芬塔 (VTR) 2008 Q1 法說會逐字稿

Good morning. At this time I would like to welcome everyone to the Nationwide Health Properties first quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. (OPERATOR INSTRUCTIONS) Thank you.

I will now turn the call over to Mr. Ron Hubbard, Vice President of Capital Markets and Investor Relations. Mr. Hubbard, you may begin your conference.

Good morning, and thank you for joining our conference call to discuss Nationwide Health Properties first quarter 2008 earnings. Certain statements made on this conference call are forward looking in nature. These statements are based on reasonable expectations and information currently available. However, actual results could differ materially from those projected in or contemplated by the forward looking statements due to risks and uncertainties described from time to time in the SEC reports filed by the company. As this call will be available on your website for some time time it is also important to note that it includes time sensitive information that may only be accurate as of May 9, 2008. The company believes that funds from operations and funds available for distribution are important supplemental measure of operating performance. The company's definition of FFO and FAD, the reasons for their importance, certain of their limitations and a reconciliation to net income are included in this earnings release dated May 8, 2008. As a reminder NHP's complete first quarter 2008 earnings release package was filed on May 8, 2008, in separate form 8Ks and are available in the investor relations section of our website at www.NHP-REIT.com. I would now like to turn the call over to Mr. Doug Pasquale, President and CEO of NHP.

Thank you, Ron. Good morning, and thank you for your interest in Nationwide Health Properties. Joining me for today's call is NHP senior management team. After reviewing the highlights of our detailed earnings release and comprehensive supplemental information, I will open the call for your questions. Compared to last year's first quarter, revenues are up $17 million or 24%, diluted FFO increased by $10 million or 21%, and FFO per share increased by $0.06 or 12% to $0.56 per share. During the quarter we issued 930,000 shares through our controlled equity offering program at an average price of $34 per share resulting in net proceeds of approximately $31 million.

On April 2nd, we closed on the previously announced sale of 23 facilities to Ameritas for $305 million resulting in net proceeds of approximately $220 million. The proceeds from the sale repay the outstanding balance on our $700 million credit facility, leaving us with 100% availability on it and about $120 million of cash. Our leverage is a conservative 46% on an unappreciated book basis. Interest and fixed charged coverages are 3.2 times and three times respectively. In short our balance sheet is strong with ample liquidity to make quality investments as they present themselves without accessing the capital markets. Investment volume for the first quarter was $24 million, of which $22 million was in senior housing having an initial yield of 9.3%. Since March 31st we closed on the first series of acquisitions from Pacific Medical buildings consisting of seven MOD assets for $159 million.

On page 23 of our supplemental package please note that we have added a schedule summarizing forward capital commitments. Forward capital commitments include acquisition obligations per transactions previously disclosed and take out commitments related to future development projects. In addition, you will find a summary of expansion, renovation and capital expenditure commitments we have made to our tenants. Finally, we are increasing the floor and ceiling of our full 2008 FFO guidance range by $0.01 per share to a range of $2.18 to $2.23 per share, and FAD guidance by $0.02 per share to a range of $2.10 to $2.14 per share. Our guidance incorporate no results from acquisitions except those completed or previously announced, nor does it incorporate the impact of any future impairments or capital transactions. We are now pleased to answer your questions. If you would please open the lines.

(OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jerry Doctrow with Stifel Nicolaus.

Good morning to you guys on the west coast. The -- Doug, the one thing I wanted to explore I apologize because I'm on the road and may not have all the supplement in front of me, but is the second round or next year's round of purchases from Pacific Medical, because I think the way I think of that at least, you have a commitment for a decent chunk of acquisitions at -- I think it was even a slightly lower cap rate of the first year's and I was trying to understand how that funding would be arranged.

We do have a schedule, Jerry, that shows that. And so when you get back, you would be able to look at that. For those of you who have it in front of you, what page is that on? 23. The one I was referring to. There is a chunk of acquisitions, Jerry, that are going to occur about another eight assets I think it is, in 2008, and the cap rates on those range in the [$6 million, low $6 million]. It is in 2009 and 2010 where the cap rates drop a little bit. Is my recollection -- is that correct, Abdo and Don? But that's basically how they shake out in terms of initial cap rates. In terms of funding of them, Jerry, we are going to continue to do what we have done in terms of trying to keep as much availability on the credit facility. Although frankly with it being -- we have to burn through the $120 million or there abouts of cash we have and then we'd start to use some of the cash. There is a fair amount of secured debt assumed with respect to Pacific Medical Buildings and as you recall on that we are issuing operating use so the financing is in place as we described in January for the PMB acquisitions.

Okay. And the primary side of the debt could be the credit line because you have enough liquidity at this point to do that even through the early 2009 stuff.

Yes, that's correct, but it depends on what other acquisitions we do. We will use the credit facility as we have in the past where we effectively warehouse the investments or the funding for investments until we find a more suitable permanent capital source. But assuming that the investment volume was low, we would just do it on the credit facility.

Okay. And let me just ask two other questions if I could. I wonder if you could you give us a little color on acquisition environments. I think what we have heard now from pretty much all your peers, everybody seems excited about acquisition opportunities. And we haven't seen huge volumes in the first quarter. and I was wondering if you can give us a sense of what you are seeing out there in terms of cap rates and volumes.

It is divided a little bit I guess into liquidity camps. We and some of our competitors are in very liquid positions. Some are in a little less liquid positions. And I think we are optimistic sorts in general. And there is transaction -- or investment opportunities out there, but with that said, we are having some challenges of getting comfortable with the pricing on certain activities or certain investment opportunities. There are few large transactions and I'm sure we and most others are looking at or have looked at. We probably have differing perspectives on those and I'm confident that a fair share of those will fall our way, at least if history is any indication of how those will shake out. I guess maybe I would be in a little less optimistic camp in terms of overall volume. I think we are all chasing more or less the same transactions.

Okay. That was my thought too which is why I was asking the questions. And in terms of where you are seeing large deals, senior housing, skilled, MOBs, any sense of where we might be seeing stuff?

I think there is some opportunities on all of those -- in all of those asset classes. There has been more activity or more what we would classify as desirable opportunities in medical office buildings still and there is at least one large potential transaction looming out there. We are seeing some in senior housing and skilled nursing, but that's not nearly as significant of a pipeline or just assets available for sale as we have seen in the last couple of years. And as we have talked about I think in prior calls, when you think about the transaction volume that has taken place over the last handful of years and the fact that they were either strategic buyers who bought them for long-term holds or financial buyers who were looking to maybe flip them for a profit, it's difficult to flip them for a profit if you bought an asset two or three years ago and if you bought them for strategic purposes you don't want to sell. So there is a certain amount of inventory that is not available for sale. And I think that's going to be one of the challenges for everybody in this space is to find enough inventory to sustain the kind of investment volumes we have seen over the last couple years.

Okay. And then just one more and I will jump off. We are getting closer to having housing legislation passed that may include changes in the REIT law relative to healthcare REITs be able to control operating assets or capture the operating income from healthcare assets. Any thoughts on that and how you would play it? Do you see it as a significant opportunity or other type of transactions you do, again -- some of that is people have already figured out a way to do obviously in the Sunrise REIT deal. Does that change your thinking going forward?

We have always viewed it as an opportunity. We were looking for some more clarity as to what was going to be acceptable and through the private letter rulings and the legislation that is in both houses, we are seeing that. Whether the legislation gets passed with the political environment it is hard to say. But hopefully, it will. We think that that does provide additional opportunity for us and others in this space. I wouldn't classify it as an immediate significant opportunity for us. We like having as many different avenues for investment and as many different capital sources available to us as possible, and of course that would just be another one, and I think we could put it to good use. But in terms of having a dramatic impact to us particularly in the short run, I would say probably not.

Alright. Thank you.

You are very welcome. Thank you. Travel safely.

Your next question comes from the line of Michael Bilerman with Citi.

Good morning. This is [David Shamus] here with Michael and Craig is on the phone as well. I think you might have said this in your prepared remarks, I just want to clarify. Since the transactions took place since the end of the first quarter, what is your amount of cash outstanding and the amount of credit facility available?

100% of the credit facility is available or $700 million, and we have cash balances of around $120 million.

Okay. And in the first quarter of, the $159 million acquired looks like about a quarter of that was funded by units, so is that a good assumption going forward for the remaining acquisitions?

This is Abdo Khoury. It would depend on a variety of things where the selection of the investors in PMB will decide if they want to take units or cash. But at this point it is a good assumption to use.

Okay. And the occupancy for the unassisted and independent living facilities was 84.9% this quarter which was down 160 basis points from the fourth quarter. Can you provide a little color on what happened and when this space will be released?

David, this is Brent Chappell. It is not terribly inconsistent what we have heard and learned from some of our publicly traded operators, the first quarter seems to be particularly hard hit by the number of debts and some increased acuity which has pushed the occupancy down. It is not terribly dissimilar from a conversation we had last quarter at this time. But that seems to be the driving force behind the decrease in occupancy.

Got you. And just one more question, how is the lease up going on the PMB assets and are there any changes to expected timing of when you will expect to buy the assets in?

Not at this point. What is driving really is the obtaining the consensus and loan assumption approval is driving the timing more than the leasing right now.

Okay. Thank you.

Your next question comes from the line of Rob Mains with Morgan Keegan.

Good morning. One follow-up to the question on the acquisition environment. If I'm hearing you right that there are some portfolios out that are kind of consistent with what we heard in the pst there that are getting bid up. NHP has done in prior quarters a lot of -- for lack of a better term, one off transactions and there is a lull in that in the first quarter. Is there anything going on specifically with the individual property level type deals where you would be folding them into an existing master lease, is there supply issue or you are not finding stuff you like, or how would you characterize that?

Hi, Rob, it is Don Bradley. Actually the stuff we did this week -- we did this quarter was exactly that. We are still finding stuff out there just not as many. We will continue to try to add as much of that as we can to our portfolios. That is our cup of tea, and if we see more out there, we will definitely be adding it in and we are looking at the bigger stuff while we are at it.

The smaller transactions, the levels seem to be lower than the past you say that's a product of what the market is offering you?

For now. Although my guys tell me that they are starting to see more and more opportunities, more and more people are coming to the grips that the world has changed, so second half of the year may have more opportunities than we've seen so far this year in that categories, we just have to wait and see.

Okay. Fair enough. Then I had one question for Abdo on the numbers and the guidance. The CapEx and TI guidance suggest there is going to be a significant ramp up in the rest of the year. I assume that that's going to kind of track when the new buildings are coming online? The new MOBs?

Yes, some of it has to do also in the first quarter some of what was plated for the first quarter didn't get done. So we moved some of it to the rest of the year. So no -- that's why our FAD was a little higher than $0.02. We increased FAD $0.02 versus $0.01. In the first quarters we have had less CapEx and TIs and leasing commissions and some of it will spill over to the remaining quarters.

So this quarter is kind of the anomaly, return to a more normal level in the subsequent quarters?

Yes, we think so.

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

Your next question comes from the line of Rich Anderson with BMO Capital Markets.

Thank you, and good morning, everybody. Hey, I think it is interesting that you are finding or Doug you are less optimistic about volumes in the acquisition environment, where as many of your peers in and out of the healthcare space are seeing more opportunities because of the lack of the leveraged buyer. Why would you say that? I mean, are you -- maybe you can sort of comment on how the market is -- the acquisition market is sort of making a different turn for you than it is for your peers.

Let me try to explain it, Rich. I think that some of the commentary you are probably hearing from some of our competitors and some -- there are a handful of large transactions out there that we have looked at and they are looking at, some of them that we have stepped away from, because we either don't like the pricing or we don't feel it fits our strategic objectives at this point in time. And so I think that those that are starting to lock up those transactions and in fact that is what is occurring are viewing the world more optimistically, because they think they are going to be announcing some large transactions in the foreseeable future. But I doubt, frankly, that the depth of what they are seeing is much different than we are, and had we decided to bid more aggressively on some of these things then maybe we would be telegraphing the message they are. We chose not to aggressively pursue some of the transactions they might be referring to.

Do you think you gave up your aggressive trump card when you bought PMB?

No, not at all. When we were sitting on $820 million and the fact that we issued equity this quarter speaks to the fact that we are still optimistic. It is just that I think people are telegraphing that they have transactions that may be -- they may be announcing imminently.

I don't know if I give a great answer or if the question was even asked on cap rates. With some of your peers as you said bidding on the same things or looking at the same things, how would you characterize cap rates if you were just to go across some of the majority property segments, movements in the cap rates?

I will let Don address that because he is closer to the firing line than I am. But I will tell you our general philosophy has been recently that we are going to price things a bit more advantageous to us than we have historically, thinking we will still end up getting our fair share of investment opportunities. We are letting them get a little closer to us so we can see the whites in their eyes a little more clearly, and so let me let Don answer the question with respect to cap rates a little bit more definitively.

Hey, Rich, and I would also just comment as far as the acquisition environment what Doug is particularly referring to is the senior housing and long-term care sector. We are seeing more opportunities on the MOB front that seems to continue to be an active area and the cap rates there are pretty much flat. The last real capital analytics report actually showed a slight downtick, but for all intents and purposes they are staying basically flat. In the other areas you are seeing as best one can tell and there aren't very many points of reference as I think others have commented, but the pressure does seem to be upward. There was an appraiser in our sector that recently indicated that they received 50 basis points bumps in class A assets in senior housing in long-term care, which would put independent living somewhere in the 7% to 8.5% -- these are cap rates now, and they actually do it on forward looking NOI, and I think you are seeing more people now while they were pricing deals on forward looking NOI a year or two ago, are now looking more historical NOI. They are seeing 7% to 8.5% on NIL, 7.5% to 9% on AL and skilled 12.5% to 14%. Those are cap rates again.

Okay. Have you guys gotten your own private letter ruling vis-a-vis (inaudible) private letter ruling or do you plan to?

We have not, nor do we plan to. First of all, we don't have a specific transaction in mind that would be -- give us enough information to request termination based on facts, and second of all, we hope the legislation gets passed so that it would render that exercise unnecessary.

Okay. In terms of your 50% ownership in the management company that you acquired through PMB, are there any sort of unique hurdles to do nonPMB MOB transactions, where by you would be able to sort of fold in the management function in your 50% interest? Is it a formality or is it because that you're not -- you don't fully own it that it makes it a little more complex?

This is Abdo. We basically have an obligation to have PMB real estate services manage any MOB acquisitions we do in the 10 or 11 states -- western states. So --

What was the last thing you said? In what areas?

In western states.

Western states. Okay. I remember now.

So anything we acquire in those states PMB reps will be managing. Outside of the 10 western states we are free to do any -- hire any manager we like.

But you could use the PMB management team?

We could use them, but their footprint is more in the western states and if they have the ability to manage something outside, we will definitely be discussing that with them.

Okay.

I would also say, Rich, just as a minor point. The restrictions we have with the 10 minor states is exactly how Abdo described. That being said however given that the PMB investors -- are investors in NHP, should we ever find ourselves in a situation where the opportunity presented itself where the only way we could access it where we need to have someone else manage it we could have a meaningful discussion with PMB and depending on the facts and circumstances, I could see them graciously waiving that restriction. We have a mutual obligation and desire to grow the management company, but the intent really is not to preclude us from other business in the 10 western states, and again it is something we left open to just good business judgment down the road if and when an opportunity like that would present itself.

Okay. Doug, you said that a lot of your peers are chasing the same opportunities. Besides the PMB pipeline that is yours, are you seeing any sort of more off-market opportunities that are more quieter in terms of the process?

We are seeing some of those and that's kind of been our bread and butter in the past. We are still seeing a number of those and hopefully we will be able to bring those to closure at the same success rate or better than we have had over the last few years. So there are those. The bigger transactions are always going to attract most of the players in our sector just because they are going to be more broadly marketed and that's been the case. And if you look at them, usually the winner has had some unique motivation or unique advantage that they have attempted to exploit for those larger transactions, but I think the one -- the bread and butter for us is not going to change and that's what we are continuing to work on and Don's team of investment officers are working on those each and every day.

Okay. And last question is are you able to secure Fannie or Freddie financing for the very low end of liquidity scale in healthcare like ILF?

We don't do secured debt but operators of assisted living can access Fannie Mae and Freddie Mac.

Okay. Thank you.

You are welcome.

Your next question comes from the line of Michael Mueller with JPMorgan.

Did we lose Mike?

I said my question was answered. Thank you.

Thank you, Mike.

Your next question comes from the line of Phil Martin with Cantor Fitzgerald.

Good morning.

Morning.

Doug and/or Don you can probably answer this. But in terms of your existing portfolio and the relationships -- I know you have always been a good relationship manager, but certainly over the last couple of years you have really stressed building these relationships, building pipelines or potential pipelines with these relationships -- how much can your existing portfolio deliver for you in terms of growth in 2008 and 2009? What is their demand? And are you turning down some of those demands? I just want to get a sense of what this existing portfolio and relationship business that has grown over the last couple of years can produce, because it certainly sounds like from some of your commentary that the acquisition environment for new acquisitions or new relationships might not be as robust, and certainly it runs in cycles, I'm trying to get a sense of your internal growth potential.

I will take a crack at it first, Phillip, and then Don and the guys can add to it. I think that the opportunity with our existing tenants, particularly the ones that we targeted for this and in many cases have commitments from them that any future business will come our way -- I think that that that remains strong. The timing as to when it actually manifests is what is subject to some question. Some customers are thinking about doing things more aggressively than others and some aren't. I think that a little bit there is some fatigue in the system too. It has been a wild few years and when the party came to an end at least in the capital market front, it hit pretty hard, and I think that we are just seeing a little ebb right now and that's a very natural thing to occur, and periodically you will see bursts of activity and at times you're going to see less activity.

I don't think that that means a whole lot other than that it is a part of a very natural end to a certain degree predictable cycle. I think that there is definitely meaningful business from existing customers out there. When it manifests, I can't tell you. Maybe Don can be more specific than that. I don't mean to overplay at all things, but I do think the markets have slowed down a bit, and to the degree others are telecasting that things are good, I think it is more a function of there is just a few large transactions that people are getting a little excited about. So --

I think -- I mean, your fill loss fee has always been the smaller one off fund off the radar screen type transactions and you have done quite well there where some of your larger competitors, totally different platforms and more focus on some of the larger deals. So -- It ebbs and flows differently.

Yes. So I would add into that, a lot of the transactions where we have commitments involved capital restructuring of entire portfolios. So not all of them, but a lot of them. So a lot of the follow-on business will come from new we are acquisitions by them or development, expansions, that sort of thing. As to acquisitions they are seeing the same thing in the marketplace we are. It's -- there is a few opportunities but not a lot of the kind of stuff that they want to operate and then on development that of course takes time, so the eminence of that is different. We definitely have in our pipeline opportunities that we think will come on board with existing clients and that has been and will continue to be a source of business for us. Timing is impossible to guess.

And have you turned down any of your operators that have come to you with proposals? Maybe you have, but is it anything of significance where you are just turning down some of the proposals for whatever reason?

Not that I can think of and not -- certainly not that we both would have agreed that it is something we shouldn't pursue.

Okay. My last question is, can you give us some feel for the size of the one off or [onesy] [twosy] market out there? I have to imagine it is huge and I know it is but have you done any work -- I know you have done some work of getting size of different markets different segments this small [onesy] [twosy] market, how big do you estimate that to be?

Well, I can't tell you precisely, Phillip, but what I have seen and what I believe to be the case is if you look at the healthcare reads in the United States and you total up the percentage of business they have in the public companies, operating companies and just our total business, based on what we believe is inventory in the United States, it is a very small number. And if you look at what the public operating companies like [Brookedale] and Ameritas and Sunrise and companies of that ilk, and again it is a very small percentage of the total inventory that [Nick] and others that publish information on. We know it is no other things. So that suggests that there are a whole lot of them out there. But it's an inefficient -- it is difficult and inefficient to access those because of that. They are all over the United States. They are often times in secondary and tertiary markets and they tend to think independently. So again they are out there, it is just a lot of work to find them identify them, and sometimes the process from identification and initial discussions to something happening can easily be three years. It doesn't happen quickly.

So in terms of that kind of inventory out there, it exists. The amount of inventory that's out there in that category that is actually likely to have a transaction in the next 12 months is probably relatively small and it is just a matter of matching up -- finding them, the ones that are likely to do something relatively soon, that is difficult to do. And at the same time you are trying to cultivate ones you don't know when they will hit.

Phil, if you take a look at the recent issue of "Assisted Living Executive" and ranked the assisted operators I think number 50 had maybe four our five buildings. That gives you an idea and the size drops off considerably once you get out of the top 10.

Okay. And I lied. I have one last question. When you look at the transactions that you have completed over the last year to two -- and a lot of those transactions were the smaller deals, smaller deal transactions, etc., what percentage of those were you competing with other REITs, if you had to guess?

If I were guessing, I would say a great majority of those. I don't think anybody in this marketplace -- I won't say anybody, but very few people in this marketplace, especially when it was hot and heavy like it was over the past two years, would just go to one person. They would tend to shop around a little bit to get a flavor.

Did you view that REIT competition as serious or --

It was all different kind of money then by the way. What it really came down to is we a lot of times were selling folks on the idea that now is a good time to monetize your real estate but you have to -- if you have an opportunity to get two bites at the apple and you can also stay in and continue to be operations and benefit from your operations, and that was the theme we replayed in many different settings and worked quite well and was receptive. We like to believe and we do believe that our operating backgrounds helped contribute to people feeling a little bit more comfortable with us and doing those transactions than perhaps others.

I think Don stated it really well, Phil. What we did was try to identify those that were interested in hearing a different and better alternative and explain to them how it could work and why it was better for them. And then we were able to isolate them and it became a negotiated transaction. And we have done that repeatedly and hopefully we can continue to do that.

Okay. Perfect. Thank you very much.

Your next question comes from the line of Omotayo Okusanya with UBS.

Good morning, everyone. Congratulations on another good quarter.

Thank you very much.

Couple of follow-up questions. First of all, with the joint venture platform, could you talk a little bit about what is going on on that front at this point?

We, as you know, Tayo, this is Abdo -- we have invested about $532 million into the joint venture. And the joint venture is operating well, and obviously, as we find suitable acquisitions we will continue because the additional funds have been approved. So now we have up to $975 million. Another roughly $440 million available to us under the JV. When we find something suitable to go into the joint venture, we will be acquiring another JV.

Great. Then just a bunch of operators over this reporting cycle have all had lower occupancies. They have given reasons for it whether it is higher than expected deaths or something of that nature, but when you kind of look across your entire portfolio, kind of thematically what are you seeing? Are you expecting that these occupancies could bounce back in second quarter? Or is there some type of secular issue at hand that will result in occupancies declining the rest of the year or staying lower versus last year?

We basically -- what we are seeing from talking to some of our operators is the same thing that the major public operators have indicated. A lot of the operators are experiencing higher debt and higher acuity, people needing higher levels of care, moving out and going into skilled nursing or other care choices. So that's what we are hearing. Now, we will see what happens in the second quarter if that -- hopefully it will see a rebound in their occupancy.

Let me add too and I think Abdo will agree with this. His memory tends to be better than mine. When we were operating, my experience is when you have events that result in a drop in occupancy, and it is hard to pinpoint exactly what is causing it, particularly when you are looking at many markets, but when you have a little bit of a drop off, it is difficult for a quick recovery to occur in occupancy particularly on a broader base scale. And the reason for that is -- let's just say you have 100 unit assisted living facility and the average tenancy is about two years, is that right, Abdo?

Yes.

So that means you have 50 people moving out every year and so it's a lot of work to generate 50 new residents just to replace what you have had, and obviously the increase occupancy you have to accelerate the pace and that frequently doesn't happen in one fail swoop. So usually when you have a little drop off -- and the drop-offs seem to come more quickly and dramatically. Although that may be just the appearance of it and it takes a while to ramp back up. I personally wouldn't be surprised if it takes a little bit of time to see occupancies to move up in a meaningful and consistent way.

Great. The last question from a Medicaid perspective, we have had some negative news come out of California and Florida in regards to attempts to reduce Medicaid payments given the budget issues that they have. What are you hearing from other states at this point as they are all preparing to put together their next fiscal year budgets?

Tayo, this is Brent Chappell. In terms of some of our states that are more prominently exposed to Medicaid, Texas there is no budget cuts expected at this point. Wisconsin no budget cuts. Massachusetts no budget cuts, and Washington no budget cuts. In terms of where we are, those states in which we have larger exposure to Medicaid, that's what is transpiring there.

So net net it seems like it shouldn't have a big impact on your tenants as given your geographic spread?

That's correct.

Great. Thank you.

Thank you.

Your next question comes from the line of Steve Swett with KBW.

Thanks. A couple of questions. I think you addressed them but I'm not sure I got the answer or didn't hear it clearly. The net proceeds from the Ameritas transaction?

Yes.

I'm sorry. What were they?

The net proceeds are $220 million.

That's net of the debt repaid and the purchase money mortgage?

That's correct.

It references the short-term purchase note. How long do you expect that to be outstanding and what is the rate on that, Abdo?

The rate is 7.25% and it is a four-year note, but can be prepaid.

Okay. And then the cash balance, Doug, I think actually you said it twice, but I think I missed it both times.

That's all right. Hopefully I can say the same thing three times. $120 million.

$120 million. And is that essentially going to be used to close the PMB purchases as they come through, or is there another use?

Go ahead, Abdo.

We are hoping that there will be some -- we have some stuff in the pipeline that is working and, it could be used for those acquisitions or for the PMB acquisitions as we need to close those. So, but, we also are working on other investments.

Okay. The next traunch of closings is June. So would it be safe to assume that those cash balances will likely be in place through June?

We hope not. Don and his team are working very hard to bring some things that they have been working on for a period of time to closure. So on the one hand it is very good to have the type of liquidity we have. On the other hand, we would rather deploy it in things that are more profitable to us. So hopefully we will be reporting smaller cash balances at the end of the second quarter.

Okay. And just a last question for me on the transaction market. Do you get the sense that the sellers are motivated, or is it something where they may be testing the market and if they don't see the bids or the pricing where they would like, the transactions won't trade, or do you think they will just trade and it is taking some time to find the price?

Personally I think it a little of all of those things. And again I will let Don comment because he is closer to the action than I am. But I think what is happening is buyers to different degrees are starting to become more entrenched in their position where they are making a determination as to what the intrinsic value of the assets are, and saying this is our price in where as there was a very strong auction environment over the last few years, in particularly the last couple years. It doesn't exist as much because people are saying, it is this price if not I'm happy to wait for another investment opportunity. And sometimes the buyers, particularly the ones -- or the sellers now that bought recently or they bought at a high price, are adjusting their return expectations and in some cases are getting close to being in a position where they make nothing or they may even have to recognize a small loss and that of course is a bitter pill to swallow, and it is very hard psychologically to adjust to that. And in some cases buyers may step up and meet the sellers expectations, and in some cases they won't. We hope that other buyers will be as disciplined as we are because I think patience will pay off and ultimately buyers will prevail if you take a steady course. But who knows if that's going to happen. Don, is there anything you want to --

No.

Okay. Thanks.

Your next question comes from the line of Jim Sullivan with Green Street Advisors.

Good morning. Hi. This is [RoseMarie Pute] here with Jim Sullivan.

How are you today? We were pretty sure it wasn't Jim's voice.

For the $22 million in assisted living that you have purchased at a 9.3% yield, how do these properties compare to others in your portfolio? Are they representative? And were you to market this property more widely, what do you think it would sell for in terms of yield?

This property was up in Wisconsin so it is very consistent with our Wisconsin portfolio. We wouldn't remarket it. I'm not quite sure -- I don't want to speculate it.

But obviously the intent is we bought it at a good price or the worse case market price. So if you were forced to go through that academic exercise, it should at or higher than what we bought it at.

Okay. I was just trying to understand why the yield was so high given where cap rates are now for assisted living. Okay. Second question, are you seeing any differences in occupancy performance by market?

I'm sorry, would you repeat that?

Are you seeing any difference in occupancy performance by market?

Rosemarie, this is Brent, not on meaningful basis. It seems to be pretty consistent across markets. You will see some slight variation from market to market but generally speaking no.

Okay. And then one comment I very much appreciate that you report occupancy as of February while your peers are reporting as of last quarter. So thank you for that.

You are very welcome.

It is February we are reporting on, is it Brent?

This is Brent. Yes, that is.

Thank you.

You are welcome.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Rich Anderson with BMO Capital Markets.

Hi. Sorry for the follow-up. I wanted to let you know that I downloaded my PMB DVD to my iPod and it is incredibly motivating when I go for my run. Hey, I wanted to ask about the guidance. Do you have any color in terms of Ameritas was this amount of sense dilutive in terms of the de play in redeploying or set of shares do you have a math that gets you to the one set up?

We can get to it. I don't have it right now.

It was like $0.03 and $0.02. It wasn't like $0.10 and $0.08.

No, no, not at all. They were tiny numbers. It was more like $0.03 and $0.02 or something like that.

Okay. Don't worry about it. Thank you.

Your next question comes from the line of Kristin Brown with Deutsche Bank.

Good morning. I just had a couple quick housekeeping questions. I was just looking at operating expenses as a percent of revenue for the operating asset -- for the MOBs and it seemed a little bit on the low side. Was there anything unusual in the quarter?

The operating --

In the operating portfolio.

Yes, it's -- when you say it's on the low side compared to what?

Operating versus last quarter and sort of your -- it was 45% of revenues where it is usually over 50%. I was wondering if there was anything unusual?

It is 56% or 55% this quarter and has actually improved I believe over the prior quarters. We have -- the portfolio of the joint venture has improved quarter over quarter and over the prior year, and so overall, our MOB's generating about 55%, 56% margins.

Okay. And then just on your guidance what is the share count assumption that is factored into your guidance?

Whatever our shares are currently because we do not include any future capital transactions.

Even from the controlled equity plan?

I'm sorry?

From the controlled equity plan, it assumes there is no future issuance.

We don't do any future capital transaction.

Okay. Thank you.

Thank you.

At this time there are no further questions. Are there any closing remarks?

That's it. Thank you very much. Have a great day.

This concludes today's Nationwide Health properties first quarter earnings conference call. You may now disconnect.