Good day, ladies and gentlemen, and welcome to the Sabra Health Care REIT First Quarter 2019 Earnings Conference Call. This call is being recorded. I would now like to turn the call over to Michael Costa, EVP, Finance. Please go ahead, Mr. Costa.
Thank you. Before we begin, I want to remind you that we will be making forward looking statements in our comments and in response to your questions concerning our expectations regarding our acquisition, disposition and investment plans, our expectations regarding our tenants and operators and our expectations regarding our future financial position and results of operations. These forward looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10 ks for the year ended December 31, 2018, and in our Form 10 Q that was filed with the SEC yesterday, as well as in our earnings press release included as Exhibit 99.1 to the Form 8 ks we furnished to the SEC yesterday. We undertake no obligation to update our forward looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during the call to non GAAP financial results.
Investors are encouraged to review these non GAAP financial measures as well as the explanation and reconciliation of these measures to the comparable GAAP results, including on included in the Financials page of the Investors section of our website at www.sabrahealth.com. Our Form 10 Q, earnings release and supplement can also be accessed in the Investors section of our website. And with that, let me turn the call over to Rick Matros, Chairman and CEO of Sabra Health Care REIT.
Thanks, Mike, and thanks everybody for joining us this morning. It's been a quiet 1st month since we finished all of our restructuring initiatives and for that, for us it's a good thing to ease into a more normal operational environment. As it pertains to guidance, we reaffirm our 2019 guidance. There were a couple of notes that presumed we'd have an issue hitting guidance due to the managed portfolio performance. That's not the case.
And Taly will be providing some details to give everybody comfort that we are comfortable with where the managed portfolio is going and why we are comfortable that we'll continue to meet guidance throughout 2019. We're also focused now on the debt side of the balance sheet and Hal will get into that in a little bit more detail. But as most of you know, we've been looking at opportunities on the debt side for a while and just waiting for sort of timing to work out for us. And we have that sort of in our sights now. So we expect to be engaged in some activities that will include the balance sheet as well.
In terms of our acquisition pipeline, it's currently around 800,000,000 dollars again, primarily senior housing, but we're starting to see some skilled deals. And for us, our focus will be on the deals that we can get done given our current cost of capital, which are skill deals, behavioral deals to the extent that we can find them. We've also been looking at the addiction space that we like. There aren't a whole lot of tried and true operators there, but there's some opportunities there that are small, but would give us at least the opportunity to get into it a little bit and learn more about it without taking any real risk. But it is a space that we expect to see grow and certainly is a nice complement to what we're doing on the behavioral side in our portfolio.
In terms of our operating results, 7 of our top 10 are skilled operators, 5 showed improved coverage sequentially. So we're continuing to show better strength there. 1 is flat, and that was North American. So some of the declines we've seen, they've stopped those declines and we're seeing signs of things improving there. And the one skilled operator that we had that came down some in coverage with Signature Health at 1.25.
Operationally, they're doing fine and we expect things to improve there. They've got a nice Medicaid rate increase coming in Kentucky, about 2.5% in July and that's their biggest state with us. The primary issue for them has been, as most of you know, they had very high PLGL, which is what led to the restructuring initiatives that we and others undertook with them. And their experience in TLGL has come down dramatically, but it's only been about 8 months. And so their actuarial results have been really swinging back and forth a little bit as it takes quite a bit of time for the actuaries to settle in with management on what the right accrual rate is to those liabilities, but nothing that we're concerned about.
They're good operators and we don't expect any issues there. And again, some upside in the short term in terms of rate increase on the Medicaid side and then of course the market basket in October 1. And relative to the market basket October 1, obviously that happens in conjunction with PDPM. That's a better market basket than we've received in years. So that's obviously a good thing for the space.
In terms of PDPM, we continue to receive feedback from all of our operators relative to their preparation for PDPM. They continue to be bullish about it. And we've gotten really nothing but positive feedback and expectations relative to implementation of PDPM with all of our skilled operators. The remainder of our same store triple net skilled portfolio was uneventful coming in at 1.29 EBITDAR and 1.77 EBITDARM. Occupancy was essentially flat and skilled mix was slightly down, but consistent with the range of spin in and still a strong 39.1%.
Skilled mix will always move around more than overall occupancy due to the dynamic nature of those patients. Our senior housing same store triple net rent coverage and occupancy were essentially flat as well sequentially. Our specialty hospital same store rent coverage was flat with occupancy slightly down by normal variance. And with that, I'll turn the call over to Talia.
Thank you, Rick. I will provide an update on our managed portfolio. For the Q1 of 2019, approximately 12% of Sabra's cash net operating income was generated by our managed senior housing communities. Approximately 84% of that relates to assets that are managed by Enlivant, 15% relates to retirement homes in 3 provinces in Canada and the balance to 3 assisted living and memory care communities in the United States. Pro form a for the 21 holiday communities that were transitioned on April 1, annualized cash net operating income from our managed senior housing communities would be 16.9%.
On a same store basis, which excludes the property in Canada that we sold in the Q4 of 2018, the managed portfolio had solid results in the Q1 compared with Q1 of 2018. Revenue increased by 3.9%, cash net operating income increased by 2.4% and revenue per occupied unit excluding the non stabilized assets was up 4.6% despite flat occupancy. This points to our operators' ability to push rates in the current environment coupled with a focus on expense control. Let me give you some further detail on our joint venture and wholly owned managed portfolios. The Enlivant joint venture portfolio, 172 properties located in 18 states across the United States, of which Sabra owned 49%, showed steady improvement.
Average occupancy for the quarter was 81.2%, 0.5% higher than the Q1 in 2018 when occupancy was 80.7%. Revenue per occupied unit was $4,159 slightly below the previous quarter and 4% higher than Q1 of 2018. Importantly, cash net operating income margin was 25.9% compared with 25 0.8% in the Q1 of 2018. If the Enlivant joint venture's cash net operating income remains flat for the rest of 2019, we would see 7% year over year cash NOI growth and that is before the impact of Enlivant's annual rent increase, which occurs on October 1 each year. As for the wholly owned portfolio, Sabra's wholly owned Enlivant live in portfolio of 11 communities continues to deliver steady results with an emphasis on controlling expenses following significant revenue gains throughout 2018.
Average occupancy declined to 90.8% compared with 92.6% in the preceding quarter, reflective of lower move in volume during the winter months. This follows multiple sequential quarters of occupancy growth in 2018, which materially outpaced everyone's expectations. Revenue per occupied unit rose to 5,300 and 63 holding nearly all of the rate gains implemented in the Q4 of 2018 and 7.6% higher than the Q1 of 2018. And cash net operating income was 16.2% higher on a year over year basis with a margin of 29.5%. Sienna Senior Living manages 8 retirement homes in Ontario and British Columbia for Sabra.
In the Q1 of 2019, the 8 properties managed by Sienna showed steady operating and financial results with 90.3 percent occupancy, down sequentially from 92.4%, but spot occupancy as of April 30 was 90.5%. So the trend is looking good. Portfolio occupancy has ranged from just under 90% up to 93% over the past year or so. And this occupancy dip is attributable to seasonality coupled with renovation RevPOR growth and expense control yielded 39.4 percent cash net operating income margin compared to 38.2% in the preceding quarter and cash NOI itself was flat on a sequential basis. Sienna continues to focus on revenue growth in the portfolio, which has a direct impact on net operating income margin at these occupancy levels and we continue to invest additional capital into the properties maintaining their appeal.
We have one operator in our wholly owned managed portfolio who manages 2 non stabilized communities and that creates some noise in our totals on the wholly owned managed portfolio. The dollars are small enough that it will not affect guidance and we still expect to achieve 3% to 6% cash NOI growth in the wholly owned managed portfolio. Subsequent to the end of the first quarter, Sabra's Holiday portfolio consisting of 21 independent living communities located across the country with transition from our triple net portfolio to our managed portfolio. Holiday's portfolio continues to have a good performance with occupancy as of March 31 at 91%, ranging between 79% to 100% across the portfolio. I will now turn over the call to Harold Andrews, Sabra's Chief Financial Officer.
Thank you, Talia. For the 3 months ended March 31, 2019, we recorded revenues and NOI of 136 $800,000 $129,300,000 respectively, compared to $139,200,000 $136,600,000 for the Q4 of 2018. These decreases are attributed to the adoption of the new lease accounting standard, which among other things impacted the amount of revenues recorded during the quarter for certain assets in transition. However, this reduction is not expected to impact our full year financial performance communicated in our previously issued 2019 earnings guidance. FFO for the quarter was $77,200,000 and on a normalized basis was $85,400,000 or $0.48 per share.
FFO was normalized to exclude $5,900,000 related to the acceleration of above market lease intangible amortization, $1,200,000 of loan loss reserves and $1,100,000 of unreimbursed triple net operating expenses. This compares to normalized FFO of $90,200,000 or $0.50 per share in the Q4 of 2018. AFFO, which excludes from FFO merger and acquisition costs and certain non cash revenues and expenses, was $83,200,000 and on a normalized basis was $84,300,000 or exclude $1,100,000 of unreimbursed triple net operating expenses. This compares to normalized AFFO of $83,800,000 or $0.47 per share in the Q4 of 2018. For the quarter, we recorded a net loss attributable to common stockholders of $77,700,000 or $0.44 per share, which includes an impairment of real estate charge of $103,100,000 primarily related to the assets previously leased to senior care centers.
G and A costs for the quarter totaled $8,200,000 and included the following: $2,800,000 of stock based compensation and $100,000 of CCP related transition costs. Our recurring cash G and A costs of $5,100,000 were 3.9 percent of NOI for the quarter, in line with the prior quarter. We expect ongoing quarterly cash G and A costs to be approximately $5,500,000 Our interest expense for the quarter totaled $36,300,000 compared to $37,200,000 in the Q4 of 2018. Included in interest expense in each quarter is $2,600,000 of non cash interest. As of March 31, 2019, our weighted average interest rate, excluding borrowings under the unsecured revolving credit facility and including our share of the Enlivant joint venture debt, was 4.28 percent consistent with the Q4 of 2018.
Borrowings under the unsecured revolving credit facility bore interest at 3.74% at March 31, 2019, a decrease of 1 basis point from the Q4 of 2018. As of March 31, 2019, we had 30 assets held for sale, which included the 28 Senior Care Center facilities that we sold on April 1 for gross proceeds of $282,500,000 and 2 additional skilled nursing facilities. We did sell 3 skilled nursing facilities during the quarter for net proceeds of $6,900,000 and recognized a $1,500,000 net loss on sale. 2 of these assets were part of the CCP portfolio repositioning plan. We were in compliance with all of our debt covenants as of March 31, 2019, and continue to maintain a strong balance sheet with the following credit metrics, which include the impact of the Senior Care Center asset sales and the holiday conversion, which occurred both occurred on April 1, 2019.
Net debt to adjusted EBITDA, 5.64x. Net debt to adjusted EBITDA, including unconsolidated joint venture debt, 6.08x. Interest coverage 4.19x. Fixed charge coverage 4.06x. Total asset sorry, total debt to asset value 48% secured debt to asset value 7% and unencumbered asset value to unsecured debt 2 33%.
As of March 31, 2019, we had total liquidity of 4 $102,600,000 consisting of unrestricted cash and cash equivalents of $22,600,000 and currently available funds under our revolving credit facility of $380,000,000 After considering the net proceeds from the senior care center sales and the holiday lease termination fee, which aggregated to $338,700,000 our pro form a liquidity increased to $741,300,000 In addition, we set up an ATM program in the Q1, whereby we can sell shares of our common stock having aggregate gross proceeds of up to $500,000,000 Subsequent to March 31, 2019, we sold 1,100,000 shares of common stock under the ATM program at an average price of $19.57 per share, generating aggregate gross proceeds of $21,200,000 which further increased our liquidity and positively impacted our leverage. Subject to market conditions, we expect to continue to use the ATM program to reduce our outstanding indebtedness and finance future investment in properties to achieve our stated deleveraging goals. With respect to the balance sheet, we are watching the bank in more markets to take advantage of opportunities to extend our debt maturities, lower our cost of debt and increase our financial flexibility with current market covenants. While I can't provide any specificity at this time, we hope to see some activity in these areas in the coming quarters.
And to reiterate what Rick and Talia said, we reaffirm our full year guidance. And regarding our managed portfolio, if NOI stays flat for the balance of the year, we will hit about 7% growth in the Enlivant joint venture NOI and will be about flat year over year on the owned portfolio. And keep in mind, the owned portfolio is so small in absolute dollars that just a couple of $100,000 per quarter increase in NOI puts us at the midpoint of our guidance range. Finally, on May 8, 2019, the company announced that its Board of Directors declared a quarterly cash dividend of $0.45 per share. The dividend will be paid on May 31, 2019 to common stockholders of record on May 2, 2019.
In terms of cash flows and related funding of the dividend, we expect full year 2019 cash flows from operations to fully cover our 2019 dividends payments. And with that, I'll open it
up to Q and A. Thanks, Harold.
Thank And our first question comes from Trent Trujillo from Scotiabank. Your line is open.
Hi, good morning out there and thanks for the comments to clarify your seniors housing managed portfolio. It's very helpful. Looking at other components of guidance, it does include some dilution from equity raises and you mentioned the $500,000,000 ATM program. On the last call, you mentioned to be patient and wait until the stock was perhaps at an improved price. And it sounds like since that time, the stock has been between $19,000,000 $19,50,000 You executed within that range subsequent to quarter end, but that's below where the stock was at the time of your last call.
So how are you thinking about ATM usage going forward?
Yes. Thanks for the question. And the answer is, with respect to the ATM program and our deleveraging, certainly we'd love to see the stock price higher than it is. But when we think about issuing equity to delever, the impact on the stock price being $20 or $19.50 it's really immaterial. And so we made the decision in early April, actually it was at the end of March to go ahead and issue a little bit of equity at the 19.57 price range.
I wouldn't say definitively that we would issue more equity at a lower price, but I think we're going to be opportunistic. And I think the point I'd like to take away is whether it's $19.50 or $21.50 we're very committed to delevering the balance sheet this year and we'll do what it takes. So what it needs to take to get the leverage down below that 5.5 times leverage level that we identified. And so again, we will be patient. We're not going to rush out and do it all at this level.
But at the same time, we think it's prudent to go ahead and get started in that process. And so you should expect to see us continue to use the ATM over time this year to get the leverage down.
That's very helpful. And I guess, following up on, I guess, the underlying need for equity, there's the future purchase of the Enlivant JV that you don't already own, which you mentioned is a likely possibility in 2020. So I guess with the stock where it is, who knows what's going to happen with the price and where you can issue stock? But are you thinking about other ways or structures or approaches besides purely raising equity to make that transaction work?
Yes, we are. And we've got a long way to go before we have to exercise that. But assuming we're kind of in same place, there are other options that we've discussed internally. One option, for example, that may be a really good option for us is to enter into a new JV. And there's certainly not a shortage of interested parties in doing that with us.
So that right now may be the best looking option. But again, we got we have plenty of time on that.
Okay. And if I may, one more. It was very nice to see that 5 of your 7 operators showed improved coverage on the quarter. So I guess what happened with those 5 operators that it improved? And what's happening with the rest of the portfolio since the aggregate coverage dropped?
And I guess specific to one of those operators, rent coverage for North American Healthcare. I think on the last call you mentioned in January, the coverage jumped back up to 1.25 after a blip. So what exactly happened that they still ended around 1.1? Thanks.
Yes. Well, I think on the operators that improved, which carry the majority of our NOI, I think we've been pretty consistent all along that we expected to start to see improvement. So length of stay has flattened out, which has helped. I think they've done a good job on expense control. So and we also didn't think that operation for PDPM was going to be an issue that was going to cause any downturn.
So I think it's consistent with kind of the trends that we've been seeing. On North American, they did have 2 to 3 months in the Q1 were a good month. But remember that that's a quarter in arrears and we're still reporting trailing 12, right? So you wouldn't see anything. But even with the Q1, it's not going to make that big of a difference on trailing 12.
I think we need a couple of more quarters, but January was a better month. March was even a better month. February is never a good month in our states because you've got 28 days in fixed expenses. But we are seeing improvement there. So it's really a function of it being a quarter in arrears and we were just we were pleased at this point to see that they the bleeding had kind of stopped as we expected it to and we're starting to see an upturn.
So as for the rest of the portfolio, Signature is actually a big driver in that. We dropped a couple of basis points. It wasn't a big drop for the entire portfolio. So we're not seeing anything from a trend perspective that's causing us concerns. And I know I tend to look at a lot of these things differently than you all do.
Just as an operator, I just expect things to move a little bit up and down just sort of the vagaries of the business. But we're not seeing anything that we're concerned about. And I think, we're pretty close to some better times for the space, both in terms of the market basket in October and PDPM. Although I think it's also fair to say that we shouldn't expect that as soon as PDPM hits on October 1, you're going to see some upturn. I think it's going to take several months to realize that.
And we're positive to think about in 2020 as we present our numbers on the traditional basis, if we're starting to see positive impact from PDPM, whether we start showing some things on a pro form a basis as well to give the market a better sense of how PDPM is impacting our skilled operators.
That's very helpful. Thank you very much for the time and taking the questions.
Yes, of course.
Thank you. Our next question comes from Nick Joseph from Citi. Your line is open.
Hey, this is Michael Griffin on for Nick. So in terms of fundamentals regarding the SNFs, we see that occupancy is up a pretty decent amount year over year. Do you see trends like that continuing into the future and
sort of any color on that would be great?
Yes, we do. I mean, you've got in the skill space, you've almost got kind of a perfect storm coming. You've got declining supply, which is going to continue. You've got an increasing demographic. And then even though most of the commentary that I think you all have seen about around PDPM has been the benefit being primarily on the expense side.
I think that's a fair statement to make, because on the revenue side, we do see opportunities there, but it's just it's much harder to sort of quantify what that may be. So for example, if you're moving your focus as a skilled operator from being exclusively on short term rehab because that's what the old system designed you to do and you're focused more patients that have nursing complexities, those patients are going to tend to have a longer length of stay. So you actually could get some revenue benefit there. And if you have a longer length of stay, then obviously you're going to have better occupancy. So you've got this convergence of declining supply and potential upside on the top line from PDPM.
And we'll have to keep an eye on length of stay because that's probably the only factor that we're going to be able to look at in order for us to differentiate on how much of
occupancy growth in the future is
due to supply issues, occupancy growth in the future is due to supply issues versus demographic versus PDPM. So I think that will be a good stat for us to keep an eye on. Is that helpful?
Yes. No, that's helpful. I just got one more quick one. Regarding concentration, you mentioned back in April that you decreased the SNF concentration portfolio down to about 60% and meaningfully decreased it in Texas, which obviously isn't that friendly a state for SNFs. Sort of long term picture, where would you like to see that SNF concentration be?
I think we'd like to get it a little bit lower, just have a little more diversity. And if you assume if you just take where we are today, and assume modest skilled acquisitions and then additionally assume the exercise of the joint venture option, you're close to 50%. So that's balance. Obviously, it's not just skilled and senior housing because we have been able in there as well. But I think we're getting it down low enough where we can take advantage of opportunities on the skilled side.
So for example, because we became our development pipeline, which is senior housing and Enlivant sometime next year, you've got more senior housing coming in. Obviously, our cost of capital isn't quite where we'd like it to be. And frankly, even if we were a few bucks higher, we still wouldn't be paying some of the prices that the PEs are paying for senior housing. So our current cost of capital actually isn't a factor in our determination as to whether we'll be senior housing and that we just think it's too expensive anyway. So we're in a good spot right now where our cost of capital does allow us to pursue skilled opportunities as well as behavioral if we can find them.
And without pushing our exposure back up to where it was, say, at the time that we closed the merger with CPP where it was 74%.
That's not going
to happen. So with everything that we've gone through, I think we're in a pretty good spot to have a little bit more time for our cost of capital to recover and then focus on skilled deals without skewing that exposure too much.
Awesome. Awesome. Well, that's it for me. Thanks for the time.
Yes. Thank you.
Thank you. Our next question comes from Chad Vanacore from Stifel. Your line is open.
Thanks. Just thinking at the beginning of the year, I think you teed up about $300,000,000 of dispositions and the majority of that was a senior care center sale, which took place. But you still got 30 assets held for sale. So what is the aggregate proceeds in the remaining from here to the end of the year that we should expect?
Yes, Chad, it's Harold. First of all, the $300,000,000 that we referenced in our guidance was in addition to the senior care center sales.
Okay.
So we still have a lot of dispositions that will occur this year that are over and above that. A lot of them are toward the latter part of the year. So I think the I'm not sure if that answers your question, but there's still a lot to be done. And the few that we have held for sale today in addition to senior care centers. Those are ones that we're far enough along the process that it's very, very close to closing on those transactions.
We don't on those transactions. We don't tend to put stuff in held for sale until we've got a contract that's executed and we're very close to closing because of the way the GAAP rules are required to qualify for held for sale. So you'll see more dispositions over the course of the next few quarters.
And those anticipated dispositions, Chad, weren't new dispositions or new issues. They were all contemplated in the context of the merger. So there's nothing new that's occurred or tenants that all of a sudden we had different issues with.
Okay. But Rick, beyond what you've already put in for held for sale and what you expect for this year. Beyond that, what if you had to circle the portion of the portfolio that doesn't hit your strategy any longer, roughly what portion of your portfolio would you estimate that is
long term? Yes, I don't think we've got any tenants left that don't fit our strategy or have products within their operations that don't fit our strategy. And in fact, we're seeing some different opportunities of strategy now in the behavioral space where we have a couple of operators who are interested in converting skilled facilities or use the skilled facilities to behavioral use, because that's a growing space. So we really don't we don't save in that. And there's always going to be some facilities from time to time that you're going to want to divest, because markets change.
But when we look at our tenants, we just don't see anybody that we kind of want to move on.
Something like those behavioral opportunities, would that be more into CapEx funding to convert those over to proper facilities or what would that entail?
Chad, it's Talia. I think that's right. It really varies on the If it's to a hospital type setting and there's more CapEx, if it's something that's not quite that just sort of a reconfiguration potentially. So it really varies. But that's just the transition and CapEx is really the sort of nominal cost to us.
And in some cases, our operators may not need the CapEx from us. So it will just be situation specific.
Got it. So that brings me to another question. Is now a better time to ramp up your new investments or to delever for Sabra?
Well, we're going to have plenty of proceeds available to do acquisitions if we can find skilled acquisitions that are interesting to us. And I don't think I mean, the question comes up, but we don't see a conflict between our ATM usage and delevering the balance sheet and getting some acquisitions done. We're not going to be out there and doing $1,000,000,000 acquisitions. So we'd like to get some growth going and I think it'll be probably smaller deals that are more along the lines that you've seen from us in the past. So I think if you actually look at the numbers and the fact that they're not going to be huge numbers, you can do both.
And we have all that out we've looked at all that obviously in our forecast and believe that we can accommodate it.
All right. That's it for me. Thanks.
Thank you. Our next question comes from John Kim from BMO Capital Markets. Your line is open.
Thank you. Good morning. I just wanted to follow-up on the guidance and the senior housing managed portfolio because it sounds like what you're saying is if you hit sort of cash NOI is flat on your joint venture portfolio, you'll hit 7% growth for the year. And then also on your own portfolio, if it's flat, it be basically flat for the year. But just looking at your last few quarters and as well as some of your peers, it seems like Q1 is behind EBITDA margin point.
So I'm just wondering what gives you confidence to either retain margins or just retain that level of NOI through the remainder of 2019?
Well, we don't view Q1 as being a high point. So and with Enlivant, for example, historically, their 2nd and third quarters are their best quarters. So that hasn't been our experience.
So 2018 was an anomaly?
Well, you had the flu that really limited, really impacted the Q2 pretty dramatically and we obviously haven't had that experience this year. And so because it impacted the Q2 so dramatically, it took a while to recover from that. So you start in the 3rd quarter as well. We aren't the only ones who experienced that.
Right. And on specifically Enlivant because they are the major contributor to our wholly owned portfolio to our managed portfolio both on the JV and the wholly owned. They do a 4th an annual rent increase in the 4th quarter. So actually 4th quarter, tended to be their strongest quarter.
Yes. They don't wait till January 1st. They do it October 1st. And that was 5% last year on the JV and 5.5 percent on the wholly owned.
So just back of the envelope, we estimate you need to get about 10% growth for the remainder of the year in the joint venture assets, 7% in your wholly owned to reach the midpoint of your guidance. Is it fair to say that the midpoint is not likely and it's more at the lower end of guidance that you're likely to achieve?
This is Harold. I'd have to see your math because as we said, we don't need any growth in the joint venture to hit 7%, which is close to that midpoint. And on the owned portfolio, it's a slight growth in absolute dollars of about, call it, dollars 250,000 a quarter to hit the midpoint. And so I'm not sure how you came up with that math, but that's our math.
We could spend time to be offline, John, because that's just not right.
Yes, no worries. Okay. Can you confirm what the impact is on NOI from the Holiday portfolio transition?
Yes. On NOI for if you're just comparing the lease versus our comparison of what the NOI was for the Q1, it's about $2,000,000 for the quarter. But again, that does not include the benefits for paying down debts from the termination fee. But from a pure NOI perspective, it's about $2,000,000 for the quarter.
For the quarter, not annualized?
Correct.
Okay.
Yes. On an annualized basis, after the FFO impact was around $0.05 or 0 point 0 $6 including the pay down of debt associated with the termination fee. And all that again fully built into guidance and reflected in our expectations for the year.
Last one for me. The impairment that you took with other charges as well was $103,000,000 I think last quarter you provided guidance of 69. I'm just wondering what that difference was between the two numbers?
Yes. The 69 was specific to the assets being sold for senior care centers. In our 10 Q, we disclosed $76,000,000 which included the other assets as well as some amount for assets that were being held. But we've made I won't get into too much detail, but because we're now keeping 3 of the assets, I'm sorry, selling 3 of the assets at the end of last quarter, we weren't exactly sure how many of those assets we were going to keep and how many we were going to sell. Now that we're pretty much committed to selling 3 of the 10, then there was some impairment for those assets as well.
So you add that in plus the $10 or so million for the other assets that we're selling that were not part of senior care centers and that's the difference to get to the $100,000,000
And the impairment, John, was specifically due to the abuse in facilities that got really damaged by the hurricane last year. Right.
Got it. Okay. Thank you very much.
You bet.
Thank you. Our next question comes from Rich Anderson from SMBC Group. Your line is open.
Thanks. Good morning, Rich. Thanks, Rick. So I just want to get back to that holiday question from John. So the $0.05 to $0.06 impact inclusive of the $57,000,000 that you collect in the 2nd quarter, is that correct?
It does not include the $57,000,000 as it affects our income statement for the fee itself. What it includes is the impact of being able to pay down debt with that $57,000,000
All right.
So the $5,000,000 to $6,000,000 is a good number next year. Hopefully, it gets better than that. But that's sort of your base case going forward?
That's correct. And again, built into our guidance numbers as well.
Okay. Just a question on Signature, if I'm looking at this correctly, the coverage last quarter was 1.43x, 1.25x this quarter. I know you said you're not concerned of some noise, sort of legal noise or whatever. But at what point do you get concerned when you see sort of a drop of that order of magnitude on a sequential basis?
Well, so if the drop was due to operational performance, we'd be concerned. But we're seeing steady operational performance there. The drop is specific to just taking longer than you would like for the actuarial to get their arms around what the reserve should actually be, what the run rate should actually be. So and the other concern would be if there was a change in their experience on those liabilities then that would be concerning because that would obviously have a run rate effect on the income statement, but that's not the case either. So the drop off that we expected in terms of claims with how the environment changed in Kentucky last summer happened and their experience since then has been consistent with expectations.
It's really just an actuarial issue.
Okay. And then last one for me. Rick, you kind of spoke swimmingly a little bit about the skilled nursing business with declining supply demographics in the right direction, PDPM cleansing effect of that and all the other things, suddenly skilled nursing starting to sound like a pretty cool asset class. Not to get ahead of ourselves, is there a time in the future you think that an operating model, I guess a SNOP model would apply realistically for skilled nursing or you think that that's just too much to ask at this point?
Yes, I think it's probably a little bit too much to ask at this point. However, if you look at everything that CMS is doing, they're actually thinking really strategically, which I think historically hasn't necessarily been the case. Healthcare spaces across post acute spectrum and actually acute hospitals too, always operated from a reimbursement perspective in silos. And all that's changing now as everything is going to case mix and with CMS opening openly discussing moving to a neutral site system, which we think would really be good for the skilled sector. So I think what you're talking about when you get to a neutral site, then I think maybe yes, it is a possibility, but that's a ways down the line.
I think just with the current dynamics that we see changing, probably not, but yes, I can but maybe at that point, but that's remember, you're taking on a lot of liability if you do the same thing with skill that you're doing with senior housing. So even if you had a model that was a lot more reliable in a neutral site environment. I think the big issue still that would prevent us from wanting to go there is on the liability side, because the difference between skilled nursing and senior housing from a liability perspective is that the database is there's a database of everybody in the skilled side called Nursing Home Compare. So it allows the plaintiffs' attorneys to just troll, right? They can just go into that database and troll and pick on companies, pick on facilities and just target.
And that isn't the case with senior housing, nor do I think it ever will be the case with senior housing. So even if you have a much more reliable model going forward, that's fairly predictable, I don't see how you get away from being concerned about those liabilities. So, as someone who's spent a few decades in skilled nursing amongst other sectors, I just don't think I can get convinced.
Okay. And one quick one for Harold, I'm sorry. On the debt and the deleveraging side, over 30% of your debt expiring in 'twenty one and 'twenty two. Is there anything about I think a big chunk of 'twenty one is your revolver, but is there anything about those chunks of debt that's out there that are unattainable at this point? Or is that something that you can go after with minimal penalties?
Yes. We can absolutely go after the 2021 maturities with very minimal cost.
And Rick, I would say, we can't be that specific right now, but just stay tuned. We feel pretty good.
All right. Sounds good. Thanks.
Yes.
Thank you. And our next question comes from Daniel Bernstein from Capital One. Your line is open.
Hi, good afternoon. I guess, morning out in California. I noticed on the wholly owned and living properties, the 11 properties there, you have about 91% occupancy, 30% margins It's very different on the JV. And is there any material difference between those assets and the reason why the JV assets can't get up to at least upper 80s, 90% occupancy and close to 30% margins over time?
There is nothing intrinsically different. We're just talking about different pools of assets. And so we're hopeful that what you just said, in fact, does come true and it's just a question of time.
Yes. The wholly owned, we're just further along in the turnaround phase and plus they're looking at some assets within the JV that they're in the process of divesting, which will help the overall performance as well. Okay.
And then the assets that you're divesting the rest of this year, are you currently getting paid rent on those or something we would have to adjust in the model once you sell those assets or is the rent out of your revenue line at this point?
Well, it's number of assets, Dan. So it's probably a mix of both. I will tell you that all those dispositions are accounted for in our guidance numbers. So any loss trends from those has been dealt with in our full year guidance. But it's like I said, it's upwards of $300,000,000 over the course of the year.
So it's a facility here, facility there, it's kind of all over the board. And frankly, a fair amount of it is towards the latter part of the year. And so you're going to have a pretty small impact. But I think if you want to chat more about it offline, I can kind of give you a little more detail
on the
modeling process. Okay. That sounds fine. And then
some of your peers had been talking about value add opportunities. Earlier in this call, you talked about cost of capital maybe being a little bit restrictive on seniors housing versus skilled nursing. But I think with the if you found some value add that probably would you can make those accretive. So are you looking for value add? Are you seeing any being brought to you?
Are you interested in those?
Let me make one comment and then Tanya may want to add on. We've always been interested in value add. I think we're trying to be a little sensitive to our investor base relative to all the restructuring we've done over that 18 month period. And now we've got that behind us. So I think if we do look at value add opportunities, it will be relatively small.
We don't want to announce anything that's going to drive the narrative again for the foreseeable future. And we don't want to announce anything that's going to require a lot of explanation. So we'll look for smaller opportunities like that. Talia?
I think that's right. And we have done them over time, as Rick said, here and there. They've always been small. And the key aspect of a value add is the time it takes to actually how much value can you add and how much time does it take to realize that value. But we're always open to looking at things.
We just haven't seen any of that felt like they were going to go well fairly quickly so far.
And the CCP was evaluated. That's what's allowed us to get out from under what's happening to us with Genesis, just really controlling the state of our company. So that goes to the comments I made earlier about us wanting to be just more sensitive now to how we approach those things.
Okay. That's good. It's been up for me. That's all I have. Thank you.
Thanks, Matt.
Thank you. Our next question comes from Lukas Hartwich from Green Street Advisors. Your line is open.
Thanks. I just have one. Can you provide the underlying EBITDA growth for the holiday portfolio during the quarter? Quarter over quarter? Year over year for the Q1.
I have to get that to you. I don't have it handy. Yes.
I mean, and you're talking about their operating force not what's in our financials, but their operating force.
Yes, yes. Because if you look at the other holiday portfolios, it like independent livings had a better environment. And so you're starting to see NOI growth show up there. So I was just curious if we're also seeing that in your holiday portfolio? I don't have that number.
We can get it to you.
Yes, we'll get back to you with that number. And our portfolio is all IL, so. Right. Okay, great. Thank you.
Yes.
Thank you. Our next question comes from Todd Stender from Wells Fargo.
Just to kind of stick with Holiday for a second. EBITDAR coverage at Q1? I know you guys used to list it in your supplemental, but just to get a sense of the starting point, I guess, for the they're now managed direction?
Yes. It's been pretty flat. It's still around 0.9 on an EBITDAR basis and that's not really much changed from prior quarters. So it's been pretty flat.
It was there for a long time, Todd.
Okay. And then any how about the CapEx commitment for just for holiday? And any comments that there's deferred maintenance and maybe now you'll be responsible for that?
We've always been involved in capital projects and discussions along those lines. There is I'd have to get back to what the capital commitment is, but there's nothing unusual that's occurring there. It's more it's status quo.
Yes. Todd, I'd say the way I would characterize it is, we don't have deferred maintenance issues in our portfolio. The question is how much more can you do to pretty the facilities up and make them a little bit more competitive. But those won't require material dollars.
Okay. And then for Harold, any or have you disclosed or could you disclose your line balance? It was on the high side as of Q1, but you had some senior care disposition proceeds already. So maybe just looking at a $600,000,000 line balance, what is it now?
Yes. To your point, it was paid down by the proceeds from holiday, the $57,000,000 and the $282,000,000 So when I gave you that pro form a liquidity number of, let me just grab it again, $741,000,000 That means our line the liquidity on the revolver is somewhere around $720,000,000 So I think there's about $280,000,000 outstanding on the line today.
Okay, got it. Thank you.
Sure.
Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Rick Matros for any closing remarks.
Yes. Thanks everybody for your time today. We're available for any follow-up and we'll follow-up with a couple of you on the items that were specified. And just to make the note again, we're comfortable with guidance. Thanks.
Have a good day.
Ladies and gentlemen, thank you for