CareTrust REIT, Inc.

I would like to welcome everyone to the Care Trust REIT first quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I would now like to turn the call over to Senior Vice President Lauren Beal. You may begin your conference.

Thank you and welcome to Care Trust REIT's first quarter 2023 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 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, 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, CareTrust filed its Form 10-Q, an accompanying press release, and its quarterly financial supplement. each of which can be accessed on the investor relations section of CareTrust'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, and James Collister, Chief Investment Officer. I'll now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO. Dave?

Good morning, everyone, and thank you for joining us. Before handing the call over to James and Bill, I'll address three topics. Investment activity since our last call, a portfolio update, and some thoughts on the regulatory environment. First, back in November, we talked about how we anticipated that more deals would be steered our way as sellers grow frustrated with delays and retrades due to the tighter credit markets. Today, we are pleased to report that that increased flow of deals has occurred, and has begun to result in exciting new investments for us. Since our last call, we've successfully closed on three transactions, totaling three skilled nursing and two seniors housing facilities for a combined $47 million. The stabilized blended yield for these deals comes in at 9.6%. And as meaningful as these investments are to the company this year, maybe more importantly, these deals officially start three new relationships with operators we believe will not only improve the lives of employees, residents, and patients at these facilities, but also fuel future growth opportunities for Care Trust. The pipeline today sits at between $150 to $200 million. Second, the existing portfolio is overall in very good shape. Since the very start of the pandemic, we expanded the way we report coverage to three views. Pre-pandemic, excluding provider relief funds and amortizing provider relief funds through their eligible periods. Excluding the relief funds, trailing 12 property level EBITDA coverage for the portfolio through December 2022 remained strong overall at 2.01 times compared to the 12 months leading up to September 2022. Last quarter I gave more color around one skilled nursing operator not in our top 10 with negative lease coverage that accounted for roughly $5 million of contractual rent. At the time of last quarter's call in February, they had not paid rent since November of 2022 and had very recently terminated their CEO. Since then, they have made a full rent payment in March, a partial rent payment of $100,000 in April, and thus far, no rent in May. They replaced their CEO just last week and we're talking through all options with them. We're striving to determine the best path forward for this portfolio as soon as possible, since its status is still one of the main things keeping us from issuing guidance. As to the dispositions and transitions, I'm pleased to report that we've made progress since our last call. Of the retained facilities, we transitioned two Wisconsin assisted living facilities from Noble Senior Services to the Pennant Group. Wisconsin is a region of strength for pennant, and they're working closely with the Department of Health to obtain licensure and have begun meaningful improvements to turn those two facilities around. Also, since our last call, we have sold one small seniors housing facility that was previously counted as held for sale for approximately three million. Finally, on the regulatory front, our operators have been preparing for the end of the public health emergency, which expires today. potentially impacting some operators while being essentially a non-event for others. Additionally, the public health emergency has implications for the Medicaid rate as the 6.25% add-on from CMS winds down by the end of the year. We are, for the most part, encouraged by the steps many states have taken to permanently address the increased cost of care for operators due to the pandemic and the subsequent high inflation. My last issue for the regulatory environment relates to the proposed minimum staffing requirement from the Biden administration. As we sit here today, there's still a lot that is unknown, but it is generally believed that despite the severe staffing crisis in health care generally and skilled nursing specifically, some form of staffing requirement will be issued. The industry is working hard to educate regulators in DC on what a requirement could inflict on operators and what conditions would make said requirement manageable, things like additional funding or employment rate hurdles or a phased timeline, et cetera. We're hopeful that the time CMS is taking is evidence of them weighing seriously the realities on the ground that are being shared with them. So heading into June, we're really pleased with the progress made to date toward our main priorities for the year. namely returning to asset acquisitions, sourcing more off-market deals, expanding our operator bench, increasing the dividend, and further de-risking the portfolio through active asset management work, all while maintaining a leverage profile that provides tremendous flexibility in a challenging market. With that, James will talk to you about our recent activity and pipeline. Thanks, Dave, and good morning, everyone.