Centerspace

Centerspace

$61.47
0.6 (0.99%)
New York Stock Exchange
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REIT - Residential

Centerspace (CSR) Q4 2021 Earnings Call Transcript

Published at 2022-03-01 10:00:00
Operator
Good day and welcome to the Centerspace Q4 2021 Earnings Call. My name is Brica and I'll be today's event specialist. [Operator Instructions] I would now like to hand the call over to Mark Decker, Centerspace's President and CEO. So, Mark, you can begin.
Mark Decker
Thank you, operator and good morning, everyone. The Form 10-K for the full year 2021 was filed with the SEC yesterday after the market closed. Additionally, our earnings release and supplemental disclosure package have been posted to our website at centerspacehomes.com and filed yesterday on Form 8-K. Before we begin our remarks this morning, I need to remind you that during the call, we will discuss our business outlook and we'll be making certain forward-looking statements about future events based on current expectations and assumptions. These statements are subject to risks and uncertainties discussed in our Form 10-K, including those under the section titled Risk Factors and in other recent filings with the SEC. With respect to non-GAAP measures we use on this call including pro forma measures, please refer to our earnings supplement for a reconciliation to GAAP and the reasons management uses these non-GAAP measures and the assumptions used with respect to any pro forma measures and their inherent limitations. Any forward-looking statements made on today's call represent management's current opinions and the company assumes no obligation to update or supplement these statements that become untrue due to subsequent events. I'm grateful to be joined this morning by our Chief Operating Officer, Anne Olson as well as our Chief Financial Officer, Bhairav Patel. We also have a special guest, John Kirchmann, who, as most of you know, is our former CFO and it's helping with Bhairav's transition. 2021 was an incredible year in the housing business and Centerspace had a fantastic year as well. Our mantra is Better Every Days and we lived up to that making meaningful progress in every respect with outstanding operating results, record investment and financing activity, critical investments into our technology platform, as well as our team as we pursue our mission to be a great place to live, work, and invest. We close the year with core FFO growth of 5.6% over 2020 and well above consensus. In 2022, the momentum should accelerate and our outlook is for core FFO growth per share of 11.5% at the midpoint versus 2021 and 3% over consensus. Centerspace is one of just a few companies in the apartment space that was able to post year-over-year growth in operations and per share FFO in each of 2019, 2020, and 2021, an outcome that reflects the quality of our business. Looking to 2022, we expect to build on our fundamentals characterized by consistency, growth, and relatively low new supply. We've made over $600 million of portfolio investment since January of 2021, improving our growth potential and quality of earnings, and we will continue to seek opportunities. Our KMS investment which we've owned for six months now is on track and the opportunity to be optimizing the lease role in those assets is just getting started as we head into our peak leasing season. We purchased KMS to grow faster and it's working. In January and February, we are seeing nearly double the blended lease rate growth compared to our same-store portfolio in Minneapolis and St. Cloud. We're also beginning to consider the opportunities for value-add in that subset of the portfolio, opportunities we did not underwrite or priced into the purchase. The work we're doing there and elsewhere should help us continue to grow revenues at better than market as we did in 2021. Our balance sheet has never been better. We closed the year with average maturities over seven years, a blended rate in the low threes and seven times debt to forward EBITDA. Our access to the private placement market was expanded in 2021 and our spreads continue to narrow and are well in line with investment-grade issuers. On the equity side, we were able to place shares through our ATM into a handful of active investors who understand our business and help us drive float in liquidity; two of which are now in our top 10 shareholders overall, and top three among active investors. As always, I want to thank our outstanding team of professionals who show up every day for our residents and for each other. Anne, please give us an operating update.
Anne Olson
Thank you, Mark and good morning. 2021 was the year of stellar revenue growth for our company as we drill the 4.8% increase in same-store net operating income for 2021 over 2020 and with 9.2% revenue growth in the fourth quarter compared to the same period in 2020, we believe we have a great runway for success into 2022. In the fourth quarter, our same-store new lease rates were up 5.8% over the prior leases and same-store renewals achieved increases of 7.8%. Given the seasonality of our business, it is important to note that in the fourth quarter of 2020, our new lease rates had declined 3.6% and our renewals were 2.3%. Our fourth quarter spread is 9.4% on new leases and 5.5% on renewals compared to the same period in 2020. On a blended basis, this is fourth quarter rental rate growth of 6.5%. Solid rental rate increases continued in January, with new leases increasing 6.6% over prior leases, and renewals increasing 9.6% for a blended rate increase of 7.5%. Our same-store weighted average occupancy was 93.4% on December 31st, 2021, a slight increase over the end of the third quarter, the lower than where we finished in 2020. Some of this is attributable to our value add renovations as well as higher turnover as we've come out of COVID and experienced increasing rental rates. Optimizing revenues is our goal, through value-add renovations, revenue management and enhancing our customer experience. While we still closely monitor expenses. We expect that the current inflationary environment will create expense pressures, particularly in labor and materials. At this time last year, we were still monitoring our collections rate and bad debt expense while working through the eviction moratoriums and regulations. 2021 saw significant quarterly volatility in our collections and we realized 101% of expected residential revenue in the fourth quarter. For the year, we collected 99.2% of expected residential revenue, which is what we are anticipating to be a normalized rate heading into 2022. The fourth quarter was also our first full quarter after the integration of the KMS portfolio. With respect to our acquisition capital expectations, we've begun to deploy capital to help drive the rental rates that Mark mentioned. Through December 31st, 2021, we've spent approximately $540,000 on culinary [ph] cleaning, mechanical plumbing, and HVAC upgrades, and we've been contracted for some of our larger acquisition capital projects across that portfolio. In 2022, we expect to spend approximately $21 million of the $38 million allocated to acquisition capital improvements for the KMS assets. Given the strong results of 2021, we're confident that 2022 brings us many opportunities to continue to execute on our operating platform, including integrating our non-same-store portfolio, capturing our loss to lease, and optimizing our property management technologies to enhance our customer experience. We're very proud of our team's demonstrated ability to execute on our vision and mission and are grateful for their contributions to making Better Every Days. I'll turn it over to Bhairav to discuss our financial results.
Bhairav Patel
Thank you, Anne. Last night, we reported core FFO for the year ending December 31st, 2021 of $3.99 per diluted share, an increase of $0.21 or 5.6% from the prior year. For the quarter ended December 31st, 2021, core FFO was $1.08 per diluted share, an increase of $0.06 or 5.9% from the prior year. The increase in full year core FFO is primarily attributable to higher NOI, offset in part by higher G&A and property management expenses as we have grown our portfolio. Total G&A was $16.2 million for the year, an increase of $2.8 million over the prior year, primarily attributable to increases of $1.3 million in incentive-based compensation costs related to company performance and share-based compensation arrangements and $800,000 in non-recurring technology initiative costs. Property management expense, which includes property management overhead and property management fees, increased $8.8 million for the year ended December 31st, 2021 compared to $5.8 million for the prior year. The increase is primarily due to $1.2 million in non-recurring technology initiatives as well as $1.2 million in compensation costs from the filling of open positions and additional staffing related to the acquisition of communities during the year. Turning to capital expenditures, which is presented on page S-17 of our supplemental, same-store CapEx was $9.7 million for the year ended December 31st, 2021. That translates to $906 per unit, which is in line with our expectations. Looking at our balance sheet, as of December 31st, 2021, we had $205 million of total liquidity, including $174 million available on our line of credit. The re-financings we completed in the third quarter strengthened our balance sheet and added financial flexibility by increasing the weighted average maturity of our debt while reducing our cost of capital. Additionally, subsequently year end, we terminated the two remaining swap positions for total cost of $2.4 million, further reducing our weighted average interest rate. As a result, we now pay interest on our line of credit at LIBOR plus 150 basis points. For reference, the swap interest rate on the $76 million outstanding on our line of credit as of December 31st, 2021 was 4.3% versus 1.6%, excluding the swaps In Q4, we issued 721,000 shares at an average price of $97.51 per share net of commissions. For the full year, we issued 1.8 million common shares at an average price of $86.13 and total consideration, net of commissions and issuance costs of $156 million under the ATM program. Now, I will discuss our 2022 financial outlook which is presented on page S-18 of our supplemental. Core FFO for 2022 is projected to be $4.45 per share at the midpoint of the range, which is growth of 11.5% over the prior year and is driven by strength in our core operations. The year-over-year growth is driven by strong projected same-store NOI growth, which is expected to increase by 8% to 10% as well as the accretive acquisition of 23 communities since the beginning of 2021. Within our same-store pool, we projected revenue to increase by 7% at the midpoint as we look to sustain revenue growth we saw in the fourth quarter of 2021. We do anticipate cost increases as a result of inflationary pressures, particularly on compensation costs driven by a challenging labor market and expect total same-store expenses to increase by 4.25% at the midpoint. Our financial outlook also assumes same-store capital expenditures of $925 to $975 per home, which is slightly above last year as a result of timing differences and inflationary increases. Value-add capital expenditures of $21 million to $24 million and the Jan 22 acquisition of four communities in the Minneapolis market. To conclude, we executed on several initiatives in 2021 to add scale, as evidenced by the growth of our portfolio since the beginning of 2021, while simultaneously positioning the company for future growth. We continue to deliver strong operating results, improve the balance sheet, and invest in our best-in-class operating platform. For that I thank all our team members for their unwavering commitment and continued hard work.
Operator
Thank you. [Operator Instructions] We have our first question on the phone lines from Rob Stevenson from Janney. So, Rob, please go ahead when you're ready.
Rob Stevenson
Good morning guys. Mark or Anne Minneapolis is 26.6% in terms of the same-store NOI percentage but what percentage of overall NOI as a given the recent acquisitions? And will we see some selective Minneapolis dispositions in 2022? Or are you comfortable growing that market even higher at this point? And can you talk about where the Minneapolis suburban versus urban mixes?
Mark Decker
Hey, Rob, good morning. Looking through same-store to everything, I think we're around 36% in many or the Twin Cities I should say. And that suburban/urban mix would be roughly 90%-10% or 85%-15%, something that -- we'll do some math on that while we're talking and hopefully get back on the call, but it would be highly skewed towards the suburbs and more highly skewed than it was toward towards B. So, pre-KMS, we were about 50%-50% by NOI and about 60%-40% by homes. So, 60% B, 40% A in terms of number of homes, but 50%-50% in terms of cash flow because of the higher rents on the on the A side. Today we would be probably more like six -- two-thirds B, one-third A. Again, I'm weighing it a little Rob, but directionally that's accurate.
Rob Stevenson
Okay.
Mark Decker
And to your other question on would we pair that down? So, one, we're happy to own things in the Twin Cities, we don't want to not do things that we think other people can't do because it's in a market we know really well and have a high degree of concentration. We are sensitive that concentration and we'll be opportunistic sellers of anything and everything. But as Bhairav called out in our outlook, we don't have any sales program this year in our plan. We're always seeking on discipline buyers and there's more out there than ever. So, I would say it's plausible, but not likely we sell something in Minneapolis. And if we do sell, it'll be to fund something else, either here or elsewhere.
Rob Stevenson
Okay. I guess the only other question I have is that the 18.7 million shares in the guidance, what did you guys end the year with, the weighted average was like $79 million, is that assume, like a $75 million issuance in 2022?
Mark Decker
Bhairav, you want to?
Bhairav Patel
Yes, I mean, no issuances in 2022 are picked up in the guidance. We entered close to just a little over 18 million shares, which is what's being picked up in the shares in the guidance for 2022.
Rob Stevenson
Okay, so that stock-based incentive or whatever the growths in the 700,000 extra shares or so?
Bhairav Patel
Yes.
Rob Stevenson
Appreciate it. And then Rob it's the OP units, there's a couple hundred thousand shares equivalents in there from the -- what we call the Min3 [ph] acquisition, which is an OP unit deal.
Rob Stevenson
Okay. Thanks, guys. Appreciate the time.
Mark Decker
Thank you.
Operator
Thank you. We now have another question on the line from Alexander Goldfarb of Piper Sandler. So, Alexander, your line is open.
Alexander Goldfarb
Thank you. Hey, good morning out there. And then just to clarify, is it it's one question and then get back in the queue where we're allowed to ask a follow-up.
Mark Decker
Fire away, we will cut you off if you get to seven questions.
Alexander Goldfarb
Okay, excellent. Excellent Mike. My kids usually cut me off after I asked them about how school was. So, question -- first question for you. As far as looking at 2022, how much free rent are you burning off from last year? Or is the revenue guidance pretty much all face rent over face rent?
Mark Decker
To restate the question, are we burning off concessions?
Alexander Goldfarb
Yes, yes.
Anne Olson
Yes. So, we have very little use of concessions and our lease rates that we're quoting the increases on our effective rents over effective rents. But so that's a true kind of lease rate over lease rate. And we very sparingly used concessions and if you recall, our markets were pretty strong, and we didn't have as much need for concessions through COVID.
Alexander Goldfarb
Okay, so when we're looking at, like the revenue up 25% in St. Cloud, or I guess that's really the standout one, that's really rents are up 25% in that market?
Anne Olson
Yes, and part of that is we had some volatility and bad debt. So, that could also be collections -- late collections or deferred collections in that market. So, that's total revenue, not just rental rates.
Alexander Goldfarb
Okay. And then the Mini S -- sorry the Minneapolis, the Twin Cities exposure, at over a quarter of your portfolio, there have been obviously the headlines on the rent control, which I think is more in the city, not the suburbs, but still just when you look at other companies that have been overly exposed to just one market, your thoughts on having that much exposure? I know you guys tried to go for Nashville expansion to other markets as a slow process, but still, how do you weigh your Minneapolis exposure versus the rent control headlines versus just overall having that much?
Mark Decker
Man, I knew we couldn't get off this call without a national barb [ph]. Thank you.
Alexander Goldfarb
No, I -- listen I -- listen I owed it to Dan Santos to ask Nashville.
Mark Decker
100%, I agree. So, I -- we won -- we are certainly focused on the concentration I think the most concentrated set of NOI is FX, which is I think north of 40 in the Bay Area, but I people like the Bay Area better than Minneapolis for reasons I understand. But -- so I'd say we're mindful of it but not afraid of it. In our minds, it's less risky to own more of something you know really well. We do want to get into other markets, we will continue to focus on Nashville, nothing in our thesis there has broken down. As it relates to rent control, St. Paul is the only municipality that actually has rent control. The rent control there is pretty egregiously bad, it stays with the unit, it doesn't change when you change your resident. The Mayor there is on record recently trying to walk that back, it is in our judgment, and I think, broadly understood to be pretty poorly written and ill-conceived. That’s the fact that I think the Council and the Mayor are starting to understand as people have stopped work on market rate projects, they've lost several thousand homes in St. Paul. It's our view that that might help inoculate to some extent, Minneapolis, which just to be clear, for everyone who is in tracking the legislation here, what was voted in was the ability for the Minnesota -- or for the Minneapolis City Council to essentially draft legislation on rent control. So, the voters didn't say we want rent control, they said we want you, City Council, to figure out what you could take as a proxy for maybe they want it who knows. Our understanding of the City Council is it's 8/5. Eight who are against it, five, who are for it, and four actually the St. Paul version, which we think is terrible. The Mayor has come out against it. So, I would say when you look at what's happened in St. Paul, if you have a head on your shoulders, and you want people to continue building things in Minneapolis, you're not going to do that. And we also have other issues in the city, around law enforcement and lots of other things. So, in terms of force ranking the priorities of the City Council, it's unclear yet where this one will fit. There are lots of projects. I've been on several calls with council members where capital has pooled development capital, because they're scared of what's going to happen here. And they're not -- they don't have to take the time to get into the whys and wherefores of what all the landscape is they just have lots of other markets to play in and so they're doing that. So, that message is being pretty well reinforced across the legislature. So, that's a really long winded way of saying we're not concerned about it. To some extent, it actually probably gives us more opportunity. So, if we're looking at doing another NoCo style deal, we might have a little bit more pricing power than we did before, because there's less institutions focused on this market, because they don't understand it. So, -- but it's a risk. I mean, frankly, I think it's a risk everywhere. I know there's lots of states that would never have rent control. But if you have 30% plus rent bumps in Florida, at some point, someone's going to say, hey, we can't do this. So, I think broadly speaking -- and we've talked about this in the past, there's legislative risk to housing everywhere. I would argue we know exactly what the risk is in Minneapolis and to some extent, that's less risky. But anyway, sorry for the long answer.
Alexander Goldfarb
No problem. Thank you, Mark.
Operator
We now have John Kim of BMO Capital Markets. So, please go ahead, John. I've opened your line.
John Kim
Thank you. Good morning. Can you just discuss the same-store revenue growth that you have sequentially as 4%? It's not really quite evident from the occupancy loss and the 6.5% spreads you had on blended lease rates? Was this driven by resident relief funds or anything else that was sort of one-time in nature?
Anne Olson
Yes, thanks, John. Yes, we did have, as I mentioned in the prepared remarks, some volatility in those relief funds and the timing of those. And so that that is part of what you're seeing there in those numbers sequentially, is we collected 101% of expected revenue in the fourth quarter, some of which was just timing on receipt of collections.
John Kim
And contemplated in guidance as far as additional resident relief rents you have or the change in bad debt?
Bhairav Patel
Yes, I mean, from a guidance perspective, we are expecting it to normalize. So, we expect to collect about 99.2% to 99.3% of our revenue. So, it's -- in the guidance, it's contemplated to go back to our normalized collection rate.
John Kim
Okay. And by us, you mentioned, the increased share count in your guidance is not inclusive of any additional equity raises? But are you assuming at all as part of any increase additional OP transactions this year?
Bhairav Patel
No, we haven't projected any acquisitions and as a result, none of the additional share count is a result of OP issuances.
John Kim
Great. Thank you.
Mark Decker
Thanks John.
Operator
Thank you. We now have another question on the line from Buck Horne of Raymond James. So, your line is open.
Buck Horne
Hey, thanks. Good morning. I want to echo maybe a quick clarification question on the occupancy that you ended the fourth quarter with just kind of the drop off maybe I realize you mentioned that there's some kind of post-COVID turnover associated with that maybe just -- is that a sign of some sort of pushback on kind of the renewal increases or kind of planned turnover or any color in terms of how you're optimizing and planning for occupancy going into fiscal 2022, and kind of how January is shaping up so far in terms of occupancy?
Anne Olson
Yes, thanks Buck. Right now, we're sitting at our year-to-date weighted average occupancy of 94.4%. So, we've already picked up some of what we were looking at. I think it's a confluence of a few things that in the fourth quarter there, one would be as the rent relief funds came in and then tapered off and the eviction moratorium being gone, there was some kind of planned turnover, or places where we needed to move residents on. We are getting pushed back across the Board, I think most people in the industry are on the rental increases. So, we've seen a slight tick up and people renting other places as we continue to push those rents. And then we had about 40 basis points of value-add in this -- in the fourth quarter there that is attributable to vacancy in that. So, that's where we want those units offline for that 30 days, so we can renovate. We saw just a little -- a slight uptick in that in the in the fourth quarter. But feeling good in January, it's picking up we feel like we have quite a bit of runway, both with respect to the lease rates and ability to push occupancy as we head into leasing season where we will also see quite a bit of turnover.
Buck Horne
Got it. Very helpful. Okay, that's all I have for now. Thanks guys.
Mark Decker
Thanks Buck.
Operator
Thank you. We now have another follow up question from Alexander Goldfarb with Piper Sandler. So, please go ahead when you're ready.
Alexander Goldfarb
Yes. Hi, just a quick follow-up. On the two swaps that you broke, I understand the existing swap, but the forward swap, presumably that was put in place in conjunction with some planned issuance, but just sort of curious, the thoughts around was that an issuance that was pulled or just a little bit more color? And then on the one that you broke, was there no option to assign that to a different piece of debt, just curious?
Mark Decker
I'll start and then Bhairav can close with math if necessary. But those swaps were attached to some bank debt that we had done I think in 2018, right John?
John Kirchmann
2017 and 2018.
Mark Decker
2017 and 2018. So, before we had the ability to borrow 10-year duration money, we -- the longest we could go on an unsecured basis was five and seven with the bank. So, we did a five and a seven-year term loan. We had -- fixed those using these derivatives. And then when we did the refi, last August, of the five and a seven-year, and we redid our line, essentially, everything that would have had in it that was originally attached, at that point was in play. Our judgment at the time was we had no downside to assess, assign those swaps. Obviously, rates moved quite a bit it got I think it went from $8 million or $9 million to break those $3 million, $3 million. So, at this point, we're not in the betting on rates game, but it was an easy bet in August, it was not a good bet in our judgment anymore, not kind of our business. So, that was the business rationale. Do you want add anything Bhairav? Please do?
Bhairav Patel
No, I think that covers it. Yes, from our perspective, when we terminated the other swaps, there was little or no risk of holding on to these in case rates move upwards and they did so. That's what triggered the termination.
Alexander Goldfarb
Okay, cool. Thank you.
Mark Decker
Yes, thank you.
Operator
Thank you. We now have another question on the line from John Kim with BMO Capital Markets. So, please go ahead, John, your line is open.
John Kim
Hey, I was wondering if you could provide an update on your lost lease and also what you're expecting as far as market rent growth as part of guidance?
Anne Olson
Yes, we -- I can. Our lost lease right now is sitting just over 8% as we head into the peak leasing season, which we feel good about. In our guidance, our rental rate assumptions are, kind of, 2% at the very low end, which would be Oxbow in the rent control -- where we're experiencing rent control in St. Paul, to 6% at the high end, which would be Denver.
John Kim
Okay. And I know you guys present the new and renewal and effective lease growth rates on calls and in presentations, but I was wondering if that was something that you can provide him the supplements going forward?
Anne Olson
Yes, we can consider that. We'll review that for the next supplement.
Mark Decker
We're going to take all the mystery out of these calls for you, John.
John Kim
We'll run out of questions.
Anne Olson
We have to keep you listening for something.
John Kim
Mark, you've said in the past that you were going to prioritize earnings growth over portfolio repositioning, and improving the balance sheet. And I know you discussed when you want to get getting to Nashville and some of you some other markets, but I was wondering if you were going to take advantage -- or further take advantage of the strength of the market to accelerate some of those plans as far as market positioning and also improvement of the balance sheet?
Mark Decker
Yes, so as we noted in our in our prepared remarks, our forward debt to EBITDA is, I think 7.1 [ph], which is the best balance sheets ever been in our maturity schedule is really good. So, while we do look at the magnificent seven, as you've dubbed them, and I've repeated, and they're incredible balance sheets, with covetous eyes, we're very happy with where the balance sheet is, and we're not going to do anything. I mean, I think we can de-lever by growing cash flow is probably our best tactic at the moment. But we certainly will be opportunistic on asset sales. But ideally, what we'd like to do, as we have done in the past is pair it with a with a buy, we like which should mute some of the dilutive impact of just the straight sale. So, I mean, that's really how -- that's how we've been thinking about it. That's lessons learned over the last five years, we did a lot of sort of selling and then finding the use, that didn't work as well, as you might expect, as finding the use and then -- either finding the use acquiring it and then selling or doing it relatively contemporaneous. So, that's really how we're thinking about it.
John Kim
And, Mark can you comment on cap rates, either in your targeted markets or your non-core markets, how they've moved?
Mark Decker
Yes, I would say cap rates are kind of 3.25% to 4.25% across our markets, roughly. I mean, there might be a little bit higher than that in a few markets. But when you look at our portfolio and you look at our average rents, and you look at our margins versus some of the recent sales, obviously, Blackstone's made a lot of noise out there buying a couple portfolios that mathematically look a lot like ours. I mean geographically different, which certainly I think matters, as it relates to people's growth rate assumptions and how they do their math. But Fannie and Friday look at dollar the same way, sort of, regardless of its origin and so there's a really good bid out there for multifamily assets everywhere and thing -- the fundamentals of our markets are very good from a supply perspective and everything else. So, pricing is strong. We really look at cap rates, and then we and we also look at unlevered IRRs, I think in general, market clearing IRRs right now, which are riddled with assumptions, as you know, are kind of in that mid 5% to 6% range. We don't see many things that we underwrite to north of 6%, where we can win, we can get into a lot of best to finals that way, 5.6%, 5.7%, 5.8%, you probably can take home the thing you're seeking. And that's on our math relatively conservative assumptions and then maybe someone's got a higher IRR with more growth or less reversion or what have you, but that's where we think assets are pricing today in our markets.
John Kim
Great. Thank you.
Mark Decker
Thanks John.
Operator
Thank you. [Operator Instructions]
Mark Decker
Sounds like that's a wrap. Any more questions?
Operator
We have no further questions on the line.
Mark Decker
Excellent. Well, then, in that case, we'd like to thank everyone, in particular, want to welcome Bhairav, who's -- we're excited to have here and thank John Kirchmann. As anyone who knows John knows, he's always one of the most interesting men in the room, and we all wish them the best of everything. So, thank you, John and thanks, everybody.
Operator
Thank you. This does conclude today's call. Thank you for joining. You may now disconnect your lines.