Diversified Healthcare Trust (DHC) 2009 Q4 法說會逐字稿

Good day. Welcome to the Senior Housing Properties Trust fourth quarter 2009 conference call. This call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead.

Thank you, Marvin, and good afternoon, everyone. Joining me on today's call are David Hegarty, President and Chief Operating Officer, and Rick Doyle, Chief Financial Officer. Today's call includes a presentation by management followed by a question-and-answer session. We would like to also note that the recording and retransmission of today's conference call is strictly prohibited without prior written consent of SNH.

Before we begin today's call, I would like to state that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and the federal securities laws. These forward-looking statements are based on Senior Housing's present beliefs and expectations as of today, February 18th, 2010. The Company undertakes no obligation to revise or publicly release the results of any revision for the forward-looking statements made in today's conference call, other than through filings with the Securities and Exchange Commission regarding this reporting period.

In addition, this call may contain non-GAAP numbers including funds from operations, or FFO. A reconciliation of FFO to net income, as well as components to calculate AFFO, CAD or FAD are available on pages 11 and 14 in our Q4 supplemental operating and financial data package found on our Web site at www.SNHREIT.com. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our 2009 Form 10-K, to be filed with the SEC by the end of the day tomorrow. Investors are cautioned not to place undue reliance upon any forward-looking statements.

With that, I would like to turn the call over to Dave Hegarty.

Thank you, Tim. Good afternoon, everyone. Thank you for joining us. We are very pleased with the results of the quarter and the year, as well as the strong financial position we're in today. During 2009 SNH was added to the S&P mid cap 400 and Russell 1000 indices. In terms of liquidity and balance sheet strength, SNH compared very favorably with not only the rest of the healthcare REITs but the whole REIT universe. We are also pleased with the significant strategic diversification of revenues we achieved in 2009.

In July, we raised our quarterly dividend by $0.01 per share or 2.9% to $0.36 per share or $1.44 per share per year. Over the past decade, we have raised the dividend by an average of 2% per year at the same time our stock price has appreciated on average 7.6% per year. For the fourth quarter we generated funds from operations of $0.41 per share, which is consistent with consensus expectations, and these results fully reflect the September equity offering but do not fully reflect the impact of the new investments made during the quarter with those proceeds. For the year, FFO grew by 2% over 2008 results, from $1.67 per share to $1.70 per share, which is significant given the negative arbitrage on earnings created by the timing delay and investing all the proceeds and a large FNMA financing in August, and the equity raised in September. Our FFO in total increased 18% while our weighted average shares outstanding was actually 16% higher in 2009 than 2008.

During the fourth quarter, we invested approximately $125 million, most of which we discussed in our third quarter earnings call. For the full year 2009, we made total new investments of approximately $537 million, which consists of 20 medical office buildings, 11 predominantly private paid senior living communities, and capital improvement for our existing senior housing assets. These investments were funded using a $513 million ten year mortgage from Fannie Mae, a $97 million equity offering in February, and a $127 million equity offering in September, and cash from operations generated in excess of dividends.

I would like to have Rick review the annual and quarterly results with you, and properties acquired in more detail. Then I will discuss operating trends, the acquisition environment and the outlook for SNH.

Thank you, Dave. In comparing 2009 to 2008, we were able to grow cash flows, increase our dividend to $1.44 per annum, and diversify our revenue stream from $236 million with 155 tenants to $298 million with 215 tenants. This growth in revenues is due to investing approximately $537 million. We invested approximately $117 million of Senior Living properties, $383 million of medical office buildings, and $37 million in capital improvements during 2009. Also included in the revenues is percentage rent revenue from our Senior Living tenants which totaled $9.1 million in 2009 versus $8.4 million in 2008. The increase in the percentage rent revenue year-over-year was not as significant as it has been historically due to the decline in occupancy and lower rental increases. For 2010, 30 Senior Living properties acquired in 2008 will begin to contribute to the percentage rent, based on the 2009 revenues.

The annual interest expense for 2009 was $16.3 million higher versus 2008 due to the interest expense, and the amortization of deferred financing fees relating to our new agency debt with Fannie Mae. In August, we closed on $512.9 million of Fannie Mae debt secured by 28 senior living properties. This was a ten year loan with an effective weighted average annual interest rate of 6.6% per annum as of December 31st, 2009. General and administrative expenses were $3.2 million higher year-over-year, primarily due to the new investments. Our G&A costs remain competitive with other health care REITs at 6.9% of revenues for the year. We recognized impairment charges of $15.5 million for the year on 11 underperforming assets. On a quarterly basis we evaluate our portfolio for impairments and performance. During the fourth quarter, we sold two under-performing skilled nursing facilities for $1.9 million and recognized a gain of $397,000.

We have two assets that are classified as held for sale in our financial statement, as of year-end. Upon the sale of these two assets there will be no meaningful impact on our results. For the fourth quarter of 2009 our FFO was $52.4 million or $0.41 per share, compared to $48.9 million or $0.43 per share for the 2008 fourth quarter. The dividend paid with respect to the fourth quarter was $0.36 per share, which is a payout ratio of 87.8% for the fourth quarter of 2009 FFO. FFO for the quarter was negatively impacted by reduced rent of $500,000 related to Five Star related to the inpatient rehabilitation hospitals to compensate Five Star for their additional costs to comply with covenants by our Fannie Mae loan. Rent lost due to the bankruptcy of Epix Pharmaceuticals in the biotech lab building and the negative arbitrage of holding excess of $50 million cash, from the beginning of the quarter until they were invested mid quarter.

During the fourth quarter, we invested approximately $125 million which was comprised of 11 senior living communities for $117 million and $6.3 million of capital improvements on December 31st. Results for the 2009 quarter do not reflect the full impact of these acquisitions. Interest expense increased in the fourth quarter of 2009 versus the same period of 2008 due to the Fannie Mae mortgage financing as discussed previously. General and administrative expenses were higher quarter-over-quarter, primarily due to increase of real estate investments. There were $4 million of property operating expenses in the fourth quarter of 2009 compared to $1.7 million in the same period of 2008. This numbers are not fully comparable because we added 20 MOBs since the fourth quarter of 2008. At year end, we had $60 million outstanding on our revolving credit facility. Two series of unsecured senior notes of $322 million, and mortgage loans and capital leases totaling $660 million. Our total debt was approximately $1 billion, and our equity was $1.9 billion for a ratio of debt to total book capital of 35%. On a market basis, our debt to total market capitalization was 27%.

To date we have $75 million outstanding on our credit facility and $475 million available to fund future investments. Our revolving credit facility expires on December 31st, 2010. However, at our option we can extend the maturity date one year until December 31st, 2011. We continue to monitor the banking market conditions, and have not made a decision to either pursue a new or amended revolving facility or exercise our one year extension option.

Now I will turn it back to Dave for a discussion about the performance of the portfolio and the investment environment.

Thank you, Rick. As Rick described, we had a solid fourth quarter in 2009, and we entered the new year poised to take advantage of investment opportunities in 2010 and 2011. Our existing portfolio continued to perform comfortably in this difficult environment. Like most businesses today everything takes twice the effort or more just to stay even. In reporting our operating statistics and our supplemental package, we have decided to present all numbers on a trailing 12 month basis to be consistent with our peers, to make the numbers more comparable. As always, if there's a statistic that would be beneficial and we can provide it, please contact Tim and let him know.

Our largest tenant, Five Star, reported its earnings earlier today. As a company, they generated operating income and generated meaningful cash flow for 2009. They are in a solidly liquid position at year end and had very little outstanding on their $40 million revolving line of credit. Five Star owns several properties and leases properties from other landlords. SNH focuses on the underlying performance of our own properties leased to Five Star in addition to overall monitoring Five Star as a company. For the 12 months ended September 30th, cash flows for all of the lease properties we own that Five Star operates covered the rent obligations by a comfortable 1.34 times, or as a cushion, of approximately $55 million. Our coverage ratios are presented on an EBITDA basis. As a reminder, Five Star will receive a net cash increase of approximately $30 million from the UBS put right on their auction rate securities, in June of 2010.

Occupancies across all product lines is the Five Star leases ticked down for the 12 months ended September 30th, but as Five Star reported today, occupancies appeared to have been flat in the fouth quarter versus the third quarter, and appear to be trending up in the new year. By comparison, just this week, the NIC released occupancy trends comparing the third quarter of 2009 to the fourth quarter of 2009 and all the segments of Senior Living properties experienced a 20 to 40 basis point decline.

The 14 properties released to Sunrise continue to perform satisfactorily. The rent coverage was 1.4 times, and occupancies averaged 90%. As a reminder, these leases are guaranteed by Marriott International and we continue to monitor Sunrise the company but the facilities are being operated well and the occupancy and rent coverage are holding up well.

The Brookdale properties continue to be stable with 92% occupancy and over two times coverage. The private operators have experienced occupancy declines at two skilled nursing locations, but still the rent cut is comfortably at almost two times in the aggregate. The two wellness tenants cover their rental obligations well over two times and have been surviving the economic downturn relatively well. The five trailing 12-month periods presented in our supplemental package reflects pretty consistent coverage for 2008 and 2009, at about 2.3 times coverage of the rent. Lifetime Fitness, one of our tenants, today reported an $18 million net income for Q4 '09, and $72.4 million for the year ended 2009, up from $13 million and $71.8 million, respectively, for 2008. So they continue to perform well in this challenging environment.

Everyone knows we are still in a very difficult economic time and all of the operators in the senior living industry and wellness industry are under pressure, but we believe the businesses are holding up well enough to pay their rental obligations due to us. In addition, our portfolio is very geographically diversified providing further safety to our cash flow.

In the medical office building portfolio, occupancy was 98% at September 30th, 2009, for the 56 properties we own, and 96% as of December 31st. Most of these properties are long-term leases with strong credits but even the multi-tenanted buildings are performing at or better than expected levels. There has been little turnover in the medical office suites but renewals on new leases have approximated the existing rents. The one problem property we have is the 57,000 square foot biotech lab building in a suburb of Boston that was occupied by Epix Pharmaceuticals until they filed bankruptcy. This vacancy is the primary reason for the decline in occupancy since September 30. There are several parties interested in leasing this space, so I expect we will relet this property on terms comparable to the former rent sometime during 2010.

As with other sectors of real estate, we are not seeing as many investment opportunities as we would have expected. We are seeing several individual assets and small portfolios to consider in both the senior living and medical office properties. But many issues have issue or, in our opinion, are not worth the debt on the property. We have also seen a few very large nursing home opportunities to consider. But we are not interested in pursuing these asset types. We have a handful of properties that I'm optimistic we will acquire in the 8.5% to 9% cap rate range, but we will continue to exercise discipline, and not chase transactions for the sake of putting money to work.

Right now, we are balancing risk adjusted returns versus safety. As stated in the past, our current business plan is to closely monitor the portfolio in these tough economic times, look for opportunities that have risk adjusted returns in today's market, prudently manage our liquidity, and look for opportunities to grow the cash flow in order to ultimately increase the dividend. At quarter end, our board declared and paid a cash dividend of $0.36 per share which is a payout ratio of 87.8%, of the fourth quarter's FFO. Our board evaluates dividends on a quarterly basis, and the board considers the dividend to be adequately funded. Based on our current payout ratio, we're generating about $35 million to $40 million of excess cash flow per year to provide a cushion for the dividend should any operator experience difficulties, or any other unforeseen needs. This surplus cash flow is currently used to fund improvement financing, make new investments and prepay debt.

Our liquidity is very strong with no meaningful debt maturing until December 2011, when the revolver matures, counting the one year extension option. As I said before we are among the top of all REITs for liquidity and strength of our balance sheet.

I'd like to open it up for questions. Operator?

Thank you. (Operator Instructions). Our first question comes from Todd Fender with Wells Fargo Securities.

Hi, thanks, guys. Thanks for taking my call here. The SNFs you sold in the fourth quarter, they were Five Star leases. What leases did those come out of?

There was one SNF that came out of lease number one and one that came out of lease number four.

Okay. And you mentioned there were two assets held for sale. What types of facilities are they?

Those are assisted living assets.

Okay. Are they Five Star assets, Five Star leases?

They are leased to Five Star.

Okay. Switching gears, just looking at the lease expirations, certainly they're minimal for the next three years. How long aer the in place leases that are expiring this year and next? Are they about the same? Looking at just the remaining lease terms on average, it looks like about 12.7 years. Are these long-term leases that are coming due now and maybe there won't be an issue where the rent would potentially be flat or down?

Most of them are short. When I say short leases, leases like three to five years in the multi-tenanted medical office buildings. I will tell you there's one lease that is a long-term lease on a nursing home that comes due at the end of this year. And we are likely to sell that property or release it probably at a bit lower rent than we currently lease it at. It is too early to tell what kind of rental levels that we'll be at but it probably will take a bit of a step down.

Okay. And the balance on the line was $60 million at the end of the fourth quarter. I think, Rick, you mentioned it is currently $27 million.

It is $75 million today.

$75 million. Okay.

A lot of that has to do with just timing. We just paid the dividend this week, borrowed to pay that.

Yes, we borrowed to pay that. We'll have some rents coming down, we can pay down a little of that in the next few weeks.

Yes. Considering it is costing you about 1%, is there any real urgency to pay that down, or what are some of your attractive options to turn that out?

Certainly, at this leal it is something we would probably leave in place and not do anything with. As you said it is very attractively priced. To the extent, like on December 31st, we funded capital improvement financings and those we earn at least 8% on. So it is a very nice spread we earn on that money, and we are in no rush to refinance that out. And so, unless we had a meaningful acquisition that prompted a requirement for additional capital, I'd say we have no need to really go to the markets, debt or equity, in the near term foreseeable future.

Thanks a lot, guys.

Thank you. (Operator Instructions). We will now go to the next question from Jerry Doctrow from Stifel Nicolaus.

Hi, good afternoon. A couple of things. On the Epix, biotechs, how much rent did that affect in the fourth quarter, and on an annual basis going forward?

For fourth quarter we were paid one month, so one-third of that rent. So, on an annual basis it was about $3.1 million.

$3.1 million. Okay. So it was $2.1 million annual and you got a third basically.

One-third of that.

Of the quarter. But you said your expectations are at some point to release, there out you've clearly got the right to do it, it's not hung up in bankruptcy or whatever? So you expect releasing early this year?

That's correct. This was just a Chapter 7 liquidation so we are free to do with the property as we want. We have had quite a bit of interest from people who would like to buy it because they have interested parties. We also have a number of interested tenants. So I do expect, it will take a little time, but we do expect to release it.

On the capital markets side, David, you've got room on the line but if you started stepping up, making $100 million, $200 million of acquisitions given the line is going to mature and that sort of thing, what would you see doing next? Would you see terming out debt, would you have a need for additional equity? How are you feeling about leverage overall and that kind of thing?

Sure. We definitely have the capacity to take on more leverage. And that would be an attractive option to us. I think the gating factor there would be we had discussions with the rating agency in the fall, and they reaffirmed their positive outlook for us. They have some hesitation on the industry as a whole, whether the occupancy levels and performance have bottomed out for healthcare operators. So, they have been hesitant to do anything. So I think we probably won't talk to them again for another couple of quarters, see where we're at. Should there be an upgrade it would be a very attractive option to us, I believe. The capital markets are fluid, and today I think that the debt's fairly attractive. And I think that the spreads and everything else are moving in our favor so they should be a little bit better in several months, let's say. But, again, it is a decision at that time, we would make, and I can't predict today which way we would go. But, it is all market conditions at the time you have real transactions.

To the extent you are doing 100 -- just to make sure I understand what you are saying -- to the extent you're doing $100 million, $200 million, you could easily just put it on the line and leave it there for a while because you have another year to go. Wait and see how you go with the rating agencies, then conceivably term it out. Equity less likely unless something really big comes along. Is that a fair assessment?

Yes. Again, I don't know exactly how much a differential we would get being non investment grade versus investment grade. So that will factor into the decision. What's interesting, at least in the last several months, it's been the case where non investment grade has been more attractive, in some ways, to buyers than investment grade. So, it would be a much easier deal to do a non investment grade deal, but the pricing, who knows.

Right. Okay. Just a couple of questions about the MOB stuff. A couple of the other guys that have reported so far have been ramping up CapEx for maybe TI improvements or just other CapEx. You have been adding a lot of MOBs. Do you have some sense about what CapEx levels might be next year based on the portfolio in place today?

About $2 million a year is a good number to use. The medical office buildings that we acquired at the end of September, leased to Aurora, do not require any CapEx from us. The ones that we had acquired from HRP that are multi-tenanted, would require traditional CapEx but nothing extraordinary.

Okay. Basically I think what you were saying is you didn't have much roll over, and rent roll downs you weren't really concerned about that in your MLP portfolio.

That's correct.

Okay. And lastly, and then I will jump off, just curious if we can get any additional color on Five Star. It seemed like the properties, as you were categorizing them, are behaving maybe more or less like industry, some of the other parts of their business were maybe hitting the earnings and stuff. Any more color on your outlook for senior housing generally, your outlook for their portfolio? Just any more color there would be helpful.

Sure. Five Star is a unique company in this space because they do have the rehab hospitals, they have pharmacies, they have skilled nursing, independent living, assisted living, the whole gambit. So it is very difficult to match them up apples and apples with most of the other public companies out there. And it seems that just some of those sectors that you would think would be the best performing or most stable, such as skilled nursing, are actually experiencing some of the more difficult aspects there. Certainly the rural properties are experiencing some occupancy issues or rate issues. And I believe that anybody who has private resources today is going to find an assisted living facility that can handle their higher acuity, and they're not going to the nursing home. So you're not seeing the long term care resident who's private pay being very common. So I'd say the nursing home properties have been under the most pressure of their portfolio.

Assisted living continues to do with very well, and Alzheimer's care also is in demand and keeps staying strong. Independent living, again, is off a little bit, but not significantly. And even one of our leases has lower coverage, and if you delve down into it, it is basically three or four properties, and most of them are nursing homes. But one is a rental CCRC that had quite a bit of capital improvements going on. As a result occupancy had dropped while the capital improvements were going on, which affects coverage. And we're funding the CapEx so rent is going up at 8% on the capital we're funding. So they're getting a double whammy. That gives you a little bit of color on the portfolio.

Okay, thanks.

Our next question is from Kevin Ellich with RBC Capital Markets.

Good afternoon, guys. Thanks for taking my questions. Just a few follow ups. Following up on the CapEx and improvements that you guys made for some of your tenants, it has fluctuated a little bit the last two quarters. Just wondering if you have any sense or visibility on what a good run rate for your purchase improvements is?

We funded CapEx in the fourth quarter, the last day of the quarter, we usually fund it. Last quarter it was $6.9 million. If you look over time, it would probably be around $10 million. 2008 was a little higher than the prior years, and it was higher than 2009. But I would give it around $10 million to $12 million per quarter. And that fluctuates, really, with the plans that they're doing, the tenants, especially Five Star, and see what they're going to do the next year.

Got you. Okay. That's helpful. Then going back to Five Star, and on the conference call this morning, Bruce indicated they're seeing decent demand in independent and assisted living but they saw some weakness out of Alzheimer's and skilled nursing. Just wondering if you guys are seeing that from any of your other operators or any of the other properties.

Some of the private operators I mentioned had a little bit of slippage in occupancy levels, and coverage. So depending on what state they're in, there's definitely softness in the skilled nursing side of things. On Brookdale, they've been very steady at 90%, 91%, 92% occupancy levels. They just seem to be humming along. All of our properties that we have with Brookdale are all in that 50 to 70 unit per building size properties. They have a very efficient model and run it well.

The Sunrise assets, it depends on which markets. Some, like the Florida ones are probably under more pressure than the other ones, but they have been doing a fair amount of discounting with some of them, on a case by case basis, and so we have seen the occupancy hold up very well but the coverage went down a bit. And that's probably the main reason. I think in general everybody is, I do believe that things have bottomed out and people are holding on right now and just waiting for the whole economy to pick up, and they should pick up along with it.

That makes sense. After the tour that we did last fall, in Arizona, that's what we saw or heard from the operators. And then going to the wellness centers, are there annual rent increases on the wellness centers?

Yes, we have annual increases. 2% on the lifetime.

Yes, they're on a straight line. We have them on a straight line basis on our financials but there are annual increases.

We do have increases on the Wellbridge facilities also.

Okay. And then just lastly, on the acquisition and development pipeline, just wondering where you are at now and what you are seeing. I know you provided a little bit of detail but are you more focused on continued expansion and MOBs or wellness, senior living? And what are cap rates looking like?

Sure. We are evaluating all of those different areas for opportunities to invest in, but I would say medical office building is the area that we are seeing the most opportunities to consider. And I envision pretty much all the deals that I am optimistic about closing on are in the medical office building space. The cap rate in those transactions, initial cap rates, cash cap rates, pretty much in the mid 8%s, and on a GAAP basis they would be around 9%, maybe low 9%. On the senior living space, again those, we would expect to do transactions in the lower 9%. As far as the cap rates for the property, it would be the lower 9%, mid 9%. But our rental rate is still going to be 8.75% that we would charge the operator. But, like I say, if you look at the past year, we did about $850 million -- No.

We did about $550 million.

Of transactions, and the bulk of that was still medical office. So I would see that us continuing to invest in medical office more than senior living.

Ultimately where would you like to get your portfolio mix to? Do you have a set allocation amount in mind? Just any thoughts on that front.

Not a hard fast allocation of resource and funds but we definitely want to have Five Star come under 50% of our portfolio. And we would like to continue to diversify in the medical office. Other areas we've considered but just have not had the right opportunities to invest in, say, hospitals or multi-located clinics.

Is that something you would consider, the hospitals and the multi location clinic?

Definitely the clinics. The hospitals, again, it would have to be the right circumstances. L-Techs we're not particularly interested, but more of an acute care situation, would be something we would have an interest in.

That's helpful. Thanks, guys.

Thank you. Our next question comes from Tayo Okusanya from Jefferies, please go ahead.

Good evening, gentlemen. Quick question. The participating rent that some of your leases have, could you just walk me through how much of your leases have that aspect to them, and a better sense of what you expect from that participating when it potentially starts to hit your bottom line. That's one thing I've never been very clear on.

Almost every single senior living asset we have has some formula for rental increases, be it CPI or fixed or percentage rent. All of the Sunrise properties and almost all of the Five Star properties have a percentage of rent formula. The way it works is the year we acquire it, it takes a little while for the operator to change over to the way they run the business and so on. So we have the next full year be the base year. And so for instance we have 30 properties we bought in 2008, they are going to have 2009 as the base year. And beginning in the first quarter of 2010, we will get 4% of the growth in revenues at those properties in excess of what their revenues were for 2009 at those properties. And so hopefully as the economy picks up, and occupancy, they can start to push rates, we see more participation and that helps us at the bottom line level. And I think you can see if you look back over the trends for the last couple of years we were adding a couple million dollars per year of percentage rent, that literally drops to the bottom line.

This past year, it only went up by $600,000. And it is because obviously 2009, you could not raise rates and occupancy was under pressure. So hopefully in 2010 we should get.

These assets, '09 will remain the base year for the life of the lease, and you just compare that base year versus what revenues were up for any particular year that we were in at this point.

That is correct, yes.

Okay. So literally, if they keep improving over the course of the next ten year, you just keep getting much more.

Correct, the better they do, the better we do.

That's helpful. I know you guys didn't give any sense of guidance, but would you say, given your overall outlook for acquisitions, whatever it may be, you expect your typical growth pattern again in 2010? Or do you think it is a year where you may see incremental growth because you are seeing better than expected acquisition outlook or something like that?

It is so hard to tell. At the beginning of this year, just the activity is a lot quieter. And I think that's true across all of the real estate sectors, not just senior housing. And I think a lot of that has to do with the debt markets and the fact that nobody wants to come to market with a property right now because they're probably not going to get the best pricing that they could get, so everybody is extending and trying to find ways to not come to market with properties. So I don't, at the present time, see terribly robust investment opportunities or pipeline, but I see a lot more of the singles than doubles type transactions. We don't give guidance but if you looked at this last quarter we indicated at $0.41 that we had a negative arbitrage for $50 million of cash for half the quarter. Those investments went to work during the middle to late part of the quarter so they contribute more in Q1 2010. And the denominator for shares is fixed for the whole quarter, so you have that number. I think you could pretty much come up with some ballpark figures.

Very helpful. Thank you.

Our next question comes from [Andrew Riu] with Bank of America Merrill Lynch

Thank you. Good evening. Most of my questions have been answered. I just had one follow up question regarding the capital markets. Are you guys looking at the unsecured debt market at all? If you were to tap the unsecured debt market, what rate do you think you can get a ten year unsecured for?

We are always monitoring the market, both on the debt and equity side and so on. But we frankly don't have any capital needs that would warrant us to go to the market at the present time. So, we just took a casual look. I think if you had a live deal, a real deal, you're going to get more accurate pricing. And again, it depends on what the rating agencies would rate it. So, it's very tough to tell, but I would say it would probably be around --

High 200s?

Yes, maybe around 300 or something over treasury. Again it would be tough to tell but that might translate into the 7s, the cost of debt.

That's helpful. Then what about in terms of GSE financing, where is that if you were to get, just talking an apples to apples comparison, for a ten-year GSE financing?

They seem to be pretty much hanging steady around that 6.5% range.

Okay. Perfect. Thank you.

That concludes our question-and-answer session. Mr. Hegarty, I will turn the conference back to you.

Thank you all very much for joining us today. I know it has been a long, busy day. We look forward to catching up with you on our first conference call in early May. Thank you.

This concludes today's conference. Thank you for your participation.