Sabra Health Care REIT Inc (SBRA) 2015 Q1 法說會逐字稿

Good day ladies and gentlemen. Welcome to the Sabra Health Care REIT's first quarter 2015 earnings conference call. This call is being recorded. I would now like to turn the call over to Talya Nevo, Chief Investment Officer. Please go ahead.

Thank you. Before we begin, I want to remind you that we will be making forward-looking statements in our comments, and in response to your questions concerning our expectations regarding our acquisition and investment plans, our acquisitions regarding our financing plans, and our expectations regarding our future results of operations. These forward-looking statements are based on management's current expectations, and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31st, 2014, that is on file with the SEC, as well as in our earnings press release included in Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday.

We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included at the end of our earnings press release, and the supplemental information materials included as Exhibits 99.1 and 99.2 respectively, to the Form 8-K we furnished to the SEC yesterday. These materials can also be accessed in the Investor Relations tab of our website at www.SabraHealth.com. And with that, let me turn the call over to Rick Matros, Chairman and CEO of Sabra Health Care REIT.

Thanks Talya. Thanks everybody for joining us for our first quarter earnings call. I will go through my talking points, kick it over to Harold Andrews, our CFO, and then we'll go toQ&A after that. For the quarter our revenues increased 36% on a year-over-year basis, normalized FFO and AFFO increased 45% and 46% respectively. But was essentially flat on a per diluted common share, due to the approximate 50% increase in share count since first quarter 2014. Our pipeline currently stands at approximately $1 billion of which 65% to 70% is senior housing. When we cite the size of our pipeline, it reflects deals that we are actually seriously spending time on. If we included everything that we get passed on to us ,or shown to us, the pipeline would actually be a lot larger. So this is a realtime increase from where the pipeline has been for really over a year. As you'll recall from past quarters, our pipeline generally is in the $350 million to $400 million range. So this is a significant increase in the size of the pipeline. While we haven't announced any deals that have closed in the first quarter, our deal activity is very, very strong right now. We actually did close very recently on a small senior housing deal, $6.7 million. We funded approximately $12 million in our development pipeline for the First Phoenix Group, and have approximately $153 million in additional senior housing investments that we'll be closing in the near term. There's one large deal in there, and one smaller deal.

So all-in we're approximately $172 million to $175 million in deals that we will have closed or will be closing in the near term, which will put us slightly ahead of where we were at this time last year, and we have a number of other interesting things we're continuing to work on. We currently re-affirm guidance, as we have closed these deals and get closure on some of the other things that we're working on, we will update our guidance, most likely with our next quarterly call. The regulatory environment appears to be benign for the skilled sector. Both the [doc fix] and the market basket were good news for the skilled sector. The two midnight rules which we've been talking about quite some time, for observation days will be enforced beginning this October. That said, there's concern about how compliant the hospitals will be with the enforcement of the rules. So any benefit is difficult to predict.

We do expect the industry to undertake efforts to introduce legislation to completely eliminate the three-day qualified hospital stay for skilled facilities, that will be a long process, because it's a legislative process. But at some point that should become a reality. We already see it with the insurers, that they don't need to pay attention to the three-day qualifying stay, unlike Medicare, which is bound by that regulation. That really is in tune with how the market is changing with ACA. Again we don't have a sense of how long that process will be. But the fact that the industry and the lobbying group associated with the industry is undertaking that process, legislatively, we think it's a good thing, and certainly the right thing to do.

Now moving on to Genesis. There have been some questions about whether there are going to be any assets that we'll be selling in conjunction with Genesis. Genesis is having their earnings call I believe this Friday morning. And they'll be talking about deals, at least in general sense, that they reached with the REITs that are their landlords, to increase their percentage of real estate that is owned, and including some divestitures. For Sabra, we engaged in a minor deal with Genesis that affects five facilities. So not a lot that we will reduce our exposure. Three of the facilities Genesis is buying us out of. The other two facilities we like the operations. We will look to release those with another operator. And if we can't release those, or can't release those at a rate that we think is acceptable and keeps us whole, then Genesis would take those facilities back. There will be no impact on our guidance as a result of this deal with Genesis. A little bit hard to discern when it's actually going to take place, sometime over the course of the remainder of this year and early next year. So again not a big deal. But I think when you look at our deal with Genesis in conjunction with the other REITs, that overall the deal is very good for Genesis. It will improve optics charge coverage with Genesis, and improve Genesis, and strengthen Genesis financially overall, so for Genesis in the aggregate, a very good deal. For Sabra it's minimal. Reduces our exposure somewhat. That is a good thing. Gets rid of a few of the operations that we really didn't want to hang on to. But not a material feel.

Next let me move on to talk about Forest Park. Harold will get into some detail on the reserve that we took for Forest Park. We're undergoing some really positive things we think with the Forest Park platform. There are a couple of things going on. There's been a lot of interest in the platform by third parties. There's a new CEO, and a new partnership in the management company, that are in the process of talking to a capital source to provide some additional capital infusion and funding, to create more flexibility for the platform. While that's happening, there is another system in Texas that is interested in taking over Opco, and bringing a capital source in as well. So those conversations are ongoing, all of which we would maintain our position, all of which would strengthen the Forest Park platform, and the fact that there's this level of interest in providing capital to the platform. And potentially some changes in Opco, which would be advantageous. We think it's all good. Whichever one of those occur at that point in time, we expect to recoup some of the rent that we provided relief on, we provided that relief to give them some flexibility so that they can pursue these other options.

In addition to that, there are two other hospital systems, one very large public system that has shown interest in actually buying out the platforms completely. At this point in time, that's not an interest that we want to pursue. We just see too much upside here in the real estate. So like the model, and we think the changes that we're talking about with existing management, the docs and the other partners, are all going to be good for the platform. We think good stuff here. Again at this point we're not interested in selling the platform. Always good to know that there's that level of interest out there. Moving on to our current operations. Genesis' fixed charge coverage of 1.18 reflects the fourth quarter integration issues they had with a skilled healthcare acquisition, that they discussed on their last earnings call, and they also indicated I think on that call that they had adequately addressed those issues, and saw an upturn in the first quarter. So we view that 1.18 as a blip. And expect coverage to improve with their first quarter. And then as I noted a few minutes ago, with the deals that they're in the process of cutting with all of the various REITs over the course of the coming year, that fixed coverage charge will continue to improve. The fixed charge coverage with Tenet is healthy 2.3. The Holiday fixed charge coverage although slightly down, is still a healthy 1.2. Regarding our facility level rent coverage, it was up and down, down in the SNFs, and up on the senior housing. One of the things I want to note that we've always talked about internally, but really haven't talked about in these calls, with 103 of our facilities being covered by corporate guarantees, we only have 22 stabilized skilled nursing facilities we report on, and 21 stabilized senior housing facilities that we report on. So it only takes a couple of facilities to have a down quarter to really shift those numbers. That said, we have no facilities in any of those categories that we're concerned about. No rent issues in either one of the categories of those asset classes. Our SNF rent coverage declined slightly sequentially to 1.19, while the senior housing rent coverage improving slightly to 1.27. Occupancy for the skilled nursing portfolio was essentially stable sequentially. And year-over-year 87.9%. Skilled however was up 180 basis points sequentially, and 100 basis points year-over-year to 39.3%. So it was nice to see the jump in skilled mix, that was helped in part by the transitional care facilities that we acquired in October. But there was also an improvement in skilled mix on a same-store basis as well. Our senior housing occupancy was 90.9%, which was up 60 basis points sequentially, and 250 basis points year-over-year. And with that, let me turn the call over to Harold Andrews

Thanks Rick. Thanks everybody for joining the call today. I'll provide and overview of the results of operations for the first quarter of 2015, and our financial position as of the end of that quarter. For the three months ended March 31st, 2015, we recorded revenues of $55.6 million, compared to $40.9 million for the first quarter of 2014, an increase of 36%. As of March 31st, 2015, 36.1% of our revenues were derived from our leases to subsidiaries in Genesis, down from 47.7% in the first quarter of 2014. In addition, 53.4% of our revenues were derived from skilled nursing transitional care facilities, that being down from 69.9% in the first quarter of 2014. FFO for the quarter was $31 million, and on a normalized basis was $31.4 million, or $0.53 per diluted common share. Normalized to exclude $348,000 of non-recurring facility operating costs, associated with transitioning two assets to new operators. This normalized FFO compares to $21.7 million, or $0.55 per diluted common share of normalized FFO for the first quarter of 2014. The funding of operating costs for the two assets declined from $1.7 million in the fourth quarter of 2014, and is expected to decline in the second quarter. We entered into a new lease on one of the assets in late 2014, and we expect to enter into a new lease on the second asset in the next few months. AFFO which excludes from FFO acquisition pursuit costs and certain non-cash revenues and expenses was $30.5 million, and on a normalized basis was $30.9 million, or $0.52 per diluted common share, compared to $21.1 million, or $0.53 per diluted common share for the first quarter of 2014. AFFO being normalized in 2015 to exclude the same nonrecurring costs impacting FFO.

Net income attributable to common stockholders was $16.9 million, or $0.28 per diluted common share for the quarter, compared to a net loss of $9.9 million, or $0.25 per diluted common share in the first quarter of 2014. G&A costs for the quarter totaled $8 million, and included the following, $0.5 million of operating costs associated with our one senior housing RIDEA joint venture, $2.9 million of stock-based compensation expense, $400,000 of state income taxes, primarily attributable to 2014, $300,000 of acquisition pursuit costs, and $1.1 million of reserves related to rents and interest. And finally, $300,000 of nonrecurring facility operating costs that we previously discussed above.

Included in the $1.1 million reserves were $0.7 million, primarily related to current rents on our Forest Park Frisco Hospital investment. As Rick said earlier, we are working with the management at Forest Park as they implement changes in the management structure and financing sources for the operations of the hospitals. In that regard, we have deferred rents totaling $2.2 million as of March 31st, representing 2.5 months of rent payments due. As of March 31st, 2015, Frisco represents 6% of our revenues, declining to approximately 5.5% after closing the acquisitions we expect to announce in the near term. Upon finalizing additional capital funding, we expect to receive the majority of the deferred amounts that were outstanding at the end of the quarter, which the balance being recovered over time as operational performance continues to improve. We'll continue to work with the management of Forest Park through this process, as necessary.

Our interest expense for the quarter totaled $13.9 million, compared to $11.1 million in the first quarter of 2014, and included the amortization of deferred financing costs of $1.3 million in the first quarter of 2015 and $0.9 million in the first quarter of 2014. During the quarter we modified six of our HUD mortgage notes with balances totalling $59.2 million, to reduce our weighted average interest rate on those borrowings from 4.39% to 3.98%. Based on total debt outstanding at the end of the quarter, our weighted average interest rate, excluding borrowings under our unsecured revolving credit facility was 4.64%, compared to 5.24% as of March 31st, 2014, a reduction of 60 basis points. During the quarter ended March 31st, 2015 and 2014, we recognized $100,000 of other expense, and $300,000 of other income respectively, as a result of adjusting the fair value of our contingent consideration liabilities, related to the acquisition of certain real estate properties with earn-out possibilities.

Switching to the statement of cash flows and balance sheet. Our cash flows from operations totaled $24.7 million for the first quarter of 2015, compared to $22 million for the first quarter of 2014, excluding the cash portion of the loss on extinguishment of debt in 2014. This was a year-over-year increase of 12.2%. We had very limited investment activity during the quarter, which totaled $8.2 million, primarily with existing loan and preferred equity relationships. We had no activity on our equity ATM program during the quarter. And as of the end of the quarter, we had $76.5 million available for future use. We paid a quarterly preferred and common dividend during the quarter totaling $25.7 million, and reduced our cash from $61.8 million at the end of last year, to $4.1 million at the end of the quarter, primarily to pay down our revolving credit facility by $42 million, leaving a balance on the revolver of $26 million at the end of the quarter.

As of March 31st, 2015, we have total liquidity of $428.1 million, consisting of currently available funds under our resolving credit facility of $424 million, and cash and cash equivalents of $4.1 million. We were in compliance with all of our debt conveyance under our senior notes indentures, and our secured revolving credit agreement as of March 31st, 2015, and continue to maintain strong credit metrics as follows. Debt to adjusted EBITDA of 5.2 times. Fixed charge coverage ratio of 3.32 times. Interest coverage ratio of 4.27 times. Total debt to asset value of 44%, and secured debt to asset value of just 5%. Unencumbered asset value to unsecured debt 243%. Finally on May 5th, 2015, our Board of Directors declared a quarterly cash dividend of $0.39 per share of common stock, and $0.04 per share of series A preferred stock. Both dividends will be paid on May 29th, 2015, to stockholders of record as of close of business on May 15th, 2015. With that, I'll turn it back to Rick.

Thanks Harold. Why don't we go to Q&A now.

Thank you. (Operator Instructions). And we'll move first to Juan Sanabria with Bank of America.

Hi, good morning, guys.

Hi, Juan.

Hi. Just hoping you could talk a little bit more about Forest Park. And what really drove the change I guess in the structure, the potential management of that?

Sure.

And why do they feel the need to give them more breathing room? Are they missing any targets currently under the current structure? And I just wanted to confirm that the revenue that's throwing through your P&L, that won't necessarily be impacted by this. This is just sort of a deferral on a one-time non-cash item?

Sure. So yes going back to sort of the beginning on it. So Frisco, first of all, they continue to make progress since they've gone fully in network. Their volumes continue to improve. Their case mix isn't where it needs to be from an acuity perspective. The other issue is while they've been improving, they've been improving really slowly. As we have spent more time on it, our conclusion was that it was really an issue on the execution side. Their costs were too high. The management company that was providing all of the shared services to the platform, generally not just Frisco, simply wasn't doing a good job from our perspective. And we had engaged in conversations with the physicians, who as you know are partners. And with the developer, as well who continues to develop additional properties. They've got hospitals now that they've developed in Austin, and in San Antonio, which have nothing to do with us. But the platform continues to grow. And we all came to the same conclusion, and that was that management just wasn't getting it done. And that frankly they were making the progress that they were making, despite the fact that management wasn't executing properly, with the appropriate changes in place, then things had a lot more upside there. So that's what really precipitated the initiative to start looking at other options.

And while we were looking at other options, we were getting unsolicited interest from different hospital systems in Texas as well. Because the platform is becoming well known, and I think between the quality of the real estate and the model, there's just been a lot of interest there. So we have been going down a particular pathway with a group that basically took out some of the management, partnered up with one of the principal doctors, changed the CEO out, and is looking at bringing a capital source in. That capital source has been doing their diligence, and I think everybody feels pretty reasonable about them. But then at the same time, another group was engaged. That an existing hospital company, they've got hospitals, they've got clinics. They're actually not big, but they are publicly held. But they'd like to actually take over the platform as well, in which case as with the former case, we'd still hold the real estate. And they have a separate capital source that they work with, that is interested in providing some flexibility as well. So that's really kind of how the circumstances developed.

In terms of the revenue, the revenue is good. And yes, we do see this as interim and expect once the capital sources come in, to start recouping that deferred rev. In terms of the other options out there, as I stated, there are a couple of hospital systems, one Texas-based, one nationally based that would like to take out everything, and take over the platform. And that's something that at this point none of us, not just Sabra, but the doc partners, the real estate developers, no one is really interested in at this point, because of the upside that we see in the platform here. Does that answer your question?

It does. And then just on the options you have on the other sort of related assets outside of Frisco, would that change at all? Are you still looking at that as opportunities to acquire, or does this kind of make you a little bit more hesitant about that opportunity?

No. It doesn't change it. We've got obviously more time in those because of the options, the Ft. Worth facility was completed not that long ago. We still have I think almost a year and a half left on the Dallas options. There's plenty of time there. So we have a lot of flexibility there. So in other words, if things go the way we would expect them to, then we're in good shape and we'll exercise the options, and go from there. And if you look at the combined value of just funding the real estate for the construction on Ft. Worth, and the mortgage at $110 million in Dallas, if in fact, we didn't like the way things are going, we're in a very good position to recoup our investments on those, if things shouldn't go the way we want.

So there's plenty of time in those. But at this point there's no reason for us to think that we're going to do anything other than exercise those options at the appropriate time. But again we have plenty of time there. That's one of the things that good for us with the other two assets, while we own Frisco, and we want to make things happen sooner than later, we've got more time on the other two assets. As do those, go ahead.

A follow-up question on the billion dollar pipeline you referenced. Could you talk about what makes it up, is it largely single asset or small portfolio deals, or is there something big and chunky? And if there is, kind of how would you view transacting on that, would it have to be accretive day one, sort of with long-term financing in mind, with regard to debt and equity? How should we be thinking about that mix, if you could give us any sense of pricing or cap rates on that. That would be fantastic. Thanks.

Sure. I would say that there are no transformational deals like the Holiday transaction in that billion dollars. There are several large portfolio deals, of which there are platform deals. In other words, where there's essentially a divestiture of a platform of health care real estate investors. Those are opportunities if we were to buy the assets. And so we're looking very hard at several of those. The balance are small portfolios went to four assets, let's call it. And there's a lot of those. Right now I will tell you that aside from development pipelines and transactions in funding associated with our pipelines, most of the transactions we're seeing are being marketed broadly. There is a lot of product on the market, and the brokers are making sure they're finding everything that could possibly be on the market and represent sellers.

Yes. The other point I would make is whereas before we would automatically discard any skilled deal under $100 million, that's not really the case any more. Now that we've gotten our skilled portfolio, and with the investments that we expect to be closing on our skilled exposures, and just about 50%, we could afford to do skilled deals that are larger than the $100 million. And still stay where we want to stay, which is around the 50% level, and not get off track with our focus on getting to investment grades. So that opens things up for us a little bit, a little bit as well, Juan.

Thank you.

We'll now take a question from Josh Raskin with Barclays Capital.

Hi, thanks.

Hey, Josh.

Hi, how are you, Rick? Sticking on the pipeline, and maybe the one-third that's not seniors' housing. Sounds like there's some skilled assets in there. Are these parts of larger bundles that are getting shopped, or are these sort of one-offs? I'm curious are these big operators, mom and pops, where are you seeing the skilled opportunity?

They are small operators. There are regional operators. Frankly the only large portfolio that we are interested in looking at just pieces of, is HCP and HCR are looking to move about 50 assets. We don't believe at this point that anybody is going to grab all of it. You never know what's going to happen. There are some good assets in that portfolio, that we think with the right operator can do really well. So we would be interested in looking at pieces of that, but certainly not the whole thing.

Okay.

So I would say the deal size is kind of SNFs that we're looking at is kind of between call it $20 million and $250 million.

Okay. Okay. So small as a couple of deals. All right. And then you made a comment, Rick, about the two midnight rule. And I know the enforcement is coming in. But the rule has been in place. So were you insinuating that you thought hospitals might actually behave differently under the enforcement period, and that could have some sort of trickle-down effect for the skilled nursing facilities?

Well, the rule is in place. But it wasn't enforced. So it was essentially delayed, so there's been no impact from the rule. So in October they're actually going to enforce it. But as I talk to guys on the trade association side, and the skilled side, their concern is that some percentage of the hospitals out there will refuse to comply with the enforcement of the rule. And then of course, how that's going to react to their lack of compliance no one really knows. This whole deal with the rule is to get around the rack audits for the hospitals. And so there's some concern that by going along with the enforcement, they're still going to have rack audit issues. So that's why it's hard to predict. So in other words, when we look at what's happened to our skilled mix, which is pretty reflective of the sector generally over the past couple of years, it's dropped pretty dramatically. Occupancy has been stable, because operators have replaced those patients with Medicaid patients, which kind of goes to the margin, and goes to the rent coverage issues. So you'd like to be able to say that come October there is going to be full enforcement. And we should see material pop in skilled mix, but there's a question mark there in how compliant the hospital sector is going to be.

Yes. I got you. And just on the hospitals themselves, any change in thoughts, you haven't sort of mentioned hospitals in the mix. I don't know if Arden changed your mind, or where you thought the cap rates were. Any updated thoughts on the hospital as an asset class?

No. We like the hospitals as an asset class. We'd be interested in doing other things. We haven't seen anything of real interest. So it's not been a function of not wanting to pursue. I think the other thing is we, in order to do more hospital deals, we'd really like to do deals with partners that have some real scope. So we've got the one hospital with Tenet, and that's transaction has worked out really well for us. That hospital TRMC is doing very well. Tenet has just recently put that and a few of their other facilities into a joint venture with Baylor, in the Dallas area. So that's proved to be a really good investment for us. So we'd like to do it that way. One of the reasons that we're interested in pursuing some of these options with Forest Park is to improve the strength of the platforms, so that they have more leverage with the insurers. So hospital deals that we've seen instead of one-offs, at this point don't interest us any more. I think we've learned some things from that. And we're going to make sure that we are affiliated with a larger platform, if in fact, we do additional acute hospital deals. But we do like the asset class.

Thanks, Rick.

Sure.

And we'll now move to our next question from Michael Carroll with RBC Capital Markets.

Hey, Mike.

Hey. Can you give us some color on the management changes at Forest Park. Did one of the founding three physicians actually leave the practice, or is this a different entity that's managing the property?

No. One of the founding physicians bought out the other guys in conjunction with a business partner. The other guys are still there, and they're still part of the doc group, and they're still practicing. So there's no change there in terms of the day-to-day for the physicians. It was just the management company. And they wanted to take out the individual who was the CEO, which they did. so we're happy that occurred. We don't know if that's the absolute best answer at the end of the day, which is why we're talking to this other group as well. That may be the best answer. And they're certainly doing some good things in terms of taking out costs, and looking at case mix. So they're making some good moves there. And when I said we, I sort of mean the collectively we, Sabra, there's another REIT that owns South Lake, one of the other hospitals in the Forest Park platform, the docs are involved. So whether I say we, it's a collective we, that we haven't determined that the group that's currently running the show is the absolute best answer. Although they may be.

Okay. And then I thought the Frisco asset was the one that was largely stabilized, and that's why you're willing to do a fee simple ownership on that. Have operations on this asset declined, or something occurred that you didn't fully expect to occur?

No, it's not that, you'll recall at the time we acquired, it was primarily still out of network. So really it wasn't until the end of the third quarter that they were fully in network. And so that transition has just been difficult.

Okay.

Their volume is has improved, as you would expect. So going from out of network to in network, the insurers are now willing to refer a lot more cases than they were referring before. And they've hit new highs on their volume, where the two issues that they've had, and so their performance is very up and down. They'll have really good months, and they'll have weak months. And there are really two issues associated with it. It one issue is on the cost side, and that was really a function of the shared services, corporate management structure that was in place. So that's being addressed kind of as we speak. And the other issue is even though volume is up, you need case mix to be strong and a little bit longer length of stay, and that's got to do with acuity, and the kind of cases that you take. But that's the other piece that needs to be addressed.

Could you kind of talk a little bit about the capital infusion, is that debt capital or equity capital, and why disease the operator need capital?

It is an AR line. Everybody needs an AR line. They've been operating really without much of one. so every business needs a revolver. It's really as simple as that. The businesses were so new, and there were so many that were in development,they were having a hard time getting an adequate revolver. Now that they have got three hospitals up and running, they've got three newly developed hospitals, now that has occurred there's much more interest in having a revolver that makes more sense, in terms of the capital needs for the hospitals, there are two hospitals that are also going to get some equipment financing. And that's pretty standard as well. It's really a function of very sort of new platform, having difficulty early on, getting the capital they need. Now that they've been around for a while longer, there's much more of an interest with entities providing capital sources to them.

Okay. And would the offer or at least the interest from the other health system to purchase the entire platform, would that make Sabra whole if that did occur?

We never pursued it.

Okay. Is Forest Park paying the rent in full right now? Do you expect to receive all of the deferred rent in the future that you've already deferred currently?

The work that was deferred at the end of the quarter continues to be deferred until they get this capital partner put in place. So we expect to get, as I said in the call, a big chunk when that's done. And then there may be some left over that we get paid over time, as operations improve.

The other point I would make, Mike, just in terms of our numbers. So it's clear for everybody that when we take look internally at our projections and if we assume really bad case, sort of hospital, which again will soon be down to 5% of our revenues, and assume a very conservative case on investments for the year, we are comfortable that we will hit Consensus for the year, not just guidance, but Consensus for the year.

Okay. And then do you expect you have to do another reserve next quarter?

It's too soon to tell. But relative to the comment that, because a lot of it is timing, with the work that these guys are doing, are bringing the capital sources in. So hopefully we won't have to. But in terms of the comment I made earlier, relative to our outlook for the rest of the year, we actually assume that does happen. So we sort of made worst-case scenario assumptions in our own projections, and still feel comfortable, with where we are relative to Street Consensus for the year.

Great. Thank you.

We'll now take a question from Chad Vanacore with Stifel.

Hi, there. Staying with Forest Park for a second. Can you give us an update on how big your development commitment pipeline, what it looks like today. And then how much of that is Forest Park?

Yes. Forest Park everything has already been expended. There's nothing more with Forest Park. So we funded the construction loan for Ft. Worth. That's done. So there's really nothing else there. So in terms of the rest of our pipeline, so we've got about seven partners. And if you exclude Forest Park completely, over the next few years, we're looking at approximately $400 million or so in stabilized assets that are coming into the portfolio. So the bulk by far, most of our development pipeline is senior housing, and to a lesser extent skilled nursing, and so that's in terms of new assets coming into the portfolio, it's a pretty nice number given the size of our portfolio. So Forest Park becomes a pretty small piece of the whole thing. And obviously a lot smaller as we continue to grow.

All right.

Just to provide some more details on what we've closed and what we will be closing. So we have $160 million that we'll be closing in short order. We have $23 million that we have closed on, that's comprised primarily of two pieces. One small senior housing facility for about $7.6 million, and the other for development funding, primarily with First Phoenix. So all-in we'll be close to, based on what we sort of have in the bank right now, we have about just under $185 million in investments that we have either closed or will be closing on. As we close on the larger deal, we'll provide a separate press release with all of the details on that. So that approximately $185 million will put us about $20 million ahead of where we were at the same time last year.

All right then. Just switching to your coverage. So what's the coverage on the Genesis assets that are being sold? And what do the planned transactions, what does it do to Genesis portfolio coverage and revenue mix overall for you?

Okay. Well, the coverage on the assets that are being moved is negligible. It's pretty weak. I don't have the specifics, and we haven't been giving out the specific facility level at Genesis. They're pretty weak. As I said, the pop that Genesis gets isn't out of the Sabra deal. It's out of the combined deal with all of the REITs. And we don't have the details, exactly what they're doing with the other REITs. So Genesis will provide more color on that on their call on Friday. We know that there's going to be a nice improvement in the fixed-charge coverage, both as a result of two things. One, what was really a blip in the fourth quarter, that they already felt they were recovering from effective January. So you'll see recovery there. And then based on the deals that they've cut with the other REITs, that's where the rest of it comes. But that's not our deal. So I can't speak to how that affects Genesis overall, other than Genesis' communication to us, that they feel very good that it's going to provide some nice uplift to their fixed-charge coverage, and to their balance sheet. But we expect to get more color from them on that when they announce on Friday.

All right. That's it for me. Thanks.

Yes.

We'll now take a question from Smedes Rose with Citi.

Hi. Thanks. I wanted to ask you on your opening remarks, you mentioned that the pipeline, it sounds like accelerated significantly from the fourth quarter. And it sounds like there is a lot of product on the market. And is there anything in particular that you see that's driving an uptick in the amount of stuff for sale, is it pricing is so good for the sellers, or is it interest rate-related, or what are your thoughts around that?

Yes. I think it's all about pricing. As you all know, cap rates have compressed. And so basically every broker out there is calling everybody whether they had an intent on selling or not, and telling them this is the time to sell. So shaking the trees would be putting it mildly. They may be putting up 1-800 billboards all over the place, like plaintiffs used to do in liability cases.

Okay. All right. That's helpful. Just wondering. So when you look at the first quarter, I mean were you surprised that you weren't able to close on more in the quarter? I mean, I realize these things have a lot of maybe some flexibility around timing. But I mean, had you hoped to close more in the first quarter?

Not really. I think we felt good enough about what we were working on. And a lot of the things that we were working on in the first quarter started coming around in the first quarter. So by the time you look at stuff, bid on stuff, get awarded stuff, get your due diligence and close, it just takes some time. So last year was a little bit different for us in the first quarter, because the things that we closed in the fourth quarter, we actually had done a lot of work on those in the fourth quarter. So we were never really concerned about where we'd be in terms of investment activity, because of the level of activity, and at the pace that we were getting awarded things, and certainly with where we are right now. It's going to put us in really good shape for the year. And this will be the strongest start that we've had to any year since we've been in existence.

Okay. Thank you.

Yes.

(Operator Instructions). We'll now move to Jonathan [Hughs] with Raymond James and Associates.

Good afternoon guys. I know you're primarily focused on acquiring senior housing assets going forward. But have you seen any greater competition for skilled nursing assets? Maybe from new entrants like Care Capital, Ventas' spinoff, or nontraded or private equity? And then, secondly, are there any hospital deals in the $1 billion pipeline, you all talked about today?

Sure. So there's no hospital deals in the $1 billion pipeline. In terms of skilled I would say, one, just to reiterate that we are looking at them more than we were before, just because we have gotten our skilled exposure down so much. And we want to take advantage of the yields. But in terms of increased competition, we really haven't seen, it hasn't changed much. There's been cap rate compression. But the competition hasn't changed much. The Ventas spinoff hasn't closed yet. So we haven't seen them in anything yet, would expect to certainly see them at some point in time. When you're doing a spin, as we said when we were doing ours, it's hard to get deals done before the spin actually closes. We certainly tried in 2010. Doesn't mean that they can't. But it makes it more difficult. So at this point no additional competition. And actually when you think of that, because Omega acquired Aviv, the Ventas spin just kind of replaces that. Before we'd see Omega, Aviv, maybe NHI, L2C, the non-tradeds tend to look at the bigger deals, not smaller deals. We see PEs on the senior housing side. So don't really see them to that same extent on the skilled side, so basically Aviv goes away, and Care Capital comes in. So net/net there's no change there.

Okay. And then just a quick numbers question. Stock-based comp, what's a good run rate for that for the rest of the year, just trying to get some more color on that?

Yes. It does move around a bit, depending on our stock price. So I think somewhere around $2.5 million to $3 million is kind of what we think about. It can fluctuate kind of in between that. In between those two collars, if you will.

Okay. All right. That's it for me. Thanks, guys.

Yes.

We'll now take a follow-up from Juan Sanabria.

Hey guys. Thanks for giving me the time. Just with regards to your comment, Rick, about being comfortable hitting Consensus, what are you assuming in that for funding of transactions for the balance of the year, and I guess specifically to the $160 million to $180 million you were talking about closing sort of imminently?

We assume that beyond the $160 million that we're closing on, that we'll close on another $350 million or so for the remainder of the year. And that plus some negative assumptions on additional reserves for Forest Park, to get us to Consensus.

And then what should we assume sort of funding from that equity sort of debt perspective for that $160 million-plus the three--?

Every deal that we're looking at, well, a couple of things. One, we look at it on a balance sheet-neutral basis. To the point someone made earlier in Q&A, everything that we are looking at is accretive on day one. Regardless of how we happen to fund it at that time. So yes, so you look at it sort of 50/50 sort of overall, as opposed to 60/40. Depending on any given deal, we may use the revolver to fund the existing deal. So leverage ticks up a little bit on the short-term, and then we match it with the ATM, and use that primarily for the next few deals. It depends on where stock price is, and all that sort of thing. But overall it is 50/50 is the way to think about it Juan, and again everything will be accretive on day one.

Okay. And then it seems from your commentary, that you think pricing is maybe a little bit aggressive, or at least the brokers are trying to be aggressive, and trying to show product to everybody. And that $1 billion pipeline there's a lot of I guess broker deals. I mean, why the need, or why the confidence, or the desire to do that, given how competitive it seems? And I guess for the deals that you are penciling in for the remainder of the year, what should we be thinking of in terms of cap rates?

Well, Juan, there are still really good assets out there with good operators. While you might rather buy a skilled deal with a nine handle, if it you can get it at 8.5 handle, it's still a good yield. And if it's still an asset you want with the right operator in place, you should do that deal. And the same applies to senior housing. So I think for skilled deals, the way to think about cap rates is kind of 8.5-ish to 9. And senior housing deals, depending on whether it's AL or IO or Memory Care, that is a wider range I think from 6 to 7.5.

Thanks. That's very helpful.

Yes.

And there are no further questions at this time. I would like to turn the conference back over to Mr. Matros for any additional or closing remarks.

Thank you for your time today. We had a lot going on in the quarter, despite that we were light on investments, just with everything else going on with Genesis and Forest Park. Hopefully you come away feeling comfortable with where we're going for the year, with the level of activity that we have, and the proactive steps that we're taking to strengthen the platform of the hospitals. And as always, we're all available for additional questions and calls. So we look forward to talking with you shortly. Have a great day.

And once again that does conclude this conference. We thank you all for your participation.