Good day, ladies and gentlemen. Welcome to CareTrust REIT Third Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. Welcome to the CareTrust REIT’s Third Quarter 2015 Quarterly Earnings Call. Listeners are advised that any forward-looking statements made on today’s call are based on the management’s current expectations, assumptions and beliefs about CareTrust’s business and the environment in which it operates. These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns and financings and all other matters, all of which are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied here. Listeners should not place undue reliance on forward-looking statements and are encouraged to review the company’s SEC filings for a more complete discussion of factors that could impact results as well as any financial or other statistical information required by SEC Regulation G. In addition, CareTrust supplements its GAAP reporting with non-GAAP metrics such as EBITDA, adjusted EBITDA, FFO, normalized FFO, FAD and normalized FAD. When viewed together with this GAAP results, the company believes that these measures can provide a more complete understanding of its business but they should not be relied upon to the exclusion of GAAP reports. Except as required by federal securities laws, CareTrust and its affiliates do not undertake to publicly update or revise any forward-looking statements for changes arise as a result of new information, future events, changing circumstances or any other reasons. Listeners are also advised that the company filed its 10-Q for the third quarter and accompanying press release yesterday. Both can be accessed on the Investor Relation section of CareTrust’s website at www.caretrustreit.com. A replay of this call will be also be available on the website. At this time, I would like to hand the call over to Mr. Greg Stapley, CareTrust’s Chairman and CEO.

Thank you, Nicole. Good morning, everyone, and thank you for joining us today. With me are Bill Wagner, our Chief Financial Officer; Dave Sedgwick, our Vice President of Operations, who is joining by phone from our Baltimore office; and Mark Lamb, our Director of Investments. Q3 was a very busy and really important quarter for CareTrust. The flywheel we’ve been steadily pushing on since our spinoff last year, finally started to gain some real momentum, producing some transformative results. I’m pleased to report that these results have catapulted us toward our long-term goals well ahead of schedule placing us in a position of real strength for the coming year. First and foremost, our by operators for operators business approach is yielding fruit in the form of a steady stream of top life healthcare and seniors housing operators who want to grow their businesses with us. Great operators are important key to our health and success. And during Q3 where we’re gratified to initiate three outstanding new tenant relationships, one of which has already resulted in a tack-on acquisition. Notably, we’re working on deals right now that will expand almost all of our existing tenant relationships, and happily, several of those prospective deals had been brought to us by the tenants themselves. These tenants in combination with the new tenants relationships that we’re continually cultivating have us underwriting and executing on what’s become a solid stream of small to medium-sized acquisition opportunities, all of which moved the dial quite nicely for us. The going-in cash yields on our Q3 investments, for example, all of which were into $10 million apiece, where over 8.4% for the seniors housing assets and over 9.5% for the SNF asset. These individual properties in small portfolios remain our primary focus, as they tend to generate above-market…

Thanks, Greg. There were couple of unusual items in the quarter that we have highlighted before, but I want to mention them again. For the quarter, we are pleased to report that normalized FFO grew by 5.1% over the prior year quarter to $7.7 million and normalized FAD grew by 10.4% to $8.7 million. However, partly because of the gap in time between the follow-on offering and the new revenue from the resulting acquisition which came at the beginning of Q4, on a weighted average per-share basis on a normalized FFO was $0.20 per share and normalized FAD was $0.22 per share. In addition, please recall, in making any per share comparisons to last year that the share counts in Q3 of 2014 did not take into account the dilutive effects of the then-pending purging distribution, which was made in mid-December of last year. Interest expense for the quarter was also up slightly to $7.2 million, but I should point out that $1.2 million of that was related to the one-time write-off of deferred financing fees in connection with the refinancing of our secured revolver. In addition, because we hit key incentive targets for the year, we increased our accrual for incentive compensation, which also impacted the quarter. These items were accounted for in developing and publishing our updated guidance for 2015, which we put out in early September. Reiterating that guidance, we are projecting 2015 normalized FFO per share of approximately $0.92 and normalized FAD per share of approximately $1.02, all subject to the assumptions and qualifications we previously articulated in connection with that guidance. We expect to update our previously released 2016 guidance and provide a little more color on the coming year when we release our final results for 2015. As Greg mentioned, the quarter, was a…

Thanks, Bill. To wrap up, we’re excited about the trajectory were on. We have a solid stream and growing rent stream and enviable portfolio with true best-in-class tenants and abundant opportunities to grow. We hope this discussion has been helpful. We are obviously excited about both our near and long term prospects, and we are grateful for your continued interest and support. And with that, we’ll be happy to answer questions. Nicole?

Thank you. [Operator Instruction] Our first question comes from the line of Paul Morgan of Canaccord. Your line is now open.

Hi, good morning.

Good morning.

As you look at your - within your pipeline right now, how should we think about the mix between skilled and private-pay senior housing. And then, as you look at the private-pay side, in light of the supplier risk, you were focused on - how would you approach geographically, I mean your red line metro areas, are you taking at kind of much more market and asset specifically?

So, hey, Paul, this is Mark. I’d say, looking at the pipe right now, we have a couple of $100 million in the pipeline as we see it today, half of which we’re focused and feel pretty good about in terms of execution. Your question on ALFs versus SNF or senior housing versus SNF. It’s about kind of 60-40 senior housing to SNF at this point. But as you know, you can change pretty rapidly, in terms of the private-pay. We are looking any - with the deals we have 8% start rate, north of 8% start rate. Most of the deals are - kind of in that sweet spot from a monthly rate perspective, so we are not targeting the high end market, we are targeting kind of that reporting out by Maryland model. So I think, we feel pretty good about the supplier risk from that perspective because it’s the affordable model that folks can meet on a monthly basis. So we’re not looking for the 8,000 to 10,000 kind of Sunrise, Brookdale model it’s the - it’s kind of the more economical price point.

Paul, this is Greg. To address the geographic question, we haven’t really red line in areas, although there is a few areas were pretty cautious about we - there is - if we’re talking about skilled nursing deals, we are concerned about the timing of payments in skilled nursing providers in the states like Illinois, for example. By large countries wide open and we’re looking all over for new deal. We’re particularly as you probably already know, particularly interested in secondary market, some of the places I’m loved, by some of the bigger competitors and that are not terribly hard to get to and we feel like we can get some really good solid risk adjusted return by going a narrow to away from the big, big major metros, and we like that.

Great, thanks. And then, other question just on the SNF side, what is your operators thinking about bundled payment initiatives and the pilot study for next year, I mean the market concerned about the impact on margins and I mean, do you think that, this is a catalyst for kind of further industry consolidation do you the change where you underwrite new operators looking into business where, how you’re kind of approaching it’s kind of shift in reimbursement structure?

Paul, this is Greg. In terms of three questions all of the investors to get them all answered, backwards maybe. First, we don’t change the ways that we have been in line an underwriting our operators, because we’ve always looked for operators, who are smart sophisticated in nimble, not necessarily big, but sophisticated. If you look at the folks we added in the further quarter for example Trillium SNF operator we have in third quarter, these guys can senior living they know what’s doing and very sophisticated, it look at Pristine, which we had a great at the end of third quarter, beginning on the fourth quarter. Also this team highly sophisticated team and big very good high end operators in Indiana. And they’re doing a terrific job out there. So that’s we have always look for, so need to change our approach and identifying good solid quality operators. Second, I don’t remember now what else you asked…

Bundled payments.

Bundled payments, BPCI, other bundled payment issues, these things have been around for a while, we’re just starting to see the first reports on private programs coming in. And I think, our operators and then there is a reason we look for sophisticated operators, they are able to adjust very quickly and efficiently to any changes in the reimbursement landscape. For example, you may - there is long been shifted underway for Medicare and Medicaid advantage. There is long been shifted underway to more and more HMO payer patients. And our operators - we identify operators, who have been very, very good historically and interfacing with the orbiters of those payment systems. And taking good care of their patients. I’d like to, we just refer you to over to Ensign - big kind of - there from this call from few days ago, where they talked about fact that they are involved in both Model 2 and Model 3 BPCI programs and doing very well in them. Length of stay is dropping they’ve always have lower length of stay to begin with a quality outcomes are improving fast, I think if you read Luin [ph] report last February, costs are not necessarily dropping, but I think it’s probably still too early to tell, whether how that’s going to play out over time. But, we are very cognizant of that, or operators very cognizant of these bundled payment systems and other things, whether it’s better - to maybe coming down to paying for this new site neutral payment, other episodic payment system, pay for performance proposals have been around forever, the ACOs are for now getting more mature, others - and there is substantial overlap between all of those, but it’s something we’re watching very carefully. Did I answer all your question?

Yes, I think all did. I tackle one kind of follow-up to that, does it change at all the way, you kind of look at pro forma, EBITDA coverage, when you are looking at SNF investment. And you look for any execution or not that’s fairly.

I think, you probably doesn’t because our expectation is that whatever the current performances, that any changes that are made, they’re going to take advantage of and probably do better with. Then, by the way capturing more occupancy market share. Being more efficient in the selection of the patients that they have coming in, which is good operator can do. And it’s really not just about what’s coming in on the top line, so what’s going on the bottom line. And this payment system shifting before more bundled payment. There is going to better discussion about what the appropriate studying for delivering particular talents and a huge part of that discussion is going to for the SNF operator for example, is that patient going to be profitable for me and that is nothing new for SNF operators, our portfolio across the country, who if they’re paying attention of the business, always asked that question before they’ve admitted any patient.

Great. Thanks.

Thank you. Our next question comes from the line of Jonathan Hughes of Raymond James. Your line is now open.

Hi, good afternoon guys. I guess, good morning over there in California, congrats on the quarter results spin out. I just want to ask, I know your revenue exposure to Ensign, as drop significantly after the Liberty deal, as you mentioned earlier. Curious to what’s your long-term target exposure to Ensign, you guys do love them as an operator. I’m just curious where you see that going over the next several years?

Jonathan, thanks for the question. We’ve been little clear from the beginning that our long-term objective for all of our tenants is to have no tenants who is over - no tenant concentration over 20% of rental revenues and that’s certainly true for Ensign, that’s the case we think for us, because we think very well of those guys. We don’t think there is a better operator in the country. If you had to pick up one operator to having your portfolio they would be the one any REIT we’ll pick, but that said we understand the market would love for us to diversify our tenant base. And so we are doing that and doing our best to grow with other great tenants who follow similar models and have a similar level of justification.

Okay. Do you have to find yourself bidding against them for properties I think I saw they acquired some like 40 assets SNFs and senior housing facilities this year. Just curious if you see them going after the same properties?

Not very often surprisingly, it’s a bit of couple of things with this, where we tripped over each other, but we are separate independent and we kept a pretty good law between us. So, that we don’t always know when we might be competing against them for an asset. We don’t generally look for the same kind of assets that they are looking for Ensigns and very well historically and I can only say this. Now, I have been there for almost 18 months, I don’t prefer to have any expertise on what their current state is what their current approach is, but historically Ensign was when I was there was by mostly distressed assets turnaround opportunities, we’re very opportunistic, buyers who have been extremely good at that. And I think they continue to do that to a large degree if not entirely. By contrast if you’re looking for more stabilized assets we love assets that are stable but have some upside left in enquiring I mean, operators or a sale-leaseback partners, but we’re buying large it’s really two different kind of assets that we and they are looking at.

Okay. And they should think as a little, looking at the dividend going forward. Obviously, it’s very well covered today. What’s your expectation to grow this in the coming years?

Hey Jonathan, it’s Bill. Yes, over the coming years we would expect to grow the dividend as we grow our FFO and FAD, but changing the payout ratio for the short-term will probably keep it around where it is which is most conservative in the sector, because we just find that we can redeploy that and create greater shareholder value overtime by investing in our pipeline.

Yes. And currently here just was curious to hear your thoughts there. And then one more and I’ll jump off, as you grow over the next several years do you have any plans to maybe provide more disclosure in your earnings releases or maybe even a quarterly supplement.

Hey Jonathan, its Bill again. Yes, I would look to last year, we completed our first investments in Q4. So, this upcoming Q4 will have all those new investments in the portfolio for over 12 months. So, I think around Q1 is when we will start doing a supplement.

Okay yes. That would be great, very helpful. All right, thanks guys, I appreciate your time.

Thank you.

Thank you. Our next question comes from the line of Chad Vanacore of Stifel. Your line is now open.

Hey, good morning, guys - sorry, good afternoon as the case could be at least on the East Coast. So, I apologize if I misunderstood you, you were talking about coverage before. Can you give us what your Ensign coverage and your portfolio coverages?

The Ensign portfolio for the 12 months ending 630 is 2.0 times and the rest of the portfolio is at above our underwriting levels for each of the deals that we did. I don’t have a blended color weighted average coverage today.

All right. And then you were describing your pipeline as well, I just missed this, but as far as single assets versus small portfolios what’s the mix there and what the mix of new operators received testing that you’re evaluating?

Just look at the portfolio. This is Greg. The mix of new operators there is probably one, two just have a look at this one, two. There are couple new operators in the mix. So, large coexisting operators right now, what was the other question you had?

Just the mix of a single assets versus small portfolios that you are evaluating?

A lot with single assets, but there are some small portfolios in there too.

All right. And then you also mentioned in your comments about changing G&A, how should we think about a run rate G&A going forward on dollar basis?

Between 10% to 11% of total revenue.

All right, that’s it for me. Thanks.

Thank you. Our next question comes from the line of Michael Carroll of RBC capital, your line is now open.

Hey Greg, can you give us an update on the Liberty portfolio transition is pristine, up and running with operations on those assets.

Yes, those guys thinks like - those guys were really in the well positioned to hit the ground running when they took - I think over I had a long conversation with Chris Book [ph] earlier in the week, just got an update from him. And they are doing really well, they’ve hit a few bounce as you always do, but nothing they didn’t anticipate and have just run rate over everything I really I’m very happy and optimistic about their prospects. They’ve only begun now for just over a month. One of the things - one of the big hurdles that they were going to have was getting their license was approved by the state which come a little bit after you takeover. And their Medicaid payments flowing there which comes well after over sometimes up to 90 days after the transition and it looks like they may have those Medicaid approvals here in the next week or so. So, that’s just a real coup for them. So, they’re healthy, they’re happy, they’re working hard, they’re well and I don’t mind telling that we’re working on a tack-on already for them.

Okay. And then how long does it really take for them to start implementing their own operational efficiencies into those assets?

Well, I think that’s a really complex question they got. Maybe I should look Dave or Mark weighing on that, because Dave can you answer that?

Sure. Can you hear me okay. It is a complex question, because there is a lot of leverage both from the top line and expense wise, this portfolio though was pretty well run on a cost basis. So, locally they don’t have to come in and right-size departments and cause cultural trauma and facility level with cutting staff or anything like that if anything they’re going to be adding some resources that were absent before. And those resources come mostly on their support structure level with expertise and technology, marketing, rehab, nursing and finance as well. So, those efforts to improve those the overall operations in the top line performance are underway. I think we’ll start seeing results of that, soon couple, first two or three months we should start to see skilled centers start to take-up just a batch which the way this portfolio has been operating the past just to a very modest take-up in skilled centers or even little bid Medicaid centers will have significant impact to the least coverage there.

Okay, great, thanks. And then I guess last question on maybe Greg can you describe what percentage of properties I guess within the current investment pipeline would require you to bring in a new replacement operator and those with skilled nursing facilities or do you have those for the senior housing communities too?

It’s about 80% new operators in the high percentage deals that we’re looking at, what was the other question you had?

Was that mostly - now those mostly skilled nursing facilities are replacing operators or do you have some of those on the senior housing communities too?

Senior housing as well, as Mark said before the current high percentage portion of the pipeline is about 60-40 seniors housing and skilled nursing. And the one operator that we have who would be a sale-leaseback operator or the same operator staying in represents about a third of the seniors housing portfolio.

Great, thank you.

Thank you. Our next question comes from the line of Jordan Sadler of KeyBanc, your line is now open.

Thank you, good morning. First one is just on senior housing, could you maybe talk a little bit how you’re thinking about the supply that we’re seeing in the space and whether or not or how you judge the potential impact?

Yes. So, there is a lot of chatter about the supply issue and if you look at the deals that we’ve done, these are assisted living that are in secondary markets, but that are also like Mark eluded to more on the high quality yet affordable housing option. And what we see on the new supply coming online is really the bulk of it is in the high price point area. And so, being both from the secondary markets, but also being in that more affordable price point. The new competition really doesn’t affect the occupancy of our assisted living particularly the ones that we had done recently and the ones that we continue to target going forward.

When you’re looking at new supply, what type of range or radius do you look at relative to the properties you’re looking at you’re underwriting?

Yes. It really depends on the individual occasion, because if you are in a more rural market that might be 15 mile radius but if you’re in a more dense populated place that might be more of a five mile radius really depending on the different factors of the location. In some cases, there is a freeway, one mile away and nobody crosses that freeway or a river something like that. But those are these kinds of general radius points that we would keep in mind depending on how dense the population is.

That’s helpful. And then one for you Bill, just curious I am, I didn’t miss this on sort of overall liquidity how you’re thinking about it and just maybe the ability to lean on credit to finance your investments in 2016?

Yes. So, we just put the $300 million unsecured revolver in place and to fund the liberty deal, we drew down about $45 million and use the proceeds from the equity offering to finalize that, but we got $45 million drawn on that unsecured. We’ve got another 150plus of availability today and then for every assets that we purchase will get about 60% credit to increase that volume capacity. So, I think we have more than enough to from a revolver standpoint going through 2016, having just finished the equity offering the lockup has expired. So, we’ll probably be looking at an ATM option as well.

Okay. And as it relates to G&A you mentioned potential SOX impact 404(b), can you quantify or give us a range of what something like that might go for, is it like a million or too annually, is that a better way to think of it?

Not for us. I think it would be something maybe half of that, but we’ll have some start-up costs in the first year of implementation, just call it implementation cost to get everything documented the way it needs to be. And then you’ll have an ongoing run rate increase. But for a company like us and how simple we are, I wouldn’t expect in the year of implementation to be more than 500,000.

Okay. Last one for you is just on the GECC mortgage that’s - we’ve got I think an option to repay in January. Can you shed some light on that, thoughts?

Yes, we have - we’re just starting the process now, kind of looking at our options. We were out at NIC a few weeks ago. And there were a lot of HUD lenders there that that would love to take a look at it. We could throw it into our line and free up a lot - even more availability under our line. I think the outlook on it is positive. I think we’ll see it decrease in interest expense on either of those options.

Yes, Jordan, it’s not repayable until January 31. And it’s not actually due until June of 2017. So we do have some optionality in terms of how we time in what we do with that.

And how would you think about that, Greg, in terms of now versus - and I forget the structure, is it, do you have to do it now or in 2017? Or when I say, now, I mean January 31. Is it January 31 or 2017, or at any time between January 31 and 2017? And how would you think about it?

And then, we can do it any time after January 31. And GE soon to be Cap One is - would love to roll that over for us. But we think that it needs to be done sooner than later, because the interest rate on half of that debt is fairly high. And we’d love to capture the interest savings by going to one of the other alternatives.

Do you have to do the whole thing?

No.

You could just do the half the tie?

Yes, but it doesn’t make sense to do the half, because we’re not getting credit for the asset value then.

Okay. I got it. And you would look to do something with term, some more term?

Well, I think one alternative would be to take those assets to HUD, where we can get something around 4%, 35-year fixed rate on them, which would be nice to put them away that way. But that’s not the only alternative we’re looking at. And there is some, there’s some brain-damage associated with that alternative. So we’re, as Bill said, we’re just starting conversation about how we want to deal with that. And there is a lot of ground to cover between here and that decision.

Thanks for the time, guys.

You bet, Jordan. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Duncan Brown of Wells Fargo. Your line is now open.

Hey, everyone. Just two for me, forgive me if I missed this, a numbers question. Bill, the write-off of deferred financing fees $1.2 million where is that embedded on the income statement?

It’s in interest expense. So the…

It is in interest expense.

Yes.

Okay. Thank you. And then, just post the equity offering your leverage is down at 5.2 times. You mentioned using the revolver for M&A going forward, then also considering ATM. I mean, how should we think about the leverage - longer-term leverage target and sort of how high you’re willing to take it over the intermediate term?

Well, I think we’ve already said that we’d like our leverage to be around 30% to 40% of debt to enterprise value. And our fixed charge coverage ratio between three and four, our debt to EBITDA between four and five times. But we don’t - we’re not looking to get there all in one jump. It will be a gradual glide to get there. So I can see us using, especially given where the equity markets are today, probably utilizing our line predominately to fund this next wave of investments that we hope to make.

Okay. Thank you.

Thank you. I’m showing no further questions at this time. I’d like to hand the call back over to management for any closing remarks.

Well, thanks everybody. We really appreciate you being on the call. If any of you have questions, I think most of you know where to reach us and we’re happy to continue any conversations. Thanks again.

Ladies and gentlemen, thank you for participating in today’s conference. It does conclude today’s program. You may all disconnect. Have a great day, everyone.