NHI - NYSE

Good morning, everyone, and welcome to the National Health Investors First Quarter 2024 Earnings Webcast and Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Dana Hambly. Sir, the floor is yours.

Thank you, and welcome to the National Health Investors conference call to review the results for the first quarter of 2024. On the call today are Eric Mendelsohn, President and CEO; Kevin Pascoe, Chief Investment Officer; John Spaid, Chief Financial Officer; and David Travis, Chief Accounting Officer. The results as well as notice of the accessibility of this conference call were released after the market closed yesterday in a press release that's been covered by the financial media. Any statements in this conference call, which are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-Q for the quarter ended March 31, 2024. The Copies of these filings are available on SEC's website at sec.gov or on NHI's website at nhireit.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules, which have been furnished on Form 8-K with the SEC. Listeners are encouraged to review those reconciliations provided in the earnings release, together with all other information provided in that release. I'll now turn the call over to our CEO, Eric Mendelsohn.

Hello, and thank you to everyone for joining us today. We're off to a great start in 2024 as the first quarter results exceeded our expectations and represents the third straight quarter of outperformance. The general theme remains the same and is characterized by stable cash collections, steady deferral repayments, improving operator fundamentals, shop occupancy and revenue growth and no unexpected rent concessions. Our excellent start, coupled with good visibility for the rest of the year, prompted us to raise our full year guidance, which implies over 5% FAD growth at the midpoint. The increased FAD guidance is broad-based with several factors contributing to the improved outlook. John will provide more details in a few minutes. As a reminder, our guidance does not include any new investment activity. We believe our portfolio is in great shape and positions NHI for strong organic growth through multiple channels including deferral repayments, rent step-ups with select large tenants, significant NOI growth potential in SHOP and capital investment projects concentrated on the existing real estate portfolio. Our Senior Housing EBITDARM coverage moved higher for the eighth consecutive period to 1.45x with particular strength at Bickford and our other need-driven operators. We reached a favorable outcome with Bickford on April 1 rent reset, which increased the base rent by approximately 10% annually while preserving our ability to receive rent deferral repayments based on growing revenue in the Bickford leased portfolio. Strong revenue growth within our NHC portfolio during 2023 drove an increase in the percentage of rent, which more than offset the scheduled reduction in base rent related to the sale of 7 properties in 2022. As most of you on today's call are well aware, the NHC lease matures at the end of 2026. So we're actively working on creating a favorable outcome for our shareholders. For the record, I need to state that the negotiations related to the NHC lease are sensitive. We understand the importance of this lease to shareholders and our unique relationship to NHC, so we do plan to provide relevant information on the process where and when appropriate. Back to our results. The Senior Housing operating portfolio or SHOP increased NOI by 54.8% year-over-year to $2.9 million on over 13% revenue growth and 600 basis points of margin expansion. Sequentially, NOI increased by approximately 2%, which is encouraging as we typically expect seasonal weakness in the first quarter. Our guidance for 2024 NOI growth remains at 25% to 30%, though continued occupancy improvement, coupled with lower move-in incentives have us optimistic that we'll be at the high end or above the current guidance range as the year progresses. Also supplementing our organic growth is a $25 million NOI producing CapEx program targeted at our leased real estate portfolio. To date, we have committed $19 million at a weighted average yield of over 8%. We view this program as a low-risk investment into properties with good coverage and returns well above our cost of capital. The balance sheet at just 4.4x net debt to adjusted EBITDA continues to be one of the lowest levered among all REITs and positions us for significant external growth. We have plenty of dry powder to execute our growth initiatives with over $970 million in capacity right now on the revolver and ATM. We've been advising sellers and borrowers for several quarters that the higher for longer rate environment could be a reality. It seems to be a certainty at this point, which has created a more active pipeline for us. Our pipeline is currently over $300 million, and we have submitted LOIs on deals valued at over $100 million with initial yields of more than 8% on average. The improvement in our cost of capital is allowing us to become more competitive to other providers of capital. With seller expectations on cap rates adjusting higher and our cost of capital moving lower, we expect external growth to remain robust for the foreseeable future. Kevin will provide more details on the makeup of the pipeline. We clearly see the momentum for NHI across several paths, including our multipronged organic growth strategy, significant external growth opportunities and a favorable macro environment driven by slowing supply and growing demand. In sum, NHI is in a great position to capitalize on several initiatives and create a pathway for several years of exceptional growth. I'll now turn the call to Kevin to provide more details on our operations. Kevin?

Thank you, Eric. As noted last quarter, we're starting to see more actual deal activity and the volume of new inquiries has significantly increased in the last several months. We're looking at opportunities across the continuum of Senior Housing and skilled nursing and across multiple products, including loan, lease and joint venture opportunities. We currently have submitted LOIs on deals valued at more than $100 million with yields of more than 8% on average. These are primarily senior housing focused with an approximate mix of 50-50 in loan to real estate acquisition. In the case of new loan investments, we continue to look for a path to future real estate ownership. As an example, during the first quarter, we funded a $15 million mortgage on an 80-unit assisted living and memory care property operated by Carriage Crossing Senior Living, a well-respected and growing operator of 9 properties in the Midwest and a new relationship for NHI. The 8.75% loan carries a 5-year maturity and NHI has a purchase option on the property after 2 years. Turning to Asset Management. We had another strong quarter with positive year-over-year adjusted NOI growth from the need-driven and discretionary senior housing operators, skilled nursing and Specialty Hospital and the SHOP portfolio. The need-driven operators again had positive coverage trends with EBITDARM at 1.35x representing the eighth straight period of sequential growth. The improvement was driven by both Bickford at 1.58x and other need-driven operators at 1.16x. On April 1, we reset the Bickford annual base rent to $34.5 million, which is an approximate 10% increase from the prior base rent of $31.4 million. On a pro forma basis, EBITDARM coverage under the increased base rent was 1.37x for the trailing 12 months ended December 31. This is still very healthy and well above Bickford's pre-pandemic coverage, so we're obviously pleased with the results of restructuring this portfolio. The next Bickford reset is scheduled for April 2026 and is based on a defined lease coverage ratio with a floor determined by a range of CPI escalators. At a minimum, the base rent will increase 4% to 6% in 2026 from the current level, but could be higher if Bickford outperforms. As a part of the CapEx program that Eric described we have committed approximately $8 million in NOI producing investments to the Bickford portfolio, which should enhance property cash flow and coverage over the next couple of years. We also adjusted the deferral repayment formula, which we estimate results and quarterly repayments of approximately $1 million going forward while continuing to align us with Bickford's improving fundamentals and revenue growth. Bickford's first quarter 2024 repayment, which is based on the older formula was a record $1.5 million. Through March 31, Bickford has repaid approximately $4 million. Our discretionary senior housing portfolio primarily includes our entrance fee portfolio, which has performed above our expectations since the pandemic began, and that continues to be the case. Coverage improved sequentially to 1.54x from 1.41x driven by an uptick at SLC, our largest tenant on another solid quarter of entrance fee sales. Discretionary coverage, excluding SLC, which largely reflects the performance of our other entrance fee communities improved sequentially to 1.63x from 1.38x. As we have seen, the variability in the CCRC coverage is higher due to the variability in entrance fee sales. But overall, our operators have delivered steady results over a long period of time, and we do not see that shifting in the foreseeable future. SNF and Specialty Hospital portfolio reported solid coverage at 2.83x, which improved sequentially from 2.74x. The coverage at NHC improved to 3.8x from 3.54x. Remember that NHC's reported coverage represents corporate fixed charge coverage and is not comparable to the EBITDARM coverage reported for all other asset classes and operators. For a point of reference, NHC operates 91 properties, of which 35 are owned by NHI, and our lease payment represents their only significant fixed payment obligation. As detailed in yesterday's filings, the NHC first quarter percentage rent increased to $3 million from $1.6 million in the prior year period. The increase in the percentage rent more than offset the scheduled decline in the base rent of approximately $363,000. Recall that in September 2022, we sold 7 SNFs previously operated by NHC for net proceeds of $43.7 million and amended the mass release on the remaining portfolio, which effectively has NHC continuing to pay rent on the 7 sold properties but at a declining rate through the maturity of the lease. Separately, we are in the process of transitioning 1 SNF in Wisconsin to another operator that has a much greater presence in that state. This resulted in an $800,000 straight-line rent receivable write-off, which should not impact our cash rent this year. Lastly, in SHOP, momentum continues to build throughout the portfolio. First quarter NOI increased 54.8% year-over-year to $2.9 million. Resident fees increased by 13.3% on an approximate 1,000 basis point increase in occupancy to 85.3%. Operating expenses increased 4.9%, leading to a 600 basis point year-over-year margin improvement to 22.2%. Our strategy continues to rely on using rate to drive occupancy growth, which is evident in the relatively flat quarterly RevPOR. Occupancy improved sequentially by 210 basis points, while the margin declined slightly by 10 basis points. The first quarter is seasonally weak, so we were happy to see occupancy growth throughout the quarter, though our acquisition costs were higher, which weighed on the margin. As we mentioned last quarter, we expect the quarterly NOI cadence to grow throughout the year, which would lead SHOP to be at the high end of the current guidance growth range of 25% to 30%. We also expect to invest approximately $10 million to $12 million into the SHOP portfolio this year, which should help drive margin growth later in the year. Our longer-term view that this portfolio can generate NOI dollars in the high teens on margins in the mid-30% range remains unchanged. I'll now turn the call over to John to discuss our financial results and guidance. John?

Thank you, Kevin, and hello, everyone. As Eric and Kevin previously mentioned, our strategy continues to be to execute on our organic opportunities and pivot toward additional NOI growth from accretive investments. Our results today indicate to all of us that our strategy is on track. First quarter results were above our expectations as primarily reflected in the percentage revenue rent results from NHC and Bickford. Our guidance reflects further improvement this year as compared to our February guidance. Kevin previously spoke about our improved pipeline. We believe that we are seeing an inflection point between seller cap rates and our improved cost of capital. I'll talk more about what this means for our guidance in a moment. But first, our results. For the quarter ended March 31, 2024, net income, NAREIT FFO and normalized FFO per diluted common share were $0.71, $1.10 and $1.12 per share, respectively. Our FAD was approximately $51 million, which is a 6.8% increase year-over-year. Compared to the prior year quarter, our net income and NAREIT FFO per diluted common share declined by 10.1% and 5.2%, respectively, while NFFO per diluted common share improved by 0.9%. Our results for the first quarter included a year-over-year net increase in NHC rent of $1.1 million, which was comprised of a $1.4 million increase in the percentage revenue rent for NHC, net of a $400,000 base rent decrease attributable to the scheduled Northeast 7 property disposition rent that occurred in 2022. Also recall that in the prior year first quarter, we recognized $2.5 million in noncash deferred rents associated with the acquisition of a high-performing Bickford property. Excluding those Bickford rents, deferred rent repayments were up $1.6 million year-over-year. Other significant items impacting the year-over-year results included the write-off of straight-line receivables of approximately $0.8 million associated with the planned transition of one property to a new operator, which Kevin previously discussed. Our strategy in our SHOP segment continues to be to increase occupancy which we believe will result in additional NOI improvements. At the end of March, our SHOP occupancy results were ahead of budget, while our NOI is tracking our forecast and guidance. Our SHOP NOI this quarter when compared to the same period last year was up $1 million. SHOP sequential FAD contribution was essentially flat after including recurring CapEx compared to the fourth quarter. Sequentially from the fourth quarter, FAD improved $3.6 million to which we attribute $3 million of this improvement to cash rents and interest income and $600,000 to changes in cash G&A. The $3 million improvement in cash rents included $1.7 million in net increase in NHC rents. The remaining $1.3 million in cash revenue growth was attributable to annual rent escalators, increased interest income and improved deferred rent collections. During the first quarter, we closed on a new investment mortgage loan for $15 million, yielding 8.75%. Subsequent to the end of the first quarter, we disposed 2 small properties and we continue to have 1 property in assets held for sale. The impacts from the new investment dispositions and the previously mentioned transition property are all included in our updated guidance. Our Q1 2024 metrics when compared to Q1 2023 saw further improvements. For the period ended March, FAD payout and net debt to adjusted EBITDA ratios improved to 76.6% and 4.4x compared to 81.8% and 4.6x, respectively, in the prior year. Last night, we raised our full year guidance for 2024. Normalized FFO was raised to a range of $190.3 million to $192.5 million or a range of $4.37 to $4.43 per diluted share. This is a $0.06 midpoint raise when compared to our initial February guidance. We also increased our FAD guidance to a range of $196.7 million to $199.2 million, which is a $5.3 million increase at the midpoint compared to February's guidance. FAD guidance also represents year-over-year growth of 5.4% at the midpoint and 6% at the high point compared to the full year 2023 results. A few more comments regarding our guidance. Our guidance includes a recent amendment to the Bickford lease, which Kevin previously discussed. Commencing April 1, Bickford's annual rent was increased to $34.5 million from $31.4 million. And we continue to expect to see increasing Bickford cash rent from the additional collection of Bickford's remaining deferral balance. Our guidance includes the recent increase in NHC rent from the 2023 percentage revenue rent. And as Eric previously mentioned, our guidance includes SHOP NOI growth of up to 30% year-over-year, which we view to be conservative. Eric mentioned, we have $19 million committed already toward the capital expenditure program. The timing of this activity is still uncertain, so the future activity from this program is not yet in guidance. We'll have more to say about this program in future quarters. Finally, our guidance includes a new mortgage investment and the expected fulfillment of our commitments but does not include any unidentified new investments. Our balance sheet continues to be a source of strength for us. At the end of April, we had $228.5 million outstanding on our $700 million revolver and only a single debt maturity this year for $75 million at the end of September. At the end of April, we continue to have ample liquidity of over $470 million in cash and revolver availability and the full $500 million available under our ATM program. Looking towards 2025, we have an additional $326 million in debt maturing, $200 million of this maturing debt is our term loan, which does have an NHI's option the ability to extend the loan for up to 1 year. As we announced last night, our Board of Directors declared a $0.90 per share dividend for shareholders of record June 28, 2024, and payable on August 2, 2024. That concludes our prepared remarks today. So once again, thank you for joining our call. With that, operator, please open the lines for questions.

[Operator Instructions] Your first question is coming from Rich Anderson from Wedbush.

So on Bickford, I just want to make sure I'm clear. The increase -- the $3 million increase was not a part of the guidance increase. Is that correct? like that was already presumed in your previous guidance.

No. This is John, Rich, hi. It was -- there was an increase in our guidance associated with part of it, let's say that. How about that?

All right. Now when you have rebalanced how they're paying you both from the standpoint of percentage rent that pays off the deferred balance and then the base rent. How has that ratio changed with the April 1 reset? Is -- can you say like it's 80% base rent, 20% deferral repayment like -- and how has that ratio change with the new setup?

Rich, this is Kevin. So what we effectively did is baked in more base rent based on the performance that they've had over the last year and where they were currently operating. And then lowered the percentage of revenue threshold or slightly increase the revenue threshold because it's higher now and then modified that percentage. So now you're going to have ostensibly 90-ish percent of your rent being base rent and the balance would be more variable in nature. We still would expect that to be a net increase over what we saw last year. But -- and then again, we still have another bite at the apple, where there will be a rent reset in 2 more years. But given where we're at on their performance, they'll start -- they're still doing some leasing up. And then also with the CapEx we're putting in, it seemed prudent to have this interim step.

Hey Rich, This is John Spaid again. Let me see if I can help you a different way. If you go to our result of operations page, you can kind of see in the 3 months ended March 31, 2024, what the results were. If you annualize that number, which is approximately $9.4 million, and you compare it to the $34.5 million plus the annualized $1 million per quarter that Kevin just mentioned, you can see we're signaling that there's a slight increase in what we're expecting.

So -- but you're lowering the pace by which they pay back the, right? You're willing to give that up in exchange for higher base rent, I guess, is that basically that right.

Yes, that's precisely what's happened here.

Okay. Last question for me on the pipeline. You mentioned $300 million, LOIs of $100 million. You said 50-50 debt, is there a risk, though, that even for a period of time, you kind of get overleveraged to being a lender versus a fee simple owner? I mean, how much are you watching that to make sure you don't let those kind of that ratio of loans to equity get too far out of whack even in the short term?

Sure. Rich, this is Kevin again. It's definitely a consideration. The keys for us when we look at a loan versus ownership is trying to acquire relationships, making sure that we're at the right entry point, and it's a more stabilized property to put into a longer-term vehicle like a lease. So I think you're spot on. It's something that would be a consideration for us. We don't want to get out over our skis. But I think we have some capacity there. It's really going to be more the relationship acquisition and where buildings are stabilizing versus are stabilized. But again, I think we have some room to run. Our preference is always going to be to acquire. And ultimately, that's what we're angling for even in a loan scenario. So this is more of what we refer to as kind of a dating period where we get to have the new relationship, let them season the property a bit more, see if there's some more business that we can do together and then have a more long-term relationship, whether that be a lease or a joint venture or something else down the road.

Your next question is coming from Eric Borden from BMO Capital Markets.

Just on the SHOP guidance, just with the big increase in occupancy, just trying to tie in your prepared remarks about the mix between driving occupancy and potentially pushing rate, should we expect rate to kind of start to accelerate as we look throughout the year? And then where are the risks and opportunities within the portfolio?

Eric, this is Kevin. We're going to continue to push on the occupancy piece until we get -- we crest kind of that 90% mark, which is going to be more on a building-by-building basis than it will be on a an aggregate basis. So each one is going to be kind of fine-tuned for their specific markets, where we're at with the CapEx program that we have and the leasing volume that they're having. So each one is going to be in a tailor-made I believe or we believe that you're going to see the incentives that have been put in place start to fall off as the year progresses. We're doing some more short-term incentives on the front end as those residents -- as we have more residents stabilized into the building, then you're going to see that fall off again. That's going to probably wane more once we cross that 90% mark. We're getting there on a few buildings. From a risk standpoint, I would tell you it's a matter of getting the capital deployed, making sure that we keep the cadence that we have right now on move-ins, that's been pretty steady so far. Over the last couple of years, it's been longer to get some of the CapEx projects done. I think Discovery and Merrill both are on top of that and doing the best they can to get the work done in these buildings, but getting the subcontractors and so forth lined up and performing the work, again, has taken a little more time than we probably would have liked. So if there's a risk, I'd say it's more on that and just getting it done, keeping the cadence. But so far, we're seeing good cadence. I've been still leading indicators going into the second quarter here. So feeling positive.

That's helpful. And then on the pipeline, -- is the board ready to look at incremental SHOP acquisitions, just given the occupancy recovery and the potential to add external growth opportunities there?

Hey, Eric, this is Eric. Yes, absolutely. We've had a bit of an experience getting these holiday buildings turned around and assigned to different operators and CapEx program completed. But now that all that's done, they've really perked up nicely. And I think that the Board has seen that this can be an avenue for growth going forward. And I certainly think that having that ability to do more SHOP will help Kevin and his people line up more acquisitions.

[Operator Instructions] Your next question is coming from Austin Wurschmidt from KeyBanc Capital Markets.

Piggybacking a little bit on that last question. I guess given the willingness to do more SHOP, I mean, would you look to do additional deals with the existing operators and scale up? Or would you look to kind of enter into new relationships and sort of diversify the operator base on the SHOP portfolio?

This is Eric again. I'd be delighted to do both. If we're going to go with the new operator, the profile would be much the same as Merrill Gardens or Discovery, our current SHOP operators. And by that, I mean deep operating experience, a balance sheet so that they can co-invest with us as joint venture partners and a great reputation. So those are kind of the criteria we look for when we're picking a new SHOP operating partner.

That's helpful. And then kind of a 2-parter here on just maybe market rent resets in general. But on the Bickford formula clarification, is the revised repayment formula? Is there any cap on the amount that they would repay in any specific quarter? And then separately, I know Discovery isn't as sizable as a tenant as Bickford, but there's a market rent reset that was pushed into '25, I believe. I'm just curious, as you look out, what type of opportunity do you see emerging there? How would you kind of compare it and contrast it versus the process for the Bickford rent resets? And how it stacks up occupancy rent coverage and so forth?

Sure. This is Kevin. On the Bickford reset, just to clarify your question, when you say a cap, are you referring to the base rent they would pay or the amount of deferred rent they pay at any given time?

The deferred rent, just in the deferred rent formula, you talked about how that was revised. And I'm just curious if there's any amount with which that quarterly payment NHI would be capped out.

Okay. Understood. Thanks for the clarification. No, there's not a cap on there. What we are trying to do is keep in pace with revenue. And as a REIT, we cannot participate in the NOI on a lease. So that's why we're basing it off the revenue formula. We're trying to also keep it in line with where we see margins, but margins, meaning that they still have some cash flow thereafter to continue to invest in the communities and in their operations. So again, no cap, but just more moving the pieces around. So we have the appropriate amount of base rent, but still allowing for a run rate that's in line with what we signaled to the market previously. On the Discovery lease, that rent reset, it's comparable in that we modified the base rent and then added in the revenue participation component. That is still kind of fresh as compared to Bickford in terms of timing. So that was really just done in November. They've started to pay a small amount as it relates to the revenue portion of it. But it's again, small as it relates to that deal now. So we would expect that to ramp up over time, and then we would do some sort of pricing reset like we did with Bickford in 2025. So that's got a little bit more room to season before we're there. They've made progress on occupancy. Overall, I feel like the buildings are operating pretty well, but they just need to keep their move-ins, which the underlying properties on those are not the same as what we've seen in SHOP, but we do have confidence in discovery. You've seen what their progress has been on the SHOP side. They have similar teams that are focused on these buildings. So we have confidence in their ability to keep moving people in.

Your next question is coming from Juan Sanabria from BMO.

Just wanted to use the time to ask about NHC. I know it's kind of a unique situation with the related parties involved with the percent rent reset with the strength in '23. Can you comment on how NHC's lease -- or sorry, how their revenue increased to 23% year-over-year and how that compares to pre-COVID levelS?

Juan, this is Kevin. So the percentage of rent increase was higher for sure this year than we've seen it in quite some time. Part of that, we think is payor is catching up. As an example, specific to Tennessee, there's been some Medicaid rate increases. Some of them were watching to make sure that they're going to be more long term in nature. But the nature of it is that several of the states have done catch-up payments lately. They're rebounding from COVID seen revenues increase. Clearly, we've benefited from that on the rent side. So it's something we're watching closely, making sure that these revenues are going to be sticky. So far, it looks like they are. So I think that's good news, but something that we're still focused on.

Hey Juan, this is John. I think they are a record. And you got to remember that when you go to pre-Covid, pre-COVID included the 7 properties that we disposed of in 2022. So for the population that we have now, it's a record.

And do you guys have any visibility on how that margin would compare to that record on the same-store pool?

Well, I'll give more of a global response to that. I think we've seen with labor margins have been pressured by a lot of operators. You can look at their filings and see what their kind of macro margins are on their buildings. So there's been -- there's -- I would think we'd all agree there's been some pressure there. So probably a bit constrained compared to pre-COVID. So it's good to see that the additional revenue is there. So they are producing additional NOI for themselves, but it's -- there are some counterbalancing factors there.

Juan, this is John again. We have a lot of limitations in terms of the information we're getting from NHC. The best we can do is watch the same sort of public information that you see. So I think we're continuing to see improvements of their total revenues on an aggregate basis. So we can't completely relate that to our portfolio, but we're a big piece of them, right?

That's helpful. And just the last question. I think, John, you referenced or maybe it was not, John, the expected deferral repayment from Bickford going forward? And is that the amount we should be taking ? I think it was about $1 million, correct me if I'm wrong, per quarter. We should be assuming is built into guidance? Is that going to be cast with this quarterly result?

So let me answer it this way. Yes. And no, I haven't really told you a lot about -- what we're also assuming on the concession front as well. We're not thinking about any concessions on Bickford, and we're trying to be conservative in our guidance. So what I'd like to tell you is we have reason to believe that we're going to see a lot better than what Kevin mentioned, but that's -- I may not have answered it really well, kind of the best answer I can give you.

[Operator Instructions] our next question is coming from Rich Anderson from Wedbush.

Sorry to keep the role in. But I guess I should -- we should ask on the record, I'm assuming you're prepared like on the whole Board commentary from land and buildings. Do you have anything to say about that at this point? Or is that a equally sensitive situation that you can't comment on today?

We have some scripted answers we can give you, Rich. We've had constructive dialogue with landed buildings to better understand their views and share ours. And as appropriate, we'll continue to engage with land and buildings.

Okay. And then the other thing, I just -- something came across my wire on a letter from some of the progressive caucus center Warren Sanders to the operators of skilled nursing sort of comparing their executive salaries to their inability to meet the minimum staffing requirements. I don't know if you saw something similar or solve that, I should say. But do you have any comment now on minimum staffing and maybe the political elements to it.

Rich, this is Kevin. So we did see the letter and read it and understand maybe why there's a question, also understand our skilled nursing partners and why they are pushing back on the issue. I think there is probably a thoughtful approach to delivering care. When we look at our portfolio, particularly the Star ratings are pretty good and stack up really well against it and think that our operating partners are delivering good care in their buildings. Yes. And I think there's probably been -- there's probably a more thoughtful way to do it than just applying aggregate hours and saying that that's what it should be for everybody and then also how they get applied versus RMs and CNAs. And I think the biggest issue that we have is just the ability to get labor. It's not so much that they don't want to care for residents that they need to be able to attract and retain talent, and it's not there, especially when you look at the RMs that are available. We see that in our markets where it's kind of a trickle-down effect where the hospitals get first pick and then the skilled nursing, they're scrambling to get nurses and then it flows down to even into the senior housing where they're struggling to keep nurses. It's just not available. It doesn't matter how much you pay them. They don't have the people to be able to staff. So again, I think there's a more thoughtful approach that's likely out there. like to think that there can be a compromise and it seems like there's going to be more work to be done on this.

Thank you. That concludes our Q&A session. I will now hand the conference back to Eric Mendelsohn for closing remarks. Please go ahead.

Thanks for attending, everyone, and we look forward to seeing you at NAREIT in June.