Q2 2022 Welltower Inc Earnings Call

Good morning, My name is shantou and I'll be your conference operator today at this time I would like to welcome everyone to the World Power second quarter 2022 earnings call. As a reminder, today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session if you'd like to ask a question.

During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again, Thank you Matt Mcqueen General Counsel you may begin.

Thank you and good morning, as a reminder, certain statements made during this call maybe deemed forward looking statements in the meaning of the private Securities Litigation Reform Act, although willpower believes any forward looking statements are based on reasonable assumptions. The company can give no assurances that its projected results will be attained factors.

Factors that could cause actual results to differ materially from those in the forward looking statements are detailed in the company's filings with the SEC and with that I'll hand, the call over to Sean for his remarks.

Thank you, Matt and good morning, everyone I'll review high level business trends and describe our capital allocation priorities.

Before handing the call over to John who will detail the operational trends and provide more details on the operating platform that he is building.

Our total revenue is up 29% year over year, driven by both organic revenue growth and contribution from significant capital deployment activity over the last 18 months.

On a same store basis, our senior housing operating portfolio revenue is up 11, 5% year over year, driven by a 5% occupancy growth and a four 5% Revpar growth. All these translated into a 15, 4% same store NOI growth in Q2.

And while EBITDA is back up $2 billion annualized in place shop, NOI is at $895 million, though shy of $923 million of pre pandemic numbers. Our revenue has surpassed pre pandemic levels. However, I'm not happy with these results, which I would just characterize mediocre at best.

Why.

Because of the size of our portfolio is much bigger today.

Given the significant amount of capital deployment over last 18 months and yet our quarterly results are not reflecting the cash flow that this portfolio is capable of generating.

I'll give you a few things to reflect on first we have about 120 senior living senior housing properties that are generating negative cash flow today in other words, if we just shut down this billings our earnings will be significantly higher.

Clearly, we would not do such a thing as they were recently developed are going through our value add repositioning program.

Hence the timing mismatch second while I don't like to fix that on short term trends and instead focus on long term prospects of the business I'll offer a few observations on the second quarter, we started the quarter with results coming in better than expected only to get hilt simultaneously by multiple challenges primary.

Really related to another COVID-19 spike during the last couple of weeks of June.

Well at this time, we didn't see it coming as the testing requirements have been lowered in recent months, particularly for those residents who are not experiencing symptoms.

In instances, where few residents our team members develop symptoms and an entire building would be tested only to find out many asymptomatic residents and staff actually write code with positive.

This created some disruption to move ins, but particularly impactful to the user the agency labor in June our operators are walking through as we speak and made very good progress in July let me dig into some recent trends even a bit more from a demand standpoint, we always see first half of July has two last weeks similar to.

The last two weeks of December as family celebrate fourth of July weekend, and don't usually move parents and grandparents in this July we lost an additional week and as a result, almost a whole month was shot from a move in perspective before we gain significant traction later in the month with tour activity returning to.

The levels experienced in June .

We and our operators have few theories of why that might be the case, one the hyper positivity rate of Colgate over 20%. Despite people on our reporting to governments families know from home testing the COVID-19 positive and are delaying move ins as they wait for this wave to subside and number two travel.

Somewhat travel as tourists that families took advantage of loser COVID-19 restrictions again I would describe this as a conjecture because we don't know for sure but we are clearly seeing broad based demand recovery continues particularly towards the second half of the month in terms of leads and tours, which.

Led to our recent rebound in move ins across the portfolio over the last couple of weeks on the cost side. It is important that you understand the progress we've made in the on the agency labor.

In the U S. Most of our operators saw decrease from June to July , resulting largely from a favorable net hiring trends. The July books are not closed yet we're expecting a decline in agency labor expense in high single digit from month of June in terms of net hiring our operators have continued to make significant momentum.

With July increase alone in head count nearly equal to the net hires of bus past six months of the year combined as a result, we're already starting to see benefit of this trend, which should reduce the dependence on agency labor in the second half of the year.

The downside of high frequency data is that you get a lot of noise and I strongly believe that's what you are seeing in the numbers today a lot of noise I encourage my team and we'll encourage you not to confuse any short term high frequency noise, whether good or bad as a signal and protect that into the future prospects of the business for a few.

<unk> I have been talking about the run rate earnings of the true earnings power of this portfolio being significantly different from our current reported earnings clearly some of the anticipated second half growth has slipped into the next year, but it should only be a timing mismatch as we've as we focus on 'twenty three 'twenty four I continue to believe that this earnings borrowers.

<unk> through <unk>.

Before I move on to the capital allocation priorities, let me make a comment on <unk>. When we bought HCR manor care portfolio out of bankruptcy, we did not outsource our underwriting to rating agencies clearly there was no way for us to predict a global pandemic or a day when almost every hospital system in the country would lose money similar to what.

Happened in Q1 of this year because of Covid, we got comfortable because our basis of $57000 for skilled nursing beds, we saw very minimal risk of permanent capital loss, which is at the core of how we think about risk of all the structuring bells and whistles aside which we're very proud of.

We fundamentally believe investment basis, not cash flow in a given building at a given point in time determines investment success, having said that the <unk> team has been able to meet reduced agency labor almost by half over the last four months and significantly narrowed their operating losses, we have.

Below market basis, and thus below market rents here.

<unk> very comfortable with our rent and long lifetime expected IRR from this investment that we discussed with you. When we did this deal four years ago.

Turning to the capital deployment I cannot overstate, how favorable of an environment, we find ourselves in today during the second quarter, our off market privately negotiated transaction machine kept humming, having deployed an additional $1 $1 billion of capital today, there's definite stress in the lending environment.

And given the significant rate and credit volatility and increasing recession top cap rates are going up across the board and most institutional capital is waiting to see where the chips fall, we're seeing many high quality opportunities and we think that environment will only get more favorable as fed continues to raise red at <unk>.

Rapid clip our pipeline remained robust having replenished after all off our Q2 and Q3 closings our fundamental investment thesis remains intact, one we need to buy at a favorable basis replace two relative to replacement cost and two we need to be able to add value through our <unk>.

What form will not spread investing deal junkies, and instead remained laser focused on total return or Unlevered IRR.

I continue to believe this year will be a record year from Walter <unk> from a capital deployment standpoint.

Cost of capital has search for everybody, including government and access to capital remains very sparse for most people in this environment. We remain in a very favorable capital position with two plus billion also equity capital that is raised but not settle and almost full availability of our $4 billion line sellers.

Did not like our price six months ago are realizing that glossy broker packets and nonbinding LOI are not cash in the bank. This environment reinforces the value of our counterparty like well tower, which always acts on a very simple principle, we say, what we do and we do what we say and in that vein as our.

Long term investors have come to expect from US we exercised utmost discipline on every transaction, we'll look at large or small and will not chase any deal as we have said in the recent past prices surprise and we only act in a manner that creates long term value for par share for our owners.

With respect to capital deployment over last 10 mid 18 months. Some of you have asked me if I am satisfied with the performance of these properties in.

In many cases.

In the cases of many of these acquisitions, including some larger ones. The answer is no.

That same store challenge that I have described above are accentuated in many non same store properties, which are being repositioned through operator changes. However, I do believe that we have turned the corner as we approach the completion of our operator transition and system integration for the Covid class of acquisitions.

We should see significant progress from these properties as we enter next year. Please.

Please recall, we made we make investment decisions based on long term IRR with an exit cap rate going up every single year from the duration of the ownership and we feel strongly about achieving those return targets as we have discussed with you as frustrating as near term challenges of operator transition might be for a reported earnings and <unk>.

Just me I shared those frustrations with you we have to do what's right for long term interest of our owners.

I will give you two examples vintage and great 12, two other most ill-fitted HCN acquisition for many months ago.

Despite some of the most coveted location and Capex plans. These assets did not live up to our expectations. We finally pulled the plug over last 12 months frankly, because we're not permitted to do so earlier, our grateful assets were transferred to care U K and the vintage assets were mostly transfer to oakmont with.

One each to kisco and cause year.

<unk> has already made incredible progress with the first tranche of the asset they received last fall with occupancy up 13% and I believe you will see this repeated in the most recent tranche as well.

K as having similar success with Grace will assets, taking occupancy above 80% and I believe they will be stabilized or get close to it in 2023.

We made similar decisions for our other properties.

Which come with some short term pain, but as we capital allocators strive everyday to create share value by compounding over a long period of time, while we hope near term priorities do not conflict with those long term practically speaking, we often encounter situations, where those time horizons.

Diverge and it is critical for our investors to understand that add these crossroads will always followed a path to long term value creation at the expense of short term gains. The good news is that all of these as my partner John Barker I would say is baked in the cake with that I'll hand, the call over to John .

We will describe to you, but perhaps the most exciting set of initiatives that will transform the business as we know today and create tremendous value for our residents team members operating partners and most importantly, our shareholders John Thank.

Thank you John My comments today will touch upon the performance of our operating business and provide additional color regarding our vision for senior housing as well as an update on our platform initiatives, starting with our medical office portfolio in the second quarter, our outpatient medical business sequentially increased occupancy by 30 basis points and delivered two 5% same store.

AOI growth over the prior year's quarter, we continued to see strong retention rates over 89% in the quarter, good demand and rising new lease rates.

Now turning to our senior housing operating platform portfolio.

The recovery in the sector continues shonk lots of revenue at our same store portfolio accelerated to 11, 5% in the second quarter compared to the prior year's quarter.

All three regions showed good revenue growth led by the U S and U K.

With growth of 13, 1% 14, 7% respectively. The.

Revenue for the quarter was driven by a 500 basis point increase in occupancy and another quarter of healthy rate growth.

Sequentially the portfolio increased occupancy 100 basis points during the period in which sequentially average occupancy has historically been slightly negative.

While expenses grew at a rate of 10, 5% our operators continue to control explore or expense per occupied room, which only grew at a rate of three 5% in the second quarter on a year over year basis.

And as Chuck indicated we are encouraged by recent trends in terms of agency hiring and new hiring which we believe should drive a deceleration in the second half.

Both.

Despite short term challenges driven by programs with the tight labor market and inflationary pressures the portfolio delivered 15, 4% year over year same store NOI growth in the period. The second highest in the company's history with the U S portfolio generating over 20% same store NOI growth.

Going forward, we expect the portfolio to look to deliver outsized NOI growth over multiple over a multiyear period with strengthening supply demand backdrop compounded by our efforts to optimize the business, which I'll get to shortly.

Regarding the overall market.

Rafik. This summer has been influenced by Covid in various ways. For example, the traffic was very good in June and then fell significantly as expected for the fourth of July weekend will continue to remain low until it accelerated in the last couple of weeks of July .

Total July traffic was about equal to the total June traffic.

We expect the increased traffic in the later part of July to lead to increased move ins in August .

The average occupancy for the portfolio in July was up over 40 basis points in the same store portfolio.

I also want to quickly comment on recent management transitions within the Sho portfolio as we make adjustments to our operators portfolios and the related assets are in transition we appropriately remove them from the same store portfolio as they tend to underperform early in the transition and subsequently outperformed later in the transition which can.

Create noise in the same store portfolio performance. This is very similar to removing an asset for full renovation.

Transitions take a substantial amount of time from the point of notice to the actual transition of management, which negatively impacts staffing sales leads and other operational aspects of the asset the challenges the new operator faces upon takeover are significant however over time, they get resolved and of course the assets performance improves.

Over the pre transition baseline, which is the purpose of the transition to begin with the fact that we have 59 assets in transition is meaningful and that management is willing to take short term earnings pain for improved performance in the future. If we had not removed transition assets from the same store portfolio, our year over year NOI growth for the quarter.

<unk> would have been 14, 9%.

Bottom line strategic transitions are undoubtedly worth it and they can drive significant value despite creating near term noise for the same store portfolio.

Shifting to an update on the operating platform previously I mentioned the opportunity to fundamentally change the growth potential of this business by creating a full scale operating platform and bringing operational excellence to our senior housing portfolio.

In terms of industry lifecycle, I would place the senior housing business in the infancy phase, but rapidly transitioning into the growth phase. This is very similar to the multifamily business years ago, whose transformation I witnessed firsthand.

Businesses that are in the infancy phase.

Of the industry lifecycle focus on effectiveness, which is essential without it the business would not be able to exist long term in the industry as an industry transitions from the <unk> phase to the growth phase continuing to remain effectively.

As the core objective as essential however, the winners focus.

On operational excellence, including efficiency.

The analogy that I have used is the diner business of the 19 fifties.

To survive and thrive you had to serve a good meal, a good burger fries and shake in the case of the Mcdonald brothers, However to grow as the industry moved from its infancy to growth phase our focus on operational excellence was imperatives, including an obsessive focus on efficiency, which is what ray kroc did when he franchise Mcdonald's.

Our senior housing operators faced many small business challenges, including the inability to recruit and retraining and retain top talent in key functions from technology and data analytics to process and facilities management due to their size and inability to compete from a compensation perspective.

Additionally, the fee based structure.

Limits, the economic incentive to fully invest in optimizing the business as an owner operator would for example, if a fee manager has paid 5% of revenues. The most they would logically spends to collect a dollar of revenue is <unk>.

Whereas owner operators would theoretically invest 99 cents to collect the dollar.

As you all know we have worked to change this unfavorable incentive structure through our aligned RIDEA three <unk> contracts and we are now working on our next generation of contracts that will provide well tower with a greater ability to help address senior housing operators small business challenges.

These challenges are across the board, including basic functions to illustrate in a relatively simple areas such as billing and the two reviews. We performed we identified that care revenue was under build by 25% or more meaning that the necessary quality care was provided to the resident however.

<unk> they were under build.

Other challenges are much greater including keeping up with modern consumer expectations such as building.

Building wide high speed internet connectivity, identifying and integrating quality technology systems, and creating and delivering real time, insightful and actionable reporting to improve operational results.

Focusing on operational excellence is more than a digital transformation, it's about people processes data and technology, recognizing that everything starts with people our residents living at our communities the employees, serving serving those residents and the operators, leaving leading the effort.

We start by focusing on the customer experience and employee experiments experience and optimizing the various processes.

Then we evaluate the data that may that we may leverage to draw meaningful insights into into the business in a way that improves the experience of the various stakeholders. Finally, we implement cutting edge technology to simplify and automate the processes as we will provide real time actionable insightful information improving the customer and employee.

Spirits, while optimizing results.

This isn't simply about buying the latest software it's about fundamentally transforming the business over the years. Many businesses have transformed from buying books to used cars to buying homes and finding vacation rentals digital transformations have fundamentally changed these businesses and improved the overall experience.

One of the key imperatives of operational excellence is a recognition that data is the asset.

There is no entity in this space better positioned to leverage data then well tower as we're effectively building the operating platform to improve the overall experience on what we call Alpha our data analytics platform that has been developed over the last six years, well tower will improve the customer and employee experience and create shareholder value through leading.

The transformation of the business.

I have gone from full immersion and in.

An observation to planning and now action mode, I will not give away all the details of our future playbook, but I will say the following we are moving very fast. Several recent highlights include forming an internal multi disciplinary disciplinary team of experts focused on improving the senior housing operations in Q2 hiring a chief technology officer in Q2 to <unk>.

Lead the technology aspect of the operating platform completing the implementation of <unk> ERP last week, which is central to this effort and frankly I want to thank the wealth our team that executed this massive project with great speed and excellent execution.

Initiating a data analytics pilot on.

The current information that we have available with an expected rollout over the next six months. This step alone will enable us to start driving value finally, creating the salesforce automation automation plan with expectations to launch a pilot in early 2023.

We have numerous other modules in the works and we will update as appropriate.

Although this is a huge effort Walter is uniquely positioned to execute it faster than historically possible. Our strategy is to leverage existing quality modules and only create new modules, where they don't exist or where they give us a strategic advantage such as our revenue management module, which we're developing another.

Another unique benefit that well tower has relates to the number of top quality operators in our portfolio. We are separating the pilots of the modules into parallel initiatives each with a different operator, which will minimize the potential delays that can be caused by a lack of employee bandwidth are overall for tea and have slowed down the other transformations ultimately as we are.

Perfect. Each module, we will then rapidly roll it out to the broader group.

This business transformation will continue to deepen and widen the moat well tower has built while improving the overall experience of all stakeholders I will now turn the call over to Tim.

Yes.

Thank you John .

My comments today will focus on our second quarter 2022 results.

The performance of our Triple net investments I mean quarter capital activity.

Balance sheet liquidity update and finally, our outlook for the third quarter.

While our reported second quarter net income attributable to common stockholders of <unk> 20 per diluted share and normalized funds from operations of <unk> 86 per diluted share.

Which included $17 million provider relief funds from the department of health and human services, approximately $11 million or <unk> <unk> per share more than was assumed in our initial guide for the quarter.

This quarter represented our second consecutive quarter of year over year normalized <unk> growth since the start of the pandemic and positive eight 9%.

777, 7% when normalized from HHS funds received in year over year changes in FX rates.

We also reported our second consecutive quarter of positive total portfolio same store NOI growth of eight 7% year over year growth.

Turning to our triple net lease portfolios.

As a reminder, our triple net lease portfolio coverage and occupancy stats reported a quarter in arrears. So these statistics reflect the trailing 12 months ending <unk>.

March 31 2022.

And our senior housing Triple net portfolio same store NOI increased nine 9% year over year, driven by improvements in rent collections and leases currently in cash recognition.

And the early impact of rental increases tied to CPI.

Trailing 12 month EBITDAR coverage increased winter of one times to <unk> 83 times in the quarter.

Next our long term post acute portfolio grew same store NOI by positive two 8% year over year.

And trailing 12 month EBITDAR coverage was 131 times.

And lastly, health systems, which is comprised of our pro <unk> senior care joint venture with the pro Medical Health system, which had same store NOI growth of positive 275% year over year and.

On a trailing 12 month EBITDAR coverage was negative two nine times and the operation continued to be impacted by higher agency utilization in the first quarter.

Turning to capital market activity.

We continue to enhance our balance sheet strength and position the company to capitalize on a robust and highly visible pipeline of capital deployment opportunities by utilizing our ATM program to efficiently fund those near term transaction.

During the second quarter, we sold 18 million shares via a forward sale agreement and initial weighted average price of approximately $87 67 per share for expected gross proceeds of $1 6 billion.

We currently have approximately $22 5 million shares remaining unsettled.

Which are expected to generate future proceeds of $2.01 billion.

Taken together, our unsettled equity proceeds inclusive committed op units on pipeline deals and.

And $257 million of expected property dispositions and loan payoff proceeds.

<unk> totaled $2 3 billion in equity capital, providing ample capacity to fund our current investment pipeline.

During the quarter, we closed on an amended 4 billion unsecured revolving line of credit along with an Upsized term facility.

Price of a $1 billion USD term loan and a 250 million CAD turmoil.

At quarter end, when factoring in cash and restricted cash balances our liquidity position exceeded the $4 billion of borrowing capacity on our line of credit.

And when combined with the previous mentioned $2 3 billion of unsettled equity proceeds and spike in disposition proceeds we remain in a very strong liquidity position.

Lastly, moving to our third quarter outlook.

Last night provide an outlook for the third quarter of net income attributable to common stockholders per diluted share of <unk> 12 to.

2017.

And normalized <unk> per share.

Of 82 to 87.

Or <unk> 84, and a half down to the mid point.

This guidance includes $7 million mentioned, Jeff funds expected to be received in the third quarter.

Excluding HHS funds guidance, representing a 5% increase at the midpoint from <unk> normalize MFS.

The <unk> increase that compose the process.

Two and a half stands from incremental show NOI growth and show investment activity and.

In <unk> and performance across the rest of our investment segments and from lower sequential G&A costs.

This was offset by three tenths of higher floating rate interest cost and unfavorable FX rates.

Underlying the desktop guidance is estimated third quarter total portfolio year over year same store NOI growth of 7% to 9% driven.

Driven by sub segment growth of outpatient medical 175% to 275%.

Long term post acute of two five to three 5%.

Health systems up to 75%.

Senior housing Triple net of 5% to 6% and finally senior housing operating growth of 15% to 20% driven.

Driven by year over year revenue growth of 10%.

Underlying this revenue growth and an expectation for approximately 400 basis points of year over year average occupancy growth and continued robust rate growth.

We continue to be pleased with momentum in the top line recovery and our senior housing operating portfolio driven.

Driven by a combination of rate and occupancy growth.

As I remarked last quarter.

We've realized that recovery in our core portfolio. We have made the conscious decision to steadily allocate capital to distressed under operated and often initially dilutive properties.

Along with high quality development projects.

While this capital allocation is the effect of offsetting some of our core growth today into.

Mr substantially amplified in years to come.

And with that I'll hand, the call back over to Sean.

Thank you Jim if I may distract you all from the short term noise and focus on the main drivers of long term earnings and cash flow per share growth there.

Really for large buckets that we must pay attention to occupancy rates labor cost and external growth.

In 2021 whenever were hit by a massive COVID-19 with it felt as though we are taking one step forward and to step back in terms of occupancy rates and labor costs.

Actually the health impact of Covid has been getting more mild and the psyche of the population is significantly improve now.

Now we are taking two steps forward and one step back in terms of occupancy and labor cost and it appears from the July trends that we're making that one extra step back forward very quickly. So COVID-19 impacts are getting less pronounced and rebounds are getting quicker as we learn how to live with COVID-19. Despite the reported issues of agency <unk>.

Over the team member counting our communities has grown significantly off late and we have not seen any letup, though we have not seen any let up the cost of labor. There is no caution that we have seen the availability of labor increased meaningfully off late the portfolio has almost the same net hiring in July as we had in the <unk>.

Six months of the combined DAU of our operators have had success in net hiring members over the last few months as you can see from the <unk> study slide on case studies on slide seven and eight it appears that the labor market is finally on demand from the significant success of hiring trends in July assuming these trends.

Continue this bodes very well for agency labor cost as we get.

The second half of the year.

And where we continue to make the largest strides is through pricing power. The recent Kobe spikes have not in any way dolled, our operator's ability to push through strong rates. What is particularly encouraging is the street rates, which are up from high single digits, all the way up to 15% to 20% in case of some large operators.

Given the sharp acceleration in growth of the senior population and plummeting new supply of few projects penciling for developers today, our confidence in driving occupancy and rate growth for next few years continue to strengthen.

As for external growth opportunities are prospects, which have been very good are only getting better the willingness of owners to transact has grown over last two years as they struggled with COVID-19 related challenges and debt maturity and now with recent surge in borrowing cost and tighter lending standards.

That are keeping many bias at bay.

If we overlay all of this with how John is fundamentally transforming our business have not been more excited about the future prospect of our farm. We know we need to translate all of this into significant higher earnings run rate and cash flow quite sure.

Cash flow per share and our team, which thinks and acts like long time Warner as a hyper focused on that mission with that we'll open the call up for questions.

At this time I would like to remind everyone in order to ask a question. Please press star one to allow everyone to ask a question. Please limit yourself to one question.

And please reenter the queue, if you'd like to ask a follow up question, we'll pause for just a moment to compile the Q&A roster.

Okay.

Our first question comes from Michael Griffin with Citi. Your line is open.

Hey, it's Michael Bilerman here with Griff shrunk.

Sean I was wondering if you can just step back and look I appreciate the comment about.

The downside of using high frequency data and the noise.

Sure.

Effectively not to confuse the short term, whether it's good or bad to protect on the future.

And you guys have been very all over COVID-19, providing us a lot of business.

I think back in June .

So you use that data to lift guidance right and you issued the different update so I'm trying to.

Understand whether you're thinking about a change in how you communicate to the street and the reads that you're feeling right. Because you took that data and you lifted the street and you raised a bunch of equity and now things are a little bit lower.

And I'm wondering as you think about that short term, whether it makes sense to really start putting out the building blocks for all these things that you've done I mean, 20% of the portfolio has been bought since late 2020.

And start to pencil that out on a three to five year basis.

Go through all the building blocks of all the deals you've done 120 assets that are negative cash flow in all of these things to try to model out where that future growth really is because of all of these what you call them noise today.

Okay.

Yes, Michael I'll start with that and then.

Keith amenity.

<unk> on.

NAREIT <unk>.

Guidance change there Chuck spoke to this in his script.

We tightened guidance at NAREIT based upon the trends that we saw in those trends reverse towards the end of the quarter and we ended up towards the lower end of that range. So I hear you on the high frequency of data and frankly, what we've been trying to do is.

Give updates.

Because the longer term view has been tougher to project.

Given COVID-19 as a backdrop right and we've been trying to balance essentially since we've been able to prevail, providing less of that long term view to provide more of that short term information and wont speak for shock and you can give any comment on this but I think part of the commentary on the short term noise is just trying to see the long term trends.

Continue to be strong in the recovery side.

<unk>.

We're certainly focused on that and we continue to evaluate that piece of it.

Although we understand the market's need for frequent updates on data, we're trying to make sure that you see how we're looking at it and keeping our long term focus.

On kind of the core fundamentals of the business I'll just add one thing Michael as I mentioned, if you look at when we got hit by <unk> five.

Second half it was about a week after NAREIT.

And that impact.

As a follow through about the middle of July .

You probably have noticed that we provided other business update few weeks ago, just to make sure that everybody knows that our view has changed because of things that we've talked about any rate. So there was another business update not just the ones that you mentioned.

So we have we provide information as investors know they see what we see but fundamentally as I mentioned in my last quarter call that all are we tell you how we think but if we get hit by Covid wave. All bets are off I mentioned that in last call I mentioned that in five calls before that.

And that continues the good news here is with every passing wave were seeing the impact is lessening and we are seeing the rebounds are getting faster, but the fact of the matter is we just went through one hour rather we're sort of coming towards the tail end of one and we have no way to project.

How and when we're going to see Covid in our communities that just not what we can do and I'm not aware of anybody else can do we're just telling you as we are seeing things, but we are hoping at least we're trying to help you understand the fundamentals of the business I would for example, if we can see there's a tremendous amount of.

Obviously noise on the agency labor. If you look at that was obviously reported quarter of June we see a pretty meaningful improvement in July but if we truly see the improvement that we are excited about is the net hiring number because July net hiring number doesn't impact July agency numbers right is sort of there's a lag between when you hire.

People versus when the impact to our numbers because you've got to train them.

There is a lag between when you hire them and when they hit the floor et cetera, right. So.

We're just telling you what we're seeing and it's important that we communicated trends change because of COVID-19 and otherwise, but I hope that you appreciate that we remain transparent and we report things to you as we see things and if things change things change.

Yeah.

Our next question comes from Vikram Malhotra with Mizuho. Your line is open.

Thanks for taking the question, so maybe Shanghai and John .

Well I just wanted to kind of take the pricing power comments.

Echoed and just think about.

Leaving cost side as you mentioned Covid comes and goes it's tough to predict.

Got it.

Would it be unfair or unreasonable to say given what youre seeing on the on the bumps the re leasing spreads as we head into 'twenty three given demand supply.

Pricing power should only accelerate and I should not be surprised if we see.

Call. It a mid to high single digit Revpar growth for a couple of quarters and lastly can you just translate that pricing power until your latest thoughts on margins in the senior housing space.

Okay vigor them I'm not going to get into.

Sort of giving our guidance on.

Pricing power.

Particularly for next year's pricing power, but I will tell you.

That we are seeing that street rates are significantly accelerating.

There has been talks.

So I mean I was in the UK for a few weeks our UK operators are talking about giving a mid year price increases in September October timeframe, I have not seen that before.

There are some talks of U S operators thinking about something of that nature, but most importantly street rates just going up fairly significantly.

So all of this should translate into continued pricing power in our portfolio, especially if you look at next year demand supply is even more favorable right.

But we're trying to optimize the revenue growth and frankly.

So from our standpoint, we think that pricing power should continue as you can.

Appreciate that we had pricing power last year right. So we obviously had revpar growth will continue to push that and.

As we move forward you will see that.

We continue to push that pricing power as I've suggested before the two types of pricing power.

That you should see frankly speaking the one youre seeing today is there is this from the need of pushing pricing because of cost inflation and that sort of we're sort of going through that.

But as we stabilized different billings you will see another set of pricing power, which is we're raising prices because we don't have a lot of rooms to sell right.

Hopefully, you'll see a lot of that going through next year.

Our next question comes from Daniel Bernstein with capital One your line is open.

Alright good.

Morning.

I just wanted to ask quickly about.

Differences in labor cost growth between <unk> and.

I'm, Karen <unk> wellness and how that's factoring into your capital allocation of what you want to buy and invest in.

Yes, so on the wireless side Theres not a lot of cost right on the people side. So you don't have that though I will say that sort of cost mostly driven by taxes.

As well as.

On the energy cost.

Increase.

Our capital allocation is not driven by what we think of labor you can just price that in it is driven by what is the opportunity set was the price relative to what the replacement cost is so that's how we think about it and if we have to think lets just say that you come with this idea that labor cost is going to be high forever, which I don't.

It's going to be the case.

Labor cost has been a problem for this industry for a live very long period of time and as I said, we're finally, probably see that is on the mend right, we will see whether that how that plays out but.

Likely probably see the first sort of shot across that Bob.

But you can absolutely priced that in where price driven investors not necessarily so we take some thematic ideas and just run with it because you can price that in.

Hopefully that's helpful Dan.

Okay.

Our next question comes from Jonathan Hughes with Raymond James Your line is open.

Hey, good morning.

Could you just talk about the recurring capex spend trajectory I see it is expected to kind of more than double through September from last year's pace is that higher spend due to some deferred or lower spending the past few years during lockdowns and were just catching up or.

Much higher construction costs a bit of both.

And then kind of an extension of that how that capex spend should trend in the next year and help fuel increased competitiveness of of your properties and ultimately revenue growth potential.

Yeah, I'll start with that and then and John can add anything.

Part of it is we have been certainly in 2010 2022, playing a bit of catch up.

She has cost the senior housing space, which is that buildings being less accessible.

Sure.

However, 2020 in 2021.

And then in addition for US a lot of the acquisitions we've made.

<unk> had substantial.

Substantial value add opportunities.

So we've highlighted that with some of the larger ones and explicitly stated how much kind of redevelopment capital.

Value add capital, we put into it but I think that's what's driving that right now is a combination of a little bit of deferred.

Our catch up capital from a period of time in which the buildings for safety reasons less successful and on top of that we put a lot of capital to work into opportunities.

High return value add investment.

And all of this.

Just add you're actually pulling something from certain sense from a future script, because I've talked about the operating platform. The next initiative that I'm focusing on in a big way of workflow really relates to capital and internal investments what I'd call. It as how we reposition the portfolio or so.

Senior housing business portfolio ages at the absolute sweet spot under described under 20 years old on average providing tremendous opportunities to reposition those assets. So I am actually building out a capital team right now and we will align our capex with our value add initiatives.

Drive pretty substantial value over the coming three to five years. So it will be a very big effort and we're at the very front of the of that effort right now.

Yeah.

Our next question comes from Austin, <unk> with Keybanc capital markets. Your line is open.

Okay, great. Thank you I'm just curious for the 120 senior housing facilities currently generating negative cash flow.

What is the NOI drag from those facilities.

Can you give us what percent of the $538 million of total NOI upside in.

And shop that they represent and do you expect them to stabilize at a faster pace than the overall portfolio.

We're also we're not going to give you a number.

On how much.

Capital, how much cash flow thats, losing today, maybe I'll talk to Tim and see if we can.

Kind of quantify that for you.

Should it grow faster the answer is obviously, yes, right. They are losing money because they are at a lower occupancy and as the stabilized over say X number of years.

Just from the base that coming out of and if you think about the trajectory of the margin they should.

ROE factor, but a lot of these properties have been recently built or we bought the properties at a very very low occupancy right. So if you look at the last tranche of for example.

The story bond acquisitions, we did I think the average occupancy was like 40% rate.

If you think about it average age of the portfolio I think that we bought is between two to four years and they're at 40% occupancy. So there's no question, there's a lot of those buildings.

That opened in last year and half and we bought a lot of these things right.

From developers from multifamily developers from banks.

That just a drag but the point here is that not a sequential sort of a linear progress to your NOI growth right as they go from a negative.

Sort of margin to the margin inflection in that sort of margin grows after you hit the J curve right. So that's sort of the way to think about it I mentioned that for you to understand that simply very simple rate just take an example of our east 56th Street property that property opened.

Seven five months ago, it's why it's probably low 30% occupied today and hour to hour average rate of those residents that we have received of the people who are living there is $23 $24000. Okay. Clearly that has negative margins, but you would think about it as we thought about that property when we developed it.

<unk> significantly high rates and trajectory of.

Lease up is doing better than we thought still that's a negative value add so but as you think about negative value as you think about putting a multiple on our income understand that you are valuing 120 buildings at a negative value that's all right.

No.

I am not going to add anything more to that at this point, but something to just reflect on what sort of dragging on.

I think ashwin today.

Our next question comes from Derek Johnson with Deutsche Bank. Your line is open.

Hi, everybody good morning.

I'm, John Burkart operational initiatives.

What's his team, hoping to accomplish and really to build confidence. These endeavors can bear fruit. How are you guys measuring success and what's the upside here.

[laughter].

Yes.

The measuring success actually let's go back to what I hope to accomplish is again really bringing modern processes technology et cetera to the business and will give you. An example, a very specific example, so.

One of the things I tested when I when I came in as I tested.

How we respond to our customers' customer experience.

And what I found out after about 200 customer inquiries was at 50% whenever returned.

And of the 50% that were returned.

The average time was about 13 business hours. So if a family member needs help on a Monday.

My father falls or something like that and I decided he needs to go into assisted living I might get a call back on a Wednesday, alright might not ever.

That's a horrible experience and that is very solvable situations.

If you look at the current CRM that are in place they are basically relying upon.

The salespeople in putting data like I wrote a sticky note I'll put it in a file that's my CRM, it's glorified because its electronic but it's the same thing. So for example, I went to one of our large operators and gave them their results, which were six out of six calls did not get returned six out of six zero return.

Sure.

And they said GM shocks because im looking at my desk at our report are pretty report Powerpoint report that shows that 85% of the phone calls that come in and we respond to you in an hour.

And so thats shocking, but this is all something that we can work ourselves through because you can just test it yourself.

But first tell me how does that get reported and he said well it gets reported because our salespeople reported themselves well therein lies the issue the tracking systems Werent werent in place et cetera, et cetera is really a bunch of sticky notes from a receptionist that get lost and picked up by the janitor in the calls get lost so.

That's the type of professionalism that we're going to apply to the business and the results will be to the financial benefit. Most obviously increased occupancy increased rates and a better overall experience for the consumers. So that hopefully answers the question as far as the details and timelines, we're obviously not giving that out.

Our next question comes from John Pawlowski with Green Street. Your line is open.

Thanks for the time I appreciate the case any pages showing net new hiring in recent months I guess.

I still don't have a sense for the magnitude of Understaffing, assuming occupancies start declining.

So to the extent, we get positive surprises on occupancy upside as next six to 12 months.

And you're going to have to lean on agency expense.

That kind.

Kind of meet that demand or do you think.

Properties on average are staffed properly right now to handle additional occupancy.

Yes.

I think John that's a very fair comment, which I should we talked about.

July was obviously very positive month for the entire.

And we hired for the portfolio overall, our operating partners have hired.

As many people in July as they did six months ago, So, but what we haven't told you that hiring puts us finally to 2% plus above while the total number of employees where last year we.

Should have added that it's a fair question.

And from your end.

So as you call recall this whole agency sort of cost drama started about a year ago and we are finally walked our way through that where does July hiring, but finally about 2% above.

Total employee count was on a net basis above last year. So what you are saying is possible, but I would say probably unlikely as we are finally seeing as I said.

I talked a little bit about that.

Our operators have been talking about the overall level ability of labor is increasing in June .

It feels like again.

To be very careful how I describe it because it is not that we know everything thats happening, but it feels like that finally that labor market is on the mend.

At least from an availability for sure it's on the men.

And hopefully that translate into price of labor.

And not a distant future, but at this point at least we're hopeful not.

Just hopefully we're seeing it in our numbers.

That agency labor, which we're obviously pretty ugly number in June but as came down in July and hopefully obviously, there's net hiring numbers in July you will see that should impact pretty positively as we get towards the end of the quarter.

Sure.

Our next question comes from Steven Valiquette with Barclays. Your line is open.

Thanks, Hi, good morning, everybody.

Yes, I wanted to actually touch on the Saturday, you've just answered, but I guess, the just frame it slightly differently not redundant here.

What percent of total open positions across all of the senior housing were filled in July but think of it that way or were talking 75% nearly a 100%.

2% above where we were before is still kind of hard to.

I guess, a frame that perfectly in our own minds, so and the other thing is just on the double staffing what's the typical time period of training, where you have that double staffing and we're talking weeks or months, just any rule of thumb would help around that too as we think of magnitude of potential expense reduction for <unk> versus <unk> et cetera. Thanks.

So net higher in July was about 3% just above 3% of total employee count.

And you should think about the second half of your question you think should think about weeks not months.

July hires should impact I know August and September .

Sort of agency numbers. There is a case study that you can see on page seven and eight page eight we'll show you and this is an interesting case rate paid 708 has two large operators, which constitutes roughly half of our agency labor cost paid seven would show you an operator, who has already made the strides.

Cost has come down meaningfully led to say call. It from a $2 million a month to call it half a million dollars a month.

Rough numbers in a matter of four months call. It from April to July .

Page eight shows you, an operator, which actually hasnt that number.

We're pretty much flat from June to July , but if you look at the number of hours booked that has come down pretty significantly which tells you. If that trend continues they should see significant improvement in August and September right. So we didn't Cherry pick. Two example wanted to give you a diversity of example, and two consequential example, with startup to Concho is a pretty.

Half of that total cost, but hopefully that sort of gives you a sense of what we have seen.

Rather than predicting the future, we're sort of giving you the positioning of our portfolio, which probably should hopefully translate that into the future.

Our next question comes from Mike Mueller with Jpmorgan. Your line is open.

Yes, Hi, I was wondering can you tie together the four 5%.

Same store revenue growth Revpar growth and maybe talk a little bit about the sequential trend there relative to Q1.

And can you dissect a little bit and talk about roll Downs, and just I guess pricing by.

Right.

Yes, yes, and I will.

On the Revpar side, I think the way to think about it as we talked about this last quarter, what we get.

A large amount of half our portfolio roughly resets on Jan one to see that occur that and that happened that part of the portfolio actually happens to also be <unk>.

Heavily.

Weighted towards our higher acuity unit types.

The Jan one increase years tend to be the daily pillars of daily pillars are the part of the business.

Have your higher acuity assisted living waiting so.

You saw those increases in the first quarter and what Youre seeing now kind of bridging from the first quarter. The second quarter as we've talked about in this business historically, you've seen kind of 10% or high single digit roll downs between move in and move out rates and a lot of it to acuity related but thats that is.

That got US why did 20% last year and is starting to tighten.

The mid to low single digit range, so youre seeing some of those Jan one increases.

I'd say bleed off a little bit with there is still some negative leasing spreads on that and that's being offset by annual increases that are hitting throughout pretty much evenly throughout the year and the other half of the portfolio.

And as I mentioned.

My last call right.

If you have pretty much and scenario, which we haven't seen in a long time.

<unk> continues to go up the way it is going up that gap will continue to narrow and sort of it is conceivable that they come very close we have seen couple of operators, where actually there is crossover but desert for.

Portfolio wise it is conceivable that they come very very close and that negative re leasing spread that comes from the acuity clip that Tim talked about goes away and so but remember what we are also talking about this is this is sort of a problem that we chase again as you raise.

You send the in house increase later again, so a new change that number again right. So.

This is a phenomena.

Frankly speaking we haven't seen in a long time eight to nine years, where street rates are getting very close to in place. So we're pretty encouraged by that.

Our next question comes from David Rodgers with Baird. Your line is open.

Yes, good morning, Sean and Timbale mentioned <unk> I think in your prepared comments and you went through some of the coverage ratios and agency labor statistics in basis, but I'm kind of curious.

Fact that you've spent a little bit more time. This quarter was that just related to where their coverage has gone and you're reiterating comfort with that or are you having conversations or have they approached you about maybe making changes I guess that would be the first question and the second question is what about that portfolio relative to the other portfolio that you own.

Hadn't made them kind of lag in some of the recoveries statistics that you've mentioned things, okay. So I'm going to be.

I'm going to repeat what I said before first is understand.

A lot of that portfolio has skilled nursing, which has been impacted obviously very significantly.

It has been a very significant hedge from agency labor in that portfolio. What we report is a one quarter lag sort of a full quarter.

Average type of.

EBITDAR would have mentioned if you'd look at.

We read the transcript you'll see that the improvement that <unk> seen has happened really in last four five months and that significantly narrowed their losses as occupancy has gone up and agency labor has come down right. So that's sort of the overall underlying picture of what's happening. It is very important for you to understand.

As we have described before that's rent.

It doesn't come from the four wall optimization right.

That trend with the only reason we did that transaction.

And we mentioned this before that rent was guaranteed by the model shift right. So that's very important for you to understand where that lies.

As I mentioned again I'm going to say this again as I've mentioned before.

We fundamentally believe.

That below market basis translate into below market rents like there's nothing in there is no special insight into that if you have a low basis and you have market rent constant you will get through and end market trends right. So on an average basis.

For example on average they've been at Primerica portfolio is roughly around $7000 per bed of rent. If you look at any other skilled nursing providers, let's just take an example, Omega you will see the average rent is about $10000 right. So so thats sort of gives you a sense of if everything was exactly the same the rent is $30.

And below right. So that's sort of give you order them.

Magnitude I'm not talking about specific because it is hard to compare assets from portfolio want to portfolio too, but that sort of would give you a sense, which gives us a lot of comfort that.

No about first our income from that portfolio and be well.

What we strive to do which is to achieve long term returns as we deploy capital and as I mentioned I am going to mention it again I remain very comfortable.

Net.

We're not losing sleep over that income or detrick and from that portfolio, that's all I'm going to say.

Our next question comes from Nick <unk> with Scotiabank. Your line is open.

Thanks.

And to understand who the operator transition assets.

Senior housing.

What's embedded in the guidance for the third quarter or about any incremental sequential NOI drag there since I think you said those assets are not in the same store calculation.

Yes, correct, they're not in the same store so the assets just to just to clarify the assets that we.

In our July business update.

We talked about transitioning those are still in the same store portfolio. They completed the quarter in under the management of the prior manager and then Theyre coming out going forward.

From a sequential basis.

We expect a slight drag from <unk> perspective, but half a cent from those transitions.

Our next question comes from Rich Anderson with MSNBC. Your line is open.

Hey, Thanks, Good morning, everyone. So I think we all get the message here on the short term versus the long term, but I wanted to see if I can get.

Some quantity kind of quick.

Evidence of that so the occupancy guide for the third quarter is 400 basis points year over year and it seems to imply a 120 basis points sequentially, which compares to 100 basis points sequential in the second quarter. So we didn't get the seasonal pop.

In occupancy and understand for the reasons you described.

When you were sitting in your seat at NAREIT.

And you were thinking about the third quarter at the time, how much do you think we lost by virtue of what happened with the Covid wave in June and the kind of the last month of July and where do you think the sequential number landing at 120 basis points as of now would have been if not for the disruptions that.

That you face after NAREIT.

Yes so.

Let's just let's just maybe I'll take the essence of your question and Theres No no debate about the fact that.

For specifically for the third quarter and I mentioned this on my script that some of that growth has slipped into next year.

Because we're not getting that growth in the third quarter why because we lost the month of July right. So if you lose.

Your traffic that much in first half in Vermont.

It's almost impossible to recover from that.

You think through the sales cycle of tours translate into sales right. So it's very important for you to understand that last month, we'd sort of it's a very important month right. So we got an average occupancy growth.

In that month as John said about 40 basis points that should have been double that and thats. It was not decades, because we got hit so.

The only good news here as I will suggest to you and I think John mentioned this on the script that we started first call. It first 10 days 15 days of July .

Towards where 40% below June like with just the market just went away.

By the time, we ended the month, we caught up on accumulative basis almost to the 95% of June . So if you think about you started a 40% hole and you end up at a 5% hold that suggest to you. There is a remarkable progress made in the second half and that's sort of we're seeing that now the move ins are coming back on back.

The tours.

But by no caution.

But absolutely no question rich that we because of this COVID-19 heads are sort of just call. It tried to be specific on something that it can be that we source between mid June to mid July as hit our June numbers on a expense basis, which sort of recovered in July or at least hopefully recover.

A lot in July and it hits revenue because the all the tourists went away it hits revenue in July I hope that sort of gives you a sense of how these.

This wave hit us and how that translate from one side of the quarter from the other side of the quarter.

Our next question comes from Michael Carroll with RBC capital markets. Your line is open.

Yeah. Thanks, John I know Youre hesitant to provide too many details on your data plan, but I wanted to touch on your comment.

In your prepared remarks that well is initiating on a data analytics pilot that's expected to rollout over the next six months I guess, what does this actually mean and how does this differ from the Companys current data analyzed programs that you have right now.

Yes, so neal it's better to look at it versus the operating platform. So the operating platform.

We'll drive will provide tremendous amounts of data because we will be able to gather all the nuances of information from the web hits the traffic all the way through.

But currently we can gather more information from our operators and Thats really the opportunity that I'm, taking mid term is to gather some more so we've been working with our operators.

<unk> connected in this particular case, we connected.

With our cloud system to pull down on a daily basis.

Information that they currently have from the platforms that they are currently using so we havent done that level of detail before.

Good reporting from them, but now that we're up in that game and so from an interim basis that will.

Inform us.

Much better than we have right now from operating level the company what the company's done from an investment side is untouchable, but from the operating perspective, there's some more opportunities there.

After that should help.

US from an asset management level.

Our next question comes from one incentive pregnant with BMO capital markets. Your line is open.

Hi, good morning.

A longer term question I guess you noted some transitions.

Turning in near term drag for a long term opportunity.

At this point, how should we think about the risk.

Further transitions into 2023 are you confident that were passed.

90% of any potential transitions or is that just part of the business, where there is always going to be some laggards.

Maybe like I think about kind of Goldman calling 10% of their stature annually is that kind of the way. We should think about there is always going to be some underperformer in youre going to kind of rectify that as things go or is this kind of we're at the end of <unk>.

Of that given where we arent Colgate and cyclically.

So one I think the way you should think about it.

Colgate class of acquisitions that we have done the transition.

Operator transition and system integration all of those things.

Leaching nearing completion, so it they are nearing completion.

From the perspective of what you are asking which is a more of a philosophical question then planning portion.

We are of the belief that you have to Arne.

Your keep if you wanted to manage our properties very simple right managing our properties, which had substantial amount of capital is not a given.

And you see that in all other businesses, whether it is a competitive business.

But just take an example in multifamily.

Right and if you look at where people who are managers fee managers, they expect to arne their right to manage five P. M.

<unk>.

Yes.

Frankly speaking.

In senior housing business has been very significant amount of complacency.

And we have not seen that so as long as people perform we have we have absolutely no no desire to move assets because it is disruptive no one wants to do that but if people don't perform there will be transition. It's a lot of capital for our shareholders capital tied up into these buildings will not going.

Ctr and take underperforming that's just not what we do.

Net underperformance, because something happened to an asset completely understandable, but as John mentioned to you.

Some of the basic operating standards are expected.

And if people don't perform and theyre not going to be in our portfolio.

Our next question comes from Michael <unk> with Citi. Your line is open.

It's bilerman again, two quick follow ups.

Chuck just uncomedic.

Who is funding the operating cash flow losses today or is the entity just taking on increased debt.

For that so maybe you can just talk to the capital structure and how all of that is happening and then secondarily just going back to my opening question about sort of longer term.

And focusing on all of the initiatives and investments that you've made I think back when you were at Essex.

This three year plan and I can remember UDR and emco and there was a.

A lot of that do you think the company would benefit.

A little bit about you have done a lot of sending out all of these.

In fact in all.

Opportunities to start to understand the earnings as well as the.

The asset value.

Because it just feels that the market is focused to short term and you can provide a lot more detail.

You've dropped a little things like.

The transfer took nine transitions 120 negative cash flow, but actually getting the details and really putting the building blocks to year three to year return based on everything Thats involved I think would be really helpful. If you can address those two things that would be great. Thank you.

Also the first <unk> funding and the operating cash losses as you guys know, it's an entity.

That has.

Their funding is very simple that entity has really helped to build off of cash on the balance sheet. So that just using that cash to fund it.

So John you want to add anything.

Yes.

Michael Technical I will continue to provide more insight into the platform. It is.

Very simple person as you know I call. It the whole enchilada literally we'll start all the way from traffic web and that type all the way through.

Salesforce management, all the way through the operating platform the ERP so to speak through <unk>.

Every other aspect of the business HRS et cetera, and we will start to lay out more information I will say from the past.

My experience.

The company is typically arent laid out specific guidelines for dollars.

We lay out paths as to what you expect to accomplish.

And how that will positively impact the business, but not necessarily time into dollars and I don't intend to do that but I'm glad to give more clarity over time, we're running extraordinarily fast at this point in time, and we will provide some more detail on the coming calls and at NAREIT et cetera, and Michael just as <unk>.

The duration of that.

Answer to your first question.

Overall, you should certainly hear from us that we've been we've adapted the way that we've.

While we disclose over the last two and a half years in a pretty dynamic environment and so a lot of it has been driven certainly by what we think is important and a lot of it's been driven by feedback from individuals to yourself and investors. So.

I hope you've seen that and certainly.

Continue to have a dialogue with the market on what is helpful to be seen and we will continue to adapt what we disclose.

So.

You Shouldnt think there'd be any change in the way that we.

Our approach to that.

We have reached the end of the question and answer session. This concludes today's conference call you may now disconnect.

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