Standing by, welcome to the Sabra Health Care third quarter 2021 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one on your telephone. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Michael Costa, Executive Vice President, Finance and Chief Accounting Officer. Please go ahead, sir. 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 future financial position and results of operations, including the expected impact of the ongoing COVID-19 pandemic, our expectations regarding our tenants and operators, and our expectations regarding our acquisition, disposition, and investment plans. 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, 2020, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K we furnished 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 on the Financials page of the Investors section of our website at www.sabrahealth.com. Our Form 10-Q, earnings release, and supplement can also be accessed in the Investor section of our website. With that, let me turn the call over to Rick Matros, Chair and CEO of Sabra Health Care REIT. Thanks, Mike, and thanks everybody for joining us. I'd like to start today actually with a quote that Talya shared with me. It's the dedication in General McChrystal's new book, which is called Risk: A User's Guide. To the healthcare and other essential workers who, when faced with risk that is often difficult to effectively assess and impossible to completely mitigate, respond with quiet courage and too often sacrifice themselves for others. Once again, I wanna thank all of our workforce out there for everything they're doing on a day-to-day basis. Let me move on to labor now because that's, I think foremost, obviously on everybody's minds. First I'll start by saying labor pressures are really different by market, so there's not sort of a simple answer or something I can say in the aggregate in terms of trends. For example, in California, the Northeast states and Texas, the labor shortage just hasn't been as bad as in other markets. It's also better in states that have kept up with wage increases. Florida and the Southern states, for example, are far behind on wage equity, and so our operators in those states are having more difficulty with labor than in other states. It really is all over the place. We also see a difference in labor pressure in the culture of our operators, so that does make some difference as well. That part's actually quite good because the fact that culture can affect retention and recruitment is helpful, and we're trying to share best practices with our tenants as it pertains to that. Our operators do have some level of optimism that those who have not come back into the workforce will do so as they start spending up for the holidays and have a less stressed environment with COVID receding and the vaccination uptake improving and creating a safer work environment. Currently, 40% of our operators have mandated, and I don't know if everybody's seen the news today, but the new mandate with CDC and OSHA is effective on January 4. By January fourth, all healthcare workers as well as others will have to be vaccinated and there's not gonna be any allowance for testing in the absence of being vaccinated. In terms of the workforce amongst our operators, just under 80% of the workforce is now vaccinated, so that's really a nice improvement since the last quarter. It's above industry average and certainly above the national average in general. We feel pretty good about that. I would say that for those that haven't mandated, there still is a fear that they're gonna lose too many employees if they mandate, but the data just really hasn't supported that. All of the operators that we're aware of that have mandated simply haven't lost that many employees, and they've actually been able to use that as a recruiting tool, because they do have a safer environment. Nevertheless, you know, we understand the concerns that operators have, but now they're just gonna have to mandate whether they like it or not, and we think that's a good thing. These labor issues are the primary impediment in the pace of the recovery. That said, our tenants have operated by incurring additional labor costs, such as temporary agency, in order to continue to push occupancy increases as much as possible. In other words, we don't have tenants that are saying, We're just not gonna renew because we have labor shortages. They'd rather spend more on labor and get the revenue in and keep those relationships with their common referral sources. Again, that's something that we favor because the demand is clearly there. In terms of funding, COVID-19 Public Health Emergency has been extended again for another 90 days, with Medicare sequestration effective through year-end, and we have optimism that that will be extended again. FMAP funding increase is extended through the end of first quarter 2022. I'll move on to investments now. Our investment pipeline continues to be very active. We have approximately $2 billion in the pipeline. Still not much skilled nursing. 75% of that $2 billion are potential investments that are in excess of $100 million. To date, we've closed approximately $400 million with a weighted average cash yield of 7.55%. I wanna note we did announce the closing of the first tranche on the RCA loan, and that's a deal that we feel really good about. We felt it was important to be a good capital partner. There aren't that many strong operators yet in the addiction space, so we wanna be there for those who are. That commitment to RCA was also a commitment to the sector relative to our intent going forward. A quick comment on the balance sheet. I know Harold will talk more about that. The two offerings that we did, both the debt and the equity offering, both served to strengthen the balance sheet and put us in really good shape on a go-forward basis with a level of optionality when it comes to funding acquisitions that we haven't had, historically. Moving on to operations. Excluding PRF, skilled rent coverage is down sequentially on a trailing twelve-month basis, primarily due to the second quarter of 2020 being replaced with the second quarter of 2021. On a core release standalone basis, the sequential drop, which wasn't significant, but nevertheless, the sequential drop was due specifically to higher labor costs. Our skilled occupancy, which lost momentum late summer, is now showing some improvement recently. The biggest turnaround has been Avamere. Avamere had actually fallen 300 basis points lower than their December low, but since opening the COVID units have increased their occupancy 400 basis points in the span of the last two weeks. Even though those COVID units won't be around forever, that should certainly buy them a lot of time as they work on getting occupancy up on a longer-term basis throughout the rest of their portfolio. With that, I will turn it over to Talya, and then she'll turn it over to Harold, and we'll go to Q&A. Talya? Thank you, Rick. In the third quarter, Sabra's wholly owned senior housing managed portfolio continued to build on the recovery that began late in the first quarter. Nationwide labor shortages, coupled with a rise in COVID-19 infections from the Delta variant, slowed the speed of the recovery during the latter part of the third quarter. We see clear signs of demand for senior housing and believe that the operators will mitigate labor shortages through initiatives on compensation, culture, and safety. As we stand here today, the recovery of occupancy feels on track, but the solution to the labor shortage remains blurry. The headline numbers for the wholly owned managed portfolio are as follows: Occupancy in the third quarter of 2021, excluding non-stabilized communities, was 78.8%, a 150 basis point increase from 77.3 in the prior quarter. RevPOR, excluding non-stabilized communities, was 3,272, essentially flat to the prior quarter's 3,263. RevPOR has remained stable over the past five quarters across both independent and assisted living despite surges in the pandemic. Cash net operating income declined by 11% sequentially, and margin decreased by 3.4% compared to the prior quarter, in part because no COVID grant income was received in the third quarter, compared with just over $500,000 of grant income in the second quarter. Excluding the grant funds, cash net operating income declined 6.2% and margin decreased only 2.4%. Operating expenses in Sabra's assisted living and memory care properties, including the wholly owned Enlivant portfolio, skewed higher in the third quarter, mostly in September, because of contract labor costs. Across the wholly owned managed portfolio, we are seeing leads at 20%-50% above 2019 levels across the quarter and conversion rates higher than in 2019. The Delta variant appears to have delayed some move-in volume during September, as well as slightly increased move-outs. Communities are beginning to recover from the effect of the Delta variant, with move-outs normalizing and move-in velocity picking up. While the focus remains squarely on rebuilding occupancy in order to rebuild revenue, the shortage of labor and utilization of contract labor at higher cost have become a critical element in the path to economic recovery. Higher acuity communities have more staff. Therefore, we have seen contract labor impact assisted living and memory care much more than independent living. Sabra's wholly owned managed assisted living portfolio has continued the occupancy recovery that began in the second half of March, gaining 234 basis points from the end of the second quarter to the end of the third quarter. From June 2021 to July 2021, occupancy increased by 166 basis points. From July 2021 to August 2021, occupancy increased 53 basis points. From August 2021 to September 2021, occupancy increased 89 basis points. From the low in March through mid-October, occupancy increased 457 basis points to 73.9%. This trend was driven by our wholly owned Enlivant portfolio, which had occupancy of 73.7% in September, 400 basis points above June occupancy. For comparison, Sabra's net leased assisted living and memory care portfolio has shown continued occupancy recovery, increasing 303 basis points in the third quarter compared with the prior quarter. Note that in the supplemental information materials, we show this portfolio statistics one quarter in arrears, which currently includes the periods immediately prior to and then immediately following the distribution of the vaccine to senior housing communities. While revenue in our wholly owned assisted living portfolio is 3.6% quarter-over-quarter, excluding grant income, revenue grew 7% quarter-over-quarter. Cash NOI margin compressed to 15.1% compared with 21.7% in the second quarter, excluding grant income. About 70% of this change is attributable to an increase in contract labor costs in our wholly owned Enlivant portfolio, of which more than half was incurred in September. Sabra's managed independent living portfolio experienced less occupancy loss than our assisted living portfolio, and its recovery has been more gradual. Throughout the duration of the pandemic, we have seen that move-outs have been driven by the need for higher care, and we continue to see that this quarter. From June 2021 to July 2021, occupancy was flat. From July to August 2021, occupancy increased 183 basis points. From August to September 2021, occupancy increased 30 basis points. Cash NOI in the wholly owned independent living portfolio grew 4.2% quarter-over-quarter and margin expanded by 0.8%. While occupancy pressure at two of our Canadian retirement homes and catching up on maintenance deferred due to the pandemic offset some of the gains made, availability and cost of labor was not a meaningful factor. With that, I will turn the call over to Harold Andrews, Sabra's Chief Financial Officer. Thanks, Talya. I'll give a quick overview of the numbers for Q3, discuss recent balance sheet activity, and briefly discuss our 2021 guidance. Before doing so, let me make a couple of remarks about the change in accounting for our Avamere lease. As we noted in our September 13, 2021 business update, Avamere has experienced cash flow constraints over the past several months from census declines as a result of a spike in COVID-19 cases in Oregon, Colorado, and Washington, together with admission limitations in these states, as well as from increased labor pressure. We have been using their letter of credit to satisfy their rent obligations beginning in September 2021 to help with these cash flow constraints. This letter of credit is expected to cover the rent obligations through a portion of their December 2021 amounts due, and we expect the full amount of rents due through the end of 2021 to be paid. However, even with the encouraging pickup in census they have seen since the opening of COVID-specific units in Oregon, we concluded that the lease no longer meets the high threshold to continue accounting for it on an accrual basis. As a reminder, we must conclude that it is more than 75% probable that we will collect 97% or more of all payments due over the life of the lease to continue accounting on an accrual straight-line basis. The Avamere lease does not mature until 2031. Given the less than optimal EBITDAR coverage historically for this lease, the 10-year remaining term and the uncertainty of the future stabilized performance level for these operations, we concluded that some level of rent adjustment in the future may be necessary. We expect this determination will not be made until sometime during 2022, as we begin to get additional clarity on future stabilized performance expectations. We consequently wrote off $25.2 million of straight-line rent receivable balances related to this lease. We continue to have $19.1 million above market lease intangible assets associated with the Avamere lease on our balance sheet. Any future lease amendments may result in the write-off or acceleration of the amortization on all or a portion of this balance. Now on to Q3 results. For the three months ended September 30, 2021, we recorded total revenues, rental revenues, and NOI of $128.6 million, $85.4 million, and $96.3 million, respectively. Included in these amounts is the write-off of $25.2 million of straight-line rent receivables noted previously. Excluding this amount, total revenues, rental revenues, and NOI was $153.8 million, $110.6 million, and $121.5 million, respectively, as compared to $152.9 million, $110.8 million, and $121.3 million for the second quarter of 2021. While our NOI, after normalizing the Avamere write-off, was essentially flat, being just $200,000 higher than in Q2, there were some notable changes in each direction in our managed senior housing portfolio and the Enlivant joint venture that landed us there. NOI from our managed senior housing portfolio decreased $1.2 million to $9.1 million, due primarily to the fact that we received no government grant income this quarter compared to $500,000 last quarter, as well as the impact of higher COVID-19 expenses and labor costs, as Talya discussed in her prepared remarks. NOI from the Enlivant joint venture was $3.5 million, which is $1.2 million higher than the second quarter, primarily due to the second quarter NOI containing the $2.5 million one-time support payment the joint venture made to Enlivant. Excluding this amount, NOI from the joint venture decreased sequentially by $1.3 million. Revenues from the joint venture increased by $1.3 million due to increased occupancy of 2.2% to 71.9% for the quarter compared to the second quarter, offset by higher labor and COVID-19 expenses. On the expense side for Sabra, the G&A cost for the quarter totaled $8.7 million compared to $8.8 million in the second quarter of 2021. G&A costs included $2.4 million of stock-based compensation expense for the quarter, compared to $2.3 million in the second quarter. Recurring cash G&A costs of $6.4 million were 6.7% of NOI and in line with our expectations. Interest expense totaled $24.2 million for the quarter, remaining effectively unchanged from the second quarter. The result of this activity is FFO for the quarter of $59.9 million and normalized FFO of $85.3 million or $0.38 per share. FFO was normalized primarily to exclude the Avamere straight-line receivable write-off. This compares to normalized FFO of $88.4 million or $0.41 per share in the second quarter of 2021. AFFO, which excludes from FFO certain non-cash revenues and expenses, was $84.8 million, and normalized AFFO was $85.2 million or $0.38 per share. This compares to normalized AFFO of $86.6 million or $0.40 per share in the second quarter of 2021. For the quarter, we recorded net income attributable to common stockholders of $10.2 million or $0.05 per share. Under the balance sheet, we issued $800 million of 3.2% senior unsecured notes due 2031. The net proceeds were used to repay $345 million of our U.S. dollar-based term loans, and subsequent to quarter end, redeem all $300 million of our outstanding 4.8% senior unsecured notes due 2024, and to fund a portion of the RCA mortgage loan. This issuance allowed us to improve our weighted average debt maturity by 2.4 years to seven years and reduced our cost of permanent debt by 23 basis points to 3.58%. Again, we were in compliance with all our debt covenants as of September 30, 2021, and continue to have strong credit metrics as follows, all of which are pro forma for the redemption of our 2024 notes, which occurred on October 7. Our leverage, 4.81x. Interest coverage, 5.32x. Fixed charge coverage, 4.9x. Total debt to asset value, 34%. Unencumbered asset value to unsecured debt, 289%. Secured debt to asset value of just 1%. We continue to have a very strong liquidity position. After giving effect to the redemption of $300 million of 4.8% senior unsecured notes that we're due in 2024, as of September 30, 2021, we had approximately $1.2 billion of cash and availability on our line. On October 15, we completed an underwritten public offering of 7.8 million newly issued shares of our common stock at a price of $14.40 per share and received net proceeds before expenses of $112.6 million. These proceeds were used to fund a portion of the RCA mortgage loan. On November 3, 2021, our board of directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on November 30, 2021 to common stockholders of record as of the close of business on November 16, 2021. The dividend represents a payout of 79% of our normalized AFFO per share. Finally, a couple of comments on our 2021 guidance. We reaffirm our previously issued guidance range for normalized FFO of $1.56-$1.58 per share and normalized AFFO of $1.53-$1.55 per share. Our previously issued guidance did not include the impact of two matters that affected our full year 2021 per diluted common share guidance for net loss, FFO, and AFFO. The first is the Avamere straight-line rent receivable write-off, which had an $0.11 per share impact on net loss and FFO. The second is the debt extinguishment costs related to the 2024 note redemption early in the fourth quarter that resulted in a $0.17 per share impact on net loss and FFO, and a $0.16 per share impact on AFFO. The impact of these two transactions are added back, arriving at our expected normalized FFO and normalized AFFO measures. With that, we'll go ahead and open it up to Q&A. Certainly. Once again, if you have a question, please press star then one. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Richard Anderson from SMBC. Your question please. Thanks, good morning out there. Harold, I think this is your last call. Congrats on that. Thanks, this is the last call. Wow. Thanks, Rick. I appreciate it. Just remind me, Rick, is the mandate, January fourth mandate, that's just skilled, right? Not the senior housing is not a part of that. Is that correct? I was clear on that before. I'm a little less clear on the news this morning because it says all healthcare workers. The original mandate was healthcare businesses that received state or federal money, and that's not the case with senior housing. I'm assuming that you're correct that senior housing is still carved out. Our guess is that most of the senior housing providers will need to have coverage because a lot of them really want to mandate. I think we'll see more senior housing operators mandate anyway, but I think that's correct. Okay. In terms of Avamere, you know, it's nice little bounce on the occupancy side. I know you gotta, you know, reserve some time to figure out what you're gonna do with that longer term, but what would it take for you to not have to do something? I mean, if you know, we get 400 basis points of occupancy gain, you know, God willing, you know, some with some sort of regularity, is there a scenario that you know, you could get back, you know, assuming COVID cases decline and all the good things that hopefully will happen in the future that you know, maybe nothing will have to happen? Yeah. I think the way we think about it, Rich, is, and I know you'll recall, that prior to the pandemic, Avamere had the lightest coverage of any of our, you know, material tenants. You know, hitting this kind of problematic period of time these last 19 months and starting out with thinner coverage just made it even that much more difficult for them. I think we're inclined to wanna do something for them. We just wanna see what that is once things stabilize. We don't expect that it's not gonna have a material impact on the company, on numbers or anything like that. I think we would like them to have a little bit more breathing room, just because you never know, and I think this demonstrated that to us. If you and I know, I mean, we had a lot of conversations with you over the course of all the restructurings we did related to the merger and all the things that we did for those other tenants. That actually held up really well during the pandemic. I mean, you know, this is the only tenant that we really had an issue with the entire time. It came pretty late in the game. Yeah, I think we're inclined to do something next year for them. We just need things to stabilize a little bit more and get a better sense of kind of where they land. Again, it won't be material. Okay. Last question from me, and I'll yield the floor to my peers. Any update on the timeline to Enlivant and TPG and an actual exit from that portfolio? Not really. TPG wants to give it a little bit more time before they really start to run sort of a full-blown process. That's really because things have been rebounding pretty nicely there. I think their thought process is, I wanna be careful here because I don't wanna speak for them, but I think their thought process is, as the portfolio's been recovering, it'll just make the opportunity to get a better valuation that much greater. My guess is it's not really gonna start in earnest until after the first of the year. Then the way to think about it is, you know, however long it takes to find a buyer, it's gonna take several months for regulatory reasons to get it closed. I don't think we're looking at anything sooner on a close than mid-year 2022. It could be later in the summer. For us, it doesn't really make a difference. It kind of is what it is now. To the extent that they're smart, to the extent that they think by waiting they'll get a better valuation, that accrues to our benefit anyway. Okay. Okay, great. Thanks very much. Yeah. Thank you. Our next question comes from the line of Nick Joseph from Citi. Your question please. Thanks. Maybe just following up on that Avamere question. So if the letter of credit runs out in December and recognizing that, once things are stabilized, maybe you can make a decision kind of longer term on the lease. What happens in that intermediate timeframe, maybe beginning in January, assuming the business hasn't kind of fully recovered to a coverage level that would allow them to pay their rent? Well, right now we think we're okay for the couple of months or so following the expiration of our ability to use a line of credit. They were able to access sort of upfront funds, which is really gonna help their liquidity on these COVID units. They negotiated with the state of Oregon and they're in the process of some other negotiations as well, which we think will help. We're not really concerned about rent in the short term right now, even after the letter of credit runs out sometime in December. Thanks. That's helpful. I think you've obviously repositioned the balance sheet to be in a good position. I think you mentioned the acquisition pipeline's maybe $2 billion. You know, how are you thinking about your cost to capital, I guess, specific cost of equity and the ability to kind of execute on that acquisition pipeline just where shares are trading today? I think, a couple of things. One, you know, on the skilled side, behavioral and addiction, clearly we can be competitive. What we're finding on senior housing is it's clearly difficult to compete on large portfolios with REITs out there, given where our equity currently stands. On the smaller deals that we have been executing on this year, about, what? $75 million of them so far, those are deals that aren't on the radar of some of the more competitive players. They're deals that we can get done, and we can be creative with those deals, whether, you know, that's earn outs or things like that because of some of the issues that some of the, particularly smaller senior housing providers have had. You know, we're really good at doing those kind of deals. Doing smaller deals like that really don't hit the radar as far as, you know, you all are concerned in terms of us taking on some difficult things. It allows us to get more things done on the senior housing side if we focus on the smaller things. Talya [Hacohen], I don't know if I've missed anything on that. No, I think that's exactly right. Thank you very much. Yep. Thank you. Our next question comes from the line of Juan Sanabria from BMO Capital Markets. Your question please. Hi, good morning. Just hoping to spend a little bit more time on Avamere. Is it possible you guys could give us a sense of how that portfolio's EBITDAR has trended over time? I don't know if you can give like a T3 or a T12 kind of pre-COVID and today, just to give us a sense of the degradation in cash flows and kinda what is potentially possible to get back to try to gauge how much rent could be cut and just the level of confidence in not having a material effect, given it is your largest tenant. Yeah. Well, they were actually trending up prior to COVID. They were trending up just because of some well, for two reasons. They were trending up because of some operational initiatives that were taken on, and they were trending up because of PDPM, just like all the rest of our tenants. So they were actually on the upswing. And really, if you know, when you think about it, you know, they made it through what, 16 months or so of the pandemic, and had their low point in occupancy in December of 2020 was 70%. They improved to about 74.5% going into the summer. So they had some pretty decent gains. And then you had these really severe readmission restrictions that we haven't seen anywhere else in the country in Oregon and Washington. Really unrelated to how much COVID was actually happening, it was just sort of this visceral reaction that the states had. They dropped from 74.5% to 67%, just under 67%. Over 300 basis points lower than their low in December. That really just, you know, threw them for a loop. Up until then, they were hold and serve. You know, I think these COVID units and the dropping occupancy biding their time, hopefully, if they need to get back. Our whole focus is they were light on coverage before, but they were able to hold and serve through the pandemic until these sort of recent events. That's why we say on a go-forward basis, when we make a final determination, that it's not gonna be material is because they were able to hold serve and we just want them to have a little bit more breathing room because there are always gonna be some bumps in the road. Any color on kind of where the coverage is on like a T3 basis and what do you think is a healthy coverage? I get that they can get by, but like just to keep them at a healthy level. Just to get a sense of how big their rent cut could be is what we're trying to get to. Well, the problem is I don't wanna negotiate with Avamere on the phone right now. Okay. Fair enough. Okay. You know, we'll get there. I think before the pandemic and before they're sort of trending upwards with PDPM, they were around just slightly above 1x, and you want them to be a little bit higher than that. You know, we're not gonna give them an adjustment that takes them to 1.5x or something like that. That's not gonna happen. Okay. Then just with regards to the seniors' housing business overall, given the labor cost pressures, what kind of flow through to NOI do you expect from incremental occupancy given the cost pressures? Said differently, how do you think about margins getting back to where they were previous to the pandemic? Well, I think there's a lot of math that goes into this. You've got occupancy, and you've got rate, on the revenue line. The rate is where operators are really thinking what they can manage, what they have to manage now in order to cover labor costs. In other words, passing through labor costs and labor increases. What we're hearing is everywhere, from what we would expect to hear on rate increases, which are call it sort of the 5% annual rate increase, to something more substantial. It really is going to depend on the type of building, and the level of acuity and the length of stay in those buildings. There is a sense. I just came back from a day and a half at the NIC conference in Houston, and there is definitely a sense among the operators with whom we spoke that some portion, if not the entire portion, of these labor costs can be put through to residents, particularly coming in. We're seeing consistently that leasing positive leasing spreads. In other words, new leases are being written at higher than in place rents. That's the good news. There appears to be an ability to do that. That suggests that the operators are not gonna eat the entire cost of labor and have it come out of their margin. How much they'll be able to offset by the top line is gonna be a function not just of rate, but of continued occupancy increase. That's why I said there's a lot of math here, but that's the best math I have right now. The other point I would make, Juan, is that our operators aren't doing any of these deep discounts like some of the competitors are. There, and you see on the rates that we put in the supplemental, that's all held up really well. They're giving Talya the feedback, knowing that they're actually able to build occupancy without sacrificing rates to get that occupancy back up. Okay. Just to confirm, the positive lease spreads that you're seeing versus inputs, I think that's new and that historically hasn't been the case because someone typically leaves that it's more acute. Are you seeing street rates for new customers moving up or is that kind of holding flat at best? I'm sure asking rates are moving up in general, certainly with the operators with whom I spoke. There are operators that are providing discounts to build occupancy. You can see from the steady increases in occupancy, at least within our portfolio, that we're seeing good traction on occupancy increases as well as high, what I'd characterize as the pent-up demand. Significant inquiry increases versus pre-pandemic periods, higher conversions to move-ins, compared with 2019. There is positive momentum on beliefs that everything indicates that is continuing, at least so far. There's a sense you can actually start to push rates more than has been pushed. This is sort of the typical was more like the 4%-5% pre-pandemic. Now we're seeing, we're hearing operators say they can do more. Going back, Juan, just to change a little bit, back on Avamere. The other thing I forgot to mention is that the phase four funds haven't come in yet as well. In addition to the money that they're able to access off the new COVID units, they'll have the phase four funds as well, which goes to our comfort with receiving rent after the LC is done. Thank you. Thank you. Our next question comes from the line of Amanda Sweitzer from Baird. Your question please. Thanks. Good morning. It looks like you granted another small tenant deferral request in September. Can you provide more information on the outlook for additional near-term rent deferrals outside of Avamere? And then is there any security behind the already deferred amounts? Yeah. Well, one, there's always security behind them. But the only other things that we've done are really just short term in nature, with nothing long term anticipated, just to buy them a little bit of time. It's been really nominal. And we don't see anything else right now on the horizon. Okay. In terms of rent deferrals in October, you wouldn't expect a meaningful uptick? No. That's helpful. In terms of additional skilled nursing support, are there any incremental state initiatives you're watching or find encouraging? There aren't specific state initiatives, but most of the states are pretty flush right now on the Medicaid side. They're really in good shape from a budget perspective. As we get into the first part of next year and they start having discussions about annual rate increases, the narrative's been a little bit more positive there because they have more money to work with. Only about half the states allocated FMAP directly to skilled operators. There's a chunk of money, a lot of it, that a lot of the states are holding onto there as well. No specific initiatives. The other thing though, that if we try to anticipate that we may see is some more negotiations like we saw in Connecticut to increase wages and use the Medicaid program as a pass-through. For those on the call that aren't familiar, the industry worked with the union in the state of Connecticut to negotiate wage increases for the employees in that state. It was all done as a pass-through in the Medicaid program. Most of the 50 states have Medicaid programs that will allow for that. We've seen it happen in California a number of times. It's a negotiation that's easier. I don't want to say it's easy, but easier than some other negotiations because none of that rate increase can ever get pocketed by operators. It has to get passed through directly to employees, and it's audited as such. I would expect there to be more of those kind of negotiations as we go into 2022. That's helpful. Appreciate the time. Yep. Thank you. Our next question comes to the line of Steven Valiquette from Barclays. Your question please. Hey, thanks. Hello, everyone. Thank you. Just a question on the overall skilled labor environment. You know, I found that really across the entire post-acute healthcare provider spectrum, we've gotten some mixed signals at different stages of the pandemic on which business models may or may not be competing for the same type of skilled labor. When you think about you know home nursing or home health versus SNFs versus inpatient rehab facilities or IRFs. I guess I'm just curious to get your thoughts on the SNF sector in particular, you know, where there's overlap on competition for skilled labor across post-acute, and also whether or not the acute care hospital sector is also you know part of that you know competition for the same type of skilled labor or not. Thanks for any thoughts around that. Yeah. I think most of the competition is on the high acuity post-acute space. You know, I think LTACs and IRFs. It isn't as competitive when you talk about the skilled labor. It is the certified nursing assistants, but on the skilled labor, it's not as competitive with senior housing or home health simply because in home health you're not looking at the same kind of staffing level requirements that even on IRFs and LTACs. LTACs are only in a handful of states. IRFs are in a lot more states, but they don't have a big presence, I think, in about a dozen states. You know, I think that the larger concern is how many healthcare workers have just left the workforce. That's really the larger concern. I think for people that haven't come back to the workforce because of pandemic-related benefits, I think there's a lot of optimism there that folks will come back in. That's where we've seen shortages in areas that we haven't ever seen shortages before, you know, dietary and housekeeping and laundry and things like that. It's more about the workforce, and time will tell that those people that have burned out, whether after taking a break, particularly since they spent so much time schooling and having this career, that they'll come back. That's something that affects everybody. It affects skilled just because of the number of employees that you have in a skilled facility versus any of the other settings like home, obviously, or AL. Okay. That's definitely helpful. Appreciate the color. Thanks. The other thing I would just point out, and you all may have seen some of these trends, but the workforce issues look like they had peaked at the end of 2020 and started to get better, because there was a lot of optimism on the part of employees that now that the vaccine was in place, things would get better. As it turned out, with the percentage of people that chose not to get vaccinated, then everybody starts going through it again, and that's really when a lot of the burnout really got worse. If you look at the trends the last several months, the peak of the burnout was worse than it was at the prior peak, because of that. I think that's why people are at least somewhat hopeful that once folks have a chance to take some time off, and particularly once everybody's vaccinated that work in the facility, they'll come back to the workforce. We'll see. Got it. Okay. Thanks, Rick. Thank you. Our next question comes from the line of Omotayo Okusanya from Credit Suisse. Your question please. Hi. Yes. Good morning out there. Harold, again, congrats and good luck. Welcome back, Tayo. Appreciate that, guys. My question is really more on the on the SNF reimbursement side. I mean, you guys give some good color in regards to FMAP and sequestration and when some of those things could end. I'm very curious what you're hearing about in regards to, you know, the following three things, skilling in place. Also, you know, the $10 billion emergency fund from the CARES Act. Is anything left in that? Could you guys suddenly get money from any of that? And also potential PDPM review by the new head of the CMS. Yeah. On skilling in place, I think there will be an initiative, and I think there have already been some discussions on the part of the trade association that represents the space to try to make that permanent. Hopefully, given the benefit that everybody saw with skilling in place and the lack of financial or the absence of financial impact on the acute space, who always sort of fought it, hopefully we've got a good shot at making that permanent. I mean, it's not a big issue, but it certainly helps on the margins and everything helps on the margins, right? There'll definitely be a key focus on that. On the fund, after phase four, there is quite a bit left in the fund. There's some optimism that if this stretches out longer and there needs to be access to additional funds, that there are those monies in there. There's been about $8 billion that's been returned from providers, particularly on the acute side, that didn't need it. If there was nothing left in the fund, I think there wouldn't be much optimism because given everything that's going on in D.C. to negotiate new money going into the fund, I think no one believes that would happen. There is gonna be money after that. I think it's somewhere around, I'm just rounding, somewhere around $20 billion or something like that. It could be a little bit less, maybe 17, but it's a pretty decent number. What was your third one? PDPM. Oh, PDPM. Yeah, I think nothing's being discussed right now about any change or review to PDPM. I think that initially, because everybody felt like we peaked with the December surge, it looked like maybe 2021 would be a good base year to use to try to assess, if everybody was recovering, to try to assess where PDPM really fell out relative to expectations. Given how tough things have been in 2021, I don't know if that's gonna be a good base year or not. You know, just stay tuned on that one. We don't have any reason to believe that the new head of CMS, who we were supportive of on getting that position, is gonna be any less reasonable with the industry on PDPM than the previous leadership. Thank you. Thank you. Our next question comes from the line of John Pawlowski from Green Street. Your question please. Great. Thanks for the time. Could you provide some details around the sequential deterioration in North American Health Care's coverage? Where is their occupancy today, and has it trended up or down in recent months? Yeah, that's just a matter of one quarter falling off and another quarter getting picked up. They're actually doing well. Their occupancy is recovering. They have the best skilled mix, or the two best skilled mix of any of our operators in the business. Yeah, we feel good about North American Health Care. We don't have any issues there. There were just some timing issues there with quarters dropping off, a new quarter coming on. California's got less, I don't wanna say there aren't labor pressures, there are, but wage equity has been pretty good in the state of California, so there are less issues, as I mentioned, in my opening remarks than in a number of the other states. Okay, maybe on that point, just looking down your top ten operator list, is geography just kind of the biggest driver in the divergent outcomes and divergent changes in these coverage levels? You know, you see North American Health Care, Avamere, Genesis HealthCare declining sequentially, but some other operators are stable, they're increasing. What are the biggest one or two factors that are driving this divergence across operators? Right. The two consistent factors were Q2 2020 dropping off and Q2 2021 dropping on. The second consistent factor was a decrease in PRFs being recorded in the current quarter. The third is absolutely geography. We don't have very many facilities left with Genesis, just the eight buildings, but they've had real labor pressures in those facilities, and that was a factor that really impacted their coverage. Yeah, geography is kind of everything right now when it comes to labor pressures, at least the degree to which you are experiencing labor pressures. Yeah. Maybe last one from me. You know, I won't hold you to a point estimate, but just some thoughts. You know, if occupancy just kinda continue to improve, but the full impact of recent labor resets finally flow through these trailing 12-month numbers, you know, a year from now, what does coverage look like across the portfolio? I'm struggling with such a lagged concept of EBITDA right now. Yeah. You know, we like to see our EBITDA coverage north of 1.4x in the aggregate. We were pretty much around there in the aggregate, you know, before the pandemic. If the labor pressures don't abate to the extent that we would like to see them abate, you know, the new normal could be 1.3x EBITDA coverage for skilled. You know, that just remains to be seen. We don't believe it's gonna get down to, you know, 1x or anything like that, and that's primarily because there are too many dynamics at work right now that are gonna just push occupancy up. The number of skilled beds continues to decline. The pandemic is actually gonna accelerate that. You've got the demographics, which we're all aware of. I mean, you basically have a space that prior to the pandemic was projected to be fully occupied by about the middle of the decade. That's gonna put the industry at a place that it hasn't been at in decades, really, from an occupancy perspective. I think that's gonna help quite a bit on the labor pressure, on the labor pressure side. It's because people are gonna be able to pay more for labor, that's gonna help the labor issue as well. Yeah. Over the long haul, you know, maybe coverage is a little bit lighter, but it's not gonna get to a point that's either dangerous or is gonna cause all of us to do some significant restructurings and long-term rent reductions. We just don't see that. Okay. Thanks for the call. Yeah. Thank you. Our next question comes from the line of Daniel Bernstein from Capital One. Your question please. Hi. I guess good afternoon or good morning for you, West Coast. I guess the only question I had. I wanted to go back to the vaccine mandate. You know, when you say that 80% of your, I guess the operators, 80% of the employees are vaccinated, it seems like that's a large number that you could potentially lose. Do you have any specific examples where your operators actually put in a vaccine mandate and, you know, what the attrition was from the employee standpoint? Maybe they did that in conjunction with wage increases or some other mechanisms to retain employees. I just wanna better- Uh- Just trying to get a better grasp of what the risk is that you will see a lot of employee attrition within skilled nursing. Right. Enlivant, Holiday, Genesis, Atria, we have a number of smaller operators. One that's one of my board members, Juniper. They saw low single digit attrition, and they didn't have to raise wages to do it. It was all really pretty consistent with all those operators and some other smaller operators that we've talked to. It just hasn't been. Viscerally, you feel like it's gonna be a bigger issue, which is holding back some of the other operators from sort of jumping on the mandate. It just hasn't been. That's really what we've seen consistently amongst the operators that we're aware of. Call it low to mid single digit attrition. That's it. Okay. Real quick, on the $2 billion pipeline, is that both in real estate acquisitions and loans or are you looking at more of a kind of doing more of like the RCA mortgages? They're more- Short-term structured deals. Sorry? They're Yeah. The RCA loan was somewhat unique. As you know, we've not done a transaction like that in the past, really, and it's not something we hold out as going to be typical for us. Okay. All right. That's all I have. Thank you. Thank you. Thanks, Dan. Appreciate it. Thank you. Our final question for today comes from the line of Joshua Dennerlein from Bank of America. Your question please. Yeah. Hey, guys. Hope everyone's doing well. Good, thanks. Question. Rick, in the past, you've talked about the occupancy recovery in senior housing and skilled nursing. Just kinda curious your latest thoughts on when we get back to that pre-pandemic level and, you know, does labor play any factor in how you're thinking about these days? Yeah. On the senior housing side, I had been saying that by the end of 2022 we should be in pretty good shape. I think we still feel that way on senior housing. On skilled, prior to the Delta surge, I felt like we'd be there by the end of the first quarter 2022. That obviously is not gonna happen. The labor pressures have put more stress on that. Right now our best guess on skilled is it's also about the end of the year. Even though there's a lot more pent-up demand, I think on the skilled side, as it turns out, because of all these other factors, maybe they both wind up in a relatively good place at about the same time. Okay. Thanks for the color. Everything else has been answered. Thanks. Sure. Thank you. This does conclude the program of the question and answer session of today's program. I'd like to hand the program back to Rick for any further remarks. Thanks very much. Thanks all for joining us today. We're always available, as you all know, for follow-up. I know we're seeing a bunch of folks, at least, virtually at Nareit, and so we look forward to having those meetings and to having additional follow-up discussions. Have a great day and stay safe. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.