CTRE - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to CareTrust REIT Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to your host Lauren Beale.

begin. may You

Lauren Beale

and statements of a or by update any financings welcome revise about other as undertake its may any regarding of and other financial projections or call. and financial reason. are by is statements could dividends, expressed to risks its and that information, future REIT's quarter as on as result well and other for in other as law, REIT to new changing pandemics expectations, operates. SEC returns, publicly affecting factors are any and are subject forward-looking today second herein. or recorded, circumstances based matters including G. natural statements may implied it results statements more call company's statistical or Thank may differ management's forward-looking include SEC company's changes information which impact that uncertainties place materially review a business on discussion should such or Except and should to complete Listeners and required such business that COVID-XX Regulation be CareTrust required earnings matters future undue current or statements forward-looking filings that not CareTrust's acquisitions, advised Participants as to any performance, listeners could their not of reliance results arise reference and actual from as affiliates to call events, on its not generally business encouraged cause investments, where aware governmental control, and XXXX factors for today's and are The disasters, beyond beliefs you, assumptions are the CareTrust made CareTrust's the that These tenants, being businesses environment this actions. the do those

FAD and EBITDA, filed and A exclusion they such quarterly can for and these of be Yesterday, XX-Q call FAD. and relied measures normalized not financial GAAP the to replay When on or provide CareTrust and this supplement, GAAP its reports. press reference EBITDA, limited which be with non-GAAP can accessed that believes the viewed release understanding Form each website accompanying of FFO its call, website the more F-A-D CareTrust's will section company company available on period. metrics cautions Relations should the together FFO but a www.caretrustreit.com. at of of will the as During the results, upon business, its complete also be of a Investor

call the and and call Callister, Executive are Officer; Sedgwick, over President Dave Executive this Investment Officer; Dave? Mark Vice now On morning Chief Financial turn Bill Officer; Sedgwick, and Lamb, President REIT's to and Wagner, CareTrust I'll Chief CEO. the James Dave President. Chief

Dave Sedgwick

Lauren, changed derisk we skilled for for us inflation, world quarter on outlook to let by the and you we announced announced an the operators. in impact. and has the bit Since and James, live the comment quite the I will update With But excluding you, investments. Bill, progress the operates. in tenants Surge nursing call everyone. recession we or But begin this for deck. look over not good Mark portfolio, current new plans work properties we're rising to complete, a is and the talk like before those time what for our re-tenanting after which and all me extraordinary our on to headwinds. the rates Thank portfolio the and an in it's on operators, a of us and from preview dispositions on hand supplemental, morning, February daily Today, dispositions, have we'll making give in

some of paths ability and and particularly of motivation the selling adapt will of yes, run dependent close the ultimately, We lenders. and buyers work, market track on to portfolio. QX. up work okay. and most has that those on end parallel in That's softened, in a derisk disposition substantially We're re-tenanting on our For with

activity, and investment of would our as For continue to rates comes couple it in when lenders more growth. become favor things rise a expect to we cautious, tip our to

certainty weeks. should pricing First, second, present. sellers in recent that moderate We're seeing ourselves and should just the prefer buyers of evidence like

two coin. for as environment operators, affects sides how Now are that our again, today's macro there to

truly labor times can has one market operators tight market because been the COVID of Historically, come the a periods loosens net persistence from any as themselves The the make back hand, labor to work. recall. us this. beneficiary inflation during people a like a On and unlike of nursing distinguish best today time recessionary skilled

occupancy looking skilled exclusive reported points XX% grew collected operators Now with XX% of by seniors basis XXX for X.X% QX for quarterly collected be XX or quarter in deposits. X.X% and the as occupancy any housing, we rent of grew for points portfolio, in over line Average at QX. And to deposits. August collections over nursing cash with appear July we the or July. basis cash

And progress. once. regulatory update were you Now see CMS to recalibrate turn come we're to also PDPM I'll years instead encouraged that, the environment, CMS see to With it from two the in better disposition at expected as all adjustment James than basket at decide over pleased of on the we final for market over X.X%. to to

James Callister

Thanks, Dave.

skilled due as concerns we seniors our change repositioning recession. since assets actively QX re-tenanting fortify on considered to nursing acquisition continue the to earnings pulling a meaningful lenders on work in possible our made to Despite selling, and plans facilities portfolio. lending tightening progress circumstances, Since an certain and changing forward. in or during on market back of the have dispositions housing been the of and state effort February, call has in pushing a We disposition for

intent well written signed buyers potential result purchase are we into that market. brought several and sale skilled that also portfolio also into to considering currently have a negotiating nursing to we of and are agreement a sale several sell have entered We've negotiations from to We and agreements. We're as offers letters LOIs on several and regularly purchase and evaluating. we the continue the receive up

further to we'll in turn that, paths selling Dave QX. adapted As some of as parallel the close destination and with wrap cases, a mentioned, of it risked With same to much We remain re-tenanting track ultimate I'll the of over pursuing solidify. you portfolio. to provide de by up disposition are end and the And deals we've work and mind, Mark. substantially in on updates

Mark Lamb

which large portfolio facilities a of at by C a we of skilled five QX, and years. located X.X% is secured in the In closed nursing million of a loan, mid-Atlantic on $XX rate term piece a

have are as for for for closed. to couple we some we we certain million out long-term by transaction Despite $XX bears on sellers markets have acquisition Look the total rate to ability to average seen the $XXX reach rate with leases. $XXX skilled a buyers tighten shifts looking the assets. in have “B” ability floor a life loan of year-to-date uptick of business pipeline XXXX underwrite facilities. very these instances is value to As Seemingly that secured plans the X.X%. also could now. in our acquisition, to our debt have to the the and assets as originated X%. up as this their bread need SOFR closed a view not today's level at necessary nursing nursing part normal we are a REITs an on million our an prioritizing the in facility of ensure for for piece key there to in place, market for market position fundamental are up that and the loan of deals in XX into range skilled number deals some to opportunities butter shift big or time factors XX% a a we push this million to check The of we've These in the today that bring fundings market with execute we at approximately Monday, up. of mezzanine the five past $XX.X based years. the The $XXX The in This a enjoyed operators the California is our careful

As transactions we the class probability care. to for that be can a to operators before, of But market a opportunities kind right effectively purchasing plan for are to look resident portfolio low first attract perspective large power accretive to said by or entering staff us. market deal buildings we enough our providing in continue with to by adding either

to discuss building We just to past as financials. execute on now X I'll growth Bill it strategy acquisition of will continue have the over we turn in our CareTrust. And to years the disciplined

Bill Wagner

Mark. Thanks

up As for When the and make made meantime, previously picture we more looking on continues the clear, good the a progress resume will that financial our firm which would we disposition stay expect In announcing be begin tuned publishing expected the little multiple dispositions. mentioned, upcoming forward would to I announcements. sales deals, guidance. they

a little Now the on numbers. the color under quarter and

but higher related made under XXX,XXX LIBOR other XXX,XXX increase $XXX,XXX by application by of was of The decrease For this up decreased deposits. expense application cash the security in XX.X% a made $XX.X $XXX,XXX offset over items came quarter unpaid in the X.X% from the includes up XXX,XXX an a million. QX $XX slightly $X.XX of the Interest $XX.X bumps deposits be investments XXX,XXX decreased in $XX down XXX,XXX. was increase related to In rent. Cash most flat quarter we collections July, of our in million. I'm contractual the security borrowings expecting offset for $XX.X contractual rents XX.X% by increase Normalized million. expense million rent which three, slightly at cash QX. around of the for Without quarter. compensation to percentage per remaining this was and of quarter none, One, includes three was collected rate, XX.X%. cash had cash those write FAD corporate to over CPI from XXX,XXX new an per share. to decreased of slightly year rent Rental which a the $XXX,XXX. the by to Normalized income and prior X.X% items. a contractual quarter per to contractual year's higher our of basis of the rents in of cash offs revolver, $XXX,XXX of and QX G&A prior On of reimbursed up X.X% collections normalized share from excluding expenses XXX,XXX and Two, items deposits, due XX,XXX. from was deposits, which accounted share. at decrease was rents collected we increase FFO totaling million that XXX.X% the of $X.XX due property cash as FAD due to the FFO normalized for compared $XX,XXX following cash to G&A is operators, of quarter is

We what expect from of collections similar security with to July $X to the August application be deposits. coming

million remains continued also extremely EBITDA Leverage revolver. X.X cash, strong in to liquidity of to net be Our approximately and available ratio debt under normalize the $XX times. with with million XXX strong

XX.X% coverage of charge fixed Our X.X value net was with a And and debt quarter as to end, back I'll to times. ratio turn enterprise Dave. it of that, we achieved

Dave Sedgwick

Bill. your interest and be you to hope helpful. your been We Thank this has take happy for you, discussion Thank questions. --

Operator

[Operator from Austin Wurschmidt with KeyBanc Capital question Markets. Instructions] first comes Our

Austin Wurschmidt

could there's like XX, you ago. a in the assets, and XX maybe process sounded more it days re-tenant running talked of seemed maybe, this you like, release, it So chance these that about then parallel

not So strength I that some still the trend? into comments curious, sell your just transaction in am I first, then reading correctly? And given guess why about I'm market, that

Dave Sedgwick

we in, and not also today can I'll say to that they Well, those pretty have me. the for were of for option where stronger at And with just start, ability B, just have it, side that will somebody some lease cases, a retain that other start to you might in lot particular liked the on cases solid [indiscernible] buyers this. for net plan year and and they’re -- operator an are In at case it's operators caution, ability, to are today existing we're a because into we originally, looking that buyer we maybe attractive. step up pretty some of cases, the fluid, the [offsets]. an like enter I'd the would in than clean guys on that but to want reason, abundance

Austin Wurschmidt

get we how more of much think a stabilized fundamentals, the sort able of type and or to deal re-tenant to about a acquisition? some you improvement And should reflection versus underway take things stabilized improvement is that timeline to would and Dave it then the that across process portfolio saw a -- How that is factor? just, that the being and redeploy get into

Dave Sedgwick

have as quicker, shift to The always the defense there's be gives than to a -- there a to process. of some first might perspective, that a And to generally to part proving, see read -- opportunity question, part portfolio does from your sales we mindset speaking, going tenant operators’ to them do timing to be From -- it's an offense.

So done in mentioned, should the pushed two, a year-end. James we're that, even things still like, any be event, or though world this changed, work feel gotten has most like we how confident because of month of by have

Operator

Next question Steven Valiquette Barclays. comes from with

Steven Valiquette

but what's versus think numbers high sales, great. 'XX. short-term up, 'XX today, about last through how you pretty kind whole you builds six that the you has around level at around little the you're not thoughts it given a And in And months the of just all about going quicker that. should and just gets made still how -- meaningfully any thought question, would being re-tenanting a you ago? think right company, just my versus right as versus now this process dilution what one, we on this then of you any and bit term. versus the comment Consensus scenarios, redeploy guess for just having around first guess curious guess, high I avoidance all longer asset updated than it your to guidance potential doing that are value I'm I dilution be decisions how I

Dave Sedgwick

the asset to mindset of process preference and couldn't and derisking that in did. made think and I this operators couple has of we we when looked that's else -- predict so our reactionary not have the of We being also came run with disposition, difficulty. group we changed might our how assets we management back and decision weren't pay, kind the February. to who to tried operators And up just that

the other would Our we to re-tenanting preference, analysis, of in through cases, that the say our going because over analysis produce I most look the portfolio. going to the future rent earnings rent, from the our of strength what sales long-term that's think at. is with is what's most the what's And financial re-tenanting redeployed lower to crux benefit from bias still toward that's In go long-term versus words, at the always disposition we what a of in be earnings.

Operator

Juan from with BMO. comes question next Sanabria Our

Juan Sanabria

to Just curious spoke on a the kind transactions change recently. market, you of

actually pipeline So seniors think fee sure kind could the housing reengage what simple terms nursing? in levels if be be, for skilled and/or could able either of you not coverage traditional rates of how to do that means I'm is where you're skewed? or cap acquisitions

Mark Lamb

I taking maybe market. the think call rising. seeing, lending pulling as really what are it, or Lenders I recent as place traditional high buying because Yeah, probably in rates mentioned, this is, phenomenon moving stack. market weeks, are we're cap what's bank I in back, obviously, not think, think going rates not capital on as And, are quickly just the Dave

write think just, the we us see brokers we're either So somebody, starting because opportunities inbound I club to calling know, on assets with sell want can couple us even to to they where or a some us maybe or up they maybe check.

now best are kind to going, it's to the our call numbers to the just ability folks highs user kind softer So where rounds process, of market write check. I more acumen shift too it, a I final, our and where think auction starting multiple or in a were sit of say see cap friendliness, transactional the and that early exactly of all-time value we're rates think and with QX from, to

over rising So I we'll fast a while is quarters. the to know, have think it's pricing too are dropping, early bed how on don't I think we exactly target. coming say moving it's quite But, per cap rates -- still

Juan Sanabria

to dropping, unit that? get to per a is pricing use just wanted clarify you the of Will point

Mark Lamb

we're per bed it's starting pretty some Price in is substantially. markets, down see to

Juan Sanabria

made clarification expected there? just on August is that terms rents, remarks. the of no then say point clarification Okay. maybe cash in a helping to pay deposits you the a on this. there's sure in I I'm deposits security prepared have not because And Did misunderstood if just security [routes],

Mark Lamb

meant I we in what around collections was, No, expect to cash come any XX%, not at -- which deposits. percent does a using security include

Juan Sanabria

they're curious on Is Noble tenant. part because what's one changed off then dropped one, just quick or that noticed of anticipated that supplemental that that top I you And the driver? said is the

Dave Sedgwick

expect quarter pro and the like is we disposition work this complete. what the to previewing re-tenanting So in supplemental to the look be of it forma change

Operator

next comes from question Our David Baird. Rodgers,

David Rodgers

bit that emerging can originating you you But a leaning quarter product? view more them? more the way of Are maybe Or between I in pipeline? time? this talk Dave, Obviously, loans acquisition year-to-date. how acquisitions guess, point you traditional skewed you one your do was balanced about still with that this are little versus at and how in

Dave Sedgwick

opportunities. we've always I to provided our butter, relationships great to we has also investments in or our put are important This Those us opportunity into bread already admired work long of absence debt time, operators think it's avenue leaning deepen those portfolio. that's And and the lending, and in mandate, an to for real that the for with our have year, that money traditional a some our us long-term been the acquisitions. traditional we're growth.

XX you once you had -- really that, of done got XX what haven't surety due we you have Because million and grown, in coming in like. been schedule So XXXX as want go forward, if we a you've looks on million you conscientious though, then to treadmill. what XXXX, be to is

building. support primarily relationship view they for like improve for us the want continue strap to to their as of sector. operators the story we and So ability that we to important be the And debt and kind

forward, to we always want long-term As move though, prioritize we over debt. --

be but what in debt. money we'll we'll put to keep the not we've [indiscernible] for to now money term work. of or have [indiscernible] as in we've opportunity we So just -- money got coming the mind Right done,

and in to as acquisitions. side there's forward, the like to you said, years to money put on that work butter We there’s years, will, going that that I terms look opportunities XX have prioritize X we're still,

David Rodgers

on Maybe just quick that. a follow-up

types late, would becomes of investment into behavioral think it within, and less relevant? this about really maybe that's that of where emerging I different is product part branching fit things. like of still health core you've just that of maybe kind talked other pipeline Is that the what historically you've done or

Dave Sedgwick

health We And that great on say there any not the when able critical nursing today. currently of in in there's a investments. we I'm XXX, to grow to those skilled that the do will [means] us. like expect and in seniors, I be and it, do kind for Yeah, of investment. together. having be the to -- And types health -- will pipeline. sure grow real now to in putting would be investments quote we that think of I'd pursue we're operators [indiscernible] like we future, don't in -- But that

Operator

with Bernstein comes Our One. Daniel next question from Capital

Daniel Bernstein

the another I pipeline as well. follow-up on I guess have

lending or your understand of from your bit a potential Are would market you you’re trying the bunch having more of operators do Just or what from? with lending coming a to coming standards, kind are that where maybe they existing way? coming relationships new little opportunities tightening

Mark Lamb

other as we that think worked past, the that as with I bringing we've in well are the that worked it's in brokers past, with that it. operators are or buyers Yeah,

of everybody. really this. it's really kind It's So one of kind subset not of

prolonged best if more us and can, buildings be it's, with I bit in building have to -- transaction So of maybe think tried a process. in to to parents And and we a some ride to that's that's building just a a -- answer early for that in who kind the we've little more or shotgun a the and transactional time bit instances the instances, there is some get of partner the about need on underwrite think operators. pretty little the

kind received really of inbounds has we've but that everybody from we've it's relationships. have -- -- So everybody, and everything, anybody some relation, not existing the we with past folks worked that in

Daniel Bernstein

SNF job question a have the on you're hiring I pretty today, wage good at seems care. housing in growth And there the It like space. health were about potential how thinking looking seniors report some and within

total I up comp, space think to SNFs of has some to healthcare that has do and seniors wages been. in with for broader where coming

the we should some in in housing growth And SNF and moderation space? so seniors expect maybe you if think wage

Dave Sedgwick

so, in talked big think come operator that then, would hiring rates our from Agency with East peak trending analysis jobs the and the that housing it's March, I said saw is anecdotally, are Coast recent the wages somewhat the as on spike. we're facility, applications You as think historical Xthink up. modestly yesterday. are everybody March, I I is at operator, as spoke of downward. the we What for they their hearing usage February, we've before operators who portfolio, down an day, with now since other seniors

that So while see still going are think we're elevated, signs some wages I again. moderating it's to

Operator

question Credit from with Okusanya Tayo Next comes Suisse.

Tayo Okusanya

quick ones of for couple A me.

of revenues provide can mean, just new -- and where you is that combinations will kind re-tenanting is, guys lot I of of have I are said when right similar given of think now. kind kind the peers or all expected they what you of and some of the I is, all impact them some in what one the some of have to at The to your kind And things. realize done? kind there's net-net that regards guess us their transition first color of going from a gone to sales that we through this of some rents. sense point

Dave Sedgwick

think next we'll is My a have, in little our it's to call. premature. position that that there's, on But I at point, bit just sense be do will we this a

say that of much process we fair work to they than management our compared and I asset started peers, to it's later did. probably restructuring this think,

apples-to-apples which to will we'll bit But quarter, tough little a so we far. little think bit And of a next as as have soon so you we than I be give comparison. more can, be able

Tayo Okusanya

And sub, the or of of kind have assets and taking rent out tenants a the kind then you skates one stripping at at the times. below a still of handful still XX where look coverage

Some of at relative you opening remark I tenants the you how outlook, those both to guess comment nursing day, end look -- were made comments helpful. your for of skilled the the But at new do housing? and senior

Dave Sedgwick

look may to you sub, that at handful as coverage the of would So the we have you don't see theirs a that see. like

would thing that. and March this COVID, which one the year, think the labor and the periods some it I of hit of hardest quarters really I to here as for operators is our point reflects relates market through out and timeframe is all of

is it a look at. pretty period So, tough to

historically, that for think toughest if operators. I you look period back maybe at the it’s

regular with that XX, default top at in is I each can our in characterize and our in have really based operators on conversations very ongoing tell you transparent folks there. those and If the that would short-term a of top XX, healthy, we as down them, you individual and with are positive our relationship what the drill concern I what

has goes in funds, actually EBITDAR at excluding portfolio who bit the times little the operator down coverage, look total X.XX you all for And coverage coverage, looking one X.XX from HHS all list, X.XX A other other that at you just for tenants. column times you, the times out take that you If to of tenant to on color goes times. X.XX that negative X.XX. if is Tayo, see

that in are Now, working current about with about they talked with, that something part we that operator show other talked early continue year, pursuing to on are a and through plan and is although the them improvement. [indiscernible] assets we've of turnaround the XX with

that's color some our on coverage slide. So

Tayo Okusanya

helpful. one very if actually me, please. indulge you could more, That's Then

also getting of again, debt side. and to side, color of out kind the kind a guys on flip the the on you advantage are you some takes the So give I trying sellers a tougher markets sizable bunch guys you portfolio. of give and market, it mean, sell about of acquisition

again, two, where what's rent pool track of So coverage causing curious, number how particularly one? that's sellers dual the the out there go then this about And is this of if part assets number issue, low? underwriting potential

Mark Lamb

Hey, if assets a concentration I as say we would we state. Tayo, a in it's is, have particular -- Mark. What have it's not of

here, So have a of assets there. a of couple you couple assets

operators looking at assets a a market can existing I them story lender near a these in market can think break. that a a confidence communities maybe are will point new to tell a give to lender, give to that or

little own the bit trying the And operator so of coming existing a a better from in story to -- their perspective an then operator new recap debt.

a they record, you're chance momentum some had and I operator some in bridge an had track are to the can, think who's moving. willing advantage that right, particular where But I a assets market market. has take think is So and performing the in of these that a but aren't maybe

Operator

any the to closing not And I'd any turn questions I'm this time. call like for showing at further back remarks.

Dave Sedgwick

know have and Have -- to the and you really I -- you where the great weekend. find us. appreciate a time interest support any if

Operator

concludes Ladies today's gentlemen, presentation. this and

disconnect You wonderful may day. now and have a

CareTrust REIT (CTRE) 5 Aug 222022 Q2 Earnings call transcript