National Health Investors, Inc. (NHI) Q2 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the National Health Investors' Second Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, August 6, 2013. I would now like to turn the conference over to Tripp Sullivan, Corporate Communications. Please go ahead, sir.

Thank you, Tina. Good afternoon. Welcome to the National Health Investors' conference call to review the company's results for the second quarter of 2013. On the call today will be Justin Hutchens, President and Chief Executive Officer; and Roger Hopkins, Chief Accounting Officer. The results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet, were released earlier this morning in a press release that’s been covered by the financial media. As we start, let me remind you that statements in this conference call that are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI in its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-K for the year ended December 31, 2012. Copies of these filings are available on the SEC's website at www.sec.gov or at NHI's website at www.nhireit.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables and schedules, which has been filed on Form 8-K with the SEC. Listeners are encouraged to review those reconciliations provided in the earnings release, together with all other information provided in that release. I'll now turn the call over to Justin Hutchens. Please go ahead.

Thank you, Tripp. Good afternoon, everyone, and thank you for joining us. With me today is Roger Hopkins, our Chief Accounting Officer. We had a great quarter, with a 14% increase in normalized FFO, a significant amount of investments, as well as enhancements to our balance sheet. I'll review our portfolio of investment performance shortly. Let me first turn it over to Roger to walk through our financial results. Roger?

Thanks, Justin, and good afternoon, everyone. My comments this afternoon are consistent with our disclosures in Form 10-Q, our earnings press release and our supplemental data report filed this morning with the SEC. I am very pleased to report strong normalized FFO growth for the second quarter of 2013. Normalized FFO for the second quarter rose 14.1% over the same period in 2012, primarily as a result of revenues from our new investments funded of $146,092,000 in 2012, including debt assumed in our RIDEA-structured transaction with Bickford Senior Living, and $26,150,000 funded in April of 2013. In the second quarter, our rental income from Bickford increased $1,200,000; new rental income from Polaris Hospital was $538,000; new rental income from Santé Partners was $522,000 related to a senior living campus; and new rental income from Landmark was $394,000 related to an assisted-living facility. Normalized FFO for the second quarter was $24,398,000 or $0.87 per diluted common share compared with $21,386,000 or $0.77 per diluted share in the same period in 2012. Normalized FAD for the second quarter was $23,792,000 or $0.85 per diluted share compared with $21,010,000 or $0.76 per diluted share for the same period in 2012. Normalized FFO and normalized FAD for the second quarter of 2013 excluded the impact on net income of a write-down of certain loan costs of $353,000 related to our updated and expanded credit facility of $370 million that we entered into in June 2013 and acquisition cost of $208,000, both of which were required to be expensed for accounting purposes. Net income attributable to common stockholders for the second quarter of 2013 was $19,920,000 or $0.71 per diluted share compared with net income of $16,928,000 or $0.61 per diluted share for the same period in 2012. Net income for the second quarter includes the accounting impact of the adjustments described earlier. Large transactions that are infrequent or unpredictable in nature that affect net income are adjusted in our reconciliation of our net income to normalized FFO and normalized FAD. Our revenues for the second quarter were up $6,226,000 or 28.5% compared to the same period in 2012 due to the volume and timing of our new investments in 2012 and 2013. Straight-line rental income was $1,412,000 in the second quarter. The revenues from our RIDEA-structured joint venture with Bickford amounted to $2,162,000 in the second quarter and represents 7.7% of our total revenues from continuing operations. Our RIDEA joint venture with Bickford currently owns 27 assisted living and memory care facilities and also has 3 facilities under construction. On June 28, 2013, we purchased 14 of these facilities from Care Investment Trust and 3 facilities from an affiliate of Bickford at a total allocated cost for accounting purposes of $137,459,000, which includes an assumption of Fannie Mae debt with a fair value of $80,528,000. Our annual lease revenue from this transaction will increase $11,086,000 beginning on July 1, 2013. In total, our annual contractual lease revenue from the operating company and the joint venture will be $18,836,000 plus escalators and operating cash flow. Including our share of income from the operating; company that flows through our taxable REIT subsidiary, we estimate that our revenues from our RIDEA investment will be approximately 15% of our total revenues over the next 12 months. Revenues and expenses for each year presented in our income statement exclude those properties that were sold or that meet the accounting criteria as being held for sale, with such revenues and expenses being reclassified discontinued operations. This reclassification had no impact on previously reported net income. Revenues from discontinued operations in the second quarter related to 6 older skilled nursing facilities that we expect to sell to our tenant, NHC, by the end of August. Rental income from our owned assets represented 89% of our second quarter revenue, mortgage interest income represented 7%, and investment income represented 4%. Depreciation expense increased $1,263,000 during the second quarter of 2013 compared to the same period in 2012 as a result of our new real estate investments funded in 2012 and 2013. Our interest income and amortization of loan costs increased $851,000 during the second quarter compared to the same period in 2012 as a result of additional borrowings to fund our new real estate investments and the write-down of loan costs, as described earlier. Our general and administrative expenses for the second quarter of 2013 increased $732,000 from the same period in 2012 due to professional and consulting fees, accrual of incentive bonuses and acquisition costs required to be expensed for accounting purposes. Share-based compensation expense was $253,000 for the second quarter. We estimate the market value of our stock options granted each year using the Black-Scholes pricing model. Based upon the required inputs to this model, we expect our non-cash share-based compensation expense to be $253,000 for each of the next 2 quarters. For the 6-month period ended June 30, 2013, compared to the same period in 2012, our normalized FFO rose 12.2%, primarily as a result of revenues from our new investments funded in 2012 and 2013. Our revenues have increased $10,239,000 or 22.3% from 2012. During 2013, rental income from Bickford increased $2,401,000; new rental income from Polaris Hospital was $1,065,000; new rental income from Santé Partners was $1,027,000; and new rental income from Landmark Senior Living was $749,000. Normalized FFO for 2013 was $47,994,000 or $1.72 per diluted share compared with normalized FFO of $42,761,000 or $1.54 per diluted share in 2012. Normalized FAD in 2013 was $48,197,000 or $1.73 per diluted share compared with $43,093,000 or $1.55 per diluted share for the same period in 2012. Normalized FFO and normalized FAD for 2013 excluded the impact on net income of a loan impairment of $4,037,000 during the first quarter and the credit facility and acquisition-related costs described earlier. On June 28, 2013, as part of the settlement of litigation with 2 borrowers, we received a full payoff of the carrying amount of our notes receivables from SeniorTrust of $15 million in cash. On the same day, we made an escrow deposit of $2,500,000 toward the purchase of 7 skilled nursing facilities in Massachusetts and New Hampshire from our borrower, ElderTrust. The transaction is expected to be completed by the end of August. The total purchase price includes cancellation of our note of $13,741,000 and cash of $23,350,000. We have agreed to lease the properties to NHC, the current manager, for an initial annual lease term of $3,450,000. We ended the second quarter with cash and investments and marketable securities of $50,674,000. Our debt at June 30, 2013, consisted of borrowings on our unsecured revolving credit facility of $167,000; unsecured bank term loans of $120 million, with a maturity of 7 years; and $80 million of Fannie Mae secured debt maturing in July 2015; and secured mortgage debt of $19,250,000 maturing in November of this year. We have $83 million available to draw on our revolving credit facility. We also expect sales proceeds of 20 -- $21 million by the end of August in relation to our sale of the 6 skilled nursing facilities to our tenant NHC. At June 30, 2013, we have ongoing construction projects totaling $38,500,000 relating to 3 new assisted living facilities and expansion and renovation of a senior living campus and an expansion and renovation of an acute care hospital. The total funds advanced so far on these projects amount to $11,745,000. We expect our normal monthly cash flows, sales proceeds and borrowings on our revolving credit facility will be the primary sources of capital to fund our new real estate investments for the remainder of 2013. We are pursuing HUD financing for a portion of our portfolio to pay down our revolving credit facility and extend our debt maturities. We are also evaluating a debt private placement, and we'll also consider agency debt. Each of these forms of debt capital will come at higher interest cost as compared to our revolving bank credit. We continue to have a very low leverage balance sheet relative to the value of our net assets and in comparison with many of our peer companies. As shown in our supplemental data report, we calculate our EBITDA coverage of our interest expense to be 18:1. On an annualized basis, our consolidated debt-to-EBITDA is less than 4:1. I'd now like to turn the call back over to Justin with comments about our investment portfolio and our 2013 normalized FFO guidance.

Thank you, Roger. I'll start with our portfolio of diversification. Looking at our portfolio statistics, lease service coverage remains very strong, with a weighted average lease service coverage ratio of 2.88x. As a reminder, you can find details on the ratios for our properties on Page 11 of our supplemental. NOI was up 9% in the Bickford joint venture with including the 27 communities and comparing to Q3 of 2012, which is the quarter prior to the original formation of the partnership. Occupancy was down a bit for the quarter and offset by pricing and expense control. The original 10 assets had similar performance. This performance is reflected on Page 12 of our supplemental. In terms of concentration, we have essentially hit our long-standing goal of moving the revenue derived from skilled nursing facilities down to 50%. Our next largest concentration is private pay assisted living and senior living campus properties, which combine for 35.5%. One of the biggest factors in hitting this goal has been our Bickford joint venture, which was significantly expanded with the acquisition of 17 assisted living and memory care communities in the quarter and a loan on another 6 communities that Bickford acquired separately in July. The NHI-Bickford joint venture has the option to purchase these 6 communities for $97 million. We had substantial investment in volume this year. We've noted on previous calls we expected most of our growth to come in the second half of this year. We are a bit ahead of schedule with over $223 million in new investments announced with top-tier operators, including Bickford Senior Living, National HealthCare Corporation, Fundamental and Emeritus Senior Living. All of the previously announced transactions have been closed, with the exception of the acquisition and lease of the Massachusetts properties to National HealthCare Corporation, which should close during the third quarter. We still expect some additional transactions could close in the second half of the year. However, most of what we had based into our guidance has been executed. Our pipeline still remains very active, and there are a number of private-pay assisted living communities on the market. Turning to our outlook. When we announced the Bickford transaction in early July, we issued guidance of our normalized FFO for 2013 to be in the range of $3.48 to $3.54 per diluted share, which equates to growth of 9% to 11% over 2012. The bottom end of this range assumes a baseline from Q2 2013, the recently announced acquisitions and the timing of the further terming out of debt on our revolving credit facility. On the top end of that range are assumptions for investment activity. As we noted in May, the dividend for the second quarter was increased to $0.735, a 5.8% increase from the first quarter and a 13.1% increase compared with the second quarter dividend a year ago, while still keeping our payout ratio low at 83%. In regards to capital planning, we termed out $120 million for 7 years at 150 basis points over LIBOR, swapped at a weighted average of 3.4%. This -- the amendment to our revolving credit facility increased the capacity to $250 million with a 5-year maturity at a very attractive rate of 140 basis points over LIBOR. We have plans to continue to term out debt with staggered maturities over the near and long term. Due to our low leverage balance sheet, we don't anticipate the need to raise equity in the near term. In summary, we have had solid results so far this year, creating value for the NHI shareholders. I am proud that the capital we provide to operators ultimately contributes to the delivery of health care services. We are fortunate to have mission-oriented, successful companies as our partners. We have established and have every intention of maintaining a culture fostering win-win relationships with operators. This approach ultimately fuels growth. Operator, we're now ready for questions.

[Operator Instructions] And our first question comes from Karin Ford of KeyBanc.

First question just on the Bickford portfolio. You noted that the occupancy fell sequentially, quarter-to-quarter, but it sounds like you got some nice rate growth. Can you just tell us where occupancy stands today? Were you surprised by the sequential drop? And what type of rate growth are you getting there?

Okay. Sure, Karin. This is Justin. And let me start by giving a little color. 4 of the 27 communities are effectively in turnaround mode, and that's what's dragging the occupancy down on the group a bit. And Bickford executed the plan to get those back on track, and the remainder of the group continues to perform very strong. In fact, the portfolio is up 9% since the inception of the RIDEA partnership. There's been a higher level of move-outs than move-ins. And the move-ins have not fallen at all, where move-outs were a little higher-than-normal, particularly in the 4 communities. And I've confirmed with Bickford, it's really just a matter of the absorption catching up again. And so there -- that really addresses the occupancy issue. The occupancy for the quarter was around 84%. And I've noted I think we're probably pretty much on that same pace. And hopefully, we'll see some improvement as these buildings get turned around over the next few quarters.

And what type of rent growth have you been seeing in the portfolio?

It's been in a range of 3% to 5%.

Okay. Can you talk about what type of expected NOI growth you expect on the new portfolio, the Care portfolio that you just purchased?

Sure. Back when we did our original RIDEA with Bickford and we analyzed their historical performance, these assets were included in that performance. So that -- you might recall that they had a 10-year track record of growing NOI 6% a year. These 17 were in there, the original 10, most of which were included in that study as well. So over time, that's our expectation. We'd like to see somewhere around 6%. Some years will be a little higher, others will be a little lower, but over the long term, that's the expectation based on historical performance and part why we ventured into this RIDEA relationship.

That's helpful. And last question just on investments. Have you changed your required cap rates on deals since the move-in interest rates? And I know you've been sensitive in the past about keeping the pace of growth, not wanting to grow the company too big, too fast. And you've done deals early, as you said. Has the rise in rates and/or the early pace caused you to sort of take a step back from the investment market here in the near term, while things settle out?

We have not taken a step back. And I have heard in the peer group, particularly the larger peers, are taking a step back and evaluating, and maybe there's a lack of large acquisitions available in the marketplaces that's helping to drive that. But in our case, there's still one-off assets and small portfolios available. And if you look at our weighted average cash yields, in '09 to '12, it was 9.4%. So far, in '13, it's at 8.77%. So there's really enormous spread in place over our weighted average cost of capital. And we have always known as interest rates go up, that there'll be pressure put on that spread, but we're starting so wide, that we're not concerned about adjusting our cap rates at all. And in fact, we do understand it'll put a little pressure on the amount of volume that we're forced to do to sustain the growth rate. We'll be mindful of that as we create our business plan and also just to inform our shareholders on a go-forward basis. But we still like our opportunity to grow. I did mention during the prepared remarks that most of the volume that we expected for the year is already done. However, there could be some more growth, and then we're continually evaluating more opportunities. And in fact, we're very busy in doing so. So I don't expect much change from where we've been over the past several years, quite frankly.

Our next question comes from Daniel Bernstein of Stifel. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: I guess, do you have year-over-year occupancy and average rate growth data for the Bickford, at least the 10 same-store properties? I'm not sure where I heard that or saw that?

As soon as Q3 happens, you'll start having year-over-year. I just wanted to make the launching pad the start of the relationship. And once we get in further down the road, we'll have year-over-year data, but I'm not really -- haven't really prepared to reach back before NIH was involved with the operations. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay, that's fine. What do you think the impact of the flu season was on Bickford's occupancy in Q2? I mean, it seemed to -- from comments from other operator in health care recently, the occupancy bottomed in March or April, but the average has kind of worked against that sequential -- how you've reported Q1 versus Q2. Let's try to think about how that flu influenced. And in going back to your operational experience, how does this flu season compared to prior flu seasons that you've seen?

Okay. So in regards to flu, and this came up on the last call, I do think there was impact in the industry. And I do think that it was probably a little more than in previous seasons. In regards to, specifically, the Bickford portfolio, they've had some flu, but really, what they were pointing to more as the cause of move-outs is just rising acuity and expirations of residents that have been a little higher than -- that caused higher move-outs than normal. Some flu, and there's a slightly higher number of memory care move-outs than there are straight assisted living, but it's really not even material. So altogether, it's a number of things that's all really acuity-related. That's how I would describe it. And the good news is, is the move-in activity has not slowed down, so we anticipate the billings that had a little bit of a falloff to get back on track. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And I guess, going back to historical flu. I mean, given the acuity increase in the industry and, I guess, in the Bickford portfolio, should we expect maybe going forward a greater seasonality in the first half of the year than we had seen in the past and then a bigger rebound in the average occupancies in the second half? I'm just thinking about how to -- just going forward, even beyond 2013, are going to have a more seasonal pattern because of the higher acuity in the seniors housing space?

What I would say just -- and this is -- I'm not really speaking to any particular company, but academically, I was little surprised by the softness in Q2. Usually, Q2 is a little stronger, and then Q3 is even stronger than that. So I don't think we've seen enough to say it's going to be a pattern each year, but it's -- I understand why you're noting it because it was a little unusual. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: I might start calling you Professor Hutchens from now on.

Thank you. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: And one last question. A few of your other health care REIT peers have talked about maybe some increased competition for assets. Maybe that applies more to the larger portfolios than the one-off transactions that you're doing. But are you seeing any additional competition out there, whether it's from private REITs or private equity or maybe even some of the small-cap healthcare REIT peers?

I would say that it's definitely more competitive. There's some smaller REITs. There's some new REITs on the scene. Private equity is stepping in more now because the leverage levels are a little higher. So it's very competitive. An advantage that we have, of course, is the fact that we have so many existing customers. We have 28 existing customers. We've had repeat business with a number of them over the past few years, even some of those that were newer to NHI. And we continue to add new customers as well. But I think part of our insulation from that competition is servicing our existing customers, and -- but I would concur that there is more competition out there in the marketplace.

Our next question comes from Todd Stender, Wells Fargo.

Can you provide a little more color with regard to the purchase option on the 6 properties that Bickford purchased that you guys funded? What was the cost of the option? And did you get a look at those before Bickford did?

Okay, sure. The 6 assets were assets that Bickford had a minority ownership and a management agreement with. They bought out the majority partner. That's what drove their purchase. They purchased it for $97 million. Based on our arrangement with Bickford, the joint venture had the opportunity, immediately, to purchase it for that price. We decided to hold off because the cap rate was sub-8, and there is some more opportunity for stabilization of those assets. And what I'd like to see is for that stabilization to occur. And because the purchase price is fixed, when that -- when we do pull the trigger on the option, if we do pull the trigger on the option, I'm anticipating that, that we'll move into those assets at a cap rate that's north of 8. That's really why we delayed it in terms of making the purchase, but we're already involved with the assets because of the mezz loan that we gave to Bickford to help make that acquisition happen.

Can you share what that stabilization rate is and what you're waiting for?

Well, really, the current -- the going-in cap rate was close to 7. And then what I would consider a stabilized cap rate is going to be north of 8. I don't have the NOI conversion in front of me, but that at least gives you an idea of the -- what the pricing would mean to us when we -- if and when we pull the trigger on the purchase option. And you asked the question earlier, too, did we pay for the option? No, we did not pay for the option. It was something available to us because of our contractual relationship with Bickford to have the opportunity to either a right of first refusal and a right of first offer, quite frankly, on their acquisitions on a go-forward basis.

Okay. I appreciate that. And with Roger, when you're looking at the guidance, I know that the low end and the top end of the guidance assume that line has termed out. Any changes in your interest rate assumptions on some of the coupons and the debt pricing that you looked at at the beginning of the year and kind of where we sit right now?

Todd, we're still actively pursuing the opportunities to term out debt. It's a high priority for us. We have seen long-term rates increase. As a matter of fact, just in the last 3 months, long-term rates have probably increased around 50 basis points. We continue to evaluate Fannie, private placement, HUD. So yes, we are in a rising interest rate involvement -- in an interest rate period. Our blended cost of debt capital right now is around 3.3%. As we look out over the next couple of years, we do expect that, that average cost is going to increase about 100 to 150 basis points. But terming out debt certainly remains a high priority.

Okay. And then the last question regarding your guidance, are the asset sales you mentioned that are expected to occur later this month, are they in your guidance?

Every -- all activity that we have any visibility into the remainder of the year is included in that guidance range.

[Operator Instructions] And it comes from the line of Rich Anderson of BMO.

So I have this idea. Since health care REITs have been disproportionately impacted because of their yield component, maybe you should cut the dividend. No?

I don't like that idea.

Okay, okay, just checking. So you talked about the transaction market is still kind of churning along. But with rising rates, would you give any more weight to using equity to get deals done? Or are you still okay to deploy the balance sheet?

We have -- in the near term -- and when I say near term, it's looking throughout the rest of this year and probably all of next year -- we think we have enough capacity on the balance sheet, plenty of capacity on the balance sheet to continue to use debt. And then, we'll reevaluate it at that time. But there's really no plan on using equity anytime in the next 1.5 years, 2 years.

Okay. How new is the website with the image of the really big guy looking down the really small guy?

That's relatively new.

Okay. Just wanted to point out that was pretty good. I like that.

Thank you.

And back to the transaction market, has there been any change in your mind to the longer-term IRR calc in terms of rising interest rates and how that might influence what you're willing to accept from, not a cap rate basis, but on an IRR basis?

Well, we have -- the way -- I guess the way we're looking at it, it's just pure spread investing. And obviously, based on the numbers that Roger gave, we're right around 500 basis points now. And we don't have any expectations that that's going to continue for much longer. And if you look out at some of our internal modeling we've done, as Roger mentioned, I think that we can see our weighted average cost of capital going up 100 to 150 basis points. So if that happens, you're getting closer to about a 350-basis-point spread. We would still consider that to be a very good spread, and that's just using our existing weighted average cash yield that we've had in 2013. But obviously, as interest rates go up, I would expect some impact on cap rates. It's not going to be a direct correlation by any means, but cap rates will go up a bit, which will help to preserve that spread.

Okay. And then the last question is, when you look at the next RIDEA deal, I know you've gone through this probably with me and others or maybe even on the conference call, but when you're valuing the real estate and you're valuing the operations, how does that rough math work out? I mean, I know you're applying incremental element of risk associated with the upward -- upside of the equation. But can you provide like a matrix on how you basically go about that?

Yes, I can. And I know that you've asked me this, and every time you ask me, I give you a different answer. The reason is we really -- we don't actually bifurcate the returns when we make the investment. But what I have decided is that if we're getting into an assisted living acquisition that's north of -- that's high quality, mid-high price point, which is exactly what the Bickford portfolio has been, and we're up in the mid-8 cap rates, then we've adequately taken into consideration that operating risk. So it's just really a matter, at that point, of where do you want to value the real estate? Do you want to call it a 6-cap, do you want to call it a 7-cap. And in any event, that operating cash flow stream, which, if not actually more volatile, in theory, it's more volatile over time. You'd have some kind of double-digit return associated with that and then a lower single-digit cap rate associated with the real estate. And that's absolutely how we viewed the risk going in, which is why we didn't do any of these deals. But when we found an opportunity to get it done at a cap rate that we think prices in operating risk, not to mention that -- where there's a structural advantage to the way we did with Bickford that mitigates operating risk to NHI, it made sense to do it. So I don't know if that helps at all.

So when you look and say, if you're looking at a RIDEA deal that's $50 million, I don't know, just need a number. What is -- how much of the value of that transaction is in the real estate? Is it $45 million? I mean, just rough numbers. How does that work?

You might have -- another way to put it is any way you slice it you have to get down to an income stream, and you need to identify the lease income stream, you need to identify what's left for the operating income stream. And you might get a 15 or higher multiple on the real estate component. And then you get maybe a 5x multiple on the operating component.

Right. But I mean, if you're just look at the asset, the $50 million transaction, is it -- certainly, it's weighted toward the real estate because you have hard assets there. But I'm just trying to get a sense of how weighted it is towards the real estate.

Yes. It's very heavily weighted to real estate, but it's -- beauty is in the eye of the beholder. I think you can get 5 of us at the table, we'd all give you a different answer.

We have a follow-up question from Daniel Bernstein of Stifel. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Justin, I want to go back to the use of equity versus debt, particularly, using secured debt. I'm not sure -- when I look at your valuation, you're really still trading like a sub-6 implied cap rate. Why incumber the portfolio with higher agency debt versus the use of equity? I know it's a little bit higher cost. But why are you -- why encumber the portfolio versus using something that doesn't do that?

Well, the reason is because it's higher cost. And if you believe interest rates are going to go up, then now is the time to term out debt. And that's where we're really focused on, it's terming out debt and utilizing debt financing, which we can fix for years and years to come. We have 7-year term loans now. Obviously, we're going to look for mid-term and long-term financing, as Roger mentioned. Now as it pertains to equity, we don't have any plans in the near term. I would never say never, though, because if there was sizable acquisition or there's potential that we could use equity. But just continuing with our current business plan and looking at the outlook for the next 1.5 to 2 years, I don't really see the need for equity. And the reason is this is more expensive. Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So you're going to sub debt for debt, and you're not too optimistic about interest rates, so you want to take that 30, 35-year term debt. That's how it's offering.

That's right.

And our final question is a follow-up from Karin Ford of KeyBanc.

I just wanted to go back to the 4 turnaround assets in the Bickford portfolio. Can you just talk about what Bickford is doing to turn the assets around and how long the turnaround plan is expected to last? Are they spending capital? Or is it simply just a marketing or a mix issue?

Sure. Yes, There's no new capital needed. All the assets are in just very, very top condition. They have -- quite simply, one of the methods we're using it just time because, as I mentioned, the move-ins never slow down. It's just trying to catch up from the higher percentage of move-outs that they experienced in the first half of the year. In a couple of cases, they have some new management they put in place. There's not any timeframe that we've put in place in terms of where the performance is going to be, but the expectation that they have is that they'll see improved performance over the next couple of few quarters. And as the performance changes, I'll keep everybody updated. But as I mentioned also, that the rest of the portfolio is performing very strong, which is why, overall, you're getting NOI growth in spite of those few properties that are dragging a bit.

Right. It's above 9% even with those included, right?

Right.

And Mr. Hutchens, I'll turn the call back over to you for any final or closing remarks.

Okay. I want to thank everybody for your interest in NHI and your continued involvement, and we look forward to talking to everybody on the next call.

Thank you, ladies and gentlemen. That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect all lines. Thank you, and have a good day.