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spk00: Welcome and thank you for attending today's Area Community Second Quarter 2023 Earnings Conference Call. My name is JP and I will be your moderator for today's call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star two. I would now like to pass the conference over to Lisa Cohn, President and General Counsel of Air Communities. You may proceed.
spk01: Thank you, JB, and good day. My name is Lisa Cohn, and I am President and General Counsel of Air Communities. During this conference call, forward-looking statements we make are based on management's judgment, including projections related to our 2023 expectations. These statements are subject to certain risks and uncertainties, a description of which can be found in our SEC filings. Actual results may differ materially from what may be discussed today. We will also discuss certain non-GAAP financial measures, such as FFO. These are defined and are reconciled to the most comparable GAAP measures in the supplemental information that is part of the full earnings release published on AIR's website. Prepared remarks today come from Harry Considine, our CEO, Keith Kimmel, our President of Property Operations, John McGrath, our co-chief investment officer and chairman of our investment committee, and Paul Belden, our chief financial officer. Other members of management are also present. All of us will be available during the question and answer session, which will follow our prepared remarks. I will now turn the call to Terry Considine. Terry?
spk05: Thank you, Lisa, and happy 21st anniversary at AIR. Thank you for your leadership of so many functions that are the foundation of what we do. On another call, we should spend more time discussing their importance in all that you do so well. Thank you to everyone on this call for your interest in AIR. AIR was organized to build a business based on its comparative advantage in property operations. Today, I plan to comment on our progress during the second quarter by addressing six subjects with more detailed reporting to follow from my colleagues. Heath and his team delivered solid customer satisfaction, air record customer retention rates of 62%, low controllable operating expenses, and high operating margins. Heath and his team steered a steady course as rent growth cooled across AIR's eight markets. They navigated the turbulence in Los Angeles from the wind down of limitations on landlord remedies and the strike by the Writers Guild, now joined by the Screen Actors Guild. With growth in same store and acquisition portfolios taken together, property NOI grew at low double digits. This will flow through to growth in air FFO, which is already increasing at the highest of the apartment REITs that have reported, pro forma last year's prepayment of the AIMCO note. Its earn in next year will drive 2024 FFO higher. Second, John sold $32 million in lower rated properties to invest in property upgrades with IRRs greater than 10%. Don and Joshua Minix on his team have a pipeline of opportunities to buy additional properties with target returns 200 basis points greater than AIR's cost of capital. Third, Paul kept the balance sheet bulletproof, reducing leverage and extending its duration. There's very little repricing risk in the next two years and almost no refunding risk in the next five. AIR enjoys abundant liquidity. Fourth, Matt O'Grady and Josh Minix again combined to access $600 million in equity capital provided by two of the largest and most sophisticated global real estate investors. Increasing AIR's joint ventures from two to four and increasing assets under management to 120% of AIR GAV. The sale of partial interest is another form of AIR's familiar paired trades. Both investors provided capital, which AIR is used to delever, repaying all debt with an interest rate greater than 4%. The balance will be used to buy real estate with target returns 200 basis points over AIR's cost of capital, and to fund share buybacks as part of a balanced investment program. Both joint ventures include undertakings, to co-invest with AIR in future acquisitions, bringing AIR substantial resources to invest at a time of great opportunity due to frozen transaction markets. Matt expects to sell down the AIR position in some of the existing joint ventures to enhance the expected return on investment on AIR's continued investment and to generate additional liquidity to invest in paired trades. Fifth, the most important fact of today's report And the report of other apartment REITs is that rental rates and inflation are dropping and dropping fast. In some peer cases, new lease rents are negative. This is not a surprise and is consistent with our January guidance, which assumed earn-in and other factors, but no market rent growth. The most important question is, what happens next? The apartment business will return to the blocking and tackling of property operations AIR has demonstrated comparative advantage. For example, with peer-leading retention, we do more of our business in higher-priced renewals with less exposure to new lease rates. For example, we have delivered low or flat controllable operating expenses for more than a decade. The most important opportunity is to acquire properties at distressed prices, distressed by the relative shutdown of transaction markets as sellers try to hold on for lower rates to arrive. Here, AIR has the advantage of access to abundant equity capital and the opportunity to use the AIR edge to improve property operations of acquired properties as demonstrated and reported in our earnings release. There is a related opportunity in the stock market to buy back shares priced at a discount as part of a balanced program of investment, just as AIR did last year when AIR bought back 5% of our outstanding shares. Sixth, AIR has a highly engaged board that is a great resource to me and the entire management team. Of particular note, the board has a shareholder bent and is recommending various amendments to the AIR charter to strengthen shareholder rights. You will see these in the proxy statement for the AIR annual meeting scheduled for September 15th. As we turn to the challenges and opportunities I feel fortunate to work with such a remarkable and motivated team. I thank each of them, my colleagues on the board, my teammates here in the Denver office, and especially my teammates in the field whose good work sets the standard for excellence in our industry. Thank you, thank you. I'll now turn the call to Keith Kimmel, President of Property Operations. Keith.
spk03: Thanks, Terry. The second quarter was good. At a high level, we're seeing solid demand. which has improved further in July. Retention at historical high levels with only 38% turnover in the past 12 months. Rents that continue to increase, albeit at a slowing rate, and are ahead of our plan. Bad debt of 60 basis points, closer to normal because of AIR's continued focus on resident quality and fewer court delays. And revenue ahead of plan resulting in an increase to AIR's operational guidance. We are now more than 80% complete with leasing for the year and have the perspective to share three takeaways. First, the market is playing out a bit better than we anticipated with solid rate and demand. In the second quarter, signed new lease rates were up 6% and renewals were up 7%. leading to a signed blended average increase of 6.5%. Leasing volume in the second quarter was in line with 2022's record level of activity, and July is 10% ahead of last year. By design, occupancy decreased during the quarter, in line with our expectations as we are transacting leases at peak volume. We call this frictional vacancy, which will begin to wane in August, We anticipate occupancy growing by approximately 2% by quarter end. This cadence is predictable in AIR's business and is part of our annual plan. Second, we are seeing financial results tracking ahead on both revenue growth and expense management. In the second quarter, revenue was up 8.8% from last year. Expenses were up 4.1%, with controllable operating expenses up only 1%. As a result, net operating income increased 10.6% from last year. AIR's operating margin was 74.2%, up 120 basis points from 2022, and the highest second quarter margin in AIR's history. As a result of the outperformance to our plan in the first half, we raised our revenue guidance, lowered our expense growth guidance, and raised our net operating income guidance. In a moment, Paul will discuss these in more detail. Third, the air edge continues to be a powerful engine for growth. The implementation of AIR's operating model creates above-market revenue growth and margin expansion. Our acquisitions from 2021, now owned for approximately two years, had revenue up 19% and net operating income growth of up 30.5%. These marks were both better than double AIR's same store portfolio in the second quarter and added 90 basis points to same store revenue growth. As we've implemented the AIR Edge, margins at these communities have grown 420 basis points from 67% during AIR's first quarter of ownership to over 71% today. Our class of 2022 and 2023 communities owned for one year or less had sequential income growth of 3.4% in the second quarter and are expected to contribute revenue and income growth in 2024 roughly double that of air-stabilized communities. Looking ahead, we see a solid start to the second half of the year. Pricing remains solid with July signed new leases up 4.7%, renewals up 5.7%, and blended lease rates up 5.1%. Demand is robust and leasing volume is 10% ahead of last year. July's occupancy is 94.6% on our plan at our seasonal low point by design with peak frictional vacancy. Due to solid leasing velocity and retention, our lease percentage, our leading indicator of occupancy, has increased 170 basis points thus far in July. and points toward our expected occupancy increase of approximately 2% between now and the end of the third quarter. My final takeaway for the quarter is that the business is returning to normal after three tumultuous years. Since 2020, results have been driven by the COVID response, urban or suburban locations, Sunbelt versus coastal markets, and the impacts and reactions to generationally high inflation. These factors are normalizing, and what we're left with is an industry in which operations matter. This is a time when the AIR edge will be increasingly apparent. AIR's demonstrated expertise in combining data, process, and most importantly, people. And our acquisition portfolio drives sustainable, higher revenue growth. And in our stabilized portfolio leads to higher margins and better income growth. This long-term engine makes our portfolio of properties and in particular, our new acquisitions, much more valuable. My thanks to all our team members for your consistently providing world-class customer service, which is the true foundation of the AirEdge. With that, I'll now turn the call over to John McGrath, the chairman of our investment committee. John. Thank you, Keith.
spk06: We've had a busy year on the transactions front. On the sales side, we sold approximately $1.8 billion in 2021 and 2022. at good prices and good markets. It is harder now, but we have completed much of our planned reduction in older properties and have reduced our exposure to regulatory risk and uncertain rule of law. During the quarter, we sold two properties, reducing our capital allocation to New York, and we expect to exit the market entirely through the sale of our loan remaining property in New York City, perhaps before year end. We also formed joint ventures with two institutional investors, to recapitalize 11 properties valued in an aggregate of $1.2 billion, generating approximately $600 million in proceeds to error. These sales of partial ownership, like the sales of 100% ownership, lower our exposure to older properties. We consider the long-term cost of capital on an unlevered IRR basis to be 8%, and near-term cost to be about 6%. but one to down to mid fives by fees and reduced Capdex obligations. We are confident that we can reinvest by purchasing brand new properties in superior locations for returns of 200 basis points or higher. As I've said before, we are spread investors. Our JV partners provide us capital that is not cheap. But given Key's operating skills, we can make good money buying new properties in great locations and and a discounted price due to the owner's interest in refunding or paying down maturing loans. We are in advanced negotiations on opportunities to invest approximately $200 million. If successful, the transactions are expected to close later this year or early in first quarter 2024, with current returns neutral to 2023 FFO and a penny accretive to 2024 FFO, with long-term unlevered IRRs and excess of 10%. will provide additional information if and when the transactions close beyond capital recycling the ventures provide air the opportunity for outsized future growth by co-investing with two of the world's largest real estate investors enhancing our access to more and larger opportunities and enabling us to grow aum and to generate recurring fee income as incremental ffo we are indeed bullish on our growth prospects and are energized and prepared to capitalize on the opportunities being presented in these exciting times. We remain firmly committed to disciplined capital allocation and expect our future portfolio growth will be opportunistic. We will continue to work to improve portfolio quality by allocating capital into well-located, high-quality properties that will benefit from the air edge sufficiently to generate enhanced returns with limited business risk and within our leverage policies. In short, we will continue to look to invest in neighborhoods and addresses that are attractive to high-quality residents and have some protection from competitive new supply. And we will maintain broad portfolio diversification and invest only when returns magnified by the air edge are highly accretive to our cost of capital. With that, I'll turn the call over to Paul Belton, our Chief Financial Officer. Paul?
spk07: Thank you, John. Today I will discuss AIR's high-quality balance sheet report second quarter results and our expectations for the full year, and conclude with a brief comment on our dividend. Their balance sheet is extremely well positioned. Proceeds from two new joint ventures were used primarily to repay debt with an average interest rate of approximately 6%, thus offsetting the loss of net operating income from the sale. As a result, leverage to EBITDA is reduced by six-tenths of a term. The refinancing of higher-cost, shorter-term debt lowers average borrowing costs and lengthens our weighted average maturity. Their leveraged EBITDA is now 5.9 to 1 and within AIR's targeted range. Available liquidity is approximately $2.3 billion. Adjusting for size, this is over three times the peer average. We have a 10-year, billion-dollar financing commitment, which, combined with cash on hand, is sufficient to refinance essentially all maturing debt through 2028, and 96% of our leverage is fixed rate. When combined with no debt maturities until the second quarter of 2025, there has little exposure to repricing risk. A 1% change in interest rates would affect earnings by less than a penny per share per year. Turning to second quarter results. Second quarter FFO of 58 cents per share is up 13.7% year over year, as adjusted to exclude the non-recurring benefit received in 2022 from the AIMCO note prepayment. And second quarter FFO is a penny above the midpoint of guidance, a result of lower than anticipated controllable operating expenses and higher fee income in our same store and acquisition portfolios. Looking forward, As a result of our strong operating performance to date and the success of peak leasing season, we are increasing our expectations for same store revenue growth to be between 7.8 and 8.6%, an increase of 20 basis points at the midpoint, reducing our expectations for same store expense growth to be between 5 and 5.6%, a decrease of 45 basis points at the midpoint, resulting in increased NOI growth to be between 8.6 and 9.8%, an increase of 40 basis points to the midpoint. We are also narrowing our expectations for full-year FFO to be between $2.38 and $2.44 per share, while maintaining the $2.41 midpoint. The one penny of incremental same-store contribution is offset by the expectation of greater than originally anticipated casualty losses. The third quarter, we anticipate FFO per share of 63 cents at the midpoint. The 5 cents of sequential growth is due predominantly to NOI growth in our same store and acquisition portfolios. Inclusive in our full year and third quarter FFO guidance is fourth quarter FFO of 66 cents per share at the midpoint. Similar to our expectations for the third quarter, continued growth in property NOI will contribute significantly to sequential growth. Their business plan results in sequential revenue and, in turn, NOI growth concentrated in the second half of the year. You can see this in our 2019 through 2022 results. For example, in 2022, about two-thirds of our sequential rate growth occurred in the second half of the year. I've noticed this nuance is missed in many sell-side models, where modeled property NOI growth is assumed to grow on a more ratable basis through the year. I encourage analysts to include this cadence in their models to reduce self-created noise in their reports. I know with appreciation that full year consensus FFO is in line with their guidance. One last item regarding our expectations for full year FFO. With the completed joint ventures, we now have approximately $2.2 billion of third party assets under management. As a result, asset management, property management, transaction-related fees are increasing in significance. In 2023, we anticipate these fees, net available costs, will comprise approximately 4% of ARFFO, or approximately 11 cents per share. Of this amount, approximately 6% is by contract and expected to continue for the life of the ventures. The remaining fees are specific to 2023 activities. I note that we earned similar fees in 2022 and we anticipate a similar amount will be earned in 2024 and beyond. This income was anticipated in setting 2023 guidance, and our expectations are largely unchanged from the beginning of the year. Last, the Air Board of Directors declared a quarterly cash dividend of 45 cents per share. On an annualized basis, the dividend reflects a yield of over 5% based on the current share price. Additionally, the tax-efficient nature of ARIS dividend allows taxable investors to retain 40% more of its dividend as compared to peer average. With that, we will now open the call for questions. Please limit your questions to two for time in the queue. Operator, I'll turn it over to you for the first question.
spk00: At this time, I would like to welcome everyone to the Q&A session. If you wish to ask a question, please press car 1 on your telephone keypad. Your first question comes from the line of Eric Wolf from Citi. Your line is now open.
spk08: Hey, thanks for taking the questions. Paul, you mentioned that the sequential increase was due to sequential NOI growth in the third quarter and then in the fourth quarter. So just to be clear, none of it or very little of it is due to any additional fees in the second half versus the first half. So let's call it $0.05 a transactional fees, if you will. They're spread evenly through the year. It's not going to be the jump that you see in the back half.
spk07: Eric, you do really good work. In the first half of the year, we had about $0.055 of net fees. For the full year, we expect $0.11. The contribution is rattle, first half versus second half. What's really driving that second half FFO growth is incremental property and OI contributions delivered by that. Both are same-store portfolio, which is growing at a rate highest amongst the peer groups, but more importantly, the acquisition portfolio that's growing at a rate about double our same store pool.
spk08: Got it. Okay. That's helpful. And then some of this obviously is going to be determined by the increase that you see in occupancy. You mentioned that the lease percentage is up 170 basis points. It gives you confidence that you're going to see that 200 basis point increase increase. in occupancy by the end of the quarter. But if you see that and when you see that, can we also see that rate stabilizes at that point or potentially pre-accelerates? Or are you expecting more of a normal seasonal decline, even though you have that occupancy that's risen back up?
spk03: Eric, it's Keith. And thank you for noting it. This is the way that we've structured our business for more than a decade. In fact, we take advantage of this peak season and the peak demand and then show this acceleration that comes in the second half of the year. And so what traditionally happens is this supply and demand starts swinging in our favor with our occupancy building. I don't want to get ahead of myself and call out exactly what the rates will do, but we anticipate that we'll be in a stronger position month by month as we find our way to the balance or to the end of 23.
spk02: Okay, thank you.
spk00: Your next question comes from the line of Rob Stevenson from Danny. Your line is now open.
spk04: Good afternoon, guys. Keith, how much of the 1.2% of gross bad debt is California and any of the other markets comprising a disproportionate amount?
spk07: Rob, this is Paul. I'll start and see if Keith has anything to add. One thing that we've talked about in meetings over the quarter is how we have been quite successful in turning over our resident base in California, and particularly in Los Angeles in particular, where we had a large percentage of our delinquent residents. As we look at where we are as of the end of the second quarter, many, many of those delinquent residents have now left portfolio which is in part contributing to our occupancy levels at this point in time so at this point what I would ask you to focus on on bad debt is not necessarily the locations of the folks but more so focus on the fact that as we analyze our portfolio we have about the same percentage of our population base that is becoming delinquent but because of court delays and other processing delays we have a larger number of individuals that are delinquent and that's what's contributing to that relatively high gross bad debt level of 1.2%. As those court backlogs are worked through and are reduced, we expect that gross bad debt number to continue to decline through the balance of the year.
spk04: Is that really a back half of 23 or is that a first half of 24 to get through that backlog?
spk03: We've worked through a lot of it, Rob, already. There's still some to go. We have about another 80 residents, but, you know, to kind of work through that we would say is in the second half. But if you start with the beginning of the year, we were north of 250 that we were navigating through. So we've worked through a lot of it, and we're in good shape, and I think that not only will we get a little tailwind towards the end of this year, but it'll build into 2024.
spk04: Okay, that's helpful. And then, Paul, you talked about on Eric's question about the build from second quarter to third quarter, but what gets you above the midpoint? What gets you at that 64 to 65 cent or even higher of FFO per share in the third quarter? What's the main delta that gets you higher than the midpoint?
spk07: Yeah, I think the delta is how quickly we're successful at continuing to build occupancy. Keith laid out a target of our expectations, but internally we want to do better. So I think that's the largest lever that we have.
spk04: Okay, that's helpful. Thanks, guys. Have a good weekend.
spk07: Thanks, Rob.
spk00: Your next question comes from the line of Handel St. Just from Mizuho. Your line is now open.
spk09: Hey, good afternoon out there. So, Paul, I wanted to come back to the fees, the 11 cents you mentioned. Did I hear you right in just saying that all of that was contemplated into the initial guide, or at least how you're thinking about the year when you're setting the budget? And then of that 11 cents, how much is sustainable from here? I'm trying to understand what the impact of that could be in 2024. And if also, by the way, included in your NY line. Thanks.
spk07: Yeah, Handel, thank you for the question. I did indicate, and you did hear me correctly, that this contribution of fees from services provided to third parties was anticipated in our annual plan for the year, so that's not a surprise. As far as breaking the 11 cents down between items that are by contract and by right as part of our joint venture agreement, that's about six cents of the 11 cents, and so the remaining five cents is related to 2023 activities. And so just let me give you a couple examples of what those are and what we have done in the past, because this is not a new phenomenon for us or for our activities. In November 2022, when we sold a portfolio in New England to a small regional operator, we provided asset management services for about six months post-close to help that operator integrate those properties into their platform. The second example is that oftentimes Keith and his team will start to provide property management services in advance of closing on a future acquisition. We think this is a win-win for us because not only do we get to earn property management fees, but we get to start the process of errorizing the communities even before our ownership begins. And so that just accelerates the incremental growth that we expect to achieve through these acquisitions. And so while these are all episodic in nature and tied to specific transactions and specific years, what we believe and what we're confident in is that this level of contribution, you know, not only did we achieve it in 2022, we've earned half of that amount in 2023 and have strong visibility in the remainder of the year. And we feel good about this continuing in 24 and into the future.
spk09: Got it, got it. And just to be clear, that is in NOI?
spk07: As far as where it's recorded, the costs are in a couple different places on our supplemental Schedule 2. The majority of the costs are either included in our net G&A or net property management expenses and another. So if you want to go through the details, I'm happy to do that offline.
spk09: Okay, I'll follow up. Keith, a quick one for you. What are the blended lease rate assumptions for the second half of the year in order for you to achieve a 2% to 2.5% earning at year end? And would you also talk a little bit about what the market rate growth expectations for your market is for the back half of the year, even though I don't think you include that in your outlook? Thanks.
spk03: All right, Hendel, when we look at the second half, it's actually about somewhere between a mid-four to a five blend will get us to the number that we have put out as far as the midpoint of revenue guidance. And then as far as market rent growth, we don't have anything that is predicted in there. But what we would say is that going back to Eric Wolf's question about whether or not we see some acceleration in the second half, we traditionally see when we're building that acceleration of occupancy, we start getting some strength. And therefore, that also helps us build some of it. I think the most important thing is to be thinking about that 80% of our business is done And that 80% is already starting to earn in. And, of course, that will be the earn in that goes into 2024.
spk09: That's very helpful. Can I sneak one in? Lost to lease, where that is right now and maybe where it's highest and lowest? Thanks.
spk03: It's running about 2% today. But I think that this is, you know, there's a lot of questions that have come over the past few years on lost to lease. I want to help just sort of define it. Every time we transact a new lease, we reprice it at the market, which it is today. So if I lease an apartment today at full market, it starts at zero, and then it starts building again as you get forward. Importantly, it's about focusing on as it grows, and when we get to the end of, call it December, that's when the relevance of how much that has grown really becomes impactful, because it gives us the insight of how we'll be able to take advantage of it and recapture as we get into 2024. Right now, as you can imagine, I talk about having 80% of our leasing activity. We're repriced. We're recapturing all those losses to leases. We're resetting them all again, and now we're rebuilding them again. So most importantly is to think about we're at 2% today, building with strength and power going forward. And when we get to December, that's when it's most important to look at that number.
spk09: Very, very helpful. Thank you.
spk00: Again, as a reminder, if you would like to ask a question, please press star, then the number one in your telephone keypad. Your next question comes from the line of John Kim from BMO Capital Markets. Your line is now open.
spk10: Thank you. I had a couple questions on the new disclosure you provided on your acquisition portfolio, the class of 21 and 22-23. So the first question is on the class of 21, can you remind us which markets you acquired that year and you know, what may have driven the 19% revenue growth a couple years later. The second part is on the 22-23, what were the blended lease growth rates you achieved in the second quarter and July to date, if you have that?
spk07: John, I'll start with the first question and then turn over to Keith to talk about blended lease rate growth. Our class of 2021 is comprised of five properties. Four of the five are located in the Washington, D.C. area, and the fifth is located in southeast Florida. As we call that on our release, those properties have performed very well. Keith quoted the contribution to same-store growth. To just give you another data point, our NLI growth benefited by about 170 basis points in the second quarter from the contribution of these properties. As I mentioned earlier, we anticipate similar levels of contribution as we go forward with our acquisition portfolio. A powerful lever for growth for us.
spk03: And, John, as we look at some of those blended lease rates, they're sort of similar to what we've seen in the same store. But what I would say is important to know is there's a whole bunch of other things that come along with that. Of course, our lease architecture, a variety of different parking initiatives and non-smoking and things that really we repopulate with a different quality of residence. So we focus very much on a resident who wants to stay with us for long term. in which we get pricing power from retention, and that's really where the emphasis starts really building, and then that gives us the pricing power as we look forward.
spk10: Will you be providing this disclosure going forward?
spk07: Yeah, we would intend so, if it's helpful.
spk10: Okay. On Miami, you had a pretty significant drop in occupancy, 220 basing points during the quarter. The market, obviously, with a lot of new supply, I know you're pushing rents pretty hard. I guess my question is, are you still sending out renewals in that 15% range in Miami? And can you provide your lease rates in Miami currently?
spk03: Sure, John. So the first is that when we look at the occupancy, I mean, a couple of things I would point to. The first one is that We've had an ongoing kitchen and bath program at a couple of our very particular properties at Bay Park and Flamingo, and they will fluctuate up and down as we're taking advantage of some of those units to take advantage of the opportunity to raise the rents. When we look at the renewal rates and the rates in general in Miami, they are cooling, and so I would say that they're not necessarily going out at those 15s that we were seeing in the first half of the year. They're more in the high single digits. And as we look into our blends that are occurring today, there is a similar type of range in the mid-single digits.
spk10: And what about the least rate? I know you quoted it on the portfolio overall, but what is it in Southeast Florida?
spk03: I have to see if I have that number on hand here, John. I don't know that I have it right here. Okay. You know, I don't have it, but I can follow up with that exact number for you.
spk09: Great. Thank you.
spk00: There are no further questions at this time. I will now turn the call back over to Terry Considine for any additional remarks.
spk05: Well, thank you very much for your interest in AIR. Given the questions, I'd just like to emphasize two points. One is this second half ramp reflects 80% of the leasing already done. So there's questions, of course, about what's happening in the market today. We've disclosed pretty well what our expectations are. But I want to encourage you to think about the fact that a lot of it is just the earn-in or going forward of work that's already been accomplished. Secondly, the questions about occupancy need to be put in the context of the cadence of air property operations. They're not a sign of weakness. They're a sign of turnover. And it's important that the market understand that or they'll give exaggerated importance to a detail. Beyond that, if you have further questions, please give us a call, either me or Matt O'Grady or Paul Belden, and we'll do our best to be completely transparent. Thank you very much. Have a great weekend.
spk00: This concludes today's conference call. You may now disconnect.
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