Diversified Healthcare Trust (DHC) 2018 Q1 法說會逐字稿

Good morning, and welcome to the Senior Housing Properties Trust First Quarter 2018 Financial Results Conference Call.

(Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Brad Shepherd, Director of Investor Relations. Please go ahead.

Thank you. Welcome to Senior Housing Properties Trust call covering the first quarter 2018 results. Joining me on today's call are Jennifer Francis, President and Chief Operating Officer; and Rick Siedel, Chief Financial Officer and Treasurer.

Today's call includes a presentation by management, followed by a question-and-answer session. I would like to note that the transcription recording and retransmission of today's conference call without the prior written consent of SNH are strictly prohibited.

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 SNH's present beliefs and expectations as of today, Thursday, May 10, 2018. SNH undertakes no obligation to revise or publicly release the results of any revision to forward-looking statements made in today's conference call other than through the filings with the Securities and Exchange Commission or SEC.

In addition, this call may contain non-GAAP numbers, including normalized funds from operations or normalized FFO and cash-based net operating income or cash NOI. Reconciliations of net income attributable to common shareholders to these non-GAAP figures and components to calculate AFFO, CAD or FAD are available on our supplemental operating and financial data package found on SNH's 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.

I'd now like to turn the call over to Jennifer.

Thank you, Brad, and good morning, everyone. Thank you for joining us on SNH's First Quarter 2018 Earnings Call. Before we begin, I'd like to take a moment to thank David Hegarty for his many years of service to SNH since its founding in 1999. His expertise and contribution helped develop SNH into a premier health care REIT. I can speak for everyone in saying that we will miss him.

Yesterday we reported normalized FFO per share of $0.45, which was $0.01 less than the normalized FFO per share for the first quarter of 2017. The joint venture transaction we completed in late March of last year reduced our quarterly FFO by $0.03 per share per quarter, prior to reinvesting the proceeds. We have since redeployed 1/3 of the total proceeds and in the first quarter have made up $0.02 of the $0.03 loss in FFO per share through these investments. We have been able to do this by acquiring approximately $300 million in assets over the last year, with an average cap rate of over 8.5%.

We've been very active on the investment front in the first quarter. We acquired 2 senior living properties, 2 life science buildings and 2 medical office buildings for an aggregate purchase price of approximately $155 million. This first quarter's acquisition total surpassed our acquisition volume for all of 2017, yet we were still able to achieve an average cap rate of over 8% for these high-quality assets located in attractive markets such as San Jose and St. Louis.

By taking advantage of RMR's national footprint, by buying assets outside of gateway markets and by not limiting ourselves on transaction size, we continue to avoid competition from larger institutional investors and to find excellent returns on quality health care real estate.

We expect the run rate of these first quarter acquisitions to produce incremental NOI of $1 million in the second quarter, which means that we have replaced the FFO loss from the joint venture transaction in a little over a year by redeploying only 1/3 of the total proceeds. This demonstrates the efficacy of our strategy of being patient and selective with our recycling of capital.

On the topic of recycling capital, in January, we announced that we entered into agreements to sell 4 senior living assets leased to Sunrise Senior Living for $368 million, with expected gains of approximately $308 million. To date, we have sold 3 of the 4 communities for $272 million and recognized book gains of $227 million; with the final community expected to close in the coming weeks. These properties were sold at a 4% cap rate, so we expect to receive a significant spread on the reinvestment of the proceeds based on our recent acquisition yields.

Moving on to our operating results for the quarter. Our total portfolio same-store cash NOI was down less than 20 basis points in the first quarter or essentially flat when compared to the first quarter of last year. Our medical office building and life science portfolio's same-store cash NOI decreased 1.9% in the first quarter. Tenant retention was 80% and overall occupancy at the end of the quarter was 95.1%. The 80 basis point decrease year-over-year in the life science portion of our MOB portfolio is the result of the vacancy of the single tenant building that we've mentioned on our last 2 earnings calls, which is located in the southwest suburb of Boston.

In April, we executed a new 55,000 square-foot lease for approximately 2/3 of this building, to the subsidiary of Johnson & Johnson. We have strong activity on the balance of the building.

In our traditional medical office building portfolio, half of the 3% same-store cash NOI decrease is as a result of an early termination fee we received from a tenant in the first quarter of 2017. This was a positive story in that we not only received the termination fee last year, but we also re-leased the space to a new tenant with just 3 days of downtime, a below-market tenant improvement allowance and a rollup in rent. The majority of the remainder of the decrease is related to 1 building in Pennsylvania recently vacated by a single tenant, where we are planning to reposition the asset.

Our triple net leased senior living portfolio continues to produce consistent growth, with same-store cash NOI increasing 1.9% in the quarter compared to the first quarter last year. The triple net leased senior living portfolio had rent coverage of 1.2x for the 12 months ended December 31, 2017, which was down only slightly from the 1.21x recorded in the prior quarter.

Our managed senior living portfolio same-store cash NOI, which accounts for only 15% of our portfolio, decreased 1.6% in the quarter. As has been the case in recent quarters, our managed portfolio's performance was negatively impacted by 2 of our largest managed properties.

Last quarter, we mentioned that our CCRC in Laguna Hills, California was our largest year-over-year decrease. And that was the case again this first quarter. The property is currently undergoing a significant multi-million dollar renovation, which, of course, hinders new move-in activity. The work there is not expected to be completed for several months.

Our large CCRC in Fort Myers, Florida, where a multimillion renovation has recently been completed, is once again positioned to compete in that market. However, it may take some time due to the amounts of new supply nearby, including a 300-plus unit IL/AL community that opened last October, just 2 blocks away. The cash NOI of these 2 properties decreased a total of $1 million year-over-year. If we excluded them from our results, our managed portfolio same-store cash NOI would have been up close to 3%, as we are starting to see growth from communities where we've completed significant renovation, such as Yonkers and Dallas.

I just mentioned the number of properties both in our MOB portfolio and our managed senior living portfolio where we've completed or in the middle of or are about to begin strategic repositioning work. We will continue to evaluate our assets to determine where we can improve our returns by strategically investing capital in properties where we believe will grow revenue, grow occupancy and maximize shareholder value.

Finally, I'm pleased to be joining the leadership team at SNH in its 19th year as we look to find new ways to build and improve upon the company's solid and diverse portfolio of health care real estate. While it's well-known that the REIT and senior living industries are facing headwinds, I believe that we are poised to come out of this current environment with a portfolio of assets and a company that is stronger than before.

As I've said a number of times to my colleagues and to many of you on this call, SNH is not getting the credit it deserves for our high-quality, well-occupied portfolio; diverse tenant mix and geographic footprint; investment-grade rated balance sheet; and our track record of delivering shareholder returns. I plan to work in the coming months to emphasize the many positive attributes of our portfolio.

I'd like to turn the call over to Rick to provide a more detailed discussion of our financial results for the quarter.

Thank you, Jennifer, and good morning, everyone. I'd like to quickly touch on some of the first quarter financial highlights beyond what Jennifer just covered.

In February, we issued $500 million of 4.75% senior unsecured notes and we're pleased with the execution. The net proceeds from this offering were used to reduce amounts outstanding under our floating-rate revolving credit facility. We ended the quarter with just $55 million drawn on our $1 billion revolver. Our debt to adjusted EBITDA was 5.8x and debt to gross assets was 41.4% at quarter-end. Between our borrowing capacity on the revolver and another $96 million of proceeds expected from the sale of our last Sunrise Senior Living community, we have ample liquidity and are well positioned for growth.

In addition to the accretive external growth Jennifer discussed, we continue to invest in our existing portfolio.

In the first quarter, we spent $12.4 million on capital expenditures, of which $7 million is considered recurring and includes building improvements, leasing costs and tenant improvements at our MOBs and managed senior living communities. $2.2 million was our funding of projects within our triple net leased senior living portfolio, which will increase the annual rents due from our tenants. The remaining portion of our capital expenditures, $3.2 million, was invested in development and redevelopment capital projects, the majority of which was spent on our managed senior living portfolio. This amount was uncharacteristically low for redevelopment spend for 1 quarter, as we have been averaging approximately $7 million per quarter or about $28 million annually for the past 2 years. We expect expansions and renovations to ramp up through the rest of the year and could spend $40 million on development at our managed senior living communities and another $10 million redeveloping a few of our MOBs in 2018.

For example, last quarter, we mentioned one of the properties we purchased from Five Star, located in Tennessee, has started an expansion for a 91-unit independent living building, which is already 50% pre-leased. This project continues to move forward and it could account for approximately half of our full year expected managed senior living development and redevelopment expenditures.

We are also awaiting final approval to begin construction of a 24-unit memory care expansion at our assisted living community in Walnut Creek, California, and we have 2 renovation projects planned for later in the year in New Jersey and Arizona.

Within our MOB portfolio, we have plans to reposition one of our multi-tenant medical office buildings in Washington, D.C. We expect these capital investments to help us grow revenue, grow occupancy and generate strong returns.

Subsequent to quarter-end, we declared another $0.39 per share dividend for the first quarter of 2018. And with the yield now over 9%, we think SNH provides a compelling investment opportunity.

We're very excited about the investments we have been making, both internally and externally, and look forward to continuing the strategy and demonstrating that our current trading multiple does not reflect the relative value or a conservative risk profile of our high-quality health care real estate portfolio.

Lastly, I wanted to provide a little more color on 2 key lines in our income statement. General and administrative expenses for the first quarter included $14.3 million of estimated business management incentive fees. The incentive fee accrued in the first quarter is based on SNH's total return in comparison to the SNL U.S. REIT Healthcare Index from the beginning of 2016 through the end of the first quarter of 2018. SNH is outperforming the index by 37% since the beginning of 2016, with a total return of 32% compared to a total return from the index of negative 5%. The incentive fee is capped at 1.5% of our equity market capitalization, which equates to an annualized estimated incentive fee for 2018 of $57.4 million, as calculated at the end of the first quarter.

This incentive fee accrual may increase or decrease over the remainder of the year, depending on how SNH performs relative to the index. Excluding the estimated business management incentive fee, general and administrative expenses decreased 8.9% this quarter compared to the first quarter of last year. The decrease is a result of our share price throughout the first quarter of 2018 being used to calculate the business management fee paid to RMR, which is based on the lower of the historical cost of our real estate or our market capitalization. With the March average share price of only $15.82, the market cap-based fee results in annual savings to SNH of $4.7 million.

Interest expense is flat this quarter compared to the first quarter of 2017. We had a $4.9 million decrease in interest expense as a result of the prepayment of $310 million of mortgage debt in 2017 and 2018, with a weighted average interest rate of 6.6%. This was offset by an increase of $1.3 million of interest expense from our line of credit, which had latest borrowings of $451 million at 2.7% this quarter as well as an increase of $3 million in interest from the $500 million or 4.75% senior unsecured notes issued in mid-February.

That concludes our prepared remarks. Operator, please open up the lines for questions.

(Operator Instructions) Our first question comes from Drew Babin with Baird.

This is Alex Kubicek on for Drew this morning. On your 1Q life science and MOB acquisitions, I know that you guys are listing your majors tenants, are those single tenants or are there other minor tenants in the buildings? And also I'm wondering if you could give us more color on these tenants and if you get -- what are the prospects you see with them? And additionally, one small thing, is Signature Health Services in any way affiliated with Signature HealthCARE that we know is experiencing financial difficulties?

Okay, so the first question was on our MOB acquisitions and the tenants. It's a mix. We have -- we bought buildings that are -- have single tenants and then that are a mix. So it's -- do you want to go through each acquisition? Or -- it's a -- it varies. So it can vary --

Yes, just color on the major tenants would probably be really beneficial.

Yes, so let's see in Overland Park, the major tenant there is -- was a company called Quintiles. It was acquired by IQVIA. They've got nice long-term with us, we're pretty happy about that acquisition. San Jose is a single-tenanted building. Complete Genomics is the tenant there. Let's see -- in Richmond, Virginia -- that's Glen Allen, that is a multi-tenant -- a single-tenant building, Virginia Premier Health Plan is the tenant there. So again, we've been -- we're comfortable with that tenant. And then Creve Coeur is a multi-tenanted building.

Right, and just to add, you asked the question about Signature Health Care. It is totally unrelated to the senior living group down in Louisville, Kentucky. This is, again, a fairly affluent suburb of St. Louis. We think it's great real estate. The building is fully utilized. We're really excited about that acquisition.

Yes, perfect. And within that -- your managed senior living segment, it appears that the occupancy, the rate and the margins are all fairly stable year-over-year basis. Is that flatness a prevailing condition we can expect until the impact of the new supply tapers? Or are we maybe going to see some quarter-to-quarter volatility through 2018, especially as -- once your guys' building improvement initiatives continue to come online?

Yes, well actually we talked in the prepared remarks about the fact that portfolio is up, if you take out 2 buildings that are undergoing major renovations. I think once those buildings -- once those renovations are complete, we'll see occupancy grow in those buildings as well. So we're pretty comfortable with where we are.

Yes, I -- just to add, I think there's no question, new competition and new supply has hurt us. But like Jennifer said, excluding those 2 construction project buildings, we would have been up 3%. And we are encouraged by the results of our spend.

Yes, we've said -- we've seen great results in some of the buildings where we have completed those projects. We have a project in Dallas that's up 19% year-over-year. Yonkers, a project that was completed, is up 49% from Q1 2017. So we're seeing great results in the repositioning of -- where we finish those repositioning projects.

Do you have any color on the timing of when that -- those initiatives on those 2 larger buildings, when you guys intend to those -- intend for those to kind of wrap up and you see some incremental growth?

So the Villa Valencia project that we've talked about in California, it's about 80% complete. So at some point this year, I'd say it would finish up. Deerfield Beach, Florida, it's about 1/3 of the way through. So I -- again, maybe by year-end we'll finish up there.

One of the projects is also in Fort Myers, which is a market that has seen a lot of new competition. So again, we think that will take a little bit of time, but we are encouraged. The facility looks fantastic.

One last question for me. In the supplemental, it looks like you cited a Pacifica Senior Living default on 1 property. Is an impairment likely to be taken? Or is a broader entity paying that rent?

No. We do have a -- we have a security deposit of about $600,000 and then we have a 1-year guarantee from their parent company. So we've been down this road before. We'll likely take the property back and operate it in our TRS. It's a pretty well -- we think it's a -- it's got high potential. It's in L.A. We're confident in the building's long-term success. It's just a matter of kind of getting through the transition.

Our next question comes from Bryan Maher with B. Riley FBR.

Welcome, Jennifer.

Thank you.

A couple of quick questions. When we want to think about your acquisitions going forward, where do you expect to concentrate? Is it really in the MOB? Is it somewhere else? And what are you seeing in the competitive landscape to make these acquisitions?

Well, my background -- I think a lot people, if you read in the press release, my background is in -- more on the MOB office, life science side. So I think -- we're hoping that we'll concentrate -- or I'm hoping we'll concentrate there. We're very opportunistic though. So we're really looking at everything. And our acquisitions team really sees everything that hits the market, both on life science, MOB and the senior living space. So we're going to strike where the iron's hot, I guess, is the expression. Again, I have a strong preference to the MOB, life science side.

Okay. And we totally agree with what you said about SNH not getting credit it deserves. Can you tell us kind of in your experience with the company, why you think that is? And what specifically, steps you're going to take to try narrow that valuation discount?

Yes, I mean it's clear, our stock price is not anywhere near where I think it should be. And so -- and we've got close to $13 million portfolio of MOB life science, 1 million square feet portfolio of MOB life science. We've got really good, strong -- I've been touring senior living properties around the country and we've got some great senior living properties. My background is asset management, and so we're -- while SNH has an asset management team now, we're going to make that team a bit more robust and really focus on asset-level strategic business plans. We already have them on the MOB side. We're going to focus on the senior living side to really make sure that, that real estate is poised. We have very strong operators, right, so they're managing the businesses in those senior living portfolios, but we're going to -- buildings, but we're going to look at an asset-level and make sure we're poised to come out of this strong.

I guess I was thinking with this question a little bit more on the investor outreach side of the story. It just seems like certain investors, whether it's SNH or HPT or SIR or GOV, they just have a bias for one reason or another -- which we disagree with -- on the external management structure. And so how do you expect to overcome that and really highlight with them what you have and why there shouldn't be a discount?

Bryan, I think we agree with you. We definitely are interested in getting out on the road and meeting with more investors. Generally, I think there are some investors that hear about an external management structure and just kind of shutdown. Typically, when we have the conversation and go through the structure of the formula in order for RMR to earn both the base business management fee and then incentive, really the interests with shareholders are aligned. And the historical owners of RMR are substantial shareholders in SNH, so everyone's on the same side here. And if you look at the -- we did approve an incentive fee this quarter because we've outperformed the health care index by 37%. I mean it's significant. So we think we've got a good secured dividend and we're very comfortable with the formula and the way things are organized. So we want to get out and tell that story and make sure people understand it. Usually when they hear it and think through it, there aren't a lot of holes they can poke. So that's certainly a piece of it.

Our next question comes from Omotayo Okusanya with Jefferies.

For the senior housing portfolio, I guess when I take a look at the current rent coverage, it's slightly above 1. You still have offsets there where there's a lot of supply concerns. Concerns about negative NOI growth. I guess, how should we be thinking about the safety of the coverage going forward? And is there any kind of tenant issues -- and you'd be worried about where coverage could go so low that you may have to deal with the rent concessions or rent deferrals or anything of that nature?

Tayo, we apologize for the early morning call. But I think in general, our coverage is fairly strong at 1.20x. I mean, there has been some drag on the coverage as a result of senior living industry headwinds. We saw our Brookdale coverage tick down a little bit, and Brookdale is a great operator. We're still over 2x covered. And really, the decrease in coverage there is related primarily to the -- some expansion funding that we have provided. So the rent had increased. Five Star remained at 1.15x covered. We still believe they are one of the better senior living operators out there. They've got an incredibly strong balance sheet. They still own 20 properties on their own balance sheet that are probably worth up to $400 million or so. Hopefully everyone can hear us. We're getting a little bit of noise on the line.

Okay, that's helpful. And then Jennifer, I appreciate your comments in regards to asset management and beefing that up. Do you think that, that's, again, the secret sauce to kind of get your operating metrics to be closer towards your peer over time? Is that like, in your initial assessment of the company as President and COO, the one area you thought that there's still work to do? Or are there others areas you're looking at to kind of start to get your metric kind of closer towards your peer group?

I -- it's early on for me still, I've been here a little over a week. But I do think that, that beefed up asset management group really looking to understand where we can position assets to compete is going to be my initial focus. I think I still need to spend some time really digging into the senior living portfolio and maybe next quarter, I'll have more color on that. But I -- we're a real estate company. Just really focusing on the real estate is where I see me starting.

Our next question comes from Michael Carroll with RBC Capital Markets.

I just kind of want to pick -- kind of off Tayo's question on the Five Star portfolio. I know coverage is at 1.15x. That's still a little tight. What's the prospects of that moving higher? Is there renovations that they're completing? Is there electronic medical records that they've been rolling out for a little while now? Has that fully been implemented and do you see an uptick from there? I guess what's the outlook with those assets?

So they are pretty far along in the electronic medical records. I think they've got all the skilled nursing facilities up -- the stand-alone skilled nursing facilities are up and running and they're starting to move that into their assisted living communities as well. So I think that, that's going to help them quite a bit.

Right. I would just add that I think Five Star's planning to report next week. We do expect the coverage will probably dip a little bit more. Q1 was tough with new supply and the flu and everything else. So I think it'll probably get a little bit worse before it starts to get better, but we are confident that overall, that the capital projects that they've been working on will start to bear fruit in the near future. And again in long-term demographics of the industry, we're still confident. And so again, it would probably tick down a little bit next quarter primarily because of the flu and other things. But again, with the 5 master leases and the cross-defaults, we still view them as one of the better credits as far as senior living operators go.

Yes, I know historically you guys have kind of highlighted that there are a few assets within that portfolio that have negative EBITDAR. And there was questions that you could possibly sell those assets, with Five Star's approval, obviously. I mean has that gone anywhere? Are you still looking at those potential sales?

We are -- we're -- as part of that strategic asset-level business plan that I talked about earlier, that will be one of the things that comes up out of those plans. And so -- really taking a good look at all of the assets, not just the TRS structures, but all of the assets and coming up with a plan, which -- part of that plan is a hold-sell recommendation. So we will be looking pretty hard at that.

Okay. And then just last question, can you give us a little more color on the renovations that you're pursuing? I mean what are the expected yields on these? And then could you start providing more details within the supplement on the projects you're currently pursuing?

So the renovations, we've got -- on the MOB side, we've got a couple of renovations that are planned for the year. Complete repositioning of an asset in Washington, D.C., we're expecting mid-teens, double-digit returns easily. And then on the TRS side, we've got Villa Valencia, I think we've talked about. We've got a building in Deerfield Beach, Florida, where we're -- it's a $30 million project, a complete repositioning. We've got a project that we're planning in New Jersey -- Teaneck, New Jersey, that's about to kick off. Also 1 in Arizona, a $3 million-or-so project that's going to be kicking off in 2018. We have an expansion in Walnut Creek, California that is also -- we're hoping to be complete in 2018. So we've got a lot of properties where we reposition the assets to either stay competitive or stay ahead of our competitors in those markets.

Okay. And then next quarter, could you add a supplemental page or a page within your supplement on these projects?

We -- I'm a little hesitant to add to the supplemental just because it's already fairly extensive, but we can make sure we cover it in prepared remarks and some other things to get that information out there. It's only -- again, it's a dozen or so projects in total, so it's not that bad. We can cover it off-line or something.

Our next question comes from Juan Sanabria with Bank of America Merrill Lynch.

This is Kevin Speight on for Juan. I just have a -- getting back to those 2 CCRCs that you mentioned earlier. You guys had mentioned, supply. What are you guys anticipating for the lease-up times?

For the CCRCs that we talked about in the prepared remarks?

Yes.

Yes, Calusa Harbor is -- I mean, we're -- we've just toured that property recently. It's -- they did a great job, we've got a great executive director down there. The issue that we're having there is that a building -- a competitor opened up literally 2 blocks away, and so we're competing head-to-head with them. We're doing quite well there I think. And so I don't know that I can give a timeline on when we'll stabilize. But again, it's a great property. Villa Valencia is the other property we mentioned. It's still under construction. And so -- and it's pretty heavy-duty construction so I think that most of that is going to have to be done before we start to expect to stabilize that asset.

Okay. And then just also regarding the remaining 1/3 of the medical office buildings and in the -- repositioning in Pennsylvania, I guess is there a timeline for getting those re-leased as well?

Yes, no, so the building in the suburb of Boston, we've had great leasing activity. I think that, that -- I don't think that's going to remain vacant for much longer. And on the 55,000 square feet that we did lease up, we signed a lease and the lease commenced. I think it was the next day. And so Pennsylvania, the repositioning we're doing is not major. It's some façade work, someone window work, putting in a lobby. I think we've also had good activity there. So it's hard to know. I always saw if you could actually plan revenue, it would be 100% occupied. But we've got great activity. It's a good asset. We've got good brokers on it so I expect that we'll get that leased up pretty -- in pretty short time.

Okay. And then it's -- last question, what are you guys seeing your life science tenants, I guess their willingness to kind of move out away from Cambridge and downtown like in Boston, out to the more -- to the suburbs. I've noticed some of your peers have noted that they kind of aren't willing to move out to the suburbs. So just I want to get your opinion.

No. I mean I think that there are plenty of life sciences companies that have moved out to the suburbs. Lexington, Waltham are pretty hot markets. We've got a property in Lexington that is well occupied. And any time we hear that a tenant might be doing something, it seems like we've got a list of tenants who are interested in taking that space. So yes, Cambridge is definitely hot. Boston, Seaport District, they are the hot life science markets. But there are plenty of tenants who can't stomach the rents that they have to pay in there and move out to the suburbs.

(Operator Instructions) Our next question comes from Vikram Malhotra with Morgan Stanley.

I was hoping you can give us sort of a timeline/maybe some budgets over the next, call it 2 years or so? All these capital investments and incremental investment in both MOB and senior housing. Can you give us a sense of what's the expected spend over the next 2 years? And how you -- can you give us may be some more anecdotes about the returns or the improvements that you're seeing in the underlying operations as you spent this money?

I guess I would just say that as a general rule, we as a company don't give guidance. I think in the prepared remarks, we probably provided a little bit more than usual just because of how significant some of the CapEx redevelopment spend is expected to be. In the prepared remarks, we said we could spend up to $40 million or so in the managed senior living portfolio and another $10 million repositioning some of our MOBs. So I think that's probably as much as we would give as far as financial information and as far as additional color. Again, Jennifer mentioned, the repositioning of the multi-tenanted building in Washington, the senior living assets. Each community is unique. Dave always used to say that it's a very local business and we think that's certainly true. Each community might need a different view or a different take on renovation capital. So we're going to work closely with the asset management team to make sure we're making the right decisions and spending it wisely. But overall, we're encouraged by the returns that we've seen on the projects we've taken so far.

Okay. I was just hoping -- and maybe this is going to be sort of ongoing investments, it would be helpful to just get some more rough numbers around like -- what's the spend going to be over the next year or 2, just so we get a sense of the outlays. But Jennifer, maybe from your perspective, you mentioned some of the portfolio being underappreciated. As you've talked to different groups, investors, folks managing the properties, are you happy with the business mix today? And what's your sense on maybe what parts of portfolio are not that well understood by the investor community?

Well, I don't -- I think we spent so much time -- I've noticed in the past 6 months -- talking about the senior living portfolio, the skilled nursing portfolio and we don't spend 50% of the time talking about our medical office portfolio. Again it's 12.6 million square feet, over 94% occupied. That's beating market occupancy across the country. So I think getting the recognition for that portfolio and then just making sure that people understand the value of the assets that we have, not only in the MOB portfolio but also in the senior living portfolio. Our stock is I think incredibly undervalued. So yes, it's getting out. As Rick said, getting out and making sure that we deliver that message and try to prove that to folks.

And so in terms of capital allocation, in terms of the fact that you think there's a big disconnect, how do you view sort of utilizing some of the assets where you come with really attractive pricing, looking at leverage buybacks, et cetera. Could you just give us an update there?

Well, I mean as far as capital allocation, I think that, that's, again, back to those asset-level strategic business plans. I can't say exactly where future capital is going to be spent until we've really dug in and taken a look at the properties at an asset level. So time to -- there's time to do that.

Yes, I would just add, I mean, we put in the press release that we have had substantial capital recycling, because again, a lot of our assets have been accumulated over years. We, historically, were not much of a seller but we've already sold about $812 million since last year and we have another $96 million of proceeds to go. So that's just on our -- a handful of assets. So we are encouraged. We think the portfolio is undervalued. We're going to continue to do what we can to demonstrate the value and try to drive shareholder value.

This concludes our question-and-answer session. I'd like to turn the conference back over to Jennifer Francis for any closing remarks.

Okay. Thank you. Thank you for joining us on our first quarter earnings call. I look forward to meeting many of you at our upcoming conferences. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.