CareTrust REIT, Inc.

Welcome to Care Trust REIT's first quarter 2020 earnings call. Participants should be aware that this call is being recorded and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions, and beliefs about Care Trust's business and environment in which it operates. These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns, financings, and other matters and may or may not reference other matters affecting the company's business or the businesses of its tenants, including factors that are beyond their control, such as natural disasters, pandemics, such as COVID-19, and governmental actions. The company's statements today and its business generally are subject to risk and uncertainties that could cause actual results to materially differ from those expressed or implied herein. Listeners should not place undue reliance on forward-looking statements and are encouraged to review Care Trust's SEC filings for more complete discussion of factors that could impact results, as well as any financial or other statistical information required by SEC Regulation G, except as required by law, Care Trust REIT and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances, or for any other reason. During the call, the company will reference non-GAAP metrics such as EBITDA, FFO, and FAD, or FAD, and normalized EBITDA, FFO, and FAD. When viewed together with GAAP results, the company believes these measures can provide a more complete understanding of its business, but cautions that they should not be relied upon to the exclusion of GAAP reports. Care Trust yesterday filed its Form 10Q, an accompanying press release, and its quarterly financial supplement, each of which can be accessed on the Investor Relations section of Care Trust's website, at www.caretrustreit.com. A replay of this call will also be available on the website for a limited period. Management on the call this morning include Bill Wagner, Chief Financial Officer, Dave Segwick, Chief Operating Officer, Mark Lamb, Chief Investment Officer, and Eric Gillis, Vice President of Portfolio Management and Investment. I will now turn the call over to Greg Stapley, Catrus REITs Chairman and CEO.

Thank you, Sylvia. Good morning and welcome, everyone. We'd be remiss if we didn't start today's call with a tribute to the nation's healthcare providers, particularly the frontline staff who are working tirelessly to protect and care for individuals affected by COVID-19. We're especially mindful of the caregivers in our nation's skilled nursing and assisted living facilities who are giving their all to protect the most vulnerable segment of our society. We're gratified by the outpouring of support we have lately seen for them and the great job they're doing under extraordinarily difficult circumstances. We would also caution in the strongest possible terms those few critics who have not walked in their shoes and who should become much better informed before forming or expressing opinions on what should or should not be expected in these care environments during the current pandemic. With the exception of a few isolated cases to get all the media attention, our nation's skilled nursing and assisted living providers, from the senior management to the front lines, are doing a remarkable and praiseworthy job. We're also grateful for our federal and some state governments who have worked quickly to provide financial support and regulatory relief. These common sense adjustments are helping providers deliver the best care possible while dealing with a highly transmissible and initially poorly understood contagion. We applaud the supplemental payments made today and urge policymakers everywhere to increase their focus and to direct their ongoing funding decisions towards skilled nursing and seniors housing providers who are protecting our most vulnerable elderly and infirm. We believe that until an effective vaccine is widely available, focusing on rigorous testing and prevention in these places, the very places where a large percentage of the virus target demographic live, will do more to stop the spread and reduce the mortality rate and almost any other effort we can make. Knowing who is contagious has been the missing puzzle piece from the beginning, and when it comes to actually saving lives, the value of immediate result point-of-care molecular testing cannot be overstated. I also want to acknowledge the efforts of our outstanding portfolio management team in helping our operators and other friends across the industry as they continue to battle through the pandemic. Dave and Eric in particular have stayed close to our tenants. And through these frequent conversations and their own deep backgrounds in health care operations, they understand the unique challenges our operators are facing in a very personal and insightful way. Dave will tell you more about it in a moment, but let me just say how proud I am of the way they marshaled our resources to quickly help our tenants get ahead of the curve as worldwide PPE shortages began to spiral out of control. And we'll continue to look for ways to help and support these tenants. As for Care Trust, I'm pleased to report that the company is in good shape today, with rents coming in as expected, low leverage, no debt maturities on the horizon before 2024, over half a billion in availability on our revolver, around $45 million in cash on hand, and a payout ratio of only 71% of normalized FAD, notwithstanding the 11% increase in our dividend recently. We are very liquid and well-positioned to weather the present storm. While we intend to retain ample liquidity to see us through should the current environment persist longer than expected, it is exactly for times like these that we keep some dry powder on hand. And as Mark will outline in a moment, we are in a position to continue pursuing compelling opportunities to grow. Bill will talk about it in greater detail, but let me just say a word about guidance. With much related to the pandemic still unresolved, we acknowledge that any annual earnings guidance offered at this time would seem speculative at best. However, with the support our tenants are receiving, it appears possible that our previously issued guidance could be achieved, although we caution that the unknowns still loom large and will continue to do so for some time. Believing that the act of withdrawing guidance could be regarded as a form of guidance in and of itself, we are accordingly neither updating nor withdrawing our prior guidance. We're adding the caveat that significant changes in economic and other factors related to the COVID-19 pandemic and the government's responses thereto could alter our outlook in the future. Of course, you knew that already, and it probably feels like we've given with one hand and taken away with the other, but we simply want to convey that despite all the uncertainty, there is a possible path through this for us and our tenants, and they and we are working very hard to make that happen. With that, I'd like to turn some time over to Dave to expand upon COVID-19's impact on the industry and our portfolio. Then Mark will discuss recent acquisitions and the pipeline, and Bill will wrap up with the financial. Dave?

Thanks, Greg, and good morning. I want to spend my time with you addressing the common questions we've been receiving related to the pandemic's impact on operations. It wasn't too long ago that several of us were operating facilities. I hope that our experience, plus the constant communication we've maintained with our tenants since March, will help us provide you with a clearer sense of what's happening. As of this week, we have 29 facilities across eight operators reporting at least one positive COVID patient case. While we recognize that those figures are of some interest to you, we have generally viewed the running COVID counts as a bit of a red herring due to the inconsistency in testing practices industry-wide. Early on, our thesis was that any report of COVID cases would be grossly inaccurate and lower than the true numbers. Our expectation has been that most facilities, including some of the very best ones, will deal with COVID at some level. We believe those expectations are being borne out, although to date we see significant variances from market to market, and we'd be happy to be wrong on that. Skilled nursing facilities have the protocols and staff for isolation precautions. and routinely treat and contain highly infectious patients with contagions like C. diff or MRSA or norovirus, they're good at it. What has made COVID-19 different and particularly devilish are the asymptomatic but contagious carriers who can escape detection by even the best clinicians and protocols and infect others. Without readily available testing for the virus, identifying infected individuals has been extremely difficult. Add to that the sudden scarcity of personal protective equipment, and even the best providers have been working with one arm tied behind their backs. With only limited and delayed testing options, when a suspected COVID infection is identified, wider testing at the facility often leads to the surprising discovery of dozens of other residents and staff also infected. In a minority of cases, we've seen the virus spread like wildfire, resulting in multiple COVID-related fatalities. Those relatively few cases are the ones that make the news. However, in most cases, operators are able to contain and isolate and successfully care for the COVID patients in the facilities, only sending out to the hospitals the most critical patients, usually only those requiring ventilators. For our part, very early on, we saw that PPE and testing were critically important to our operators' ability to contain the virus and treat COVID patients in a controlled fashion. But our operators reported that their relatively small PPE orders were unable to get the attention of the big medical suppliers. We began an accelerated dialogue with all of our operators and discovered a reliable source for reasonably priced PPE. We leveraged our portfolio size to get the attention of the supplier and placed a seven-figure order in behalf of our operators. Not only did they get more PPE and get it sooner, we estimate that our bulk order resulted in roughly $2 million of combined savings for our smaller tenants. This week, we're working on another order of PPE for them. In addition to PPE, testing is the other problem that needs to be solved. We believe that the Abbott-style molecular test, which we'll tell you in minutes at the point of care, is what our facilities need now. Unfortunately, Sales are currently restricted to hospitals, clinics, and laboratories. We need the White House to raise skilled nursing to that same priority as soon as possible. With good information, skilled nursing providers will be able to be instrumental in helping turn the corner on the spread of the virus. Next, let me address occupancy. First, overall occupancy for seniors housing in April compared to March held steady. These residents, generally speaking, are in much better health to begin with than those in nursing homes. In April, we saw more move-ins than expected. We believe this is largely due to the positioning of our mid-market facilities as more needs-based than the more expensive private pay AL options. Our seniors housing operators report that prospective residents and their children, after being in quarantine for several weeks and often together, are coming to the realization that they could not get the assistance needed in their homes and they couldn't afford to wait to move into assisted living. On the skilled nursing front, occupancy has declined. Outside of the COVID hotspots, hospitals have been in a hurry-up-and-wait mode, running incredibly low occupancies. They have largely stopped non-critical and elective procedures, and emergency department volumes have reportedly dropped significantly. Therefore, the skilled nursing facilities that depend most on short-term rehab patients coming from hospitals are being hardest hit. By contrast, the facilities that primarily care for the long-term Medicaid residents are less sensitive to the sharp decline in hospital census. Our SNF portfolio consists of approximately 75% Medicaid residents and 16% short-term Medicare or managed care patients, also referred to as skilled patients. Not including Ensign, who will report for themselves next week, our overall skilled nursing portfolio occupancy dropped 370 bibs in April. But the higher margin skilled occupancy increased in April by 240 bibs, providing additional revenue to offset the occupancy loss. Now, on the surface, any drop in census may be a concern. However, I want to make sure you understand an important lever that the current state of emergency grants to operators to help mitigate transfers to hospitals. It's called skilling in place. Before the state of emergency, a long-term Medicaid resident would have to have a serious change of condition requiring hospitalization for at least three days to qualify for Medicare skilled services. Today, because the government has waived the three-day qualifying stay rule, patients who have a change of condition, including but not limited to those who test positive or are suspected to be positive for COVID, may be immediately billed at the much higher skilled patient or Medicare rate without going to the hospital. Let me just give you a little illustration. Today, a hypothetical Medicaid resident has a serious change of condition, but is stable enough to be cared for in the facility. A new care plan is formulated, appropriate care is rendered. Now, Medicaid and Medicare rates vary widely by geography and patient, but say that yesterday Medicaid was paying about $200 a day for that resident. Today, Medicare begins paying $800 a day for that patient. So while we have seen parts of our portfolio experience drops in overall occupancy, the increase we've seen in skilled mix, which can offset the financial hit from census declines. This emergency measure is one of several ways the government is helping operators bridge this difficult, high-risk phase of the pandemic. No doubt you are already familiar with some of the others. For example, the Family First Coronavirus Response Act. Under the Families First Act, a temporary 6.2% increase in federal medical assistance percentages, or FMAP, was approved retroactive to January 1, 2020, and several states have directed FMAP funds to SNFs, which has included some of our tenants. A couple of examples. The state of Washington raised the Medicaid daily rate by $29, and the state of Louisiana raised the Medicaid daily rate by $12. Our estimated impact to our portfolio is approximately $5 million. There's also the Coronavirus Aid, Relief, and Economic Security Act and its several components. Under the CARES Act, a substantial number of our tenants have received or are expected to receive assistance from a $100 billion fund provided for eligible healthcare providers, which includes operators of SNFs. Additionally, a payroll protection program was established under the CARES Act to provide forgivable small business administration loans to eligible businesses. and many of our tenants qualify. The CARES Act also includes a temporary suspension from May 1st, 2020 through December 31st, 2020 of a 2% Medicare sequestration cut and a deferral of employers' Social Security remittances through December 31st, 2020. The combined CARES Act estimated benefit for our portfolio is approximately $60 million. Looking forward, As we weigh the several headwinds along with the support provided today, we see a path for our operators to continue to care for their residents, keep their caregivers fully employed, and pay their rent as they fulfill their role as a critical part of the solution to the crisis. Thanks to the emergency measures taken by state and federal officials, liquidity has actually improved for most of our operators, including those who have been on our watch list in recent quarters. In April, we collected 99.3% of contract rents. And as we sit here today, we've collected 99.8% of May rents. With that, I'll pass the call over to Mark to talk about investments. Mark?