Good morning. Welcome to Healthcare Investor First Quarter 2021 Earnings Conference Call. All participants will be in listen only mode. Followed by 0. After today's presentation, there will be an opportunity to ask questions.
Please note So this event is being recorded. I would now 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, 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 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 I will now turn the call over to Taylor.
Thanks, Michelle. Good morning and thank you for joining our Q1 2021 earnings conference call. Today, I will discuss our Q1 financial results, the COVID-nineteen pandemic and various industry issues and the vaccine rollout. We are very pleased with our strong first quarter results. Our adjusted FFO of $0.85 per share and our funds available for distribution of $0.81 per share allowed us to maintain our quarterly dividend of $0.67 per share.
The payout ratio is 79% of adjusted FFO and 83% of funds available for distribution. Additionally, for the Q1 end in April, we collected virtually all of our contractual rents. Over Over the last 6 months, we have issued $1,400,000,000 in bonds and we have recast our $1,500,000,000 bank credit facility with a 4 year maturity in 2025. Our liquidity and our debt maturity ladder Have never been stronger as we move forward facing the uncertain timing of pandemic recovery. I again want to thank our operating partners and their staff We've cared for tens of thousands of residents within our facilities.
I would also like to recognize and thank the federal government and the states for their support of the skilled nursing and The allocation and distribution of additional government funding along with the communication and evolution of clinical protocols has been critical in protecting and saving With an estimated 24.5 Sorry to avoid facility financial stress and potential closures. We continue to strongly believe in the positive long term prospects for our operating partners, while acknowledging the possibility of near term stress that some skilled nursing and senior housing providers may Turning to the vaccine rollout. We continue to gather vaccination data from our operators and can report the following. As of April 30, all three clinics have been conducted at substantially all of our facilities. Based on operators representing over 90% Our facilities reporting in, the vaccination rate for residents is approximately 81%, with the vaccination rate for staff at approximately 49%.
This is a vast improvement over what we reported last quarter of 69% at 36% for residents and staff, respectively. I will now turn the call over to Bob.
Thanks, Taylor, and good morning. Turning to our financials for the Q1. Our NAREIT FFO for the quarter was $170,000,000 or $0.71 per share on a diluted basis as compared to $181,000,000 or $0.77 per share for the Q1 of 2020. Our adjusted FFO was $204,000,000 or $0.85 per share for the quarter and excludes several items as outlined in our adjusted FFO 1st quarter was approximately $274,000,000 before adjusting for non recurring items. The revenue for the quarter included Approximately $12,000,000 of non cash revenue.
We collected over 99% of our contractual rent, mortgage and interest payments for the Q1 as well as for the month of April. Our G and A expense was $10,400,000 for the first quarter of 2021 in line with 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 20 21 to improve our liquidity, capital stack and maturity ladder. 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 up 4.375 percent notes due in 2023 And to repay LIBOR based borrowings, as a result of the repurchase, we recorded approximately $30,000,000 in early extinguishment of debt cost. At March 31, we had $135,000,000 in borrowings outstanding under our $1,250,000,000 credit facility, which matured end of the month and $50,000,000 in borrowings under a term loan facility that had a maturity in At an average swap rate of 0.8 675 percent, these swaps expire in 2024 and provide us with significant In the Q1, we issued 2,000,000 shares of common stock through a combination of our ATM and dividend reinvestment With flexibility to weather a potential prolonged impact of COVID-nineteen on our business, it also provides significant liquidity to fund potential acquisitions.
In In 2021, we plan to continue to evaluate any additional steps that may be needed to further enhance our liquidity. At March 31st, approximately 97 percent of our $5,500,000,000 in debt was fixed and our funded debt to adjusted annualized EBITDA was approximately 5.2x and our fixed charge coverage ratio was 4.5x. When adjusting to include a full quarter of contractual revenue for new investments completed during As well as eliminating revenue related to assets sold during the quarter, our pro form a leverage would be roughly 5.1 times. I'll now turn the call over to Dan.
Thanks, Bob, and good morning, everyone. As of March 31, 2021, Omega had an operating portfolio of 954 facilities with over 96,000 operating beds. These facilities were spread Operator, EBITDARM and EBITDAR coverage for our core portfolio as of December 31, 2020 stayed relatively flat for the period at 1.86 and 1.5 times respectively versus 1.87 and 1.51 times respectively for the trailing 12 month period ended September 30, 2020. These numbers were negatively impacted by a number of external factors as a direct result of COVID-nineteen, including a significant drop in patient census and a dramatic spike in operating expenses, particularly labor costs and personal protective equipment. These negative results were more than offset throughout 2020 by the positive impact of federal stimulus Funds, which were distributed in accordance with the CARES Act.
During the Q4, our operators cumulatively recorded approximately Trailing 12 month operator EBITDARM and EBITDAR coverage would have decreased during the Q4 of 2020 to 1.38 and 1.04 times respectively as compared to 1.53 and 1.18 times respectively for the 3rd quarter when Including the benefit of the federal stimulus funds. EBITDAR coverage for the standalone quarter ended twelvethirty one 2020 core portfolio was 1.33x, including federal stimulus and 44 times and 0.97 times with and without the $102,000,000 in federal stimulus funds respectively. Cumulative occupancy percentages for our core portfolio were at a pre COVID rate of 84% in January 2020. While they flattened out to around 75% throughout the full months, they subsequently fell to 73.3% in December and further in January 72.3% before starting to show signs of recovery at 72.6% in February and 73 point 1% in March. Based upon what Omega has received in terms of occupancy reporting for April to date, occupancy has continued to improve Averaging approximately 73.4%.
We are cautiously optimistic that the rollout of vaccines, which began in late December of 2020 and continued in earnest throughout the Q1 of 2021 will provide a much needed catalyst for improving occupancy statistics as infection rates continue to decline and visitation restrictions continue to ease. Turning to new investments. As previously announced, on January 20, 2021, Omega closed on the 24 senior housing facilities from Healthpeak for $510,000,000 The acquisition included the assumption of an in place master lease with Brookdale Senior Living, the leading operator of senior living communities throughout the United States. The portfolio primarily consists of assisted living, Independent living and memory care facilities with a total of 2,552 units located across 11 states. The master lease with Brookdale will generate approximately $43,500,000 in contractual 2021 cash rent with annual escalators of 2 Additionally, during the Q1 of 2021, Omega completed an $83,000,000 purchase lease transaction For 6 skilled nursing facilities in Florida, the facilities were added to an existing operator's master lease for an initial cash yield of 9.25 percent with 2 inclusive of $17,000,000 in capital expenditures.
Turning to dispositions. During the Q1 of 2021, Omega divested 24 facilities for total proceeds of approximately $188,000,000 I I will now turn the call over to Megan.
Thanks, Dan, and good morning, everyone. As Taylor previously mentioned, there is approximately 24.5 The American Rescue Act on March 11, 2021. While it is likely that SNFs and AFSC will see some funds out of these remaining amounts, Our operators are really looking to their states for new or increased stimulus given the substantial amount of funding to states via the American Rescue Act. This would be in addition to or as a continuation of SMAP increases previously allocated by states to SNF. Our hope is that those states who have previously not made any allocations to the sector will reconsider based on the new availability of funds.
With large outbreaks experienced across the country and therefore in the long term care space in Q4 and into January, the The preliminary results of the vaccine rollout, which Taylor mentioned earlier, have been a sign of hope. There has been a substantial reduction in resident and employee across less than 250 of our buildings, which low numbers have not been seen since April of last year. Likewise, we were extremely pleased last week to see revised CDC recommendations, both on the visitation and testing front. Removing the regular requirement to test already vaccinated employees unless symptomatic or during an outbreak will go a long way in reducing the cost burden associated therewith and the relaxation of visitation restrictions, including the reduced need for social distancing and mask wearing In certain circumstances where visitors and residents have been vaccinated, will not only benefit the mental health of the current resident population, but it will While the height of the infection battle may be somewhat behind us and despite these welcome revised CDC recommendations, the industry is still With what will likely be a long drawn out recovery. Census will take time to rebuild and reduction in expenses will be gradual over time, all while the ability to skill in place will be reduced with far less COVID cases.
Specifically, as it relates to expenses, labor shortage Continued to be a huge concern for our operator base. Pre pandemic, operators were faced with shortages due to low unemployment rates. During the pandemic, the issue has been exacerbated by employees leaving the long term care space, both permanently and temporarily, As the environment is understandably much tougher since the onset of COVID and unemployment benefits have been increased substantially. This expected slow long term recovery means that continued financial support of both federal and state governments is critical, and we hope that they will be mindful of that as they determine how to spend any remaining or newly allocated stimulus funds. I will now turn the call over to Steven.
Thanks, Megan, and thanks to everyone on the line for joining today. In conjunction with Maplewood Senior Living, in late March, We completed license and opened our ALF memory care high rise at Second Avenue and 93rd Street in Manhattan. We thank the New York State expected to be approximately $310,000,000 Lease up momentum has been solid with 35 move ins through April, the first Full month of operations. The COVID-nineteen pandemic poses certain challenges unique to senior housing operators, including increased The challenges of managing COVID positive patients and meaningful practical limitations on admissions. While they very much appreciate the help they have received, Private pay senior housing operators have not seen the level of government support provided to other areas of senior care.
We saw continued challenges to our senior housing throughout the Q4 with variations tied to when and where COVID outbreaks were encountered. However, we have seen evidence of stabilization and strengthening of census in certain markets. By example, our Maplewood portfolio, which is concentrated in the early affected Metro New York and Boston markets, saw meaningful census erosion early in the pandemic, with 2nd 6% in the month of November. Census has plateaued at this level for the time being as COVID driven census challenges in select buildings further occupancy increases in the remainder of their portfolio. 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.
This total includes our recent Brookdale investment, which closed during the Q1. All of our senior housing assets are in triple net master leases, Including our 24 recently acquired Brookdale assets, our overall senior housing investment comprises 156 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 for 4 basis Selective approach to development.
While we make further progress on our existing ongoing developments, we continue to work with our operators on strategic reinvestments in Existing assets. We invested $16,800,000 in the Q1 in new construction and strategic reinvestment. Dollars 9,400,000 of this investment is predominantly related Active construction projects. The remaining $7,400,000 of this investment was related to our ongoing portfolio CapEx reinvestment program. I will now open up
Call. Our first question is from Jonathan Hughes from Raymond James. Go ahead.
Hey, good morning. Taylor, you talked about government support for skilled nursing earlier and that we could see some shortfalls in operator ability to pay obligations if they don't get more assistance. So my question is, How long can your operators continue paying their rent without more direct government support? There is still billions of CARES Act's money left, As Megan said earlier, and some of that could be allocated to SNF, but say they were to get none of that and no support from the states, how long would they have?
Yes. And Jonathan, just to be clear, some of my comments reflect what we've already seen in the industry with LTC having their Texas portfolio refile. So I think some of this is industry related. As we look at our operators, Obviously, they paid through April. They're still in pretty good shape from a liquidity perspective.
But with no more funding, I think you see that stress start to hit operators in the back half of the year. But I think you'll see industry wide That issue arise earlier and that's part
of what I wanted to highlight.
From our perspective, We're fairly certain that the industry will receive a piece of that $24,500,000,000 and that will be helpful. And then it really comes back to Timing of the occupancy recovery, that has the offset to all of this. Okay. That's
helpful color. Appreciate that. And then, there has been a lot of talk about inflation fears lately. I'm curious if CPI based leases are something you find attractive, if we do in fact see inflation creep up these next several years?
Yes, we've gone pretty much to we're virtually 100% fixed escalators and they average, What is it, Bob, 2.3 percent versus 2.3 percent? And that was a shift. Years ago, the industry was predominantly CPI based with CPI based with caps, and we moved away from that for a variety of reasons. So, I don't see a shifting back, it would just be a different piece of negotiation and there would be other components that would be negotiated in our leases. And when you think about Long term duration of our leases in those relationships, I don't think you see changes there.
Okay. Fair enough. And then just one
more for me. Any update on skilled nursing external growth And pricing, you obviously did a deal in the quarter, but that was kind of with an existing partner. Just Curious if you can give any comments on any opportunities you're seeing in pricing or if it's kind of still limited and we won't see anything until really the back
So, I mean, we did obviously have some activity in the Q1 with 100 plus million of acquisitions, only a small portion of that was SNFs. And I don't think it's Opportunistic at this time. We haven't seen a lot of distressed SNF on the market. We've seen some distressed assisted living, but not hasn't gone for distressed price, I can tell you that. And then SNF pricing, it's remained in kind of the 9s between 9 and the high I don't expect that to go down anytime soon or up anytime soon.
Okay. All right. That's it for me. Thanks for the time.
Our next question is from Nick Yulico from Scotiabank. Go ahead.
Thank you. So just turning back to the occupancy data that you gave for the Q1 and into April. Can you just give us a feel for how much of that occupancy tick up off the bottom Was long term care versus shorter term stays?
That's a hard one
to pin down because it's not terribly material, right? We've increased about EPS in the last two and a half months. So it hasn't been a large uptick, but it's Long term, I think makes up the lion's share of it even though you might have a lot more admissions in the short term, just the short term rolling over every 15 25 days long term staying in for the for a year, year and a half.
Does that make sense? Okay.
It's really Hard to pick up how many people are being admitted, we don't track admissions.
Okay, got But I think you I mean, I think you've said previously right that the decline in occupancy and the eventual rebound was going to be driven more by Improvements on the long term care side, is that right? As we just think about the pace of facilities reopening And people going back into, utilities?
Yes. I think it's a little
bit of both, Nick. The rapid Decline we saw in occupancy when the pandemic started was all Medicare. And so, and That then stabilized, but it really hasn't come back fully. So I
think we may see a
leg up there, but to your point, then you have The long term care side of the house, which will take time to build just like it would in senior housing to Vance point, you have a 1 year
Okay. And Taylor, I guess just going back to commentary you talked About the industry maybe facing some more pressure later this year depending on how future government funding pans out. I assume this is why you continue to not provide earnings guidance for the year. And I guess as we're thinking about potential Comes of getting farther along in the year, how should we think about prospects of right now as you're looking at Tenants and sort of trying to figure out whether they can pay rent for the rest of the year, how we should think about potential rent deferrals Versus the need for a permanent change in lease terms. Yes.
I would say that From our perspective, there's certainly the potential for rent deferrals and it's just the intersection of everything we talked about, See recovery, government support, the current state of balance sheets. And so you're going to have the whole spectrum of various levels of risk And then I look outside our portfolio of the industry and I see even greater risk. And so, I think we may get splashed with industry issues before we have to face them ourselves. And to answer your question, in In terms of how we think about it, we think about support in the form of deferrals because we think this is all Ultimately, going to work itself out over time. And it's just a question of is that 12 months or 24 months or longer.
I don't think it goes longer, but we just don't know.
Okay, that's helpful. I guess just last Question on this is, is there any way for you to frame out potential magnitude right now if we are looking at rent deferrals for your tenants, Right. I mean, I know your sector was a little bit unusual in that. You didn't have to give rent deferrals yet, whereas most of the other REIT sectors have. So I mean maybe you could frame out the magnitude of potential rent deferrals As a percentage of your tenants?
Yes. There are so many assumptions that have to go into that, Nick, that
it Really
would be unfair for I think other than to say there's the risk out there. And you can think about if Dan's talked about The coverages we're seeing without federal support at sub-one, But that's at occupancy levels where they sit. And I think that's the reference point you have to use and then you make some everybody has to make assumptions about how fast She comes back and how much government support will be forthcoming and a lot of that's just timing driven. So You'd have to share to go beyond that.
Okay. Appreciate it.
Thanks, Tony.
Thank you.
Our next question is from Matti Okusanya from Mizuho. Go ahead.
Yes. Can you guys hear me?
Yes, Tayo.
Perfect. Could you just talk about, again, really solid quarter acquisitions wise in 1Q? Could you kind of talk about what you're seeing out there both in regards to skilled nursing and senior housing? And how we should think about acquisitions for the rest of the year?
Tayo, I don't think it differs from obviously 2020 was a weird year, but I don't think it I think it's a little bit more normalized, but it which is normalized to us is choppy, right? It's hard to predict deal flow. We're seeing a fair number of sort of what I would call the small to mid sized deals, but we're not right now, We're not involved or seeing any really, really big chunky deals on the snip side. On the assisted living side, We've made an effort to look for potentially distressed prospects and quite frankly those have not panned out. We just We've seen some distressed activity, but there's a lot of money out there chasing those deals.
And how are you underwriting these transactions right now, just given all the uncertainty in NOI growth?
That's a good question. It's a mirror out of different things because we can't look at just our normal trailing 12 month because you have COVID results and all the stimulus money and everything else, so you really look to what happened pre-twenty 2019 results and then you have to look to the operators in their 2021 or in most instances our 2022 budgets and where they expect to
be. With all the
other companies, a little bit bigger buffer than normal for your coverages.
Got you. And I think that's in the opening one more. Jonathan's comments earlier on about kind of reimbursement, could you just talk a little bit about again, if you're not getting much from the From the federal government, what really has to happen at the state level to make you feel that your tenants I'm going to be all right at the end of this all.
Well, some of it's just a continuation of the state support that we've already And the possibility for expansion of that. And the vast majority States have been very willing to be supportive of the industry, Michigan, Texas and California. The only state where we have a big presence where there hasn't been a lot of state support today is Florida. So So that would be an example where we'd be hopeful that we see the State of Florida step up with some of the money that Megan mentioned Earlier, from the Rescue Act and support the industry. So, that we're really looking for
Got you. Thank you.
Thank you.
Our next question is from Rich Anderson from SMBC. Go ahead.
Hey, thanks. Good morning, folks. So question on CMS And some discussion around PDPM and pulling back Some of the revenue generation from that program to skilled operators. I'm curious how kind of bummed you are to see that and if it kind of makes you nervous about Just a general kind of mindset in terms of reimbursement going forward. What is your expectation in terms of how that may play out in terms of period of time knowing we have 2020 being a really Tough year to figure that out off of, I would think.
Yes. So it's interesting, Rich,
if you read the role, CMS spent 15 pages talking about PDPM and the options, Yes. It was much more accommodating in terms of how to think about What they're required to do, which is to make it revenue neutral. And so I feel pretty good about the options that they laid out In those 15 pages, which included the possibility of a deferral of rate changes For a year or possibly 2, and or a phase in or a combination. And so I think that opens the door for comments on the proposed regulation. And I'm sure you'll see the industry talk about a Combination of a deferral and a phase in, and based on the language in the proposed rule, I would expect that we'll get something like that, Which should get us to where we need to be.
Okay. Fair enough. Well said. And then second question on the vaccine acceptance, the improvement versus previous quarter. But do you see any geographical sort of Factors at play here in terms of people being red or blue And having a certain feeling about vaccines, that seem to be a part of the reality or the political side of the vaccine rollout?
Or is it Somewhat uniform around the states?
It's not 100% uniform, but it's a pretty tight band. The coasts Tend to be just a little bit more, the uptake rates just a
little bit higher, but I don't I wouldn't say it's significant enough that you'd highlight that.
Okay. Last for me is you had a lot of movement around in terms of your capital raising and so on Do you have a thought in mind about where interest expense could sort of run rate to given all that movement that happened in the Q1?
It's Bob here. If you look at the $700,000,000 we issued, we paid off $350,000,000 at a savings of about 100 basis points, but we also paid off $350,000,000 of LIBOR based borrowings that were 100 basis points left, so it should even out barring any credit facility borrowings to do a deal or something like that, Pretty close to where it is now.
Our next question is from Nick Joseph from Citi, go ahead.
Thanks. Let me just stay on the capital front. As you think about the acquisition pipeline going forward, How are you thinking about funding that? Obviously, you did
some ATM equity in the quarter.
But how
do you expect Capital funding and leverage levels to trend going forward?
Yes. We ended the 4th quarter at 5 times debt to EBITDA and this quarter at 5 A little over 5.1 times. We would expect, if possible, to fund acquisitions a little heavier on the equity side via Our ATM assuming the currency holds up there, our goal would be to reduce our leverage sub five times Which is our stated goal. So we're slowly working on that. Thanks.
Our next question is from Daniel Bernstein from Capital One. Go ahead.
Good morning. Just wanted to touch back on the Sensus side and maybe if you had some feedback from your SNF On discharge patterns, obviously, there's been a lot of talk about home health maybe taking some share and what the discharge patterns will look like post COVID has. Have you seen any changes to those discharge patterns? Are they looking kind of normal? Just trying to get a sense of maybe A better sense of what that census uptake might be in the next couple of quarters?
So I think as you look at
the hospital discharges, you're looking at they were much lower than they had been historically. And so there had been And so we're hoping that as those admissions become higher in hospitals, those Elective surgeries come back, that it starts coming back to the nursing home industry.
Okay.
And then I think the other question I was going to ask, which was just to ask on the capital markets over equitizing Acquisitions going forward. So, I'll just switch gears on that and just ask about In terms of pricing in skilled nursing, what is you don't seem to think that Pricing is going to move up at all, but there still seems to be, at least from your comments, some financial distress. What is keeping the cap rates Moving to initial yields moving to 10% or higher versus the 9%, 9.5% that you're getting now. Just Trying to think, I mean, obviously, senior Towson there is that wall of money there, suppressing cap rates, but what's the competition that you're facing
on skilled nursing for acquisitions?
It's pretty much the same. I mean, we're just seeing a lot of private equity, a lot of dollars out there in general. Obviously, they have a focus on assisted, but there's Jason's net deals. We've seen it time and time again. So there's a ton of money and it will keep at least in the short run, it's going to keep cap rates pretty low.
Okay.
All right. That's all I had. Thanks.
Our next question is from Lukas Hartwich from Green Street Advisors. Go ahead.
Thank you. So there was a little more churn than normal in the property Operator,
I was just curious if there's anything worth pointing out in there?
No, I don't think so, Lucas.
Just sort of
the normal movement amongst Yes.
Okay. And then can
you talk a little bit about
the moving pieces in the undecedolidated JV? Looks like you sold something.
There was a gain, there was also an impairment, so a lot of
15% stake in a JV that sold, I think, 5 facilities for a large gain. Our share of that was about $10,000,000 $14,000,000 but they also had about $4,000,000 of impairment. So that's the incremental $10,000,000 change.
Got it. And then the $5,000,000 of non recurring revenue, what was that and where does that show up on the income statement?
It's part of Revenue, it actually hits lease revenue.
It's really 2
operators that We're transitioned and or sold and it's in place lease liability. So you have to once you move that, You have to record the revenue related to it. It typically amortizes over the life release. Now it's you write it off it or in this case, It's a pickup.
Great. That's it for me. Thank you.
Thank you.
The next question is from Joshua Dennerlein from Bank of America. Go ahead.
Yes. Hey, guys. Hope everyone is doing well. I guess when I think about it like big picture, it feels like the big kind of key whether or not you'll After like, the rent relief in the future really is going to be determined by kind of fundamentals coming back. How are you guys thinking about maybe the recovery in occupancy Going forward and then cost as well for SNF operators?
Yes. In terms of occupancy recovery, the one thing I'd say is, the last Few months, I wouldn't think about that as the trend. I think it's just the beginning of the reaction to the vaccine and we're That will see occupancies go up a little more rapidly as summer approaches. But that's the question, no one knows, we've never been through it. There are some folks who think it's a 12 month recovery and some of who argue it's 24 and you You can make a case for either set of logic.
And then in terms of cost, Dan, you want to talk about what
the big issue? Yes. I mean, The big one obviously is labor. I mean, it's not obviously just impacting senior housing. It's impacting everyone.
Minimum wage going up, unemployment benefits coming out. It's all making employment that much more difficult inside of SNF. So, there's been a lot more turnover that they've seen lately. They're having to hire on bring on a lot more agency, which is more expensive. So, So they're just they're having a difficult time.
It was difficult environment before the pandemic and it's actually become more difficult at this point. So that's the big challenge on On the expense
side. Interesting. I think you mentioned too like it sounds like there was maybe People leaving the industry, was it just were they was that driven by the unemployment benefits being high or Maybe just it was just a tough year and they decided enough is enough.
It's a combination. I mean, I think people maybe just exited the nursing industry or you do have, At this point in time, excellent unemployment benefits. So, some people are just doing the math and taking advantage of that.
Okay. Okay. And then you guys opened Inspire just late March, I think, if I remember correctly from the press release. Curious to see how the filling up of that building has been going, where you stand on occupancy and kind of where Where you expected to stabilize that or when rather? Sorry.
Stephen, can you take that?
Yes, I'd be happy to. I mean the Early returns are encouraging. As we've said in our prepared remarks, we've got well into the Mid-30s in terms of residents in the building. We had always sort of underwritten the project to be a 3 year stabilization. And We have really no reason to come off of that at this point.
There's just too many variables out there. Market's been receiving the property well, but you can appreciate the fact we're living in an interesting time. So We're still comfortable with that projection.
Awesome. Appreciate it. Thanks, guys.
Thank you.
Question. So this concludes our question and answer session. I would like to turn the conference back over to Taylor Pickett for closing remarks.
Thanks everyone for joining us this morning. And as always, please feel free to reach out to
The conference has now concluded. Thank you for attending today's Presentation. You may now disconnect.