Ladies and gentlemen, thank you for standing by, and welcome to the National Health Investors Third Quarter 2014 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, today, Tuesday, November 4, 2014. I would now like to turn the conference over to Colleen Sullivan, please go ahead.

Thank you, Amanda. Good morning. Welcome to the National Health Investors Conference Call to review the company's results for the third quarter of 2014. 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 yesterday afternoon in the press release that's been covered by the financial media. As we start, let me remind you the 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-Q for the quarter ended September 30, 2014. 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 in 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 will now turn the call over to Justin Hutchens. Please go ahead.

Thank you, Colleen. Good morning, everyone, and thank you for joining us. With me today is Roger Hopkins, our Chief Accounting Officer. I'm pleased to report a solid quarter and year-to-date results. We reported at 9.4% increase in normalized FFO and a 4.4% increase in normalized AFFO over the same quarter in 2013, 15.4% and 8.9% year-over-year respectively. We have announced $233 million of investments and commitments for the year, which is evidence of our continued focus on high-quality, relationship-oriented growth. Roger will provide some color on the quarterly results.

Thanks, Justin. Good morning, everyone. My comments this morning are consistent with our disclosures in Form 10-Q, our earnings press release and our supplemental data report filed yesterday afternoon with the SEC. I'm very pleased to report strong financial results for the third quarter and the first 9 months of 2014. Normalized FFO for the third quarter was $34,598,000 or $1.05 per diluted share, compared with $26,819,000 or $0.96 per diluted share for the same period in 2013, an increase of 9.4%. Normalized AFFO for the third quarter was $31,168,000 or $0.94 per diluted share, compared with $25,216,000 or $0.90 per diluted share for the same period in 2013, an increase of 4.4%, and includes adjustments to exclude our straight line rental income and amortization of bond discount and debt issuance cost. Normalized FAD for the third quarter was $31,391,000 or $0.95 per diluted share compared with $25,469,000 or $0.91 per diluted share for the same period in 2013, an increase of 4.4% and includes an adjustment for our non-cash stock-based compensation expense. Our results for the third quarter of 2014 are reflective of the volume and timing of our new investments and the refinancing of $38 million of borrowings on our revolving credit facility to secure HUD debt with a long-term maturity and a higher fixed interest rate. More about this new debt to follow. Net income attributable to common stockholders for the third quarter of 2014 was $25,250,000 or $0.76 per diluted share, compared with net income of $42,744,000 or $1.53 per diluted share for the same period in 2013, as the prior year included gains and other income from discontinued operations of $20,709,000 or $0.74 per diluted share. Our revenues for the third quarter were up $13,629,000 or 44% compared to the same period in 2013 due…

Thanks, Roger. I'll start with our portfolio of our performance. Our total portfolio lease service coverage ratio is 2.2x. Our skilled nursing coverage remains very strong at 3x, while our senior housing portfolio is 1.3x. The Bickford joint venture, which accounted for 13.7% of NHI's cash revenue, continues to deliver strong performance and growth opportunities. EBITDARM in Q3 was flat sequentially, while same-store occupancy grew to 88.2% versus 86.6% from the prior quarter. Same-store EBITDARM is up 5.5% when comparing the trailing 12-month performance to the prior trailing 12 months. The development properties continue to lease up as planned with the 2 focus properties are improving as well. You can find enhanced disclosure regarding our RIDEA relationship in the supplemental on Page 7. We expect rent increases in the fourth quarter of 3% to 4% with continued occupancy gains based on the strong ending occupancy at the end of the third quarter. As a reminder, our RIDEA structure is designed to follow the Fundamental elements of a triple net lease. Within the RIDEA, we continue to foresee organic growth potential from improving operations, but our agreements with Bickford also enforce growth through a hybrid feature providing a preferred payment stream subject to 3% escalation in payable first to NHI. Our relationship with Holiday Retirement Corporation accounts for 20% of our cash revenue. The Holiday retirement portfolio of independent living communities continues to improve occupancy ending the quarter with 91.8%. National HealthCare Corporation, which represents 23% of our cash revenue and over half of our skilled nursing revenue, continues to perform consistently and enjoys a 4x corporate cash coverage. Moving on to new investments. Year-to-date, we've announced $233 million of investments. I'll walk through the 3 that were announced subsequent to quarter end. Starting with the $154.5 million lending agreement to…

[Operator Instructions] Our first question comes from the line of Daniel Bernstein with Stifel. Daniel M. Bernstein - Stifel, Nicolaus & Company, Incorporated, Research Division: I want to ask a little bit about the overall investment strategy, you just announced a fairly large loan. Is there any shift in the investment strategy given the decrease in cap rates in the -- on the acquisition side? Any shift in the strategy towards more loans and debt investments in the investment side of the equation?

Okay, sure. We have right now 4.4% of our revenue is derived from loans that we have made, so it's a very small part of our business. This recently announced transaction, that we intend to close by the end of November, was the right fit for this property and for this particular customer and we do have the opportunity to purchase the property, which is always the end game for us. However, it's not the beginning of a new loan program or any strategic shift in our type of investments we make whatsoever. Our intention is primarily to own real estate. We have made exceptions at times when it's a better fit for that particular investment. But overall, we're always working towards property ownership. Daniel M. Bernstein - Stifel, Nicolaus & Company, Incorporated, Research Division: I'll ask it in a different way, Justin. Are you seeing more opportunities to do loaned, owned type of investments. I mean, certainly, if you're doing loans and debt investments, you want some kind of purchase option to eventually get a hold of the property, would that be the right way to think about it?

I would -- the first part of your question is are we seeing more of those types of opportunities? And the answer is really, no. We're still looking our pipeline, looking primary at triple net lease investments. However, if you're going to entertain a loan, certainly, in our case, we're doing so with the intent of eventually, potentially owning the real estate. Daniel M. Bernstein - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. Okay. And then, the actual investment was made in the entrance fee CCRC. I think, this is the first entrance fee CCRC you've made investment in and you can correct me if I'm wrong. So what are your thoughts about -- it's been a space, it's kind of been there for a little while since the recession, not an asset class, sub asset class of senior housing that's been in favor with investors and so how are you thinking about the entrance fee space? Do you want to do more investments in that senior housing subclass? And what are the opportunities within entrance fees for more investments?

Okay. I think to best address that question, I am going to step back and just revisit our overall plan to diversify the portfolio. If you look across the portfolio, you have starting with the need-driven medical properties, which would be acute hospitals, specialty hospitals and then in our case, primarily it's skilled nursing facilities. And then, you have the need-driven senior housing, which is assisted living and memory care. And then, you have -- you start moving into a more discretionary senior housing, which would include independent living and continuing care retirement communities. And if you look at the 3 categories, the need-driven medical, the biggest risk there over time, is changes and reimbursement. The risk that's generally been associated with need-driven senior housing, which is assisted living, has been the threat of new supply. And then, the risk that is associated with the more discretionary senior housing product is the housing market, which is why during the downturn, particularly early in the downturn, there was some pressure on independent living occupancies and CCRC occupancies. But if you look at where the housing market is today and where the occupancies are in those product types, they have rebounded significantly, in fact, independent living has surpassed assisted living in overall occupancies. So the fundamentals in all categories are very strong currently, but over time, they will be impacted differently, meaning the risk associated with those investments are different and don't usually move together, which is part of the point of diversification. The CCRC investment in Seattle that we made is 95% occupied currently. It was opened during the recession and it was opened without the amenities that we're going to finance the construction for in Phase II. If you look at Phase II, it's already 75% presold and we're adding amenities and of course, the price per unit in Phase II is better than where it was in Phase I. Everything looks very good and, yes, moving forward, we're open to making more investments in independent living, CCRCs and assisted living and the commonality among all 3 of those are the fact that they're private pay backed and so it further insulates us from reimbursement risk, which has been a high priority for us. So I think the diversification has been a big part of the game plan and this new investment fits right in.

Our next question comes from the line of Richard Anderson with Mizuho Securities.

So just a bigger concept for you Justin. I know you guys have this thesis about not wanting to be as big as some of the big 3, but do you think your sweet spot in terms of size is, what -- I mean, do you think you can be a $5 billion or $10 billion company and still have that kind of smallness opportunity about you or is that getting too big in that kind of order of magnitude?

Well, the first part is we're not -- you already made this point, I'm just going to reinforce it. The fact that we're really not focused on size. We're focused on creating value for our shareholders and doing so on a selective basis as we make investments. Certainly, there's been opportunity there over the past 5 years and so, we have added quite a bit of growth to the portfolio. Our intent is to continue to grow, we see opportunities for continued growth. What advantage of getting bigger, of course, given our credit metrics and the size of our portfolio and the quality of our portfolio is that eventually, we should qualify for an investment grade rating. That's something that, that is a goal for down the road. But other than that, we like to marketplace and this gets to kind of the second part of your question. And that is if you look at NHI sitting with 100 -- soon-to-be 177 properties, once we get this recently announced transaction closed, in 30 states with 31 operating partners at a $2 billion market cap, we have the financial capability to take down large investments, like we did last year, we had a $490 million acquisition. But we have the ability to give time and attention to a smaller opportunity such as the $5.5 million investment we made in Portland, Oregon. I think that gives us a huge advantage, because the large caps are sitting at $20 billion and have 5x to 10x the size portfolio that we have. So there is a middle market void. That has been filled a little bit with some new competition. But we've also been able to benefit from that and hope to continue to moving forward.

Okay. Good stuff. What is your -- with Omega and Aviv, do you think that there has been kind of a renewed appetite for skilled nursing, maybe some lesser risks related to regulatory issues and reimbursement? How do you feel that transaction may be indicative of the sector in general?

I think, in the case of those 2 companies, you're talking about 2 companies that have dedicated their business plans towards investing in skilled nursing and certainly, they made a statement, which I think is a good indicator for the marketplace. In our case, and well also I'll add the second point, which is reimbursement is expected to be pretty stable in the near-term, which bodes well for skilled nursing as well. In the case of NHI, we have 40% of our revenue that's derived from skilled nursing on a cash basis. We anticipate that to go down. It doesn't mean we would not make skilled nursing investments. We have existing customers that look to grow at times, but most of them have been long-term customers, we're very comfortable with their operating track record and their credit. And we're always concerned that if there was a change in reimbursement, does that operator have the ability to navigate through that and that's part of our underwriting criteria. With our existing customers we have that covered. So I don't think you'll see an increase in interest in skilled nursing from NHI. But I do think that transaction was very a positive statement for that asset class.

Okay. And then, lastly, with this debt investment and others kind of closing out the year, no real major impact on 2014, but would you be able to hazard a guess what you think the kind of full year impact of your $200 million-plus acquisitions year-to-date might have on next year?

We will -- we give -- we will renew our guidance, of course, at the beginning of the year, and really not in a place now to predict the impact for 2015 and that we don't really project investment volume either. So unfortunately, I have to leave you in suspense.

But obviously, particularly the debt investment is, well, it's accretive of course. But is there anything in guidance right now related to that, even though it's just a month or 2 of impact?

I don't mind sharing this. And that is that when we close the debt investment, which we expect to close by the end of the month, we will probably fund initially $30 million. We will fund potentially or probably an additional $80 million during 2015 and then the remainder, which is $40 million to $45 million or so would be funded in 2016. And then just to remind you, at that time, once it's fully funded and we're moving towards opening, the entrance fees then pay down the majority of the loan leaving about $60 million in place on a stabilized basis. And while I'm at it, I'll just mention that on a stabilized basis, we anticipate the debt service coverage to be better than 2x.

[Operator Instructions] Our next question comes from the line of Karin Ford with KeyBanc Capital Markets.

Just wanted to ask about the option properties, look like there is pretty strong performance there. Are they heading towards your target yield as the option period starts to -- is the option starting to look a little more attractive today?

Yes. Thanks for asking. I will just remind anyone that doesn't remember that we have the option to purchase a portfolio of 6 properties. This is the joint venture purchasing them from an affiliate of Bickford Senior Living for $97 million. We had circled an 8 cap or better to go ahead and make that purchase. The fact is they're pretty much at that run rate. So we'll revisit the timing in Q1. And I don't expect it to be a Q4 priority to pull that trigger. But considering the fact that we broadcasted the portfolio and our intent to eventually execute the purchase, that's why we included the disclosure, so that our investors can see where the performance is and obviously they've done a good job on improving performance and we're getting close to where we will consider adding most of the joint venture.

That's helpful. And second question, I think you said debt to EBITDA is running about 3.8x. Where does that fall within your target range and where do you rank sources of equity capital today?

Can you repeat the second half of your question?

Sure. I'm sorry. Just your thoughts on sources of equity capital today, would you prefer to issue stock, would you prefer to -- is there other assets you consider selling, just your thoughts on leverage?

Okay. Let me step back and kind of revisit the overarching game plan. And the overarching game plan is that, we like our current leverage level. We're comfortable letting it drift up a little bit, but the intent is to always be below 5x. And, we're circling a run rate around 4x. So that gives us the ability to ebb and flow with acquisition volume. The way we're going to stay around 4x is by utilizing 60% equity and 40% debt over time to fund our investments. And, yes, our preferred method to date is to raise equity and not use existing assets.

Okay. thanks. And then, just last couple of questions on Timber Ridge. So the 75% presold number that you said, those are all entrance fees that are presold or are there renters included in that as well?

Those are all entrance fees. And they're $700,000 on average.

Okay, great. And then what's the cap rate on your option to purchase?

There's no cap rate. It's a floor of a purchase price of $115 million and a fair market value thereafter. So we'll go through an appraisal process that we've agreed to with the borrower to ultimately determine the value at that time.

I'm showing we have no further questions registered at this time.

Okay. As you can see, we're pleased with the performance of the company. We appreciate your interest in NHI and hope you have a great day and look forward to sharing our results on the next call.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.