Earnings Call Transcript - NNN Q2 2023

Operator, Operator

Greetings, and welcome to the NNN REIT Second Quarter 2023 Earnings Conference Call. I will now turn the conference over to your host, Mr. Steve Horn. Sir, you may begin.

Stephen Horn, CEO

Thanks, Ali. Good morning, and welcome to NNN's Second Quarter 2023 Earnings Call. Joining me on the call is Chief Financial Officer, Kevin Habicht. As this morning's press release reflects, NNN's performance in the second quarter produced 1.3% core FFO per share growth over prior year's results, along with investments of slightly over $180 million with a 7.2% initial cash yield. The solid acquisitions for the quarter are driven by our tenant relationships. In addition, our portfolio continued with the high occupancy of 99.4% and strong lease renewals for the quarter that have been trending above historical levels year-to-date. These results have NNN positioned to create shareholder value as we transition into the second half of 2023 and beyond. In July, we announced an increase in our common stock dividend to be paid on August 15, thus making 2023 our 34th consecutive year of annual dividend increases. NNN is in select company among 75 U.S. public companies, including 2 other REITs, which have achieved this impressive record of accomplishment. Based on our first 6 months' performance, we announced an increase of our 2023 core FFO guidance to a range of $3.17 to $3.22 per share. Our long-standing strategy is designed to deliver consistent per share growth on a multiyear basis. This discipline of this long-term approach is reflected in the guidance increase during the current challenging economic backdrop. Turning to the highlights of the quarter. Our portfolio of 3,479 freestanding single-tenant properties continues to perform exceptionally well and has maintained high occupancy levels of 99.4% for 4 consecutive quarters, which remains above our long-term 98% average. At quarter end, NNN only had 22 vacant assets, which is the result of our leasing department's effort working with the nonperforming properties and creating value for NNN. In addition, nearly 90% of the leases that were up for renewal during the quarter exercised an extension at 105% of the prior rent. Moving to acquisitions. During the quarter, we invested just north of $180 million in 36 new properties with an initial cash cap rate of 7.2% and an average lease duration of 19.7%. We closed on 19 transactions in the quarter, and 17 were from our relationship tenants with whom we do repeat business. During the first half of the year, we invested over $337 million in 79 new properties with an initial cash cap rate of 7.1% and an average lease duration of 19.4%. Given that NNN closed on roughly 60% of the original midpoint acquisition guidance, coupled with the visibility of our acquisition pipeline, NNN has increased acquisition guidance to $600 million to $700 million for the year. Almost all our acquisitions this year are long-term lease deals, defined as 15 to 20 years. That is a result of the calling effort of NNN's acquisition team. NNN prides itself on maintaining a relationship business model and targeting sale-leaseback transactions. There is a lot that goes into deploying capital at the right risk-adjusted returns, and the value of NNN's lease form is a tool to mitigate risk within the portfolio, which is easier to obtain if you have the sale-leaseback model. It can sometimes be overlooked. With regard to the acquisition pricing environment, as I mentioned in the May call, we are seeing that cap rate increases have started to plateau and stabilize. That played out in the second quarter as expected with a 20 basis point increase over Q1 versus a 40 basis point pickup in the quarter before. The first 6 months cash cap rate was 7.1%, which is 90 basis points higher year-over-year. As for the second half of the year, I see NNN's initial cap rates slightly higher than the second quarter in the range of 10 to 20 basis points. During the quarter, we also sold 7 properties, 2 of which were vacant, raising $28 million of proceeds at a 5.1% cap rate to be easily reinvested into accretive acquisitions. Year-to-date, we have now raised $40 million of proceeds at a 5.6% cap rate from the sale of 13 properties, including 5 vacant. Although job 1 is to release vacancies, year-to-date, NNN has had a 97% rent recapture with minimal TI dollars reinvested. We will continue to sell nonperforming assets if we do not see a clear path to generate rental income within a reasonable time frame. The current banking conditions, along with the higher interest rates, are creating a softer market, but NNN is navigating the waters successfully. Our balance sheet remains one of the strongest in our sector. Our credit facility has plenty of capacity, no material debt maturities until mid-2024, strong free cash flow, and a viable disposition strategy. NNN is well positioned to fund our 2023 acquisition guidance. In closing, I want to thank our associates for their dedication and hard work in putting NNN in a position to finish 2023 strong and set us up for 2024 and beyond. With that, let me turn the call over to Kevin for some more color and detail on our quarterly numbers and updated guidance.

Kevin Habicht, CFO

Thanks, Steve. As usual, I'll start with a cautionary statement. We will make certain statements that may be considered to be forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not issue revisions to these forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC and in this morning's press release. Okay. With that, headlines from this morning's press release report quarterly core FFO results of $0.80 per share for the second quarter of 2023. That's up $0.03 or 1.3% over year-ago results of $0.79 per share. First half 2023 results were $1.60 per share, which represents an increase of 2.6% over the prior year results. AFFO for the first half of '23 was $1.62 per share, and that's a 1.3% increase over prior year results. As we footnote on Page 1 of the press release, absent the accrual basis deferred rent repayments in both 2022 and 2023, this AFFO per share growth would have been 2.5% for the first half of 2023. Similarly, the scheduled cash basis deferred rent repayments continue to taper off as anticipated in 2023 and can be seen in the details provided on Page 13 of the press release. Absent these cash basis deferred rent repayments in both '22 and '23, core FFO per share would have increased by 3.2% for the first half of 2023. Separately, I’ll note that in the second quarter of 2023, results included $290,000 of lease termination income, which compared with $1.7 million in the first quarter. But overall, a good quarter, which was in line with our expectations. Moving on. Our AFFO dividend payout ratio for the first half of 2023 was approximately 68%, generating approximately $95 million of free cash flow after the payment of all expenses and dividends for the first half. As Steve mentioned, after quarter-end, we announced that we will be increasing our dividend, which will be our 34th consecutive annual increase, and that gets paid in a couple of weeks on August 15. Occupancy was 99.4% at quarter end. That's flat with the prior quarter and flat with year-end 2022. G&A expense was $10.7 million for the quarter, representing 5.3% of total revenues, and it was 5.7% for the first half of 2023. Notably, our midpoint guidance for this line item is still $44 million for the full year 2023, which should put us closer to about 5.5% of revenues for the year. Lastly, we ended the quarter with $794.5 million of annual base rent in place for all leases as of June 30, 2023. Steve mentioned we did increase our 2023 core FFO guidance, increasing the bottom end by $0.03 and the top end by $0.02 to a range of $3.17 to $3.22 per share. AFFO guidance was increased to a range of $3.20 to $3.25 per share. The smaller increase in the AFFO guidance range is primarily a result of projected capitalized interest expense from increased investment in what we call split-funded acquisitions. These are acquisitions that are funded over time as the property is constructed, which we think is valuable to our customer. We're doing more of that this year than typical. In a typical year, probably 20% to 25% of our acquisition dollars are in that type of program, where construction gets funded this year. We're probably pushing closer to 35% in terms of total dollars invested in that sort of mode. But overall, in terms of per share growth, the more modest growth in 2023 reflects really a couple of things in my mind. A, the high bar from last year's 2022, which created 9.8% growth, and the lack of tailwinds that were helpful in 2022, coupled with the slowdown in our scheduled deferred rent repayments in 2023, as noted on Page 13. The '23 guidance and key supporting assumptions are on Page 7 of today's press release. The only notable change is a $100 million increase in our 2023 acquisition volume guidance, which is now $600 million to $700 million. Switching over to the balance sheet, we maintain a good leverage and liquidity profile with over $750 million of liquidity. The second quarter was quiet in terms of capital markets activity. We issued $13 million of equity in the second quarter and $30 million of equity for the first half of 2023. This relatively modest equity raise of $30 million in the first half, plus $95 million of free cash flow in the first half and $40 million of property disposition proceeds totals $165 million, which allowed us to fund nearly all of the equity portion of our $337 million of first half acquisitions on a leverage-neutral basis. Consistent with our plan and prior comments, we have begun to use our bank line a little more after a few years of virtually no usage, part of the plan to navigate this rockier interest rate and capital market environment. Our weighted average debt maturity is over 12 years, which includes the bank line, and is among the longest in the industry. Our debt outstanding is all fixed-rate, with the exception of the bank line, which represents about 8% of our total debt. A couple of numbers: net debt to gross book assets was 40.8% as of June 30. Net debt to EBITDA was 5.5x at June 30. Interest coverage and fixed charge coverage was 4.6x for the second quarter. All properties owned by NNN are unencumbered by mortgages. In closing, we're in good shape to navigate what seems to be elevated economic and capital market uncertainties and to continue to grow per share results, which we view as the primary measure of success. The fundamentals, as Steve mentioned, of our business remain in good shape—occupancy, re-leasing, renewals, acquisition and disposition volumes, and cap rates. We feel like we're on a pretty good track for this year. With that, we'll open it up to any questions, Ali.

Operator, Operator

Our first question is from Brad Heffern with RBC.

Bradley Heffern, Analyst

Kevin, a couple for you. So on the new AFFO guidance, last quarter, I think you mentioned things were trending towards the high end of guide, and obviously the acquisition total went up. So can you talk about what the offset was that kept the high end of guidance from moving higher? I know in the prepared remarks, you mentioned the capitalized interest, but I think that's backed out. Correct me if I'm wrong on that.

Kevin Habicht, CFO

Yes. So you're talking about the core FFO guidance or AFFO or both?

Bradley Heffern, Analyst

Just the AFFO.

Kevin Habicht, CFO

AFFO, yes. Really what's driving that back a little bit is two things this year is the scheduled accrual basis deferred repayments, which is a piece of the equation, but that's been out there for a while. So that's not changing much. It's really the capitalized interest piece because more of our acquisition investments are being done in what we call a split-funded program, that creates more capitalized interest. We back out capitalized interest when calculating AFFO. So that's a bit of a drag on our AFFO for this year relative to prior years. I would say, generally, if you go back pre-pandemic, you would see our AFFO—on a quarterly basis, our AFFO is normally $0.01 more than our core FFO, generally, round numbers. $0.01 a quarter, $0.04 a year, maybe $0.05 a year. That's typical kind of pre-pandemic levels. We're working our way back there. We came very close this quarter. Our AFFO, $0.80. I mean, I think we were like $0.007 from rounding to $0.81. So just one rounding, it went to $0.80. We think it's still largely in line with our expectations. But because of the incremental capitalized interest expense currently, it's a little bit of a weight on our AFFO number in the short term.

Bradley Heffern, Analyst

Okay. Got it. And then as you mentioned the line of credit is obviously being used more, I think the cost on that is 6% plus with the latest Fed hike. It seems like that would be wider than what you could get by issuing bonds or doing a term loan. So what's your desire to continue to let that float versus terming it out?

Kevin Habicht, CFO

Yes, a fair question. Yes, you're right. The bank line cost is right at about 6% now, which is not ideal. We think we're comfortable getting the bank line up to about 50% of our capacity. That's probably a line that we prefer not to cross. In some time periods, we would obviously be thinking about looking to take that out with longer-term debt, which, as you know, is priced as well, if not a little better than the bank line currently is. So yes, we don't give guidance on our capital markets activities. But yes, fair comment that, over time, we'll look to take that out with longer-term capital whether it be debt and/or equity.

Operator, Operator

Our next question is coming from Joshua Dennerlein with Bank of America.

Farrell Granath, Analyst

This is Farrell Granath on behalf of Josh Dennerlein. So I had a quick question about bad debt assumptions in your guidance and maybe what's already been incurred year-to-date, especially with the increase.

Kevin Habicht, CFO

Yes. So our typical bad debt assumption is that we assume we're going to lose 100 basis points, or 1% of our rent every year. That's been our guideline virtually every year for the last number of years. We don't have any expectation of it being elevated. Currently, what we're seeing in terms of our tenants' behavior and their position, we don't think we need to do anything beyond what we normally do. Over the years, we decided it was prudent to assume that not everything will work out perfectly, so we've assumed 100 basis points. We've not utilized very much of that at all. I would say, even though we assume in our guidance 100 basis points, the typical is probably closer to half of that, meaning about 50 basis points of rent loss. So far this year, I would say we're going to be still in that kind of normal zone with the way things are shaping up.

Farrell Granath, Analyst

And also, I wanted to touch on tenant health or maybe tenant watch list. I think I saw in the news about Walgreens. Some Walgreens stores are closing, as well as last quarter, we had touched on Bed Bath & Beyond. So I'm curious if you can give an update.

Kevin Habicht, CFO

Yes, overall, I guess, globally, I would note that the size and the shape of our credit watch list, I view as largely unchanged from recent quarters. The specific tenants you mentioned, as you know, Bed Bath & Beyond filed for bankruptcy. We had 3 stores with them. It was 0.2% of our annual base rent. We will be getting back those 3 stores. Those leases are projected. As it relates to Walgreens, I'm not worried at all about their ability to pay rent. I guess that's the most important thing. They did announce store closures, but none of ours are on that list. We don't have any concerns at all on that front. Just a reminder to investors, even if a tenant closes a store, that doesn't change their obligation to pay us rent for those properties. But regarding Walgreens, we don't have any closed stores on their closure list.

Stephen Horn, CEO

Just really a follow-up on Walgreens. That was a transaction we primarily did in the fourth quarter last year. So there was a self-selection process that Walgreens went through to sign 15-year leases.

Farrell Granath, Analyst

Great. And also, if you have a few comments on Regal Cinemas.

Kevin Habicht, CFO

Yes. Regal actually just exited bankruptcy yesterday, very recently. We only had one property with them. We're going to come out fine there. We offered a small rent reduction, but in exchange, got the ability to develop an outparcel on that property. We think when the dust settles down the road, we'll be pretty much even in terms of where we were. It was a very small exposure, under 0.1% of rent, and we offered a very modest rent reduction in exchange for this ability to develop an outparcel on the property, which is reasonably well located. We kind of like our odds in all that, but it won't have any impact on our bottom line of note.

Operator, Operator

Our next question is coming from Eric Wolfe with Citi.

Eric Wolfe, Analyst

If I look at your cap rate in the quarter of 7.2%, how wide was the CapEx range around that? And was there anything done, say, north of 8?

Stephen Horn, CEO

Can you say that last part again? You kind of broke up on me.

Eric Wolfe, Analyst

Well, just how—like if I think about the top end of where you're buying is, was there anything done north of an 8? Like I'm just trying to understand how wide the cap rate range was within the quarter.

Stephen Horn, CEO

The bandwidth in our cap rates on that 7.2% is fairly tight. Looking at the overall list, it's probably we had a couple of legacy deals that we split-funded that we priced midway through last year that kind of dragged the fee. We're in the high 6s. The highest cap rate deal we did was kind of mid-7s. So it's a pretty tight bandwidth.

Eric Wolfe, Analyst

Got it. Yes. The reason why I asked the question was I was just curious if you're seeing any pockets of the market that are seeing a little bit more stress, maybe a little bit less access to capital causing acquisition yields to rise there despite a similar risk profile. And then you talked about the—I think you call it the split-level acquisitions. I mean, I guess I'd be curious how you underwrite those relative to a more normal type of acquisition where you're getting all the income immediately.

Stephen Horn, CEO

Yes. As far as the underwriting, we've been doing split-funded for a decade. We were one of the first movers in the REIT industry to do it where we use the current relationship, primarily our tenants, who will identify the site. NNN essentially acts like a bank. We're not taking the risk of development. We like the split-funded deals because there's no developer profit in them. So the tenants' and NNN's interests are aligned to keep rent low. Historically, we always had kind of a 50 to 75 basis point spread over the market. In recent times, that spread has compressed. But we're still seeing kind of a 20 to 30 basis point spread due to split-funded. Again, the rent is typically lower because there's no profit baked in. It's not a developer lease; it's an NNN form lease. A lot of risk mitigation goes into those deals.

Kevin Habicht, CFO

Just a side note on that, these are relatively simple, smaller projects in the scheme of things. They don't go on for years; these are measured in months typically. They get developed pretty quickly. The pricing that we established, we’re very comfortable holding during the construction period, if you will.

Stephen Horn, CEO

One of the mitigants we do in those leases, if they do drag on for some unknown reason, is that we have to close the window, and rent has to commence whether the building is complete or not.

Kevin Habicht, CFO

Related to your question because—and I want to broaden the lens a little bit, just because I think the thought was that the more stressed tenants get under, the higher the cap rate might be an opportunity for higher cap rates for acquisitions. While there’s an element of truth to that, for us, raising the cap rate is not a great way to solve a risk problem in our opinion. That tends to make the risk greater, meaning the cap rate is higher, which means the rent is higher, which means the tenant is less likely to succeed at that location. We've not, over the years, found increasing the cap rate a good way to address risk. A better approach for us is to reduce the proceeds invested in a property and not increase the cap rate materially. We think that way, you end up with a safer investment. Less proceeds in the property means lower rent, and the tenant is more likely to succeed. To the extent the tenant doesn't succeed, that rent can be replaced more easily by the next tenant. We just go at it a little differently. When we see risk out there, we don't run to raise cap rates as a mitigant; we don't think that works in the short term, but we don't see it as a long-term approach.

Operator, Operator

Thank you. Our next question is coming from Spenser Allaway with Green Street.

Spenser Allaway, Analyst

Maybe just following up on those cap rate questions. Just curious now that we've moved into Q3, has anything changed in terms of pricing either by credit or retail industry now that we're somewhat through this quarter?

Stephen Horn, CEO

So, kind of what I mentioned in the prepared remarks. We're kind of seeing that 10 to 20 basis point pricing increase in the third quarter. I'm not expecting it to be any higher, just given the resistance. Primarily, the deal flows for us are coming from the convenience store category and auto service primarily. So yes, we're not seeing any significant increase, but just given the recent Fed rate hike, we deal with sophisticated tenants, and they understand the cost of capital is increasing, so we're able to pass through some of that.

Spenser Allaway, Analyst

Yes, okay. That makes sense. And then again, sorry if I missed this in your prepared remarks, but can you just provide a little bit more color on that disposition you guys disclosed, the 5.1% cap rate, I believe? Again, sorry if I missed it.

Stephen Horn, CEO

The 5.1% was the overall weighted average of the 7 assets, or 5 assets because 2 of them were vacant. We were opportunistic; someone saw some land that they thought was a lot more valuable than NNN thought it was. So we were willing to depart at extremely low cap rate. There's a barbell approach in there; it's the weighted average cap rate. We did some defensive sales in there that were at a 7.5% cap, but then we had a couple in the 4s to bring that down to a 5.1%.

Operator, Operator

Our next question is coming from Linda Tsai with Jefferies.

Linda Tsai, Analyst

You talked about headwinds in '23 to earnings growth, the nearly 10% growth last year, a slowdown in scheduled rent repayments, and capitalized interest being backed out of AFFO. How are you thinking about '24? The comparison will be easier. The rent repayment isn't as much of a headwind. Do you think capitalized interest remains a headwind? Or are there other items to consider?

Kevin Habicht, CFO

We haven't put out any guidance on '24 yet, but it feels like at this point—and I know it's early and the world is changing fast—2024 will return to what we think of as a more normal cadence. There are still some headwinds out there, and the capital markets would be my presumption for '24. I think cap rates will need to adjust some more. We should have worked our way through a lot of the one-time items, both good and bad, by 2024. Hopefully, we can get back to what we think of as a more normal cadence of kind of mid-single-digit per-share growth. If you look at 2022 and 2023 in combination for that 2-year period, we're right at our mid-single-digit growth rate; it just happened that a lot of it came in 2022 and not so much in '23. But if you look at the average of the 2 years, it's kind of what we think of as our sweet spot goal for long-term per-share growth rate. At the moment, 2024 feels like the deferrals will be pretty much all behind us. The capitalized interest may continue because we're still doing more split-funded deals than historically. I said a normal year for us is 20% to 25% of our investments is in the split-funded approach. This year just happens to be closer to 35%. I think that will normalize with time, but we'll see. We don't have visibility on that, so it's hard for me to be definitive with my thoughts.

Linda Tsai, Analyst

And then in terms of the balance of the year for acquisition volumes, do you expect volumes to be evenly distributed between 3Q and 4Q?

Stephen Horn, CEO

We're a very lumpy business. But as I sit here today, yes, I would guess it's a little more even than historically, just given the visibility I have on the third Q.

Operator, Operator

Our next question is coming from Alec Feygin with Baird.

Alec Feygin, Analyst

The first one is, are you seeing any acceleration in either new retailer or developer relationships now that the lending conditions are more difficult?

Stephen Horn, CEO

We're always in the market talking to developers, but our split-funded program is usually with a tenant. What we find is we can talk about a lot of capitalized interest, and we're a little above our historical averages. This is a result of there's not as much M&A in the market, and our retailers still want to grow organically. They're finding good opportunities redeveloping existing sites. That's why we've kind of leaned into it a little more than historically. But no, as far as new development interest is concerned, we typically shied away from it because of the risks involved in those deals, as the developer is negotiating the lease, and they don't look to hold it long-term. Therefore, there are a lot of unknown risks that are very difficult to underwrite within that lease. So we prefer to go back to our tenant relationships and find lots of good opportunities there.

Alec Feygin, Analyst

Outside of the capitalized interest being a drag on FFO, is there any other one-time items in the quarter we should be aware of or going forward?

Kevin Habicht, CFO

No, nothing beyond that. I mentioned the lease termination income amount, which can be lumpy and was elevated in the first quarter and was not in the second. That was kind of—but that's kind of an ongoing thing. And then the deferred rent repayments, which are detailed on Page 13 of the press release, give you all the numbers on that topic. The broad answer to your question is no, we don't see any one-time pluses or minuses going forward.

Operator, Operator

We do have a question from Ronald Kamdem with Morgan Stanley.

Ronald Kamdem, Analyst

Sorry, I jumped on a little late. Can you just take a big step back and give us an update on the watch list, the bad debt that's baked into the guidance, and how that's trended year-to-date? And any sort of particular exposures you haven't touched on already would be great.

Kevin Habicht, CFO

Yes, I think our—as you know, our assumption at the beginning of the year in terms of guidance is we assume we'll lose 100 basis points of rent, or 1% of our rent will be lost for some reason or another related to tenant issues. That's our typical rent loss assumption in our guidance. Historically, we've not realized that level. Normally, it's probably around 0.5%, 50 basis points or less. This year is trending to be normal, meaning probably over the scope of the year, it will be closer to that 50 basis points. Nothing unusual in that regard. Nothing changed in terms of the quantity and quality of the credit watch list. It doesn't feel like there's any significant changes brewing there. We've alluded to two tenants: Bed Bath & Beyond, which filed for bankruptcy—we had 3 stores there, and that was 0.2% of our rent, and we'll have those stores back. Regal Cinema just exited bankruptcy recently. That won't create any notable impact on our revenue or bottom line. Our watch list still has AMC as a question mark, along with some fridges, restaurants, and Rite Aid drug. But those have not changed notably in recent quarters. We'll just continue to monitor those and deal with them as they come up. It's interesting; as we look back over the years, for tenants that filed bankruptcy, on average, they end up assuming 85% of our leases. So bankruptcy is not the end of the world necessarily—it's the rejection of the lease that creates the potential for some lost revenue in the short term. If we get the property back and re-lease it, we're able to recoup the majority of that rent, and we aim to do that with little to no incremental TI dollars or CapEx. All in all, we think we're still in pretty good shape in the credit watch rent loss arena.

Ronald Kamdem, Analyst

And then just the last one—just get a pause on the acquisition market, which obviously $324 million in the quarter and so forth. Just compared to 3 to 6 months ago, is the pipeline building unchanged? Is there more distress, more sale-leaseback activities for people needing capital? Any cap rate commentary would be helpful. Just trying to get a sense of how things are evolving today versus when we were doing this call 3 to 6 months ago.

Stephen Horn, CEO

Based on the bump in guidance on acquisition volume, our pipeline is stronger today than it was 3 to 6 months ago. The sale-leaseback market is still fairly robust. We're not seeing distressed sale-leasebacks because we don't want to do business with companies that are distressed and have to do it. As for the cap rates, we picked up 20 basis points in the second quarter over the first quarter, and we're kind of in the range of 10 to 20 basis points in the third quarter over the second quarter. It's definitely starting to stabilize, not accelerating at the same rate as in the second half of last year. But we feel good about our pipeline; we're getting our fair share of deals. NNN is in good shape regarding meeting its acquisition targets moving forward.

Operator, Operator

Thank you. We have no further questions in queue at this time. I will hand it back to Mr. Horn for any closing comments.

Stephen Horn, CEO

As I stated, NNN, we're in good shape to deliver the remainder of 2023 and position ourselves well in 2024. Thanks for joining us this morning. As summer winds down, we look forward to seeing many of you in person at the fall conference season. Enjoy the day.

Operator, Operator

Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.