Diversified Healthcare Trust (DHC) 2013 Q1 法說會逐字稿

Good day, and welcome to the Senior Housing Properties Trust, the first-quarter financial results conference call. This call is being recorded.

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

Thank you, and good afternoon, everyone. Joining me on today's call are David Hegarty, President and Chief Operating Officer; and Rick Doyle, Treasurer and Chief Financial Officer. Today's call includes a presentation by management followed by a question-and-answer session. I would also note that the transcription, 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 on Senior Housing's present lease and expectations as of today, April 29, 2013. The Company undertakes no obligation to revise or publicly release the results of any revision to 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 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 to not place undue reliance upon any forward-looking statements.

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

Thank you, Tim, and good afternoon, everyone. And thank you for joining us on today's call. Early this morning, we reported Normalized Funds From Operations, or Normalized FFO, of $0.43 per share for the first quarter of 2013, in line with our expectations.

Rick will discuss our year-over-year quarterly results in further detail later on in this call. But to start off, I'd like to review some of the important highlights from the first quarter. And we continue to have an industry-leading 94% of our revenues derived from private pay tenants. I think it's best to discuss the portfolio in three operating primary segments. Approximately 49% of our net operating income, or NOI, is derived from triple net senior living investments; 32% from medical office buildings; and another 15% from managed senior living communities, which are leased to our taxable REIT subsidiary, or TRS.

In addition, 4% of our NOI is derived from wellness centers. Occupancy and rental coverage at our triple net senior living communities was strong and essentially unchanged from the 12 months ended December 31, 2012 or the prior-year period. Our managed senior living communities began to demonstrate internal growth. And we believe these properties have the potential to add significant long-term growth to our overall portfolio. Same-store occupancy at our managed communities was up 430 basis points from last year, and same-store NOI increased by 3.2%.

We are encouraged by signs of continued improvement here and by the general positive outlook for the industry as a whole. Our medical office building portfolio is well occupied at 95% at March 31, 2013, and NOI was up 13% since the first quarter last year. We also executed over 300,000 square feet of leasing activity for a 3.6% weighted average rollup in rent, and a five-year weighted average lease term.

On the acquisition front, during the first quarter, we completed $75 million of acquisitions and have approximately $44 million of additional investments under agreement. On the capital markets front, we issued 11.5 million common shares in January and raised net proceeds of approximately $262 million. We used these proceeds to repay amounts outstanding under our revolving credit facility and to fund additional acquisitions. We still have surplus cash on-hand, and our $750 million revolving credit facility is currently undrawn.

Our capital needs remain low for the foreseeable future, as our debt to total -- debt to book capital is a conservative 39%. Last but not least, our Board declared a dividend earlier this month of $0.39 per share, representing a 5.5% dividend yield after Friday's close.

Looking now at the details of our acquisition activity for the quarter, since January 1, we've acquired one private pay senior living community and three medical office buildings for a total of $75 million, including assumptions of $12.3 million of mortgage debt. The senior living community located in Redburn, Washington has 150 units and is triple net leased to Stellar Senior Living, an independent operator. Two of the medical office buildings are located in Bothell, Washington, and contain 145,000 square feet of primarily state-of-the-art research and lab space. These properties are 100% leased to Seattle Genetics. The other medical office building is located in Hattiesburg, Mississippi, and has 72,000 square feet and is leased to six tenants, with the primary tenant being Forrest General Hospital, an A-rated hospital system.

The weighted average GAAP cap rate for these acquisitions was 8.6%. In April, we entered a agreement to acquire 54,000 square foot medical office building for $21.5 million. This property is located in New Jersey and leased to an A-rated hospital system. We also entered into an agreement to acquire a private pay assisted living community with 93 units located in Georgia for $22 million, which we expect to lease to our TRS. The closing of these acquisitions are contingent upon completion of our diligence and other customary closing conditions.

Towards the end of 2012, we saw a flurry of acquisition activity as sellers were trying to complete transactions before a new tax year and potential tax increases. As we'd experienced in the past, we saw a slowdown in opportunities to consider at the beginning of 2013, but we are now seeing an increase in acquisition opportunities. We will continue to seek acquisition opportunities in both the senior living and medical office spaces, and feel comfortable in our ability to invest between $300 million and $400 million this year.

Turning to the performance of our existing portfolio for the quarter, our leased senior living properties, whose results are reported on a rolling 12-month basis, as of December 31, 2012, continue to perform well. Overall occupancy were up slightly from the previous year, and coverage ratios were essentially unchanged at 1.4 times and remain strong.

Looking at the performance of our individual operators, Five Stars' 190 leased communities had combined occupancy of 84.5% and rental coverage of 1.3 times. The core properties we leased to Sunrise Senior Living had occupancy of 93.4% and rental coverage of 1.9 times. The 18 properties we leased to Brookdale Senior Living had occupancy of 94.8% and rental coverage of 2.4 times.

Our other triple net leased properties leased to private regional operators had occupancy of 83.1% and strong rental coverage of 2.3 times. The decline in statistics at these communities over the prior year is attributable to recent acquisitions we made with a private operator who represents a majority of the investment value in about half of the NOI of our private regional operators category. These new communities have relatively lower occupancies and were brought on at 1.2 times coverage, which is typical coverage for a new triple net lease.

Moving on to our managed senior living communities, we have 39 communities with approximately 6700 units, generating $17 million of NOI. Starting this quarter, we are reporting same-store data in this portfolio in a supplemental data package. Occupancy at the 22 same-store communities during the first quarter was an impressive 91.5%, up 430 basis points, although the average monthly rates were essentially the same for the two comparable quarters. We have an opportunity to increase rates at these communities in 2013, given that occupancy is now over 90%. Overall, same-store NOI was up 3.2% over last year and same-store margins held steady at over 28%.

Last quarter, we told you that the managed senior living community NOI margin, excluding the 10 Sunrise properties, was 27.5%. This quarter, NOI margins at these same communities moved up to 30.5%. We also saw an increase in the margins at the 10 Sunrise communities.

So, things are moving in the right direction, and overall, we're pleased with the performance of this portfolio. One particular item of note in the expenses was that our maintenance and utilities were higher in 2013 versus 2012, due to 2012 being a milder winter than the current year.

Moving on to the medical office building component of our portfolio, we have 122 medical office buildings with over 8.5 million square feet, generating NOI of $36.5 million. And that represents 32% of our total Company NOI. NOI was up 12.6% from last year, due to growth from acquisitions. Occupancy at March 31, 2013 was 95%, up 80 basis points from last year.

And looking at the 106 same-store communities, occupancy was 94.6%, up 40 basis points, and NOI was $31 million. Same-store NOI declined by 3.8% or approximately $1.2 million. Revenues declined by $700,000, primarily driven by the fact that prior-year revenues included nonrecurring retroactive escalation income adjustments. And expenses increased by $500,000, primarily due to our maintenance and utility expenses being higher this quarter compared to last year, again due to the mild winter we had last year versus this year.

During the quarter, we renewed 288,000 square feet of leases and signed new leases for 45,000 square feet for a weighted average rollup in rent of 3.6%, and weighted average lease term of approximately five years. Our tenant improvement and leasing commissions for the quarter were $544,000.

And now I'll turn it over to Rick, our Chief Financial Officer to discuss our financial results in more detail.

Thank you, Dave, and good afternoon, everyone. I will now review our first-quarter year-over-year financial results.

For the first quarter of 2013, we generated Normalized FFO of $78.9 million, up 9% from last year. On a per-share basis, Normalized FFO for the quarter was $0.43 per share compared to $0.45 per share for the same period last year. The year-over-year quarterly decline in Normalized FFO is attributable to two main items. Starting this quarter, and as I alluded to on last quarter's call, our quarterly NOI declined by approximately $1 million, due to the transfer of 10 previously triple net leased Sunrise communities to our TRS.

We expect the NOI to recover over the next four to six quarters as we invest the appropriate amount of capital that we believe will bring operations back to stabilization, and eventually the NOI of these 10 communities will be better than historical performance. In addition, we experienced short-term dilution from our January equity offering arising from the difference between the timing of the offering and until we invested the proceeds.

Earlier this month, our Board declared a quarterly dividend of $0.39 per share, which represents a 91% payout ratio of the first quarter's Normalized FFO. Looking first at the income statement. Rental income for the quarter was $114 million, up 4.4%. This increase was due to external growth from acquisitions since January 1, 2012, which included five leased senior living communities and 18 medical office buildings. Approximately $57 million of rental income was derived from our leased senior living communities, and approximately $53 million was derived from our medical office buildings.

Percentage rent from our leased senior living communities was $2.2 million for the quarter, down from $2.9 million for the same period last year, due to the transition of 10 communities formerly leased to Sunrise to our TRS. Revenue from residence fees and services at our managed senior living communities grew to $75.1 million during the quarter, due to the acquisition of seven managed senior living communities in the transfer of the 10 formerly leased sunrise communities to managed communities since January 1, 2012.

Property operating expenses for the quarter increased to $74.6 million, due also to external growth from acquisitions. Approximately $17 million of property operating expenses were derived from our medical office buildings, and approximately $58 million were derived from our managed senior living communities. General and administrative expenses for the quarter were $8.6 million compared to $7.7 million for the same period last year. The primary increase in G&A is the result of external growth. As a percentage of revenues, G&A was down to 4.6% compared to 5.3% last year.

Interest expense increased 2.3% to $29.6 million this quarter compared to last year, due to several factors. During 2012, we assumed a total of $121.8 million of mortgage debt at a weighted average interest rate of 5.9%, and we repaid $252 million of mortgage debt at a weighted average rate of 6.5%. Also in January of this year, we assumed $12.3 million of mortgage debt at an interest rate of 6.25%.

Looking back and reviewing our year-over-year results of revenues and expenses, we believe that first quarter's results are a good run rate moving into the second quarter. During the first quarter, we recorded an impairment of assets charge of $1.3 million related to a vacant medical office building located in Pennsylvania, which is scheduled to be demolished for possible build-to-suit or sale. We removed this property from our medical office building statistics for 2013 in the same-store results of operations for the first quarter of 2012 and 2013.

Moving to the balance sheet. We closed on approximately $75 million of investments during the quarter, comprised of one senior living community and three medical office buildings. The weighted average cap rate for these acquisitions was 8.6% based on estimated annual NOI. In connection with the acquisition of the senior living community, we assumed $12.3 million of mortgage debt at an interest rate of 6.25%. We also have two properties under agreement to acquire for a total of $44 million that we expect to fund with cash on-hand.

During the first quarter, we invested $8.2 million into revenue-producing capital improvements at our leased senior living communities. We also spent approximately $5 million of capital improvements at our managed senior living communities. Our managed senior living capital improvements this quarter included both major projects as well as recurring capital expenditures. We expect that $5 million will be a good quarterly run rate over the next four to six quarters for this portfolio. After we complete our major projects, we expect our recurring capital expenditures for the managed senior living properties will be between $1000 and $1500 per unit annually.

Regarding our medical office portfolio, we spent $1 million in capital improvements during the quarter. Medical office capital improvements are typically lower in the first quarter and ramp up as we move through the year. And normal quarterly capital expenditures would be approximately $2 million. At March 31, we had $39 million of cash on-hand, $1.1 billion of unsecured senior notes, and a $734 million of secured debt and capital leases, making our debt to book capitalization ratio 39%.

Our targeted leverage using debt to total book capital is in the range of 40% to 45%, and we may operate slightly above or below that at certain times. In January, we sold 11.5 million common shares, raising net proceeds of approximately $262 million. For the second quarter of 2013, our total outstanding common share count will be 188 million shares. We used a portion of the net proceeds to repay the entire outstanding balance on our $750 million revolving credit facility. As of today, we have no borrowings outstanding on our line of credit and approximately $40 million of cash on-hand.

Given our cash balance and ample capacity to borrow under our revolving credit facility, we do not anticipate any near-term capital needs. Our credit statistics remain extremely strong with EBITDA over interest expense of 3.7 times and debt over annualized EBITDA of 4.2 times.

As you can tell from our presentation today, we are happy with the significant progress being made at our managed senior living communities. Our triple net leased senior living communities and medical office properties are also continuing to perform well. During 2013, we will continue to focus on opportunities to grow cash flow, pay a consistent and growing dividend, while maintaining a conservative balance sheet.

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

(Operator Instructions) James Milam, Sandler O'Neill.

My first question is on the MOB portfolio. So the same-store number, if I heard you correctly, doesn't -- no longer includes that Philadelphia life science building, correct?

Yes, we took that out of the statistics, results of operations.

Okay. So, I guess my question is, the same-store NOI was down but it looks like you guys had some pretty good leasing velocity. Can you just, I guess, maybe tell us how much of that includes or is impacted by leases that have been signed but having commenced paying rent? And what your outlook is maybe as those tenants take occupancy further -- kind of through the rest of the year?

Sure. With the new leases that have been signed as you said, one thing that's unique about office statistics is that the occupancies that are stated here are as of quarter-end, and do include leases that are for future occupancy. And I would expect that really is probably only about 0.5% or 1% of the [say] 95% that's in place as of quarter-end. And the leasing is looking pretty good for renewals and so on going forward.

I'd say in a couple of properties, we have situations where we've extended the leases but had to reduce the rents a bit to keep them in place. But most of the typical doctor's offices and so on, we're seeing modest increases, a couple percent. So, net-net, probably the growth will be more or less flat though, I'd say for the year -- for this year.

Okay. So maybe slightly positive into the second half to kind of offset the dip in the first quarter?

Right. And also, we expect some improvement on the expense side too.

Okay, great. And then just moving to the managed communities, it sounds like the work is progressing there kind of in line with expectations. Is there -- I guess when you guys are going through some of the major projects, is there -- is that kind of evenly spaced over the next four to six quarters? Or are there any quarters where there may be more disruption, in terms of what's going on at the resident level and your ability to keep the units full?

We're budgeting that's going to be consistent quarter-over-quarter. We don't have any real uptick on any specific one quarter over the next four to six quarters.

Right, what you seeing right now is actually the -- a lot of the V and early bell transactions, a lot of the CapEx being fully implemented now, and some of the projects are wrapping up. So, in the Sunrise projects, our -- some of it is just commencing right now. So it should stay pretty much --

Consistent.

-- more or less consistent over the rest of the year.

Okay. And then, sorry, Dave, just my last question. You mentioned the margin last quarter was 27.5% and now it's 30.5%. Is that for everything except the former Sunrise assets?

That is correct.

Okay. Thank you, guys.

Thank you.

(Operator Instructions) Jorel Guilloty, Morgan Stanley.

I had a question on acquisitions. So you said on the last call that you've envisioned $300 million to $400 million of acquisitions for the year. You mentioned earlier on this call that acquisitions pace has been slower, if you will. And especially that compare what you've announced in closest years, $120 million versus $340 million at this point last year. So, what I wanted to get is a little more bit more color as to timing, and as to when you expect the acquisitions pace to quicken? And a little bit more color as to what exactly is driving the -- this slowness, if you will, so far this year?

Well, I think it's fair to say that most, but not all, of the large portfolios and senior living properties out there have already probably been acquired. So, now it's -- there's a handful of major -- of large portfolios that still could be acquired, but generally, we're seeing the one-off in small portfolios. And those typically are a developer has developed a property or two, or somebody has done a turnaround over the last couple of years, and is bringing it to market now that it's stabilized, and probably going to get some very good value for the pricing.

So, I think we had people who were rushing to get what they could get done before year-end last year to take advantage of what, if you recall back in December, nobody was quite sure what the tax increases were going to be, but they knew they were going to be going up. So, there were a lot of closings that occurred in December. Then, January, just first couple of weeks started off really quite slow.

But we are seeing, I would probably say, half a dozen opportunities a week to consider. And so I think it's time to pick up to pretty much a steady pace where it was in the middle of last year. So, and I think there is also a considerable amount of capital chasing senior living and medical office buildings. So, it clearly probably will affect pricing and drive down cap rates a bit more.

This truly is a truly Class A product that's coming out one at a time typically, and those are probably going to be 5's and 6's for cap rates. I would say the A-, B properties will still be in the 7's. And those were -- I guess we'll see a pretty steady amount of individual assets in that category. And medical office, it's probably similar, where I expect more of our growth to come from medical office this year than from senior housing. And it's because we are seeing a lot more opportunity there. And again, it's in our $10 million to $25 million per transaction type sweet spot, where we can compete very effectively. I thought I'd give you some color on it.

When you say 5 and 6's, are you talking about individual assets or small portfolios?

Individual Class A or A-plus assets. You know there are some that have just hit their stride this year and have been coming to market about once every other week. And those tend to be trophies and it's a lot of money chasing them, so.

Got it. And then on their call this morning, and as a corollary to the cap rate compression comment, Five Star mentioned that they're actually looking more into redevelopment to drive returns just because of where pricing is right now. Is this an area of more interest to you? And if so, how would you two intend to participate? Would you do investments on -- direct equity investments yourself? Would you provide loans to your tenants? Is this something that's been more considered now, given where cap rates are at?

Right. It is something we are actively considering. And I know we already have a mechanism in our Five Star leases where they'll do the improvements, and then look for us to reimburse them basically. And when we do reimburse them, the rent will go up at typically 8% on the dollars invested. And during the quarter, we did a bit over $8 million in the first quarter of that type of expenditure -- a revenue-producing expansion, let's say.

And so I would expect that number to pick up as they expand certain properties that are under our leases. Let's see, I'm trying to think -- there are a few locations too, where it may even make sense for them to do a whole new facility catering to Alzheimer's care or assisted living. And we may or may not participate in some of those standalones. And we also have done it for other tenants, some of our private operators. We've funded expansions there too. And in every case, we get a return on investment and we structure it as additional rent.

Thank you.

You're welcome.

Michael Carroll, RBC Capital.

Can you give us an idea of how much you would spend this year on -- or annually on those redevelopment projects that you're mentioning?

Let's see. Well, we seem to be running at, I would say, $8 million or $10 million anyway per quarter. So, I would envision there would be an uptick from that, so it would probably be, say, $50 million or $60 million this year of expansions, improvements, and so on.

Is that just with Five Star? Or do you have other tenants you're doing that with too?

At the moment, I would envision that just to be with Five Star. We have, like I say, done a few million-dollar expansions at other tenants, particularly the private ones. So, I think we are open to it. But at the moment, we don't have any on the plate.

Okay. And then with the transitioning Sunrise communities, do you expect incremental dilution going into the second quarter? Or did we already receive that initial drop and it should be going up from here on?

Well, we received that drop and we -- the rents now will be getting there and the operations now should be flat to slightly better as we move forward. You won't see any more dilution from where we stand in the first quarter of 2013.

Yes, those assets should be stabilized by year-end. Is that correct?

We would hope that most of those 10 properties will be stabilized by the year-end. And, as we've been saying, it may take four to six quarters to get the capital needs completed and the major projects completed. So, a couple of properties may take until mid-2014.

Okay. And then with the Senior Housing asset that you currently have under contract, is that a triple net acquisition? Or would that be put into the RIDEA structure?

That would be put into the RIDEA structure.

Okay. And then my final question is related to the asset you're marketing for sale in Pittsburgh. How big is that asset? And what's the reason for the sale?

Well, that was an asset that was acquired as part of a portfolio years ago. And it was, to be honest with you, converted school. And it made it difficult to operate, and so we've decided to empty it out and just sell it. So, right now, I mean, probably only receive $1 million or so on the sales proceeds of it. And --

Take away the (multiple speakers) --

(multiple speakers) Right now, we're talking about triple net leased assets, and we're getting rent on it. But we would not get any negative impacts from the sale of that.

Okay, who's the tenant?

That's one of the Five Star properties.

Okay. All right, great. Thanks, guys.

Daniel Bernstein, Stifel.

I just wanted to going into the acquisition pipeline first. On the Seniors Housing side, again, both you and Five Star kind of alluded to cap rate compression. Are you seeing more Class B assets or lower quality assets come to market trying to take advantage of the cap rates? So are you not seeing as attractive asset acquisitions out there? Just trying to understand kind of the mix of quality that's coming to market.

Well, we are seeing Class A and Class B product coming to the market fairly steadily, but the Class A is drawing all the attention, particularly if it's of size, and therefore, driving the cap rates down on those particular assets.

The other ones are attracting attention because, as I mentioned, there is a lot of private equity, private REITs, and just other smaller REITs that are public, all chasing this product. So I think even the Class B product type is getting the benefit of pricing. I don't think -- I'm not seeing any of those really trade below a 7, let's say, or even below 7.5. But we are seeing a decent amount of product to consider -- not pricing clearly would be between 7.5 and 8, I guess, right now.

So, would you characterize that some of the pricing is getting out of your comfort zone and that's why you're looking at MOBs a little bit harder?

Yes, in some cases. Again, either an individual Class A or a portfolio of Class A product is getting pretty frothy. And we're just -- it's going to trade in the 6 and 6's; we're just not going to chase that product at that pricing.

And when you say 5's, you're thinking more independent living, right? Not assisted? Or is it both?

Yes. (multiple speakers) And it's high-5's, you know?

Okay, right. And then also, given that -- are you looking at any other alternative investments like mortgages or development funding where you can get a higher yield? You really don't have much of that in your portfolio or not at all. And so are some of those other real estate-related investments on the horizon -- are you looking at those at all?

As you mentioned, we don't do development generally and we've not provided development financing. I think that there is quite a bit of demand for that out there. But fortunately, the banks are still not lending that easily for development. So, right now there is nothing in those categories that I envision us investing in. I wouldn't rule it out entirely but at the moment there's nothing.

Okay. And then one other question I have here -- on the managed asset same-store, NOI was up 3%. That portfolio is really starting to push 92% occupancy. So, what are your kind of definitive expectations for the same-store stabilized assets that are being managed by Five Star in terms of rate growth, margin expansion, NOI? I would think the NOI growth should be over 5%, given that occupancy, but I kind of want to hear it from you.

Well, yes, I mean, a couple of thoughts on that. One is, we still have a relatively small portfolio. And if you noticed, if you were to take the 3% growth that we had -- 3.2%, it's only a couple of hundred thousand dollars that brings up to 5% growth. So, it wouldn't take much to hit 5% or do better than 5%. I think that our occupancy has moved up considerably without rate increases. So I expect that we should be able to push rates. Typically, 3% to 5% would be the range.

I know that at these properties we're currently seeing 4% and 5% rates being requested of new residents. So, again it's a portfolio of [22] and I'd say some of the properties maybe still have to offer some incentives to -- for people to come in while others are pushing 100% occupancy. And they can push that 4% or 5% rate growth. I don't know if any of our properties are charging in excess of 5%. But 4% and 5% typically, I would say.

Okay. And you expect sort of the significant margin increase as well. So that 5% to 7% NOI growth seems pretty reasonable.

For that.

For that particular part of the portfolio.

Yes.

Okay. All right. That's all I have. Thanks a lot.

Okay.

Todd Stender, Wells Fargo.

Was the IL investment in Redmond a sale-leaseback with Stellar?

Yes. Yes, triple net leased. And that property is literally at the entrance of Microsoft, and they -- I think it was featured in one of the recent magazines on senior living business. It's a property that we see significant potential in, which almost all of that would be for the benefit of the operator. We would see increasing rents as performance improves.

What was the occupancy? And what do the in-place rates look like versus the market?

Let's see. Occupancies were in the -- about -- yes, about 83% or so at that property. And historically, have been operating in the low to mid-90s. So, rate-wise, I believe it was in the low 3000's per month. And, it's about 75% independent living, and the rest of it is memory care and a little bit of assisted living. So I think it has a good amount of potential.

Does that mean you get -- did you get above-average rent escalators as -- in relation to the occupancy upside?

Right. We get modified minimal bumps in the rent that are fixed. And we get a percentage of the revenue growth at the property on top of that. So as they fill up and raise revenue, we get 4% of the growth in revenues there.

Okay. And Stellar is an existing tenant, isn't that right?

Right. We currently have four properties with Stellar and we've added to the master lease.

Okay. And there is assumed debt on this. When does that come due?

2015.

Okay, that's helpful. And just lastly, with the Cherry Hill, New Jersey MOB, any other specifics on that deal? It was a single tenant or hospital-affiliated? Any other details you can share?

Sure. I mean, obviously, we'll talk about it more on our next call or as soon as the deal closes, but it's an A-rated healthcare system, and it's triple net leased. They manage it themselves. And so, there's bumps in the lease and it's a long-term lease.

Okay. Thanks, guys.

Okay.

Thank you, Todd.

We have no further questions at this time. So I'd now like to turn the conference back over to Dave Hegarty for closing remarks.

All right. And thank you all for joining us today. We intend to take part in several upcoming conferences this spring -- the Bank of America Merrill Lynch conference in Las Vegas in May; the Jefferies Global Healthcare Conference in New York City; and the Annual NAREIT Conference in Chicago, both occurring in June. And we hope to see many of you at those conferences. And we're more than happy to meet with you and talk to you in further detail at those conferences. Have a good day. Thank you.

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