CareTrust REIT, Inc.

Thank you for standing by. My name is Prila, and I will be your conference operator today. At this time, I would like to welcome everyone to CareTrust REIT Third Quarter 2024 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, seem to press the star followed by the number one on your telephone keypad. If you would like to respond to your question, please press the star followed by the number one again. Thank you. I would now like to turn the conference over to Lauren Beal, SVP Controller, please begin.

Thank you, and welcome to Care Trust Reef's third quarter 2024 earnings call. We will make forward-looking statements today based on management's current expectations, including statements regarding future financial performance, dividends, acquisitions, investments, financing plans, business strategies, and growth prospects. These forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from our expectations. These risks are discussed in CareTrust REIT's most recent form of NK and Q filings with the SEC. We do not undertake a duty to update or revise these statements, except as required by law. During the call, the company will reference non-GAAP metrics such as EBITDA, FFO, and FAP or SAD. A reconciliation of these measures, the most comparable GAAP financial measures, is available in our earnings press release and Q3 2024 non-GAAP reconciliation that are available on the investor relations section of CareTrust's website at www.caretrustweek.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 Wacker, Chief Financial Officer, and James Collister, Chief Investment Officer. I'll now turn the call over to Dave Sedgwick, Care Trust REIT's President and CEO. Dave?

All right. Hello, everybody, and thank you for joining us. The flywheel started to pick up speed a year ago, and it is now racing. At the end of last year, we recognized that 2024 could be a historic year for growth, and the company recalibrated the team and the balance sheet to capitalize on that opportunity. I am so proud of their relentless work to make this year extraordinary. As you may know, yesterday we announced that we entered into a material contract to acquire a portfolio of 31 skilled nursing assets around Tennessee for a purchase price of $500 million, investing $442 million at an estimated yield of 9%, expected to close by year end. This deal will continue to expand the influence of some of the country's very best operators who have a proven ability and commitment to caring for their employees, residents, patients, and communities. James will provide additional color in a minute. We also announced yesterday that we expect to acquire 57 million of skilled nursing facilities in the Northeast next month. We don't normally announce transactions before they close, but due to the size of the Tennessee deal and the imminent timing of the Northeast deal, we decided to announce these along with earnings. So now as we round third on the year, we are equally excited for next year's potential to diversify and grow the business significantly. Thus far in 2024, we have delivered the following. First, year-over-year market cap growth of 123%. Second, record-setting investments of approximately $917 million at an average stabilized yield of 9.4%. Third, we announced pending acquisitions of approximately $500 million of skilled nursing facilities with a 9% stabilized expected yield to close during the last two months of the year. The combined year-to-date investments and announced pending deals produced projected 2024 investments of over $1.4 billion at an average stabilized yield of 9.3%. Fourth, equity issuance of approximately 41 million shares for gross proceeds of $1.1 billion. And fifth, a net debt to EBITDA of 0.08 times. On last quarter's call, I commented on how two things are equally remarkable. Not only this year's growth, but also the sense that momentum was actually building. Now you know, at least partly, what I was referring to. As we sit here today, our pipeline, including these two pending deals, is $700 million, almost all of which are real estate acquisitions. A quick comment on the makeup of this year's investments. Including the pending November and December deals I referenced, we will have closed on the following over 1.4 billion, approximately 825 of that 825 million of that are real estate acquisitions and 590 of debt investments or roughly 60, 40 acquisitions to loans, all at a blended estimated stabilized yield of 9.3% after any rent ramps take effect. Allow me to give you some more color. on the return on investment we've achieved on the targeted loans we've made over the past few years. For a few years now, we have been executing a strategic approach to lending that includes at the very least a handshake with the borrower, JV partner, or operator that they will bring us real estate acquisition opportunities in the future. And at best, the debt investment activity also includes more than a handshake. either a loan to own or loan and own a part of the portfolio. This approach has been incredibly successful for us, as our friends in the industry have made good on their word and brought to us deals, many of which are off market, that we would not have otherwise seen nor won. We made a total of approximately $200 million of debt investments from 2022 through 2023. Looking at this year's 1.4 billion of expected deals, approximately 780 million of acquisitions are a direct result of these strategic debt relationships we fostered over the past couple of years. Our underwriting discipline has not changed. We do not grow for growth sake. And we are driven by our mission to expand the positive influence of operators who improve and dignify the care communities that they serve. And that's a nice segue to the portfolio. Last week we had our operator conference wherein we brought renowned experts in policy, staffing, reimbursement, mental health, and healthcare AI to educate our operators on what is best in class and what's to come. It's one way we try to add value and show how grateful we are to them. I cannot tell you how energizing it is for our entire team to rub shoulders with leaders who are engaged in the noblest of professions day in and day out. We're proud to associate with them and proud to report that they continue to provide superior star ratings and quality ratings compared to the industry nationally and the states that they operate in. While there's no perfect way to measure quality care and skilled nursing, Medicare's star ratings do provide some tea leaves. As of September's ratings, I am pleased to see Our operators achieve an average of three stars versus 2.8 stars in the states that they operate in. Our operators quality measures performance is even stronger with an average of four stars versus 3.4 industry stars. As former operators ourselves, we have an absolute conviction that sustainable financial success can only be achieved after clinical success. You will see in the supplemental, lease coverage continues to show tremendous strength and security overall. Property level EBITDAR with a 5% management fee and EBITDARM coverage was reported to increase 2.23 times and 2.85 times respectively. The scale of underperforming operators remains small and manageable. We have a couple of transitions underway and a handful of assets for sale. that when transitioned and or sold will result in higher revenues next year since they have not been rent producing this year. I'm very pleased to report that the Midwest skilled nursing portfolio with negative lease coverage that we've talked about for over a couple years was sold in the quarter. These transitions and dispositions taken together will effectively deal with all of the properties that have underpaid this year. Finally, three observations. First, I'm very proud again of the Care Trust team. An extraordinary year like this doesn't happen without a talented team, a strong culture, and sacrifice. Second, I want to again recognize the tireless pursuit of quality care and performance by our operators. We are truly blessed to work with some of the finest operators in the country and proud to report superior lease coverage, quality measures, and star ratings. Third, we are at the start of demographic tailwinds that should last for decades to come. James will now provide you with color on the investment landscape and reloaded pipeline.