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Sabra Health Care REIT Inc
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Good day, ladies and gentlemen and welcome to the Sabra Health Care REIT First Quarter 2019 Earnings Conference Call. This call is being recorded.
I would now like to turn over to Michael Costa, EVP of Finance. Please go ahead, Mr. Costa.
Thank you. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations, regarding our acquisition, disposition, and investment plans; our expectations regarding our tenants and operators; and our expectation regarding our future financial position and results of operations.
These forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31, 2018 and in our Form 10-Q that was filed with the SEC yesterday, as well as in our earnings press release, included as Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday.
We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances and you should not assume later in the quarter that the comments we make today are still valid.
In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included in the Financials page of the Investors section of our website at www.sabrahealth.com. Our Form 10-Q, earnings release and supplement can also be accessed in the Investors section of our website.
And with that, let me turn the call over to Rick Matros, Chairman and CEO of Sabra Health Care REIT.
Thanks, Mike, and thanks everybody for joining us this morning.
It's been a quiet first month since we finished all of our restructuring initiatives and so that for us is a good thing to ease into a more normal operational environment. As it pertains to guidance, we reaffirm our 2019 guidance. There were a couple of notes that presumed we have an issue hitting guidance due to the managed portfolio performance, that’s not the case. And Todd will be providing some details to give everybody comfort that we are comfortable with where the managed portfolio is going and why we feel comfortable that we'll continue to meet guidance throughout 2019.
We're also focused now on the debt side of the balance sheet and how we'll get into that in a little bit more detail, but it's not that we've been looking at opportunities on the debt side for a while and just waiting for sort of timing to work out for us, and we have that sort of in our sights now. So we expect to get some activities that will improve the balance sheet as well.
In terms of our acquisition pipeline, it’s currently around $800 million, again primarily senior housing, but we're starting to see some skill deals. And for us our focus will be on the deals that we can get done given our current cost of capital which are skill deals, behavioral deals to the extent that we can find them.
We've also been looking at the addiction space that we like. And there aren't a whole lot of tried and trued operators but there are some opportunities there that are small that would give us at least the opportunity to get into it little bit and learn more about it without taking any real risk. But it is a space that we expect to see grow and certainly is a nice compliment to what we're doing on the behavioral side in our portfolio.
In terms of our operating results, 7 of our top 10 are skilled operators, 5 showed improved coverage sequentially. So, we're continuing to show better strength there. One is flat and that was North American. So some of the declines we’ve seen they’ve stopped those declines and we're seeing signs of things improving there. And then the one skilled operator that we have that on came down some in coverage with signature health at 1.25.
Operationally they're doing fine, and we expect things to improve there. They've got a nice Medicaid rate increase coming in Kentucky about 2.5% in July. And that’s their biggest state with us. The primary issue for them has been as most of you know they have very high PLGL which is what relatively restructuring initiatives that we and others undertook with them, and their experience in PLGL has come down dramatically.
But it's always been about eight months. So their actuarial results have been really swinging back and forth a little bit as it takes quite a bit of time for the actuaries to settle in with management and with the right accrual rate is to those liabilities. But nothing that we're concerned about, their good operators and we don't expect any issues there. And again some upside in the short-term in terms of rate increase on the Medicaid side. And then of course the market cascade in October 1.
And relative to the market estimate October 1, obviously that happens in conjunction with PDPM, and that’s a better market basket than we've received in years. So that's obviously a good thing for the space.
In terms of PDPM, we continue to raising feedback more of our operators relative to their - relation for PDPM, they continue to be bullish about it and we've gotten really nothing but positive feedback and expectations relative to implementation at PDPM, with all of our skilled operators.
The remainder of our same-store triple-net skilled portfolio was uneventful coming in at 1.29 EBITDA and 1.77 EBITDAR. Occupancy was essentially and the skilled mix was slightly down, but consistent with the range of spin-in, and still the strong 39.1%. Skilled mix will always move around more than overall occupancy due to the dynamic nature of those patients.
Our senior housing same-store triple net rent coverage in occupancy were essentially flat as well sequentially. Our specialty hospital same-store rent coverage was flat with occupancy slightly down there as normal variance.
And with that, I'll turn the call over to Talya.
Thank you, Rick.
I will provide an update on our Managed portfolio. For the first quarter of 2019, approximately 12% of Sabra's cash net operating income was generated by our managed senior housing communities. Approximately 84% of that relates to assets that are managed by Enlivant, 15% relates to retirement homes and three provinces in Canada, and the balance to three assisted living and memory care communities in the United States. Pro forma for the 21 holiday communities that were transitioned on April 1, annualized cash net operating income from our managed senior housing communities would be 16.9%.
On a same-store basis which excludes a property in Canada that we sold in the fourth quarter of 2018, the Managed portfolio had solid results in the first quarter compared with first quarter of 2018. Revenue increased by 3.9%, cash net operating income increased by 2.4%, and revenue per occupied unit excluding the non-stabilized assets was up 4.6% despite flat occupancy. This points to our operators' ability to push rates in the current environment coupled with a focus on expense control.
Let me give you some further detail on our joint venture and wholly-owned managed portfolios. The Enlivant joint venture portfolio, a 172 properties located in 18 states across the United States of which Sabra owned 49%, showed steady improvement. Average occupancy for the quarter was 81.2%, 0.5% higher than the first quarter in 2018 when occupancy was 80.7%.
Revenue per occupied unit was $4,159, slightly below the previous quarter and 4% higher than the first quarter of 2018. Importantly, cash net operating income margin was 25.9% compared with 25.8% in the first quarter of 2018.
If the Enlivant joint venture’s cash net operating income remains flat for the rest of 2019, we would see 7% year-over-year cash NOI growth and that is before the impact of Enlivant’s annual rent increase which occurs on October 1 of each year.
As to the wholly-owned portfolio, Sabra’s wholly-owned Enlivant portfolio of 11 communities continues to deliver steady results with an emphasis on controlling expenses following significant revenue gains throughout 2018. Average occupancy declined to 90.8% compared with 92.6% in the preceding quarter, reflective of lower moving volume during the winter months. This follows multiple sequential quarters of occupancy growth in 2018 which materially outpaced everyone's expectations.
Revenue per occupied unit rose to $5,363 holding nearly all of the rate gains implemented in the fourth quarter of 2018 and 7.6% higher in the first quarter of 2018 and cash net operating income was 16.2% higher on a year-over-year basis with a margin of 29.5%.
Sienna Senior Living manages eight retirement homes in Ontario and British Columbia for Sabra. In the first quarter of 2019, the eight properties managed by Sienna showed steady operating and financial results with 90.3% occupancy, down sequentially from 92.4%, but spot occupancy as of April 30 was 90.5%. So the trend is looking good.
Portfolio occupancy has ranged from just under 90% up to 93% over the past year or so and this occupancy dip is attributable to seasonality coupled with renovation projects at three of the properties in the residential areas.
RevPar growth and expense control yielded 39.4% cash net operating income margin compared to 38.2% in the preceding quarter and cash NOI itself was flat on a sequential basis. Sienna continues to focus on revenue growth in the portfolio which has a direct impact on net operating income margin at these occupancy levels and we continue to invest additional capital onto the properties maintaining their appeal.
We have one operator in our wholly owned managed portfolio who manages two non-stabilized communities and that creates some noise in our totals on the wholly owned managed portfolio. The dollars are small enough that it will not affect guidance and we still expect to achieve 3% to 6% cash NOI growth in the wholly owned managed portfolio.
Subsequent to the end of the first quarter, Sabra's Holiday portfolio consisting of 21 independent living communities located across the country with transitions from our triple net portfolio to our managed portfolio. Holiday's portfolio continues to have importance performance with occupancy as of March 31 at 91% ranging between 79% to 100% across the portfolio.
I will now turn over the call to Harold Andrews, Sabra's Chief Financial Officer.
Thank you, Talya.
For the three months ended March 31, 2019 we recorded revenues and NOI of $136.8 million and a $129.3 million respectively compared to $139.2 million and a $136.6 million for the fourth quarter 2018. These decreases are attributed to the adoption of the new lease accounting standard which among other things impacted the amount of revenue recorded during the quarter for certain assets in transition.
However this reduction is not expected to impact our full year financial performance communicated in our previously issued 2019 earnings guidance. FFO for the quarter was $77.2 million and on a normalized basis was $85.4 million or $0.48 per share. FFO was normalized to exclude $5.9 million related to the acceleration of above market lease intangible, amortization $1.2 million of loan loss reserves and $1.1 million of unreimbursed triple-net operating expenses. This compares to normalized FFO of $90.2 million or $0.50 per share in the fourth quarter of 2018.
AFFO which excludes from FFO merger and acquisition costs and certain non-cash revenues and expenses was $83.2 million and on a normalized basis was $84.3 million or $0.47 per share. AFFO was normalized to exclude $1.1 million of unreimbursed triple-net operating expenses. This compares to normalized AFFO of $83.8 million or $0.47 per share in the fourth quarter of 2018.
For the quarter, we recorded a net loss attributable to common stockholders of $77.7 million or $0.44 per share which includes an impairment of the real estate charge of $103.1 million primarily related to the assets previously leased to Senior Care centers. G&A cost for the quarter totaled $8.2 million and included the following; $2.8 million of stock-based compensation and $0.1 million of CCP related transition costs. Our recurring cash G&A cost of $5.1 million or 3.9% of NOI for the quarter in line with the prior quarter.
We expect ongoing quarterly cash G&A cash to be approximately $5.5 million. Our interest expense for the quarter totaled $36.3 million compared to $37.2 million in the fourth quarter 2018. Included in interest expense in each quarter is $2.6 million of non-cash interest.
As of March 31, 2019, our weighted average interest rate excluding borrowings under the unsecured revolving credit facility and including our share of the Enlivant joint venture debt was 4.28% consistent with the fourth quarter of 2018. Borrowings under the unsecured revolving credit facility borrow interest at 3.74% at March 31, 2019, a decrease of 1 basis going from the fourth quarter of 2018.
As of March 31, 2019, we had 30 assets held for sale which included the 28 Senior Care Center facilities that we sold on April 1 for gross proceeds of $282.5 million and two additional Skilled Nursing facilities.
We did sell three Skilled Nursing facilities during the quarter for net proceeds of $6.9 million and recognized a $1.5 million net loss on sale. Three of these assets are part of the CCP portfolio repositioning plan.
We were in compliance with all of our debt covenants as of March 31, 2019 and continue to maintain a strong balance sheet with the following credit metrics which include the impact of the Senior Care center asset sales and the Holiday conversion which occurred - both occurred on April 1, 2019.
Net debt to adjusted EBITDA 5.64 times. Net debt to adjusted EBITDA including unconsolidated joint venture debt 6.08 times; interest coverage 4.19 times; fixed charge coverage, 4.06 times; total asset, sorry total debt to asset value, 48%; secured debt to asset value, 7%; and unencumbered asset value to unsecured debt, 233%.
As of March 31, 2019, we had total liquidity of $402.6 million consisting of unrestricted cash and cash equivalents of $22.6 million and currently available funds under our revolving credit facility of $380 million. After considering the net proceeds from the Senior Care center sales and the Holiday lease termination fee which aggregated to $338.7 million, our pro forma liquidity increased to $741.3 million.
In addition, we set up an ATM program in the first quarter whereby we can sell shares of our common stock having aggregate gross proceeds of up to $500 million. Subsequent to March 31, 2019, we sold 1.1 million shares of common stock under the ATM program at an average price of $19.57 per share, generating aggregate gross proceeds of $21.2 million, which further increased our liquidity and positively impacted our leverage. Subject to market conditions, we expect to continue to use the ATM program to reduce our outstanding debt investments and have future investment in properties to achieve our stated deleveraging goals.
With respect to the balance sheet, we are watching the bank and bond markets to take advantage of opportunities to extend our debt maturities, lower our cost of debt and increase our financial flexibility with current market covenants. While I can't provide any specificity at this time, we hope to see some activity in these areas in the coming quarters.
And to reiterate what Rick and Talya just said, we reaffirm our full-year guidance and regarding our managed portfolio if NOI stays flat for the balance of the year, we will hit about 7% growth in the Enlivant joint venture NOI and will be about flat year over year on the owned portfolio. And keep in mind, loan portfolio is so small in absolute dollars that just a couple of hundred thousand dollars per quarter increase in NOI puts us at the midpoint of our guidance range.
Finally on May 8, 2019, the company announced that its Board of Directors declared a quarterly cash dividend of $0.45 per share. The dividend will be paid on May 31, 2019, to common stockholders of record on May 2, 2019. In terms of cash flows and the related funding of the dividend, we expect full year 2019 cash flows from operations to fully cover our 2019 dividend payments.
And with that, I’ll open it up to Q&A.
[Operator Instructions] And our first question comes from Trent Trujillo from Scotiabank. Your line is open.
Hi, good morning out there and thanks for the comments to clarify your seniors housing managed portfolio. It's very helpful. Looking at other components of guidance, it does include some delusion from equity raises and you mentioned the $500 million ATM program. On the last call, you mentioned to be patient and wait until the stock was perhaps on an improved price and it sounds like since that time, the stock has been between 19 and 19.50, you executed within that range subsequent to the quarter end but that's below where the stock was at the time of your last call. So how are you thinking about ATM. usage going forward?
Yes, thanks for the question. And the answer is, with respect to the ATM program and our deleveraging you know certainly, we'd love to see the stock price higher than it is but when we think about issuing the equity to deliver, the impact on the stock price being $20 or $19.50 it's really immaterial. And so we made the decision in early April, actually it is at the end of March to go ahead and issue a little bit of equity at the 19.57 price range.
I wouldn't say definitively that we would issue more equity or lower price, but I think we're going to be opportunistic. And I think that the point, I'd like to take away is whether it's 19.50 or 21.50 we're very committed to delivering the balance sheet this year and we will do what it takes and when it needs to take to get the leverage down below that 5.5 times leverage level that we identified.
And so again, we'll be patient. We're not going to rush out and do it all at this level, but at the same time, we take it it's prudent to go ahead and get started in that process and say you should expect to see us continue to use the ATM over time this year to get the levers down.
That's very helpful. Yes, it does. Yes it does. I guess following up on, I guess the underlying need for equity there's the future purchase of the Enlivant JV that you have done already own, which you mentioned as a likely possibility in 2020. So I guess with the stock where it is who knows what's going to happen with the price and where you can issue stock but are you thinking about other ways or structures or approaches besides purely raising equity to make that transaction work?
Yes, we are and we've got a long way to go before we have to exercise that but assuming we're kind of in the same place there are the options that we've discussed internally. One option for example that may be a really good option for us is to enter into a new JV and there's certainly not a shortage of interested parties in doing that with us. So you know, that right now, may be the best looking option but again, we've got we have plenty of time on that.
And if I may one more, it was very nice to see that five of your seven operators showed improved coverage on the quarter. So I guess what happened with those five operators that it improved and what's happening with the rest of the portfolio since the aggregate coverage dropped and I guess specific to one of those operators rent coverage for North American Health Care. I think on the last call, you mentioned in January, the coverage jumped back up to 1.25 after a blip. So what exactly happened that they still ended around 1.1?
Well, I think on the operators that improved which carry the majority of our NOI. I think we've been pretty consistent all along that we expect to be starting to see improvement. So length of stay is flattened out, which has helped.
I think they've done a good job on expense control. So - and we also didn't think that operation for PDPM was to be an issue that was going to cause any downturn. So I think it's consistent with kind of the trend that we've been seeing.
Our North American, they did have two, two to three months in the first quarter, were good month, but remember that, that's a quarter in arrears, we're still reporting trailing 12, right. So you wouldn't, - say anything.
But even with the first quarter it's not going to make that bigger difference. On trailing 12, I think we need a couple of our quarters. But January was a better month, March was even a better month, February is never a good month in our states because you got 28 days and fixed expenses.
But we are seeing improvement there. So it's really a function of being a quarter in arrears and we were just really, we were pleased at this point to see that they are breathing a kind of soft, as we expected it to, and we're starting to see an upturn. So that's for the rest of the portfolio. Signature is actually a big driver now, drop a couple of basis points, it wasn't a big drop for the entire portfolio.
So we're not seeing anything from a trend perspective, that's causing us concerns, and I know, you know, I kind of look at a lot of these things differently, then you all do, not just as an operator, just have set things through sort of, move a little bit, up and down, just sort of vagary to the business, but we're not seeing anything, that we're concerned about.
And I think you know, we're pretty close to some better times to the space, both in terms of the Market Basket in October and PDPM although I think it's also fair to say that, we shouldn't expect that as soon as PDPM hits on October 1. You're going to see some upturn, I think it's going to take several months to realize that, and we'll positive impact continue to think about in 2020, as we present our numbers on the traditional basis, if we're starting to see positive impact on PDPM when we start showing some things on a performance basis as well, to give the market a better sense of how PDPM is impacting our skilled operators.
Our next question comes from Nik Joseph from Citi. Your line is open.
This is Michael Griffin on for Nik. So in terms of fundamentals regarding business, we see the occupancy is up a pretty decent amount year-over-year. Do you see trends like that continuing into the future and sort of any color on that would be great?
Yes, we do. I mean we've got in the skilled space you've got kind of a perfect storm coming. You've got declining supply, which is going to continue. You've got an increasing demographic. And then even though most of the commentary that, I think you'll have seen about around PDPM has been the benefit being primarily on the expense side, I think that's a fair statement to make. Because on the revenue side we do see opportunities there but it's just - it's much harder to sort of quantify what that may be.
So for example, if you're moving your focus as a skilled operator from being exclusively on short-term rehab because that's what the old system designed you to do and you're focused more on patients that have nursing complexities. Those patients are going to tend to have a longer life to stay.
So you actually could get some revenue benefit there, and if you have a longer life to stay then obviously you're going to have better occupancy. So you've got this convergence of demographic decline in supply and potential upside on the top line from PDPM and we'll have to keep an eye on the state because that's probably the only factor that we're going to be able to look at, in order for us to differentiate on how much of occupancy growth in the future is due to supply issues versus demographic versus PDPM. So I think that will be a good step for us to keep an eye on that. Is that helpful?
Yes, no that's helpful. I just got one more quick one, regarding concentration, you mentioned back in April that you've decreased a SNF concentration portfolio down about 60% meaningfully decreased that in Texas, probably it isn't that friendlier state for SNFs sort of long-term picture, where would you like to see that SNF concentration be?
I think we'd like to get it a little bit lower just have a little more diversity and if you assume, if you just take where we are today and assume modest skilled acquisitions and then additionally, assume the exercise of the joint venture option you're close to 50%.
So that's a pretty nice balance obviously, it's not just skilled in senior housing because every day in there as well. And I think we're getting it down low enough where we can take advantage of opportunities on the skilled side.
So for example, because we between our development pipeline which is senior housing and Enlivant sometime next year, you've got more senior housing coming in, obviously, our cost of capital isn't quite what we'd like it to be and frankly even if at present we are few bucks higher, we still want to be paying some of the prices that the PEs are paying for senior housing.
So the current cost of capital actually isn't a factor in our determination as to whether we'll be senior housing that we just think it's too expensive anyway. So we're in a good spot right now where our cost to capital does allow us to pursue skilled opportunities as well as behavioral if we can find them and without pushing our exposure back up to where it was say, at the time that we closed the merger with CCP was 74%, that’s not going to happen. So with everything that we've gone through, I think we're in a pretty good spot to have a little bit more time for our cost-to-capital to recover and then focused on skilled deals, without skewing that exposure too much.
Our next question comes from Chad Vanacore from Stifel. Your line is open.
Just beginning of the year, I think you keyed up about $300 million of dispositions. Now the majority of that was in senior care center sale which took place but you still got 30 assets held for sale. So what is the aggregate proceeds that are remaining from here to the end of the year that we should expect?
Yes Chad, it's Harold. First of all the $300 million that we referenced in our guidance was in addition to the senior care center sales.
Okay
So we still have a lot of dispositions that will occur this year that over and above that a lot of them are towards the latter part of the year. So I think I'm not sure if that answers your question but there's still a lot to be done. And the key that we have held for sale today, in addition to senior care centers those are ones that we're far enough along the process that it's very, very close to closing on those transactions.
We don't tend to put stuff in held for sale until we've got a contract that's executed and we're very close to closing because of the way the GAAP rules are required to qualify for held for sale. So you'll see more dispositions over the course of the next few quarters.
And those anticipated dispositions, Chad were new dispositions or a new issue. They were all up in finance in the context of the merger. So there's nothing new that occurred or tenants that all of a suddenly had different issues.
But beyond what you've already put in for held for sale and what you expect for this year, beyond that what - if you had to circle a portion of portfolio that doesn't fit your strategy any longer roughly what portion of your portfolio would you estimate that as long-term?
Yes, I don't think we've got any tenants left that don't fit our strategy or have products within their operations that don't fit our strategy. And in fact, we're seeing some different opportunities of strategy now in the behavioral space where we have a couple of operators who are interested in converting the skilled facilities, or you need skilled facilities to behavioral use because that's a growing phase.
So yes, we really don't say - it always going to facilitate from time to time that you’re going to one of the best because market will change. We look at our tenants we just don't see anybody that we kind of want to move on.
And something like those behavioral opportunities would that be more can do CapEx funding to convert those over to proper facilities or what would that entail?
Chad it's Talya. I think that's right and it really varies on the situations. If it's to a hospital typesetting and there's more CapEx if it's something that's not quite that - reconfiguration potentially. So it really varies but that's - but just a transition and CapEx is really the nominal cost to us.
And in some cases our operators they not need the CapEx from us. So, it would just - be situation specific.
And that brings me to another question, is now a better time to ramp up your new investments or to deliver for Sabra?
Well, we’re going to have plenty of proceeds available to do acquisitions, if we can find skilled acquisitions that are interesting to us and other things. I mean the question comes up, but we don't see - a conflict between our ATM usage and delivering the balance sheet and getting some acquisitions done. We're not going to be out there, and doing, $1 billion dollar acquisitions. So we'd like to get some growth going.
And I think it'll be, they'll probably be smaller deals that are more along the lines that you've seen from us in the past. So I think if you actually look at - the numbers, and the fact that they're not going to be huge numbers, you can do both. And we have all that out. We've looked to all that obviously in our forecast and believe that we can accommodate it.
Our next question comes from John Kim from BMO Capital Markets. Your line is open.
I just wanted to follow up on the guidance and the senior housing managed portfolio because it sounds like what you're saying is, if you hit sort of cash NOI is flat on your joint venture portfolio, you'll get 7% growth for the year. And then also on your own portfolio if it's flat it will be basically flat for the year, but just looking at your last few quarters as well as some of your peers, just like first quarter is the high EBITDA margin point. So I'm just wondering what gives you confidence to either retain margins or just retain that level of NOI through the remainder of 2019?
Well, we don't view first quarter as being a high point. So and Enlivant for example, historically, the second or third quarters are the best quarters. So that hasn't been our experience.
So 2018 was an anomaly?
Well, you had the flu but that really lingered, it really impacted the second quarter pretty dramatically. We obviously haven't had that experience this year. And specifically impacted the second quarter, so dramatically it took a while to recover from that so you start in the third quarter as well. We are not the only ones who experienced that.
Right now, specifically on Enlivant because they are the major contributor to our managed portfolio both on the JV and the wholly owned. They do a fourth an annual rent increase in the fourth quarter. So actually fourth quarter tended to be their strongest quarter.
Yes, they don't wait till January 1, they do it October 1 and that was 5% last year on the JV and 5.5% on the wholly owned.
So just back of the envelope, we estimate you need to get about 10% growth for the remainder of the year in the joint venture assets 7% in your wholly-owned to reach the midpoint of your guidance. Is it fair to say that the midpoint is not likely and it's more of the lower end of guidance that you're likely to achieve?.
This is Harold. I have to see your math because as we said, we don't need any growth in the joint venture to hit 7% which is close to that midpoint. And on the owned portfolio, it's a slight growth in absolute dollars of about call it 250,000 a quarter to hit the midpoint. And so I'm not sure how you came up with that math but that's our math.
We could spend time with you offline John that's just not right.
Can you confirm what the impact is on NOI from the holiday portfolio transition?
Yes, on NOI, if you're just comparing the lease versus our comparison of the NOI for the first quarter it's about $2 million for the quarter. But again that does not include benefits for paying down debt from the termination fee, but from our pure NOI perspective, it's about $2 million for the quarter.
For the quarter not annualized?
Correct. On an annualized basis after the FFO impact was around $0.05 or $0.06 including the paydown of debt associated with the termination fee. And all that again fully built into guidance and reflected in our expectations for the year.
Last one form me, the impairment that you touch with other charges as well, was a $103 million, I think last quarter you provided guidance of 69, I'm just wondering whether the difference was between the two numbers?
Yes, the $69 million was specific to the assets being sold for Senior Care centers. In our 10-Q, we disclosed $76 million which included the other assets as well as some amount for assets that were being held, but we've made - again some too much detail, but because we're now keeping three of the assets, I'm sorry, selling three of the assets at the end of last quarter, we weren't exactly sure how many those assets we were going to keep and how many we were going to sell.
Now that we're pretty much committed to selling three of the 10, then there were some impairment for those assets as well. So you add that in plus the $10 million or so million for the other assets that we’re selling that were not part of Senior Care centers and that's the difference to get to the $100 million.
And the impairment, John was specifically due to, we have Houston facilities that got really damaged by the hurricane last year.
Our next question comes from Rich Anderson from SMBC Group. Your line is open.
So I just want to get back to that holiday question from John. So the $0.05 to $0.06 impact inclusive of the $57 million that you collected in the second quarter is that correct?
It does not include the 57 million, as it affects our income statement for, the fee itself, what it includes is the impact of being able to pay down debt with that $57 million.
I see all right. So the $0.05 to $0.06 is a good number next year hopefully it gets better than that, but that's sort of your base case going forward?
That's correct.
Okay.
And again, built into our guidance numbers as well.
Just a question on Signature. If I’m looking at this correctly, the coverage last quarter was 1.43 times, 1.25 times this quarter. I know you said you're not concerned there's some noise - sort of legal noise or whatever. But at what point does - do you get concerned when you see a sort of a drop of that order of magnitude on a sequential basis.
Well. So, if the drop was due to operational performance, we'd be concerned. But we're seeing steady operational performance there. The drop is specific to just taking longer than you would like for the actuarial, you get your arms around what the reserves should actually be, what the run rate should actually be. So, and the other concern would be, if there were a change in their experience on those liabilities and that would be concerning because that would obviously have a run rate effect on the income statement, but that's not the case either.
So the drop-off that we expected in terms of claims with how the environment change in Kentucky last summer it happened, and their experience since then has been consistent with expectations. It's really just an actuarial issue.
And then last one from me. Rick, you kind of spoke swimmingly a little bit about the skilled nursing business with a still declining supply demographics in the right direction, PDPM cleansing effect of that, and all the other things, suddenly skilled nursing starting to sound like a pretty cool asset class. Not to get ahead of ourselves, but is there a time in the future you think that an operating model, I guess a SNOP model would apply realistically for skilled nursing, are you think that that's just too much to ask at this point?
Yes, I think it's probably a little bit too much to ask at this point. However, if you look at everything that CMS is doing, they're actually thinking really strategically which I think historically hasn't necessarily been the case, on health care spaces, of course post-acute spectrum and actually acute hospitals to always operated from a reimbursement perspective in silos. And all that’s changing now, is everything is going to case mix and with CMS opening, openly discussing importance in neutral site system which we think would really be good for the skilled sector.
So I think what you're talking about, when you get to a neutral site then I think maybe yeah, it is a possibility, but that's a ways down the line. I think just with the current dynamics that we see changing probably not but yeah I think, but maybe at that point, you know that remember you're taking out a lot of liability if you do the same thing with skilled that you're doing with senior housing. So even if you have a model that with a lot more reliable, than in a neutral site environment, I think the big issue still that would prevent us from wanting to go there is on the liability side.
Because the difference between skilled nursing and senior housing from a liability perspective is that the database is the database of everybody on the skilled side called nursing home compare. So it allows the plaintiffs’ attorneys to just troll right. They could just go into that database, and troll and pick on companies, pick on facilities and just target. And that isn't the case with senior housing nor do I think it ever will be the case with Senior Housing.
So even if you have a much more reliable model going forward, that's fairly predictable, I don't see how you get away from being concerned about those liabilities. So with someone who’s spent a few decades in skilled nursing amongst the other sectors, I just don’t think I can get convinced.
And one quick one for Harold, I'm sorry, on the debt and the deleveraging side, over 30% of your debt expiring in 2021 and 2022. Is there anything about I think a big chunk of 2021 is a revolver, but is there anything about those chunks of debt that's out there that are unattainable at this point or is that something that you can go after with minimal penalties?
Yes, we could absolutely go after the 2021 maturities with very minimal cost.
Okay.
I would say we can't do that specifically right now but just tune we feel pretty good.
[Operator Instructions] And our next question comes from Daniel Bernstein from Capital One. Your line is open.
I guess it’s morning out in California. I noticed the - on the wholly-owned Enlivant properties, you have 11 properties there, you have about [90%] more occupancy, 30% margins. It's very different on the JV and is there any material difference between those assets and the reason why the JV assets can't get up to at least upper 80s, 90% occupancy and close to 30% margins over time?
There is nothing intrinsically different. We're just talking about different pools of assets and so, you're hopeful that what you just said in fact, does come true and it's just a question of time.
See, the wholly owned were just further along in the turnaround phase, and plus they're looking at some assets within the JV that, they're in the process of divesting, which will help the overall performance as well.
And then the assets that you're divesting the rest of this year, are you currently getting paid rent on those or is - something we would have to adjust in the model, once you sell those assets or - is the rent out of your - revenue line at this point.
Well, it's a, it's number of assets Dan, so it's probably a mix of both. I will tell you that, all those dispositions are accounted for in our guidance numbers. So any lost trends from those has been dealt with in our full-year guidance. But it's like I said, upwards of $300 million over the course of a year, so it's a facility here, facility there all over the board. And frankly, a fair amount of it is towards the latter part of the year and so you're going to have a pretty small impact. But I think you know if you want to chat more about it offline, I can kind of give you a little more detail on balance sheet.
And then some of your peers had been talking about value-add opportunities, earlier in this call, you talked about cost of capital maybe being a little bit restrictive on senior housing or skilled nursing but you know, I think if you found some value add that that probably would you know you can make those accretive. So are you looking for value add, are you seeing any being brought to you or you're interested in those?
Let me make one comment and then, Talya may want to add on. We've always been to the value add I think you know we're trying to be a little sensitive to our investor base relative to all the restructuring we've done over that 18 month period and now, we've got that behind us. So I think if we do look at value-add opportunities, we'll be relatively small.
We don't want to announce anything that's going to drive the narrative again for the foreseeable future and we don’t want to announce anything that's going to require a lot of explanation. So we'll look for smaller opportunities like that. Talya?
I think that's right and we have done them over time as Rick said here and there. They've always been small and the key aspect of a value-add is the time it takes to actually how much value can you add and how much time does it take to realize that value? But we're always open to looking at things we just haven't seen any that felt like they were going to go well fairly quickly so far.
So look CCP was evaluated that what's allowed us to get out from under what was happening as the Genesis. Just really controlling the state of our company. So that goes to the comments I made earlier about us wanting to be just more sensitive now to how we approach those things.
Our next question comes from Lukas Hartwich from Green Street Advisors. Your line is open.
I just have one, can you provide the underlying EBITDA growth for the holiday portfolio during the quarter?
In quarter-over-quarter?
Year-over-year for the first quarter.
I have to get that to you and I'm having.
I mean, you're talking about their operating performance and not what's in our financials but their operating performance.
Yes. Yes. Because, if you look at the other holiday portfolios, it looks like independent livings, had a better environment and so you're starting to see NOI growth show up there. So, just curious if we're also seeing that in your holiday portfolio?
We can get it to you.
Yes, we'll get, we'll get back to you with that number, in our portfolio is all I have l so.
Our next question comes from Todd Stender from Wells Fargo. Your line is open.
Just to kind of stick with holiday for a second. What was the, -what was the EBITDAR coverage, at Q1, I know you guys used to listed in your supplemental, but just to get a sense of the starting point, I guess whether they're now managed, direction.
Yes, it's been pretty flat. It's still around 0.9 EBITDAR basis and that's not really much changed from prior quarters. So it's still pretty flat.
It was there for a long time, Todd.
And then any, how about the CapEx commitment, for just for holiday and any comments that there's deferred maintenance and maybe now you'll be responsible for that?
We've always been involved in capital projects and discussions along those lines, there is, I'd have to get back to what the capital commitment is. But there's nothing unusual, that, that's occurring there its more - it’s status quo.
Yes, Todd I’d say the way I would characterize it is, they don't have deferred maintenance issues in our portfolio. The question is how much more can you do to putting the facilities up and make them all the more competitive. But those will require material dollars.
And then for Harold, any or have you disclosed or could you disclose your line balance, it was on the high side as of Q1, but you had some senior care disposition proceeds already. So maybe just looking at a, you know $600 million line balance what is it now?
Yeah. To your point it was paid down by the proceeds from holiday to the $57 million in the $282 million. So when I gave you that pro forma liquidity, number of - I’ll just grab it again $741 million. That means our line, the liquidity on the revolver is somewhere around $720 million. So I mean there's about $280 million outstanding on the line today.
Thank you. And I am showing no further questions from our phone lines. I'd now love to turn the conference back over to Rick Matros, for any closing remarks.
Yes, thanks everybody for your time today. We’re available for any follow up, we’ll follow up with a couple of you on the items that were specified and just to make the note again, we’re comfortable with guidance. Thanks. Have a good day.
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a wonderful day.