Q2 2023 CareTrust REIT Inc Earnings Call

Participants

David M. Sedgwick; CEO, President & Director; CareTrust REIT, Inc.

James B. Callister; CIO & Secretary; CareTrust REIT, Inc.

Lauren Beale; Senior VP & Controller; CareTrust REIT, Inc.

William M. Wagner; CFO & Treasurer; CareTrust REIT, Inc.

Austin Todd Wurschmidt; VP; KeyBanc Capital Markets Inc., Research Division

Connor Serge Siversky; Equity Analyst; Wells Fargo Securities, LLC, Research Division

Michael Albert Carroll; Analyst; RBC Capital Markets, Research Division

Steven James Valiquette; Research Analyst; Barclays Bank PLC, Research Division

Tao Qiu; REITs Analyst; Joh. Berenberg, Gossler & Co. KG, Research Division

Wesley Keith Golladay; Senior Research Analyst; Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good morning. My name is [Polte,] and I will be your conference operator today. At this time, I would like to welcome everyone to the CareTrust REIT Second Quarter 2023 Operating Results Conference Call. (Operator Instructions) I will now turn the call over to Lauren Beale, CareTrust's Senior Vice President and Controller. You may begin.

Lauren Beale

Thank you, and welcome to CareTrust REIT's Second Quarter 2023 Earnings Call. Participants should be aware that this call is being recorded, and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions and beliefs about CareTrust's business and the environment in which it operates. These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns, financings and other matters and may or may not reference other matters affecting the company's business or the businesses of its tenants, including factors that are beyond their control, such as natural disasters, pandemics such as COVID-19 and governmental actions.
The company's statements today and its business generally are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied herein. Listeners should not place undue reliance on forward-looking statements and are encouraged to review CareTrust'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. Except as required by law, CareTrust REIT and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, change in circumstances or for any other reason.
During the call, the company will reference non-GAAP metrics such as EBITDA, FFO and FAD or FAD and normalized EBITDA, FFO and FAD. When viewed together with GAAP results, the company believes these measures can provide a more complete understanding of its business but cautions that they should not be relied upon to the exclusion of GAAP reports.
Yesterday, CareTrust filed its Form 10-Q and accompanying press release and its quarterly financial supplement, each of which can be accessed on the Investor Relations section of CareTrust's website at www.caretrustreit.com. A replay of this call will also be available on the website for a limited period.
On the call this morning are Dave Sedgwick, President and Chief Executive Officer; Bill Wagner, Chief Financial Officer; and James Callister, Chief Investment Officer.
I will now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO. Dave?

David M. Sedgwick

Well, good morning, everyone, and thank you for joining us. Q2 saw continued positive momentum on many fronts: investments, operator relationships, the existing portfolio and equity issuance. I'll touch briefly on these and on the regulatory environment before handing the call over to James and Bill to provide more color.
First, investments and operator relationships, investing roughly $200 million at our historic yields across 8 transactions with 6 new operators in 1 quarter represent some of the best works done in that short amount of time in our history. Last year, with the dearth of attractive acquisition opportunities, we decided to lend more than in years past. Our view of lending is that in most cases, those loans do not directly produce real growth because of the short-term nature of the returns and the need to immediately recycle the payoffs. However, there is a strategic case for measured lending activity here if several criteria are met that lead us to believe there will be real growth opportunities with that borrower or operator in the future. In fact, of the roughly $200 million invested in the quarter, $128 million is an indirect result of last year's lending activities.
Capital has not historically been the constraint for us to grow. For CareTrust, the choice of operator has always been the most important consideration for new investments. We are thrilled to welcome 6 new operators in the quarter. That deeper bench opens up new markets and new opportunities for investment. We are eager to help grow these relationships and to continue to expand our existing operator relationships as well.
Second, looking at the existing portfolio, last quarter, I gave more color around 1 skilled nursing operator, not in our top 10, with negative lease coverage that accounted for roughly $5 million of contractual rent. We decided the best path forward is to classify these assets as held for sale and are currently negotiating the sale of these properties. We have therefore removed this operator from the supplemental. In the sup, we have reported on lease coverage in an expanded way since the pandemic began. We have been reporting coverage in 3 ways: first, on a pre-pandemic basis; two, excluding provider relief funds; and three, amortizing those provider relief funds through their eligible periods.
When you look at coverage, excluding the relief funds, trailing 12 property level EBITDAR coverage for the portfolio through March '23, increased to 2.13x overall compared to the 12 months leading up to December 2022 of 2.01x. Removing the properties now held for sale contributed to 9 bps to the overall coverage improvement.
Finally, on the regulatory front, 2 quick comments. First, we continue to wait for the proposed minimum staffing requirement from the Biden administration. We don't have any more insight really into what to expect and has been speculated by many others. And second, we're pleased to see the announcement this week of the net 4% increase to the Medicare rate, effective October for fiscal year 2024. So the first half of the year was extremely busy for the whole team here. We're excited for the new investments and the new operator relationships. We're pleased to see the vast majority of the portfolio doing well and position to expand together. Including the investment and equity issuance from the ATM forward. Year-to-date, we have already funded 96% of the $215 million of new investments, and are going into the second half of the year with ample dry powder to continue to grow the business and set up the company for a return to growth in 2024.
With that, James will talk about our recent investment activity and pipeline. James?

James B. Callister

Thanks, Dave, and good morning, everyone. I'll start by adding some additional color on the transactions Dave referred to in his remarks, and I will then turn to discussing the current acquisitions market and our deal pipeline. Q2 was an exciting and busy quarter for the acquisitions team at CareTrust. As Dave mentioned, during the quarter, we closed 8 transactions, 7 acquisitions and 1 mortgage loan, acquired 12 facilities and added 6 new operator relationships, with a total investment amount for the quarter of approximately $200 million at an initial blended yield of 8.4%, and we expect the stabilized yield on these assets after 2 years to be 9.5%, not including annual CPI-based rent escalators.
Of the 12 facilities we acquired during this quarter, 7 are skilled nursing, 4 are assisted living and memory care and 1 of them is a skilled nursing and assisted living campus. We also closed on a $26 million mortgage loan. Several of these transactions closed subsequent to the date of our Q1 earnings call. During June, we closed on a 4 facility skilled nursing portfolio in Southern California, and entered into a 15-year master lease agreement with Links Healthcare. Links is an established California skilled nursing operator who we have known and admired for many years. Year 1 rent under Links master lease is approximately $6.8 million, increasing to $7.6 million in year 2 and to $8.9 million in year 3, with CPI-based annual rent desk escalators thereafter.
In June, we also closed 3 other transactions, the acquisition of a 125-bed skilled nursing facility in Katy, Texas; the acquisition of a 2-facility memory care portfolio in Michigan and Ohio; and the funding of a $26 million mortgage loan secured by a skilled nursing assisted living and independent living campus located in Loma Linda, California. In July, we followed these transactions up by funding a $15.7 million mortgage loan on 2 Florida skilled nursing facilities to our existing tenant, the Elevation Group at an interest rate of 9%.
While we are excited to have put $215 million out to work this year, we do not feel like we are done. Overall, deal flow remains strong at a pace relatively unchanged from last quarter. We continue to opportunistically pursue deals where we feel our access to capital, low execution risk and reputation as a quality transaction partner make us a particularly attractive buyer.
With respect to the skilled nursing acquisitions market, pricing has continued to adjust as we have seen a further tightening of credit by lenders who continue to increase borrowers' equity requirements and require additional recourse liability to borrowers and guarantors. There continue to be attractive opportunities to source and pursue skilled nursing acquisitions, particularly in those states where there have been favorable Medicaid rate increases.
With respect to seniors housing, we are still seeing a gap between seller and buyer pricing expectations. Much of the seniors housing deal flow coming across our desk involves increasing numbers of facilities in some stage of operational distress as sellers face hike in variable interest rate loans and our maturity day risk.
Moving forward, with many of the high leverage buyers not as active in the acquisition space as they have been previously and given the company's access to funds through our low leverage and ability to issue equity, we remain focused on external growth opportunities. We continue to foster and enhance our relationships with the broker community, but we have also seen promising results from our decision last year to direct additional resources and manpower towards sourcing off-market opportunities and towards developing new operator relationships in geographically strategic areas. Nevertheless, we are careful to continue our history of a disciplined approach to underwriting and valuation as we work closely with operators to focus on key factors that will allow them to execute on their business plans with a sustainable rent structure.
The pipeline today sits at approximately $150 million as we continue to look for opportunities that can be accretive to our operators. We will continue to execute on our acquisition strategy of disciplined growth with risk-adjusted returns consistent with how CareTrust has been built over the past 9 years.
And with that, I'll turn it over to Bill.

William M. Wagner

Thanks, James. For the quarter, normalized FFO decreased 2.8% over the prior year quarter to $34.6 million, and normalized FAD decreased by 3.6% to $36.1 million. On a per share basis, normalized FFO decreased $0.02 to $0.35 per share and normalized FAD decreased $0.03 to $0.36 per share.
Rental income for the quarter was $47.7 million compared to $46.2 million in Q1. The increase of $1.6 million is due largely to the following items: First, we received approximately $1.1 million from new investments. Second, we received approximately $369,000 in CPI bonds. Third, tenant reimbursements, which are non-income and FFO producing because they have a corresponding expense, increased $507,000 to $1.2 million. Lastly, these positive items were offset by $202,000 lower cash related to a prior tenant that we've mentioned on the last 2 calls, $180,000 lower cash collections from existing tenants that are on a cash basis and $63,000 from properties that we have sold.
If you exclude the tenant reimbursements amount of $1.2 million, contractual cash rental revenue was $46.5 million for the quarter. Another way to reconcile the contractual cash rent of $46.5 million is to take last quarter's supplemental where we disclosed annualized contractual cash rent at 3/31 of $184.3 million. If you back out the 1 tenant we've been talking about, who represents about $5.1 million, you get an annualized number of $179.2 million. Divide that by 4 to get a quarterly number of $44.8 million, add in the $1.1 million of new investments, $280,000 of CPI bumps, $370,000 cash collected from that 1 tenant, and you get $46.5 million. There are some other immaterial items in there that net to 0. I hope this -- I'm hopeful this helps you better reconcile this number.
Interest income was down $635,000 due to a $15 million note that was paid off at the end of Q1. The quarterly interest income rate on our notes portfolio is approximately $4.4 million. Interest expense was up $1.2 million from Q1 due to higher borrowings and rates. Also subsequent to quarter end, we drew $30 million more on the revolver. G&A expense decreased $343,000 from Q1 due mostly to lower short-term incentive comp. Stock compensation continued to be roughly $1 million due to stock forfeitures in Q2 related to certain performance criteria that needed to occur that likely will not be met. I expect that it will return to a quarterly run rate of around $1.6 million in Q3 and Q4 and G&A expense for the year will be around $21 million.
Cash collections for the quarter came in at 96.7% of contractual rent, and in July, we collected 98%. We entered into a forward sale agreement under the ATM program, and to date, have issued approximately 10.6 million shares at an average gross price of $19.80 for net proceeds of $207 million. As a result, our liquidity remains extremely strong with approximately $12 million in cash, $290 million available under our revolver and the $207 million of future ATM proceeds. I expect we will settle this contract during the third quarter and use the proceeds to pay down the line. Leverage also continued to be strong with a net debt to normalized EBITDA ratio of 3.8x, which is below our stated range of 4 to 5x. Our net debt to enterprise value was 26% as of quarter end, and we achieved a fixed charge coverage ratio of 4.5x. And with that, I'll turn it back to Dave.

David M. Sedgwick

Great. Thanks, Bill. We hope the reports are helpful to you, and happy to take your questions now.

Question and Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Tao Qiu from Berenberg Capital.

Tao Qiu

Congrats on a very active quarter. I think I lost kind of how many transactions that came through, but the Street was certainly impressive. But my first question is on the $5 million tenant. I think last quarter, you said was the main reason that keeps you from issuing full year earnings guidance. The assets have been moved to how to sell. You will see some rents this quarter and some more in the third quarter. It doesn't seem to be a lot of downside from here. Are there any other variables that we are now considering from a guidance perspective?

David M. Sedgwick

Great question. No, I'd say that this tenant and the -- how it ultimately plays out continues to be the primary factor for us in not issuing guidance quite yet. The sales price and the amount of rent that is in play is significant enough for us to hold off on guidance at this point.

Tao Qiu

Got you. And a follow-up on that. I think in Iowa, I saw that Medicaid rate rose by $50 in April and I think another $15 in September. So understanding the starting rate in that state is pretty low, but curious why would you choose to sell the assets today rather than kind of seeing through the rate gains?

David M. Sedgwick

We believe that the best path forward for these particular assets is probably a sale. Nothing is set in stone at this point. We're negotiating with the buyer right now. And we think that, that's the best path forward. As we look at the proceeds from that and what ultimate rent reset would be in the likelihood of being able to turn it around at the existing rent. When you look at all of that, we think that a sale is probably the most advantageous outcome for us.

Tao Qiu

That's fair. And 1 last from me. So on the 4 ATM sales, how should we think about the settlement schedule? Like from a modeling perspective, should we expect that to be settling multiple tranches? Just curious how we should build that into our models.

William M. Wagner

This is Bill. I would probably model that as settling it in the third quarter. We would probably hold it out a little bit longer if interest rates weren't where they're at -- aren't where they're at, but given how high they are, the accretion of holding it out on the forward isn't really there. So we'll probably settle it in Q3, all of it.

Operator

Your next question comes from the line of Wes Golladay from Baird.

Wesley Keith Golladay

Are you looking to develop a lot of new relationships. I am just curious how big the pool is of the high-quality operators that are actually looking to monetize assets.

David M. Sedgwick

We love that question. When we -- one of the things that makes us a little bit unique, I think, is the level of former operator experience that we have here at CareTrust. And so the priority that we give that decision in any investment is really paramount.
If you look at the first real big wave of growth that we had, we had found a number of hungry, younger operators, and we placed some pretty good bets on them. And those have, for the most part, really paid out beautifully. And we feel like as we look at this next phase of growth ,that's going to come from expanding those existing relationships, but it's also going to require some new ones. And so last year, we made some decisions around human capital here at CareTrust and moved some people over into investments with the express mandate to build that operator bench to find off-market deals and to find operators that we don't know.
And to see the fruit of that decision and effort happens so quickly has been really gratifying to us as we've welcomed in 6 new operators already. We're not done. So we're going to continue to look for the best-of-breed operators that have some of the same characteristics as our most successful operators have demonstrated so that we can have new geographies and new opportunities for growth that we haven't quite had in the past.

Wesley Keith Golladay

Okay. And then looking at the balance sheet, I'm just curious how low would you take leverage? And I guess, what is the delta between your cost of debt and cost of equity? Would you look to issue short-term debt in the near term at any point? Just curious on how the balance sheet will be going forward.

William M. Wagner

Yes, this is Bill. I'll take that one. Right now, difference between short-term debt which is our revolver and our equity is not that great. So as long as we're doing deals at the yields that we're currently doing and our stock price holds at where it's currently at, I think you can assume that we'll continue to issue equity to match fund these investments as we go. And that inevitably will take leverage down. But over time, I think as interest rates, call it lower, and we continue to do more investments, we'll probably use a little bit more short-term debt with that revolver.

Operator

Your next question comes from the line of Steven Valiquette from Barclays Capital.

Steven James Valiquette

Couple here. I guess first, just based on some of the comments from other healthcare REITs this quarter seems to still be a pretty wide range on SNF transaction valuations either from a per bed or a cap rate perspective. The cap rates are maybe 8.5% to 10.5% range and per bed is anywhere from $75,000 to maybe $125,000, somewhere in there. So just curious to get your thoughts on how you think the industry valuations are trending directionally right now. And then I got a follow-up on a different topic that I'll ask in a minute, I guess.

James B. Callister

Sure, Steven. This is James. I guess I would say that first, per bed is really to us useful when the assets really aren't cash flowing. And the variation in per bed pricing amongst different geographies is really huge. It's just -- you can go from some markets trading close to $200,000 a bed, other markets trading $30,000 a bed. So it's really all over, I would say, in a hyper-geographical for us as we look at it. I think that there is definitely on the skilled nursing side, an upward trend in yields that are being used to price the deals I think that were starting in the high 9s or even 10 per beds on skilled nursing.
And I think that as some deals slowly start that we look at to actually become positive cash flowing, then you do look at the per bed, but you also work super closely with your operator to make sure that you are really trying to dial in a stabilized value that will give them a rent stream they can really be successful with which can be difficult in today's environment, particularly with labor. I do think, like I said, rates are up in terms of the yield, but cap rates are still pretty much the same in the skilled nursing of around 12.5%.

Steven James Valiquette

Okay. Okay. That's helpful. Then shifting gears here a little bit. Among some of the healthcare payer and provider companies that we cover, there's definitely been a buzz that behavioral health demand has accelerated this year. It seems like both from either a per visit basis but also for facility-based care settings. I guess in light of that, just looking for maybe the latest update on the progression of some of the facilities that you're repurposing for behavioral. Whether we're close now to some reopenings, how you're feeling about the pace of your strategy around this? And also just thinking about the Page 9 in the supplemental when you kind of break down the portfolio performance by property category. When should we think that behavior might be like a separate category within that? Is that something that might start happening for 2024? Or maybe you guys haven't thought about that yet, but just curious when that might become an additional category within the property type breakdown of performance?

David M. Sedgwick

Yes, that's great. So our strategy with respect to behavioral has been to, let's say, shoot some -- shoot some bullets before cannonballs. We want to take a bit of a measured approach and test out the thesis. And so we haven't been super aggressive in trying to grow in that space, just to grow, just to do it. Our philosophy for behavioral is exactly the same as it is with skilled nursing, which is we've got to have conviction in the operator, their model and have a really strong relationship with them in order to do that. Candidly, we've been so busy with our bread and butter and have seen so many great opportunities with the skilled nursing, seniors housing assets that that's taken all of our attention.
The conversions that are in play are still tracking. They're coming along. The renovation work is underway. And those will come online as soon as they are ready, I think, early next year. We have had -- we came close on a sale leaseback with the behavioral operator this year. They ultimately brought us -- they had brought us in a little bit late into their process and decided to go ahead with the normal financing that they had planned. And so it's still very much an area of interest for us. The priority to identify the best operators in the space. It's a space that's even more fragmented than the skilled nursing space is in terms of operators and building those relationships and finding those best operators is a bit of a challenge, but it's one we're here for, and we want to grow that segment over time, but it's really going to be dependent on finding those operators and finding the right accretive deals. And so I think until we have a little bit more critical mass that's when we'll start reporting on that as a separate segment.

Operator

Your next question comes from the line of Michael Carroll from RBC Capital Markets.

Michael Albert Carroll

Dave, I want to touch back on the assets that you have held for sale. I know you said you have 1 interested buyer into that property. I mean I guess what is the level of interest, I mean are there -- is that -- is the deal going to get done with that 1 buyer potentially? Or is there other players kind of in the sidelines that -- and they are looking at it too?

David M. Sedgwick

Yes, we have fielded interest -- we are working with the buyer right now. We've been negotiating purchase sale agreement in terms and all of that. That's moving forward pretty well, but we're sort of gotten out on the process and we have fielded interest from some backup options and plan Bs that are a host of purchasing versus re-tenanting with a purchase option and different things like that. But we're -- all of our energy right now is really with the group that we are negotiating with.

Michael Albert Carroll

Okay. And the existing operator, I know they still continue to pay a tiny bit of rent. I guess why are they still paying those small stub pieces of rent? And are they interested in buying the portfolio?

David M. Sedgwick

Yes, they have expressed interest in that. And I think that by staying active and engaged in improving the performance there and paying some rent gives them an advantaged position in the negotiations in our thought process.

Michael Albert Carroll

Okay. And then what's the time line should we be expecting on this? I know for the past few quarters, you kind of highlighted that you would have a plan in place, and it could get done pretty quickly. I mean could this get done by the end of the year?

David M. Sedgwick

Mike, I hope so. But given the environment we've been in and that we remain in, transactionally, it's just -- it's the most challenging market for buyers who have to finance stuff that we've ever seen. And so I want to not make any prediction on the timing on this one.

Michael Albert Carroll

Okay. And would you provide -- are you willing to provide seller financing to the buyer?

David M. Sedgwick

It's a possibility. Our preference would be to have a clean break, but that might be required to get a deal done.

Operator

Your next question comes from the line of Connor Siversky from Wells Fargo.

Connor Serge Siversky

It seems to be running out of question ideas here. But maybe taking a more abstract view on underwriting. I'm curious, as we've gone through COVID and the risk factors changed dramatically for skilled nursing, has your perception of risk in the underwriting framework changed? And I mean that in the context of looking at the risk curve as rates have gone up, would you actually -- would it be reasonable to assume that your underwriting standards have gotten more stringent following what happened over the past couple of years?

David M. Sedgwick

It's a great question. And James, you can correct me if I'm wrong on any of this, but I think the short answer is no, that our underwriting hasn't become more stringent. I think we've always tried and worked at having a very disciplined collaborative underwriting process with our operator. So before we even lob in an LOI, we've usually already underwritten the deal together and really tested each other's assumptions and gotten comfortable. And so the process is very similar to what it was pre-pandemic.
We just look at things in a bit of a different light because of the pandemic today. But I still feel like we've been able to be successful even in the midst of the pandemic, underwriting these deals that maybe require return. I would point your attention to the investor deck that we put out along with [Navy] in June, we actually put in a slide there, the case study of a few buildings that we had underwritten with an existing operator in the middle of the pandemic, I think that we acquired them in 2021, they were not cash flowing, so underwater basically on day 1, but we had worked on the pro forma together, and we, as former operators feel like we can feasibility test that pretty well, the improvement from day 1 in place negative or under 1x coverage to just about 18 months later was really impressive.
A lot of the investments that we've done this year kind of follow that same model where these buildings haven't been fully stabilized, perfect anywhere -- only place to go is down. Now there's been quite a bit of upside in them. And so I think Connor that as we employ our experienced operators, and we select the right operator, and we collaboratively underwrite together then we can have great success.

James B. Callister

Yes. I think, Connor, I would just add that through COVID, maybe we look at one -- a few things differently, in particular on the expense side, we may really look at labor, obviously, a lot more carefully, just in terms of understanding where the facilities are, what the labor situation is in the immediate geography, looking closer, especially if it's a rural deal, are they really going to be able to find labor. So I think there's 1 or 2 -- a few things that came out from the fallout of COVID and where the market is today that have led us to focus more carefully on a few things, but the overall process is still pretty consistent with what we've done before.

Operator

(Operator Instructions) Your next question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets.

Austin Todd Wurschmidt

If the existing operator -- capital behind the existing operator were to purchase these assets in Iowa, I guess is it safe to assume that you'd require kind of market value plus any back rent to win that deal?

David M. Sedgwick

Yes. I think we just have to be a little careful on what we would accept and what we would -- during the open negotiation like this. So -- and we probably have to unfortunately deflect comments on ongoing negotiations right now.

Austin Todd Wurschmidt

That's fair. But -- and maybe if you were to sell or finance, how much of the deal value would you ultimately be willing to finance, just given kind of what's happened here operationally and some of the challenges they faced?

David M. Sedgwick

I'm really not trying to avoid you, but it's kind of the same issue. What we've -- the terms of the transaction, how much we would finance, what the price would be, what conditions we would need, that's all very much in play real time, so we can't really comment on it.

Austin Todd Wurschmidt

Okay. And then just speaking back to the $150 million investment pipeline, what's been kind of the time line from the time it enters the pipeline to where you're able to close? And how much really beyond that $150 million is crossing your desk that meets criteria, but just is on the back burner until you're really able to move on those.

James B. Callister

Also, I'd say that how long a deal takes from when we get it in, to when we close, it's all over the place, right? It's very dependent on a number of things. I think you see a little bit of a rush in the June, July time period, especially in California with some changes in the CHOW regs. So sometimes the deal is going to take -- you might have to provide 120 days of notice before you can close. Others, you'll get finished in 60 to 90 days. I would say typically from the time we see it, it's probably a 90- to 120-day process. And in terms of things that are outside of the $150 million, I guess I'd say that, look, if something looks good to us, we really don't put it on the back burner ever. It's front and center, and we're going to get the resources to it that it needs for us to be competitive and go get it. So I think that things on the back burner, if you like them, they're not going to stay there. They're going to move to the top or towards the top very quickly.

Austin Todd Wurschmidt

Yes. It just seems like you guys have had success quickly backfilling that $150 million throughout the year. So I was just curious beyond that. But last one for me, I'm just curious, what percent of your leases are CPI-based?

William M. Wagner

Well, outside of -- well, the vast majority of them are.

David M. Sedgwick

Yes, almost all of them. I mean if we give a short-term fixed ramp, that might be there, but then ultimately, it goes to CPI-based, the vast majority are.

Operator

There are no further questions at this time. I will now turn the call back over to Dave Sedgwick.

David M. Sedgwick

Thank you. Well, we really appreciate everybody's support and questions. And as always, if there's anything else that you'd like to talk about, you know where to reach us. Have a great weekend.

Operator

This concludes today's conference call. You may now disconnect.