National Health Investors Inc
NYSE:NHI
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
51.62
85.15
|
Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Greetings and welcome to the National Health Investors Second Quarter 2022 Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded, today, Tuesday, August 9, 2022.
I would now like to turn the conference over to Dana Hambly. Please go ahead.
Thank you. And welcome to the National Health Investors conference call to review the Company's results for the second quarter of 2022.
On the call today are Eric Mendelsohn, President and CEO; Kevin Pascoe, Chief Investment Officer; John Spaid, Chief Financial Officer; and David Travis, Chief Accounting Officer.
The results, as well as notice of the accessibility of this conference call on a listen-only basis, were released after the market closed yesterday in a press release that's been covered by the financial media.
As a reminder, any statements in this conference call which are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI in its periodic reports filed with the Securities and Exchange Commission, including the Risk Factors and other information disclosed in NHI's Form 10-Q for the quarter ended June 30, 2022. Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhireit.com.
In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules, which have been filed on Form 8-K with the SEC. Listeners are encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release.
I'll now turn the call over to our CEO, Eric Mendelsohn.
Hello, and thanks for joining us today.
As we communicated on our last quarterly conference call, the portfolio optimization we commenced just over a year ago is largely complete and we are now starting to see some of the benefits.
The Bickford lease was reset on April 1 and we're happy to see that their EBITDARM coverage for the second quarter was 1.3x and occupancy improved through the quarter including another 100 basis point, monthly increase in July. We know that we're not out of the woods yet, as Bickford, like the rest of the industry continues to deal with elevated operating costs. So we will continue to monitor this relationship closely. That said our Bickford dispositions and rent restructuring puts our company in much better operational and financial health. With our significant deferral balance outstanding and the fair market value reset of the lease in two years, we're providing all the resources necessary to accelerate the recovery and we're pleased with the early outcomes.
While our portfolio is in better shape and siloed, there are other components in the Bickford organization, unrelated to NHI's portfolio that still need attention. And as a result and with an abundance of caution, we have put them on a cash accounting basis. John will cover more of the details in his comments.
We're encouraged by the quarter of our new SHOP operations, which contributed over $3 million of NOI, excluding non-recurring transition costs, which is in line with our forecast for the year. Recall that these properties have transitioned operators twice in less than 12 months. And we had limited visibility in the months leading up to our SHOP transition due to our litigation with Welltower, which was settled, effective, April 1, of this quarter.
This is difficult on residents and employees. So we've been impressed with the diligence of our partners Merrill Gardens and Discovery, in coordination with NHI's internal operations team in stabilizing these properties. We know this will be a lengthy recovery and see significant upside for internal growth. As we gain more confidence in this platform, we see SHOP as another avenue for long-term external growth as well.
In addition to the Bickford and SHOP transactions, we've completed many other optimization efforts, which has touched well over half the properties in our portfolio. Since announcing our intention to sell between $250 million and $400 million in assets, we've completed over $356 million, including $288.2 million in senior housing sales that had EBITDARM coverage of just 0.5x. We're starting to see the fruits of this labor. While it is a lagging measure, we're encouraged by the direction that EBITDARM coverage is moving.
Our senior housing coverage improved to 1.11x in the first quarter of 2022 versus 0.98x in the fourth quarter of 2021. And total company coverage improved to 1.68x from 1.54x over the same timeframe. See our progress report which was published along with this 10-Q.
The balance sheet is in great shape as we reduced debt by over $330 million in the last 12 months and leverage for the quarter at 4.0x is at the low-end of our targeted range. We have repurchased $70 million under the share buyback program and still have in excess of $250 million of incremental capital to deploy without the need for issuing additional equity.
I'll now turn the call over to John to discuss our financial results and guidance in more detail. John?
Thank you, Eric. Hello everyone.
As Eric mentioned, our second quarter was eventful for NHI and we're pleased with our progress. But I do need to walk you through some of the significant items impacting our results. I'll update you on those items. Then walk you through how our updated guidance reflects those changes and our view for the rest of the year.
Beginning with our net income per diluted common share for the second quarter ended June 30, 2022, we achieved $0.47 compared to $0.85 for the same period in 2021, and sequentially up $0.29 from the first quarter in 2022. For the six months ended June 30, we achieved $0.66 compared to $1.63 for the same period in 2021.
The combined write-off this quarter of the Bickford straight-line rents receivable and lease intangibles representing approximately $0.55 per diluted share are negatively impacting our reported net income and NAREIT FFO per share metrics. Going forward we will be recognizing rental income associated with Bickford only to the extent of the cash we receive from them. For the second quarter Bickford met its obligations to us under their master leases and mortgage notes receivable.
Our pandemic-related concessions were $22.9 million this quarter compared to $7.8 million last quarter. This is primarily the result of the Bickford lease restructuring efforts we had discussed last quarter. We do see a transition away from the pandemic-related rent concession lease accounting expedient back to normal lease modification accounting. We're attempting to execute longer-lasting lease modifications with tenants, where applicable, that incorporate former repayment terms for any prior deferrals. The accounting rules would then require, we include these deferrals into our accounting for newly restructured leases, which can increase the amount of straight-line rent revenue recognized.
The cash collection of those deferrals is still in the future, and in some cases, distant future, and maybe more tied to the deferrals maturity date rather than an imminent cash repayment.
Pandemic lease modification guidance may still be applicable in the future depending on the facts and circumstances of any given deferral. However, the pandemic impacts on our results are much less meaningful and our results of operations are more significantly impacted by occupancy, inflation, labor constraints, and other factors.
The next two significant items are senior housing operating portfolio or SHOP results, and segmented financial statements. This quarter, we are providing you with the results for our 15 property SHOP portfolio and beginning with the second quarter we're now accounting for SHOP as a new segment. As a result of these significant items, revenues on a GAAP basis for the second quarter were down $14.4 million as compared to the prior year quarter. Excluding the effects from the Bickford straight-line rents and intangible lease incentive write-offs, revenues for the second quarter are up $10.8 million from the prior year second quarter. The increase is primarily due to the inclusion of SHOP segment resident revenues, additional revenues attributable to the Welltower settlement or past due Holiday rents, plus with revenues from new investments, offset by reductions attributable to dispositions, lease restructurings and other tenant concessions.
In our provider results, you'll note, we are transitioning many of our performance metrics to NOI-based metrics. Net operating income or NOI, nets total revenue with SHOP operating expenses and eliminates revenues from reimbursable tenant expenses, which we believe will be more comparable to our prior results and more in keeping with how we manage our business. NOI for the six months ended June 30 includes the impacts of the previously described significant items and were down approximately $34 million from the same period in 2021. Adjusted NOI in the second quarter was $70 million sequentially up $2.7 million from the first quarter in 2022. For a more detailed discussion of NOI and adjusted NOI, please see our 10-Q and supplemental information report filed last night.
In the second quarter, we acquired a 53-unit assisted living facility in Oshkosh, Wisconsin, for approximately $13.3 million at an initial cash yield of 7.25%, which also resulted in a retirement of our $9 million first mortgage loan to that same customer.
Also, during the second quarter, we received repayment of $111.3 million mortgage on our Sagewood first mortgage loan.
Together with our earnings press release and supplemental information, you'll find our updated report detailing our progress on dispositions.
During the second quarter, we placed an additional four properties in held-for-sale and recorded a $4 million related impairment charge. Further details on our dispositions year-to-date and assets held-for-sale may be found in note three of our 10-Q for the quarter ended June 30.
Our FFO metrics per diluted common share for the second quarter ended June 30, 2022, sequentially compared to the first quarter. NAREIT FFO decreased $0.34 to $0.71 from $1.05, which includes the impact of the Bickford write-offs.
Normalized FFO, which does not include the impact of the Bickford write-offs, increased $0.16 to $1.26 from a $1.10. Sequentially for the second quarter our normalized funds available for distribution increased $3.6 million to $56.3 million for the first quarter -- from the first quarter.
The sequential quarterly increase in FAD was largely driven by the SHOP contribution of approximately $2.9 million, which excludes transition expenses and is net of non-controlling interests. The Welltower settlement -- and also the Welltower settlement of $6.9 million, higher interest primarily from the $900,000 exit fee earned on the Sagewood payoff and $1.5 million in lower legal expenses. This was offset by additional rent concessions, higher interest expense, and higher general administrative expenses, excluding non-cash share-based compensation expense.
Reconciliations for our pro forma performance metrics can be found on our earnings release and 10-Q filed yesterday at sec.gov.
Our second quarter dividend of $0.90 per share was paid on August 5, 2022, and represents normalized FFO and FAD total dollar payout ratios to 69.5% and 71.4% respectively. As announced yesterday, our Board declared our third quarter dividend of $0.90 per share for shareholders of record on September 30 and payable on November 4.
Turning to the balance sheet. For the quarter ended June 30, our net debt to annualized EBITDA leverage ratio was 4x, which is at the low-end of our targeted range of 4x to 5x. The sequential improvement from the first quarter of 4.9x was driven by $2.9 million NOI contribution from SHOP recognition of the Welltower settlement and excluded non-cash write-off of straight-line and lease incentive impacts. Also contributing to the improvement was lower non-cash share-based compensation expense.
On July 31, we had no amount outstanding under the revolver and $51 million in corporate cash. We did not issue any equity through the ATM program during the second quarter and do not expect to issue equity during the third quarter. We continue to have approximately $416 million available to us under our ATM program.
During the second quarter, we purchased approximately $1.2 million shares of our -- 1.2 million shares of our stock for approximately $70 million at an average price of $58.52 including commissions. At our current dividend per share, this repurchase reduces our annual dividends by approximately $4.3 million.
Our remaining authorization for additional share repurchases is $170 million and expires April 2023.
Together with our second quarter earnings press release, we're updating you on our annual guidance for 2022. Our guidance for the year reflects the significant items mentioned previously and includes NAREIT FFO per diluted common share in the range of $3.86 to $3.92. Normalized FFO per share in the range of $4.48 to $4.43 -- $4.53, excuse me and FAD in a range of $200 million to $203 million. Compared to our April guidance that the client NAREIT FFO guidance is primarily due to the effects from the straight-line and lease incentive, intangible write-offs.
Our guidance includes fulfilling approximately $52.6 million in investment commitments this year, which is a decrease from our April expectations due to expected lower mezzanine investments to Montecito. As previously mentioned, SHOP continues to be in line with our expectations. Our guidance does reflect a modest increase in interest expense this year as compared to our earlier guidance.
We continue to not include any future unannounced acquisitions, any repayment on outstanding deferral balances or any additional share repurchase activity in our guidance. Other assumptions may be found in the guidance portion of our second quarter's earnings press release.
With that, I'll now turn the call over to Kevin Pascoe to discuss our portfolio. Kevin?
Thank you, John.
I'll concentrate my comments on our major asset classes and operators as well as business development and pipeline activity.
Starting with our senior housing needs driven portfolio. This group accounts for approximately 26% of adjusted NOI is where most of our optimization efforts have been focused as our second quarter total deferrals of $3.9 million were all related to five needs driven operators.
Since the second quarter of 2021, we have completed the disposition of 31 buildings for $288.2 million, including $73.3 million in the second quarter of this year. As Eric noted, we are starting to see the benefits from the dispositions in our coverage ratios. Specifically, the needs driven coverage, excluding Bickford improved by 8 basis points sequentially to 0.87 times through the first quarter of 2022.
We have continued to execute our plan with Bickford and their trailing 12-month EBITDARM coverage improved by 10 basis points sequentially to 0.92x through the first quarter of this year, which was calculated using the legacy lease. Adjusting for the rent payments under the new lease, the pro forma coverage was 1.31x through the first quarter and is 1.3x on a trailing three-month basis for the second quarter of 2022.
On Page 7 of our progress report, we detail the significant occupancy improvements in our current portfolio of 38 properties by selling just three underperforming buildings. The portfolio has grown average occupancy by 190 basis points to 84.5% since the most recent asset sales in May, which we attribute in part to greater Bickford focus on the core portfolio.
We are still working on the sale of a few more Bickford properties, which should also improve the portfolio's health and has no impact on in-place rent. We have a $26 million deferral balance with Bickford and continue to target a minimum deferral repayment of $3 million annually with reductions of up to $6 million continue on Bickford meeting specific performance targets and completing certain property dispositions.
First quarter of operations with the 15 SHOP properties, which represents 5% of adjusted NOI included expected disruptions from the operator transition, which was the second transition in less than 12 months. That said, the $3.2 million in NOI for the quarter excluding transition costs is in line with our forecast and we continue to expect the first year annualized NOI contribution will be in the low-to-mid teens with future incremental upside of $6 million to $8 million.
Detail in the supplemental and in the progress report, with second quarter margin in the mid-20s well below historical performance. Our operational priority right now is to rebuild the sales funnel to drive occupancy. July average occupancy improved at both Merrill Gardens and Discovery with the combined portfolio of 90 basis points from June to 77.1%.
13 entrance-fee communities, which account for 27% of our annualized adjusted NOI continue to have exceptional performance. SLC, our largest tenant had EBITDARM coverage of 1.22x. Occupancy improved 60 bases points in the second quarter to 82.3%. This is 200 basis point higher than SLC's pre-pandemic occupancy and the momentum continued into July as occupancy increased by another 130 basis points compared to June.
Senior housing discretionary coverage, which largely reflects the performance of the entrance fee communities improved to 1.39x through the first quarter from 1.16x in the fourth quarter due to strong operating performance, as well as the transition of the legacy Holiday portfolio to SHOP.
Skilled nursing portfolio, which represents 34% of annualized adjusted NOI continued to have solid EBITDARM coverage at 2.7x, including 3.51x in NHC and approximately 1.98x for other operators. The SNF resilience was primarily attributable to NHC and Ensign, which represent approximately 77% of the SNF portfolio. Our other five SNF operators under leases have received minimal rent concessions since the pandemic began, and we did not provide any SNF-related deferrals in the second quarter.
The second quarter was quiet from an investment standpoint. The pipeline is definitely more active than it had been in recent quarters, which is encouraging, but we are not seeing pricing change material at this point despite the significant increase in financing costs this year.
On a positive note, we have seen several deals that we had previously passed on, come back to the market, which suggests that balance may be tipping back towards buyers.
We continue to prioritize deals with immediate real estate ownership or short-term financing structures with a path to ownership. As I noted on our last conference call, we are seeing more RIDEA type opportunities in the pipeline and believe this is a tool for longer-term external growth, but our focus is now on driving operational improvements in the current ventures before looking to expand the platform.
With that, I'll hand the call back over to Eric.
Thank you, Kevin.
Our second quarter GAAP results were impacted by our conversion of Bickford to cash basis, but were otherwise in line with expectations. We've updated our guidance, which includes a modest revision to FAD as our visibility continues to improve with the portfolio optimization efforts largely concluded. Our focus now is very much on returning to growth. We're in excellent financial health with leverage at the lower-end of our targeted range, which gives us significant capital to deploy without the need to issue equity in the immediate future.
Operator, we'll now open the line for questions.
Thank you. [Operator Instructions].
Our first question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please proceed.
Great, thanks, and good afternoon, everybody. I guess, Eric, given the challenges that you've endured and, sort of the recent lease restructuring with Bickford, why wait until now to move them to a cash basis? And maybe what more specifically did you see in their financials that caused you to cash out on that ability to remain a going concern?
Hey, Austin, it was a number of factors. One is, they have other loans and other creditors that we have no control over. And they have debt that's coming due that will probably be rolled over and refinanced, but our auditors here are very focused on that. So rather than fight that battle, we just decided that it was the right time to convert them to cash accounting. I feel that we've done a good job creating a silo around our portfolio. We've got a master lease. We've got good coverage. If you look at our progress report, you can see that the last coverages -- quarters coverage was really strong, based on the new modified lease payment. So we feel good about our properties and our portfolio.
That's fair. And I guess you've mentioned, sort of, out of an abundance of caution, to the extent, I guess, Bickford didn't remain a going concern, I guess, what sort of options are you left with? Do you have any replacement operators that you're, in the back of your mind, I guess, trying to line up in the event that there is a change that needs to be made? And do you think you can, sort of, keep the terms that you recently restructured under the Bickford lease, with any new prospective operator?
That's a great question and one that we certainly consider a lot around here. We recently did a transition of properties from Holiday to RIDEA using different managers. When you have a larger portfolio, that's geographically diverse the way Holiday was and the way Bickford is, that may be something to consider, meaning that different managers in different geographies would take some properties, but not all of them.
The other likelihood is that, if Bickford were to restructure, they would just be leaner and meaner and probably want to keep this portfolio. It's a well-performing portfolio of newer buildings and better markets. It's taken us three years to get this portfolio where we want it. And it would be easy sell to either a re-tooled Bickford or another operator that wanted to take over a portfolio that had good cash flow.
And then what would that mean for the $26 million of deferred rent under that scenario? And then separately just last one for me, I'm curious if you believe that you're going to be able to sell these three assets that I believe were held-for-sale, kind of in light of this news around Beckford?
Yes. You want me to take the first part of it.
Sure.
This is John, Austin. So in terms of the $26 million, remember we've never said we've put that that deferral on our balance sheet. And then, as I mentioned, in my call, where we feel confident straight-line revenues will begin to pull in those deferral balances elsewhere onto our balance sheet.
In the case of Bickford because they're on a cash basis now, through straight-line receivables or other means, we won't initially be doing that, but we'll always be evaluating Bickford situation, and in the future, that that doesn't mean to say that we couldn't change the accounting on Bickford at a later date.
And then, Austin, to your point about the properties held-for-sale, the properties we've been selling have been older underperforming properties, so some accounting treatment done by us here in Tennessee isn't going to affect how a buyer feels about a building that is of a certain age and of a certain level of performance. That that usually isn't something that is a concern to a new buyer, that's going to be putting on their own operating platform and capital structure onto whatever building they're buying.
[Operator Instructions].
Our next question comes from Connor Siversky with Berenberg Capital Markets. Please proceed.
Hi, out there and thank you for taking the question. I just want to move on to your burdening SHOP portfolio. Curious what the expectations -- well, as it relates to guidance, I'm curious what the expectations are for RevPOR growth through the end of the year? And then how does that compare to unoccupied rooms that are being leased in real time?
Sure. Hey, Connor, it's Kevin. As we kind of talked about on the prepared comments, our focus right now is really to get the lease volume up, rebuild the sales funnel and improve occupancy. As you can see in the progress report, though, historical margins were much better on this portfolio, and we would expect a fair amount of flow-through to drop to the bottom line as occupancy improves.
I would tell you that the goalposts have shifted a bit, and we don't expect to get back to a 45% margin, but we do expect margins to improve over time. And then once occupancy gets to a more stabilized level, then we can focus more on improving RevPOR, which I do believe is going to be an opportunity, but that's secondary to the approach right now.
Okay. And then just sticking to the margin outcome in terms of OpEx for the SHOP portfolio is the SHOP portfolio running at full head count in terms of employment? And what does the use of agency labor look like in real time?
Well, I would say the -- from a full head count standpoint, no. It's a challenging environment to hire and retain people right now. So there's always going to be some level of turnover. That said, the good news is because we're not delivering care, there isn't a large need for agency in this portfolio. So we're not seeing large expense due to agency, as there may be some overtime and just things like that, trying to hire people. So there is a little bit of wage pressure, but it's not like we're seeing in the needs-driven side.
Hey, Connor, this is John. Can I -- let me also say this with respect to the guidance and the strategy that you're seeing play out here. And there's some information now in our supplemental regarding some historic SHOP information, I think you'll find pretty interesting. And you got to remember that these are independent living communities, and they typically will have a lot of flow-through from that revenue line down to NOI if we can build occupancy as opposed to other higher acuity product lines.
So if you don't see a lot of RevPOR push right now, we'll have a lot more successful increases in our NOI if we can just build occupancy in these portfolios at the moment. And I think that's where we're focused.
[Operator Instructions].
We have a question from Sam Choe with Credit Suisse. Please proceed.
Hi, guys. I'm on for Tayo today. Just wanted to just make sure that, I guess, in terms of the SHOP portfolio expectations that low to mid-teens annualized NOI earnings profile still hold in the near-term. And then I guess, just to kind of think about the incremental $6 million to $8 million, like, how should we think about that in terms of timing?
Yes. So this is Kevin again. And yes, we are still targeting kind of a low- to mid-teens run rate, which, if you look at our numbers, we're on pace for that now. As we look at what the opportunity is for the portfolio, I would tell you that's going to unfold over the next probably 18 to 24 months. We don't expect it all to show up next year. This is going to be a process for us to rebuild the occupancy, get the operations stabilized. So it's going to be over time, but we do still see that opportunity for this portfolio.
Got it. Got it. That's helpful color. And then on the deferral balance, I know it's been growing. But subsequent to 2Q, have you guys announced anything? And I mean, I know that you guys are still working with a smaller operator. So should we assume that the 2Q number that we saw is an appropriate run rate until you guys resolve something with these smaller operators?
So that's a pretty difficult question for us to answer because we're not giving you a lot of color on forward-looking concessions that we might be looking at. And is one of the principal reasons why we felt very strongly to give you guidance. So I don't want to -- I really don't want to answer that question, to be honest with you. But we will have some continuing deferrals through the end of the year. We may actually have some that kind of flow into 2023.
Our mission here is to minimize those. So it feels more like business as usual four or five years ago. It's what Eric has always referred to in the past as that 3% to 5% of our sort of worry list. And I think we're getting there. In fact, we're there. So that's the best way I want to answer that question today.
Got it. And then, I guess, the takeaways based off of what you're saying is that, I mean, you guys are getting close to resolving things with the smaller operators. So you're more optimistic than before. Is that what I should take away right now?
Yes, absolutely. And you can see that in our EBITDARM coverage chart and the progress report, you can see how things are improving. And it's a combination of selling underperforming buildings and the remaining buildings are gaining occupancy and margin.
We have a follow-up from Austin Wurschmidt with KeyBanc Capital Markets.
What was the collection figure for July?
So we didn't publish that, and we're not going to publish that. What I would say to you is we did talk about $2.9 million in rent deferrals in the second quarter -- or I'm sorry, $3.9 million in rent deferrals in the second quarter. And -- but obviously, as we restructure things, collections are very high and very different than they were during the pandemic.
Yes, that's -- I was just trying to get a sense with some of these restructurings, if we should expect that to migrate higher. And then separately, the April run rate on the deferrals that you gave kind of held steady through the quarter, but it looked like it expanded from three operators to five operators. Any reason we should expect that to drive a higher deferrals in sort of the months ahead?
So this is Kevin. I would tell you that we continue to work with our operators on a case-by-case basis. We had a couple that popped up this quarter. We'll continue to monitor it. We've given the guidance in terms of where we think that bucket comes in for this year and that's incorporated with them. And we're still working through the portfolio.
We talked about a few other buildings that we're evaluating for sale and may go into that bucket where once we have them sold, we're no longer looking at deferrals. So that's a continued refinement in the portfolio. We've gotten rid of the big drivers. We have a few more to continue to evaluate and decide if they're going to be ones that we stick with or if we dispose of, but that will be kind of the work for the rest of this year.
There are no further questions at this time.
Thank you, everyone, for joining us and your time and attention, and we'll look forward to seeing you at NIC or one of the many conferences we attend.
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.