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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day and thank you for standing by. Welcome to the Care Trust REIT's Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. [ Operator Instructions]. I would like to hand the conference over to your speaker today, Lauren Beale CareTrust, Senior Vice President and Controller. Thank you. Please go ahead.
Thank you and welcome to CareTrust REIT third 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, financing, 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 ended business generally are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied here in. Listeners should not place undue reliance on forward-looking statements and are encouraged to review CareTrust 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 certain 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. Earlier this morning, CareTrust filed its Form 10-Q, and 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 Operating 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 Greg Stapley, CareTrust REIT Chairman and CEO. Greg.
Thanks, Lauren. And good morning, everyone. Last quarter, we were concerned about the near-term effects of the rising wave of Delta variant infections and the possibility of a stall in the census recovery that was just getting underway. Fortunately, those concerns were short-lived and we can report the occupancy began to steadily continue in most markets, with a few facilities actually having fully recovered in census. But we're still far from pre -pandemic occupancy overall. The continuing trajectory of the census recovery is consistent with our expectations so far. These gains on the census and revenue front are welcome news, but only half of the equation. The shortage of qualified workers and the sharp rising labor costs is a growing challenge, especially as patient and resident census rises.
Several of our tenants report turning some patients away simply because they lack the necessary staff to care for more. In spite of the challenges still facing both the skilled nursing and seniors housing industries, pricing for assets and skilled assets in particular has been unusually strong. As Mark will explain more fully in a moment, our disciplined underwriting approach is dictating that we forego some opportunities while we wait for pricing to rationalize. When that happens and it always does, eventually, we expect to benefit from heavy lots of dry powder on hand. We believe that the value of that discipline is more evident than ever in our portfolio today. With the exception of one small short-term deferral, our tenants have been able to pay their rents right along this year, despite the effects of the pandemic. While the industry is not yet out of the woods, I would be remiss if I did not know for the record that we do see some encouraging indicators of strength emerging in our portfolio independent of the provider relief. Dave will talk more about that in just a moment.
That said, we're very pleased with the quarter. We posted double-digit normalized FFO growth of 13% over the same quarter last year, and normalized FAD growth of 15.1%. We collected 96.2% of contract rents in Q3 and 96.1% thus far for October, with the shortage being the one deferral that we disclosed last quarter, which we still expect to collect by December 31 to bring us to a 100% of rents due thus far this year. We grew the portfolio with $32.5 million in new investments in the quarter, bringing our total capital deployment this year to over $184 and if things come together as planned, we're maybe not quite done. We paid down a revolver following the acquisition and held leverage steady at a comfortable net debt to EBITDA of 3.7 times at quarter-end.
And as Bill will discuss in a moment, we are raising our 2021 guidance today. To cap it off, we got together with most of our operators last month at our annual Operator Conference, which was held in person here in Laguna Beach. I think it left everyone who came really invigorated and better prepared to tackle whatever comes next. We are constructive on the long-term future of our portfolio, and CareTrust remains well-positioned to continue pursuing our mission of pairing great operators with meaningful opportunities to transform individual opportunities for the better. With that, I will turn it over to Dave. Dave?
Thanks Craig. And good morning, everybody. Let me begin this quarter by thanking all of our skilled nursing operators for joining us at our recent annual Operator conference at Greg just mentioned, speaking for all of us secure trust, bumping fists, hearing real-time updates from Mark Parkinson of the American Healthcare Association, and sharing best practices for a few days was incredibly energizing and informative. We're so proud of our association with a group of operators that we consider to be among the best in the country. In a conference, we spent a lot of time sharing what's working best to address the current COVID and labor challenges. Virtually all of our operators agree that their occupancy recovery has slowed because of tight labor.
The flipside of that is that our operators is for us and our operators is that the question at the beginning of the year about sniff demand has been answered. Demand is high, and the recovery would be much further along if not for the tight labor market. Nevertheless, we're seeing some operators and some facilities hitting either record occupancy numbers or close to them. We continue to be impressed by those who are managing this latest challenge well. Let me share with you just a few examples of the progress we're seeing and hearing in the portfolio, what Greg just referred to as some encouraging indicators of strength.
Ensign, our largest tenant reported 4 sequential quarters of occupancy growth and enjoys lease coverage north of 3 times. We cannot overstate how exceptionally well they've performed through this pandemic. Priority management group has grown its occupancy 6.7 percentage points since its low in December. Aduro has improved its coverage during COVID excluding all provider relief funds. Trillium has slashed agency costs by over $400 thousand a month since the summer, and staff turnover from 60% down to 20%. Trio Healthcare has vaccinated 100% of its employees and is nearing record high occupancy and skilled mix. Covenant Care slashed agency usage from a February high of around a million dollars a month, to under a $100 a month right now.
And momentum created a special secure unit to accept in care for the large county hospital's difficult-to-place patients, growing occupancy and earnings and valuable goodwill with their referral sources along the way. Occupancy is 13.5 points higher than last summer. I could go on. These are the types of successes that we don't get to read about in the news but are happening throughout the portfolio. Again, let me say thank you to all of our operators and their teams for the extremely heavy lifting they've been doing these last 21 months. These positives don't mean that many of them won't need or benefit from the next round of provider relief funding. We believe all of our operators have applied for Phase 4 except for Ensign and Pennant does not needed or accepted relief funds from the beginning.
We'll find out how much the Phase 4 funds extend the runway for each operator as funding amounts are determined and checks are received in late November and December. But it's great news for our operators, skilled and assisted-living alike who have needed those funds so far. Occupancy growth will also be critical. In Q3, our skilled nursing operators reported continued occupancy recovery from the prior quarter resulting in a projected return to pre -pandemic levels sometime next summer. While just under 20% of our skilled nursing facilities are still operating below 80% of their pre -pandemic occupancy, the majority almost 60% are back above 90% of pre -pandemic occupancy.
And on the skilled mix front, the Delta surge appears to have actually given a balance to some of our operators in the regions most affected. Overall portfolio skilled mix remains about 300 bips higher than the pre -pandemic levels, with the higher reimbursement rates that offset some of the overall occupancy loss. Of course, this projection assumes that qualified labor is available and that no new headwinds, such as a new variant or wave of infections, intervenes. For seniors housing occupancy, overall occupancy in our relatively small AL portfolio remains unchanged from Q2 in spite of the fact that admissions are significantly up. The treadmill here with AL occupancy is really a result of one of our operators electing to discharge a host of residents for various reasons. Now that that's largely done, we expect to see our seniors housing occupancy begin to recover more quickly from here on.
Turning now to Lease Coverage. With few exceptions, overall coverage remains very healthy, both with and without provider relief funds. A couple of our operators have really needed those funds to extend their ability to survive and ultimately recover from the impacts of COVID. Our top 10 operators coverage, which accounts for over 80% of revenue, continues to be strong at 2.2 times for property level EBITDAR and 2.76 times of EBITDARM. Our relatively transparent coverage disclosure will prompt questions around individual operators, so let me go ahead and address 3 of them right here. First, last quarter, we talked about Noble senior services, one of our senior housing operators and their request for some flexibility and paying a few months of rent. You will have noticed both the investment total and rent numbers increased for Noble since last quarter.
That is a result of transitioning the second of two premier facilities to Noble in Wisconsin around this time last year, we began talking to Premier about transitioning there 2 Wisconsin facilities, which were outliers for Premier. Noble's top-performing facility was nearby. And at the time, again last year, Noble as a whole was performing a little bit ahead of their expectations in spite of COVID. We saw this transition as a win-win for both operators. The two buildings transitioned this year, the first in March and the second in July, as regulatory approvals were required and took some time. We're happy to report that Noble's admission rates have really picked up lately. But as I noted a moment ago, their discharge rate has also been unusually high, primarily due to an internal review that led to discharging a number of residents that were not best served in their settings.
These discharges represented 12.5 percentage points of their overall occupancy. We think that's essentially done now, but, of course, it's left a significant hole in their near-term revenues. They hadn't received provider relief funds previously, but they have applied for and expect Phase 4 assistance. So in September, we agreed to defer approximately 90 days of rent under an arrangement for them to pay it all back, plus the rest of their 2021 rent by the end of this month. Their obligations under the agreement will be funded from their proceeds of our pending acquisition of there to memory care facilities in New Jersey. That arrangement which is only dependent now on the imminent receipt of regulatory approvals appears to be on track. After that, there's still other ways to go to get to positive lease coverage, but the Phase four provider relief funds and other government assistance will be immensely helpful in the meantime.
And perhaps more importantly for the long-term, as I noted, we believe that the discharges are over now, and with the increasing pace of admissions, their occupancy numbers should finally get some traction. Second, Covenant Care is a SNF operator who's month-over-month occupancy and coverage is actually trending really positively in recent months. We're in the minority piece -- we're a minority piece of their overall portfolio and the corporate credit is very good as their other facilities are reportedly performing well. We're optimistic that their recovery trend will continue. Finally, let me talk about Bayshire Senior communities. They're seniors housing and skilled nursing operator that took over 2 of the 4 beautiful large campuses in California we acquired early in the year, plus another in El Centro, California.
The Bayshire team has a positive momentum in those 3 assets and we expect them to near stabilization soon. We remain very constructive on both the near and especially the long-term prospects for our skilled nursing and seniors housing portfolio. The combination of steadily recovering census and continuing relief funding, especially for the AL operators, bodes well for them even though it's no guarantee of success for the most challenged. We will continue to monitor and report. With that, I will pass the call over to Mark to talk about investments. Mark?
Thanks, Dave. And good morning. In Q3, we executed on a $32.5 million acquisition of 2 skilled nursing facilities in Austin, Texas that we can currently lease to operating affiliates of the Ensign Group. The 2 assets are well located and practically brand new and it will be exciting to watch Ensign ramp them up over the coming months. The acquisition brought our total investments in 2021 to $ 184.7 billion. From a market perspective on the skilled side, we continue to see more off deals with mostly non-strategic and struggling facilities. As you would guess, deal flow for stabilized assets has been very light. And stabilized assets are understandably harder to come by for the moment. And with respect to value-add assets, the ongoing government support and the SNF industry is kept some owners a float.
Owners that we would have normally seen selling their assets as property level economics term negative while they deal with challenges of reduced occupancy and higher labor costs. With stronger-than-usual demand for fewer-than-usual assets on the market, pricing for skilled nursing has surprisingly spiked, just when you thought there might be [Indiscernible]. In fact, on a price-per-bed basis, SNFs have been trading at an all-time top -- all-time highs, including many assets with little to no cash flow. In other words, yes, Virginia, there is a Santa Claus for SNF sellers this year. Seniors housing is its own story. There's a large range of assets on the market from Class A to Class S, and everything in between. A lot of those assets appear to be mispriced as well, although we have seen a few more reasonable numbers for the mid-market product that we typically pursue.
We are looking hard at some opportunities where we think we can get risk-adjusted returns you're accustomed to seeing from us. I will remind everyone that we've consistently reassured the market that at any point in the real estate cycle where pricing becomes unsustainable, we will stick to our underwriting discipline to ensure that we keep -- that we keep our portfolio healthy and well-positioned for the long-term coverage growth. So we continue to tap our extensive industry contacts for our properly priced opportunities, which is why we've been able to close a $184 million in largely off-market deals year-to-date. And is Greg mentioned, there may be more before the year is done. But we will not chase mis -priced assets or place our tenants in untenable situations where their rents and the annual escalators will [Indiscernible] lease coverage to a point that it's unsustainable.
Looking to 2022 and 2023, the investment sales community continues to express an expectation that a wave of deals will be coming to market based on the record number of broker opinion of value or BOV s they're being asked to issue by prospective sellers. We can't predict exactly when, but we expect that pricing will eventually settle as the pandemic subsides, the supply chain issues are resolved, interest rates rise, and credit standards inevitably tighten. In that environment, we'll be ready to use our consistently conservative balance sheet to grow more aggressively with quality assets and good markets and above all, with customer class operators. In the meantime, we continue to eye every deal out there for opportunity that might fit us and our operator partners, and we believe we'll get our fair share of them. Our current pipes system's $125 million to $150 million range.
The pipe is made up of singles and doubles with a couple of solid smaller portfolio opportunities that we believe are a good fit for our operators. The pipe is split roughly evenly between SNFs and senior housing facilities. 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 13% over the prior-year quarter to $36.7 million, in normalized FAD grew by 15.1% to $39 million. On a per-share basis, normalized FFO grew by 11.8% over the prior-year quarter to $0.38 per share and normalized FAD grew by 11.1% to $0.40 per share. Moving onto guidance, we plan on issuing guidance for 2022 when we released 2021 year-end results. For the remainder of 2021, we are raising our previously released guidance by 1 penny on the low end of the range to normalized FFO per share of a $1.49 to a $1.50 and normalized FAD per share of a $1.58 to a $1.59. This guidance includes all investments and dispositions made to-date, a share count of 96.5 million shares, and relies on the following assumptions: 1.
No additional investments, dispositions, or rent deferrals, cuts to reserves, nor any further debt or equity issuances this year. 2. Inflation-based rent escalations, which account for almost all of our escalators at an average of 2%. Our total rental revenues for the year, again, including only acquisitions made to-date are projected at approximately $186 million, which Includes less than $40,000 of straight-line rent. 3. Interest income of approximately $2 million. 4. Interest expense of approximately $23.8 million. In our calculations, we have assumed the LIBOR rate of 15 bips and a grid-based margin rate of 125 bips on the revolver, and 150 bips on the unsecured term loan. Interest expense also includes roughly $2 million of amortization of deferred financing fees. Not included in interest expense was a $10.8 million charge that we recorded in Q3 related to our Q2 bond refinancing.
The $10.8 million was made up of $7.9 million of redemption fees and a $2.9 million write-off of deferred financing fees. And 5, we're projecting G&A of approximately $19.6 million to $21.5 million. This range is consistent with what we discussed last quarter. Our G&A projection also includes roughly $7 million of amortization of stock comp. Our liquidity remains extremely strong with approximately $23 million in cash, $520 million available under our revolver. and we produce roughly $12 million in cash per quarter after paying the dividend. Leverage also continues to be strong at a net debt to normalized EBITDA ratio of 3.7 times today. Our net debt to enterprise value was 25.1% as of quarter-end and we achieved a fixed charge coverage ratio of 8.5 times.
Lastly, cash collections for the quarter came in at 96.2% of contractual rent and in October came in at 96.1%. I would expect November to be much like October based on the color given today on this call. As Greg mentioned, we do, however, expect to collect a shortfall before year-end. And with that, I'll turn it back to Greg.
Thanks, Bill. Everyone we hope this discussion has been helpful for you. We certainly appreciate your continued interest and support. And with that, we're happy to open it up for questions, Citi.
Yes sir, and ladies and gentlemen, if you would like to ask questions, please press [Operator Instructions] on your telephone. Again, if you would like to ask a question, press [Operator Instructions] on your telephone, or pause for just a moment to compile the Q&A [Indiscernible]. For our first question we have Juan Sanabria from BMO Capital Markets. Juan your line is open.
Thanks for the time. Just hoping to spend a little bit more time on Noble. The two assets that you guys are moving just curious on if those were EBITDA negative and or coverage enhancing for Noble. And there is the rent that's staying with those assets staying in place with Noble or just curious on how we should think about that and/or the risks for rent on those 2 assets being lower than what was subscribed to it under the prior lease. Just a little bit more color on that piece would be helpful.
The buildings were not [Indiscernible] so they're under 1 times coverage sort of chronic under-performers for our Premier. And one of the things we really liked about putting them into Noble's hands last year when we were looking at it was that Noble's, say, their top performing facility is in Wisconsin nearby to these 2 premier assets, their strongest local leader and most consistent operator. So this created the opportunity for them to build on that strength. form a nice little cluster. And we felt like it gave those two buildings a better chance to get back to stabilization than they were, and Premier agreed. The rent came over at the same amount to Noble, but there's some work to do there to get those to be performing. Since the transition happened, they have under Noble's Care improved slightly on a coverage perspective, but they still have some ways to go to get north of 1-times coverage.
And just to clarify, there's not assets being taken out from Noble to be given to a new operator? I was just reading over the 10-K. I was a little confused about maybe another two assets or are those the same two assets?
There's 2 groups of 2 assets so I understand why there's some confusion. The reason why I talked about these 2 Wisconsin buildings that were added to Noble is to address the question of why Noble has actually increased in investment size and rent in terms of our relationship with them. It's because of that, because they took over those 2 assets from Premier that we started negotiating last year and then has finally took place this year. The other 2 assets that we've been talking about for Noble, one is a building in Fort Myers, Florida, which has been offline since they stepped into the lease back in 2019 for major renovations and getting that back ready to go. That's still a ways out from being ready and licensed. The other one is a building in Baltimore, Maryland that's actually being actively marketed right now for sale. So those are probably the other two buildings that you're thinking about from the queue.
So once those buildings are carved out, is that coverage enhancing or do you have a sense of what the pro forma coverage would be just to give us a pro forma type number?
I don't have a pro forma number at my fingertips, but absolutely when Fort Myers is removed and Baltimore is removed, those will be significantly coverage improving for Noble
Okay. And then just switching gears to the pipeline. What gives you the confidence, I guess that the prices will stay where they are, cap rates lower, price per units high, and that we've seen significant cap rate compression in other asset classes with low rates and who's to know where interest rate goes? Just curious if -- or what you see changing or what you think you're not willing to match versus some of the other buyers out there in terms of underwriting, is it just the speed of the recovery or is it the underlying value of the assets that may or may not change? Just curious if you could provide a little bit more color on that.
I think -- this is Mark. I think just talking to the investment sales community and understanding that eventually the SPIG it's going to get turned off so I think we feel pricing, at some point, will rationalize. And so I think over the next probably 12 months we'll start to see more and more opportunities. Am I answering your question? Is your question, why we think pricing will go south?
Why will it normalize and/or where you're different I guess in the underwriting versus the people who are winning the bids? Is it just they're more aggressive on the timeline over recovery or just have a -- or placing a greater value on the underlying real estate and ops?
I think the folks that are winning bids, I think are making some assumptions on certain states. Specifically states that have CMI based Medicaid rates. And are assuming pretty aggressive increases in Medicaid rates. And that's not something that we're -- necessarily willing to underwrite going into door. What operators can do day one, whether there's certain insurance costs or kind of very easy rolling through the Datawatch. I just want to take those into consideration, but getting on an operator. To increase our CMI, which then increases that Medicaid rate, which would increase coverage. There are some new launches that don't, won't give us a lot of comfort in their operators that are willing to take that risk. And it's also those assumptions.
Thank you.
And for our next question, we have Jordan Sadler from KeyBanc Capital Markets. Jordan, your line is open.
Thanks and good morning, guys. Wanted to just dig in a little bit more on Noble. Dave, it seems like there's a third group of 2 assets which are the 2 assets that you'll be purchasing in New Jersey, the Memory Care assets, just to make matters more confusing the other payer. Can you give us a little bit more color on those 2 assets and how that transaction is going to come into the fold? You haven't so maybe how much you'll be paying, what the evaluation would be?
Those two assets are owned by Noble. There's just some regulatory -- one last regulatory hurdle to pass, and then we can execute that purchase, which we think we'll do in this month if all goes according to plan. Those are two -- about 40-45 bed facilities for memory care in New Jersey that have been empty for quite some time being renovated. They have been renovated. We'll probably, once we acquire them, put a little bit more into it to get them really beautiful and ready-to-go. The process in process in New Jersey takes a little bit longer than other states to get license once you have Certificate of Need. So we're likely going to start collecting rent on that sometime in first half of next year, hopefully first quarter. But sometime in the first half of next year we are likely going to have a different operator run those, then Noble.
We are currently marketing the facilities, having really good conversations with a host of interested operators. We are going to be touring the facilities with them soon. And we have some time because of licensing to get that lined up, but there has been a lot of interest in them for operators that are already in and around New Jersey. The purchase price on that is around $12 million for those 2 buildings.
And then you'll put in how much additional?
TBD, but probably under $0.25 million.
Oh. Small amount. And then those will be leased to somebody else to the yield that we would expect [Indiscernible]
Yeah. That's right. Most likely. But because they are empty, there's going to be a bit of a ramp in that rent. So once they get stabilized, then we'll land that that normal yield that you expect from us.
Okay. And then just clarifying on the two that are well, Baltimore and Fort Myers. It sounds like Baltimore will be sold. Curious there what the sale price might be and then how the credit, what the rent credit would be [Indiscernible] basis relative to the value back to Noble. And then maybe if you could clarify what's happening with Fort Myers.
Yeah. With Baltimore, we will find out what the market says about the price for Baltimore. I don't want to I don't want to whisper a number to the market while it's being actively marketed at this time. But we will take those proceeds and hit it with what you might expect a rent yield to be for that, and adjust the rent accordingly. In Fort Myers, there have been some -- since that building went through a full renovation, as it's gone through licensing with the fire authority, they've discovered some shortcomings that they'd like us to shore up before we reopen it, and they're pretty extensive. And so that's what's caused the delay there. But we have our Director of Construction Services has been boots on the ground there very recently talking face-to-face with their fire authority in collaboration with Noble to try to move that along.
Okay. That's helpful. Last one, maybe get Mark in the conversation here. It sounds like you're not closing the door on the 250, that's $300 million of acquisitions you guys have spend historically a little bit of a ways to go. Is that the right [Indiscernible] we should be coming away with?
You know it's obviously getting late in the year and I think what we have teed up in the pipeline. I don't think it's going to get us quite maybe the historical number that you saw pre - COVID. But what we do have in the pipeline, we're pretty excited about, and so it'll just be a function of how quickly we can get through diligence and get operators signed up.
Okay. Thank you.
For our next question, we have Amanda Switzer (ph) from [Indiscernible]. Amanda, your line is open.
Great. thanks for taking my question. Last fall by Noble here. But do you know if Noble currently has any debt against the Q assets that you're acquiring, but need to pay off or should we really think about that purchase price for those assets as one, for one cash infusion for Noble.
They have some debt that will be paid off from the proceeds and it's the largest amount of the proceeds will go towards paying off the deferral in prepaid rent and other obligations for us.
Okay. That's helpful. And then on staffing for the operators that you mentioned where you are seeing those lower agency costs. Are you also seeing less occupancy restrictions? Or are those operators generally trading agency labor for full-time staff and are still then facing staffing constraint overall.
So. Thanks for asking because I think it gives me a chance to correct something. When I was talking about Covenant Care, somebody -- I was nudged here at the table that said I said that their costs went from a million a month down to a $100 a month. But this is really a $100,000 a month for Covenant Care. So as it relates to our operators in general, most of them are saying that there is some limitation on how much they -- for the skilled side, not so much for the senior housing side. But for the skilled side, how much they can admit because of tight labor. There's really 2 ways to approach that; you can continue to admit and staff with agency, which takes a big cut to your margin, or you can stay with lower occupancy and keep agency out. We have operators that are basically approaching it in both of those ways. And there's pros and cons to both of those approaches. I'm not sure if that answers your question, but that's how they're approaching it now.
That was helpful. And then last question probably on your Senior Housing portfolio and the improved trends you're seeing there. Can you quantify how big the occupancy uptake is that you've seen quarter-to-date?
Unfortunately, I can. Seniors housing occupancy quarter-to-quarter really has remained flat.
Appreciate your time.
And for our next question, we have Michael Carroll from RBC Capital Markets. Michael, your line's open.
Thanks. Dave, can you go back and talk a bit about the internal review that you were highlighting about Noble. I guess what drove that internal review and where were those residents? Where did they move to? What was the better setting?
Well, I think I -- this -- the overall question -- the overall concern was appropriateness of care. So in other words, there's really kind of two things that led -- two pools concerned. One was appropriateness of care, and the second was payer source. It's 1 thing to admit residents, but if they aren't able to pay over time, then you have a problem, and you have phantom revenue there. So that was an issue. And the other was just the appropriateness of care most common around either acuity or behavior, things like that. So there is what prompted it was Management finally coming to grips with some lingering issues and taken a hard look at what they had in there and a handful of their facility. Is really a couple of buildings where they had persistent problems. And as they dug into it, they realized that there were collection issues and those collection issues were not unrelated to some of these is behavioral issues as well. And finally, just made some policy decisions around the types of residents that they can really appropriately take care of.
That 12.5% drop was that at how many communities with -- or and I guess of how many are within their portfolio and where they move to what behavioral health facilities or skilled nursing facilities or those types of assets?
They would be. I didn't -- we didn't really keep track of where they went, so I can't give you a specifics on what percent went where. But you're right, that's where people would go, or other assisted living facilities that specialize in behavioral type health as well. Within a seniors housing, you have all sources specialties, and the buildings that they had just didn't have that capability to take care of that population. It was concentrated at a couple of the buildings.
And that 12.5% occupancy drop, that was at the whole portfolio or just flexibility?
The whole portfolio.
Okay. Where is occupancy at for Noble for their portfolio today?
I might have to get back to you on that one, Mike.
Okay. That'd be helpful. And then can you talk a little bit more about Premier? I mean, I know their coverage ratio has been pretty low over the past few years. I mean, moving those two assets to Noble out of that portfolio, where does coverage ratio go? Is it closer to one times?
Yeah it is. It's creeping up. We've been receiving -- we just saw Premier at a conferences last week, had a really good conversation with them, have a good relationship with those guys. They're starting to see some traffic pickup in their Michigan portfolio. They expect more movings net increases by the end of this year. They've applied for the Phase 4 funding and rural funds as well. So things are actually a little bit better and stronger at Premier today than they have been in a long time. And removing the two Wisconsin facilities. That’s helped that.
When you say it's moved up a little bit, I think it was around 0.8 times last quarter and obviously, they fell out of your top 10 so I don't believe it's in this most recent report. But is it backup to 0.9 times or how much is -- does that removing those 2 assets really help them and can we take them off the watch list? Does it help them that much?
No, I don't think we're going to probably take Premier off the watchlist until they're comfortably north of 1 times and they still have a ways to go. I think their coverage in the quarter was fairly consistent with what it was the quarter before, maybe a little bit down. What I was referring to has more real-time information that we have in Q4. Just looking at their occupancy and talking to them about their costs. We expect that it's starting to creep up right now.
And then just my last question for Bill, can you talk a little bit about the CPI rent escalators within the Company's leases? I believe you have 2% in guidance and CPI has been well ahead of that. I guess what CPI should we typically look at for those, and is it above 2%, or is that really going to be a 2022 event versus 2021?
Yeah. Hey, Mike. CPI, most of our leases contain CPI -W and CPI -U. It is for the last few and as you know, our leases contain floors of 0 and caps, most of them have caps, enzymes capped at 2.5%. CPI came in for them above 2.5% on June 1st, but we still raise them by 2.5%. The other caps go up to like, I think it's 3.5 and CPI has been well above 2.5, so they -- so our assumption of 2% in guidance for the rest of the year, which we only have a few tenants with bumps in Q4, isn't really material if it goes from 2% -- if I used 2% or 2.5% or 3%.
Okay. So if we look into 2022, it's safe to assume that we're probably closer to that 2.5 range given where CPI has trended?
Correct, yes.
Okay. Great. Thank you.
For our next question we have Steven Valiquette from Barclays. Stephen, your line is open.
Hello, everybody. Thanks for taking the question. Actually, a couple of questions here really on the decision by ensigngroup in announcement from weaker too ago about starting a captive right within their Company. I guess, for the near-term and long-term, maybe just break up the questions that way. I guess I'm curious, in the short term, will this slow down the pipeline of deals that you've done with them. I mean, they have a lot of positive comments on their call about continuing to do transactions with existing partners, etc. But maybe I'll just pause for a second, get your high-level thoughts and ask a few follow-ups on this topic as well. Let me start get your thoughts around any implications for you guys short-term or long-term, and then we'll go from there, thanks.
Sure. This is Greg. Look, I don't think it changes things very much for us. We have a good relationship with them. And you saw it in our deal with them in the quarter to do the two Austin facilities. In that case, we brought those facilities to them having tied them up previously. And I really think that's probably the only way that we will be -- we would be doing deals with Ensign in the future. It's really the only way we've done deals with them. Their cost of capital has always been good enough, their availability of capital has been good enough specifically if they found a deal. I think it's financed the Deal and they've done their own deals and so they've done a very, very, very well.
That said, with their captive reach, not exactly sure what they're going to be looking at, if they continue to look at the same kind of distressed assets that have been their bread and butter historically, I don't think there's going to be a ton of overlap. But to us, they really just represent another player in a large marketplace with lots, and lots, and lots of players that we compete against, and I don't think we're too worried about whether we will get our fair share of the deals. Does that answer your question?
Yeah, it's helpful. Maybe just two quick follow-ups on the same. So one of them is half answered already, but if we look at Ensign Group and Pennant combined, I think your total number of properties combined back in 2014 was 94. Now, would be a 106 currently between the two. So if you've added a couple of properties per year under that combined relationship. It sounds like you are bringing those properties and transactions to them as oppose the other way around. So it sounds like going forward that that will still be the case based on what you said. I just want to confirm that.
Yeah, and actually, what happened was we bought a 4-building portfolio with an end-time lease in place last year, and then, we did this deal with them this year. I can 't think Mark would be -- we don't need anything else with them.
How many [Indiscernible]..
We bought -- we did a Covenant Care tack on with a building with them. Again, a building we brought to them.
And they grew a little bit when they acquired Five Oaks, which is the smaller operator of ours,
That's right. They bought one of our operators and just stepped in to the lease that was already there. Those are the kind of deals that we do with them. Again, they have -- they're a great operator. They have superior cost of capital and if they source a deal, they're going to do that deal themselves every time. I would.
In just the Sandy check on just the exploration date of your master lease with Ensign Group right now and then when you on the I'm guessing there's really no risk of losing any of your current lease property arrangements with them, but maybe just long-term. Is there something -- should we assume that's all would stay in place for long-term, or is there is a risk on long-term that something changes as far as the size of the relationship? [Indiscernible] not existing.
That's a good question. I'm glad you brought it up. It gives us a chance to remind everyone that when we set those leases up in 2014, those 8 master leases, and they are all -- they all have staggered maturities with various 2 to 3 five-year extension options that Ensign can exercise, and they are all well-diversified in terms of geography, asset class, and asset quality. And our -- that was done so that we would be able to have the expectation that there's a very high likelihood that those will be renewed as those renewal options come up.
Okay. One last real quick one did you know that this strategy was coming from them for a while or so, maybe catching you by surprise a little bit as far as their decision around this. Just curious if you have any high-level response to that.
No, I don't think anybody should have been surprised. Lanzyne has been telegraphing to the market, literally for years, that they wanted to do something like this without saying exactly what it was going to be. But I think everybody's known that they have a sizable real estate portfolio, that they have built since the 2014 CareTrust spin-off. They've done a terrific job with it. And I think it's a good, solid, logical step for them in terms of just making sure that they get credit for the value of the excuse me, the real estate equity that they continued to create and buildup in that portfolio. Just as they did with the portfolio that we started with. They're doing a great job.
Got it. Okay. That's all very helpful. Thanks.
For our next question we have Daniel Bernstein from Capital One. Daniel, your line is open.
Thanks for taking my calls here -- my questions here. I'd like to go back to the skilled mix that you noted has been increasing. I wanted to understand a little bit more about how you think about the sustainability of that increase in skilled mix, and maybe how much of that was related to PDPM versus the uptick in COVID and 3Q.
Hey, Dan. I'm not sure that we could attribute the skill ed mix increase or decrease or any movement there to PDP M necessarily, We've always compared the numbers pre -pandemic to post and we had about 6 months of PDPM in those pre -pandemic numbers. Roughly, we're at about 15.5% for skilled mix on our skilled nursing portfolio for pre -pandemic. We've seen it go as high as 25.5% in December of last year. It came down to -- in June, a high 16% and slowly eek back up to a September number of 18.5%. I think that's largely because of the Delta variant. And we'll see. A lot depends on how long the three-day qualifying stay waiver stays in place. We think that is a key element, of course, to these numbers. Whether or not that is a permanent change, you know very well is anybody's guess, but probably not something that it's worth putting a lot of money on. So I think as when the dust settles on COVID and we could say that it's far in the rear view mirror. We probably get back down somewhere closer to those pre -pandemic skilled mix levels.
Okay. All right. And then on the pipeline, obviously with some of your operators in the high-risk coverage and Ensign giving back PRF funds that -- they don't need that. But it seems maybe from an industry level, the industry continues -- needs continued PRF funds or other federal state supports. Does that kind of playing into the idea that you're going to get a pickup in acquisitions and better pricing down the road that -- those -- that funding maybe goes away next year and then well maybe we'll see some more distress or I don't know if distressed the right word, but you will see more assets come to market where operators need financing or a way out financially.
Dan, this is Mark. Yeah, that's exactly, I think, the way do it. We've already seen some smaller operators head for the hills. We're currently working on a transaction right now where that was the case. We closed the deal and El Centro earlier this year with they, Shire for the same type situation. So I think when the PRS funds get turned off than the public health emergency eventually expires. EC - mAb funding stops flowing then I think we'll start to see a significant amount of transactions come to market. And I think at that point supply is going to outstrip demand and I think that's when the price per bed will start to fall.
Okay. And then one last question on the labor side. I think you noted some easing up of the labor pressures at some of your operators. Is that a matter of increasing wages or are they actually seeing increased job applications, more people coming back to the market to work? Just trying to understand the dynamic there that's giving you some green shoots in labor.
Dan, it's really a combination of both. We do see higher wages across the board to very varying degrees. On the other hand, with the unemployment benefit lapsing and people burning through their savings from COVID and the people coming back to work as well. What we've seen is in the operators that have had the most success. It's those who bring that same tenacity and follow-up and prompt response that they have around admissions from the hospital to applications. You combine that tenacity and intensity with a focus on culture and providing a great place to work and we do see operators that are able to move the dial in a significant way in the face of an otherwise difficult macro environment.
Okay. So better operators are having better performance, I guess, or better -- less issues on the labor side, all things [Indiscernible].
Yes.
[Indiscernible]
Go ahead.
[Indiscernible] that's all the questions I have, but.
[Indiscernible]
[Operator Instructions]. For the next question we have from Jordan Sadler from KeyBanc. Jordan, your line's open.
Hi, guys. Just a quick follow-up on the repurchase options and then maybe looping in just as a reminder. Does Ensign -- do any of the Ensign properties have repurchase options during or any of those master leases rather.
No, just Texas floor that we acquired, but none of the original properties.
Can you remind us when the Texas floor opens up?
2027.
2027. And then coming back to purchase options, the disclosures on Page 13 of the deck, it looks like the first group of purchase options are probably with Noble, I'm guessing, just because it says one of the properties is held for sale on September 30th. Is that the right assumption, because I would assume if that were the case, it'd be unlikely they'll be exercising? Is that fair?
That's fair. We think it's pretty unlikely at this point as well.
And then the next couple down on the late SNFs. One opened up January first and that's kind of a bigger chunk. Can you share who that is and what the expectations are around that?
So Jordan, to correct what I said about the Texas forward. I'm saying that's actually that option opens the end of 2024 and then the next guy in line is a sniff operator in the Midwest and we also, based on their current performance, would say that it's pretty unlikely that they are in a position to exercise, but we can't know for sure until we get closer.
Can you share what the cap rate is on there to fix cap rate on that lease revenue? Can you share what that is?
I don't --
It's [Indiscernible]. Yeah, let's see. Let me get back to you on that, Jordan.
No worries. Thanks, guys.
And for our next question we have Steve Manaker from Stifel. Your line is open. Steve, your line is open.
It looks like Steve's off. Is there anyone else in?
We don't have any further questions at this time. You may continue.
Great. Thanks, Sitti (ph). Well, thank you, everyone, once again for being on today. If you have additional questions, you know where we are. We're happy to engage anytime and we look forward to hearing from you and hopefully seeing you in conference soon. Thanks, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.