Omega Healthcare Investors, Inc.

Greetings and welcome to the Omega Healthcare Investors' fourth quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After today's presentation, there will be a brief question and answer session. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. I will now turn the conference over to Michelle Rebar. You may begin.

Thank you and good morning. With me today is Omega's CEO, Taylor Pickett, COO, Dan Booth, CFO, Bob Stevenson, and Megan Krull, Senior Vice President of Operations. Comments made during this conference call that are not historical facts may be forward-looking statements, such as statements regarding our financial projections, potential transactions, operator prospects, and outlook generally. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. During the call today, we will refer to some non-GAAP financial measures, such as NAVREAD FFO, Adjusted FFO, FAD, and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles are available in the quarterly supplements. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega. I will now turn the call over to Taylor.

Thanks, Michelle. Good morning and thank you for joining our fourth quarter 2023 earnings conference call. Today I will discuss our fourth quarter financial results and certain key operating trends. Fourth quarter FAD, funds available for distribution, of 64 cents per share was as expected, reflecting several portfolios that are in the process of being transitioned, which will result in meaningful FAD upside over the next few quarters. Full year FAD was $2.62 per share, slightly below our full year dividend of $2.68 per share, resulting in a payout ratio of 102%. We continue to have a handful of cash basis operators, including Maplewood, that will impact our go-forward AFFO and FAD, making first quarter 2024 FAD difficult to predict. However, longer term, we believe all of these assets, but in particular Maplewood, are well positioned to generate reliable and growing cash flows and related rent. We believe that we have enough visibility into the timing and ultimate resolution of the portfolios that are being transitioned or sold to provide guidance for the first time since the pandemic started. Our 2024 AFFO guidance is between $2.70 and $2.80 per share. As Dan will discuss, key tenant occupancy and rent coverage metrics continue to improve including the under one times EBITDA coverage operator metric, which dropped from 27.5% of total rent to 13.2% of total rent. We can break the 13.2% into a handful of buckets. Operators representing 7.5% of the 13.2% are strong credits and therefore payment of rent should not be an issue. Operators representing 1.2% have third quarter and October EBITDA coverage above 1.0 times, benefiting from state rate increases and operational improvements. that we expect to continue on a go-forward basis. 0.9% represents facilities that have already transitioned to performing credit. That leaves operators representing 3.6%, of which an operator representing 0.5% was recently transitioned, which leaves a balance of 3.1%, representing 11 small operating relationships. I will now turn the call over to Bob.

Thanks, Taylor, and good morning. Returning to our financials for the fourth quarter, revenue for the fourth quarter was $239 million before adjusting for certain non-recurring items compared to $145 million for the fourth quarter of 2022. The year-over-year increase is primarily a result of timing related to operator restructurings, revenue from new investments completed in 2022 and 23, and net straight-line write-offs partially offset by asset sales completed during that same time period. Our NAE REIT FFO for the fourth quarter was $129 million, or 50 cents per share, as compared to a loss of $30 million, or a loss of 13 cents per share for the fourth quarter of 2022. Our adjusted FFO was $173 million, or 68 cents per share for the quarter, and our FAD was $163 million, or 64 cents per share, and both exclude several items consistent with historical practices and outlined in our NAREIT FFO, adjusted FFO, and THAAD reconciliations to net income found in our earnings release, as well as our fourth quarter financial supplemental posted to our website. Our balance sheet continues to remain strong. In the fourth quarter, we repaid 25 HUD mortgages, totaling $227 million. These repayments stemmed from the previously disclosed levy asset sales and transitions. We ended the quarter with over $440 million of cash on the balance sheet and over $1.4 billion in credit facility borrowing capacity and are well positioned to pay off our April 1st $400 million bond maturity and fund new investments. As of year end, 99% of our $5.1 billion in debt was at fixed rates And our net funded debt to annualize adjusted normalized EBITDA was 4.96 times. And our fixed charge coverage ratio was 3.8 times. As Taylor mentioned, for the first time since the start of the pandemic, we were providing full year adjusted FFO guidance of between $2.70 to $2.80 per share. We're assuming no change in our revenue related to operators currently on an accrual basis of revenue recognition. or stated another way, no additional operators being placed on a cash basis for revenue recognition. We're assuming a timely completion of operator restructurings, which includes both the Levy and Guardian portfolios, and Maplewood's eventual return to full contractual rent. We're assuming $94 million in asset sales related to the facilities classified as held for sale as of year end. We've included the annual impact of new investments completed in 2023, as well as $27 million of new investments completed year-to-date. We project our quarterly G&A expense to run between $11.5 million to $13.5 million per quarter, with the first quarter typically being the highest. Non-cash stock-based compensation expense, which is included in NAREED FFO but eliminated in our adjusted FFO, is estimated to be approximately $9.2 million per quarter. We assume the repayment of our April 1, $400 million bond maturity. We assume no material changes in market interest rates as it relates to either the overnight investment rates earned on balance sheet cash or interest expense charged on credit facility borrowings. Our 2024 adjusted FFO guidance excludes any additional new investments or asset sales, as well as any additional capital transactions other than what was already mentioned. As several operator transitions are still in negotiations and the precise timing is unknown, we provided a wide range to our adjusted FFO guidance. As stated in yesterday's earnings press release, in the fourth quarter, Levine paid $5.3 million in rent and in January, LeVie paid approximately $1.45 million in rent. We utilized Guardian's $4.4 million security deposit to record fourth quarter rent. The remaining $60,000 in security deposit was exhausted in January, and no additional cash rent was received from Guardian in January. And lastly, we recorded $11.6 million in Maplewood revenue in the fourth quarter, through a combination of cash and security deposit applications. In January, Maplewood paid $3.8 million in rent. Dan will provide additional color on these operators in his prepared remarks, and with that, I will turn the call over to Dan.

Thanks, Bob, and good morning, everyone. As of December 31, 2023, Omega had an operating asset portfolio of 862 facilities with approximately 84,000 operating beds. These facilities were spread across 69 third-party operators, and located within 42 states and the United Kingdom. Trailing 12-month operator EBITDA coverage for our core portfolio as of September 30th, 2023, increased to 1.28 times versus 1.15 times for the trailing 12-month period into June 30th of 2023. During the third quarter of 2023, our operators cumulatively recorded approximately $12 million in federal stimulus funds as compared to approximately $13.2 million recorded during the second quarter. Trailing 12-month operator EBITDA coverage would have increased during the third quarter of 2023 to 1.21 times as compared to 1.07 times for the second quarter when excluding the benefit of any federal stimulus funds. EBITDA coverage for the standalone quarter ended September 30th of 2023 for our core portfolio was 1.33 times including federal stimulus and 1.27 times excluding the $12 million of federal stimulus funds. This compares favorably to the standalone second quarter of 1.21 times and 1.15 times with and without $13.2 million in federal stimulus funds respectively. Occupancy for our overall core portfolio has continued to recover from a low of 74.6% in January of 2022 to 80.2% as of mid-January 2024, based upon preliminary reporting from our operators. For comparative purposes, occupancy for our core portfolio was 83.2% for the fourth quarter of 2019, just prior to the onset of the COVID pandemic. 32 portfolio matters. Levy. In the fourth quarter of 2023, Omega sold a total of 30 Libby facilities for $317.9 million of gross proceeds. All of the facilities were located in Florida. Omega is currently in the process of transitioning six additional facilities, four in Louisiana and two in Florida, to third-party operators. Omega's remaining portfolio with Liberty will consist of 30 facilities, which include 13 facilities in North Carolina, nine in Pennsylvania, six in Mississippi, and two in Virginia. Three of those four states are considered highly desirable from an operating environment standpoint. We are currently in ongoing discussions with Levee on the best overall future for each of these remaining 30 facilities. Levee has paid approximately $1.45 million per month for the last three months, including January of 2024. Maplewood. During the fourth quarter of 2023, Maplewood paid rent of $11.6 million, consisting of $9.8 million of cash payments and $1.8 million in security deposit applications. In January of 2024, Maplewood paid $3.8 million in rent. Maplewood continues to see strong performance across the portfolio, with 16 of the 17 facilities fully stabilized. Occupancy at Inspire New York City is currently at 65%, and Maplewood believes there is a path to stabilization at the facility in the near future. Maplewood was recently awarded Best of Senior Living awards at all 17 facilities, which places the communities in the top 1-2% of senior housing care providers nationwide. This remarkable achievement reflects the dedication and commitment of the Maplewood employees. Omega currently leases six facilities to Guardian, five in Pennsylvania and one in West Virginia. We are currently negotiating lease terms to release the remaining six facilities to an unrelated third party subject to normal regulatory approvals and the finalization of certain documentation. In addition to the aforementioned restructurings and transitions, Omega is working with several other relatively small operators on various restructurings. Turning to new investments. During the fourth quarter of 2023, Omega completed a total of $249 million in new investments, consisting of $167 million in real estate loans and other loans, $51 million in real estate acquisitions, and $31 million in capital expenditures. These new loans have a weighted average interest rate of 10.5%. The new acquisitions have a weighted average annual yield of 9%, with 2.5% annual escalators. During the full year of 2023, Omega made new investments totaling $667 million, including $84 million in capital expenditures. Subsequent to year-end 2023, Omega has closed on $27 million in new mortgage loans. These new loans, completed in 2024, have a weighted average interest rate of 9.6%. Turning to dispositions, during the fourth quarter of 2023, Omega sold 32 facilities for $324 million. During the full year of 2023, Omega sold 69 facilities for $485 million. I will now turn the call over to Megan.

Thanks, Dan, and good morning, everyone. There continues to be positive momentum on the staffing front, albeit with wide variation by market. Agency expense on a per patient day basis for our core portfolio for third quarter 2023 dropped to three times where it was in 2019 in comparison to the four times we reported last quarter and the five times we reported two quarters ago. And as expected, with the staffing shortages easing, we see occupancy continue to slowly improve with a slight slowdown in the winter months as is typical. The number of core facilities recovered is now at 42%, up from the 37% reported in the second quarter. Additionally, 22% of core facilities that have not yet fully recovered are at or above 84% occupancy. Overshadowing these improvements, however, is the promise by CMS that they will finalize the staffing mandate sometime this year. This was not entirely unexpected given the current administration had promised its implementation. Despite the long-term impact that this could have on the industry, especially if left unfunded, the impact is negligible in the near term. Recall that the mandate as currently proposed is already slated to have a delayed implementation, with the 24-7 RN requirement going into effect two years after the mandate is finalized for urban facilities and three years for rural, and the required hours per resident day for RNs and nursing aides going into effect three years after the mandate is finalized for urban facilities and five years for rural. With ACCA's strong track record in getting improvements made to proposed rules and more than 40,000 comments received by CMS, all of which need to be reviewed and considered, it is too soon to tell what the ultimate mandate will look like. We can only hope that reasonable lines will prevail and that any final mandate will be well-balanced. And of course, we also need to remember that a lot can happen in two years when the first impact, as currently proposed, is slated to occur. There's always the potential that additional rulemaking or legislation will change the final rule substantially within that time, not to mention the possibility that legislation could block the mandate altogether, with bipartisan legislation already introduced in Congress to do just that. I will now open the call up for questions.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and the confirmation tone to indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question and one follow-up. One moment, please, so we poll for questions. Thank you. Thank you, and our first question comes from the line of Jonathan Hughes from Raymond James. Please receive your questions.

Hi, good morning. Thanks for the time. On the fourth quarter acquisitions, I see the initial cash yields were 9%. Can you just share if those were SNFs or seniors housing, and then maybe what yields you're underwriting on the current investment pipeline?

Yeah, so most of the yields that we're underwriting to are 10% or even north or All the fourth quarter yields on those investments that you highlighted were 9%. Some of those deals were a long time in the making, had been in the pipeline for a while, so we had quoted a price some quarters back. The overall yield for the year is north of 10%. I think it's 10.4% blended. And that's pretty much what we're quoting today is 10% in north. Okay.

And then that mix of investment activity over the past year, it's been, you call it 60% loan investments versus 40% acquisitions. And I get the loan investments might be because you're filling a void left by banks. And those have been with existing relationships, but when do we see acquisitions, you know, pick up and comprise the majority of your investment activity?

You know, I think we still did a number of acquisitions, right? I'd say that we, sort of our same store that we've done in prior years. I think we just had a hiccup in loans. And as you said, or kind of answering your own question, that it was just filling a void in the capital markets as they stand today. I mean, there's a lot of banks that aren't active and we're filling that void. We can continue to see that certainly in 24. Okay.

And maybe just one more for me. Can you share some details on the $50 million term loan made in December? What are use of proceeds? What is exposure to that operator and the EBITDA coverage of that portfolio? And maybe, you know, why do such a short-term non-real estate investment? Thanks.

Yeah, so our relationship with that individual or companies that he controls is less than 1% of Omega's revenue. And just a couple of facts to highlight. That relationship goes back for many, many years. This individual's been in the industry for over 35 years. Our worlds cross on multiple fronts, including the fact that we share multiple relationships. He has an excellent history. He has a high net worth. And the investment was actually to allow him to make an investment in another company that he privately owns And so it falls outside of any relationship we have in this world, in the SNP world. And it's collateralized as well by the equity interest in that private investment. So it's well collateralized, high net worth individual with great track record.

And then maybe, I don't know if I heard you, but what's maybe the coverage of that portfolio? I realize it's less than 1%, but if you have that, that'd be great.

So, I mean, we just generally don't, comment on individual operator coverages, so I'm not going to go there today, but I'll just say that I've been paying for probably 10 plus years on both those leases, and they pay like clockwork.

All right. I appreciate the time. Thank you. The next question is from the line of Vikram Malhotra with Mizuho. Pleased to see you with your question.

Good morning. Thanks for the questions. Maybe just to start off the guide, could you give us some color on sort of what's baked in at the low end versus the high end and how we should think about sort of operator resolution and investments both at the high end and low end?

Yeah, Vikram, we returned to, and happily so, our adjusted FFO guides based on historical practices and gave a little bit wider range because we did mention we have Libby and Guardian in the transition slash restructuring mode and Maplewood needs to return to paying full contractual rent. So at the low end, it means it takes a little bit longer on those transactions and the repayment. On the high end, it's just sooner. I mean, it's kind of that simple.

Got it. Okay. And then specifically for Maplewood, As you look through the year, you know, you mentioned sort of you're hoping as we go through the year, they return to more normal paying. Any assumptions you can share with us? One, just in terms of the JAN payment, is that sort of a good run rate near term? And then second, what are you assuming for occupancy of the New York asset as we go through the year for that normalized payment to occur? Yeah.

Obviously, the January cash is a good run rate to start, but it doesn't reflect the impact of rate increases for 24, which the Maplewood team expects to be 7% to 8% net. So that's, you know, we'll see a pickup there as we start to march through the early part of the year. And then The team is still working through some revisions on Second Avenue. The thought process now is they'll be able to go from 65% into the 80s by year end. But you have to remember that building has become a little bit mature in a competitive market now in Manhattan. So even though we might have 10 move-ins in a month, you'll see six or seven move-outs. So the net is... it's real work to increase that occupancy for the next 10 months. Game hasn't finalized their plan. We'll probably have a lot more color on that for the next call.

Okay, great. And just sorry, one second, just follow up on the 50 million loan. It is sort of, it seems like a one-off. I just wanted to hear from your perspective if this is truly a one-off and is there something strategic to it as well? Because it sounded like a, not kind of focused on real estate, but more relationship-based. So I just want to understand the, you know, kind of is this truly something very unique, and then is there something else or strategic to it as well?

Yeah, I would say that this is more of a one-off than anything else. It's not where we're going to focus our attention.

Thank you.

Our next question is from the line of Michael Griffin with Citi. Please receive your questions.

Great, thanks. I just wanted to ask a question around occupancy. You said that in January you're seeing it north of 80%, but at the end of the year it was about 79%. Given that we're in a more seasonal time period, can you maybe just give some more color on why you're seeing occupancy increase? Is it a function of some of these facilities being better staffed, or anything you could provide there would be helpful?

Yeah, I think what we're hearing from our operators is mostly the fact that the staffing is easing up, right? Some of the agency has come down. They're getting more permanent staff in. They're building up their cultures again. And it's just easier to have staff in the building and increase that occupancy. So that's really what's driving it.

great um that's helpful uh and then just on the remaining levy assets in the portfolio is the plan to ultimately sell out of all of them and exit that relationship or do you see yourself kind of hanging on to some once the restructuring process comes to an end yeah well um dan and his team are still in the middle of the discussions um so it's

We don't really have an answer for that. I will tell you, though, the important thing is, as Dan mentioned, those assets perform well. So in whoever's hands they end up, there's a lot of value there. It's just a question of working through the process to make sure we maximize the value proposition.

Great. That's it for me. Thanks for the time.

Our next question is from the line of Connor Seversky with Wells Fargo. Please just see what's your question.

Morning out there. Thank you for the time. One on Maplewood. I'm curious what we should expect from the Washington, D.C. development when it rolls online next year. Do you have any sense of what that fixed cost load will look like once the doors are open? Is it reasonable to assume that opening that operation would impact Maplewood's forward cash flow profile negatively, and then could you put any numbers around it at this time?

Yeah, it's a little too early to put numbers around it. I will tell you that it's about a $200 million project. The expectation is that the cash returns there will be at least 8%. It could be higher. We're working through the pre-sales now. They've opened their sales office They've got a decent list right now of people that are looking forward to being there. In terms of the costs, Maplewood as an entity doesn't have a source of capital or fund to fill up, so ultimately that's going to fall on us and it'll be additional capital. How that gets accounted for, I can't tell you, and it's going to depend on Maplewood when we get to the day the door's open.

Okay, that's helpful, thanks. And then maybe one on rent coverage. So I'm curious to see if there are any expectations for that number trending into 4Q. We have NIC data suggesting that occupancy had more or less flattened down as expected given seasonality. I'm wondering if any Medicaid rate hikes took hold towards the end of the year that could push the number higher specifically.

We did have the Medicare rate hikes in October, and we had some – some increases in Medicaid, but I think you'll just continue to see as the occupancy improves that that coverage is going to improve. With the exception, obviously, that December you have audit adjustments, and that can sometimes play into what the coverage looks like.

All right. Okay. I'll leave it there. Thank you for the time.

Our next question is from the line of Tayo Okunasanya with Deutsche Bank. Please proceed with your question.

Yes, good morning. Just one just about general regulatory backdrop. Again, from CMS and minimum staffing rules, the comments period has ended. Just kind of curious what kind of came out of the comment period, what could potentially be next steps as CMS continues to kind of think through implementation of minimum staffing rules.

So like I said, there are about 40,000 comments plus that were submitted, and every single one of them needs to be reviewed and considered. I think the idea right now is that the likely implementation of the rule would be sometime in the summer at the earliest, potentially a little bit later than that. And to the extent, we don't really know the extent of how that rule is going to change from where it was proposed, but with that many comments, it's likely that there are going to be some improvements in it. But at the end of the day, even after it gets finalized, there's still legislative action that can be taken to repeal it that's in Congress right now. And there are other ways that that can be changed over time. And so it's really too soon to tell what the ultimate impact of that final rule will even be.

Gotcha. That's helpful. And then just to indulge me on the acquisition front as well, again, I know you don't have acquisitions and guidance. You know, you did do decent volume in 4Q. Just kind of, you know, as you kind of think going forward, opportunities to buy skilled nursing versus senior housing and potential cap rates. Any kind of color you could provide on that would be helpful.

I will say that we are seeing a very active pipeline at this point. It's probably been as active since before the start of COVID. So we are, as we pointed out, seeing a number of loan requests. But, you know, we're sort of able to pick and choose the right deals, and we are able to, we are holding pretty firm on our 10% yield requirements.

Great. Thank you.

Thank you. Our next question is from the line of Josh Dennerlein with Bank of America. Please proceed with your questions.

Hi. This is Farrell Granup on behalf of Josh. I had a question about the Medicaid reimbursement. Are there any states that you are currently trying to avoid or target in that sense?

Sincerely saying target, I mean there are certainly some states that have their difficulties right now, like Pennsylvania is one of those. Not necessarily that we would avoid it because we think ultimately that will head in the right direction down the road. You know, Florida, as you know, we exited quite a bit in 2023 and 2022, so we're not looking to jump back in there quickly anytime soon. And then there are certain states, you know, Texas has staffing issues. Our operators personally do pretty well there, but there are staffing issues in the state. You've got states like Iowa and Missouri who just had recent rate increases. That's too soon to tell how those states are going to do. And we just look at where our operators are, where they're looking to do business, and where the right opportunities are, and just make sure we understand the risk of each individual state.

Great. And one other question about the debt investments, though, 167. We were discussing the makeup between the loan and acquisition volumes. Do you see that going forward of continuing to bridge that gap in the capital markets, or... Is there another color that you're seeing in the deal flow?

You know, right now I think there's just a dearth of senior lending, and otherwise it's just, you know, there's not a lot of people out there with capital that are prepared to lend at this point, so we're just filling a void.

Great. Thank you.

I can't predict how long that will last.

Thank you. The next question is from the line of John Pulaski with Green Street. Please proceed with your questions.

Thanks for the time. Megan, in your conversations with your operators, can you give us a rough sense for the average labor cost increases your operators are expecting in 2024?

You know, I think it's going to vary by operator depending on what regions they're in. There already have been large wage increases over the past several years, and so it just depends on the competition in those particular states.

If you use some direction, is it closer to three? Is it closer to 10%? I'm just trying to get a sense for the pace of moderation labor cost backdrop.

Again, it's going to be very operator specific. I would say on average, I'm sure it's probably in the four or 5%, but I can't really say for sure where that would end up. It just depends on where they're located.

Okay. And then As occupancy builds across markets and there's still staffing shortages, have you seen pockets of your portfolio where that have needed to go back to the agency labor from pretty hard and pull that lever just to compete with, again, just the demand of healthcare rising in the markets?

So I would say in general, I mean, like I noted, the agency has come down pretty substantially over the last few quarters. There are definitely pockets where, you know, you have buildings that are using a lot of agency. But I would say, you know, if we talk operator to operator, most of the time it's, you know, a few of their buildings that have agency as opposed to all of their buildings that have agency.

Yeah, thank you for the time.

Thank you. The next question is from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Good morning. Just a two-parter, I guess, on dispositions. I guess first, how should we think about the rents collected for the dispositions that took place in the fourth quarter largely tied to Levy? Was there anything being accrued or accounted for there? And secondly, how should we think about the health for sale or 24 guidance on dispositions in terms of potential yields on those proceeds?

The levy assets were sold, right? So, you know, we just put a cap rate on those sold assets and then turn around and obviously reinvest those proceeds. We're still working through the restructuring levy, so we haven't determined exactly what that will actual rent will be when that's all shaked out. So that's kind of a TBD.

Hey, Juan, on page 18 of the supplemental, we show, we list, you know, how much we booked in the fourth quarter around what was disposed of, and you can see it's 244K. It's very immaterial.

And how about what should we be assuming for the 24 guidance in terms of disposed?

And then the helper sale assets that, yeah, the helper sale assets, we've booked 788K in the fourth quarter related to those.

Okay. And then just on Guardian, so what's the status there? Do you have an operator all set? It's just a question of getting the state approvals, or if you could just give us a little color on the process from here and where you stand.

Yeah, Dan and the team have identified the likely transition partner and they're working through the process. Again, you know, the timing is, I'm hopeful that by the time we have our second quarter call, we can tell you where it landed, but we don't know right now.

And then just last one for me, you gave the adjusted FFO guidance, but how should we think about

fad as it relates to that adjusted ffo and and uh any commentary you can give on on when you'd expect the dividend to be covered yeah juan so you know based on the assumptions in the forecast i would assume that that's going to run anywhere from two to four cents uh less per in per quarter based on the affo guys and you know there's a based on given the range and what we see, but really timing is unknown, that we could, on a run rate basis, cover the dividend in the late second quarter. But again, timing is the key there.

Thank you very much. Our next question is from the line of Michael Carroll with RBC. Please proceed with your questions.

Yep, thanks. Now, with regard to your investment outlook, should we assume that Omega is mainly targeting individual deals to achieve that 10% yield target? I know there are a few bigger portfolios out there. Is that something that you guys are going to kind of stay away from just given your current cost of capital?

I think that's a fair statement. There are bread and butter tends to be the singles and doubles. There are some relative, there are some more sizable transactions in the UK that are hitting the pipeline. So you might see some stuff there. That's all 10. If you want to call us back and tell us the sizable ones we're not aware of here in the States, we'd love to hear it.

And then with regard to Guardian, how long does it take for the approval process to go through? So if the tenant that you're talking to decides that they want to take the assets, how long does it take to get the regulatory approval before they can get in there?

In the state that we're talking about, 30 to 60 days from the time that you file.

Okay. And then as Guardian kind of winds down, is there any chance that you can get a true up-rent payment as the transition is completed and that operator kind of moves away? Not likely. Okay. And then just last one, I believe in your prepared remarks when you were talking about guidance, you kind of implied that you think your guidance implies that that Maplewood eventually returned back to full contractual rent. Was that a comment that that could occur in 2024, or was that just a general comment that that will occur sometime in the future?

We haven't finalized with the Maplewood team their cash budgets for 2024, but I think they're aspirational that by the end of the year they can reach that target, but definitely going into 2025 won't be there. Assuming nothing else happens, you know, unusual happens.

Great, understood. Thank you.

Our next question is from the line of Nick Uliko with Scotiabank. Please proceed with your question.

Thanks. Maybe a question for Bob. I was hoping to just get a kind of a walk on the balance sheet, you know, based on some of the activity you're assuming on, you know, asset sales. I wasn't sure if there's any more information HUD repayment associated with those. And then you have sort of the cash that's earmarked. It sounds like a lot for the bond maturity. Just trying to understand from a point in time where you guys are at from cash available to invest into new acquisitions based on all that. And then how are you thinking about funding additional acquisitions, whether it's equity or debt?

There's a lot of questions within that one, so let me try to address them all. So I'll start saying today we're sitting with $440-plus million in cash on the balance sheet. And, yes, it's earmarked for the April 1st maturity of $400 million. However, if an acquisition comes up first, you use that. And as I stated in my prepared remarks, we have over $1.4 billion in credit facility capacity. to handle a combination of either the debt repayment and or future acquisitions. We're also, as I stated in the assumptions, that we're assuming that we will dispose of the $94 million of assets out for sale. So that's additional cash to help us handle that bond maturity slash acquisitions. Again, it's really going to be dependent on the pipeline from a capital funding standpoint, but I think we're well positioned just where the balance sheet says today.

Okay, thanks. And then I guess second question is on some of the recent loan investments, whether it was the $50 million term loan or other loans. Were any of those – is there a non-cash interest portion of any of those recent loans? And maybe if you could also just break out – on page three of the SUP, you guys do give all the buckets on the different loans. If there's any non-cash interest income associated with any of those different loan investments you have.

Certainly not on the new deals that we just did. I don't think there's any embedded in page three.

Nick, all the numbers that we're quoting for yields are all cash. There are a couple of loan deals where we have some upside opportunity if there's a refi for excess proceeds, but we don't include any of that in our yield calculation.

Okay, thanks. And then so just on page three, then all the interest income associated with the various loans you're saying is like 100% cash. I wasn't sure if there was any like pick component of any of these loans?

As you know, we have a few contracts out there, a few loans out there that have a component that you and I have walked through in the past that are still in place.

Okay. I'll follow up. Thanks.

Our next question is from the line of Wes Galladay with Baird. Please proceed with your question.

Hey, good morning, everyone. I just have a quick question on the New York asset for Maplewood. Do you see that asset stabilizing by the end of next year? And then if you have it handy, do you know how much EBITDA upside is at the asset?

Well, as I mentioned, we're still working through with the Maplewood management team a revision of the cash flows there. But yeah, I would think if you're talking about end of next year, end of 25, I think that's absolutely fair to assume it'll be fully leased up. and the cash flow number is substantial, but they haven't finished their plan, so we're not prepared to talk about that today.

Okay, and then looking at the held-for-sale assets, are those mostly the V, or would any of it be the 11 small operators that make up that 3.1% of troubled tenants?

So the held-for-sale assets, it's

It's some properties from one existing operator that we're just carving out a few properties. And the second one is one portfolio that we're in a process of selling.

Okay, so would that be part of that 3.1%? You did mention 11 operators you're still working through. Would that, I guess, come down after you sell these assets?

Yes, there is one operator in that 3.1% that we will likely exit those assets, and the 3.1% will go down.

Okay, thank you. Thank you. There are no further questions at this time. I would like to turn the floor back over to Taylor Pickett for closing comments.

Thanks for joining us this morning. We appreciate the time. Feel free to call the team if you have any follow-up questions.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.