Rithm Property Trust Inc. Common stock

Greetings and welcome to the RPT Realty Third Order 2020 Earnings Conference Call. At this time, all participants are on a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Mr. Vin Chow, Vice President of Finance. Thank you, sir. You may begin. Thank you, sir.

Good morning, and thank you for joining us for RPP's third quarter 2020 earnings conference call. At this time, management would like me to inform you that certain statements made during this conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. Additionally, statements made during the call are made as of the date of this call. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, factors and risks could cause actual results to differ from expectations. Certain of these factors are described as risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2019, and quarterly report on Form 10-Q for the second quarter of 2020, and in our earnings release for the third quarter of 2020. Certain of these statements made on today's call also involve non-GAAP financial measures, Listeners are directed to our second and third quarter press releases and third quarter supplement, which includes definitions of those non-GAAP measures and reconciliations of the nearest GAAP measures, and which is available on our website in the Investors section. I would now like to turn the call over to President and CEO Brian Harper and CFO Mike Fitzmaurice for their opening remarks, after which we will open the call for questions.

Thank you, Vin. Good morning, and thank you for joining our third quarter 2020 conference call. I hope you and your families are all well. Despite the challenges facing our industry, we experienced an excellent quarter of leasing activity and rent collections, in addition to making strong progress on several of our ESG initiatives and accomplishments. Also, we continue to keep two eyes on the current business and a third eye on the future as we start to see opportunistic shifts in the retail real estate landscape. While we will be disciplined with our capital, we are well positioned to be on the offensive. We are pleased with the level of leasing demand that we are seeing so quickly after the economy reopened. This quarter, we executed 106,000 square feet of total new leasing volume, the highest level since the first quarter of 2019. As a result, our sign-not-open ABR of 3 million nearly doubled since last quarter. As we look ahead, our leasing pipeline is very healthy. Today, we have an additional $1.5 million of ABR that is currently in lease negotiations, with significantly more in advanced LOI stages. Much of this demand is coming from grocery, off-price, QSR, and medical-use tenants. We have also seen an acceleration of traditional mall tenants looking for space in open-air centers. While this demand creates friction in the market and helps drive pricing, We are being highly selective in this area as we are not interested in turning our centers into outdoor malls with a heavy concentration of full-price apparel. Overall, visibility into our leasing pipeline and pending sign-not-open balance gives us comfort that incremental cash flows will provide some cushion from COVID-19 store closures. Along with our solid leasing activity, we achieved double-digit growth in our releasing spreads, including a 43% increase on new leases, the highest level since the second quarter of 2018. In fact, since mid-2018, after the new management team started, our new releasing spreads have averaged 30%, with an incremental return on capital of 12%. Reflecting the mark-to-market opportunity embedded throughout the portfolio. We look forward. We expect to continue to drive rent as we believe our Midwest and Southeast geographies have in-place rents that are more accessible to tenants. Leasing highlights for the quarter were new deals with Nike, Sephora, Burlington, and Bank of America, to name a few. These credit tenants not only improve the quality of our cash flows, but are also providing a good return on capital in the mid-teens range. During the quarter, we opened Lululemon at our Woodbury Lake property in Minneapolis, with initial sales significantly exceeding Lulu's forecast. Touching on our growth share initiative, we continue to see tremendous opportunity for stronger growth and gain share opportunities. including Kroger, Sprouts, and Publix. Each reported impressive quarterly earnings and sales, while Aldi recently announced plans to open 70 new U.S. stores in 2020. The demand is real, and we continue to see a unique opportunity to improve property values and strengthen the resiliency of our cash flows. Our pipeline of deals includes the addition of grocers to non-grocery anchored centers, and then opportunities to enhance the existing grocer tenancy. Negotiations are progressing well on several locations and we hope to provide further updates in the coming weeks. Our collections rates in the third quarter showed noticeable improvement with 87 percent of base rent and recovery income collected as of October 30th. We have seen further improvements in October with 90 percent collected thus far which is ahead of the pace we experienced for September at the same point in time. Our collection levels are rising quickly as deferral periods end and tenants resume payment in accordance with their deferred plans. As a result, our second quarter collections have increased to 76% up from 65% as reported last quarter. We also intended to collect rent from our local mom and pop tenants at a very high rate of 94% in the third quarter. Throughout the sector, these tenants have historically suffered the most in past downturns, and we believe our high collections are a reflection of the quality of our smaller tenants and our boots-on-the-ground leasing and asset management approach. We also believe our relatively lower exposure to this category of just about 10% should provide some shelter from potential future fallout. With our percentage of open tenants by ABR at 94% and October collections sitting at 90%, absent any macro headwinds, we are cautiously optimistic that we will continue to drive collections higher. While we are still in the throes of the pandemic, I think it's important to keep in mind that several of our top tenants are thriving today, including Whole Foods, Best Buy, and Dick's. We're also seeing a comeback with Bed Bath & Beyond, our fourth largest tenant. They recently launched same-day delivery to complement their focus in curbside pickup services that fueled an 89% increase in digital channel sales in the first positive comparable sales growth quarter in almost four years. Gap recently announced its Power Plan 2020 strategy that will refocus the business on growing just the Old Navy and Athleta brands. Today, 10 of our 13 DAC concepts are Old Navy and Athleta. On the tenant risk front, about 3% of our ABR is currently in bankruptcy proceedings, and we expect to retain about half of this amount. During the quarter, we recaptured 8 of 15 ASEANA locations, and we're actively working on backfills well before the bankruptcy filing. We have already released one location and are in various stages of negotiations on the remaining seven. We expect to vastly upgrade tenancy and experience positive mark-to-market opportunities for these locations. During the fourth quarter, we expect to recapture two Steinmark boxes, representing roughly 60,000 square feet. We are in advanced negotiations on both with off-price concepts, providing us the opportunity to materially enhance credit and merchandising for both properties. At just under $11.50 per square foot, we also see a sizable mark-to-market opportunity upon release of those spaces. Given recent headlines, I wanted to provide some color on our theater exposure. In total, 4% of our ABR comes from theaters, 3% of which is with Regal, that recently announced that it would temporarily reclose due to a lack of studio releases. While this news is disappointing, we believe that the theaters will remain a key source of distribution to the film studios and provide a difficult-to-replace form of entertainment to us as consumers. We are hopeful that the difficult steps taken will allow Regal to continue to weather the pandemic. However, like every troubled tenant, we are not sitting idle and are proactively evaluating our alternatives at all four locations. Three of the four are standalone boxes that give us additional replacement options, including single tenant replacements, box splits, and potentially even some non-retail uses, including last mile distribution. The last location is at our Webster Place asset in Lincoln Park, Chicago, where we have been cultivating densification and mixed-use opportunities. The highest and best use at this asset is residential. We've been trying for quite some time to clear the site so that we can progress towards a JV with a residential partner. Overall, we believe our exposure to the theater category is manageable We are taking the appropriate measures to minimize the impact on our business, including reserving a significant amount of our expanding theater uncollected rent. I think it's worth noting that while many analysts have pointed to our somewhat higher exposure to the theater category as a reason for concern, our collection levels in the third quarter and in October are now at or above peer collection levels. As you think about the risk profile of RPT, I would simply point to the convergence of our collection rates and our below-average at-risk exposure to a broad range of groups versus narrowly focusing on individual tenants and categories that may be in the headlines today. We have a slide in our investor presentation that we think provides context regarding our broader COVID-sensitive exposures versus our peers. Turning to our strategic outlook, without the pressure to raise capital near-term, we are in a position to play offense. While we continue to manage our liquidity closely, we are actively scouring our target markets for acquisition opportunities. We have roughly $95 million of excess cash in our balance that we can strategically and accretively deploy as opportunities arise. Though overall deal volumes in the open-air sector have been light, we are starting to see the first signs of activity, and I'm personally starting to get calls about stressed opportunities. To date, these deals have not met our stringent underwriting criteria, but we believe more appropriate opportunities for RPT will emerge later in the year and in the early part of 2021. At this point, the percentage of retail CMBS debt in special servicing is at an all-time high, and stress debt, which includes debt that is not yet in special servicing, is already above levels seen during the Great Recession. We believe our excess cash and our strategic partnership with GIC will be a key advantage as deal flow materializes. Also, while our current liquidity is strong, we are not resting on our laurels and are actively exploring additional options to generate even more capital at attractive pricing in order to be ready for further deployment opportunities that could be transformational for a company of our size. Before turning the call over to Mike, I wanted to highlight the progress we've made on our ESG initiatives. As noted in our press release, we recently launched a landing page on our website highlighting our ESG mission, goals, and accomplishments. I'm also proud to say that we filed our inaugural graduate assessment as part of our commitment to sustainability and launched our diversity inclusion committee as we fulfill our corporate purpose of turning commercial ground into common ground. Highlighting our efforts on the social front, We were recently recognized as the top place to work by the Detroit Free Press and were selected for the Crain's Detroit 2020 Cool Places to Work list. And just yesterday, Commercial Property Executive announced that RPT won an award for one of 2019's best investment transactions within the portfolio category for our joint venture with GIC. With that, I'll turn the call over to Mike to discuss our financial performance for the quarter.

Mike? Thanks, Brian, and good morning, everyone. Let's begin with a brief review of our third quarter results. Third quarter, same property NOI and operating FFO were both up since last quarter, fueled by a smaller impact from rent not probable of collection, a direct result of improving collections as we move past the depths of a pandemic. Our rent not probable of collection and abatements were roughly $4.5 million in the quarter, which included about $900,000 related to prior quarter billing, primarily our theaters. The clean rent not probable of collection for the quarter was $3.6 million. As detailed on page 33 of our supplemental, our third quarter rent, excluding prior period amounts, is down 7% or $3.7 million versus the pre-COVID first quarter level. While this is a point in time number and not a run rate moving forward, it is a stark contrast to the decrease implied in our share price. As we look forward, there are puts and takes to the trajectory of NOI. The puts are items such as sign that open ABR backlog of $3 million, the $1.5 million of sign that open ABR associated with leases and negotiation, and embedded annual contractual rent growth. The takes are any reductions in rent or tenant fallout, which is tough to speculate on given the state of the pandemic. Regarding third quarter uncollected rent, this totaled about $6.4 million for the quarter, of which $3.6 million was reserved, as I noted earlier, and $2.6 million was deferred net of reserves, leaving about $200,000 unaddressed. For reference, this is detailed in our supplemental on page 33. Touching on our operating fundamentals, during the third quarter, we signed 44 leases covering 279,000 square feet. Blended rent spreads were 10.7%, driven by our 43% new lease spread, our highest since mid-2018. We ended the quarter with a lease rate of 93.3%, down 30 basis points sequentially as the effects of COVID-19 begin to impact our occupancy statistics. Given our solid leasing activity during the quarter, our anchored lease rate was actually up 10 basis points from last quarter, fueled by our Nike and Burlington deals at Front Range Village in Fort Collins, Colorado, where we are seeing excellent leasing demand. As Brian noted, our small shop lease rate was impacted significantly This quarter, as we recaptured eight escena spaces, which unfavorably impacted our lease rate by 30 basis points. Bolstered by our rising rent collections of nearly 90%, and as a result of liquidity measures we took earlier in the year, we ended the quarter with a healthy cash balance of $220 million, including $125 million of solver borrowings and $95 million of cash. Our cash balance before debt repayments increased by about $20 million, With our strong third quarter cash flow generation and incremental confidence in our business, we paid off another $50 million of our revolver during the quarter. We expect to repay additional outstanding amounts on our revolver as the stability on cash flow continues to improve and the economy overall returns to a more steady state. We will also continue to keep tight control over liquidity, gap backs, and expenses. This approach gives us the flexibility to strategically invest at the right time for the long term. Regarding the dividend, we understand this is a very important piece of our total return for shareholders. However, as I noted last quarter, we would not need to pay a common dividend over the balance of 2020 to meet our re-taxable income payout requirement based on our current projections. The timing of reinstatement remains a quarterly board decision. As previously noted, when we reinstate the common dividend, we will do so at a sustainable level that we can grow in conjunction with earnings. We entered the third quarter with rallying 12-month net debt to perform an adjusted EBITDA of 7.2 times, up slightly from 7.0 times last quarter, as another COVID-impacted quarter entered the calculation. We remain committed to bringing leverage into our long-term target range of 5.5 to 6.5 times as the impacts of the pandemic move behind us. As I alluded to earlier, and as part of our continuing effort to improve transparency, into our business, we have provided a granular breakdown of our first and third quarter recurring revenue and the bridge between reported base rent and recoveries to build an unaddressed rent on page 33 of our supplemental. We hope you find this helpful as you evaluate the trajectory of NOI from COVID-19. With respect to guidance, we will not be providing an update at this time given the high degree of uncertainty surrounding the scale and duration of several macro factors including the pandemic, economic stimulus, and the results of the election, to name a few. We will continue to reassess the practicality of resuming guidance in future quarters. With that, I will turn the call back to the operator to open the line for questions. Operator?

Thank you. At this time, we will conduct a question-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in question queue. You may press star 2 if you would like to remove the question from the queue. For participants who can speak for equipment, it may be necessary to pick up your handset before pressing the star key. One moment for our first question. Our first question comes from Todd Thomas with KeyBank Capital. Please proceed with your question.

Hi, thanks. Good morning.

First question, just regarding some of the deferrals that have been now rolling off, What percent of the deferral rent was collected in the third quarter and maybe in October is scheduled? And have you had to recut any new deals where you had agreements in place?

Yeah, sure, Todd. Good morning. Good to hear from you. I'll start with the deferral question, and Brian can talk about the ongoing negotiations. So let me walk you back to Q2. At that point in time, the last time we reported, which was in early August, We had about $12 million or so deferred. Since then, Todd, five of that $12 has been paid. And if you notice in our collection stats that were reported last night, our second quarter's collection rate went up from 65% to 76%. So after pay off that $5 million, that leaves us with about $7 million or so. And then when you layer on the deferred associated with Q3, you're about at $10 million. And the trajectory from there, Todd, is about 30% of that $10 million will be paid in the fourth quarter of this year, 50% in 2021, and then the remaining thereafter.

Yeah, and as far as any other ongoing negotiations on top of the made deferral agreement, there has been none so far. And that's from our anchor, national small top as well as local mom and pop. So as of yet, there hasn't been any, you know, deferrals on top of deferrals. So that's where we're at.

All right. Great. And, you know, appreciate the comments on the theaters, on your theater exposure. So a few questions. I guess the three standalone boxes, you know, it sounds like you're working on, you know, potential plans, I guess, to redevelop or, you know, reimagine. those boxes, what rights do you have to recapture that space from the theaters that aren't paying rent if an opportunity were to surface, or would you be constrained and unable to get at that space?

Yeah, that's a good question, and obviously that's from a confidentiality perspective, you know, with the leases. I'm referring from kind of the rights of what we have, but with that said, you know, we're playing offense on those. There's three freestanding boxes, one in Jacksonville at our River City, tremendous outdoor open-air center, one in Nashville, and the other one in Deerfield Town Center across the street from a very high-performing Super Walmart and a true freestanding separate parcel. So we're looking at wholesale clubs. We're looking at, like I said in my script, you know, last-mile logistics. And then there's even demands where some junior box tenants are we're full and there's a lot of openings or a lot of interest from certain junior boxes where we can split up the box into two different spaces.

Okay. And the rent that Regal pays, you know, it's almost $23 a foot, seems pretty full. But what's the rent for the Regals, you know, if you sort of stripped out the Webster Place location, can you share how much that skews that figure?

Yeah, we have that number in front of us, Todd. Let us get back to you offline on that one.

Okay. And just one last question then on the local small shops. So the trend there was positive from 2Q to 3Q in terms of, you know, collections, but it picked down 1% in October. The other segments, the anchors, mid-tier, and the national small shops all increased. Is there anything to read into that? Are you seeing any weaknesses? at all beginning to surface within the local small shops?

No, I haven't. I mean, October, you know, it's a statement of time. And, you know, October today is more advanced than where we were same time over September. So it wouldn't read into that 1% at all. We're seeing good movement, you know, even daily on that number. So it's just a point of time.

Okay. All right. Thank you. Thanks, Seth.

Our next question comes from Derek Johnston with Deutsche Bank. Please proceed with your question.

Hi, thank you. This is Connor Peeks on for Derek Johnston. Congrats on the positive lease operating metrics. But looking into that, how sustainable are these rent spreads going forward that have been reported?

Hey, Connor. I think, you know, that's a good question, and thank you for that. So I think sustainability is there, and since we've, as a new management team, have been in place, I mean, we've been averaging 30% average rate spread since second quarter 2019. So this is, as I said, continually under-managed, hence under-market rent, where we can continually, over the long term, drive rents. Obviously, there'll be ebbs and flows on the quarter, just especially given our size. But we see massive upside across the board, and that's within the junior box category and the small shop. I was really pleased with the S&O and the spreads and the quality of deals. And then when you're talking Sephora, when you're talking Burlington, when you're talking Nike and Bank of America, just to name a few. Really, the average rent, you know, from an ABR perspective at $2,149 was pretty impressive. So these deals at that 43% spread, you know, there were certainly a couple of junior boxes that drove it, but we were averaging, you know, mid or let's call it double digits still with some small shop spreads.

Got it. Thank you. And then looking over to the acquisition front, you guys said that there is a bit of an increase in potential transactions. Kind of just looking into that, but what kinds of opportunities are you starting to see from that area? Any color along those lines? Thanks.

And we were doing this pre-COVID as well in the private sectors where Some families, whether it's family office or private individuals, have CMBS loan debt coming due. These could be one-offs, portfolios. We're seeing increased activity from some of the banks where I think this could be a huge opportunity. Really, the key for all of this is finding deep value on great real estate. where we can come in and drive outsized IRRs in a meaningful way. So we haven't found anything to date based on our underwriting and based on our strategy, but deal flow has picked up considerably. And as I said in my prepared remarks, I'm personally getting calls from some of these operators as well, or operators across the country that you know, have some debt coming up and would like to sell.

Thank you. Thanks, Donna.

Our next question comes from Linda Tsai with Jefferies. Please proceed with your question.

Hi, good morning. Spine but not opened ABR, how do you see the weighting of that come online in the coming quarters?

Yeah, the Spine not open of 3 million, all that will come online over the next five quarters. So a little bit this year and, you know, relatively over 21.

Thanks. And then can you discuss what you're seeing in the leasing pipeline for 4Q? And, you know, 11% of your ABR is due in 2021. How much of that has been addressed?

Yeah. So from an Leasing pipeline, you know, the visibility is pretty strong. You know, it said in my prepared remarks, well, $3 million is S&O. We have $1.5 million behind that in lease, and then another few million behind that in advanced LOI negotiations, if you will. So, I mean, Linda, a few weeks ago I had lease committees on every Monday morning, and it even without brochure deals included in this quarter. And in that committee, it was the largest committee of new deals I've had being here. So the pipeline is pretty robust, and I'm very quite pleased with the team's results on that.

Yeah, and then as far as the renewal plans for next year, right now we're about 45% to 50% complete on that.

Thanks. And then over the next several quarters, do you have a sense of where occupancy might trust?

Oh, man, you know, I wish I could tell you. I think there's just too many down-competing variables out there. I talked a little bit about my prepared remarks. We're obviously still waiting on the election results, but primarily it's really the duration of the pandemic. So too early to really be seen on occupancy. I think the good news is Brian kind of talked about in his prepared remarks, he's talked about Again, here in Q&A, we have the $3 million of backlog from S&O, another $1.5 million from leases and negotiation, plus some contractual rent growth. So there's some puts, some positives, you know, going into this quarter, into next year. But the biggest unknown is the tenant fallout or any, you know, rent deterioration, you know, across the portfolio. So to be seen.

Thanks for that. Just one last one. In terms of avoiding full-priced apparel tenants but welcoming banks and medical uses at your centers, how do you evaluate the long-term demand for these lines of businesses?

It's asset by asset. It's a macro and it's a micro. And obviously there's oversupply in certain segments of certain geographies and there's undersupply. And from a perspective of banks, obviously, the visibility and access is key. From medical, we have a team really assigned to really harvest institutional hospitals in these municipalities where they are looking to have really a branch of – their hospital, you know, at these open-air shopping centers. So 15,000 square feet, 20,000 square feet of outpatient facilities where we just get solid credit on that lease. So it really depends. We're not really all macro, you know, from intersections to intersections.

Thank you.

Thank you.

Our next question comes from Flores Van Deekum with companies. Please proceed to questions.

Thanks. Morning, guys. Strategically, Brian, can you maybe comment on your GIC joint venture? Discussions are moving along also, particularly given the fact the lending markets still appear to be very slow and gummed up. And also, how do you reconcile that with the stock price seems to be staying in terms of allocating capital?

Yeah, so obviously we're in conversation with GST a lot. They see a lot of deal flow that we don't see. We see deal flow that they don't see. As I said in an earlier Q&A, You know, IRR and yield, if you will, is everything. So we're matching that compared to other strategic areas where, you know, that could be leasing capital where as we first started, we had 20 vacant boxes and average mid-teen yields, right? Yeah. We're managing that versus the debt. Our number one responsibility is capital allocation, and it all goes into a pot, if you will, and that's really what comes out of it's got to be a special acquisition for us to jump. I do believe that there are out there. I do believe that there are enormous opportunities where we can achieve high IRRs just based on you know, assets going back to receivers or assets being mismanaged over several years. So where we can find those unicorns, we will likely pounce, but it will be a delicate balance compared to balance sheet, compared to leasing capital and our liquidity, which is, I think, in a very good place.

Yeah, and just a reminder, Floris, and good morning. Good to hear from you. But we do have $100 million of our cash unrestricted on the balance sheet. to be able to allocate accordingly as Brian just described.

And how does your discussion with lenders, is that one of the biggest stumbling blocks right now on the acquisition side in particular in the M&A market potentially? Yeah, no.

I think for the right assets, you know, there's debt. Obviously, size and geography and credit is very extremely important. So for, yeah, for large M&A deals, we're not talking about that. We're talking more on one-offs and smaller portfolios and where there's good credit, a good story, good narratives, most likely grocery or off-price. We're seeing, you know, some of the markets open for that.

Thanks, guys. Thank you.

Once again, if you have a question, please press star 1 on your telephone keypad. Our next question comes from Mike Mueller with J.P. Morgan. Please proceed with your question.

Yeah, hi. A couple questions. First, I'm not sure if I missed this, but did you comment on was there anything abnormal driving the new lease spread this quarter? And second question, in terms of thinking about future acquisitions, are you thinking differently about, you know, re-anchored, you know, essential mix and just kind of those factors in terms of what you're contemplating buying?

Yeah, Mike, thanks. So let me hit the spreads first. there wasn't really anything abnormal. We had two junior boxes that were extremely good spreads, but then we had a number of small shop deals that were double-digit spreads as well. So that's that. Two, on the acquisitions perspective, essential business and grocery, I think, I think what's intriguing is, you know, while those are driving low cap rates today, where we might have a grocer or two or three in our back pocket on a power center or on a community center where we can have a deal in hand, you know, in DD, you know, before we even execute, that's creating value, and that's obviously driving cap rate compression. So we're really looking at just solid real estate. And again, we are a bottoms-up IRR company and know if we achieve the highest IRRs on the property level, the stock will eventually show that, right? And we've proven time and time again, since we've started of outsized NOI growth and occupancy increases and taking 20 boxes and filling up every single one of them at double-digit yields, that we can do that. And we have tremendous relationships across the country with a lot of these tenants. So I have the eye on strategy of where we can go in and maybe do cap rate arbitrage of, you know, buying at a high yield but having a tenant locked and sealed before we even close.

Got it.

Okay. That's helpful. Thank you. Thanks, Mike.

Thank you. At this time, I would like to turn the call back over to Mr. Hopper for closing comments.

Thank you. Years from now, there will be three things I believe that stakeholders remember from this crisis. Those are humanity, liquidity, and innovation. Humanity is how we treated our employees, retailers, and our vendors. Liquidity and how we prepared we were in the pandemic and what measures we took after the pandemic hit, and innovation and how we found new ways to create value for our stakeholders. These three pillars have guided our decision-making every day throughout this pandemic. I'm extremely confident that if we continue to hold humanity, liquidity, and innovation in high regard, we will look back and be extremely proud of the decisions we made today. that will have led to a better tomorrow. Thank you all for joining our call this morning. And I'm looking forward to seeing many of you at the virtual Navy conference in a couple of weeks. Have a wonderful day.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation and have a great day.