National Health Investors Inc (NHI) 2011 Q3 法說會逐字稿

Good morning ladies and gentlemen. Thank you for standing by and welcome to the National Health Investors, Inc. third quarter 2011 conference call. (Operator Instructions).

I would like to now turn the conference over to Trip Sullivan of Corporate Communications, please go ahead.

Thank you Jennifer. Good morning. Welcome to the National Health Investors conference call to review the Company's results for the third quarter of 2011. On the call today would be Justin Hutchens, President and Chief Executive Officer, Roger Hopkins, Chief Accounting Officer.

The results, as well as notice of the accessibility of this conference call on listen only basis over the internet, were released earlier this morning in a Press Release that has been covered by the Financial Media. As we start, let me remind you the statements in this conference call that are not historical facts or forward-looking statements. NHI cautions investors that forward-looking statements may involve risk or uncertainties and are not guarantees of future performance.

All forward-looking statements represent NHI judgments as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI in its periodic reports filed by it Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-Q for the quarter ended September 30, 2011. Copies of these filings are available on SEC's website at www.SEC.gov or NHI's website at www.NHIREIT.com

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the Company's Earnings Release and accompanying tables and schedules, which has been filed on form 8K with the SEC. Listeners are encouraged to review those reconciliations provided in the Earnings Release, together with all the information provided in that release. I now turn the call over to Justin Hutchens, please go ahead.

Thank you Tripp. Good morning everyone thank you for joining us. With me today is Roger Hopkins, our Chief Accounting Officer. We were very active in the quarter with new investments and asset sale and $0.74 of normalized FFO, the pace of activity has picked up since quarter end with our largest transaction closed of the year and the closing of new $200 million credit facility.

I will walk through this investment activity, provide an update on our skilled nursing facility and assisted living portfolios, and then turn to over to Roger for a financial review. This July 1st we have closed or committed to fund a little over $79 million in capital. During the quarter, we funded a $2.5 million dollar second mortgage for development and construction of an Assisted Living and Memory Care facility in Florida that we talked about on the last call.

We also completed a $5.4 million purchase lease transaction of an assisted living community in Georgia. At the very end of the quarter we closed on a development and lease transaction with Polaris Hospital Company to develop a 60-bed General Acute Care Hospital, specializing in Acute Psychiatric and Rehabilitation services in Murfreesboros, Tennessee. We also sold an Assisted Living community in Florida for $3.2 million.

Subsequent to quarter-end, we completed a purchased and lease back transaction of Legend Health Care, involving four Skilled Nursing facilities in Texas for $49.8 million. The facilities are only an average of two years old and we have an option to purchase a 5th newly built facility at the same financial terms. Legend is existing operator in our portfolio and we are pleased to expand our relationship with them. We expect to selectively continue to pursue similar opportunities that are backed by strong credit and sponsorship, excellent operators and exposures to markets with multiple and sustainable demand drivers.

To better fund this investment activity, we closed on a $200 million unsecured revolving credit facility last week that has a $100 million accordion feature and matures in 2015 with a one year option. The new facility replaces $100 million facility that was set to mature in 2013. We now have better pricing on the facility at 150 basis points over LIBOR and no floor and greater flexibility. Turning to the hot topic in the Industry right now, I would like to spend a few moments on the current state of Medicare reimbursements and impact on SNF's, while our overriding goal is to reduce our Skilled Nursing facility exposure from roughly 67% now to roughly half of our revenue over the next three to five years.

We believe we have one of the strongest skilled nursing portfolios in the Industry and have been conservatively underwriting for the worst case scenarios for some time. To protect against the uncertainty of Medicare reimbursement, we have been under writing with 13% cuts from CMS fiscal year if 2011 run rate which takes into account the 11.1% cuts that have already occurred, plus the potential 2% more that is expected should the Joint Select Committee fail to come to agreement.

You will notice in our this 10Q filed last night that we provide an update on matters related to two nonprofit borrowers that we highlighted before our previous conference call and in our public filings. We have entered into agreements to purchase and lease to a third party, the facilities owned by one of these nonprofit borrowers, although the transaction is subject to the approval of the Office of the Tennessee Attorney General.

Separately, we have been informed that the second non-profit borrower that the Office of the Tennessee Attorney General plans to seek the appointment of a receiver for that nonprofit. Other than described in our 10Q filing we don't know of any legal proceedings with respect to either of these non-profit corporations. Our pipeline continues to be very active with well skilled nursing and it assisted living communities.

We remain focused on select investments that offer the best combination of asset quality, credit and yield. We have been patient and selective and will continue to be. With more clarity now in the level of cuts and that bit of uncertainty quantified, we believe we are the logical buyer in the market, but any investment would need a cover one and a half times after those cuts of 5% management fee and $500 per bed capital expenditure adjustment.

Our recent transaction with Legend meets these criteria, with the benefit of being new properties. As you look at our current skilled nursing facility portfolio, nearly two third of our revenue from skilled nursing assets is derived from National Healthcare Corporation, this Operator has some of the best (inaudible) statistics in the Industry, with a little less than four times coverage in CMS fiscal 2010, a little under five times coverage in fiscal 2011 and a projected four times in fiscal 2012 after the announced cut. Not to mention that their credit is exceptional, with very little debt and a substantial amount of cash on the balance sheet.

If we look at our entire skilled nursing portfolio, we have an estimated weighted average lease coverage ratio of 3 times in fiscal 2012 after the cut. With our private pay assisted living portfolio, our three primarily tenants are Meredith Senior Living, Bickford Senior Living, and Senior Living Management. all three are performing well and our total lease coverage ratio for the entire assisted living portfolio is 1.5 times. In summary, we have had another quarter marked by a accretive investments and one of the more pristine balance sheets in the Health Care REIT Industry. I will turn it over to Roger for comments on our financial results.

Thanks Justin. Good morning, everyone. My comments this morning are consistent with disclosures in Form 10-K our Earnings Press Release and Supplemental Data Report.

Normalized funds from operations for the third quarter of 2011 rose 2.2% over the same period of 2010, primarily as a result of revenues from our new investments funded in 2011, totalling $31.5 million. Normalized FFO for the third quarter of 2011 was $20,474,000 or $0.74 per diluted share, compared with normalized FFO of $20,025,000 or $0.72 per diluted share in the third quarter of 2010.

Normalized FFO for third quarter of 2011 excludes $1,090,000 in gains on sales and marketable securities, a $1,188,000 of decline in fair value of our interest rate swap agreement, and $99,000 recovery of our previous loan write-down. The decline of the fair value of our interest rate swap agreement, a non cash adjustment was an increase to reported interest expense.

Net income for the third quarter of 2011 was $18,808,000 or $0.68 per diluted share, compared with net income of $17,334,000 or $0.62 per diluted common share for the same period of 2010. Net income for the third quarter includes the affects of the gains on sells and marketable securities, the fair value adjustment of the interest rate swap and a gain and the sale of one assisted living facility of $1,048,000. A reconciliation of our net income to FFO and normalized FFO for the three months and nine months ended September 30, 2011, is included in our Earnings Release, Form 10-K and Supplemental Data Report.

Our revenues for the third quarter of 2011 were up 5.3%, compared to the same period in 2010, to $20,454,000. Straight line rental income was $907,000 in the third quarter, compared to $801,000 during the same period in 2010. Rental income excludes the revenues from those properties that were sold or that meet the accounting criteria as being held for sale. There remains five skilled nursing facilities in Texas that we plan to sell to our current tenant, when they obtain long term purchase financing.

These properties are classified as assets held for sale in our balance sheet, and as discontinued operations in our income statement. We plan to defer recognition of the tax gain of the sale of these properties when they are sold. Income from properties classified as discontinued operations are $1,235,000 in the third quarter of 2011, compared to $1,376,000 during the same period in 2010. Rental income from our owned asset represented 92% of our third quarter revenue.

Our operating expenses for the third quarter of 2011 increased 5.1% from the same period this 2010. When you exclude the effect of the loan recovery of $99,000 described above. Depreciation expense increased $113,000 during the quarter 2011, compared to the same period in 2010, as a result of our it new real estate investments in 2011.

Investment and other income includes $1,090,000 in Gain on the sale of marketable of securities, as we had an investment in the common shares of our Industry peer, NHP, which was acquired by Ventas. Our interest expense and amortization of debt related cost were $1,781,000 for the third quarter 2011, and includes the non cash charge of $1,188,000 for the change of the fair value of our interest rate swap agreement. Our only debt at the end of the third quarter was a bank term loan expiring November 2015, with a current balance of $48,125,000.

I'll discuss our bank debt later in my it comments. All together our third quarter results met our internal forecasts and were consistent with our expectations when we had last earnings call in August. Barring any unforeseen events effecting our tenant revenues we expect the fourth quarter of 2011 to be positively impacted by our investment of $49.8 million announced on October 31st, 2011 and our lower cost of bank capital which I will describe in a moment.

Normalized funds from operations for the nine months ending September 30, 2011 rose 4% over the same period in 2010. Primarily as a result of lease revenues from our new investments in real estate in 2010 and 2011. Normalized FFO for the first nine months of 2011 was $58,729,000. Or $2.11 per of diluted share, compared with normalized FFO of $56,452,000, or $2.04 per it diluted share for the same nine-month period of 2010.

Normalized FFO for 2011 excludes $9,899,000 of realized gains on a sale of a portion of our investment in marketable securities, $922,000 in a non cash adjustment for the change in fair value of our interest rate swap agreement and $99,000 recovery of a previous loan write-down. Our revenues for the first nine months of it 2011 were up 4.5% compared to same period 2010 to $61,178,000.

Straight line rental income was $2,762,000 in the first nine months of 2011, compared to $2,230,000 during the same period in 2010, due to new real estate investments made in 2010 and 2011. Our total operating expenses for the first nine months of it 2011 were $16,190,000 and increased 3.6% from the same period in 2010 when you exclude the effect of loan recoveries of 2011 and 2010. Depreciation expense increased $637,000 during the first nine months of 2011, compared to the same period 2010.

As a result of our new real estate investments made in 2010 and 2011. Investment and other income of $13,398,000 for the first nine months of it 2011 includes $9,899,000 of gains on the sale of marketable securities. The remaining income is our dividends on our investments on the common and preferred shares of other health care REITs and interest on our bank deposits.

Our interest expense and amortization of debt related cost was $2,628,000 for the first nine 2011 and it includes the cumulative decline in 2011 of our interest rate swap agreement of $922,000. September 30, 2011 we had no borrowings on or revolving credit facility of $50 million. We have a low debt total book capitalization of only 9.7% and a low debt to total market capitalization of only 4.1%. On November 1st, 2011 we entered into a new four-year $200 million unsecured revolving credit facility.

Interest on outstanding borrowings is at a margin of 150 basis points over LIBOR and there is unused commitment fee of it 35 basis points. We have the option to extend the maturity to five years. There's an accordion feature in the credit facility that could increase the total commitment to $300 million. We paid off and canceled the previous credit facility that had an interest margin of 250 basis points over LIBOR and we terminated the interest rate swap agreement.

We expect our normal monthly cash flows and borrowings on or recovering credit facility will be the primary source of capital for our new real estate investments for the remainder of 2011 and 2012, though we plan to leverage our balance sheet to fund our new real estate investments in the short term we intend our debt to total book and market capitalization remain at a level that is below our larger peers in the REIT Industry. Our Company has a history of being a low leverage Health Care REIT as it relates to total book and market capitalization. Our decision to strategically sell certain assets in order to redeploy those funds in newer assets with long term relevance to the Company had a declining effect on revenue until those funds are invested.

For example, the sale of market securities in 2011, the sale of one assisted living facility in 2011 and sale of two medical office buildings in December, 2010 lower our revenue for the three and nine months ended September 30, 2011 by $367,000 and $736,000 respectively. We ended the third quarter with cash and marketable securities of $24,994,000. It is the time of year when we analyze and compute our expected taxable income for 2011. As a result, we will announce our fourth quarter dividend on December 9, 2011 for share holders of record on December 31, 2011, to be paid January 31, 2012. I now would like to turn the call back over to Justin, with comments about our 2011 normalized FFO guides.

Thank you Roger. We tightened our guidance for 2011 in both top and bottom ends. Normalized FFO is expected to be 287 to 289 per share.

Given the relative stability of our portfolio, the variability in this range this close to year end is tied solely to timing of additional investment under consideration. If the transaction closes in early December, we should be at the top end of the range. Recall that our guidance range all year has relied upon the timing and size of any additional investments.

We have completed $100 million in investments over the last 12 months and close to $300 million since mid 2009. The types of investments we have can completed are consistent with what we are pursuing going forward. When considering our lower cost of capital and our recent sizeable transaction, we have set the table for a potentially strong 2012. With that I'll turn the call over to our Operator to take any questions that you may have for us this morning.

(Operator Instructions). Our first question comes from the line of Jerry Doctrow from Stifel Nicolaus, please go ahead.

Good morning, this is Seth filling in for Jerry. I was just wondering if you could provide us with some commentary bout your non-NHG skilled nursing assets in terms of you gave us a weighted average of 3 EBITDA lease coverage and I was just wondering what is that level with the CMS cut and your 2% for your non-NHC assets.

Sure the non-NHC skilled nursing facility cover at roughly 1.5 times after a 5% management fee, after the capital expenditure tour allocation and after the cuts.

Roughly 1.5 times.

Ok. Thank you. And just one more question, I was just wondering if you could provide us with commentary in terms of acquisitions going forward, what kind of year do you see 2012 being, is it going to be greater than 2011, is the focus still going to be SNF and AL or more AL than SN, that kind of thing.

Ok. Sure. With regard to acquisitions, if you look back starting in June 30 of '09 to current, we have invested or committed $300 million. And the pace has been therefore a little more than a $100 million a year.

This past 12 months has been roughly a $100 million and that includes the acquisition of some stabilized assisted living properties, the acquisition of new at least relatively new skilled nursing facility, and then the funding of some construction financing for assisted living and also a specialized Acute Care Hospital. I think that the activity we have had over this past year, and really over the past couple years, is consistent with the investment activity that we intend to do moving forward.

Our goal would be to continue the pace that we have been on. And one thing I will point out is timing is everything in terms of investments and how it impacts our FFO each year. If you look at our history, it's been spotty.

We have been consistently spotty in terms of our acquisitions that we have made, and partly because we are patient and selective, and partly just it's just a matter of, you know, lining up appropriate timing with the seller of the properties and I would, I would count on that going forward. Particularly since we like the smaller deals, the one off and small portfolios. But the goal is to continue with the pace which would be somewhere between $200 million and $250 million over the next couple of years. With similar assets that we have been buying over the last couple years.

With that $200 million, $250 million range does, that include potential lending transactions.

Well, mostly what we have been doing is buying stabilized assets and leasing them back. And our revenue from interest has been dropping as we've been diversifying more and more known assets. In fact our revenue from interest is, somewhere around 7%, 8% now and going down. We do some selective second mortgages, where our last construction financing that we did, we owned the property from the of start, so that's even a little different. I would expect most of our transactions to involve us owning the assets.

Well thank you very much.

Thanks.

Thank you. Our next question is from the line of Rob Mains from Morgan Keagan, please go ahead.

Yeah, thanks. Just when you talk about the pipeline, you said that you know you've seen the combination of types of facilities that you have been closing on this year. Is it skewed towards any particular property type.

Well, generally what we like Rob, is assisted living properties that are private payback, we like the it secondary markets and the last, since December to now, we have purchased eight assisted living properties. They all qualify as private pay, stabilized and also in secondary markets. The skilled nursing facilities we are a little more picky with.

In fact, we have only made the one transaction since the first quarter of 2010 and that's the transaction we just announced recently. And what was unique about that, you know, well, a few things, one is we know the credit inside and out, because it's existing credit, very strong regional operator and perhaps what's most exciting is the new skilled nursing facilities which, as you know, are very hard to find. So if you look at, you know, all of those transactions I just outlined, I would expect us to continue with those moving forward.

The construction of the specialty hospital was an opportunity to expand our footprint when it comes to psychiatric care and services. We have a stabilized Acute Psychiatric Hospital in San Diego that performs very well and we like that business as well. That's a very small market. Newer skilled nursing facilities are a small market as well.

Assisted Living is a bit bigger market but it's also the most it competitive. So all of those factors lead to the spotty growth that we have. But we have plenty of opportunities to continue to grow in spite of that.

Got it. So if I were to like look at your pipeline I would see probably predominance of AL but that doesn't necessarily translate into the percentage you might close on just because of the competitiveness of that sector.

Yeah, that would be accurate. We probably do have multiple Assisted Living in our pipeline. And we do have a fair amount of Skilled Nursing but we weed those out depending on the markets they are in and the age of the properties.

Right. Could you can talk about the competitiveness for deals currently.

Sure. It pretty consistent. It's been consistent over the last two to three years, that if you are dealing with deal size of under $50 million, we don't run into much competition from the it standpoint of our REIT peers.

It's pretty unusual for us to run into a REIT. If your get over $50 million in size, then it starts attracting a crowd and generally a lot of those types of opportunities are positioned to go to the highest bidder. And we generally self select out of those bidding opportunities. But if we stay in the $50 million and under, we are not seeing a lot of competition, particularly from other REITs.

And any other sources of capital.

Sure, you know, certainly HUD financing, combination of equity raises and HUD financing are being utilized by Operators, Fannie, Freddie, still some local bank financing, and the smaller deals, those are all what I would consider competitors due to the very attractive interest rates available and cost of equity I think in the smaller deals has come down a bit. But generally a REIT stepping in, we are the combination of that debt and the equity and can offer a little bit higher, loan-to-value than a bank can. And also the convenience of having a one-stop shop and that's how we compete with these other options that these Operators have.

Ok. And then you look at the portfolio now, you've got some name brands, NHC, where do you see the portfolio evolving over the next year or so.

Okay. Certainly we like having the public company credits and the public company resources that they bring to the buildings that we own. A lot of the of growth, though, with us is going to come more so with regional companies and private operators, which I like because you get a very high concentration of talent focused on fewer buildings.

But it's good to have a healthy mix of both. So we are always looking for opportunities to expand or public company relationships but then at the same time the more the growth I would expect to come with the smaller companies.

Okay. Great. That's very helpful. Thank you.

Thank you. Our next question comes from the line of Todd Stender from Wells Fargo Securities, please go ahead.

Hi, guys good morning.

Hi Todd.

With the legend deal, I know there's a fifth property you have an option on, how big a company is Legend and are there potentially more properties behind this deal.

Legend altogether has 12 buildings that are up and running. They have another two to three that are either in development or planned for development. And I will say there are opportunities for more properties beyond the fifth one.

But in terms of their priority, we started with the four that we have. That gave them some liquidity to help them expand their business, and then the fifth one just, we would like to buy it, they would like to sell it, it just isn't quite ready yet from a stabilized performance perspective. So we are going to keep our eye on it and consider buying that next year.

That option expired you have 12 months to buy this?

That's right.

Okay. And just in general, what made you comfortable to make these SNF purchases before you ultimately see how Legend does in its first quarter for fiscal year 2012.

Ok, sure. First of all, legend is a known credit because we already have four properties with them that perform very well. They have very strong credit support involved with our lease that gives us a lot of comfort. And then the property performance is very strong on the newer ones as well.

In fact, they are still on their way to stabilization, but they were performing well in excess of 1.5 times coverage before the cuts. They cover at 1.5 half times post cuts and they are projected to cover close to two times when they hit their full stride. So all together very strong coverage, very strong credit, and then the operating experience, the level of it talent these guys have focused on 12 buildings has got to be among the best out there.

OK. Thanks and the last question. I think Roger, you indicated that the marketable securities that were sold in the corner was the result of the NHP deal. Any indication or anything teed up for sale I think you still have a position in LTC, any color around what you will hold from going forward.

We have no plans to sell any of our other marketable securities unless we just had an immediate desire to redeploy some of those assets. Otherwise we are very content to hold what we have.

Okay thanks guys.

Thanks Todd it.

Thank you (Operator Instructions). Our next question is from the line of Brandon Austin . Please go ahead.

Hey guys nice work. Long time shareholder. I just wanted to ask you guys, you said that you wanted the SNF business to be 50% of revenues within two to three years. Can you just refresh my memory, I don't have my model opened, what percentage of your revenues is NHC right now.

NHC is a little under 45% of our total revenue.

Okay.

And then there are about two third of our skilled nursing revenue, which is two third of our total revenue.

Right. Okay. That makes sense. Okay.

Okay.

I think we can figure out where all your SNF revenue is going to be coming from. It doesn't sound like your are going to do much outside of that. In terms of your acquisition strategy, you guys are talking about, you know, a $100 million to $200 million over the next couple of years.

What is your plan going forward on the divesture strategy because you guys do it, you do a descent amount of selling and I guess we always treat the buying as normal course of business. But I don't necessarily treat the selling as normal course of business but the selling seems to constantly come up. Do you have any sense of what percent of your portfolio is for sale over the next five years, or is there any plan there.

You know what, it's more opportunistic, there really isn't much of a plan outside of we do have some assets held for sale is that are skilled nursing assets that will sell sometime next year. They have been going through a HUD approval process that's taken an enormous amount of time. We are selling it to the existing operator.

And in that case, the plan is to redeploy as soon as possible. But in general, we are not looking to sell assets. There's not any pending purchase options or anything like that the operators have. So I wouldn't expect that to be a big part of our game plan moving forward by any means.

Ok. And just looking at your balance sheet, I guess you said like 5% debt or something. But in a net of securities for sale and, you know, stuff like that, it looks like your balance sheet is pretty much debt neutral at this point. I mean obviously that's a bit of a weapon for you guys in the market nowadays.

I would imagine that the guys you are competing with or deals cannot say that about their balance sheet. With regard to what's happened with Medicare and the reimbursement changes which I think only take the market back to like 2010 so there may be not as dramatic as everybody makes them out to be, but on the SNF side, while you guys are trying to diversify away from SNF's, is there a chance that the market for SNF's collapses and you guys have to change course for the, the opportunity gets so great because prices go through the floor and you've got this wicked balance sheet and you can start buying things at it 14% rates and stuff like that.

Or is diversifying a way from the SNF market set in it stone regardless of prices. And I guess the follow on to that is there a difference in terms of what's happening with the SNF prices out there many for AL prices out there given that the SNF market is under pressure.

I'll start with the market and then if Roger wants to comments on the balance sheet a little bit. The goal for the Company is selective and consistent growth. So we are trying to be as disciplined as possible.

We want to offer consistent growth that leads to dividend growth, that's our goal. Growing too fast, you know, there's, we are on a treadmill that you can never get off. So we want to, you know, stay on as long as possible.

And offer growth and our relative small size has helped us to really have a pretty healthy FFO growth pace in spite of not having to deploy much capital. So we are going to continue that as long as possible. In terms of the skilled nursing pricing, versus assisted living, you know outside of earlier this year skilled nursing Cap rates have been the same for 15 years and I would, and the reason is the price is always risk in.

The risk is always priced in, excuse me. For the reimbursement risk and also it to some degree the regulatory risk that is associated with skilled nursing properties. Maybe there will be some opportunities to take advantage of some deals, but and assisted living with the private payback and a little less sophisticated regulatory oversight, is viewed to be a less risky investment so the valuations tend to stand up a little bit better from a cap rate perspective.

But the overriding goal still is diversification for the Company. So I wouldn't see us making as aggressive moves to take advantage of the changing market. I think what I would expect to see, certainly is our goal just to be consistent with our growth and to continue to diversify.

This is my last question, sorry. There's no target debt that EBITDA or it debt FFO ratio that you guys, given the opportunity would get to in a short period of time then.

No, there's no particular target or goal. You know, you observed correctly, it the strength of our balance sheet and many if there's anything that defines our strategy it is patience. And we are spread investors. We are very selective in the investments that we make.

We have good spread. They are accretive in the first year. We have good growth in our existing portfolio due to the built in escalators that are in our leases, so we will lever up a bit over the next year or so, but it will be less than our larger peers just by the nature of who we are and our history as a Company.

All right. Thanks guys your patience has paid off pretty handsomely so far, so keep up the good morning.

Thanks, appreciate it.

Thank you next question is from the line of John Roberts from Hilliard Lyons, please go ahead.

Hi guys, can you talk a little bit about strategy on the dividend going forward.

John this is Roger, as I've said in my prepared comments we are analyzing our taxable income for the year. We, as a practice have always paid out 100% of our taxable income. So we will do that analysis, we will set a fourth quarter dividend to be paid January 31st. We said on previous calls that goal is to increase FFO and dividend per share on an annual basis, and that would certainly be our goal for 2012 as we go forward.

I would just add that, you know, we have also talked about mid single digit FFO, growth and then keeping our payout ratio to normalize the FFO 90% or less, and we have been running in the mid 80s in the payout ratio so we have a lot of room to work with to continue to raise the dividend.

When you say target it would probably be somewhere in the mid 80s.

That's our target FFO payout range.

Great of the.

Nine year below.

Okay. I'm sorry, I missed the SNF coverages, can you run through those numbers again.

Yeah, sure, so the overall skilled nursing portfolio post cuts and when we give coverages it is always after the management fee and after capital expenditures.

The whole portfolio will be 3 times coverage.

Thanks guys.

Thanks, John.

Thank you, there are no further questions from the phone lines at this time, Mr. Hutchens I would like to turn the call back to you for closing remarks.

Ok. Thank you for the participation on our call today and we look forward to speaking with you on the fourth quarter call.

Thank you, ladies and gentlemen that does conclude the conference call today. We thank you all for your participation and we ask that you please disconnect your line.