CareTrust REIT, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the CareTrust REIT fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to your host, Lauren Beal, CareTrust Senior Vice President in Control. You may begin.

Thank you and welcome to CareTrust REIT's fourth quarter 2021 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 CareTrust's business and the 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 risks 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 SEC filings for a 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. Yesterday, Care Trust filed its Form 10-K, 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. On the call this morning are Dave Sedgwick, President and Chief Executive Officer, Bill Wagner, Chief Financial Officer, Mark Lamb, Chief Investment Officer, and Eric Gillis, Senior Vice President of Portfolio Management and Investments. I'll now turn the call over to Dave Sedgwick, CareTrust REIT's president and CEO. Dave?

Thanks, Lauren, and good morning, everyone. I'd like to start with the tip of the hat to our executive chairman, Greg Stapley. All of us here and those associated with CareTrust express our deep appreciation for his leadership during our first seven and a half years as our CEO. He put this team together and took what was a highly levered spinoff with one tenant, and grew it into one of the top-performing healthcare REITs over the last seven years, producing north of 150% total shareholder return at the time his church mission was announced in December, with one of the strongest balance sheets in the business. We wish him and his wife, Debbie, the best of luck in the next chapter of their lives. Turning to the quarter, we're pleased to report 100% of contractual rents collected in the quarter, including the complete repayment of the one deferral granted last year, making the full year's collections also 100%. The fact that we collected 100% of contractual rent over the past two years is a testament to the quality of our investments, our operators, and our team's ability to manage needed changes in the portfolio efficiently. Despite the track record of strong returns since our inception, it has certainly not been all smooth sailing. The team we have in place today has overcome several challenges over the years from some operators hitting the wall to strong competition for growth to changes in the regulatory field of play to a long running pandemic. We have previously reported quarter over quarter occupancy recovery in skilled nursing while seniors housing had remained flat. In the fourth quarter, we saw occupancy flatten across both asset classes in the latter part of the quarter. Our portfolio was not immune from Omicron's impact on employee infection rates and limitations on admissions. We've repeatedly reported that a few of our operators have needed provider relief funding to mitigate the effects of COVID on their operations. Late last quarter, the latest HHS phase four provider relief disbursement provided insufficient runway for the soft landing we hoped for, for a couple of our operators. resulting in 93% of contractual rent collected in January. Throughout the pandemic, we've conducted stress tests of the portfolio and identified a handful of operators and properties that we believe pose an unacceptable risk of default as provider relief measures end. For these relationships and properties, we've decided to take advantage of the frothy seller's market and proactively remove these cracks and the associated uncertainty from our foundation as quickly and efficiently as possible. We have begun to pursue the sale, retenanting or repurposing of up to 32 assets representing approximately 10% of contractual rent. We do not intend to play the defer and hope game with operators or properties that have been on our watch list since before the pandemic. Rather, we intend to take advantage of the seller's market, redeploy any proceeds into new investments underwritten for today's realities, and use this time to upgrade the risk profile of our growing portfolio. Given the early stage of this plan, we will postpone guidance until we've made meaningful progress and will provide business updates along the way. It is a seller's market today, and yet we still do see opportunities to deploy capital this year. Mark will expand on our investment outlook for the year, but I'll highlight a few things. First, we intend to take a small part of the 32 assets I mentioned and repurpose those into behavioral health facilities. We've been looking at this asset class for years and are thrilled to have found a proven operator we're excited about and an entry point with some of our very own properties to convert into a higher and better use. This will be a powerful new asset management tool to prune and strengthen master leases in the future, and it provides the company with a new growth vertical as well. Second, Mark will talk about an exciting new partnership with one of the industry's most respected lending teams, allowing us to continue to participate in the stories of some of the best operators in the business. And for my last point on capital deployment, our stock repurchase program was approved in 2020, and is a significant lever available to us if the opportunity ever presented itself. We should look back on 2022 as a pivotal year in our history wherein we took the measures to deal with chronic watch list properties and reinforce our foundation to stand the test of time. We're as enthusiastic as ever about our expanding mission of matching high quality operators with great skilled nursing seniors housing and now behavioral health opportunities for many years to come. With that, I'll turn it over to Mark.