Colleen Sullivan - Director, Investor Relations Eric Mendelsohn - President and Chief Executive Officer Roger Hopkins - Chief Accounting Officer Kevin Pascoe - Chief Investments Officer John Spaid - Executive Vice President, Finance.

Chad Vanacore - Stifel Nicolaus John Kim - BMO Capital Markets Juan Sanabria - Bank of America Merrill Lynch Daniel Bernstein - Capital One Securities Jordan Sadler - KeyBanc Capital Markets Todd Stender - Wells Fargo Securities Eric Fleming - SunTrust Robinson Humphrey.

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 third quarter of 2017.

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

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 statement may involve risk or uncertainty and are not guarantees of future performance.

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

Investors are urged to carefully review various disclosures made by NHI in its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-Q for the quarter ended September 30, 2017.

Copies of these filings are available on the SEC's website at www.sec.gov or on 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 earnings release together with all other information provided in that release. I will now turn the call over to Eric Mendelsohn..

Thank you, Colleen. Hello everyone. glad you could join us today. With 2017 quickly coming to a close, we are very pleased with the financial strength of NHI. Our industry is currently facing a few headwinds. Its seen cross currency in occupancy throughout the senior housing space.

We appear to be nearing a cyclical peak in terms of supply and cap rates continue to remain low.

In light of these factors, we have stayed focused on conservatively managing our balance sheet, targeting accretive acquisitions and setting up NHI for growth and the ability to thrive in the current environment which presents challenges as well as opportunities. We have placed a great emphasis on delivering during this time.

Earlier in the year, we proactively amended our credit agreements. These gains are starting to impact our financials through interest savings. As John will discuss later we have also issued shares on our ATM program using those proceeds to reduce our revolver balance.

Through these strategic steps, we have seen our net debt to EBITDA dropped this year from 4.5 times in Q1 to 4.0 in Q3. As a result, we have ample runway in terms of borrowing capacity and our ability to make new investments or weather off storm. Our third quarter is reflective of our financial health.

During the quarter, normalized FFO grew 11.4% and normalized AFFO grew 10.9% per share when compared to the same period in 2016. Year-to-date, we've executed 164 million of investments and gained 2.6 million in annual revenue from a Sniff lease renewal earlier this year which was $0.06 accretive per share on an annualized basis.

We are very pleased with this quarter’s results, the health our balance sheet and the platform for growth that provides. Before we move into the quarterly details, I would like to pause and recognize our operating partners who were affected by the recent natural disasters.

Their preparation and responsiveness has been outstanding keeping residence, patience and staff safe. We are especially grateful for the efforts of senior living communities, HSM and the LaSalle Group as they each took on evacuating residence.

Our portfolio thankfully sustained no damage in operations and the effective buildings have returned to normal. I will now hand the call over to Roger Hopkins to walk through our financial results. Roger..

Thanks, Eric. Hello, everyone. We have had an excellent third quarter as our results reflective of steady investment growth in 2017 with new and existing tenants, and a low cost of debt and equity capital with which to fund these investments. Normalized FFO per diluted share increased 11.4% to $1.37 compared to $1.23 for the same period one year ago.

Normalized AFFO increased 10.9% to $1.22 per diluted shares compared to $1.10 one year ago. Along with $166 million of announced investment so far this year, we continue to fund our development in loan commitment totaling $102 million at September 30 as outlined in our Form10-Q.

We have deployed a careful mix of debt and new equity to maintain our low leverage profile. NHI’ s total revenues for the third quarter showed strong growth of 12.8% over the same quarter in 2016.

This growth has been primarily fueled by our new investments in 2017, the full-year impact in 2017 of investments made throughout our 2016 and the renewal of the significant lease that Eric mentioned earlier.

For the third quarter of 2017, our general and administrative expenses were $2.5 million and when compared to the same period one year ago, increased due to additions to our corporate staff and in incentive and non-cash share based compensation. For non-cash stock based compensation expense in the third quarter was $405,000.

During the third quarter, we opportunistically bought back a portion of our convertible notes due in April 2021. We had a loss of $495,000 on such note retirement during the third quarter. For the first nine months of 2017, revenues increased 13.1% over the same period in the prior year.

Normalized FFO increased 9.4% over the prior year and normalized AFFO increased 9.3% over the prior year.

General and administrative expenses have increased approximately $1.9 million when compared to 2016 primarily due to additions to our corporate staff, incentive compensation and non-cash stock compensation expense calculated using the Black Scholes pricing model.

NHI’s management is focused and incentivized on annual growth in AFFO on a per share basis. this non-GAAP metric excludes the accounting convention of non-cash straight line rent income and gives credit to our actual lease escalators and to our investments for which no straight line rent calculation is required.

Importantly, it assures to managements focus on making accretive new investments over our blended cost of debt and equity capital. This morning we announced our regular fourth quarter dividend of $0.95 per share.

We currently estimate our normalized FFO payout ratio will be in the low 70% range and our normalized AFFO payout ratio will be in the low 80% range. Moving onto guidance for 2017, we have affirmed our previous normalized FFO guidance range up $5.22 to $5.26 and our normalized AFFO guidance range of $4.07 to $4.72.

Going forward, we will give more information on pending transactions that we have included in our guidance. For example, we now have clarity on approximately 42 million of new investments that we currently estimate will close by December 31st.

One is an IL for $34 million with an assumed loan of $18 million, the other is an AL Memory Care facility for $8 million. Both are expected to close in the fourth quarter. I will now turn the call over to John Spaid, who will discuss our recent capital transactions. John..

Thank you, Roger. For the quarter ended September 30, our debt capital metrics were net debt to annualized EBITDA at four times, weighted average debt maturity at 6.5 years, weighted average cost of debt of 3.56% and fixed charge coverage ratio at 6.6 times.

Looking at the revolver, at the end of the third quarter, we have $167 million outstanding with an available capacity of $383 million. Turning to our ATM program. During the quarter, we sold 537,977 shares of our common stock. The shares are sold at an average price of $80.20 per share resulting in net proceeds after commissions of $42.5 million.

After our Q3 ATM activity, we had $275.6 million in capacity remaining and our recently filed shelf facility. Net proceeds were used to reduce the revolver balance and maintain our low leverage metrics. Since its founding, NHI has consistently maintained its balance sheet and keeping with investment grade debt metrics.

We are committed to maintaining those metrics into the future. Our incremental cost to debt remains low. Our ability to efficiently access capital continues to be strong and as Eric mentioned in his opening remarks, NHI’s balance sheet is well positioned to competitively serve our existing and future customers.

I will now turn the call over to Kevin Pascoe to discuss the portfolio..

Thank you, John. As Eric mentioned, there are some headwinds affecting our industry. The good news is we have solid operator that are up the challenge of these pressures. We continue to create strong corporate cultures to attract and retain talent and have prepared themselves by improving the fiscal plants ahead of new competition.

The strength of our Sniff operators is second to known and they work tirelessly to prepare themselves for the changing reimbursement climate. We are proud of our operators and the work they do every day. With some of the activity of our peers we get many questions about how often and how we transition operators.

As with any portfolio, we have a few buildings that transition to a new operator from time-to-time either through lease maturities or through issues that mirage from operations. With the stable of 34 operating partners and other industry relationships, we are able to find solution to these issues with the targeted and thoughtful approach.

By having these relationships with other operators, we have ample expertise and geographical coverage. We feel confident we can transition underperforming communities if necessary. An example for NHI, is a small portfolio in Minnesota we recently transitioned to Bickford.

At the time, we work through some issues of non-compliance with the operator, we became clear the portfolio needed to have a new operator. We work with the tenants and the guarantors to transition the properties of Bickford and NHI was paving full on the rent that was due.

The new rent on the portfolio is slightly lower than previous tenant, but this is also reflective of an upgrade in guarantor for NHI. Looking at the overall portfolio. At the end of the second quarter, the EBITDA uncovered ratio on the portfolio was 1.7 times.

Our senior housing portfolio performance was steady at 1.24 times on a skilled portfolio remains very strong at 2.54 times. The skilled nursing coverage now includes the rent impact for the new lease with HSM.

Turning to our larger operating leases, our partnership with senior living communities represents 16% of our cash revenue and has an EBITDA on coverage ratio of 1.27 times on a trailing 12 months basis at the second quarter end. National Healthcare Corporation which represents 15% of our cash revenue as a corporate fixed charge coverage of 3.6 times.

A relationship with Bickford Senior Living accounts for 15% of our cash revenue and has an EBITDA on coverage ratio of 1.21 times for the trailing 12 months ending in June 30th.

The open development properties continue to perform ahead of their respective pro formas the two remaining development with Bickford underway or under a loan structure where NHI has a favorable purchase option at stabilization. One project is slated to open in the first quarter of 2018 and the other is expected to open in the third quarter of 2018.

Holiday retirement has an EBITDA on coverage ratio of 1.17 times as of second quarter-end and represents 14% of our cash revenue. Occupancy through the third quarter continue to improve as the company’s average occupancies improved 170 basis points in sequential quarters.

The marketplace is competitive but our pipeline remains very active largely comprised of private pay senior housing opportunities. We continue to focus on growing selectively with high quality operating partners and communities. With that, I will hand the call back over to Eric..

Thank you Kevin. We look forward to seeing many of you at the upcoming NAREIT Conference in Dallas. With that, we will now turn the line over to questions..

Thank you. [Operator Instructions]. And our first question comes from the line of Chad Vanacore of Stifel. Please proceed with your question..

Good afternoon.

So in your queue you mentioned that tenant has had a compliance with the lease, could you quantify the rent at risk and then what you are going to be mitigated?.

Hey Chad its Kevin here. I think what we said in the queue is that its less than 4% of revenue. We are working through our remedies that we have with them, I think as normal course we need to make sure we protect our rights as it relates to the lease and that’s what we are doing here.

We are also very customer focused and we want to make sure that we work with them to get through the issue and that’s what we are doing now and as we have also mentioned that NHI is current with its rent or just making sure that they get their house in order and we are helping them to get there..

Alright.

And then you also transitioned that one property that you mentioned with the same operator?.

I’m sorry. I think you are mentioning a small portfolio on that one property that was Bickford Senior Living..

How many properties was that, because I saw on the queue that there is - you just talked one property at a 1.5 million rent..

It's actually four smaller buildings..

But that's unrelated to these units ongoing..

That's correct..

Okay and then thinking about this quarter here, you beat pretty substantially and did name it’s pretty low and why was that, or should we expect that to continue and what is a good run rate that we're talking about?.

Chad, we did have a good quarter and part of that is due to the fact that we received all of the rent on the small portfolio that Kevin mentioned just a moment ago that we transitioned to Bickford, as we approach the fourth quarter, we do expect our general and administrative expenses to be a little bit higher than this quarter as we approach year end and do the things that we normally do at that time..

So speaking about the quarter pretty substantial beat versus consensus in the quarter were there any one-time items that you would point to or was that pretty clearly what you thought how you would perform?.

It turned out the way that we hoped it would primarily because we were able to collection all of the rent from the small portfolio that Kevin mentioned and so we were unsure of that three months ago and now we are transitioning that small portfolio to Bickford..

Okay, and then just one more you didn't brace guidance in the quarter despite the substantial beat can you talk about fourth quarter it is implied down to third quarter and how you are thinking about that?.

With the transition of the small portfolio to Bickford there is a two month period of rent free that would be in our FFO, but not in our AFFO, and the other portfolio that Kevin mentioned that was out of compliance was some of our technical covenants we are taking a wait and see approach in helping them to hopefully work out the situation that they have and so we are a bit uncertain for the fourth quarter as to how that will come out..

Alright. I will seed the floor. Thanks a lot..

Thanks Chad..

Our next question comes from the line of John Kim of BMO Capital Markets. Please proceed..

Thank you. Can you just clarify are there two separate portfolios or assets in transition to Bickford, one was in the prepared remarks and one disclosed in the 10-Q or it is same issue..

Hey John its Kevin.

Two separate portfolios, so the one the transition to Bickford was a small portfolio that we've mentioned a couple of times here now that transitions happen effective 10,01, so Bickford is moving forward with their portfolio so it's separate and apart from the issue that we've mentioned of the notice of non-compliance that we had, but we're not transitioning those assets at this time, we're just working through some of these issues of non-compliance with least terms again which are not rent.

They are the technical defaults as Roger had mentioned..

So can you explain what non-compliance be in?.

So specifically in this case the stated not meet their least service coverage test that we have described in our least agreement.

So as I mentioned before, in accordance with that we need to make sure we protect our rights by having a default letter issue and it was at a level where we want to make sure we had appropriate disclosure around what we are working on here..

Okay.

On the asset that your transitioning are you putting in any additional CapEx?.

We are not. This under triple net lease Bickford is 100% responsible for CapEx on that portfolio..

Okay. The purchase options that you provided is this what was necessary to get the transaction completed and also the 8.5% cap rate it seems like if the exercise I would imagine I just want to get the [indiscernible]..

Yes sure that’s really the intent as we look at this portfolio was one and had some issues historically in terms of just holding occupancy and so forth felt like this is probably a better one for NHI to sell and prune over time so to be able to give Bickford opportunity to come in, get the operations transitioned to them and then really incentivize them to by the buildings down the road I think is a good outcome for NHI..

Okay.

And then final question from me is I think on your development disclosure there is a Bickford senior development project that’s been progressed as far as the capital spend on it this quarter, is there something with this project does it get stalled or is there a reason why there is no [indiscernible] movement on it?.

John, I think while there is not any issue if you will in terms of the development pipeline with Bickford there maybe some normal course licenser things that are going on that have maybe pushed back opening or its progression, but we are talking a matter of 30 to 45 days is not a material delay if you will.

It’s just a matter of normal course things that happen with development. The pipeline was Bickford is good, we feel very strong about how that’s progressing and the building is that have been opened are doing really well. So we feel very strong about where that sits..

Okay, great. Thank you..

Our next question comes from the line of Juan Sanabria of Bank of America. Please proceed with your question..

Hi, just first question on the small portfolio that you are transitioning to Bickford, what was the old rent and what is the new rent and/or it’s a temporarily rent retrieved or free rent or whatever you want to call it what is that amount in dollars?.

So we just closed in 10-Q in the MD&A that the rent with the former tenant was $2.1 million and all of that rent was collected by the end of September.

This is the third tenant now and Bickford will be the third tenant that we have had in a relatively short period of time and we feel like we have right sized the rent going forward to $1.5 million in the first year plus escalators..

And then you said something about two months freeze, is that right I mean in addition to that $1.5 million delta versus the 21..

That’s right. There is a period of free ramp in our agreement..

And that’s two months, is that right?.

Correct..

Okay. And then separately on the skilled nursing coverage, I just wanted to go through some massive, just looking at the breakout that you guys give for NHC in their fixed charge coverage.

It implies a 1.4 EBITDA coverage for the non-NHC skilled nursing portfolio? I mean it depends on what margins you assume and the fees you assume for asset management but it looks like that portfolio’s EBITDAR could be below one time which I guess could be why one of your tenants is in technical default.

Could you just help us understand I guess one what the EBITDAR coverage is at the non-NHC skilled portfolio and what the coverage is for this tenant is that in technical default..

Hey Juan its Kevin. So first off the technical default is with the senior housing customer, not a skilled nursing customer. So where we are looking at the skilled nursing portfolio. You know where there are some areas where it’s a little bit lower than maybe we would have liked.

We do have strong credit on those leases and I understand how you are coming up with your math, but our portfolio as it relates to skilled nursing we still feel good about customers we have are very strong and like I said where there may have been some lower coverage.

We have very good credit enhancements and feel good about the customer and the trajectory of the portfolio..

Is it wrong to assume that the EBITDAR is below one times?.

I think if you are making that assessment, I mean there is definitely some assumption in there and I do not think that would be an accurate assessment..

So what do you guys calculate the coverage at?.

Juan typically we don’t breakout by operator, so our practice has been to give you skilled nursing and then to give you our top five operators which includes NHC. I understand that analyst in the street are hungry for more information on this.

We have to straddle those wishes against the fact that some of our operators are publicly traded and consider that information their own. So both NHC and [indiscernible] are public so this is kind of the tug of war that we are in between you and them..

Okay.

And then could you just go into more color last question on the Seniors Housing portfolio that has some issues, what is their coverage, I'm assuming since you are not - and maybe you're clear to say what the coverage is?.

Well needless to say the coverage is below the covenants and not where we want it to be, the good news is that we believe the situation is salvageable and we also have the asset management skills here, we have several former operators on staff that can help with supervising and managing the rehabilitation of this tenant and we're in the middle of that right now.

I would describe the situation with this tenant as salvageable and abundance of caution we issued that letter and I want to reiterate that the rent is still being paid, but that's one of the reasons we didn't raise guidance for next quarter.

we want to make sure that we're taking a conservative approach as we look at the situation with this tenant and make decisions about what is needed to get them back within compliance..

So it's not a liquidity issue it's a coverage issue?.

A little bit of both..

Okay. Thank you..

Our next question comes from the line of Daniel Bernstein of Capital One. Please proceed..

Good morning. I would ask the questions a little bit different way, if you're not going to give us the lease coverage, are any of the tenants and the tenant that you gave the notice I guess default or with notice of covenant [indiscernible] behind on rent it all, are they paying the rent in full, just want to understand how come….

Yes. So to reiterate what Kevin said Dan that this is not a skilled nursing tenant, this is a senior housing tenant and they are not behind on rent so, it's a non-monitory default..

Okay.

Is the issue there an operator management issue or is it something that [indiscernible] industry like over supply or wage pressure something that's could end up being a bit more transitory?.

Well when I described it as salvageable, I guess I would characterize it as more a management issue, I think that there are some levers that can be pulled like not to get to granular managing over time, less reliance on referrals like A Place for Mom that can give you residence, but charge too higher price to do that, and then just some basic blocking and tackling of marketing and customer service and other types of hospitality issues.

So, when we go visit these buildings and talk to the management and interview the employees and even the residence, this is something that we have done in the past 60 days, we have really immersed ourselves in operations of these buildings and come up with the business plan strategy and week-by-week pro forma that we update and monitor to make sure that the buildings are on track and doing what they think we can do..

Okay.

And just also little bit more detail, is it systemic through the portfolio or is it maybe one or two properties are underperforming that you could transfer to another operator or sell trying to get a sense of the magnitude?.

I mean I can jump on this.

I think lateral is one where there is some optimization that happen we are evaluating all our options still so we haven’t made decisions in terms of what that looks like, but there is some opportunity I think to maybe potentially move some pieces around if it goes that way, but then again if they get back on track and where they were before then that’s a different conversation.

So it something we are watching very closely, but all options are still kind of on the table in terms of how we look at the opportunity to help them succeed..

I just going to ask would that include the options included the right structure at all to tamper some upside in the operations or is that just not something you really wanted to go back to?.

Well Dan, we are very picky about who we do [indiscernible] with. So I would say that if we were going to do [indiscernible] our idea on operations would have to be with an operator that has a different profile than this operator..

Okay. I appreciate that and one last quick question. You delevered the balance sheet, u have been very conservative on and for good reason on the underwriting.

What will give you more aggressive investor and maybe you can take it 1piece-by-piece in terms of our senior housing versus skilled nursing, is it fundamental, is it pricing, what would get you to be a more aggressive investor and using the high powering your balance sheet?.

Dan, it’s Kevin again.

I think it’s one where we just remain selective in terms of what is out in the marketplace, a lot of what we have seen this year have been kind of odds and end to be honest with you it’s either a larger portfolio that’s going a pricing that’s not accretive which isn’t really for us or it’s been stuff that just not something that we really want to pursue to have in our portfolio.

So it’s one the opportunity to got to be there, but as we have discussed we have got to have - we have the dry powder when that does present itself. We would like to see the yield or the pricing improve a little bit, but the fact of the matter is for the right portfolio of the right customer we have that ability to stretch.

We are just again remaining in selective on what we pursue and make sure we are adding the quality of portfolio that we want..

Okay. That’s all from me. I’m going to hop off..

Thanks Dan..

Our next question comes from the line of Jordan Sadler of KeyBanc Capital Markets. Please proceed..

Thank you. Good afternoon. just coming back to this, sorry to beat the dead horse, on the portfolio that you have issued the out letter to the tenant.

Did you think how many properties it is?.

We did not..

Can you, will you….

So Jordon, let’s talk about that for a minute.

I consider the gold standard of disclosures on defaulted tenants to be LTC and Windy Simpsons disclosure last quarter about per tenant Anthem and when and if this tenant is in defaults on a monetary issue and when and if it’s going to affect our earnings, you will get that level of information which I think was great and the right thing to do.

Right now we are being a little cautious about how much we say because frankly this is a private company with a brand name that if we start talking about them that internet will light up in their markets and they could lose business.

It’s trying to become a self fulfilling prophecy when a competitor is having issues, their competitors pulled that out to all new leads and say you don’t want to put your family there because of this. I saw that happen in when the front line story came out, it’s a very market driven environment.

So we are trying to be careful about respecting their ability to do business and we are also trying to satisfy our analyst and investors with information that you can use to plug in your model and make decisions about NHI as an investment and management’s ability to deal with issues like this.

So watch us play defense and I think you will be satisfied that’s why we highlighted this transition to portfolio in our prepared remarks, because we want you to know that this type of stuff goes on and that we know how to deal with it and we couldn’t come out whole or close to whole..

Okay, that’s fair. I appreciate the disclosure you have given us so far and the sensitivity.

Can I read into sort of your cadence right now as you view this as ultimately a no harm no foul type of situation which it will be ameliorated in a short window or is it too soon to tell?.

That’s a fair question. I would say this is probably a six to 12 months project for us and this won’t be the last you will hear about it. We will probably be updating you quarterly until we are either at a position to make a decision as to whether or not they are rehabilitated or whether or not they are going to be transitioned..

And then the other last one on this and I will leave it alone is do you own all of this tenant facilities or do they have additional facilities outside of NHI and the reason I'm asking that is really to figure out just their scope and the scale and just their exposure to you versus having a….

Yes, we do not own all of their facilities, they have others besides ours..

Okay.

And then just I actually wanted to talk a little bit about the offenses side of the business you've been deleveraging I have noticed and you've mentioned issued to the ATM in the quarter, to take it down a little bit further, I was a little bit surprised that the pace of acquisition was little bit slower this quarter, can you sort of comment on the environment and the opportunities you're seeing?.

Sure, this is Kevin. Jordan as I mentioned just a few minutes ago we remain selective but we're very focused on growing with our partners and trying to develop new relationships which we're out there doing every day.

As Roger mentioned we have in the pipeline a certain number of acquisitions that are underway, the pipeline itself I feel like we're seeing everything in the market, it’s just a matter of being able to really just finding the right one to bring in and have the opportunity.

So we expect a little bit of lumpiness this year as I mentioned there is kind of two different I will say kind of the bifurcated markets that is kind of Class A stuff that's going at or below our cost to capital which JUST doesn't really make sense to spend time on if you're not going to get paid for any risk that you're taking.

And then while that kind of serves to our benefits to spend time in more of the secondary markets which really plays to our favor what we've seen so far this year has been kind of more odd and ins that not really want that we want to bring into the portfolio.

That said I do feel good about the opportunities that are out there, what we're seeing it's just a matter of continuing to cultivate those relationships and be able to add to our customer base and I feel strongly that we'll continue to be able to do that that's been our business plan, its worked well for us, we just have to stay patient and we'll find those opportunities..

And then Eric or Roger just on the balance sheet should we expect leverage to continue to come lower from here, what sort are the objectives?.

Jordan this is John. We're not changing any of our guidance regarding our leverage metrics, we recognize we're at the lowest end of that guidance, if possible we could still go a little bit lower, but we're not trying to signal anything different there..

Okay. Thank you..

Our next question comes from the line of Todd Stender of Wells Fargo. Please proceed with your question..

Hi thanks.

Kevin thanks for your color on your underwriting, if we can stick with you based on where we are in the cycle I guess specifically with Senior Housing as you look at the growth prospects over the next couple of years and you factor them into your underwriting, are you starting to assume a bottoming at some point, I guess in trends and you're factoring new supply at some point demand is going to exceed supply, just give an update maybe on how you're thinking about seeing the light at the end of the tunnel?.

Sure. Hopefully this doesn't sound like a non-answer, but it really depends on the market. This is still kind of a local market business for we got a look at each individual market and see what the supply has been delivered, are they kind of chewing through those new units that I have been in.

I would say that we look at supply that’s coming on and new starts that it does seem like there is light at the end of the tunnel that the demand characteristics are starting to get better, the supply of leveling out a little bit as it relates to new supply in our portfolio nothing has really changed in terms of what have we seen in our markets.

We have been fortunate in that respect. Our operators are feeling good about their position and their respected to market and how they are unable to compete. So I think there is good news in the future here and something that we continue to watch very closely..

Alright, that’s helpful. And I didn’t know if I missed this.

What is your Bickford concentration go to pro forma for the recent transition?.

Well currently it’s 15% of our revenue with the new rent, I wouldn’t expect that the change materially..

Right, still inside of 20%?.

Yes..

Okay.

And I know this is a small piece, but just looking at the [MLB] (Ph) coverage it’s really not a focus for years, but when you see a drop of coverage from nine times down to sub seven times it does seems like a lot maybe there was something in there?.

So our tenants on those the medical office buildings or the hospitals, those hospitals have allocated expenses that vary from quarter-to-quarter. So I think that’s really what you are seeing is just really the changes in the hospital versus the underlying medical office or that in essence who are our tenant is that entity.

So when we are measuring coverage that’s what you are seeing that is normalize down for the amount of rent that they pay, so we are not grossing up the imputed coverage by hospitals in a NOI but that does give you - what that really is there to give you is a way to see how well rent is covered on those properties.

You know systemic issues that we picked up in those properties and anything like that I think is just kind of the amount of rent as it relates to hospitals NOI just can change substantially, because we are not talking about huge numbers here..

Got it, a smaller base. Okay. Thanks Kevin..

And our next question comes from the line of Eric Fleming of SunTrust. Please proceed with your question..

Hey guys. I wanted to go back to the other Bickford portfolio transition so the rent moving from you say what 2.1 million from the prior tenant to 1.5 million.

Did you say that the prior tenant paid that full 2.1 million so is that a benefit in the rent for third quarter so they paid essential an additional quarter of rent that runs through your third quarter number?.

This is Roger. They just paid all their rent that was due. This is a portfolio that we have been working on for several months to try to transition, but you know they were not the tenant for it. We knew we wanted to make a change, but we needed to right size the rents for that local market..

So they paid their just the year-to-date required rents for three quarters and so that was all paid in full, they didn’t pay any additional rent beyond it to get out..

Yes [indiscernible]..

Okay good. Thanks..

And we have a follow-up question from the line of Juan Sanabria of Bank of America. Please proceed..

Hey I was just hoping for an update on how Ensign is doing with the legend portfolio that was transitioned to them and if you could just given us an update there?.

Sure, they have continued to put resources into the portfolio. They like where its heading, they don’t like where it’s at.

I would say they wouldn’t tell you that they are happy with where things are today, but they are happy with the progress that they feel good about the investment and that its going to be a good portfolio and a good investment for them.

So that I think they would say just that its progressing and it’s not where we wanted to be, but starting to get there..

Okay. And then just one from me from the ATM and what drove the decision to issue during the quarter where the leverage already being very low and I guess these new tenant issues kind of propping up in between the last quarter and now..

Well I think we mentioned that we continue to wind up have as much dry powder as we can to take advantages of opportunities in the future.

We also announced that we have in front of us some additional investments that we are going to be making over the next quarter and then we have ongoing commitments that are highlighted in our queue that you can see as well. But it was clearly an effort to continue to kind of maintain our leverage at a very bottom of our range..

Okay. Thank you..

Again our last question comes from the line of Jordan Sadler of KeyBanc Capital Markets. Please proceed..

Thanks I’m not sure if missed this, but I guess in an abundance of caution I want to ask that question regarding you know the condition of tenants more broadly obviously you give these broader averages which you have spoken to.

But there were two separate instances in this quarter that rose and I’m curious are there any other tenants that they are mentioning that are on the watch list that have become distressed in the quarter or over the course of last six to nine months or what have you that we should be aware of?.

Well hi Jordan its Eric welcome back. Sure.

Fair question you know we are watching Brookdale very closely, we do have nine buildings with them and they are performing reasonably well, they are not killing it that’s enough buildings for us to pay attention and to our wring our hands about as we watch all that’s happening with them and turnover in COO suite, that's a concern to us.

We do have some bright spots, so if I could point to senior living communities and to Bickford, we have some tenants that are just truly excelling and doing much, much better than their competitors and that the market would expects and then we talked about holiday before.

I'm concerned whenever a company like that has as much turnover as they did last year and then moves their corporate headquarters across the country and turns over much of their back office personnel and then of course change their management model in the buildings from live-in managers to external professional management.

So holiday in Brookdale are on my worry list and senior living communities and Bickford are on my dragging list..

And on the worry side are those guys near or close to breaching covenants or they're fine for now?.

They're fine..

Okay. Thank you..

There're no further questions at this time. I will now turn the call back over to you for some closing comments..

Thank you everyone for joining us today and hopefully we'll see you all at NAREIT in Dallas, Texas. Thank you..

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