National Health Investors Inc (NHI) 2014 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the National Health Investors first-quarter 2014 conference call. (Operator Instructions). As a reminder, this conference is being recorded Monday, May 5, 2014.

I would now like to turn the conference over to Tripp Sullivan of Corporate Communications. Please go ahead, sir.

Thank you, Denise. Good morning, everyone. Welcome to the National Health Investors conference call to review the Company's results for the first quarter of 2014. On the call today would be Justin Hutchens, President and Chief Executive Officer, and Roger Hopkins, Chief Accounting Officer.

The results, as well as notice of the accessibility of this conference call on a listen only basis over the Internet, were released overnight in a press release that has been covered by the financial media.

As we start, let me remind you that statements in this conference call that are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-K for the year ended December 31, 2013.

Copies of these filings are available on the SEC's website at www.sec.gov or at 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 of schedules, which has been filed on Form 8-K with the SEC.

Listeners are encouraged to review those reconciliations provided in the earnings release, together with all other information provided in that release.

I will now turn the call over to Justin Hutchens. Please go ahead.

Thank you, Tripp. Good morning, everyone, and thank you for joining us. With me today is Roger Hopkins, our Chief Accounting Officer.

This was an active quarter for us in terms of the long-term growth and financial strength of NHI, just as important as fourth quarter's completion of the Holiday transaction and our equity offering. We reported a 13.4% increase in Normalized AFFO; completed a $200 million convertible note offering at very attractive pricing; put in place a new $700 million credit facility; executed on two acquisition opportunities from our pipeline; and raised 2014 guidance.

I will come back in a few minutes to talk about the implications of all of this activity on our growth plan. Roger will provide some color on the quarterly results.

Thanks, Justin. Good morning, everyone. My comments this morning are consistent with our disclosures in Form 10-Q, our earnings press release and our supplemental data report filed this morning with the SEC.

This morning we also filed a Form 8-K, which describes changes to our previously reported performance metrics of funds from operations, adjusted funds from operations and funds available for distribution to include the impact of all depreciation of assets associated with our triple net leases, thereby reporting our metrics on a basis consistent with the majority of our peer companies.

We are pleased to report a very strong quarter of financial results. Normalized FFO for the first quarter was up 22.1% to $34.669 million or $1.05 per diluted common share compared with the prior year, and includes an adjustment for the write-off of debt issuance costs due to our new credit facility modifications.

Normalized AFFO for the first quarter was up 13.4% to $30.874 million or $0.93 per diluted common share compared with the prior year and includes adjustments to execute our straight line rental income and amortization of note discounted issuance costs. Normalized FAD for the first quarter was up 10.2% to $32.223 million or $0.97 per diluted share compared with the prior year and includes an adjustment for our non-cash stock-based compensation expense.

Our results for the first quarter of 2014 are reflective of our strong acquisition volume throughout the previous year when we funded approximately $750 million of new investments in real estate assets. Our new investments in 2014 occurred at the end of the first quarter.

Net income attributable to common stockholders for the first quarter of 2014 was up 26.8% to $23.533 million or $0.71 per diluted share compared with the prior year and included the write-down of $2.145 million of debt issuance costs mentioned earlier.

Large transactions that are infrequent or unpredictable in nature that affect net income are adjusted in our reconciliation of our net income to Normalized FFO, Normalized AFFO and Normalized FAD.

Our revenues for the first quarter were up 59% to $16.010 million compared with the same period in 2013 due to the volume and timing of our new investments in 2013. Our purchase and lease back of 25 independent living facilities in late December from Holiday generated $10.954 million of rental income or 25% of our total revenues from continuing operations, of which $7.979 million was billed rent and $2.975 million was straight-line rent for financial statement purposes.

The revenues from our RIDEA structure joint venture with Bickford amounted to $5.421 million in the first quarter and represents 12.5% of our total revenues from continuing operations. Our RIDEA joint venture with Bickford currently owns 29 assisted living and memory care facilities, of which two opened in late 2013 and are not yet stabilized. And there is also one facility under construction and expected to open by the end of the third quarter.

Our current annual contractual lease revenue from the operating company and the joint venture is $19.108 million plus annual escalators and operating cash flow. We had no sales of assets during the first quarter.

We have adopted the FASB's new accounting standard update whereby disposals of assets will be reported as discontinued operations only when the disposal represents a strategic shift that will have a major effect on our operations and financial results.

For 2013 and prior periods, there is no change in disclosure whereby the revenues and expenses for those years presented in our income statements exclude those properties that were sold or that meet the accounting criteria as being held for sale with such revenues and expenses being reclassified to discontinued operations. This reclassification had no impact on previously reported net income.

Rental income from our owned assets represented 93% of our first-quarter revenue. Interest income on our notes represented nearly 4%, and investment income represented 3%. Depreciation expense increased $4.989 million in the first quarter of 2014 as compared to the same period in 2013 as a result of the volume of our new real estate investments in 2013.

Our interest expense and amortization of note discounted issuance costs increased $5.765 million during the first quarter compared to the same period one year ago as a result of additional borrowings to fund our new real estate investments in 2013 and the $2.145 million write-off of debt issuance costs required for accounting purposes related to modifications to our bank credit facility.

Interest expense included amortization of $368,000 related to debt issuance costs.

Our general and administrative expenses for the first quarter of 2014 decreased $154,000 from 2013, due mainly to lower non-cash stock-based compensation expense of $1.349 million compared to $1.580 million in 2013.

We estimate the market value of our stock options granted each year using the Black Scholes pricing model. Expense is recorded for accounting purposes over the vesting schedule of the stock options granted.

For the next three quarters of 2014, we estimate our share-based compensation expense will be approximately $225,000 per quarter.

We ended the first quarter with cash and investments and marketable securities of $19.683 million. During the quarter, we successfully executed terming out debt and fixing the majority of our interest expense. In March we issued $200 million of seven-year 3.25% senior unsecured convertible notes. The notes have a conversion price of approximately $71.81 per share.

NHI's conversion obligation may be satisfied at our option in cash, shares of common stock or a combination of both. The fair value of the debt and equity component of these convertible notes is described in the footnotes to the consolidated financial statements. The discount of the notes created by this fair value estimate is amortized over the life of the notes.

On March 27, we entered into an amended $700 million senior unsecured credit facility with a syndicate of banks. The amended credit facility provides for a $450 million revolving credit facility that matures in five years, inclusive of a one-year option and interest of 150 basis points over LIBOR; a $130 million term loan that matures in June 2020 with interest at 175 basis points over LIBOR of which interest of 3.91% is fixed with an interest rate swap agreement; and two existing term loans totaling $120 million maturing in June 2020, which bear interest at 175 basis points over LIBOR; a notional amount of $40 million being fixed at 3.29%; and $80 million being fixed at 3.86% with interest rate swap agreements.

In addition, we have approximately $80 million of Fannie Mae secured term debt maturing in July 2015 prepayable without penalty at the end of 2014. At March 31, we had $343 million available to draw on our revolving credit facility.

At March 31, we had ongoing construction commitments with four tenants totaling $27 million. The total funds advanced so far on these projects for land and construction amounts to $11.056 million.

We expect our normal monthly cash flows and borrowings and our revolving credit facility will be the primary sources of capital to fund our operations at new investments in 2014. We are pursuing HUD secured financing of approximately $40 million for a small portion of our portfolio to pay down a revolving credit facility and extend the debt maturity beyond 30 years.

We estimate the current fully loaded interest cost of the HUD loan to be 4.25% to 4.5%. As shown in our supplemental data report, we calculate our EBITDA coverage of our fixed charges to be 8.21. We calculate our consolidated debt to pro forma normalized EBITDA to be 3.7 to 1.

We believe these debt metrics are important to maintaining a low leverage profile for NHI.

In our earnings press release tables provided as an exhibit on Form 8-K this morning, we have provided a reconciliation of our Normalized FFO and Normalized AFFO guidance, which incorporates changes in our guidance estimates since year-end and the definitional changes in the reported metrics to achieve more consistency in reporting these metrics alongside our peer companies. We hope this reconciliation is helpful to our investors and analysts.

I would now like to turn the call back over to Justin with comments about our investment portfolio and our updated 2014 guidance.

Thanks, Roger. Starting with our portfolio of performance, lease service coverage ratio continues to be in good shape with a weighted average lease service coverage ratio of 2.43 times. Details on the ratios for our property types can be found on page 6 of our supplemental.

As mentioned on the last call, there were some seasonality considerations due to the weather that we had in the Midwest, primarily in higher utilities and snow removal costs. In spite of the $250,000 of additional expense, EBITDARM is up 4.8% year over year and flat sequentially in the Bickford RIDEA portfolio.

The Holiday portfolio continues to perform ahead of our underwriting with the lease service coverage ratio of 1.26, average occupancy improved in Q1 versus Q3 from 88.6% to 89%. As I look across our portfolio today, it has changed vastly over the past few years and greatly diversified in terms of revenues and geography. With 30 partners now in 30 states and 172 properties in total, we have a substantial presence in the West and the Midwest, and in addition to our historical concentration in the southeast, we are now national in scale, and we will look to put that scale to work.

We will be doing so with a stronger capital structure as a result of the $200 million convertible senior notes offering and the new $700 million unsecured credit facilities we put in place during the quarter. The convertible notes were at a coupon of 3.25% and due in 2021. The new unsecured credit facilities include a new $450 million revolver and $250 million of term loans.

All in, these transactions extended our maturities, fixed our interest rates and lowered our borrowing costs. We remain low leveraged with a 3.7 times debt to EBITDA ratio.

We now have roughly $400 million of liquidity when considering credit facility capacity, cash on hand and marketable securities.

During the quarter, we completed a sale-leaseback transaction with Prestige Senior Living that included 105-bed assisted living and memory care community in Idaho and three skilled nursing facilities totaling 196 beds in Oregon for $42 million in total and an initial lease rate of 8.4%.

The combined EBITDARM lease service coverage ratio of the four properties is 1.9 times, and the occupancy combines for an average of 88.5%. Approximately $2 million of the proceeds will be used by Prestige for CapEx improvements at the three skilled nursing facilities to maintain their solid market positioning.

Prestige is a large, established West Coast operator based in Washington, and this was the start of a new relationship with them.

We also disposed in a filing last month that we have a definitive agreement to purchase a 72-bed assisted living freestanding memory care community in Sacramento for $11.5 million that will be leased to existing customer, Chancellor Healthcare, at an initial lease rate of 8%.

We expect that transaction to close in June. This community is 92.9% occupied with a $7500 revenue per unit and a lease service coverage ratio of 1.29 times. Our pipeline is very active and primarily private pay assisted-living assets. I will avoid giving any assurances related to the timing of our potential investments. For those who followed us for some time, that timing has certainly been lumpy, but I am encouraged by the amount and quality of opportunities we have under review.

Turning to our outlook, we are raising our estimate for Normalized FFO and Normalized AFFO to adjust for the benefit of the Prestige transaction and the lower coupon rate on the convertible senior notes. This guidance does not include the impact of the Chancellor transaction expected to close in June, but it does include the impacts in the methodology change on Normalized AFFO that Roger mentioned earlier.

For 2014 we now expect Normalized FFO to be in a range of $4.14 to $4.20 per diluted share. We expect Normalized AFFO to be $3.69 to $3.75 per diluted share.

I am pleased, very pleased with the start to the year and the solid execution on our growth plans. We have the capital structure in place to continue to grow, and we look forward to reporting continued progress on all fronts during the year.

Operator, we are now ready for questions.

(Operator Instructions). Daniel Bernstein, Stifel.

I have a question on the shop portfolio. If you look at the national data, it looks like occupancy was up, and from what a lot of other region operators reported, their EBITDAR margin would have come down; expenses would have gone up a lot. It looks like for you the opposite had happened in your RIDEA portfolio. I was trying to understand the occupancy drop there, as well as just the drop in operating expenses over 4Q where there was something one time in 4Q that helped you maintain a proper operating margin at the RIDEA portfolio.

Right, okay. And, well, also in addition to what you see here, there was about $250,000 of additional expense that impacted the portfolio due to the weather-related expenses. So, it was even -- if you adjust for that, if you care to, it is even probably better than what's reflected.

On the occupancy side of things, they had started beginning of the quarter right on track with where they left off, which is a big improvement in Q4, and then about halfway through the quarter, they started to experience just higher-than-expected moveouts and so far so good in this quarter. But there was no troubled community or nothing alarming about their occupancy change from my perspective. Pricing still holds, and then, obviously, they have -- they are very good at managing expenses, so their margins have held up well.

Do you think the impact of the flu was a little bit different for your geographies and maybe nationally? Obviously, it's a local -- the flu is a local item, so you could have -- do you think your flu impact was any greater than the national impact that affected occupancy?

It's always a bit of a subjective measure, but this is a Midwest-based portfolio. So I would expect that it generally has a little bit more impact from the flu. Certainly we had higher-than-expected moveouts in the second half of the quarter.

Okay.

But altogether I am very pleased and comfortable with the performance and look forward to their continued performance, particularly as we fill up the new communities.

Okay. And then on the acquisition front, I guess I'm trying to grapple with the idea of increased competition for assisted living. The 10-year is clearly heading -- has headed back towards 2.5%, so cap rates are probably going to stay low, and yet your entire pipeline seems to be mainly assisted-living. What kind of cap rates are we going to expect?

How are you finding transactions that are going to be a sufficient yield or meet your yield criteria going forward and how you do that without adding leverage like you do with the Holiday transaction? Just trying to understand the strategy to buy assisted living in this environment.

Well, the very best way to buy it is assisted living or any property type is with our existing customers, and the reason for that is that generally they are already operating in the community. They need to do a sale-leaseback for some kind of capital planning desire they have, and they are always going to want to leave cash flow in place in those operations. And, so, you're not competing out in the open market. You're not exiting an operator who has no ongoing interest in the property.

So the best economics come from our existing customers, and we have 30 of those, and we have had -- we have done a nice job, I think, of having repeat business with many of our operators over the past several years, and we will continue to service their needs. And then when we are competing out in the open market and we are, in fact, exiting an operator, what we are looking for -- and that was the case, by the way, with this Chancellor investment -- we're just looking for a stabilized property that could even have some upside potential, but something that was very easy to underwrite. So we were comfortable paying an A cap for a one-off asset in that case.

Okay.

You mentioned the competitive environment. It is very competitive, which I always like to point out is a complement to our asset class, because it has had tremendous stability over the past several years, and all indicators are it will continue to have stability over -- in the future as well. So it's attracted a lot of competition, both with private equity and debt combinations, as well as the REITs and the nonlisted REITs, but I think that also has created a lot more potential volume out there in the market as well.

So, we're still getting opportunities. I think that particularly the nonlisted REITs are going to drive the cap rates down a bit, and we will continue to until the 10 year, in fact, does drift up, because there is a lot of capital being raised ahead deployment. And when that happens, the pricing gets more aggressive.

So, whether they are actually landing the deals or just bidding up the properties in a bid process, I see there will be some impact there from that part of the competitive landscape. However, like I said, we're getting lots of opportunities that are under review.

So, I feel comfortable that we continue to get our fair share, and I think we have shown that already year-to-date.

Okay. All right. Thanks for all the color, Justin. I'll hop off.

(Operator Instructions). Juan Sanabria, Bank of America.

Just a couple questions. Justin, could you remind us or give us your latest thoughts on potential timing of the soon to be stabilized RIDEA portfolio with Bickford and how you are thinking about that?

Are you talking about the new construction assets?

I think it's close to $100 million of potential options for acquisitions.

Okay, yes. (multiple speakers). You are referring to a portfolio of six assets that NHI has a $97 million purchase option. It's really NHI and Bickford through our joint venture has the purchase option. Bickford -- another Bickford entity currently owns that portfolio. They bought it from a JV partner for $97 million.

The JVs that were in with them retains the right to purchase at that same price. When Bickford purchased the portfolio, they purchased for a 7 cap. We wanted to see the NOI stabilize and so that we can purchase at an 8 cap or better. That has not happened yet, so we continue to review.

I would not be surprised if that's a wait 2014 or early 2015 potential execution.

Okay. And how would you characterize generally your pipeline of opportunities ex this potential RIDEA portfolio purchase? How does it compare to the last couple of quarters? Has it grown, or how confident are you on the ability to continue to execute on deals, I guess?

In my prepared remarks, I said our pipeline is very active. That was excluding the Bickford portfolio that you just referenced.

Okay.

So, I feel as though we are getting our fair share of opportunities that are under review, and I do have confidence in our ability to continue to grow.

Okay. And could you just comment a little bit, I think is a new disclosure on the purchase options it seems like your tenants have, what the purchase option is in 2014, and it seems like there is a fairly sizable one in 2016 in this SNF portfolio?

Sure. And for everyone that's listening, you'll notice in our supplemental that we disclosed tenant purchase options for the first time. The reason we did this is because there was a merger in the industry where it highlighted purchase options that operators have, and some of the REITs involved potentially had some income at risk because of those purchase options over time.

Well, because of where we stand, which we think it is very minimal impact over time, we wanted to go ahead and put the schedule out so that questions can be asked and shareholders can be very clear about the potential.

What you'll notice is that in 2016 and in 2018 those are the biggest impacting in the near-term, if you want to call that near-term, and that's one operator that has the purchase option. And when we -- I don't remember the exact figures -- but when we negotiated any purchase option we have, there is a very nice return to NHI when the purchase option is executed. That really enhances our return.

There is also strong potential that we would have found a way to negotiate a lease extension ahead of purchase options. That would be our general intent. And if you look out beyond 2018, it is very immaterial what we have available to operators and sort of the purchase options.

There was a REIT that was no longer in play that was doing a lot of deals with purchase options. Since they have been out of the marketplace, there really hasn't been much demand for that. We have addressed the operator's interest in realizing some of the equity they create over time by offering earnouts, and so that's why you have very minimal impact on the purchase options in our case.

Great. So are all of these at fair market purchase options? Do you expect a 2014 purchase option, that small one to be executed, or do you not have any insights as of yet on that one?

I don't know. I doubt it. It's been open for a long time, that purchase option window, so I don't think that will get executed. And then there is a fair market component, but there is also a formula driven -- the price of the purchase option is also formula driven. So there is a guaranteed minimum return to NHI if they do get executed.

Okay. Great. And just the last question, do you guys have any guidance for the all-in G&A we should be expecting for the year?

We did not give guidance specific to G&A, so -- but it is baked into our total guidance.

How about -- can you comment on the first quarter as a run rate? Is that a fair run rate?

Juan, this is Roger. The non-cash stock-based compensation that I described in my prepared remarks for G&A and as typical the first quarter is frontloaded with that non-cash cost, so if you take that nonrecurring cost out of the first quarter, then you've got a run rate for the year.

Great. Thanks.

Karin Ford, KeyBanc Capital Markets.

First question is, was there any percentage rent from NHC in the quarter?

There is percentage rent, yes.

Can you tell us what the amount was?

I will be glad to give it to you. We disclosed that in our footnotes, and I'm just turning to it right now.

Apologize, I just missed it.

The percentage rent was $566,000, and then we had a little trueup from the prior year. It was -- a year ago was $569,000.

Great. Thanks. Next question is on the guidance increase, just for simplification purposes looking at it on an apples to apples basis as you disclosed it, the $0.06 increase, it sounded like it was the Prestige deal and the refinancing. Were there any other contributors or negatives in the change in the guidance there?

No, and you are exactly right. We have clarity now at the top end of that range, and that's excluding any additional investment activity. And the things that -- the moving parts we had in the first quarter were obviously large, because we have the acquisition, and then we had very significant refinancing. So, now that we have clarity on those two fronts, we were able to raise guidance, and the $0.06 increase is reflected.

Great. And what was the depreciation that you used to exclude in the old methodology?

We are including all depreciation in the new methodology. If there was any operating equipment and that sort of thing that was particular to our triple net leases, we did not include it. Given, frankly, our increase in size and, also, the debt refinancings, particularly the convertible debt in the first quarter, this gave us really a good opportunity to review our larger peers and to challenge ourselves on how we were reporting FFO. And once we studied that and studied our peers, we said, okay, how do we make this very transparent for those that are modeling our metrics? How do we do that?

And, so, really that culminated in the 8-K this morning where we described previously reported metrics and then the metrics given our new interpretation. And then that also is baked into our guidance reconciliation and our press release tables this morning.

Thanks for the color. And then just last question, can you just talk about the lease-up progress at the two Bickford developments and where you will ultimately expect the yield to shake out on those when they're done?

Sure. Both of them opened in fourth quarter. They are both about half full and ahead of our budgeted expectation for fill up, and at stabilization we expect a low double-digit yield.

Wow, that's great. Okay. Thank you.

Todd Stender, Wells Fargo.

Justin, I think you talked a little bit about Prestige. Can we hear a little bit more about them, maybe what their track record is, how they are looking at growth, and do you have right of first refusal or any other perspective deals with Prestige?

Okay, sure. Prestige, as I mentioned, they are based in Vancouver, Washington. They have been in business for 25 years. They operate 80 properties. One of the unique aspects to Prestige is the fact that they operate skilled nursing and assisted living, and they are good at both. They truly have expertise in both areas and a track record in both areas, which is unique, because usually you have a concentration, and operators will be exceptionally good at skilled nursing. They might do some assisted living, but they don't necessarily do it well.

Were I have seen assisted living companies that have taken on some skilled nursing and they don't necessarily do the skilled nursing well, so Prestige -- they have both going for them.

We do not have right of first refusal on future business. I'm confident we will have future business with them. The relationship has started out very good, and, certainly, in both cases, in NHI's case and in Prestige's case, the investment together provided the opportunity to get the relationship started. So we can review potential acquisitions that their company will have and also new development that they will consider.

That's helpful. Thanks, Justin, and this deal included an earnout. Is that common in some of your deals, and if Prestige does earn this, how much does that impact your yield?

Okay. Great question. What I will start with is the comment in our deals. We do tend to offer earnouts because operators often times will -- they are hesitant about selling real estate because they are giving up potential upside in the real estate to NHI or to any REIT. And so what we try to do is offer an earnout so that we're paying out that equity. They have a method they can use as they improve operating performance to have an equity payout. In the case of Prestige, they had a reimbursement adjustment that has already occurred that supports a large majority of the -- well, at least about half of that earnout payment, and we have accounted for that in our accounting.

And then we also agreed to fund CapEx so that we could support their strong market positioning that the communities have today. So, if you have the opportunity to improve your asset, you have the opportunity to incentivize continued better performance to the operator, and, also, give the operator a comfort level that they can access equity that they have created over time, then we are happy to consider it. It does not affect our yield because the earnouts are paid at whatever the in place yield is at the time the earnout is paid.

So, for instance, if we start an investment at 8.5% and it is escalated at 3%, that new yield is the amount that the operator will pay for the earnout when it is funded.

We also consider coverage ratios. They have to qualify at a minimum coverage ratio when we fund the earnout. I mentioned on the prepared remarks they have a 1.9 times coverage ratio. That is, of course, an EBITDARM coverage ratio that we utilize because our peers report on EBITDARM. When we underwrite assets, we utilize EBITDAR and then -- which would have -- which would adjusted for that 5% management fee and then $500 of it CapEx. In the case of Prestige, they are covering at about 1.52 times on that underwritten lease service coverage ratio that we utilize, and then once we fund the earnouts, assuming they are funded over time, we think the combined lease service coverage ratio for the four properties would be about a 1.45 times.

And, so, and what you're getting there is you are getting a 1.5 times on the skilled nursing assets, and then you're getting something a little lower than that on the assisted living community. So the blended would be a 1.45.

So you can see that no impact on yield. I think it is a good incentive in place for the operator, and then, also, we're still credit conscious when we are funding these earnouts so the lease service coverage ratio remains strong even after we fund those.

That's very helpful. Thanks, Justin. And, Roger, I think you mentioned you are seeking the HUD financing to term out the line balance. What is the current line balance, and are there any other capital sources you are assuming to take out the line, or is it just the HUD? I think you said about 4.25% or 4.5%?

Yes, right now we are just looking at HUD. The line balance was $107 million at the end of the quarter, and we are hoping that we can close this HUD loan perhaps even by the end of the third quarter, but, hopefully, no later than the end of the year.

Okay, thanks. And just lastly, Roger, just wanted to get an update on your further tolerance to add debt. As you guys ramp it up, I think you are just shy of about 4 times debt to EBITDA. What do you think that will look like by year-end?

We do have capacity. We are very low levered. That's very, very important to us to remain low levered as we described our debt metrics in my prepared remarks. I expect that we would fund acquisitions on our revolver unless there was something very large. As an example, last December when we funded the Holiday transaction, we actually funded it with more equity than with debt. We're of the size and of the debt profile now that over a period of time, about 60% of what we raise will be in the form of equity. It could be on a specific transaction. It is certainly one -- certainly one large transaction. Otherwise, we would look over it about a year or two, and you would say that NHI has funded its pipeline with about 60% equity.

Great. Thank you.

Daniel Bernstein, Stifel.

Just a quick question on the Prestige assets you are buying. You talked a little bit about the census there, Medicaid versus Medicare versus managed care, and how they are doing compared to what you normally look at skilled nursing and whether they can improve upon that or not?

I don't have all of those metrics right in front of me. I can tell you that the skilled nursing assets are fairly traditional. I think they are around probably a 30% Q mix. And then the assisted living in Idaho does have some Medicaid -- I can't remember the percentage. Both -- well, all four assets were what I would consider stabilized. I don't think Prestige is trying to pursue a lot of upside there. They are just trying to maintain what's been -- what we have considered to be a very solid historical performance that was very easy to underwrite.

This wasn't a -- it's not a turnaround story. It's not a lease-up opportunity. These are stabilized assets and a new relationship and where the operator was able to take capital off the table, but left plentiful cash flow in place to support their business on the go forward basis.

Okay. That's good. Thank you very much.

Mr. Hutchens, there are no further questions at this time. I will now turn the call back to you.

Okay. Thank you for the participation in our call today. We are attending and presenting at NAREIT next month. We look forward to seeing many of you there or speaking with you on the second-quarter call.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.