Sabra Health Care REIT Inc (SBRA) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Sabra Healthcare REIT third quarter 2015 earnings conference call. This call is being recorded. I would like to now turn the conference over to Talya Nevo-Hacohen, 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 expectations regarding our financing plans, our expectations regarding our Forest Park investments, and our expectations regarding our future results of operation.

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 31, 2014 and our Form 10-Q for the quarter ended June 30, 2015 that are on file with the SEC, as well as in our earnings press release included as 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 today. These materials can also be accessed in the Investor Relations section 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. Rick?

Thanks, Talya. Good morning, everybody. Thanks for joining us. Harold will cover Forest Park in detail, including more detail around the updated guidance that we gave on our earnings release, and we'll talk about 2016, as well, and we'll give you a range of impacts of various scenarios to provide a better sense of the financial outcome, providing more realistic outcomes than what we see reflected in the stock price.

Let me start off by talking about where we are other than Forest Park and where we're going from a strategic perspective. 2015 was extremely productive from an investment perspective. As such, we'll have strong earnings growth going into 2016, including any variety of outcomes from Forest Park. So we've got no need or desire to push to get more done at this point. We did close one senior housing facility in Canada and we will be closing the fourth NMS facility, but both of those were contemplated in the $200 million that we anticipated closing that we noted on the last call.

So in other words, we're taking our foot off the pedal at this point. Obviously, the whole group's down in terms of stock performance. We're down even more, obviously, because of the overhang. We won't be issuing any equity through the ATM or otherwise. Once Forest Park is resolved and the overhang is removed, we'll re-evaluate our cost of capital and the acquisition environment. Proceeds from the sales of Frisco and debt take outs at Dallas and Fort Worth, if that were to occur, will be used to delever the balance sheet and potentially buy back stock, as well. Additionally, we do believe that there will be expansion of cap rates as we go into 2016.

As noted on the last call, and we continue to see recycled deals, busted deals, we see a slowing down of available product, and the product that we see is of lower quality, all of which we think are indications that there's been a peak in the acquisition market and a peak in pricing, as well. The public REITs have all been exercising restraint in terms of pricing. The only group out there that isn't exercising any restraint on pricing are the PEs, as it pertains to senior housing. And we don't anticipate that changing, as we see the PEs doing the same thing in other real estate sectors, not just senior housing sector.

But from our perspective, as sellers come to us and come to the other public REITs, we fully expect that pricing won't be as generous as it's been and guys still have to sell and so there will be some forced expansion of cap rates as we go in to 2016. And so whatever minimal increases the Fed is going to do in terms of interest rates should be immaterial to any cap rate expansion that we think will occur going forward.

In terms of -- let me mention our pipeline. Our pipeline is now approximately $400 million, which is well off from where it was earlier this year but actually reflects where it normally is. And everything in the pipeline, except for about $30 million, in senior housing, that $30 million is (inaudible), but we're not looking at any hospitals. But again, a lot of the stuff that we see in the pipeline isn't the quality that we'd like to see. And again, we're not really interested in doing anything more right now anyway.

Let me move on to the business fundamentals. Our business fundamentals were good in our portfolio. Our skilled transitional care portfolio, EBITDA coverage improved from 1.25 to 1.27. Our senior housing coverage improved from 1.21 to 1.29, and our coverage is up sequentially on our rent coverage throughout the portfolio. Genesis improved to 1.27, Tenant Health improved to 2.44, and Holiday, we feel comfortable 1.17.

Occupancy in the skilled nursing traditional care portfolio dropped 70 basis points to 87.3, while skilled mix improved 160 basis points to 39% and is up sequentially. I wanted to make note here, I see a lot of comments about quality mix. Quality mix is actually not a good determining factor in terms of where the skilled business is going. Quality mix is something that we used back in the day, really, that included all non-Medicaid revenues, so Medicare, managed care and private pay. But when you look at private pay rates today, private pay rates today aren't really indicative of what's happening in the business. Private pay rates today don't come close to either Medicare rates or managed care rates in the skilled sector. They actually are very close, in numerous states, to Medicaid rates.

So from our perspective, if you really want a good indicator as to whether operators in your skilled portfolio are moving their business to sort of a new world business model, which is short stay, transitional care, post surgical, and longer stay complex medical care, like pulmonary and vent patients, you have to look at skilled mix, which is Medicare and managed care. So we will continue to report on our skilled mix. We will not report on quality mix. I don't think I've done that for about 15 years. So you're getting this from an operator's perspective.

And in certain states, Medicaid is actually a good thing, because there are a number of states, like Pennsylvania and Maryland and probably 15 or so others, that provide Medicaid rates that equal Medicare rates for high acuity patients because they want to keep them out of hospitals. So you've got vent rates in Pennsylvania and Maryland, for example, that are the same or better than Medicare fee for service rates. You've got Medicaid rates in states like Idaho that are for bariatric patients that approximate Medicare rates.

So my suggestion is that everybody looks at this a little bit differently and focuses on really more accurate metrics to focus on whether the operating companies are moving strategically the way they need to be moving as the business model continues to evolve.

Our senior housing occupancy was up 200 basis points to 90.8%. And we believe we still have room there for improvement.

And one note before I turn it over to Harold, on the Frisco Hospital, and that is that since the debtor in possession financing was put in place, this is the first time in months that they've actually had liquidity. We've seen a relatively material increase in their volume, though they still have a ways to go, obviously. But when you look at their volume the week before the [diff] was put in place and the week after, it changed almost overnight. Because now they've got the funds available to get all the supplies they need, take all the cases they want. And we continue to see that volume increase. So regardless of the outcome of this, that's a good thing.

And with that, I will turn it over to Harold, who has about an hour worth of comments, about 99 minutes on Forest Park and about 1 minute on everything else.

Thanks, Rick, and thanks, everybody, for joining the call. It won't be quite that long, but I do want to get into quite a bit of details to paint an appropriate picture here. But I'll provide an overview of the results of operations for the third quarter and our financial position as of the end of the quarter, as well as provide some additional details around Forest Park and our full-year earnings expectations.

For the three months ended September 30, 2015, we recorded revenues of $59.9 million, compared to $44 million for the same period in 2014, an increase of 36.3%. As of September 30, 2015, 32.8% of our annualized revenues are derived from our leases to Genesis, down from 37.4% a year ago. In addition, our annualized revenues from senior housing assets has increased to 37.1%, up from 31% a year ago.

FFO for the quarter was $35.6 million, and on a normalized basis was $38 million, or $0.58 per share, normalized to exclude reserves booked during the quarter for $2.3 million of Forest Park Frisco's straight line rental income that was recognized in prior periods. This normalized FFO compares to $24.6 million, or $0.51 per share for the third quarter of 2014, a per share increase of 13.7%.

AFFO, which excludes from FFO acquisition pursuit costs and certain non cash revenues and expenses, was $34.5 million, or $0.53 per share, compared to $24.6 million, or $0.51 per share, for the third quarter of 2014, a per share increase of 3.9%. For the third quarter of 2015, we reported net income attributable to common stockholders of $15.5 million, or $0.24 per diluted common share, compared to $14.6 million, or $0.31 per share in 2014.

As I will discuss further near the end of my comments, there's been quite a bit of concern over the financial struggles at the Forest Park Frisco and Forest Park Dallas hospitals. In order to provide some perspective on the impact our investments in these assets had on our financial performance for the third quarter of 2015, I would like to note here that the normalized FFO and AFFO for the quarter included no revenues from our Frisco investment and $2.2 million of interest income from the Dallas loan, representing $0.03 per share, or 5.2% of our total normalized FFO and 5.7% of our total AFFO for the quarter. Excluding the revenue that was recorded for Dallas during the quarter, our normalized FFO and AFFO would have been $0.55 and $0.50 per share, respectively, and that would represent completely eliminating the Forest Park investments from our numbers in the quarter.

Moving on to our expenses, G&A costs for the quarter totaled $4 million and included stock-based compensation expense of $0.7 million, $0.4 million of operating costs for our RIDEA joint venture investment, and acquisition pursuit costs of $0.5 million. Our ongoing corporate level cash G&A costs were $2.3 million, compared to $2.2 million in the third quarter of 2014, representing a 3.8% of revenues for the quarter, compared to 5% of revenues from the same period of 2014.

During the quarter, we recorded $2.5 million provision for doubtful accounts, including $2.4 million to fully reserve all straight line real income receivables related to the Forest Park Frisco hospital lease, discussed previously. The reserve was increased to 100% of the straight line rent receivable from Frisco, due to our current expectation that the in-place lease agreement will be substantially modified or canceled upon resolution of the bankruptcy proceedings.

Interest expense for the third quarter totaled $15.2 million, compared to $10.5 million for the same period in 2014, and included the amortization of deferred financing costs of $1.3 million in 2015 and $0.9 million in 2014. Based on debt outstanding as of September 30, 2015, our weighted average interest rate, excluding borrowings under our unsecured revolving credit facility, was 4.6%, compared to 4.7% at the end of 2014.

During the quarter, we recorded an adjustment to the fair value of contingent consideration liability associated with an acquisition resulting in a non cash other expense of $0.1 million. In addition, we recorded a $1.8 million net loss on sale of real estate associated with the disposition of three skilled nursing facilities, the loss being associated with one of the assets that was previously leased to Genesis and therefore having a carry-over basis from before the formation of Sabra. The other two asset sales resulted in a small net gain and were acquired in 2011; net proceeds from these sales totaled $14 million.

Switching to activity during the quarter and the impact on the statements of cash flows and balance sheet, our investment activity for the quarter totaled $93.8 million and included nine senior housing facilities in two separate portfolio transactions and two new preferred equity investments associated with two senior housing facility developments. We have made total investments during 2015 of $471.1 million, with an aggregate weighted average year one yield of 7.6%, including an additional $28 million of investments made subsequent to September 30 in a senior housing facility and a preferred equity investment associated with a senior housing development.

The senior housing facility acquisition is our second investment in Canada and is structured as a 100% owned RIDEA investment that will be managed by the entity we did our first Canadian acquisition with. This investment activity during and after the quarter was funded with our revolving line of credit and cash on hand, resulting in an increase in our revolving line of credit from $122 million at June 30 to $204 million at September 30.

On September 30, 2015, we completed the final tranche of HUD mortgage loan refinancings we had been working on the past several quarters, which provided $28.7 million of proceeds, having an interest rate of 3.64% and maturing in 2045. Proceeds from this financing are included in the $31.5 million of cash and cash equivalents as of the quarter end and were used to fund the $28 million of investments closed after quarter end. As of September 30, 2015, we had total liquidity of $277.4 million, consisting of currently available funds under our revolving credit facility of $246 million and available cash and cash equivalents of $31.4 million.

Cash flows from operations totaled $79.1 million for the nine months ended September 30, 2015, compared to $71.2 million in 2014, up 11%. During the quarter we had no activity in our equity ATM program and as of quarter end we had $76.5 million available for future issuance under the program. We have suspended our ATM program for the near term, given the current trading levels of our stock. We will reactivate the program at the time we believe acquisition activity and our stock price warrants considering utilization of the program again.

On November 9, we declared a $0.41 per share cash dividend to be paid to common stockholders on November 30, 2015. This represents 77% of our AFFO for the quarter.

We were in compliance with all of our debt covenants under our senior notes indentures, our secured revolving line of credit agreement and our term notes as of September 30, 2015 and continue to maintain strong credit metrics as follows, net debt to adjusted EBITDA of 5.8 times; consolidated fixed charge coverage ratio, 3.3 times; minimum interest coverage ratio, 4.3 times; total debt to asset value, 47%; and secured debt to asset value, 6%; ratio of unencumbered asset value to unsecured debt, 226%.

As stated previously, we did not access our equity ATM program during the quarter and do not anticipate accessing the equity markets for the balance of 2015 through the ATM program or otherwise. We expect to fund current pending acquisitions that total approximately $59 million and any loan or preferred equity investment fundings with current partners in the near-term with borrowings under our revolving credit facility. This is expected to increase our net debt to adjusted EBITDA to approximately 6 times by year end.

This is higher than our historical range and exceeds our long-term target of between 4.5 times and 5.5 times, with a bias to the low end of that range. While this level is not a concern for us, bringing our leverage back down toward our long-term targeted range continues to be a priority and achieving that target will depend on achieving a higher share price level or applying any proceeds from the sale of Forest Park assets that I will discuss shortly. With the current reaction in our stock price to the Forest Park investments, we believe that painting more clarity toward the final resolution of Forest Park is a key element to being able to move forward with that process of delevering.

With that, I'd like to provide an update on Forest Park investments. As of September 30, 2015, our total net investment for the assets is $284.4 million plus accrued and unpaid interest net of reserves of $4.9 million and the DIP financing balance of $3.3 million, all representing 11.9% of our total assets. I will walk through the current status for each of the three investments and comment on current estimated values and possible outcomes.

I'll start with Frisco, where we have $109 million net investment in the hospital and related parking structure plus accrued and unpaid rent net of reserves of $2.3 million. In addition, we have funded the $3.3 million debtor in possession financing as of the end of the quarter. On August 10, 2015, the memorandum of understanding dated July 21, 2015 with the Frisco tenant to restructure the terms of the lease was canceled due to their failure to obtain additional financing as required under the MOU and their failure to comply with other terms of the MOU.

On September 25, the Frisco tenant filed chapter 11 bankruptcy. As part of the bankruptcy, we agreed to provide up to $18.5 million in debtor in possession financing to the Frisco tenant, subject to terms of a senior secured super priority debtor in possession loan and security agreement. The DIP loan provides, among other conditions, that monthly rents due under our lease totaling $0.9 million per month will be paid in full starting October 1, 2015 until the sale process is concluded or the bankruptcy court orders otherwise.

We did not record any revenues for Frisco during the three months ended September 30, 2015 and increased our reserve associated with accumulated straight line rental income receivable balance by $2.3 million to fully reserve all straight line rents associated with Frisco, as I mentioned above.

The tenant has engaged an investment bank to market the assets and that marketing process has begun. The bankruptcy proceedings are progressing as expected and we will continue to fund the DIP financing and keep the hospital operating as long as we believe it is prudent to do so to maximize the value of the asset. As of today, our total funded amount under the DIP loan is $8.2 million, and the hospital continues to increase its case volume as we move toward the end of the year.

Ultimately, we expect to either, enter into a new lease agreement with a new operator or sell our interest in Frisco. Our course of action will be based on what we believe to be the best resolution, taking into account the impact on the realization of the DIP loan and prior rents due and the value of a potential lease arrangement as compared to selling the Frisco asset. Process and outcome is subject to bankruptcy court approval. In addition, we have individual personal guarantees from the various physician owners of the Frisco tenant totaling $21.3 million, which provides additional sources for realizing our investment.

The ultimate realized value of this investment is very difficult to estimate until we get further into the sales process. However, we believe certain of our options could provide an outcome that would result in no loss on our investment amounts, including the option if we were successful in bringing in a new operator under a revised lease agreement at what we believe to be market terms. In a downside scenario, where we sell our investment completely, we believe it is unlikely that we would incur a loss on any such transaction in excess of $30 million, and that's assuming we fund the entire $18.5 million DIP financing, which may or may not occur.

Switching over to Dallas, our investment in Dallas is a $110 million mortgage loan, plus accrued and unpaid interest of $2.3 million secured by the hospital and the related parking structure. The borrower did not make its monthly payment of interest due October 1, 2015 and was served with a notice of default. We will exercise all remedies available to us under the Dallas mortgage loan and have served the Dallas borrower with a notice of foreclosure, with the foreclosure sale scheduled for December 1, 2015, barring any action by the borrower to judicially stop the sale.

This foreclosure sale could result in the pay-off of our loan including all interest, penalties and late fees or, at our option, we could credit the D asset and acquire it ourselves at an amount just above the highest bidder, whereby we would then have an option of bringing in a new tenant or selling the asset in a fully marketed transaction.

The collateral for this investment was recently appraised at $115 million. We also hold an option to purchase these assets in a value to be determined based on rents from the lease between our borrower and the hospital operating company with a floor of $115 million. Given the small spread between the estimated value and the real estate and our invested amount, we have not assumed any value of the purchase option and no value is included in our financial statements.

If we acquire the assets through foreclosure or otherwise and cancel the current lease, we will consider both selling the asset or finding a high credit quality tenant to lease the asset from us under a new lease agreement. Based on the appraisal, we currently don't expect to incur a loss on the resolution of the default on this loan, including collecting the $2.3 million of past due interest. The foreclosure process will progress over the coming weeks and we will gain more clarity as to the ultimate course of action and outcome in the next several weeks.

Switching now to Forest Park Fort Worth, our investment there is a $61 million construction loan with unpaid interest of $0.4 million secured by a recently built campus which includes a hospital, a 79,000 square foot MOB, and the related parking structure. The borrower did not make its monthly payment of interest due October 1, 2015 and was served with a notice of default. We intend to exercise all remedies available to us under the Fort Worth construction loan and have served the Fort Worth borrower with a notice of foreclosure, with the foreclosure sale scheduled also for December 1, 2015, barring any action by the borrower to judicially stop the sale.

This foreclosure sale could result in the pay-off of our loan including all interest penalties and late fees due or, at our option, we could credit bid the asset and acquire it ourselves at an amount just above the highest bidder, whereby we would then have the option to bring in a new tenant or sell the asset in a fully marketed transaction.

There remains $6 million of availability under the construction loan that we have suspended funding pending the outcome of the foreclosure process. The majority of this available funding would be used to build out the tenant improvements in the MOB.

A recent appraisal estimated the value of this campus securing our loan at $122 million, indicating excess collateral value of approximately $61 million. We understand there have been offers for the MOB asset which supports the value assumed in the appraisal and indicate an ability to quickly sell the MOB if we were to acquire the assets through foreclosure.

In addition, we hold an option to purchase the hospital and parking structure assets at a value to be determined based on rents from the lease between our borrower and the hospital operating company. We estimate the value of this option to be up to $20 million, depending on the ultimate value of the real estate. We have not recorded any separate value on our financial statements associated with this purchase option; and therefore, any value realized on the option would result in a gain on our financial statements. If we obtain ownership of the assets due to foreclosure process, we believe there's a significant up side to be realized from this investment.

Taking into consideration the current situation of each of these assets and the progress we are making in resolving the issues, we believe we will have additional clarity on the outcome for each asset by year end and expect to have ultimate resolution around the end of the first quarter of 2016. Because of the range of outcomes, it is hard to estimate a specific dollar impact on 2016 FFO and AFFO.

Based on current information, we believe that under any of the expected potential outcomes, the impact will result in some combination of reduced interest and rent from the current contractual levels in each agreement. We anticipate that any such reduction would be partially offset by a redeployment of proceeds from asset sales or by rents under any revised leases for the investments we may retain.

We expect that the full-year 2015 normalized FFO and normalized AFFO will include between $0.18 and $0.25 per share from the three Forest Park investments, depending on the potential need for additional reserves. This includes $0.06 from the Fort Worth loan which, as mentioned before, we believe will be resolved with no negative financial impact to Sabra.

Based on these potential outcomes I discussed, we believe 2016 normalized FFO and AFFO from revenues generated by these assets or from utilizing the proceeds from their sale to pay down debt and reduce interest expense will range from $0.08 to $0.33 per share. This indicates a range from a reduction in normalized FFO and AFFO of $0.17 per share to an increase of $0.15 per share in 2016 compared to 2015 for these specific assets.

We should now believe any of the potential outcomes will result in a significant impact on the financial health of Sabra. In addition, proceeds from any sales with a pay-off of any of our loan investments would likely be used to pay down the revolver and bring leverage down to as low as 5.5 times without any other deleveraging activities. Taking all this into consideration, along with the success we had in 2015 making accretive investments, we believe we will achieve normalized FFO and AFFO per share growth in 2016, even assuming we make no additional investments in 2016.

I'll close up finally with a couple of comments related to our updated guidance for 2015. Because of the circumstances surrounding the Forest Park investments, we have revised our normalized FFO per share guidance range from between $2.21 to $2.24 to between $2.13 and $2.23, and our normalized AFFO per share guidance range from between $2.12 to $2.15, to $2.01 to $2.12. This increased range in our guidance reflects the range of potential outcomes surrounding the bankruptcy proceedings in Frisco and the foreclosure proceedings in Dallas and Fort Worth.

The revised guidance assumes we record no interest income on the Dallas loan during the fourth quarter and assumes we stop accruing interest on the Fort Worth loan effective November of 2015, when we commenced foreclosure proceedings. In addition, the low end of the range assumes the $4.5 million of accrued and unpaid rent from Frisco and interest from Dallas as deemed unlikely to be collected and therefore will be fully reserved.

The total impact of these Forest Park assumptions reduced the low end of our guidance numbers for both normalized FFO and AFFO by $0.13, the difference between the low end guidance reduction of $0.08 and this $0.13 being the positive results we have had in excess of our prior guidance estimates.

Finally, it should be noted that if we put the Fort Worth and Dallas loans on non-accrual basis, as reflected in the revised guidance, it is not an indication that we believe that unrecorded interest will not be recovered through the foreclosure process or otherwise. Rather, it is a reflection of the proper accounting treatment under our accounting policies. In that circumstances, we expect to realize those unrecorded amounts upon disposition of the assets.

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

Thanks, Harold. Before I turn it to Q&A, just one comment on the Canadian facility we acquired.

Going back to 2012, when RIDEA first became popular, we have consistently said that we are not interested in pursuing RIDEA as a growth strategy, that we will only do it in certain circumstances that make sense for us and an operating partner that we want to grow with. And that was the case here. It's immaterial. It shouldn't be a signal to anybody that we're going to pursue these things on a go forward basis. These are really good partners. We do want to grow with them.

And I think some of you may be aware, but Daybridge, this is the same operating group that acquired the Amica portfolio a couple of months ago in Canada. So very strong, highly respected operating company in Canada. So again, it's one off, it's immaterial, and it doesn't -- shouldn't be viewed as any change in our view of RIDEA or in our strategy going forward.

And with that, let's go to Q&A.

Thank you.

(Operator instructions)

Our first question will come from Juan Sanabria of Bank of America Merrill Lynch.

Hello, guys, this is actually Josh Federline with Juan. For Dallas and Fort Worth, have any bidders in Frisco expressed any interest in those assets?

Yes, that's a good question. We actually -- the books have gone out. And as it pertains to Frisco, we've got some strong interest and some positive conversations. It's too early to speculate on valuation at this point, but the responses have been relatively quick.

And yes, we've specifically have gotten interest on Dallas, as well. And our expectation is that the sales process of Frisco may lead to resolutions to the other hospitals in the portfolio, as well, including South Lake, which is owned by another REIT.

But that said, the direction the broker has is regardless of how much interest there is in any other hospital, that they don't take their eyes off the ball in Frisco. Frisco has to be closed. So in other words, even if there is interest in our two other assets and it's tied to Frisco, we're not going to want to hold up a resolution on Frisco pending other potential outcomes.

We want to get Frisco closed. And obviously, we're happy to pursue the others, as well. And they may happen simultaneously, but we're not going to take our focus off Frisco, because that really is the biggest issue.

Okay. Great.

Then for kind of a slightly different topic, on Genesis. What's the expectation for how coverage leverage will change as they buy back some leases from you?

Buying the leases from us is immaterial. But they can be buying leases from their other REIT landlords, as well. So when you act -- because we have a corporate guarantee -- when you aggregate all the transactions that they're going to be involved with, with all the REITs, that will have a positive impact on coverage.

I don't know exactly where it's going to go, but they reported actually a really nice quarter. And I believe they were the only post-acute company of any type for the third quarter that reported a core that met expectations. So they're doing better, even in the absence of those transactions, and those transactions will help. And I couldn't give you a specific number as to how much coverage will improve, just that it should improve.

Okay. I appreciate that. I think you actually answered most of my questions from Forest Park in the prepared commentary, so I'll yield the floor now. Thank you.

Thanks, Josh.

(Operator Instructions)

We'll go next to Tayo Okusanya with Jefferies.

Hello, guys. This is actually George on for Tayo.

And sorry if I missed this earlier. But just on the foreclosure of the Forest Park assets, I don't know if you commented on what's the likelihood that the buyer -- sorry, the current owner actually tries to prevent the foreclosure sale from happening?

I did make a brief comment, but I'll expand on it a little bit. The only way they could stop the foreclosure is through the judicial process, because the way our loan agreements were drafted, when we provided them with notice of default, they -- it's in the loan agreements - they waived their rights to cure their, so basically the loan was accelerated immediately.

So the acceleration of the loan triggers our ability to take it to sale. So in other words, they can't just come and pay our interest and get current on interest and stop the foreclosure. It will still continue down that path.

So they're really thinking it through. The most likely way they could try to slow it down would be to file bankruptcy at the prop co entity. But that could provide challenges for them if -- and this is what we believe is the case -- if we're the only creditor in that entity and the only real assets in the entity are our hospital. And I've been told by our attorneys that the judge would likely not allow that to slow down the process dramatically, but it could slow it down a month or two.

So we'll see how that plays out. And frankly, given the value in Fort Worth, either they're going to want to come to us, I believe, and try to negotiate something or do whatever they can to stop it because of that, obviously, significant value that's in those assets. So that will play itself out over the next couple of weeks.

I want to accentuate one point Harold made, so that everybody is clear on it, we are the only creditors here on both of these assets. So we're really in a fantastic position, from that perspective.

That's a good point, Rick. These are in special purpose entities. They are not tied up with the operations of the hospital.

Those are under lease agreements with the hospital. So it purely is the real estate assets and our loan, and that's pretty much what's in those entities.

Okay. So if we're trying to ballpark what's an estimated time frame of when final resolution happens on these assets, what's our ballpark of when these could actually get final resolution?

I think on Frisco, it's probably not unrealistic to think that we wouldn't have some are under contract, whether it's an op co or a complete sale, by the end of the year. But then it's going to take another couple of months still to close. So I think sometime in the latter part of first quarter for Frisco and maybe that long for the other two, but maybe a lot sooner for the other two.

As Harold outlined, there are a number of potential outcomes on Dallas and Fort Worth. And because we've got real value there that we could recognize, we want to be careful that we do everything we can to capture that value and not move too precipitously.

Okay. And then sorry I missed this earlier, but given where the stock price is now, it's obviously sold off significantly, and would you guys consider doing a share buyback?

Yes, I did mention that earlier. We're not going to use liquidity that we have available. We're not going to use up all of our liquidity right now to do it, because it would take a significant amount of liquidity to have any sort of impact.

But as I noted earlier, once we resolve the Forest Park issue, then assuming we're going to have proceeds from between one to three of those assets, we will use those proceeds to pay down debt. And we will seriously consider using those proceeds to buy back stock, as well. Because certainly, we agree that it's really grossly over sold. When you look at the actual impact on the Company, there's no relationship between the impact on the Company and stock being off 35%.

Okay. And then I guess one last one for me right now. In terms of the coverage at Holiday, can you comment on how that portfolio is performing?

Yes, it's actually performing really well. You've got coverage ticked down a little bit, but we're not uncomfortable with it.

In terms of where they are with their lenders and their debt covenants, they're actually ahead of schedule there. We've talked with the CEO about it. There was some rumors otherwise about five weeks ago or so, but they're actually doing real well, as they are ahead of their projections as it pertains to their lender. So they're good right now.

Okay. Thanks. I'll yield the floor.

(Operator Instructions)

We'll go next to Don Altscher of FBR.

Good afternoon. This is actually Cole Allen on for Dan. Just a couple quick ones.

You guys have done a really great job of giving a lot of color on the Forest Park assets, so I'll shift to another aspect of the Company. I noticed G&A was down quarter-over-quarter. If you could just talk to about that, what the run rate maybe for that is going forward?

Well, it is down quarter-over-quarter. A big part of that was the outsized transaction costs we had in 2014 on the Holiday acquisition. So our transaction costs were down to $0.5 million for the quarter, which really is kind of closer to our typical run rates.

So we had about $2.5 million of cash G&A costs this quarter, which is -- and it was $2.4 million last year. So I think if you take somewhere in that range for our corporate G&A costs on a cash basis, and then our transaction costs typically are going to run somewhere around $0.5 million. And then our stock compensation, frankly, can vary dramatically depending on the stock price. But that's typically -- it was extremely low this quarter compared to last quarter's, as well, because of the drop in the stock price.

And then the RIDEA portfolio runs about $0.5 million a quarter. So I think the bogey is what does our stock comp to, and that's kind of hard to estimate, but everything else, where we were this quarter kind of feels like an appropriate run rate, given a normal level of acquisition volume.

Maybe about $4 million a quarter, round about.

Right.

All right. That sounds good. That makes a lot of sense.

Moving forward, if these loans at the Forest Park get worked out, you'll have, either buy the properties or a lot of cash coming back. Does this turn you guys on more to the loan portfolios, doing more loans like this or doing less loans like this? What is the goal going forward for your loan segment on your portfolio?

No, it doesn't incentivize us to do more loans. Because the purpose of the loans that we've made, whether it's been here or development stuff or whatever, has been the path to ownership.

We're not a bank. We're not going to do loans just to do loans.

To the extent that we do well with these two, then we've had loans in place for a few years where we've gotten 8% interest and that's great. But that's not really what the point of the loans are. The point of the loans are to give us a path to ownership. So you won't see us using our balance sheet to do, basically be a bank for guys.

Perfect. Perfect. Thank you guys so much.

We'll take a follow-up question from Tayo Okusanya of Jefferies.

This is George again. Just one thing, considering the experience of the Forest Park assets, does this change your view on the hospital sector in general?

I've always said a couple things that I still believe. One, I think the hospital sector generally is a winner in the Affordable Care Act. I think part of the problem here, even though we've said all along that part of the problem, and a big part of the problem with Forest Park, was the operating company just really failed to execute on the transition to the in-network model.

One of the things that I don't think any of us has actually gone back to look at research from the think tanks and the industry to project how sectors were going to be impacted by ACA. But ACA clearly hurts the physician hospital model, because ACA [secluded] the physician hospitals from participating in Medicare and Medicaid for any hospitals that opened up once the legislation was signed post-2009, I believe it was.

And while the physicians were happy not to take Medicare and Medicaid because the reimbursement really isn't very good. If you look at Forest Park, if they had had the volume that would have been available for Medicare and Medicaid while they transitioned, that would have given them a lot more cushion to transition.

So that's something that is one of those things that you don't pick up in any research or diligence. And we outsourced our diligence to a third party, beyond our normal diligence on this deal, to assess the model, the market rates, everything that was going on. So it's much more extensive than anything we've ever done. But in hindsight, that clearly was a factor.

So all that said, if we were to announce a hospital deal tomorrow, I think people would probably take me out and shoot me. So I think we'll be focused on senior housing and skilled nursing, and that's going to be it on a go forward basis.

I would point out, though, that our Texas Regional Medical Center, once we switched out to a good operator, and the good operator being Tenant Hospital Corporation, that hospital is doing great. And the shame of all this is that if we wind up getting out completely, which is still probably the most likely outcome, we're going to sit by the sidelines and watch a good operator realize everything we thought that these assets could do. But it is what it is.

So senior housing and skilled nursing, that's what it is going forward.

Thanks, Rick. Appreciate the color.

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

Hello, guys. Thanks for taking the follow-up. A question on Forest Park.

What do you guys put a value on as far as the price per bed at your Frisco or Dallas or Fort Worth facility? Looking at comps across the industry, it seems like perhaps a little over $800,000 is what most people have paid in the past or price per bed. Just trying to --.

We actually haven't actually looked at price per bed at all -- and I feel the same way about price per bed when you look at senior housing and skilled nursing. And this is from a guy who's been doing deals for 30 years in the sector -- price per bed has never been that meaningful a metric to me, because it's so market specific and the composition of the product affects it so dramatically.

I've bought businesses that have dramatic differences in price per bed because of the markets they're in, but the margins are the same, the yields are the same. So we really haven't looked at it.

And these really are very unique assets, which the problems that surround the portfolio, putting that aside, they're very unique assets in terms of comparing them to comps, because when you just look at the real estate itself, this is new real estate, these are LEED-certified facilities. These are arguably the nicest acute hospital real estate assets in the country.

You may find some that are close to us, but you aren't going to find any that are nicer. So that makes it a little bit harder to judge, as well.

Got it. Thanks. Appreciate it, Rick.

We have no other questions at this time. I'd like to turn the conference back to our presenters for any additional or closing remarks.

I appreciate everybody's time today. I know it's a busy day for everybody. Ventas has their Investor Day.

Normally, we'd schedule our calls earlier than this, but because of the events that were unfolding with Forest Park booked, we wanted to make sure we were where we thought we would be with the bankruptcy court hearings on Frisco.

And the news report that came out on Dallas about a week and a half ago, even though that was unsubstantiated and kind of a shame that it actually got reported on because things were up in the air, we needed to wait and make some decisions on Dallas and Fort Worth, as well, so that we could be as specific with you guys as possible. And really, that extra time allowed us to provide as much clarity as we've been able to provide on this call and to update guidance and give some outlook on 2016, as well.

So appreciate everybody's attention this morning. And Harold and I, as always, are available for follow-up calls. And we'll look forward to seeing a number of you at NAREIT next week. Take care.

That does conclude today's conference. Thank you all for your participation.