Diversified Healthcare Trust (DHC) 2012 Q4 法說會逐字稿

Good day, and welcome to the Senior Housing Properties Trust fourth-quarter and year-end results conference call. At this time, all lines are fully interact -- or listen-only mode, and today's call is being recorded. For opening introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead.

Thank you, 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. I would also note that the recording and retransmission of today's conference call is strictly prohibited without the prior written consent of Senior Housing.

Before we begin, 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 other securities laws. These forward-looking statements are based upon Senior Housing's present beliefs and expectations as of today, February 15, 2013. The Company undertakes no obligation to revise or publicly release the results of any revisions of the forward-looking statements made in today's conference call, other than through filings with the Securities and Exchange Commission, or SEC, regarding this reporting period.

In addition, this call may contain non-GAAP numbers, including normalized funds from operations, or normalized FFO. A reconciliation of normalized FFO to net income, and the components to calculate AFFO, CAD or FAD, are available in our supplemental operating and financial data package found on our website 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 filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.

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

Thank you, Tim, and thank you all for joining us on today's call. Earlier today, we reported normalized funds from operations, or normalized FFO, of $0.43 per share for the fourth quarter, and $1.75 per share for the full year. Rick will discuss these results in further detail later on in this call.

The fourth quarter marked the close of a very dynamic and successful year. In 2012, we took a high-quality portfolio and made it better, as evidenced by the further diversification across geography, tenant and asset mix. Our focus was on acquiring medical office buildings affiliated with major health care operators, and high-quality senior living communities in growing markets that were added to our taxable REIT subsidiaries, or TRSs.

During 2012, we acquired approximately $450 million of senior living and medical office buildings. The 24 properties we acquired are spread across 15 states, and have a weighted average cap rate of 8% based on their estimated annual net operating income, or NOI. In addition, this year we added a seasoned private operator in the northwest for our triple-net leased senior living communities located in that region. During the year, we diversified our portfolio by increasing our TRS NOI from 4% to 12% during the quarter, compared to last year.

We also expanded our investments in medical office buildings during the year. During the year, we welcomed 45 new tenants, growing our total number of tenants by 8%, and this was accomplished while purchasing assets at rational prices. Overall, we purchased 13 MOBs with a weighted average cap rate of 8.3%, and purchased 11 private-pay senior living communities at a weighted average cap rate of 7.7%.

During 2012, we raised the dividends for the 11th consecutive year, and did so while maintaining conservative payout ratio. We will look to maintain this positive record going forward, and believe our growth through acquisitions will help achieve normalized FFO growth per share to allow us to grow our already attractive dividend while maintaining a conservative payout ratio.

During the year -- during 2012, we stayed true to our conservative financial history and strengthened our balance sheet. We ended the year with debt as 43% of total book capital, and we have no near-term debt maturities. 82% of our debt matures in 2016 and beyond, and 44% of our debt matures in 2020 and beyond. Our investment grade credit rating of Baa3 was recently reaffirmed by Moody's with a stable outlook, where they noted that they view positively SNH's focus on private-pay sub segments of the health care real estate market and our execution of a disciplined growth strategy.

Our access to capital has never been stronger. In 2012, we raised approximately $650 million in capital markets transactions. Subsequent to year end, in January, we sold 11.5 million common shares, raising net proceeds of approximately $262 million. This offering was upsized modestly in the face of overwhelming investor demand. I would note that yesterday, our stock priced closed at its 52-week high of $24.72 per share, and this transaction put us in a strong position to pay down our revolving credit facility in full, finance our recent acquisitions, and positions us to be able to maximize acquisition opportunities in 2013.

As we enter 2013, we continue to operate in an industry where health care supply-and-demand fundamentals are largely positive and growing. We continued to find attractive acquisition opportunities, both in the fourth quarter and moving into the new year. During the fourth quarter, we acquired approximately $85 million of properties comprised of two senior living communities with over 150 units, and six medical office buildings containing over 250,000 square feet. The weighted average cap rate for these acquisitions during the quarter was 8.5% based on estimated annual NOI.

Subsequent to year end in January, we acquired a 150-unit private-pay senior living community in the state of Washington for $22.4 million. And this acquisition expands our relationship with Stellar Senior Living, a privately owned senior living operating company operating in the northwest.

Yesterday, we acquired two medical office buildings that are also located in the state of Washington for $38 million, with a combined 145,000 square feet. These properties are biotech research lab buildings, and they're [100%] leased to Seattle Genetics.

We also have an agreement to acquire a multi-tenant medical office building located in Mississippi for $14.6 million containing 72,000 square feet. This medical office building's major tenant is an A-rated health care system, and the closing of this acquisition is contingent upon completion of our diligence, and we can provide no assurance that we will purchase the property.

As we have discussed in the past, we continue to evaluate individual assets in small portfolios in the senior living and medical office space. We are uniquely positioned in the health care REIT industry; due to our size, we enjoy the best of both worlds. Like the smaller health care REITs, we do not have to bring in big deals to move the needle; and like the larger health care REITs, we have excellent access to capital.

Now turning to the performance of our portfolio. First, I will review our senior living properties, whose reports are reported on a rolling 12-month basis as of September 30, 2012. Overall, we saw consistent quarterly and annual increase in occupancies in independent assisted living, while skilled nursing declined modestly since last year. If you look at the data provided by the industry-leading provider of senior housing data, the National Investment Center For Seniors Housing and Care, they show that occupancies for senior housing have been increasing over the last 11 quarters. Absorption rates were favorable, while new development was still very modest. These trends are clearly benefiting our tenants, as we have seen improving occupancy across the portfolio, which gives them the ability to increase rental rates as demand increases and the supply remains constrained.

Now looking at Five Star, our largest tenant, the 190 communities leased to them had combined occupancy of 84.8%. Rental coverage on an EBITDA basis was between 1.2 times to 1.7 times across the full leases, and 1.3 times in the aggregate. Earlier today, they reported another profitable quarter, with net income from continuing operations of $0.07 per basic diluted share for the fourth quarter. And the fourth-quarter results reflect the 16th consecutive quarter of profitability, and improving private-pay independent assisted living results.

Our four properties leased to Sunrise Senior Living saw a slight increase in occupancy, which was 93.2%, with rental coverage at a strong 1.9 times. Now, although Sunrise Senior Living is now a private entity, we still hold a guarantee by Marriott International for these leases.

The properties we lease to Brookdale Senior Living saw a nice increase in occupancy, which was 94%, and rental coverage increasing to 2.4 times. Our other triple-net lease properties are leased to private [pay] operators, and these properties in the aggregate experienced a slight decline in occupancy, while rental coverage remained strong at 2 times to 3 times.

Now, looking at our managed senior living communities. Occupancy during the fourth quarter was 87.4%, an increase from both last quarter and last year. NOI from these properties now represents 12% of our overall portfolio. We are pleased to announce that we have successfully transitioned all 10 properties formerly leased to Sunrise into our TRS as of year end. At December 31, we had 39 private pay communities in our TRS, with just over 6,600 units. We believe that we have created a very good foundation for future growth with these high-quality assets.

And moving on to the medical office building component of our portfolio. At year end, we had 120 medical office properties, with over 8.4 million square feet, which works out to an average of 70,000 square feet per building, and NOI totaled $34.1 million; occupancy was 93.3%.

Now, on a quarterly same-store basis, occupancy was 92.8% and NOI was $30.7 million. Although same-store occupancy declined 310 basis points since the fourth-quarter last year, NOI only decreased by approximately $360,000, and NOI margins actually increased 20 basis points to 68.3%. The decline in occupancy and NOI was primarily due to the vacant building we have in the mid-Atlantic region, which we've discussed on prior calls.

Now, during the quarter, 42,000 square feet was renewed; we signed new leases for 19,000 square feet with average rental rates increasing 5% compared to previous rates for the same space. For the full year, 535,000 square feet was renewed, and we signed new leases for 101,000 square feet with average rental rates increasing 2% compared to previous rates for the same space. Tenant improvement and leasing commissions for the quarter were $2 million, and for the full year, $6.3 million.

Through our medical office acquisitions during 2012, we expanded our relationships with HCA and Emory Clinic. We also established new relationships with major investment grade health care systems, including Hallmark Health Care Systems here in the Boston area, Baylor Health Care in Texas, and the Straub Medical Center in Hawaii. In addition, we began relationships with a number of other well-established health care providers across the country.

We entered 2013 having strengthened our portfolio, increased the dividend, and maintained our conservative financial profile. We look forward to deploying our substantial capacity to make acquisitions and grow FFO per share, and make 2013 our 12th continuous year of dividend growth.

With that, I'll turn it over to our Treasurer and Chief Financial Officer, Rick Doyle, to discuss our financial results in detail.

Thank you, Dave, and good afternoon, everyone. I will now review our fourth-quarter financial results. For the fourth quarter of 2012, we generated normalized FFO of $75.5 million, up 11% from last year. On a per-share basis, normalized FFO for the quarter was $0.43 per share compared to normalized FFO of $0.42 per share that we reported for the same period last year. For the year ended December 31, 2012, we generated normalized FFO of $296 million, up 15% from last year. For the 2012 full year, we reported normalized FFO of $1.75 per share, up from $1.73 per share for the previous year. In early January, our Board declared a quarterly dividend of $0.39 per share, which represents a 91% payout ratio of the fourth quarter's normalized FFO.

Looking first at the income statement. Rental income for the quarter increased 3.1% to $124 million, mainly due to external growth from investments in senior living leased communities and medical office buildings. $72 million of rental income was derived from our senior living lease communities, while the other $52 million was derived from our medical office buildings.

The increase we reported in rental income was offset by a reduction of $2.4 million due to the transition of 10 communities formerly leased to Sunrise into our TRS. Percentage rent from our senior living operators was $10.9 million, down from $11.3 million last year, due to the transition of the 10 communities from our triple-net lease communities to our TRS. During 2013, $2.1 million of percentage rent will be excluded due to this transition.

Resident fees and services from our managed senior living communities grew to $70.1 million during the quarter, up from last year. NOI for the fourth quarter was $14 million, and NOI margins were at 20%. If you were to exclude the 10 Sunrise communities, NOI margins would have been 27.5%. Average monthly rate for the fourth quarter was approximately $4,200, up 4.8% compared to the third quarter of 2012. We expect to report same-store results of operations beginning in the first quarter of 2013 that will provide a meaningful comparison from our senior living managed communities.

Property operating expenses for the quarter increased to $73 million. $17 million of property operating expenses were derived from our medical office buildings, and $56 million were derived from our managed senior living communities. For the full year, property operating expenses increased to $201 million. These increases were in line with our expectations, as we added a significant number of senior living managed communities and medical office buildings to our portfolio.

General and administrative expenses for the quarter were $7.4 million compared to $5.6 million for the same period last year. For the full year, G&A grew to $31.5 million compared to $26 million for the same period last year. The quarterly and annual increase in G&A are a result of acquisitions. As a percentage of revenues, G&A for the full year decreased 90 basis points to 4.9% compared to last year.

Interest expense increased 9% to $29.8 million from the prior quarter. For the year ended, interest expense increased 19% to $117.2 million from the prior year. Interest expense increased due to several factors. During 2012, we assumed a total of $122 million in mortgage debt related to several properties we acquired at a 5.8% weighted average interest rate. Also, in July of 2012, we issued $350 million of 30-year unsecured senior notes at an interest rate of 5.625%. Offsetting this activity, in January, we repaid $225 million of 8.625% of unsecured senior notes. And during 2012, we also paid off approximately $250 million of mortgage loans that were encumbered by 31 properties at a weighted average interest rate of 6.4%.

Moving to the balance sheet. We closed on approximately $85 million of investments during the quarter comprised of two senior living communities and six medical office buildings, and assumed $9.6 million in mortgage debt at an interest rate of 6.7%. Weighted average cap rates for these acquisitions was 8.5% based on estimated annual NOI.

During the quarter, we invested $12.3 million into revenue-producing capital improvements at our leased senior living communities. We spent $4.2 million in capital improvements at our medical office buildings, of which $2 million was lease and capital, and the remaining $2.2 million were building improvements.

We also spent $4.1 million in capital improvements at our managed senior living communities during the quarter. We expect capital spending to increase significantly at our managed senior living communities, mostly focused on the 10 former Sunrise communities, and could be in the range of $5 million to $6 million per quarter. We expect this spending may have an impact on occupancy and rental rates at the underlying communities while the renovations are conducted.

Note, our normal recurring capital expenditures' run rate would be $1,000 to $1,500 per unit, which is $5.6 million to $10 million per year. And the extra amount we are spending now is to reposition and to upgrade the properties.

At year end, we had $42.4 million of cash on hand, $190 million outstanding on our revolver, $1.1 billion of unsecured senior notes, and $725 million of secured debt in capital leases, making our debt-to-total-book capitalization ratio of 43%. Our targeted leverage using debt-to-total-book-capital is in the range of 40% to 45%.

In January, we sold 11.5 million common shares, raising net proceeds of approximately $262 million. We used a portion of the net proceeds to repay the entire outstanding balance on our revolving credit facility. Yesterday, we acquired two medical office buildings for $38 million, which we funded using these proceeds. Today, we have approximately $100 million of cash on hand. Following our equity offering, our total common shares outstanding are 188 million shares. Taking this offering into account, our debt-to-total-book capitalization ratio would have been approximately 38%. Our credit statistics remain extremely strong, with EBITDA over interest expense of 3.5 times, and debt over annualized EBITDA of 4.8 times.

Overall, our results for the fourth quarter were in line with our expectations we shared with you on our third-quarter conference call. We communicated last quarter that our reported normalized FFO per share of $0.43 would be a good run rate going forward due to the focus we have been placing on transitioning the 10 Sunrise communities from our triple-net lease portfolio to our managed senior living portfolio. The transition of these communities to another operator is a situation that always leads to a two- to three-quarter retrenchment in operations. We also expect to spend significant capital to get these properties back to stabilization and subsequent growth.

In addition, for calculating estimates for our first quarter of 2013 normalized FFO per share, you need to consider our recent equity offering in January, which we expect may dilute our earnings by $0.01 per quarter until the excess funds are fully invested.

As we begin 2013, we are very well positioned for growth, with $100 million of cash on hand and a $750 million untapped credit facility. The senior living TRS properties we acquired in 2011 and 2012 have seen encouraging occupancy increases, and we have ample capital to invest to make these properties even more attractive to potential residents.

Our existing MOB portfolio experienced increased rates on new leases of 5% in the fourth quarter. Like the senior living market, the national MOB market is fragmented, and we believe we will provide us with total acquisition opportunities for the full-year 2013 of $300 million to $400 million. Taking into account the positive industry trends and favorable demographics, we think that SNH is in a great place to provide investors with an attractive yield and improving shareholder returns.

With that, Dave and I are now happy to take your questions.

(Operator Instructions).

Our first question today comes from the line of James Milam with Sandler O'Neill. Please go ahead.

Hey, guys. I apologize for my voice a little bit here today. First question for you. On the G&A, can you maybe just help me out with the math as to either -- I guess I thought that G&A was based on a percentage of assets; it went down sequentially. I'm just curious if there was something else in that number, or if I'm thinking about the way it's calculated incorrectly?

Yes, our G&A actually grew year-over-year, but from our third-quarter of 2012 to the fourth-quarter 2012, it went down, and we incurred some expenses in the third quarter. You know, there is professional expenses and other expenses that go to our G&A, and not just the acquisitions; and we incurred some expenses in the third quarter that we didn't in the fourth quarter. And also in the fourth quarter, we closed on a lot of our properties there the last week of the quarter. So the fourth quarter doesn't take into effect the full quarter G&A of the acquisitions. So when you are modeling for the first quarter, you really have to take the last week of acquisitions in the year and calculate a full quarter of those. And we have also closed about $60 million already in 2013 that you would have to model in there, too. But basically, the answer to your question, quarter-over-quarter, it did decrease because of some expenses we incurred in the third quarter that we didn't in the fourth quarter.

Okay, so then I guess another way to think about it is probably $30 million for the full year of '13 plus a little bit more for acquisitions, should be about the right number?

Yes. The right number, too, if you took an average of the third- and fourth-quarter, maybe both 500,000 is probably a good run rate there. Then with the acquisitions, just making sure that you have a full quarter run rate on any new acquisitions.

Okay, perfect. And then my second question, I'm sorry, can you just repeat what the operating senior housing margin was excluding the Sunrise transition asset? And then just bigger picture, are the capital expenditures and renovations going on in these communities, are they -- basically involve shutting down certain wings over a period of time. And I guess the lost NOI to the extent that it's lost from occupancy declines, et cetera, will that be recovered by growth in the other part of the senior housing portfolio? And then I guess thinking three to five years out, where do you see the margins for this business going to as everything stabilizes and gets into kind of a normalized state of operation?

Sure. We did a -- our margins, if you exclude the 10 former Sunrise communities, would be approximately 27.5%, which would be an increase sequential quarters.

Okay.

We do plan on putting on excess capital expenditures on some of those properties that may affect some of the units. We're going to be very careful on how we pick which properties we are going to upgrade to make sure that we do get ample return on any renovations that we do, and we are going to be very careful to not interrupt too many units, also. So it's something we are not going to go out and do all of them all at once and interrupt our whole operations, we will spread this over. And as we have said in prior quarters, it's really only one, two or three properties that's going to have major renovations, and it's not -- it's going to take some time to put in. It's going to take the full year 2013, as well as maybe another six months going into 2014. So we'll spread it around and make sure that we're spending it at the right place and we are going to get returns after they're all done.

Right. James, I would just add, too, a lot of the issues that are coming up, stuff like carpet and paint and stuff should not be that intrusive; could make it fairly quick. But a lot of the costs have to do with redoing some of the units that have been vacant; many of them are not fitted out for occupancy right away, so we would have to do turns for those properties. And then there is a few issues like a generator or EFIS issues in some of the buildings that will have to be addressed, and that's predominantly exterior related. So again, I don't anticipate that it would have a big impact on the performance, but it is disruptive. And a lot of ways, you'd have to compensate for that might be to be discount rates and stuff or give people breaks initially, and then as soon as the work is done, go mark everything to market.

And then I guess over the longer term, you would expect these -- the total portfolio to be in the 30% or higher margin range as everything stabilizes and --

Definitely. Definitely. A lot of -- like the V product we acquired is all -- is 75% independent living, and that's well occupied and performing well. You should expect margins closer to the 40% range. And then for assisted living, it can depend on size of the building and efficiencies you can gain, but you would think that those should be the 35% to 40%. To the extent of skilled nursing, like some of -- almost every one of these Sunrise properties has a skilled nursing unit in it and the margins in skilled nursing, as you know, are pretty much single-digits or low-teens at best. So when you average all that in, you are probably back to the 30% or 35% margins.

Great. Thank you, guys. Appreciate it.

Thank you.

Our next question comes from Paul Morgan with Morgan Stanley. Please go ahead.

Good afternoon. This is actually [Jerrell] with Paul. My first question is following up on James, he got -- specifically, I wanted to know about the NOI margin. What -- how soon do you think you can hit that 30% level with the Sunrise assets in place?

Well, that's the question. With the Sunrise assets in place, I would say we're probably later into the year, probably at best. I do think that the other Bell and V portfolios and the initial assets can get their -- I would think during this year, but the Sunrise will take time, late this year, early next year.

Got it. And in terms of the recent [ready] acquisitions, you have been -- the last two assets were acquired at yield, at or above 8%. Is this where cash yields for ready assets are right now, or was this specific for these assets?

Well, what we had acquired recently were individual assets in individual markets that were complimentary to existing properties, but they weren't New York or East Coast necessarily. So we believe individual assets can be acquired in the 8 -- in the 8s. If it's a 300-unit trophy property, it would go for less, but a lower cap rate. There is a portfolio premium and there are certain locations that would demand a premium, too. Urban, difficult to build sites and stuff like that, that might -- it's a nice quality portfolio, you probably -- in the 6s at this point. But otherwise, you should be able to acquire something in the 7s, and like I say, individual assets are more likely to be 8 or thereabouts.

Got it, and then my last question pertains to the empty Philadelphia medical office building.

Yes.

You mentioned it on your initial comments, but could you provide an update as to the plans for the asset? Are you planning on selling it as of this point? Are you looking at lease up?

Well, we are still evaluating what we want to do with the property. The property was one that was built out with some lab space, and it -- for a new party to come in, we would have to substantially redevelop the property for them. So we would do a build to suit or something of that nature, but we're also considering whether we would sell it, and I think we'll determine that, clearly, in the first half of this year.

Got it. Thank you very much.

Thank you.

Our next question today comes from Michael Carroll with RBC Capital Markets. Please go ahead.

First to your [Redia] portfolio, what percentage of those assets are -- when you coin as stabilized and what percentage are currently being transitioned?

Good question because we typically look at these as portfolios. I would say the first two portfolios we bought, I would consider at this point, stabilized and growing from here. The Sunrise assets are transitioning, obviously, and that represents 40% of the portfolio. So I would say about 50% in total would be transitioning, and the other 50% is stabilized and actively contributing and growing.

Okay, and then with the stabilized assets, when can we expect a growth rate from those? Do you expect like a 5% growth rate or something lower than that?

Well, I mean, I would be conservative right now just to say the 3% to 5%. I will be able to provide more clarity on that probably on the next earnings call because we will be providing same-store data, which we'll then will delve into more detail on individual portfolios. But, I mean, it may be faster, but I just am cautious to say that at this point.

Okay, and then with the transition assets, it'll be expect a flat on growth rate, or should we expect a modest decline?

I believe they have hit bottom and our -- would be improving from here.

Okay, and then my last question is related to -- I know we talked before about the potential tax change to medical devices that could put pressure on your off-campus MOB portfolio. Have you had discussions with those representative tenants? Is there any updates on that?

Not really any updates. We have had some lease renewals that have been short-term renewals as they assess what the impact of that would be. On the other hand, we have another situation where I thought was going to be a challenge, but I believe they are going to renew for at least another five more years. So we have a couple of situations, and one is uncertain, I think, for beyond a year out, and the other one, I think, we're pretty good for at least five more years.

Okay, great. Thanks, guys.

Thank you.

We will go to the line of Jana Galan with Bank of America Merrill Lynch.

(Operator Instructions).

Miss Galan, your line is open.

Thank you for providing kind of a $300 million to $400 million range of potential acquisitions. Can you maybe let us know what the pipeline you're looking at, is it larger now than it was at the end of last year? Has it kind of slowed down because of some people looking to get ahead of any potential tax changes? And then what's kind of the split between senior housing and medical office?

Sure. Well, I will say that we did have a flurry of transactions closing, and it was a very crazy week between Christmas and New Year's. You know, and a couple buildings came right down to the last day of the year to close, so I do think there was very much concern about tax considerations and there was an acceleration of closings. You know, we have done some acquisitions subsequent to year end, and it's -- I'd say, for new activity to look at during the first couple weeks of January, was probably kind of slow compared to the past. But we are starting to see things pick up significantly, and I think that we're probably most likely to be close to a 50/50 split between MOBs and senior housing, all one ops and small portfolios. There is obviously a few large transactions that are percolating out there, but I don't think they are actively in the marketplace at the moment.

Thank you.

Our next question comes from the line of Dan [Bernstrin] with Stifel Nicolaus. Please go ahead.

Good afternoon.

Hi, Dan.

Hi. I want to make sure, a clarification on the operating margins and senior housing operating portfolio. Those margins you quoted are before or after the management fee to Five Star?

They're after the management fee to Five Star.

Okay, and just also along the lines of your acquisitions in the quarter, Stellar Senior Living, is that Edward Benton's company out in Salt Lake?

That is a company that he has formed with his sons and some other people out on the west coast.

Okay, so do you see additional opportunities with them going forward? I don't know what kind of scale. Do you see helping him grow his company?

Yes, I think we have five (multiple speakers) -- at the moment.

Okay, and then also on the MOB acquisitions, I just want to be clear, as well. Are those acquisitions what we would consider traditional medical office affiliated with a hospital, physicians and surgery, or is it more of the lab space, medical devices? I want to make sure I understand what you bought and what you're buying and maybe what the pipeline is, as well.

Sure. Well, pretty much all we acquired were affiliated with major health care systems where they were the major tenant, and one or two have been like surgery centers with large physician groups. And then I don't believe any of the ones that are closed during the last year were biotech, what -- the one we did announce today was the one in Seattle that is biotech lab space, and so that's -- I'd say that's the only biotech-type tenant.

Okay, and so you would say you're focusing more on the traditional medical office buildings then?

Yes.

-- Biotech made devices? Okay, and then one other question I had. The terminated acquisition. I guess, what was the reasoning behind the termination there, and I guess that was a Sunrise property? I am just trying to remember what that was.

Well, I don't think we've --

That's real relevant to going forward, right?

But -- no -- just in the course of diligence, we discovered some issues that wouldn't be resolved in the short term, so we decided not to pursue it.

Okay. All right, and that's really all I have. And I just want to mention we'll appreciate in the first quarter when you guys start to do the same-store, so that's very much appreciated.

Good. Thank you.

All right, thanks.

Thanks.

And we have a follow-up from James Milam with Sandler O'Neill. Please go ahead.

Hi, thanks, guys. I just wanted to ask one more. We touched a little bit on MOB leasing, but it looks like in the quarter at least, leasing costs and concessions for -- in the quarter were a little bit higher on a per square foot per year basis. I'm wondering if you can just broadly speak about what the leasing trends are, and if -- the interpretation there is that you had to put a little bit more capital into the buildings to attracted tenants, or if this is more specific to the individual lease that you signed in the quarter. Thank you.

Okay. Sure, James. Well, I would say we don't have a lot of volume of transactions that make up our leasing rollover. I think it does -- it is a case-by-case basis. I don't believe the market has changed all that much that we need to put in substantial upfront capital to get them to renew, to offer a new tenant. But again, as you know, in our portfolio, we have some very intense MOBs like the Cedars-Sinai that is 100% full all the time, to the other ones that are probably 80% full or 90% full. And depending on tenancy for that last space, it affects our CapEx requirement. I don't -- and clearly, a new tenancy will require -- we are willing to step up and offer greater tenant improvements and so on. I mean, I just think that that's -- just hitting this quarter, I don't think that is a cycle or anything to extrapolate from that.

Okay, perfect. Thank you.

Thank you.

Thanks, Jim.

And speakers -- Mr. Hegarty, there are no further questions at this time. Please go ahead.

Great. Well, thank you all for joining us today. We hope to see you soon at either the Wells Fargo Real Estate Conference in New York at the end of February, or the Citi Global Conference to be held in Florida in early March. Thank you all, and have a great day and a great weekend.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and using the AT&T Executive Teleconference. You may now disconnect.