CareTrust REIT, Inc. (NASDAQ:CTRE) Q3 2017 Earnings Conference Call Transcript

Nov 09, 2017 • 12:00 pm ET

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CareTrust REIT, Inc. (NASDAQ:CTRE) Q3 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Welcome to CareTrust REIT's Q3 2017 Earnings Call. Please note that this call is being recorded.

(Forward-Looking Cautionary Statements)

During the call, the Company will reference non-GAAP metrics such as EBITDA, normalized EBITDA, FFO, normalized FFO, FAD and normalized FAD when viewed together with its GAAP results. The Company believes these measures can provide a more complete understanding of its business but cautions that they should not be relied upon the exclusion of GAAP reports.

(Forward-Looking Cautionary Statements)

Listeners are also advised that CareTrust filed yesterday its Form 10-Q and accompanying press release and its quarterly financial supplement, each of which can be accessed on the IR section of CareTrust's website at www.caretrustreit.com. A replay of this call will also be available on the website for a limited period.

I would now turn the call over to Greg Stapley, CareTrust REIT's Chairman and CEO.

Executive
Greg Stapley

Thanks, Dylan. Good morning, and welcome, everyone. With me are Bill Wagner, our CFO, Dave Sedgwick, our VP of Operations, Mark Lamb, our Director of Investments and Eric Gillis, our Director of Asset Management.

We've been very busy since the quarter began. Nearly a year's worth of hard work has produced over $200 million in new investments in Q3 and since, bringing our total year-to-date to a record $300 million-plus and pushing our enterprise value north of $2 billion for the first time. Most importantly, the groundwork we've been laying all year for future growth has produced some tremendous fruit with projected normalized FFO per share for the fourth quarter, jumping from $0.28 to $0.31 to $0.32 on a sequential basis, which equates to $1.24 to $1.28 going into 2018.

On the asset management front, lease coverages with several of our newer operators had been rising nicely, partly as a result of our asset management team's efforts. And we've resolved the only significant problem in our portfolio. Specifically, we are pleased to report that we've implemented a meaningful long-term solution to the challenges we've been talking about over the past nine months with respect to our 16-property Ohio portfolio. Since the initial property tax payments earlier this year, Pristine Senior Living has been the subject particularly intensive asset management work. As a result, Pristine has been showing steady and, we believe, sustainable operational improvements since late spring.

Nevertheless, in pursuit of a more definitive solution for the portfolio, we've agreed to give Pristine some short-term rent relief, which will immediately improve our lease opportunity with them. In exchange, they have agreed to relinquish seven of the 16 properties and start stepping the rent back up in the coming months and years. The seven properties will be transferred to our existing tenant, Trillium Healthcare, the successful operator of our assets in Georgia and parts of Iowa.

These changes position our Ohio assets for better success as the two operators focus more closely on a smaller subset of the assets and the improvement opportunities that they still contain. Moreover, the deal lowers our exposure to Pristine from 15.1% to