Welcome to the Omega Healthcare Investors' Fourth Quarter Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Michelle Reiber. Please go ahead.

Thank you and good morning. With me today are Omega's CEO, Taylor Pickett; CFO, Bob Stephenson; COO, Dan Booth; and our Chief Corporate Development Officer, Steven Insoft. Comments made during this conference call that are not historical facts may be forward looking statements such as statements regarding our financial projections, dividend policy, portfolio restructuring, wreck payments, financial condition or prospects of our operators, contemplated acquisitions in our portfolio outlook generally. These forward looking statements involve risks and uncertainties which may cause actual results to differ materially. Please see our press releases and filings with the securities and exchange commission including without limitation our most recent report on Form 10-K which identifies suspect actors that may cause actual results or events to differ materially from those described in forward looking statements during the call today we will refer to some non-GAAP financial measures such as FFO, adjusted FFO, FAD and EBIDTA. Reconciliations of these non-GAAP measures to the most comparable measures under generally accepted accounting principles as well as an explanation of the usefulness of the non-GAAP measures available under the financial information section of our website at www.OmegaHealthcare.com. And in the case of FFO and adjusted FFO in our press release issued today. I will now turn the call over to Taylor.

Thanks, Michelle, good morning and thanks for joining Omega's fourth quarter 2016 conference call. Adjusted FFO for the fourth quarter is $0.88 per share, funds available for distribution, FAD, for the quarter is $0.80 per share. Our full-year adjusted FFO of $3.41 represents a 10.9% increase over our 2015 adjusted FFO. In six out of the last seven years we've delivered double-digit adjusted FFO growth. We increased our quarterly common dividend by $0.01 to $0.62 per share we have now increased the dividend 18 consecutive quarters. Dividend payout ratio remains very conservative at 70% of adjusted FFO and 78% of FAD. Our fourth quarter adjusted FFO was above our guidance range as the sale of assets occurred later than expected while the closing of the LG joint venture occurred earlier than expected. Our adjusted FFO guidance for 2017 was $3.40 to $3.44 per share and our funds available for distribution FAD guidance is $3.10 to $3.14 per share. Our 2017 guidance excluded the impact of new investments beyond plan capital expenditure projects and reflects higher interest costs from converting our $250 million term debt from variable rate debt to fixed-rate debt and projected higher variable rates throughout 2017. Notwithstanding our poor stock price performance, operationally, 2016 was a very successful year. We continue to reposition assets within the portfolio with asset sales and the transition of certain facilities to new operators. We sold 38 facilities with a realized gains of $50 million basically offsetting impairments of $58 million. We have 20 assets held for sale year and expect these will be sold throughout 2017. We invested over $1.3 billion and we raised $1.3 billion in new capital. Our balance sheet is particularly strong with annualized pro forma EBIDTA in excess of $900 million. And a funded debt EBITDAR ratio of 4.7 times. As I indicated in our press release we believe 2017 will be particularly challenging for the skilled nursing facility industry. The combination of labor cost pressures and senses pressure will continue to challenge operators net cash flow. In addition and increasingly aggressive regulatory and Department of Justice environment continues to divert many management teams attention away from patient care to deal with survey and legal issues not to mention the cost of defending and settling these issues. We will continue to work proactively with our operators to identify ways to maintain operating cash flow and manage through these issues. Bob will now review our fourth quarter financial results.

Thank you, Taylor and good morning. Our reportable FFO on a diluted basis was $171.5 million or $0.84 per share for the quarter as compared to $127.4 million or $0.65 per share for the fourth quarter 2015. Our adjusted FFO was $180.4 million or $0.88 per share for the quarter and excludes the impact of $5.9 million in provisions for uncollectible mortgages, notes to straight-line receivables, $3.7 million of non-cash stock-based compensation expense and $650,000 of revenue reported as a result of a legal settlement. Operating revenue for the quarter was $234.5 million versus $210.5 million for the fourth quarter of 2015. The increase was primarily a result of incremental revenue from over $1.3 billion of new investments completed in 2016. The $234 million of revenue for the quarter includes approximately $18 million of non-cash revenue . Our G&A was $7.5 million for the quarter and we project our 2017 quarterly G&A expense to be approximately $8 million to $9 million. In addition we expect our 2017 quarterly non-cash stock-based compensation expense to be approximately $3.7 million consistent with our fourth quarter of 2016. In the fourth quarter we reported $5.9 million in provisions for uncollectible mortgages, notes and straight-line receivables which primarily resulted from the write-down of an operator's notes to its fair value. Interest expense for the quarter when excluding non-cash deferred financing costs and refinancing costs was $44.4 million versus $38.6 million for the same period in 2015. The $5.8 million increase in interest expense resulted from higher debt balances associated with financings related to our 2016 investments. As Taylor stated, we expect our 2017 quarterly interest expense to increase as a result of converting our $250 million term loan from a variable rate to a fixed rate on December 31, 2016 and overall higher projected LIBOR [ph] rates. For modeling purposes our guidance assumes 2017 interest expense will increase by $1.5 million to $2 million per quarter. Turning to the balance sheet, during the quarter approximately $30 million of noticed operators repaid. In addition, as Taylor mentioned, during quarter we sold 18 facilities for approximately $105 million recognizing a gain of slightly over $30 million. These facility sales and the repayment of the notes represented roughly $2.2 million of revenue or $0.01 per share of our fourth quarter adjusted AFFO. Our leverage remains exceptionally strong as does our balance sheet for the three-month period ended December 31, 2016, our net debt to adjusted annualized EBIDTA was 4.7 times and are fixed-charge coverage ratio was also 4.7 times. I will now turn the call over to Dan.

Thanks, Bob and good morning everyone. At the conclusion of 2016 Omega had an operating asset portfolio of 981 facilities with approximately 99,000 operating beds. These facilities were spread across 79 third-party operators and located within 41 states and the United Kingdom. Trailing 12 month operator EBITDARM and EBITDAR coverage dip slightly during third quarter 2016 to 1.68 and 1.31 times respectively versus 1.72 and 1.34 times respectively for the trailing 12 month period that ended June 30. Our operator coverage has steadily declined throughout 2016 due to number of factors including increased labor costs, a dip in the overall quality mix, as a percentage of revenue which has been driven by continued pressure on the length of stay and Omega's annual rent escalators which average over 2%. As Taylor mentioned we continue to work with our operators to provide support for the challenges currently facing our industry. Accordingly, during 2016 Omega repositioned a number of assets within our portfolio including a sale of 38 facilities and the releasing of eight additional facilities we expect to continue these reposition efforts throughout 2017. In addition to our reposition efforts Omega continues to support our existing operators with a strong capital investment program. In 2016 Omega funded $69 million of capital expenditures for the refurbishing or expansion of over 100 facilities. A large part of these CapEx dollars were spent to upgrade patient rooms, expand our approved therapy space and refurbish common areas such as dining and activities rooms. Other projects involve the creation of specialty units such as memory care and short stay private suites. Turning to new investments, during the fourth quarter 2016 Omega invested $50 million in a joint venture with Lindsey Goldberg to require 64 skilled nursing facilities for approximately $1.1 billion. The facilities were leased to affiliates of Genesis Healthcare and existing Omega operator pursuant to a 15 year master lease. The joint venture is 85% owned by affiliates of Lindsey Goldberg and 15% owned by Omega. During the calendar that year ended 2016 Omega made new investments totaling approximately $1.3 billion including capital expenditures. As of today ,Omega has $1.2 billion of combined cash and revolver availability to fund future investments and provide capital funds for existing tenant lease. I will now turn the call over to Steven.

Thanks Dan and thanks to everyone on the line for joining today. In conjunction with Maplewood Senior Living we finished abatement and commence demolition on our planned 215,000 square foot half memory care high-rise [indiscernible] 93rd Street in Manhattan. The project is expected to cost approximately $250 million and is scheduled to open in the first half of 2019. Our commitment to reinvest in our assets continue not only did we invest $40 million in fourth quarter in new construction and strategic reinvestment we currently have over 90 active capital reinvestment projects at the end of Q4, 14 of these projects represent new construction with a total budget of approximately $490 million inclusive of Manhattan and are actively being funded. We have $191.3 million of construction and process on our balance sheet as of December 31, 2016. The remaining projects that aren't new builds encompass $163 million of committed capital, $107.5 million of which is been funded through the end of fourth quarter. Our reinvestment strategy prioritizes the allocation of capital to those facilities that are not only markets that present the highest potential for success but also lease to those operators best suited to succeed in the evolving marketplace. The $50 million joint venture investment, Dan mentioned earlier, allows us to leverage off of our relationship with trusted past partners not unlike our overall operating strategy. This relationship allowed us to invest in a high-quality portfolio at a 9.5 part yield in addition to the [indiscernible] management these we received strategically it would not make sense for us to own this portfolio in its entirety today but through the JB structure we created path ownership should make sense of the future.

Thanks Steven. I will now open the call for questions.

[Operator Instructions]. The first question comes from Tayo Okusanya with Jefferies. Please go ahead.

Excellent. Congrats on the quarter and the good guidance. A couple of questions for me. First of all, Taylor, in your comments you mentioned -- I think everyone is aware of how soft it is for the operators out there that one of the factors you mentioned was a more aggressive Department of Justice. Could you talk a little bit more about what you meant there and if any of your tenants are under any kind of DOJ investigation?

Sure. As most folks on the call are where the DOJ has investigated a number of very, very big nursing home chains. And recently we started to see a couple of our regional operators have requests for information from the DOJ. So it looks like there is a little bit of an expansion beyond those very large operators into some of the regional operators. So we've got two or three that have had requests for information in our dealing with that and we will see where it falls.

And is it under request for information, is that around more around Medicare willing or anything like that X

It similar to what Genesis faced an extended care faced and Medicare is facing. It's Medicare billing where they take a look at something and they extrapolated across population. There is a settlement and you end up with a corporate integrity agreement and compliance and that sort of thing none of it is solidified to a number that we're now seen it for the first time where they're reaching into smaller operators perform portfolio specs

That's helpful. Number two, any sense of if the new secretary of health , his views toward current around funding . There some thought that maybe he will try to slow the process down just curious on what you guys think about what he could or could not potentially do .

I think frankly it's so early in the game to know. I agree with you there some commentary around slowing the mandatory bundles down. And in general Mr. prices been as -- had favorable commentary around this industry but it's too early to know.

I will just add generally our operators overall think highly of him. I think that's a good fit.

Great. That's helpful. Last one for me, just acquisition outlook you definitely have the capacity on your line but again with a soft not doing as well as I think most have you guys heard anything about funding deals in 2017 and a sense of what's happening with cap rates at this point in the market.

We're pricing in the mid- ninth from a yield perspective. That's where we've been deals. I want to be clear, there's activity in the market and we basically see everything. When we talk about our pipeline, we're typically talking about actionable deals and there's not a lot of that from our perspective today. There certainly a lot of products out there. So we will continue to look and if it meets our criteria we can get a deal done in the nines, for me yield perspective, we will pursue its and one thing that we've talked about in the past when we having given yield guidance is to give some guidance of what yields mean in terms of accretion. So from our perspective, every hundred million dollars of deal flow activity is worth about 1.5 cents of accretion on a go-forward basis. Just a little commentary around what's out there and how we think about it. I think we will see activity in our base pick up after the first quarter.

Great. And is a pricing that is holding you back right now or really more just quality on what you've seen out there ?

I don't think it's pricing as much is our interest in the type of things that are out there today.

The next question comes from Juan Sanabria with Bank of America. Please go ahead.

I was hoping you could speak to your expectations for EBITDAR rent coverage levels given the pressures you talked about with labor, DOJ investigation, cost et cetera . Any thoughts on where that may trend?

I think similar to our last quarter call where we talked about flats is probably good. And it wouldn't surprise as to continue to see a very slow drop in coverage that we've seen . We have three bps from 134 to 131. Over the next few quarters could that go into the high 120s I think that certainly possible. I wouldn't expect it to go up.

Okay. A lot of these pressures have been around and you guys have not been as vocal in terms of the negative risks to this to the operators. What change for you to flagged this , these risks now at this point so prominently. Should we expect the fourth quarter to be incrementally more challenging than what we saw in the third quarter? And what changed and how do you guys feel about the fourth quarter and into the first quarter?

I think the primary change and it hasn't been terribly seven it was throughout most of 16 and you've seen our coverage ratios drop measurably was been just the tightening of the labor market. The nurses there is as a shortage of note nurses virtually everywhere in the world but in this country is pretty acute and it has been getting worse. And it just makes it that much harder. Have to go into overtime and you have to use outside nursing if you get callouts or whatnot. Over the course of the year, the has gone from being a challenge to being a pretty big issue. And it's really hitting the expense line. I think that's a big overall occurrence that happen in 2016. You have all these moving parts relating to a new revenue model out there and I don't think that's had a significant impact on the U.S.. We've seen as I indicated the shortening of the length of stay, that's pressures from different HMOs and payers forces . And we've seen that go down and because of that we've seen a slight reduction in our quality mix. But it wasn't that significant. And then if you look at occupancy which is the other big driver that's been virtually flat for the last three, four, 5/4. Or hasn't been anything terribly different labor is a big component -- obviously is the biggest component of any nursing facilities expense items.

Great. Last one for me, have you had any discussions with signature one of your larger tenants about any rent relief or rent cuts?

We had ongoing conversations with signature but we've had no conversations with any rent relief or rent cuts. We've had conversations and I really hate to highlight individual names but with signature and a lot of our other operators quite frankly about what can we do -- we talked about reposition of our portfolio and what we do to help them and whether it involves perhaps the sale of a few buildings that don't otherwise fit into the markets or their portfolio to a third-party. If it involves the releasing of some of their facilities to another party maybe even a closure of a building and the worst-case scenario. Those are the types of things that we're talking about with the signature and with a couple of other operators quite frankly. And that's what we will continue to do in 2017.

The next question comes from Chad Vanacore with Stifel. Please go ahead.

You've covered the big question a little bit. On investment portfolio coverage and the challenges. I actually want to go little bit deeper into those. Typically you give investment guidance now how should we think about what Omega could do and go a little deeper into how you're thinking about the market.

Sure. And just to be clear, historically we never gave guidance . But we felt with the Aviv merger we had to give guidance because that was a big part of the strategy of the merger to be able to deliver on deals and last year we gave guidance because we had a number of deals we do -- we're highly likely to close. For us, we're back to what we've done historically because as everyone knows it's a very choppy , that being said, we have the engine to deliver the type of investment volume that we did last year. 1.3 billion $1.3 billion plus another billion in the JB that we had to close were just a 15% partner. We have the capacity to do to plus billion dollars' worth of deals the year. I think a really comes down to what type of product are we presented with and as I mentioned earlier we haven't seen a lot that's out the market today. That we're interested in and we see everything. But will that type of products are to come out in Q1, Q2. Our view is that well and to the extent it meets our criteria we will close it. So it's really not a question of balance sheet capacity or people capacity it's a question up will the product come out to the market that we like and I think it will. It's just timing and Ultimate volume is a question.

Taylor, do you think it's more a matter pricing or more a matter of operating and underwriting? What do you think the -- why pullback now?

We haven't pulled back as much as we just haven't seen product that we like. And quite frankly the operators like. In this day and age it's not so much about doing these gigantic acquisitions that cover a lot of geographic ground but the back fill in given markets for our operators. So we could just involve a small portfolio of tuck ins in any given market and that's the kind of stuff we're really trying to root out in our operators are looking to do. So it's not these massive portfolio deals most of our operators at this point have pulled back and look at those they're looking at fill in the market space.

But to your point, we've seen felons and last year we did a couple quote unquote villas that were $200 million FX.

Thinking about the challenges you have labor costs, census decline and administrative costs and probably expect portfolio coverage to slip a bit . What can you do from here to mitigate the risks whether it be underwriting new deals or changing the deal structure that they have in place . Anything you can do?

I think it's just a continued to be proactive with Management the portfolio and frankly, the one thing that we haven't talked about is -- we talked about in the past is it's really getting from here to there in terms of the demographic wave that's coming. 2017 I think will be a tough year. We roll into 2018 and 2019 and we will see the demographics that everybody knows are out there. So that's really the driver. A 1% change in census is really dramatic for some of these bigger operators in terms of cash flow. And I think we will see that turn it's just 18 months from now.

Okay. Thinking about what you have done so far, it looks like you pared down the number of operators over the last couple quarters. Can you talk about what you're thinking there and what the plans are?

I would expect that the operator number will be in the 70s. We will pared down a couple more. That's typically as a cooperative thing where we know we're not going to grow with some smaller operators and there are exits that makes sense for both parties and we will take advantage of that. We will continue to pared down the portfolio and focus on the guys that we want to be with to grow.

The next question comes from John Roberts with Hilliard Lyons. Please go ahead.

My questions have been answered but I just want to get a little more rationalization of the -- your guidance. If you look at Q4 and annualize that your three 52% back an envelope you go there dollar for the sales you made another $0.03 another $0.03 and higher debt costs in the 345 area you adding 2% bump, random bumps and the various acquisitions and various investments you make during the year and you come to probably somewhere in the 348 range, 347 - 348. What else are you looking at negative in 2017 that is not reflected their?

There are a couple things. One is, the rent bumps are already taken into adjusted FFO because of straight-line accounting. So if you look at our fat per share, that actually goes up year-over-year which reflects some of the things you've talked about. No straight-line that sort of thing. The other thing is we've modeled in for a very real variable rate debt increasing interest rates throughout this year.

That's about $0.03 you said $1.5 million a quarter.

$1.5 million to $2.5 million a quarter.

And we also give guidance on G&A also increases versus the fourth quarter. Historically the fourth quarter is our lowest quarter and historically first quarter is our highest quarter in G&A.

Maybe go little more, what's your shadow pipeline. What are you looking at right now in the pipeline? What are you evaluating? Dollar amount or any thoughts on that.

At any point in time we will be looking at 500 million $500 million-$1 billion worth of deals that we talk about our pipeline and we talk about what gets to the actionable. And that's pretty limited today. But -- the point is we look at -- we see everything. There's a couple billion dollars' worth of stuff floating the market.

To emphasize something Dan said earlier part of the challenge we always faces it's not just pricing in underwriting is it's to have the operator to execute a business plan. A lot of these portfolios are large and perhaps under rideable from a numbers standpoint but if you don't believe the operator is coming along with it can execute it's not something you want to be involved with.

The next question comes from Michael Knott with Green Street Advisors. Please go ahead.

Just on coverage to touch on that again . Taylor, it seems like you're suggesting that maybe we will get down to the high 1.2 range but maybe not much lower than that. Just hoping you can help me understand how it might not be worse than that just based on the roughly 10 bits of decline we've seen in the last several quarters.

I think part of it is the decline hasn't been at the revenue line . Our operators have managed to maintain relatively flat census. So that's an important component and then you look at the expense side of the equation and it's tough to predict labor but there's nobody in our group of operators same labor is going to be a 5% component increase. That it's continued to put pressure on as. So as long as census continues to hold up and we think it should, then it's really managing the expense side of the equation and these guys are pretty effective at it but that's not to say that labor will not continue to pressure them throughout the year. At a very macro-level increasing cost environment the reimbursement system whether it's Medicaid, the state Medicaid programs are inherently lag in the market and decreasing cost environment there also like in the market but the operators get the benefit. I think part of what you'll see in the stabilization will be the per-unit revenues catching up but that takes time.

Okay. So are we suggesting that the bottom so to speak in coverage will be in 17 or do you feel like this is potentially a multi-year trend particular if you make the argument that the change to some of these new revenue models could have some impact as it bleeds in overtime in a very slow way .

I think it's just a question of when the demographics kick in to drive census. So could the bottom be 2017, sure. It certainly will be some time in 2018. From the way we look at the world today.

And then can you talk about on the investment side, I think on the last call you talked about maybe trying to get some traction with moving your yield hurdle of 210% on new deals and today it's mid-ninth I'm curious if you could give us some color on how you're thinking about that or are you strictly in the Midline's today or are you looking at 10 in some cases acts

It's 9.5 to 10. It will depend on the actual facility and how it underwrites -- 9.5 to 10 is my range.

In terms of market coverage levels just given the slippage in coverage that we've seen just curious your thoughts and when your underwriting new deals it seems like market convention is still 135 to one for coverage on EBIDTA thinking about if you need more coverage than that on new deals?

I think it still really leaning more towards that's what we've been looking at for the last couple years now.

Okay. Maybe just last one for me Bob, can you talk about since you gave quite a bit of color on interest expense in terms of 2017 guidance, can you give us some thoughts on where you're -- where you see your debt costs today and in an unsecured basis versus maybe had financing and how you think about using those two different levers?

We've only ever used had financing is basically being an assumption of the debt via an acquisition. So really it's not -- that's not a component on a go-forward basis unless we're assuming a via acquisition. From a debt standpoint if we win out today treasury is to 50, -- Turner 30 , 250 we would be roughly 4 475 and four and 78 rain range for tenure all in.

The next question comes from Michael Gorman with BTIG. Please go ahead.

Just a quick follow up on the underwriting of new investment opportunities given some of the commentary about working with new tenants have you changed the average rent escalators that you're considering when you underwrite a new deal what you would be able to achieve from that average 2% that Dan talked about X

We've always looked at the escalate between 2% to 2.5% in our current averages slightly above 2%. That's of all philosophy hasn't changed.

Just given some of the stresses on the operators right now while there hasn't been any change in terms of reserving against any straight-line, receivables or anything correct?

No. No changes at all.

The next question comes from Nick Yulico with UBS. Please go ahead.

First question I wanted to go back to when you talked about the two or three operators that got request for information from the DOJ. Are any of these on your top 10 operator list ?

They are. Yes.

Can you quantify then not saying we need names that maybe from a percentage of revenue basis, for these operators , what is the percentage of revenue and the current coverage for these operators?

They are within the top 10 and it spread out.

The coverages -- the coverages the top 10 and they all perform well?

These are request for information, --

Is there in your top 10 operator list presumably 10K filing I'm wondering if you could give us this information now or if we need to rate wait for the 10K filings to understand what the Ultimate exposure is here.

It will be the 10K. If there's any be estimate the potential liability is an you have to look and say does it even affect is from our rental perspective. The more important point is , it's just another -- you have Management now focus on not running the business but dealing with other issues. Marketplace is difficult. These are troubling a little bit from a balance sheet perspective but more just having Management focused on other things and frankly if you get to a settlement with the Department of Justice that comes along with a corporate integrity agreement that cost money. So it's money and time and effort away from the running the business that's the troubling part for us.

I understand all that but if these are two and it's not clear if you said it was two or three or what is the number of operators?

You've got two top tens.

Two top tens. Okay ultimately you're talking about at least 10% of your revenue . I guess I'm just wondering how this is not something that would be viewed as a material event since we know that for other companies that disclose a large operator whose under potential DOJ investigation it's perhaps -- it seems like this would be across the materiality threshold I'm a bit confused as to why this would not be considered --

How do you define materiality? Right now all they have asked for is information. How do you put a number on it.

Okay. So I guess going back to the idea that your operators may face more strain , if we go to your tenant buckets and the 27% of your rent where coverage is below 1.2 , are you having conversations with these operators about rent relief are lower escalators?

No and no. I think I went through some detail what we're going through with these operators which is how do call our reposition some of assets within their portfolios. Which in effect has the effect of reducing rent to some degree and to the extent that you selloff will give their buildings and you provide them with the rent cut that's equal to the amount of the sale proceeds times some cap rate call it 9%. So in that way yes, they would get a rent cut and it does ultimately benefit them. And it takes away some of their time that there focused on facilities that might otherwise be taken up in undo amount of their time. We're having those conversations. That's constantly.

Going back to the guidance for this year, is your guidance assume any rent relief or additional provisions for uncollectible mortgages, notes and straight-line receivables?

No.

Okay. Just last question is on the charge you did taken the fourth quarter roughly $6 million you said it was mostly related to Aviva it looks like that was about a $19 million balance on that note. Which would be mean this is about 30% breakdown . Is that math right and what drove that?

That's not correct. We wrote that thing down by about 70% there's virtually nothing left.

I guess I'm confused because the -- you brought over $90 million fair value balance on the notes --

That's in your 10-Q filing from last quarter. We brought over a lot of balances from Aviv. This is just one note the Aviv had several notes.

Okay. I'm sorry, what did you say the percentage breakdown was ?

Roughly 70%.

70% ?

Roughly 70%.

Okay. Last question is if we go back to your 640 million mortgage receivables on your balance sheet , another $280 million of other investments which is Meza lean working capital loan's , what is -- and there's quite honestly not a lot of detail given on the specifics of some of these investments. What is the come for level we should have that you are not going to take a meaningful write-down on this loan book ?

The bulk of the mortgage debt we talked about in the past is mortgage versus a lease but the underwriting and the credit is the same as our lease. So it's a little bit of semantics there. On the debt that's all been underwritten very high coverage ratios so we're very comfortable with the collectibility of that. I think we have to be a little be careful where you have legacy notes that when we did our merger with Aviv we knew there could be some trouble attached to them and there are a handful of that and one persistently since we did the merger we've been dealing with we thought we could work it out and we're unable to do it. We took to write off and we don't have anything else like that in the portfolio that was a legacy Aviv merger. Everything else we've underwritten under our normal criteria just like we would do a lease.

The next question comes from Eric Fleming with SunTrust. Please go ahead.

Most of the questions I had were answered but this one, 2017 guidance, the legal 5% can you remind how that's going to rolling the

It's one quarter but that's actually an income pickup , one time that we were verse out for adjusted FFO. We're not going to take a throw numbers and said this is some recurring item. It's an income pickup first quarter through FFO we will adjust FFO down to adjusted FFO because it's a one-time pick up.

But you're saying it's in one quarter 2017?

In the first quarter. We put it in active guidance because we knew it. It's done.

[Operator Instructions]. At this time it appears we have no more questions. So this concludes the question and answer session. I would like to turn the conference back to Taylor Pickett for any closing remarks.

Thanks Steven. And thank you all for joining this morning's call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.