Welltower Inc (WELL) 2010 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the third quarter 2010 Health Care REIT earnings conference call.

My name is Tina, and I will be your conference operator today.

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

We will be facilitating a Question-and-Answer session towards the end of this conference.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

Now I would like to turn the call over to Mr.

Jeff Miller, Executive Vice President, Operations, and General Counsel.

Please go ahead ,

Thank you, Tina.

Good morning, everyone, and thanks for joining us today for Health Care REIT's third quarter 2010 conference call.

If you did not receive a copy of the news release distributed late yesterday afternoon, you may access it via the Company's website at hcreit.com.

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

Certain statements made during this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although Health Care REIT believes results projected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that the projected results will be attained.

Factors and risks that could cause actual results to differ materially from those in the forward-looking statements are detailed in the news 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, CEO, and President of Health Care REIT for his opening remarks.

Thank you, Jeff.

Good morning.

I can report this morning that our strategy and execution during the economic downturn has now taken us to a very important inflection point.

We have the opportunity and ability to drive significant organic and external FFO and FAD growth.

That, in turn, should provide an opportunity for accelerating dividend growth.

I would also point out to the group that our enterprise value now exceeds $10 billion, which is quite an achievement for our company.

As many of you know, we used the time during the last few years to reposition our portfolio, dispose of nonstrategic facilities, and deepen current and develop new operator and health system relationships.

Specifically, we repositioned the portfolio to focus on combination facilities in senior housing as well as newer, state of the art medical facilities, and those two categories together should exceed 80% of our portfolio by year-end.

Secondly, we disposed of facilities that we believe did not align with our target portfolio mix including stand-alone skilled nursing facilities, especially those with a significant Medicaid component, and for that matter, other stand-alone senior housing projects.

In total, we disposed of $600 million of assets during the last three years, generating gains of over $200 million.

We also deepened relationships with existing operators and health systems and developed some very promising and productive new ones.

We added 19 new senior housing operators and health systems to our portfolio.

And as most of you know, a commitment we -- our commitment to relationship-based investing is critical to our strategy, because historically 80% of our new investments have come from existing operators and systems.

Thus, by increasing the number of relationships, we are better positioned for future growth.

We also spent the past few years strengthening our team.

We made multiple key hires to enhance our capabilities in all areas of the business.

That process has continued into 2010.

We recently hired Stephanie Anderson, formerly a managing director at GE Capital, to complement our marketing and management team, and simultaneously elevated Mercedes Kerr to Senior Vice President to reflect her broader responsibilities.

During the last three years, we have hired 74 new employees, and we are clearly committed to continuous improvement of this company.

In order to fund our quality investments during this period, we raised $2 billion of capital in 2010 through the end of the third quarter.

This allows us complete access to our $1.15 billion line of credit for future transactions.

Our debt maturities have been extended from 4.4 years at the end of 2009 to 6.5 years today.

Health Care REIT has successfully differentiated itself from the competition.

Through our relationship-based strategy, we have already invested $1.6 billion in 2010 in attractive properties with strong operators and systems.

Including the additional $500 million added to our investment guidance today, we are on track to meet or exceed a record $2.5 billion of investments for the year.

All of our investments are focused on our disciplined investment strategy.

Moreover, with our $5.5 billion shadow pipeline, we believe we should be able to drive future high quality investments through off-market opportunities.

You should note that 90% of our shadow pipeline are comprised of off-market opportunities, and we believe these off-market opportunities and investments provide more certainty and dramatically better returns than competitive bid situations.

We continue to have the sector leading coverages of the facility level, currently 2.1 to 1.

At the end of the third quarter, our portfolio is more diversified than ever, a result of our full spectrum investment platform.

Senior housing facilities and medical facilities currently comprise 60% and 40% of the portfolio respectively, and our top five and 10 customers comprise only 29% and 43% of our portfolio.

We believe that our private pay revenue should exceed 75% by year-end.

The point I want to make strongly today is we have grown but we have grown in a very disciplined manner.

As we repositioned the portfolio, strengthened our team, and built our liquidity, we knew that our 2009 and 2010 FFO and FAD would be relatively flat.

However, we also knew that we were positioning ourselves for strong external investing that would drive significant earnings growth.

We have arrived at that inflection point I spoke of earlier.

An increasing number of our investments are positioned to drive higher organic FFO and FAD growth than standard operating lease transactions.

The Merrill Gardens RIDEA structure is expected to drive 5% annual growth over the long-term.

And I might point out, too, that we're very pleased with how well that relationship is working as we more closely align our companies.

Any additional RIDEA structured transaction should also contribute to more significant growth than the triple net lease structure.

And we remain very focused on senior housing investments because of our belief that senior housing is at a favorable point in the cycle and will afford greater than normal growth in the future.

I can also report the first two lease renewals at our Cambridge Life Sciences investments comprising 15% of the space, exceeded our expectations, so we're very hopeful for a very good result in Cambridge.

Also, increasing yields on entrance fee communities and the conversion of development projects will also begin to add to our internal earnings growth.

Let me take a moment to talk about our medical facilities portfolio and our teams.

In 2006 and 2007, we made a major commitment to the medical facility space.

At the end of 2007, the portfolio included 143 properties with an investment balance of $1.6 billion.

That is 121 in medical office buildings and 22 specialty care facilities.

Since then, we have sold 16 of those original properties and invested another $1.35 billion in new properties.

So, our current medical facilities portfolio is comprised of larger and higher quality assets than it was in 2007,now includes 180 properties with a total investment balance of $2.8 billion and the assets we owned in 2007 now make up less than 50% of that portfolio today.

In the MOB side, we have moved our average medical office building size from 39,000 square feet to 53,000 square feet.

We also enhanced our operating platform which has now driven sector-leading occupancy and retention rates of 93% and 84% respectively.

And our customer satisfaction ranks in the top quartile of all medical office buildings.

As we look ahead, our medical facilities pipeline continues to be very robust with at least $1.7 billion in our new facility pipeline with leading healthcare systems.

Health Care REIT's success as a solutions partner for operators and health systems drives our external and organic growth.

Our reputation as a trusted, value-added partner to our operators and health systems has never been stronger or for that matter, more important in the marketplace.

Our disciplined strategy is driving record investment levels this year and will do the same in the future.

We are successfully executing on this growth strategy while retaining our historical commitment to disciplined underwriting and portfolio management.

And with that I will now introduce Scott Estes, our CFO, for a financial and portfolio review.

Scott?

Thank you, George.

Good morning, everybody.

The first three quarters of the year have been very successful in terms of both investments and capital raising for the Company.

As George mentioned, we have now raised a record $2 billion year-to-date through a combination of debt and equity.

This cost effective capital has enabled to us fund new investments while extending our debt maturities and maintaining an attractive credit profile.

As we look forward to 2011, we are in a great position to continue our disciplined growth by capitalizing on the best opportunities in our investment pipeline.

Turning first to investment activity, we completed over $700 million of growth investments during the third quarter bringing our year-to-date total to $1.6 billion.

We anticipate that the majority of our investments this year will be acquisitions, as opposed to development, with acquisitions expected to total 85% to 90% of our 2010 total gross investments.

Activity completed in the third quarter includes the previously announced Merrill Gardens partnership as well as four of the six combination senior housing assets we announced last quarter and one additional combination senior housing asset in Illinois with an existing operator.

Our development projects, which currently comprise 7% of our total committed portfolio balance, are being completed on time and on budget.

At the end of September, we had only $286 million remaining to be funded on these projects.

We expect most of our future development projects will be outpatient facilities in medical office buildings, either on-campus or off-campus affiliated with market leading healthcare systems that are substantially pre-leased.

Turning now to the portfolio, first senior housing, our stable senior housing and care portfolio continues to perform well.

Senior housing payment coverage remained at a solid 1.54 times with current occupancy of 88%.

And our skilled nursing payment coverage improved slightly to a strong 2.37 times with current occupancy of 85%.

I would like to highlight that we experienced increases in our same store revenue growth rates within both the senior housing and skilled nursing portfolios during the third quarter.

Our same store senior housing revenue increased a solid 1.5% versus last year, while our same store skilled nursing revenue rose a strong 4.1% year-over-year.

This revenue growth is largely driven by positive CPI increases throughout 2010.

Next, our entrance fee properties also continue to show solid progress.

Our overall campus occupancy increased sequentially from 61% to 64% in the third quarter, and has increased to 65% through the first three weeks of October.

At this point we are encouraged by this performance and anticipate raising rents on the original nine communities operated by Senior Living Communities, representing an investment balance of approximately $400 million, by approximately 50 basis points on January 1.

We also began expansion projects at three of Senior Living Communities properties during the third quarter, all three of which have waiting lists at the healthcare or rental component of these communities.

And these are each approximately 50-unit, $8 million additions per facility and will pay us an initial rate of 8.7% upon completion.

Before moving to our medical facilities portfolio, I would note that we have included a new category in our disclosure this quarter called senior housing operating.

This senior housing operating line currently comprises our Merrill Gardens partnership and includes 38 communities with an investment balance of $745 million.

The portfolio is 92% occupied in September and is 100% private pay.

We anticipate including some more details on a separate senior housing operating portfolio page in our supplement beginning next quarter.

Regarding our lease-up portfolio, we continue to see progress with these properties and note that 80% of our lease-up portfolio is within a multi-facility master lease.

We did stabilize two senior housing properties this quarter, and we expect to stabilize an additional 24 properties over the next 24 months -- excuse me, the next 12 months.

As a result of these expected stabilizations, and the fact that most of our future pipeline will be in the form of acquisition opportunities, we anticipate that our lease-up portfolio will be reduced to 10% next year.

Moving now to the hospital portfolio, third quarter stable payment coverage improved 9 basis points sequentially to a strong 2.65 times.

We also experienced a significant 4.5% same store revenue growth in our hospital portfolio during the third quarter on a year-over-year basis.

Our medical office portfolio, as George mentioned, also had another strong quarter.

Occupancy at this point is on track to exceed 93% at year end, and we recorded a solid retention rate over the last twelve months of 84%.

Overall, NOI continued to increase.

It was up 5% sequentially to $31 million for the quarter, as a result of earlier than anticipated development completions and positive leasing activity.

We also saw an improvement in our same store MOB performance, as third quarter same store cash NOI was up 0.5% year-over-year.

And finally, we did spend $4.8 million in CapEx during the quarter bringing our year-to-date total to $13.6 million.

Turning now to financial results, we reported normalized FFO per share of $0.79 and normalized FAD per share of $0.74 for the quarter, both up 3% versus last year.

Our results were somewhat affected by our decision to opportunistically raise capital to finance additional investments.

As I note that the $900 million of capital raised during the third quarter was not contemplated in our previous guidance.

Regarding our dividend, the Board approved a cash dividend of $0.69 per share for the quarter, which represents 1.5% increase versus last year's rate, and this will be our 158th consecutive quarterly dividend payment.

Now to provide some additional color on our third quarter capital activity.

We successfully issued 9.2 million shares in September which generated just over $400 million in proceeds.

Given strong demand, we were able to up-size the offering by 1 million shares, and note that the overallotment option was fully exercised and is included in this 9.2 million share total.

Also during September, we issued $450 million of seven-year senior unsecured notes priced to yield 4.75%.

Under our dividend reinvestment program, we issued 586,000 shares at an average net price slightly above $44 per share which generated $26 million in proceeds.

And under our equity shelf program we issued 431,000 shares at an average net price of about $44.50 which generated $19 million in proceeds.

And finally during the quarter, we did repurchase $159 million of secured debt with a blended yield of approximately 5.9%.

As a result of this considerable activity, we ended the quarter in an exceptional liquidity position.

As of September 30, we have over $1.3 billion of cash and line availability.

This puts us in position to finance our near-term investment pipeline, which currently implies roughly $600 million to $1 billion of additional net investments during the fourth quarter.

However, we do expect to assume approximately $300 to $400 million of project-level debt associated with these remaining 2010 investments, which would further reduce our potential fourth quarter cash needs.

Our credit profile remains strong.

Our debt to undepreciated book capitalization stood at 41% and interest and fixed charge coverage were at 3.6 times and 2.9 times, respectively.

Secured debt remained low at only 11.2% of total assets at the end of September.

Finally, I will review our 2010 guidance and assumptions.

In light of the strength of our current investment pipeline, we are increasing our 2010 acquisition guidance today by $500 million.

This increase brings our gross investment guidance to a range of $2.3 to $2.7 billion for the full year and this includes $2 to $2.3 billion of acquisition and joint venture investments and $300 to $400 million of funded development.

As a result of several planned asset sales likely to be pushed back to early 2011, we are slightly revising our 2010 disposition guidance to $200 million from the previous $300 million.

As a result, our full year net investment guidance has increased by $600 million to $2.1 to $2.5 billion.

Finally we did update our full year earnings guidance to reflect third quarter capital activity and fourth quarter projected investments.

As a result, we expect to report normalized FFO in a range of $3.13 to $3.16 per diluted share and normalized FAD in the range of $2.89 to $2.92 per diluted share.

The slight decline in the midpoint of our 2010 FFO and FAD guidance is solely a reflection of our third quarter capital activity, which is not included in our previous guidance.

Our current expectation for net income available to common stockholders has been updated to a range of $0.98 to $1.01 per diluted share as detailed in our press release.

With that, that concludes my prepared remarks and I think, Operator, we would like to open up the call for questions now, please.

(Operator Instructions) Our first question will come from the line of Rich Anderson with BMO Capital Markets.

Good morning, everybody.

Good morning, Rich.

One of the dings on your company in the past has been your exposure to development as a percentage of the total.

I think you mentioned you're down to 7% of portfolio, of that which is under development today that you're committed to.

What do you -- how would you respond to that?

I assume you would say that it is not a reasonable ding.

But where do you think development could go if you're seeing this inflection point as a percentage of the total from what is now a relatively low level?

Well, Rich, I think our so-called commitment to development has been overstated.

It was largely a result of the downturn and the constraints on capital where we were left with finishing out development, but not being able to proceed with some acquisitions that were very good.

If you look at the last year or so, most of our investments have been acquisitions, and investments are way back down to where they historically have been.

So, while we think that especially in the acute care space that there is a need for new medical facilities and larger state of the art medical office buildings, we think that our development in the 5% to 8% range, or something like that, is very reasonable and appropriate for how healthcare is evolving.

Okay.

In terms of the inflection point that you described, is that purely an observation about fundamentals stabilizing, improving, or is there something else involved in your characterization of it as an inflection point?

I think there are a confluence of factors that lead to my observation about an inflection point.

One, we have worked the last three or four years to move our portfolio to where we think we should be, moving toward combinations and newer state of the art acute care facilities, so we made a lot of progress there.

As you will recall, selling even some of the older skilled nursing facilities had a short-term dilutive effect, not a lot, but some.

And so, by getting rid of some of the projects we wanted to get rid of and redeploying into more modern assets, that had a dampening effect on FFO and FAD, but we thought it was appropriate.

We also have seen the opportunities that go with an economy that has driven a lot of the specialty finance companies out of the marketplace.

You know very well my attitudes about some of the people that come into senior housing and healthcare and do not factor in the operating risk sufficiently, and therefore roil the market, so pricing is good.

We have a lot more opportunities, and of course our -- the capital is readily accessible at very low levels.

So, I think there are a large number of factors that go with the territory.

I think as well, internally, the fact that we made a major commitment to full spectrum investing and we've really ramped up all of our capabilities and brought in top flight people who have become available over the last two or three years of the downturn, has put us in a position to really be running hard and effectively.

Okay.

On the entrance fee portfolio, you mentioned raising rents and starting the first of 2011 on nine assets.

Is that the deferred rent recapture or I guess that's what it is.

But when do you start seeing that deferred rent come back into the mix in earnest over the next -- is it all of 2011 or can you sort of timeline that for me?

Well, those are the original nine projects that we had with SLC.

Right.

And they have been very steady performers, and they're sort of the beginning of the move upward for all of our returns in entrance fee communities.

And as Scott pointed out, we're also adding more healthcare components to those facilities that should really help over time.

Whether we go up 50 bips or more, we don't know yet and what we're assuming 50 basis points, and we think we might be able to go up more in the following year.

And as well, Donald is running two other assets and we expect some real progress on those as well.

So, it is hard to project, but it is clear that the entrance fee communities are still very good projects, and that right now I'd expect to catch up in about two to three years, but it really depends on how the economy goes and how those particular markets go.

Last question is kind of bigger picture.

You mentioned the achievement of becoming a $10 billion company.

But just to play devil's advocate on this, if you're seeing all of this organic growth potential, why not kind of pull back on your, sort of, external growth, massive external growth activity and allow it to grow organically?

I mean, the more you become bigger, the more difficult it is to move the needle from a growth perspective.

So, I am just curious if you can comment on allowing your portfolio to grow without a whole lot -- this enormous amount of acquisition activity.

Can you just comment on that?

Sure.

We understand that as we get larger it is a little more difficult to get the kind of growth we want.

On the other hand, you don't turn down opportunities that we have seen this year and expect to see next year, when they're going to substantially strengthen our already very good portfolio.

So, it could well be that the next two years are going to be game changers and we're going to certainly have more than our share of those great investments, and it could be that things will get a little tighter and maybe there is more competition in 2012 or 2013.

But we see no reason when we have really terrific investment opportunities, probably one of the best periods for investing in my career at Health Care REIT.

We're not going to turn that down, but as Scott I think has intimated and I have as well, even being a $10-billion plus enterprise value company, we're going to drive very substantial growth next year and the following year.

If you were to just allow the business to marinate right now, to use a word, and just grow organically, is there the risk, though, if you continue to acquire that this inflection point will be extended out in terms of your growth -- your bottom line growth?

You're willing to give up the timeline a little bit to build a portfolio even larger?

Is that basically the thesis, allowing growth to kind of extend out to future years and maybe not next year?

No, I think we're going to have very substantial growth next year even with our size.

And frankly, if you look at -- your question almost implies or assumes that it is the old model of triple net leases, and steady increasers.

As you look at perhaps adding other RIDEA structures, as we look at our MOBs beginning to contribute to organic growth, and as we look at the entrance fee folks catching up, we think we're going to have very substantial growth along with very attractive investment opportunities.

So, we think we can do both for the next two years.

We're not pushing back anything.

I strive to ask dumb questions to get smart answers so you know.

Thank you.

I hope that's right.

Our next question will come from the line of Dustin Pizzo with UBS.

Good morning, guys.

Hey, Dustin.

Scott, I know we ask you this every quarter, but just on the loan receivable balance, can you talk about -- I see that it is down to $11 million this quarter from $78, which is good, and saw the provisions for the loan losses, but can you talk about what happened to the other $30 million of loan balances that -- did they become current or -- ?

I will give you an update, Dustin, for everybody on the loan book.

I would say big picture right now our loan portfolio is down to $416 million, which is only about 5% of our investment balance.

I would point out that our current blended interest on that is about 9%, on average, even including non-accruals.

The breakdown of the existing loan portfolio, as we said, is about 60% or $250 plus million is with three of our top ten operators, and another $100 million or so are with operators that have multi-property master leases.

And to your question in particular, I think we have gone a long ways to resolving virtually all of the outstanding issues within the portfolio this quarter.

As you mentioned, we reduced our real estate loans on non-accrual from $78 million down to $11 million this quarter, which is now only 0.1% of the overall portfolio.

And what we did was first we decided to write off $29 million related to one entrance fee and one senior housing development project that we no longer intend to pursue.

And I think that's consistent with a $20 to $30 million number I mentioned last call, in terms of what we viewed as our risk portfolio, and then on the positive side, we made some, I think, significant achievements.

We did transition a portfolio of LTACs to a new operator that assumed the in-place leases and loans and is paying us current as of October 1.

On another loan we ended up taking back a deed in lieu and took the land back and have an appraisal in excess of the land value.

And in one other project we restructured a loan where we now have an equity position with equal, if not better, economics for us.

So, at this point we don't foresee any additions to the balance of loans on non-accrual and it is down to only three small loans, two of which actually should be resolved over the next quarter or two.

Our next question will come from the line of Jerry Doctrow with Stifel Nicolaus.

Thanks.

So, just -- I want to come back a little bit to acquisitions.

Do we -- I guess I wanted to get a sense of what your appetite is for additional TRSs, which I think sounds like it is fairly good.

Do you kind of have a sense of a limit of how much NOI you would have or --

Well, Jerry, first of all, I think Scott and I have made it pretty clear that probably around 20% to 25% might be about right, because then you put that together with 20% to 25% MOBs that, hopefully as we drive even higher quality, will have an opportunity to contribute to positive growth.

And then one adds to the life sciences, and that investment is doing very well, so that would be my answer, 20 to 25% sort of our target.

Okay.

And I guess sorry didn't mean to cut you off.

That's okay.

Go ahead.

Obviously, we have the Atria deal out there which kind of sets a new pricing level.

What kind of pricing should we assume on transactions, particularly if you're thinking about TRS transactions in the fourth quarter and into next year?

Really, if you look at pricing generally, in senior housing, the cap rates have stayed quite low.

I don't really think that many people are going to go to the cap rates that we saw in the Atria deal, but it certainly had some impact, tightening up cap rates even further.

I think you're probably talking about probably 7% to 7.5% on a regular senior housing.

And if there is a greater than normal growth component, with -- only with the right operator, with the right facilities, it could perhaps be tweaked down a little below that.

But again it is only reason you would go down lower than 7% would be if there is really a terrific group of assets with a really substantial growth probability.

Okay.

And, again, I think you commented on this in general, but when you talk about the opportunities, I mean, TRS is a significant piece of what you see in the pipeline?

No, not necessarily.

We're looking at some possibilities, and we're looking at just standard senior housing transaction and John and his team have substantial possibilities in the medical facilities area as well.

So, we're looking across a full spectrum and we are evaluating some potential RIDEA structures and we'll have to see if we get home with those.

Okay.

And, two kind of nitty-gritty things, and I apologize if they're in the supplement, I may not have seen it.

Operating expenses looked like they jumped a little bit and looked like, I don't know if it was senior housing or deal related or MOBs and could you just -- is my observation sort of right there and is that kind of level expense going to continue or maybe a little more color what was going on?

Sure, Jerry.

It is Scott.

The property operating expense line included the Merrill Gardens portfolio, its property level operating expenses this quarter.

That was the biggest change, it was about $8 million of that number, it's just in there for one month this quarter.

So, you would expect that number to go up obviously once we have a full quarter of that portfolio performance in there and we will give more detailed, excuse me, senior housing operating disclosure next quarter.

Okay.

And then the other thing just in terms of you being a couple pennies under where we were, just looks like it was timing.

I think we have the timing on the capital raises.

How about the timing of the dispositions?

Is that in supplement or can you give us detail there?

It is in the quarter, Jerry, I would generally characterize that answer as it was totally related to timing, a few things that come to mind.

I know that the secure debt that we repurchased was on the very last day of the quarter.

I would also point out that we added on to our convertible debt as well as our 6% 10-year senior unsecured notes right at the end of the second quarter.

So, you had to reflect probably full quarter of interest expense there.

So, really it's issues of timing and we do give the breakdown in the supplement on Page 18.

Okay, I'll just look at the supplement.

Thanks.

(Operator Instructions) Our next question will come from the line of Todd Stender with Wells Fargo Securities.

Hi, guys.

Thanks.

George, in your prepared remarks you just highlight kind of an update on your Cambridge facilities.

Can you just go over maybe what you're seeing from the ground floor on the maturities, maybe in the next six to 12 months?

John, do you want to address that?

I think we're being a little careful right now because of our relationship with Forest City and what we're going to disclose before actual resets.

But I would say, in general, that everything that we assume going into the investment has been born out.

One, we clearly purchased our investment -- made our investment based upon a very attractive price point in terms of the real estate value, replacement costs.

And, two, it appears as well that the existing rents were going to move up dramatically, and give us opportunities for some very good organic growth.

John, do you want to add anything to that?

Yes.

Todd, this is John.

Todd, if we have the early renewals we have for 2011 we have seen substantial improvements over the -- or growth in the rent there.

We don't have any material -- more material space rolling until 2012 and later as we reported earlier.

But again, what we have seen so far really exceeded our expectations.

Okay.

Thanks.

Back just a discussion on the dispositions, did you provide any seller financing on the stuff that closed in the third quarter?

No, Todd, we didn't.

And just going back broad strokes, George mentioned your shadow pipeline, over the long-term, of about $5 billion.

What percentage would you say would that be towards new development?

Very little.

I am looking at my list right now.

Looks like about over 85% are acquisitions.

We're seeing some great opportunities and some very new modern buildings so far.

So, it has been a great year.

Thanks, guys.

Our next question will come from the line of Rob Mains with Morgan Keegan.

Thanks.

Good morning.

Just one left.

On the entry fee building that you discussed, rents are going to go up by 50 basis points on January 1.

Did I hear that right?

That's our expectation at this point.

Scott, can you remind us how much did they get reduced last year third quarter?

In concept, Rob, you can see $650 million total balance went from roughly 8.5-ish to an average of about 6%.

So, we're moving up from the 6% on about $400 million is our current expectation by 50 basis points.

That's actually all I had left.

Thanks.

Our next question will come from the line of Tayo Okusanya with Jefferies and Company.

Todd has actually asked my question.

So, thank you very much.

Thank you.

There are no further questions at this time.

I would like to turn the call back to Mr.

Chapman for closing remarks.

Thank you.

We're very, very pleased with where we are, and how we repositioned the Company.

And we appreciate all of your participating in the call and per usual, Scott and his team will remain available today for any follow-up questions.

Thank you.

Thanks.

Ladies and gentlemen, this does conclude today's teleconference.

You may all disconnect.