Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome if it starts for 2019 Ventas earnings Conference call. At this time, all participants Farnham listen only mode.
Please be advised to today's conference is being recorded if you require further systems. Please press star Zero I would now like to hand, the conference over to your speaker today.
Mr won.
Not really.
Vice President Investor Relations. Thank you. Please go ahead.
Thanks, Good morning, and welcome to the Ventas Conference call to review the company's announcements today regarding its results for the quarter ended September Thirtyth 2019.
As we start let me express it all projections or predictions and certain other statements to be made during this conference call maybe considered forward looking statements within their meeting at the Federal Securities Law.
The company cautious at these forward looking statements are subject to many risks uncertainties and contingencies.
<unk> as you know they should recognize it actual results may differ materially from the company's expectations, whether expressed or implied.
I taught expressively disclaim any obligation to release publicly any updates or revisions to any forward looking statements reflect any changes in expectations.
Additional information about factors that may affect the company's operations results is included in the company's airport on Form 10-K for the year ended December 31, 2018, and the company's other FCC filings.
Please note the quantitative reconciliations between each non-GAAP financial measure referenced on this conference call.
And it's most directly comparable GAAP measure as well as a complement the company supplemental disclosure schedules are available in the Investor Relations section of our website at Www Dot Ventas read Dot com.
Ill now turn the call over to Deborah acre Farr, Chairman and CEO as a company.
Thank you wine and good morning to all of our shareholders. Another participant welcome to the third quarter 2019 earnings call.
I'm joined on today's call by my valued Ventas colleagues catch we discuss our strong enterprise results in the quarter and other recent highlights including the closing up on the group Murray's partnership accelerating investment into our future growth primarily in our research and innovation business.
And our environmental social and governance leadership that is highlighted in our 29 <unk> corporate sustainability report released today.
I'll also addressed the lower than expected third quarter performance of our senior housing operating portfolio and its forward implications for us in the context of very positive leading indicators in the business.
It is very heartening to see that construction starts of new senior living communities this quarter, especially in assisted living where the lowest they've been in nine years and that demand for senior living is growing at its highest level on record.
Starting with our third quarter results I'm very pleased to report a strong quarter of normalized get that though 96 cents per share.
Performance was driven by accretive investments excellent capital markets activity and growth in our office and Triple net leases.
We've also refine our full year normalized AFFO per share guidance range to $3.81 to $3, an 85 cents per share maintaining our midpoint at $3.83 per share.
That's expected outcome for 2019 is also consistent with the upper half of the normalized FFO guidance range, we initiated in the first quarter of this year.
Ventas is benefiting significantly from our diversified portfolio and our effective investment and capital markets activity.
Indeed in the corridor is 70% of our same store portfolio represented by our office Triple net lease and Canadian Senior housing portfolios grew cash I know why by nearly 3%.
However, in our U.S. shop business, which represents 25% of our enterprise, we experienced dynamic operating conditions in the corridor.
And occupancy took a precipitous leg down at the end of September .
That as Bob will address in more detail, we expect our 2019 shopped performance to fall below our original guidance range, mostly because our portfolio did not experience the strong seasonal lift in occupancy that it's typical and rates softness continued during the quarter.
These trends are continuing into the fourth quarter, leading to a reduction in our full year shop 2019 guidance.
Because we will and 29 team and enter 2020 at the lower base.
We've also concluded that our enterprise growth will be deferred until after 2020.
Well, we are very disappointed and this deferral of our growth expectation that team is resolute and focus on closing out the year by delivering this solid 2019 enterprise results we've outlined today.
Additionally, we intend to make necessary adjustments and decisions that will improve performance and position us to capture the powerful upside that remains ahead in senior housing.
At the same time, we will continue to invest in our future a good partners stay productive and focus on delivering value for our shareholders from this strong diversified business we have built.
We expect to provide you with 2020 guidance and the components there out in the first quarter consistent with our historic practice.
Among other things our guidance in senior housing well be predicated on our review of operator budget, how the year end and the impact of January one rate increases.
Before Bob addresses senior housing in greater detail I'd like to highlight our accretive in attractive investment activity and our E.S.G. achievements.
Within the $3.8 billion have consolidated investments we've made year to date, we were delighted to close on her new partnership with Montreal base liquor Marie in the third quarter with its price portfolio of 29, new high quality apartment like senior housing community and five in progress developing.
Valued at 1.8 billion U.S. dollars.
The LTM transaction and integration have gone exceedingly well and performance is inline with our expectations.
Two where new partners north of the border. We thank you for choosing Ventass as your partner and we congratulate you on your success in maintaining your company and well regarded brand and positioning LG N for continued sustainable growth.
We've also made great progress on our 1.5 billion dollar University based research and innovation development pipeline as we continue to build this exciting business with our best in class development partner Wexford.
Among our key accomplishments in the quarter, where execution of a 30 year lease with Drexel University for its new school of nursing and health professionals with an expected yield of nearly 10%.
And the expansion of our footprint in the burgeoning used city market where assets are currently 98% occupied.
Acquired assets increase our developable square footage in the U.S City Submarket of Philadelphia to 4 million square feet net of our one new city and Drexel development.
The Ventas team, it's also aiming to close and commence several more are and I project in the pipeline over the next several quarters.
In sum, we're pleased with our year to date investment quality and volume as we continue to improve our portfolio and invest in our future.
Finally, we significantly elevated our environmental social and governance profile. Our longstanding E.S.G. efforts are organized around three key pillars of people planet and performance and we are pleased that aren't yes, Ci leadership has been repeatedly recognized by several prestigious organization.
Today, we released our 2019 corporate sustainability report that catalog R.E.S.G. achievements and aspirations.
We will continue our focused improvements and E. S. T areas that also support our business success.
In closing over the past two decades, Ventas has experienced incredible business success and outperformance punctuated by periodic said that.
Yes, with integrity positivity Gil focused and teamwork, we've always been able to rally back stronger than ever and today is no exception.
With that I'm pleased to turn the call over to our CFO Bob probes.
Thanks Debbie.
I'm going to start by driving straight into our third quarter results for our shop segment, which represents 33% over in Hawaii.
Shops same store cash NOI in Q3 decreased 5% versus prior year.
Disappointing result that fell short of our expectations.
This result was led by revenue weakness from the cumulative effect of new openings in a dynamic competitive market.
I'd highlight three primary drivers versus our expectations.
First.
So Q3 average occupancy grew sequentially 86.7%.
We did not see the expected typical seasonal occupancy lift.
Therefore, the occupancy gap versus prior year widened from the second to third quarter by 30 basis points.
To an average 70 basis point occupancy gap.
In truck order.
The year over year occupancy gap widened sharply in September so.
September period, and occupancy approximately 115 basis points lower than prior year.
Second.
Price competition, driven by new supply was significant in pursuit of new residents and select geographies, most notably in secondary markets.
Negative releasing spreads in our portfolio widened in Q3, instead of our expectation that they would tighten relative to prior year.
As a result reported growth reduce sequentially from 60 basis points in the second quarter to 40 basis points in the third quarter year over year.
And third yes, all experienced discrete pricing challenges exacerbated by new supply.
Active action plans are in progress.
I would note that excluding yourself.
Our Q3 shops same store NOI performance will improve by over 100 basis points.
In light of Q3 revenue trends in a lower occupancy stark <unk> point entering the fourth quarter.
Our operators plans call for aggressive pricing actions in pursuit of occupancy as we close healthier and set the base for 2020.
We're also evaluating actions at the ventas levels to improve shot performance.
Leading selective dispositions indoor capital investments.
Turning to expenses and on a positive note.
Operating expenses grew a modest 1.8 present in the third quarter.
Our operators continue to mitigate wage pressures by adroitly managing staffing.
Driving efficiencies and indirect costs.
I'd also highlight our Canadian portfolio.
Which increased occupancy 40 basis points, 94.2%.
And grew into why had a robust 4.7%.
This performance underscores the health of the Canadian senior housing market.
Which now represents nearly 25% to the shop portfolio went away post our closing a Belgium.
Given third quarter results, we're revising our shop full year 2019 same store cash NOI guidance to know range from minus four to minus 5%.
The guidance range implies a challenging fourth quarter, given Q3 two trends.
Dynamic and competitive market.
And lower occupancy levels entering the fourth quarter.
We do see upside in senior housing in the U.S. given record levels of demand in Q3.
I continue positive trend in new starts.
And attractive demographics.
Let's move onto our exciting optics segment.
Which is approaching 30% of or in Hawaii, and currently represents over 26 million square feet.
Our overall office segment delivered attractive same store cash NOI growth of 3.7% in the third quarter.
And with year to date office growth of 2.9%.
We're pleased to improve our full year off the same store guidance.
More on that in a minute.
Our our an eye business, which now exceeds 6 million square feet.
The other way for office in the third quarter.
Increasing same store cash and why why stellar 10.6%.
Occupancy increased 290 basis points on strong lease up at our wake Forest assets.
Well revenue per occupied square foot increased 7.6%.
Our 40 220 Duncan development in the cortex innovation community.
Associated with Washington, Saint Louis.
There's no at 100% occupancy after only 16 months of operation.
Reinvent tosses five in place cortex buildings to 99% occupancy overall.
With a pipeline of incremental demand.
Far and I also benefited by lease termination fee in Q3, and its non same store portfolio, a $4.7 million if I know why.
We're slightly more than a penny that that's though.
Turning to our 20 million square foot medical office building business.
And we'll be same store NOI increased by a steady 1.6% in the third quarter.
Operating expenses increased by just 20 basis points year over year in Q3.
Benefiting in part from utility savings arising from sustainability investments.
We've seen a meaningful improvement in our remote be tenant satisfaction scores.
While our trailing 12 month and will be tenant retention ratio.
Improved to the company's highest on record.
These office results are proof points of the various operational best practice initiatives Ventas has successfully implementing under people gorillas leadership that will drive sustainable growing cash flows.
On the heels a strong year to date results. We're pleased to raise our full year 2019 office same store NOI guidance.
I will range from 2% to 2.5%.
Driven principally by better than expected strength in our nine.
On to Triple net.
We are same store cash NOI increased by 2.1% for the third quarter.
And my annual rent escalators across our diversified portfolio.
Trailing 12 month EBITDARM cash flow coverage for overall stabilize triple net lease portfolio for the second quarter of 29 team.
The latest available information.
Was stable at 1.5 times.
Coverage in our Triple net seniors housing post acute and health system assets also held firm with prior quarter.
I would highlight the continued strong performance by ardent for the Ventas owned assets and for the enterprise overall.
We are still on track to the approximately $10 million nothing I know on impact.
From proactively addressing leases with select lower credit Triple net senior housing operators.
This impact appears in non same store results.
As a result of year to date growth of 2.3% from the Triple net full year same store pool.
We're raising our full year 2019 same store cash NOI triple net guidance to know range from two to two and half percent.
Turning back to enterprise results normalized AFFO per share in the third quarter was a solid 96 cents.
Yes, I felt performance versus 2018 was flat year over year.
Adjusted for the three cents per share cash fee received in the third quarter of 2018.
Related to the Kindred go private transaction.
We were active in the debt capital markets in the third quarter.
We extended our average debt maturity to nearly seven years.
And manage interest rate risk via issuance of 650 million.
3% senior notes due 2030.
Which were used to retire 600 million of foreign according to notes due 2022.
To manage currency risk from the close of the LG and transaction.
We also closed a Canadian dollar 500 million unsecured bank term loan.
At attractive pricing.
Our net debt to adjusted EBITDA ratio is 5.9 times at quarter end.
As expected leverage increased sequentially from the second quarter as we raised equity in Q2.
To fund the L. GM deal, which closed in Q3.
I'll finish your prepared remarks with guidance.
At this late stage in the year, we're narrowing our normalized AFFO per share outlook for the full year 2019 to know range from 3081 cents $3.85.
The guidance midpoint of 3083 cents is in line with our guidance range from the second quarter call.
And that's the higher end of our initial guidance range provided in February .
375 to 385 per share.
We've also narrowed our overall portfolio same store cash NOI growth guidance for 29 team.
I will range from zero percent up 30 basis points.
Taking into account increased guidance range on a triple net and office portfolios.
And the reduction in shop.
[noise] other assumptions underpinning or AFFO garden guidance are largely the same as last quarter.
Guidance includes the impacts of announced investments in capital markets activity today.
[laughter].
To close the whole Ventas team is resolute in taking actions that will improve performance.
And deliver growth and value for the benefit of all of our stakeholders.
With that I'll hand, it to the operator to open the lines for questions.
Thank you.
As a reminder to ask a question you'll need to press star one on your telephone Oh, sorry question. Please press the pound Kate please standby wells compounds culinary roster.
First question comes from Nick Yulico of Scotiabank. Your line is open.
Thanks. Good morning, I guess you know first question is you had the commentary or Debbie in the press release about.
You don't you think you now your return to enterprise growth will occur after 2020.
Are we to read into that that you're not expecting asset AFFO growth next year.
Directionally, yes.
Okay Roche will be deferred past 2020.
Okay, and then I guess is as we think about this year right. You had you had an investor day, where you're pretty a positive you know you now had a tough quarter for seniors housing keep just remind us how often are you getting updates from your senior housing operators on the performance of of your assets.
And then specifically you know besides what you cited about.
Potential sales of assets one other steps you take into addressed the issue a that you're facing right now in senior housing is it is it operator issue is there something better that you can do in terms are predicting that business that'd be helpful.
Sure. It gets Bob let me, let me start with a cadence of of conversations with the operator, which I would describe is very regular our asset management teams.
And and I don't call the constant contact with our operators what absolutely is the fact is as the market change pretty rapidly in the third quarter.
And even the boots on the ground as I described the operators you know we're we're surprised.
By the nature of the change and particularly the occupancy trend in September .
Which we highlighted in the prepared remarks.
And so it's really that dislocation as we then you know review the outlook the entry into few Q4 the outlook for the year.
That changed those circumstances change is pretty rapidly.
So what are we doing about it the second part of the question certainly had an operational level.
All the operators are actively engaged in I'd call them asset by asset.
Recovery plans very much focused on revenue.
And Ah, we continue to engage with them on that.
Had a portfolio level clearly there are different options, we have including selective dispositions.
Potential underperformers as we look forward and see the profile is very Submarkets capital investments clearly.
As we think about ways to continue to compete in B b competitive in select markets.
And continuing to invest behind a up opportunities that drive that drive growth. So it seemed playbook as you would expect and I'd say the frequency of dialogue is very very regular.
I guess, just a itself I guess just one follow up there is that I mean, you talked about Bob that negative a leasing spreads widened.
In the quarter instead of tightening, which we were forecasting a tightening what what gave you confidence to forecasted a tightening was that something you were seeing some your operators, who tell I'm, telling you and how did you end up seeing that negative surprises in the quarter.
Right. So if we if you back up to our guidance early in the year and then reaffirms last quarter.
In the last half of last year. The second half of last year 2018, we did see aggressive price discounting. It we saw the re leasing spreads widen.
In the second half as a consequence, and we saw occupancy sequentially grow.
Nearly 80 basis points in the third quarter last year, so that that was the backdrop in that context all of our operators.
Consistently believed the ability to price I'd say more surgically.
In this second half and therefore, not have a significant a discounting environment.
And have an improved narrowed releasing spread that was the predicate of the prior guidance. What indeed has happened is in its really I called the cumulative effect.
Of the openings that have been coming online over the course of time.
Has driven that to be more price competitive.
More widespread in the discounting and therefore as you see in our rate.
Sequentially, a softening in red for as opposed to.
Gross and a year over year wider releasing spread rather than their or so fundamentally in the third quarter that was a change both in the market it versus our expectation.
Okay. Thanks, everyone.
Thank you and yesterday.
Our next question comes from Nick Joseph Citi. Your line is open.
Hey, it's Michael Bilerman here with Nick Hi, Mike.
Good morning.
So it's sort of piecing some things together backing away from the growth for next year.
How much of that is the weaker threeq and fourq results playing into the run rate.
Verses the expectation that same store NOI for shop, because it appears that the rest part of your businesses, which is almost two thirds of the company or doing fine and Oh actually probably in line to head of where your expectations are so how much of this shift is due to the run rate versus the expectation.
That shops going to be negative again in 2020, often heard down call. It 5% this year.
Yeah, I mean and tuck it Michael Thanks for your question I'm not sure I totally understand it but in terms of I guess I mean, just from the standpoint of you know the street right now the 393, you're going to do a 383 for earnings this year rights in the street was expecting up.
10 cents.
Which is probably somewhere realm of where you thought you were going to get growth NFL now, you're saying you're not going to have the AFFO growth.
And Bob there's two parts in it right. It's it's getting slower into the year, because you've had very weak shop results of the run rate is lower that accounts for I don't know I don't know if that's five or 10 cents. In addition, I don't know how much cadence you have for 2020 shop, and I know, you're not giving 2020 guidance, but I don't know how much of your per se.
Doctors have changed in making the statement that you're going to defer the earnings growth.
Right. So arguably the number for next year is gonna be below 383.
And I'm just trying to piece together how much of that is the weakness that you have in the second half of this year, what you experienced in the third quarter and what you're forecasting in the fourth quarter and how much of it is a change to how you're looking at 2020.
Okay, I mean, basically what we want to do is addressed 2020, and our guidance and all the component.
When we normally do in the first quarter.
And when we do that we want to have some of the key underpinnings of that including.
The 2020 budget.
The rate ladder.
And and so on and see where we end the year. So I would just defer that conversation we want to give you the guidance and the parts when the guidance is ready and reliable for 2020 and that'll be in the first quarter.
Maybe we can address it this way so you have an implied fourth quarter guidance that 80 to 94 cents right based on.
You provided for the full year, and where you have year to date that 80 to 94 is down from the 96 97 that you've experienced in the prior two quarters.
Still a pretty big range right expenses.
You're talking about six 7% in terms of a range from the fourth quarter and one would have imagined you would have gotten the benefit of all the investments.
Accretive investments you've made and closed recently, so maybe Bob you can walk through the Delta of getting from Threeq, you reported AFFO of 96 down to that 80 before you know a same store is effectively from what we can tell implying shock down about 4% sequential.
We are down about seven the half percent year over year based on your.
Guidance numbers, which should only be a couple of pennies. So maybe we can start talking about that part.
Yeah, well Oh Oh.
Also address a bit of your first question.
The lower finishing point this year as you know embedded in our outlook and the implication for therefore 2020, Israel I mean, the start point to where you finish.
As we're seeing in the fourth quarter.
Fundamentally determines where we earned 2020 and we've lowered that starpointe.
So that you know that's a fundamental employed to obviously into 2020.
The.
Let's use the midpoint for easy math.
Sequentially.
The second part of the question, which is 96.
In third quarter becomes 91, or 92 with rounding depending if you round up or nine round down in the fourth and what's what's driving that and number one most most notably shop.
And property.
And that is that is the largest driver.
We highlighted in the in the third quarter, we also had a term fee and our and I.
Roughly a penny.
And between those two things there for property and that did that term fee you bridge the gap.
So that's the that's the sequential midpoint description and again the range.
It's really predicated principally on the shop revenue I will turn.
In the fourth quarter.
But you should get spent.
Hi, Morgan My hopefully that's more helpful. Then my answer to you.
Hi, good I understand the once it goes down shop in the lease term fee, but you bought a significant amount of assets you did the loan on colony you raise equity in June that was accretive like all of that should.
The debt refinancing all that should help sequentially no.
Well, yeah that well I mean colony with in in the third.
And Dan Lungren, Murray's is expected to be breakeven and.
29 team.
So I think your those those are.
Selected and so Bob you know simplification NAV third before.
And our the represent the principal drivers.
Okay.
Thanks.
Thank you.
Thank you. Our next question comes from Vikram Malhotra of Morgan Stanley . Your line is open.
Thanks for taking the questions I've two questions. So just first going going back to the question on.
That's helpful growth I'm still not.
Understanding if you're if you're benefiting I get Maurice is not a positive this year, but should be a bunch of next year got any should be a bust is next year, you're only nine office and will be should all be a positive next year, so effectively I'm not sure how how youre.
Rejecting shop.
2020 right now to come to know growth if in the third quarter. It says things were still volatile.
And it's just stuff to get a near term read I'm not sure how your.
Forecasting into 2020, what it looked like so if you could just walk us through to get to that no growth in F. Before like what what's in that state men, what's embedded in shop for next year, [laughter], well I'd I'd really be delighted to do that and we're going to do that in a disciplined way with all this component when we give our.
2020 guidance has we historically have done in the first quarter and so.
And I.
I know I'm asking you to be patient with that that is a disciplined process that we have historically gone through after we see how the here and we want the guidance to be ready and reliable and so I would encourage us to talk about it when we give 2020 guidance in the first quarter.
With all the parts that you're looking for.
Okay fair enough, but just because you said noise AFFO growth then obviously people are gonna question. So.
Yes, what we would wait for we'd wait for the details. The second question really is just.
Around the shop, the changes that you're are you're articulating in senior housing and they do parts. If you can bear meant to be one one on the on the shop side. It's it's obvious that there's there's probably a need for more real time data or maybe.
He fostered eat up because things could be so volatile as they were in Threeq you. So apart from like longer term things like putting in capex.
Et cetera, and selling assets like what what can you do what are you contemplating to get data into more real time manner.
In the shop side, and then on the tripling that side. If you could address this you've you've baked in 10 million of potentially restructurings, but if you look at the EBIT dollar and Inplace EBITDAR I'm, assuming is well below one.
You have you have a several years on some of your leases but.
How should we get comfortable that additional leaves restructurings will not be required in 2020 and 2021.
Yeah, I'll take I'll take the first so.
Reminder, obviously, we are reliant in the shop business on the data from our operators.
As you speak to real time that is that is by definition coming through our operators.
And therefore, there is by definition gonna be some timing between their received that ours I would say the clock speed is pretty good that said there are there are indicators, which is such as occupancy, which one can see.
More color weekly.
On the other hand things like Rep for and Youre Your Opex really.
Our both intra quarter quite dynamic, but also you really need to see the whole quarter play out before you can get a strong beat on it.
So I would I would agree fully that data continues to be in the industry.
Sounds and one that we continually endeavor to get better on.
But in some cases, such as and Hawaii, and Opex, you really need to see it through the quarter.
[noise] that'd be one thing second.
Yes, and in terms of the Triple net portfolio, we've given our expectation for 2019 with approximately a net 10 million impact were materially on track for that.
In terms of looking forward.
Again, that's a part of that 2020 guidance that we want to provide to you a when we provide all of our guidance and we have a significant amount of our triple net senior housing tenant.
The like Brookdale, which is the largest one.
Which obviously has had very significant ability to pay wrong and that to a large portion of the senior housing triple net and many other operators who have other credit indoor coverage out where we feel comfortable with the go forward.
Ah rent obligation.
Okay, great. Thank you.
Thank you.
Thank you and our next question comes from Rich Anderson SMBC. Your line is open.
Thanks, Good morning, Hi, Rich learning how you doing so you know I know you just just out of curiosity I know you typically wait till the first quarter for guidance with these aren't typical times I guess and I Wonder if you would give any thought to maybe being a little bit or early in that process say pre.
End of the year to provide and then look and outlook into 2020 sooner than than later, just because of the uniqueness of the situation I would I would just offer that as a suggestion, but I'm not a question. My question really is 4% to 6% for the five years, how how much is that disrupted what from your Investor day.
Do we do we assume that is.
You know a different range going forward or do you standby the five year outlook still.
Yeah, Thanks, Rich and I'll, let Bob Kerrey follow line. Thank you know basically right now I really our real focus is closing out 2019 in the way that weve outlined here today, taking steps to improve performance and also position us for.
For the upside in senior housing, obviously to the extent that and we want to get it good 2020, and we want to have it be I'd given to you, which you deserve when it's ready and its reliable.
And there are many inputs that will go into that and so obviously to the extent that are 2020 outlook has changed due to changing circumstances that would have implications for the five year outlook.
Okay.
Getting you a good 2020 that you can you can feel good about.
Okay.
Bob we're going to add something I missed I didn't know.
No no okay. Okay, and then lastly in Bobby you you'd said the market changed dramatically in the third quarter and I'm curious as to you know, perhaps why you know the supply has been high but it hasn't really changed must from the second to the third quarter I guess, you're saying the behaviors of your competition have changed and would you say.
That this is perhaps a.
The condition of the geographical footprint of yourself, where do you feel like this is more of a holistic sort of national conversation.
Well you rightly say, we knew supply it was coming that's not a that's not news to us.
I think it's a cumulative impact.
Of what we've been seeing over the last two years, which seems to.
Have taken a bigger impact made made the market tougher, particularly on selling.
And then within that how our operators and others compete particularly on price.
Seems to have become tougher in the quarter.
[noise].
It is clearly semantically when you look at the Nic data, which again is the only industry data that we see there was.
Some sequential occupancy growth ours in fact was better than that.
I mean look Q2 to Q3.
But both pricing as measured by Nick and in occupancy continues to be.
That is short challenge, so without better industry did and that it's hard to say really overall for the market, but certainly in our portfolio in the markets in which we compete.
We did see a change in how we how we need to continue that needs to change.
Okay fair enough. Thanks, very much thank you rich.
Thank you again, ladies and gentlemen to ask a question that star one.
Our next question comes from Michael Carroll of RBC capital markets. Your line is open.
Yeah. Thanks, Bob It's kinda wanted to dive into that last question that rich had related to the impacts of supply.
Was there more supply delivered this quarter or was the issue dance.
The your competitors or just more aggressive on price and Ventas was nine and you lost more occupancy relative to those competitors yeah well.
It's always important to note that the openings in a quarter, though important.
These it's not a flash to bring that to media to you know takes time.
For those to lease up and you know historically, we've talked about 18 to 24 months I don't know if that rule of thumb applies anymore simply because the cumulative amount of new openings has been so significant over the last couple of years.
So I would not I would point to the cumulative impact as opposed to some elevation in the quarter itself.
Then how folks compete you know by definition, new new openings coming to market into submarket the whole submarket for those existing operators, we'll see an occupancy drop.
It's kind of a a pro rata basis. It's then how do you compete within that and I would say in certain geographies. We did lose share I think it's fair to say.
And hence back to the to the asset by asset.
View of how do we compete in pricing within that most notably in secondary markets, if I read a point to markets.
Where we saw again these are perhaps more price sensitive markets as well, but also.
Whereas the deliveries came first.
That is where we're seeing the greatest price competition in the greatest impact on rent for the releasing spreads and why.
So hopefully that answers your question.
Yeah, and then what I guess talking about the I think the changes that I think Debbie made in her prepared remarks on things that you referred to in the queue and they also I guess, what specific changes as ventas pursuing I think the ones that you highlighted seemed like stuff. That's a the company has always done investing in the properties in pursuing.
Thats pruning.
Are you planning on cutting rate also to gain more occupancy is out one of the more meaningful changes.
Yeah, and likely I'll call it the operational strategy.
Certainly incorporates more aggressive pricing in the fourth quarter.
In an effort to two when that resident and so that is that is definitely in the plans as as distinguished by what I'll call them at the overall portfolio level.
Actions that we can take what you rightly mentioned so at the operating level at the asset level pricing is critical.
For us to to compete in changes the trajectory.
Okay, and then were you surprised that operators started offering more concessions I think that.
I believe then tosses mentioned in obviously other reason operators have said that the market has been fairly disciplined to not offering those concessions has something changed this quarter versus prior quarters.
So by definition and that was one of the three predicates of why.
The guidance is different for us than our assumption again last second half of last year more widespread discounting.
Expectation.
Hi, or operators in us and others I believe that that would.
I'd be more targeted in the third quarter that back half of this year and that's not what we're seeing quite the opposite a widening in a more competitive market in the pricing so quite different right and that's a result, even know sequentially. We grew more than neck in the third corridor, we did not build occupancy with.
Seasonal lift.
And how were that we would typically see as a result right.
Since widening the gap year over year.
Okay, great. Thank you.
Thank you.
Thank you.
Your next question comes from Jordan Sadler of Keybanc capital markets. Your line is open.
Thank you good morning.
Sure Dan.
How are you I'm not going to beat a dead horse.
Can you could we switch over to the Triple net portfolio the same store NOI growth there.
<unk> for the full year moved up pretty significantly by about 125 basis points I think Bob at the midpoint.
What's sort of the driving the change there I feel that's like a pretty stable predictable business.
So we're still alive and kicking so so you're not beating a dead horse in terms of Triple net I would just say that if we said at the beginning of the year in and Bobs remarks that some of the all all of the 10 million net impact can I know why.
On the street set of assets that we've talked about is in non same store and FX, though and therefore outside of the triple net pool, and we had talked about that I think at the beginning of the year. When we made the simplifying assumption around in that 10 million.
Okay. So it's a 10 million was previously and then now that's out I get that right with remember we talked about it being a simplifying assumption within.
Noted that if there were dispositions our transition.
And it it needs to another category and that's what we've called out this quarter right.
Okay, so that out.
How much of the 10 million in adjustments is crystallized at this point last quarter I think you'd said 3 million Bob and then what is what's the annualized impact of the totaled 10 million.
As we age or not yet to keep it simple I'd say the the fourth quarter impact is approximately 4 million.
And 10 million is lifted the 2019 impact.
But if I think about leno I like the annualized impact of the 10 million adjustment.
So the incremental adjustment to 2020 for example.
The annualized impact from the 10 million of adjustments will be 25.
So an incremental 15 to next year.
I'm not sure. How you are you got that number or the well or the annualized <unk> is the 10 million an annualized number or is it the adjustment no. It's a 2019 number and it started in the back half.
Over the year, principally and is 4 million in the fourth.
Right and not have that's not an annualized number right. So I'm I'm just curious if you annualize.
What the rent adjustments were right to annualize ran through.
Falling by a total of 25 as a result of those adjustments or it has to be more than 10 obvious yet right correct and ceteris Paribus, you can annualize 4 million.
Okay. That's just okay.
And then.
The the other guide thing that I noted on the guidance was it a previously you had maintained that there were no changes to holiday the holiday lease contemplating guidance is that still the same.
Yeah Okay.
Okay, just didnt see that called out and then lastly on the balance sheet.
Leverage is 5.9 times did you guys or look to the ATM at all in the quarter or since quarter end and then how should we be thinking about the balance sheet going forward Bob.
Yep, So fivenine really a function of the close of LG I'm in the quarter.
So very much as anticipated very much within the range.
Of five to six that we've operated within a long time. So we're we're quite comfortable there.
We did not incrementally do ATM in the quarter. We had last earnings call described a little that we did early on in the third quarter, but.
We didn't do any after that simply we didn't have we didn't have uses so.
That's the rationale, but we're very we're very.
We're comfortable with where we are.
Okay I'll yield the floor.
Thanks for the questions. Thank you.
Thank you again, ladies and gentlemen to ask a question. Please press Star then one and we ask that you. Please limit your questions to change.
Our next question is from seats, Steve Sakwa of Evercore ISI. Your line is open.
Ah Thanks, Debbie and Bob I, just wanted to maybe switch to expenses in the shop portfolio and just sort of what you're experiencing on the labor front and sort of how you maybe see that trending you know as a positive negative. We're you know kind of maybe consistent in moving forward.
Yeah, Steve so.
Nice thing to talk about I'm happy to talk about the Opex, we grew opex year on year in the third by 1.8%.
What continues clearly is underlying wage pressure kind of mid mid single digit sort of range.
When you look at a per hour basis.
And we've described how consistently.
We've been able to manage that number by.
Staffing.
Operating model at the asset level.
Procurements in managing indirect costs and as a consequence.
Keeping that overall growth below too and that is year to date pretty consistently what we've seen across the portfolio.
You know clearly if and if the economy continues as is and there's continue labor pressure.
In wages in the mid single digits range, we'll need to run that same playbook.
And keep the Opex in the range that a that we've had but it's been I I get lots of credit to our operators doing a fantastic job by managing.
The Opex basin, and keeping that below the inflation.
Okay, and I guess, just second question on the Arne I business Debbie as you sort of look out just sort of the opportunity set today I mean, how would you sort of describe it versus three to six months ago.
I'm going to turn that over to my colleague John causes and underground our Chief investment officer or this is John I think what we're seeing is we're seeing a our pipeline is still good on the development side with a our friends at Wexford, we're seeing lots of activity and and so forth. There were still looking at a fair amount of.
Acquisitions, and both core markets and also in our University markets those are become a little bit more competitive, but we're definitely seeing a fair amount of activity.
We have a great competitive position and a University research and innovation business and John and his team are doing everything humanly possible to maximize that competitive advantage that we have.
I guess, just a quickly follow up on the competitive nature on sounds like on the acquisition front is it new players coming into the business or just trying to get a little more color on maybe what's happening to pricing on those assets.
I mean, theres been some new competitors, but there's always been competitors and all of them all the a and industries that we plan. It just happens to be a theres a little bit more right now and life Science you know a couple of privacy phones have formed some funds, but it's no different than.
Then I would say the last six months I mean, it's it's always been competitive it just become a little bit more price compression.
Okay. Thanks.
Thank you.
Thank you and our next question comes from Joshua Dennerlein of Bank of America.
Lunch your line is open.
Morning, guys.
Good morning can the in the opening statements when have you mentioned Oh, yeah, yeah, Yeah sell was weaker than expected and maybe Ed. If you have removed that it'd be about a 100 basis points, if I heard that correctly.
Can you maybe give some more color on what's going on there and that's just.
For them or their markets or [noise].
[noise] Yeah. So you you you're right we did call out 100 basis point impact to the Q3 result from yourself some adequately.
What drove the US all result, this is not different than what I talked about overall in terms of occupancy in pricing. That's a couple of things that are unique or discrete in this case one is the footprint.
Which tends to be more secondary tertiary markets and two is yes, so still I would say in the process of implementing new.
New models as it has had these assets and taking them over including a new pricing model.
Which in the mid stuff in the context of the the tough market.
Made it even tougher for yourself in particular, but generally somatically that.
Drivers of the same.
Okay and.
Our the the drivers that were impact to shop this quarter consistent with what was going on in a net lease.
Senior housing portfolio, just trying to get a sense of where like 32, nineteens a coverage ratio might shake out.
And maybe the evolution got kind of going forward like should we expect that to trend closer to one or maintain the 1.1.
Well I would say the industry, regardless of where irrespective of business model is the industry.
So to the extent that.
Triple net operators are seeing the same market conditions and.
Cash flow at the assets has a similar profile then yes that would have a impact on coverage you know as you know we report on a delayed basis in terms of coverage, we haven't got yet the results from all our operators for triple net so too early to say.
But clearly the underlying market is what drives ultimately that number.
Okay, and you're still confident that those coverage ratios over time, we kind of.
Being at a comfort range, where do you feel like the leases.
Kind of consist as they are or I will point would you like consider taking action.
Well again, I would say in a normal market if you're looking at EBITDARM coverage over a long period of time, you would want to see there's been no. One two to one three range, maybe one 1.13, which is where we are now over time, a it really depends how you address.
That's different thing.
Depending on what the the circumstances are what the credit is whether it's whether they're pools leases. What other kind of supports you may have and so one and knows really determine how you would approach this situation.
Yes.
As if coverage becomes more compressed we've talked about how we've addressed in the Street Creek pool of those in 2019, and I think very effectively and that the largest percentage has been pool of triple net senior housing operators.
We're quite comfortable with.
Okay. Thank you.
Thank you.
Thank you.
And our next question comes from John Kim of BMO Capital markets. Your line is open.
Thank you question on the lack of enterprise growth next year.
Does this kind of hijacking.
Yes, its contemplate major disposition.
Shrinking the company, you know or any significant significant amount of poverty transition.
Hi, it's it's a fairly steady state.
Luck.
Okay still seems difficult to get to that.
Lack of earnings growth.
I mean I.
I think that's questions asked earlier, but are there is there going to be another significant rent relief that you had somebody at the $10 million again this year and it looks like for instance on the outside of the Triple net coverage went down a notch.
I'm wondering if that's also part of your garden.
Yeah, I'll touch on the Eltek when the Eltek.
Was literally a matter of basis points.
That that made the round change driven by both rent and.
And the asset performance, but it's literally around so there's no no fundamental change in the Elteks.
Okay. Second question is just a follow up on you know it still seems like the 100 basis point impact on your shopping pretty significant given the size.
Of yourself can you just.
Verify how significantly aren't as part of your shop seems to shop portfolio and any parameters in the home and even though the performance one.
Yeah, a roughly 10% round numbers [noise] little bit less.
Of the shop portfolio is what they represent clearly as you say 100 basis points is a big impact.
And so that that year over year performance is double digits down is just by the definition the math.
So quite materially in quite quite material quite notable.
But again it comes back to the same.
Same drivers [laughter] I was I would highlight again secondary and tertiary type business model slightly lower margins.
As a consequence lower revpar in dollars.
So a bit more operating leverage as well.
Okay. That's helpful. Thank you.
Thank you John .
Thank you.
In any background noise, we ask that you plan on mute. Once your question has been stated our next question comes from Steve Valiquette of Barclays. Your line is open.
Oh, great good morning, everyone and a question.
Hello, So I'm just a few more questions here in senior housing pricing dynamics, I guess I'm curious, whether you know one or two operators in particular that may be trigger some of the more aggressive pricing or was it more widespread across a whole bunch of different companies with new supply.
Well just to confirm did you see any acceleration in situations, where pricing became more aggressive from existing competition or was the more aggressive pricing primarily from new supply.
In the various markets as they try to build the occupancy.
And finally would you consider the new pricing to be irrational, just the opposite or the pot too much but as you know is gone to irrational levels or how would you characterize thanks.
Well I think first of all there I wouldn't point any.
Bad actors say for example, there's not.
One or two that are driving the market.
I think again when there's a cumulative.
A significant amount of new openings of course, you have the new the newbuilding opening.
Which it's quite rational to be aggressive on price to fill up the building.
Which is a relatively small investment relative to the cost of building.
And in opening the community. So that's not irrational, that's certainly drives probably cut price competition.
And that's not a that's not a new insight.
Have seen widening releasing spreads.
Kind of talked in the mid to high single digit range lower for declines.
And that has accelerated so I'd say, it's just taking what we've seen in amping it up.
Amping it up.
And again not because of any one factor I think but the cumulative impact of was of what's happened over the last years.
Okay, sorry, I appreciate the extra color. Thanks.
No problem.
Thank you.
And our next question comes from Nick Joseph of Citi. Your line is open.
Hey, it's Michael Bilerman again here as Nick I was wondering just you mentioned, but as you talked about 2020, a steady state and the deferral of the growth from enterprise from a natural flow perspective next year.
Largely was driven by the shop.
Change, which we spent a lot of time talking about on the call.
What are the things you talked about Investor Day was you know having $2 billion of net investment volumes and I just wanted to understand when you're walking back the growth for next year does that still assume $2 billion of net investment volumes.
Yeah again in terms how.
Looking at 2020 and.
Having said that guidance or expectations and the components thereof.
And I feel very responsible to all let to use so when that is ready and reliable I couldn't feel more strongly about that Michael if you can imagine.
In terms of.
The deferral of enterprise Rose.
I would say that.
You know when I said steady state it simply.
What we have now if you want to think about that.
Well I'm just trying to piece together and maybe the bigger question. As you know this is it's unfortunate situation that you've had to walk back and shop as much younger.
Then you expected. Unfortunately, you have to manage other managers. So it's not even something internal that you can just fire someone or disciplined someone for bad performance or oversight.
If I look at certain of the guide and then.
And the FFO trajectory you had an issue last year, where numbers have to come down pretty significantly for 2019, you hadn't in Investor Day, where I would say you did the reverse which was get people really excited about the future growth profile of the company.
You started talking down numbers, a little bit on the Twoq call. When further at a conference in September putting things were a little bit weaker and then dropped today.
Weaker results and a significant change for 2020.
And so I can respect the level of wanting to be responsible and get all the numbers in action.
But this is not a one time event.
And so I really would like to understand from an enterprise perspective, what else are you doing here you talked about fixing things and maybe doing more dispositions or capital Morrison from your own guidance and financial.
Perspective.
What has the last 12 months taught you from that.
Side.
Yes, its good Sam it's amazing to be at this stage and Craig and they'll be you know learning good lessons I would say that.
Again, we've always.
We've always been known over long periods of time to be reliable and to be fourth right.
And those are values, we we hold here.
I would say that are one of the lessons is certainly.
That in a dynamic market like we have now we have to be disciplined even if people are asking for information earlier.
Or do you know more detailed information we have to be more gets a plan to make sure we have.
All the input that we believe are necessary to have confidence in what we are telling you and that lesson is reinforced by today and Dan.
No I, we have we feel and have a deep responsibility to you and to our shareholders and to all our stakeholders and Dan.
We.
That's how I would characterize really what.
We will do differently going forward and what we've learned.
And then I think the the key point that we're all trying to sort of isolate is you've had the confidence to be able to tell the market. Today you know, we're not gonna grow with AFFO in 2020 based on our trajectory of shop that we experienced in the second half and likely some element of what we expect.
Her shop next year, and we're going to please hold off until January we'll we'll give you all the details I think somebody other pieces in coming to that comment.
Like $2 billion of investment, that's where I think we're trying to put the pieces to the puzzle together.
At least I understand you coming in making the declaration of no growth for next year, what does that mean does that mean.
You should assume zero acquisitions, which is by the way the historically the way used to do guidance.
Since Investor Day, where you layer that into your growth profile and so I think there's some.
Like apples and oranges and I think we're all just trying to understand the meaning of your no growth in what's embedded.
Generally speaking in that.
It's in and whatnot.
Right and well you know what we can say is.
That.
Ralph will be deferred we there's a significant amount obviously that is driven by our senior housing and.
With respect to the rest of that.
We do you want to come back to you at the right time and give you some of the.
More underpinning of.
A range.
And then just somewhat different components are that go into that range right I just want to make sure that when you said steady state. So in your comment about growth for next year would exclude net investment activity your comment about not getting to growth because that is that include because obviously that could be accretive to numbers and I just want to.
Again about all the other components that means a major one because it could add anywhere from five to 10 cents to earnings if you're buying $2 billion of assets finance degree to fully so that's that's to me seems like a major ones just to make sure we understand.
I mean, where to act as I said and Youve interpreted correctly, Michael in terms of steady state.
We're just thinking about effectively organic without you know additional.
Acquisitions dispositions capital markets et cetera.
So all that could potentially be added is to whatever.
But on a steady state basis current portfolio current same store that would lead to earnings have to AFFO being down next year from that point, you're going to work your <expletive> off to improve operations at shop and work with your managers find accretive investments and so there could be it a chance I hope.
Things could turn out better than that expectation and set a fair assumption.
Well, we are certainly focused first and foremost on delivering 29 team we've outlined here and we will absolutely. The whole team is committed to working as hard as possible.
For for men.
And.
Two.
Get the benefits of senior housing upside external acquisitions and cell line you have our commitment for that.
Thank you.
Thank you Michael.
And our next question comes from Derrick Johnson of Deutsche Bank. Your line is open.
Hi, everybody good morning.
<unk>.
Hi, So we've covered a lot on I apologize if I Miss this but what are what are some options to optimize the shop portfolio. So as you look forward you know how do you balance the possible disposition of underperforming assets versus reducing dependence on senior housing through gross and.
Our and I know, where maybe hospital investments if you could speak to that for a second.
Right I mean, there's a definite Alan here because the leading indicators in senior housing continues to be very positive. There is a powerful upside in senior housing.
We certainly can always optimize the portfolio and do things to improve performance.
We also want to be there and have our shareholders be there to enjoy that powerful upside as it materializes. So there definitely is a dallas there as you pointed out.
Okay, but as far as growth in an hour and I, we expect that should continue but how about how capital investments in general is that a possibility as well yes.
Uh huh.
Okay, and Bob any Bob talked about Arden performance, which is thing Greg that investment has done very very well and debt.
Our new Montreal investment of course has five assets under way that well continue to invest and so there are many good aspects of the portfolio in the enterprise that are going very well and we can obviously continued to build on those strengths while we.
We also address.
Where we are in senior housing.
Okay, Debbie Thanks, a lot thanks, everybody. Thank you.
Thank you.
Next question comes from Lukas Hartwich of Green Street Advisors. Your line is open.
Thanks, Good morning, highly dampening hi on shop do you have any ideas why there's such a large disconnect with the Nic data performance.
Well on one side on rate I would tell you that the rate from Nick is not effective rate, it's not rest poor we really get screened garden.
It's the rack rate basically.
No I think that that really should be kinda off the table in terms of occupancy sequentially. We built occupancy 40 basis points. They built at 20 that difference is a year over year comparison.
And I would only a that the coverage.
Because it's not 100% of the country to in certain geographies. So.
Although representative I think not not complete.
Great and then just one other can you compare contrast, the capex spend that is going into your shop and triple net senior housing portfolio.
Well, we know that Brookdale for example in the Triple net portfolio is investing.
A significant amount in capex and through our agreement with them, we've committed to keep that assets competitive in their markets by.
I'm doing a sudden yielding investments in capital is well most of the triple net leases have a requirements for Capex, then I would say in general our shop portfolio, which is higher and and higher rate by.
George we do tend and call it 2500 unit so.
You know very significant to keep the assets a in good condition and with a high price point for the rest again.
Oh.
Great. Thank you.
Thank you.
Thank you.
Next question comes from Vance fan of core of Stifel. Your line is open.
Alright, thanks, and good morning.
How many I'm going to try and get a little more detail about the shop occupancy only because it seems to be a dramatic shifts in occupancy from mid quarter to the ended the quarter that.
Just like you have no new supply doesn't really seem to account for.
Can you give us a little more detail would that confined to specific properties and operators or geography to receive did something water.
Yeah Yeah.
So.
It is it is.
A significant change and it was significant even within the quarter and most notably in September .
And that was a trend which is true across all the operators that we haven't or shop portfolio.
And Ah.
At least in my experience pretty unprecedented so.
It.
It's not specific to geography, either you know we saw a again I mentioned.
Secondary and tertiary markets, where more supply has come online earlier.
Is where we see the most acute impact.
But even in primary markets you see similar similar trends. So that's why keep coming back Chad to this this notion of the cumulative effect.
Is it a capitulation of some kind or not only time will tell.
But it is it is notable in that it is consistency as we looked at a different ways.
Alright, then you this is wider spread.
How has been tosses expectation of a weaker shop and 2020, how does it alter your view of potential senior housing acquisitions in 2020.
Well again as we talked about as it relates to 2020, we're not factoring in any of that in the conversation that we've had today.
Over the past several years, we've been quite judicious about our senior housing investment that vast vast vast majority of our investment activity has been and growing the are a nice pipeline and obviously non U.S.
Montreal base for example, the LTM investment and show I would say our expectation about investment is really based on.
Oh, it's a case by case basis, we remain positive on the fundamental long term gross in the senior housing business, but we've been very judicious about our investment in the senior housing business over the past couple of years.
Right. So what do you think you know optimal portfolio mix looks like you know down down the line two three years.
Well, we've talked about 54, and I would say that we hope to continue building our University base researching innovation business, where we expect to have.
Excellent risk adjusted returns, we've always thought that he shop should be in the U.S., certainly somewhere between 20, and 35% and that's been consistent overtime and as I wouldn't I would continue to endorse diversification.
And all that manifestations, which again has the company is really benefiting from right now if you've seen the outperformance from office on some of the health care Triple net lease business and so on.
All right I'll leave it there thanks.
Thank you.
Thank you.
Our next question comes from Michael Miller of JP Morgan Your line is open.
Hi, good morning.
Hi, Mike.
This is not 2020 question.
Given the wide performance variance between the primary markets in the secondary markets should we assume that you're going to shrink the secondary markets overtime and ramp up asset sales.
I think as Bob said, you know if yes. This is a an outgrowth of earlier.
Development in secondary markets. That's now being felt you know we want to make sure that were taking operational action pricing decisions and so on to compete effectively in the markets.
While also preserving that powerful upside and so those maybe the first Q.
To change on a positive note.
And we will look at all of those markets and all those assets on a case by case basis, both operationally and strategically.
So I don't I don't think your conclusion is really directionally, how we're thinking about it.
Okay got it and then the negative rent spreads can you put some numbers around that just in terms of how they trended.
That's a lot question or yeah, I'm last year, I've I would call. It in the 7% range this year closer to 10.
Down.
Got it okay. That's it thank you all right Mike Thanks.
Thank you.
Our next question comes from Daniel Bernstein of capital One your line is open.
All right I'll still say good morning, this on still standing outside.
Good morning, I guess I'm happy.
A question on their resupply use and some of the rate pressures out there [laughter].
Stemming from the merchant builders wherever that the older operator here for your asset came online in 16.
Three years in and you're not stabilized you're coming up against some of your probably your construction.
Debt covenants.
Is that where the pressures emanating within the industry from kind of the merchant builder or is it again I'm trying to understand and how broad based.
Good rate pressure is out there.
Yeah, I I think it's.
It's all the above.
To be honest with you, it's not to against specific to anyone.
Yeah at least as we see it anyone operator or or owner.
It's more of an industry commentary than anything and a geography specific conversation.
[laughter] and then I assume it's more on the outside in the on all sides were again. This is a kind of that's important distinction yeah, absolutely. The it's definitely a ill again, that's whereas you know.
The supply has come and where this starts have gotten the lowest switching right in the most of the most notable improvement nine years low I think the latest stayed at Lewis in nine years.
So I I O is performing pretty well actually it's the shale that seem to pressure.
[laughter] does that you know nothing no we're not going into 2020 acquisitions are going to train.
<unk> for me just a broad perspective.
Because that Dan we viewed more inclined to see continue to buy.
Builds assisted living given where the starts are in good.
You are kind of continue down the path of more right exposure versus triple net.
Here's something and you should and maybe where you would want to invest and how you would want to invest in senior housing.
<unk>.
Yeah, as we've talked about in terms of our investment strategy. We are positive on their long term fundamental outlook for senior housing we have invested judiciously over the past few years, we're building our research and innovation business with universities, which is our.
Number one priority and you know will continue to look at investments on a case by case basis as we see good what we believe it's good risk adjusted return.
Okay. Okay I.
I guess what continues on the conversation offline up it's going in late.
I look forward I look forward to it.
Thank you so I wanted I, thank everyone for their patients and participation in this call as Michael Eloquently said, we are aligned and are committed to.
Two working as hard if we can on behalf of our shareholders as we always have.
And yeah, we really appreciate your continued support and trust should we look forward to seen you and November thank you.
Ladies and gentleman. This concludes today's conference. Thank you for your participation you may now disconnect.
[noise].