CTRE - Earnings call transcript Q3 2018

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Operator

Good day ladies and gentlemen, and welcome to CareTrust REIT Third Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder today's conference is being recorded. At this time, I would now like to turn the call over to Lauren Beale, CareTrust Controller.

Lauren Beale

Thank you and welcome to CareTrust REIT's Q3 2018 earnings call. Please note that this call is being recorded.

and be are any expectations, based beliefs CareTrust please on statements assumptions begin, which about call in today’s on business we advised forward-looking that made and it Before operates. environment the management’s current differ financial implied that include financings investments, results could matters, of cause future other herein. to subject materially dividends, which acquisitions, actual These statements are regarding from risks performance, or may all projections those returns, expressed and and to uncertainties reliance on review or undue as statements and for Listeners more SEC to place should any of other results, forward-looking are encouraged required by could Regulation CareTrust’s a financial not information well as impact filings G. SEC statistical factors complete discussion that

Greg as FAD. on available its Dave Chief Director Listeners A would and will CareTrust FFO complete Asset business, company a During that Officer; REIT's normalized and also EBITDA, Relations understanding Bill Management viewed morning and period. When and believes EBITDA, are Eric Investor provide its FFO www.caretrustreit.com. and GAAP Officer; the company these each metrics to the website call, the results, and FAD more of Mark with will this be undertake and they on financial call quarterly I Chairman Staple, together of also on its reference Lamb, this website limited relied can be REIT the Investment includes should changing the do for as the not Operating release Wagner, where cautions result the measures affiliates advised Management. turn such over Officer; but CareTrust's that Chief arise Except future reports. Financial information, any or Chief its and law, call CEO. call GAAP not press required changes Sedgwick, supplement, of by circumstances now Gillis, accessed CareTrust publicly which of any a as or forward-looking the yesterday CareTrust update a of XX-Q revise filed its reason. be section statements upon accompanying events, for other new Form to replay exclusion at of to of can non-GAAP

Greg Stapley

that already good a Thank you, morning. busy our know morning and had everyone of we plan keep you welcome today, and We comments most so Lauren to brief.

as the report on program Our and exciting. closely nice ATM a is closed doing tenants that went tenants level deals, third to transition's including the both and for our saw demand quarter from tenant We about to continue over across robust any as we the couple past replacement watch operations. smoothly the our of new are actively we're history. under facilities we ones well, of equity continuing in our operators We're our and The pleased engagement our seeing portfolio year.

fact of initial again In enough to transition digest careful ahead grow pause pro the several and well are following although opportunities operations actively were together. the those to that of additional new several operations running we doing seeking forma we're let are tenants transitions, and

last the since we across our asset to tenants portfolio, the total time portfolio. XX to operators XXX to new two triple-net added spoke also We bring our

to fortifying been also sheet. addition operator In balance pool, our our strengthening we've

XXXX done. expect pays, we've $XX before minus our is year. will don't expect two a but less, that start number million little plus an all-time in a in at and debt are years release seen yield a all-time grow a over mentioned, over in net acquisition The to deployed at pipeline slow last XXXX $XXX million we've basis, we press I shape at As the we're yesterday's an earnings successfully best on EBITDA the is low, year-to-date, high, leverage blended replicate we to the our or X.X%

that project as despite a current we an horizon. our what challenging of our a as started and out lot historical In year More XXXX. should very XXXX well are the both XXXX importantly see short, to outstanding we ways, position on pipe pace there resume operators and our finishing in in well from CareTrust

sometime will with talking So, I'd the little up wrap to the will over in our Bill financials. will Dave pipeline the about acquisitions Dave? and bit in that, operators, recent assets on team you start like then to turn details. by and the fill a current with Mark discuss

Dave Sedgwick

negotiated certifications their back the care the now bit, is that stride. morning. their which seven going two are good remaining in report to took and more contracts. many more Ohio a which schedule pleased least to be expectations December Hillstone X Thanks of appears experienced poised ahead has well contracts exceeding vendor finish and took admittedly Ohio. Greg, and well assets has on of Likewise upswing. XX took last things us most occupancy challenges surprised the Trio Trillium I'm on the hitting in arguably also obtained of Trio to Tie-in their transition same seven notices track. assets Medicaid the of May that assets on right and with managed and coverage and year received of favorable is through two Medicare their which and And the initially They've payers is working performance challenging significantly Trillium Ohio facilities. the

their Speaking over several operators expectations, course coverage we've year. of improve exceeding had of coverage the the

challenging largest a been Remember, coverage our at sole For for QX. of when stellar climbed to quarter. example, coverage whole, which XXXX. CareTrust times Group In four they in as of Ensign the with Ensign's as end tenant has four another years X.XX X.X industry tenant, our had times as just Ensign started launched have we a the The years,

new added this operators also since. and we've mentioned, Greg As quarter

has is great admire approach from local They’re providers. and outstanding One regional of quality challenges our improve as asset to they only and nimble, tools to the changes our facilities. operators ways for management relationships see people to us weekly the approach gives and talk days. also individual analytical for them group to of regularly it dig and but fruits with confidence what business. look in This and quarter, into made their to with companies abilities. extra us deeper partnership. smart not management continued understand committed come the personally coming brainstorm business, into in to sophisticated, or them in Kalesta our see our them share we and prepare and In Knowing their of operation-centric them, Healthcare a the almost We We California-based know personally we care. spirit and and develop to own advanced asset operators more of helps health from their team operating up our question and of we their the the tenants

industry, broader skilled major from the with last landscape remains the changes Finally, stable quarter. no looking at nursing

on reimbursement Our new it that, Mark? inform talk And outlook operating operators, reimbursement experience, over as continue to to our Mark combined sector our near-term the PDPM positive model and pressures nationwide. I'll labor hand the operators to even pipeline. challenge stable with coming about the environment, to the

Mark Lamb

Campus just North the operating and $XX and Thanks in tenant start Dave, and a in a due California September XX-bed at we everyone. SNF, Dakota collapsed South million transaction Saratoga, ALF SNF Saratoga, including closed licensure hello acquired in Eduro Healthcare. In to slower steps XXX-bed investments Dakota, of an under the Fargo, Dakota. in Healthcare. The QX partner XX-unit and we've in SNF our process Aberdeen, XX-bed Kalesta two North Villas with Since The with to existing closed in

watching forward them to principles we known for and As some expand the Kalesta’s Dave into model look time have in years. referenced, new facilities coming their

pipeline our is compare a closed business or operators had Group. we since range, and recapitalize $XXX of with those investments new building investments the approximately is allowed new about Taking million buyout exclusively existing we Providence been skilled year-to-date and Lastly, is over Providence tenant on $XXX them this new with XXXX. our versus SNF/ALF assets, their to running former the the the so. and deals includes week million total our the $XX tack-ons we highlighted past leaseback Campus accounts sale sits with year has and the to past up in where The partner. million. operators made almost nursing Today Health

in we XXXX are goes assuming shape, excited pipe targets planned taking we hopeful about are acquisitions are everything not early XXXX. the that adding investments finished we Although and as how are in the accretive

unlike this we of both broader earlier seeing would are characterize portfolio year, market As we normal for a currently opportunities. smaller what one-off the flow as and

if which when we bigger as close execution coverage are pipe portfolio are but Bill we pursuing now from quote In Please remember to much then we the and financials. portfolios encouraged only underwriting in from our lower meets said out from pricing and today actively at place and we it to and volume few that quote are them. probability deliverable time the have them accustomed have interesting addition, And that us. time seeing are turn have of that overall think confidence there the standpoint. in always there deals we are we But the yield that only and market standards can are deals to a lock up reasonable to that a we standards we deal over level that I'll of discuss larger economics you offer the underwriting other we the

Bill Wagner

Mark. Thanks

$XX.X grew per million, by by that in XX% we normalized equates represents prior and REIT FAD to FFO FAD the $X.XX, grew which quarter, dividends $X.XXX XX% grew ratio report also $XX.X on XX% to of $X.XX normalized the grew the best given the one to on XX% the and dividend over recent share to the to For XX% this are over million, pleased by again a quarter share share, healthcare per FFO by XX% quarter covered sector. normalized prior our per FAD of payout most FFO of to normalized

as Mark issuing under the Given the ATM. quarter we Greg pipeline in the have equity during continued mentioned, the increase and

FAD also normalized share $X.XX for per nor equity shares $X.XX. of investments $XX million. issued revolver These investments balance quarter million $XX paid down issued investments were resulting XXXX share annual This rent price proceeds. count includes to net share escalations fund X%. of guidance FFO relies year. the shares range on remainder in to we yesterday's diluted Two, to million In For $X.XX normalized release assumptions. guidance CPI of weighted One, net million a revised no of a outstanding of following have made per in the have today average through X.X shares or our at million we on $XX.XX used resulting and proceeds. additional we a$X.XX Year-to-date $XXX.X and press any debt this of further of the average XX.X and the our all issuances X.X to today for proceeds and million an

approximately revenues do only three total interest including living $XXX,XXX fees. and the to on approximately G&A of rates rate LIBOR includes of date have LIBOR independent approximately XXX this about roughly seven-year at on NOI XXX includes $XX.X current deferred million projected million. straight approximately of $XX.X of bps assumed make of to financing calculations are of of Our for income projecting That $X.X million interest expense in year. our loan our bps six, year, million term made rental margin based projected X.XX%. a also expense Four, million. we’re Three, plus facilities And the and at $X.X amortization term the floating again $X In grid $XXX rates loan. on line to and Five, acquisitions our revolver approximately we up revolver rent. Interest of the million. million $XX.X are the

comp. million stock also of projection amortization includes roughly G&A Our $X.X of

basis enterprise debt net As as ratio stats, is of for times, approximately today, is is value credit X.X run and fixed X.X to our times. charge calculated XX% approximately of leverage our rate on our about EBITDA coverage a

hand $XX have on also We cash today. million of

I'll XX.X%. of of XX.X% excluding the Greg. is I of housing SNF it XX.X% with is of supplemental. a on Greg, of that, to it and like to turn in and Page instead I’d for back over numbers the Before our total to turn resulting in a total X occupancy XX.X% XX.X% couple Ensign And correct instead portfolio portfolio occupancy occupancy seniors transition

Greg Stapley

their XXXX he's buildings and in happy prospects and overall. today. Thanks here been headed with We To be Cincinnati tenants but in Baltimore for very questions headed has Eric your also touring today, good but out XXXX and Trillium. on not appear shape sum as tenants be just available again the we encouraging. Dave prospective our is working for to out will discussion look Bill. up, as is note, helpful. meet for in Mark our likewise today, to acquisitions buildings and and to be afternoon. headed out speak NAREIT We've stopped today that hope We support questions. I thank who And continued for this to Texas San will the drew to with Bill answer you a to operations we straw this and prospective and be short with tenants, Francisco will meet tours to

So want have year to that see up well some going and we we you are stopped not even are there. - I though the hope on resting not this of you to of we reassure But they're laws. any things

it. that's So

some take Let's questions.

Operator

from [Operator Bernstein Instructions] of question And Daniel the line Capital comes of our first One.

is line open. now Your

Daniel Bernstein

get into think are to bumps, opportunities pipeline, when sense thinking like you just Yes, and about are you the I have guess a what you into building lease rent it PDPM coverages I risks one - on the about underwrite? question just the how really so some, the underwriting there trying seems how of it’s the the

Dave Sedgwick

it’s this to little do a about, how going point, talk At early bit to that. we're

are in go PDPM is get who the could without of deals new at map rug There have we than way several information you we're the past. wide to revenue score weeds with have As that in under to the map yet, firms going look more going a to something patient there certainly it formula have we rate current to eyes we to but not in not year process, into PDPM easy information. help as an to the dig that specific easy really an consulting a to to way open are it's into is there

Greg Stapley

that yet built you know reliable about that I’ll remind our is we PDPM when optimism we nobody conceptual there talked a about has optimism cross-walk. a

the that out working As says rugs feverously Dave opportunity - for there see those that to just but we we we improve. we clinically reimbursement not see cost are focused - going that, more - between likely savings, opportunity and there only PDPM, the but on having, and care know to a profits operating that quality our both comes that system improve from to is believe we

our try bought that, pro-forma, more probably a into So, value But numbers. building their the anything coming have our initiative we're what carefully special to underwriting in not actually doing trailing that on but kind now. to but of we aims we to assets will do not any little on year. right in VPM analysis based We rather start dual

Daniel Bernstein

That pro question thinking was pro really whether you're the - forma about trailing. forma numbers versus

the I for margins seems skilled perhaps? stabilized think had the I has space probably and other How somewhat, thinking are the question the space it about nationally. XXXX risk wages you housing going unemployment low nursing are like up the to with senior but So, is skilled picking in

Dave Sedgwick

Yes.

it acutely look state operators, varies is felt at So, portfolio because again. operator. our We this management is - team with David asset and operator and that where regularly most to have our state in in we we our touch know so by

in labor has like if aren’t with right - you’ll overall portfolio specific impacting of that is that's you basically tracks historically, now labor some manifest and how where operators at see As is look those itself. the down historically, might it look the our so pressures expense we you but expect, numbers of margins drill at

employer operators control something able reduce with the cost by operators choice able they that have being thinner of differentiate And pool, that that their the going to labor And expect of are as their rate, market. order that amount the turnover to the use. themselves employer case better in talent agency better to even to forward. our to to it’s We reduce that continue be be in

Daniel Bernstein

as I leverage leverage, in up. question the ever point or can. think at lowest current last the back you not risk lowest mean a if at. been at you come the you'll I given Is this you're acquisition the where are there some opportunities stay out invest you've to really do place XXXX environment leverage want see One will you you

Bill Wagner

get net times come X would to as time expect to over EBITDA we stated of a leverage X on I our the basis. range to that try No to up debt range and

but yes the below right below a now So below last been year. little we've we're it range, it, stated

to back past. expect I like in So it the it would up come has

Operator

from next of KeyBanc. line our comes Sadler question And of the Jordan

Your is line now open.

Jordan Sadler

it, little seeing you abundance wanted on a of seeing to are what level you but platform you a could little a the seeing So in about one-offs see an type do follow leverage or if terms curious you Dan's are deals. up you bit I regarding questions elaborate or the it also are more bit, more optimistic, you're I'm seeing of pipeline

Mark Lamb

both it’s back. actually buildings portfolios, seem three we're trimming buildings, you landlords it's looking know it know say outliers would to they seeing where call portfolio divesting. somehow need their maybe dial I still operators two to have it you They from and geographically one-offs small private anywhere landlords divest

but strategic So three to would of spectrum the seeing really it's so buildings currently we most buildings, time kind with bag, so across operators then lease that's two say do see as still the albeit it's the frequently and just we're it's opportunities sale own I portfolio. - where more one-off, would assets, what’s not not then but and mixed a of own the - driving completely be backs not and are the divestiture that

Jordan Sadler

elaborately magnitude maybe pipeline bit but you've might there it underwriting today what seeing not how there driving be more but what little the looks and and out then maybe imminent like is I pricing. a describe more the what you've And seen you're you in characterize time. to with or terms very the think over of shadow characterized similar pipeline as Can optimistically

Mark Lamb

on to there Maryland, other are there places a that we pricing and past, are - bed. is seeing seeing mean think while alluded other still are market-by-market have basis trade can't is I - I the really don't $XXX,XXX facilities we've we're in states at shadow buildings to we at one a really Florida because the markets pipeline interesting, it’s of California, you're Virginia, pricing but a $XX,XXX I in trade speak where bed, north seeing Well

look mixed of So and for most we're fit I our it's a so and a a across, time, there's little that going opportunities make know is in, cash mean some a good we the to from. and - and of really the terms assets Medicaid oftentimes that, mix cash almost as it's of to coverage strategic in those there's we at there really coverage kind more of looking bit that get the expenses all able that really kind stay of operators of - one we - going back short dial we're with day bit bag you flow leverage immediately that upside of switching a complete off are get of kind there - way little changes from

So north wide states really fit sense a bed from $XXX,XXX certain at mean - to a $XX,XXX strategic our a of and sometimes, makes a is spectrum the in $XXX,XXX that we're of us, bed it's perspective, it bed, stuff a operator. I for to north of seeing it if

Jordan Sadler

sellers really guess, aren’t relates the like, kind of fair? much words it maybe your like sounds curious Is past between feel what it I that earlier saw But in BXB. the that’s not taking buyers year to guess in seems that this of I’m as it similarly and one balanced, how in way to and you sellers balance has sounds it here other somewhat what Dan exception pipeline, put lighter as the mouth I with you was but or the been like

Greg Stapley

our you like correct deals never is the think think was, with between continue and level probability I to the close balance lower we And your to other the deals just field. it of some sort sellers, that one-off way good Mark at seeing to like I darn that likely, it’s better that we're even back of closing. think pipeline, all to outside you don’t statement and seller that premium, that or the how Mark million not smaller us. we and playing back, the than perspective, there. respect is pretty chance and level look that that, getting it's do Larger higher referenced, feel quite the other be buyers too that’s quoted of $XXX $XXX you coming at where part million and about probably described maybe we things are for feel short playing from the is field we'll deals portfolios us an deals ask is shadow a know chaff of fair, and But least that carefully have

some equity ever are REITs, those there still out got but those cases deals other and so just on have aggressive. the to competition little And if larger private underwriting be few from would we're there, significant a more a we them seeing and on

Operator

our question next from Michael of RBC Carroll comes of Markets. And line the Capital

open. now is line Your

Jason Idoine

This Dave, Mike. team your the some if of before. on operators. Also in this operators. some more you on the role your with I is is for could have might of taken of using that color has coordination offer insights little analysis type offering Jason a mentioned you new what the not had you that was active that with tools you’re wondering analytical

Greg Stapley

question for That’s handle okay will you. Eric that

Eric Gillis

our being from the database operators have we're last the this all the and focused monthly into putting indicators we've having Cincinnati analyzes we over but we have but of all what the in the here this numbers those of to as most our that able as what to those they're facility. analytics brings the recently, on financials progress as of the and a understand for trying down to key from that those goes on diving that into basis it a what like well in the use now operators, track indicators - financial example of also dashboard are each of year We portfolio. view operations really alongside a as performance to Cincinnati had with course performance we for really Trillium the continue and right breaking operator together operator those last just out each set that operators, year of Yes, I'm metrics in building our really the history our really down level key not

we being point and in our operator see with when of out to what and to kind but so and it and - able And of that also in those see while analysis these alongside operators lot to progress. unison continue these can trends, come they’re seeing, really comes work a reinforce

been have that’s Cincinnati excited the today our of regional operator also team that’s a the as helps well. just I in so to As leadership, operating to also see and what this building, really look from the progress it and perspective, here getting and another a we culture had numbers not but culture that a at understanding has of

invest to invest We a from as also from a those continue tools continue looking also not in well. in financial perspective to just and tools clinical it at but perspective

Jason Idoine

you're with if wondering with? I on guys you the operators could might underwriting that partnership have versus working different some you color when have - an existing next how then new give is was And those

Mark Lamb

operators the that sure the want and sure the performance as every sound going and that cost. consideration into we make at we their careful taken we that look to door With going make of coverage new that really in have that kind to in they've we're obviously, that item, assets every line for budgets

of have down the financials a labor basis surprises take a PPD hundreds once expenses here the who's for details and that coverage. nursing deep we and take guys seen nursing is get here deals of make perspective, operator they everything side there dive any with we in so and have a a that the years and to number any at come underwriting a what's we erode an have accounted operators we through of dive might PPDs, So that through specifically that added for alongside look on and are sure the go on so specifically team into multiple that from been

for much they door, of operator the process it's that more the us in arms it going their with that they've it's that a around structure make everything, then call our business. So, comfortable cost hand-holding just get helps sure the and accounted a to to new in and have

Operator

question And of our next Canetto the Stifel. Seth of from line comes

line is Your open. now

Seth Canetto

Chad. Sean is on for This

the Just a all have to said a healthcare pipeline. consists other you publicly geographic it there? there the your reason function question that on assets add footprint know or rates, color out that SNFs REITs, mostly and any is almost stands cap housing no is could really why I SNF and of that a guys traded it's you of compared underwriting senior

Greg Stapley

at overpriced into and above. sort assets it’s out that I housing absorption. the find That XX out we all senior partly of the is we're to to it skilled where nursing. side, Greg, B-plus units there new housing today right in out of in in just, - under there and of us occupied what think we are comfortable we're saw - from can't senior where on like The acquire partly we that makes and still make risky market I This - now we we not we market it Seth coincidence, has like that a markets space statistic the ready find put step the we the as - portfolio of that as quarters hidden happy in to our those. mean gems the really like you our being that at secondary premium is has that it's line looking than the are doesn't type housing But overbuilt, risk overpriced number perspective we coming out know. kind of that of We exceeded the that really Does housing. nursing real most to fact we're market is on of don't any see we're any do on skilled put - the one better the We will sense? we the give We feel it's a space just take things us when there's comes get and assets seem yields past where don't seniors lot a perceive have there if it don't investments feel recently when much us is that just not you you that like risk and when lot so do look are and know feel more so. those and seniors assuming if which for

Seth Canetto

you And and mentioned they've what then, operator? the with you just guys grow expectations transitions is Ohio And done what how room exceeding how Can they've of about maybe done to mentioned had this have year. you that played you expectations. in Hillstone and have well out there sort talk

Eric Gillis

with Hillstone, and to the of an difference some for Hillstone the and has is operator needed and Hillstone in to quite think Ohio really over they has immediately in experience two And the that that time the really some I in put these came - great state here. were place Specifically here to bring growth facilities really understood been some taking understood really things good they in facilities.

they They coverage perspective. we to being they're model on trends from to to come some expectations in but coming in giving and to clinical the service over into and the increase on good embraced delivery could really And of really well the really place. had the that and that in the Having the market directors that have portfolio and with of the of great and buildings over in focus we're a one giving place the took as incredible in staff, going seeing operator the that presence able cost perspective. and past that - with contracts seeing great state exceed that had the costs. also regards really these We're it definitely now, very and meeting really identity toured In we're along their some came with transition. quality really with labor they and in is been had it's they a even of to knew Ohio, needed management Toledo, the struggled seeing nurses it buildings care their able Ohio, put contracts in of well. some meeting from put occupancy cost focusing how example, those For because rest what labor and of lowered an Hillstone understood

So, seeing it's to state continue and Ohio, excited go. we're where of in great the to a progress lot going of about we're really

Operator

next question Jordan the Instructions] of comes our from KeyBanc. of Sadler line [Operator And

line is now open. Your

Jordan Sadler

more I regarding just had one inflation.

I think meaningful in guide. of the in Bill to set what are terms if little there date you in a the assumed you X% have maybe been XQ? bit escalators any escalators realized Can actual and to elaborate

Bill Wagner

or X% I'd CPI have of slightly year, been around the For say over. the most bumps

remainder that on in of material. a that the renewal X there's year not calced it’s - always bump lease our and that has more been this for included those only a not guidance, For have - and has think I one December

Operator

further would questions showing the not time. like at Greg I’m any And I to closing remarks. this call over Stapley to turn for

Greg Stapley

of rest week everybody Thanks and for Mark. call being to the we at Thanks and you the some NAREIT of on for you. hope this see

anybody hesitate If you or to the call. other Bill, give have please me don't Thanks. a team any on questions,

Operator

thank Ladies program conclude in all may for Everyone disconnect. conference. day. and and the This participating have a gentlemen, does you today's great you

CareTrust REIT (CTRE) 6 Nov 182018 Q3 Earnings call transcript