Colleen Sullivan - Director, IR Eric Mendelsohn - President & CEO Roger Hopkins - CAO Kevin Pascoe - EVP, Investments.

Chad Vanacore - Stifel Juan Sanabria - Bank of America-Merrill Lynch Todd Stender - Wells Fargo Jordan Sadler - KeyBanc Capital Markets Rich Anderson - Mizuho Securities Dana Hambly - Stephens.

Hello, everyone. This is Colleen Sullivan, Director of Investor Relations. Welcome to the National Health Investors Conference Call to review the Company’s Result for the Fourth Quarter 2016.

On the call with me today is Eric Mendelsohn, President and CEO; Roger Hopkins, Chief Accounting Officer; and Kevin Pascoe, Executive Vice President of Investments.

The results as well as notice of the accessibility of this conference call on a listen-only basis over the Internet were released this morning before market opened in a press release that’s been covered by the financial media.

As we start, let me remind you that any statements in this conference call which are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance.

All forward-looking statements represent NHI's judgment as of the date of this conference call.

Investors are urged to carefully review various disclosures made by NHI in its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI’s Form 10-Q for the quarter ended December 31, 2016.

Copies of these filings are available on the SEC’s website at www.sec.gov or at NHI’s website at www.nhireit.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the NHI’s earnings release and related tables and schedules, which has been filed in Form 8-K with the SEC.

Listeners are encouraged to review those reconciliations provided in the earnings release, together with all other information provided in that release. I’ll now turn the call over to Eric Mendelsohn..

Thank you, Colleen. Hello everyone and thank you joining us. On behalf of the entire team, I’d like to thank you for our continued interest and support of NHI over the past year. We’re very pleased with our fourth quarter results and positive momentum going into 2017.

Normalized FFO or normalized AFFO increased 8.5% and 11.6% respectively over the same quarter in 2015. Throughout 2016, we continued to position the Company for growth and value creation.

Over the course of the year, we sold a large portion of our investment in LTC stock creating a cleaner balance sheet and 49 million of proceeds to reinvest in real estate.

We also transitioned our ideal portfolio with Bickford Senior Living into a triple net lease structure, reducing NHI’s exposure to operational risk and creating a stronger operating partner. Our investment volume for the year totaled 447 million, 320 million of which was from existing relationships.

During that same time period, we acquired 11 senior housing and 11 skilled nursing communities. It’s been a great year at NHI for total shareholder return. For the year NHI's total shareholder return was 26.5% far exceeding the MSCI U.S. REIT and S&P Total Return Indexes.

Moving on to 2017, we are raising the dividend as Roger will discuss later making that our 15th consecutive yearly increase. We continue to focus on creating value for shareholders and maintaining our low levered conservative balance sheet. I'll now hand the call over to Roger Hopkins to walk through our financial results.

Roger?.

Thanks, Eric. Hello everyone. For the fourth quarter of 2016, normalized FFO increased to $1.27 per diluted share, compared to $1.17 for the same period one year ago. And normalized AFFO increased to $1.15 per diluted share, compared to $1.03 one year ago.

On positive momentum, we continue to achieve and our non-GAAP financial metrics is reflective of high investment volume and a careful blend of debt and equity to maintain low leverage.

As of December 31, our net debt to annualized adjusted EBITDA was 4.4 times, weighted-average debt maturity was 6.9 years, current weighted-average cost of debt was 3.62% and our fixed charge coverage ratio was 5.9 times. Our results for the fourth quarter were better than we had forecasted.

As we have received full payment on a lease of 126 units senior housing portfolio that we classified as non-performing. Our RIDEA joint venture with Bickford Senior Living ended on September 30, 2016. So, there was no impact where financial statements in the fourth quarter from the underlying operations of their assisted living facility.

NHI now has revenue from 37 stabilized Bickford facilities and from three new facilities which opened in 2016. NHI's total revenue for the fourth quarter shows strong growth, up 10.8% over the same quarter in 2015. Our general and administrative expenses for the fourth quarter were $2.5 million or 3.9% of revenue.

Our non-cash stock based compensation expense was $251,000. We continue to opportunistically sell a portion of our investment at LTC common shares, which we have held for more than 15 years. During the fourth quarter we sold 209,000 shares and recognized gains of $6.2 million.

For the year, we offset these capital gains with their dividend return of capital thereby retaining all of the sales proceeds for redeployment into real estate. At December 31, we held 250,000 LTC common shares, valued at approximately $11.7 million.

At year end, our firm commitments to fund ongoing construction, expansions, loans and new acquisitions totaled over $127 million as outlined in our Form 10-K and supplemental data report. At December 31, we had $158 million outstanding on our revolver, with an available capacity of $392 million, including unrestricted cash.

Our available liquidity at the end of the fourth quarter was over $396 million. We continue to manage our available liquidity resources, so that NHI is well positioned to meet the future investing and financing needs.

For the year ended 2016, normalized FFO was $4.87 per diluted share, while normalized AFFO was $4.39 per diluted share, an increase of 4.3% and 7.1% respectively.

These normalized results primarily exclude gains of $29.7 million during 2016 on the sales of our marketable security investments and non-cash write-offs for GAAP accounting purposes of $15.9 million related to the transition of our lease of 15 skilled nursing facilities from our tenant legend to The Ensign Group.

As the management team, we are focused on annual growth in AFFO as this metric excludes the accounting convention of non-cash straight line rent income and gives credit to our actual lease escalators into our investments for which no straight line rent calculation is required.

One of our investment highlights in the fourth quarter is the opening of the Phase 2 expansion of the Timber Ridge entrance fee community in Issaquah, Washington. We have funded the full $94.5 million construction loan to the project and received $61.3 million in repayment by December 31 from new entrance fees.

We've received another $7.3 million since year end. These repayments were used to pay down our bank revolver balance. I am pleased to report a 5.5% increase in our quarterly dividend to $0.95 or $3.80 on an annual basis.

We currently estimate our total dividends for 2017 will result in a normalized FFO payout ratio in the low 70% range and a normalized AFFO payout ratio in the low 80% range. Moving on to guidance for 2017, the normalized FFO guidance range is $5.06 to $5.12 per share, and the normalized AFFO range is $4.61 to $4.65 per share.

We do not include an estimate of investment volume in our guidance range; however, our guidance includes the effects of expected transactions for which we have clarity in the short-term including financing transactions. I'll now turn the call over to Kevin Pascoe who will cover portfolio details and new investments..

Thank you, Roger. As Eric mentioned, we had a successful year adding to our existing relationships and building new ones. We remain confident in our operating partners and believe they're positioned for success.

Looking at our portfolio, the EBITDA and covered ratio is 1.3 times as of third quarter end, which is fully inclusive of the Bickford rent payments. Our skilled nursing coverage is 2.78 times and our senior housing portfolio is 1.23 times.

Looking at some of our larger operating partners, National HealthCare Corporation which accounts for 16% of our cash revenue has a corporate cash coverage of 3.67 times.

Our relationship with senior living community represents 16% of our cash revenue and has an EBITDA and covered ratio of 1.22 times on a trailing 12 month basis as of third quarter end. Entry fees during 2016 were the strongest in company history and the Company is positioned well for 2017.

Our partnership with holiday retirement represents 15% of our cash revenue and has an EBITDA and coverage as of third quarter end of 1.15 times. The NHI portfolio occupancy averaged 91.8% for the year, which was down slightly in the fourth quarter to 90.8%.

Holiday has been working on transitioning their community management model to a traditional management team versus within managers. Today, the transition is on plan and leading indicators for the portfolio positives.

Bickford Senior Living accounts for 14% of our cash revenue and has an EBITDA coverage ratio of 1.19 times for the trailing 12 months ending September 30th. Occupancy on the stabilized portfolio is solid averaging 89.8% for the year and the development properties have opened with great success.

Three of the five NHI on developments are now open with some remaining to schedule to open in mid-2017. NHI also has two additional developments with Bickford that are underway under our loan structure where NHI has a favorable purchase option at stabilization. The Ensign relationship represents 8% of NHI’s cash revenue.

The transition of these 15 properties from the former operator Legend Healthcare has taken longer than expected where we remained confident in Ensign's ability to operate these facilities.

NHI has been active in managing the relationship and based on discussions with senior leadership, indicators for the portfolio are positive and Ensign's leadership feels good about the direction of the portfolio is heading. Furthermore, Ensign remains a strong company with corporate fixed charge coverage of 1.93 times.

Moving onto new investments, in January NHI announced that it funded the remaining $11.9 million mortgage and mezzanine loan commitment to affiliate the senior living management to facilitate the acquisition of five senior housing communities operated by SLM.

The NHI loans totaled 24.5 million mature in August 2021 and bear an interest rate of 8.25% annually. The financing expands NHI’s relationships with SLM to 15 communities in Florida, Georgia and Louisiana including 10 communities leased to SLM.

Our pipeline remains solid with good opportunities to add to our existing relationships and expand our current customer base with accretive deals. As mentioned last quarter, the market plays as competitive and we remain selective to make sure we are adding high quality operators in communities.

Our portfolio is well positioned to continue to grow, and we are vigilant in monitoring our portfolio for competitive impacts. As of now, the impact is not widespread, but we are monitoring a handful of markets that we think have potential competitive pressures for our operators.

That said, our operators have done excellent job positioning their respective communities and their markets and have a cash flow to whether the headwinds of the anticipated mix supply. So, with that, I will hand the call back over to Eric..

Thank you, Kevin. We are all very well aware of the issues and concerns regarding our industry; and based on conversations with our operators, we feel very positive about the year ahead and the guidance we’ve given today. With that, we will now open the line for questions..

Thank you. [Operator Instructions] Our first question comes from the line of Chad Vanacore from Stifel. Please go ahead..

So, I was just looking at our estimates forward estimate for FAD, and seems like we had model the straight line rent in properly. So, the difference being straight line we figured would increase with the conversion to triple net lease; however, it doesn’t seem like it structured that way.

Can you give us a little more detail how the ultimate structure of the Bickford portfolio, how that comes out?.

Chad, this is Roger. We have more than one lease in that portfolio which will soon be 42 building. They are maturing at different times. They would infest automatically renew on certain dates. We would calculate the straight line rent income. But that’s really not the biggest factor in our straight line with modeling.

We have had some very large acquisitions over the past several years. Straight line rent is the highest in the initial year and so there is a bit of burn off each year in that straight line math calculation. So, this is our best estimate plus straight line rent would be for 2017..

Roger, can you remind us do you have fixed escalators or CPI based?.

No, only the fixed escalators would be set the straight line rent. And it really brings up the topic that is worth mentioning. Our AFFO excludes the impact of straight line rents which in know it's hard than model those. Straight line rent is only for those leases in which we have fixed escalators.

And so, certain of our leased for example NHC, Ensign, which was a large investment this year, has no fixed escalators. One as a percentage rent escalator the other is inflation based escalator. The other thing that we have done is investing strategically and mortgaged and construction loans. Those of course don’t get varies to straight line income.

So, it's little bit more difficult to model FFO, but easier to model AFFO..

Okay and just thinking about that portfolio, I think I heard Kevin said, it was 1.19 EBITDA and coverage, but I think last quarter we talked about though writing those leases at about 1.3 times.

Can you tell me where the difference is?.

Chad, it's Kevin.

So, you are talking about Bickford, correct?.

Yes..

Yes, right. So, there are 1.19 times of that is -- I think what you might be referring to and that’s a kind of relationship coverage. The 1.3 that I think we may have disclosed was on the option properties where we bought the five properties. So, this is a whole relationship versus just the subset where we are looking at those visual communities..

Okay. And then just thinking about your commentary on Ensign and the Legend portfolio that they're leasing from you, they seem to a struggle with integration of those properties.

So, can you give us some more color on what they related to you what's going there and where it might change?.

As I mentioned, we have been very active in talking with them about what is going on and see very close to those particulars.

In deference to them, we're not in a position to disclose more than they did, but that said the issues have really been more around, the integration, turnover in management, refilling those seats and getting their culture installed in the buildings. Legend was a very good operator. They have a little bit different way of doing things.

So that I think has really been the tale of the tape here. But as I mentioned, they feel good about the investment, the initial indicators are good, they're leading indicators I should say where they're getting the referral volumes back and the things that we're going to be productive to their business and that's something we're watching closely..

Our next question comes from the line of Juan Sanabria from Bank of America Merrill Lynch. Please go ahead..

Just following-up on Chad's question on Ensign, I am wondering if there is anything specific to Texas which I think is where the locate -- the actual located the caused any of the integration issues.

I know a couple of other REITs have talked about Texas being a problem from the skilled nursing perspective?.

Juan, it's Kevin. You know, there's not anything specific as you look at the rate environment or any other issues that impact facilities from just a Texas specific level, it's really been just with their largest acquisition they've made, it's just going to take a little bit of time for them to digest it and fully integrate it..

Okay, and then curious if you guys have seen in your skilled nursing tenants any DOJ inquiries for materials or any other regulatory pressures whether they're rack offs or what have you that is new this quarter that you guys haven't seen before on the skilled nursing side?.

We haven't been apprised of anything new. I mean clearly there is the -- in the rack audits and the typical regulatory visits that happened, but nothing that has been out of the ordinary within our portfolio..

And this is the last question from me.

Could you just speak a little bit about what drove the holiday change and how they kind of managed the assets at a local level to be kind of more normal with the rest of the industry versus the live-in? And if you had any initial discussions, I know it’s obviously very early days with Softbank about how they're thinking about that business with the purchase of Fortress.

How things may change, if you have any insights there?.

Well, second part first, we haven't had any discussions at that level yet, we're really just focused on our portfolio and how they're managing through their, the change that they're making. As I mentioned, they're on plan and they're actually probably slightly ahead in terms of what type of disruption they allowed for in their forecast.

But the major catalyst here was last year they had the Department of Labor ruling on how they treat overtime, and with the live-in managers, it's nearly impossible to be on a salary and then have that profile that they had before without kind of going off the clock.

If you will, so, there was really to some degree, there was something that they have been talking about, but their hand was in essence forced to comply with the partner label ruling for how they’re going to achieve it overtime and just made sense for them to go to the traditional model.

And the people that they had as live-in managers were great people. The niche they had that they have done well for them. That said, I think there is an opportunity for them and I think they would agree that to get somebody that is a sophisticated sales person seasoned in, selling and managing a business unit is a potential upgrade for them.

And that’s something they’re really looking forward to and kind of as they make this transition going forward..

Could you give us a sense of how far long they are just we’ve heard a lot of comments and it's very difficult to find people giving all the new supply and just generally a very tight labor market.

Just curious kind of what pressure that maybe adding to that, a very heated market?.

The majority of our billing is going through the change and the managers have moved out and they’ve released the majority of those units so far.

So, again just looking solely at our portfolio, you will feel good about the progress that they’ve made and there are clearly challenges in the market place just not even specific to holiday but in terms of attracting and retaining labor and you’re continuing to build your culture but so far they are doing everything that said they were going to do and they are on plan..

Our next question comes from Todd Stender from Wells Fargo. Please go ahead..

The supplemental shows the Bickford construction loan.

I know there was one made in January but is the one in the supplemental of Q4 loan?.

One in the supplemental would have been from last year..

Okay, so that was as if 1231, there has been one funded, partially funded already in January?.

That’s right..

Okay. Thank you and just looking at the SLM mortgage, can you go through some of the terms, the coupon looks pretty attractive to them, I guess at being a quarter versus say what you buy a real estate acquisition add.

Can you just kind of go through the terms and maturity Yes, that kind of stuff?.

Okay. Yes, this was basically a relationship play a tenant that we’ve had for a very long time and they had the opportunity to purchase these communities from an existing individual landlord, and this is way for NHI to position itself to acquire additional building down the line.

Basically, we have a right to buy the buildings down the road or at least be in position to buy the buildings, which is why we would do a mortgage or any kind of alternative structure in the first place. So, I mean that’s kind of just to kind of couch the relationship and what we’re looking at here.

But in terms of LTV, about ballpark 8% loan-to-value traditional kind of point in and out and you there is also a feature where we have a fact like period interest in the property so if we don’t buy it there is an upside for us on the way out which puts us in position to buy the communities when they are ready to sell them.

So there is a little bit of seasoning if you will in terms of how long we have the loan -- but feel like we are in a good shape to be able to purchase these and continue to expand that relationship..

Thank you, Kevin.

And just to stay with you Kevin, when I look at the Brookdale facilities you own it's not that many, but are those legacy and Emeritus assets?.

They are, yes..

And where I am going with this, I wanted to see if you can provide some further details on any landlord consent provisions that you have in those?.

Hi, Todd, this is Eric. I can do that since I actually negotiated that lease. When I was at Emeritus, just by coincidence the landlord change in control provision provides that consent is necessary unless the acquirer is the same or better management reputation, same or better balance sheet and same or better regulatory history..

Okay.

So, there are some quantifiable all items in there, it’s a credit decision?.

And operator, so it's for example -- just for example, I just got through email update about Ventas. If it were Ventas then we need to know what type of in credit enhancement what the balance sheet will look like. What the network would like after the merger would Ventas stand behind it and where the management team stay in place questions like that..

And, Roger, just one last one. Looks like you don’t have much variable rate debt in the balance sheet.

I think it's just your line balance, is that right?.

That's exactly right, just no revolver..

With rising interest rates, I guess when you look at the 10-year and you also think about what the Fed is doing.

How do you view your most attractive fixed rate long-term debt sources as you potentially take out the balance, the line balance and fund new investments this year?.

I am going to let John Spaid, handle this one..

So, we are in contacts with a variety of assertions and we regularly test the market. We have private placement sources that we look at. And depending on tenor, they are in the 4% range. We have some bank sources that we can slop in into. They are not too far off of the private placement sources, but for generally slaughter tenders.

And then, we definitely keep an eye out on the convertible debt market as well. We can usually find a lower coupon, quid pro quo being the convertible of the other bond. And we are still seeing some pretty strong metrics there and of course we are always testing the public debt market as well.

We have not made any decisions to go in that direction just yet or we're keeping an eye on it as well..

[Operator Instructions] Our next question comes from the line of Jordan Sadler from KeyBanc Capital Markets. Please go ahead..

I thought I had messed it up one for. So, I want to come back, Eric, if I could on the question regarding Brookdale/Emeritus.

So, are the metrics somewhat subjective? How would you or is there an actual standard surrounding better versus worse credit, if you end up with -- if you have non rated entities?.

Well, frankly, there's a lot of different ways to measure net worth enterprise value, you would look at that Brookdale's balance sheet, what their leverage ratios are, what their cash balances are, whether or not a company is rated keep in mind..

So, I guess I understand the -- you could certainly come up with a bunch of different, host of different metrics to measure two different disparate entities, but I guess what I'm asking is do you have -- is the decision a subjective decision based on one person's opinion of credit versus another's or is it defined?.

Jordan, this is John Spaid. It's defined as better net worth than the current tenant, so you could, we generally we view that as book net worth and so it’s pretty clear to us.

Now, with that said if the -- say they were being purchased by another operator and say that operator was not a good operator and had a lot of regulatory difficulty then there would be some subjectivity there..

Okay, that's helpful, thank you for that. Separately coming back to I guess your guidance for a second if I could, the run rate again in a -- I know I always go here.

But the $1.27 that you did in the fourth quarter annualizes to $5.08 and mid-quarter, little earlier than mid-quarter you purchased a CCRC for $74 million and obviously you've done this loan to -- this loan at post quarter end which offers some accretion opportunity and so I'm looking at your run rate being better than the $1.27 when you adjust your sort of full quarter and what you invested recently and so kind of seeing that FFO number push up above your $5.12 high end of the range, and I know you don't give acquisition guidance but I'm trying to understand what the offsets might be to FFO, that I might be missing?.

Jordan, it's Roger.

In the first quarter for one thing, we do an annual option grant, there will be a sizeable non-cash comp expenses component that will affect our P&L in the first quarter as I mentioned our guidance inclusive of the fact that we have visibility in the short-term about potential acquisitions and ways to fund them and we’ve been very active this year in terms of rising capital both on the equity front and permanent long-term debt.

So, this is our best estimate given the factors that I mentioned..

Okay. Is there a line of sight on the acquisition pipeline, is there an acquisition pipeline that you either have under contract or high likelihood of closing that you could offer any guidance around.

Is it be it 20 to 50 million or some kid of guide post or?.

Jordon, this is Eric. Unfortunately, we don’t offer guidance on that. I’ll tell you that our run rate is between 300 million and 500 million and our guidance reflects a pipeline that we do have visibility on after backing out all those items Roger mentioned. So, we’re feeling very good about the first quarter..

Okay. And what do you -- so, as you actually -- so, it's interesting that you feel good.

How is the transaction environment from your perspective? You didn’t offer a ton of flavor and you usually got some good insight in terms of what you’re seeing in the market?.

Certainly, happy the comments on it, just to define the parameters here, our pipeline is we described it is the deal flow that we’re reviewing and underwriting of deals that were interested in and I can tell you that the first quarter is off to a bang.

There are several large transactions floating around that we’ve reviewed and multiple smaller ones and regional ones. So it's almost like you’re at the end of the game of musical chairs and everyone wants to get a deal done before the music stops. So, we’re underwriting as fast as we can..

Is that senior housing heavy, what would you think the mix looks like?.

Senior housing and there is a respectable amount of skilled nursing still. It's not all about genesis, it's not all about manicure, there are several other skilled nursing providers out there that are shedding assets and swapping out operators..

Our next question comes from the line of Rich Anderson from Mizuho Securities. Please go ahead..

Thanks and following on what Jordan just asked there.

When you look at your track record of growth FFO earnings, growth going back a few years, how much of it would you say is produced from internal sources, escalators and what not? And how much of it is from external sources? Just trying to get a sense of how that meth works out on a typical run rate basis?.

Well, Roger, do you want to talk about increases and what not?.

We generally have fixed escalators in our leases of 2% to 3%. I've mentioned the NHC escalator which is a percentage rent and increasing revenue over a base here. We entered into large transactions with Ensign which is in inflation base escalator. But blended over portfolio you can probably count 2.5% escalators organically.

And then as you know, we have done a lot of repeat business with their existing stable of operators. And we showed that on Page 5 in our supplemental. And then each year, we have been fortunate to add new operators.

So, our growth has really been outsized over the last six or seven years and we had another really good year this year in terms of investment..

I guess under -- knowing kind of the escalators or kind of range how does that matriculate to the bottom line? Is it kind of directly or when you add leverage do you get FFO growth from 2.5 that translate from FFO growth like 4% or 5% is that a regional way to look at it?.

Which we think that again, you are saying with the escalators….

Begin, I know your NOI growth and then when you look at growth at the bottom line does that translate from sort of 2.5%, 3% at the top line to 4% or 5% at the bottom line when you tack on leverage and other moving parts within your P&L?.

There are a lot of moving parts and I'll say that the escalators certainly add to the top line of revenue in terms of straight line rent and fall to the bottom line net income. Of course all that is attracted out to AFFO which is really a focal point for our management team.

We have a used leverage wisely I think we were very low levered in the first place, our weighted average cost of debt as we disclosed at the end of the year was only 3.62%.

So, really the strengthening in debt and equity, careful use of our revolver maintaining very substantial liquidity at all times those really together get us to 5% plus growth which is really a minimum goal for us as a management team its 5% AFFO growth..

And then, Eric, you mentioned also in response of the Jordan's questions.

Looking at potential opportunities in scaled nursing state what is that you are doing differently now given all the uncertainty about underwriting now you -- is it tougher for a school nursing deal to cross the finish line? Or is it deal out listed that you are seeing some dislocation happening that’s presenting more opportunities for you that -- someone easier to underwrite with which would be interesting..

I would say it's tougher there seems to be a lot of new money coming into the state that has deduct the value of assets that we consider just average.

So we are looking at stuff and we're passing on it and then we're scratching our heads as we see the announcements come in, so we're pretty picky, we stick to our underwriting guidelines which is a minimum of 1.5 coverage on a skilled nursing asset and I think you've seen some deals close below that and we're also conservative in our underwriting in that we want to underwrite using in place or trailing financial not pro forma future financials..

Okay, and so your run rate of 300 million to 500 million, you feel like given what you just said there that you'll be closer to the low or high end of that range in '17?.

I wish I knew, I know that we're going to have a good early part of the year and Rich I like to under promise and over deliver, I still consider myself fairly new in this role and still building credibility with the street, so I don't want to over promise and we'll certainly adjust guidance like we did in 2016 as soon as we know what it looks like..

Our next question comes from the line of Dana Hambly with Stephens. Please go ahead..

Given that the $56 million commitment to purchase four skilled nursing facilities, can you remind me of that with the Legend portfolio?.

Sure, this is Kevin, so within the investments that we made, as we purchased the Legend portfolio they had four developments that were either under way or in the planning processes, so as those come out of the ground and season we will have the opportunity to purchase those buildings, one of them opens here in the very near term and then there will be several others that happen over the next call it year to two years..

Okay.

And the Ensign is to be the operator of those buildings, correct?.

That's correct. As they open, they are the operator day one, as they season that's when we have the opportunity to purchase..

Okay, alright, you're not obligated to purchase and I'm just wondering kind of given the challenges they've had is there any increased hesitancy to get involve with those properties?.

These are going to be brand new buildings or good sites, or good markets, we still have a very high regard for Ensign. So, I don't foresee anything changing, there are some hurdles that they have to meet in terms of physical plants, the licensor, there are steps along the way that have to be completed but it is our intention to purchase those..

Okay, that's helpful, and then Eric or Kevin, the specialty hospital opportunities I think you guys have done pretty well with the rehab behavioral down in Murphy's Borough, just wondering if they're, as part of the pipeline are there any meaningful opportunities to expand that segment either with the operator in place there in Murphy's Borough or other assets that you're seeing..

Good question. The operator in Murphy's Borough was the operations were bought by Acadia, a large behavioral health company based in Franklin, Tennessee near Nashville. So, we’re in discussions with them, so that’s the good news. There are great credit tenant and they are in our neighborhood.

The bad news is they have great access to capital one to capital markets, so they don’t really need our money or our help. So we’ll keep relationship building with them and hope that there is fruit. In the meantime, there are other behavioral health companies out there that do need capital partners and we’re meeting with them and reaching out to them.

So stay tuned on this..

Thank you. And there are no further questions, so Mr. Mendelsohn, I will now turn the conference back to you..

All right, everyone. Thank you again for our interest and participation, and we’ll see you at one of the many conferences we attend soon..

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