
Now I'll turn the call over to clients.
Thank you Pam.
I'll begin my discussion with the thrive portfolio as Wendy mentioned the entire portfolio has been successfully transition. It's a final community in Jacksonville transferred operations to affinity living group on August 1st.
But then as you know operates two properties owned by LTC.
The Jacksonville property, a 60 unit memory care community was leased to an affiliate of affinity under a new 10 year leagues.
The new lease provides for less than 12 months free rent increasing to $450000 in year, two and $600000 in year three and thereafter.
And your to the less he has the option to deferred rent and amount not to exceed $150000.
Rental rate increase subject to a contingent escalation formula commencing in nursery and annually thereafter.
Next I'd like to update you on the progress of our newly developed and still to be completed communities.
Boone Spring, a Boone County, a 143 non traditional care center in Kentucky.
It is now up to 67% occupancy as of July 31st which was ahead of projection and is up from 45% as of our last quarterly call.
Boone Spring opened in February of this year.
Hamilton House, all other intend unit independent living assisted living and memory care community in Wisconsin is now at 16% occupancy as of July 31st up from 10% as of our last call.
Hamilton House opened in May of this year.
Wasn't really court, a 78 unit assisted living and memory care community in Oregon is still under construction remains on track to open later this year.
The preferred equity investment on nonaccrual status. Pam mentioned includes two locations in Arizona. The first location is a 28 acre campus in the Phoenix Metro area. There's 432 units offering independent living assisted living and memory care services spanning three buildings. The second location isn't assisted living and memory care community in Yuma with a 148 units.
LTC entered into this investment with an affiliate of senior lifestyle in 2015, and Ltcs investment balances as of June Thirtyth is $24.3 million, the two locations or under a letter of intent with a likely closing expected to occur sometime towards the end of the year or in Q1 of 2020.
From the net sales proceeds LTC expects repayment in full of the 24.3 million dollar investment.
Based on forecast of net operating income for the remainder of 2019 provided by senior lifestyle. We anticipate additional income to be paid to us in 2019 of approximately $600000, but given the non accrual status our guidance does not assume any such additional income.
Moving on to the portfolio numbers, our coverage remained stable Q1, trailing 12 month, EBITDARM and EBITDAR coverage using a 5% management fee was 1.43 times and 1.21 times respectively.
Our assisted living portfolio, and 1.77 times, and 1.28 times, respectively for our skilled nursing portfolio.
Now I would like to briefly comment on our pipeline. We have identified a few interesting opportunities primarily what we can strategically add quality growth owing to the operators and will improve the average age of our portfolio.
We currently have two signed purchase agreements totaling approximately $38 million.
One is for the purchase of a newly constructed 90 bed skilled nursing center in the Kansas City market that is 90% occupied and is offered by night medical resorts and new operator for LTC.
This transaction is expected to close in the current quarter.
The other is for the acquisition of a land parcel and development of a new 90 bed skilled nursing center also did the opposite they buy ignite the same market. The land parcel acquisition is expected to close this quarter with groundbreaking shortly thereafter.
Completion of the project is slated for the fall of 2020.
Both of these transactions off market deals sourced through a long standing relationship. We built with Avenue development will be handling the development and construction of the new property Avenue with a well respected full service development company that focuses on health care and senior living.
We are reviewing other opportunities as well spending acquisitions and real estate joint ventures, primarily in the assisted living and memory care space operators new to LTC.
We will update you as our activities for glass now I will turn things back over to Wendy.
Thank you Pam and Claire.
Coming back to my opening comments, we have made significant progress in resolving the portfolio issues, we have faced.
I'm very proud of our team who has helped bring these issues to resolution. While also remaining focused on continually positioning LTC for future value creation.
We are continuing to successfully execute our plan and are confident that the current portfolio challenges under our control will be fully resolved by the end of this year or early next year.
At the same time, we have been working toward building a more diversified asset operator base and positioning LTC to deliver long term and sustained growth.
Thank you for joining us today, operator, we're now ready to take questions.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
And our first question comes from Jordan Sadler of Keybanc capital markets. Please go ahead.
Hey, guys. Good morning. This is Katie on for Jordan.
I appreciate all the color you guys gave us on your portfolio, but I wanted to touch on.
Guys have some brookdale renewals coming up next year have you guys got for any additional color on that.
Yeah.
Hi, Good morning. This is Clint all we do have the current term for the Brookdale leases expires at the end of 2020.
Oh, and Brookdale is not yet in a new window, all that would open up on the first part of 2020.
And given the performance and coverage our expectation is that they would extend the lease to the older and older.
Thank you.
You're welcome.
Our next question comes from Chad Vanacore of Stifel. Please go ahead.
Hi, good morning.
Good morning.
All right. So now that you transfer to transition all your thrive.
They had old you show them past you rent where are you able to collect any of that or do you expect to collect any of that in the future.
Well John this is Clint we.
Had they owed us all runs from 2018, which we did collect and 2019, maybe not paying rent and 2019 to facilitate the transition of the properties to new operators. We provided a note to them to assist in some of those transition costs.
We have guarantee and security interest you full repayment of those funds, which we may be a line of credit is available. So that's why we feel confident we'll be able to collect on those amounts that are due to us on the note related to the transition.
Okay, that's fine and then Adam.
Properties that you transition in the past six months how are they fearing so far under their new operators. There was frontier. There's a few with thrive there's some here or there but in general what's the direction should we expect that the anti why to really be a slog for you know the next 12 months or had some showing some kinda improving <unk> really <unk> onshore basis.
It's almost been a stable improving there's been some decline in others. It's just it's been a little bit the disruption when you have a transition but the operators. We brought him to these communities. So we're excited about the opportunities are and I think that it takes a while to change culture and build a presence under that brand in the marketplace. So I mean, we feel confident that the operators that we're working with better a better now taking over those communities will be able to make progress how much time. It will take you know it's to be seen but I think everybody's been we've been encouraged by People's interest in these communities and we think over time that will grow.
I think basically quit [laughter] operators that are now in a.
[noise] transition properties are better capitalized the price.
And so you know they have a base of that [noise]. The most challenge property as you.
And into it was Jacksonville, and so we gave a year's worth of of the free rent and I expect that that will do very well the operator affinity. It is a very well known in the <unk> and established operator.
And they're very excited about having that property. So I think where we are very comfortable with the operators that have transitioned and in fact, the people who took over the Baker Bach from Brookdale had some deferred rent opportunity and make this current period. They haven't used that deferred rent. So that's that's doing better.
All right, Hey, Wendy just on Jacksonville watch here to keeping it rather rather than now or why did you [laughter] why did every renting it rather than filling it.
Yeah. The the prices we were getting were not indicative of the value of the property because of the feeling that we were you know up against a wall and everything that came in relative to the market in Jacksonville and the growth in Jacksonville and all of the forward looking information was very positive. So we decided that for our future portfolio. It was it made much more sense for us to keep it and get the right operator in there. So that's why we did it it wasn't an easy decision I mean, it's easy to say, let's just take the loss and walk away, but it just it was just such a badly one property that you know we had a lot of faith in the market and the property.
All right. Thanks for taking the question.
Sure.
Our next question comes from Rich Anderson of S.M.B.C. Please go ahead.
Good morning out there.
Good morning so.
So on thrive can we kind of aggregate. This all up I thought I'd try to do the math it looks like the new cash rent one.
You kind of get to the cash paying.
Story for all six is call it three and a half to 4 million per year.
I don't know if I got that right did it quickly, but I think that's right and does that compare to cash rent prior to all this you know sort of starting up 7 million is it is it could we say that the the change from pre and post.
You know kind of transitions with 7 million to three and a half million annual rent.
Good question, Rick So right now we were facing in rent on the property. So right now when we get to.
The third year, where rents of about $5.2 million compared to the $7 million ish with what's right, but that does not include the percentage rent that we have on one of the buildings that we transition to prioritize.
Plus the other two buildings with the Tos, which our assisted living and memory care properties, one in Georgia, and South Carolina to <unk>. It's a two year lease. So we have the ability to reset rents at that point in time. It really was that was born out of.
Looking at could be offered to reduce costs on those buildings than we thought there should be able to reduce cost and easy solution for us and toss wants to enter into the two year lease and then dress appropriate rems once they've been able to operate the communities and make appropriate <unk> our expense reductions at the time. So we're hopeful that $5.2 million increase going into year three up because we can we shot though the rents hopefully on the two buildings that are in the two year lease with marathon.
Got you that's helpful. Thanks.
On on anthem, or so you know the big.
Story, there is 45% increase in rent for this year I know you know you don't you have to wait it out to see.
What a what a real stabilized rent will be as you discussed Wendy but I'm curious is the bent towards rent going up or down versus what your what you see today.
Oh It will go up.
Okay that will definitely go up there they are beating their they are beating their projections, they're even beating our welfare, beating our projections definitely because weve hair cut their projections in order to establish rent, but they are beating their projections, which were higher than ours. So we have we have a lot of hope relative to the anthem Oh properties I figured that was the answer but you didn't explicitly say, it's I figured I'd give you a chance to do that so you're welcome.
Thank you rich [laughter] on questions for next quarter. So [laughter] so on on the preferred equity issue.
So does the the 600000 that you're not assuming from the sale of over and above your investment that's.
That is sort of tethered to the fact that it's a non accrual status as the <unk> the impact on guidance has nothing to do with the 600000 correct.
Oh, well it kind of does if we put the 600000 in guidance we'd be up another two cents.
But we don't have that in guidance.
Okay. So so the other.
Okay, maybe I'll take that offline because I I understood that to be a sales proceeds, but maybe I'm misunderstanding no no no no. It is it's it's it's how much interest they can pay on the $24 million balance sport.
Oh, Okay. He's done okay, I will spend the remainder of the year.
Probably later this year right interest so X hundred thousand.
Got you 600000 interest that is not in Guyana now correct correct. Okay. Thank you. Thanks for that and then lastly, I heard you say that you used the line of credit to pay off principal balances.
This quarter is that common practice or where's the all the moving parts from things going on does that kind of require you to go and do that to to make those commitments.
Well I mean cash is fungible, we used cash to you know pay our development commitment you know pay for development to have undergoing renovation. So you could say we used cash to.
To do that and pay down debt I mean, it wasn't a one for one.
I know that.
<unk>, yes, okay, what kind of cash flows.
Yeah. The most important statement in the financials and look at the cash flow statement.
And I assume we had that we had and we had investments quite a few investments.
Yeah, Hey, we borrowed for the investments and we used our free cash flow to pay down our debt yeah.
I understand okay, I just want to make sure I understood. Thank you very much at all I got.
Thank you.
Our next question comes from Daniel Bernstein of capital One. Please go ahead.
Hi, good morning.
Oh Dan.
Alright.
How much you can talk about prefer cure, but I was trying to get a sense of.
At this point, whether you have Uh huh.
Any kind of idea of kind of the split of what you might sell versus what you might release.
I think there at this point, it's it's I'd say the majority of the portfolio is probably likely to be sold as we indicated on last quarter's call. We are actively involved in the process and I'm getting offers them. So I think the majority is likely to sell if things could change that in the case of Jacksonville with right. You just never know what what transpires out of this but it's likely the majority would be sold preferred care has indicated they'd like to stay in a few of the properties and we're looking at the best option available to LTC, whether that's a leasing buildings to preferred care.
Another tenant or selling it. So there's we're actively engaged in the process and trying to bring conclusion to it as quickly as possible and we think on next quarter's call, we'll be able to provide that to you.
Okay. Okay I appreciate that.
And then on the pipeline.
It seems like you have some level of investments that are picking up.
Can you talk about a little bit of belt.
That activity in terms of.
Are you seeing more flow come in that you're evaluating.
You know the quality of the assets the pricing of the assets, that's trying to get a sense of where your investment level might be okay. You know in the past youve.
You've kind of.
Alluded to maybe pricing not being where you want it to be and quality, maybe not being where you wanted to be so just trying to understand if something has changed in terms of your investment pipeline.
I think we're being very selective down on what we invest our pricing is still very strong a lot of interest from private equity. So we're looking at finding unique opportunities such as the opportunities we found with ignite to invest in newer skilled nursing as well as a development project.
And we are seeing a few select opportunities from a price point on the private pay side that we are.
Opportunistic about that we can convert to transactions, but it is a it's trying to find needles in the haystack that are priced appropriately and that's yeah. It's been a challenge if you talked about throughout the year. So far I think Dan what we have.
What we've seen recently is that.
So we've seen older properties not ancient properties that older properties, maybe in the Ninety's built in the Ninetys where.
To to buy them and to bring them up to a standard that our operators and we would like you know we generally have to add a capex component to our price.
And we're finding that some of the other buyers are fine operating them as they are and maybe for the next five years or so getting the cash flow that they can so one of our I think what we're finding out in in our underwriting is that you know we are looking at putting cash in addition to our purchase price and might be you know not making that final cut for people who are just willing to take them. The way they are and operate them for the current cash flow. So that's I think one of the things that's.
Hurting our opportunities we are finding opportunities from other Reits, who are looking at their portfolio and finding one or two assets that they might not want it's not that they don't want to keep them. It's just that doesn't fit their profile and we're finding some smaller operators who in the assets fit nicely into their portfolio. So you know that's a that's a source of acquisitions that we haven't really seen in the past, but it's it's not it's not a huge amount of assets that were looking at but I'm very happy with the ones that we are looking at like think there would be really good.
Additions to our portfolio.
[laughter] and you have.
You know a number of turnaround assets assets and your transition in your portfolio now.
But you know I'm from other recalls we heard you know opportunities and value and then I guess, maybe you wouldn't you that where you can actually put capex in.
You think it could be a viable asset kinda how much risk do you want to take.
Valued on value add and turnaround today.
[laughter], given maybe the perspectives that seniors housing or skilled nursing fundamentals my trough in the next couple of years.
Yeah do you want to take what do you want to take on any kind of value add or additional risk or <unk> or which stable assets be preferred at this point.
Well, Sam we only have 746.6 million to take [laughter], <unk> and I would say virtually zero of that would I.
No that's not true I mean, if we found an opportunity with a really established operator, we would do that but to to in this environment funded another and summer or something like that it just wouldn't be in our wheelhouse. We kind of are with the ignite I mean, we're going to build a property with ignite, but but we've already seen a property that they.
They're going to buy from them, it's already 90% full it's one it's up high and rehab sort of resort community and and so you know building one with them is kind of that.
[noise] development type of thing, but no I don't I don't see us putting.
50 million to 100 million in a property that we're hoping will turn around by putting another 5 million into it.
Right now we are we're seeing some not a lot, but a lot of some stabilize whatever we're buying now other than the nice thing is stabilized and cash flow positive.
Okay, I appreciate that and I'll hop off thanks.
Thanks, Dan.
Our next question comes from Todd Stender of Wells Fargo. Please go ahead.
Hi, Thanks, So just back to the transitioned a portfolio.
Is it very cost are they the ones taking over the the Georgia and South Carolina properties. It's I know, it's got a two year lease.
Correct Todd.
Okay. That's.
It took over time, just because they also took over a building in Texas.
Which we've added to their mass release, which includes other properties are they offering for us in Texas.
Okay. So that's going into a master lease I guess, the Texas, one, but how does a two year lease work is this was this your coal was it there's was it kind of a combination I. Just said it was a that was a combination of between US is you know the occupancy was strong at these communities. It was really a cost issue. We felt the cost under thrives operation was higher than it probably should be and toss wasn't certain they can drive down the cost as quickly.
So the idea of having to your lease really gave both have also a point not to look at this and give them a chance to get in and see where staffing ratios are were HM salaries are.
To make it the assessment of where they feel they can operate long term, but that's awesome like they do is basically two new communities.
But we've been involved in either bought at sea of old or developed what drives. So they were encouraged that's also encouraged and excited about the buildings in a locations is really looking at can they reduce the cost and that was a decision that we collected the main to be able to look at setting pay rent long term you didnt, we didnt want to given the.
Vince I discussed already on the call.
One obviously make sure that we can get an appropriate return on this and you thought it was our best interest to be able to let the task at hand establish their operating model and then assess what the appropriate when should be on those two buildings.
Do you have any operating expense exposure on this or this is all triple net.
Triple net.
Okay.
And they can defer some of the rent or do you book It all upfront how does that work.
No no they're not deferring anything.
Well on that.
Yeah, that's it.
Now that I'm presuming that we didn't get them all.
Yeah, Oh, we give them a small small net deferred rent just to get through the transition to get started so there's a little bit of deferred rent on those two buildings.
Okay got it thank you and again, we hear about a trilogy management.
We know there are tough, but I don't think we know trilogy is if I have that right.
Oh it truly is a fairly large operator based in Louisville, Kentucky of which one of the buildings that we have leased to them is located in Louisville.
And then the other buildings in the Cincinnati market, where they have a strong presence already so trilogy is a sizeable operator, both of skilled nursing and seniors housing properties. So that was a an ideal fit I think from a present standpoint, where they are already in the marketplace. They knew the buildings and his organization have you talked with over a number of years to look at investment opportunities.
And it just happens to be the right opportunity for them to come in and we felt confident with their knowledge of the local markets that they can drive a performance and improvements at these two communities.
Right. Thank you.
Then just last question with the loan that you're making the a mortgage loan.
Its at 9.4%, it's got escalators on it how long is that going to stay outstanding just with interest rates so low.
How long do you project that to be a outstanding.
Todd. These are these loans are the ones with prestige healthcare, which on properties located in Michigan, So given Michigan reimbursement.
Most investments in Michigan are done via our mortgage as opposed to a triple net lease. So these mortgages as we said in the past in body. Many elements of a long term lease said the duration on those is approximately a 30 year term.
It's similar to all the other loans, we have with that's prestige.
Got it thank you clynt.
Thank you.
Again, if you have a question. Please press Star then one.
And our next question will come from Michael Carroll of RBC capital markets. Please go ahead.
Yeah, Thanks, and I appreciate your comments on on the investment activity and I know that LTC typically is pretty conservative on their underwriting and that's kind of what makes it a little bit more difficult to acquire assets because you're looking for the right deal I mean is the competitive landscape getting more difficult to find those types of deals in this marketplace I'm I guess, how do you kind of looking at that.
Sure No if we talked about during the course this year. It is very competitive and I think we've seen where it is more challenging to grow it and we've made a decision not to be aggressive at this point in time to overpay for an asset. So we've been actively engaged in finding unique opportunities like we have with ignite, but it's a very very competitive market place today.
Yeah, and then how are you thinking about its I guess when these comments earlier about taking some portfolios or maybe a few assets from from other reeds is that kind of like the transition type opportunity, where you'll be buying the assets and transitioning the operations to one of your existing operators.
Oh, yes correct.
Okay, and then how do you kind of underwrite those types of deals is that the operators currently in those specific markets and that's how you can get comfortable about their ability to do that.
Exactly it's finding operators that have a presence in those existing markets. So they see an opportunity where we can partner with them.
And do you typically get better valuations on those types of deals I'm sure the competitive landscape for for those projects or are not as steep.
I think on those type of deals the the seller will look at what the execution risk is and if we have a relationship with an operator, we have a lease in place and obviously were known capital provider that doesn't have those financing contingency. So I think that's an enticing part of the sellers looking at what I'm trying to mitigate that risk and actually closing they'll just like because they were looking on selling buildings within our we're looking at maybe not the highest dollar but the best execution and I think that we provide the two some of the other larger reserve looking potentially at selling assets.
Okay, and then I guess last one from me just kind of talking about the senior care centers I'm not sure. How much you can really mention but I guess, what's the next steps I guess, if you're filing your emotion to Jack to senior cares.
I'm wanting to affirm the lease I guess, what's the outcome there or what are what what are we should we be looking for.
Well, it's a you know when you mentioned in her comments, it's a situation where we had the least amount of control and it was we found out bankruptcy is a.
Doesn't always make the most business sense as far as the process the duration and decision that corn snake.
So the main.
Concern that we have and looking at the senior care centers potential plan of reorganization is just understanding who is that management team that has been continued offered those buildings if they're successful in being able to emerge from bankruptcy. That's one of the biggest you know challenged concerns that we have looking forward.
At this but if.
You have seen or care centers was successful in emerging and assuming our leased about which we do have objected to that.
You know, we would be able to bill.
Get paid our rents that we have not recorded for the month of December of 2018.
So we but we were positioned right now we have another operator that we've been working with his prepared and if we can get colder people to transition. This buildings to another operator, we recognize that it's subject to court approval.
We'll have to wait and see but we have a we have objected as Wendy mentioned too that lease assumption and the court process right now and.
The date in which the motion to assume is scheduled to be heard has been moved to August thirtyth.
So we'll see how things play out on August 30, Oh, when that motion is hurting court.
Okay, great. Thanks Bye.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Wendy Simpson for any closing remarks.
Thank you Andrea.
We look forward in the third quarter to having more updates about preferred care and hopefully senior care centers also and look forward to talking to Dan.
Thank you very much for joining us today.
I have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.