Q2 2020 Preferred Apartment Communities Inc Earnings Call
Pardon me the preferred apartment communities conference call will start momentarily I repeat the preferred apartment communities conference call will start momentarily.
Thank you for your patience once again.
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The conference call is being recorded I wouldn't want to introduce you to your host for today's call Paul Coghlan Executive Vice President Investor Relations. Please go ahead.
Thank you for joining us this morning, and welcome to preferred apartment communities second quarter Twentytwenty earnings call.
We have each of you has had an opportunity to review our second quarter earnings report, which was released yesterday after the market close in a moment I will turn the call over to Joe Murphy, Our Chief Executive Officer to share. Some initial thoughts and then John Isaacson, Our Chief Financial Officer will share some additional details about financial metrics.
And capital markets.
Then Joe will return to conclude our prepared remarks.
Following Joes remarks, we'll be pleased to answer any questions you might have.
Also present with US this morning, as Mike Cronin, our Chief Accounting Officer, Jeff Sherman, Michael age and Boon to pre the business leaders of our multifamily grocery anchored retail and office verticals.
I'd like everyone to note that forward looking statements may be made during our call.
These statements are not guarantees of future performance and involve various risks and uncertainties and the actual results may differ materially. These risks and uncertainties include but are not limited to the impact of cobot 19 pandemic on our business operations on economic conditions in the markets in which we operate.
Our ability to mitigate the impact arising from cobot 19, and the information about third quarter Twentytwenty rate collect rent collections in light of Cobot 19.
For a discussion of these risks and uncertainties.
You should review the forward looking statements disclosure in Yesterdays earnings press release, as well as our SEC filings.
Our press release and other SEC filings can be found in our website as P.A.C. ABTS dotcom.
The press release also includes our supplemental financial data report.
Our second quarter, Twentytwenty with definitions and reconciliations of non-GAAP financial measures and other terms that may be used in today's discussion.
And the reasons management uses these non-GAAP measures. We encourage you to refer to this information during your review of our operating results on financial performance.
Along with our earnings release, we also furnished a business update that can be found on our investor section of our websites.
Yes, we otherwise indicated all per share results that we discussed. This morning are based on the basic weighted average shares of common stock and class a partnership units outstanding for the period.
I would now like to turn the call over to Joel Murphy go ahead Joel.
Thank you Paul Good morning, everyone and thank you for joining.
Thank you for joining our call I hope that everyone on this call and their families continue to stay safe and healthy as we all work together to navigate this challenging and continually evolving environment.
At pack, we remain focused on the continued health and safety of our associates, our resident our tenants and our communities.
We continue to operate effectively in a hybrid office and remote work environment, which we have tailored to meet the needs of our associates and the needs of our business.
We're also proud to continue to be so closely associated with our grocery store partners, whose companies and employees were and still are on the front lines for our communities even as this pandemic environment evolves.
Quick look ahead do our comments this morning.
Our focus this quarter with the onset of the realities of Coven 19 in early March has been operations and managing our liquidity.
I will first discuss our operational results, our markets and where our revenues come from with our multifamily focus.
John Isaacson will then discuss measures about our liquidity and financial results and then we will also take a look ahead.
While the length and long term impacts of the pandemic still remain uncertain the impacts on society and health in general have been significant and real estate assets in markets have not been I mean.
However, what has not changed is our dedication to the mission of creating long term stockholder value.
The locations of our 107 owned assets in 13 states and our diversified strategy run by experienced and specialized teams.
The operation results, we released last night after the close demonstrate the positioning of our assets.
The strength of our markets.
And tenants the value of our diversified operating platform and our teams solid execution of a well conceived coded 19 game plan launched in mid March.
We disclosed disclosed previously our April and May rent collections on April 24th and June 4th and most recently on July 14, we disclosed June collections and updated the previous months collections as well.
And last nights release, we updated our collection results for second quarter is a whole and also included July.
I want to pause here in reflect on these results.
We believe these numbers are very good in this environment, especially so on a relative basis for competitive sets in each property type, but there is more to it than that.
The numbers reflect a well conceived real estate in market strategy focused on sunbelt suburban markets. These strategies, while built independently share many characteristics, including broad economic drivers diverse employment bases.
Hi, educational attainment strong growth in solid growing household incomes are unifying suburban sunbelt focused means we have benefited and expect to continue to benefit from pras positive net migration trends.
From 2015 to 2018 seven of the Thompson 10 States for net migration were located in the sunbelt, including the top six.
We expect this trend to sustain and likely accelerate in the mid and longer term whos cobot environment as do many industry commentators additional details on our markets are shown on page nine of our business update.
For the second quarter, we received 99% of our multi housing rents, 92% of our grocery anchored shopping center rents and 99% of our office rents each adjusted for rent deferrals.
We are running at approximately the same pace of collections or slightly ahead in July and August for each vertical as of the same date for the previous months.
More detail on these collection results for April through July are included on page four of the business update.
We are encouraged by these collection results, which highlight the resiliency VR bar portfolio and its composition.
That said, we are keenly aware of the uncertainties posed by this pandemic and the macroeconomic impacts in scope and in duration to the economy and to our markets.
In times of stress and volatility like these the experience of highly most fotis management teams with deep expertise in their specific product types and our strategic portfolio composition serve us well.
Now I will turn to where we receive our revenues and points you towards the pages of our business update that will give you more details.
First multi housing comprises approximately 57% of our revenues. We are pleased on a relative basis with our same store year over year second quarter annualized growth of 0.1% and our multifamily business.
This same store pool represents 79.6% of our multifamily units. So this is a very broad indicator for additional details on our multifamily portfolio. Please refer to pages 11, and 12 of our business update furnished in connection with yesterday's press release.
Our recent multifamily acquisitions in Florida, which we completed in March and April are performing quite well.
Horizon, where grant Wiregrass is currently 94.6% occupied and Parkside at the beach is 97.6% occupied as of yesterday.
These acquisitions are closely aligned with our investment strategy.
Having confidence in that strategy and following through with the closing on these deals in uncertain times has now resulted in owning well performing attractively finance best in class assets.
As always we intend to be measured and disciplined in our approach, but we will continue to grow the multifamily portfolio.
As mentioned earlier, our business leader for our core multifamily business, Jeff Sherman is with US today in available to address any questions you may have.
We have continued to operate in lease our student housing portfolio, well and as of this week kicked off the first move ins across the eight properties in our portfolio importantly, all of the university's our property serve are currently planning to open in some fashion for on campus attendance for the fall 2020 academic semester.
Our pre leasing initiatives, even during coated has gone extremely well as we recently passed the 96.5% Mark which is ahead of where we were as of this same day last year with rental rates trending above the 2000 1920 school year.
The operational and leasing teams in our multi housing groups have been creative and resourceful and leasing units and beds, maintaining renewals and keeping us at high occupancy and collection levels.
Next while our grocery anchored retail business only comprises approximately 21% of our revenues, we didnt want to focus on this more than we typically would since there has been so much industry focus on retail generally and we thought it was important for us to discuss more specifics about our portfolio composition.
This is a 100% pure play grocery anchored strategy.
And 41 of our 54 centers are anchored by publics, Kroger and Harris Teeter top performers across our markets.
We are actually proud to be the fourth largest publix landlord and the country.
53% of our grocery anchored retail portfolio tendencies are considered essential and all of our centers have remained open through the pandemic.
Our strategy of investing in high performing grocery anchored retail centers highlighted by their convenience based merchandising mix has positioned our sunbelt grocery anchored retail portfolio well to navigate to continually evolving impacts of coven 19, and the collection results over these past four months demonstrate.
With that.
Many of our centers have seen traffic returned to close to pre coded levels and traffic has actually increased at several locations. This year according to place or a app a foot traffic analytics firm, we use that interprets locational data from mobile devices, our primary market, leading grocers such.
As Publix, Kroger and Harris Teeter are continuing to generate record sales, while driving consistent strong traffic to our small shop tenants of whom nearly all are now open for business.
Taking into account negotiated deferral arrangements, we collected 92% of our base rent and reimbursements in the second quarter as I mentioned earlier and its 89% if you didn't even take into account those deferments.
We're encouraged by our momentum with cash collections and in fact of collected 92% of July Brent to date. This strong performance is a testament to our well positioned assets in our experienced asset management team.
We have been very deliberate with our deferment discussions and are taking each on a tenant by tenant basis.
Many of our Red deferrals came with an increase in term or other lease modifications that enhance the long term bay the asset.
Our goal is to stabilize our existing tenant base and partner with each of our tenants to find an outcome that helps all parties prosper in the long term.
At that point, we were able to maintain solid portfolio leased excluding redevelopments of 94.6% as of the end of the second quarter.
While there have been retail bankruptcy filings many of them during covered 19, our grocery anchored portfolio has very limited exposure to these filings of our over 900 tenants in the portfolio. We only have 10 leases with six companies that have entered bankruptcy proceedings during coated.
The annual billed charges are only represent roughly 1% of the retail groups annualized second quarter revenue oral only approximately 0.3% of packs annual second quarter revenue.
For the majority of this exposure we are either in lease amendment discussions for these retailers to remain in our centers or we have already strategically backfill them in a new lease with a new operator.
The team has also actively leasing new space in completing renewals. Despite the headwinds we have continued to sign new leases executing approximately 127000 square feet of new leases to date in 2020 with 113000 square feet of those executed during the second quarter and today in the third quarter.
We've been pleased that our leasing pipeline is gradually building back up with new tenant interest and some pre code the deals that have been revived.
As we continue to be cautiously optimistic during these challenging times, we are believers in our grocery anchored portfolios long term resiliency. Please refer to pages 14 to 16 of our business update for more specifics on our grocery anchored retail portfolio and composition by tenant type.
As mentioned earlier, our business leader for our grocery anchor business, Michael aid is with us today and available to answer any questions you may have.
Finally office comprises approximately 22% of our revenues. This segment of our business provides stability, we're 96% leased across nearly 3.2 million square feet, and our contractual leases or with predominantly well capitalized large corporate users and carry more than seven years.
Of weighted average term remaining.
Since March 1st we've signed 14 leases totaling more than 96000 square feet in our office portfolio.
Average lease economics for these signed leases were well ahead of budget carry more than eight years of average new lease term and result in average cash rent roll up of more than 13, 14%.
These leases point to continuing demand for our high quality office properties and markets.
The credit part quality of our portfolio customers has been highlighted year to date by collection success against the backdrop of major market disruption.
In the second quarter, we averaged 97% collections of those rents bill and in a handful of situations with viable businesses in need of short term relief, we have creatively structured arrangements to the benefit of both parties. We have seen high retention with approximately two thirds of the 96000 square feet of leasing being attributable to renewals.
Please refer to pages 17 to 19 of our business update for additional details in our class a office portfolio composition and tenant base as mentioned earlier, our business leader for our office business, but into pre is with us today and available to answer any questions you may have.
All of this said we are truly in the most unusual of times.
The scope in duration of the economic downturn remains uncertain.
We will be vigilant as events change and be prudent and our actions. We are focused on both the present and future for our stockholders.
As we discussed in our last quarter call in May we continue to focus on packs broader capital strategy.
We will share our plans and strategies with you and with the market as they continue to take shape with renewed in fresh perspective on our capital stack and on our balance sheet.
Certainly the pandemic has impacted the timing focus and deployment of any capital strategy in the near future, but we remain focused on both near term and long term goals.
Finally, we will continue to focus on achieving excellence with particular attention on our company wide operating performance our governance, the training and developing Barr associates, our culture and our ESG initiatives. These attributes are now more important than ever.
So now let me turn the call over to John Isaacson, John Thanks, Joel.
First off I Echo Joel settlements for the safety and health of everyone. On this call all my best to you in your families I.
I would like to turn first to our quarterly financial results for the second quarter 2020 packed generated revenues of approximately 123 million.
FFO of negative one cents a share.
FFO noted internalization cost of zero Thats, a share core FFO 21 cents, a share and AFFO of five cents a share.
Our revenues are up over 8.3% compared to the second quarter of 2019, owing to the continued growth in all of our product the verticals.
You should know that FFO results are skewed due to the treatment of internalization expenses that closed in January in addition to the internalization issue. There were several factors in the second quarter that materially affected our results first we refinanced seven multifamily assets with near term maturities that incurred prepayment and defeasance costs.
The real estate investment loan payoffs in the first quarter or not offset by new originations, which resulted in a lower outstanding balance and interest income.
Third the real estate investment loan payoffs in the first quarter also had associated accrued interest and purchase option termination fees.
Pack had no real estate investment loan payoffs in the second quarter ended not realize any of these accelerated fees or interest income.
Finally, the company experienced a variety of covert related operational costs at the property and corporate level.
And digging a little deeper into our operations and financials I would like to point out that our collections performance has provided us a much smaller bad debt and delinquency issue to deal with than many others in the market specifically in our grocery anchored retail portfolio, we have less than 5% and reserves this quarter over into the high level of collections and our.
Asset management teams impressive results on an ongoing basis by continuing to collect rent from previous months in the pandemic.
Our multifamily at office portfolios, while experiencing higher delinquencies and reserves than normal are still very manageable.
Further in addition to other expense management strategies, we have continued to pause all nonrecurring Affleck spent utters other than any emergency life safety items or capital related to the leasing of space in our grocery anchored an office verticals.
We have noted in the past the variability of FFO and AFFO due to a variety of factors in our business as discussed in the last quarter call. We moved to core FFO. This year as the main measure of the company's performance in an effort to produce a metric that we'll adjust for those variations and provide a more stable measure the company's operating results.
While we continue to report FFO and AFFO and discuss these results our focus will be on core FFO in the implications for its results for current and future performance.
All right AFFO number continues to be impacted by the results of our real estate investment loan program, which we have mentioned previously.
As these loans are repaid our interests are accrued interest gets paid and recognized in our AFFO number making of lumpy from quarter to quarter in the first quarter. We had three real estate investment loan payoff, which contributed to us receiving more than 13 million an AFFO benefit in the form of accrued interest and purchase option termination pain.
What's in the second quarter as we mentioned we had no real estate investment lows pay off and as a result received none of the associated in cover fees generated by these transactions, which materially affected our AFFO.
In addition to reduced accrued interest from a lower mezzanine book balance at the end of the second quarter, we had approximately $23 million of accrued interest from 25 real estate investment loans that are booked as a receivable on our financial statements.
As the real estate investment loan book balance declined to 295 million at the beginning of the second quarter from the first quarters activity. We had a decrease in interest income of $5 million from a combination of purchase options and interest while we expect to have additional pay offs and new originations going forward. This quarter was understandably quiet given the current environment.
The payoffs on these loans are difficult to forecast in the best of markets due to the number of factors that influence the sales of these assets whether to pack our third parties and that is certainly exacerbated by the code to 19 environment.
The balance in our investment loan programs stands at just over 383 million and commitments with over $308 million drawn at quarter's end.
Our real estate loan investment book, which was launched 25% of our total assets is now less than 7%.
I'd like to now turn to our capital markets activity in the second quarter, which was significant.
The company took significant steps to take advantage of near historical low interest rates and available accretive capital.
As previously mentioned the company refinance seven multifamily assets in the second quarter and an additional asset in early July totaling almost $290 million. These refinancings had the dual benefit of removing over 50% of our multi housing debt maturities between now and January of 2024, and lowering the average interest rate on.
Those assets by over 70 basis points to less than 2.92% in.
In addition to addressing maturities and cost of capital. These refinancings raised over $72 million liquidity for the company.
Due to the performance of the portfolio and liquidity provided by the above mentioned refinancings. The company reduced its outstanding line of credit balance to less than $93 million at the end of the second quarter.
With the closing of the eight multifamily refinancing in July and other transactions. The company has now lowered as lot of credit balance through a current level of $51 million.
In addition to the performance of our portfolio and our financing efforts improving our liquidity the trends in our series a preferred stock continue to be positive, while we saw decided uptick and redemptions early in the pandemic. Our continued messages stability combined with our portfolio performance and market conditions have led to a significant drop and redemption requests.
In April we had 12 and a half million dollars in total redemptions 24.9 million in May and 13.6 million in June the downward trend is encouraging and continued into July.
We expect to reach a point of equilibrium for redemptions in the third quarter barring a dramatic term the economy.
Today, we have met all redemption requests and forcing no issues during the same in the future, while we have the ability to satisfy redemptions and either cash or stock at our option.
The vast majority of redemptions made recently had been in cash we will continue to monitor the trends and while we certainly can't see ended the future based on current information. We believe the series a redemptions will be absorbed into our business plans.
The combination of better than expected operational performance ability to access low cost financing and the moderation of series I redemptions combined with the study inflow from our series a sales has resulted in the company being an it better liquidity position than expected in the early days of the pandemic.
Our initial estimates of prove conservative to date and as indicated by the reduced balance on our line of credit we have considerable liquidity, which provides us with optionality and flexibility you both take advantage of opportunities as they arise and affords us protection against a further decline in the market or operations, while there remains significant uncertainty in the.
Market, we believe we continued to be well positioned to meet any challenges.
Finally, I would like to try and look ahead generally as we survey the market today.
Going forward as co Tonight and continues to evolve we will be selective and focused in our capital deployment opportunities that we believe create the most long term value.
We continue to see attractive opportunities in our real estate investment loan program, which has consistently been one of the most accretive investment options for the company.
The results of our portfolio performance and our capital raising efforts should allow us to exceed to selectively take advantage of opportunities in the market in terms of real estate investment loans and select acquisitions.
While the economic fall over the pandemic will likely impact properties in which we have invested with our real estate investment loan program. We continue to expect that sets issues will be more about timing and less about overall performance, we could see longer construction schedules longer lease up time frames and lower rental rates for a period of time. However.
Based on the underwriting of our loans at our current view on the market. We believe this portfolio will hold at well over time and continued to be accretive to our results in summary, the comedy continues to be well position financially and operationally to navigate the impact of the car crisis longer term, we want to be nimble enough to selectively take advantage of opportunities.
When they present themselves I.
I would like to now turn the call back over to Joel for some final thoughts Joel. Thank you John appreciate that.
No I think the best way to end on this is.
To recap we are a real estate company of significant scale.
That has operating teams in assets that are performing well in high growth Sunbelt markets.
We look forward to continuing to take prudent steps with regards to our liquidity our capital structure, our balance sheet and our growth.
As we stated in our annual stockholders letter annual report what got US here wont get us there.
Those words and our belief were written and in place pre covet and they are even more true now and we are already focused on the opportunities that will be presented in a post covered environment I'll now turn the call back over to Paul Cullen.
Paul Thank you Joe now I'd like to ask the operator floor for any questions may have operator. Thank you.
I will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then to at this time, we'll pause momentarily to assemble our roster.
Our first question will come from pure off Mehta with National Securities. Please go ahead.
Yes, thanks, good morning.
Last question double have alone.
Transaction market I was wondering if you could provide any color that you may have on what kind of trend you're seeing in that market today.
As it relates to be influence pricing of assets.
Yeah, I'll take that are how you Don.
Hi, either John or are any of our business leaders can take it but let me just let me try to just kind of hit that globally for you. It was interesting kind of when everything started.
Happening with rapid pace in March.
The market can adjust everybody's kind of clenched up here by didn't really know what was going on we added a couple of deals that were looking at that we went slower sellers pull things from the market as I mentioned in my comments.
We had two deals that we head.
Committed to pre coated.
And we look to Adam and said you know what these are just really consistent with our strategy.
They are right in the right markets and we believed it.
And they were inside multifamily. So we went ahead and executed on it what we did see is a quick.
And maybe unfortunately, two quick a moment, where a lot of our partners that we have dealt with on management on the real estate investment loans.
Net equity deals and in fact went away.
Deals that we had maybe wanted to be in very involved in and we're trying to be involved in but they had gone another direction from maybe a pure equity play and then they came back to us and we stepped in really quickly on some transactions.
One of which I know, we've announced and others in the pipeline.
And on very good terms for us on the real estate investment line in end markets that we want and assets that we would like to ultimately own.
The other markets have kind of just really slow just based on valuation and lack of uncertainty, but I will tell you on the multifamily and also little interaction to grant I referenced we want to grow the multifamily portfolio.
But.
Based on what we've seen on some assets that we really like.
Those net pricing has come back fast.
And at pre coded levels much now inside our surprise I think people have underwritten the little bit differently. So you might miss it if you're looking at it on a on a on.
On a cap rate basis, because what they've said is well what's going to happen if theres. Another downturn of this and what happens if stimulus wears out so they might be a little bit more conservative and their first year analyze.
But that market's back because we're in it and trying to participate but we're going to actually be prudent in smart and make sure pricing is where we feel like we needed to bake.
Okay, and I guess in or within your real estate loan portfolio.
You guys have any purchase option rindos that's expiring this year.
We do find probably I might want to turn Johnny that best seller make sure you give the best and either you or maybe perhaps to Jeff Sherman.
Good.
Respond to that.
Hey, this is John as Jeff you want to take that.
We're in a week DNA socially distance mode here, because we are socially distant than in deferred rooms.
I think we've got it now and leverage the cash do question again was related to options on the mezzanine loan portfolio, yes expiring this area.
That are expiring this year.
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I'd have to look over my lets more carefully I think we've got a couple that are likely expiring this year, but most of those you're going to bleed into into future years.
Dams right now I believe there is a 11 properties remaining that have have options associated with them up 17 multifamily properties that we got.
Okay. Thanks.
I guess finally for your for your apartment portfolio.
You bet, it's Brad what puts and end of your tenant had been taking advantage of the unemployment benefit then I guess what is your view in the event business fiscal stimulus.
Going forward.
With that on the ability of tenants to make the rent payments for your apartment portfolio.
I think our as we said before I think our portfolio the composition of our portfolio being newly constructed class a and suburban location.
Is more resilient then other strategies and I think we're witnessing that seem to anecdotally through collection.
Up until today and I don't think barring some.
Massive change in the economy I don't see that changing I think our portfolio will remain resilient as we continue through the recession and then of course into an expanding economy.
Okay. Thank you Thats all the hub.
Thanks growth.
Our next question will come from Michael Lewis with Truest. Please go ahead.
Great. Thank you.
John I already gave some some good detail on this but I wanted to ask a little more about the issuance and the redemption of the preferred shares.
The issuance was a little lower you did spend some some cash you also did issue some common shares to meet the redemption requests.
Is this something is this something to be concerned about especially as more preferred shares at the five year, Mark and become free for the holders to redeem.
It sounds like you're projecting it out and it's totally manageable, but is that a risk or concern is that not much of a risk are concerned how should we kind of thinking about that.
Great question, Michael and something that I, certainly spent a good bit of time on early on in the pandemic. We certainly felt like it was a much bigger pressure point than it has become.
We had a peak in may it appears.
It down in June.
Did down again in July and.
Our.
Although not exactly our issuance in our redemptions that basically netted out to me little positive or negative one way or the other and the feedback we're getting from the Salesforce and from the the wholesalers is that we're basically about at a steady state today, which is for the moment Thats fine with us I don't.
I see it as a particular risk I'm sure. We'll have you know a jump up and redemptions here or there I'm sure we'll have a jump up and sales of the preferred stock here or there, but I don't today see it as a big risk the trend over the last 60 90 days has been has been pretty encouraging.
Okay great.
I wanted to ask one about about the portfolio. You know you guys had you were able to maintain high occupancy.
Good rent collection.
And the other area was you're able to control the opex. The multifamily same store portfolio. The Opex was down maybe talk a little bit more about the ability to continue to keep those costs down even as the uncontrollable costs, the taxes and insurance I imagine.
We'll probably continue to go up.
What kind of reports have been expense side.
Sure.
Yes.
Hi, Jeff.
It is Jeff shown on the I'm happy to take that we did have good six that.
The second quarter, managing operating expenses and think that will lead to some degree continue going forward, where we really saw benefit within three places that first who was in advertising we brought some of those functions in house.
Well, we were spending money previously on posting their social media accounts, we found a way to do that internally.
Second we benefited from reduced turnover and do we expect that trend to continue then obviously, we'll we'll keep our turnover expense down and finally that has been savings from internalization is we anticipate an expected and said that in previous quarters and that trend will continue as well so we're going to focus.
Our efforts on managing and best we can.
The remainder of the operating expenses and keep them control as we continue to push push on the revenue side.
Great. Thanks, and then just.
I would just going to say Michael died. Thank you Jeff for that description and I can just say overall and the multifamily group and in all of our groups.
Jeff gave you some great specifics there.
I also just kind of want to saying I referenced it in my notes this didnt happen by accident.
This was the formation of a operational team they've got together and early March and planned for this and said how do we do this how do we take care of our residents how do we take care of our tenants what if this happens what if that happens how do we do that how do we reduce operating expenses how do we take.
Our capex.
So the strategy and the teams were in place and running those but the teams themselves were the ones that executed get effect.
Thanks her and.
The last question for me I saw the pay last week with.
Access to the management compensation plan you added some restricted stock units.
Maybe talk about that I like that of course.
It's important to have alignment of interest I was wondering too if there were any.
I'll turn it sounds as compensated centers this essentially.
Additive.
For a lack of better we're kind of a raise that will you know events, which helped them it's been a line.
Yes. So good good question, Michael and thanks, Thanks for bringing that look if you think about what this was all about and I'm glad.
That because I think it is a good thing I know it's a good thing. This is really just the natural evolution of us being a fully integrated internally managed company.
And trying to Cray compensation structures for the team.
That line up.
Yes, they do a couple of things that keep this good team together for a longevity.
Basis on retention, but also to two type things to performance.
In favor of the common shareholder.
So yes, there is some more detailed too that there will be rolling out over time, particularly as we get right. After the turn of the year.
That will all be described out more fully.
In our proxy, but I think is was also listed in the material as you know it was great to get an outside compensation consultant independent members of our board on a compensation Committee, who deliberated and went through all the different places and really compare this to peer groups and tried to find a structure and apply.
Plan.
That was in the fairway and I think we've done that.
Okay, So theres no offset.
Additives.
So the compensation for the suit.
Well, yes, but I mean, what's going to be determined over time is look what we're trying to do is get more of the compensation overtime into equity versus cash and thats. The goal we're going to achieve.
Okay understood. Thank you.
This concludes our question and answer session I would like to turn the conference back over to Joel Murphy for any closing remarks. Please go ahead.
That's really Ed. Thank you for your interest in our company. Thank you for taking the time.
Thank you have listened into our story in asking questions.
And that's all we have for today.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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