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spk13: Good morning, ladies and gentlemen, and welcome to the MAA fourth quarter and full year 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterward, the company will conduct a question and answer session. As a reminder, this conference call is being recorded today, February 22nd, 2022. I will now turn the call over to Andrew Schaffer, Senior Vice President Treasurer and Director of Capital Markets of MAA for opening comments. Please go ahead.
spk15: Thank you, Nikki, and good morning, everyone. This is Andrew Schaefer, Treasurer and Director of Capital Markets for MAA. Members of the management team also participating on the call with me this morning are Eric Bolton, Tim Argo, Al Campbell, Rob DelFrori, Joe Fracchia, and Brad Hill. Before we begin with our prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statement section in yesterday's earnings release and our 34-act filings with the SEC, which describe risk factors that may impact future results. During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures, as well as reconciliations of the difference between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data. Earnings release and supplement are currently available on the For Investors page of our website at www.maac.com. A copy of our prepared comments and an audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. I will now turn the call over to Eric.
spk05: Thanks, Andrew, and good morning, everyone. MAI wrapped up calendar year 2022 with fourth quarter results for core FFO that we're ahead of expectations as higher fee income, along with continued growth in average rent per unit and strong occupancy, more than offset pressure from higher real estate taxes. Looking ahead to the coming year, there's clearly some uncertainty surrounding the outlook for the employment markets, the pace of inflation, and the broader economy. In addition, while we do know that new supply deliveries in 2023 broadly will be higher than in 2022, We continue to believe that MAA is well-positioned for the coming year as the leasing market returns to more normalized conditions. Our expectations for the coming year are built in a lease-over-lease pricing environment of 3%. This performance assumption, coupled with the earn-in from 2022's rent growth, should drive growth in effective rent per unit of around 7% over the coming year. We will, of course, see conditions vary some by market and sub market location, but we believe that our portfolio is in a uniquely solid position to weather expected moderation from the historically high rate growth of last year. This view is really supported by three key variables. First, we continue to believe that our Sunbelt footprint maintains an advantageous position for capturing demand, given the stronger and more stable employment markets in the Sunbelt states. We continue to see job growth, positive migration trends, affordable rent-to-income ratios, and low resident turnover. Secondly, MAA's unique diversification across the Sunbelt region, including both large and high-growth secondary markets, provides exposure to a good range of employment sectors and works to help soften some of the pressures surrounding new supplier levels in a number of our larger markets. And thirdly, With a rent price point average for our portfolio that appeals to our broad segment of the rental market, and it is around 20% below the price point of the mostly high-end new product being delivered, we believe we will capture more stability and top-line performance as leasing conditions normalize in 2023. In the event that we do find ourselves later in the year headed towards a more severe contraction in the economy or a recession, As MAA has consistently demonstrated over the past 20 years, we expect to perform with a lower level of volatility than what generally is seen with more concentrated portfolios and or those concentrated in large coastal markets. The transaction market remains very quiet and we are likewise remaining patient with what opportunities we do see. I expect it will be the second half of the year before pricing data becomes more readily available. We do have plans to initiate development on four new projects in 2023 associated with sites that we already own or that are under our control. These projects will, of course, not actually start delivering units for another couple of years. In conclusion, I want to give a big thank you to our MAA associates for their tremendous service and record performance in 2022. We have the company well positioned for the next cycle, as a number of new tech initiatives will positively impact performance over the coming years. Our external growth pipeline continues to expand, and the balance sheet provides a good, strong foundation for supporting our current portfolio operations, as well as active pursuit of new growth opportunities. That's all I have on the way to prepare comments, and I'll turn the call over to Tim.
spk17: Thank you, Eric, and good morning, everyone. Same short performance for the quarter was once again strong and ahead of our expectations. While pricing performance moderated during the fourth quarter from the record growth we'd achieved September year to date, blended lease-over-lease pricing was up 5.7%. As a result, effective rent growth or the growth on all in-place leases for the fourth quarter was 14.9% versus the prior year and 2.0% sequentially from the prior quarter. Full year 2022 blended lease over lease pricing was 13.9%, helping to drive full year effective rent growth of 14.6%. Alongside the strong pricing performance, average daily occupancy remained steady at 95.6% for the fourth quarter and 95.7% for the full year 2022. In line with normal seasonality, our January new lease rate of negative 0.3% improved from December's new lease rate of negative 0.9%, and other than 2022, represents a higher new lease rate than any year since we have been tracking the data. Combined with renewal pricing of 8.6%, January blended lease over lease pricing was 4.2%, and average daily occupancy was 95.7%. With new lease pricing moderating as expected, renewal pricing, which lagged new lease pricing for much of 2022, is providing a catalyst for the strong January pricing and is expected to be strong for the next few months before moderating to a more typical range. We're achieving growth rates on sign renewals of around 8% to 9% for the first quarter. We do expect new supply in several of our markets to remain elevated in 2023, putting some pressure on rent growth, but the various demand indicators remain strong, and we expect our portfolio to continue to benefit from population, household, and job growth. As Eric mentioned, should we see a more dramatic downturn in the economy from here, we expect our markets, diversification, and price point will help mitigate some of the impact to performance. During the quarter, we continued our various product upgrade initiatives. This includes our interior unit redevelopment program, our installation of smart home technology, and our broader amenity-based property repositioning program. For the full year 2022, we completed more than 6,500 interior unit upgrades, and installed over 24,000 smart home packages. As of December 31, 2022, the total number of smart units is over 71,000, and we expect to finish out the remainder of the portfolio in 2023. For our repositioning program, leases have been fully or partially repriced at the first 11 properties in the program, and the results have exceeded our expectations with yields on costs averaging approximately 17%. We have another four projects that will begin repricing this quarter and five additional projects currently under construction. Those are all my prepared comments, so now I'll turn the call over to Brad.
spk08: Thank you, Tim, and good morning. Despite execution challenges in the transaction market, our team successfully completed our disposition plan for 2022 by closing our last two dispositions in the fourth quarter. Our total disposition proceeds for the year were approximately $325 million. representing a stabilized NOI yield of 4.3% and an investment IRR of 17.7% for assets with an average age of 25 years old. In 2023, we will continue the discipline of steadily recycling capital out of older, higher capex properties with the intent to redeploy the capital into newer, lower capex, higher rent growth properties to drive higher long-term earnings growth within our portfolio. While transaction volume continues to be muted, we believe it's likely that the transaction market will provide more opportunities toward the back half of the year. Currently, the number of marketed properties is down substantially from 2022, with the majority of sellers waiting until at least the spring leasing season before reevaluating their planned sale timing. In the face of this lower volume, we have seen some upward pressure on cap rates. with the degree of the movement varying based on property characteristics, embedded rent growth, as well as market and sub-market location. However, until closed transactions materially increase, transparency around cap rates will be difficult. When marketed deal volume does increase, we expect buyer financial strength and speed of execution to be attractive key differentiators, and our balance sheet strength and capacity will support our ability to transact despite a more difficult credit environment. On our new developments, our team has done a tremendous job working through the challenges of elevated construction costs and permitting delays, leading to steady growth in our development pipeline. During 2022, we started construction on 1,253 units at a cost of $468 million, a record level of starts for MAA. During the fourth quarter, we started construction on two projects that have been in pre-development for some time. These two projects will begin delivering units in two years and should finish construction in three years, lining up well with what we believe is likely to be a strong leasing environment. While the timing of planned construction starts can change as we work through the local approval and construction bidding processes, we expect to start four new developments during the back half of 2023. This includes two in-house developments, one located in Orlando and one in Denver, and two pre-purchase joint venture developments, one located in Charlotte and the other a phase two to our West Midtown development in Atlanta. Our construction management team continues to do a tremendous job actively managing our projects and working with our contractors to keep the inflationary and supply chain pressures from causing a meaningful increase to our overall development costs or our schedules. Despite these headwinds, the team delivered three projects on time in 2022 and under budget by approximately $4.5 million. During the fourth quarter, construction wrapped up on MAA Windmill Hill, and we reached stabilization at MAA Robinson, MAA West Glen, and MAA Park Point, with operating results well ahead of our pro forma expectations, delivering stabilized NOI yields on average of 6.6%. Leasing demand at our new properties remains high, and the competition from other new supply has, to date, not had a significant impact on our lease-up performance, with rents being achieved well ahead of performance. That's all I have in the way of prepared comments, so with that, I'll turn the call over to Al.
spk09: Okay, thank you, Brad, and good morning, everyone. Reported core FFO per share of $2.32 for the quarter was $0.05 above the midpoint of our guidance and contributed to core FFO for the full year of $8.50 per share, representing a 21% increase over the prior year. Same-store rental pricing and occupancy levels were in line with expectations for the quarter, while higher fee and reimbursement revenues combined with strong lease-up and commercial revenues to produce about two-thirds of this earnings outperformance for the quarter. This favorability was partially offset by real estate tax expenses as final millage rates came in higher than expected during the quarter for several markets, primarily in Texas. Our real estate tax estimates were based on strong valuations supported by the very strong revenue trends over the last year, offset by expected millage rate rollbacks as counties managed overall tax needs. And rollbacks occurred but were less than expected in Texas, particularly in Dallas and Austin. Our initial guidance for 23, which we'll discuss more in a moment, anticipates some continued pressure in this area given its backward-looking nature. Our A-balance sheet remains very strong as we enter the year with historically low leverage, debt to EBITDA REIT of 3.71 times, with 95.5% of our debt fixed, an average interest rate of 3.4%, and with $1.3 billion in available capacity to support growth and manage our debt maturities late in 2023. Also, at the end of January, we settled our outstanding board equity contracts, providing an additional $204 million of capacity at an attractive cost of capital. We currently expect to fund our near-term acquisition, development, and refinancing needs with short-term debt capacity, allowing the financing markets to continue to stabilize before locking in long-term financing. Finally, we did provide initial earnings guidance for 2023 with our release, which is detailed in the supplemental information package. Core FFO for the year is projected to be $888 to $928 per share, or $908 at the midpoint, which represents a 6.8% increase over the prior year. The foundation for the projected 2023 performance is same-store revenue growth, produced by historically high rental pricing earn-in of about 5.5%, combined with a more normalized blended rental pricing performance of 3% for the year, as well as a continued strong occupancy remaining between 95.6% and 96% for the year. Based on this, effective rent growth for the year is projected to be a solid 7% at the midpoint of our range, with total same-store revenues expected to grow 6.25%, slightly diluted from the other revenue items, primarily reimbursement and fee income, which grow at a more modest pace. Same-store operating expenses are projected to grow at 6.15% at the midpoint for the year, with real estate taxes and insurance producing the most significant growth pressure. Combined, these two items alone are expected to grow just over 7% for 2023, with the remaining controllable operating items expected to grow around 5.5%. These expense pressures are offset by the continued strong revenue growth, with NOI for the year projected to grow 6.3% at the midpoint. We're also expecting continued external growth, both through acquisitions and development opportunities during the year, with a combined $700 million full-year planned investment. This growth will be partially funded by asset sales, providing around $300 million of expected proceeds. We expect to fund the remaining capital needs for the year from internal cash flow and short-term variable rate borrowings as we anticipate the financing markets to continue stabilizing over the next year, eventually providing better opportunities to lock in long-term debt rates. This does produce some slight pressure on current year FFO performance, given high short-term rates, but is expected to be rewarded with lower long-term financing costs when markets stabilize further. So that's all that we have in the way of prepared comments, so Nikki, we'll now turn the call back to you for any questions.
spk13: Thank you. We will now open the call up for questions. If you would like to ask a question, please press the star, then 1 on your touch-tone phone. If you would like to withdraw your question, you may press the pound key. And we'll take our first question from Nick Ulico with Scotiabank. Please go ahead.
spk20: Thanks. Good morning, everyone. So I just wanted to start with the guidance on same-store revenue. So if you're at sort of right around 6%, the midpoint, you know, I think you guys had an earn-in that was close to that number coming into the year. So you have occupancy being roughly flat in the guidance. So just trying to understand kind of what might be the offset as to, and you are assuming some market-rank growth as well, so just trying to understand kind of the build-up there, and if there's anything we're missing as to why the revenue growth guidance wouldn't be a little bit higher based on the earnings you've cited. Thanks.
spk09: Yeah, Nick, I'll give you the components of it. This is Al. I'll give you the components of it, how we built it, and maybe Tim can give a little color, if he would like, on some of the components. But really it's built on the earning. You talked about based on where pricing was, when you think about earnings pricing in the year, if it were to carry forward that same level, not up or down, what would it be built into our portfolio? That's about 5.5%. That's the way we think about it. And on top of that, you get about half of the current year expected blended pricing. And as we talked about, we're expecting about 3%. So you add those two numbers together, you get right at the 7% effective rent growth guidance that we put out. Now that is, as we mentioned in the comments, a little bit moderated from other income items. About 10% of our revenue stream is from reimbursements and fees and those things, and they're expected to grow more modestly than that. So that's what gets it to six and a quarter. But in terms of the earn-in and the components, that's really what it is.
spk20: Okay, thanks. That's helpful. And then the second question is just to get a feel for, you know, what type of economic scenario is baked into guidance, you know, whether this is, you know, a softer landing with modest job losses. Any commentary from you guys on the economic outlook would be helpful. Thanks.
spk05: Well, Nick, this is Eric. I mean, broadly, as Al mentioned, I mean, we do expect that the overall rent growth for the market next year will be something around 3%, which I think is going to be fueled by what we expect to be a continued relatively stable employment backdrop. to what we're seeing today. We're not seeing any real evidence, significant evidence, building in any of our markets at this point relating to employment weakness or people losing jobs. We're not having any kind of issues surrounding collections. Migration trends continue to be very positive. And so as we think about the outlook for 23, I mean, it's definitely moderated from what it was in 2022, but we're not seeing any concerns at the moment that a severe contraction or any sort of a materially worse decline in the employment markets were to occur. Now, if that does happen, as I alluded to in my comments, You know, we've been through recessions in the past, and we think that if we find ourselves in a more severe economic contraction where broadly the employment markets start to really pull back, we think that that's where the, you know, sort of defensive characteristics that we build into our strategy really start to pay a dividend for us. And that's where our secondary markets come into play, our lower price point of our product comes into play. And the broad diversification to employment sectors that we have across the large number of markets that we're in all provide some level of cushion, if you will, if we find ourselves in a more severe downturn. So right now, you know, we're not calling for that, but we think that should it happen, we would probably weather that pressure better than a lot of others.
spk19: Thanks, Eric.
spk13: We'll take our next question from Alexander Goldfarb with Piper Sendler. Please go ahead.
spk02: Hey, good morning. Just first question is on development and your appetite for using capital. You said that cap rates overall for stabilized products are still sort of in flux. The debt market's clearly better for apartments, but CMBS, which you guys don't use, Fannie, Freddie, whatever, you know, that's still, well, I guess more CMBS remains sort of closed. So as you guys think about development, do you think more about starting on your own account? Or do you see the potential that you're better off buying from other people who may run into financial difficulty, where on a risk adjusted, you're better off to pick from someone else rather than starting ground up from you guys?
spk08: Yeah, Alex, this is Brad. I'll start off with that. You know, I'd say it's both. We're looking at both opportunities, both on our balance sheet and then working with partners as well. I mean, what we haven't seen broadly yet are developers kind of spitting sites, spitting land sites. We've seen it a little bit, but it's been sites that we're not really interested in. We've not seen the well-located sites that have gone under contract kind of being let go. We've not seen that yet. So we will keep our eye on that for sure because I think that's where the opportunity presents itself for our on balance sheet developments where we can pick up some of those land sites that other people drop. I think what we are seeing short term is exactly what you mentioned, is the difficulties in the debt market kind of showing up through some of our development partners. Maybe they can't get the debt financing for some of their developments going or equity partners backing out on deals. We are seeing that short term. You know, we've got a team of folks this week that are out at NMHC and You know, we've already gotten a number of emails of projects, JV development opportunities that are a follow-up from that where, you know, they're shovel-ready, could start mid-year. So we'll begin evaluating those because I think those are the ones that are going to be impacted by the debt market and just how tight that is right now. But the long story is we'll look for opportunities in both of those areas.
spk02: okay and the second question is uh just going back uh to nick's question on you know sort of state of the markets and the employment you know one of the common refrains about the sunbelt is you know it always has a lot of supply but the economic growth you know seems to be more than offset you spoke about that relative to your ability to manage you know higher taxes higher insurance as you look at this year and based on what your property managers see among the resident base and employment stats within your your markets Do you see any, like, substantial risk that employment or economic job growth in your markets will not be able to, you know, exceed the, you know, the new supply coming on? Or as you sit here today, you're, you know, as you guys sit around the roundtable, you're like, you know, there are a few more markets that we're more concerned about now than we were back in, let's say, November, you know, when you guys were assessing, you know, how 2023 would look.
spk05: Well, Alex, this is Eric. You know, as we sit here today, we continue to feel good about the demand side of the equation for us. You know, as I mentioned, we're not seeing any, you know, the lead volume and traffic that we're seeing is still strong. We're not seeing any evidence of stress with our renters in terms of collections. We're not seeing any evidence of people coming in talking about losing their job because of needing to get out of their lease. We're not seeing any roommateing trends starting to pick up. And so as we sit here, and then also you look at the migration trends, we still saw 12% of the leases that we did in the fourth quarter were for people moving into the Sun Belt from outside the Sun Belt. So, you know, we are still not seeing any worries build on the demand side of the equation at this point, moderating from what it was, but still quite strong.
spk02: Thank you.
spk09: We're getting a little feedback. Is that coming?
spk02: Yeah. All good on our end. Thank you, though. Okay. Thank you.
spk13: We'll take our next question from Austin Worshmith with KeyBank Capital Markets. Please go ahead.
spk18: Great. Thanks, guys. I was just curious if you could share how I believe the 3% figure you provided on lease over lease is the blended lease rate growth assumption embedded in guidance. And I was wondering if you could break down that between sort of the first half assumption and back half, as you alluded to, kind of renewals maybe trending a little bit lower as the year progresses.
spk17: Hey, Austin. It's Tim. Yeah, you know, you heard me mention in the comments that renewals right now are catalyst for us and kind of carrying the strengths new lease pricing outpaced renewals for the for the bulk of 2022 so we knew we kind of had some runway on the renewal side that's carrying us through this early part of 2023 so The 8% to 9% I talked about in renewals, I think that probably carries through the first quarter, call it, and then starts to moderate a little bit as you get into probably June through the rest of the year. I would expect it to be a little more normal with sort of what you typically see from MAA, which is kind of in that 6% to 7% range. And then on the new lease side, we're sitting slightly negative right now. I think that will... slowly accelerate through the spring and summer and go modestly positive and then trend back down towards the end of the year. So kind of higher renewals in the first half of the year, moderating a little bit, new lease rates growing slightly through the year, and then moderating just with seasonality as we typically would see in Q4. And you kind of blend that all together and get to the forecast that we have for blended lease and release.
spk18: On the new lease rate side, I guess what specifically, I mean, it seems like that's fairly low relative to what you've achieved historically, you know, pre-pandemic period. And with 3% market rent growth, you know, you would think that you kind of surpassed that 3% into the peak leasing season before it moderates in the back half of the year. So I guess I'm trying to understand, you know, that kind of cautious new lease rate growth assumption there. in your guidance. And then could you also just share what would get you to the low end of the guidance range? Because that seems like a pretty draconian scenario to be able to achieve the lower end. Thanks.
spk09: I'll give you sort of the forecast, how it's laid out quarter by quarter, and Tim can give a little more specifics on it. It is fairly consistent around that 3% for the year, with obviously a little higher in the second two quarters of the year, as Tim mentioned, as we get more traffic and renewals hold stronger and new lease pricing becomes most robust. It's really going to come down to new lease pricing as the variable through the year, but the band is fairly tied around 3% in our expectation, just given the blend of overall demand.
spk17: And so... Yeah, and just following up on the new lease rate, I mean, we, you know, again, absent last year that was record highs, new lease rates kind of in November, December, early part of the first quarter typically are negative. So it's not unusual kind of the new lease rates that we're seeing right now. And then they start to accelerate as we get into the spring and summer. But in terms of getting to the low end, I think it's kind of back to Eric's comments on the economy. If we see a a further deceleration in demand or see something, a shock on the economic front that could drive pricing obviously lower. And that's how you get towards the lower end of guidance. And then, you know, the opposite, a little bit better economic backdrop would push pricing higher and get us more towards the higher end of revenue guidance.
spk09: If that shock came, it would, given the impact would come through pricing, it would be manifest probably in the latter part of the year as those new leases blended in.
spk20: Got it. That's helpful. Thanks, everybody.
spk13: We'll take our next question from Nick Joseph with CD. Please go ahead.
spk06: Thanks. Eric, in your comments in the sub, you talked about the strong balance sheet and that being in position to capture and influence opportunities. It sounds like you think it may emerge. From your comments on the call, it sounds like maybe that's more of a second half 23 comment. But, you know, where do you think those opportunities could come from if that's more acquisitions, DBs, land, something else?
spk05: You know, Nick, I would tell you that my belief is that when we've been through this in the past, where we tend to find the best opportunity is is in projects that are in lease up, fairly newly constructed. They're more likely than not have already finished the construction. They may be at that 50, 60% occupancy level in their initial lease up. They've been leasing for probably the better part of a year. So they're now getting to a point where they're starting to run into lease expirations and related turnover, which just brings out much more pressure on the lease up effort itself. And these, as I say, are not yet fully stabilized assets, and thus they're more difficult to finance from a typical leveraged buyer. And so that's where we're hopeful that we will find more emerging opportunities in that kind of a scenario. We've certainly seen that in the past. And one of the things I think is important to point out, I mean, our assumptions is built around leverage. For 2023, our guidance is built around the assumption of a $400 million acquisition volume. Now, we are assuming that their initial yield on this $400 million of acquisition is only 3%, reflecting that non-stabilized status of these investments. So while that is weighing on FFO performance for the year, we think that it has, you know, great value proposition, value opportunity going forward long term. And so given the supply that's coming into the market, given the difficult financing environment we find ourselves in, we think that that area of opportunity is going to emerge over the course of this year. And that's what we've kind of dialed into our guidance for the year.
spk06: Thanks. That's very helpful. And then I guess we've spent a lot of time on kind of macro backdrop and the blended rent growth assumptions and everything that goes into revenue. But if you think about from a market perspective, in 23, given your new guidance, what does that imply for which markets are kind of the top performers and which you're more concerned about?
spk17: Yeah, Nick, this is Tim. I mean, you know, with the earned in we talked about, you know, of our larger markets, I expect just rent growth or revenue growth should be pretty solid for several of our markets due to that earned in. But if you think about some of the stronger ones that we think will continue into 2023, I mean, Orlando continues to be a really strong market for us. It's been strong now for a couple years. In terms of demand, it's our number one job growth market that we're expecting for 2023. It is getting a little bit of supply, but it's not necessarily situated where our portfolio is in Orlando. Of the sub-markets in our portfolio that are getting the most supply, only one of those is in Orlando. So the demand combined with the supply there expects Orlando to be strong. It's continued to have really strong blended pricing both in Q4 and January. And then Dallas is another one I would point out that we think can show some strength in 2023. It's one of our lower supply markets we would expect. There's a couple sub-markets that we're in, particularly North Dallas, Frisco, Plano Island, that'll get some supply. But broadly, Dallas isn't seeing as much supply pressure. And we've seen the pricing both in Q4 and January been a little bit higher than portfolio average. So those are a couple that we've kind of got our eye on from a strength standpoint. Austin's probably one that you know, on the downside that we're keeping our eye on more than anything, it's kind of got the extremes on supply and demand. It's one of the better indicators in terms of demand with job growth, migration, population, all that, but it also has the absolute highest supply coming into the market of any of our portfolios or any of the markets in our portfolio out of the various sub-markets that we're seeing supply of four out of the top 20 are in Austin. So that's one we do expect to moderate, though it does have pretty good earned-in rate growth. So those are a couple that we're kind of keeping our eye on.
spk06: Thanks. That's helpful. So it sounds like maybe the large still outperform the secondary markets in 23, or maybe that spread narrows a bit?
spk17: Yeah, it probably narrows a bit just with You know, with the moderating rent growth, we typically see the secondary markets hold up a little more if we get into a softer economic environment. But I think broadly in terms of revenue growth, again, with the earn-in, I would expect that the large markets hold up pretty well. Thank you very much.
spk13: Okay, our next question from Anthony Powell with Barclays. Please go ahead.
spk16: Hi, good morning. It's a question on new lease spreads and pricing going into the spring. What would cause you to get a bit more, I guess, confident and pushing rate more as you get to the peak leasing season? Would it be just general improvement in economic sentiment, you know, job growth continuing to be where it is, the market continuing to do well? Just curious how you may change your approach to pricing in spring if things get a bit better.
spk17: Yeah, I mean, generally it's going to be, it'll be that, you know, it's the economy and the demand. And, you know, we look at lead volume, we look at exposure, we look at rent income and various things there that drive some of our decisions on, you know, we're always sort of balancing how much we want to push price versus occupancy. So, you know, there's nothing, there's no blinking red lights right now that would suggest that we see any sort of downturn. We're kind of We're kind of monitoring all those various metrics right now and everything looks about what you would typically think during this time of the year, during the winter. So it'll really be as we get into spring and summer as demand picks up and traffic pick up and lead pick up. That'll be really the determining factor on where 2023 heads in terms of demand.
spk16: Thanks. And turnovers seem pretty consistent. And any changes in how – How certain residents responded to lease renewals, price increases, and any trends there you want to call out?
spk17: I mean, the turnover was, it remains pretty low, historically speaking. It was up a little bit in Q4, but the reasons for turn have been pretty consistent. We've actually seen the, you know, move out to rent increase decline a little bit, but it's still, you know, it's job transfer. and buy a house are still the two biggest factors, but those are certainly been down from what we've seen in the past, but no notable trends one way or the other.
spk16: Thank you.
spk13: We will move next with Chutney Luther with Goldman Sachs. Please go ahead.
spk12: Hi, good morning, and thank you for taking my question. Could you spend some time talking about the expense outlook for 2023? You know, what would get you to the low end versus the high end? And, you know, guidance does talk about property taxes in there, but perhaps you could spend some time on other elements. And then, you know, what are the markets where you see more tax pressures versus others? Thank you.
spk09: this is al i'll start with that and then maybe tim can get some color on some of that i think that the way to think about that as you go into 2023 is um we're continuing to see general inflationary pressures a bit in our expenses but really taxes and insurance are the drivers of the main pressure and as i mentioned in my comments those two together are over seven percent and so that's really and taxes are 35 of all operating expenses so it's very meaningful And, you know, and then the other expenses together are about 5.5%. I think we're beginning to see some moderation in your personnel, repair maintenance, and those things. And I think you'll see that manifest, and Tim can talk about components of it, but as we move more into the back of the year, you'll see a little more of that manifest in those line items. But taxes and insurance, there's a pressure point. What could take us higher or lower to our guidance on the overall, which is primarily going to be taxes and insurance, would be we don't have a lot of information yet on either one of those. Taxes, when you go into the year, notoriously, you don't have a lot. You have a good idea what you think valuations will be based on cap rate markets. But you're totally guessing on millage rates, and that has been very volatile in the last year or so as municipalities deal with their budget issues. And we've got a few fights left over from last year. I mean, we've got some things that we're going to fight hard, and we continue to. In Texas, we will formally litigate half of our properties this year than we did last year, and some of those have not yet finished. And so there are things like that that can make you go higher or lower. We feel like we've got our best estimate in there right now, and that's the appropriate thing to do. And so, overall, we'll see some moderation in the controllable expenses, but expense pressure driven by insurance and taxes.
spk17: Yeah, Sean, and I'll add to that. As Al mentioned, you know, about 40% of our expenses are taxes and insurance, call it around 7%, and then the other 60%, around 5.5%. So, if I had to, just thinking in terms of absolute year-over-year growth, I'd sort of rank them. I would say, you know, insurance is probably the highest, R&M probably the second highest, and real estate tax is the third. So, Getting on R&M, it's really driven by inflationary pressures. Not so much that we expect to get really any worse in 2023, but kind of carry over or earn in, if you will, on some of the inflationary increases that we saw in 2022. We've seen HVAC up 16%, plumbing up 18%, appliances up 17%. So that's expected to drive the pressure on the R&M side, though we still remain on a per unit basis lower than the sector average. I do think personnel moderates from what we saw in 2022. We have some opportunity there, but and then the other smaller line items are fairly manageable. So it's really on the controllable, if you will, side. It's R&M we think is driving the bulk of the increase.
spk12: Thank you for all that detail. For my follow-up question, I just wanted to clarify or, you know, try to understand how you're thinking about bad debt in 2023, what's embedded in your guidance, if there's anything, and, you know, how does that compare versus 2022? And then, as you've obviously talked about, supply issues. being higher in 2023. How are you thinking about concessions? Are you seeing more concessions in your markets, in your properties? Any thoughts around that would be very helpful. Thank you.
spk09: I'll start with the bad debt. I mean, I think in terms of what we have in our guidance, collection practices have come pretty much back to normal, not 100% maybe, but very close, I would say. And Rob may have something to say about that. So collections are very good. What we've dialed in is close to historic normal. I'll call it 40 to 50 basis points delinquency, which is very low. And we have, you know, almost no collections coming from any government programs. We have the amount of our uncollected from history continues to decline. So we're in a very good position there, and so our forecast for the year reflects that. And so the moderating or normalizing trends that we're putting in our forecast really has collections about where they typically are in a normal environment.
spk17: Yeah, and one I'll add on the concession point, you know, we're not seeing any significant increase in concessions at this point. It was 0.3% of rents overall in Q4, which was in line with what we saw in Q3. You know, we are, to the extent we're seeing them, it's still largely across the portfolio more in some of the urban or downtown submarkets, which is seeing more of the supply and seeing less concession usage on the more suburban assets, but generally no big change from what we've seen the last couple quarters.
spk12: Thank you for that.
spk13: We'll take our next question from Handel St. Just with Museumville. Please go ahead.
spk03: Hey, good morning out there. A few questions for me on the external growth front. I was at National Multihousing, too, heard that there's a ton of buyers, more institutional demand, but a shortage of sellers and products. I guess I'm curious if you would see an advantage to perhaps selling more assets now? Is there perhaps a scarcity premium? And perhaps be willing to sell a bit earlier in the year to capitalize on, even if it does mean a bit of dilution, as you wait to redeploy in a more favorable fashion? acquisition markets in the back end.
spk08: Yeah, Handel, this is Brad. I'll take that. As we enter this year, our disposition plan is really a big component of that, as you mentioned, is the ability to redeploy that capital. That's a big part of what we're looking to do. And so we're not generally looking to time the market. We do a very in-depth review of our disposition plans in the third, fourth quarter. of the year to really identify what we're going to sell for the year. And we generally don't factor in what we think are going to be the market dynamics in terms of just maximizing value. We want to do that, but broadly speaking, what we're trying to do is really build a long-term earnings profile within the company that really supports our ability to pay a growing dividend over time. And so we think that's better done on a consistent basis. where we're in a position to be able to sell assets, maximize our proceeds to the best we can, and then redeploy that capital into external growth opportunities. So what we have in our forecast right now is a sale of one asset earlier in the year, and the reason for that is We're targeting a strong primary market that's in Charlotte where we think we can kind of maximize the proceeds given the fact that there aren't a lot of sellers out there right now in that specific market. And then we'll come out with our other assets later in the year when we think the debt markets will be a little bit, you know, settle down a little bit, spreads will be a little bit less volatile than where they are right now, and frankly, where buyers can get a little bit more visibility on values. We think that that's the best direction for us in terms of our dispositions and our external growth plan.
spk03: That's very helpful. Appreciate the call there. uh a follow-up on maybe on a different attack but external growth related um we've seen a lot of uh mid and high score cap rate trades of late uh but hearing the bid-ask spread out there remains fairly wide 10 that referred from some folks so curious kind of what you're hearing or seeing on the bid-ask spread and how this plays out what you think the market clearing price is or what you'd be willing to pay to get some deals done here thanks
spk08: Yeah, you know, it's hard to say. I mean, there's just, you know, as we looked at the market in the fourth quarter, honestly, in terms of the assets that we would be interested in buying and track, there was really only seven. So in the universe of us normally tracking, you know, 40 deals in a quarter to only have seven transact is a very, very small universe. And we have seen cap rates move up. I would say in the third quarter, They're around a four and a half on the projects that we looked at in the fourth quarter. They were four, seven, five. But there's a spread, obviously, and it really depends on where the assets are located. We saw one in the fourth quarter that traded, call it for five and a quarter. But generally, when you're getting into that cap rate range right now, we found that the quality of the asset or the location is not ideal, and it's not generally a location that we're interested in. So for assets we're interested in, they're still in the 475 range, to your earlier point. I think part of the driver there is that there's just not a lot on the market. And I think as more volume begins to come to market, which we think will happen late second quarter and into third quarter later this year even, As more properties come to market, that those cap rates likely expand a bit. I mean, the fact is interest rates are up substantially. Today, the debt rates are five to five and a half, and that's got to push cap rates up at some point, negative leverage. is not something that we can maintain in perpetuity. But until you have a significant volume of assets coming to market, there's still going to be a number of aggressive buyers out there that are bidding hard at assets that are really setting a lower cap rate range. And then I would also say that a majority of what's selling right now continues to be loan assumptions. And so that kind of masks what true cap rates are out in the market, and we just need volume to really help us see that.
spk03: That's really helpful, too. I appreciate that. If I could squeeze in one more. I don't think I heard it, but did you guys share or can you share what your turnover assumption is for a full year of 23? Thanks. Thanks.
spk17: Yeah, I know this town and for now we're expecting it to be pretty similar. I think you know some of the reasons that drove turnover this year probably moderate a little bit and maybe some of the other reasons go up a little bit, but on on in general we're expecting similar turnover to what we saw in 2022. Thank you.
spk13: We'll take our next question from a bridge Anderson with SMBC. Please go ahead.
spk10: Thanks. Good morning. So my first question is on the expected deceleration of rent growth, obviously, in 2023. No one's surprised by that. But I'm wondering if you can sort of get into some more of the nitty-gritty detail of where you're landing. How much of it is proactive on your part? How much of it is reactive? Are you sensing fatigue from customers? Are you noticing... you know, occupancy moving around or turnover. I think you mentioned, Tim, I think you mentioned turnover uptick in the fourth quarter. Are there any things that you're reacting to that's causing you to pinpoint where you're headed for same store growth, revenue growth in 2023? Or are you just sort of protecting the downside given some of the uncertainty in the macro environment and being more proactive in your approach?
spk05: Well, Rich, this is Eric. Let me try to answer that. I think that at the ground level, I would say that we're not really seeing anything at this point that causes us to believe that we're looking at a much weaker demand environment over the coming year. touched on earlier. I mean, we're still seeing no evidence of distress with our render base. Our rent to income ratios remain very stable relative to where they have been. Collections performance has been very strong. We're not seeing any behavioral changes with room aiding, things of that nature. We're not in the trends to, you know, migration trends continue to be quite positive. Move outs to non-MAA markets or move outs out of the Sunbelt continue to be quite low. So I think more than anything for us, we're just, you know, trying to keep an eye on the broader economy and the broader employment markets and any evidence that the employers are really starting to get aggressive at downscaling and downsizing jobs. their staffing. And we've not seen that yet, but that would be obviously a positive concern. But at a macro level, move outs to home buying continues to be quite low, and there's no evidence mounting that that's starting to change. and move out due to people not wanting to pay the rent increase they were asking for still is our third biggest reason, but we're still having people come in after them when they do move out willing to pay more than what we're asking the renewing resident to pay. So that, to me, is a fairly strong, you know, indicator that the market is still holding up quite well. And so I think we're just moderating off of, you know, incredible highs, and that's what's happening here. But in terms of any significant, you know, pullback in demand, we're just not seeing that at this point.
spk10: Okay, fair enough. Second question is just closing the loop on the supply conversation. you know, what always happens, developers chasing 2022 growth by delivering product in 2024. Always, you know, a smart strategy. But I guess my question is, do you feel like given the environment and interest rates and everything else, do you feel like, you know, sort of the private developer model is on shakier ground than normal this time around? And perhaps even more of an opportunity for you to step in at some point down the road? Or is it sort of a typical environment, you know, different, obviously variables, but a typical opportunity for you a year or two down the road.
spk08: Hey, Rich, this is Brad. You know, I definitely think in terms of new starts, they're on much shakier ground than privates are for sure in terms of getting financing. You know, I would say that for anything that is in lease up right now, I mean, there's not distress in that market currently. So, you know, there's not a lot of forced selling at the moment. Now, there are still equity and capital markets folks that they want to cycle out of. As I mentioned earlier, our region is predominantly controlled or developed by merchant developers and they're really their model is built on developing an asset and selling it, taking the profit, moving on to the next deal and renting and repeating. I'd say that that's a little bit in flux right now with nothing selling and the inability to start new assets. So I would say, you know, the private developer is a little bit more in flux right now because of those reasons.
spk10: Okay. Thanks very much.
spk13: We'll take our next question from Wes Galladay with Baird. Please go ahead.
spk19: Hey, good morning, everyone. Last year you had about just under $200 million of non-recurring CapEx. How are you thinking about the spend for this year, and is there anything in there that will drive down expenses maybe in 2023 or 2024?
spk09: Wes, this is Al. I'll start and frame the capital. I mean, you know, overall we're spending, you know, all the programs together probably, you know, around $300 million and recurring and re-enhancing together probably $180 million. And so that's $1,800 a unit, probably $1,000 recurring or a little more. And the rest being revenue enhancing. We continue our programs in a unit redevelopment program, which includes our smart rent. So we'll do those interior programs and smart rent together. That's another $97 million. And we'll continue our property repositioning program, which Tim talks about taking properties and increasing their revenue potential another $20 million or so. So overall, it's about a... $300 million. I mean, certainly there's some things in the revenue has that we think, whether it be some ESG investments and some things like that, that will have some potential for the future. We're also seeing some inflationary pressures in that as well. And then a large portion of that is just investment for the future. Some of those programs, repositioning program, unit redevelopment and smart rent. So that's kind of how we think about that.
spk19: Okay, and then I guess as we maybe fast forward for the next few years, does this ever start to ramp down, or do you have just a big pipeline of when the smart rent's done, you just move on to something else? How should we think about a multi-year view on this?
spk17: Yeah, Wes, this is Tim. I mean, in total, I think it comes down a little bit. You know, the smart rent installation is a fairly significant piece of that. We expect to finish that capital project this year. I think you'll see that come down, but I would expect both on the unit interior redevelopment program and the broader sort of amenity-based property repositioning program that we expect to continue those at similar levels.
spk19: Okay. Did you comment on the exposure right now? I might have missed it.
spk17: Exposure right now is set at about 7.5%, which is in line with what it was last year and kind of what we would typically expect this time of year.
spk19: Okay. Thanks a lot, everyone.
spk13: We'll take our next question from Rob Stevenson with Johnny. Please go ahead.
spk11: Good morning, guys. Brad, what are the markets represented by the four to six development starts over the next year plus? And given Tim's comments on R&M pressures, what are you seeing in terms of construction cost pressures going forward for new starts?
spk05: Yeah, Rob.
spk08: So for the four starts that we feel we're in good, good shape on for this year, we've got one in Charlotte. We've got one in Denver. We've got one in Orlando and one in Atlanta. I think I had those in my prepared comments. So those are projects we've been working on for a while and plans are in process on those. So we feel pretty good about those. In addition to Those projects, you know, we own a number of sites, and we've got some in Denver, another phase in Orlando, a second phase in the Raleigh market. So a number of those projects, you know, that would add up to that six over the next 18 months or so. But for this year, the four are the ones that I mentioned in my comments. In terms of construction costs, you know, What we're seeing right now is that costs are not escalating like they were in 2022. We saw a significant increase in construction costs throughout the year. At this point, we're not seeing that at the moment. It's certainly our hope that as we get further into this year, the times where our developments will be starting third and fourth quarter, that perhaps we get some relief there. The first signs of that are that we're getting calls from contractors saying they didn't think they had capacity to bid our job originally, but now they do. We're hearing that from subcontractors as well. So, you know, given where the single-family market is and the fact that we expect new supply starts and to come down on multifamily, we hope to see some relief on the construction side. But for now, it's just holding flat.
spk11: Okay. And then, Al, G&A was 58.8 in 22, and the guidance is 55.5 at the midpoint for 23. Obviously, Tom's left, but what else is in that expected decrease?
spk09: I think that's – well, let me start with Rob. As we talked about, we really look at overhead as a total, and so I would focus more on the 128.5, and then that's a little over 3% growth in total for the year, which we think is – but on that specific G&A line, the biggest item there is we had very strong performance in 2022, so you've got certain programs that – performance incentive programs that are max, and then we said our guidance for next year is based on the target. It's a target, so that's a big part of that. And then on the property management expense line, the growth in that that you see is really investments primarily in technology, you know, both to strengthen our platform and to support initiatives that were going on. So I answered both of those because I think that's both together a part of that overall overhead growth of the year, Rob.
spk11: Okay. Thanks, guys. Appreciate it.
spk13: We'll take our next question from Michael Goldsmith with UBS. Please go ahead.
spk04: Good morning, thanks for taking my question. What's the expected expense growth cadence through the year? Is that is that relatively flatters that accelerating and within that? You know, are you, you have a mid-year renewal insurance that's easier compared than the back half. How does that reconcile? And then on real estate taxes, the midpoint of the guidance is six and a quarter percent, but that would be lower than six and a half percent last year. So just trying to understand the shape of the expenses through the year and also why real, why real estate taxes would be perhaps slightly down this year.
spk09: Okay. I'll try to answer that. This is Al. I think the cadence for expenses, you should see the most pressure in probably Q1, and that's because you've got a continuation of sort of the inflationary levels that we saw in third and fourth quarter carrying sequentially over and comparing to Q1 last year with a lot of inflationary pressure wasn't yet built in. So the highest point would probably be Q1, and it will moderate down Q2 and Q3 to more level, you know, that mid-single-digit range. So that's the main thing. And taxes, you know, the six and a quarter, I think, you know, we are – last year what we saw in 2022 was, you know, – looking back to a strong year we saw millage rates come in that we thought would roll back more than they did um got surprised a little bit in the fourth quarters we talked about um and so so that was that we we ended the year a little higher than we expected in 2022 and i think as we move in 2023 but we don't expect significant reprise in key areas you know our uh we got a pretty we have a pretty good beat on what's revaluing this year it's primarily texas and part of atlanta uh parts of georgia that's primarily atlanta And so given what's revaluing and our expectations for mills rates, and we have a few of our cases from 2022 that we're litigating that are spilling over into 2023. And so we've got an estimate of what we think we'll win on that. We may be wrong, but we've got an estimate on that included in that. So all that together gets us to that six and a quarter range. And a lot of unknown in that right now, as we talked about, but we think where we stand, that's a very good estimate.
spk04: Got it. And sticking with you, Al, NOI growth has been strong, but property values haven't had the same magnitude of increase due to the rising cap rate. So does that leave more opportunities for successful appeals maybe in, you know, 24 and beyond?
spk09: Yeah, I think I think what would say is 23 is a year just that they're still looking back at very strong revenue. It's kind of backward looking game. Look at the beginning of this year. Still looking at long strong revenues from 2022 and a pretty stable cap rate environment has changed, but they're still fairly stable. So that's driving it. I do think your point I think is a very good point as we move into 2024. that they're looking back at a more normalized year, we would expect some moderation in taxes, primarily in Texas, Georgia, and Florida. We're seeing that most pressure because it's going to be driven by a normalized top line, to your point. So we would agree with that comment.
spk04: Thank you very much. Good luck in 2023. Thank you.
spk13: We'll take our next question from John Polosky with Green Street. Please go ahead.
spk07: Thanks for keeping the call going. Al, maybe just a few quick follow-ups on the property tax conversation. Could you just give me a rough sense what percentage of the portfolio you already have a high degree of visibility for the increases this year?
spk09: Ah, man, what we have a high degree of visibility is pretty low, other than we have a good beat on what we think the values are. Obviously, we know, given the current cap rate environments, what they are. And, John, I mean, you know, 70% to 75% of our tax exposure is from Texas, Florida, Georgia. So it's really going to come down to the millage rates. It's going to turn down to what do the municipalities need, what are they going to, you know, we expect to have continued strong valuations and probably millage rates rolling back again. Where that all ends up, it's hard to have precise visibility at this point. I mean, I think we have consultants that help us. We have a lot of market knowledge. So it's based on, our estimate is based on, you know, Texas. Georgia and Florida, the key drivers of our expense. And that's, you know, I wish we had more at this point, but I do think that our experience, our history in the markets, our consultants give us a pretty good understanding at this point, as good as we can have until second quarter, John, we'll have more. Third quarter, we'll have not perfect, but very good knowledge, I would say.
spk07: Okay. I understand there's a range around all these estimates, but just curious, Al, what do you think a reasonable worst case scenario is for property taxes this year? You know, that's kind of why we put a little higher.
spk09: I'm sorry. Yeah, that's good. Good question. That's why we put a little bit higher range or wider range on that, John. You saw that we put seven at the top end of our. I think that's what we would say. I mean, we're at six and a quarter. You know, you could have some things go either way. You know, we're hopeful that we have some strong fights in these areas, but I think seven would be several things going against us that we didn't expect.
spk07: Is 8, 9, 10 a zero probability if cities don't lower millage rates?
spk09: I mean, 8, 9, or 10, I mean, given what's revaluing and given the shape of where things are, I think 8, 9, 10 is probably low probability. But I do think, you know, zero, too, that low end is a low probability. We're looking back again to a very strong 22-2. They're going to use that to put a cap rate on. And so I think it's hard to see much reduction expectation this year. But as we mentioned, John, as we move into 2024, it would be hard to not be able to argue that, some of those. So we would expect what moderation that we see to begin in 2024. OK. Thank you.
spk13: I'll take our next question from with Credit Suisse. Please go ahead.
spk00: Good morning, everyone. Thanks for keeping the call going. Just a broader general question about the regulatory backdrop. Again, I apologize if this has been asked. But again, just a lot of talk in several municipalities around additional rent control. Even at the federal level, you have the White House putting out guidelines. Just curious your overall thoughts on this, if you think it will actually have any impact in the short, medium, or long term. But if you kind of think maybe a lot of the suggestions are just things that may not impact you at all because it's all about just weeding out the bad players in the industry.
spk01: Hi, Tayo. This is Rob. Thank you. Shout out answering that. I think really like if you start at the federal level and the White House blueprint that they put out a couple weeks ago, it really does seem to focus a lot on more on the affordable housing component of it and really almost using the agencies as part of the leverage there. As we look at our states in which we operate and the municipalities, there is some rent control pressure or proposals that come up from time to time, but really don't ever see them gain any traction. So from a kind of a short, medium term. We don't really see anything as we're tracking legislation across the board that gives us any significant concern and still view it as really, if affordable housing is the end goal, it's more of a supply-driven pressure that needs to be added to the system rather than focusing on rent control, which ultimately is a negative for both the the owners, and the residents.
spk00: Great. Thank you.
spk13: We'll move next with Jamie Feldman from Wells Fargo. Please go ahead.
spk21: Oh, great. Thank you. I guess just to follow up on Tyra's question, I mean, do you in any way include, you know, handicapped, any kind of rent control risk in your guidance for your rent outlook?
spk01: We have not.
spk21: Okay. And then I appreciate all the color on, you know, so far on kind of markets. It sounds like things are still going pretty well. But I guess if you focus specifically on like Austin, Nashville, Raleigh, some of these big, you know, tech growth markets in recent years and probably markets that have more layoffs than others, can you provide any kind of anecdotal evidence of anything changing there, whether it's, you know, different types of people backfilling vacancies or move outs or anything like that? Just, you know, those kind of markets versus, you know, the rest of the portfolio would be helpful. Thank you.
spk17: Hey, Jamie, this is Tim. I mean, I think the ones you point out are right in terms of, you know, also National Rally are the ones where we would have more tech exposure than some of the others. But as of now, we haven't seen it. I mean, we're keeping an eye on what it exactly means in terms of, which staff are going to be impacted by some of the announcements that have already been made. But to date, we haven't seen any impact from that. No trends different in those markets, you know, other than sort of the broader, you know, we talked about Austin with the broader supply-demand concerns. But, you know, we haven't seen anything yet, but those are the ones we would be keeping an eye on for sure.
spk21: Okay. Are you seeing slower demand from those types of employees, people in those industries?
spk17: Not really. I mean, you know, a lot of these markets aren't quite the Silicon Valley in terms of the types of employment that we had there. It's a little more, you know, call it, you know, mid-level or if you want to say a little more blue-collar type tech. But we've not seen it yet. Like I said, it's something we're keeping an eye on, and that could be what drives more of the downside risk on our forecast for 2023, but nothing reportable so far.
spk21: Okay, all right, thank you.
spk13: We have no further questions. I will return the call to MAA for closing remarks.
spk05: Okay, well, we appreciate everyone joining us this morning. If you have any other thoughts or questions, follow up, just reach out at any point. So thank you for joining us.
spk13: This concludes today's program. Thank you for your participation. You may disconnect at any time.
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