Thank you for standing by. My name is Prima [Ph] and I will be your conference operator today. At this time, I would like to welcome everyone to CareTrust REIT Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

[Operator Instructions] Thank you.. I would now like to turn the conference over to Lauren Beale, SVP Controller. Please begin..

Thank you, and welcome to CareTrust REIT's third quarter 2024 earnings call. We will make forward-looking statements today based on management's current expectations, including statements regarding future financial performance, dividends, acquisitions, investments, financing plans, business strategies, and growth prospects.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from our expectations. These risks are discussed in CareTrust REIT’s most recent form 10-K and 10-Q filings with the SEC. We do not undertake a duty update or revise these statements except as required by law.

During the call, the company will reference non-GAAP metrics, such as EBITDA, FFO, and F A D or FAD.

A reconciliation of these measures to the most comparable GAAP financial measures is available in our earnings press release and Q3 2024 non-GAAP reconciliations that are available on the Investor Relations section of CareTrust website at www.caretrustreit.com. A replay of this call will also be available on the website for a limited period.

On the call this morning are Dave Sedgwick, President and Chief Executive Officer; Bill Wagner, Chief Financial Officer; and James Callister, Chief Investment Officer. I'll now turn the call over to Dave Sedgwick, CareTrust REIT’s President and CEO.

Dave?.

over $1.4 billion, approximately 825 of that - $825 million of that are real estate acquisitions and $590 million of debt investments or roughly 60/40 acquisitions to loans all at a blended estimated stabilized yield of 9.3% after any rent ramps take effect.

Allow me to give you some more color on the return on investment we've achieved on the targeted loans we've made over the past few years.

For a few years now, we have been executing a strategic approach to lending that includes at the very least, a handshake with the borrower JV partner or operator that they will bring us, real estate acquisition opportunities in the future and at best the debt investment activity also includes more than a handshake, either a loan to own or a loan and own as part of the portfolio.

This approach has been incredibly successful for us. As our friends in the industry have made good on their word and brought to us deals, many of which are off-market that we would not have otherwise seen nor won. We made a total of approximately $200 million of debt investments from 2022 through 2023.

Looking at this year's $1.4 billion of expected deals, approximately $780 million of acquisitions are a direct result of these strategic debt relationships we fostered over the past couple years. Our underwriting discipline has not changed. We do not grow for growth sake.

And we are driven by our mission to expand the positive influence of operators who improve and dignify the Care communities that they serve. And, that’s a nice segue to the portfolio.

Last week we had our operator conference where we brought renowned experts in policy, staffing, reimbursement, mental health and Healthcare AI to educate our operators on what is best-in-class and what’s to come. It's one way we tried to add value and show how grateful we are to them.

I cannot tell you how energizing it is for our entire teams to rub shoulders of leaders who are engaged in the noblest of professions day in and day out.

We're proud to associate with them and proud to report that they continue to provide superior star ratings and quality ratings compared to the industry nationally and the states that they operate in.

While there's no perfect way to measure quality care and skilled nursing Medicare’s star ratings do provide some key leads as of September’s ratings, I am pleased to see our operators achieve an average of 3 stars versus 2.8 stars in the states that they operate in.

Our operators’ quality measures performance is even stronger with an average of 4 stars versus 3.4 industry stars. As former operators ourselves, we have an absolute conviction that sustainable financial success can only be achieved after clinical success.

You will see in the supplemental lease coverage continues to show tremendous strength and security overall. Property level EBITDAR with the 5% management fee and EBITDARM coverage was reported to increase 2.23 times and 2.85 times respectively. The scale of underperforming operators remains small and manageable.

We have a couple transitions underway and a handful of assets for sale that when transitioned and/or sold will result in higher revenues next year, since they have not been rent producing this year, I'm very pleased to report that the Midwest Skilled Nursing portfolio with negative lease coverage that we've talked about for over a couple years was sold in the quarter.

These transitions and dispositions taken together will effectively deal with all of the properties that have underpaid this year. Finally, three observations, first, I'm very proud again of the CareTrust team an extraordinary year like, this doesn't happen without a talented team, a strong culture and sacrifice.

Second, I want to again recognize the tireless pursuit of quality care and performance by our operators. We are truly blessed to work with some of the finest operators in the country. And proud to report superior lease coverage, quality measures and star ratings. Third, we are at the start of demographic tailwinds that should last for decades to come.

James will now provide you with color on the investment landscape and reloaded pipeline..

Good morning everyone.

During the third quarter, as previously announced, we closed on approximately $441 million of new investments, largely consisting of a $216 million loan and a $43 million preferred equity investment in connection with the borrowers acquisition of a large portfolio in the Northwest including 37 skilled nursing and assisted living facilities to be operated by affiliates of The PAX Group.

Since quarter end, we have closed on approximately $89 million dollars of additional investments including the acquisition of a four facility, 396 licensed bed, skilled nursing portfolio located in the Mid-Atlantic for approximately $75 million.

These facilities have been master leased to a new tenant relationship for CareTrust with an initial term of 15 years with two 5 year extension options and a year one contractual lease yield of approximately 9.3% inclusive of transaction costs and with annual CPI-based escalators.

In addition, yesterday, we announced an updated investments pipeline of $700 million, which includes the announcement of a CareTrust affiliated joint venture having entered into binding agreements to acquire 31 skilled nursing facilities for an aggregate purchase price of approximately $500 million, exclusive of transaction costs.

CareTrust is expected to contribute approximately $442 million to the venture and in exchange will own 100% of the preferred equity ownership interests in the venture and 50% of the common ownership venture. The portfolio consists of a total of 3,290 licensed beds with 30th facilities, located in Tennessee and 1 in Alabama.

Completion of the acquisition is subject to customary closing conditions. And is expected to close in two phases during December of 2024. A majority of the facilities will be operated by existing CareTrust tenant relationships, including affiliates of the Ensign Group, PAX Group Inc. and Links Healthcare Group.

Initial annual base rent to the venture is approximately $44.4 million. The company's initial contractual yield on its combined preferred and common equity investments in the venture is expected to be approximately 9% after estimated transaction cost.

The announcement of this transaction should provide a fantastic way to finish out what has been an extraordinary growth year for CareTrust and set the stage for continuing the momentum into 2025. Please remember that when we quote our pipe, we only quote deals that we have a reasonable level of confidence we can close on within the next 12 months.

Now, a quick note on the current transaction environment. As the updated pipeline indicates, the skilled nursing transactions market remains active with deal flow being consistently strong. We continue to see regional owner operators and smaller independent owners looking to sell as they seek to capitalize on improved operating conditions.

The buyer pool continues to be somewhat narrow the buyers who bring certainty of closing continue to have a distinct advantage. With respect to assisted-living, there remains a good amount of distressed assets coming across our desks.

With that said, we are seeing improvement in operating metrics, including occupancy, and we are seeing an increase in the number of buyers looking to potentially transact. Senior housing assets that have an AL Medicaid waiver component are drawing stronger interest from buyers, including from Middle Market acquirers.

So while the acquisition market remains competitive, we continue to leverage our relationships and our disciplined investment approach to identify opportunities that offer appropriate risk-adjusted returns and that match the right operators with the right assets.

With demographic trends in our favor and an ongoing supply and demand advantage for post-acute and senior care, we are confident that the sector provides significant runway for future growth. With that, I'll turn the time over to Bill..

Thanks, James. For the quarter, normalized FFO increased 66% over the prior year quarter to $60.9 million and normalized FAD increased by 60% to $61.9 million. On a per share basis, normalized FFO increased $0.03 to $0.38 per share and normalized FAD increased $0.02 to $0.39 per share.

And again, this quarter because of our replenishing robust pipeline, we continued to take advantage of our ATM and issued $500 million of equity under the ATM during the third quarter, resulting in us having $377 million of cash on the balance sheet at quarter end.

Since quarter end, we had used roughly $89 million for investments and have approximately $230 million of cash on hand as we sit here today. We will use $57 million to fund the investments that will close in November leaving us with roughly $175 million.

In yesterday's press release, we updated and raised our guidance for this year from normalized FFO per share of $1.46 to $1.48 to a new range of $1.49 to $1.50 and for a normalized FAD per share from $1.50 to $1.52 to a new range of $1.53 to $1.54.

This guidance includes all investments made to-date including the one that will close in November a diluted weighted average share count of 152.6 million shares and also relies on the following assumptions.

One, no additional investments, other than the announced pending $57 million deal closing in November nor any further debt or equity issuances this year. Two, CPI rent escalations of 2.5%. Our total cash rental revenues for the year are projected to be approximately $216 million to $217 million.

Not included in this number is the amortization of a below market lease intangible that will total about $2.9 million but this will be in the rental revenue number as required by GAAP. Three, interest income of approximately $65 million.

The $65 million is made up of $50 million from our loan portfolio, and $15 million is from cash invested in money market bonds. Four, interest expense of approximately $30 million. This interest expense also includes roughly $2.5 million of amortization of deferred financing fees.

And five, G&A expense of approximately $26 million to $28 million and includes about $5.8 million of deferred stock compensation. If the announced acquisition does close in Q4, it will trigger one-time short-term incentive compensation that will acquire us to accrue additional expense in Q4 that is not included in this range.

Our liquidity continues to remain strong. We have approximately $230 million in cash today in our entire $600 million available under our revolver. As announced, we are working to upsize our revolver to $1.2 billion. I believe that this amount is already committed by our lead banks as we begin the syndication process.

Leverage hit an all-time low with the net debt to normalized EBITDA ratio of 0.08 times. Our net debt to enterprise value was 0.4% as at quarter end and we achieved a fixed charge coverage ratio of 9.7 times.

Lastly, as long as the price of our equity relative to the current cost of a long-term debt issuance remains pretty comparable, we continue to believe that it makes much better sense to continue to fund this replenishing pipeline with equity. But given the strength of our balance sheet, we love having all options on the table.

And with that, I will turn it back to Dave..

All right. Thank you, guys. Let me conclude the call with four things. First, our projected total 2024 investments of $1.4 billion equals over six years of growth compared to our life-to-date average annual growth rate. Second, we have a balance sheet that provides enormous flexibility and historic capacity for both the near-term and mid-term.

Third, looking at next year, a full year impact of this year's investments should produce meaningful FFO share per share growth without any additional investments. And fourth, if you look at consensus growth projections over three years from 2023 through 2026, we have the lowest multiple amongst healthcare REITs today.

We hope the reports been helpful to you and thanks for your continued support. Happy to take some questions..

[Operator Instructions] Thank you. We will now begin the question and answer session. Your first question comes from the line of Jonathan Hughes with Raymond James. Please go ahead..

Good morning out there. Great to see the recent investment activity in the pipeline. I was hoping you could talk about the trade-off between investment volume and deal structure, many transactions this year have come with preferreds or a JV, or a multi-year stabilization period, which is a little more complex than historical investment activity.

So are those more complex structures necessary to get these transactions to the finished line? And if you were to ask on the more simple deal structuring with that activity has been lower?.

Great question. And I think the answer is clearly yes. If we would we would certainly always prefer a vanilla triple net deal with no strings attached and no partners attached. However, you look at these deals that have had the added complexity, they have largely come to us only through a relationship. And most of it has been off-market completely.

The folks are out there trying out deals and the friends of ours who do that know that they've got a great partner in us to help them transact.

And because for the last couple of years we've made it pretty clearer that there's got to be true long-term real estate economics for us that conversation is becoming much more efficient and productive than, call it a couple of years ago..

That’s very helpful. Thank you for that. And then just sticking with the pipeline, I think there's $200 million outside of the pending transactions.

and when I look at those, I think the implied yields are the double-digits pushing maybe nearly a 11%, maybe what’s the mix of that, call it $200 million or so between kind of the own and the loan – and the loan to own investments?.

Hey Jon, this is James. The vast majority of it is definitely owned, it puts us a little higher based on some structuring stuff with the deals, but it's nearly all real estate acquisitions, very little loan activity is in the remainder of the pipeline after you take out the Tennessee deal and the $57 million Northeast deal announced..

Okay. That's helpful. And then just one more from me. There was appeared you’ve recently talked about moving into the - or seniors housing operating structure and James you did talk about more seniors housing opportunities in the transaction market.

Obviously, your, call it, 90% skilled nursing and Dave I know that your background and that's where the core focus of the company is, but curious that to your views or interest in opportunities.

Yeah, so I'd say, for about the last 18, 24 months as we've been getting that question. Answer really hasn't changed and it's a compelling interesting opportunity for the right opportunity.

We're not going to do it just to do it, but if we can find sort of that Goldilocks opportunity, where it's, it’s a sufficient size that it matters and it comes with some great people that are experienced in the - format. And it comes with exceptional operators. If we can - if you know of that give us a call.

But that's kind of what we would be open to doing. So I would say yes, very interesting. We're open to it. We certainly have plenty on our on our plate of the traditional triple net business though..

All right. Thank you for the time. Thanks Jonathan..

Thanks, Jonathan..

Your next question comes from the line of John Pinkowski with Wells Fargo. Please go ahead..

Thank you. So, just kind of going to the portfolio deal here. I don't know if you’ve announced this for ever given this information, but maybe you could just talk about the coverage of these assets in particular and then also kind of dive into the Links relationship.

I know that on your coverage sheet, they don’t have anything, because a lot of their stuff is pre-stabilization.

But maybe what the assets in this portfolio look like?.

Yeah, so hey, John, this is James. The assets in the portfolio vary a bit by kind of but overall I would say I would say kind of just shy of a one going in, but each of the tenants has a stabilized pro forma that probably puts it like a 1 5. And so, we're excited about that and we're excited about the tenant mix.

Links is performing fairly well based on the transaction we did with them a couple of years ago. We can kind of expect that upper trend to continue with them. They've been doing a great job and I think that they are just looking at this transaction, and these facilities was really impressive to us.

They dug in all the way and we feel really confident about their ability to really exercise on these facilities and be a great part of the overall portfolio with the other tenants,.

Got it.

And James, if I could follow-up, on one from your opening remarks, just about the acquisition environment or the transaction environment, how do we think about competition eventually re-entering the market? It sounds like, obviously given the numbers you are able to put up that you found a vertical that you can really compete on your own and, but at what point do you worry that this opportunity set gets competed away or private capital comes back or do you feel like you kind of developed the mode here giving you cost of capital that you are seeing capital not really likely to re-enter this space any time soon?.

It's interesting because while the buyer pool is somewhat narrow, John, it's still incredibly competitive. It's a very active with private money and other buying for the same deals. Right? And so, I don't know what, how much of an impact others re-entering may really have. It really is very competitive already.

There are a lot of buyers out there whose appetite of time seems insatiable. And so, I don't know new buyers coming in, it's really going to change that much at all for us..

Got it. Well, thank you and congrats on the quarter..

Thanks a lot, John..

Your next question comes from the line of Austin Wurschmidt with KeyBanc. Please go ahead..

Great. Thank you.

And wanted to just go back to the portfolio deal and I was hoping Dave, maybe you could just provide some additional detail on the nature of this structure for the joint venture and the kind of preferred common interest and curious if there is any ability for you or right of first refusal for you to take down the remaining common interest over time?.

Yeah, I'll let James talk to that..

Yeah. So, the breakout really is - the preferred equity is, the vast majority of what we would be putting in would be close to $425 million of it. And that's not a preferred equity that comes back or has a term on it or anything like that. So it stays out there forever and we do a couple of periods during the investment horizons.

We do have a call right and the JV partner has the foot, right? So we do look forward to having the opportunity to acquire the entire venture ourselves down the road. And still have it be accretive to us, which is kind of where we structure the book all the way we did..

Can you give us a sense how far out that call rate is?.

Between years 1 and 30. No, I'm kidding. Between about 4 and 7, call it..

That’s helpful. And how long did it really take for you to get the deal to this point? I mean, was this one of the earlier large portfolio transactions that was presented to you from the time, I want to say 12 to 15 months ago that you start to kind of discussing the investment pipeline plus large potential portfolio deals.

Just any color there would be helpful..

I think this came around call it, April to June is when it kind of first started percolating, Austin..

And has there been any strategic focus to expand the geographic footprint or the deals would you say taking you to these new markets? Just curious kind of the chicken in the egg there..

Really it's the deal that takes us to the new market. Do we have areas we like and we like to growing sure but we really take it on a deal-by-deal has to be the right deal first before we really focus on exactly where it might be in terms of targeted growth, and this one fits where we were looking has a deal first..

Very helpful. Thanks for the time..

Thanks, Austin..

Your next question comes from the line of Michael Carroll with RBC Capital Markets. Please go ahead..

Yes, thanks. James, I wanted to follow-up on an earlier question where you talked about the coverage ratios which is portfolio transaction. I mean, I believe you said that going in coverage ratio was 1 going up to 1.5. I guess, first is that an EBITDAR coverage ratio.

And second, what’s driving that improvements? Is it something that these new operators are doing differently to drive that type of uptick? Or I guess, what’s actually driving that better pro forma expectation?.

Yes, it is an EBITDAR coverage, Michael, I think it’s, each of the sub portfolio is a little different, but I would say it's - there's some up room in occupancy. The Medicaid rate has gotten better in Tennessee and as these operators’ abilities to really operate efficiently and reduce costs in particular with some of the ancillaries and whatnot.

So, that’s kind of where the growth is going to be coming from the operators..

Okay.

Was there a big Medicaid rate increase? So that does the trailing doesn’t include the Medicaid rate increase, but now it does, is that what you said?.

Training does include part of it. Yeah..

Okay.

And then, are these new leases that you have with Ensign PAX or Links or are they going to be included in your existing master leases?.

Because the real estate to be owned by the venture, Michael, they got to be new master leases, but they are on consistent terms with what we have..

Okay.

And then the, the type of transactions, James, that you are looking at, I mean, are there more stabilized deals, just given the improvement that we’ve seen in this new space and what type of coverage ratios are you comfortable with on the stabilized deals that you are targeting like all the stuff that you acquired and you had similar cap rates that are coming in or lease rates.

Are we seeing like the 1.4, 1.5 coverage ratios on most of these transactions?.

I mean, stabilized, yeah, I think historically, you're still seeing a really wide range that based on a lot of things in terms of where that portfolio or operator is in terms of recovery. Also the geography that they're in, right? I mean there's a huge correlation between per bed pricing and the Medicaid rate in that state.

So, really depends on the portfolio, but stabilized, we're generally still underwriting to 1.4, 1.5. And the lease yields, as you get into higher bigger size portfolio deals, you're going to make it trade a little bit for a little lower yields for a little higher coverage and that's a trade will do a lot.

You know, if it works for us, you get a little higher yield on smaller deals still, but that's kind of what we're seeing..

Okay. Great. Thanks..

Thanks, Mike..

Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Please go ahead..

Hi, this is Robin Haneland sitting in for Juan.

Just curious on the Tennessee acquisition, could you maybe elaborate a little bit on the background of the deal that usually take 4 to 5 months take down a deal of the size and just curious why really need it given that Ensign has its own sort of captive REITs and it was a seller?.

Some of those questions we really answered as much as we can at this stage. So, but in terms of the deal itself yeah, it's one that that that we tied up and brought to these different operators not vice versa. So that', why it made sense for Ensign to do it with us as opposed to by themselves..

Got it and it's the deal excluded from guidance because it's closes the late in the year or what kind of impact can assume by year end?.

That's a great question. It's not included in the guidance that was provided so far, but, yeah, I mean, if you just put in the type of accretion, that is likely from that, looking at next year it's going to wake up on January 1st into double-digit FFO per share growth with this deal and the rest of what we've done this year.

Of course, real guidance for 2025 will come in our next earnings call..

Are there any other portfolios out there where you – we feel like, you might have any chance to land the deal of this size?.

Yeah, when we, when we quote our pipe, we've sort of made a point this year to give the number that we feel is very conservative, very doable at least at an LOI stage somewhere between LOI to tied up with the purchase agreement. And it has about 12 months for us to execute on.

But we’ve also made a point to say, that that number because it's fairly conservative does not include everything that we're looking at. And that’s certainly true today with that $700 million pipeline number that we gave, that does not include some larger portfolio deals that that we continue to evaluate..

Okay.

And what - the dispositions, well, what's the yield on them? Were you collecting any rents there and is there any expectation for rent collection on the remaining eight assets held for sale?.

I'm sorry.

Could you repeat the question?.

Sure. Yeah.

Just curious on the dispositions in the quarter, were you collecting any rents there? And is there any rent expectation on the remaining eight?.

Oh, the answer is no, and no..

Thank you..

You bet..

Your next question comes from the line of Wes Golladay with Baird. Please go ahead..

Hello, everyone. You’ve essentially doubled the size of the company this year close to it.

Curious how you are thinking about staffing for next year?.

I think, this time last year like I alluded to in my prepared remarks, we were looking forward to what we thought could be a historic year and made some improvements. I think I used the word recalibrated the team a bit, which included adding some people. We are still a very lean group.

And I think as we sit here today, looking at next year, we have a similar outlook for 2025, 2026 and beyond. And so, our approach to that is to get ahead of it. So that we can execute as flawlessly as possible. So we could certainly be adding incrementally to the team as we head into next year.

Okay. And then just one quick follow-up. I think, Bill made a comment, if the portfolio close this year, there might be a one-timer in G&A.

Do you have an approximate estimate of that?.

He is asking you..

No, I don't have an approximate estimate of it, just yet..

Okay. Thank you..

You bet..

[Operator Instructions] Your next question comes from the line of Rich Anderson with Wedbush. Please go ahead..

Hey, thanks and good morning out there. So, on the portfolio, the $500 million, what the mechanism to get these to in the hands of Ensign, PAX and Links.

Is that a, happened simultaneously with the close, or is there a period of sort of process that is kind of created some lag effect into 2025 in terms of getting to that stabilized coverage?.

There will be a period of time where they'll need to get in and ramp up and get to the stabilized coverage. I mean, it's not a - going into the historical coverage they're looking at.

But I mean it'll take some time for them to put into place the levers they want to pull to get coverage to their projected stabilization levels, but, so, it’ll take some time, yeah..

You can't comment on the current operator?.

In terms of who it is?.

Yeah..

I think we probably can. I think they've released them and I think it's American HealthCare Partners..

Excuse me. I didn't, I didn’t, I missed that I apologize..

American Healthcare Partners, yes..

Okay. Bigger picture, you guys have been growing impressively this year. Sometimes, growing at that pace we've seen it happen inbound problems occur and ultimately, we got some issues to resolve in the aftermath. Think to be – here but how do you manage those types of risks.

You know your own portfolio, but you don't necessarily know what you're buying as well. What gives you the confidence that you are not going to have some 10% of everything that you bought that’s $1.4 billion is going to require some attention in the aftermath? I wonder if you just comment on that process..

Yeah, I'd say that what gives us confidence is that our underwriting discipline has not changed from day one we have always said and lived by the mantra that we do not grow for growth sake. And we have taken advantage of a really special window of opportunity that we're in right now.

But we haven't done it in a way that in any respect deviates from our culture or our operating discipline.

And so, when you - in this business, when your underwriting decisions starts and ends with who is that operator? And is this the right match for this deal you're able to take advantage of an opportunity like you're seeing us do right now?.

Yes. Let me ask you it this way. We’ve had outsized growth in Medicare reimbursement and Medicaid in many of the states. Perhaps a recapture of – not perhaps, a recapture of inflation in the past several quarters and years.

What would you say to the fact that maybe the thrill is gone here in skilled nursing and that we're going to start moving back to a more normal pace of reimbursement and then you start saying, okay, well what’s the escalator.

What’s the reimbursement rate and what does that do to coverage over the next few years if we get back to more like a two percentage type of number on both the Medicare and Medicaid front on a go forward basis. Maybe you could comment on where you think we are in that part of the skilled nursing cycle today? Thanks..

Yeah, thank you. I’d say that what the benefit that we have, particularly here at CareTrust is that we've been in the skilled nursing business for over 25 years. So we've seen ups and downs and right now, we're in a situation where I would call the operating environment very stable, very steady.

And if we can be in a steady state environment with Medicare and Medicaid, where we're back to kind of historic expectations for moderate cost of living type adjustments year in and year out and we go to sort of that pre-pandemic environment, we would be thrilled and we are thrilled with it.

The excitement over here has not started waning at all, because the difference is we're going back to a steady state environment, but the difference between this steady state environment and the steady state environment that we've been used to excluding COVID for the last 25 years is that now, we're on the very beginning of a demographic wave that is inevitable.

So you've got, call it, 2% increases on Medicare and Medicaid going forward. But you're in an inevitable occupancy increase situation because these demographics are what they are. So, as you go into next year, the year after that, 5 years out, ten years out, we're really super excited about both skilled nursing and seniors housing..

What is your Optimal rent escalator using that mentality in your history? Is it 2%, is that the new normal? Or is it something higher than that? Just so you don’t lose credit over time..

Yeah, so we've always almost all of our leases are done in the way that we think is optimal and that's CPI based. So they've got a ceiling, relatively low ceiling at four zero and hedges against those escalators out running, what those increases are for Medicare and Medicaid..

Okay, got it. Thanks very much..

Thank you...

And there are no further questions at this time. I would like to turn it back to Dave Sedgwick for closing remarks..

Well, we are just really excited and grateful for your support and interest. And hope you have a great rest of the day. Thank you..

Thank you and this concludes today's conference call. Thank you all for participating. You may now disconnect..