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spk01: Hello everyone and a warm welcome to the Independence Realty Trust's first quarter 2022 earnings release. My name is Emily and I'll be coordinating your call today. At the end of today's presentation, you will have the opportunity to ask a question by pressing star and then one on your telephone keypads when prompted. I now have the pleasure of turning the call over to our host, Lauren Torres. Please go ahead.
spk03: Thank you and good morning everyone. Thank you for joining us to review Independence Realty Trust first quarter 2022 financial results. On the call today are Scott Schaefer, Chief Executive Officer, Ellen Nalen, Chief Operating Officer, Farrell Ender, President of IRT, and Jim Sebra, Chief Financial Officer. Today's call is being webcast on our website at www.irtliving.com. There will be a replay of the call available via webcast on our investor relations website and telephonically beginning at approximately 12 p.m. Eastern time today. Before I turn the call over to Scott, I'd like to remind everyone that there may be forward-looking statements made on this call. These forward-looking statements reflect IRT's current views with respect to future events, financial performance, and the merger with Steadfast Apartment REIT which will be referenced herein as star. Actual results could differ substantially and materially from what IRT has projected. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to IRT's press release, supplemental information, and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations. Participants may discuss non-GAAP financial measures during this call. A copy of IRT's earnings press release and supplemental information containing financial information, other statistical information, and a reconciliation of non-GAAP financial measures to the most direct comparable GAAP financial measure is attached to IRT's current report on Form 8-K available at IRT's website under Investor Relations. IRT's other SEC filings are also available through this link. IRT does not undertake to update forward-looking statements in this call or with respect to matters described herein, except as may be required by law. With that, it's my pleasure to turn the call over to Scott Schaefer.
spk02: Thank you, Lauren, and thank you all for joining us today. After an exceptional 2021, when we more than doubled the size of our portfolio and accelerated our deleveraging efforts, we are pleased to report that our momentum continues as we delivered 16.2% combined same-store NOI growth and almost 40% core FFO per share growth in the first quarter of 2022. Our December 2021 merger with Star resulted in the combination of two high-quality portfolios and non-gateway markets with outsized growth fundamentals. And now, more than two years since the onset of the pandemic, we continue to deliver strong results that reflect the resiliency of our markets and the success of our strategic initiatives. We have increased our exposure to non-gateway markets in the Sunbelt region, which currently represents approximately 71% of our NOI. Our markets continue to see high residential demand as population growth exceeds new supply. These trends are expected to continue with the Sunbelt area benefiting from outsized job creation and increasing wages as people seek a lower cost of living, better tax policy, and growing economic opportunity. We believe IRT has a long runway for growth, whether that be through investing in our existing communities or expanding our presence in current IRT markets. We have a sizable renovation pipeline and will continue to invest in our redevelopment efforts through our longstanding Value Add program. This program has historically generated unlevered ROI of approximately 20% and should provide over $800 million of incremental growth in shareholder value. In addition, we will explore new investment opportunities and look to advance our joint venture relationships. We have been exploring single-family home rental development opportunities and recently closed on a joint venture that acquired development in Huntsville, Alabama. This JV marks our entrance into the single-family home rental space and is of notable scale in a market we know well. This is a natural expansion of our strategy and will be focused on the same non-gateway markets in the Sunbelt region. Our joint venture already owns and operates 178 homes in a single community and is in the process of completing the second phase of the community with another 222 homes. In addition, we're excited to announce that in April we acquired the first multifamily property in Nashville that was completed through our joint venture development program. Farrell will go into greater detail on these transactions, but they are both exciting opportunities, which reflect the creative capital allocation that attracts cap rates and value creation at IRT in two markets that we have targeted for additional investment. Looking ahead, we are confident in our ability to implement our strategic initiatives, capture incremental growth, and strengthen our total company platform with increased economies of scale. This is reflected in our increased guidance for the full year 2022, as we are now targeting 12.5% combined same-store NOI growth and 25% core FFO per share growth, each at the midpoint of our guided ranges. While we continue to be mindful of economic headwinds, we have strong visibility on delivering these results as we head into peak leasing season. We will remain patient and disciplined in our efforts to create long-term value for our stakeholders. I'd like now to turn the call over to Ellen Allen for an operational update.
spk00: Thanks, Scott. As Scott touched upon, we kicked off 2022 with strong operating results. led by our ability to maintain high occupancy levels at our communities and drive rent growth. In the first quarter, our average occupancy rate was 95.4% of 10 basis points compared to a year ago. And we delivered a 10.4% increase in our average effective rental rate, both on a combined same-store property basis. On a lease-over-lease basis for the combined same-store portfolio, New lease rates increased 15.7% and renewals were up 10.2% during the first quarter, yielding a blended lease-over-lease rental rate increase of 12.8% for the leases expiring in Q1 2022. We're pleased to note that the strong trends continue in the second quarter to date, with new leases for our combined same-store portfolio having increased 15.8% while renewed leases are up 9.5%. So far, in Q2, our resident retention rate is 54.6%, up about 370 basis points from Q1 2022. As mentioned last quarter, our property management and revenue management system integration is complete, and we are on track to deliver $31 million in synergies as we implement the best practices from both companies. This includes $8 million of annual operating synergies and $23 million of annual corporate expense savings. I would now like to turn the call over to Farrell to provide you with an update on our investment opportunities.
spk08: Thanks, Ella. Since the inception of our Value Add program in 2018, we've remained focused on renovating our existing properties where we see the potential for outsized rent growth. This continued in the first quarter as we completed renovations on 143 units, which is lower than anticipated due to a higher resident retention rate. For these 143 completed renovations, our renovation cost was $12,436 per unit, and these units achieved on average a $331 increase in monthly rents over comparable unrenovated units. This yields an unlevered return on investment of 32%. Our Value Add program currently has 12 communities undergoing renovations with an additional 10 communities that will be added this year. We have also designated seven communities as completed. We have a pipeline of approximately 20,000 value-add units, which includes about 12,000 former star units. This year, we expect to renovate 2,000 units from the combined portfolio and ramp up to 4,000 units per year thereafter. As Scott mentioned earlier, we're excited about the progress of our joint measure program, which focuses on new multifamily development and now single-family rentals. Recently, one of these investments came full cycle. In September 2021, we invested in a joint venture that was developing three communities in the national market. Just last month, we acquired the first of those communities from the joint venture for $25.4 million. This price translates into a 5.47% effective economic cap rate, better than current market transactions, and is an example of how these joint venture investments provide value to our shareholders. As our first investment in the single-family rental space, on March 31st, we entered a joint venture referred to as Virtuoso, consisting of a two-phase development with 400 single-family home rental units located in Huntsville, Alabama. The development of 178 homes in phase one was completed in late 2021 and is 85% occupied today. The average rental rate for leased homes is $1,563 per month or $1.79 per square foot. We expect the development of the remaining 222 homes in Phase 2 to be completed and acquired by the joint venture in the second quarter of 2022. IRT's investment is expected to total $37.1 million, of which $16.4 million was funded on March 31st. Our virtuoso joint venture is ideally positioned in the Huntsville market with easy access to major retail and a commute to the Cummings Research Park in less than 10 minutes. As an update, construction efforts are progressing well across the three of our joint ventures, and we are pursuing several other opportunities in our existing markets. We've provided an update on our joint ventures on the investment and development activity page of our supplement. As of the end of the first quarter, we've identified two properties as held for sale. One of these properties is located in Louisville and the other in Terre Haute, Indiana. We expect the blended economic cap rate of these dispositions to be 3.9% with an expected close in the third quarter of 2022 and intend to recycle the net proceeds to properties and markets with more attractive long-term growth prospects. I'd now like to turn the call over to Jim.
spk10: Thanks, Val, and good morning, everyone. Beginning with our first quarter 2022 performance update, net income available to common shareholders was $74.6 million up from $1.1 million in the first quarter of 2021. During the first quarter of 2022, GAAP net income is inclusive of $94.7 million of gains on the disposition of four real estate assets and a $29 million one-time amortization expense associated with in-place leases from our star merger. As we highlighted in our 2021 year-end earnings fall, these assets were sold and the proceeds used to deliver the combined balance sheet post-murder. During the first quarter, core FFO grew to $57.7 million, up from $18 million a year ago, and core FFO per share grew 39% to $0.25 per share, up from $0.18 per share in Q1 2021. This growth is a result of the completion of our merger with STAR and the related accretion, as well as the sizable organic rent growth we've experienced throughout the combined portfolio. IIT's first quarter combined same-store NOI growth was 16.2%, driven by revenue growth of 11%. This growth was driven by a 10.4% increase in average rental rates, with an increase in other income generated by STAR communities. While this NOI growth includes value-added communities, we did see similar NOI growth of 16.1% at our same-store non-value-added communities, which reinforces the fundamental strength of our core markets. On the property operating expense side, combined same-store operating expenses grew 3.2% in the first quarter, led by higher contract services and personnel expenses. The increase in contract services was driven by expenses for resident reimbursable services as well as some snow removal costs. For example, during Q1 2022, we've continued to roll out our valid trash services to residents, particularly at Starters communities. The increase in contract services for this reimbursable service was more than offset by higher other income from the billing of those services to residents. On payroll expenses, the increase in the quarter was driven primarily by increased incentive compensation to our community personnel, as well as inflationary pressure. Clearly, this incremental incentive compensation is a result of our positive portfolio performance. Before moving on to the balance sheet, we would like to highlight Appendix A in our supplement, where we provide our Q1 2022 combined SAMHSA results broken down between legacy IRT and star communities. As you will see, the 19.2% NOI growth of stars communities is a result of strong rental and other property revenue growth. as well as the execution of our operating synergies that we identified as part of the merger. Now, turning to the balance sheet. As of March 31st, our liquidity position was $457 million. We had approximately $24 million of unrestricted cash, $383 million of additional capacity through our unsecured credit facility, and $50 million of ATM proceeds available from forward equity sales. Our net debt to EBITDA was 7.6 times that quarter end, down from 8.2 times a year ago. We're excited on the progress we've made on the deleveraging front and still expect to achieve our leverage target of the low sevens by the end of this year and mid sixes by year end 2023. Regarding our full year 2022 guidance, we're updating our outlook on continued strong fundamentals, the economic strength in our market, and our seamless merger integration efforts. Our guidance now includes an EPS range of 50 cents to 52 cents per diluted share, and the core FFO per share range of $1.04 to $1.06. The midpoint of our core FFO per share guidance of $1.05 is an increase of $0.03 from our previous guidance. This increase is a result of improved expectations on property NOI performance and lower Q1 2022 interest expense and how it impacts the full year. For 2022, we now expect NOI at our combined same-store portfolio to increase 12.5%, an increase of 150 basis points at the midpoint. This guidance reflects expected combined same-store revenue growth of 9.6% at the midpoint. For 2022, we are guiding average occupancy to be 95.6% at the midpoint, with an increase of 10.5% in our average rental rate. Moving on to expenses, the increase in our guidance on controllable operating expenses is primarily due to the incremental expenses we are incurring related to incentive compensation, and costs associated with enhanced reimbursable resident services, as well as some inflationary pressure. At this point, it is still too early to update our guidance on real estate taxes until more information is received from tax assessments later this year. Regarding our transaction and investment volume expectations, we are providing updated assumptions given the investment activity we've announced to date, as well as the two assets we've identified as held for sale. The proceeds from the dispositions will be used to invest in communities in our targeted markets, consistent with our historical capital recycling activity. Now, I'll turn the call back to Scott. Scott?
spk02: Thanks, Jim. In closing, I'd like to thank our team for their incredible efforts. The past two years brought about unexpected challenges, but IRT emerged as a stronger company in the multifamily sector. And since the completion of our merger in December, we've notably increased in size and realized meaningful synergies which will drive growth. We are confident in our strategy, which is focused on capitalizing on continued macro trends and resident demand, accelerating our organic growth profile through our value-add program, and continuing to refine the portfolio and expand our presence in core high-growth markets throughout our capital recycling and joint venture development initiatives. We thank you for joining us today, and we look forward to speaking with many of you at Mayreith's conference in early June. Operator, we would now like to open the call for questions.
spk01: Thank you. If you would like to ask a question, please do so now by pressing Start, followed by 1 on your telephone keypads. If you change your mind and wish to withdraw your question from the queue, please press star and then 2. We ask that when you're preparing to ask your question, please ensure that your device is unmuted locally. Our first question today comes from Austin Werschmitt with KeyBank. Austin, please go ahead.
spk07: Great. Thank you and good morning, everybody. Scott, over the last few years, you know, you've added various investment opportunities to the arsenal. And, you know, you've now dipped your toe into single-family rentals. And I know, you know, historically you've been patient and disciplined in your approach, but can you just help us understand how long, you know, you and the board have considered SFRs as an investment consideration and then how you, you know, how you prioritize your capital uses today and where SFRs maybe fit within that ranking or framework? Sure.
spk02: Sure, Austin, and thanks for the question. And yes, we will remain patient and disciplined. We've been looking at single-family rentals for some time now. When the space for that product started, it was a different business than it is today. We're considering it where they are built for rent in one location. So we look at this as multifamily. It's just horizontal multifamily. It's 400 rental units all in one location. And as home ownership becomes more out of reach for the typical person, we think it's an opportunistic next step for us to take advantage of these opportunities, again, in markets that we have a presence where we want to grow and have management capability. So it's something that we're trying out here. We are looking at some other opportunities. But it's all along with our existing capital allocation strategy.
spk07: Are you planning to take operations in-house and down the line? And I guess, what build-out within the ops platform is necessary to take that on?
spk02: We don't think there's any build-out necessary. Again, this is multifamily. And yes, we will take it in-house. We have a purchase option where we can buy out our JV partner in the near future. And when we do that, we will take over management. But we think it fits right within our existing operational platform.
spk07: And then just last one for me. How deep is your investment pipeline in single family today? And are you more focused on you know, one-off type single-family purchases or more of the entire projects like you did with this Huntsville deal? And then I'm also curious, what price point are you focused on relative to kind of the primarily Class B strategy and multifamily?
spk02: Not a very deep pipeline. It's something we're looking at. Again, this was an opportunity in a market that we know well. There are some other opportunities, again, in existing IRT markets that we're considering, but it's not a very deep pipeline at this point.
spk07: Got it. Thanks for the time.
spk02: Thank you.
spk01: Our next question comes from Nick Joseph with Citi. Nick, your line is open.
spk10: Thanks. Maybe following up on Austin's questions with single family, you know, obviously capital is scarce, and you guys have done well in terms of redevelopment and acquisitions and some of these more recent JV deals. So how do you think about the entrance into single family from a return perspective? Maybe you can rank stack them against some of the other potential uses of capital.
spk02: We look at it as returns that are very similar to our other investments in the JV program, where we're able to buy completed operating rental housing at cap rates that are higher, so a lower cost per unit higher than what is available for just one-off transactions of existing product. So again, for us, this was opportunistic. We expect when it's all said and done and we buy out our partner, it'll be depending on values at the time. But if we were to do it today, it would be five cap or slightly north of that. So when you compare that to a very you know, heated, you know, acquisition market where, you know, 10 to 15-year-old product is trading at three and a half caps, we see this as very attractive.
spk10: And when you're doing your IRR calculations for this deal specifically, what sort of rent growth are you assuming on the single family side versus if you were buying multifamily in the same market?
spk02: Well, I'm going to let Farrell talk about the rent growth, but I'll tell you, Nick, you know, I really, we don't really use IRRs because, you know, We don't know what the hold period is going to be when we're making the investment, and we don't know what the exit cap is going to be. So we're looking more at year one, year two cash flow, return on equity when we're making our investment decision.
spk08: We're underwriting these not really as a FAR specifically, but what's going on in the market and what are the other SFR communities getting. So these deals are – this one in specific was over the hold periods. 3% to 5% annual rent increases.
spk10: Thanks. And then just finally, I think previously in terms of the merger integration, you talked about over $28 million in synergies. Now it sounds like it's 31. What's the additional $3 million there? And then is the 31 the final number, or is there still an opportunity for more?
spk09: Man, you guys continue to push. I love it. So I think, yeah, the $31 million is obviously the final number. There could be a little bit more, but it's not going to be materially different. The final items came from a variety of small services and small things, audit fees, tax fees, professional services for a variety of different things that we use, IT-type services. It was really an amalgamation of small things, $50,000 here, $100,000 there. They just continue to add up to large dollar amounts, so it's good. Thanks.
spk01: Our next question comes from Neil Malkin with Capital One. Neil, please go ahead. Your line is open.
spk06: Hey, everyone. Good morning. Good morning, Neil. Hey, yeah. First one for me on this traditional multifamily or apartment communities. We've heard just given the rise in rates, you know, the buyer group, you know, impacted the most is the leveraged buyer. It seems like they're taking, you know, some time on the sidelines to see where everything shakes out. Just given that they are the, you know, a larger part of your, I guess, competitive set when you're looking at a product, are you seeing opportunities to come in on, you know, retrades or just maybe the market backs up a little bit and, you know, comes to you? You know, obviously your stock price has done tremendously well. Cost of equity, you know, historically low.
spk08: uh is now a time or do you think you're going to have an opportunity over the next you know three to six months to uh kind of be more aggressive on acquiring value add yeah we are that you're actually exactly right we are seeing that it's impacting leveraged buyers um we're not seeing the opportunity yet we're confident that they they should start showing themselves in the next two point three to six months but we're seeing we're still seeing that for the well-located well-constructed property in our markets, you're still seeing enough people in the transaction to get to where the strike prices are. Some of the tertiary markets and inferior locations, you're starting to see retrading. And we're just, you know, we're being patient and seeing how this all plays out over the next couple of months.
spk06: Okay. Thanks. And then, you know, in terms of The JV, the development side, you talked about, you know, wanting to grow that, seeing opportunities in targeted markets. Can you maybe just elaborate a little bit on how deep that pipeline is? You know, the kind of markets you're looking at, you know, the size, scale, economics, you know, deal structure. That'd be great. Thank you.
spk02: So, the markets that we're looking at are all of the markets that we currently operate in, you know, the Sunbelt region. We think it's a strategy that is, you know, will play out well. We're doing it a little different than some of the other companies that are in that space. You know, for us, we're coming in to a development program when all of the pre-development work is done, it's shovel ready. So it's a limited timeframe from when to make our investment until there's a CO, usually 18 months, give or take, versus a development from start to finish could be four years, five years in the current environment. So my goal here was to limit our exposure to to changes in the cycle. And you do that by coming in when you know that the building will be complete, again, within a reasonable timeframe, a year and a half, give or take. And because we're coming in at that point and we're putting some capital at risk, We end up with this purchase option, you know, at a much better price than we would be able to buy it at if we just waited and came in, you know, to the transaction once the building was complete. So it's, I think, an accretive allocation of capital for us. It will continue. We have a deep pipeline, but we are clearly prioritizing it. in, you know, markets and developers and, you know, other aspects where we think we can, you know, limit the additional risk by coming in, you know, in that phase.
spk06: We agree. Last one. I noticed that the renewal rates kind of ticked down a little bit. I think that just given loss to leases and, you know, the REITs strategy of not pushing as hard on renewals, would, you know, signal that there's more opportunity or more runway to push for longer and push higher. Can you just talk about what you're seeing on that and if there's a reason for the, you know, the back off on the renewal side? Thanks.
spk00: Yes, thanks, Neil. And, of course, it's still early in Q2, but as we look forward, the mix of new leases will help increase the blended rate increases later in the quarter. We're utilizing our boots on the ground intel and our revenue management system and believe we're really well positioned to drive lease rate growth into the peak leasing season. But still, as you said, Neil, leaving a little bit of gas in the tank, which I think is particularly noteworthy in light of the potential economic softness that many people see coming. But with our loss to lease of about 14.5% and the demand for moderate income apartments in our non-gateway markets, that pricing power really sets the foundation for the raise in our 2022 full-year guidance that we had for property revenue growth and NOI growth. So you're exactly on point.
spk06: We thank you guys very much.
spk00: Thank you. Thank you.
spk01: Our next question is from Anthony Powell with Barclays. Anthony, please go ahead.
spk04: Hi, good morning. I guess the question on move-ins, you know, As you're seeing a lot of, I guess, landlords try to push rates pretty aggressively, are you seeing move-ins from, I guess, comparable apartments in your markets? How is in-migration trending into your markets? Just curious what the profile of the new tenant for you is right now.
spk00: Well, we're definitely seeing inbound migration in our markets, and it's interesting because I think we've been a leader in picking some of these target markets, but You sort of pick up the Wall Street Journal in the last couple weeks, and they highlight a lot of our markets as being markets that people are migrating into. I think they picked Austin, Texas, Nashville, Raleigh. They picked Florida, and they're picking it because those are the cities where we're seeing household formation. We're seeing inbound migration. We're seeing companies move into those markets. And one of the reasons we've always picked them is because they are business-friendly. population, job growth, quality of life, low taxes. So, yes, we're clearly seeing demand increase in those. But the interesting thing that's giving us our pricing power is you're not seeing supply keep up with demand.
spk04: Got to maybe follow up on that, Jess. Are you seeing more, I mean, you talk about Class B being a sweet spot because, you know, it kind of catches both people trading up and trading down. Are you seeing any trends with that as rent increases kind of increase across the board.
spk00: And again, you're exactly right because the moderate income B class apartments have always been very sticky. Very seldom will someone in a B class apartment move up to an A if they get a raise, but you clearly see in soft economic times people that can't afford luxury rents moving into the B market. So we've always had that sort of inflation protection in the B market. in good times and in bad times. So yes, we continue to see demand. And I think it's not just the non-gateway markets that we're in, but it's the moderate income rents, because most of working America can afford an IRT apartment. And that's what they're looking for. They're looking for a well-maintained, well-positioned, near good schools, near businesses, apartments. And today, clearly, the fact that our rent to income is about 19% gives us a bigger audience of residents
spk04: And maybe one more from me. Thanks. Maybe one more on the single family, I guess, opportunity. What's the supply outlook and the development outlook for these kind of highly amenitized kind of communities being built? I'm just curious. It seems like it's not traditional single family, obviously. It's kind of built for purpose. Are you seeing more zoning for these being allowed? Are you seeing more developers getting into it? I'm just curious about maybe the long-term opportunity for you in this space, which seems to make sense given... given kind of the need for rental housing.
spk08: So I think that's what's attractive about this space is that to get any type, what we're seeing is smaller developments. And if you want it like 80 to 120 units, if you want larger developments, they're moving further out with today's work from home. And there's a lot of demand for that. I remember these mostly aren't highly amenitized. They might have a clubhouse and a pool, but they don't offer the amenities that are typical apartment community offers in regards to, you know, pet spas and car washes and whatnot. But the demand, I think, is going to far exceed supply, at least in the near term. I mean, they're looking at, this went from basically no product to about 8,000 units a year now, and maybe we'll get to 20. You know, it's predicted the demand is, you know, three, four times that in the next several years. So we think there's, you know, a good opportunity there, which is why, like Scott said, opportunistically in the markets we're in, if we see something that's attractively located, you know, we will pursue it.
spk01: All right. Thank you. Our next question comes from Peter Abramowitz with Jefferies. Peter, please go ahead.
spk05: yes thank you uh just wondering if you could uh kind of quantify some of the return metrics um you're looking at between the the assets that you're you're looking to call from the portfolio um and then the acquisitions that that you're underwriting i guess just you talked about you know kind of the difference in growth prospects so wondering if you could sort of quantify that
spk08: When we do the capital recycling, we really try to match them up. What we've seen in this market is, I said this before, capital is kind of agnostic. So we've been able to trade out of what we think are inferior markets and maybe more challenging assets into what we feel are better growth markets and better assets in the past, and we'll continue to do that. And we we think we'll be able to sell and buy right around the high 3% cap rate range. So neutral to earnings.
spk02: So just to be clear, the recycling, again, is where we're trading out of assets and cycling that capital into different assets that we think have better growth prospects. For allocating capital otherwise, that's where we're looking at these JV programs because it's just a much better return, and I frankly am not interested in going in and being part of a widely marketed bidding process for a 15-year-old property that's going to trade at 3.5%. So we would rather avoid that in the current environment, see where cap rates settle out with these interest rate increases coming, and allocate our capital to the value add and to well-located joint ventures in development.
spk05: Right. I guess I'm just trying to get a sense of where your underwriting grows for the assets that you want to bring in from an NOI and a revenue perspective versus those that you're selling out of the portfolio. Yeah.
spk08: Yeah, I mean, again, we're trying to buy in the markets that we think have better long-term growth prospects, so we're underwriting their revenue growth much higher than we would budget for the assets that we are selling.
spk02: It's also an operating cost analysis as well. It's not just revenue growth, but we're trading out of the older assets that are much more expensive to run. So the ones we're trading into will have a lower CapEx cost going forward.
spk05: Got it. Thank you.
spk02: Thank you.
spk01: Those are all the questions we have for today, so I'll now turn the call back to the management team to conclude today's call.
spk02: Thank you again for joining us, and we look forward to speaking with you again next quarter. Have a nice day, everyone.
spk01: Thank you everyone for joining us today. This concludes our call. You may now disconnect your line.
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