CareTrust REIT Inc (CTRE) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the CareTrust REIT Fourth Quarter 2021 Earnings Conference Call. (Operator Instructions)

I would now like to turn the call over to your host, Lauren Beale, CareTrust Senior Vice President and Controller. You may begin.

Thank you, and welcome to CareTrust REIT's Fourth Quarter 2021 Earnings Call. Participants should be aware that this call is being recorded, and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions and beliefs about CareTrust's business and the environment in which it operates. These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns, financings and other matters, and may or may not reference other matters affecting the company's business or the businesses of its tenants, including factors that are beyond their control, such as natural disasters, pandemics, such as COVID-19, and governmental actions.

The company's statements today and its business generally are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied herein. Listeners should not place undue reliance on forward-looking statements and are encouraged to review CareTrust's SEC filings for a more complete discussion of factors that could impact results, as well as any financial or other statistical information required by SEC Regulation G.

Except as required by law, CareTrust REIT and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. During the call, the company will reference non-GAAP metrics such as EBITDA, FFO and FAD, or FAD, and normalized EBITDA, FFO and FAD. When viewed together with 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 to the exclusion of GAAP reports.

Yesterday, CareTrust filed its Form 10-K, an accompanying press release, and its quarterly financial supplement, each of which can be accessed on the Investor Relations 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.

On the call this morning are Dave Sedgwick, President and Chief Executive Officer; Bill Wagner, Chief Financial Officer; Mark Lamb, Chief Investment Officer; and Eric Gillis, Senior Vice President of Portfolio Management and Investments.

I'll now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO. Dave?

Thanks, Lauren, and good morning, everyone. I'd like to start with a tip of the hat to our Executive Chairman, Greg Stapley. All of us here and those associated with CareTrust express our deep appreciation for his leadership during our first 7.5 years as our CEO. He put this team together and took what was a highly leveraged spinoff with one tenant, and grew it into one of the top-performing health care REITs over the last 7 years, producing north of 150% total shareholder return at the time his church mission was announced in December, with one of the strongest balance sheets in the business. We wish him and his wife, Debbie, the best of luck in the next chapter of their lives.

Turning to the quarter. We're pleased to report 100% of contractual rents collected in the quarter including the complete repayment of the one deferral granted last year, making the full year's collections also 100%. The fact that we collected 100% of contractual rent over the past 2 years is a testament to the quality of our investments, our operators, and our team's ability to manage needed changes in the portfolio efficiently. Despite the track record of strong return since our inception, it has certainly not been all smooth sailing.

The team we have in place today has overcome several challenges over the years, from some operators hitting the wall, to strong competition for growth, to changes in the regulatory field of play, to a long-running pandemic. We have previously reported quarter-over-quarter occupancy recovery in skilled nursing, while seniors housing had remained flat. In the fourth quarter, we saw occupancy flatten across both asset classes in the latter part of the quarter.

Our portfolio was not immune from Omicron's impact on employee infection rates, and limitations on admissions. We've repeatedly reported that a few of our operators have needed provider relief funding to mitigate the effects of COVID on their operations. Late last quarter, the latest HHS Phase 4 provider relief disbursement provided insufficient runway for the soft landing we hoped for for a couple of our operators, resulting in 93% of contractual rent collected in January.

Throughout the pandemic, we've conducted stress tests of the portfolio and identified a handful of operators and properties that we believe pose an unacceptable risk of default as provider relief measures end. For these relationships and properties, we've decided to take advantage of the frothy sellers market and proactively remove these cracks and the associated uncertainty from our foundation as quickly and efficiently as possible. We have begun to pursue the sale, retenanting or repurposing of up to 32 assets, representing approximately 10% of contractual rent.

We do not intend to play the defer and hope game with operators or properties that have been on our watch list since before the pandemic. Rather, we intend to take advantage of the seller's market, redeploy any proceeds into new investments underwritten for today's realities and use this time to upgrade the risk profile of our growing portfolio. Given the early stage of this plan, we will postpone guidance until we've made meaningful progress, and will provide business updates along the way.

It is a seller's market today, and yet we still do see opportunities to deploy capital this year. Mark will expand on our investment outlook for the year, but I'll highlight a few things. First, we intend to take a small part of the 32 assets I mentioned and repurpose those into behavioral health facilities. We've been looking at this asset class for years and are thrilled to have found a proven operator we're excited about and an entry point with some of our very own properties to convert into a higher and better use. This will be a powerful new asset management tool to prune and strengthen master leases in the future, and it provides the company with a new growth vertical as well.

Second, Mark will talk about an exciting new partnership with one of the industry's most respected lending teams, allowing us to continue to participate in the stories of some of the best operators in the business. And for my last point on capital deployment, our stock repurchase program was approved in 2020 and is a significant lever available to us if the opportunity ever presented itself.

We should look back on 2022 as a pivotal year in our history, wherein we took the measures to deal with chronic watch list properties and reinforce our foundation to stand the test of time. We're as enthusiastic as ever about our expanding mission of matching high-quality operators with great skilled nursing, seniors housing, and now behavioral health opportunities for many years to come.

With that, I'll turn it over to Mark.

Good morning. In Q4, we bought 2 seniors housing assets in New Jersey for $12.4 million. This acquisition brought our total investments in 2021 to approximately $200 million. Looking at the pipe, we currently sit in our customary $75 million to $100 million range. The pipe is made up of singles and doubles, predominantly SNFs, with a few senior housing assets in there.

As Dave discussed, we are excited about partnering with a leading lender in this space to fund a variety of loans which we anticipate will lead us into markets and operators we have targeted for growth. Looking at the market, pricing on nursing homes has never been more robust. This, we believe, is due to a few things. First, there is not a significant amount of supply on the market. So everything that comes to market, especially if it's a portfolio of size, gets bid up significantly. Second, there is a ton of private liquidity looking for deals that they can bridge to HUD. Third, many operators have figured out how to manage through COVID, and have come out on the other side stronger and more efficient.

Lastly, on the senior housing front, we are seeing every type along the spectrum of stable and well performing to turnaround situations to buildings that are really struggling. But we continue to underwrite and size opportunities for us and our operators in the senior space, and hope to find a few nuggets in the coming quarters. Looking forward, we anticipate the tight supply I mentioned above to loosen as the investment sales community continues to provide record numbers of opinions of values to existing owners who are considering selling.

We are cautiously optimistic that the reality of stimulus drying up and a tighter-than-ever labor market will force owners into selling their assets. In the meantime, we continue to work with the brokerage community to find deals that fit with us and our operators, and continue to run down off-market leads that you have grown accustomed to seeing us close on each year. Please remember that when we quote our pipe, we only quote deals that we are actively pursuing under our current underwriting standards, and then only if we have a reasonable level of confidence that we can lock them up and close them in the relatively near term.

And now I'll turn it over to Bill to discuss the financials.

Thanks, Mark. For the quarter, normalized FFO grew by 9% over the prior year quarter to $37.3 million, and normalized FAD grew by 11.5% to $39.8 million. On a per-share basis, normalized FFO grew by 8.3% over the prior year quarter to $0.39 per share, and normalized FAD grew by 10.8% to $0.41 per share. Our liquidity remains extremely strong with approximately $13 million in cash and $510 million available under our revolver. Leverage also continues to be strong at a net debt-to-normalized EBITDA ratio of 3.7x. Our net debt-to-enterprise value was 23% as of quarter end, and we achieved a fixed charge coverage ratio of 8.7x. Cash collections for the quarter came in at 100% of contractual cash rent, and January came in at 93%. February currently stands at 92%.

As Dave previously mentioned, we are postponing issuing guidance for 2022 until the picture gets a little more clear on the timing of the sale, retenanting or repurposing of up to 32 assets. As soon as this becomes clear, we will put this out. In the meantime, we will be putting out announcements as we make material progress.

And with that, I'll turn it back to Dave.

Thanks, Bill. So we hope this discussion has been helpful and thank you for your continued support. And with that, we'd be happy to take questions.

(Operator Instructions) Our first question comes from Steven Valiquette with Barclays.

I guess I was curious to hear more about the opportunity on the behavioral health side. A couple of questions around that. First of all, just curious to hear more about the pipeline of opportunity. We've seen a few other health care REITs also attempt to diversify into that space. But also, as far as any licensure as far as conversion of facilities, just curious to hear more about that process, whether that's something that could happen quickly? Or is that a lengthy process? Just more color around the nuts and bolts of some of those conversion opportunities as well.

Great. Thanks, Steven. I'll take it, and Mark can correct me where I go wrong. So with behavioral health, we like it for a couple of reasons. And one is offensive, and the other is defensive. On the offensive side, there's a lot of product hitting the market right now that is fairly distressed. And that's not normally a place that we like to play, but if we can pick up some really distressed assisted living or skilled nursing facilities at a good price, and underwrite that along with the behavioral health operator, and then take that and repurpose that for behavioral health, that could be an interesting way to grow, for Mark and his team, for new investments.

But from an asset management perspective, there's some select opportunities here where that really makes a lot of sense. For example, if you have a portfolio, a master lease, that is really weighed down by 1 or 2 buildings with negative EBITDAR. And if you can remove that from the master lease, strengthen that tenant that remains with you, and convert it into behavioral health, that seems like a no-brainer, especially if the yield that you'll get from that asset is competitive, if not better than, what you would get from re-tenanting or redeploying sales proceeds. And that's really what we've been looking at here. That's how we're starting.

You look at these 32 assets and you say, okay, which of these do we feel like the yields would be just as competitive with behavioral health that will start this relationship for us in an area that we've been looking at for quite some time.

And then really to your question of licensing and the nuts and bolts, each state is very different. It feels like maybe nursing home industry did 30 to 40 years ago in terms of regulations and licensing requirements. But each state is different. And from a timing perspective, we would expect 12 to 18 months from signing a lease to redeveloping the asset, to getting zoning and licensing and permits done until that rent will come online.

Okay. That's helpful. The other quick follow-up is, just from like a 1031 exchange perspective, should we assume that whatever assets might be divested in the current portfolio this year, that from a 1031 perspective that most of the replacement would probably be on the behavioral health side? Is that just the right way to think about it for now? Or could there be some deviation on that, like you said, with other opportunities either in the senior housing or even maybe a few on the SNF side as well?

Thanks for asking that. We -- as you think about new investments for CareTrust this year, I think -- the right way to think about that is that we will very much look this year like we had last year in terms of asset classes and that our entry into behavioral health will most likely be from repurposing our own facilities among these 32. In the future -- that's not to say that in the future we won't become more active in behavioral health, but that's how you should be thinking about how we'll start it off.

Our next question comes from Connor Siversky with Berenberg.

Thanks for having me on the call. So just to dig a little more into the sales or repositioning of these assets you identified. I mean you mentioned a handful of assets that could potentially be repositioned to behavioral health. Can you provide any color as to what percentage of this -- of this total ABR that could potentially be repositioned. And then in the event that you're selling off another portion of the assets, I mean where do you seek to put those proceeds? Is there a potential that you engage in a stock buyback program, or would you look to invest in behavioral health facilities with those proceeds as well?

Well, I'll go in reverse order. I would say that all options are on the table when it comes to redeploying those assets -- those proceeds, including behavioral health. But like I just said, what I would expect is that you would see the redeployment of that capital into the skilled nursing and seniors housing assets as we have historically done, historical -- underwriting rates there.

When it comes to the percent that could be sold versus retenanted versus repurposed, at this stage we're reluctant to really say much on that because we're just not far enough along. Particularly with behavioral health, unlike skilled nursing and seniors housing, there's a gating item of zoning that's really important. And that zoning -- the preliminary diligence work is being done right now on a handful of these properties, but until we have cleared those gates; it could be none, it could be a few, it could be a handful. But until we have done some preliminary diligence on zoning, it's probably not really helpful to guess at this point.

Okay. Okay. That helps. And then you had mentioned that the yields on behavioral health could potentially look similar to, say, the skilled nursing facilities that may be repositioned or repurposed. Can you give any sense of what those lease agreements could look like? And then more specifically, would the rent coverage metrics be similar for behavioral health versus skilled nursing as well?

Yes. So we're anticipating that stabilized lease coverage for behavioral health properties would be north of skilled nursing, probably north of 3x coverage, and that the yields on -- if we were to do a new investment, we would probably be in the 9%s as well.

Okay. That helps. And then just one final one, just to clarify on external activity. So the agreement to invest in this variety of loan products as you stated, that is separate from the real asset acquisitions that you could engage in 2022 as well, correct?

Yes. This is Mark. Yes, it's sort of a -- kind of another pipeline for us. We -- everything that I quoted in the pipe was, call it, our normal bread and butter business, was skilled nursing and in seniors housing on the triple-net side. And so we've had discussions with this lender over the last couple of months, and would expect to see opportunities crossing our desk in the coming weeks. So -- but that -- we won't veer from our bread and butter, and that's investing in skilled nursing and seniors housing on a triple-net basis.

Next question comes from Juan Sanabria with BMO Capital Markets.

Question on the 32 assets, 10% of rents. Can you give us any sense of what the split is between seniors and skilled, and really kind of what changed in the last 3 months? You had some funds come in, occupancy flat-lined, but really what got worse here? Is it just the labor situation that kind of pushed these tenants over the edge, and we're now not able to collect 100% of your rents? And do you think that 93% drops to 90% if the plan gets enacted, given you're now looking to address 10% of your rent base?

Yes. Juan, as we've been stress-testing the portfolio all along the pandemic, we really update it with the new information that COVID presents. So last year, we updated our stress tests with the impacts of the Delta variant. We saw, after Delta and into Q4, these labor costs appeared to be more long-lasting than maybe 6 to 9 months before that. Going into -- towards the end of the year, there was a lot of anticipation around the Phase 4 funds. And we knew that there was going to be another phase, but we didn't have visibility into how much was going to come.

And then you have Omicron happen, kind of at the same time that those Phase 4 funds hit. That's 4 pretty important data points that impacted our stress tests as we look forward. And so then when January hits, and we don't collect 100%, there's certainly some operators and properties and relationships that we have to deal with there, but we also factored in this updated stress test model to look beyond January and February and March and look more at, okay, what does the world look like after these provider relief measures go away?

And that's why we didn't just take action -- or are not just taking action with the properties that are impacted in January, but really even with properties and relationships that are current with rent. But we feel like there's a bit of inevitability for risk of default in the future according to these stress tests. And so that's what's changed. And our thinking is, instead of playing the defer and hope game with folks that have been on our watch list for so long that it makes more sense to remove the uncertainty that's presented by those operators and be more decisive with it right now.

In terms of the mix, it is a mix of skilled nursing and seniors housing, and we'll update everybody on the specific mix as we have come to milestone agreements for sales and retenanting and things like that.

And can you provide any sense of what the coverage levels may look, or go from and to, as you do this repositioning? And how long do you anticipate this whole process will last before we get clarity on the go-forward earnings run rate?

Yes. So the coverage situation will improve, all things kind of staying the same in the future, as we take care of these 32 properties. And I'm happy to give kind of pro forma numbers on that as we go from LOI to actual closing deals. I think it would be premature to do it at this point. But we are committed to providing those business updates along the way. The second part of your question was what?

The timing of when you expect earnings clarity on when this could be done.

Yes. So at this point, I'll just give you some color about where we are, and that will help, I think, you gauge the timing of it. We've had really productive collaborative conversations with our main operators involved in these 32 assets, engaged a few of the best brokerages in the business. We've gotten their opinions of value. We've started marketing some of these assets already, we've toured some new operators through some of the properties that may want to retenant, and we'll kind of be going a parallel path there because there might be an opportunity to start a new relationship that we're excited about with some of these instead of selling them.

And we've also, in this time, vetted this new behavioral health operator, LOI stage with them, negotiating leases and doing the preliminary diligence with them. But because we're mostly at LOI stage and lease negotiation stage, it's impossible to determine the number that will be sold versus retained. But I think it's safe to say that we would assume under normal circumstances -- again, not another curve ball variant by COVID that could sidetrack this -- but the sales would probably be executed by -- closed by sometime this summer.

And if we're going to retain any and retenant them for the similar use, we'd probably get that done inside of that time. And then for repurposing, that's going to be, like I said earlier, about a 12- to 18-month process, depending on whether or not the operating company's already within that state and other permitting and licensing nuances.

And one last question for me. For the pipeline that you do have of your bread and butter acquisitions, can you give us any sense of yield expectations in what your underwriting coverages to?

Yes. I mean it's a complete mixed bag. I would say yields are kind of in the kind of mid- to high 8%s on SNFs. In some instances, kind of low 9%s, just sort of depends on state and asset. And then on the seniors housing side, that's, again, sort of a kind of a mixed bag of the low 8%s. And then on coverage, depending on the asset, we're still underwriting to like 1.2x to 1.25x for seniors housing. And then skilled nursing, we always start kind of at the -- in the 1.4x range. Obviously, there's some secret sauce to the underwriting that we look to do in terms of day 1 changes that can take place. But [1.40x] is still our target underwriting coverage for skilled nursing.

Our next question comes from Jordan Sadler with KeyBanc Capital Markets.

So I just had one question on what took place basically between -- since you guys last reported and today. And specifically, it's sort of a fundamental question. You commented in the release that your operators have shifted to offense to be part of the solution to treat COVID patients. And while we've discussed the impacts of labor incentives, I'm curious if the Omicron variant also happened to cause an uptick in skilled mix in late December and through January that's kind of been seen in prior COVID spikes that you guys have talked about?

Yes. That has happened. Omicron, we have seen -- I mean the occupancy data that we get is really through conversation and e-mail and things like that, and it can change once those financials get here, but they've largely been in line. And your hunch is exactly right. Omicron has improved skilled mix for several of our skilled nursing operators.

Unfortunately, it's also caused quite a bit of -- increased the labor cost, because those probably most affected by Omicron in the facilities have been the employees, not to say that the residents haven't been affected, but the -- to the operations, it's caused wide infection rates among employees, which has caused increased usage of agency and overtime and things like that. And so that improved skilled mix is not exactly translating to margin.

Got it. That makes sense. And now I just want to come back to this sort of asset management endeavor. I'm struck by -- I've covered you guys for quite a while now, and I guess the thing I'm struck by is, you mentioned that some of these tenants have been on the watch list for so long. And I was struck by that comment because I remember just before the pandemic, you guys I think endeavored to do a similar type of spring cleaning, I believe you called it at the time. And at that time, you were dealing with Trillium in Southern Ohio, Trio in Central Ohio, Priority Life Care was replaced with Noble at 7 facilities. Metron was a bit of a blow-up, if I recall. And so there was a lot that went on.

And then in the context of that spring cleaning, the idea was to really derisk and -- the portfolio, and to position the company much better heading into 2020. And so I think a lot of that stuff did take place. And I'm just curious, what is it now? And who was not on the watch list then or who was on the watch list then that didn't get dealt with that now has to be dealt with? Or is it a lot of these same properties and issues that just never were appropriately or fully dealt with at that time?

Yes. I think that the asset management work that we did towards the end of 2019 and the derisking of the portfolio is exactly the work that has enabled CareTrust to collect 100% of rents for the last 2 years. I think if we had not done that work in 2019, then we would not have had the performance that we have had through the pandemic so far. The term watch list is a pretty artful term that can mean different things to different people. If you're transitioning buildings, you might put them on a watch list. If their performance is poor, you might say they're on a watch list.

And so there are folks that, back in the end of 2019, even after the derisking activities that we did, we still were needing to watch closely and make sure that they were going to be able to be successful. Going into the pandemic, I would say that we felt really good about the state of the portfolio. And when the pandemic hit, because of the confidence that we had had in the work that we had done in 2019, that's also why we were the only health care REIT to keep guidance in place for 2020 and 2021.

It comes -- the reality is, pun intended, the immunity that we've had to COVID has waned, and as the Delta variant and the labor situation and Omicron has become a reality, there are those that were, call it, on our watch list beforehand or at the time of the transition or the time of the pandemic, we feel now pose a risk of default in the future that we'd like to take care of proactively now in addition to the folks that we're really having to react to here in January.

Okay. I can appreciate that the pandemic has obviously had an impact on operations for a lot of these guys. Maybe just one last follow-up for Bill, not to leave you out here. The nonroutine transaction costs, Bill, and just the overall elevated G&A outside of the accelerated amortization of stock-based comp, is there -- can you speak to the cause of the nonroutine transaction costs? Was that -- did you guys engage bankers as was reported, or was there a process run of some sort? Is this more related to the transition of the [senior fund]?

Jordan, this is Dave. I'll take that. So those charges that you see there relate to strategic alternatives for the company that management and the Board considered in the quarter. And after fulfilling our fiduciary responsibility on that front, what I can tell you is that we do not expect to incur similar charges this year. It's business as usual for the team.

Any other color on that process, Dave? What that yielded? Or what precipitated it?

No. That's all the color I can give you on that.

Our next question comes from Michael Carroll with RBC Capital Markets.

Dave, how comfortable are you with the size of the repositioning plan? I mean do you think that the company might need to expand that above and beyond the 32 assets that were identified?

That's a fair question. I think what I would say to that, Michael, is that in the year of COVID, it's pretty dangerous to never say never, but we do feel really good with the asset management plan that we have. We feel good about the ability to collect rents on the remaining portfolio long term. And yes, we're trying now to take care of the cracks in the foundation that we can see out in the future. I can't promise there won't be a surprise, but we think we've got a pretty good handle on it.

Okay. And then what's the expected run rate that we should expect for cash collections going forward? Is that 93% in January, is that a good base that we should think about? Or could it dip down to 90% to reflect all 32 of those assets here in the near term?

No. We -- I think at this point, given where we are at in the process, we probably couldn't give you much in terms of color there.

Okay. And then I guess just one for Mark on the investment market. I know that you've been kind of saying for the past several quarters that private market valuations are pretty frothy, but if new product comes to the market, you think that valuations could normalize. I know you and some of your peers are bringing [MASSes] to the market. I mean has that process started? Have you started to see valuations starting to normalize? Or if so, when do you think that could occur?

No. I think valuations are as high today as they've ever been. I think certainly as more opportunities hit the market, I think the biggest constraint to many buyers is having an operator. Certainly, there are private buyers that own real estate and also have their hand in an operating company, and they're in a pretty good advantage to be able to take on the real estate and operations all in one fell swoop. But I think if I had a crystal ball, I would say kind of later in the year I think things start to normalize, and especially as labor hopefully starts to normalize and more mom-and-pops come off the sidelines and start to sell.

We're obviously seeing some of the REIT brethren selling off nonstrategic and kind of -- nonstrategic assets and relationships as well. So I think it's going to -- I think it will stay hot. As long as HUD rates stay down, stay low, the market will continue to have aggressive pricing. Lenders are out there lending at 85% loan to cost, and there is a huge appetite for operators to take on that kind of leverage and pay up for assets. So I think we historically have bought a lot of assets off market and through relationships.

And I think we feel pretty good about being able to do that. What the ultimate number will look like at the end of the year, we don't necessarily have visibility on that, but I think the market will -- it will be interesting to see. I think pricing is going to be high, definitely in the short run. But it depends on how many operators run out of runway when -- especially if stimulus is not what most were expecting. And obviously, the more that come to market will sort of dilute on a per bed basis, and that certainly could happen.

Okay. And then just last one for me. On the behavioral transition that's planned or, I guess, could potentially happen, I think you said it was going to take 18 months. So if that occurs, will you not -- will CareTrust not get rent on those assets for 18 months? Is that a good way to think about it?

Yes. That's right. But it's really 12 to 18. And the trigger there is whether or not the behavioral health operator is already in the state. So if they're already in the state, it takes -- it'll -- ballpark 12 months. If it's a new state for them, we would think 18 months.

And then how much does it cost to renovate that?

That completely depends on the scale of renovations needed. Some require maybe $1 million or $2 million, others might require $3 million, $4 million, just really depends on what's needed.

Our next question comes from Connor Siversky with Berenberg.

Kind of a broad-based question here, and I'm going to try to zero in on how it relates to your portfolio, but to start, given this disruptive environment, do you get the sense that some of the stronger operators in any given region are able to step in the fold and expand their operations within some of these distressed facilities?

And then second to that, within this potentially repositioned portfolio you've identified, could -- is it a likelihood or a possibility that we see an operator, maybe Ensign or something similar, that would take up operations within these particular facilities?

I'd say that first part of your question, yes, I think this -- what the pandemic has shown is that -- it's really magnified the strengths and the weaknesses of operators. And those who were very strong leading into the pandemic, for a host of reasons, I think, have done really well, and those who are more on the margins have really struggled. So yes, I would think that the guys who have been strong before and during the pandemic will be those who are able to capitalize on assets that come to market during this time.

In terms of retenanting these 32, all options are on the table for that. As we sit here today, I'm -- I would guess that we would sell the majority of the 32, retenant or repurpose a minority of those. But how that plays out is to be determined, and we'll update you as we have information.

Our next question comes from Juan Sanabria with BMO Capital Markets.

Sorry, I just wanted to follow up on one of Jordan's questions. Are the 32 assets -- are the actual assets themselves repeat offenders? I guess the underlying question would be, is it more the asset rather than the operator? Just curious on your views there, if there's kind of just impaired real estate, kind of obsolete at this point.

Yes. It's pretty difficult to separate the facility from the operator as we look at continuing on with folks. So I wouldn't really make a distinction on that front.

Okay. And then just on the leverage front, you mentioned the buyback as a tool. Curious if you can give us any sense of parameters around at which point you find your stock compelling? And if you were to use the buyback, would you fund that with dispositions? Or would you be willing to take on leverage to do so?

Do you want to take that?

Yes. I'll take it. So -- it's a bit tricky to talk about at what price a company is willing to pull the trigger on a repurchase program. And so we probably won't give you much guidance on that besides talking about it being a function of NAV and where we feel like that is. And if we get to a situation where we're at enough of a discount to that, we would be probably pretty eager to pull that lever.

And the use of leverage to do so?

No. I don't think we would need to do that given the fact that we have the proceeds coming in, but it's all going to be dependent on timing. Bill, do you want to add anything to that?

No. I think...

And then just one last question for me. Any comments you can make about your views on the dividend, and how safe or not that may be given the quantum of what you're looking to effectuate?

Yes. We're not concerned about the dividend. We don't make decisions about how much we're going to increase it until March, so you can anticipate our decision on that front then.

And I'm not showing any questions at this time. I'd like to turn the call back over to Dave Sedgwick, President and CEO.

Well, thank you. We're really grateful for the attention and the questions. Grateful, especially to all of our shareholders for the long-time support. We're excited for what this year brings. With that, we'll say goodbye.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.