Healthpeak Properties, Inc. Q2 FY2021 Earnings Call

Greetings and welcome to Physicians Realty Trust Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to Bradley Page, SVP, General Counsel. Thank you, you may begin.

Thank you. Good morning and welcome to the Physicians Realty Trust second quarter 2021 earnings conference call and webcast. Joining me today are John Thomas, Chief Executive Officer; Jeff Theiler, Chief Financial Officer; Deeni Taylor, Chief Investment Officer; Mark Theine, Executive Vice President, Asset Management; John Lucey, Chief Accounting and Administrative Officer; and Laurie Becker, Senior Vice President, Controller. During this call, John Thomas will provide a summary of the company's activities and performance for the second quarter of 2021 and year-to-date as well as our strategic focus for the remainder of 2021. Jeff Theiler will review our financial results for the second quarter of 2021. And Mark Theine will provide a summary of our operations for the second quarter of 2021. Following that, we will open the call for questions. Today's call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. They are based on the current beliefs of management and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe our assumptions are reasonable, our forward-looking statements are not guarantees of future performance. Our actual results could differ materially from our current expectations and those anticipated or implied in such forward-looking statements. For a more detailed description of potential risks and other important factors that could cause actual results to differ from those contained in any forward-looking statements, please refer to our filings with the Securities and Exchange Commission. With that, I would now like to turn the call over to the Company's CEO, John Thomas. John?

Thank you, Brad. And thank you for joining us this morning. Our portfolio of best-in-class medical office facilities continues to perform exceptionally during this second quarter, delivering the predictable growth and operating outcomes that medical office investors have come to expect. This includes the collection of over 99% of all cash rents due during the quarter, supported by patient volumes that remain resilient, despite the recent spikes in the Delta variant. Along with this operational performance, we continue to have confidence in our external growth pipeline. Since our last call, we have made additional progress on our acquisitions and have high-quality medical office building targets in various stages of negotiations. Substantially all of this pipeline is off market in direct negotiations with existing health systems as well as developer and owner clients. So while our investments will be back-weighted this year, we remain very confident in our guidance and $400 million to $600 million of investment activities for 2021. Our loan pipeline continues to grow as well, including the newly announced mezzanine loan in Brooklyn Park, Minnesota. DOC's real estate loan book totaled $176 million in outstanding principal at quarter-end, secured by real estate valued at over $1 billion. In addition to the attractive 8% average coupon, our loan portfolio represents a source of future growth through embedded local REITs and purchase options. Within this loan book, our five projects under development have an expected market value of over $200 million upon completion, including one loan-to-own transaction. Our pipeline for development financing opportunities continues to grow. We expect to secure mainly these new opportunities by year-end supporting our growth in 2022 and 2023. We're also evaluating the opportunity to use the robust medical office market to dispose of some non-core facilities at a profit. This planning can both enhance the quality of the portfolio and also provide an additional source of funding for growth this year. Our Chief Financial Officer, Jeff Theiler, will review our financial results and balance sheet in a few minutes. But I wanted to recognize Jeff and Mark Theine for leading us in the achievement of our long overdue upgraded credit ratings with both S&P and Moody's. We've already seen the benefits of these well-deserved upgrades to our cost of capital, amplifying our opportunity for outsiders to predict growth going forward. The trends in favor of medical office have proven to be very predictable and reliable, driving consistent and growing rental income for the benefit of our shareholders. Public investors in healthcare real estate can count on medical office to remain open, occupied and busy. Medical office does not need to recover; as an asset class it was only impacted temporarily in spring 2020, and DOC has maintained close to 96% occupancy throughout the pandemic. We remain focused on growing our funds available for distribution each year and we'll continue to manage our organization to achieve that result annually. Jeff will now review our financial results, and then Mark Theine will share our operating results.

Thank you, John. In the second quarter of 2021, the Company generated normalized funds from operations of $58 million or $0.26 per share. Our normalized funds available for distribution were $55 million, an increase of 3.6% over the comparable quarter of last year, and our FAD per share was $0.25. Our operating portfolio has continued to perform well in the second quarter. Our same-store portfolio had consistent occupancy year-over-year and generated NOI growth of 2.4%, right in line with the fixed escalators and consistent with our expectations. The one deferment we granted in the midst of the pandemic last year has been fully paid back, including $200,000 of associated late fees. Through this quarter and to the present time, we are seeing very little negative impact with our tenants from COVID at this point, despite the emergence of the Delta variant. We are optimistic that our portfolio will continue to perform and be resilient in the current environment. Turning to the balance sheet, we've been recognized by two major rating agencies over the past few months for portfolio and balance sheet improvements that have been years in the making. We were upgraded to BBB flat by S&P on May 13, and upgraded to Baa2 by Moody's on July 1. These upgrades have a significant impact on our cost of capital and improve our ability to compete for the highest quality buildings. In their rating evaluations, both agencies recognized the high quality of our pure play MOB portfolio and its superior performance during the pandemic. They also noted our disciplined capital strategy and best-in-class tenant mix, specifically our 63% concentration of investment-grade tenants, 93% exposure to net leases and significantly lower proportion of near-term lease expirations relative to the sector. We remain highly disciplined with our capital strategy, raising $83 million on the ATM in the second quarter at an average price of $18.39, as we continue to pre-fund our acquisition pipeline. As a consequence, we currently sit in an excellent financial position with consolidated debt-to-EBITDA of 4.5 times, and an outstanding revolving credit facility balance of $72 million, leaving $778 million of availability. This pre-funding has placed us in a position to successfully execute on our substantial pipeline in the back half of the year. We are still confident in the acquisition guidance we laid out at the beginning of the year, $400 million to $600 million of new investments, and expect to execute on those investments prior to the end of the year. As we discussed last quarter, the pipeline is full of the types of buildings that are in our sweet spot, high quality MOBs with strong investment-grade tenants from leading health systems. JT has talked about the progress on this pipeline and perhaps that progress has been slower than we were anticipating. It has been steady and we remain on track. Turning to other relevant portfolio metrics, our second quarter G&A came in at $9.1 million and recurring CapEx was $5.7 million for the quarter. Our full-year guidance for those metrics remains unchanged at $36 million to $38 million for G&A, and $25 million to $27 million for CapEx. I will now turn the call over to Mark, to walk through some of our portfolio statistics in more detail.

Thanks, Jeff. Quarter by quarter, MOBs have continued to prove their reputation for stability with occupancy, collections, and leasing trends that remain strong regardless of market factors. The steady internal growth delivered by our asset management platform is the result of superior tenant satisfaction, strong 2.4% built-in rent escalators, and an industry-leading 96% lease rate. Our leasing and CapEx teams continued to deliver value during the quarter, with an impressive tenant retention of 87%, positive cash releasing spreads of 2.7% and low CapEx investments that totaled just 7% of cash NOI. The operations team also continued to execute on the plan to expand our in-house property management platform, laying the groundwork for further cost efficiencies across the portfolio that will deliver long-term value for shareholders. Specifically, we've recently welcomed Mercedes Marquez and Nicole Bradley to the DOC family as we expand our management efforts in Phoenix, Arizona and Birmingham, Alabama. From a performance perspective, our MOB same-store NOI growth in the second quarter was 2.4%. The NOI growth was driven primarily by a year-over-year 2.4% increase in base rental revenue. Operating expenses were up 6.2%, and offset by a 7.0% increase in operating expense recovery revenue. Year-over-year operating expenses were up $1.9 million overall, primarily due to a $0.5 million increase in utilities and a $0.4 million increase in insurance cost. Same-store occupancy remained steady at 95.4% year-over-year, as our leasing team continues to execute consistently with strong retention. On a consolidated basis, we completed a total of 395,000 square feet of leasing activity during the quarter, the second highest quarterly volume in history of the company. Tenant retention was 87% across 353,000 square feet of lease renewals with cash renewal spreads of positive 2.7%. Notably, these results were achieved with limited leasing costs totaling $1.68 per square foot per year across the full volume of leasing activity, a figure that is much more efficient than industry averages. Our successful net effective rent outcomes are driven by our deep understanding of our primary markets and constant evaluation of the local leasing trends. Turning to our capital investments for the quarter, we once again proactively managed recurring CapEx to $5.7 million or 7% of cash NOI. Year-to-date, DOC has invested $11.3 million in recurring capital projects. While committed leasing TIs were low on a per square foot basis, we do expect capital expenditures to tick up during the second half of the year due to increased leasing volumes. As a result, we still expect to fall within the $25 million to $27 million full-year guidance previously announced. Embedded within all capital investments made by DOC is a strong commitment to materials and practices that enhance the patient experience and our ESG efforts. Our second annual interactive ESG report was released in June and highlights the exceptional progress toward our three-year goal to improve the portfolio's overall carbon footprint, energy, water, and waste usage by 10% compared to our 2018 base year. In 2020, DOC invested in 29 sustainability-driven capital expenditure projects totaling $4.2 million, generating approximately $7.7 million in operating expense savings over the next 10 years. Additionally, we exceeded our team's social goals by raising over $350,000 for worthy causes across the country and providing over 515 volunteer hours of service to charitable organizations. In the eight years since our IPO, we have not only built one of the best healthcare real estate portfolios in the country, but we have also assembled the best healthcare real estate team. Our efforts directly translate into care for tenants, evidenced in our 2021 Kingsley Associates Tenant Satisfaction survey results. This year, we surveyed nearly 365 tenants representing nearly 3.4 million square feet. Physicians Realty Trust received an industry-leading 76% response rate. In addition, despite the ongoing COVID-19 pandemic, we earned the highest scores in the history of the company, including an overall management satisfaction score of 4.53 out of 5.0, beating the national benchmark. Going forward, we expect continued successes from our growing operating platform, resulting in enhanced local market knowledge, repeat investment opportunities with existing partners, profitable operating efficiencies, and continued tenant retention. With that, I'll now turn the call back to John.

Thank you, Mark. Thank you, Jeff. We'll now take your questions.

Thanks guys. Only my wife calls me Ron, but that's fine. Certainly acquisition pipeline, hoping you guys can give us a little bit more color on the expectations for the second half. I think last quarter you talked about visibility on $200 million of opportunities, maybe how those evolved in kind of pricing expectations?

Yeah, great question, Juan. The pipeline has just continued to build; we're very confident about getting the full year numbers of $400 million to $600 million, and we've got line of sight to a pipeline that's at least that big right now. So it's a collection of high-quality medical office buildings, some that were under construction in the first half of the year, and just kind of moving to CO and we'll move to recommencement here this quarter. And so we're really excited about it. So hopefully, we'll share a lot more with the next call.

And the pricing is still kind of that mid 5% to 6%?

Yes, 5% to 6%. I mean, again, the higher quality newer buildings are going to be at the low end of that range. But the development pipeline, which continues to grow, is where we achieve those higher returns.

Okay, and then just curious on what you guys think about the importance of scale, and maybe the opportunity for public M&A given potential cost synergies or further improvements to the cost of capital post your credit rating upgrade? Or if you prefer to kind of just focus on one or two properties and don't really like the prospect of larger portfolio transactions or just kind of your general thoughts on that subject matter?

Yes, Juan, I'm sorry, we had a brief disruption here. I think I got the gist of your question. Our execution strategy from the beginning has been direct negotiated off-market transactions, primarily through health system relationships, physician relationships, and healthcare real estate developers. And that's what we're focused on our strategy and execution there. And again, we've got a high-quality pipeline; we'll be able to share a lot more about with the next earnings call. Scale is obviously very important. As we've grown, as Mark mentioned, we've expanded our internal property management team in a couple of markets, where we had some significant growth opportunities. So again, scale in our core markets continues to drive a lot of synergy value, and it grows enough to provide more opportunities. So, as far as public market M&A or large portfolio transactions, we certainly look at everything, but we're focused on our core strategy, and we're approaching $6 billion in assets; we've got pretty good scale already.

Thank you, guys.

Our next question is from Nick Joseph, with Citigroup. Please proceed.

Thanks. As you look at your acquisition pipeline, obviously, a lot of it is back-end loaded this year. Is that unique to this year? Or is that representative of what your acquisition pipeline should also look like heading into 2022?

Yes, it is unique for this year just due to the circumstances of how the pipeline built-in at the end of last year. We'd like to be a little more spread out. Historically, there was a time where we were closing a building a week. So it's just the uniqueness of this year. I think there were some sellers from some health systems at the end of last year who weren't really thinking about monetizing. However, with expected changes in tax laws, and changes in the political environment, we're seeing more opportunities kind of evolve that have bubbled up in the first quarter that we've been negotiating through. And again, we expect to execute on this quarter and the last quarter. So, I think it's just unique to this year, but it's been, frankly, quite exciting for us.

Thanks. And then just back to the broader transaction market, you mentioned cap rates, maybe 5% to 6%. How have you seen portfolios trade relative to individual assets? And then what does the buyer pool look like?

Yes, the buyer pool has gotten bigger. Private equity continues to quote unquote, as it continues to raise a lot of capital and explore both individual assets and the portfolios that have been floating around. We haven't seen anything - of course, we look at everything that is marketed. Most of our transaction volume this year will be off marketing, not portfolio-based transactions, but there's a premium out there for portfolios. We've seen traded leases based on the quoted cap rates, the ones that have $300 million to $500 million portfolios that are floated around. I think we're hearing five and a quarter cap rates, 5.5 on some of those assets that are probably high fives to six if bought on an individual basis. So there's a lot of capital chasing the assets. As we said, we expect to dispose of, opportunistically, a few of our assets that just don't fit our strategic portfolio going forward, but they're tracking at a nice high price.

Thank you.

Our next question is from Jordan Sadler with KeyBanc Capital Markets. Please proceed.

Good morning, guys. So, I want to follow up on that last piece. JT, you mentioned dispositions, which I feel like we've kind of had - you guys have had an on-again, off-again view towards disposing a little bit. And it sounds like you're mentioning them again, which makes me feel like you're a bit closer maybe than you had in the past to selling some stuff? Can you offer a little bit more color surrounding the sales?

Yes, we think our portfolios - we pruned some things a couple of years ago out of the portfolio. We think our portfolio is outstanding, so of our 275 buildings, we love all our properties. There's just a couple of small circumstances where either a portfolio might trade, and our assets are complementary to that, or we're always kind of out exploring the opportunity to sell non-core assets, so it's just opportunistic in things that have bubbled up. But we do expect to close on a handful of dispositions this year. We will use that capital to fund our acquisitions.

Volume-wise, are we looking at like $100 million total or something smaller?

We dropped the line.

Hey, Jordan, we lost you for a minute. Sorry about that.

Shall I repeat the question, or do you have it?

Yes, your question was that you said $100 million. And my response to that is that would be on the high end. It's a handful of dispositions.

Okay. And then, along the same lines, the leverage really with the use of the ATM, Jeff, good job, you're, I think about as low as we've seen in a while and 4.5 times net debt-to-EBITDA I think you've quoted. So sort of appetite that continues to sort of use that to get the leverage lower ahead of sort of the back-end weighted acquisitions would be my question. And then any insight on additional ATM that has been issued post quarter-end?

Yes, good questions, Jordan. Like you said, we've been pretty proactive about funding the acquisition pipeline in the first two quarters of the year. So really, we're at a point right now where we could execute on that acquisition guidance and not raise additional equity. So I think we're in a really good spot. We're always opportunistic about how we fund our deals and it's dependent on what we see coming down the line in the far future as well. So, we'll take it day by day, but as a need, we don't have any need for additional equity.

Okay. Then the second one for you, Jeff, the late fees in collections totaled book in 2Q that will repeat?

Yes, just $200,000.

200, okay. Thank you.

Our next question is from Amanda Sweitzer, from Baird. Please proceed.

Thanks. Good morning, guys. Following up on your comments on increased CapEx and the increased leasing volume, you expect your back half lease maturities to actually look comparable to what you experienced in the first half. So are you expecting to be able to build occupancy over the remainder of the year? And what's the outlook for leasing vacant space today?

Yes, thanks, Amanda. This is Mark. As you'd mentioned, in the back half of the year we've got about 2% of our ADR coming up for renewal in the second half of 2021. It's about 91 leases, and an average of about $23 per square foot. So we feel really good about where the market rental rates are and especially a lot of the local market trends being able to push some of those rents and some of the escalators upon lease renewal. We're seeing a lot of requests for CapEx and TI and some early lease renewals. So we accelerated a few leases this quarter, extending early and adding some nice term to hospital leases, which we expect solid leasing activity to continue.

That's helpful. And then, as you've seen more companies start to kind of solidify the return to office plan. Can you provide an update on how you're thinking about your health system administration tenants today? Have those tenants given you any update about how they're thinking about their go-forward space needs?

Yes, I think we have a small amount of, if you will, administrative space with health systems, but it's leased for multiple years. So we're having that dialogue. I think health systems are, again, with this Delta variant, it's kind of slowed down some of their internal thinking, while I focus on the hospitals that are full, and again, shifting patients to the outpatient care facilities like we own. We don't have any good color yet other than systems are trying to rationalize make that decision. We've had conversations about either selling those buildings, subleasing those buildings, or keeping them in shape, while they figure out those plans, maybe in the fourth quarter. So, sorry to be so vague, but we don't have a lot of that space.

No, that makes sense. I appreciate the time.

Our next question is from Vikram Malhotra with Morgan Stanley. Please proceed.

Thanks for taking the questions. Good morning. I guess maybe just on that last point around health systems, figuring things out given COVID and maybe this resurgence, can you just give us any color on conversations have had or expect to have on either sort of sale leasebacks or just even more directly on health systems, looking at that whole off-campus close to consumers in terms of pushing care out there?

So, we're obviously big believers in that long-term strategy by health systems to plant outpatient care facilities in new markets. That's exactly like the Brooklyn Park development, we're financing the project we're developing this year. Almost all of our financing the development of this year is exactly that description—ambulatory surgery center anchors and health system-employed physicians, outpatient care diagnostics, things like that. Our portfolio does include a nice balance or a mix of on-campus assets that are the health systems. In our case, in our pipeline, health systems are monetizing to raise capital for their balance sheets, and at the same time, coordinating discussions around new developments with those same health systems. So it's a good mix. I haven't seen a real change in the long-term trends of expanding on-campus, newer assets, while at the same time planning flags and new demographics for growth.

Okay, that's helpful. Maybe Jeff, if you can just remind us in this environment where there are still inflation concerns, whether it's on labor materials, or taxes, can you remind us again, just the overall structure kind of the preponderance of leases, how the pass-throughs work?

Yes, Vikram, this is Mark. Actually, Jeff mentioned in his prepared remarks that our portfolio is very well insulated from rising operating expenses due to the triple net structure. 93% of our portfolio is triple net, and really all but 2% have some protection against inflation of operating expenses. Some of them are modified gross leases, which also have a cap that's paid for by the tenants. So we solved that in our same-store results with a slight increase in operating expenses, but nearly all of it was recovered through our recovery structures in the portfolio.

Got it, okay, that's helpful. And then I just want to go back to the disposition comments that you made. Given where some of what your private peers are doing, which seems like they're in the market or sell more given pricing, what would make you want to move that disposition number higher?

Really not, Vikram. Like I said, these are opportunistic sales, if you will. We’ve talked for years about selling the non-core assets, if we can get an appropriate price. They continue to perform very well in this COVID environment, and that's kind of what they're used for. So EBITDAR has been stronger than a year. So there's a potential for good opportunities to sell those this year. The others, again, it's a very small handful of buildings in unique situations that we're having the opportunity to sell; pricing has been excellent. We’ve really, the portfolio is in fantastic shape with 96% occupied; there's not a lot in the portfolio that we want to even consider selling.

Great. Okay, thanks so much.

Our next question is from Michael Carroll with RBC Capital Markets. Please proceed.

Yes, thanks. JT on the investment pipeline, it sounds like the size of the pipeline equals the amount of deals that you want to close in the second half of the year? I mean, do you have those deals under contract right now and you just need to close on those? How does that work out?

Yes, a good portion of them are under contract and just moving to work down the normal closing process with those transactions. Others are under exclusive signed letters of intent, with all the economics and deal terms worked out; we're just working through the documentation and closing process. It's been a little slower in part because of travel restrictions and the demand for construction and other factors going around the country, but we remain very confident about not only getting those transactions closed but continuing to negotiate several other deals in our pipeline.

Okay, how many of those deals in the second half of the year reflect development projects? And do you work out those deals during the time of those projects begin the construction as soon as occupancy or the leases commence? That's when you close those dealsOr how's that work out?

Yes, it varies a little bit. The loan downs essentially work out where we finance the construction off our balance sheet. They’re 100% occupied investment-grade credit quality tenants, and then the loan stays in place for typically for a year for tax reasons but stays in place for one year and then it converts to ownership. You'll see one of the investments we made this year was the cancer center, which is exactly the process we've been on for a couple of years—the first is a loan, and now it's converted to ownership. Some of the development financing is just part of the capital stack. Typically, that happens when the building is pre-leased to some high percentage but not fully leased and the developer has their own capital and gets a construction loan; we provide some capital, and then we have a real firm that is triggered again, usually with rent commencement. We’ve said that the assets under construction on our books today would be valued at about $200 million once we convert those to ownership. Most of that will happen in 2022; some of that could blend into 2023. Projects we start in the fourth quarter of this year we're working through most likely probably early 2023 conversion to full ownership. But that pipeline is growing. It's been an interesting year for health systems, moving forward projects that didn't start last year but proceeded with this year.

Okay, and then your investment targets, does that reflect the amount of capital you're going to deploy out this year? Does that reflect the amount of capital you're going to commit to deploy, including those development projects that will bleed into '22 and '23?

Yes, it'll reflect obviously, the amount of acquisitions we complete, and then the amount of development that we're committed to for the year.

Okay, great. And then just last one, Jeff, can you remind us what the long-term leverage targets is? It's still mid-five net debt-to-EBITDA number; has that changed?

No Mike. So 5.25 kind of long-term debt target, obviously, that's a conservative number. So there can be some flex around that. But that is in general our long-term target.

Our next question is from Daniel Bernstein with Capital One. Please proceed.

Good morning. Wanted to dig into a little bit about the benefits of the increasing internal management and maybe the strategic direction of that as it relates to ESG. Just signal maybe that you guys are looking a little bit more away from triple net to more gross lease type of assets. And then maybe and certainly way to quantify the benefits, or what benefits you've seen as you grow that management side of the business?

I'll give you a second to think about the direct financial relation, but it's really, again, part of our long-term strategy, Dan. When we have a health system, we always have a lot of repeat business with the facilities; that’s our goal with the health systems we work with. Once we get to scale, and you can internalize that management, there's a financial benefit of kind of every time you add another building, but you don't have to add another property management team, just the direct correlation there. Like in the Phoenix market and Birmingham market, we just continue to grow in those two markets, and just had the opportunity to hire a couple of outstanding people to put on the team and then directly manage those buildings in those markets ourselves. Scale is pretty natural; Columbus, Ohio has been a fantastic example for us of how once we internalize management, not only are we getting a return from that financial return from that, but it's also leading to more opportunities in those markets. So, it's not a sign of moving away from triple net leases. Again, we're focused on minimizing risk and maximizing synergy value of internalizing management and managing the buildings better and at a lower cost. Hopefully, moving more of the total cost of occupancy to triple net rent, not just expenses.

Yes, to add to that, as JT said, it all starts with the relationship, the hospital relationships, the local market knowledge, and the ability to expand our acquisition opportunities with hospital partners across the country. Secondly, the financial impact starts with economies of scale from just having more properties in the market and being able to lower operating expenses for our healthcare partners in the buildings. Again, most of our expenses are insulated by the triple net leases, but we looked at the benefit upon lease renewal relating to total occupancy costs that we can show the tenants. The management fee itself usually adds about 20 to 30 basis points onto a cap rate as an acquisition if we internally manage there. So there's a direct impact from the management fees associated with internalizing property management. We've really grown a great team around the country and look forward to leveraging the economies of scale and the team as we grow the portfolio in the future.

All right, and what portion of the portfolio is now internally managed?

Yes, seven of our largest markets, or our top 10 largest markets are all internalized. We manage everything in the portfolio, of course, but there are a few markets where we partner with hospital systems who have a real estate team directly. We treat them exactly like part of our partner or a development partner that has lifelong relationships in the markets. We work just hand-in-hand with them, almost as if they are part of the DOC team. But technically, it's not internally managed. So, some of our top 10 largest markets today.

Okay. Appreciate that, that's all I have. Thanks.

Thank you, Dan.

This does conclude our question and answer session. I would like to turn the conference back over to management for closing remarks.

Yes, thank you again for joining us today. We really appreciate the questions dialogue and please follow up if you have any other questions. We do encourage you all to get vaccinated. We're starting to move back into the office ourselves and stay safe. We hope to see everyone at the conferences this fall. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.