Good day, and welcome to the Omega Healthcare Investors Second Quarter 2021 Earnings Call. Today, all participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. At this time, I would like to turn the conference over to Michelle Reber.
Please go ahead.
Thank you, and good morning. With me today are Omega's CEO, Taylor Pickett COO, Dan Booth CFO, Bob Stevenson Chief Corporate Development Officer, Steven Insoft and Megan Kroll, 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 ks, which identifies specific factors that may cause actual results or for 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. And in the case of NAREIT FFO and adjusted FFO in our recently issued press release. In addition, certain operator coverage and financial information
Thanks, Michelle. Good morning and thank you for joining our Q2 2021 earnings conference call. Today, I will discuss our Q2 financial results and industry occupancy and labor trends. We continue to post strong quarterly results with 2nd quarter adjusted FFO of $0.85 per share and funds available for distribution of $0.81 per share. We have maintained our quarterly dividend of $0.67 per share And the dividend payout ratio remains conservative at 79% of adjusted FFO and 83% of funds available for distribution.
Our liquidity and debt maturity ladder have never been stronger as our operators face the uncertain timing of occupancy recovery and widespread labor shortages. As we have discussed in previous calls and investor presentations, the combination of significant occupancy declines and a tight labor market with increasing wages and a shortage of staff has started to create liquidity issues for certain operators. In June, we had an operator representing 3% of annual revenue inform Omega that they would be unable to pay rent due to both occupancy and labor issues. It is possible that additional operators could experience similar cash flow stress. Turning to occupancy and labor trends.
Since January, occupancy has improved every month and it is likely that this trend will continue. However, in general, we need occupancy to return to over 80% in order to meaningfully mitigate the cash flow reductions from the pandemic. At the same time that occupancy has started to improve, the labor shortage has created 2 significant issues. First, a number of facilities have self imposed admission bands as they cannot staff at clinically appropriate levels. Therefore, even though there is an opportunity to increase census based on demand in the market, these facilities have elected to limit new admissions due to staffing limitations.
2nd, wage rates continue to decline. These labor cost increases are particularly difficult to manage in states with limited or no COVID-nineteen reimbursement relief. Additionally, it appears that these wage increases may create a new baseline wage rate going forward. We strongly believe in the positive long term prospects for our operating partners as occupancy rebounds in the aging demographics drive increasing demand for skilled nursing facilities. We remain hopeful that the federal government and the states will provide additional near term support to the skilled nursing facility and assisted living industry as we work to overcome the ongoing challenges from the pandemic.
Finally, I again thank our operating partners and in particular, to 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 Q2. Our NAREIT FFO for the quarter was $181,000,000 or $0.74 per share on a diluted basis as compared to $186,000,000 or $0.80 per diluted share for the Q2 of 2020. Our adjusted FFO was $207,000,000 or $0.85 per share for the quarter and excludes several items as outlined in our and FFO reconciliation to net income found in our earnings release, in our supplemental and also on our website. Revenue for the 2nd quarter was approximately 2 $7,000,000 before adjusting for the non recurring items.
As previously disclosed, in June, an operator informed us it would be unable to make its contractual rental payments for the foreseeable future. As such, we revised our revenue recognition treatment For that operator, to cash basis rather than straight line accounting method. As a result, we recorded a $17,400,000 reduction to rental income related to the write down of straight line receivables. We collected over 99% of our contractual rent, mortgage and interest payments for the 2nd quarter and 98% for the month of July, with a decrease resulting from the one operator just referenced. Our G and A expense was $9,000,000 for the Q2 of 2021 and slightly better than our estimated quarterly G and A expense of between $9,500,000 $10,500,000 Interest expense for the quarter was $56,000,000 Our balance sheet remains strong and we've continued to take steps in 2021 to further improve our liquidity, capital stack, maturity ladder and overall borrowing cost.
On the debt side, on April 30, We closed on a new $1,450,000,000 unsecured credit facility and a $50,000,000 unsecured term loan that both mature in April of 2025. At June 30, we had no outstanding borrowings under our credit facility and had $100,000,000 in cash. In March, we issued $700,000,000 of 3.25 percent senior notes due April 2033. Our note issuance was leverage neutral as proceeds were used to repurchase through a tender offer $350,000,000 a 4.375 percent notes due in 2023 and to repay LIBOR based borrowings. We have no bond maturities until August of 2023.
On the equity side, in May, we issued a new $1,000,000,000 ATM program. In the Q2, we issued 4,100,000 shares of common stock through a combination of our ATM and our dividend reinvestment and common stock purchase plan, generating $154,000,000 in cash proceeds. Year to date, we have issued 6,200,000 common shares, generating $231,000,000 in cash proceeds. We continue to use our equity currency via our ATM to gradually delever with our funded debt to adjusted annualized EBITDA at approximately 4.9 times and our fixed charge coverage ratio at 4.5 times as of June 30. While we believe our action today provide us with flexibility to weather a potential prolonged impact of COVID-nineteen on our business, it also provides significant liquidity to fund potential acquisitions.
In the second half of twenty twenty one, we will continue to evaluate any additional steps that may be needed to further enhance our liquidity. I will now turn the call over to Dan.
Thanks, Bob, and good morning, everyone. As of June 30, 2021, Omega had an operating asset portfolio of 949 facilities with over 96,000 operating beds. These facilities were spread across 65 third party operators and located within 42 states and the United Kingdom. Currently 12 month operator EBITDARM and EBITDAR coverage for our core portfolio as of March 31, 2021 decreased to 1.8x and 1.44x respectively versus 1.86x and 1.5x respectively for the trailing 12 month period ended December 31, 2020. During the Q1 of 2021, Our operators cumulatively recorded approximately $74,000,000 in federal stimulus funds as compared to approximately $115,000,000 recorded during the Q4.
Trailing 12 month operator EBITDARM and EBITDAR coverage would have decreased during the Q1 of 2021 to 1.24 and 0.9 times respectively as compared to 1.38 and 1.04 times respectively for the Q4 when excluding the benefit of any federal stimulus funds. EBITDAR coverage for the standalone quarter ended March 31, 2021 for our core portfolio was 1.17 times including federal stimulus and 0.83 times excluding the $74,000,000 of federal stimulus funds. This compares to the standalone 4th quarter of 1.33 times and 0.78 times with and without the $115,000,000 of federal stimulus funds respectively. Based upon what Omega has received in terms of occupancy reporting for July to date, occupancy has continued to improve, averaging approximately 75.7%, up from a low of 72.3% in January. Turning to portfolio matters.
As Taylor previously mentioned, in June, we had an operator representing approximately $30,000,000 or 3% of annual revenue Inform Omega that the June rent of approximately $2,500,000 would not be paid and that future rent payments would not be remitted in the coming months. The operator has asserted that the COVID pandemic along with its associated challenges, including census declines and labor shortages were the primary drivers of their liquidity predicament. We are in active ongoing discussions with this operator to determine what we hope will be a consensual restructure of their portfolio. The restructure may result in either releasing facilities or outright sales of part or all of the portfolio. At this time, it is too early to predict the ultimate outcome of these discussions.
Turning to new investments. On June 1, 2021, Omega provided $6,400,000 of mortgage financing to an existing operator. The loan is secured by 2 nursing facilities located in Ohio and bears an initial interest rate of 10.5%. Turning to subsequent events. On July 1, 2021, Omega provided $66,000,000 of mortgage financing to an existing operator.
The loan is secured by mortgages on 6 nursing facilities located in Ohio and bear an initial interest rate of 10.5 percent. Separately, on July 14, 2021, Omega completed a $9,500,000 purchase lease transaction for 2 care homes in the United Kingdom. The facilities were added to an existing operators master lease with an initial cash yield of 8% with 2.5% escalators. Year to date, Omega has made new investments totaling $722,000,000 including $48,000,000 for capital expenditures. Turning to dispositions, during the Q2 of 2021, Omega divested 6 facilities for $12,400,000 As of June 30, Omega has divested a total of 30 facilities for approximately $200,000,000 I will now turn the call over to Megan.
Thanks, Dan, and good morning, everyone. In positive news, last week, CMS issued its final payment rule, which includes a 1.2% rate increase beginning October 1, but more importantly delays the proposed 5% cut related to PDPM. In the proposed rule issued earlier this year, CMS had highlighted the fact that PDPM rather than being budget neutral instead led to an unintended 5% payment increase and that a rate cut would need to occur. That rate cut in the final rule has been pushed out 1 year, which is welcome news to the industry as a whole, especially as it continues to recover from the pandemic. Moving on to COVID, last quarter we highlighted the fact that there was approximately $24,500,000,000 of unallocated funds left in the Provider Relief Fund, which number excludes monies returned by providers, which we believe could be substantial.
Since then, none of those funds have been allocated, and we are still in a wait and see mode as to what benefits the long term care industry will receive. Thankfully, a handful of states have announced new, continued or increased stimulus for the long term care industry, such as Michigan and Pennsylvania. However, as states work through how they plan to spend funds received from the American Rescue Act, it is still too soon to tell what the ultimate impact will be on our operators or the industry as a whole. What we do know is that the industry continues to need government support, especially in light of the Delta variant and the potential impact that it could have on what was already expected to be a slow long term recovery. While the overall impact of the vaccine rollout has strong with cases at the end of June at less than 250 resident and employee across 125 of our buildings.
We did see an uptick as of last week's monthly reporting at slightly less than 500 cases across approximately 153 of our buildings. Operators are preparing themselves to deal with a potential rise in cases that could lead to increased visitation restrictions And with vaccination rates for employees still running low at less than 60% at best, the staffing shortages and self imposed admission spans that Taylor mentioned earlier, could be exacerbated should large employee outbreaks occur. Both of these have the potential to slow, but hopefully not to stall the occupancy progress that is being made. All of that said, the vaccination rate of residents at close to 80% is a bright spot. While occupancy growth may continue to be no more than a slow steady climb, the infection risk to the vaccinated resident population appears to be low or at the very least not fatal.
And therefore, the industry should be able to avoid in large part the devastating clinical effects and associated expenses that plagued them through 2020 the early part of 2021. Day in and day out, our operators care for Particularly vulnerable segment of the population. This has never been more evident than during the pandemic and early federal decisions recognize that fact. For now, we hope that the federal government finds a renewed commitment to this space and that states that haven't stepped up to provide support Soon well with the additional funds that they have now received. I will now turn the call over to Steven.
Thanks, Megan, and thanks to everyone on the line for joining today. Inspire New York, our ALF memory care high rise at Second Avenue and 93rd Street in Manhattan, leased to and operated by Maplewood Senior Living opened at the end of March and is in the midst of lease up. Lease up momentum has been solid and in line with our underwriting and expectations. The COVID-nineteen pandemic poses certain challenges unique to senior housing operators, including increased costs, the challenges of managing COVID positive patients and meaningful Limitations on admissions. While they very much appreciate the help they've received, private pay senior housing operators have not seen the level of government support provided to other areas of senior care.
Along with continued pandemic related challenges, we saw small but measured occupancy improvements to our senior housing portfolio throughout the second quarter. We We have seen evidence of stabilization and strengthening of census in certain markets. Our Maplewood portfolio, which is concentrated in the early affected Metro New York and Boston markets, saw a meaningful census erosion early in the pandemic with Q2 2020 census hitting a low point of 80.4% in early June of 2020. That said, their portfolio occupancy level has returned to 87.6% in June of 2021. Including the land in CIP, at the end of the Q1, Omega Senior Housing Portfolio totaled $2,200,000,000 of investment on our balance sheet.
All of our senior housing assets are in triple net master leases, including our 24 recently acquired Brookdale assets. Our overall senior housing comprises 155 assisted living, independent living and memory care assets in the U. S. And UK. This portfolio excluding the 24 Brookdale properties on a standalone basis had its trailing 12 month EBITDAR lease coverage fall 6 basis points to 1.02 times at the end of the Q1.
With COVID outbreaks having affected different markets at various times, This decrease in performance was to be expected. Rising vaccination rates among residents and staff are a critical step to restoring occupancy and performance. While we remain constructive about the prospects of senior housing, the COVID-nineteen outbreak has warranted a far more selective approach to development. While we make further progress on our existing ongoing developments, we continue to work with our operators on strategic reinvestment in our existing assets. We invested $31,100,000 in the 2nd quarter in new construction and strategic reinvestment.
Dollars 19,500,000 of this investment predominantly related to our active construction projects. The remaining $11,600,000 of this investment was related to our ongoing portfolio CapEx reinvestment program. I will now open the call for questions.
We will now begin the question and answer session. Today's first question comes from Jonathan Hughes with Raymond James. Please proceed.
Hi there. Good morning. Question on kind of operator and news disclosure. If you do have More operators come to you in the future saying they're having issues with paying rent, say within your top 15 operator list. How will you Disclose that going forward.
Will you kind of wait until the quarterly earnings releases or do you press releases intra quarter like we saw in June ahead of NAREIT? I'm just trying to get a better sense of and understand how we can monitor operator health and new developments hopefully on a On a more real time basis.
Yes, fair enough, Jonathan. As you know, it's pretty nuanced when you start to have discussions with operators. And so some of the timing is you just have to work through some of those issues. But I will tell you the one thing we will be certain of is We don't have selective disclosure. So to the extent that we're talking to investors about any potential issues, You'll see disclosures before we have those conversations.
And we're talking to investors all the time. So I would think it'd be relatively timely from our perspective.
Okay. That's great. And then maybe talk about Florida and Texas. Those are your 2 largest states in terms of exposure. There are also 2 states that have not Seeing as much, I'd say, government support as maybe others during the pandemic and even pre pandemic.
Can you just talk about the reimbursement rate and government support outlook for those 2 states, and then maybe also update us on the Daybreak transitions in Texas.
So Texas early on in the pandemic actually had an add on to its Medicaid rate of $19 per day. And it has continued to that add on has continued. They recently Extended it again, I believe it runs through October of this year. So that's been hugely helpful. And it tracks the kind of the federal Emergency plan, so we would hope that if the federal emergency plan continues, the federal the Texas Medicaid add on would continue as well.
The State of Florida has offered no such assistance. They have not added anything to the Medicaid rate. They have not offered any supplemental payments. So that has produced a situation in Florida that's becoming increasingly dire, I would say, because there has been No add on and now we're seeing cases spike with the delta variance. Daybreak.
Daybreak, we need to Finalized re leasing or selling all those assets in the second quarter. I believe most of them were gone in the first quarter. So there is no more daybreak as far as we're concerned. All those assets have been distributed amongst other operators either existing or new And or sold to 3rd parties.
Okay. And the Daybreak transitions that was converted At similar rents to where maybe Daybreak was before?
No, but they were in line with what we had projected.
That's right.
Okay. What's it going to take for Florida to kind of realize maybe they do need to give some more Support, I guess, I could drive to Tallahassee, but just curious if there's been any discussions among the lobbying organizations and just if there is any Progress on that or if it's still pretty quiet?
No, it hasn't been quiet, that's for sure. There's been a huge push From the operators, lobbyists, etcetera, for some rate relief in Florida. And There's no eminent expectation, but I think that continues to gain momentum and we're hopeful that we see something out of the state
Okay. Last one for me. There was an announcement, you announced the addition of a new Director to your Board yesterday. Can you just provide some additional details around this? Thanks.
Yes, Jonathan, I'll ask Matthew to cover that please. Hey, Jonathan.
So Ed Lonefull is retiring as a Board member at the end of his current term. And while we have Ed as a Board member for a number of more months, It's probably a good opportunity to publicly thank him for his over 25 years of exceptional service as a Board member. While we're sad to be losing Ed, we're also very happy that Doctor. Lisa Eduardo Davis has agreed to join our Board. For those of you who didn't see the 8 ks filing, here's a little additional background.
Doctor. Ebonyu Davis has literally decades of health care experience as both a physician and as a healthcare executive, where she's primarily focused on patient centric businesses. So So as you can imagine, her experience and her nuanced understanding of the healthcare continuum will be extremely helpful for Omega as we To navigate the evolving landscape. So we're excited that she's joined the Board and we look forward to many years of working with them.
All right. Thanks very much. Appreciate the time.
Thanks, gentlemen.
Our next question comes from Connor Seversky with Berenberg, please proceed.
Good morning, everybody. I appreciate the prepared remarks and wow, a rare Matthew appearance on the call today. First question on acquisitions. I mean, it seems relatively quiet on the sniff front, yet some publications, Some of the industry journals are suggesting even an acceleration of activity, maybe from private investors. So I'm wondering if From OHAI's perspective, is this a cost of capital issue?
Are there just not really attractive opportunities in the space? Or is there a new kind of competitive element floating around out there that may not have been present prior?
Yes. I mean, I hate to sound like a broken record, but The acquisition environment just remains choppy. I mean, we're still seeing some deals, a fair amount of deals. We're actually seeing activity pickup in the UK. Once again, it's choppy.
We continue to partner with our operators to do transactions. There hasn't been a lot of distressed situations that have presented themselves that haven't gone at distressed prices. There's There's some distressed real estate out there, but actually it's been up. So I think we're seeing stuff out there, but It's not like there's a whole land flight of new opportunities at this time.
Okay. Appreciate the color there. A bit more of a broader question on operations in general. So there's some commentary out there that certain operators are looking to take on Higher acuity patients. So I'm wondering at a high level, maybe Megan can jump in here, how that affects the cost structure on a per patient basis?
And then if this dynamic is to turn into a trend across the whole industry, I mean, how could this look in terms of the rate changes in years
to come. I mean, there's been a push for higher acuity patients, obviously, right? That's been going on for Decades. The relatively healthy folks are being treated at home or in the assisted Living settings are just otherwise generally other settings. So that's been ongoing.
I haven't seen any Traumatic change in that as of late. It's just been a very, very, very slow evolution. And so We haven't seen anything material in that respect.
Okay. Thanks for that. And last one from me. I apologize if I missed the detail here, but on the dividend, it seems like the payout ratio remains relatively comfortable even with the degree of lost rent. I'm wondering how you guys feel about it at a high level, maybe what are the payout ratio bands you're looking to work in, in the near future and whether or not you'd be willing to let that Climb above 100% for the short term if necessary.
Yes. Fortunately, Connor, we've never had to deal with above 100% From a forward perspective, several years ago, we got into the 90% range. And we're comfortable with that because we can look forward and know we were going to get back into a more normalized range as we transition properties like Daybreak We spoke about earlier. So I think for us, it really comes down to what's the outlook. And a good example would be the operator we're talking about that stopped paying us right in June.
Part of the issue for them is the payback of the Medicare Advance payments, which has created some liquidity concerns, Those assets are really desirable. So as we look long term, we don't think There'll be any meaningful impacts on our cash flow streams. So that's an example of the type of thing we look at say on a forward basis. Do we need to do anything with the dividend? Well, we know ultimately we're going to be in good shape.
Hopefully, that's enough color.
Yes. That's very helpful. I'll leave it there. Thank you.
Thank you.
The next question comes from Joshua Dennerlein with Bank of America. Please proceed.
Yes. Good morning, everyone. Hope everyone is doing well. I guess just curious on the operator who came to you in June about having trouble paying the rent. Just any kind of additional color you can provide on like maybe what was going on operationally?
Was it unique to that tenant or maybe something within that broader region that we should be watching?
No, I don't think there's anything specific. I think it's the general items that Taylor mentioned. It's some stress on occupancy And huge stress on labor, which is compounding the occupancy issue if they can't staff a facility up adequately to Provide the clinical needs of the residents. So it's really the combination of those two events. And then they had also seen Through COVID, they have seen a fairly high rate of folks taking ill.
So that compounded the situation, but beyond that, there was nothing else specific.
Okay. And by taking it
all, you mean the staff or the residents? Both. Both. Okay. And then speaking of staff, I guess just kind of Curious, are operators starting to kind of incentivize their employees to get vaccinated?
That 60% uptake seems pretty disappointing. And then how are you guys thinking about expiration of the extended UI benefits? I think it rolls off everywhere in September. Should that be a help at
all? Yes. I mean from a vaccination standpoint, the employees, it is still relatively low. And our operators have been trying to incentivize them from the beginning. So that's monetary incentivizing and also trying to educate them with local leaders within the community.
So we are starting to see some uptick, but I don't know that we're going to see anything substantial. That said, With the Delta variant, we are hearing that more staff are interested in taking the vaccine, so that might help it pick up a bit as well. In terms of the unemployment benefits, yes, I think that will be a big help. If the unemployment benefits go away and we can get people back to work, that will help with the staffing shortages, definitely.
The next question comes from Nick Joseph with Citi. Please proceed.
Thanks. I was hoping to
get more color on the potential watch list for any other tenants that are getting close to having issues paying rent?
So I mean, I don't think our watch list has changed much. We've got those operators who are under one times coverage, but usually there's a secondary source of repayment associated with those operators. So It's mitigated. The federal stimulus money certainly is running out. So I think it's a little bit of operator, but it's a little bit of geography too in states that are they have another A huge rebound of the delta variance.
Those are the ones that are going to get hit hardest and the ones that are probably most susceptible to liquidity issues. So we're keeping an eye on that. The incidence rates of the viruses Followed the incidence rates in the counties or the communities in which they're in. So it hasn't necessarily Transpired over into the nursing home side yet, but we're watching those communities, particularly in Florida and the South, where We're seeing pretty quick upward trends in the virus and looking to see whether that In fact, equates to the nursing homes having a pickup in the virus. So those kind of things are what we keep a close eye on.
Thanks. I appreciate it. And then as you think about the pressures on labor, obviously COVID has Correct havoc on margins. But when you think about pre COVID, how much your ability was there for labor costs to rise before they would really cause an issue from a margin perspective?
There's a fair amount of room, Nick. I think The best way to think about it is 2% or 3% wage inflation Would move coverage a few basis points. Now, we are seeing areas where the wage inflation is Far greater than that, 7%, 8%. And so that's obviously some additional basis points. But In terms of general coverage at a 1.3%, we're not going to see a scenario where labor Takes that to 1 or 1.1.
That would be really meaningful changes in labor. That being said, the big drivers we've talked about in the past is getting occupancy back, because each incremental resident provides Pretty substantial cash flow. That's really where the focus needs to be. So, our operators We'll find labor and they'll pay what the market needs to clear labor and that will impact coverages, but It won't change the viability of the vast majority of operators to pay our rent.
Thanks.
The next question comes from Daniel Bernstein with Capital One. Please proceed.
Hi, good morning. It's fine to go back to Florida. I mean, is there are there any occupancy trends that you've seen so far with the surge in the COVID virus down there, I mean you're about 6 weeks into the Delta virus, I guess surge in Florida. It sounded like Cases have gone up a little bit within facilities, but has there been any kind of occupancy trend impacts thus far?
I don't think we've seen anything from a state perspective, but certainly buildings that have smaller outbreaks are going to have occupancy trending down. But we haven't seen anything yet overall in the state.
Okay. And then the labor shortages and wage pressure, is that across the spectrum within the labor pool for a facility? Is it all nursing, caretakers, just all levels of labor within the facility or is it Concentrated more in the caretaker side or concentrated more in the labor shortage on the nursing side. Just trying to understand where the I guess the nuance of where the labor issues are.
It's interesting. We've had operators Point out in particular, nursing assistants and dietary staff. So They tend to point out that level of worker where it's $14 or $15 an hour wage rates versus Nursing necessarily. And I think that's one of the big pressure points right now. Workers who have mobility into Other jobs, non healthcare type jobs.
Okay. And then Going back to the tenant that's not paying rent, is that tenant within the Pool that's under 1.0 EBITDAR, is that an addition to the disclosure you have in your supplemental?
It would be in addition to what's in the supplement.
Okay. Okay. I just want to make sure about that. And one last question for me here, Just on the acquisition side, is there a I just want to understand the comments that there's, I guess not a landslide of opportunities. Is it more of a pricing issue Where you have there's distressed operators, but the pricing of the real estate is not really distressed at this point.
I just want to understand where The disconnect there is between the stress we see in the industry versus maybe consolidation opportunities that you would think would arise from this kind of distressed situation?
Yes. I think the buyer universe is still very aggressive in terms of picking up real estate. So they've been willing to pay up for it despite the fact that the operations might be distressed.
Okay. All right. I'll hop off. Thanks.
Our next question comes from Rich Anderson with SMBC Nikko. Please proceed.
Thanks. Good morning, team. So on the Back to the tenant that gave you the notice they did. Is there a can you quantify a kind of a watch list of Percentage of revenue that you're looking at, you said 3% here, but is there a number out there that you're kind of keeping an eye on that you can share?
Not specifically now. I mean, listen, it's since the virus came out, we've been in constant contact with Virtually all of our operators, I think that's the best way to keep an eye out is just with communication with our operators and we've Done that and continue to do that. So I think we're we look at everybody and we have to Sort of gauge the level of risk of each and every operator and what's the challenge
So I guess what's the over under on This time next quarter, you'll have another you see it as a high probability or nothing is jumping out at you right now?
I think part of the answer to that question is, we've been waiting on the last tranche of federal money. Right. Some of it's going to be timing related to that. Remember, there's $24,500,000,000 Megan mentioned in her prepared comments and we've heard, I don't know if this is this came from ASHA that There's another $20,000,000,000 I'm sorry $1,000,000,000 $24,500,000,000 and another $20,000,000,000 has been pushed back into that fund principally from the hospital. So There might be $44,500,000,000 to be distributed and it's going to be needs based.
So if that happens in a reasonably timely way, I think to handicap any of the quarters, it's impossible. And another good example would be Florida. There's been a big push On the lobbying side, we get some money released in the state of Florida and then that happens. It dials down The risk that we see a lot and the last comment I make, and again, I'm just trying to give you as much color as I can is, we haven't had the type of conversations with any operator that we have with the one that we talked to in June as of now. So that's the early indicator on from a watch list perspective for us, we just That hasn't happened.
If there's no money forthcoming from the government or it's not timely, sooner or later, The occupancy rebound isn't going to be quick enough to prevent some other liquidity issues or we'll just have to tackle them when they arise.
Yes. Okay. So what maybe a broader question, anything about what you've been through That's informing you about the future of OHI. I know you've spent some time expanding into senior housing with Healthpeak's Steel. But do you see yourself as a more diversified story in the years to come And not hanging your hat as much as you are in skilled nursing?
Or do you sort of continue the course and You know, muscle through whatever is to come.
Well,
we the franchise of operators Our partners are fantastic and we'll continue to deploy capital there. But the trend that you've seen in terms of senior housing and other assets, Now about a 5th of the portfolio, I think that continues. And part of that's just supporting the operators in those property types, whether it's Maplewood or Our U. K. Operators or otherwise, I think, you'll see that percentage climb over time, Just as it has over the last 5 years.
Yes. Okay. And then lastly for me, I think Steve said Maplewood specifically occupancy Dropped at 80% a year ago May and is now at 87%. Did I get that right?
You did. That's correct.
That's really good, right? I mean, is there anything about that 87% number you're seeing today that Is apples to oranges to what other people are reporting? Or is there something special going on that you're kind of already back into the high 80s occupancy wise?
Hey, Damian, do you want to take that?
Sure. The one thing that we know to
be the case, although it may not account for all of the Difference between Maplewood and other operators is Maplewood made a committed effort never to let off the marketing investment during The COVID pandemic, it still isn't. And I think in certain local markets, they were awarded for that.
Okay, great. Well, thanks very much. Appreciate it.
The next question comes from Lukas Hartwich with Green Street. Please proceed.
Hey, good morning. So I suppose inflation fears are receding, but on lease escalators, I think most of those are fixed, but are there any inflation protections built in or are they purely fixed for the length of the lease?
Hey, Lucas. About 97%, 98% of our leases are fixed escalators.
Okay. And then can you provide some color on the $3,500,000 credit loss provision during the quarter?
Yes. So as you know, there's a lot of components that go into the CECL or credit loss component. So we have to go look at each one of our loans and you're required regardless that you have to have some reserve on those loans. So it's kind of normal When I look at it's kind of normal occurrence. We're going to have something every quarter from a loss standpoint.
Got it. All right. And all my other questions were answered. Thank you.
Thank you.
At this time, we are showing no further questioners in the queue, and this concludes our question and answer session. I would now like to turn the conference back over to Taylor Pickett for any closing remarks.
Thank you all for joining us this morning. As always, we'll be available for any follow ups you may have. Have a good day.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.