New Senior Investment Group Inc.
Q1 2020 Earnings Call Transcript

Published: 8 May 2020

[Operator:]

Good day! And welcome to the New Senior Investment Group, First Quarter 2020 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, today’s event is being recorded.I would now like to turn the conference over to Jane Ryu. Please proceed.

[Jane Ryu:]

Good morning, and welcome to New Senior's earnings call for the first quarter of 2020. With me today are Susan Givens, our CEO; Bhairav Patel, EVP of Finance and Accounting; and Lori Marino, General Counsel.Before I turn the call over to Susan, I'd like to highlight that this morning's press release, company presentation, our quarterly supplement and the reconciliations of GAAP and non-GAAP financial measures can be found on our website at newseniorinv.com. Before we begin, please note that our discussion will exclusively focus on non-GAAP measures unless otherwise indicated.During this call we will make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. No forward-looking statements can be guaranteed and actual results may differ materially from those projected.Forward-looking statements made on this call should be evaluated together with the risks and uncertainties that affect our business, particularly those disclosed in the risk factors and in other disclosures in our most recent annual and quarterly reports filed with the SEC, including the Form 10-Q that we will be filing later today. We undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future events or otherwise.And now, I'd like to turn the call over to our CEO, Susan Givens.

[Susan Givens:]

Great! Thanks Jane. Good morning and thank you for joining New Senior’s earning call for the first quarter of 2020. The world has obviously changed pretty significantly and just few months since our last earnings call on February 27.While this is our first quarter earnings call, we know people are focused on understanding what’s happened since we began to see the impact of the COVID-19 pandemic and how we're thinking about things as we move through these extremely challenging times.Let me start by saying that as we all know, this crisis has severely impacted the entire world with at-risk populations, including the seniors that our communities serve, being disproportionately impacted.Our operators had taken several critical steps to protect the health and safety of the residents and employees within our communities. While necessary, we know that these important measures have had and will continue to have an impact on our financial results. It’s difficult to predict how long the pandemic will impact our communities and when a recovery will start or what form it will take.As a result, today we announced that our Board of Directors made it difficult, but a prudent decision to decrease our dividend for the first quarter of 2020 by 50% to $0.065 per share. This was not an easy decision, but in uncertain times we believe that we need to do everything we can to preserve capital and put the company in a solid position.In 2019 we accomplished a number of significant achievements to transform the company. We sold our underperforming Assisted Living portfolio, we repaid over $360 million of debt and we completed nearly $400 million of new financing, resulting in lower desktop and extended debt maturities.As a result of these and other initiatives, we have significantly improved the quality of our overall portfolio and the financial profile of the company prior to the onset of the COVID-19 pandemic. While these are currently very difficult time, we believe we are well prepared to weather this storm.Before I go into more detail about the impact of COVID-19 on our business, let me remind you that the full year 2020 guidance that we provided in February did not factor in any disruption to the company's business from the COVID pandemic. As such, today we are withdrawing our previously provided full year 2020 guidance.It remains too early to estimate the complete effect of COVID-19 on the company's future results. Our focus throughout all of this has been to control the thing that we can control and to be as transparent as we possibly can be, recognizing that we are trying to incorporate new data every day and the situation remains very fluid.Since the onset of the COVID-19 pandemic, we have shared periodic updates with our stakeholders in order to provide as much information as we can. Going forward, we intend to continue to provide those updates.Along those lines, in addition to issuing our first quarter press release and supplement, this morning we posted a presentation on our website. The presentation covers three key areas which I’ll reference throughout my comments.First, it provides a brief overview of our company and the composition of our portfolio, as well as some observations on the larger demographic trends within Senior Housing. I want spend a lot of time on this in my comments, but I encourage you to review as I think it provides some good perspective on where we fit within the Senior Housing industry and how compelling the long term fundamentals remain.Second, it provides some information on how our operators have responded to the pandemic, including what we've seen within our communities and how our operators are preparing to move forward. And third, it provides some additional observation on the financial impact that COVID-19 has had on our financial results and some expectations for moving forward.As a quick reminder, today our portfolio is comprised of 102 independent living properties and one CCRC property, which are managed by four different operators. We have close to 11,000 residents across our communities and our communities are staffed with approximately 3,300 associates.For us 2019 was a transformational year and 2020 was off to a strong start. However, in early March and it became clear that COVID-19 was quickly spreading in the U.S. our operators began to take steps to modifying and enhance their existing infectious disease protocol.Things evolved rapidly and by mid-March all of our operators had implemented significant measures, including restricting access to non-essential visitors, securing additional PPE supply, closing all communal dining services, canceling all group activities, implementing quarantines for all residents and performing daily temperature check for all residents and staff.As an owner of Independent Living Properties, it’s important to remind everyone that our operators do not provide healthcare services within our communities, and as a result the healthcare needs of the residents within our communities tend to be slightly lower. In addition, the average age of our residents is typically slightly younger than an Assisted Living.In general the residents in our communities are accustomed to having more independent and frequently come and go from the communities. That dynamic created a unique set of challenges for our operators, and the measures taken back then, while they now seem common and obvious after the implementation of all the shelter-in-place and stay-at-home orders across the country, in early and mid-March they represented a significant shift in the daily lives of the residents and our communities.Our operators are difficult, but we believe necessary steps to protect the residents and the staff in our communities, and the restrictions that they implemented are still in place across our portfolio. We know that these necessary actions have already and will continue to result in both lower move-ins and increased expenses. At this point all of our communities have remained fully operational since the start of the COVID-19 pandemic. To-date our operators have reported a total of 141 cases, including 101 residents and 40 associates across 16 properties.The incident rates have not been uniform across our portfolio. Of the 101 resident cases, more than half, 58, are concentrated at a large CCRC located in downtown Philadelphia, an area that has been significantly impacted by the pandemic. That building has approximately 350 residents and 330 associate. So it’s a large community and has a lot of staff moving throughout the building given the levels of care.On the other hand, Holiday, our largest operating partner who manages 98 of our 103 communities has reported 33 positive resident cases today, representing 0.3% of total residents. Since Holiday is an independent living operator, they don't provide healthcare services, which generally results in lower staff count by building and fewer people coming and going to their building.We don't take any of these numbers likely, and we do expect that the numbers will go up as the virus spreads and more testing becomes available. That said, our operators are working to implement plans to safely lift certain restrictions at our communities in a phased approach. I think it's important to note that due to the high – at the at-risk nature of the residents in our communities served, we expect that many of the protocols in place will continue for some time, even as federal, state and local stay-at-home, shelter-in-place and social distancing orders are relaxed overtime.Our operators face a host of challenges as they begin to lift restrictions, including allowing physical tours and increasing the volume of new move-ins, implementing a measured approach to allowing non-essential visitors back into the communities, allowing residents to enjoy communal dining again, and allowing resident activities to resume.We know that many of these services are an essential part of the physical and mental wellbeing of the residents in our community, and we are focused on working with our operators to ensure that the safety of our residents and associates remains the top priority. Along those lines, we’re actively working with our operators to roll out strategies around testing, including testing for new residents, existing residents and employees.Now turning to how the COVID-19 pandemic has impacted our financial results. First, I’ll discuss occupancy and then I’ll touch on expenses.On the occupancy side, due to in large part of the restrictions on tours and move-ins at our communities in the second half of March, total portfolio occupancy declined 130 basis points from 88.7% on February 29 to 87.4% on March 31. April was the first full month to be impacted by the pandemic.Ending occupancy declined another 120 basis points from 87.4% on March 31 to 86.2% on April 30. Importantly, we do have a number of individuals that are scheduled to move into our communities and have pushed out their move-in days and we also have new residents that are planning to move in. So while there is no doubt this pandemic is having a significant impact on portfolio occupancy, there continues to be demand for the product.Also, while we have certainly seen leaves and move-in volume trends lower than historical averages, we've also seen voluntary move-outs come down. As an example, in April move outs were down 9% versus January and February averages, which has helped mitigate some of the occupancy declines from fewer move-ins. All that being said, as we move forward we expect to experience additional occupancy declines due to the continuation of the various measures taken to stem the spread of the virus within our communities.On the expense side, operating expenses have increased since the onset of the pandemic as a result of enhanced safety protocols, which includes the cost for acquisition of personal protective equipment, additional supplies, enhanced cleaning and the need for additional labor.In April, the first full month to be impacted, operating expenses were up approximately 5% versus what we had originally budgeted for the month. We expect these increased expenses to be partially offset by reduced variable expenses, primarily across marketing and maintenance as a result of lower move-ins and reduced occupancy levels.It's important to note that while we have seen labor expenses increase since our IL operators do not provide healthcare services, we have not seen as significant an increase in labor costs as compared to Assisted Living operators. As we move forward, we expect that operating expenses will remain elevated as our operators continue to implement protected measures within the community. Importantly, the additional expenses could vary by community and could be impacted as our operators’ partner to safely lift restrictions.While it’s too early to estimate the complete impact of the COVID pandemic on our financial results, we do want to provide as much perspective and we can. If you look at April alone, the first full month to be impacted by the pandemic, we are currently estimating that NOI for the month will be down approximately 8% to 10% versus April 2019. For illustrative purposes, we have also provided some estimates as to what the monthly impact could be while we're managing through the pandemic.If we assume monthly occupancy is down an additional 100 to 150 basis points each month consistent with April, that would result in total occupancy declines of 300 to 400 basis points for the second quarter compared to ending occupancy on March 31. And if operating expenses are up 5% to 10% versus budget each month, which is slightly higher than operating expenses were up in April, that could result in NOI being down 10% to 15% in the second quarter of 2020 versus the second quarter of 2019.While these aren’t perfect estimates, we wanted to provide some sense of what we are seeing and how things could play out in the second quarter. The ultimate impact of the COVID-19 pandemic will depend on a variety of factors and it's too soon to say with certainty what will happen, but as we move forward we have better information, we will work to continue to keep you updated.Before I turn it over to Bhairav, I want to quickly thank our operating partners and the staff at our communities. I have been overwhelmed by the commitment and the leadership that our operators have shown during this difficult time. This is truly an extraordinary time to be serving seniors and we can't thank them enough for the exceptional care and service they have provided to the residents in our communities.I also want to thank our team at New Senior. We are relatively small team, but we are also a tight-knit group that happens to be headquartered in New York City. Like many others around the world, this pandemic has hit us personally and despite all the stress and uncertainty, they have worked tirelessly over the last couple of months. I want to thank them for their hard work, their dedication and their flexibility as we have worked to navigate our way through this.And lastly, I want to thank our investors. We know this has been hard on everyone and we want to thank you for sticking with us. We continue to believe that the long term value of Senior Housing and Independent Living in particular remains intact. We also believe in the strength and foundation of our company. The necessary measures that we’ve taken to battle COVID-19 will no doubt have a near term impact on our financial results, but we also believe they will highlight the importance of senior housing and will strengthen our position as we move forward.With that, let me turn it over to Bhairav to discuss the financial results in more detail.

[Bhairav Patel:]

Thanks Susan and thanks everyone for joining us on the call this morning. I will provide an overview of our financial results for the first quarter, followed by a brief discussion about recent actions we have taken in life of the disruption caused by the COVID-19 pandemic.As of the end of the first quarter, our portfolio was comprised of 103 private paid Senior Housing properties across 36 states. During the quarter we completed the sale of 28 AL/MC properties for gross proceeds of $385 million, realizing a gain of $20 million. These assets are separately identified as discontinued operations on the face of our financial statements for the period presented. As a result of the sale, our same-store pool now includes our entire portfolio of 103 properties, which includes a 102 managed IL properties and a single lease property.Same store cash NOI for our total portable of 103 assets for the first quarter of 2020 was up 0.1% compared to the first quarter of 2019. Our cash NOI for the quarter includes approximately $500,000 of incremental COVID related expenses incurred towards the end of the quarter. Excluding those expenses, our cash NOI was up 1.5% year-over-year, which is generally in line with our expectations for the quarter.Average occupancy for our managed IL properties increased 87.1%, a 10 basis point increase versus the first quarter of 2019. Occupancy growth was accompanied by an increase of 0.9% in RevPOR, resulting in top-line growth.Expense growth generally trended in-line with expectations for the quarter, until the second half of March when we started incurring incremental expenses I mentioned earlier with respect to supply of personal protective equipment, and other items required to implement enhanced protocols designed to contain the spread of COVID in our properties.Now I’ll discuss our financial results, balance sheet and highlight certain actions we took to strengthen our liquidity position. AFFO for the first quarter was $14.1 million or $0.17 per diluted share. NOI for the first quarter was $35.5 million. Both NOI and AFFO include approximately $500,000 of additional expenses we incurred in connection with COVID related protocols instituted in March.Interest expense for the first quarter was $17.2 million or about 4% lower compared to the prior quarter. This was driven by a lower average debt balance as a result of debt repayments and a slight decrease in LIBOR. Also, please note that the interest expense excludes interest related to $260 million of debt directly attributable to the sold assets, as those amounts were included in discontinued operations in the financial statements.Turning to the balance sheet, we ended the quarter with gross assets of $2.3 billion and cash and cash equivalents of $135 million. We had $1.6 billion in total debt outstanding at the end of the first quarter with a weighted average coupon of 4% and weighted average maturity of six weeks. Our maturity profile improved significantly as a result of refinancing we completed in conjunction with the sale of the AL/MC portfolio and we now have no significant maturities until 2024.Given the sharp decline in LIBOR since the end of the quarter, our weighted average coupon is approximately 2.4% at the current spot rate of approximately 20 basis points. This is important, because approximately 50% of our total debt outstanding is subject to LIBOR fluctuation.For reference, every 10 days this point change in LIBOR impacts annual interest expense at approximately $800,000 or just under $0.001 per share. In addition, over 90% of our total debt outstanding has security agency debt not subject to financial covenants, allowing us to navigate through potential near term disruptions and operating performance as a result of COVID-19.Now, let me outline a few measures we have taken recently to strengthen our balance sheet and liquidity. First, out of an abundance of caution, we drilled down on our revolving credit facility to the tune of $100 million in March to safeguard ourselves against consequences of the turmoil and volatility that exists within the markets during the early days of the pandemic. We expect to repay the draw amount in the near term as we gain more visibility to the operating impact and the level of uncertainty subside.Second, given the current environment and restrictions on access, we have temporarily suspended all non-essential capital expenditure targets and will reevaluate as the restrictions are lifted. Our current expectation is that our total spend for the year will likely be at least 25% to 30% below the initial projected spend of approximately $20 million. Especially in an environment laden with uncertainties, our Board has prudently decided to reduce the dividend payout for the current quarter by 50% to $6.05 a share.While we are taking several measures put ourselves in the best possible position to weather the current crisis, it is too early to be able to accurately project the impact of COVID-19 on our financial results. Accordingly we have made the decision to withdraw our previously issued full year guidance as it did not contemplate the impact of the COVID-19 pandemic on our business. Instead as Susan described earlier, we have tried to constrain the range of potential outcomes based on trends we have observed since the pandemic began in mid-March.As we have done since the initial stages of the pandemic, we expect to keep you informed as we process the information and the final assessment of the potential impact on our business.With that, I will turn it over to the operator to open the lines for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question today will come from Daniel Bernstein with Capital One. Please proceed with your question.

[Daniel Bernstein:]

Yes, thank you. I hope you don't mind if I ask a few extra questions and I just want to – you know I hope everybody's well at the company and I wish all your residents and operators well in addition.

[Susan Givens:]

Thank you. You too.

[Daniel Bernstein:]

Yeah, thank you. So I just want to understand the expense side of the equation. Are you assuming that variable cost completely offset the increase in COVID costs or is there some differential between those two? In other words, if COVID costs are up 5% and you decrease variable, there’s some kind of net like one or two. I just want to make sure I'm clear on that.

[Susan Givens:]

Yeah, I know. You got it exactly. So we do think that variable expenses will offset some of the increased COVID expenses, but we don't expect them to completely offset. If you look at April, which you know that’s not – you know 12 months of data is one month of data, but it’s pretty much all we have at this point. There we saw that our variable expenses and the decline there did almost entirely offset the COVID expenses, but we don't think that that is necessarily going to continue to support this as we move through.So our assumption is that we will you know have an offset on the variable side, but it won’t completely offset the increase as we kind of are still in the hunker-down mode.

[Daniel Bernstein:]

Okay, and the assumption is that there’ll be some increase in costs that continue beyond restrictions, local restrictions. Just the infection control, all of that will just stay in place until I guess maybe the pandemic ends.

[Susan Givens:]

Yeah, that's the really tricky thing I think all of us here are having a hard time forecasting that, right. I think that what we have done is we’ve assumed that there will be some level of expense, even after the restrictions have lifted if you will at certain properties, and I know you're hearing this from everyone, but I think it just plays out and we would hope to be able to get you know kind of a full revised guidance and to really be able to kind of nail something down.But as we're seeing it kind of play out across the board, different states, different counties, different jurisdiction are going to have a different approach and so we think we may have you know certain assets where restrictions are lifted sooner than others and the restriction lifting me vary by assets themselves.Well, as an example you know we may have some return to a form of communal dining, so call it 10 residents at a time. And then one community, whereas in another community we may say, actually we want to continue to keep the communal dining room closed, and so those expenses will vary depending on what's happening in a specific property.But for our purposes and for the purposes of thinking about how we can kind of best model this, we are assuming that there will be some expenses that continue not to the level that we're seeing kind of right now in the full restricted access time period, but some expenses even as properties come out of kind of the full restriction zone.

[Daniel Bernstein:]

Okay, and then on the occupancy, did you see any – you know were the weekly trends in April consistent week-to-week or did you see any moderation or acceleration as you have progressed. And where I'm going with this, I'm trying to understand, I guess May probably will look the same as April, but you know is there an opportunity maybe for some stabilization in the occupancy in June based on maybe the levels of enquiries to levels of virtual tours. Just trying to see if there's a trend where we might bottom in May and maybe come back up.

[Susan Givens:]

Yeah, it's been pretty consistent from our experience, so we’ve seen kind of weekly trends have not fluctuated too dramatically. I mean if you look at kind of the first – you look at you know February and March as we stated, occupancy there was down 130 basis points and then March to April it was down 120 basis points. So you know those two months , pretty consistent.I will comment though, what we are seeing is that these are growing and so that’s an encouraging trend that while we haven't seen that necessarily hit into the weekly occupancy numbers, we do see that lead volume is starting to increase after it went pretty quiet in terms of you know increasing it to essentially negative there for a while.In observation that you know we wanted to be a little but careful about showing here, but we have had tour volume go up significantly as a result of the increased usage of kind of virtual tours. We're not really at this stage you know kind of confident in what that means. As you can imagine with virtual tours, right, a lot of people just click on things and look. So if you just look at those round numbers, our virtual tours have gone up over 30%, but you know that’s not something we want to necessarily point to and kind of you know drive any decisions on occupancy, so a couple of comments there.But the point is that we’ve seen pretty consistent weekly occupancy declines. However, very recently we started to see lead volume go up, which you know we don't want to make any sort of assessment at this point, but obviously in light of everything going on, you know that's a favorable thing to be seeing.

[Daniel Bernstein:]

And I guess one last question. I guess I Just want to kind of confirm that you're fully paying your GSE [ph] debt mortgage payments or you haven't asked for any forbearances there.

[Susan Givens:]

We have not, no. So we are probably paying – intend to fully pay and do not intend to ask for any forbearance there.

[Daniel Bernstein:]

Okay, I'll hop off. I'm sure there are others who want to ask a few questions. Thanks.

[Susan Givens:]

Thanks Dan.

[Operator:]

Our next question will come from Vikram Malhotra of Morgan Stanley. Please proceed with your question.

[Vikram Malhotra:]

Thanks. Susan, I know you were sort of trying to come up with the more narrowed guidance range and then there's a lot of variance and things turned. But maybe if you can give us some color on how you sort of see the occupancy trend you know playing out in the next few months and then maybe what are the signs – what are you watching for in terms of any inflection or divergence in some of the properties and markets that you referenced.

[Susan Givens:]

Sure. So in terms of you know kind of the guidance if you well, you know we try our best to sort of take a look at kind of what we've seen in April and I think that information is coming in daily and exchanging pretty quickly and evolving as we all know. But as we sort of laid out a range if you will for kind of what we could see for Q2, our expectation is that you know May and June look pretty similar to April and I think that as we sit here today, you know that's kind of a decent enough assumption.I think as we start to see more active restrictions being listed and kind of things opening up, we can refine that, but I think that you know we try to [inaudible] if we see the same sort of activity in May and June as we saw in April, like we think that you know the numbers and the range we gave is pretty kind of accurate.We aren't at this point seeing kind of major divergence in terms of markets. I think as an observation, Holiday in particular happens to really be in kind of secondary and tertiary markets. You know we have seen – the case counter has been kind of lower you know in our properties. I want to be careful not to glean too much from that. I think that there are lots of you know questions a lot of people have. Is that because the virus hasn’t gotten to some of these markets yet? Is it because the testing isn't quite what it is. So you know we can't really draw too many conclusions.But the point is, we can look at the cases in the absence of like brave data, like that is data and that’s what we will kind of look at. And as I mentioned, you know we do – there’s one you know asset that we have that’s a very large complex CCRC in a very large market. We have seen a disproportionate number of cases in that property versus the rest of our portfolio.So you know many others in the senior housing space have a more diversified portfolios of CCRC and then Assisted Living, so they would have better perspectives on that. I can only comment on you know that one asset versus our independent living assets, but I think you know when you look at our independent living portfolio, there are assets here and there where we’ve seen some different things playing out, but there's no pattern to sort of glean from that.

[Vikram Malhotra:]

Thank you, that's fair enough. Maybe just on from sort of a further expense reduction, can you talk a little bit more about specifically you know what sort of CapEx are you differing. What’s sort of needed; what are you differing out and specifically what savings can you achieve from a G&A perspective?

[Susan Givens:]

Sure, absolutely. So on the CapEx side, right now for the most part, unless it’s essential maintenance CapEx, very little CapEx is you know going into the properties right now, given the fact that you know the facilities are kind of restricting all non-essential people. So what we you know first looked at in terms of our overall CapEx plan, we had in place some plans to do some upgrades across the portfolio in 2020, so we have put those plans for those assets on hold and will revisit and will kind of continue to evaluate as we move through the year.But if you look at kind of the high level numbers, we were projecting about you know kind of $20 million to $22 million-ish of CapEx for this year and I think that depending on how things play out, that number could be you know down anywhere between kind of $10 million to $15 million depending on sort of what we decide to do. It could even be lower if we you know decide to kind of push our project.But first and foremost the CapEx that we focused on are kind of the non-essential upgrades that we have just been through to planning as a part of kind of the ongoing business. So that’s on that side. And if you put it in kind of a per unit, kind of number, we've been projecting about $1,700 per unit, including kind of regular maintenance and then upgrades. We are now looking at somewhere closer to a 1,000 and we’ll refine that as we go through.On the G&A side in our numbers, we are assuming that G&A comes down. That is a number that we are you know very focused on. I think right now we are looking at about a 10% to 15% kind of reduction. So that's something that will kind of evolve as we go through the year, but we are obviously focused on it and we know that that’s an area that everyone needs to be taking a look at and we’re doing the same thing.

[Vikram Malhotra:]

Great! And then just maybe last one in terms of the dividend. Just sort of two questions on that. What sort of were you baking in or metrics were you are looking at in the site, sort of 50% is the right level and how did you think about just suspending the dividend versus like you know cutting it by 50% you know the decisions between the two.

[Susan Givens:]

Yeah, the dividend is obviously a focal point always. In terms of how we looked at it and came up with it for this quarter, you know as we mentioned, we don’t have perfect visibility in terms of kind of what the final impact on our cash flows will be. So I think if you had to sort of bifurcate it, we assume that there will be an impact to our cash flows. So part of the dividend cut is incorporating kind of the reduction in our cash flows and then the other part of the dividend cut is preservation of capital kind of in a time of uncertainty.And so the approach we took was that we wanted to give ourselves some room and to kind of have some flexibility and that as we move forward and have more information, the dividend will be something that you know the board will continue to evaluate and address. But really a portion of it is to you know account for kind of decline in cash flows and a portion of it is just to preserve capital in kind of uncertain times, so that’s – you know that was a different question. What was your second question? Vikram?

[Vikram Malhotra:]

Sorry, I put myself of mute. It was just really between how you thought about the magnitude of the dividend cut and then secondarily versus dividend cut versus dividend suspension.

[Susan Givens:]

Ah! Suspension, sorry about that. And then on the suspension side, we looked at it and we were aware of the fact that people out there have done that. I think from my standpoint and the Board’s standpoint we are still generating positive free cash flow and we think that we have an obligation to our shareholders to pay a dividend if we can, and to have that dividend be prudent and so that was the rationale behind it.And so you know we looked at it and we thought we’re – you know a number of potential scenarios knowing that you can't model perfectly right now, and we felt like that level kind of address the kind of two points I just talked about in terms of cash flow and preservation of capital, and we also recognized that we did have a strong first quarter and wanted to make sure that we were addressing kind of the dividend in light of that.

[Vikram Malhotra:]

Great! Thanks so much.

[Susan Givens:]

Thanks Vikram.

[Operator:]

Our next question will come from Michael Gorman of BTIG. Please proceed with your question.

[Michael Gorman:]

Hey, thanks. Good morning.

[Susan Givens:]

Hi Mike.

[Michael Gorman:]

Susan, I just wanted to go back to the comments on the CapEx side and obviously differing CapEx here. I imagine there will be a catch up on the other side. You know maybe it’s too early, but if you had any discussions with the operators about any maybe long term CapEx investments that are going to need to be made to bring the properties into kind of this new world, whether it's changing the layouts or changing the common dining spaces or any kind of incremental capital expenditures that would aid reopening these properties going forward, beyond just the typical maintenance or even beyond the upgrades that you had previously contemplated before the pandemic hit.

[Susan Givens:]

Yeah, look it's a great question. Look I think that it's too soon to have a complete kind of reconfiguration, CapEx conversations given everything that's going on. I do think that as we talked to certain number our operators, including Holiday which is far and way our largest, the complexity of the Holiday building, meaning the lack of complexity really is an advantage as we start thinking about some things that you know we might want to look at over a longer period of time.So what I mean by that is, Holiday’s only Independent Living, so you don’t have different levels of care, you don’t have kind of different parts of the building that caters to Independent Living versus Assisted Living. So you don’t need multiple dining facilities, so it’s a pretty basic building and we don’t think that you need to do kind of a massive reconfiguration to make sure that the residents are safe and are actually adhering to kind of distancing and to kind of protection. So I don’t think there is any kind of massive reconfiguring that needs to be done.I think as I mentioned in my comments, through the biggest you know challenge if you will that I think that Holiday and IL have here, is that the residence base very much you know wants to be independent, and they want to come and go from the buildings. You know it's not a an environment where people are kind of in a nursing home if you will, and so I think ensuring that the right sort of people are coming in and out of the building, those are things that they’ve had to focus on, to making sure that certain doors can't be open, that everyone’s going through the main entrance to get temperatures checked.Some of those things are things we spent more time talking about versus kind of the reconfiguring on the CapEx side and obviously, there is not a lot of deferred CapEx here to begin with. So I think it's too soon to talk about whether we would reconfigure buildings, but I think Holiday and we feel pretty good about kind of the format that's in place now.

[Michael Gorman:]

Okay, great. And also maybe still a little too soon, but I guess as you’ve seen some of the changes in the properties over late March and April, have you had any situations or conversations with residents where there's been reductions in rates or any changes to rates or suspension of rate increases for in-place tenants just as a result of the situation or as a result of the reduction in services or is it mostly just an impact on the occupancy and expense side.

[Susan Givens:]

Yeah, so far we have not, meaning April rent collections were completely in-line with what they normally are. May, we are still getting that information. It will come in in the next day or so, but so far it’s exactly in-line with kind of what it typically is, so that's something we're watching. I think that it's wise to be focusing on that. I think that we all are, but so far we haven't seen that and we have seen the impact been more on the occupancy side, and we’ll get anecdotal and I think that I never love pointing to kind of these kinds of things.But I think what we’ve heard out of the community is that there’s overwhelming gratitude and support for how the operators have handled this pandemic, and everyone that lives within the communities knows and is aware that they are in the vulnerable cohorts. They are overwhelmingly appreciative of the measures that people have taken to protect their health and safety and no one wants to be told they have to be quarantined in their room and take all their meals in their room, but we have been, and I have been overwhelmingly you know kind of pleased with the reaction and the response that we've seen from residents in the communities.And so I think that, we don't know, we're watching it, but that tells us that having a lot of people kind of showing up and asking for massive reductions in rent, it's harder in these types of environmental where people see that there are people taking care of them and are looking out for them and have their best interest in mind versus maybe what you see on the multi-family side and I’m not you know trying to draw comparisons. But we haven't seen that yet, but it’s something we're kind of carefully watching.

[Michael Gorman:]

Okay, great. And then maybe last one for me. Just trying to triangulate the – obviously the increase in traffic to the virtual tour is great, but right, you don't know the conversion rates and the move-in’s being down. Do you have a sense or as you're talking to the operators, how much of this is going to result in pent-up demand, that once these facilities start to relax will result in a higher than average move-ins or is this a situation where you'll get back to normalized move-ins and it's just going to be a normal building process versus just a flood of tenants that have been waiting and deferring and looking to move in at a later date.

[Susan Givens:]

Yeah. Well I think that’s the question we would love to know. We know that there is some pent-up demand. We know that we have had people that have wanted to move in and wants to move in.I think that what we have been focused with our operators, we have said let’s get this right and take as good care of the residents as we can and we think that will then sell the product and that will lead to more people viewing this environment as a good place to live and the fact that our operators, Holiday provides three meals.There is some oversight, there are activities, we are hearing – again, its anecdotal, but a lot of people are calling and saying, I want my parents to be in an environment where I at least know they are getting fed. They don’t have to go to the grocery store, they don't have to go out and you know go to Walmart. I want people to you know be kind of looked after.So we hope that translates into kind of demand beyond the normal demand, but I think it’s hard to say and what we do know is that we still have people that want to move into the properties; we still have people wanting to tour and still kind of move family members in, and the inquiries that we've been receiving in the last couple weeks have actually been you know much higher than what we've seen historically.So does that translate into move-ins, don’t know, but I think that it tells us that there is a real view that the value that this product offers is important and that people look at it and want to be able to move their loved ones into these properties.

[Michael Gorman:]

Great! Thanks for your time Susan. Hope you all stay well.

[Susan Givens:]

Thanks Mike. I appreciate it. You too.

[Operator:]

Thank you. This concludes our question-and-answer session. I would now like to turn the conference back over to Susan Givens for any closing remarks.

[Susan Givens:]

Thank you. Thank you everyone for joining us today and very importantly everyone, be safe and we will update you as we move forward. Thanks.

[Operator:]

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect.