Michael Costa - Executive Vice President of Finance Rick Matros - Chairman and Chief Executive Officer Harold Andrews - Chief Financial Officer.

Chad Vanacore - Stifel Nicolaus Juan Sanabria - Bank of America Merrill Lynch Smedes Rose - Citi Daniel Bernstein - Capital One Eric Fleming - SunTrust Robinson Humphrey Philip DeFelice - Wells Fargo Securities Good day, ladies and gentlemen, and welcome to the Sabra Health Care REIT third quarter 2017 earnings conference call.

This call is being recorded. I would now like to turn the call over to Michael Costa, Executive Vice President of Finance. Please go ahead, Mr. Costa..

Thank you. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our acquisition, disposition and investment plans.

The status of our integration efforts with respect to CCP and with respect to other investments this year, our expectations regarding our portfolio repositioning with certain legacy CCP tenants, our expectations regarding our financing plans, and our expectations regarding our future result of operations.

These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31, 2016, and in our Form 10-Q that was filed with the SEC yesterday as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K, we furnished to the SEC yesterday.

We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results.

Investors are encouraged to review these non-GAAP financial measures as well as explanation and reconciliation of these measures to the comparable GAAP results included at the end of our earnings press release and the supplemental information materials included as Exhibits 99.1 and 99.2, respectively, to the Form 8-K we furnished to the SEC yesterday.

These materials can also be accessed in the Investor Relations section of our website at www.sabrahealth.com. And with that, let me turn the call over to Rick Matros, Chairman and CEO of Sabra Health Care REIT..

Thanks, Mike. Appreciate it. And thanks everybody for joining us today. Let me start by talking about Sabra 3.0 and give you all the update of where we are.

My understanding there were some concerns about the level of activity that we've had and whether we have issues with integration and such and so I want to report today that the integration of CCP is going pretty flawlessly actually as expected and the integration of North American as well was uneventful. The closing was uneventful.

And the closing of the Enlivant deal is proceeding as expected. Although we now expect it to close right after the 1st of January, but nothing is happening. That's actually causing that delay, so everything's going really smoothly.

We've increased our staffing here at Sabra, reporting the senior management team which has been really helpful to us obviously and added to our infrastructure generally. So, we are pretty much fully staffed and handling everything that we need to be handling. So now we should not have any concerns about that.

In terms of some of the other benefits of all the deals that we've announced over the past few months that impacts now being realized, leverage levered 4.79 and the weighted average cost of our debt down to approximately 4%. In addition to that, we're pleased with the increased scale we have kind of diversity.

So, we'll be at a point where we no longer have any issue with any particular tenant controlling a whole narrative. About the company's larger credit facility is benefiting us pretty dramatically as is the investment grade ratings and Harold will talk in more detail about some of these savings.

And we do anticipate addressing our outstanding bonds in the near term as well, given the benefit of not being investment grade. And performance of 3.0, our skilled nursing exposure drops from 73.5% to 64%. So, we are still high at a price of the CCP and that's a dramatic drop in a former field exposure just with doing one additional deal.

So, we feel good about that as well and hopefully, the market will see that we have a continuing commitment to enhancing and increasing our senior housing portfolio.

We improved the dividend by $0.02 and the dividend, it's a little bit misleading this quarter because we had a catch-up from the prorated dividend and so the normalized dividend will be increased, it's actually 45% and Harold will discuss in more detail on that as well but we are pleased to be able to increase the dividend.

Let me talk about a couple of our tenants, first Signature. Signature's performance has actually improved. So, we are pleased with the fact that the management team there is doing a good job, they are keeping their eye on the ball and they're exceeding their projections for 2017.

That said, the company still requires restructuring and along with the other constituents that we're working with, particularly the one of our larger landlord, we are very close to the construct of the deal. I would be working really well together. Everybody, I think, is on the same page.

I know there are questions still about whether we get the same restructure outside of bankruptcy, whether we go through bankruptcy, and I think that at this point is really just depended upon the negotiations with the plaintiffs on the net now claims.

If they are reasonable in those negotiations, my thinking is that every opportunity to restructure this outside of doing a bankruptcy.

And if they're not negotiating in a good faith, then I currently have no comments, because I think everybody on the call knows about going through a BK that would be relatively quick in payments to cleanse the balance sheet of the liability claim.

So either way, we have been a very close to having a constructive deal and in which direction we were going in the near-term relative to BK and so feel a little good about Signature. And again, management will stay in place, now the size of the portfolio will pretty much be intact and we're pleased with those guys who are doing it.

In terms of Genesis, how we get into detail on that, but we'll have the majority of the 35 close before the year-end and the remainder close hopefully shortly after that and we have begun the marketing process on the other 43. The results have been relatively stable.

So, we're glad to see that and we know that in addition to talking with us, they're talking with the renovation constituents as well to do some restructuring and I'm sure they will be announcing that on their earnings call next week.

And we'll probably follow that or simultaneously put an announcement once the deal comes together for Genesis and all of its constituents. In terms of our acquisition pipeline, it is currently extensive about $1 billion.

It's primarily of senior housing and I would say since the announcement of the CCP merger, we have been shown everything that Enlivant shown, large portfolios that we have a large witnessing. We're still being shown small deals we are going to continue to focus on small deals.

We already have and as far as larger deals are concerned, we will just see the merit -- look at the merit of those deals and determine where we are at that particular point in time, but despite the size of the pipeline, I would expect that to the end of the year, it would have been very quiet end of the year, which I think frankly at this point, it will be a good thing given all the activity that we've had -- that we've this year.

So, I wouldn't expect much from us in terms of announcements other than potentially on the debt side with our bonds, announced at the end of the year. In terms of our skilled transitional and senior housing EBITDAR coverage, it is 1.49 and 1.14 sequentially down from 1.56 and 1.16 respectively.

In terms of the skilled exposure being down slightly to 1.49, say a couple of things. What is more important it is healthy and I noted on the last two quarters that given how our skilled nursing and transitional care coverage has been increasing on regular basis over the past couple of years. It's not going to keep increasing.

And so, I think it's going to sort of hover somewhere around here, look at foreseeable future. Occupancy was down a little bit and that really was the contributing factor to the skilled coverage being little bit lower, but again still very healthy 1.49. So, we're not seeing any trends with our operators that are causing us any concern.

At this point, we are not seeing deterioration amongst our operators. They move a little bit around the margin, but generally speaking, a lot of stability there and that applies to senior housing as well as skill. Our same-store coverage for Skill is 1.51 from 1.33 and 1.32 for senior housing, which is essentially flat.

Our occupancy for our skilled traditional portfolio is 87.8% with skill mix of 42.4%, sequentially they have 60 basis points to 70 basis points for occupancy and skilled mix respectively.

Again skill mix is still probably with the highest in the space and it's just going to fluctuate a little bit around that number, we're not going to see any dramatic increases.

We all believe on a go-forward basis, predictions harbor somewhere around there and our occupancy obviously this is primarily the Sabra -- Sabra portfolio is well above industry averages.

Our same-store skilled transitional occupancy is at 87.4% with skilled mix at 41.9% sequentially, occupancy is up 10 basis points and skilled mix is up a 140 basis points. Occupancy for senior housing, on a same store basis is 87.7 sequentially down 60 basis points -- and for same store is down 40 basis points sequentially at 88.5%.

And with that I'll turn it over to Harold Andrews, when Harold is done, we will go to Q&A..

one, a full quarter dividend of $0.45 per share, which is an increase of 4.7% from $0.43 per share in the prior quarter; and two, approximately $0.07 per share, which is the difference between the pro-rated dividend paid on August 18, 2017, and the previous full quarter dividend of $0.43 per share.

The dividend will be paid on November 30, 2017, to common stockholders of record as of the close of business on November 15, 2017. The $0.45 per share ongoing full quarter portion of the dividend represents 75% of our Q3 2017 normalized AFFO per share.

This new dividend rate represents a dividend yield of 8.9% based on our closing stock price on November 1, 2017. On November 1, 2017, our board of directors also declared a quarterly cash dividend of approximately $0.45 per share of Series A Preferred Stock.

The dividend will be paid on November 30, 2017, to preferred stockholders of record as of the close of business on November 15, 2017. A quick update on Genesis asset sales, we expect 20 of the 31 remaining to close in the fourth quarter, resulting in gross proceeds of a $103 million and a $9.3 million rental income reduction from Genesis.

The remaining 11 assets are in various stages of negotiations and will likely close in the first quarter of 2018. Proceeds from those asset sales is estimated to be approximately $50 million with related rental income reduction from Genesis of $2.8 million.

With respect to our recently announced plans to sell the remaining 43 assets in the Genesis portfolio, we continue to work to the details of Genesis to structure the sale in a way that is mutually beneficial.

We expect to have more information on those plans in the coming few weeks and don't expect the final plan to change our outlook for the full year 2018. With respect to the CCP portfolio repositioning, the plan is being executed as we expected.

We are on track to have agreements in place with the effected tenants by year-end with the possible exception of Signature as Rick described above. We continue to expect the relief to be no more than $33.5 million in the aggregate. With respect to Signature and one other tenant, it is impacted by the repositioning plan.

We immediately reduced recorded revenues from the date of the CCP merger to the actual cash payments received, which resulted in a reduction in rental income of approximately $2.1 million for the quarter. On an annualized basis, this is equal to $19.6 million. This $19.6 million was contemplated in the $33.5 million rent reductions.

These reductions will begin to be reflected in our coverage disclosures in our fourth quarter reporting under our normal reporting methodology. And lastly, I would just say that we again reaffirm our previously issued full year 2017 and 2018 earning guidance. And with that, I guess we can open it up for the Q&A..

Thanks Harold. We will start Q&A now..

[Operator Instructions] Our first question will come from Chad Vanacore with Stifel. Please proceed..

It's actually Seth Canetto on for Chad.

First question just on the 2018 outlook, I know you guys mentioned that the acquisition pipeline is pretty much all senior housing, but can you just kind of give us an idea redeploying those Genesis as that's on the funds from that and what cap rates are you seeing any kind of an update on the acquisition environment?.

Yeah, I'll turn it over to Harold to talk about process.

In terms of cap rates, skilled nursing, we're seeing cap rates anywhere from lower-mid 8.0 to mid 9, just depending really on the quality of the asset and the size of the portfolio that's being shown, while senior housing, there are still some people out, that are looking for five handles on larger portfolios, for the most part, we're seeing things between 6 and the high 6s are cap rates for senior housing and that's primarily AL and memory care.

For us towards seeing a lot depth, but I don't know how to compare that to where we were previously because of all the changes with Sabra were being shown a lot more things in the historical event shown, so it's active for us, but I don't know that means that it's active across the space generally..

Yes, as far as, thinking about the proceeds from Genesis as you -- as we've talked about before, it's very difficult to predict the timing, but if I think about moving into 2018, Rick mentioned that we are anticipating taking out the bonds later this year.

As we do that, we'll likely upsize the new bond offering such that we can get the revolver that basically paid down to zero, which will give us a billion dollars of availability for future acquisitions and then as we know we'll be closing the Enlivant deal, as Rick said in early January, which will obviously we will be able to use the revolver to finance that acquisition and as I said keep our leverage where we need to keep it, we've got plenty of liquidity to do that.

So then as proceeds come in from sales of Genesis assets, just think about those as in the short-term being used to pay down the revolver to give us more liquidity and then obviously acquisition volume will hit when it hits. It's hard to predict timing of that. We will have plenty of liquidity to do that.

So with the bond offering, I think it's safe to say we won't need to be out raising significant amounts of equity.

We'll have plenty of liquidity, we will have the ATM, so we can match fund acquisitions as they come through in a fashion that's prudent and certainly we'll be very cautious in doing that relative to our stock prices in a given time, but I think we've got a nice runway here to use the revolver once we get those bonds taken out and get the revolver refreshed and then start seeing the proceeds from Genesis assets deal sales coming..

And the fact that we did the equity offering at the stock price and we did it -- that shouldn't be indicative of what we wanted to do going forward.

At that point time, timing always doesn't come together like you like and when we made the Enlivant announcement, and people were looking at the leverage and expecting us to raise equity and credit in overhang on the stock, and knowing that we were going to be announcing the North American deal as well, shortly thereafter and clearly there was a huge overhang on the stock.

So we were in a position where we needed to do what we did.

It was about 9.5% of outstanding shares which is quite a bit lower than what we normally do in equity offering and so we tried to be sensitive to the pricing of that given circumstances at time and we will be sensitive going forward and that's why we think we're in a pretty good position having made the announcement.

To the best, the remaining -- it's not the all the remaining Genesis assets, so we've got proceeds coming in while the stock has some time to recover..

Just looking at the portfolio as it stands now, I know you guys mentioned you're about 64% skilled nursing in given the dispositions and then future acquisitions, I mean what's the like updated strategies, is it trying to just be diversified kind of 50:50 senior housing, skilled nursing?.

Yes, it's really no different than it has ever been. We got into the 50s on skilled nursing exposure, I expect it will be there again, just to remain diversified not as sort of knock against the space.

I'd actually think the dynamics of skilled nursing with some of the reimbursement changes that we've discussed before and the continuing decrease in supply, with increasing demographic, is a pretty good dynamics of skilled nursing.

And we've said this before too, the fact that we went up in skilled nursing exposure as much as we did to the CCP deal, the part of that means -- we have got so many benefits from doing that merger that it was worth it to go up in skilled nursing exposure because we have the confidence and obviously we're working on a senior housing deal to know that we get that skilled nursing exposure knock down pretty quickly and we did and we knocked off almost 10 points with that increase very quickly after the CCP merger.

So, it should -- people get short memory, but it shouldn't be lost on anybody, what we look like at Sabra, where even though we had less skilled nursing exposure, we have 33% exposure at Genesis.

They've continued unfortunately to have a lot of missteps, and every time they do, we get wacked pretty hard for that and so I think people know what our point of view is relative to Genesis versus our other tenants and regardless of all the activity we put in the market and through the digestion issue, that the market clearly has with that, I think over the longer haul, if you look at us today given the size of the company, the balance sheet, investment grade all that stuff and the diversity of tenants versus where we were before given the outlook that we think exists for a company of Genesis in size and the outsize exposure we had will be much better off now than we were before..

Our next question will come from the line of Juan Sanabria with Bank of America Merrill Lynch..

It's actually Kevin on for Juan.

I just had a question on the senior care center and the coverage there decreasing quarter over quarter, was that -- where you guys mentioned earlier on the call?.

No, no, they had a slight decrease in coverage, but we are going through some upper management changes there -- senior roles starting who we know, who we think can have a really nice impact on that portfolio.

Prior to the CCP merge, there were a lot of changes in management there and unfortunately, the CFO was also being the acting CEO and the acting COO basically, so he is good smart guy that you can spread pretty thin.

So all those spots have been filled out and we've got a pretty deep dive with those guys and still pretty good with where they are and how their results have held up pretty well, given sort of all the management churn that they have and they have been trying to ride the ship a little bit at that company. So there's nothing happening there.

That's a surprise to us, nothing unusual, nothing that changes how we are looking at the merger or the rent repositioning that Harold talked about and that's a $33.5 million that number has been out there for a long time. That's still remains worst-case scenario from our perspective.

And it's the worst-case scenario to remind everybody that still going to the 2018 numbers..

And then also, just thinking about the North American acquisition.

How do you guys looking at comparing or generally thinking the criteria you guys have make you guys do or consider another stint acquisition versus your pipelines of senior housing currently right now?.

Yes, I think the makeup of our portfolio, I mean our acquisition pipeline right now is just circumstantial, another 6 weeks from now it would be 40% skilled nursing, but we've said all along that we don't want to bypass doing good skill nursing deal, because to us, it's always about the operator and that's the narrative that we've had, that's narrative that we believe in.

There is just differences between operators in this space. Anytime any kind of business space, it does not have to be this space, is going through any kind of paradigm shift or shifts in the market, and you see in every business sector that they're guys that do well and guys that don't do well. So, it's always going to be operator-dependent.

And in our case, if you look at the operators in the skill space that we've acquired that's why our numbers have been so good, that's why our occupancy is so far above industry average. That's why our skilled net is just high as it is. And so those are the kind of operates that we're identifying, because we're operating background.

We're in a unique position to be able to make that kind of assessment. And in the case of North America, I would challenge anybody to find a portfolio that size that is 80%, 5-star rated with the remaining 20% being 4-star rated with 60% of their revenue being Medicare. We're not less dependent on Medicaid and having rent coverage.

That's really healthy. So despite market sentiment, if we see another operator that has the kind of characteristics that we think we're seeing our characteristics that it clearly going to make them a winner in this space. We're going to do that deal and we know the space inside and out. I don't think anybody knows the space than we do..

Our next question will come from the line of Smedes Rose with Citi..

I wanted to just ask you on your investment in the Enlivant portfolio.

And just I guess given that senior housing looks like it's coming under some pressure this year and other remarks, seems like it's going to be sort of under pressure, next year, what's your confidence about portfolio can continue to and it's kind of its turnaround phase? And then just in general, are you open to more RIDEA exposure, or if it's more sort of a one-off?.

Yes, so this is more of a one-off. I will make a couple of comments. One, Enlivant in a different position than the space generally.

I mean the senior housing space generally as we all know, post the recession continue to have improved occupancy, got into the mid 90s and really sort of peaked and then the supply and demand issue started hitting with all the new construction.

Enlivant in a different place, because they've acquired a portfolio with TPG LLC., as everybody knows that was just a disaster operationally, with 60% occupancy harbor reputations in the communities and a lot of licensing regulatory issues and TPG was not enough to bring Jack Callison through, as you know, it's a pretty pristine reputation in the space with Holiday and before Holiday as well.

And he put a fantastic management team together and the results have been pretty remarkable pretty quickly, but still with a long runway ahead of it. So there -- they nowhere near The Ninth Inning if you want to pay homage to recent world series. They've got a long way to go. So I think they're in a different position in the space generally.

It's interesting, because I think we all are guilty of having certain perceptions of companies when they were in trouble for a long time and we tend to think everything about the company is struggle. That in the case of Enlivant and its predecessor company LLC, because they were so poorly run.

It's easy to think about, it's just not being a good company, but the physical assets are actually good. And that was one of the surprises that Jack had when he went and visit the facilities and we've seen a number of the facilities as well. They are really nice assets and compete really and look very good to compared to the competition of market.

And then despite that, there's a lot of CapEx going in to those facilities. So, they are the best facilities in those markets. So, it was purely an operational turnaround, so getting a lot more runway there. And that sort of duck tails into our view on right there, because as you know, we've never really pursued RIDEA.

And if you think about RIDEA in the space, a lot of the larger REITs got into RIDEA, sort of back in 2012 and things are still in the upswing and eroded out and even though sharp growth has slowed down different levels for different operators obviously.

If you look at the returns from when all those entities entered into those RIDEA arrangements, the returns have been really nice. So, we would not want to enter into a RIDEA in a company that we viewed as stable, but in the company that's on the way up. So the way we look at Enlivant, it's something like looking at your space back in 2012 or earlier.

They're on the way up. So, I mean there is -- because of the market, if there are any secondary markets which we happen to like, there is very little competition from new entrants period the developers don't like to build smaller facilities in smaller markets.

So that's -- so we look at that sort of distinctly, because we see ourselves getting into when it's lining up so we can ride on sharp growth up. And then I think we all expect over the next couple of years with construction starts slowing, with the recent absorption and things will start stabilizing.

And even though there is still pressure as you say and I agree with you that there is still going to pressure for quite some time on occupancy. It's certainly nothing like it was during the recession normally will get down to the level.

So mid to high 80s that's where it bottoms out which is kind of what we like that's not such a bad place to be and start growing from..

And so when you mentioned your $1 billion pipeline of opportunities in those senior housing, that would be more looking at those as a triple-net acquisition opportunities..

The stuff that we have in our pipeline is primarily triple-net..

Our next question will come from the line of Daniel Bernstein with Capital One..

Just the continuing up on that the question of RIDEA versus triple-net, the change in the corporate tax code at all effect your view, why you won't do more triple-net or RIDEA, kind of thinking about this morning with the tax code -- new tax bill review?.

At this point, Dan, no. It hasn't affected our thinking on that at all. I mean, look we -- when we underwrite and we think about doing RIDEA, we've always looked at it based on the tax credit was in place before.

There some improvement from that, which presumably there may be, some corporate tax improvement from changes in the tax code, that would just be a beneficial to us, but it's not something that's going to change our view as to whether we're going to be investing in RIDEA versus triple-net structures..

So Dan, this mean that you actually think they're going to something down at Washington?.

No, it's just an interesting question to me. If there is some tax breaks that could be picked up within the TRS, the lower tax rates within TRS doesn't make more attractive triple-net..

Yes, I mean it's certainly would, but I think it's enough to change our view on -- how we wanted this..

Appreciate that. And in terms of holiday, do you have any preliminary trends that you could talk about for their third quarter, obviously the second quarter tick down a little bit, but that seems to be normal seasonality.

Is there any update so far into the fourth quarter or even, I guess, in the third quarter on Holiday's portfolio performance?.

It has been actually really stable.

So, we don't anticipate much change, remember that coverage is the guarantor basket, which includes us and the other major landlords that the transaction on Holiday, so we don't necessarily see, there are specific numbers, but Holiday as a whole and certainly our portfolio has been pretty stable and that's despite the fact that they've gone through this a complete paradigm shift with their model change going from the live in managers to the more traditional professional team with executive director onsite.

So, the occupancy is held steady; the EBITDA margins have held steady at around 40% give or take on any given month and so the season -- the seasonal upticks for them are not anywhere near as significant as they are in skilled nursing and given the fact that we report trailing 12. It doesn't impact it that much anyway..

And I just want to go back over the last comments -- the comments before the Q&A about, that I hear right that, $19 million of the $33 million already out of the rental stream?.

Yes, that's right..

Any -- mechanics for that..

So, the mechanics are this when we closed on the CCP transaction, we looked at our GAAP accounting for revenues.

We are not recording contractual rents for Signature and one of the other tenants were recording cash rents and that if you can look at an annual basis, and it is just about little over $19 million and so effectively we're already taking the redheads in the actual numbers of that $19 million now because we're not recording the revenues at the contractual level..

And what were the -- of that $19 million account what was the actual number that was out breakeven?.

It is $2.4 million for the quarter. So that's basically right a little remark..

Our next question will come from Omotayo Okusanya with Jefferies. Please proceed..

This is Joss on Omotayo. Just one quick question, kind of a follow-up from some of the other questions. How quickly do you think you can act on the $1 billion pipeline that you guys have been talking about? Is that over the first half of 2018 or….

Well, it's definitely a 2018 event. It's always hard to predict, which you can get done which are not going to get done. So, if you got -- it's a bidding process and all that stuff. So I think people can expect that things will be relatively quiet for us in the next few months. So, we will see how much is affected, but it's hard to predict exactly..

Right now, it's probably a good thing for us to be quiet. For a little while as the market -- give the market some more time to absorb everything that we've done in the benefit of what we have done..

[Operator Instructions] Our next question will come from Eric Fleming with SunTrust..

Quick question on the CCP dispositions, do you have any update on that? Is that still the plan with the $115 million of dispositions out of that CCP portfolio?.

Yes, it's basically the same, Eric. No change there. They are progressing as expected. So, we had two dispositions that have already occurred and those will discontinue on as we discussed..

And just jumping back to that Signature and the other tenants on cash, you moved them to the cash basis, so effectively how do you reflecting that piece of the rent reduction in the run rate right now? Is that reflecting in the pro forma coverage number too, because as I thought the coverage numbers didn't reflect any rent reduction?.

Yes, it's a great question. The pro forma coverage numbers are based on contractual rents historically.

So as I said in my comments, the actual rent cuts that we -- these rent reductions will start to flow in once we're actually presenting numbers post merger, because right now those pro forma rent coverage numbers are all based on periods prior to the merger. And so it's just contractual rents from Signature.

So you don't see any of that benefit in the coverage numbers, so it's a good question..

And so, basically we're just looking at on the revenue run rate, we're just looking at the balance from the $33.5 million to $19.6 million as being coming out sometime by the -- going into 2018, right?.

That's right..

So, the other way to think about it is, if it was actually reflected in the coverages then Signature will be more or like the 1.3 that we said we didn't get them to..

Thank you. Our next question will come from Philip DeFelice with Wells Fargo Securities..

The acquisition of the North American portfolio moved Wingate out of your top 10 tenants, as the last quarter, they were running at about 0.8x and kind of a little bit more than $14 million of revenue or at least on a lining.

We were wondering if you could provide an update on the health of that tenant? What their expiration schedule looks like? If there is any chance for re-negotiations in the interim?.

Well, I would just tell you that Wingate is part of the tenants that are being evaluated for some rent adjustments. And so we're not finished with those negotiations and where we're going to settle in so, I’d just kind of leave it at that for now..

And part of the reason we're not finished with Wingate is, they're also looking at selling assets. So, we are working with them on evaluating which assets should be sold because that's going to help us. They still need some help on net repositioning, but they will need as much help when they sell some of those assets.

And they are not that big a company.

So the assets they are looking at selling are actually relatively material piece of the company and kind of as we said earlier, this isn’t the rent repositioning, isn't just about adjusting rents, it's about looking at the entire portfolio of any particular tenant which includes looking at the rent that includes looking at whether they should retain all that facilities, that effects [indiscernible].

So, it's any number of things that go into that analysis..

Thank you. And I'm showing no further questions at this time. So now I'll pass the conference back over to Mr. Rick Matros, Chief Executive Officer for some closing comments or remarks, sir..

Thanks very much.

I appreciate everybody calling in today and we'll see a lot of folks at NAREIT in Dallas and then in the middle of December, we're going to do a quick road show in New York and Boston and I know I'll see a number of you guys out there as well and in the interim Harold and I always available for any questions, so please feel free to ping us.

We will get back to directly. Take care..

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program and we can all disconnect. Everybody have a wonderful day..