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spk10: Hello and welcome to Broadstone Net Lease's third quarter 2023 earnings conference call. My name is Cole and I'll be the moderator for today's call. Please note that today's call is being recorded. I'll now turn the call over to Mike Caruso, Senior Vice President of Corporate Strategy and Investor Relations at Broadstone.
spk01: Please go ahead.
spk08: Thank you, operator, and thank you, everyone, for joining us today for BroadStone Net Lease's third quarter 2023 earnings call. On today's call, you will hear prepared remarks from CEO John Marrana, President and COO Ryan Albano, and CFO Kevin Fennell. All three will be available for the Q&A portion of this call. Before we begin, I would like to remind everyone that the following presentation contains forward-looking statements. which are subject to risks and uncertainties that can cause actual results to differ materially due to a variety of factors. We caution you not to place undue reliance on these forward-looking statements and refer you to our SEC filings, including our Form 10-K for the year ended December 31st, 2022, for more detailed discussion of the risk factors that may cause such differences. Any forward-looking statements provided during this conference call are only made as of the date of this call. I'll now turn the call over to John.
spk02: Thank you, Mike, and good morning, everyone. In what continues to be a challenging and dynamic net lease and capital markets environment, I am pleased to report another strong quarter of results. As you have heard us say consistently throughout 2023, we believe our prudence and highly selective approach to capital allocation is the best path forward in our mission to maximize long-term shareholder value, and our third quarter results and slightly revised guidance for 2023 reflect that. While we are maintaining our AFFO guidance range, of $1.40 to $1.42 per share for the year, we are slightly adjusting our investment, disposition, and G&A guidance. More to come from Kevin on this. Notwithstanding the difficult environment, our pipeline of potential investment opportunities continues to grow as we evaluated over $10 billion in potential new acquisitions. Our third straight quarter of sourcing above average volumes. But while sourcing and underwriting remained highly active, the number of investment opportunities that met our buy box were minimal. As interest rates expanded nearly 100 basis points throughout the quarter and the dislocation between public and private markets continue to widen with new investment cap rates lagging the pace of interest rate increases. Of particular note, we recently walked away from a large significant late stage investment opportunity as we could not agree on final pricing terms amidst the rapid increase in rates. The lag we are seeing in cap rates and risk-reward trade-offs has been a persistent theme for this year, and the recent run-up in interest rates and treasuries only exacerbated the disconnect further. Despite that, we remain opportunistic in sourcing investment opportunities and are committed to the prudent, patient, and disciplined capital allocation strategy we have employed throughout 2023. We continue to believe that strategy will be key to avoiding missteps in such an uncertain market and providing long-term shareholder value. Given the current investment environment and our highly selective strategy, our third quarter results were driven by continued solid portfolio performance and incremental asset recycling during the first half of the year. Our existing portfolio of 800 assets with 220 unique tenants who operate across 54 different industries and our best in class diversification have positioned us to provide durable and consistent cash flows across any market cycle. We continue to view our tenant and industry diversification as a key differentiator for B&L, which, when combined with top-tier annual rent escalations of a weighted average 2%, provides significant downside risk mitigation benefits, especially in difficult or uncertain markets like this one. Our real estate portfolio, which is predominantly leased to industrial and defensive retail and restaurant tenants, continues to perform exceptionally well. has evidenced by 99.9% rent collections during the third quarter and 99.4% occupancy as of September 30th, 2023. As of quarter end, only two of our 800 properties were vacant and not subject to a lease. We have seen corporate or site level improvements in many of our headline watch list tenants with the main lingering issue in our portfolio continuing to be Green Valley Medical Center. Similar to our update last quarter, the tenant continues to fail to meet certain milestones as defined by our agreement. Based on the tenant's lack of progress, we are no longer anticipating operations to commence in Q4 of this year. While we have yet to receive rent that commenced on October 1st, the tenant continues to maintain the property and cover carrying costs. We are closely monitoring their progress towards reopening the hospital, but we have also begun evaluating all potential alternatives and may look to bring a clear end to the outsized distraction that this single asset has cost our company for over a year. As noted in my comments earlier, We had only a limited number of investments meet our criteria during the quarter, with the majority of investments driven by development fundings and revenue generating CapEx. Partnering with current tenants and developers has created additional ways to add value and continues to supplement our more traditional investment sourcing efforts. Our team remains focused on these relationships, along with establishing new partnerships, further diversifying our business. Despite the challenging lending environment, we have continued to have success selling select assets that either possessed a credit and or residual risk throughout the quarter. These sales continue to provide benefits in both mitigating risk within our current portfolio while also building dry powder to be accretively recycled when the time and investment are right. The resiliency of our portfolio paired with our flexible and fortified balance sheet gives us great confidence as we navigate this higher for longer interest rate environment. We ended the quarter at 4.9 times leverage on a net debt to annualized adjusted EBITDA RE basis, giving us ample liquidity and flexibility to deploy capital when an investment opportunity meets our criteria. I've said this before, and I'm sure I will say it again. The decisions we made throughout 2022 and year to date in 2023 continue to put us in a position to make decisions that we want to, not decisions that we have to, which remains an important distinction in today's real estate market. In a higher for longer interest rate environment, where the outsized growth of the post-GFC years will be difficult to achieve, operational expertise, financial flexibility, solid portfolio performance, and durable cash flows will be key to success. And you have seen all four of those things from B&L throughout this year, and you will continue to heading into 2024. With that, I'll turn the call over to Ryan, who will provide an update on our portfolio.
spk09: Thanks, John, and thank you all for joining us today. As John noted, our efforts in disposing of select assets that either possess a credit or residual risk remain successful throughout the quarter. We sold two properties for gross proceeds of $62.3 million at a weighted average cash cap rate of 6.2%. Year to date, inclusive of asset sales closed since quarter end, we have sold 11 properties for gross proceeds of $189.1 million at a weighted average cash cap rate of 6% on tentative properties. We intend to continue to opportunistically execute on asset sales in the fourth quarter and into 2024. On an external growth front, price discovery in the transaction market persists. The upward trajectory of treasury yields continue to influence the capital allocation decisions of buyers at a more accelerated pace than the price expectations of sellers. leading to widening of bid ask spreads and an overall decline of the transaction volume in the broader market. As John highlighted, we remain focused in our efforts of sourcing the right investments and highly selective in the pursuit of opportunities as the market continues its price discovery. Our investment activity during the quarter consisted entirely of fundings related to UNFI and incremental revenue generating CapEx. UNFI, our previously announced $204.8 million bill to sue transaction remains on track to open in the third quarter of 2024 with rent commencing no later than October of next year. Year to date, we have funded approximately $58.4 million and expect to fund an additional $37.5 million throughout the remainder of the year. We will continue to look at similar opportunities to partner with developers in this capital-constrained environment while remaining highly selective and cautious as the macro environment evolves. From a watch list standpoint, similar to last quarter, we still do not see any notable overarching thematic trends across our portfolio. Specific assets such as Red Lobster, Carvana, and Green Valley Medical Center remain a key focus. While we recognize that Red Lobster continues to evaluate ways to improve the company's overall operating performance, site-level performance across our sites continues to improve. We remain focused on these assets and will look to confirm these trends over the next several quarters, beginning with Thai Union's third quarter results, which will be released next week, and through ongoing corporate and site-level financial reporting. As for Carvana, we remain confident in our investment's defensive positioning driven by both the mission-critical nature of our industrial sites, as well as the longer-term fundamentals in the sub-market in which they are located. As we highlighted last quarter, we are encouraged by the steps they took during the second quarter to increase the company's financial flexibility and its planned path forward. With that, I'll turn the call over to Kevin for commentary on our financial results for the quarter.
spk12: Thank you, Ryan. Turning to our financial results, during the quarter we generated AFFO of $70 million, or 36 cents per share, an increase of 1.3% in per share results quarter-over-quarter. Results were largely driven by same-store portfolio growth and incremental asset recycling in the first half of the year. Additionally, we incurred $7.9 million of cash G&A, which tracks slightly better than planned. We once again ended the quarter in a strong and flexible financial position despite no capital markets activity. Our success in disposing of selective assets allowed us to further reduce the balance on our revolver by $49 million in a quarter, resulting in more than $925 million of remaining capacity. From a leverage perspective, John mentioned we ended the quarter at 4.9 times, down slightly from five times at the end of last quarter. Given the current market dynamics, it is worth reminding everyone again that our mostly fixed rate debt capital structure has insulated us from the surge in interest rates and the higher for longer expectations. At our quarterly meeting, our Board of Directors approved a 28.5 cent dividend per common share in OP units. This is a 1.8% increase compared to last quarter and a 3.6% increase over the dividend declared in the fourth quarter of 2022. This quarter's increase marks our sixth semiannual dividend increase since our IPO and is payable to holders as of December 29th, 2023, on or before January 12th, 2024. The dividend remains well covered and aligns with our targeted ASFO payout ratio in the mid to high 70% range. and represents an attractive dividend yield relative to many of our peers. Finally, we are maintaining our 2023 per share guidance today with an ASFL range of $1.40 to $1.42 per share. We've been navigating this year with a focus on strong operating performance and self-financing our capital deployment. As John alluded to in his comments, we are revising our investment volume from between $300 and $500 million to up to $250 million for the full year of 2023. As Ryan talked about our success on the disposition front, we're also revising our total disposition volume from between $150 and $200 million to approximately $200 million. Finally, G&A has been well controlled throughout the year, and as a result, we are revising cash G&A from between $32 and $34 million to between $31 and $33 million. Please reference last night's earnings release for additional detail, and we will now open the call for questions.
spk10: Thank you. If you'd like to queue for a question, please press star followed by 1 on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by 2. Again, to queue for a question, please press star 1. We'll pause here briefly as questions are registered. Our first question comes from Mitch Germain with JMP Securities. Your line is now open. Thanks for taking my questions. Appreciate it guys.
spk03: Nice quarter. Um, this is the second quarter in a row where we've seen, um, a bit more of industrial, um, on the disposition front. And I'm curious, is it, I know that you guys have talked about, you know, specific assets and what the requirements are for you to sell, but is it also a little bit where the demand is in the market for sales?
spk02: Yeah, it's a little column a little column B. Um, Thanks for joining, Mitch. We certainly have continued our trend this year of looking at dispositions where we continue to have either credit or lease rollover risk. And so we're looking to do risk mitigation at the same time that we're trying to generate proceeds. And to hit the old cliche, in many cases, real estate's a local game. And so when we're looking at where we have an opportunity to sell something, particularly when more than 50% of our portfolio is made up of industrial assets, there's going to be some industrial assets that make their way into it. there's still continued to be some good demand for those assets and where we've got some concerns, we're happy to move some of those along.
spk03: Great. And John, the runway. So if I think about, you know, obviously you guys have fantastic balance sheet, lots of liquidity, but if I'm thinking about your funding, you know, growth heading into, you know, 4Q in 2024, you know, how much of a, you still have a pretty decent runway in terms of the ability to sell properties in this market.
spk02: Yeah, we feel pretty confident about it. Our current view, and you can call it conservative, but our view is that 24 is going to look a lot like 23. We're not anticipating that the equity markets are going to turn in a way where we're going to be raising significant amounts of equity capital, if at all. So we'll continue to look to self-fund and control what we can control. And so we've got an ample pipeline of opportunities that we're evaluating on the disposition front. A handful of the things that are in the same vein that we looked at this year, looking at some incremental reductions in health care exposure, uh and so we'll continue to do that and prepare ourselves for another run at 24 like we did for 23. gotcha it seems like you've got some frustration regarding green valley you know where do we hit a certain head where you start to evaluate alternatives there we're already there um green valley as i said in my prepared remarks has been the single largest distraction that we've had as a company over the last year Where we stand today, we have 800 properties and the large majority of my time and almost every conversation I've had externally has been focused on one of them. So we have been absolutely hopeful and supportive of our operator and trying to get them up and running. We'll continue to do that. And, but at the same time, uh, this has been an outsized distraction. It's 0.8% of our ABR. So it's immaterial overall. We did not include any rent in our 23 guide. We will not be including any rent in our 24 guide. So it doesn't have a material impact on how we're thinking about financial results for this year or for next year. And it's time to look at all the options we have to clean that up if we can. Is it a labor issue? There's a host of things related to that particular asset, both the market itself and as well as sort of structural problems that you would see if you're looking at that type of hospital throughout the country. We're lucky to have a member of our board of directors serve as one of the regional CEOs for one of the largest hospital systems in the country and speaking with her about the difficulties that sort of regional community hospitals like Green Valley are experiencing throughout the country and the number of ones that have shut down even in the last 12 months has been very helpful for us in understanding the sort of risk profile of this asset and sort of helping confirm our view of where we need to take it.
spk01: Thank you. Much success, guys. We appreciate it.
spk10: Our next question is from Eric Borden with BMO Capital Markets. Your line is now open.
spk07: Hey, guys. Good morning out there. Maybe just starting with Green Valley, you know, what was – just given the fact that they didn't pay rent in October, what is the expected drag on AFFL and 4Q? And then maybe could you just talk about some of the different options that you're currently evaluating as it relates to the assets?
spk02: Sure. Thanks for joining, Eric. No impact on AFFO. We had already built into our guide that they weren't going to be paying rent and they are covering all the carrying costs as well as maintaining the property. So there's no leakage for us with respect to the asset right now. So there's no impact on AFFO. And from a sort of opportunity standpoint, they still are working hard to try to get up and running. And so there's a good chance that that's what happens. But in our
spk07: focus on trying to minimize the distraction caused by the asset we have worked to engage local brokers to help us evaluate possible re-tenanting options as well as to sell the asset so we're looking at all possible options here okay that's that's very helpful let me one on carvana i know we we've talked in the past and you mentioned your prepared remarks how it's you know crucial to their operations you know they recently received a re-rating and the stock's up 500 percent the year to date but on the other hand you know Car loan defaults are on the rise, just given the weakening consumer. You know, how are you thinking about your exposure to the auto industry at this time?
spk02: Yeah, I mean, it's great to see Carvana have the improvement that they've had this year. It makes us feel better about it. But we keep coming back to that is a real estate play at heart. You know, it's 140 acres of graded industrial land and a great industrial sub market outside of Indianapolis that has a lot of potential uses to it. So the residual value there was key to how we thought about making that investment. And it's key to how we think about if there ever were to be something that happens with Carvana, where either they go through a restructuring and they go through a liquidation, we feel comfortable that we'll be in a pretty solid position to maintain the value.
spk07: Okay. That's helpful. And then one last one, maybe just on the acquisitions under control, you know, what's, what's kind of the breakout there, the 76.1 million, is there any developments in that pool? and what is the expected pricing on those assets?
spk09: Sure. The breakdown there is primarily leaning towards industrial. I'd say there and upward, if you look further up the pipeline, not under control, there are certainly development opportunities that we're looking at. But it's predominantly industrial weighted with a little bit of retail mixed in there as well. And then in terms of economics, you know, we're looking at things certainly north of 7%. Okay, that's helpful.
spk05: Thanks, guys.
spk01: Our next question is from Spencer Allaway with Green Street.
spk10: Your line is now open.
spk00: Thank you. You talked about a widening bid-ask spread. Can you guys just comment on the magnitude of the spread you're seeing currently, and are there any property types or industries that stand out as having a larger than average bid-ask spread?
spk09: Sure. I'd say we've seen the bid-ask spread probably widen out in some cases, you know, widen out maybe 25 bps, maybe even 50 bps. What I would say is there's certainly less bids on deals, and those bids are a range in terms of what the economics are that buyers are looking for. I'd say I've seen things probably about as wide as 200 basis points from top to bottom of the bid range. Obviously, there are other terms involved that are at play that sort of drive some of that spread differential, but that's probably the widest I've seen it in quite a long time.
spk00: Okay, that's really helpful. And then do you guys have a sense of what your AFO growth would be next year absent any external growth?
spk12: Yeah, I think I'd point you towards a low single-digit figure based on our embedded lease bumps of 2%. You know, run rate for us is in that low single-digit growth.
spk00: Okay, great. Thanks.
spk12: And maybe Spencer, I'll finish the question if you step forward a little bit more on run rate given UNFI's impact. When you think through that starting in October of next year, you know, that number takes a decent bit higher for 25.
spk05: Thank you.
spk01: Our next question is from Keebin Kim with Truist. Your line is now open.
spk06: Thanks. Good morning. Just going back to Green Valley. Can you just talk about how that, how deep is that potential pool of different operators that can operate that hospital? And secondly, you know, how is a nurse's strike indirectly or directly impacting potential operations there?
spk02: I'll take the second part first morning Cuban. They are having a, any sort of difficulty that you can imagine in terms of getting this thing up and running between the licensing process that they have to go through between looking at staffing, pharmaceutical licenses, financing on these things and all sorts of stuff. So I wouldn't attribute the delay to any one particular thing. Certainly nurses strikes that are happening aren't helpful for the healthcare system generally, and certainly aren't helpful for folks that are trying to get a new hospital up and off the ground. To take the first part of the question, this isn't a huge pool of potential operators that can come in there. Between state licensing as well as population densities and the way that the healthcare Our production system is surrounding this area. You know, there's only a handful of players that could potentially have an interest in it. And, you know, it may need to be something that you rethink the use of the physical space where maybe it's getting cut up into a different direction. You've got multi-tenants that are potentially be in there or someone who thinks about using a portion of it. There's a whole lot that we have to think about and we're still in that learning phase. So more to come.
spk06: And you have 18% of your portfolio dedicated to healthcare. And, you know, the nurse's check may not impact operations directly, but it does cause a higher benchmark for wages. Are you seeing kind of follow through impacts on perhaps the cost structure for your health care tenants?
spk02: Not at the moment, but I think it's also important to dive into the particulars of what our health care portfolio is. You know, you can't paint with a broad brush in the 18% that we have. About 7% of that's clinical, and the clinical assets would have nurses on staff and on site. And so, you know, maybe there's a little bit of a read through to those assets. But then the other 11% of our ABR is a variety of things, including what would, you know, traditionally be considered med tail type assets, plasma centers, dialysis. We have a decent chunk that's committed to veterinary services. which wouldn't have those types of issues. And then we also have some sort of more R&D-type facilities that would be included in our healthcare bucket. So you can't sort of look at it as a monolith, and it's a fairly small percentage that we do have, and there's not any read-through that we have at the moment on that type of a nurse's strike issue.
spk06: Thank you.
spk10: Our next question is from Michael Gorman with BTIG. Your line is now open.
spk11: Yeah, thanks. Good morning. John, maybe just stepping back for a second and talking about dividend policy. Obviously, a nice little increase in the quarter, stocks yielding about 8% in a market that seems to want to pay more attention to dividend yield. But given what we're seeing just generally in the cost of capital environment, Mike Nygren, How are you thinking about balancing continuing to kind of increase that payout to investors versus you know retaining what is probably your cheapest cost of equity capital here, so how are you, how are you balancing out the payout versus retained cash flow for future growth.
spk02: Mike Nygren, yeah good question more Mike it's something we talked about a lot and. When you look at the hard dollars, the total amount of increased dollars that are going to go out the door as a result of this dividend increase, it's about a million dollars. So it's not a huge amount, but it is something, it's a million dollars that could be applied somewhere else from a capital allocation standpoint. Where we came down on was that in the current environment, as I sort of mentioned in my prepared remarks, the outsized growth that the net lease sector has experienced in the post-GFC world for that 15-year period or so uh, feels more and more difficult. Um, that's not to say that it's not going to come back and it's unlikely, but at the moment, you know, gone through the entirety of 2023, we're looking at 24 and, uh, us and I think a lot of our peers are looking at 24 being very similar to 23. And so in a period when you're not seeing the type of external growth and the outsized return expectations that come from that, uh, which is fed by a low interest rate environment and much better cost of capital than what our industry is currently experiencing, um, We turned and looked at, okay, then we need to do better as real estate operators. And as I mentioned in my remarks, operational expertise, financial flexibility, solid portfolio performance, and durable cash flows are going to be key to success in the short term and potentially longer term if you don't see a significant change in cost of capital. So we looked at that and we thought about how do we provide the best possible value for our shareholders and the highest possible total shareholder return, continuing to provide them with solid dividend growth was a key part of that. So that's where we came down on that decision.
spk11: No, that makes sense. And I agree. And I'm curious, as you think about 24, and you look at the opportunity set, obviously, as you mentioned, Broadstone's got some skill sets here in terms of operations and redevelopment and development. Understanding that the cold storage facility is a pretty big lift through October. Are you seeing alternative opportunities to step into broken development, step in on sort of MES financing on properties you'd ultimately like to own at the end? Are you seeing any more unusual opportunities away from the regular way acquisition market that's pretty slow?
spk02: Yeah, no, absolutely we are. And that's actually the place where we continue to see what we think are the best possible opportunities. The regular way acquisition market has been slow to adjust to rising interest rate and treasuries and cost of capital reality for people that are on the buy side, particularly now that you're seeing a full drop off of the PE buyer and the 1031 buyer. You know, there's a much smaller buyer pool than there was before. And as Ryan talked about earlier, that bid ask spread is still pretty high and sort of the traditional market. But where you see a lot of difficulty for folks right now is in those developments, is in those sort of creative capital allocation decisions. where they are having difficulty finding their traditional sources of financing because the bank real estate lending market is completely seized up. So that's a great opportunity for us to step in and provide them with a unique source of new capital. And then we're just in the process of looking at those, evaluating them, trying to make sure that those fit within the net lease wrapper and will be something that is readily digestible by the market and not something too far afield.
spk11: Great. And then just last one for me, I'm triangulating a few of the comments that you had in prepared remarks and prior questions. You mentioned the deals kind of not fitting within the buy box, mostly from the cost of capital side, but then also with the dispositions, kind of some Justin Cappos, Credit risk or some tail risk on the tenant side i'm wondering if, given what you're seeing on cost of capital if you've adjusted your tenant credit by box in terms of what would actually make you comfortable in bringing new tenant credit on board.
spk09: James Meeker, Sure, I would say yes. James Meeker, there's not a one size fits all. James Meeker, In terms of how we're thinking about that today, however, we certainly have. adjusted the way that we're looking at it and how we're thinking about bringing potential new credits online. In addition to that, I'd say that also goes for the real estate fundamentals. I would say we always look for a balance between the two, but we're in an environment where we've got pricing backing up and we've got financial strain across the market in general. And how long does that persist is a good question at this point. So we have certainly tightened up the way that we're looking at things. And I think you see that in terms of our selectiveness.
spk11: Great. Thanks for your time, guys.
spk10: Our next question is from Ronald Camden with Morgan Stanley. Your line is now open.
spk04: Hey, morning, you have Jenny on for Ron. I just have two quick ones. The first one is if I dig into your pipelines, I see like Q3 investment is very light. So in this higher rating environment for Q4, if you want to compare with Q3, are your real conversations going on right now still kind of in the same pace or every part of you rather want to wait until like early 2024? Like any color on the pipeline would be helpful.
spk09: Thank you. Sure. I guess I'd sort of zoom out for a second. I'd say that if you look at Q3 of this year versus Q3 of last year on an overall transaction closing basis for the market as a whole, not just us specifically, it's down about 66%. So I think that tells pretty much everything you need to know. From our perspective, we're looking at it being very selective. We've had a lot of commentary around that. As we look forward here, we're looking for prices to continue to adjust since late summer, we've seen a hundred bits of change in the treasuries. So just the risk free rate alone, pushing the change in asset pricing or asset pricing expectations from a buyer perspective, and we're being highly selective. So I think what you're seeing is probably yes, a light Q3, but we have a number of opportunities that we're looking at today that has either been broken in the past, and we're looking at ways that they're good deals just capital behind them is no longer there, but they take time to sort of come through the finish line.
spk04: Makes sense. The second one is on your cap structures. I hear you said you're not planning to use ATM programs in the near future, but as you mentioned as well, the cap rates continue to go up, not only from acquisition front, but also from disposition front. Just curious if cap rates continue to go up, how do you measure whether you want to rather sell assets to recycle to fund your acquisitions or you would use the further ATM program? If you can talk about your approach there, that would be great. Thank you.
spk12: Yeah, I think the heart of your question is on source of funding. I'd say we've got a pretty big runway in front of us with where our balance sheet sits today. And I'd set a baseline expectation on considering the library jar disposition opportunities as we think about where we can redeploy that money. As John has mentioned, I think quarter after quarter after quarter, there's not a world where we're thinking about issuing equity at these levels, especially where the transaction environment currently sits from an opportunity set.
spk04: Yes, I can ask another one. Just for the pipeline front, do you think you will be focusing more on the industrial over other sectors?
spk09: Yeah, I'd say when I look at our pipeline today and even look further up from what we have under control, I'd say it's weighted towards industrial and then with a second weighting towards retail.
spk05: Okay, very helpful. Thank you very much. That's all my questions.
spk01: We have a follow-up question from Kiben Kent with Truist.
spk10: Your line is now open.
spk06: Thanks. That's a quick one on the on the large development project you have for UNFI. Can you just remind us how you're treating the cost to fund that? Are you capitalizing costs? And when do you start booking that income?
spk12: Yeah, keeping everything associated with that development is hung up on the balance sheet. So you'll see the asset grow both from the dollars we fund, but also the interest associated with it. And then when it comes online in October, that's when I'll start hitting the P&L on both fronts.
spk01: Okay, thank you.
spk10: There are currently no further questions registered, so I'll pass the conference back to the management team for any closing remarks.
spk02: Thanks, everybody, for joining us today. Appreciate all the questions, and looking forward to seeing many of you in Los Angeles at NAERI in a couple of weeks.
spk01: Have a great rest of your day. Bye, all. That concludes today's conference call. Thank you for your participation. You may now disconnect your line.
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