Good morning, ladies and gentlemen, and welcome to the Third Quarter 2014 Health Care REIT Earnings Conference Call. My name is Holly, and I will be your operator today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. Now I would like to turn the call over to Mr. Jeff Miller, Executive Vice President and Chief Operating Officer. Please go ahead, sir.

Thank you, Holly. Good morning, everyone, and thank you for joining us today for HCN's Third Quarter 2014 Conference Call. If you did not receive a copy of the news release distributed this morning, you may access it via the company's website at hcreit.com. We are holding a live webcast of today's call, which may be accessed through the company's website. Before we begin, let me remind you that certain statements made during this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although HCN believes results projected in any forward-looking statements are based on reasonable assumptions, the company can give no assurance that its projected results will be attained. Factors and risks that could cause actual results to differ materially from those in the forward-looking statements are detailed in the news release and, from time to time, in the company's filings with the SEC. I will now turn the call over to our CEO, Tom DeRosa. Tom?

Thanks, Jeff. The strong third quarter financial results we announced this morning are a tribute to HCN's people, partners and industry-leading business model, a model that has been built not over years, but decades. Our unique model provides strong and predictable cash flow growth, new investment growth, dividend and debt coverage and access to capital that is delivering for our shareholders on all fronts. Here are a few highlights of the quarter. Same store NOI for the entire portfolio grew 4.3%, and our seniors housing operating portfolio posted an outstanding 7.6% growth. I'll let Scott Brinker provide you with more detail about how we achieved these industry-leading results. But as I've said in the past, it's about partnering with the top operators in health systems who own the best health care real estate in the best markets. We were happy to welcome HealthLease and Gracewell to the HCN family during the quarter. With HealthLease, we will acquire an excellent portfolio of seniors housing and Class A post-acute assets for a blended cap rate of approximately 7%. This acquisition also gives us a development pipeline with Zeke Turner's Mainstreet development business to acquire $1.4 billion of their state-of-the-art, next-gen, post-acute facilities. Our Gracewell acquisition in the U.K. provides us with another senior housing brand and develop a pipeline in the more affluent London and Southern England markets. I would also note that Sunrise U.K. will manage the Gracewell assets for us, which is a value add that we were able to deliver to our largest operating partner, Sunrise Assisted Living. Also in the quarter, we were pleased with the announcement that Genesis HealthCare agreed to combine with Skilled Healthcare. This gives HCN's second largest operator access to public capital, further improving the credit quality of our portfolio. We're also happy to see our friend, George Hager, back in the public markets, and we're excited about what this means for the future of our relationship with Genesis. We generated $757 million of accretive investments in the quarter, of which $558 million was generated from our existing team of operators. We've been speaking to this every quarter, as it's another example of the predictability and unique transparency of the external growth component of the HCN model. Our financial results also reflect our history of financial and strategic discipline, whether it's the discipline to dispose of over $2 billion of non-core assets over the past 4 years or the discipline to have raised over $2 billion in equity in the last 6 months to further enhance the strength of our balance sheet. We believe that these prudent actions are what enables us to deliver strong earnings growth over the long term. As Scott Estes will speak to later, despite the enormous growth in our business, our balance sheet and financial metrics have never been better. With that, I'm now going to turn the mic over to Scott Brinker, our Chief Investment Officer.

Thanks, Tom. I have a lot of good news to share today. The HCN team delivered another outstanding quarter. Our investment activity and proactive asset management are driving best-in-class internal growth. We've averaged 4% same store growth over the past 4 years. I'm going to start with outpatient medical office. This portfolio has been completely transformed in the 8 years since we entered the business. Today, on every important metric, our outpatient medical office portfolio is at or near the top of the peer group. We've added a slide to our corporate presentation showing how we stack up to our peers. Operating results in this portfolio are very steady. Same store NOI grew 3.3% over the comparable quarter. Looking forward, we see strong demand for space. The shift to outpatient care is a fundamental change in health care delivery that greatly benefits our portfolio. Let's turn to seniors housing. Same store NOI in the operating portfolio grew 7.6%, extending our history of superior results. Performance continues to be exceptional in the U.K., strong in the U.S. and steady in Canada. This portfolio has averaged 8% NOI growth since inception 4 years ago, substantially above all benchmarks. The outperformance is driven by the quality of our real estate and operating partners. We were highly selective in picking both our partners and our acquisition targets. The consistency is driven by purposeful diversification by operator, geography and service type. Our well-diversified triple net senior housing business continues to generate steady growth. Same store NOI increased 2.7%, continuing a nice history of inflation plus growth. Moving to post-acute. Our rental income is well secured and growing consistently. Same store NOI increased 3% over the comparable quarter. The big news last quarter was Genesis agreeing to combine with Skilled Healthcare. This is a big win…

Thanks, Scott, and good morning, everyone. From a financial perspective, we sit in a great position entering the final 3 months of the year. My remarks today will focus on our financial results, balance sheet and guidance. First, our continued success on the acquisition front and strong portfolio performance drove another quarter of meaningful earnings growth. Second, we have strategically positioned the balance sheet to produce the strongest financial metrics that I can remember, which includes sitting on $1 billion in cash as of September 30, effectively prefunding all acquisitions announced to date. And third, the strength of our results have allowed us to maintain the midpoint of our 2014 guidance despite increasing our annual disposition forecast by $175 million and raising over $1 billion of additional equity in the quarter. So I'll begin my more detailed comments by taking a look at our third quarter financial performance. Our platform continues to generate consistently strong earnings growth. Normalized FFO increased to $1.04 per share for the third quarter, while normalized FAD came in at $0.91 per share, representing solid 7% and 6% year-over-year increases, respectively. Results were primarily driven by the same store cash NOI increase and the $2.3 billion of investments completed over the prior 12 months. In terms of operating expenses, our G&A for the third quarter came in at $31 million, in line with expectations. Regarding our dividends, as we move into 2015, our confidence in our portfolios' internal and external growth has allowed us to announce a 4% increase in our 2015 dividend payment rate. Our Board of Directors has approved a 2015 quarterly dividend payment rate of $0.825 per share or $3.30 annually beginning with the February 2015 dividend. And in terms of our disclosure, I would note we added pictures of our MOB portfolio…

Thanks, Scott. So as you've heard, our third quarter results underscore the power of the HCN model. We continue to deliver strong, predictable growth and financial performance through our unique, diversified, global operating partner network as well as embracing a disciplined and conservative approach to managing our capital position. Our external growth is equally disciplined and conservative. The fact that I can tell you that $1.2 billion of our total year-to-date new investment growth of $1.8 billion has come from our existing operating partners truly demonstrates the transparency and predictability of our external growth model. I'm proud to say that HCN is now the fourth largest publicly-traded real estate company and is truly a global business. We know that investing outside the U.S. requires dedicated knowledge, skill and feet on the street in order to properly manage the opportunities and risks in these markets. I'm delighted to tell you that last month, HCN moved into its new London offices on Cornhill in the city of London, just a few paces away from where John Goodey, our SVP International, and I worked together in the 1990s. I invite all of you to visit John and the team when your travels take you to London. During the quarter, we welcomed Serge Rivera, President of The Americas for Starwood Hotels & Resorts, to our board, which adds additional bench strength and lodging and hospitality industry knowledge to an already outstanding group of directors. Finally, I want to acknowledge the recent passing of a great friend of HCN, Mary Wolf, wife of our founder, Fritz Wolf. For over 40 years, Mary was a strong supporter of our company. She was a passionate patron of the arts here in Toledo and in Palm Beach, Florida. Mary's intellect, kindness and humor were an inspiration to all of us. We will miss you, Mary. Now Holly, please open up the line for questions.

[Operator Instructions] And our first question will come from the line of Michael Knott with Green Street Advisors.

A question for you, Tom or Scott, on your thoughts on the cost of capital environment. And Scott talked about the forward pipeline being strong. Just curious if you want to add any more color to those comments, what we might expect to see you guys do over the next 6, 9, 12 months.

Let me just kick it off on the investment pipeline. We'll talk about cost of capital...

I can talk about the investment pipeline. Michael, it's consistent with our history, so you're going to see us be active in the U.S., U.K. and Canada, high-quality assets, major metro markets, mostly private pay, and importantly, the lion's share of it will be with existing partners. And this is referring to the pipeline beyond HealthLease. So some of it will close in the fourth quarter, the rest might spill over to the first, but it's definitely an active time for us.

And from a cost of capital perspective, we obviously are sitting on a nice bit of cash today. But given the solid stock price performance and debt markets performing pretty well, I think we can absolutely continue to invest accretively.

I would support that, and look -- because of our cost of capital and access to capital really be opportunistic when we think about the business going forward.

Okay. And then a question on the operating portfolio senior housing. It sounds like you're increasing your guidance. I think before it was 6% to 6.5%. And it seems like you guys could hit 7% for the year if you can finish it maybe 4%, 5% or better in 4Q. I was just curious if you want to comment on operating guidance.

Yes. Michael, the fourth quarter is usually a little bit lower, so it's hard to say for sure, but I'm not sure that we'll get to the high 7s, low 8s like we have over the past few quarters. We won't know for sure for a couple of more months, but our best guess is that it will be a bit below that.

Okay. So just to clarify, what then is the new bogey for the full year?

We would hope it would range 6.5% to 7%, if not toward the higher end of that range, depending on Scott's comment on the fourth quarter performance.

Okay. And then last question for me. Tom or Scott, when you look at Life Science and you see kind of an ugly NOI print like you had this quarter, and then also you maybe think it -- maybe it doesn't quite fit your passion for improving health care delivery like your other business lines, do you sort of say to yourself, I've got some really valuable Cambridge properties, like you noted on the call and maybe, think about maybe time to recycle that and focus on your other business lines? Is that a thought that you guys have?

Michael, that's an asset that we're quite proud of, and I think the decision to invest in that asset a number of years ago has really proved to be a very good one. As you look at the Life Sciences market, we think that's probably, in the United States, among the very best locations you could find. So we think owning the best-in-class asset in the best market kind of fits our strategy, and we don't worry about that asset at all. As Scott mentioned already, we'll see very -- we're seeing very good lease-up of that available space. And that being said, you know that we always actively manage our portfolio, and we look -- we know that's a very valuable asset. We know it's an asset that -- where we have a very large gain in. And there may be an opportunity at some point in the future where we would consider doing something with that asset. But today, we're very happy to own it, and we feel very good about how it's being managed. And we like seeing it in the portfolio.

And your next question will come from the line of Joshua Raskin with Barclays.

This is Racha Fellinger on behalf of Josh. Just a couple of quick ones. Do you have any plans around pub development in England in the RIDEA portfolio in the near future?

We do. This is Scott Brinker speaking. And we've been actively developing in that market for over 3 years now. It's interesting, if you go do some site visits, the quality of the stock in the U.K. is quite low on average, so we feel like there's a real opportunity as that market transitions away from government pay and towards private pay to build high-quality assets that people will actually want to be in and want to pay for. And that's what we own. So we've got 60-or-so communities in the U.K. right now, and these are all very new purpose-built private pay assets, and that's not typical in the U.K. So we've been very purposeful about what we bought. But frankly, there's not a whole lot left to acquire. There certainly are portfolios we're looking at, but there's really a development opportunity. So we're actively developing with Signature, Sunrise and Avery, all 3 of our partners. So you could easily see us do 10-plus projects a year going forward. And they've been extremely successful to date, with yield on cost in the high single digits or low double digits.

Okay, great. Just one other question. Are you seeing anything particular in terms of demographics of individuals that are moving in and out of your RIDEA portfolio? Are they younger, living longer, utilizing more ancillary services?

No, we haven't seen a material change there. They continue to be in the mid-80s. They're still staying 2 to 3 years on average, so these aren't -- I wouldn't say that the demographic profile of our communities has changed materially over the past few years.

It's just that demographic trends are going to mean there are going to be more people attracted to these assets in the future, so we just see more demand coming. And I think we see that across the U.S., we see it in Canada and we see it in the U.K. And just to add to Scott's comment on the U.K., you're seeing a real change in the U.K., a societal change there. Elder care has been in existence there for a long time and offered by the National Health Service. You're seeing a change in the U.K. in that people are now willing to pay for their elderly care. There is a more affluent market, and so the product that's being developed is really being developed to meet the demands of that market.

And your next question will come from the line of Emmanuel Korchman with Citigroup.

This is Archena for Manny. In early September, there was a press release regarding the acquisition pipeline being around $1.7 billion for the second half of 2014, including $535 million of expected future acquisitions. So we were hoping that you could give us maybe some color on the composition of those remaining deals.

This is Scott Brinker. I'll try to answer that. The press release in August included the HealthLease portfolio, which was the lion's share of the $1.7 billion. That accounts for about $1 billion of it. And then most of the balance is what we just announced for this quarter. So it's the Sunrise deal; there's a big private pay senior housing acquisition in the U.K. with Avery Healthcare, an existing client; and then we did some MOB acquisitions. So the third quarter activity plus HealthLease will -- should total to $1.7 billion.

Okay, great. And in terms of like the international pipeline, could you give us a sense of the acquisition or investment pipeline that you're seeing today? You just made some recent comments about like U.K. being a little difficult in terms of acquisitions, and it's going to be more development focused. Are you looking at any other additional markets? So maybe some color there might be helpful.

Well, I'd say we continue to see good opportunities in the U.K. As Scott did mention, a lot of it is development-oriented, but there may be some additional acquisition opportunity there as well. So I will tell you, as I've said in the past, we see tremendous opportunities in the U.S., number one. And then we are also seeing good opportunities in Canada and the U.K. I'd say our plate is quite full today with those markets. So we're not spending a tremendous time looking outside of those markets, but I can assure you that we're on top of where there may be opportunities in the future outside of those markets. I think having a strong team on the ground in Europe helps us understand those opportunities and gives us a competitive advantage at seizing whatever opportunities may come out of the existing markets we're in -- the existing market we're in, in Europe and other markets that we may choose to go into in the future.

And your next question comes from the line of Rich Anderson with Mizuho Securities.

Pretty good. All right. So I've heard -- Tom, I've heard that you might be more upbeat or sanguine on Life Science than your predecessor and maybe even willing to increase your exposure in that business over time. Is that a fair characterization?

Rich, when I've talked about Life Sciences in the past, it's been Life Sciences that are related to academic medical centers. And we still believe at some point in the future, there are tremendous real estate investments for us that may come out of those large academic medical centers that lead many of the Life Science efforts in this country. So to the extent that there are Life Science assets that may provide a connection to one of those or a few of those institutions, that's where I'm interested. We don't see it as a leading business for us going forward, but it may be a bridge into the type of business that you -- or the type of assets that you like to see us invest in.

Okay, good stuff. In the U.K., first a big-picture question. A lot of talk of deflationary pressures in Europe, and U.K. being kind of close proximity, do you worry at all about that in terms of expanding your platform there? Or are you just going to kind of plow through at this point?

Rich, so much of our portfolio is concentrated in the greater London, MSA and southern England, so I think that there are issues in England as you go throughout the country. We are very deliberate about where we own and develop assets. So -- and I can't underscore that enough, because we know the U.K. market quite well. We -- our assets, again, are largely around London. We see London as perhaps the most resilient market in the world. The amount of wealth that continues to consolidate into London is extraordinary. So we feel that being there is very important. And when you look across any property type owning assets in the U.K., I think investors should want to see a focus on the greater London markets, southern England and the other market, where there -- which is attractive because it's the second-largest market at England is around Birmingham, England, which is the middle level of the country. I think as you get above Birmingham we pause,, because we worry about some of the demographic issues from the mid- to northern England markets. So I think, like a lot of markets, Rich, if you're with the best operators who own the best real estate, generally you've got -- you create a bit of a strong competitive advantage. I could say that about certain markets in the United States, too, that -- where people will say might be overbuilt, but if you're in the best submarkets in those larger markets with the best operators, we think we're in a great position to capture growth in the future.

Okay. And specifically, the Gracewell deal, if that company is winning awards for managing their assets, why replace them with Sunrise? Or did they want that?

Yes, Rich. It's Scott speaking. I wouldn't call it a replacement. It's more like an addition to Sunrise's already strong team. So Tim and Danny, the 2 principals at Gracewell, really have a development expertise. They're real estate guys, and they're going to continue in that function going forward. They're going to deliver this pipeline of assets in London and southern England. And then the best of the operating team from Gracewell is joining Sunrise. So to me, we're just combining 2 good platforms.

Okay, fair enough. Scott, maybe a question for you. The 7.6% same store NOI growth this quarter for RIDEA, when you think about sustainability of that number -- Ventas is producing a number lower than that. Do you think the number is more like in the 5% to 6% range when you kind of get through some of the occupancy lift? Or do you think a long-term number is close to 7% for now?

Rich, I hope it's 7%. We've said, when we started doing RIDEA 4 years ago, that 4% to 5% long term in a static environment was probably realistic. I don't think our view has changed. I mean, we are confident that because of the assets and the operators, we'll outperform the industry. But in terms of continuing at our current pace of 8% per year, that would be very difficult. It's just the comparable quarter becomes so difficult to see.

Rich, you've heard us talk about the operating initiatives that we lead for our operating partners. That's real stuff. That's not made up. And so we'd like to think that because of our relationship and the skill set that we bring to the operator that we have a direct role in driving that same store sales growth, and I think that's just a unique aspect of our business model.

Okay. And then I don't know if anyone has asked you about this, but with the problems that Ventas had with their Sunrise in Canada, do you have any comment about why that might have happened since you're a part owner of the management company?

Yes, Rich. We're a minority investor. We have 0 input on what Sunrise does operationally, and there is a strict Chinese wall. So I couldn't even begin to comment on it if I wanted to. We have nothing to do with their portfolio.

And your next question will come from the line of Daniel Bernstein with Stifel. Daniel M. Bernstein - Stifel, Nicolaus & Company, Incorporated, Research Division: I actually wanted to start on entrance fee properties. Some of your peers have been making investments in that space, and I'm not -- I don't feel like you've done a whole lot since development a few years ago. If you can talk a little bit about how your entrance fee portfolio is performing and maybe how you feel about increasing investments again in entrance fee CCRCs.

Dan, I can comment on the existing portfolio performance. It's obviously very small. We have only 8 properties at about $390 million investment balance, but they actually continue to fill pretty well. Right now, the overall occupancy is in the mid-80s. It's about 86%. And the entrance fee community component of those properties are filling up. They're over 80%, and the rental part is in the low 90s. So I think they're doing fine. We just have chosen not to make additional investments in that portfolio.

Yes, Dan. It's less than 2% of our income today. And we've been in that business for over a decade, and we've just found that the cash flows are too volatile. Not saying that we would sell this portfolio that we have. It's performing well, but that's not an industry that we're looking to expand in. Just we like the consistency of our results, and it's very difficult in that business to generate any level of predictability. Daniel M. Bernstein - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then I was thinking about your dividend growth was a little bit -- is coming in a little bit below your FAD growth. Can you talk a little bit about goals for the FAD payout ratio or however you're thinking about the payout ratio for the dividend going forward?

Yes. We like to be in a position where we can increase the dividend meaningfully but still push the payout ratios down pending earnings growth. So where we're at today I think we can get our FFO payout ratio down into the mid-70s or below and FAD in the mid-80s or below over the next several years pending our rate of earnings growth. Daniel M. Bernstein - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then in terms of -- I'm trying to think about -- a lot of investors I think have been concerned in the Health Care REIT space about investment spreads over cost of capital. You addressed a little bit about your strength in your cost and your capital availability earlier in the call, but can you talk a little bit about how you're thinking about investment spreads today versus where you've seen them in the last couple of years? Just want to hear how you're thinking about your ability to invest accretively.

Yes, Dan. We've spent a lot of time looking at that. This is Scott Brinker. The spreads haven't changed that much. It's important that we're doing the vast majority of our investments off-market with existing clients. And the yields are pretty good if you compare that to what people are paying in auctions. So if we were generating all of our volume through large public auctions, it would be difficult to maintain a positive spread, but we feel like we've continued to do that. And it's still in the 50 to 150 basis points, given our current cost of capital, which, for us, is plenty of cushion to make a profit. I think what you are seeing, though, is just the company's getting bigger, so it's more difficult to, on a percentage basis, grow the company through external growth. But we knew that was coming, and that's why we're so focused on the performance of the existing portfolio and have these systems in place to improve NOI growth.

Yes, and I -- Dan, on the external growth, I think, again, our operators, who we say we're aligned with the best national operators and the best regional operators, these operators are seeing tremendous demand and need to grow their businesses. And we are at the table with them and working with them to deliver the capital to realize their business plans. And I think that's where, largely, you've heard us say that over the last few quarters, and we said it strongly today, that's where our external growth is coming from. So again, we think we're -- and as Scott said, these are not opportunities that are being put out to auction. They're opportunities that are coming directly to us, and we think that we're still able, as you've heard today, generating plenty of accretive investment opportunities for our shareholders here. Daniel M. Bernstein - Stifel, Nicolaus & Company, Incorporated, Research Division: Given what you said about marketed transactions, does this also suggest that you're going to pick up more development as we go forward in the next couple of years? It looked like your development picked up a little bit. Are you -- I think you're running CIP to gross book below 1%. Do you see that increasing significantly over the next few years, given where cap rates are for marketed transactions?

Dan, you've heard us today, for instance, talk about the $1.4 billion development pipeline with HealthLease. Here's a situation where we're developing with them the next generation of post-acute care. These assets need to be brought to the market in order to have a health care delivery system that will lower costs and improve outcomes. So there is development that needs to be done in health care in the U.S. today because the product just doesn't exist. You don't see us investing a lot in old -- what we would say, our old-model SNFs because we think they're -- that business will be challenged in the future. But we are very bullish on what we call post-acute and the next-generation post-acute, things that you've seen in our portfolio with the Genesis PowerBack facilities and what you will see more of through Mainstreet and its next-gen, post-acute facilities.

Dan, the other thing I'd mention, this is Scott speaking, is that a lot of the development that we're involved with right now is really not our capital. I think we've been -- we've tried to be smarter about this round of development so that we're not taking as much risk if 2 or 3 years from now when these projects open, the market is not conducive to new supply. So Mainstreet is an example, and we have an option to buy those assets once they're built. So we're not putting out the $1.4 billion of capital. They build it, and then we have the option to buy it when it's complete. And that's the case with a pretty large number of our development projects right now. So the dollars you see on our balance sheet and in our supplement are actually a lot lower than what the potential pipeline could be.

[Operator Instructions] And your next question will come from the line of Juan Sanabria with Bank of America.

I was just hoping you could give specific numbers on the RIDEA portfolio's growth by geography.

Sure, Juan. This is Scott. The U.K. led the pack at about 11%. The U.S. was right in line with the overall portfolio, about 8%. And then Canada was right around 4%.

Okay, great. And then on the previous question on the developments. With Gracewell, are those options to acquire those assets upon completion? Or are those -- or do you have to take those out upon stabilization?

The Gracewell assets are set up as more of a guaranteed takeout at a slight premium to their build cost. So we underwrite the project alongside Sunrise, take -- they take all the predevelopment risk, being the developer, so we're not involved there. They find the land. They get it approved. Sunrise and HCN agree to the project, and then they build it. And 12 months later, we buy it at a fixed price.

Okay, great. And just in terms of quantifying that potential pipeline of opportunities that we don't necessarily see. I mean, is there a way to -- for you to quantify kind of what your funding may be off-balance sheet, preferred or mezz lending, that maybe it's not as apparent just on some of your disclosure that would help us get a sense of that?

Yes. If you include the Mainstreet pipeline, Juan, the potential pipeline of new development projects is in the range of $1 billion a year. But again, most of those are set up where we have the option to buy, not an obligation.

And your next question is a follow-up question from the line of Michael Knott with Green Street Advisors.

I just wanted to clarify on the operating expenses for the senior housing operating portfolio. I think they were about 6% higher this quarter, and I think they were about 3% higher year-over-year last quarter. And I just wanted to see if you could give some color on why that ticked up so much. And then also, just can you talk about, to the extent that most of your operating costs there are variable to some extent, which I think is the case, just maybe chat about -- if the top line growth were to slow a little bit, you would be able to sort of reign in that operating expense increase, is my understanding.

Yes, Michael. It's Scott Brinker. It's tough, with just 3 months of data, to draw any conclusion. So operating expenses were a bit higher this quarter, but there is nothing dramatically out of line and nothing that we view as a long-term issue to be concerned about. Occupancy was up substantially year-over-year, 180 basis points, so that certainly impacted expenses a bit. But again, hopefully there is room for improvement if at some point in the future revenue growth is a little bit slower. And in terms of your last question, it's an important one. The vast majority of the expenses at these communities is variable, so when occupancy declines at some point in the future, we do think that there's a real opportunity to reduce costs and maintain NOI growth. And we saw that happen during the recession. And that's really a difference in seniors housing versus some of the other real estate asset classes. People talk about our operating margins being in the mid-30s rather than 70% like multi-family, and that's true. But it's also true that most of our expenses are variable. So when you have issues with revenue or occupancy, you can adjust and maintain NOI. So we've seen that happen in the past, and we think it could happen in the future if revenue growth ever slows.

Okay. And then can you just talk about the pricing power in your top line revenue growth that you reported this quarter and what you're sort of seeing looking forward? It seemed like it was mostly occupancy And maybe on the rate or services revenue side it was maybe in the mid-3% type range? Can you just talk about any change or maybe no change that you see on the pricing power side?

Yes, the pricing power is huge, Michael. That's been the main driver of our outperformance over the past few years. The same store rate growth this quarter was 4.6%. It's a little different than the supplement because I'm giving you a same store number. The supplement is the whole portfolio. So that's roughly 2x what the industry is achieving. And we've tracked that over a number of years. And we've been about 2x the national average consistently, and that's driving most of the substantial NOI growth that you see.

And then last question is on the U.K. You mentioned the NOI growth there in that portfolio is double digits. Can you remind us where that has been in the last few quarters and then kind of what's driving that substantial rate of growth? Is it occupancy pick-up? Or is it the pricing power?

Yes, it's been double digits for a year now, and it's a combination of occupancy and rate growth. So all the numbers that I just gave you, which is our entire same store portfolio, the U.K. is even better.

And that will conclude today's conference call. We do appreciate your participation. You may now disconnect.

Thank you.