Good morning, and welcome to the Omega Healthcare Investors first quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Michele Reber. Please go ahead.
Thank you and good morning. With me today are Omega CEO Taylor Pickett, COO Dan Booth, CFO Bob Stephenson, 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, dividend policy, portfolio restructurings, rent payments, financial condition or prospects of our operators, contemplated acquisitions, dispositions or transitions, and our business and portfolio outlook generally. These forward-looking statements involve risks and uncertainties which may cause actual results to differ materially. Please see our press releases and our filings with the Securities and Exchange Commission, including, without limitation, our most recent report on Form 10-K, which identifies specific factors that may cause actual results or events to differ materially from those described in forward-looking statements.
During the call today, we will refer to some non-GAAP financial measures such as Nareit FFO, Adjusted FFO, FAD and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles, as well as an explanation of the usefulness of the non-GAAP measures, are available under the Financial Information section of our website at www.omegahealthcare.com and, in the case of Nareit FFO and Adjusted FFO, in our recently issued press release. 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, Michele. Good morning, and thank you for joining our first quarter 2022 earnings conference call. Today, I will discuss our first quarter financial results, skilled nursing facility industry trends, operator restructurings, and our share repurchasing activity. Our first quarter adjusted FFO is $0.74 per share, and funds available for distribution are $0.65 per share. We have maintained our quarterly dividend of $0.67 per share. Dividend payout ratio is 91% of adjusted FFO and 103% of funds available for distribution. We believe that the elevated FAD payout ratio is temporary based on the fact that 14.5% of our contractual rents and interest are involved in restructuring discussions and 12.3% of contractual rents were not paid in the first quarter and therefore are excluded from FAD.
The successful sale of the Gulf Coast Health Care portfolio and imminent completion of the Guardian Healthcare restructure provide us with strong momentum to eventually return to comfortable FAD payout ratios. Turning to skilled nursing facility industry trends. Fortunately, the December and January pause in facility occupancy improvement reversed in February and March, with preliminary mid-April Omega core occupancy levels at 77.9%, up 300 basis points since January 2022. Unfortunately, staffing shortages and elevated costs continue to pressure operating cash flows and the ability to admit new residents. At this point, it is impossible to predict how quickly industry occupancy will fully recover or how rapidly the current labor force pressures will subside. Turning to operator restructurings. Dan Booth will provide detail regarding specific operator restructurings. In general, these efforts include one or more of the following actions.
One, rent deferrals, two, asset sales or transitions to a new operator, and three, in certain cases, rent resets with other amended lease provisions. Examples include elimination of purchase options, future upward potential rent resets, lease extensions or revisions of renewal rights and collateral enhancements, adjustments or usage. As we have discussed in the past, the strength of our portfolio assets generally allows us to work through operator restructurings with limited long-term cash flow downside. The Gulf Coast portfolio net proceeds of over $300 million offset the lost Gulf Coast contractual revenue, while Guardian, which is still in process, will result in a very modest diminution in value from the pre-restructuring contractual rents and no diminution in value from our origination yields. Turning to share repurchasing activity. We have repurchased $133 million of our stock utilizing a portion of our asset sale proceeds.
The share repurchase program is an efficient tool that has allowed us to harvest capital non-dilutively. Finally, I again thank our operating partners and in particular the frontline caregivers and staff who have cared for the tens of thousands of residents within our facilities. I will now turn the call over to Bob.
Thanks, Taylor, and good morning. Turning to our financials for the first quarter. Our Nareit FFO for Q1 2022 was $171 million or 69 cents per share on a diluted basis as compared to $170 million or 71 cents for the first quarter of 2021.
Our adjusted FFO was $184 million, or $0.74 per share for the quarter, and excludes several items as outlined in our adjusted FFO reconciliation to net income found in our first quarter earnings release and our supplemental and also on our website. Revenue for the first quarter was approximately $249 million before adjusting for non-recurring items compared to $274 million for the first quarter of 2021. The year-over-year decrease is primarily the result of revenue recorded in Q1 2021 related to Gulf Coast, Agemo, and Guardian, all cash-based operators, as well as revenue related to asset sales that occurred after Q1 2021.
In our last earnings call, I provided revenue, adjusted FFO, and FAD commentary on Gulf Coast, Agemo, Guardian, and an operator who indicated it would not be paying its first quarter rental obligation. I want to provide an updated revenue status and Q2 2022 outlook on these operators. Dan will provide contractual and operational updates on these tenants in his prepared talking points. First, regarding Gulf Coast. In Q4 2021, we recorded $7.4 million of adjusted FFO and FAD based on our ability to offset any unpaid rent against the balance of a sub-debt obligation owed by Omega. At December 31, the sub-debt balance was fully exhausted, and therefore, we did not recognize revenue related to Gulf Coast in Q1 2022.
On March 31, all but two of the Gulf Coast assets were sold for over $300 million in net proceeds. Looking at Agemo. In Q4, we recorded $4.6 million of adjusted FFO and FAD as Agemo paid one month of rent and interest. For Q1 2022, Agemo did not make any contractual payments, nor did it make any payments in April. Q2 2022 contractual rent and interest of approximately $15 million will only be recognized to the extent Agemo makes any payments as they are on a cash basis. Turning to Guardian. In Q4 2021, Guardian was placed on a cash basis, and we did not record any revenue as we did not receive any cash during the quarter.
In Q1 2022, Guardian failed to make any rent or interest payments, and as a result, again, no revenue was recognized. In April, we received $944,000 from Guardian, and based on the signed restructuring agreement, we're expecting to record approximately $5.2 million in Q2. However, as Guardian is on a cash basis, we will only recognize AFFO and FAD to the extent payments are made. As noted in the Q4 earnings release, in January, an operator representing $8.3 million of quarterly revenue or 3.4% of Q1 contractual annualized rent and mortgage interest revenue did not pay its January contractual rent and asked for a short-term forbearance. This operator did not make any rental payments during the first quarter.
However, it remains on a straight-line basis for revenue recognition based on our conclusion that their contractual rent is fully collectible over the term of the lease. During Q1, the operator did pay its full Q1 interest obligation of $360,000. For AFFO purposes, we included $8.3 million of Q1 revenue related to operator's lease and interest obligations. However, we recognized only the $360,000 of cash received in our FAD calculation. In Q2 2022, this operator paid its April contractual obligation of $2.8 million, and we expect this operator to continue paying its full contractual obligations. In Q2, this operator also borrowed an additional $1.8 million on his $20 million credit facility with Omega.
Lastly, as noted in our April 1, 2022 press release, an additional operator representing $5.9 million or 2.4% of our Q1 contractual annualized rent and mortgage interest revenue did not pay its March contractual amounts under its lease agreement. In April, the lease with this operator was amended to allow the operator to apply its $2 million security deposit to its March 2022 contractual rental payment and allow for a short-term rent deferral for the month of April, with regular rental payments required to resume in May. For Q1 2022, we recorded $5.9 million for both Adjusted FFO and FAD purposes.
If the operator does not make its May or June rental payments and remains on a straight-line basis for revenue recognition, we would include $5.9 million of revenue for Q2 for AFFO purposes. However, we will only recognize FAD based on cash received. The $249 million of revenue for the quarter includes $3.2 million related to the write-off of straight-line receivables associated with 6 facilities transitioned to a new operator and also included $1.2 million of one-time revenue, both of which are excluded from AFFO and FAD calculations. Moving to our balance sheet. It remains strong, thanks to the steps we've taken during 2021 and the first quarter of 2022 to further improve our liquidity, capital stack maturity ladder, and overall cost of debt.
In Q1, we repurchased 981,000 shares of Omega common stock for $27 million. At March 31st, we had $355 million of outstanding borrowings on our revolving credit facility. We also had $491 million in cash, primarily due to the March 31st sale of the Gulf Coast Health Care portfolio. In April, a portion of the balance sheet cash was used to repay $255 million of credit facility borrowings and repurchase 3.9 million common shares of our stock for $106 million. At the end of April, we had approximately $170 million of cash on hand. At March 31st, over 92% of our $5.7 billion in debt was fixed.
After the April credit facility repayments, 97% of our $5.4 billion of debt is fixed. At March 31st, our net funded debt to adjusted annualized EBITDA was 5.3x, the same as Q4 2021, and our fixed charge coverage ratio was 4.1x. It's important to note, similar to Nareit FFO, Adjusted FFO, and FAD, EBITDA in these liquidity calculations includes our ability to apply collateral and recognize revenue related to operator non-payments previously discussed. However, if the collateral is exhausted, a decrease in EBITDA will impact our liquidity ratios. The actions taken to date provide us with significant liquidity and flexibility to weather the continued impact on our business, primarily driven by COVID-19. I will now turn the call over to Dan Booth.
Thanks, Bob, and good morning, everyone. As of March 31, 2022, Omega had an operating asset portfolio of 938 facilities with approximately 94,000 operating beds. These facilities were spread across 64 third-party operators and located within 42 states and the United Kingdom. Trailing twelve-month operator EBITDARM and EBITDAR coverage for our core portfolio as of December 31, 2021 decreased to 1.48 and 1.14 times respectively, versus 1.52 and 1.18 times respectively for the trailing twelve-month period ended September 30, 2021. During the fourth quarter 2021, our operators cumulatively recorded approximately $47 million in federal stimulus funds as compared to approximately $26 million recorded during the third quarter.
Trailing 12-month operator EBITDARM and EBITDAR coverage would have increased during the fourth quarter of 2021 to 1.26 and 0.93 times respectively, as compared to 1.21 and 0.88 times respectively for the third quarter, when excluding the benefit of any federal stimulus funds. EBITDAR coverage for the standalone quarter ended December 31, 2021 for our core portfolio was 1.19 times, including federal stimulus, and 0.98 times, excluding the $47 million of federal stimulus funds. This compares favorably to the standalone third quarter of 1.04 times and 0.92 times with and without $26 million in federal stimulus funds, respectively.
Occupancy for our overall core portfolio continued to slowly trend up throughout 2021, reaching a high of 75.8% in December, up from a low in January of 2021 of 72.3%. In January of 2022, the portfolio saw a dip in occupancy to 74.9% due to the Omicron surge, but has since trended up based upon preliminary results, increasing to 75.3% in February, 76.5% in March, and 77.9% as of mid-April. Turning to our senior housing portfolio, today, our overall senior housing investment comprises 182 assisted living, independent living, and memory care assets in the U.S. and the U.K.
This portfolio, on a pure play basis, had its trailing twelve-month EBITDAR lease coverage decreased to 0.94 times at the end of the fourth quarter as compared to the end of the third quarter, which covered at 0.97 times. Based upon preliminary results, occupancy for this portfolio has trended up steadily during the first quarter of 2022, increasing from 82.3% in January to 82.7% in February and 83.1% in March. Turning to portfolio matters. Gulf Coast. On March 31, 2022, Omega completed the fee simple sale and transition of 22 Gulf Coast facilities for net proceeds in excess of $300 million and simultaneously re-leased one facility to an existing Omega operator. The one remaining Gulf Coast facility, which is currently closed, is expected to eventually be sold along with its existing licensed beds.
The sale and re-lease of these 23 facilities, excluding the closed facility, effectively concludes our restructuring efforts with Gulf Coast. Our ultimate rent equivalents, based upon net proceeds of $300 million and a 9.5% cap rate, effectively equal Gulf Coast pre-restructure 2021 contractual rents, taking into account the offset which the company is entitled to under the terms of its subordinated notes. Guardian. On April 8, 2022, Omega entered into a restructuring agreement with Guardian Healthcare. The agreement, which was made retroactively effective to January 1, 2022, provided for, among other provisions, that, one, Guardian would be allowed to defer certain rents, provided those rents would be repaid over time based upon certain cash flow thresholds. Two, Guardian would consent and actively cooperate in the transition of 20 existing facilities, either through sales to third parties or re-leases.
Three, rent would resume post deferrals beginning in April of 2022. To date, Omega has sold or re-leased 13 facilities. The remaining seven facilities are expected to be transitioned in the second quarter of 2022, although there is no assurance that these transactions will either close or close on a timely basis. Agemo. We continue to be in ongoing discussions with Agemo on a restructuring agreement, which is expected to involve the sale of a material portion of Agemo's existing Omega portfolio. We will continue to provide updates as discussions progress. Other operators. As of today, we have two other operators that failed to make payments in the first quarter. As it relates to the first operator, on March 14, 2022, Omega entered into a letter agreement which provided for the deferral of January, February and March rent.
The deferral is due in a lump sum on December 31, 2022. This operator paid April rent in full. As it relates to the second operator, on April 29, 2022, Omega entered into a fourth amendment to an existing master lease, whereby we agreed to use an existing security deposit to pay March rent and defer April rent. Rent is expected to resume in full in May. At this time, no further action is underway with either of these two operators. Turning to new investments. As previously announced, on January 1, 2022, Omega completed an $8 million purchase lease transaction for one skilled nursing facility in Maryland. Also, as previously announced, on January 31, 2022, Omega completed an $8 million purchase lease transaction for one care home in the U.K.
For both transactions, the newly purchased facilities were added to an existing operator's master lease with initial yields of 9.5% and 8%, respectively. On March 16, 2022, Omega completed a $5 million purchase lease transaction for one care home in the U.K. On March 23, 2022, Omega closed on a $100 million purchase leaseback transaction for 27 care homes in the U.K. Concurrent with these acquisitions, Omega entered into master leases for the care homes with two new U.K. operators. Both new master leases bear an initial cash yield of 8% with 2.5% annual escalators. Omega's new investments for the quarter totaled $142 million, inclusive of $20 million in capital expenditures. Turning to dispositions.
During the first quarter of 2022, Omega divested 27 facilities for total proceeds of $333 million. I will now turn the call over to Megan Krull.
Thanks, Dan, and good morning, everyone. As expected, the COVID case count since the height of Omicron in January has fallen exponentially. While that fact, coupled with the surge itself not resulting in the high hospitalizations and death rates experienced pre-vaccine, is welcome news, given where we were a year and a half ago, it should not detract from the fact that the industry continues to face challenges. Staffing shortages continue to persist with a heavier reliance on agency. AHCA estimates a loss of 241,000 nursing home employees, or 15.2% of the workforce since February 2020, including an additional 2,500 jobs in March 2022. Because of those shortages, nursing and agency expense continues to be elevated.
Agency expense on a per patient day basis for our core portfolio for fourth quarter 2021 was more than six times what it was in 2019. This in turn continues to have an impact on occupancy, with self-imposed admission bans due to staffing shortages delaying an even better occupancy recovery. The good news is that, as mentioned earlier, we are starting to see traction on the occupancy recovery front despite these staffing challenges. As of February 2022, approximately 25% of core facilities have now recovered from an occupancy perspective. Unfortunately, on the federal stimulus front, no new releases from the Provider Relief Fund have been announced. There still remains approximately $3.5 billion of phase four payments yet to be released as HHS continues to review applications submitted last year.
While additional federal stimulus would be welcome, given continued elevated expenses and occupancy that hasn't fully recovered, now more than ever, it is critical that the states step up to ensure that rates keep pace with the persistent increased expenses, including post public health emergency when the increase in FMAP will no longer be in effect. Finally, while the number of cases and deaths in nursing homes during the pandemic has put somewhat of a regulatory target on the back of the industry of late, it is important to note that individuals in nursing homes were in the demographic and clinical state most vulnerable to the virus, and therefore it should not have been unexpected that they would experience the largest impact. The prioritization of the vaccination efforts to this population was a clear recognition of that fact.
We hope that while the administration contemplates modifications to regulatory oversight, it recognizes the nuances of the industry with extreme staffing challenges, increased expense pressures, and the tremendous efforts the industry has made for over two years in adapting to care of the elderly during an unprecedented pandemic. I will now open the call up for questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star then two. Please limit your questions to one with a single follow-up. Our first question comes from Jonathan Hughes with Raymond James. Please go ahead.
Hey, good morning. Bob, thank you for all the details on the moving parts of revenues back in the first quarter and into the second quarter. I guess just to simplify for us listening, could you maybe give us that net change from 1Q to 2Q, from revenues that are not expected to be collected and revenue that is expected to come back?
Yeah, Jonathan. I'll look at it from a FAD perspective. The FAD was $161.9 million in Q1. I would expect based on my talking points to go up about $11 million-$11.5 million increase.
Okay. I guess, I mean, barring any more operator issues and realizing it's still a very challenging environment for skilled nursing, that's still a very real possibility. Obviously if Agemo and Guardian and others do pay some rent in the second quarter that are currently on a cash basis that I assume are not in that figure you just gave us, I mean, have we effectively found the bottom in terms of cash flow paid, you know, to you by your operators?
Just a couple comments, Jonathan. Bob does have Guardian as part of that Q2 FAD number. To your point, Agemo, which essentially has paid no rent, if they were to pay, that would be upside. I think in terms of calling the bottom, it's fair to call the bottom as it relates to the operators we're talking about, but we still need to be wary of the next couple of quarters. I would point out as Megan in her prepared comments talked about, public health emergency is still supporting via FMAP, the revenue side of the equation for our operators. When the health emergency isn't extended beyond July, that will create some additional pressures.
You know, we feel good about the resiliency of the portfolio, the workouts that the team's been able to work through. You know, I would still stress that we're not through this. In terms of these operators, I think we're in pretty good shape.
Okay. Thank you for clarifying that. I appreciate it. Can I just sneak in one more? Just on the buybacks, you know, if we use consensus NAV, that's basically, you know, purchase their shares at a mid-8% implied cap rate, and obviously there's no underwriting uncertainty there. You know, can we expect maybe more buybacks with the expected sales proceeds for the, you know, 26 properties under held for sale? Would you prefer to deploy those into new assets like U.K. care homes? Thank you.
Yeah. Yeah, for sure, Jonathan. Step one for us is to find a home for our capital with new assets and support our existing operators. To the extent that there's not enough volume there in the pipeline, then we'll certainly continue to look at stock repurchases as well.
Great. Thanks for the time.
Thank you.
The next question is from Sam Cho with Credit Suisse. Please go ahead.
Hi, guys. I'm on for Tayo, and thank you for taking my question. Just wanted to go back to the Guardian portfolio restructuring. Regarding the 8 re-leased facilities, just curious as to what the expected rents are and the timing of when those will start.
When you say eight, we had a total of 20 facilities that we had teed up to either sell or re-lease. To date, we've transitioned 13 of those. We have actually seven left. When we're all finished, which we hope will be in the second quarter of 2022, but I wanna caveat that this restructure is not complete yet. Based upon you know what we have inked to date and what we have in process, it looks like our total rent or rent equivalents for those 20 facilities in total will equal about $8 million.
Got it. Will that start like maybe 2Q and into 3Q? Is that the expectation?
The ones that we've already transitioned have, well, depending on the timing of those transitions, will start paying rent almost immediately, as will the seven remaining.
Got it. Okay. Just shifting gears. The 26 facilities classified as held for sale, I know some of that's Guardian. Could you kind of talk about the remainder of that held for sale facilities and maybe the cap rates that you're expecting on those?
Yeah. You're right. The bulk of that is the seven Guardian assets that Dan talked about in his close in the press release. There's one operator that we're looking to exit the portfolio. It's been held for sale for a number of quarters. That represents about 13 additional assets. Then we have four closed assets. As you know, every quarter, we go through our portfolio and look to sell closed assets if we have those. So the total on our books is $92-$93 million of net book value. We're hoping to get in excess of, you know, around $120 million in proceeds. We booked in the first quarter $2 million of revenue related to that.
Got it. Great color. Thank you so much.
The next question is from Nick Joseph with Citi. Please go ahead.
Hey, this is Michael Griffin on for Nick. I'm curious, just to touch base, on the tenant side, beyond the currently non-paying tenants, can you quantify maybe a percentage that might be on, like, a future watch list?
You know, I can't quantify a percentage. There are some smaller operators that are struggling, that we've had discussions with. There's no operators of any real scale, that we're having issues with from a payment perspective. It's hard to predict out in the future. As we've said, there are still challenges out there, and a number of things on the horizon, including, you know, the comeback in occupancy, the labor costs, all the things that we've discussed that, you know, are still remain challenges for our sector. You know, we'll have to sort of navigate the next few quarters going forward. To predict what percentage that is, that would be throwing darts.
Yep. No, totally understand. Just shifting to the regulatory side, I'm curious to get your thoughts on the recent CMS proposal for the rate cuts, kind of how you expect this to impact your tenant base, and if you expect any changes during this, you know, 60-day comment period.
Well, it's a little disappointing that there wasn't more discussion from CMS about phasing in the PDPM adjustment, which was, you know, there were 16 pages in last year's proposed reg about ways to phase it in. That would be helpful given that the environment this year isn't any better than it was last year. You know, we're hopeful that over the next 60 days that perhaps there's a shift and that the adjustment isn't just all at once, and therefore we have a negative rate. That being said, we know it's eventually coming, so, you know, our operators will do what they've always done and work hard around that. It's just that much, just another piece of pressure that we'll be dealing with.
Gotcha. That's helpful. Thanks. Appreciate the time.
The next question is from Connor Siversky with Berenberg. Please go ahead.
Good morning, out there. Thanks for having me on the call, and appreciate the detail prepared remarks. I'm just thinking back to the context of deploying capital, whether that's in buybacks or deploying real assets. I mean, what does the opportunity set look like in the U.S. and the U.K.? I mean, are you seeing the action of the seller's market cool off at all? Do you expect you see more opportunities for OHI through the end of the year?
Yeah, I mean, it still is a seller's market in the US. We're seeing more opportunities in the UK, obviously based upon our acquisitions to date. That's coupled. It's not just opportunistic in the UK, it's also coupled with the fact that occupancy in the UK was not hit near as hard as our counterparts in the US under COVID. Therefore, their recovery has been swifter. Therefore, the stability is just, you know, we're seeing a lot more stability across the pond than we are here. You know, once again, it's opportunistic, but I do expect we'll continue to look at transactions in the UK as well as in the US. Most of the deals that we're doing in the US right now are not big portfolios.
They're more sourced by our existing operators and are more regional or smaller in nature.
Okay, thanks for that. Quickly on Guardian, apologies if I missed this before, but in these re-leasing activities, are you looking to place new operators in these facilities, or are they already on the tenant roster for the most part?
No. We've got a couple of new operators that have gone into these facilities. Most of them are involved sales, to be honest with you, but we do have a couple of new operators that are going into these buildings.
Okay. Appreciate the color. Thank you.
The next question is from Richard Anderson with SMBC. Please go ahead.
Thanks. Good morning. Early on in the call you said, 12.3% of rents and interest not paid in the first quarter. All of that would be reflected in your FAD number. How much of that actually shows up in FFO, meaning those that are still on a GAAP, you know, accounting basis?
So you have the one operator, the 3.4% of that absolutely shows up. That's the operator I said we kept on a cash basis but did not record FAD. What's the total % Neil, you have it? I don't have the total in front of me of that. I can call you back on that.
Yeah.
I know it's around.
I'm just trying to connect the dots and the cadence between FFO and FAD and how to, you know, sort of move that forward, you know, based on all the moving parts.
Well, the best way I think is, I mean, I can offline call you and walk through the model, but the best thing I think is to take that FAD number of that $162 and then add back the numbers we said today are, you know, around $11-$11.5 million of additional FAD.
Okay.
We have a couple operators, you know, that or at least that one operator that's on a cash or a straight line basis.
Right. Right. Okay. Fair. Yeah, that's fine. Second question is, you mentioned, I think you said this, you know, you're talking about traction appearing to materialize on an occupancy front. Then I think you said something more than 20% of your facilities have, you know, kind of had the full occupancy recovery. Did I, first of all, hear that right?
Go ahead.
Yes, about 25% of the facilities have recovered from an occupancy perspective.
Is that a geographical observation? Is it an operator observation? Is there some common knitting to that 25%, that informs the rest of the portfolio?
You know, there really isn't. We've dug into it quite a bit. There is a little bit of a geographic concentration, you know, in Florida and Texas, but those are states that we're heavily concentrated in anyway. So we continue to try to see if there's, you know, any sort of way to look at it to garner something as to what's going on, but we haven't been able to find anything.
Okay. Short and sweet. Thanks.
The next question is from John Pawlowski with Green Street Advisors. Please go ahead.
Thanks for the time. Megan, could you just give us a sense how pervasive the number of facilities that are restricting admissions is today versus, call it, the end of last year?
Yeah. I mean, it's significant enough to be causing an issue with occupancy, clearly. I think, you know, just anecdotally with operators, some operators are feeling like things are maybe not getting worse, but at least stabilizing. It's hard to sort of figure out day-to-day how many facilities are on admission stand because it really is so fluid with, you know, staff calling out, and then you're not being able to admit. It can change on a daily basis.
Okay. The restrictions really haven't gotten much better in the last three months or so?
I wouldn't say so, no.
Okay. Last question from me referring back to the Medicare cuts. Have you seen it have an observable impact on the bidding trends for assets you have for sale right now?
We have not.
Okay. All right. Thank you.
The next question is from Nicholas Yulico with Scotiabank. Please go ahead.
Thanks. Just going back to, you know, all the details you provided, Bob, is helpful on the operators. I guess my question is if you. You know, can you remind us what is the trigger to put these operators on a cash basis versus, you know, keep booking GAAP revenue? Because, you know, I think for those two other operators, right, the 3.4% and the 2.4%, those exposures, right, they didn't fully pay in the quarter, yet you're booking revenue, you're assuming some revenue, GAAP revenue in the second quarter. So just trying to understand, you know, what's the what's sort of the delta there about what would put those on cash basis versus keeping them in, you know, FFO.
Well, you look at the long-term collectibility of the total rental obligation over the life of the lease. If you feel you're gonna collect it, then you keep them on a straight line basis. It's basically it. There's other facts and circumstances that come into play, that's the big picture.
Okay. I guess, you know, the follow-up there would be, at this point, why not provide some quarterly guidance? I mean, you got. You know, you booked revenue for these operators. You have some visibility as to what you're thinking you're gonna get in the second quarter. You know, why not provide quarterly guidance? Even if you could also maybe just give us a feel for as we think about, like, this quarter from a, you know, from a normalized FFO number, you know, like whether that first quarter run rate is a good one to start basing off for the second quarter. I mean, any perspective there would be helpful 'cause I think, you know, from a modeling standpoint, it gets pretty tricky about whether these companies are on cash, whether they're on GAAP revenue.
It also, you know, looks like some of the, you know, election of that treatment for the operators in the first quarter will look like a, you know, a beat. That's why I think it would be helpful to understand, you know, what. Going into the second quarter, okay, well, what are we dealing with now?
Yeah. From our perspective, Nick, it's just, I think we've been pretty clear about the uncertainty around cash collections. You know, we're hopeful that the couple operators that have resumed paying will continue, but it's just impossible to know. To your point, you know, I get it that trying to connect the AFFO and FAD dots can become complicated, and the best we can do is just give you as much data as possible. I would just encourage you to continue to talk to Bob about, you know, specifically how we're recording.
Right. Okay. All right. Thanks, guys. Yeah, I guess from the cash collection, I get it. But you know, from a GAAP revenue standpoint, I mean, just understanding, you know, you booked it in the first quarter. Okay. Well, we're gonna definitely have this in the second quarter, which sounds like that's. I mean, that is the case, right? That you are assuming that for the 3.4% operator, the 2.4% operator, right? The Guardian, you're assuming as well, just to be clear, full revenue, GAAP revenue in the second quarter. Is that correct for those three?
That's correct. Remember, Guardian's cash basis, so you don't have any straight line component there. Yes, that is correct going into Q2.
Okay. Thank you. Helpful.
The next question is from Steven Valiquette with Barclays. Please go ahead.
Great. Thanks. Good morning, everybody. You know, obviously, there's a lot of moving parts right now within the portfolio of disclosed and non-disclosed operators. I guess, as we look at that table with a list of operators with EBITDA rent coverage ratio that's sub one on page 6 of the supplement, can you just give us any sense for how many of those 21 operators on that list are currently paying rent versus how many are not paying rent?
We can. Bob's looking at it right now.
Okay. Sorry to throw you the math question in the middle of the call there. In the meantime, I can ask a follow-up that I wanted to ask. Just given where the total portfolio coverage ratios shook out at 12/31 that you just put in the supplement, as we think ahead one additional quarter, is there any preliminary directional view today on whether those coverage ratios will improve or deteriorate further for that core portfolio when you report the Q1 2022 coverage ratios next quarter? That'd be the follow-up. Thanks.
Yeah. I think to the extent that occupancy is such a major driver of cash flow and coverage, and we saw occupancies improve, my initial inclination would be to say I would expect coverages to improve, but take that with a grain of salt. I mean, you know, until we have the numbers come in.
Right. Well, you also had, you know, the Omicron variant kick in in January, right? Which isn't gonna help you in that month. It's a little bit too soon to tell where it's gonna go. Taylor's point with occupancy improving, hopefully the latter part of the quarter improves substantially.
Okay. That's helpful.
And getting back to-
Yep.
Getting back to your original question, if at the bottom of page 6 there, you can see everyone's current on their except with the ones with footnote 5, and that represents 14.2%. If you read the note there, their current pursuant to court order can be short for any reason.
The two new ones that were added to that list, are they paying? Well, I guess I can see right from there. Yeah, the details are there. Never mind. I'm good. Thanks for the color. I appreciate it.
The next question is from Omkar Dinkar with Mizuho. Please go ahead.
Hey, good morning, Omkar Dinkar on for Vikram Malhotra. I'm just curious, how do you think about PHE going away, and what impacts do you expect?
If the public health emergency goes away, you obviously lose the benefit of FMAP. The states won't be stepping up as much, although we have heard some states trying to take some of that, you know, some of what they were giving in FMAP and trying to put it into their permanent rates, at least pieces of it. You're also gonna lose the ability to skill in place, that three-day stay waiver, which has really helped folks during outbreaks. Right now, public health emergency runs through July. I mean, we hope that that ends up getting pushed out through the year-end, but there's no way to tell what's gonna happen.
Okay, great. Thank you. Just a follow-up on that. Where are new deals being struck in terms of EBITDA coverage?
It hasn't changed. I mean, obviously, the lion's share of our deals have been in the UK, and they're still 1.3x-1.4x coverage out the gate.
1-3. Okay, great. Thank you. That is for me.
The next question is from Joshua Dennerlein with Bank of America. Please go ahead.
Yeah. Good morning, everyone. I'm assuming most of your share repurchases were done before the CMS came out with their reimbursement proposal for the next fiscal year. Does that proposal change your appetite at all for further buybacks near term?
No, the proposal really wouldn't be a linchpin for buyback decision. It's really where we harvested capital, and we can think about where we deploy capital on a leverage neutral basis. Obviously, we deployed a bunch in the UK, and we bought back stock, and we retained cash, leverage neutral. It's an effective way to just manage our balance sheet.
Okay. I saw that it looks like you issued some shares via the dividend reinvestment program. It just kind of seems weird to be buying back shares and then also issuing them that way. Just kind of curious what the rationale is there.
Yeah. We have a DRIP plan in place, and so that was early in the first quarter, you know, with the DRIP. These are for the really mom-and-pop investors out there reinvesting in our shares. We just feel it right to turn it off this time.
Okay. Okay. That's it for me. Thanks, guys.
Thank you.
Again, if you have a question, please press star then one. The next question is from Michael Lewis with Truist. Please go ahead.
Great. Thank you. My questions are kind of bolt-ons to questions that were asked earlier. About the coverages on, at the bottom of page six, just to be 100% clear, that footnote five, does that mean that those tenants are currently not paying under an agreement to temporarily not pay? Or does that mean they were restructured in a way that perhaps, you know, makes those coverages, you know, lowers the rent and makes those coverages better or different than they show here?
I think you've got a combination of both in there. You've got some tenants that are under forbearance agreements and some that are restructured.
Okay. I see. Then, you know, along these same lines, you know, somebody asked earlier about, you know, your optimism, I suppose, on some of these low coverage ratios. You know, when we look at that with about, you know, almost a third of the portfolio below one time, again, kind of directionally, I mean, do you see a path for a lot of these guys to kinda get back to where the rents are? Or do you think this is a portfolio that really just, you know, just about everybody here needs to be restructured? Or maybe there, you know, some percentage in between, I imagine.
It's predominantly driven by occupancy recovery. If you assume occupancies will recover to pre-pandemic levels at 84%, then the vast majority of those operators climb back out of that under one coverage scenario, and we should be in decent shape. That's why there's so much focus on the philosophy of occupancy recovery. You know, ultimately, who knows what that'll be. We feel highly confident that the demographics will eventually drive us there, but is it eight months or 24 months? We don't know the answer to that yet.
Okay. I see. Then if I could break the rules and ask a third one, I imagine I might be last in the queue anyway. You know, I don't know if you could answer this, but do you think, you know, when I look at this whole page and I look at the coverages and what's happening with occupancy, I mean, do you think this is indicative of the industry overall, or do you think, you know, your portfolio's either outperforming or maybe this, you know, experience causes you to kind of reexamine the portfolio in a specific way? Like somebody asked about geography before, kind of other things. You know, anything you could comment on in that line of thinking?
Yeah. I mean, it's hard to compare to the world as a whole, but I would say our portfolio is doing as well, if not better than other portfolios that we see and other operators outside of our world.
Okay. You don't see any, like, area where, you know, you would focus to improve, you know, any theme that kind of runs through this that ran into more trouble than others? Nothing like that?
Well, there were some geographic challenges, certainly in Texas and Florida. I think Florida hopefully has fixed a good bit of that, and we're able to see some better results in the state of Florida going forward.
Okay, great. Thank you, guys.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Taylor Pickett for any closing remarks.
Thanks, everyone, for joining us this morning. As we went through a lot of details, please feel free to sort of call the team for modeling and other purposes. Have a great day.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.