CareTrust REIT, Inc.

Good day, everyone, and welcome to the CARE Trust REIT Announces Third Quarter 2023 Operating Results. Today's call is being recorded, and 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 1 on your telephone keypad. If you would like to withdraw your question, you can press star 1 again. I would now like to turn the call over to Lauren Beal, Senior Vice President and Controller. Please go ahead.

Thank you and welcome to Care Trust REIT's third 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, 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. In addition, certain operator coverage and financial information that we discussed is based on data provided by our operators that has not been independently verified by Care Trust. Yesterday, Care Trust filed its Form 10-Q in 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.caretrustrete.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, Care Trust REIT President and CEO. Dave?

Well, good morning, everyone, and thank you for joining us. As we round third base on this year, we are pleased to report progress on several fronts. Not only have we made a significant return to external growth by investing $280 million year-to-date, but also we have set the table for 2024 and 2025 with an active pipeline and a ton of dry powder. We have financed that $280 million of investments by selling $420 million worth of equity off our ATM. The excess proceeds were used to completely pay down the $600 million line of credit, resulting in a net debt to EBITDA of 2.5 times at quarter end. We are willing to take some modest dilution in the short run to be positioned to take full advantage of the favorable investment environment we are in today and expect to be in for the foreseeable future. I will touch on our investment activity in the quarter and how we are thinking about next year. I'll also touch on the portfolio and the regulatory environment, and James and Bill will take it from there. First, investments. After a significant return to external growth in Q2, the team has continued to drive forward with its foot on the gas. Since Q2, we have invested another $79 million with a blended, estimated, stabilized yield of 10.2%. Investment activity since Q2 consists of two loans for just over $19 million at a blended rate of 9.6%. The loans we make are done strategically to borrowers and operators who we believe will lead us to true acquisition opportunities in the future. That was certainly the case, again, with these two loans. Investment since Q2 also included two acquisitions consisting of three skilled nursing facilities in California. We added one skilled nursing facility at a yield of 9.7%. The second deal was for two high performing skilled nursing facilities with a lease in place operated by Covenant Care. You will notice in the supplemental that with this acquisition, Covenant Care's property level EBIT DAR coverage pops to 1.43 times. The leases in place initially yield just under 6%, but in 2027, the leases provide for a rent reset. Assuming current performance is maintained, our yield at the time of the reset is projected to be just under 11%. Now, turning to the portfolio, you will see in the supplemental, lease coverage slightly improved overall. Let me chat about a couple of individual operators. Notably, and as I mentioned a second ago, CovenantCare EBIT Dark coverage has popped up to 1.43 times with the acquisition of two facilities with a very well covering lease in place. Additionally, the same store covenant care properties continued its trailing 12-month coverage improvement for the third quarter in a row. eDuro's lease coverage has been on a downward trend the last couple quarters. We are working with them on a solution for a couple of their non-core facilities that we agree should be in different hands. We have a great relationship with the duro and are working closely with them to minimize any material impact to rent. Lastly, as of a few minutes ago, we are under contract to sell the 11 skilled nursing facilities in the Midwest that we classified as held for sale last quarter. We hope to close on that sale before our next earnings call. Finally, on the regulatory front, one quick comment. We add our voice to the thousands of others in our industry that have called for significant changes to the proposed minimum staffing mandate from the federal government. The proposed rule requires 24-hour RN coverage at .55 RN hours per patient day and 2.45 hours per patient day for certified nurses' aides, with no mention of LPN hours nor adjustment for acuity. Even with the delayed and staged implementation schedules, the industry is unified in its efforts to work with CMS to modify the proposed rule to be in a form that the industry can work with. We're hopeful that CMS will pay attention to the feedback they've solicited and modify the rule. Now, James will give you more color on the pipeline, but I'll just say this. The investment landscape is very favorable for us as we head into 2024. As I said before, the table is set for the next couple years. We have a favorable cost of capital that allows for accretive investments. We have a balance sheet that provides enormous flexibility. We can do roughly $500 million of investments and still end up below our stated range of four to five times debt to EBITDA. And we have a macro environment that has sidelined some of our historic high leverage competitors. And we do not expect the banks to come roaring back with cheap debt anytime soon. So with that, James will talk to our recent activity and pipeline. James?