Executives
Ken Avalos – IR, ICR
Dan Baty – Chairman and Co-CEO
Ray Brandstrom – EVP Finance, CFO and Secretary
Granger Cobb – President and Co-CEO
Analysts
Donald Hooker – UBS
Mark Biffert – Oppenheimer
Rob Mains – Morgan Keegan
Dan Bernstein – Stifel Nicolaus
Carter Dunlap [ph] – Dunlap Equity Management
Emeritus Corporation (ESC) Q4 2008 Earnings Call Transcript March 16, 2009 5:00 PM ET
Operator
Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Emeritus Corporation fourth quarter and year-end 2008 earnings conference call. At this time, participants are in a listen-only mode. Following the presentation, we will conduct a question-and answer-session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone this conference is being recorded. And I would like to turn the conference over to Mr. Ken Avalos. . Mr. Avalos, please go ahead.
Ken Avalos
Thanks, operator. Good afternoon and thank you for joining us on the Emeritus Corporation fourth quarter and year-end 2008 conference call. On the call with today are Dan Baty, Chairman and Co-CEO; Granger Cobb, President and Co-CEO; and Ray Brandstrom, Chief Financial Officer.
Before we begin, I would like to remind everyone of the Safe Harbor statements under the Private Securities Litigation Reform Act of 1995. The following prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed on them.
For a more detailed discussion on the factors that could cause actual results to differ materially from those suggested in any forward-looking statements, we refer you to the Company’s most recent 10-K filing.
With that, it is my pleasure to turn the call over to Mr. Dan Baty. Dan, please go ahead.
Dan Baty
The key measures in looking how Emeritus is doing are pretty simple; it’s occupancy, rate, and margin. A lot of effort, operations goes into getting these results, but they provide a pretty good guide to our progress. Over the last eight months or so, our occupancy has been basically flat. Our rate over the last year has gone up 6%. Our operating margin has increased by 1.5 points. Overhead on a dollar basis has been flat for the past year.
Our goal this year is to manage our cost, to pick up one to two points spread between our cost and our revenue. From operations then we anticipate a good and improved in ’09. In addition, we have high expectations of growth. We earn the best financial position of any of our peers and we have a strong operating team. Our average tenure for our six divisional operating people is eight years with the Company. So, it’s very stable, very experienced and we look at it as a good time and good opportunity.
Senior housing has traditionally been a counter-cyclical business. ESC Emeritus is doing well and there is nothing to indicate it will not continue to do so. Ray?
Ray Brandstrom
Thank you, Dan. Good afternoon everyone. I’d like to begin by discussing our fourth quarter results, given an update on our balance sheet, and finish by providing some comments regarding our 2009 financial guidance.
It’s important to note that the fourth quarter of 2008 marks the first quarter of comparable year-over-year financial results in relations to the Summerville merger, which added 81 communities in 13 states comprising 7925 units to our consolidated portfolio. This transaction closed on September 1st of 2007.
For the year, total revenue was $769.4 million. For the fourth quarter total community revenue was $202.2 million compared to $182.5 million in the fourth quarter of 2007, an increase of $19.7 million or 11% over the prior year quarter. $11 million of this increase is related to rate growth with the balance attributed to acquisitions.
Looking at average rate per unit, excluding our December acquisitions, our average rate per unit for the fourth quarter of 2008 compared to the fourth quarter of 2007 increased 6% to $3498 from $3300, a level in line with our expectations. On a sequential quarter basis, our average rate per unit, again, exclusive of our December acquisitions, increased 1.4% from $3449 in the third quarter. The average rate for the month of December which was inclusive of the new acquisitions, was approximately $3620.
Average occupancy for the fourth quarter was 86.4%, which was essentially flat with the third quarter. Same-store occupancy was down 50 basis points from the fourth quarter of 2007. We believe the sequential quarter stability in our occupancy in the current economic climate speaks to the effectiveness of the programs and initiatives we implemented since last year as well as a need driven demand for assisted living in Alzheimer's business.
Outside of the impact of our acquisitions, we experienced only 3% growth in our operating expenses, primarily due to the beneficial of cost adjustments of our self-insured programs, professional liability, and workers’ compensation. Excluding the beneficial impact of these adjustments in the quarter, fourth quarter margins in 2008 improve by 40 basis points to 35.9% from 35.5% in the fourth quarter 2007.
General and administrative expenses were $14.8 million in the fourth quarter of 2008 compared with $14.6 million in the fourth quarter of 2007. General and administrative expenses as a percent of total operated community revenues was 6.4% in the fourth quarter of 2008 compared to 7% for the fourth quarter of 2007.
Property related expenses include interest on a GAAP basis for the quarter of $25.9 million and rent on a GAAP of $24.4 million. Cash interest for the fourth quarter was $21 million and cash rent in the fourth quarter was $25.3 million. We filed a supplement to our press release today that provides a schedule of cash rent and interest along with depreciation for the fourth quarter of 2008 and a projection for first quarter 2009.
Routine capital expenditures totaled $3.9 million in the fourth quarter or $175 per unit. We define routine capital expenditures as cost to maintain the communities for their intended business purpose and exclude expenditures for acquisitions, development, expansions or repositioning for revenue enhancements.
The Company’s fourth quarter 2008 adjusted EBITDA increased 11% over the prior year quarter to $40.4 million from $36.3 million in the fourth quarter of 2007. Adjusted EBITDA was $37.1 million in the third quarter. Beginning with the fourth quarter, we are reporting from cash from facility operations. Including the $6.5 million beneficial impact of the self-insurance adjustments previously discussed, cash from facility operations were $0.38 in the fourth quarter of 2008.
Turning to our balance sheet, as of December 31, 2008, the Company had approximately $27 million of cash and had no outstanding borrowings under the Company’s $25 million credit facility.
On December 31st, total assets were $2.1 billion, including $1.7 billion of net investment in properties. Total debt was $1.6 billion with $1.4 billion related to mortgage debt and $190 million related to capital lease obligations. Shareholder equity was $359.4 million.
Now, let me update our updates related to our debt and significant progress we made during the fourth quarter. As a result of the financing we completed during the quarter, we have no material maturities in the near term. Of the $18.3 million of current portion of long term debt reflected on the balance sheet at December 31, 2008, $11.8 million is related to properties held-for-sale. Beyond that, we have $46 million of mortgage debt that matures in 2010. We currently – are currently evaluating various financing alternatives for these portfolios and based upon our recent experiences we believe we’ll complete these refinancings on terms acceptable to the Company.
Regarding development activity, we had no openings in the fourth quarter. However, a 38-unit free-standing Alzheimer's community opened in the first quarter of 2009. We also had a 22-unit expansion in an existing community opened in the first quarter of 2009.
Now, let me turn to transaction activity during the quarter. In October, the Company closed on the purchase of 10 communities from affiliates of healthcare REITs, which were formerly leased by us and represent 693 units. In December, we closed on an agreement to lease 11 communities comprised of 1462 units from affiliates of healthcare property investors. The term of lease is 10 years with a purchase option beginning at the end of the fifth year and continuing through the end of the lease term.
The Company also purchased five communities from affiliates of Ventas in December that were formerly leased by the Company and are comprised of 432 units. This acquisition increases the Company’s portfolio of owned properties to 164 or 61.2% of the total consolidated portfolio now consisting of 268 communities.
The Company filed 8-Ks providing specific details on each of these transactions. During the quarter, the Company also closed on an agreement to leas two communities comprising 254 units.
I am going to finish with a discussion of guidance for 2009 with providing range for a few key operating metrics. The Company will not be totally immune the general financial and economic conditions, but we do believe our long term goals are achievable given our existing portfolio, the need driven nature of our business, and our programs, systems, and experienced field management.
Based on our fourth quarter 2008 performance and our initial indications of first quarter activity, we are establishing full year 2009 revenue guidance of $865 million to $885 million. We expect G&A as a percent of total operating revenue to be at or below our rate of 6.4% as reported for the fourth quarter of 2008.
In the first quarter of 2009, we expect GAAP rents to range between $29.2 million and $29.5 million and GAAP interest to range between $26.5 million and $27 million. We expect cash rents range between $27.5 million and $27.8 million in the first quarter and cash interest to range between $22.1 million and $22.4 million.
Finally, we expect routine CapEx for the year to run between $600 and $700 per unit, which along with additional routine capital expenditures related to the December acquisitions, will run between $18 million and $20 million.
With those comments, I will turn the call over to Granger Cobb, our Co-CEO and President. Granger?
Granger Cobb
Thank you, Ray. Good afternoon everyone and thank you for your interest. Our fourth quarter results demonstrate the effectiveness of the new structure and systems, which were fully implemented in the first half of 2008. The combination of annual rent increases, level of care revenue capture, and a community specific approach to street rate pricing drove the strong sequential increase in average revenue per occupied unit, which brought us to the 6% year-over-year RPU unit.
The fact that we were able to keep occupancy stable at the same time demonstrates that the underlying business fundamentals are holding up. For this quarter, we have a meaningful same-store comparison of 244 communities, which comprises 91% of our consolidated portfolio. In this group, we grew average rate per unit by 6% and we held expense growth after normalizing for the beneficial impact of the insurance adjustments to less than 3%, resulting in operating cash flow growth of over 25% relative to Q4 of 2007. As you can see from our Q4 over Q4 operating metrics, the Company is becoming more efficient and we believe going forward that we can continue to hold year-over-year cost increases to a lower percentage than year-over-year revenue increase thus resulting in continued margin improvement.
One of the reasons for our optimism relates to expense control. Our risk management outcomes continue to improve, resulting in significantly reduced cost associated with our self-insurance programs for general and professional liability and workers’ compensation. Also, utility increases are expected to moderate relative to prior years and we anticipate continued progress as a result of a newly deployed system tracking and managing daily labor hours to ensure appropriate and efficient staffing.
In terms of the overall economic climate, we remain very cognizant of the risks in the market, and we continue to diligently monitor the activity levels and competitive landscape on a community-by-community and market-by-market basis. Demand so far has held steady and this is consistent with our previous experience in down economic cycles.
With 15 days left in the first quarter, we are pleased to report that our occupancy should come in flat to slightly up relative to Q4 and our rate is holding. While the operating environment in certain markets maybe in flux, we are well prepared with our data systems and regional oversights to quickly identify and respond to any changes in consumer needs or desires.
With our high quality, moderately priced portfolio, high percentage of need-driven assets, and experience managing cost, we are well positioned to continue to improve occupancy rate and margin as we move forward over time. We have spent the last year implementing scalable structures and systems to better monitor and manage our key business drivers. Our operating teams are now comfortable with this structure and proficient with the systems as our operating results have begun to demonstrate. We are fortunate to be in a business where the primary driver is the demographics associate with an ageing population. Beyond that, it is all about execution, and we feel we have the structure, systems, and personnel to continue to grow the business in both the short and long term.
With that, thank you for taking the time to listen and I think I’ll turn it back over to the operator for questions
Question-and-Answer Session
Operator
(Operator instructions) We are taking our first question from Donald Hooker from UBS.
Donald Hooker – UBS
Hi, good afternoon. I also should have taken note here from you comments, but did you mention kind of an average cost of debt? (inaudible).
Granger Cobb
Yes, we got the question, say, operator?
Operator
Yes.
Granger Cobb
We have some background calls coming through. Is that distracting anybody else or is it just through us?
Operator
We heard (inaudible) trying to isolate the problem.
Granger Cobb
Thank you. I am sorry, go ahead, Don.
Donald Hooker – UBS
Yes, I have sort of taken note here. I don’t know if you mentioned it on the – in your prepared commentary. Did you mention your average cost of debt with all the new debt pieces out there?
Ray Brandstrom
We did not and I actually don’t have that exact number, but probably more recent debt has been coming in at 6.25% to 6.5%.
Donald Hooker – UBS
Okay. Got you. And then in terms of – I guess looking at the – can you give any update on the Blackstone joint venture because it’s hard to see that through your consolidated financials? Is that improving still?
Granger Cobb
I think that’s a good assessment. We are pleased with the progress in occupancy and the rate development. I’d say generally that’s progressing very nicely.
Donald Hooker – UBS
Okay. Actually let me jump back on queue. Thank you.
Granger Cobb
Okay, thank you, Don.
Operator
We will take the next question from Mark Biffert from Oppenheimer.
Mark Biffert – Oppenheimer
Good afternoon guys. First question is related to the actuarial adjustment. As you look into 2010, can you talk about what your outlook is for operating expenses, excluding – and I know you adjust your estimates in 2009 based on what your experiences have been this last year?
Ray Brandstrom
We didn’t give any guidance on expenses. I think that we are optimistic that we are going to be able to control expenses. Our goal has always been to have expenses run at a point to point and a half below rate increases and we accomplished that even this past year when we saw some inflation in the more commodity areas in second and third quarter. We have seen that soften in the fourth quarter and this quarter so we expect that we won't see a reoccurrence of that and we do expect some utility softening in the year. So, we are just generally on cost control, we are pretty optimistic.
Mark Biffert – Oppenheimer
Okay. And then, Granger, I was wondering if you could provide a little bit of what you are hearing from your management team at the individual properties in terms of traffic patterns and if tenants are starting to push back on – for concessions and what they are saying?
Granger Cobb
Yes, actually, I had the opportunity to visit three of our six divisions and spend a fair amount of time with the community level staff as well as regional and divisional level staff and I would say that the kind of the just consensus in terms of their feel is that things kind of bottomed out in October-November of last year in terms of enquiry traffic and just ability to – just level of activity on the sales front. I think also in terms of the amount of discounting or specials that competitors in certain markets were running, all of that seem to kind of hit a low point towards the end of last year. They are al feeling that things are now on the uptick. Certainly our enquiry traffic has improved. I think the overall sentiment in the field is that activity is moving back in the right direction. So, we’re – they are pretty optimistic right now.
Mark Biffert – Oppenheimer
Okay. And then lastly, can you talk a little bit about the opportunities you are seeing for acquisitions or greater leasing agreements as you look into 2009? We’ve been hearing a lot of news that pricing is adjusting and looking at some of the writedowns that you took in the fourth quarter, it seems like asset pricing has started to fall a bit. Can you just talk a little bit about pricing in the market and what you are seeing in terms of those opportunities?
Granger Cobb
Well, I mean in our experience opportunities always seem to present themselves in some of the down times. So, I think that’s consistent with your sense. Now that said, I think we are very cognizant of our capital structure and as we evaluate all of the potential opportunities out there and we are really – we want to ensure that any transaction that we do is value added to the Company. So, we are being cautious, but there is a tremendous amount of, I would say, just kind of activity out there in terms of products kind of flowing across the desk. So we are being opportunistic in looking at it and we’ll see if anything makes sense.
Mark Biffert – Oppenheimer
Do you have a – just lastly, do you have a targeted return that you are seeking on any of those or on your acquisitions?
Ray Brandstrom
Generally – we generally look at the amount of cash we put in and the cash we are going to get back out and if it’s a negative cash going out the door, we’d like to have a breakeven or positive cash flow in the second year. And by the third year we are usually looking at high-single digits to low-double digits cash on cash return as leverage.
Mark Biffert – Oppenheimer
Okay. Thanks.
Operator
We’ll take our next question from Rob Mains from Morgan Keegan.
Rob Mains – Morgan Keegan
Good afternoon. And (inaudible) we’ve still snow on the ground up here, so (inaudible) who is up waterskiing there. Just quick question on numbers, Ray. You guys kind of changed the definition of adjusted EBITDA and adjusted EBITDAR this quarter. Am I correct in assuming that minority interest and debt refinancing cost – if I want to track them back to the income statement that they are on the other net line?
Ray Brandstrom
Yes, I believe they are on the other net line.
Rob Mains – Morgan Keegan
Okay. I just want to make sure that. You talked about kind of what’s going on in the market right now, Granger. One thing that we hear is that consumers might be pushing back against rate increases or there might be economically based move outs. Are you seeing anything that either of those – either not being able to push the rate increases or people moving out for economic reasons?
Granger Cobb
Kind of taking the second one first on we have not seen any increase in move outs. We have been pretty diligent though about encouraging residents and families to talk to us if they are financial concerns in terms of existing residents. We have seen an increase in residents choosing a companion living option where they are sharing a unit with another resident that substantially reduces the monthly rent. So, we – so there are – there is a little bit of movement to – well actually, there has been steady movement over the last two quarters into that kind of companion arrangement. So, I’d say that that is one trend.
On the move-in front, I think that – I probably dare to say industry-wide, people are doing some discounting on the upfront fees. So, if there were upfront fees associated with moving in there has been discounting to that. We haven’t felt – we’ve only done that in select markets where we felt it was necessary. We have not had to do any discounting to our monthly rate. So, we are still getting full monthly rates in each of our markets. But we have responded with giving the communities the ability to do some discounting of upfront fees. And that – so far that has not impacted our RPU in a negative sense. We are still move that in the right direction. But that is out there.
Rob Mains – Morgan Keegan
Okay, that’s helpful. Ray, did I hear you right, G&A is 6.4% of revenues?
Ray Brandstrom
It’s total operated revenue, which would include the revenues from managed communities.
Rob Mains – Morgan Keegan
Right. That would imply, based on the revenue guidance you said, an absolute decrease in dollars from this year, do you think?
Granger Cobb
It’s about flat.
Ray Brandstrom
Yes, it’s about flat.
Rob Mains – Morgan Keegan
Great. And I think some things just kind of naturally grow up. Are there anything that you are specifically – are there any kind of reductions or anything like that that pushing those numbers?
Ray Brandstrom
No.
Granger Cobb
No. We basically just held our G&A level for – flat to Q4 of last year – and then – despite the growth that we had. So we were able to lower the percentage overall. We kind of – we moved the – what is that, the numerator or–?
Ray Brandstrom
Yes that one right.
Granger Cobb
(inaudible) and just held cost flat.
Rob Mains – Morgan Keegan
Okay. Okay, that’s good for me. I might jump back. Thanks a lot.
Granger Cobb
Okay.
Operator
(Operator instructions) We’ll take our next question from Jerry Doctrow with Stifel Nicolaus.
Dan Bernstein – Stifel Nicolaus
Hi, it’s actually Dan Bernstein filling in for Jerry.
Ray Brandstrom
Hey Dan
Granger Cobb
Hi Dan.
Dan Bernstein – Stifel Nicolaus
I just wanted to be clear – be sure I was clear on your comment, Granger, about the flat occupancy for first quarter. Is that from year-end or from the average number for fourth quarter?
Granger Cobb
It’s actually flat to – on the average number and I think we come in just slightly up on from year-end to quarter-end.
Dan Bernstein – Stifel Nicolaus
Okay. And then also, I just want to see if you could clarify or not maybe not clarify but talk about your general strategically especially the trade-off between acquisitions and development at this point? I think previously you had talked about doing three to four developments a year.
Granger Cobb
I think we’ve pretty much – any development – I think with the exception, we have about four developments that we are still moving forward on.
Ray Brandstrom
Walking as opposed to running.
Granger Cobb
Walking as opposed to running. And we’ve – everything else, we’ve kind of pushed off because we’ve seen such an increase in acquisition opportunities at very attractive pricing and kind of structure. So, I think that until that balance change – shift back, we probably are not looking to do any development beyond those four properties.
Dan Bernstein – Stifel Nicolaus
Okay. And are you still seeing attractive debt rates from Fannie and Freddie? I mean we’ve heard that they’ve been increasing their debt service coverage requirements and just first thoughts on that?
Granger Cobb
I mean they are increasing it slightly, but it hasn’t been to the point that it’s been – it’s made a huge impact at this point. I mean it’s right – they have – required – it’s requiring a little bit more equity into some of the financing, but other than that no real change.
Dan Bernstein – Stifel Nicolaus
You can still do sub-seven with 60%-70% LTV?
Granger Cobb
Yes.
Dan Bernstein – Stifel Nicolaus
Okay. And then the last question is I was looking at the receivables and payables in the balance sheet. They went up pretty significantly from 3Q. Is that just the acquisitions you made or is there a push-out there at all?
Ray Brandstrom
No, actually there is no push. It is primarily or this is almost all acquisition related and the increase in receivables in primarily due to getting the collection behavior in line with the acquired properties.
Dan Bernstein – Stifel Nicolaus
Okay. That’s all the questions have. Thank you.
Ray Brandstrom
Thanks, Dan.
Operator
We’ll take a follow-up from Rob Mains from Morgan Keegan.
Rob Mains – Morgan Keegan
Thanks. Granger, you said in the first quarter flat occupancy rate holding. When you say rate holding, does that mean the rate increases, would expect to see similar to what we had in the fourth quarter or will it be flat versus Q4?
Ray Brandstrom
I think – this is Ray – I think Granger’s comments probably fed off of a comment that I made. We gave a lot of variations on rates in the – within the fourth quarter, kind of comparing before acquisition and post acquisition. And I made the comment that the rate, including our December acquisitions, was $3620. And that’s a significant difference from where the average has been running. I think what Granger was saying was we’ve seen that rate hold off into the first quarter. So it stabilized.
Granger Cobb
Yes, I – that was a one month kind of calculation there and whenever you bring on significant number of acquisitions, I am always a little eerie of one month data. But it appears that that rate, $3620 the rate quoted is holding up. We are moving up from there a little bit, but too soon to tell exactly how much.
Rob Mains – Morgan Keegan
Are you still getting for people who are anniversarying or people who are going – increased levels of ADLs increases?
Granger Cobb
Yes, except bear in mind that we still – I mean that will only be good for probably another year. So – but we still have the majority of our increases coming due in August-September timeframe rather than in the first part of the year. So, it’s skewed a little bit in our case because of the Emeritus legacy communities that had a – in August-September timeframe, they are still skewed to that – to those months.
Rob Mains – Morgan Keegan
Got you. Okay, thanks a lot.
Operator
We’ll take our next question from Dunlap Equity Management.
Carter Dunlap – Dunlap Equity Management
Hi, in one of the industry pieces, senior care investor Naveen [ph] talked about AL pricing last year being down on the order of 29% or so, but also talked about the fact that there was a big decrease in quality of assets sold in a very thin market. If you sort of thought of apples-to-apples in quality, where would you say the acquisition market is now in terms of either dollars per unit or cap rates or however you want to describe it?
Dan Baty
Boy, that’s a tough question. It’s – basically there is no trading in the better properties. The only thing that’s moving is the – is stuff people want to get rid off. So, I think you come back and look at what the cash flows are from these businesses and those really – I mean from our standpoint, they’ve improved over the last year. So, what do you multiply it by or how do you value and that changes over time. But the basics operations of business has improved. And the occupancy is there. The enquiries are there. The costs coming down. So the operating part of the business has improved.
Carter Dunlap – Dunlap Equity Management
I was just sort of tying – trying to tie it to your comments earlier about the numbers of properties coming by your desk going up. It sounds like what you are saying is that they are not necessarily assets you are–?
Granger Cobb
I would say, Carter [ph], in terms of – if you want to kind of think of it on a per unit basis, now there is probably opportunities on the acquisition side that are below and maybe even significantly below what you could build it for. So that’s one piece of it there. But what makes it difficult is the sort of transactions we are seeing are not – they are structured in ways that it’s not a clear – it’s hard to get to a clear value in terms just straight cash sale or something. That’s not what we are seeing.
Dan Baty
I mean there is no secret about this. You got Sunrise that’s in a state of flux and different owners looking at what they are going to do with their properties. You have some left [ph] out of sale almost 300 properties and they are various stages of bankruptcy. And then you have your financial players that three or four years ago made significant investments and they are supposed to get 30% returns and they aren’t seeing that. So, they are looking at taking their money and going some place else. So, there is a lot of activity then, but not a lot happening yet. But it’s going to.
Carter Dunlap – Dunlap Equity Management
One last question. Thank you for the time. A while back the sense was that – of a sale and leaseback opportunities you had with your landlords you’ve – and sort of with – I think the view was you’d sort of do any of them that made sense, but the landlords were sort of happy if they sort of – did you see that attitude shifting in terms of their willingness to part?
Dan Baty
I would say more of them considering that this is a cheaper source of capital at the moment.
Carter Dunlap – Dunlap Equity Management
Thank you.
Operator
And with no more questions – I apologize, we do have a followup question from Jerry Doctrow from. Stifel Nicolaus.
Dan Bernstein – Stifel Nicolaus
Hi, it’s Dan Bernstein. Thanks for taking my follow-up. On the Sunrise acquisitions, you know they are in a state – like you said they are in a state of flux. Is there any additional CapEx you have to put into those properties at all.
Granger Cobb
On the deal that we did for the eleven, we – as a part of the deal we agreed to put up $3 million of CapEx and HCP put I $3 million of CapEx and we need every penny of it. So, we are going to use every penny of it and probably in the course of this first year. So, there was some – we just identified some areas that we felt the properties could definitely improve from right off the (inaudible) and have addressed that.
Dan Bernstein – Stifel Nicolaus
Okay. Thank you.
Operator
And with no more questions in the queue, I would like to turn the call over to Granger Cobb for any additional or closing remarks.
Granger Cobb
Alright. Well, we’ll be available for a bit in Seattle if anyone has any followup questions. And thank you again everyone and have a very nice evening.
Operator
This does conclude today’s call. Thank you for participating. Have a great day.
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