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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 morning, and welcome to the Omega Healthcare Investors Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded.
I would now like to turn the conference over to Michele Reber. Please go ahead.
Thank you, and good morning. With me today are Omega's CEO, Taylor Pickett; COO, Dan Booth; CFO, Bob Stephenson; and Megan Krull, Senior Vice President of Operations. Comments made during this conference call that are not historical facts may be forward-looking statements such as statements regarding our financial projections, dividend policy, portfolio restructurings, rent payments, financial condition or prospects of our operators, contemplated acquisitions, dispositions or transitions and our business and portfolio outlook generally.
These forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially. Please see our press releases and our filings with the Securities and Exchange Commission, including, without limitation, our most recent report on Form 10-K, which identify specific factors that may cause actual results or events to differ materially from those described in forward-looking statements.
During the call today, we will refer to some non-GAAP financial measures, such as NAREIT FFO, adjusted FFO, FAD and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles as well as an explanation of the usefulness of the non-GAAP measures are available under the Financial Information section of our website at www.omegahealthcare.com and in the case of NAREIT FFO and adjusted FFO in our recently issued press release.
In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega. I will now turn the call over to Taylor.
Thanks, Michelle. Good morning, and thank you for joining our fourth quarter 2021 earnings conference call. Today, I will discuss our fourth quarter financial results, skilled nursing facility industry trends and operator liquidity issues.
Our fourth quarter adjusted FFO is $0.77 per share and funds available for distribution are $0.72 per share. We have maintained our quarterly dividend of $0.67 per share. Dividend payout ratio continues to have cushion at 87% of adjusted FFO and 93% of funds available for distribution.
Turning to skilled nursing facility industry trends. The Omicron COVID area has paused the skilled nursing facility occupancy recovery and created further labor force stress. Omega SNF occupancy has been virtually flat for the 3 months ended December 31, and the preliminary January occupancy is slightly down.
One interesting item is that in December, 21% of our facilities are at or above pre-COVID occupancy levels, which may indicate that full occupancy recovery is achievable over time. Unfortunately, the already difficult labor shortage grew increasingly worse as staff became infected and were forced to quarantine.
These staffing shortages have limited many facilities ability to admit new residents, which has had the knock-on effect of backing patients up in the hospital systems. Although the impact of Omicron appears to be rapid and transitory, it is impossible to predict how quickly the industry occupancy recovery will regain traction or how rapidly the current labor force pressures will subside.
Turning to operator liquidity issues and restructuring. Dan will provide detail regarding specific operator, current liquidity and restructuring issues. In general, these efforts include one or more of the following actions: one, rent deferrals; two, asset sales or transitions to a new operator; and three, in certain cases, rent resets with other amended lease provisions. Examples include elimination of purchase options, future upward potential rent resets, lease extensions or revisions of renewal rights and collateral enhancements, adjustments or usage. Historically, in many of our restructurings, one or more of the actions that I have outlined are sufficient to protect the value of our assets and most, if not all, of the long-term cash flow generation from the restructured assets.
We continue to remain hopeful that the outcome of our covered restructurings will yield a similar result. Finally, I again thank our operating partners and in particular, the frontline caregivers and staff who have cared for the tens of thousands of residents within our facilities.
I will now turn the call over to Bob.
Thanks, Taylor, and good morning. Turning to our financials for the fourth quarter. Our NAREIT FFO for the fourth quarter was $124 million or $0.50 per share on a diluted basis as compared to $173 million or $0.73 per diluted share for the fourth quarter of 2020. Our adjusted FFO was $190 million or $0.77 per share for the quarter and excludes several items as outlined in our adjusted FFO reconciliation to net income found in our earnings release in our supplemental and also on our website.
Revenue for the fourth quarter was approximately $250 million before adjusting for certain nonrecurring items compared to $264 million for the fourth quarter of 2020. The year-over-year decrease is primarily the result of $16 million of straight line and lease inducement write-offs in the fourth quarter of 2021 related to Guardian and one other operator both placed on a cash basis in the fourth quarter of 2021.
In our last quarter's earnings call, in answer to a question, I provided a revenue commentary on Gulf Coast, Agemo and Guardian. I want to provide an updated revenue status and a Q1 2022 outlook on those operators. Dan will be providing operational updates on these tenants in his prepared talking points.
First, regarding Gulf Coast. In Q4, we recorded $14.8 million of revenue based on our continued ability to offset any unpaid rent against the balance of the sub debt obligations owed by Omega. To be consistent with prior quarters, only $7.4 million of revenue was included within adjusted FFO and FAD. At December 31, the sub debt balance was fully exhausted, and therefore, we will not recognize revenue related to Gulf Coast in Q1 2022.
Looking at Agemo. In Q4, we applied the remaining security deposit balance of $115,000 in October to partially cover October's rent. Agemo additionally paid rent and interest in November of approximately $4.6 million. Q1 2022 contractual rent and interest of $15 million will only be recognized to the extent Agemo makes any additional payments as they are on a cash basis.
Turning to Guardian. In Q4, Guardian failed to make any rent or interest payments, and as a result, no revenue was recognized in Q4. In Q1 2022, we will only record revenue to the extent Guardian makes any payments as they were placed on a cash basis in Q4 2021.
Lastly, as noted in our earnings press release, an additional operator, representing 3.5% of contractual annualized rent and mortgage interest revenue did not pay its January contractual amount due under its lease agreement and ask for a short-term rental forbearance.
If the operator does not make any rental payments during the first quarter and remains on a straight-line basis for revenue recognition, we would include $9 million of revenue for Q1 for adjusted FFO purposes only. However, we will only recognize FAD based on cash received.
Moving to CECL. In Q4 2021, we recorded a $50 million provision for credit losses primarily driven by the funding and reserve of the $20 million Gulf Coast DIP loan and a $38 million reserve related to Guardian's mortgage loan.
Moving on to the balance sheet. It remains strong, thanks to the steps we've taken during 2021 to further improve liquidity, capital stack, our maturity ladder and our overall cost of debt.
On the debt side, in March of 2021, we issued $700 million of 3.25% senior notes due April of 2033. Our note issuance was leverage-neutral as proceeds were used to repurchase to a tender offer $350 million of our 4.375% notes due in 2023 with the balance used to repay LIBOR-based borrowings.
We currently have no bond maturities until August of 2023. In March of 2020, we entered into $400 million of 10-year interest rate swaps at an average swap rate of 0.8675%. These swaps expire in 2024 and provide us with significant cost certainty when we refinance our 2023 bond maturity.
In April of 2021, we closed on a new 4-year $1.45 billion unsecured credit facility and a $50 million unsecured term loan that both mature in April of 2025. At December 31, we had no outstanding borrowings on our revolving credit facility, and we also had approximately $21 million in cash. At December 31, over 99% of our $5.3 billion in debt was fixed and our net funded debt to adjusted annualized EBITDA was 5.3x, and our fixed charge coverage ratio was 4.2x.
It's important to note similar to NAREIT FFO, adjusted FFO and FAD, EBITDA on these liquidity calculations includes our ability to apply collateral and recognize revenue related to our operator non-payments previously discussed. However, when the collateral fully exhausted, a decrease in EBITDA will impact our liquidity ratios. On the equity side, in May of 2021, we established a new $1 billion ATM program. Throughout 2021, we issued 7.6 million common shares of Omega stock generating $282 million in gross cash proceeds primarily through our ATM program.
As previously disclosed, in January 2022, our Board of Directors authorized a repurchase of up to $500 million of Omega's outstanding common stock through March of 2025. We believe the actions taken to date provide us with significant liquidity and flexibility to weather the continued impact on our business, primarily driven by COVID-19. The steps taken over the past 12 months also provide us with the tools we need to continue to evaluate and act upon any additional actions that may be needed to further enhance our liquidity or improve shareholder value.
I will now turn the call over to Dan.
Thanks, Bob, and good morning, everyone. As of December 31, 2021, Omega had an operating asset portfolio of 939 facilities with approximately 96,000 operating beds. These facilities were spread across 63 third-party operators and located within 42 states in the United Kingdom.
Trailing 12-month operator EBITDARM and EBITDAR coverage for our core portfolio, as of September 30, 2021, decreased to 1.52x and 1.18x, respectively, versus 1.63x and 1.28x, respectively, for the trailing 12-month period ended June 30, 2021.
During the third quarter of 2021, our operators cumulatively recorded approximately $26 million in federal stimulus funds as compared to approximately $49 million recorded during the second quarter.
Trailing 12-month operator EBITDARM and EBITDAR coverage would have decreased slightly during the third quarter of 2021 to 1.21x and 0.88x, respectively, as compared to 1.22x and 0.89x, respectively, for the second quarter when excluding the benefit of federal stimulus funds.
EBITDA coverage for the stand-alone quarter ended September 30, 2021, for our core portfolio was 1.04x including federal stimulus and 0.92x excluding the $26 million of federal stimulus funds. This compares to the standalone second quarter of 1.2x and 0.99x with and without the $49 million in federal stimulus funds, respectively.
Occupancy for our overall core portfolio continue to slowly trend up throughout 2021, reaching a high of 75.8% in December, up from a low in January of 2021 of 72.3%. January 2022, mid-month occupancy actually fell off slightly to 75.4%, mainly as a result of the robust Omicron variant.
Turning to our senior housing portfolio. Today, our overall senior housing investment comprises 155 assisted living, independent living and memory care assets in the United States and the United Kingdom. This portfolio on a pure-play basis had its trailing 12-month EBITDAR lease coverage fall 1 basis point to 0.97x at the end of the third quarter as compared to the end of the second quarter. Based on what Omega has received in terms of mid-month occupancy reporting for January to-date, this portfolio is averaging approximately 86%.
Turning to portfolio matters. On October 14, 2021, Gulf Coast and operator representing approximately $30 million or 3% of annual revenue, filed for Chapter 11 bankruptcy in Wilmington, Delaware. As part of that filing, the [vetters] and Omega agreed upon and entered into a restructuring support agreement.
Since that time, on December 1, 2021, the management of Omega's 23 of the 24 Gulf Coast facilities were transferred via management and operations transfer agreement to an unrelated third party, [Inspire Healthcare]. Subsequently, on December 31, 2021, Omega entered into a purchase and sale agreement for the sale of 22 of the 24 Gulf Coast facilities to a separate unrelated third party. The sale of the properties, along with the change of ownership of the operations, is anticipated to close sometime early in the second quarter of 2022, subject to the usual closing conditions.
As referenced on our previous earnings call, Omega has 2 other large operators that have ceased paying all or a material portion of their contractual rent. The first, Agemo representing approximately $53 million or 5.5% of annual revenue, stopped paying rent and interest in August of 2021 and with the exception of November every month since.
Accordingly, Omega drew upon existing security deposits of approximately $9.5 million to pay all rent due for August, September and a portion of October, thereby exhausting our deposits. We are in ongoing discussions with Agemo, which discussions may involve the re-leasing or sale of a material portion of their portfolio.
The other operator, Guardian, representing approximately $37 million or 3.8% of annual revenue, has failed to pay its contractual rent and interest since October of 2021. We have been and continue to be in active ongoing discussions with Guardian to transition a significant portion of this portfolio to an unrelated third party. The exact number of facilities involved and the timing of such transitions is still being finalized.
Turning to new investments. In 2021, Omega had made new investments totaling $841 million, including $164 million for capital expenditures. Subsequently, on January 1, 2022, Omega completed an $8 million purchase lease transaction for one skilled nursing facility in Maryland.
Separately, on January 31, 2022, Omega completed an $8 million purchase lease transaction for one care home in the United Kingdom. Turning to dispositions. In 2021, Omega divested a total of 48 facilities for approximately $319 million, including 3 facilities for $8 million in the fourth quarter.
I will now turn the call over to Megan.
Thanks, Dan, and good morning, everyone. The COVID case surge over the last month from Omicron has resulted in case counts of both residents and staff combined at levels we have not seen since January 2021. However, the severity, hospitalizations and death rates are nowhere near where they had been pre vaccine.
So while Omicron is not proving to be as much of an issue clinically, it is exacerbating the already severely strained staffing environment in the long-term care industry, which in turn is impacting occupancy recovery while also substantially increasing staffing and staffing-related expenses.
Agency expense itself continues to increase. And on a per patient day basis for our core portfolio for third quarter 2021 was more than 5x what it was in 2019. Vaccination rates in the industry continue to improve with residents and staff at approximately 87% and 83%, respectively, according to CMS data with the staff percentage seeing meaningful movement given the impending federal mandate.
For the states that were not a part of preliminary injunction, the deadline for full vaccination is late February with the other states with a deadline in mid-March. CMS intends to enforce the mandate via the survey process starting in March, with achievement of certain benchmarks and proof of a plan to reach 100%, providing the potential to push any enforcement action out up to 90 days.
Of the $25.5 billion release from the Provider Relief Fund that HHS announced in September, nearly $7.5 billion of the $8.5 billion American Rescue Act funds have been paid out starting in November with approximately 96% of applications having been processed.
And nearly $11 billion in Phase 4 payments have been paid out starting in December, with approximately 82% of applications having been processed. While this additional release from the provider relief fund has been a welcome change from where this administration had been, it is certainly not anywhere close to a cure all.
Approaching what will be almost 2 full years of dealing with this pandemic day in and day out, the long-term care industry has forever changed as it continues to face new and increased challenges every day. Governmental support is needed now more than ever to deal with unprecedented staffing shortages and other increased costs. And we are hopeful that this latest round of funding will prove to be just a first step in the right direction.
I will now open the call up for questions.
We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Jonathan Hughes with Raymond James.
Bob, could you please confirm that aggregate income that was booked in the fourth quarter from applying the security deposits that will not be in the first quarter? I know you gave the figures, I think, it’s like $7.5 million from Gulf Coast to maybe like $4.6 million from Agemo. So is that about $12 million total. Is that right?
No. The Gulf Coast is correct. The $7.4 million for Gulf Coast. For Agemo, it was only $115,000. The second part of the Agemo they did pay, as Dan mentioned and I mentioned, they did pay November -- a rent payment in November.
And that's the last time. Okay. So that's the last time. Okay. Fair enough. And then what is the -- can you share maybe the location of the operator representing that 3.5% of rents who did not pay in January? I'm just trying to understand if the location is partly to blame for why they're no longer paying? And was that operator included in the 15% to 20% of at-risk rents that was identified last summer?
So that operator is spread across several states throughout the South. I think it was a common -- they're all struggling in the South with labor. It's the same sort of story, still very new development, it's very fluid, and we're in ongoing discussion with that operator.
Okay. And was that -- there's analysis, I think, done last summer that kind of identified 15% to 20% of that risk rents. Was this operator in that bucket? Or is this maybe an incremental one?
I believe it was. I'd have to go back and double check.
Okay. Bet I can follow up on that. I saw that Florida is your largest state. And just yesterday, the Senate and Tallahassee proposed a $375 million Medicaid funding increase, which is -- which reduce funding by almost $550,000 per SNF. Is that figure -- is that roughly half the amount of contractual annual rent for the 115 or so properties you have in the state?
I haven't done that math to be honest with you. But this is a bit of a process just like getting any bill passed. It was very hard for me to see the put forth a budget with such a great rate increase. I mean next up at the house, they're going to push through another one, which we hope will also be -- have high rent increases.
But sort of time will tell how that shakes out, what we start with and what we end up with are not always the same thing. But to do that math, I would have to go back and look at that -- the math.
Okay. Yes. Hopefully, we get some more clarity on that from The House shortly. But last one for me. What is the expected sale price and maybe the expected yield current or contractual on the 19 properties that are under contract to be sold and maybe that expected timing?
Yes, Jonathan. So there was 41 buildings listed for wholesale, the remaining 19 that we didn't give a price. It's around approximately $90 million, and the timing, hopefully will be -- since they're in held for sale, that means there's timing involved but hopefully, in the next quarter or so.
Okay. And the rent, maybe that was -- that’s currently being booked.
Yes. So in the fourth quarter related to those buildings, we booked $1.7 million of rent.
Next question is from Connor Siversky with Berenberg.
Maybe a couple for Megan here. So based on the most recent BLS data, we're seeing that SNF employment headcount is down, call it, 15%, while the hourly cost of labor is up around 15%. So I'm wondering within that framework, can you give us a sense of what percentage of the SNF labor force is currently attributable to agency labor?
Yes, I think that's probably pretty tough to determine. We haven't looked at it from that perspective. I know certain operators are obviously affected more than others, but you have some buildings that hardly have any agency or no agency at all and then you have other buildings where it's a very large percentage of their workforce at any given point in time.
And obviously, with the Omicron variant in there, agency is being used quite a bit more due to quarantines for the current staff and people being out with COVID in general.
Okay. Then I think in your prepared remarks, you had mentioned that the cost was about 5x that of your standard labor pool? Or am I mixing a message there?
It's about 5x the agency usage that we had in 2019, which was pretty minimal. So that's not as a percentage of the total labor. It's just how much it's gone up over that time.
Okay. And then, I mean, I know this is a bit of an abstract question. But given that we are approaching the time of the year when we could get a sense of what the preliminary ruling looks like, I mean, what kind of rate basket increase would you view as favorable? And then what do you think could come in as draconian given the current operating environment?
I mean given where costs have gone, I think last year was, what, 2%, 2.3%, something along that line. That would be a pretty draconian to me. I would think you would need to be quite a bit higher given where costs have gone.
Okay. I think we'd all agree with you there. And then another one on occupancy trends. You can see that Guardian, I believe, recently reported a pretty strong increase in referrals. I think it was the tune of about 125%. Do you get the sense that these patterns will reflect an occupancy gains in the coming months? Or do admissions remain difficult given the labor picture? I mean what I mean to ask here, are those increases in referrals translating to occupancy at present?
Kind of when you say Guardian, you're talking about -- what are you talking about?
It came out of Skilled Nursing News, the other -- a couple of weeks back.
Okay. Not aware of that. Go ahead, Megan.
Yes. I mean, the only thing -- yes, I'm not aware about it either, but the only thing I would say is we have quite a number of operators who have been telling us for quite a while now that the admissions are out there but they can't take them because they don't have the staff, right? So I don't think it's necessarily translating and it certainly isn't going to be translating in the Omicron environment. We'll see what happens if some of those staffing issues start to ease up a little bit once the surges go down.
Okay. And then last question for me. Just thinking about the potential portfolio sales. I mean where do you seek to push the proceeds from these sales? I mean, would you push them directly to the share buyback, given your cost of capital and the risk of acquiring assets in the current environment or perhaps pushing it to the ongoing kind of maintenance CapEx or capital improvement projects you have?
So Connor, we still have -- the pipeline is incredibly active, but we still have deals in the pipeline. So I think step one is redeploying those -- that capital into pipeline deals. And then if we don't have pipeline deals, then I think we just -- we step back and think about the best way to allocate capital. And we have put the tool and the toolkit with the share buyback. So it's -- we have the potential to use that lever. But I will tell you that, that's something we wouldn't -- we would only use on a leverage-neutral basis. So we'd be taking out that and equity, we go that route. But the priority for us is to support our current tenants. The last thing we want to do is have a deal in our pipeline where we're not supporting our tenants, which have always been the franchise for growth.
Next question is from Nick Joseph with Citi.
You mentioned that industry occupancy overall has stalled a bit, but I think you said 20% of your portfolio is at or above pre-COVID occupancy levels. So what are you seeing different at those facilities? I don't know if it's geography or labor differences versus the other 80% that are still struggling?
There's a certain larger percentage within that bucket that's non-SNF, so that's a piece of it. We've dug in quite a bit to look at state concentrations, to look at size of buildings, various other items that had affected COVID originally, and we haven't really seen much correlation other than how far did they drop originally, right?
So if they were more than a 15% drop originally, obviously, it takes longer for them to come back, but to be in that bucket, they had a smaller percentage drop. So that's why they're coming back a little bit quicker.
And then just on the dividend. How are you thinking about it for the remainder of the year. Obviously, there's a lot of uncertainty in terms of rent collections and other noise in the numbers. You declared the first quarter dividend already. But how are you thinking about the policy just kind of more broadly?
Consistent with how we've talked about it in the past, to the extent we're working through these restructurings, but we have a view that long-term cash flows are going to -- not going to be impacted or the impact is minimal, then I think we'll be consistent with our dividend policy. And I guess the best example of that is Gulf Coast that we had.
We have $30 million of rent, which in Q1, we're not going to collect any rent because they're in bankruptcy. But we're going to redeploy those assets by selling them, and we'll end up with, call it, $300 million net that we'll redeploy.
So the ultimate resolution on the Gulf Coast situation is a push from a cash flow perspective. And I think to the extent that some of these other restructurings end up in that same realm and there's no reason to jump forward and say, "Hey, we're going to change our dividend policy. But as everybody on this call knows, it's an evolving environment. We're going to be as transparent as we can.
What I'd say today, the policy is the same, unless we see a long-term impact on our cash flows, we're not changing the dividend.
The next question is from Daniel Bernstein with Capital One.
I just wanted to go back to Agemo and understand have they not paid rent in January and may be kind of what your expectations are for 1Q rent versus 4Q?
So they paid -- the last rent that they paid was in the month of November, they did not pay December, they did not pay January. They have still not been the recipient of any provider relief funds. There's kind of 2 buckets that came out of what I would call the easy buckets that the federal government was able to ascertain the amounts relatively quickly, and those monies were distributed. And then there will be more complicated applications, which are being gone through as we speak. So we do expect that there will be a significant amount of provider of lead funds coming to some of our operators, including Signature who did not get any funds in the first round, and that likely will be a source for some rent going forward, but that's sort of in the short run. In the long run, I think that Signature portfolio is going to be -- we're going to probably slice off a fairly significant chunk of that and either release it or sell it, much like we're doing in Gulf Coast.
Okay. Okay. No, that's great color. And then just trying to go back to the labor environment, some and you look at the RPRF funds coming in, you've got the, I guess, Jonathan said earlier, the a potential increase in Medicaid funding in Florida, maybe in Texas. Is that enough to allow SNF operators to better compete for labor? I guess maybe the right way to ask it is, is the PRF funds and other government support just a shortfall relative to the increase in wages out there? Yes. So just can SNFs compete for nurses? I think that's really the bottom line.
The short answer is yes, but we don't -- it still remains to be seen how this all plays out. One of the -- the biggest issue in labor, we have a permanent increase in the labor cost rate in this industry. That is not going to let go. The biggest issue is eliminating agency. And I think we'll be able to get back into the balance with agency over time.
But I don't know that 6 months or 12 months or 18 months and that cost incrementally is pretty rough. And I just don't know if you have a lot of sufficient support from the state to overcome that short term.
The next question is from Tayo Okusanya with Credit Suisse.
In regards to the loan book, you actually did take the charges according to CECL. But going forward, I'm assuming those loans are still performing and they're still booking all the interest income associated with it. Is that a correct assumption? Or should we be making some adjustment for that in 2022 as well relative to what you received in fourth quarter?
That's correct. We're -- we've done our CECL works related to those, and we are booking the interest as it's paid on this.
Okay. That's helpful. And then also during the quarter, I noticed that you did have a severance charge, I think, on LinkedIn, it looks like Steven Insoft has kind of moved on. Could you talk a little bit about that and kind of what that may mean in regards to what the setup for the future management team? Does it get replaced? Are those responsibilities being handled by someone else?
Sure. Well, first of all, Steven was a great asset, and we really appreciated his time here at Omega. And we just got to the point in time towards the end of this year where it was time for both parties to separate, it’s very amicable. And his responsibilities have been moved into other senior members of the team, including Megan on the call, and Vikas Gupta, our Senior VP of Acquisitions.
Next question is from Vikram Mahotra with Mizuho.
So maybe just stepping back, I guess, can you sort of walk us through what sort of your base case versus maybe their case of sort of a recovery versus pre-COVID I think at NAREIT, you were talking maybe late third quarter '22? Just kind of how are you viewing sort of the recovery path from here on in terms of time line?
Yes. So the recovery for us is really a focus on occupancy recoveries into the low 80% and hopefully, ultimately, back to 45%. So if the pace of recovery post Omicron is consistent with pre at, call it, 40 basis points or 50 basis points a month that we have 12 months at least. So I think we have to now be thinking about 2023 and hope that we don't have another variant come up that creates a pulse.
Okay. That makes sense. And then just going back to the buyback, can you maybe just give us a bit more color sort of what's the thought process behind authorizing it now in terms of -- you've talked about a lot of funds you have, some recovery going on. The dividend in your mind is well covered.
So I'm just trying to understand like, typically, when you've seen other companies put buybacks and it's usually when maybe the stocks are well below their NAV or perceived NAV. I'm just trying to figure out like what is -- is there some potential news that you're anticipating or event you're anticipating that would warrant the buyback now versus at some other point?
No. It really is just putting a tool and the tool kit given that, as Dan mentioned, we have the potential for additional asset sales. And thinking about where that capital would go, maybe it's on our balance sheet as cash. Hopefully, we deploy it through the pipeline but it is another tool in the toolkit, and we elect to, on a leverage-neutral basis, deploy that cash.
Is there some sort of level you're looking at in terms of floor or some number you're saying, okay, because you -- the last 2 years, if I'm correct, I think you issued stock at 34%, maybe 36%, somewhere in that range. Is there a level which just says, hey, this doesn't make sense, there's a big disconnect between us and where maybe private market is trading?
When you see the stock dip into the 20s, that's interesting, but we have not established a level now.
Okay. Fair enough. Just 2 quick numbers question. You mentioned looking at new deals. Today, for where new deals are occurring, what sort of coverage levels on an EBITDA basis are you targeting or is the market focused on?
So a lot of underwriting is taking place based upon 2019 results, to be honest with you, because with occupancy down and labor costs up, it's very difficult to get your arms around what those assets are worth with those type of operating results. So a lot of it is based on historical results.
So the cap rates, I don't think have changed much. It's just not based upon current run rates. It's based on historical. And quite frankly, we're seeing right now more opportunity in the UK than we are in the U.S.
Okay. So I guess from an EBITDAR coverage, if somebody would enter a new deal, a new lease today or you were on, you'd look at a number that what on an EBITDAR basis north of [1.3]?
Yes, historically.
Okay. And just the last question on that EBITDAR. So I know you said in place EBITDAR, excluding care funds, I think it was 0.92 million. I'm just looking at the chart in your supplement where you break down the EBITDAR coverages by ranges. I think 36% of rent is between 1 -- sorry, between -- 24% is between 1.2 and 1.8 -- but the weighted average is 1.19. Can you just maybe elaborate on that calculation?
Yes. I can tell you that 1.19 is definitely a typo. We will have -- we will go back and check.
What is the actual number?
I don't know. I just -- we just noticed this like seconds before the call.
Next question is from Andrew Rosivach with Wolfe Research.
So I got stumped on a question from somebody. I think often people look at the stuff that isn't paying rent and they kind of assume like the EBITDA is zero, which isn't necessarily right. Would you have a sense of what your coverage buckets would look like if you included, I think it's 89% that's in there, what it would look like if you included the 11% that weren't.
Well, it will certainly be lower. But no, I don't have that off the top of my head.
Got it. But it would be lower, but it wouldn't be zero, right? There's some capacity to pay rent?
Yes, not even close to zero.
Got it. Okay. And in the 89%, I'm just trying to back that into the tenants, the 11, the tenants that aren't paying now, is the 3.5% in the 89%, the new tenant that you announced this quarter?
Yes. No, they're not in that. I don't think they are -- oh, in the 89%, yes, they’re core. I'm sorry.
They are in 89%. Okay. Great.
They next question is from John Pawlowski with Green Street.
Maybe just one question on the capital plan for this year. If your cost of capital stays in the same zip code as right now and acknowledging it's taking another leg down or stock taking another leg down this morning, but what kind of aggregate disposition volume could we see come through the system this year?
Well, we've already talked about the $400-plus million for the 41 held-for-sale assets. So you got that. And then the restructurings are still in process. There's no doubt, in my mind, there'll be some sales out of that, but taking that number is just impossible.
Okay. And then apologies if I missed it. Could you just give some expectations on pricing on the dispositions range of cap rates?
They're incredibly high because most of those assets currently have low cash flow numbers. You're looking at multiples like 20x cash flow, very, very high. But remember, it's what Dan mentioned that the buyers are looking at how these properties performed pre COVID and are looking at a post-COVID environment with our pricing.
The next question is from Joshua Dennerlein with Bank of America.
I guess, one question I had is maybe what are you guys looking for or like a turn in the SNF industry. And maybe could you remind us if there's anything else on your watch list?
I mean, well, the key metric for us is just occupancy, but yes, some of that's going to be driven from staffing is that -- is that the question in terms of the term?
Yes. I guess, is it just the labor component? Or I saw on your latest incident report that looks like 75% of your facilities have COVID cases. So I wasn't sure if like that was kind of impacting it, and you got to wait for that to come down.
Yes. So you're right. It's all the components of that. Labor, COVID, having that facility count go down. And then ultimately, occupancy as I think you've heard a couple of times in this call, we think there's more demand out there than the industry can serve because of the underlying labor issues, which are partly driven by COVID infection.
So they all run together, ultimately for us, though, it's getting occupancies back. And then what was the second half of your question?
Just an update on the watch list -- that report you put out last summer that study you did last summer, where you kind of looked at your top tenants. Like are there still tenants that you're kind of watching that have been paying rent or we kind of passed all the ones that you were concerned about where there may be more to that?
We're not past tenants that we're concerned about. I will tell you that we've had additional tenants to express some liquidity concerns over the next couple of quarters. So I think all of our constituents need to be very careful thinking that the restructuring type scenarios are behind us. I'm sure we will have more they might be small. They might be bigger, but it's -- there's no doubt we're going to be having these discussions for a few more quarters, just no doubt in my mind.
This concludes our question-and-answer session. I would like to turn the conference back over to Taylor Pickett for any closing remarks.
Great. Thanks, everybody, for joining us today. As always, feel free to reach out to the team and we'll be responsive. Have a good day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.