Sabra Health Care REIT, Inc.

Good day, ladies and gentlemen, and welcome to the Sabra Healthcare REIT fourth quarter 2021 earnings call. I would now like to turn the call over to Lucas Hartwich, SVP Finance. Please go ahead, Mr. Hartwich. Thank you, and good morning.

Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position and results of operations. including the expected impacts of the ongoing COVID-19 pandemic, our expectations regarding our tenants and operators, and our expectations regarding our acquisition, disposition, and investment plans. These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31st, 2021. as well as in our earnings press release included as Exhibit 99.1 to the Form 8K we furnished to the SEC this morning. We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures as well as the explanation and reconciliation of these measures to the comparable gap results included on the financials page of the investor section of our website at sabrahealth.com. Our Form 10-K earnings release and supplement can also be accessed in the investor section of our website. And with that, let me turn the call over to Rick Matros, Chair and CEO of Sabra Healthcare REIT.

Thanks, Lucas, and thanks everybody for joining us today. Our opening song heroes is dedicated to the staff at the facilities. Let me start with updating everybody on our current trends. In terms of vaccination uptake, the workforce is now up to 87% vaccinated, which is really fantastic. Residents are about 92%. Approximately half of our operators have mandated vaccines. And moving on to occupancy, for occupancy, 25.5% of our operators are now at pre-COVID occupancy levels. The last week of January, about 41% of the staff returned to work from being out due to Omicron. We had just huge numbers of staff out that was really impacting occupancy. So with staff coming back really in droves, it's having a direct impact on occupancy. The last two weeks, our managed portfolio showed improved occupancy of 46 basis points. And our top seven skilled operators have shown improved occupancy of 149 basis points in the last two weeks, which is as big a jump in that timeframe as we've seen since the pandemic started. Additionally, I would note that while there was obviously a lot of concern over coverage and things like that as Omicron hit, skilled mix from the first of the year was up 360 basis points due to acuity and skilling in place. And that really helped mitigate some of the financial impact of Omicron. Moving on to reimbursement. Phase four funding, that money is still coming in so we don't have solid numbers yet on what the total is. We'll update as soon as we have that. I do want to spend some time today though on Medicaid because most of the focus understandably has been on all the assistance from the federal government. But there's really been tremendous assistance from the states which is going to go beyond the federal government, and so I just want to highlight a few things there. We took a look at 14 states that represent 73% of our skilled assets. In most states, there's a two- to three-year timeline before increased costs are captured. However, most states will use an annual market basket to adjust for inflation, which provides an opportunity for sooner recognition of increased costs. That inflationary increase has a specific labor component. About 80% of our states have provided a temporary Medicaid add-on. There's a common misconception that if PHE isn't continued, the Public Health Emergency Act, that FMAP funding goes away, but that's actually not the case. The states have discretion as to whether they want to keep those Medicaid add-ons in place, and we're optimistic that a number of the states will have that in place. So from a lobbying perspective, the focus has really shifted from the feds to all the individual states. After phase four, there's not much left in the fund, and we're certainly not betting on getting new money in this Congress, so the focus is really going to be on the states and all the Medicaid assistance that we've gotten there. I want to make one comment on Avomer. I know that's been out there. I just want to point out that that negotiation we think went really well. We look forward to the ability to recapture it, and we fully expect that we will see some upside there. We have no additional restructurings being contemplated. There's no ongoing discussions with any of the tenants about restructurings. I also want to comment on ESPRIT, the Canadian deal, which Tali will talk more about. These are very high-quality new assets with a trusted operating partner and strong growth prospects. So we're really pleased to finally, after years of making the effort, see additional growth in Canada. Our acquisition pipeline. Currently it stands at about $1.4 billion. While it's still primarily senior housing, we are starting to see more skilled nursing opportunities and opportunities in the behavioral addiction space. We're also seeing more deal flow in Canada, and we're seeing more deal flow anyway But the announcement of the Canadian deal has increased that deal flow even more so. In terms of the balance sheet, Michael spent a lot more time on that, but leverage continues to be well within target range, and it should be expected to fluctuate. And that's really the primary message that we want to convey to everybody, that if we hit five times, it doesn't mean we're going to access equity. We've got plenty of room up to five and a half times as deal flow happens. leverage can be expected to fluctuate up and down. We'll have some natural deleveraging events with the portfolio improving, particularly the managed portfolio and EBITDA improving. We've got asset sales still that will be ongoing. So we're in really good shape from a balance sheet perspective and in terms of the fact that we don't need to access the markets. We aren't issuing guidance. And while we did issue guidance at least for periods of time last year, The impact of Omicron, particularly on the managed portfolio, makes it impossible right now to predict the degree and the rate of recovery. Hopefully we'll be in a better position to do that. I doubt by the time we have first quarter, because that's only about six weeks away, but hopefully after that. And if we are able to, we will do a first quarter, but I think it's unlikely. at this point in time. If we had strictly a triple net portfolio, we'd be in much better shape and have a high degree of confidence relative to issuing guidance. And with that, I'll turn it over to Holly.