芬塔 (VTR) 2005 Q4 法說會逐字稿

Welcome to the fourth quarter and year end 2005 Ventas earnings conference call. [OPERATOR INSTRUCTIONS] I would live now like to turn the call over to Mr. T. Richard Riney, General Counsel.

Good morning, everyone. Welcome to the Ventas conference call to review the announcement yesterday regarding its results for the year and quarter ended December 31, 2005. As we start, let me express that all projections and predictions and certain other statements to be made during this conference call may be considered forward-looking statements within the meaning of the federal securities laws. These projections, prediction and statements are based on management's current beliefs, as well as on a number of assumptions concerning future events. The forward-looking statements statements are subject to many risks, uncertainties and contingencies and stockholders and others should recognize that actual results may differ materially from the Company's expectations, whether expressed or implied. We refer you to the Company's reports filed with the Securities & Exchange Commission including the Company's annual report on form 10-K for the year ended December 31, 2004 and the Company's other reports filed periodically with the SEC for a discussion of these forward-looking statements and other factors that could affect these forward-looking statements. Many of these factors are beyond the control of the Company and its management. The information being provided today is as of this date only and Ventas expressly disclaims any obligation to release publicly, any updates or revisions to any forward-looking statements to reflect any changes in expectations. Please note that quantitative reconciliations between each non-GAAP financial measure contained in this presentation and its most directly comparable GAAP measure are available in the Investor Relations section of our Web site at www.ventas.com. I will now turn the call over to Ms. Debra Cafaro, Chairman, President and Chief Executive Officer of the Company.

Thanks, Rick. I want to welcome all of our participants to the Ventas year end and fourth quarter 2005 earnings call. Rick Schweinhart, our CFO, Ray Lewis our Chief Investment Officer, and my other Ventas colleagues are here as well this morning. Today we want to discuss our strong quarterly and annual results, the reset right with Kindred and our outlook for the year and beyond. After my comments, Rick will report in detail on our financial results.

So, Ventas had a great and transformational year in 2005. We completed a number of our strategic objectives the most important of which was the closing of over $1.5 billion of acquisitions during the year, almost all of them in the private pay arena. The highlight of our growth and diversification efforts during 2005 was our acquisition of Provident Senior Living with its 68 high quality, independent and assisted living assets, operated by Brookdale. Provident was the second merger we completed in two years.

Over the past couple of years, we have entirely reshaped the Company. We have now doubled our size to $5 billion in total enterprise value. We've also reduced Kindred Healthcare to about half of our annualized revenues, increased the private pay portion of our portfolio to 44% of our annualized revenues, improved our credit rating due to strong balance sheet management and diversification efforts and invested in people and infrastructure to support our future growth. We have become the country's largest owner of long-term care and senior housing assets with a high quality and diverse portfolio of 380 facilities located in 42 states.

As we have pursued these strategic goals, we've also remained faithful to our obligation and our commitment to deliver consistent, superior return to our shareholders. For the last five years, Ventas has delivered a 51% compound annual total shareholder return, making us the best performing REIT in the Morgan Stanley REIT Index and the 22nd best performing public company in the United States during that period.

We believe these returns follow from our unrelenting focus on continually increasing our year-over-year normalized FFO per share while systematically enhancing enterprise reliability. In 2005, we grew FFO per share by 16% to $2.09 from $1.80 in the prior year. This is the fourth consecutive year that Ventas has produced double-digit normalized FFO per share growth all from our escalation, accretive acquisitions and exceptional events such as our fourth quarter litigation settlement with Sullivan and Cromwell. As the result of these developments, the Ventas Board of Directors has increased our dividend by 10% to $0.395 per share for the first quarter 2006. Our indicated annual dividend level of $1.58 a share represents approximately 75% of our expected 2006 cash flow from operations. The dividend increase follows through on our commitment to share our increasing cash flow with you and also to retain sufficient free cash flow to grow and remain financially strong and flexible.

Today, we're also reaffirming our full-year 2006 normalized FFO guidance of between $2.20 and $2.23 a share. If achieved, this would represent a 6.5% to 7% core growth in year-over-year FFO per share. And as usual, our FFO guidance excludes the impact of any future unannounced acquisition or disposition activity, early debt repayment, capital events and other unusual items. It also excludes any amounts derived directly or indirectly from our reset right with Kindred.

Now, I would like to turn to the reset right and also the status of our Kindred portfolio. The Ventas reset right is a unique one-way option built into our Kindred master leases that allows us to potentially increase our Kindred rents to market. There is no downside in the reset option for Ventas because our base rent can go up. It cannot go down. We continue to believe that the reset right should provide significant value for Ventas''s shareholders. Just to review recent events, we had intended to give Kindred notice to commence the reset right process on January 20th, the first day we were entitled to do so.

However, the night before, the Centers for Medicare and Medicaid Services proposed new Medicare reimbursement rates for long-term acute care hospitals or LTACs. These proposed rules if adopted in their current form would reduce Kindred's corporate EBITDA and LTAC margins through a combination of an 11% cut in Medicare rates to LTACs and a freeze on any market basket inflationary rate increase for fiscal year 2007 which, for the LTACs begins on July 1, 2006. In light of this development, we decided to wait to deliver the reset notices that triggered the reset process. Doing so preserved important option value for Ventas. Waiting also gives us time to fully examine the potential impact of the proposed rule on our LTACs and also to complete some additional analytics on our entire portfolio of 225 assets leased to Kindred including our skilled nursing facilities.

It is important to note that CMS's proposal is just that, a proposal. Ventas and Kindred are perfectly aligned in seeking a Medicare LTAC reimbursement system that fairly compensates the providers for caring for medically complex patients. The LTAC industry groups have commenced a significant and persuasive educational effort to provide detailed information to CMS that could result in CMS reconsidering its position before the LTAC rule becomes final. And if the rule becomes final in its current or less severe form, we expect the operators to attempt to adjust their patient mix and cost structure to try to mitigate the impact of the reimbursement change. Finally, please remember that we own only 39 of Kindred's 74 LTACs so our portfolio will bear only a portion of the total potential reduction in Kindred's corporate EBITDAR from the new rule.

Under the master leases, we have the luxury of an 18-month window until July 19, 2007, within which to initiate the reset rate process. Importantly, if we provide the notices before the middle of 2006, then our increased base rent, if any, would begin on July 19, 2006, even if the appraisal process stretched out beyond then. Alternatively, if we wait to initiate the reset process, until after July 19, 2006, then our increased base rent, if any, would be effective retroactively to the date we give the notices.

So, we're not prejudiced by waiting to give the reset notices. But we intend to remain active and tactical in our decisions regarding the reset right. We're in the process of determining the optimal time to give the notices and commence the process which should take about five months from start to finish. Whenever we give Kindred the reset notices, the master leases require us to include in the notices our proposal for increased fair market rent and new annual escalation. To put this in context, our annual cash rents from Kindred will be 206 million as of May 1, 2006. Of that amount, 75 million would come from the LTACs and 131 million would come from the skilled nursing facilities in our portfolio.

Currently on a trailing 12-month basis for the period ended September 30, 2005, the EBITDARM coverage on the LTACs is 3.7 times cash rent, and 2.0 times cash rent on the SNFs. Rents for the 2006/2007 lease year will be less than 21,000 a bed for the LTACs and 5,600 a bed for the SNFs. Overall, TTM EBITDARM coverage at our Kindred portfolio is excellent at 2.6 times.

It is important to note that though master leases provide a number of reference points, the appraiser must Tuesday determine fair market rentals. One of these required data points is the historical EBITDARM at the properties so as to average or normalize cash flow at the properties and determining fair market rental levels within the context of ever changing healthcare reimbursement rules. In sum, we continue to like our position on the reset right, despite the LTAC proposal from CMS and the inherent uncertainty that has always surrounded the potential value of the reset right and the appraisal process. We believe that our reset option is valuable and we intend to work actively, creatively and collaboratively with Kindred if possible to deliver a positive outcome for our shareholders.

Moving beyond the reset right, we also have good news to report on our investment activity and plans. In the fourth quarter of 2005, as previously announced, we acquired a lease to Capital Senior Living an assisted living, independent living facility for $20 million and we recently announced another $29 million deal to acquire a rental CCRC from Capital Senior. Our pipeline is active, too. While acquisition timing and size can never be assured or predicted with certainty, we're working on a number of interesting opportunities that should provide us with solid acquisition volume this year.

I want to give you some background on our plans and thoughts. Following our acquisition of Provident in the middle of 2005, we hypothesized that senior housing private pay assets would be increasingly attractive to investors, and that yields on those assets would continue to compress. With Brookdale's wildly successful IPO in the fourth quarter of 2005, Brookdale has become the most aggressive and probably the most efficient consolidator of senior housing assets in operations. We're delighted with Brookdale's success because its scale, experience, access to capital, transparency, growth prospects and financial strength should make Brookdale an excellent tenant operator for us. But these same qualities also make Brookdale a formidable acquirer of senior housing assets. We anticipated these trends in the summer of 2005 and began thinking about how we could continue to succeed at acquiring quality private pay senior housing assets and also how we could continue to grow effectively and find good risk adjusted return in our sector.

So, we decided to focus on a few areas. First, in the senior housing space, we will continue to look for opportunities with our existing tenants and others where we find assets that meet our risk/return hurdle and that are operated by quality management teams who don't necessarily want to sell to a strategic buyer and we expect to generate good returns on equity with these investments. Based on our pipeline and transactions we're seeing in the market, we believe we will have some attractive opportunities that meet these criteria.

Second, to remain competitive on pricing and still achieve our equity/return objectives, we began to consider and work on forming partnerships with institutional capital. These discussions are ongoing and you should expect to see us partner with one, or perhaps two, quality sources of institutional capital as we continue to grow. And third, we decided to begin to allocate our resources and our capital to other areas within healthcare that may present more favorable risk adjusted returns.

As a result, this year we expect to invest more in the hospital and hospital-related space including medical office assets. With hospitals, we see low multiples and stable EBITDAR. So, if we can acquire these assets now, and if either operator EBITDAR or multiples rise then our investment decisions will pay off. We have intended to crack the hospital space for some time which is part of the reason we asked Chris Hannon, a respected hospital executive, to join our Board last year.

In the MOB arena, we're focused on good platforms and assets that provide future growth opportunities and appropriate risk adjusted returns. In this space, like senior housing, you might see us partner with institutional capital as an avenue for continued growth and enhanced returns on equity. We expect to gain traction on these efforts this year. In further expanding our funnel of opportunities, we have also decided to look abroad for investments and identify countries that either have graying populations, such as the U.K., or countries that are actively building healthcare infrastructure for a young and burgeoning population. This approach fits with our stated desire to diversify our revenue source by tenants, by geography, and by asset class. As always, we would move carefully in making international investments and our initiative may take awhile to fully implement and develop. But it is a way to capitalize on new opportunities and broaden our footprint where we see long-term growth.

On the disposition side, we intend to use the strong market for healthcare assets to sell or joint venture a small portion of our portfolio, to recycle capital and continue our diversification efforts. As in the past, Kindred remains the most logical buyer of certain of the assets that leases from us. And in this robust market, we should have plenty of excellent opportunities to selectively divest some of the Kindred assets to other buyers who are aggressively bidding for quality healthcare portfolios.

And lastly, we continue to believe that healthcare REITS should pursue consolidation to gain the benefits of scale, liquidity, risk pooling, lower cost of capital and improved EBITDA margins. We'll also be interested to see whether the go private craze in the REIT universe makes its way to healthcare REITs due to the attractiveness of the assets, the disparity between public company valuations and private portfolio pricing, the relatively higher yields in our space compared to other real estate asset classes, and the current low leverage in size of healthcare REITs.

All of these ideas and initiatives are directed toward creating an excellent company that delivers consistent, superior return to our shareholders and simultaneously increases our long-term enterprise reliability. Our key focuses during the year will be to maximize the value of the reset right, to expand our existing customer relationships and create new ones to drive future growth, to invest more in the hospital and hospital-related space including medical office, to partner with institutional capital where appropriate, to continue growth and generate good returns on equity and to increase FFO per share through acquisitions, debt cost reduction, and opportunistic capital recycling. With that, I would like to turn the call over to Rick Schweinhart who will review our financial results in detail. After that, we'll be happy to take your questions.

Thank you, Debbie. Fourth quarter normalized FFO per diluted share increased 17% to $0.55 compared to $0.47 last year. Fourth quarter normalized FFO excludes the net pickup of $13.5 million consisting of proceeds of $15.9 million from our litigation settlement with Sullivan and Cromwell, a $2 million charitable contribution to establish a charitable foundation, a $1.4 million noncash deferred debt cost write-off on the prepayment of our CMBS debt, and a $1 million net gain on a swap break. Normalized FFO totaled $57 million compared to $40 million for the fourth quarter last year. The $17 million increase was attributable to $36 million of revenue increases offset by a $2 million increase in combined general, administrative, and professional fees, and a $16 million increase in interest expense.

Revenue for the quarter totaled $98 million, compared to $62 million last year. The $36 million increase was due to the May 1st Kindred escalators which added $1.7 million, the Provident acquisition which added $26.3 million, other acquisitions which added $7 million, net new mortgage investments which added $600,000, and an increase in other income of $500,000, mostly due to fees earned on mortgage placements. Combined general, administrative, and professional fees for the fourth quarter of 2005 totaled $6.4 million which is 6.5% of revenues. Interest expense increased $16 million from the fourth quarter of 2004 to the fourth quarter of 2005 due primarily to acquisition borrowing offset by a decrease in our effective interest rate. The fourth quarter 2005 effective interest rate is 7.4% improved from 8.3% in the fourth quarter of 2004.

In the fourth quarter, we reduced our swap from a declining $330 million notional amount to a $100 million notional amount expiring June 30, 2008. This produced a net gain of $981,000. 2005 normalized FFO per share totaled $2.09 compared to $1.80 last year. Revenues for the year grew to $333 million from $236 million last year. Normalized FFO grew to $200 million in 2005 compared to $152 million in 2004. Items of note on the balance sheet compared to the September 30th balance sheet are real estate investments increased $19.5 million due to our fourth quarter investments. Mortgage notes receivable declined from $53 million to $40 million, reflecting repayments. The weighted average interest rate on these paydowns was 13% because $9 million represented a paydown of our THI mezzanine loan that has a current cash coupon of 17%.

Debt decreased $9 million from $1.811 billion at September 30, 2005 to $1.803 billion at December 31, 2005. The net decrease is due to the $210 million prepayment of our CMBS, scheduled principle payments, and a revolver decrease of $7 million, offset by the issuance of $200 million of new 6.5% senior notes due 2016, and the assumption of mortgage debt of $11 million. Our debt to total capitalization at year end was 35%. The mortgage debt has an effective interest rate of 6.8% and is due 2012. The revolver balance decreased to $89 million at December 31st from $96 million at September 30th. Our unused line at December 31 is $210 million.

Just prior to our issuance of $200 million of senior notes at 6.5% to 2016, we were upgraded by Standard & Poors to BB-plus from BB and Moody's to BA2 from BA3, each with a stable outlook. So, we continue to move towards our objective of achieving an investment grade rating. The fourth quarter dividend of $37 million was declared on December 6th, accrued at year end, and paid January 13th. Weighted average diluted shares increased to 104.2 million this year from 85.2 million in the fourth quarter of 2004 reflecting the weighted average portion of the 15 million shares issued in acquiring Provident and the 3.2 million shares issued July 6th.

2005 was an excellent year in terms of growth. We generated $224 million of operating cash flow, paid dividends of $126 million, made scheduled debt payments of $8 million and invested the remaining $90 million in growth. We invested close to $1.6 billion in healthcare and senior housing assets and financed it with free cash flow of $90 million, $500 million of equity and close to $1 billion of debt. The debt consisted of $400 million of senior note issuances, $50 million of revolver borrowing and assumed debt of a little over $540 million. We also refinanced $200 million of CMBS debt with senior notes. We grew FFO, made our cash flows more reliable, improved defective interest costs, moved up the ratings curve, and kept the balance sheet in excellent condition. Back to you, Debbie.

Annmarie, we'll be happy to open the call to questions.

Absolutely. Thank you. [OPERATOR INSTRUCTIONS] And your first question will come from Jerry Doctrow with Stifel Nicolaus. You may proceed, please.

Good morning.

Hi, Jerry.

I had a couple of specifics and maybe one broader one. Just in terms of the -- you had this $5.1 million gain. Was there another asset sale or something during the quarter? Or is that simply related to the TransHealth paydown? I'm just trying to get a good number for net investments.

That actually was a purchase option that a tenant exercised. That didn't have to do with TransHealth.

Okay, so what were net investments then for the quarter? What was the amount of that investment that was sold or purchased?

It was an asset that was sold for about $10 million.

On a basis of $5 million. So, if you look at the property and equipment and try to roll it forward, it is down $5 million for the sale and up almost $20 million for the acquisition.

Ok. And what was the yield on that? It is really --

It was about 1 million in rent.

Correct.

Ok. So we've got that and the TransHealth health rolling off and then the new one coming on? Okay.

Right.

Do you have straight line rent for the quarter?

Yes. Jerry, if you look at the cash flow statement, it is stated right on there.

Ok, sorry. Didn't see it.

That's ok.

And then just a couple other detail things. G&A run rate was up a little bit in the quarter. I was wondering if there were some one-time things, end of year, or just the cycle of the year. What is a good run rate going forward?

We were happy that it was about 6.4% of revenue. 6.4%, 6.5% of revenues. And I think looking forward, it is going to be somewhere between 6% and 6.5%, if you look into '06, of revenues.

Ok. And then, do you have additional charges, obviously we get into the different calculations for noncash compensation, do you have a sense of where that is next year? What you are assuming?

Yes, we do. Next year, it should total about $3 million in noncash compensation and that would be about $2 million for restricted shares, and about $1 million for options. That's in our guidance in terms of having that be an expense to get to normalized FFO.

Ok. And then, just my last thing. Obviously on investment prospects, you know, you sort of gave us sort of -- very interesting actually -- sort of laundry list of things that you're looking at. I don't think that you've provided in the past sort of an overall level of investments but I was trying to get a little bit more color of how confident you feel sort of going into the year about sort of levels and particularly on the overseas stuff, whether that's something you could see coming on this year? There's just a lot of moving parts there in terms of potential JVs, potential overseas. I'm trying to get a better feel for how I should be thinking about what overall volumes might look like.

Yes, I mean, you know, we're always focused on reliability in doing what we say. So, we have been consistent about waiting until we actually do things to include them in our guidance. Our overall view has been that -- since Ray has been here, we've been very successful in making acquisitions -- our overall view is that if you work hard enough and long enough, good things happen. And we continue to be optimistic simply on that account, and because of the relationships that we've developed, over time.

Going farther than that though is much harder to predict. So, I would just encourage you to sort of follow along with us as we make acquisitions. I do think that you should not assume that we'll make an international acquisition this year. We could but I think that's a project that will take longer to come to fruition, given our temperament to be cautious and expand sort of incrementally.

In terms of next year, you would see acquisitions both on balance sheet and with JVs? Should I get that sense from your comments?

Jerry, this is Ray. I think Deb's right. I think it will depend upon the opportunities that we're presented with and the most efficient way for us to capitalize those opportunities. Certainly, we've been cultivating relationships with potential joint venture partners in anticipation of being able to do some of those transactions but to the extent that we can generate accessible yields on balance sheets, by ourselves, that is generally the preferred avenue for us.

Even some of the institutional JVs could potentially be on balance sheet in certain circumstances.

Ok. And just -- last one then I'll jump off. In terms of the hospitals, I assume you're more thinking of sort of specialized hospitals, or community hospitals, that sort of thing since the big ones don't get sold that often.

Certainly the specialty hospitals will probably be a more active marketplace for us to pursue but we're also working on general acute care hospitals as well. We think there could be some opportunities there also.

Okay. Thanks.

Thank you.

Thank you, sir. Your next question will come from A.J. Rice with Merrill Lynch. You may proceed, please.

Hello, everybody. Just a couple of quick questions, hopefully. Just the Town Centre, is that included in the guidance or not yet? Not that it moves the needle that much, but --

Yes, it is included in the guidance.

Ok. When you talk about looking abroad, can you define that, what you might be interested in terms of asset class? Would it be exactly the same thing domestically or is it a narrower or broader range of opportunities and then also does your return requirement change in any way when you look overseas?

Ok. A.J., on the international front, I think we could divide the analysis into two parts. The first would be countries where there is an aging population. And those could include countries like the U.K., Japan, Germany, Canada. Countries like that. In those areas, we would be look at senior housing, nursing homes, that sort of thing. In the growing, building infrastructure, countries and those would be countries like Mexico there where there is a large, growing, young population and the countries are building healthcare infrastructure, we might be looking more for -- more classic sort of healthcare opportunities although I would say in Mexico, there also is a growing trend toward building senior housing for ex-pat U.S. residents.

We would look at that as well. So, those are the two avenues that we're pursuing. Then in terms of returns, again, it is always about for us, risks adjusted return. And so, whether we would demand a higher return or not, would depend on what we thought the relevant risk was in making those investments and obviously the return would be after any tax or other kinds of expenses that would be inherent in any international investment.

Ok. I mean, is it your sense that there are all of a sudden a plentiful supply of opportunities abroad that maybe it has emerged for one reason or another?

Well, people have started investing abroad.

Right.

A.J., this is Ray. I think generally, it is important to remember that you know, this is something that is sort of in the study phase for us at this point. We're really trying to assess what the opportunities are. Make sure we understand the market's potential entry points, the best way to enter the markets, and really sort of doing our homework.

I think the general thesis for doing this is, as Debbie mentioned, other people and other sectors have done this successfully and it is a logical way for us to widen our funnel of potential opportunities in a competitive market place to make sure that we're creating the best possible chance of generating acceptable risk adjusted returns for our shareholders. So, that's the thesis. It is early on. We're going to continue to work on it. We'll update you on our progress as and when it develops.

Okay, last question then would be you mentioned looking at dispositions. Is that to take advantage of overheated, in your view, sectors or how would you describe your approach to dispositions and how much are we likely to see out of that?

I think it would likely be a modest amount because we do like our portfolio. I think that it is a reaction to the acceptance of these asset classes and the aggressive pricing that we're seeing on a lot of nursing home assets in particular, and most importantly, it just continues our diversification efforts and our desire to recycle capital in a way that would basically generate internal equity, which I think can be very attractive for a REIT so it doesn't always have to keep going back to the capital markets.

Right. Ok, great, thanks a lot.

Thank you.

Thank you, sir. Your next question will come from Rob Mains with Ryan Beck. You may proceed, please.

Good morning. Rick, I couldn't write fast enough. THI, how much of the mezz did you pay down?

Approximately $9 million.

What's remaining on that?

Approximately $3 million.

Ok. And then a question for Ray about the MOBs. In the past, you said that before getting involved in that business to a large degree, you would probably want to have management expertise on hand. Are you looking at adding Ventas' personnel or would you do something kind of akin to what NHP has done in possibly doing a JV with someone who could bring you the management? What are the options to get you up the learning curve with MOBs?

So far as we've discussed in terms of MOBs, what we've purchased have been opportunities where people have been looking to repatriate some capital to their investors and continue managing the assets. We'll continue to pursue those opportunities as they come up.

At the same time, that we're doing that, we're looking for the appropriate platform which could be an integrated management platform, the ability to manage, lease and you know, develop potentially the medical office buildings going forward. So, you know, we're looking for that opportunity. And then, as far as joint ventures go, I think we would have a little bit of a different take potentially than NHP in the approach in that if we can find that platform, we would prefer to be managing those facilities and generating the fees from that. So, that's sort of the vision that we have for it. It is going to take obviously a lot of work to find that right platform but that's what we're working on.

Ok. That's great. Everything else I had has been asked.

Thanks, Rob.

Thank you, sir. [OPERATOR INSTRUCTIONS] And your next question will come from Rich Anderson with Harris Nesbitt. You may proceed, please.

Thanks. Good morning.

Hi.

Any more purchase options in your portfolio to deal with?

Not in the near term.

Ok. You mentioned that Town Centre is in your guidance for '06. Was it in your guidance last quarter and if so, does that mean that it was a neutral impact?

Well, since -- it was not before. It is now. It is a relatively small transaction and so within the range that we've given of 2.20 to 2.23, it doesn't really alter that guidance. Ok. With regard to the international commentary, and sort of along the same lines as building intellectual capital for your MOB interest, would you likewise be hiring intellectual capital to pursue international opportunities? Good question. We like to think we have a lot of intellectual capital here at Ventas. The first thing we're going to do is work on it ourselves with contacts that we have abroad and we have a lot of contacts, frankly, in the medical office space we've been working on for awhile. But, if we were to proceed in a big way, particularly internationally, we would likely add firepower of people who are in the jurisdictions where we would be investing.

Ok. Debbie, you mentioned, you know, some of your observations about the acquisition environment, generally here in the States and you mentioned, you wondered I guess, thought out loud, about whether the go private craze will find its way to the healthcare arena. I guess the question is that an option for Ventas eventually down the road?

Well, I was exactly thinking out loud. And as you know, those of you who know me know I love thinking about trends and ideas. And for those of you who are familiar with REITs as you are, Rich, it has been an absolute craze with REITs last year starting again this year, this whole go-private transaction. And there is no theoretical reason that it couldn't spill over into the healthcare REIT area because these assets are enjoying growing acceptance, the entities have relatively low leverage, and our sector has relatively higher yields than most of the real estate asset classes. So, you know, I think that's exciting and I'm just curious about whether it will come the way of the healthcare REITs in 2006. As for us, we will always do and have always done what's in the best interest of our shareholders.

Ok. And last question, sort of a vague reference to the reset right. Have you sensed any impact on SNF market coverages as a consequence of the LTAC news that is sort of on the plate rate now.

Could you clarify that Rich -- just so I understand the question?

Well, I mean, presuming that there will be some risk adjustment to market coverages for the LTAC arena, I was wondering if you've noticed any change in rent coverages sort of a spillover effect into the SNF category following the CMS news on LTACs.

Got it. Ok. The amazing thing about SNFs is there's so much data and we can look at coverages over really, really long periods of time. And the coverages are sort of amazingly constant at somewhere between sort of 1.1 to 1 and a quarter EBITDAR to rent and we don't sense any change in that. The most recent transactions that have been announced have been at about a 1.1. But that's -- the range that I gave you is incredibly consistent over long periods of time and shouldn't really change because of the LTAC changes. Ok. And would you be able to provide any commentary on the market coverage environment for LTACs, sort of post-CMS announcement? Or is that beyond your scope? Yes. I think it's important to say up-front though that here we're laying uncertainty on top of uncertainty. There have been over the past couple of years, two closed LTAC transactions between arm's length parties and those coverages were somewhere between 1.3 and 1.5 EBITDAR to rent. And what an appraiser would do going forward in the environment that we have now, it is hard to say. But you know, we believe that those are the appropriate comps and we've always said that and the reason that we've given more transparent information about the portfolio is that we want the analysts and investors to have the information and then really make their own judgments about what their views are on the value of the reset at this time.

Thank you very much.

Thank you.

Thank you, sir. There are no further questions at this time. I would like to turn the conference back over to management for closing comments.

Great, thank you, Annmarie. I want to thank everyone on the call for joining us today. We really appreciate your interest in our company and we look forward to speaking to you soon. Thank you.