Michael Carroll: What — under what scenario would you defer all your rent? I mean if they ask for it, would you necessarily provide that to them?
Steven Hamner: Well, we’re a long way from that. There are lots of parties involved in the Prospect strategies and negotiations. And we have simply said that along with other parties, we are willing to consider contributing to Prospect’s 2023 cash needs and primarily by virtue of potential rent concessions, rent deferrals.
Michael Carroll: Did Prospect pay their full rent in January and February?
Steven Hamner: No.
Michael Carroll: Okay. Did they pay any rent in January and February?
Steven Hamner: That we haven’t disclosed, but no, they did not pay their full rent.
Michael Carroll: Okay. And then under what scenario, I guess, do you that this will be completed. I know in the press release, you highlighted that this will take 12 to 18 months, but then you also indicated that you would expect to get some recoveries in the second half of the year. I mean, what’s the give and takes with that potential outcome?
Edward Aldag: Yes. Well, it’s the Yale sales, the Connecticut sale, the improvement of the overall operations in the facilities and an ultimate conclusion of a restructuring for them.
Michael Carroll: Okay. And then last question for me. What transaction taken so long? I know in the middle of 2022, you kind of expected something will get done in the fourth quarter. So why is it being pushed out further into 2023 — it sounds like probably 2024?
Steven Hamner: Well, we did expect — we had good reason to expect in the fourth quarter actually going into the first quarter and into the early weeks of January. We I say we Prospect was negotiating with a potential financial partner that would have begun the monetization process of the managed care business that would have provided immediate liquidity for operations. And those negotiations went very deep, and it was only in the middle of January that it became apparent that, that particular party was not going to continue to move forward. And that’s what — that’s the big change that caused us to make these accounting decisions.
Michael Carroll: Okay, great. Thank you.
Operator: Our next question comes from Michael Mueller from JPMorgan. Please go ahead with your question.
Michael Mueller: Take you off mute there. So, first of all, I guess after the Connecticut assets are sold, are you anticipating a rent cut on Pennsylvania and the California assets on a go-forward basis? And is any of that baked into that $0.15 cash recovery?
Steven Hamner: No, the difference — the primary difference between the $1.50 worst-case scenario, which, again, not to belabor it, but assumes no rent at all from any Prospect properties. The difference between that $1.50 and the $1.65 is primarily collection of the Connecticut rent and collection of the California rent and interest.
Michael Mueller: Got it. But on a go-forward basis, so you’re assuming — what are you assuming on a go-forward basis, not necessarily calendar 2023, but for the Pennsylvania assets. are you anticipating some sort of rent there? Or just that operating–
Steven Hamner: I think at any point along the range of $1.50 to $1.65, there is no Pennsylvania rent assumed there. Ideally, we’d like to see Pennsylvania improved — and as I mentioned earlier, become an attractive — it is an acquisition target. And you all may recall, this time last year, there was an offer, a non-binding offer from an investment-grade rated not-for-profit. And it is still an attractive facility for operators. So our preference would be for that to happen and Prospect defined a buyer and we actually sell the real estate and recover at least the impaired value of the real estate.
