New Senior Investment Group Inc.
Q3 2015 Earnings Call Transcript

Published: 8 Nov 2015

[Operator:]

Good morning. My name is Brianna, and I will be your conference operator today. At this time I would like to welcome everyone to the New Senior Investment Group Third Quarter Earnings Conference Call. [Operator Instructions]. David Smith, Vice President, you may begin your conference.

[David Smith:]

Good morning. I'd like to welcome you to New Senior's third quarter 2015 earnings call. Joining us today are Susan Givens, our CEO, and Justine Cheng, our CFO. Before I turn the call over to Susan, I would like to remind you that certain statements made today may be forward-looking statements. Forward-looking statements describe the Company's current expectations, and actual results may differ materially from such forward-looking statements. I encourage you to review the cautionary statement in our earnings release and investor presentation regarding forward-looking statements, and to review the risk factors contained in our annual and quarterly reports filed with the SEC. With that, I'd like to turn the call over to Susan.

[Susan Givens:]

Thanks, David, and good morning, everyone, and thank you for joining us today for New Senior's third quarter 2015 earnings call. We posted an investor presentation on our website this morning, and I'll be referring to pages in that presentation during my remarks. I'd like to start off by saying that Q3 was another strong quarter for the company, and I'm excited to update you on our progress as we continue to execute on our strategy. Since the time of the spin-off almost exactly one year ago, we have consistently generated above-average portfolio growth as well as strong earnings for our shareholders. For the fourth quarter in a row, our same-store occupancy and NOI growth outpaced the overall market. And since the time of the spin our AFFO per share has increased 58%, and we have increased our dividend by 13%, all while completing several acquisitions of high-quality senior housing portfolios. Today, we feel better than ever about the overall composition of our diversified portfolio, as we've added more stable, high-quality, private pay, independent living assets over the last 9 months. We still believe we have a lot of growth left in our assets and we feel very good about our market positioning as we approach the end of the year. Now turning to page 4, before we dive into the results for the quarter, I'll give a quick recap of the Company. Today, our portfolio includes 154 high quality senior housing assets with 19,000 beds in 37 states. Our managed portfolio includes 96 properties across 33 states, while our triple-net portfolio includes 58 properties across 24 states. Over the last three years, we've assembled one of the largest portfolios of independent living and assisted living properties in the US, and we think it's a very unique and hard-to-replicate portfolio. Our strategy has been and continues to be to focus on private-pay independent and assisted living properties, and today our private-pay assets represent over 90% of our portfolio. In terms of asset type, approximately 70% of our NOI comes from independent living, 22% is from assisted living memory care, the remainder comes from rental CCRCs. To put it in context, those are the largest concentrations of private-pay and independent living assets among our peers, and they're portfolio stats we're very proud of. Our diversified portfolio includes an attractive mix of long-term triple-net and managed assets, and as a result we believe we're positioned to deliver continued strong organic growth from both contractual rent increases and participation in property-level growth. In addition, we've partnered with best-in-class operators and over 80% of our NOI is managed or leased by the top three largest senior living operators in the US. Now let's turn to page 5 to get into some of the details for the quarter. First, the company continued to generate impressive and consistent financial growth, which we attribute to our disciplined investment strategy and the quality of our existing portfolio. Normalized FFO for the quarter was $26.3 million, or $0.30 per basic share, and AFFO was approximately $23 million, or $0.27 per basic share. Importantly, we closed on the acquisition of 28 independent living assets mid-quarter, so the results do not reflect a full quarter's worth of contribution from that acquisition and we believe it's helpful to provide pro forma results, which reflect our estimate of what our results would have been if that acquisition, as well as a small acquisition we completed in October, had closed at the beginning of Q3. Pro forma normalized FFO was approximately $29 million or $0.33 per share, and pro forma AFFO was approximately $26 million or $0.30 per share. Also, today we announced that our Board of Directors authorized a third quarter dividend of $0.26 per share. Second, our high-quality senior housing portfolio continues to outperform the overall senior housing market. On a same-store basis, our managed portfolio NOI grew 6% from Q3 2014 to Q3 2015, with occupancy up 210 basis points year-over-year. There is been a lot of noise about the strength of the senior housing market, and we'll comment on that a little later; but overall, we're incredibly pleased with the continued strong performance of our assets. Third, it was an active quarter on the acquisition front, as we successfully closed on the $640 million acquisition of 28 private-pay properties. While it's still early, the portfolio has already exceeded our expectations, with occupancy up 330 basis points from 87.9% at the time we announced the deal to 91.2% in September. As we move into the fourth quarter, we expect this acquisition to have an even greater positive impact on our financial results as the recent occupancy trends are expected to translate into future NOI contributions. Importantly, this acquisition also improved the overall quality of our portfolio by adding more high-occupancy, stable IL assets. Year-to-date we've closed on $1.3 billion of acquisitions, including 49 IL properties, four AL memory care properties, and one rental CCRC. And finally, we feel very good about our balance sheet and our overall liquidity after completing a $465-million 10-year fixed-rate financing at 4.25% with Freddie in August. Today, we have approximately $85 million of investable cash, so we have plenty of liquidity, and we have no plans to raise any equity. We are very mindful of our cost of capital right now, particularly given where our stock has been trading. We've always had an incredibly rigorous and disciplined acquisition strategy, but now more than ever we are only considering new opportunities where we project very attractive returns. To put it in context, this quarter alone we passed on a few deals which had been in contract, because we decided the risk-return profile was not sufficiently compelling in light of our current cost of capital. In an investing environment like the one we're in, we're comfortable holding onto our cash, ensuring that we're well-capitalized, and focusing on organic growth opportunities; and then when interesting opportunities arise, we can selectively decide whether it makes sense to pursue them. And as I mentioned last quarter, we continue to explore the possibility of selective one-off dispositions of non-core assets where we might be able to recycle the capital. We're only evaluating doing this in modest size, and we've been making some progress on this front. There's nothing to discuss just yet, but we will continue to post you as our plans crystallize. Now, turning to page 6, I'll spend a minute touching on our financial performance. As I mentioned, our financial results continue to be very strong and we believe our results reflect our portfolio's embedded growth potential as well as the quality of the investments we've made. Taking a moment to step back and reflect on how the overall business has performed since the time of the spin, you'll see that our financial results have been pretty impressive. The chart on the lower right-hand side of the page shows that AFFO per share has grown 58%, from $0.19 in Q4 2014 to $0.30 pro forma this quarter. Importantly, if you look up the return on invested equities -- so, really, the measure of how well we're doing investing capital -- you will see that number is equally impressive. Return on invested equity, or ROE as we're calling it here, has steadily increased and is currently north of 11%. In this low-rate interest environment, we believe that delivering consistent and steady returns of 10%, 11%, 12% is something to be very proud. As I said before, it's all about performance, and our financial performance has been and continues to be spot-on and even better than expected, so we feel very good about our financial results. Turning to page 7, I'll go into a little more detail on the managed portfolio. We continue to be very pleased with the performance of our managed portfolio as occupancy across the portfolio has trended upwards with the addition of more high-quality independent living assets. Importantly, we're seeing occupancy gains while we're also seeing consistent rate growth. Total occupancy increased 290 basis points from 84% in Q3 2014 to 86.9% in Q3 2015, and NOI increased 113% over that same period. On a same-store basis, NOI grew 6% from Q3 2014 to Q3 2015, with occupancy up 210 basis points from 83.5% to 85.6%. Year-to-date, same-store NOI has grown 6.1% from Q3 2014 to Q3 2015, and occupancy has increased 110 basis points from 82.8% to 83.9%. It's worth noting that the same-store occupancy has steadily been increasing each month for the past 5 months, so September occupancy was actually 30 basis points higher than the average for the quarter. We like to see that kind of trend, and it's a trend we're generally continuing to see in the early part of the fourth quarter. I will point out that the figures exclude one property which was not fully operational and had significant units unavailable for rent during the quarter. It's a highly unusual situation for us, so we wanted to show the figures both with and without that property. Even when including this property, our results were still incredibly strong, with same-store growth -- NOI growth at 3.5% and occupancy up 150 basis points. Overall, we continue to be very optimistic about the growth prospects for our managed portfolio; and while we've seen steady increases, our occupancy is still lower than industry averages. We think that's a function of historic under-management, not the intrinsic quality of the assets, and that together with our experienced operators we can continue to drive occupancy higher as we move into 2016. Page 8. Now turning to our triple-net portfolio, which includes 58 properties across 24 states. The vast majority of our triple-net assets are independent living, and nearly 80% of our NOI comes from these stable, high-quality assets. Performance has been very solid across the portfolio, with coverage of approximately 1.3 times and average occupancy of 88.8% for the trailing 12-month period ended June 30. It's worth pointing out that we have one of the best lease maturity schedules among our peers, with no lease maturities until 2029. So, our triple-net cash flows remain well-protected to provide continued stability. If you look at the chart on the bottom right side of the page, you'll see that our same-store triple-net portfolio, which includes 51 independent living assets, as you can see, the performance of that portfolio continues to be very strong. Coverage has remained steady and occupancy has grown 180 basis points from 88.9% in Q3 2014 to 90.7% in Q3 2015. Our triple-net same-store portfolio is 100% IL, and we believe the occupancy gains speak to the strength and resiliency of our IL product in the current market. Turning to page 9. So, we've obviously had very good growth, and now I want to take a minute to touch on how our growth compares to the market and to the NIC data that's been widely reported. Overall, we think our portfolio stacks up very favorably versus others in the industry. And if you look at the chart on the left side, you will see that our NOI, occupancy and RevPOR growth -- you'll see our NOI, occupancy and RevPOR growth this year versus the market. This shows that our growth has been well above the market in each of those areas for the entire year. And if we went back even further, you would see a similar trend. If you look at the chart on the right side, you'll see our year-over-year occupancy growth this quarter versus the market by product type. There are two key takeaways from this chart. First, we experienced significant occupancy gains across each of our product types in the third quarter, while the overall NIC data showed some softness, particularly on the AL side. And second, the one product type where the NIC data showed some growth was on the IL side, which is where we have the largest concentration of our assets. This is a trend we've seen with the NIC data throughout the year, and we're seeing it play out in our markets. Page 10. We believe there are three primary factors that account for our overall performance and will continue to drive our growth going forward. Here we've briefly summarized those items, and I'll go into detail on each -- on the following pages. First, we believe our unique acquisition strategy really sets us apart from others on the market, and has been a significant contributor to our overall growth and performance. On the one hand we focus on sourcing and underwriting smaller, off-market transactions where we think the assets are undervalued or underperforming. And at the same time, we selectively pursue larger-portfolio deals which tend to include more stable, high-quality assets that can improve the overall profile of our portfolio. If you look at what we've done to date, the vast majority of the deals we've completed have been smaller deals, and the returns those portfolios have generated have been really excellent. The chart here shows the blended unlevered and levered returns for the small managed portfolios, pre-acquisition and now. And when you look, you will see that the blended levered yield on the small managed portfolio deals we've done has improved from approximately 15% at the time of acquisition, to close to 18% today. If we assume some additional growth, those portfolio level returns could ultimately exceed 19%. The point here is that we've done some very good deals and we've been able to buy assets at attractive prices with significant growth potential. This has always been our focus. And while the market has become a little more competitive, we still think the long-term prospects for rolling up these small portfolios is very good. As I mentioned before, we're being very conservative about the deals we're doing, and we will only execute on really attractive opportunities. The good news for us is that a little capital can go a long way, and a small acquisition can have a meaningful impact on our earnings. Page 12. Second, we have the right operators for our assets. Ultimately the returns I just talked about are driven by two things -- good underwriting, and good operations with active asset management. So much of our performance is attributable to having the right people running our portfolio. And for our assets, we feel very good about the partners we have. We choose the right operators for our assets and we work closely with our operators when we're underwriting assets. As a result, we're aligned once an acquisition closes. When you look at what the results have been with two of our largest operators, it's a very good story. Same-store results were terrific for both Holiday and Blue Harbor, which collectively account for the vast majority of our NOI. As you see, Holiday's same-store NOI growth was nearly 5%, while Blue Harbor's was nearly 7%. Obviously, those are much higher than the industry numbers for the quarter. So, our performance is largely a function of having the right people showing up every day, running our properties, and making sure we're aligned to produce results. Page 13. Lastly, we think our portfolio is incredibly unique versus others in the market. Over 90% of our NOI is private-pay, which means our portfolio NOI is stable and less vulnerable to economic or regulatory changes. And while we're certainly seeing new supply, we feel great about the characteristics of our portfolio. Approximately 70% of our portfolio is concentrated in independent living properties, and the level of new construction of IL properties is less than half the level of assisted living, so that should provide further stability to our cash flows over time. As it relates to new supply, we've done a detailed analysis on a property-by-property basis to analyze what's occurring in our specific market. When looking at a 5-mile ring of each property in our managed portfolio, there are 41 properties under construction near properties in our portfolio that represent only 15% of our total Company NOI. Furthermore, as we've looked into the specific property types under construction, nearly half, or 18 of these 41 new properties, are a different product type. We've presented the information conservatively by including all senior housing under construction regardless of our views of whether it's a true competitor. But if you were to exclude those properties with a different service offering, it would only impact 11% of our total NOI. So, we feel very good about how our portfolio is positioned from a new supply perspective. This obviously isn't a perfect exercise, but it's a good way to think about how new supply is impacting our market. Also, with all the focus on new supply these days, I do think it's important to take a step back to keep in mind the bigger-picture fundamentals in the sector. Here's how we think about it. Today, there are 1.4 million senior housing units in the US and a total of 32 million people over the age of 70. Of the 32 million people, only 1.2 million of those seniors live in senior housing units today. So, the penetration rate is still very low at just under 4%. A small increase of just 50 basis points to 4.5% would absorb all of the existing supply in the industry. And as senior housing continues to be an increasingly accepted option for these individuals, we think this penetration rate will only increase over time. Another way we look at the huge wave of demand is this. Over the next 5 years it's projected that there will be another 6.5 million seniors over the age of 70. Assuming penetration rates stay constant, this implies significant additional demand for over 250,000 senior housing units over the next 5 years alone, or nearly a 10% increase from today's inventory. So, we really believe the demand is there. These large macro demographic trends, along with the senior housing serving as an efficient setting to provide quality care to our nation's elderly population, are why we remain so excited about the long-term prospects of our business, and why institutionally we've been one of the largest investors in senior housing over the last 15 years. Yes, supply is something that we have to watch very carefully. And we've seen periods of increased supply in the past. But we believe the long-term prospects for the business are as sound as they've ever been. So, with that, I'm happy to turn it over to Justine, who will discuss the financial results in more detail and wrap up.

[Justine Cheng:]

Thanks, Susan, and good morning, everyone. I'm pleased to report that all the activities Susan just described translated to another quarter of solid financial performance. In Q3 we added 28 private-pay properties and ended with $3.3 billion of gross assets. Post-quarter-close, we acquired two assets, bringing our total portfolio to 154 properties today. It's important to note that because of the timing of these acquisitions, our Q3 financials do not reflect a full quarter's contribution from these assets. For this reason, we've provided pro forma information to show what we think Q3 would look like had we owned the assets since the beginning of the quarter. Now, turning to our portfolio results, Q3 NOI was up 39% year over year, from $38 million to $53 million, and sequentially grew 10%. Roughly 90% of that growth came from our managed portfolio, which increased 108% year over year from $12 million to $25 million, and was up 21% sequentially. The triple-net portfolio grew 6% year over year from $27 million to $28 million, and 2% sequentially. Looking at our Company metrics, we delivered normalized FFO of $26 million, or $0.30 per fully diluted share. Our AFFO was $23 million this quarter, or $0.26 per fully diluted share. Normalized FAD, which deducts maintenance CapEx of $2.1 million this quarter, was $21 million, or $0.24 per fully diluted share. Pro forma, which assumes the acquisitions I mentioned earlier had closed at the beginning of July, our results would have been, for NFFO, $29 million or $0.33 per fully diluted share; AFFO of $26 million or $0.30 per fully diluted share; and normalized FAD of $23 million or $0.27 per fully diluted share. And again, those are pro forma numbers. Lastly, we announced our dividend of $0.26 per share, which represents an 87% pro forma AFFO payout ratio. That also roughly equates to a 10.5% dividend yield on our stock price today. Looking at our capital structure, in Q3 we added new secured financing to fund our acquisitions, and ended the third quarter with $2.1 billion of total debt, with a blended cost of funds of 4%. To finance our acquisition of 28 independent living assets, we raised $465 million of 10-year fixed-rate debt from Freddie at a rate of 4.25%. we used $15 million of the proceeds to repay some of our floating-rate debt, and since Q1 we've successfully increased our fixed-rate exposure from 50% to 60% while maintaining our overall leverage of 65% and cost of funds of 4%. The financing also extended the weighted average maturity of our debt to 7 years, with no debt maturities until the end of 2017. As you heard, we are very focused on driving organic growth, and we believe our assets have the potential to meaningfully delever over time. As we look forward, New Senior is in a great liquidity position. We have roughly $85 million of investable cash, and we are looking to potentially add a corporate revolver. As Susan mentioned, we are also exploring select non-core dispositions which would further add to our financial flexibility. Turning to page 15, I'll wrap up. To summarize, New Senior's high-quality private-pay portfolio continues to outperform our peers in industry. Since spin, we have sequentially posted above-market results across all key metrics and product types. Secondly, our Company performance has been excellent. We have grown, since spin, our NFFO and AFFO per basic share 15% and 42% respectively, and as a result we've been able to increase our dividend this year by 13%. We believe there's a lot of embedded upside in our assets, and we are optimistic that our organic growth, combined with accretive investments, will support further dividend growth. And lastly, we have executed on $1.3 billion of acquisitions, which has delivered impressive results to date. We remain disciplined and prudent with our capital allocation; and looking forward, if we were able to invest the $85 million of cash at comparable yields as our smaller deals, that could potentially add another $0.12 to $0.15 annually to New Senior's AFFO. And that concludes my prepared remarks. And with that, I'm happy to open the line for questions.

[Operator:]

[Operator Instructions] Your first question comes from the line of Paul Morgan with Canaccord. Your line is open.

[Paul Morgan:]

Hi, good morning.

[Susan Givens:]

Hi, Paul.

[Paul Morgan:]

Just looking at the managed portfolio and the operating expenses, I mean, they were up 6% year-over-year, and then on a sequential basis 4.3%. And could you give any color there, what the drivers are? And looking at it sequentially particularly, is there something that might ease or is there something that we might expect to pressure same-store growth as it rolls in on a year-over-year basis?

[Susan Givens:]

Sure. So, I think when you look at it sequentially quarter-over-quarter, the big driver on a sequential basis is utility costs in the third quarter. And that's something we see on a regular basis in the third quarter. So, utilities tend to kind of rise in the third quarter, obviously with the summer months and the air conditioning and all those kinds of things. So, that's a pretty typical sort of movement between Q2 and Q3. And our expectation is, of course, the utility costs go down in the fourth quarter. But the other thing that is impacting kind of us on the expense side, and I think you're seeing this across the board, we are seeing some increased expenses on the wage side. So, on the labor side, it's not something we haven't projected. And so it's actually coming in line with what we had projected, but there has been some modest increases on the wage side. But I think the real driver in terms of sequential quarter-over-quarter kind of expense is the utilities sort of increasing. If you look at last year, as obviously we do, you see that it's a very similar trend between Q2 and Q3 with respect to the expenses.

[Paul Morgan:]

So, the 6% year-over-year number, I mean, that’s being partly wage-driven. I mean, is there any reason to expect that to ease or is that something where kind of revenues are going to have to keep pace, and that's just kind of the status quo now?

[Susan Givens:]

Yes. And sorry, and the other thing that's impacting the year-over-year -- so we talked about the sequential difference. The other thing on the year-over-year basis is, we have some step-ups on some of our management fees that are paid to our operators and so we had a step-up in Q3 with respect to a few of our properties. So, that's also driving that heavily, the revenue is going up, and so, we feel okay with having our management fees going up, but we don't see bump-ups in the management fees after that, because it's one step-up and then it flattens out.

[Paul Morgan:]

Okay. And then the property you left out of the pool, is this the same property that you talked about last quarter? And is there resolution there? Do you expect to exclude it going forward for much longer?

[Susan Givens:]

Yes. It's a great question. It is the property. And I'll say, it's a very unusual situation and so we really wanted to show the information both ways. It's a property where we just don't have the ability to rent out units right now. And so historically it's been a very high-occupied property. The good news is, we do have resolutions and we will be able to start renting the units again at the end of the fourth quarter. And so it will actually have a meaningful, in our view, hopefully a meaningful impact on our financials as we start off the New Year, because we'll be able to generate that NOI from that property again. So it's an isolated event. We wanted to show the information both ways. It's not a market issue at all. It's actually a very good market. And this is just an issue with -- it's a licensing issue with our operator that they have resolved.

[Paul Morgan:]

Okay. Great. And then just the last question on asset sales. I mean, you kind of gave similar comments, I guess, as you did the prior quarter. But I mean have you gone down the road with opportunities to sell assets? Is this something that we could expect to see transacting in the next quarter or two or I mean is it still on a very preliminary basis?

[Susan Givens:]

Yeah. No, we're making progress on it. So I think last quarter we'd identified it. We've done a bunch of work this quarter to really figure out which were the assets that we think make sense to be looking at. We are talking to folks about what makes sense to do with those assets. So, I would certainly think it's something that would happen in the next quarter or two. But again, it's we're doing it -- as we talked about before, we're doing it offensively, not defensively. And so it isn't any sort of massive asset sale program. It's really just one-off opportunities. But we're further along than we certainly were last quarter, but we aren't quite ready to come out and tell folks what we've done yet.

[Paul Morgan:]

Great. Thank you.

[Susan Givens:]

Thanks, Paul.

[Operator:]

You next question comes from the line of Lucy Webster with Compass Point. Your line is open.

[Lucy Webster:]

Hey, good morning, guys.

[Susan Givens:]

Hi, Lucy.

[Lucy Webster:]

I was hoping – could you provide us with any more details around small acquisition that you made subsequent to quarter-end?

[Susan Givens:]

Sure. So that was an acquisition that we closed in October we've had in our in-contract pipeline for a number of months, I think since the beginning of 2015 and so it's a great acquisition, but again, it's a small deal, just $15 million of equity. That's what we invested in the portfolio. Two assets, very good markets. And going-in yield is very high, so it's consistent with our strategy of pursuing these small one-off transactions. And like I said, we've had a few deals in our pipeline and few deals in our in-contract pipeline that we decided not to do. And this was actually one that we made the decision to go ahead with, because we thought the returns were compelling enough that it made sense to do it. So, again, minimal capital but high returns.

[Lucy Webster:]

Okay, great. And then I think I missed a couple of comments earlier on to what’s your expectations for growth going forward. But I was wondering if you could comment on what you're thinking for the fourth quarter given the pro forma numbers that you put out there today, and if that's a good starting run rate to use and then just expectations for growth given that aggregate portfolio.

[Susan Givens:]

Sure. We haven't given formal guidance this year, and that's something that we're evaluating for next year. Obviously, this being our first year as a standalone public company, we wanted to be a little careful around that. So, I don't have formal guidance to give you. What I would say is, I do think it's a good way to think about it. Looking at the Q3 pro forma and expecting that we should get some growth in the fourth quarter to come out of those numbers, I think that's a reasonable expectation. And then, I think as we're thinking about 2016, we'll update you guys if we do decide to provide formal guidance; but I think it's fair to say we've always represented that we think the assets in our portfolio, particularly on the managed side, still have a lot of growth left in them. And as I mentioned, our occupancy levels – we've made great progress in getting our occupancy levels up from the low-to-mid 80s to the high 80s. But we still think there's a lot of room left in our managed portfolio. And so we see kind of growth prospects with that portfolio.

[Lucy Webster:]

Okay, great. Thanks. That's all for me.

[Susan Givens:]

Thanks, Lucy.

[Operator:]

[Operator Instructions] You next question comes from the line of Daniel Bernstein with Stifel. Your line is open.

[Elizabeth Moran:]

Hi, this is actually Elizabeth Moran, calling in for Dan. Good morning. So, it sounds like you're still thinking it's prudent to stay back on the sidelines on major acquisitions for now. What kind of ballpark volume do you think is doable from those smaller one-offs for the balance of the year or should we assume it's pretty quiet except for what you announced today?

[Susan Givens:]

Yeah. I mean, look, I do think for the bigger deals, we're on the sidelines for sure. I think that's a function of our cost to capital. It's also a function I think of the market. And I'd probably say the second point is probably the more relevant point. I think what we're seeing is that the private cap rates that sellers are expecting, or the cap rates in the private market, have not caught up with what's happening on the public market side yet. And so, how we feel about that generally is it in periods where you see that kind of dislocation that tends to result in interesting investing opportunities, if you stick to your strategy and you hold onto your cash, then opportunities will arise. And so we don't think it makes sense to be pursuing large deals right now, because we think there will be some interesting things that will come out, as we think that cap rates will ultimately go up and we think that that can provide some good things for us to be doing. And so, I think for the balance of the year, and I think even going into the early part of next year, our strategy will really be to kind of we're doing acquisitions, it will be on these very small one-offs, high-yielding portfolios. As we pointed out in the presentation, I mean, the returns we've been able to generate on those portfolios are truly outstanding and we like those types of deals. There are still plenty of those deals to be done. And of course, those take a little bit longer, because a lot of times the seller universe is a little bit different than what you see with the large portfolio transactions. But the good news is, if you're patient and you’ve had experience doing those types, actually get pretty impressive results. So, without giving a specific figure on kind of what our volume expectation is, we're not doing any big deals, and to the extent we do any deals at all, which we are taking a different lens to even the smaller deals we do. They have to be very high returning portfolios.

[Elizabeth Moran:]

Okay. And actually to that point, I'm sorry if I missed it, but what is the approximate yield on the acquisition that you just announced – the memory care assisted living facility?

[Susan Givens:]

Yes. It's 7 plus percent.

[Elizabeth Moran:]

Okay. All right. And then, looking at what you said last year, I mean, obviously 6% same-store NOI growth is still pretty strong. But given it came in around 6%, and you said 6% to 8%, should we be thinking about maybe a 5% to 7% range now or is it just a quarterly fluctuation?

[Susan Givens:]

Well, I think the 6% -- I think we've said historically 5% to 7% is what we think is the achievable over the next 12 to 18 months. I think that's how we characterized it last quarter. We still feel like that's a good number. Again, as I said right before, we think that we still have a lot of growth that's there. I think there are certainly supply, as I mentioned, supply is out there, of course. I think we feel very good about how we're positioned in light of that supply, and I think that's why we wanted to share some information that we look at. But we still think we're seeing good trends and good growth. And in fact, I think as our same-store portfolio starts to include a lot of these properties that we've acquired this year, we'll see even stronger growth. Because I think that's where we are seeing very steady and stable performance.

[Elizabeth Moran:]

Okay. That's all for me. Thank you.

[Operator:]

We have no further questions in queue. I'll turn the call back over to Susan.

[Susan Givens:]

Great. Well, thanks everyone. Appreciate folks dialing in and we look forward to updating you on our continued progress.

[Operator:]

This concludes today's conference call. You may now disconnect.