Brookdale Senior Living Inc. (BKD) Q3 2013 Earnings Report, Transcript and Summary

Good morning. My name is Tonya, and I will be your conference operator today. At this time, I would like to welcome, everyone, to the Brookdale Senior Living Third Quarter 2013 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mr. Ross Roadman, Vice President, Investor Relations. Sir, you may begin your conference.

Thank you, Tonya. Good morning, everyone. I would like to welcome you all to Brookdale's Third Quarter 2013 Earnings Call. Joining us today are Andy Smith, our Chief Executive Officer; and Mark Ohlendorf, our President and Chief Financial Officer. I would like to point out that all statements today, which are not historical facts, may be deemed to be forward-looking statements within the meaning of the Federal Securities Laws. Actual results may differ materially from the estimates or expectations expressed in those statements. Certain of the factors that could cause actual results to differ materially from Brookdale Senior Living's expectations are detailed in the earnings release we issued yesterday and in the reports we filed with the SEC from time to time. I'd direct you to Brookdale Senior Living's earnings release for the full Safe Harbor statement. With that, I'd like to turn the call over to Andy Smith. Andy?

Thanks, Ross. Good morning. I want to add my welcome to all of our shareholders and other participants to our third quarter earnings call. Brookdale's third quarter performance was strong and we are quite pleased with our results. Before discussing the details of the quarter, I want to update you on certain elements of the strategy we've outlined for you over the past 3 quarters. First, as evidenced by the substantial increase on our same community operating income, we've been laser focused on the organic growth of our current portfolio by improving our sales and marketing functions and our operational execution. The enhancements we've made to attract prospects are producing more leads, better conversion ratios, and thus, more move-ins. The enhancements -- these enhancements include our brand activation, our internal and external call centers and new digital media initiatives. Second, the changes we made at the beginning of the year to flatten our field organization have resulted in better operational effectiveness, tighter cost control, and greater responsiveness at the community level. Third, as evidenced by the 170 basis point increase in the third quarter operating margin for the senior housing portfolio, the investments we've made in support systems are paying off with increased operational efficiency. An important component of this effort is our service alignment initiative. Service alignment is a proprietary process that benchmarks our labor standards to ensure, first and foremost, that we provide top quality services, while secondarily, ensuring that we do so as efficiently as possible. Matching our labor to meet those benchmarks makes us a more efficient service provider, and it ensures that we maintain our high quality -- our high standards for quality. Fourth, we continue to deploy our free cash flow into areas that produce the most attractive returns. Our Program Max initiative, with expected mid-teens returns is just now gaining momentum, and we are just beginning to see the impact on our results through increase occupancy, better pricing, and new capacity on repositioned units. We also acquired the ownership interest in a number of communities so far this year. We will remain active in seeking strategic and tactical acquisitions in a fragmented industry that has considerable potential consolidation opportunities. Lastly, we continue to innovatively expand the services we offer in the marketplace. We are pursuing opportunities such as hospice services and private-pay home care, both inside of our communities and outside of our walls. We place a high premium on innovation, as we analyze the programs we deliver, the services we offer, where we offer those services and even the customers we serve. Turning now to third quarter results. We produced strong growth in operating income and cash flow. We produced over $75 million of CFFO in the third quarter, nearly a 14% increase over the third quarter of 2012. Operating income was up almost 9% and adjusted EBITDA grew by 7%. This year-over-year improvement in both our consolidated and our same community results came through rate growth, occupancy gains and solid expense management. Consistent with the first 2 quarters of the year, our rate growth moderately exceeded our expectations. Senior housing rates increased 2.8%, up from last quarter's 2.5%. Our rate growth continues to gradually trend up as we build occupancy and reduce discounting. Looking specifically at occupancy, we increased our quarterly average occupancy by 100 basis points for the consolidated portfolio when compared to the third quarter of 2012. Sequentially, our consolidated occupancy was up 70 basis points. We saw similar positive improvements in each of our segments and each of our product lines. As we said last quarter, we expect occupancy to gradually build through the balance of this year, and October followed the trend with average consolidated occupancy of approximately 20 basis points. We continue to be excited about our national branding activation effort. We believe that we have a meaningful opportunity to differentiate Brookdale in our communities in a marketplace that doesn't have strong national brand. Over time, we are confident that the name Brookdale will become top of mind for our prospective customers, and will come to symbolize the trusted provider of the highest quality, Senior Living Solutions. We are using a multilayered marketing approach with local, regional and national activities. Some of these are traditional and some our innovative and new. We are creating better awareness of the benefits of our platform and greater opportunities for engagement with our seniors and their families, with the final result of more people experiencing the benefits of what we do and becoming advocates for the brand. While it is still early, we are measuring a number of metrics to track our progress since the brand activation began in May. Here are a few examples of the metrics we're tracking: comparing the 150-day period, pre- and post-brand activation, we saw that our website visits were up 22%; searches originating from mobile devices were up 96%; and prospects searching for specific community information on our website increased by 27%. We feel it is critical to continue to evolve and innovate our sales and marketing activities to adapt to a changing marketplace. Our third quarter third-party call center, which handles and qualifies inbound phone inquiries responded to 40% more calls in September than in May. Our internal call center, which we call the Brookdale Solution Center, focuses primarily on 2 areas of opportunity: first, speed to lead. That is more rapid response to Internet leads; and then secondly, to nurturing relationships with current but older prospects in our lead bank. We're also continuing to develop and enhance our social media presence. One immediate benefit of social media is the creation of new channels for public advocacy for our communities, our satisfied residents and their families. Recently, a number of questions have arisen regarding new construction activity in the industry. As the NIC data has shown, there is an increase in construction of new units. From a high-level perspective, this is neither surprising nor alarming for Brookdale. Why is this? Well, first, demographics are inevitably going to broaden and deepen our market. There are a number of ways to major demographic growth, but all of them showed demographic tailwinds for the industry. For example, consider the growth of those over 85 with incomes over $50,000. This is our demographic sweet spot and today, there are 4.4 million people in this group. But that number is estimated to grow by 7% per year through 2015. Second, the level of new construction is still fairly modest, both on a historical basis and when measured against current inventory. The NIC data for the top 100 markets shows 19,250 Senior Living units under construction, or 2.5% of inventory. That's not a large number in comparison to the almost 800,000 units of current senior housing capacity in these markets, and it is meaningfully lower than the 7% demographic growth that I just described. Of course, the real impact of new construction is more subtle than these broad big national numbers, which don't tell the whole story. We have a very diversified portfolio, both by geography and by product type. So one has to look at the local markets and really local submarkets, in order to make accurate assessments. As we do our planning, we look carefully at our local markets and what is happening in the competitive landscape. For new competition, we look at proximity, which we typically measure as a 5-mile radius, and then measure the demand in that submarket to assess the impact of new capacity. Telescoping down this way shows that the vast majority of the new construction is actually not within our submarkets and is therefore, not actually competitive with our existing communities. That said, there are a few submarkets where we expect new competition over the next several years. In those instances, we plan a response by implementing a comprehensive plan, what we call new competition readiness action plans, to address a number of response areas including marketing, pricing and potential CapEx for the affected community. The reality is, that the new competitor brings added marketing dollars into the market, usually generating additional demand and we most often get a shot at those prospects to sell the value of what we do. So while we keep a watchful eye on new construction activity, we don't currently believe that the current industry's supply-demand equation is unfavorable to Brookdale and the new construction is far from an irrational level. And on a local level, in the limited instances in which we actually face new competition, we believe we're well-equipped to minimize the impact of the new supply. In conclusion, we often tell you that what our associates do is more than a job, it's a passion. Nothing represents our associates passion more than what they have done for the Alzheimer's Association this year. Over the last several months, our associates have been involved in multiple activities and have raised almost $650,000 for this cause. I want to take this moment on behalf of those affected by this terrible disease to thank our associates for their caring and again, showing that this is more than a job, it's a calling. I also want to thank each of you for your interest in Brookdale. And now, here is Mark, to review our financial results in more detail.

Thanks, Andy. After the market closed last night, we issued our press release summarizing our financial results for the third quarter of 2013. We've also posted on our website, brookdale.com, our quarterly supplemental data package. Let me walk you through the key elements of our performance for the quarter. Looking at our key non-GAAP financial performance metrics, we saw that, excluding certain items from both periods, our cash from facility operations or CFFO for the third quarter totaled $75.2 million, a 13.8% increase over the third quarter of 2012. Adjusted EBITDA was $114.1 million, a 6.8% year-over-year increase. For the initial 9 months of 2013, CFFO was $219.9 million, again, excluding certain items from both periods, a 13.5% increase from the first 9 months of 2012. Our same-community data for senior housing for the third quarter of 2013 compared to the third quarter of 2012, continued the solid performance trends we've seen this year. We produced a 3.8% increase in same-community revenue, due to a 2.5% increase in revenue per unit and a 100 basis point improvement in occupancy. For the third straight quarter, our initiatives demanded same community costs resulted in modest expense growth at 1.7% for the third quarter. We continue to see progress from our service alignment system that Andy mentioned. This process improves the matching of labor required to provide quality services to our residents, even as we add associates to accommodate occupancy growth. Also, savings in our employee health benefit plans contributed to moderate our cost growth. Senior housing same-community operating income grew 8.1% versus the third quarter of 2012, and 6.4% for the first 9 months of 2013 compared to the same period in 2012. We drove top line consolidated revenue growth of 4.7% for the third quarter -- over the third quarter of 2012. Total occupancy grew by 100 basis points year-over-year. Looking at the year-over-year growth in occupancy by segment: Retirement Centers were up 110 basis points; Assisted Living was up 90 basis points; and together, the CCRC segments were up 80 basis points. Our overall sequential occupancy was up 70 basis points from the second quarter of 2013. Compared to the second quarter, the quarter average occupancy for our Assisted Living segment was up 60 basis points, and the Retirement Centers segment was up 80 basis points. Average occupancy for both of these segments was over 90% for the first time in quite a while. Occupancy in both CCRC segments was up -- was also up modestly over the second quarter. During the third quarter, we saw continued pricing strength with a 2.8% year-over-year increase in senior housing average revenue per unit, which raised our year-to-date growth rate to 2.7% compared with the first 9 months of 2012. Our net entrance fee cash flow came in at $11.4 million. Third quarter entry fee cash flow was less than last quarter due to higher refunds and fewer sales. We continue to believe that this market is improving. As a reminder, this product line has a 2-year sales cycle and sales can be somewhat blocky. We do not believe that our third quarter entry fee sales results were materially impacted by negative macroeconomic or general economic factors. We have 43,000 leads in our entry fee lead bank and bring in over 2,500 new leads per quarter. We continue to see consistent activity from our entry fee leads and feel good about entry fee sales going forward and we're off to a good start in the fourth quarter with both deposits and sales. Year-to-date, net entry fee cash flow is over $35 million. Our ancillary services business produced $61.2 million of revenue in the third quarter, a 7.6% increase over the third quarter of 2012. Operating income for the ancillary business for the third quarter was roughly flat with the third quarter of 2012, as the business continues to be adversely impacted by therapy caps, sequestration reductions and rate reductions in Outpatient Therapy. We expect continued volume growth in Home Health and hospice. We now have 10 hospice agencies in operation, 5 of which are in startup. We continue to anticipate that full year operating income for our ancillary service segment will approximate last year's performance. General and administrative expense was $45.8 million for the third quarter of this year. Included in our G&A cost is noncash stock-based compensation expense of $6.9 million and integration transaction-related in EMR rollout cost of $4.7 million. General and administrative expenses for the quarter, excluding these items, was $34.3 million, a 5.4% increase over the third quarter of 2012. G&A expense, net of the noted items, was 4.3% as a percentage of total resident fee revenue under management. Our Q3 spending on routine CapEx, which we reflect in our CFFO calculation was $12.1 million. Looking at other uses of cash, we continue to put a top priority on reinvestment in our portfolio. We spent $29 million in the third quarter and $76 million year-to-date renovating our portfolio to improve the competitive position of our communities and to drive higher occupancy and rate growth. We've completed 12 Program Max projects so far this year. In addition, we have 21 more Program Max projects under construction, with 19 more in active development. Our capital structure continues to be sound. Our ratio of debt to adjusted EBITDA is 5.7x, slightly below our target, and is trending down. We have negligible debt maturities through the end of 2014, and we have over $230 million in available liquidity from cash on hand and availability under our line of credit. Finally, turning to guidance. given the third quarters a result, we're refining our full year guidance to between $2.40 and $2.45 of CFFO per share. This guidance includes a partial year's accretion from the recently closed 7 community acquisition, otherwise, it does not include the impact of future acquisitions or dispositions nor the expenses from transactions integration and EMR rollout cost. We'll now turn the call back to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] Your first question comes from the line of Kevin Fischbeck with Bank of America Merrill Lynch.

Just wanted to see if there was any more color to how you guys are thinking about the general backdrop and demand for Senior Living? I guess, the commentary on the entrance fees not being impacted by the macro environment. Any color as to why you feel like that was not the case in the quarter? And then if there's some way to kind of parse out what you think the core growth in your business is versus maybe what the new marketing initiatives have added to the occupancy.

Okay. I'll take a crack at that, Kevin. The -- first off, on the entrance fee front, as Mark said, these are long lead-time sales activities and they can be a little chunky. We feel very good about where the entrance fee business is heading for Q4. The month of October has been very, very strong both in terms of lead activity, as well as the deposits we've actually taken. So again, we feel like these -- our markets, our entry fee assets are in markets that are improving. And we think -- we feel very positive about where that part of our business is heading for the fourth quarter. In terms of marketing, if I understood your question, we do believe that we're seeing -- we're getting traction from our branding activation, from our focus on improving our marketing function and our sales execution. As a result of that, we're seeing more leads, year-over-year, our lead base is up quite significantly. And we think we're just doing a better job in terms of executing and converting those leads into move-ins. I hope I answered all of your questions, Kevin.

Yes. I mean, I guess, as far as the lead side of things, I guess the numbers you kind of included this quarter were very similar to the numbers you had in the first few months, that's good to see that the momentum is staying on. Is there any reason to think that, that number has room to improve again next year? Or is this kind of -- I'm just trying to figure out how much of the lift we're seeing this year is related specifically to that, whether there's something to think about as being a tailwind into next year?

We believe that this is a long-term gain, and we believe that our branding activation along with the enhanced marketing activities that we're doing, are both the near term and intermediate term and long term, are going to produce long-term gains. So we would expect, as we go through next year, to see all of these metrics continue to improve.

Okay. And then on the ancillary side, the therapy volumes were pressured. I mean, how do you think about that business? Is that kind of reached a plateau now that bottomed out? Given that we now have the new rules kind of in for a more sustained period of time? Or do you think that there'll be pressure on that next year?

Well, obviously, we're beginning to get some visibility from a REIT standpoint into what CMS is planning for 2014, both Home Health and likely, Outpatient Therapy, will be under some rate pressure. We are responding there to adjust the cost structure where we can and when we can. Beyond the economics of the business though, the ancillary services part of what we do is critical to our brand positioning and our product positioning in local markets. It's an important tool as we reposition and integrate acquisitions that we might do. So you're right. There may be some short-term economic pressure there where the growth rates are in its high as they had been, historically. But in a broader sense, in terms of how we package our service and our brand, continues to be very important.

Your next question comes from the line of Jack Meehan with Barclays.

I appreciate the color on construction and I like the 5-mile radius. Is there any way to tell what percentage of your communities fall within that range and have some sort of construction activity? And then, whether or not it's a similar property type to what you have in that market?

Well, again, Jack, I don't have those statistics right here with me, but we do track that very carefully. Let me -- in fact, let me give you an example, I was looking at Houston yesterday, which is part of our budget planning process for 2014. So when you look at Houston, we operate 22 communities there in 15 submarkets with around 4,100 units in operation. In total, the Houston market has 135 communities with Senior Living capacity of about 16,700 units. Now the NIC data shows growth of 11 Independent, Assisted and Memory Care communities, 1 of which we're going to manage, which is almost 1,125 new units or 6.7% of the total capacity in the broader Houston market. However, against this new supply, NIC estimates that the Houston market of people over than 85 with income greater than $50,000, again, our demographic sweet spot, that demographic is going to grow at a compound annual rate of 9.2% over the next several years. In addition, 85% of the new units under construction are Assisted or Memory Care, which is well below the amount by which NIC indicates that Assisted and Memory Care markets in Houston are already, today, undersupplied. So as we analyze our 15 Houston submarkets, we really see that there are only 3 markets that have a slight bit of oversupply after all of this new construction is completed in the next several years. In those 3 submarkets, we have 257 units. Again, we are providing competitive response action plans to deal with that new competition with respect to those 257 units. So while Houston could appear to be an average market based on the general NIC data, it's a huge MSA with a lot of underserved areas and a growing target population that's going to absorb this new construction. So that's the way that we analyze each of our particular submarkets when we think about what new construction looks like. I hope that's helpful to you.

Yes, that makes a lot of sense. And then on the branding, it sounds like you have pretty good momentum. Is there any way to parse out -- was there any sort of contribution to the occupancy that you can segment to that? And do you think more -- it's in the lead phase and then maybe we'll start to see a bigger contribution in the fourth quarter or in the next year?

We expect to gradually improve all of the metrics that we're tracking around the marketing -- all of our marketing functions, including our brand activation. There's no real way to parse out what the brand actually is producing when comparing that to the other marketing innovations that we're implementing and what we believe is better sales execution. So I can't really say, "Oh hey, the occupancy improvement, part of it is directly associated with the brand." All we can do is track the general metrics, some of which, we just outlined for you as we go forward. But again, we think the momentum will continue to build in terms of developing new leads, more inquiries, and producing greater conversion ratios, so that we'll we see greater move-ins.

Got you. Okay. And then just a last one for me on the rate growth, modestly exceeding expectations. What sort of increases are you seeing in the units that turn over, is it above that rate? And do you think that could be an opportunity as well?

Well, certainly, as we go forward, it will be. Again, both the Retirement Center and Assisted Living segments averaged over 90% occupancy in the third quarter. We have talked for the last 2 or 3 quarters about the fact that the mark-to-market features of our rates have just started to turn positive. So certainly, the farther into the future you go, and the farther we sustain the occupancy momentum that we've seen, the more rate growth that will support. Now again, as a reminder, though we are in a fairly low inflation environment today, so what one might think of as reasonably heady rate growth today, would be different that it would have been in 2005 or 2006.

Your next question comes from the line of Nick Halen with William Blair.

As occupancy continues to tick up, I was just wondering if you could parse out the benefit you think you could see to your rate growth from using lower discounts, or still no real changes there?

Well, we think as occupancy trends up, we will be able to reduce our use of discounts and then our rate therefore, will gradually increase.

Okay. And we saw that you recently froze some wages just given the Medicare regulatory changes that are impacting innovative senior care. How much can that offset pressure and what else are you doing to manage that operating segment under the regulatory changes?

Well, first, we froze wages for a small portion of our associates that were working in the ISC division. We did that actually at the beginning of 2013. Not -- I saw some press releases and it make it seem as if we did it in the middle of the year. We did that in order to respond to the -- what's happening in the regulatory environment or the rate environment. It's unfortunate we don't mean, we don't like to do that but it's a reality that we had to do to make this business more productive. We continue to search for ways, to make -- to respond to the reimbursement headwinds that ISC is in all -- anybody who is being compensated by Medicare is facing. And so we're searching for ways to be more productive, more efficient and more effective in the delivery of those services because frankly, they're extremely important to our residents.

Your next question comes from the line of Darren Lehrich with Deutsche Bank.

This is Dana Nentin in for Darren Lehrich. Just wondering if you could talk a little bit about rate growth trends you're seeing in your sort of top quartile versus bottom quartile communities in terms of occupancy, and if you're seeing any notable deviation?

Obviously, that's something that we look at. And as Andy mentioned, we're right in the middle of our planning process for next year. So one thing that we focus on, is just as you described, how is rate growth and the different features of rate growth, whether it's discounting, lack of discounting, street rates and those kind of dynamics, how are those playing out across the various types of portfolios. There is -- we are seeing higher rate growth in the very high demand, high occupancy markets. It is not a factor higher, but it is somewhat higher as you get into those higher occupancy markets. Again, there are lots of different markets, there are lots of product mixes in different markets and we're in a general environment today, where inflation is relatively low. So we certainly do see a difference in rate performance in different markets but the range of that is relatively narrow.

Okay, great. And then just last quarter you mentioned you were about midway through rolling out EMR to the Outpatient Therapy business, and I think with skilled nursing on deck next. Can you just update us on, I guess, where you are at this point and sort of how much is left?

Sure. I -- we're over halfway through that process now with Outpatient Therapy. We should complete that deployment by the end of November, early December. Obviously then, we go through a few months where -- when we're fully deployed we're tweaking and training and refining the system deployment but that's pretty close to being deployed out in the field.

Okay, great. And then just one more, if I could. On cost control, how much runway do you think you have with respect to cost control?

Interesting question. We've seen relatively low cost growth now for 3 quarters in a row. We're certainly focused on it as we go into next year. The magnitude of that I think we'll describe when we do guidance in the fourth quarter.

Your next question comes from the line of Daniel Bernstein with Stifel. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: I guess, I'll be the one who asked about the real estate and where you are in the strategic review, the real estate, is there still a strategic review and how -- and has interest rates and this pressure of cap rates in the seniors housing industry changed your view how you want to think about the real estate strategically. I just haven't heard about that in quite a while from you guys in a couple of quarters, so I just wanted to get an update on where you are on that.

Sure. Thanks for asking again, Dan. We really don't have anything more to say than what we said in the past, but I'll reiterate it. Mark and I and the management team here, we believe it's part of our job to constantly assess what's the best way to maximize the advantages of our capital structure. And so we're continuing to do that, and one of the elements that we look at is what's happening in the rate environment and that's simply one factor of many that we're constantly assessing as we try to figure out what's the best way to maximize value for our shareholders. I don't have anything else to say other than what we've said in the past on that front. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay, okay. And then in terms of -- I just want to get back to the expense issue there. When I think about the year-over-year expense -- facility operating income growth and margin improvement, how much of that is maybe last year's third quarter being very high utility expenses with heating costs across the country versus -- I guess, I would characterize as more normal heating expenses for this summer. Is there -- Was there a pickup on the utility side? And then also, the other part of the expense equation that I'm thinking about is, as you talk about the increase in Internet leads and move-ins, how is that affecting the amount of your expenses for referral sources like A Place for Mom, et cetera. And how big of an impact has that been for your expense control so far?

Well, this is a memory quiz. So on the cost side, it was a more moderate cooling quarter this year but utility costs are 5% or 6% of our cost structure. So that can have some minor decimal effect on our cost growth but it's literally a minor decimal effect. Beyond some additional efficiencies on the labor side of things, the one other thing that would have impacted the numbers this year is our employee benefit health care costs. If you remember last year, we had, had fairly difficult experience, particularly in terms of a few high-cost claims. This year, we have not seen that. We've had much better claim cost experience in the plan. So, probably second behind the service alignment efficiencies would be the changes in health care cost.

Dan, on the Internet lead front, I wouldn't say that our cost of acquiring leads or move-ins was materially reduced for the third quarter. That's not what drove the 1.7%. Now I would underscore, over the longer-term haul, as we make these investments in our brand activation, in new, in better, in more innovative marketing techniques and better sales execution, we would expect the cost of our lead acquisition to go down, but that was not a driver in the third quarter. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay, okay. But if I had to characterize your future expenses, there was nothing really abnormal in the quarter you expect to maintain this kind of operating margin with normal seasonality going forward, is that a correct characterization?

Yes. The seasonality, yes. But again, around general cost growth, we'll give folks some perspective on that as we wrap-up our budget process and provide us some guidance for next year. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Yes. You did mention it just a moment ago. One other quick question in terms of development, how do you think about you guys developing your own facilities at this point? Own it, operate it versus managing assets for somebody else that's developing? What is that trade-off? Have you thought about developing your own assets at this point?

Yes, we think about that type of thing all the time. First and foremost, our principal use of our free cash right now is to invest in our current portfolio through Program Max and simply making investments in the physical infrastructure that we currently operate, own, manage or lease. That's our #1 use of our capital. And that right there is a very significant development pipeline, very significant. I think as you look out over time, it's possible that we might, in a moderate way, where we believe it helps in local submarkets, we might partner with other folks to develop the DeNovo communities. But that is not a big driver of our plan going forward. We believe we have significant, actually, huge opportunities to continue to make the investments in our current portfolio, where again, we're seeing mid-teen returns, and so we expect that to be our principal focus in terms of new development. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: And I guess the right characterization, it's those program, as to EBITDA enhancing, would be a lower risk, maybe higher return, than building a DeNovo new property?

Yes. Exactly, I wish I had said that.

Yes. We've got to be careful not to split hairs here because we're often building new capacity in Program Max. So if we build a new 40 unit Dementia care building next to an existing retirement center, that's our version of development. And we get a lot of those economic yields that you see from new assets but at a much lower risk than you would with true greenfield-type development. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Right. But you're building capacity where you know you need the capacity, that was my point?

Yes. Of course, of course.

There are no further questions at this time. Do you have any closing remarks?

I just want to say thank you for participating. Management will be around if you have follow-up questions. With that, have a good day. Thanks.

This concludes today's conference call. You may now disconnect.