Question-and-Answer Session
Operator
(Operator's instruction) Your next question comes from the line of Jerry Doctrow - Stiffel Nicolaus & Company, Inc.
Jerry Doctrow - Stiffel Nicolaus & Company, Inc.
I just have a couple of things. One, just on the acquisition that you made in the quarter, I guess what is the most interesting there to us is the initial yield and I was wondering if you could give a little more color on maybe the coverage ratios and how reflective you think that is really of current markets? I am trying to figure out what is the cap rate used on any be really?
Robert Stephenson
Sure. The yield obviously reflects our view of cost to capital heading into the end of 2008 and frankly it is a deal that the yield went up in the process of negotiations in order for us to get approval at the board level to close the deal but the properties are in West Virginia. It is a great state. We feel really strongly that Formation Genesis will do quite well and the coverage ratios are north of our standard 1.25. But I do not think I would correlate all that together to start thinking about cap rates in the industry because we just have not seen enough product coming through to say here is where cap rates are falling out. It is more of a function of views of cost to capital as we headed towards the end of 2008.
Jerry Doctrow - Stiffel Nicolaus & Company, Inc.
Okay. So, I mean if I put 1.25 coverage on a 12.3, I am getting close to 15% cap. What is your sense where cap rates maybe these days?
Robert Stephenson
I think traditionally 12.5 has been our cap rate over the long term and that is probably the low end today and the high end is 15 or 16. It is going to depend on the quality of the product and the view as an example. In this situation, we believe the operators are going to be all improved those operations, not unlike you see transactions in the Ensign to the world where they acquire properties and they know they are going to be able to do better.
Jerry Doctrow - Stiffel Nicolaus & Company, Inc.
Okay. Obviously, you still have a year or so in the line but any preliminary discussions with lenders you are feeling comfortable with renewal there at this point?
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