Brookdale Senior Living Inc (BKD) 2008 Q1 法說會逐字稿

Good morning. My name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living First Quarter 2008 Earnings Call. (OPERATOR INSTRUCTIONS). I will now turn the call over to Mr. Ross Roadman. Please go ahead, sir.

Thank you, Dennis, and good morning everyone. I also would like to welcome you to the First Quarter 2008 Earnings Call for Brookdale. Joining us today are Bill Doniger, our Vice Chairman; Bill Sheriff, our CEO; and Mark Ohlendorf, our Co-President and Chief Financial Officer.

Before I turn the call over to Bill, as Dennis mentioned, this call is being recorded. A replay will be available through May 10th by calling 1-800-642-1687 from within the US, or 706-645-9291 from outside of the US, and referencing access code 45785738. The call will also be available via webcast on our website, www.brookdaleliving.com, for three months following the call.

I would also like to point out that all statements today, which are not historical facts, may be deemed to be forward-looking statements within the meaning of the federal securities laws. Actual results may differ materially from the estimates or expectations expressed in those statements. Certain of the factors that could cause actual results to differ materially from Brookdale Senior Living's expectations are detailed in the earnings release we issued last night, and in the reports we file with the SEC from time to time. I direct you to Brookdale Senior Living's earnings release for the full Safe Harbor statement.

And now, I'd like to turn the call over to Bill Doniger. Bill?

Thanks, Ross. Welcome everyone to the breakfast edition of our quarterly earnings call. Net of adjustments for the quarter, our CFFO was $0.41 a share, which is a 17% increase over the first quarter last year. Our results for the quarter are right where we expected them to be, and we are extremely pleased with the efforts of the team in getting there.

Our current financial performance illustrates both the quality of our business model and the strength of our company. The fact that we're able to grow our cash flow at current levels in the midst of the worst economic environment in history of our industry, gives us even greater confidence in the strong earnings prospects for Brookdale.

Our business plan remains simple; continue to grow our free cash flow organically at 15% to 20% a year in these difficult conditions, and use our excess cash flow to begin to repurchase stock to capture the discount between current market prices and our view of the Company's net asset value.

We think long-term investors will be amply rewarded for their patience. While we can't be more specific at this point where we are on the stock buyback, I can tell you we remain on track with our plans.

With that, I would like to turn the call over to our CEO, Bill Sheriff.

Thank you and let me add my welcome to everyone on the call. For those who are joining us for the first time, let me give a brief overview of the Company. We are the largest senior housing provider in the country with 550 communities serving approximately 52,000 residents. We have 34,000 employees in 35 states. And we have the full spectrum of products and services for senior living from independent living, assisted living, to continuing care retirement communities.

We are the largest provider of dementia/Alzheimer's residential care in the US. And we have a very successful and growing ancillary service business, which adds differentiation in the marketplace, as well as very meaningful economics.

I'd like to remind everyone again of the basic metrics of our business. Each year we expect to increase revenues organically by 5% to 6%, excluding ancillary services and assuming no change in occupancy. At a 36% operating margin, we generate 7% to 9% NOI growth. This translates into CFFO growth of approximately 20% per annum. The primary factor that is currently affecting our growth rate is our occupancy level.

When creating our plan for the year, we assumed we would have some occupancy decline in the early part of the year. Today our assets are about 90% full. That is down a fraction from this time last year. Our cash flow growth for the year will be affected primarily by occupancy. Our assumption going in was a decline in the first half of the year and more stability in the second half. While it is still early in the second quarter, our views haven't changed.

As we all know, consumer confidence is the lowest it has been in 26 years. As such, 2008 continues to be a difficult operating environment. However, against all of these factors, our first quarter performance was very good. It is important to recognize that the underlying fundamentals of the senior housing industry continues to show strength. Furthermore, the demand is stronger in these times for needs-based services liked assisted living and skilled nursing, more than discretionary services like independent living. The reality is, the population continues to age, pent-up demand is growing and building acceptance of our products and services. All of these factors lead to recovery early in an economic upswing, and we will see very strong fundamentals ahead when the economic environment turns.

Now let me discuss what we are doing about improving our occupancy, primarily through enhanced sales and marketing programs. These programs are oriented to keeping residents in our network of communities longer and increasing sales leads. Let me give you a few examples. We initiated a major management program-- a major market management program, or as we call it, M3, which we have talked about before, that integrates the sales and marketing efforts of all of our products in a market. The program has successfully demonstrated the strong advantage we can realize with our scope and size in major markets.

The M3 program started in July of 2007 with five markets. This has now expanded to 12 markets with an additional three to be functioning as M3 in the near future. Total market management of sales and product positioning creates what we refer to as the virtual CCRC in the market. We share advertising and marketing initiatives, lead generation events, and resident transfers, and as a result, the M3 markets maintain occupancy better through Q1 than the balance of our portfolio. The M3 markets performed 70 basis points better than non-M3 markets in terms of occupancy in Q1. The cross referrals are very healthy and growing, as well as the intra-market resident transfers.

We've also introduced a new powerful website that is generating significantly increased leads. And it is becoming a vital generator of interactive communication that connects Brookdale with its prospects. Traffic is up 50%, leads are up 18% in March, being a record at 2,000 qualified leads. The search engine traffic is up 76%.

Looking ahead, we will be implementing this quarter a new product innovation to capture greater market share through an incentive-based loyalty program. We have made very significant investments in systems, programs, and people over the last couple of years. We remain focused on making additional investments with the conviction that it is the best way to address the current environment, and, more importantly, to position the Company to take advantage of the tremendous opportunities as and when the housing market and economy starts to improve.

I would like now to turn the call over to Mark.

As Bill said, our reported Cash from Facility Operations, or CFFO, for the quarter was $0.38 a share, a 19% increase over the first quarter of 2007 where we reported $0.32 a share, both of these numbers based on our new definition for calculating CFFO. Excluding acquisition and integration-related costs, Brookdale's first quarter CFFO would have been $0.41 a share, an increase of 17% over the first quarter of '07.

Revenue for the quarter totaled $481 million, an increase of 7.6% over the first quarter of '07. Facility Operating Income was $167 million, a 4% increase over the first quarter of 2007. Same-store results for the year over year period showed an increase in revenue of 6.6% as a result of an average revenue per unit increase of 7.4%, and a decline in occupancy of 70 basis points. Expenses grew at 6.3%, resulting in same-store NOI growth of 7.2%. Effective January 1, we instituted 4% to 5% rate increases across much of our Assisted Living portfolio.

The pricing environment remains firm. Adjusting out the ancillary services impact from the Legacy Brookdale units, revenue grew 4.7% with rate up 5.5%, offset by the 70 basis point occupancy decline. In other words, ancillary services added 1.9% to revenue growth. Our primary NOI growth metrics remain strong. Had occupancy been flat in the year over year period, NOI growth would have been approximately 9%.

Let me provide some insight into the same-store expense growth in the first quarter. These numbers are impacted by the roll-out of ancillary services to the Brookdale units and related start-up expenses. Excluding this ancillary service expense, same-store expense growth in the first quarter was 5.6%, in line with our plan. Over time, we would expect to see costs grow in the 3.5% to 4% range. In the first quarter, much of the excess over that level was driven by several factors dealing with several-- with salaries and wages.

First, having an extra day for leap year, where we pay wages by the day and receive rents by the month, cost about a $1 million impact on cost. As Bill said, we've added 50 salespeople in the last year to bolster our sales efforts on the front line.

We also experienced an increase in salaries and benefits for certain positions during the last year, in an effort to increase retention of top community leadership. Local leadership is critical to producing solid results. We reduced the number of vacant management positions over the last year, which in effect, increased labor costs. It's the right business decision to increase our performance in the long-term.

Beyond salaries and wages, we also increased advertising and promotion activities, and saw an increase in some commodity related costs. These costs, which include items such as food, supplies, and utilities, account for around 15% of our operating costs. Americans are experiencing these types of increases in commodity related costs throughout the economy.

As Bill Sheriff noted, the results for the quarter were consistent with our expectations. As we had discussed last quarter, beyond operating income, G&A was similar to the prior quarter. Entrance fees came in close to Q1 '07 levels, and interest expense came down as the result of recouponing of our swaps.

Our CFFO for the quarter is net of $2.9 million or at $0.03 a share, related to integration costs that represents the costs in the quarter to develop and implement integrated systems and processes. We've incurred these costs in previous quarters, and previously stated that they would continue in '08, and total in the range of $10 million to $11 million. We also incurred $1 million of start-up losses within ISC in the first quarter.

With respect to our balance sheet, we placed $288 million of secured financing since the first of the year producing net proceeds of $111 million. As of the end of the first quarter, we had $119 million of cash and $79 million of undrawn capacity under our corporate line. We're in the process of completing two other portfolio refinancings, that when done, will increase our cash in line about-- availability by more than $100 million. We continue to refinance property level that to approximately 65% to 70% loan to value, and use the excess proceeds generated in these financings for corporate uses or to pay down our corporate line.

In closing, the results for the quarter were consistent with our internal expectations. And we are holding firm, which is a testimony to our business model and the hard work of our team. We continue to make progress in a number of areas of the business, and continue to focus on proper positioning and investments that will yield the best results over the long-term.

I'll now turn it over to the operator for questions.

(OPERATOR INSTRUCTIONS). Your first question will come from the line of Jay Haberman with Goldman Sachs.

Hey, good morning everyone. Here with [Sloan Bowen] as well. Just starting off with occupancy, obviously given the year over year decline. Can you just give us a sense-- I know you mentioned the rate increase in January, but how do you anticipate being able to push rates going forward? Is it really just more sort of an expectation that you're seeking to maintain that 90% occupancy level?

Well, as we went into the year again, we expected some softness in the first and second quarter, which we think we're seeing, and also, that we could expect to see some turn in the next-- the last half of the year. And we believe that the fundamentals of the field are still being well demonstrated and don't (inaudible) affect the rate increases. And again, those come from an average of the rate increases to existing residents, but also the street rates, the mark-to-market effect, and the other care charges that we have. So it's a blend of those factors, and we don't really see any weakening to the point that we're not going to be able to consistently affect those price increases.

Okay. And can you just give us a sense, maybe by region or by market, where you're seeing more pressure on occupancy?

It is a little bit geographic, and maybe the west cost might be the softest at this point, but it's-- we don't see a major difference, a dramatic difference in the markets.

Okay. And just-- also just touching on the expense growth, I mean obviously the increase for the quarter-- and obviously there was some discussion on the call about some of the factors driving it. But it seems as though some of those cost pressures may remain throughout the year. You mentioned, perhaps, that expense growth would return to a more normalized level, but I'm just curious what gives you that confidence, given that some of those cost pressures could persist for some time?

Well, again, I think we need to identify which of these items are inflationary cost pressures and which of these items are consistent with the plan that we have for the business. But two more significant drivers, if you compare Q1 '08 to Q1 '07, are we put more salespeople on the ground in the field to supplement the sales resources we have on the front line and we have a lower vacancy level in our community level management teams. Now, again, both of those are things that we think are very important over the long-term to have the business perform the best, and are very consistent with our plan.

Now that is after taking into account, the impact of rolling out our ancillary service business in the quarter. The cost growth year over year is about 5.5% after adjusting out the impact of rolling out the ancillary services. And we've got a very significant pick up in revenue quarter over quarter, related to the roll-out of the ancillaries, and there is some cost attendant with that as well.

Okay, great. Thank you.

Your next question will come from the line of Jerry Doctrow with Stifel Nicolaus.

Good morning. A couple things that I don't want to belabor the occupancy too much. I was just wondering if we could get a little more color on entrance fees and entering into these communities and how they're playing out in the current economic environment, and whether you're doing anything differently there to pick up net entrance fees?

Well, as we went into year, we said we didn't expect 2008 to be much different than 2007. And the first quarter 2008 was nearly the same as Q1 '07. An important point to make here is that we do not need real improvement in entrance fees for 20% cash flow growth. However, once we start to normalize, the impact will be quite significant.

For example, if you look back at our six maturing entrance fee communities that are included in our same-store group, those communities generated annual net entrance fees of $30 million to $32 million in 2004 and 2005 at stable run rates. Those same communities produced only $17 million of net entrance fees in 2007. So we move back to stable run rate, and even gaining ground, there's substantial upside to their cash flows, not only retuning to the normal run rate or recapturing some of that shortfall. And again, as the profile of the year, we see it very much as mirroring the profile of '07.

Okay. And just, Bill is that-- you're seeing more softness, if you will, on the entrance fees than in other housing markets. I mean, that's kind of the conventional wisdom there everybody has in the business. I just want to see--.

Our actual occupancy delta, or change there, is not a lot different actually, between those. And again, our folks continue to work really hard to-- on that part. But it's not significantly different in-- there's just a tad, but it's very small.

Okay. And then, would you describe it as kind of as front door/back door problem in terms of whether it's higher move outs or just less-- you've got the rate of movements is just lower than where it has been?

Well if your question was to the entry fees, that attrition rate is pretty stable, static. Consistently there's not a change in the attrition issue. Go to look at the rest of the portfolio, we don't see a significant difference in our attrition rates. Again, we've worked very hard in terms of closing the back door, if you will, in different ways, and within our major markets and where we have the ability to move people from one of our communities to another, et al, and also support them at the ancillary services. Our experience may differ a little bit from some out there, but we don't see a significant difference in the attrition rates.

Okay. So it's more of a front door problem. And then, Mark, again, I think you said this, I just didn't pick it up as you went by. You raised rates primarily January 1 on the AL side of the business, so what was the actual rate increase on just the AL portion? I know it translated into its own portfolio in the first--.

I think generally, the rate increases would have been a little bit over 5%. Again, a little bit geographically sensitive, but I think sequential quarters, the rates are up 3.3%, 3.4%. And the Assisted Living portfolio is about 40% of the capacity.

Okay. And then the last thing I just wanted to ask about is strategy overall, and for everyone to take it. It sounds like you would be doing less in acquisitions, so that you're focused on-- I guess I'd just like to talk about, obviously we talked about growing the existing portfolio. There's a-- and the ancillaries. There's a program of kind of expansions and conversions, I'd just like to get a little more color on that. And then it sounds like that you might well be more likely to be buyers of stock than buyers of additional properties in this market, but maybe if you could touch on those two items?

Thanks Jerry, this is Bill Doniger. It's-- from which, you know, a generalization perspective we are primarily focused on return on our shareholders' capital. And so that can come from a variety of factors. You can make expansions, you could rebuild assets, you could do new developments, you could make acquisitions, or you can invest in your stock of your own company. Right now, we believe the best return on a dollar that we would invest, is probably going to be in our stock.

And so, we are working pretty hard to do that, but that's not necessarily to the exclusion of some of those other options. But primarily, that is where our focus is. Again, if we can deliver 15% to 20% growth organically, and we believe that we can, we're not going to make acquisitions for acquisition's sake. But everything's on the table, but it's primarily where we get the best return is where our strategy lies.

Okay. And you're moving ahead with other, the sort of the expansion stuff were planned, but there may be less of that go forward, or that program may not be as expanding, Is that sort of an accurate generalization--?

We've adjusted our strategy just a little bit, and focus more on the expansions of the leased assets versus the corporate assets at this point in time, again, because they fund that. But we're continuing on with our expansion program, just having shifted a little bit of the mix of those.

Okay, great. Thanks a lot.

Your next question will come from the line of Ryan Daniels with William Blair.

Good morning, it's Kristina Blaschek for Ryan Daniels this morning. I have one additional question on the occupancy front. Did you happen to see any impact from any Q1 specific events? For example, did the Easter shift postpone any move-ins, or how was the impact from a worse than expected flu season? Any color you can provide would be helpful.

We didn't see the flu season as something that was affect us more than the general. Almost every year, you have some elements of that, and we certainly had a bit, but recovered from that fairly quickly.

Okay.

There is nothing in terms of otherwise that we saw as being particularly different.

Okay, great. Thank you. On the price increases for Assisted Living in January, you mentioned prices went up generally over 5%. Did you happen to see any pushback from existing residents on those increases?

I don't think the experience in the first quarter was different than what we've seen for the last several years.

Okay, that's helpful, thank you. Moving on to systems integration, on that front, how is everything coming along? I know you've mentioned in past quarters, it was about 65% done. What is the status now, and when do you expect that to be completed?

Can you repeat your question? You digitized a bit.

Sure. On the systems integration front, can you give us an update on how that is coming along and when you expect that to be completed?

Sure. You might notice in the results for the quarter, our integration related costs and the P&L were probably a little bit lower than you would have expected--.

Right.

--based on what we talked about on the fourth quarter call. Reality is, the market conditions now are such that we want our community level folks very focused on selling in the market. So we're very sensitive to the pace at which we do things corporately that requires local folks to divert their attention away from the market. So it likely is the case that we have extended the period over which we'll do this work during the year this year, not substantially so.

We continue to be in a situation where the financial system installations are largely complete, and the work we're doing is focused around our operating systems. So we're very sensitive to the pace at which that will go.

Okay, great. I guess that's a good lead into my next question. How-- can you give us a sense for how the field organization, in general, has responded so far to any organizational marketing or system changes you've begun to implement?

It has been very positive. It certainly is a lot of change for folks, but they embraced the fundamental concepts and principal reasons for it. Very enthusiastic about that, and have-- I think the first quarter is strong evidence of the fact that that has gone well.

Alright, great. Thank you. And then I have one last question. Under the new segment reporting that you implemented in the fourth quarter, about 3,500 beds that were previously in CCRC retirement segment, moved into the retirement independent living. Can you explain what drove that, please?

It is simply a redefinition of the segments. The segments that we had been using were driven around sort of a Legacy origin of the properties, whether they came out of the Nashville, Chicago, or Milwaukee operation. The segments that we're using beginning with the 10-K, are simply product line definitions. So all the retirement centers are in one group, all the free-standing Assisted Living another, all the CCRCs another. So there was a minor amount of shifting between the two versions, but not very substantial.

Okay, that makes sense. Thank you very much.

Your next question will come from the line of Frank Morgan with Jeffries.

Good morning. Two questions, first on the ancillary side, I'm just curious, obviously your other (inaudible) seem to be as little more sensitive to the economy, but how do you think about sensitivity of the growth in that ancillary business relative to the economy? And secondly, over the next couple of years, what do you think you can ultimately grow that ancillary business to? If we looked out a couple years from now, where do you think revenues and NOI contribution could be once this thing completely builds out? Thanks.

Well this continues to be one of our very exciting parts of our growth story. We added about 1,500 additional units in Q1 of our expected 8,000 that we expect to roll-out in '08. We now reached about 60% of our total portfolio. We're continuing to see improvements as the clinics mature and increase in their economics.

And we've made good progress in the expansion of our Home Health business, as well. We're now serving over 10,000 units going in to this second quarter. Home Health is an important part in achieving what we had laid out before of the $150 per unit target for the Legacy Brookdale portfolio. And actually, for the first time, the ancillary services operating income of the Legacy ARC exceeded $200 in the first quarter. We expect that to continue to build and we still think that's a realistic benchmark going out. It still will take five to six quarters as we get the clinics open in order for those to mature.

Thank you.

Your next question will come from the line of Adam Feinstein with Lehman Brothers.

Okay, thank you. Good morning, everyone. Just a few questions here. I guess just on the stock buyback, Bill, I understand your sensitivity about talking too much about it. But just curious if you could just give us any color in terms of how we should think about the timing, and have you guys bought back any stock yet? So just, any clarity that you can give us?

The clarity we can give you is we haven't because we've been restricted, but beyond that, I think we're pretty hand strung about what we can tell you.

Okay, understood. Okay. And then, I guess just another question for Bill here. Last quarter you talked about the NAV being about $45, and you had mentioned about a 6.5% cap rate was how you guys were thinking about it. Do you still think about it that same way? Do you think 6.5% cap rate is the right number?

Yeah, we talked about 6.5% to 7%, I think. And got us even at 75, I think it was in the low 40's. So I don't think a 6.5% cap rate is probably a fair bit higher than that. Again, you've got to think about our portfolio. We probably have assets that would trade in the 8%, 8.5%, but the-- the majority of our assets trade well below that.

So, again, I don't think it's scientific, but maybe one way to think about it is to look at some of the healthcare reads and how they are valued, and people think about them often on a cap rate basis. And by the way, the REITs probably are at 7 or maybe inside of that, and they own, theoretically, a lot of our own assets. So, it's really-- we look at that as a benchmark to justify, really, that number.

Okay. And then just, Mark, maybe just a quick question here just about the environment for secured financing. It sounds like you guys aren't having any problems there. Do you think the market will continue to be pretty good for you guys there?

We think so. Again, the financings that we're doing, by and large, are of stable assets. So they're cash flowing, relatively high occupancy assets where the NOI grows every year. We also don't apply a lot of leverage in our financings. We're financing at 65% or 70% of value. The part of the secured financing market that I think that has seen the biggest impact is high leverage, which we do not use, or development in lease up financing, which we generally don't have.

Okay, great. And then just a follow up question here. Just curious just in terms of-- clearly the macro environment has changed in the past year. You talked before that-- you're looking at various opportunities, besides stock buyback, in terms of using your capital. But, just curious as to terms to get thoughts here, just in terms of the competitive landscape, are you guys getting shown assets recently that had more attractive terms? Just curious in terms of the deal environment. Thank you.

You know, to be honest, we haven't been out looking for assets. There's probably opportunistic ways for Brookdale to invest capital, sub-performing assets with debt issue, with kind of leverage issues. But to be honest with you, the assets in this business are performing pretty well. So it's maybe a pretty distressed world outside the senior housing industry, but people are still growing their cash flows in the industry. The industry is not really the least bit distressed right this second. It's not like you can go out and steal people's assets because they're-- people are performing reasonably well.

Okay, thank you very much.

Your next question will come from the line of Eduardo Abush with Millennium.

Yes, thank you. Following your business strategic line of questions. You're giving the mismatch between what you think the NAV of the Company is and where the stocks trade. I mean have you been exploring the possibility of creating either an institutional fund or joint venture fund, in which you can contribute properties, maybe take in cash, buy more stock? You know, something like what the REITs are doing, but you also have-- but would you probably start something like that? Is that in your current thinking?

Not quite. I mean, we may look at different ways of taking some of our assets and generating cash to buyback stocks, but I wouldn't expect to see anything material in terms of our capital structure.

Okay, thank you.

Your next question will come from the line of Peter Ryus with Smith Barney.

Good morning guys. I know you didn't-- you don't want to talk about it, but you haven't mentioned it, but have you had at all commenced-- so it's two part question-- commenced the buyback at all? And since you're not returning-- you decided to return the stock holding cash in the form of buybacks. When the buybacks are finished, the platform was to ultimately pay our cash flow in dividends. Do you intend to, once you finish the buyback, put or continue to raise, or put back the dividend to where it was prior to this decision?

We don't have a rule book in terms of what's going to happen into the future. What we can promise you is we will be good stewards of the Company's capital, and so we could buyback stock. We're not limited to $150 million, it's just what we thought was-- the Board thought was prudent at this point. When that gets done, and again, we can't really talk about the timing and process of that, we will see. If we don't have a better use of capital, distribute it to shareholders, again, we think the dividend will grow and we intend to grow the dividend. But when and how much is really something that the Board will determine on a quarter by quarter basis.

Okay. Supply/demand, because of the economic conditions and the growing senior population, although there has probably been some hesitancy on the part of buyers and people going into the facilities. Is there a pent up demand you see going forward that has sort of been delayed because of the economics?

I think we should appreciate the very strong fundamentals that are being demonstrated across the board. As Bill said, there's not a whole lot of total distress; there is the edge that's been taken off. We absolutely do see an up demand, as well as we see still growing acceptance. So the fundamentals coming out of this recovery ought to be extraordinarily strong.

And one thing to point out, which Mark Ohlendorf references, is it's very hard to get financing for new developments in the industry. And a year and a half or year ago, really, the questions were, are you worried about supply, are you worried about supply, and we weren't worried then. Well, we're even less worried now. And so you really have an incredibly positive supply/demand imbalance that's a little bit tempered by the economic environment, but our view is that's not going to occur forever. And when that does, you'll really start to see outside growth, relative to what we're doing now.

Would you, given where we are in the cycle, put the occupancy rate more at the-- close to its trough? And the second part of that is the financial leverage, if occupancy is at the bottom or close to the bottom, and perhaps you can bring your expenses. What kind of financial leverage do you see to the upside?

As you said, it's planning out somewhat as we saw it coming into the year with softness in the first and second quarter, and we still view that the second half of the year will show stronger stability. And absolutely, there's significant leverage, as you see occupancy coming back on the positive side, the income statement is considerably leveraged.

I think about $0.14 a share of improvement on the upside when we start to pick up occupancy. A year and a half ago, we thought the right occupancy level for this Company was going to be 92, 93, ultimately. And so, you add 3 points of occupancy into this, plus the ancillary businesses-- well 3 points of occupancy is $0.40 a share plus you get back the entrance fees back to normal, you've got another $0.15 plus a share there. There's a lot of upside when we get back to what we think is a level of normalcy for this Company.

Right. And finally, what-- how much of ancillary services has been rolled out to the Legacy Brookdale units? What percentage--?

Well we're now reaching about 60% of the portfolio. There's a maturation process yet to happen within those that have rolled out, and we do expect that to grow yet or beyond the 8,000 units of therapy side of it, and we've got more on the Home Health to actually gain pick up, and we expect some more growth into '09.

Okay, great. Thanks.

Thanks. With that, we'll end the call. Thank you for your participation. We'll be around the rest of the day if you have follow up questions. Either e-mail me or leave me a message and we'll get back to you. With that, thank you very much.

Ladies and gentlemen, this does conclude the Brookdale Senior Living First Quarter 2008 Earnings Call. You may now disconnect.