Welltower Inc (WELL) 2006 Q2 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Health Care REIT Inc. second-quarter 2006 earnings conference call.

Today's call is being recorded.

At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session.

Instructions will be provided at that time for you to queue up for questions.

(OPERATOR INSTRUCTIONS).

I would now like to remind you that this conference is being recorded and would now like to turn the conference over to Georganne Palffy of the Financial Relations Board.

Please go ahead.

Thank you, Cindy.

Good morning everyone.

Thank you for joining us today for Health Care REIT's second-quarter conference call.

You may have received a copy of the press release late yesterday afternoon; but in the event you have not you may access it via the Company's website at www.HCREIT.com.

I would like to remind everyone that we are holding a live webcast of today's call which may be accessed through the Company's website as well.

At this time management would like me to inform you that certain statements made during this conference call call which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although Health Care REIT believes the expectations reflected in any forward-looking statements are based on reasonable assumptions it can give no assurance that its expectations will be obtained.

Factors and risks that could cause actual results to differ materially from expectations are detailed in the press release and from time to time in the Company's filings with the SEC.

I would now like to turn the call over to George Chapman, Chairman and CEO of Health Care REIT for his opening remarks.

Please go ahead, Sir.

During our last earnings call, I discussed the ways in which we are positioning HCN to prepare for the changes occurring in senior housing in the health care delivery systems.

As I mentioned then care is being delivered in the least institutional, most cost-effective settings.

Technological and pharmaceutical breakthroughs are leading to greater utilization of noninvasive and minimally invasive procedures and the customer is already affecting how services are provided and we are now awaiting the Baby Boomers, who will demand even more care and to be treated as customers.

All of these changes are spawning innovative senior housing and health care options to take a more integrated approach to social wellness and health care needs.

With our repositioning efforts we believe we are in the forefront of change and are able to take advantage of a full spectrum of senior housing and health care investments.

We also indicated in that last call how we had realigned into business lines within our Company and made certain changes to our management team.

We have added people such as [Chuck Hiller] most recently as the Associate General Counsel.

We appointed Scott Estes as CFO; and now Ray and I are on a lot of airplanes and we are very very actively involved in the marketing efforts.

Even more so than in the past.

Let me take a moment to talk about our marketing efforts in 2006 and I should add that, in a very tough market, we think we have been quite successful.

To date we have completed gross investments of $220 million and have been able to increase our investment guidance as per our earnings release.

We have a shadow pipeline or what we call operator lines of credit that totaled over $2 billion and I might say - and as an aside within these lines - approximately 80% of those investments that we expect relate to combination or CCRC assets that provide a variety of housing, wellness and health care services.

Accordingly, we believe that these buildings will more appropriately address the changing needs of a more demanding customer base.

Of the $2 billion amount, over $650 million has been approved to date.

Over $400 million of that amount has been funded and approximately $1.6 billion remains unfunded.

I would remind you that these lines, so-called lines, remain subject to our usual underwriting and due diligence standards.

For those and any number of reasons there can be no assurance that all or in a substantial portion of these lines will be funded; however we do believe that having such lines and the underlying relationships substantially improve the prospects of closing a good percentage of these possible transactions, providing comfort that our deal flow will remain strong.

In addition to these lines, we believe that our traditional origination process that is led by Chuck Herman will generate, continue to generate additional opportunities.

At this point I'll turn the program over to Ray Braun, our President, and Scott Estes, Senior Vice President and CFO, to discuss the portfolio and financial matters in more detail.

Ray.

Thanks George.

First I'm going to review the portfolio including an update on government reimbursement issues; then I'll discuss some of the development initiatives we have undertaken before I turn it over to Scott for financial results and guidance.

The portfolio continues to perform well.

Payment coverage was 1.93 times before management fees.

Our portfolio composition is showing exhibit 1 to the earnings release with coverages by facility type and exhibit 2.

We own 94% of our property. 88% of those are in master leases.

Now driven partly by reason consolidations we are realizing improved (technical difficulty) credit quality in our portfolio.

Approximately 30% of our overall portfolio is now with public operators and almost 70% of the portfolio is concentrated with our top ten operators, including larger private companies such as Life Care Centers of America and Merrill Gardens.

Turning now to government reimbursement, we are getting some color on the impact of changes in the Medicare Resource Utilization Group or RUG System.

Our operators are effectively managing under the new environment to avoid the predicted rate cut above the $20 per day.

Medicare rates in our portfolio remain flat but expenses increased as operators shifted the mix to care for more patients with higher acuity levels in the new RUG categories.

We had originally estimated our nursing portfolio of coverage could have declined by up to 20 basis points but coverage has only dropped five basis points for the trailing 12 months.

Most importantly, nursing portfolio coverage remains strong at over two times; and we do not anticipate any material increase in payment risk as a result of the new rugs.

Turning now to Medicaid, rates in the nursing home portfolio are projected to increase by approximately 2% in fiscal 2007 - which started July 1, 2006.

None of our 29 states are expected to enact an across the board rate cut; however due to either case mix adjustments or rate freezes, we expect rates to be essentially flat in three of our top ten states - Ohio, Colorado and Indiana.

We do not expect the rate freezes to create payment risks because the applicable portfolio [sets] strong payment coverage.

Finally, provider taxes which is advancing mechanism used to increase federal matching funds for state Medicaid programs, are proposed to be cut in President Bush's '07 budget from 6% to 3%.

14 of our 29 nursing home states have a provider tax equal to the 6% maximum.

CMS appears to be moving forward with revised regulations likely to be issued in the second half of 2006.

Cuts to provider taxes may pressure states to reduce rates.

The impact would vary by state and by facility, depending on the state's federal matching percentage and the facilities patient mix.

In general, a facility with a high Medicaid mix and a high federal match is most at risk for a provider tax deduction.

We do not expect any material increase in payment risk as a result of these changes.

Turning now to development, we are increasing our guidance this quarter to $175 to $250 million of construction funding from $150 to $250 the previous quarter.

Please refer to exhibit 8 of the press release for additional detail on construction activity.

The Company has funded $72 million year-to-date '06 for construction projects; and expects to fund an additional $92 million on those projects over the next two quarters.

The remaining expected construction funding for '06 will come from new projects that will commence in the second half.

With that I will turn it over to Scott to walk you through quarterly financial results and guidance.

Thanks Ray.

Good morning, everyone.

During the second quarter we completed gross investments of $97 million and now completed gross investments of $220 million year-to-date.

Based on our current investment pipeline, we are increasing our gross investment guidance for 2006 to $525 to $600 million from $450 to $550 million previously.

Gross investments are expected to consist of $350 million in acquisitions and advances on existing assets, and $175 to $250 million of construction funding.

We still anticipate $100 to $150 million of dispositions, resulting in a new net investment forecast of $375 to $500 million.

This quarter the average initial cash yield on new acquisitions was 9.1% and the average expected yield was 10.8%.

Average annual increases over the life of the leases are expected to approximate 26 basis points.

As detailed in exhibit 8, our development advances during the first half of the year again were $72 million and we currently have outstanding unfunded commitments related to our projects underway, totaling an additional $260.1 million.

On the disposition front we sold $16.3 million of assets during the quarter.

The average yield on (technical difficulties) dispositions was 10.1%.

Turning to dividends, dividends paid in the second quarter were $0.64 per share and their FFO has been at payout ratios for 86% and 85% respectively.

The Board did approve our 400 -- excuse me, 141st consecutive dividend to be paid August 21st, 2006, in the amount of $0.64 per share which represents a 3.2 increase above last year's rate.

Our drift program again generated nice interest in the second quarter as we issued 486,000 shares, generating net proceeds of 16.5 million.

Turning now to our earnings results.

We recognize second quarter net income available to common stockholders of $0.37 per share versus a net loss of $0.03 in the comparable period last year.

A second quarter FFO was $0.74 this year versus $0.70 last year, representing a 6% increase.

The FAD came in at $0.75 per share compared to $0.68 in the second quarter last year.

Importantly, excluding additional cash receipts totaling $0.04 during both periods, second quarter normalized FAD increased approximately 11% quarter-over-quarter to $0.71 versus $0.64 last year.

Moving to our income statement, there are a couple of income statement items this quarter which I believe are worth highlighting.

The first relates to transaction fee and other income which totaled $1.7 million in the second quarter, which is up from $366,000 in the first quarter and $547,000 in the comparable period last year.

Included in this line item is an additional $1 million of income that we received from a warrant division, which we held in a private company that was sold during the second quarter.

Secondly, G&A expenses this quarter totaled $5.1 million versus $6.2 million in the previous quarter.

As we mentioned on last quarter's conference call, this significant sequential decline was a result of the fact that first quarter's 2006 G&A did include an additional $1.7 million as a result of accelerated expensing of stocking options when compared to prior amortization methodology.

At this point we do remain comfortable with an annual G&A forecast of approximately $22 million for full year 2006.

I'm moving now to the balance sheet which again is in very good shape.

We ended the quarter with gross real estate investments of approximately $3.3 billion.

As of June 30th our debt to book capitalization stood at 49% and debt to undepreciated book cap was 44%.

These are both down 3% sequentially relative to prior quarter as a result of our April common stock offering.

Our loans receivable of $178 million now represent only 5.4% of gross real estate assets.

In addition, we are currently in discussions with our bank group to renew and extend our line of credit.

We do anticipate providing everyone a more detailed update on our line sometime during the third quarter.

I would point out however that the $394 million of availability on our existing credit line at the end of the second quarter is sufficient to fund a potential $352 million of additional net investment which will be needed to get us to our high end of our net investment guidance of $500 million for the year without requiring any additional capital raises through the remainder of the calendar year.

Now wrapping up with an update on our 2006 guidance.

The Company is increasing its net income available to common stockholders' forecast to range of $1.34 to $1.42 per diluted share from the previous range of $1.33 to $1.41.

This increase is primarily related to the gain on sale of 929,000 we recognized in the second quarter.

Our FFO guidance for the year remains unchanged in a range of $2.88, $2.96 per share and we are increasing our 2006 FAD guidance by $0.04 per share to a range of $2.95 to $3.03 from the previous $2.91 to $2.99 per share.

Our FAD guidance excludes any additional cash receipts which we may receive throughout the remainder of the year.

Our increased guidance is primarily a result of the $2.7 million in cash received during the second quarter from straight line receivable payoffs in prepaid rent.

With that I'll conclude my report and turn it back to you, George.

Thanks very much, Scott.

Just a couple of concluding comments.

One I would remind you that clearly our longer-term strategy is to extend our investment reach across the full spectrum of senior housing and health care.

As we move toward this more diversified broad spectrum platform, we believe our ongoing acquisitions and development investment as supported by our very strong investment pipeline should put us in a position to post strong consistent FAD growth.

With that summation, I will open for questions.

(OPERATOR INSTRUCTIONS) Jerry Doctrow at Stifel Nicolaus.

I just had a couple of things.

First of all, if we could talk a little bit about, more about development.

I think in the past you just funded development with loans and sort of rolled it on the books.

My sense is you are owning the development now and I wanted to just clarify that a little bit in terms of really mostly how legally the process is working.

And then in terms of income recognition whether you are taking any fees and stuff or really just generate income essentially when it's completed?

As a point of clarification, we generally have done our development with operating leases and that has generally led to capitalizing the interest during the development stage.

When we were the leader in the assisted living about years ago, we did it the same way we are doing it today.

All right; my mistake.

And, two, we take fees, we generally take fees in connection with the construction period.

And, Scott, I don't know if you would want a clarify any of that but -- I think that's responsive to your question.

So basically there would be sort of a recognition of the fee of point or whatever they are paying when you commit essentially and then the income from the lease really starts at the end of construction.

Yes; there is a fee or fees during construction recognized over the construction period, followed by permanency that is spread over the 15-year (inaudible) .

I was wondering if you would just give a little more color on investment yields?

We've had some movement in rates and sorts of things.

I noticed you're giving guidance now on the yields on the future development.

But can you talk a little bit more about pricing on acquisitions and income development, as well?

It remains extremely competitive as you have seen from some of the larger transactions that have been completed this year.

Cap rates are at historical lows which is why we find earning an extra 3 to 400 basis points on development makes more sense.

On the spread, the development yields I think that you are indicating are like from kind of the low nines - up to maybe towards 9.5.

Is that fluctuation most just the mix of projects or is there something else going on?

Assume you're charging more maybe on what's up more skilled or --.

Those are initial yields by the way, Jerry.

It will vary by the type of project.

Some projects we priced a little bit higher than others because we think there may be a little bit more risk.

Initial yields on acquisitions right now.

I think Scott touched on that but went through it a little faster than I was writing.

It's 9.1% on the new acquisitions this quarter and if you look at the expected return over the average life of those leases, it's 10.8% including the increasers.

The average increasers should approximate about 25, 26 basis points of the stuff we did this quarter.

Right, but you are not doing straight line anymore so it's --.

Correct.

Just one or two last things if I could.

The $1 million, I guess, in the warrants is presumably not going to be repeated so I assume guidance would be sort of in the range of something sort of the net of that number for the quarter on the transaction fees.

Correct.

I think on straight line rent, your guidance was something like $7 million for the year but you are running I think above that rate so did I misunderstand that or just -- I was just trying to get some clarification on where you see that going the rest of the year.

I think we stated on the last call that on a gross basis our straight line forecast would have been about $8 to $8.5 million.

Net of the $13 million in cash we have received, you can see in our last exhibit that as our guidance of $4.5 million of cash in excess of our gross straight line is the differential there.

So that just makes -- backs it down.

Basically that 8.5, 8 to 8.5 million run rate is the right run rate and then we can make any assumption -- your assumption is that there is no additional cash coming in.

We can make any other assumption we might want there.

That is absolutely correct and halfway through the year we approached straight line rents of 4.6 (inaudible).

Thanks.

Ross Nussbaum at Bank of America.

Good morning, everyone.

Want to follow up on the development pipeline.

The yields that you do a nice job laying out by year what you're projecting, could you break that out for us by the type of facility?

What kind of development orders yields you out are expecting on the (indiscernible) with the assisted living?

(MULTIPLE SPEAKERS)

For independent living, our projected yields on conversions and there is some variability in this because (indiscernible) upon what treasuries are.

Roughly 9.7.

Our assisted living 9.2 and our skilled nursing 9.1.

Okay.

I thought in response to one of Jerry's questions that you had said that you were seeing 3 to 400 basis points spread on development over acquisitions but that number just intuitively sounded high to me.

That is where the initial yields will come in that we are projecting.

And we are seeing stuff done in the 6 to 7% cap range.

On the acquisition side.

Right.

The other question I had for you is just on your coverages.

When I look at the coverages, say, for the assisted living or the (indiscernible) do you think your numbers are roughly in line with what you would call market today?

I'm just getting a sense of upside, downside to those numbers over time.

I would say -- I mean, we are towards the high end of our historical range and I would say we are mid- to high end in our peer group as well.

Final question.

Can you just shed some light on the nature of the investment that triggered that 1 million, that warrant that you declared the income on?

What was the nature of that investment?

It was a line of credit that we did with an operator and as part of our return, we negotiated for some warrants in the Company.

Final question on development.

I am sorry.

Do you have operators lined up for everything that is under construction right now?

Yes.

Thank you.

Greg Andrews at Green Street Advisors.

Scott I also missed your numbers for the quarter when you ran through them quickly.

Could you give me again the coverage ratio for the acquisitions during the second quarter?

We didn't do any coverage numbers.

We gave the initial yields which, again, was the 9.1% on the new acquisition.

And you don't have a coverage figure there?

Maybe the fairest way to as in that question is to look at our underwriting and when we underwrite IL - independent living - or assisted living, we tend to be toward the 1 25 range.

When we look at skilled nursing we want them to be those facilities to be at a coverage of 1 5.

L tax are usually underwritten at 2 times.

So that is how we look at it and generally within some flexible ranges that's what you should have (indiscernible).

You talked about the amount approved under your lines of credit with operators as being $650 million versus $400 funded to date.

When should we expect that?

What does approval mean?

Is that an approval on your part or that the operator has selected to use those funds?

And when should we expect those funds to be dispersed?

I think that approval means that we have approved it within our investment committee and that they have submitted particular projects for that approval.

So we are both in agreement and our funding has commenced.

I believe that within our numbers, too, we have suggested that there is about another 190 million for example within the development pipeline that should go out through the remainder of the year.

To some degree it's guesswork.

Depending on how construction progresses etc., but we have found that the lives of credit are extremely valuable in terms of adding certainty to our numbers.

So the lives of credit are actually related to the development you have underway?

In part.

And, again, any additional acquisitions we may make that haven't been consummated yet, obviously, could be on top of this number but we wanted to get a sense for the amount of the pipeline we have with the relationships that are already in place.

Lastly, a small item on the balance sheet.

I noticed the equity investments increased from about 3 million last quarter to about 5.

Is that something -- could you tell us what is going on there?

And also is that an area you are looking to do more in?

We just have a couple of small investments in our operators, similar to the warrant position that we just recognized some income on.

So it basically represents small, very small equity positions or warrants essentially in a couple of our operators but it is not an area of major focus.

Thank you.

Rob Mains at Ryan Beck.

Since you've become one of the more significant players now in the development area, what do you see in terms of competition out there?

Some people who are very active in the health care area, Rob, do not do development.

We have, since 1970 actually, when we were a leader in the emerging (indiscernible) market - Skilled Nursing market - have always built these new types of platforms and then - as you know - we were a leader, the leader probably, in assisted living because we thought it was timely to do so.

Others tend to stick more with acquisitions but I really couldn't give you a percentage of how many of our REIT colleagues or specialty financiers do construction or not.

Scott, I don't know if you have any idea, but we certainly have never been adverse to doing construction and taking the construction fill-up risk with the right operators.

We think, frankly, given the change in health care and senior housing that is coming, is especially going to be driven by the Baby Boomers that to not do some development is really taking a huge risk.

We are very content being where we are and being a leader in the evolution of the health care and senior housing arenas.

As Ray pointed out, whether it's a 200, 300 basis point gain over what people are paying in terms of cap rates for acquisitions, the risk reward relationship is excellent.

But I can't give you how many other people are doing -- there are some other REITs that will do some construction.

Some that won't and, Ray, do you have any thoughts on that?

Yes.

I don't see a lot of competition amongst the REITs.

It's primarily one off transactions we are seeing in markets.

I was thinking more even beyond the REITs.

One of the paradoxes of the assisted living market the last couple of years in a capitalist economy has been that returns are pretty good, and yet it hasn't drawn a lot of new entrants in.

And is that still the case, you think?

We are starting to see an uptick in assisted living development but it is not in huge volumes yet.

It's slight.

I think when you see some of the NIC map data come out the next couple quarters you will continue to see an uptick.

It's still a small percentage of overall supply.

Good enough.

Nice market to be developing in.

Just want to clarify to make sure I've got this right.

When you are going over the development yields by asset types the [Smith] yields you are looking at are the lowest among the asset types?

I'm sorry?

When you are going over the year and expected initial yields on developed properties by a type of asset, the initial yields you are talking about for Smith, they were the lowest of the three? (MULTIPLE SPEAKERS)

Yes.

That's correct.

My last question is.

Rob, if I can point out that generally one would receive, perhaps, on average a higher yield, perhaps, on Smith.

So there are a lot of other factors in play here.

Some of the financing we are doing in the Smith area is to very creditworthy companies.

So there are a lot of -- it's a matrix of factors.

In master leases and things like that.

So the risk is pretty low on these.

Last question just concerning guidance.

We are halfway through the year and your spread - the FFO guidance - is kind of wide.

Is that reflective of the widespread that you have still got in expected activity for the rest of the year?

I think that it is in part.

We have a range on the acquisition front.

From time to time you recognize, we receive cash and fees but I think on a -- we are comfortable with the range where it is.

I think we've traditionally (technical difficulties) obviously going into the fourth quarter.

We tended to keep the range where we are comfortable with both ends of the range at this point so we chose to keep it as it is.

There's nothing funny operational that goes into that that range, right?

No.

That's what I had.

Thanks a lot.

Jerry Doctrow at Stifel Nicolas.

Just a few things.

The (indiscernible) for everybody but the percentage of [Brook deal], I made you've got them listed at 10%.

In terms of the other announced acquisitions - the American Retirement.

Is there going to be any change in that number for you?

Basically I'm wondering whether they bought other people or announced other people that they are buying below your 5% cutoff that we show?

We have no American Retirement assets in our portfolio.

So that 10% should be fairly good as far as you know?

Right.

Last thing, Scott, I think you touched on this but just access to capital markets.

I think what you said is you've got enough on your line that you could fund everything through this year.

You don't see coming back for comment anytime soon.

But that would be the likely next thing that you would do when it becomes necessary?

I don't think we have actually determined either way.

It's always contingent upon our investment pipeline.

And should you be more successful, we would put in place permanent capital sources as necessary.

But the point was really that we don't need to unless the markets appear attractive to us.

Fair enough.

Thanks.

Kristin Brown at Deutsche Bank.

My question is about the investment market.

Year-to-date, you are about 50% in Smith and how do you see this mix changing going forward?

Where are you seeing opportunities?

For acquisitions.

We are often asked that and we always sort of duck because we see REITs as being very much opportunistic.

We have seen pretty good opportunities as a result of Chuck and his team because we see virtually everything out there.

We certainly are going to begin to do more post-acute and acute care but that is just slowly building with J. Morgan's leadership.

I really can't answer that because, tomorrow, we could have a new deal like the Southern Assisted Living deal.

That was a huge deal about two years ago or an Emeritus or then we could have a large skilled nursing operator.

It really is impossible for us to say.

We have that same difficulty when we go into the rating agencies.

They want to say, what is our percentage of skilled nursing?

And what is our percentage of assisted living or acute?

And we really can't do it.

Other than to say generally over the next three to five years, we expect to have a higher percentage in the post-acute and acute care space to have a more diversified broader based portfolio.

Anything, Ray?

No I think we are comparable with the allocations we have today.

And we keep our eye on overall allocations as we looked at new investment opportunities.

But it is hard to predict the type and timing of those transactions.

I just wanted to ask about the recent deal with Formation Capital and GE Health Care.

What impact do you think that is going to have on this next investment market?

It certainly indicates that there is a renewed interest in the Skilled Nursing market from capital sources other than Health Care REITs in the more traditional capital sources which should bode well for the overall market.

It is, overall, a plus for Health Care REITs in the sense of having Health Care and senior housing properties being the mainstream of the property world.

It makes all of our jobs a little harder in terms of pursuing great investments, because people know now why we've been here for 35 years.

Thanks.

(OPERATOR INSTRUCTIONS) Scott O'Shea at Deutsche Bank.

Couple questions on the pipeline.

How many of the properties are situations where it's an existing operator and the new development deals are going to be crossed to an existing master lease?

Hang on Scott.

Just approximately is fine.

I would say that what's interesting about our pipeline is that a lot of the new deals are with newer companies and so they are forming their own master leases as development lines evolve.

Now on the other hand, some of them are people we have done business with in, people in former lives with different companies but I would say maybe 20 to 25% might be existing lines of credit.

For the remainder are you getting some kind of backstop to the credit to cover you through the two-year fill up period?

Oh yes.

It ranges but as you know we really look at personal guarantees, letters of credit, whatever.

That's why some deals don't come to us because we look at a lot of these relationships almost like -- as a lender would and we definitely need a backstop during the development period.

It's only going to be out three or four years when we have several of the facilities coming out of construction and filling up.

We begin to feel better and we could back down their guarantees and/or the size of their letters of credit.

But it ranges all over the map on that. (MULTIPLE SPEAKERS) we are very much of a lender.

We have a lender mentality in terms of how we structure our lines of credit.

That's helpful.

The next question concerns the nature of the locations for the current pipeline as compared if you went back maybe to the last construction cycle five, six years ago.

Are there more in-field projects in this pool or are do tend to still be more suburban greenfield locations?

Any change in --?

Let me start and then I will have Scott and Ray step in.

I think there are a couple of things I can take away looking in our lines in front of me.

One is that we are doing many more combination properties so that takes a certain amount of space.

Many more CCRCs in combination facilities.

We think that puts us in a much better position to attract customers in the future including the Baby Boomers because that's what more and more people demand.

I would say the second comment is that we are seeing many more Midwestern properties.

I don't know whether that reflects the movement back up from the Southeast, Southwest - people who want to be back by their kids, back in their home communities.

But it could be reflective of that.

As I look at it, too, there are perhaps more, maybe a higher percentage of infield properties here.

Ray?

Comments.

There's a mix, Scott, and we have successfully developed different types of facilities in different types of market environments, including smaller buildings in rural communities which have been very successful.

So we have a little bit of that.

We are doing some larger combination buildings in suburban markets; and we have some projects that are highly specialized like (indiscernible) projects that are in urban markets.

So there's really a mix.

What I can tell you is that what we are developing we have seen in the past and seen [unsuccessful].

That's helpful color.

The last question would be on the nursing home development.

I don't know if that is whether it is one property or two or three.

Are those new licenses and new CO wins or are these cases were you are going to replace an existing building and tranch the license and scrape the predecessor property?

Some of them are new campuses.

Others are -- and probably the really great, the plum investments are the ones where there are existing campuses.

Maybe a combination of a (indiscernible) or Smith IL or maybe just IL and people are converting those into CCRCs.

Which we again think will stand the test of time a little bit better than stand-alone facilities at least in a high-end, higher income arena.

So this line item is less just a pure stand-alone facility and more just another weighing or potentially something like that on an existing property?

A campus where it is being added.

That's helpful.

That is it for me.

Thank you.

It appears we have no further questions at this time.

I would like to turn the conference back over to our speakers for any additional or closing remarks.

Thank you for your participation and if there are follow-up questions, Scott will be available.

Thank you.

Thank you.

That does conclude our conference at this time.

You may disconnect your lines.