Good morning. My name is Thia, and I will be the conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living First Quarter 2017 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ross Roadman. Please go ahead, sir.

Thank you, Thia, and good morning, everyone. I would like to welcome all of you to the First Quarter 2017 Earnings Call for Brookdale Senior Living. Joining us today are Andy Smith, our President and Chief Executive Officer; Cindy Baier, our Chief Financial Officer; and Dan Decker, our Executive Chair of the Board of Directors. I'd like to point out that all statements today, which are not historical facts, including all statements regarding our earnings guidance, may be deemed to be forward-looking statements within the meaning of the federal securities laws. These statements are made as of today's date and are subject to various risks and uncertainties. Forward-looking statements are not guarantees of future performance. Actual results and performance may differ materially from the estimates or expectations expressed in those statements. Future events could render the forward-looking statements untrue, and we expressly disclaim any obligation to update earlier statements. Certain of the factors that could cause actual results to differ materially from our expectations are detailed in the earnings release we issued yesterday as well as in the reports we file with the SEC from time to time, including our annual report on Form 10-K and quarterly reports on Form 10-Q. When considering forward-looking statements, you should keep in mind those factors and the other risk factors and cautionary statements in such SEC filings. I direct you to Brookdale Senior Living's earnings release for the full safe harbor statement. Also please note that during this call, we will present both GAAP and non-GAAP financial measures. I direct you to our earnings release and our supplemental information, which may be found on the Investor Relations page at brookdale.com for important information regarding the company's use of non-GAAP measures, including the definitions of each of these non-GAAP measures and a reconciliation of each such measure from the most comparable GAAP measure. With that, I would like to turn the call over to Andy. Andy?

Good morning, and thanks for joining us. As always, we appreciate your interest in Brookdale. I will make a few comments about our progress during the first quarter and discuss our outlook for the remainder of this year and for 2018. But before I do that, I'd like to ask Dan to make a few comments.

Thank you, Andy, and good morning to all. I'm pleased with the progress that we are making at Brookdale. The first quarter was a good start for the year as we continue to be highly focused on execution of our business strategies, including achieving consistent operational excellence and optimizing our portfolio. As we've previously discussed, our board, in conjunction with management and our financial and legal advisors, remains very hard at work at our ongoing process to explore options and alternatives available to us to create and enhance shareholder value. Again, there can be no assurances that this review will result in any specific action or transaction. And I want to reiterate that no decision has been made to enter into any transaction at this time. Brookdale will only enter into a transaction or transactions if it can do so under terms that our Board concludes are in the best interest of the company and its shareholders. While the review process continues to be active and ongoing, there's no set date for it to conclude. We are not in the position to answer any questions or make any additional comments about this subject at this time. But rest assured, that we are committed to transparency and will provide updates as we can. Thanks, Andy, I'll turn it back to you.

Right. Thank you, Dan. As Dan mentioned, our management and board are focused on maximizing shareholder value. While we are exploring the options and alternatives available to us, we are also fully committed to driving the operational improvements in our business that will increase shareholder value, while also providing high quality care to our residents and strong opportunities for our associates. Let me turn to my comments about the first quarter's performance. For the quarter, our operating performance was generally consistent with our plan, and we are pleased with the operating improvements that we have made. We grew adjusted EBITDA by 8.5% over the first quarter of 2016 to a total of $198.3 million. Our adjusted free cash flow was $63.4 million, an increase of $35.6 million from the prior year's first quarter. Our proportionate share of the adjusted free cash flow of our unconsolidated ventures was $8.8 million, up from $8.5 million in the first quarter of 2016. Our seniors housing revenue was consistent with our expectations. RevPAR increased 1.4% from the first quarter of 2016, in spite of the fact that we experienced higher attrition due to debt at the end of 2016 and throughout the first quarter. During the first quarter, deaths were unfortunately up almost 10% compared to last year. We did an excellent job at controlling cost during the quarter and beat our operating income projection for seniors housing. We remain cautious, however, about projecting these savings to the rest -- aggressively throughout the balance of the year because we expect to continue to see labor tightness and wage pressures for the remainder of this year. Our Ancillary Services business also hit our expectations and showed a marked improvement in margin. Finally, we made significant progress on our portfolio optimization initiative by completing the previously…

Thank you, Andy, and thanks, everyone, for joining us today. I will discuss three topics: our first quarter 2017 results; our refinancing plans for our 2017; and 2018 maturity and our 2017 outlook. Turning to our first quarter 2017 results. We generally performed well relative to our expectations. We improved our adjusted EBITDA by 8.5% or 15.6 million on a year-over-year basis to 198.3 million. We more than doubled our adjusted free cash flow. We generated adjusted free cash flow of 63.4 million, a year-over-year improvement of 35.6 million. Additionally, our proportionate share of adjusted free cash flow of unconsolidated ventures was 8.8 million, a 2.9% year-over-year improvement. Our core senior housing operations performed slightly better than our expectations. While we expect our portfolio optimization initiatives to improve cash flow and our leverage, they do complicate our result. But I will start with our senior housing same community results for first quarter 2017. We grew same-community revenues by 80 basis points compared to the prior year. Same-community RevPAR was $3,925, an increase of 80 basis points from the prior year quarter. Our first quarter 2017 same-community senior housing portfolio weighted average occupancy declined 100 basis points year-over-year to 85.7%. Our same community occupancy declined 80 basis points sequentially, which is a bit higher than our seasonal occupancy decline, but we saw an increase in deaths as compared to last year, as Andy mentioned. Our first quarter 2017 same-community senior housing RevPOR increased 200 basis points on a year-over-year basis. The year-over-year rate growth reflects our use of incentives and discounts to manage occupancy in a very competitive macroeconomic environment throughout 2016 and the first quarter of 2017. Our RevPOR grew 340 basis points from the fourth quarter of 2016 to the first quarter of 2017. This was largely from in-place…

Thanks, Cindy. Our management team is focused on improving our operating performance. We're focused on overcoming the challenges of increased supply and wage pressures in 2017, and we believe that we're going to be well positioned for additional growth going into 2018 and beyond. And with that, we're pleased to take your questions now.

[Operator Instructions] And the first question will come from Frank Morgan with RBC Capital. Please go ahead.

I was hoping you could parse out a little bit in more detail the NOI growth you had in your own portfolio. Certainly, I think you only sold one building in that group. So, any color on how much of that improvement was just attributable to divesting the 1 asset versus what you were doing on an ongoing basis?

I would not characterize it the improved operations for the first quarter, I would not characterize as being markedly affected by any disposition. We didn't do a lot of disposition activity in the first quarter other than the HCP and Blackstone transaction. So, if I understood your question correctly, I would not characterize it as being primarily or even materially related to the dispositions that we've got.

Okay, that's good. But you did sell 1 of those to owing that own portfolio. Would that have been in your results that they weren't...

It would have been in our results. That was a small community which we sold for just shy of $6 million and not had any sort of material effect on the quarter's performance.

Okay, good. And then you talked about some discounting that you're having to do. I'm just curious, what form is that taking? And how much of discounting are you seeing from existing competitors in the market? And are you seeing discounting from some of this new supply that's entering the market?

Yes. Generally speaking, we're trying as best as we can to minimize our use of discounts and incentives. And where we can, we're trying to use short-term incentives which burn off as rapidly as we can. And I would say that during the first quarter, we had less use of incentives than we had in the third quarter and fourth quarter of last year. That having been said, we have to respond to what's going on in the local submarkets where our communities are competing. And it's very common for new competitors to come into the marketplace and to try to buy market share through very aggressive sales tactics and very aggressive discounting and incentive packages and programs, so we had to respond to that. And we expect that in many of our markets throughout 2017 as these new competitive openings happen, we expect that we're going to have to continue to respond that way or with some degree of incentives and discounting. But again, I would say we're trying to limit it as best as we can in the face of a pretty competitive market.

Sure. And I know this may be an oxymoron, but are they rationally discounting? I mean, obviously, these are new buildings, they got to have much higher cost basis. Are they flat out meeting you on a absolute dollar basis in terms of revenue per month and monthly rent?

In some markets, there are new competitive deliveries which are very aggressive in their effort to get their buildings to cash flow breakeven. I wouldn't say it's irrational. I might say it's frustrating, but it's not irrational in the sense that if you have a building that's empty, then you have every incentive in the world to get it to at least cash flow breakeven as rapidly as you can. And so you're going to see some -- where our operators and our sales force see some very aggressive incentive and discounting packages at least in certain markets where folks are trying to fill their new buildings up. We -- and as a result of that, sure, there are instances where we're beaten on price.

One final and I'll hop back in the queue. You mentioned this ongoing process. I'm just curious, when you -- as you continue this exploration, are you seeing any interest from any new types of buyers out in the marketplace?

Yes. We can't -- again, as Dan said at the outset, we can't comment very much on -- beyond what we've already said with respect to the strategic process. I would say that there is a lot of capital, both equity and debt capital, that is interested in our space. And I think I'll just have to leave it at that.

The next question will come from Brian Tanquilut with Jefferies. Please go ahead.

First questions for Andy and Cindy. As I think about the progress you've made in terms of managing expenses, both at the facility level and also on the G&A line, how should we think about the remaining opportunity for the year in terms of flexing the cost structure?

It's Cindy. Look, I think that we are always going to be focused on trying to reduce our costs. We gave guidance on G&A for the year which we haven't changed. I think that the big benefits that we see so far, this year, the $25 million of cost takeout that we did at the end of 2015, and as you can see from our first quarter results, we are obviously very focused on retaining that guidance. Now as we go throughout the year though, as we complete our portfolio of dispositions, we'll clearly look to take out cost associated with communities that are outside of our portfolio that we don't manage. And what we traditionally said is that 1% to 2% of revenue, it'll take us 6 months or so after the community is disposed of, to get the cost out of our balance sheet. On the senior housing side, we had really good labor control in the first quarter, but there's no question that it's a very competitive labor market. Our average wage rate was up 4% year-over-year, and we're seeing pressure on labor on both coasts in the Midwest. Pretty significant wage pressure. So we're still expecting to see 5.5% to 6% growth in our total labor expense, including benefits for the year. But we'll flex labor and manage it with occupancy as the year progresses.

Got it. And then, Cindy, as I think about the NOI increase on the owned portfolio, it's roughly a 12% in a quarter-over-quarter basis. So if you parse out the drivers of that between the disposals of underperforming assets last year and what's being driven by the expense controls that you've put through, how would you look at breaking that out?

This would be owned portfolio?

Yes, that's right.

So if I look at it, I basically say that we operated 363 communities or over 33,000 units at the end of Q4. We only had 1 fewer community in Q1. And what you saw was you saw sequential increase in $5 million of revenue, but you saw a $7 million decrease in our facility operating expenses. So to me, the primary driver is solid expense control. I think it's just an evidence that we really are paying attention to the details of the business. We're controlling what we can control in, let's say, sort of a very competitive macroeconomic environment.

Last question from me for Andy. We heard from some of your peers out there that there's supporting capital interest in this space, and I think there's been several transactions in the last 2 weeks of valuation there's load of it, $200,000 per unit. So what do you think is the appetite right now for senior housing assets in general? I mean, whether it's local domestic capital, foreign capital, strategic buyers?

Yes. I think the, again, as I alluded to earlier, Brian, I think that there is a lot of equity capital that's interested in the space. That includes traditional participants but also foreign participants. And you've heard that from a number of the REITs as an example. So I think there's a lot of liquidity, and I think there's a lot of equity capital interested in the seniors housing space. The debt markets remain pretty liquid as well. So I think there's quite a bit of interest in seniors housing.

The next question will come from Joanna Gajuk with Bank of America. Please go ahead.

So in the terms of the guidance and how you kind of view the quarter, so am I reading you right that you said that kind of the cost control is really kind of the improvement of there? And, I guess, you said 4% labor increase in the quarter versus you still expect 5.5% to 6%, so is there any view, or in terms of what drove that? Or is that just, you just pretty much flex the cost structure that you have to the point where you kind of was able to manage? Or was there anything you will highlight there on the labor cost versus the kind of the full year expectation, which we expected to be much higher than what you did in the quarter?

Joanna, this is Cindy. So the 4% was our average wage rate growth year-over-year. But the same-store labor growth was only up 2.1%. So because of difference between the 4% and 2.1%, you can see that we're actually able to get better labor productivity. Now a small piece of that was the fact that last year was a leap year. We had $4 million of benefit for leap year costs year-over-year, $3 million of that was labor. But with regard to leap year or not, I think that certainly we're doing a great job flexing labor in our communities with occupancy.

Great. In terms of the outlook for the years, so you did not change the top line outlook either, and with the pricing, I guess, still [indiscernible] it was deterioration versus the last couple of quarters because of the discounting. So is there any way you could describe kind of the effectiveness of this discounting? Because I guess you said that occupancy was still below your expectation, and I guess you highlighted that, that rate was much higher, up 10%. So is there any kind of indication that you're getting some incremental residence in as you respond in the marketplace with a discounting?

Yes. Well, let me take the first crack at that, and then Cindy, you can augment my response. First off, as we indicated in our prepared remarks, our revenue for seniors housing was pretty consistent with our game plan, was right on top of what our internal expectations were. Our occupancy was just a little bit below plan. And again, the flu was not only for us but for the industry, was pretty significant, beginning at the end of last year and going through the first quarter of this year. The attrition due to deaths for us was unfortunately up about 10% compared to last year, and the number of days in which we had communities embargoed. In other words, we were not taking new admissions based upon the flu being persistent and present in the community itself. That increased by about 24%, 25% compared to last year. So that certainly had a consequence on us. The -- and I would say I think our price performance, we had a very tough comp in terms of pricing comparing 2016 to the first quarter of 2017. But sequential rate improvement of 3.4% I think is pretty good. 3.2%?

2.4%. Sequential.

I think that was quite -- really very consistent with our expectation, and with -- it's quite good. So, look, we are trying to minimize our incentives and our discounting as best as we can. And our -- we are trying to respond on a local market by market basis based upon what our operators are seeing so that they can maximize not occupancy or rate, but to maximize revenue. So in that sense, we think it's effective, but it's challenging market out there for sure.

And, Joanna, just to clean up the transcript, the RevPAR increased sequentially with 2.4 %. The RevPOR increased sequentially with 3.4%. So clearly strong sequential increase.

Great, that's helpful. And if I may, just switching to the balance sheet and your comments about how you plan to address the 2018 maturities later this year. So do you have any sort of plans how you going to finance? I guess, there's some market descent, there's also converts that you would have to, I guess, either refinance or do something with that. So any indications how you will be able to finance that?

Sure. We essentially are planning to get mortgage debt on existing assets, predominantly our 2018 maturities.

And then what about the converts that are maturing?

The mortgage debt will generate enough proceeds to -- with additional cash and cash from operations to retire the converts.

The next question will come from Josh Raskin with Barclays. Please go ahead.

Just on the slide that you guys talked about the competitive reopening's, I think it went sort of 10% in 3Q, 9% last quarter and then 1% into the first -- I'm sorry, 7% into the first quarter. It sounded like from your comments, Andy, is this fair to say that you're expecting that to pick up through 2017 before it abates? And then sort of Part B of that question, can you just remind us what a sort of EBITDAR or EBITDA look like for a facility when a new competitor does open, when a new delivery does hit the market for, say, the next 12 months or so?

Yes. So two questions there. We're expecting new competitive deliveries for 2017 to remain roughly at the level that we've seen here in the first quarter throughout most of this year, beginning to taper off towards the end of the year or at least into early 2018. So we're sort of expecting today's environment to continue throughout 2017. It's very difficult, Josh, to generalize about what happens to a community in the face of new competition. In many cases where if we've got the right team in place and if we've got the building in tiptop shape and there's not a CapEx need or anything like that, we're able to hold around or suffer just a very little amount, a relatively modest consequence. But if the market is truly overbuilt and is really suffering from a glut of new competition or if we've had management change in one of the three key positions out of particular community that faces this new competition, then, of course, the consequence is more severe. But it's really difficult to cross the platform of a 1000 communities to generalize on the effect of new competition in any generalize way.

That's fair. I guess if you just took an aggregate that if you looked at communities that were impact -- your facilities that were impacted by new deliveries, say, in 2016, is there a way to say, okay, the average EBITDAR that portfolio is down 5%? Or is it 15%? Just trying to get a ballpark there.

Why don't we follow-up on that?

I will say it's very difficult to just generalize because if you've got a strong leadership team in place, if you've got the right marketing, the assets well positioned, you don't necessarily see a large impact of competition. If, however, your talent is recruited away and you lose your Executive Director, your Sales Director and Health and Wellness Director, the decline can be much more significant.

Okay. Maybe next question just on in the press release and in your comments, you talked about potentially other transactions. While you're doing the overall strategic review, which is more shorter term, these potential other transactions, are these ones that are contemplated with potential REIT partners or are these all on owned facilities or it sort of all of the above?

I'd say it's all of the above. I mean, our corporate development team is -- with respect to our owned assets, there are a number of potential transactions, I believe, been working on to simplify our streamline to platform or the portfolio. So there is certainly a number of at least potential owned assets that we might dispose of. And then we are in constant dialogue with our REIT partners about transactions that would work for them and work for us, it's got to work for both sides of the equation. And we are constantly dialoguing with them, looking for ways to improve our portfolio, at the same time searching for a win-win from their perspective as well.

Okay, that makes sense. And last answer on the refi. Just based on current market rates, and I understand you guys aren't necessarily doing the refinance today, but as you contemplate it this year, is there a rough estimate as to what to the increased cash interest cost would be sort of on an annualized basis if you did the full refi? And then any onetime cash disbursement that have sort of prepayment penalties or anything like that?

I think it's a little too early for us to give you an estimate of that. Part of it depends on at what point in the year we do the transaction. Certainly, the later in the year, the lower the interest cost. But when we get together on our call next quarter, we'll provide an update for you.

Okay. So you don't expect to do anything before the next quarter?

We don't expect to complete a large amount of our refinancing before the end of the second quarter.

The next question will come from Chad Vanacore with Stifel. Please go ahead.

Andy, you mentioned some potential owned assets to dispose of. Now would that generally be single asset that you're talking about or small portfolio and such?

Well, we're looking at a number of different things. But at the moment, I would say it would be either single or small portfolios, at least generally speaking.

All right. And then just thinking about occupancy too. Occupancy was down in the quarter but was actually in line with what we've seen from senior housing comps at large. So, were you able to parse in the quarter how much of that occupancy changed due to strong flu season and how much is from new competition?

Look, the decision for somebody to move into one of our communities is multi-factored and multifaceted. So, I don't know that we can parse it down as precisely as your question would call for. New competition creates pressure, though, on occupancy and on rate in many circumstances. That's clearly part of the environment that we're in today. Now with respect to the flu, Chad, I mean I can tell you -- you heard me say that our attrition related to deaths was up just shy of 10% year-over-year, that's about a little bit less than 300 people. And the number of communities that we had embargoed where we weren't moving people in throughout the quarter was up by about 24% or 25%, and that was -- I don't remember the exact number, but that was about 850-ish or so days that we had communities that were closed during first quarter because of the presence of the flu in the communities.

All right. Well, how about this. We're halfway through the quarter, so what's the early look on occupancy in 2Q? And where does the portfolio stand today?

Yes, I mean, as we said at the beginning of this year, we're going to -- we're focusing on RevPAR in this respect. And again, we're looking to grow our RevPAR for the year by at least 1%. That remains unchanged and so I think I'll leave it at that.

All right, let me try this one. How about -- prior quarters, you had said that you thought that the portfolio occupancy would end the year down just a little bit. Given the 1Q ending, did that change your expectations at all?

We aren't changing our expectations for the year. Certainly, our first quarter was slightly weaker than we expected, but it's still very early in the year, and we expect that our occupancy will be down slightly.

Just one more for me. Looking at your Ancillary Services, it looks like revenues, they were down but they looked like they've stabilized. Are you done with the outpatient therapy closures, or is there more to come? And is this a good run rate revenue that we should think about?

This is Cindy. We are done with our outpatient clinic closures. We finished those in the fourth quarter of last year. I would hope that we grow from here.

The next question will come from Ryan Halsted with Wells Fargo. Please go ahead.

Just a couple follow-ups on some of the questions that have been already asked. On the RevPOR growth, the rate environment, how would you characterize the rate growths that you're seeing where new supply has already been on the market for, say, over a year relative to where you're seeing the new pressures?

I think, again, it's very difficult to generalize. But if you, it normally takes for a market to stabilize in the face of, I'll call it, rational new competition, where there really is unmet demand, et cetera. It nevertheless takes about a year or so for that market to stabilize and to get back to more of a normal, sort of a more normal-type set of circumstances. In those markets, you're going to see, you're going to obviously have better pricing power than you have in markets where you've got brand-new competition that's opened up. And as I've; talked about earlier, you've got, in many cases, there are very aggressive discounting incentive programs that are utilized that have new competition. So again, it's hard to generalize. Obviously, if a market is stabilized though, you're, as a generalized rule, you can have better pricing power.

Okay. I mean in the past, it's, the range is being anywhere from 3% to 4%. I mean, is it fair to think that you're getting closer to the 4% rate growth in those markets where it's really fully normalized?

I'd say the rank, the, 2 different ways to think about this. What we have talked about is the -- what rate increases we get for in-place residents, and that happens in the main, in the majority of our communities on January, early in the year, usually in January. And those price increases, again, depending upon the competition and a lot of different factors, but mostly competition, that's going to be in the range of 3% to 5%. What happens, in our vernacular, what we would call mark-to-market, which is what does it look like when we move new residents in, that's what going to depend upon what's happening in the competitive marketplace and what's going on with respect to what these new competitors might be doing. So I don't think we have ever tried to generalize or say that the mark-to-market is 3% to 4%. That's going to vary depending upon the product type, depending upon the local market and depending upon new competition. But I don't think we've ever generalized on that, Ryan.

Okay, that's helpful. And then going to the expense questions. The $4 million benefit from 1 less day, was that across both compensation as well as other facility expenses?

$3 million of it was labor and the other $1 million was other expenses, totaling $4 million.

Okay. So even excluding that benefit, maybe just to take the other facility expenses since we haven't really spoken much about that, I mean, it looks like it was down year-over-year pretty significantly. And what, 1 in particular can you point to that, that you really were able to control effectively this quarter?

I think we did a great job on food, repairs and maintenance, communication and bad debts, in particular. All those cost areas were improved year-over-year on a same-store basis.

Okay. So -- but not one more than the other pretty broadly?

We had good expense control broadly.

Okay. And then moving on to -- you've talked a lot, up to this point, on some of the discussions you're having with your landlords regarding the leases you're looking to revisit. Can you just give us an update on how those discussions are going? And what's the typical lead time you think for you with a lease when you can really start to have more material conversations about those -- about potentially terminating those leases?

Again, just to -- well, a couple of different ways to talk about this or to answer that question. Obviously, we have conversations with our REIT partners as leases get near to their terminus or when they're near to their expiration, and we have to decide if we want to continue to lease the assets or if we want to exit the assets or if there's something in between to be done. And so those conversations happen around the -- probably a year or so, depending upon the size of the portfolio because some of them can be large. And so those conversations happen roughly a year before the lease terminates. Separate from all of that, we are always searching, and, again, I think this is true of our major health care REIT partners, they likewise are always searching for things that we could do to improve our portfolio while simultaneously improving their portfolio. There are no real timeframes around that, that searching for deal that works for us and it works for them. And again, we're in constant dialogue with our REIT partners around searching for those types of win-win solutions.

Okay. Maybe one last one for me. On the strategic review process, understanding that it's a very complex process, but is there any reason to assume that as time is passing since you first announced the review process that the scope of the options that you're considering or exploring might be getting reduced in size or complexity?

I don't think, Ryan, that we can add to what Dan said in our formal remarks. There's really not much we can add to that.

The next question will come from Dana Hambly with Stephens. Please go ahead

Cindy, just back on the labor, it was up 4% in the quarter. You're still targeting 5.5% to 6%. So I just want to understand, is there something you're seeing already that would push it towards that higher range? Or was it -- did you just benefit from the leap year in the first quarter? Or is this -- you just kind of being a little conservative here?

Well, so let me make sure that I'm clear. So the 4% is the average wage increase. On a same store basis, our compensation expense only increased 2.1%. So that 2.1% included sort of the effect that we flexed labor for occupancy as well as the fact that we have that leap year benefit. As we look forward, we basically have the impact that annual merit increases, we certainly are seeing labor tightening and wage pressures. And when we look at wage pressures, we certainly look at new competition, we see pressure on the Coast, we see pressure in the Midwest, we're seeing pressure on our nurses. And so I think we want to make sure that we are prepared to get the right people in our communities because as you know, having the right Executive Director, Health and Wellness Director, Sales Director and the right team in the community is what makes the difference for us. So that's a long answer to a short question.

No, it helpful. I appreciate that. And then on the refinancing, do you expect that the total debt load will remain approximately with the 1.2 billion for 2018?

So we are not looking to increase our debt leverage. Now I think what we'll need to do is get mortgage debt ahead of refinancing we'll get mortgage debt in 2017, we'll use that to repay the converts in 2018. So there will be a period of time where we have a higher debt load, but our intention is not to increase our debt.

That's helpful. And then last one. Andy, I don't want to get into quarterlies, but just thinking about occupancy, are we back to a year where you would expect a more seasonal pattern of low in the first, start to build into the second, third and fourth?

Well, yes. And to be clear on that, our expectations are that what we've seen seasonality, year in and year out, is that there'll be some occupancy pressure through till late second quarter. And then there will form a bottom and will grow into the -- occupancy will grow through the real growth season through the third quarter into the fourth quarter and will, hopefully, just hang on for the fourth quarter.

At this time, I would like to turn the call back over to Andy Smith for any closing remarks.

Thank you very much for joining our call this morning. We feel good about our first quarter. And if there are any follow-up calls, we'll around today, and we would look forward to talking to you. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.