Q2 2021 American Assets Trust Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Q2.2021American assets Trust, Inc. Earnings call. At this time, all participants are in a listen only mode.
Because presentation there'll be a question and answer session to ask a question during the session need to press star 1 on your telephone if you require any further assistance. Please press star zero I would now like to turn the call.
And while you may begin.
Thank you operator, good morning, everyone. Welcome to American assets Trust, Inc. Second quarter 2021 earnings call yesterday afternoon, our earnings release and supplemental information were furnished to the SEC on form 8-K. Both are now available on the investors section of our website at American assets Trust.
Over to you a telephonic replay and on demand webcast will also be available for this call over the next week. During this call we will discuss non-GAAP financial measures, which are reconciled to our GAAP financial results in our earnings release and supplemental information. We will also be making forward looking statements based on our current expectations, which statements are subject to risks and.
And uncertainties discussed in our SEC filings you are cautioned not to place undue reliance on these forward looking statements actual events could cause our results to differ materially from these forward looking statements for a number of reasons, including as it may relate to the continuing impact from COVID-19.
And with that I'll turn the call over to Ernest Rady, our chairman and CEO to begin to discuss.
Dot com or our second quarter 2021 results Ernest Thanks, Adam and good morning, everyone. We are making great progress on all fronts as we focus our efforts on a pound from COVID-19 impact by enhancing and a minute ties in existing properties acquiring new accretive properties like E.
Eastgate Office Park in Bellevue, which the team will talk about more in a bit retaining and adding new customers to our portfolio further furthering our development of La Jolla Commons of which we recently bottomed out our excavation and otherwise remain on time and on budget and of course growing our earnings.
And net asset value for our stockholders.
We have been through hard times before and each time, we have emerged stronger which remains.
Our expectations and mine now I want to mention that the board of directors has approved a quarterly dividend of 30% 30 per share.
Earnings for the third quarter, an increase of 2 <unk>.
<unk> per share or 7 cents or 7% from the second quarter, which is we believe is supported by our increased collection efforts in the second quarter, improving traffic and Waikiki at our embassy suites and our expectation for operations.
<unk> to continue trending favorably in the near term.
I'm also pleased to announce that the board has appointed Adam while to the position of President. In addition to his chief operating officer role and title as many of you know Adam is a valuable and hard working member of our executive.
Team and this title describes the breadth of responsibilities and leadership that he has successfully taken on prior to and during the pandemic.
As well as the confidence our board and myself and our management team has in him to manage and partnership with our excellent executive.
Team that day to day operations.
I personally am blessed with excellent health and this company is very important to me.
I intend to continue my role as chairman and CEO for the foreseeable foreseeable future.
However is very important to our board.
<unk> myself and shareholders that you know this company will always remain in very capable hands and that we are fortunate to have such a great management team and group of associates at a T.
All of whom work together as we continue on as a best in classes class REIT.
Adam Bob and Steve will go into more detail on our various asset management segments collections and financial results and will be available for any questions. You may have at the conclusion of prepared remarks.
On behalf of all of American assets Trust, we thank you for confidence in allowing us to manage your company.
And for your continued support now more than ever and now I'm going to return it back to our newly elected President Adam. Thanks.
Thanks, Ernest very much appreciate the kind words and leadership opportunities, none of which would have been possible without your mentorship not to mention the daily collaboration with such an incredible management team and top notch team members and colleague.
The leagues.
We continue to feel bullish about our portfolio, particularly with government restrictions lifted and all of our mainland markets in Hawaii, having lightened, it's reopening restrictions considerably and.
And we're seeing firsthand consumer behavior reverting to pre pandemic levels with Pac parking lots and tons of shoppers at all our retail properties.
We're already seeing many of our retailers with gross sales above pre pandemic levels in our restaurants recovering which is obviously very encouraging.
Our collections have continued to improve each quarter with the collection rate north of 96% for the second quarter. Furthermore, we had approximately $850000 of deferred rent due from tenants.
2 based on COVID-19 related lease modifications and we had collected approximately 94 per cent of those deferred amounts.
Other validating our strategy of supporting our struggling retailers through the government mandated closures.
Remaining collection challenges at this point are primarily with a handful of local retailers at our Waikiki Beach walk property.
But with Hawaii tourism back in large numbers, we think will have an opportunity to rebound to be viable long term, even more so once Asian countries relax their travel restrictions to Hawaii later this year or early next.
Additionally, we are seeing positive activity engagement with new retailers, including mid box retailers about half of our over 200.
Third and 50000 square feet of vacant retail space are in lease negotiations are LOI stage deals that we believe we have a good likelihood of being finalized.
And the vast majority of our retailers are renewing their leases at flat to modest rent rent increases on.
On the multifamily front with new management in place that has a low we are currently 99 person.
And asking rents are trending up almost 20% since December 2020.
Multifamily collections have been more challenging in Portland, due to eviction protections still in place through the next month or so but we are doing everything we can to stay on top of that which include government rental assistant programs that we expect meaningful disbursements.
Sent lead him.
In San Diego, our multifamily properties are currently 97% leased and we have leased approximately 90% of the 100 and thirty-three master lease units that expired less than 2 months ago and expect the remaining to be leased over the next few weeks asking rents at our multifamily properties are trending up as well in San Diego.
From almost 10% since December 2020.
With that I'll turn the call over to Bob to discuss Q2 financial results in more detail.
Good morning, and thank you Ernest and Adam last night, we reported second quarter 2021 F that flow per share of 51 cents and second quarter 'twenty.
21, net income attributable to common stockholders per share of <unk> 15 cents.
From my perspective, I believe we are seeing the beginning of the recovery story for a T debt, we have been talking about for the last 6 months with embedded growth into 'twenty 'twenty, 2 and beyond as we have previously.
Obviously shared with you on our bridge in our Investor presentation, which you can find on our website let.
Let me share with you several data points that support my belief.
First as earned as previously mentioned the board has approved an increase in the dividend to its pre COVID-19 amount of <unk> 30 per share based on the continued improvement in our core.
Collections as expected, but the overwriting factor was the strong results. We are seeing at the embassy suites hotel and Waikiki beginning in mid June.
And increasing into July with a strong pent up demand.
Q2 paid occupancy was 67% and the month of.
June by itself reached approximately 83%.
The average daily rate was $274 per for Q2, and approximately 316 for the month of June.
Revpar or revenue per available room was $184 for Q.
And approximately 262 for the month of June.
It is definitely heading in the right direction.
Effective July 8 all travelers entering into Hawaii.
Vaccinated in the U S can skip quarantine without getting a pre travel COVID-19 test by uploading proof of their backs vacs.
New tuition to the state of Hawaii Safe travel website.
The Oahu is still under tier 5 of its reopening plan until Hawaii total population is 70% fully vaccinated, which should occur in the next month or 2 bars and restaurants in Oahu can be at 100%.
Capacity as long as all customers show their vaccination card or a negative COVID-19 test on entry.
The Japanese wholesale market had accounted for approximately 35% to 40% of our customer base pre COVID-19.
Japan is currently just 9% fully vaccinated, though with its current pace of over.
For 1 million vaccines, a day, Japan is expected to be completing vaccinations by this November and to start issuing vaccine passports in the next 30 days in anticipation of opening up international travel in.
In the meantime, there is a pent up demand from U S West and Canada that is expected to.
Hotel occupied and on track with its recovery.
Secondly.
Looking at our consolidated statement of operations for the 3 months ended June 30th.
Our total revenue increased approximately $7.8 million over Q1.
Which is approximately at 9.3%.
Increase approximately 37% of that was the outperformance of the embassy suites Hotel as California, and Hawaii began to open up travel.
Additionally, our operating income increased approximately $6.3 million over Q1 dollars 21, which is approximately an increase of 31%.
[noise] third same store cash NOI overall was strong at 23% year over year.
With office consistently strong before during and post COVID-19 and retail showing strong signs of recovery.
Multifamily was down primarily as a result of Pacific Ridge apartments.
At <unk> 71 per.
Percent leased at the end of Q2 due to the recurring seasonality of students, leaving in may including the exploration of the USD Master lease and new students leasing over the summer before school starts in late August Gen.
Generally approximately 60% of.
133 units at Pacific Ridge are leased by students with the USD campus right across the street.
As of this week, we are approximately 90% leased at Pacific Ridge with approximately 150 students moving in over the next several weeks in August.
Hassle on eighth in the Lloyd.
District, Oregon is a 657 multifamily campus at the end of Q1 occupancy was approximately 84% due to the due to the lingering impact of Covid and political challenges in the prior months as.
As of Q2, we have increased the occupancy to approximately 95%.
But in doing so we had to adjust our rent and increased concessions.
Pacific Ridge, and hassle and 8 are the 2 factors that impacted our multifamily same store this quarter.
As Adam mentioned.
Asking rates have been trending favorably on our multifamily properties recently, which we expect to provide meeting.
Meaningful.
Both going forward.
Note that our same store cash NOI does not include our mixed use sector, which will return with Q3 and Q4.2021. After completing the renovation of the embassy suites hotel during Covid.
And fourth as previously disclosed we acquired landscape.
Office Park on July 7 comprised of approximately 280000 square foot multi tenant office campus in the Premier I 90 corridor Submarket of Bellevue, Washington, 1 of the top performing markets in the nation. The Eastside market is anchored by a leading tech life science biotech.
And telecommunication companies.
The 4 building East Gate Park as Jen is currently greater than 95% lease to a diversified tenant base with in place contractual lease rates that we believe are 10% to 15% below prevailing market rates for the sub market.
Additionally, East Gate Park recently.
Obtained.
Municipal approval for rezoning, increasing the flow or Eric floor area ratio from 5 to 1 point, though which will allow for additional development opportunities.
The purchase price of approximately $125 million was paid with cash on the balance sheet.
Recently.
Excuse me the going in cap rate was approximately 6% with an unlevered IRR north of 7%.
We believe this transaction will be accretive to <unk> by approximately 5 <unk>.
For the remainder of 2021.
And 10 cents for the entire year of 2020.
'twenty 2.
These 4 items are the data points that are pointing to at the beginning of a recovery story starting to unfold.
1 last point of interest is that on page 16 of the supplemental total cash net operating income, which is a non-GAAP supplemental earnings measure.
The.
He considers meaningful and measuring its operating performance.
As shown for the 3 months ended June 30 debt approximately $58.7 million if.
If you use this as a run rate going forward it would be approximately $234 million, which would exceed 2019 pre COVID-19 cash.
Companywide of approximately $212 million.
A reconciliation of total cash NOI and net income is included in the glossary of terms in the supplemental.
Moving on.
At the end of the second quarter, we had liquidity of approximately $718 million comprised of.
Cash and $368 million in cash and cash equivalents and $350 million of availability on our line of credit.
Our leverage which we measure in terms of net debt to EBITDA was 6.6.0.0 times, our focus is to maintain our net debt to EBITDA at 5.5 or below.
No.
Our interest coverage and fixed charge coverage ratio ended the quarter at 3.7 times.
As far as guidance goes we are in the middle of budget season now for 2022, we hope to begin begin issuing formal guidance again for 2022 on our Q3 'twenty 1 earnings.
I'll now turn the call over to Steve Center, our Vice President of office properties for a brief update on our office segment, Steve. Thanks.
Thanks, Bob at the end of the second quarter, excluding 1 beach, which is under redevelopment our office portfolio stood at approximately 93% leased with less than 1% expiring through the end of 2021.
Our top 10 office tenants represented 51% of our total office space rent.
Given the quality of our assets and the strength of the markets in which they are located with technology and life Science is a key market drivers our office portfolio is poised to capitalize on improving dynamics, especially in Bellevue in San Diego.
Q2.
Bio stats by region were as follows our San Francisco, and Portland, Portland Office portfolios were stable at 100%, 96% leased respectively.
City Center Bellevue was 93% leased net of a new amenity space under under development in San Diego was 91% leased net of new amenities space is being.
Added to Torrey reserve.
We had continued success in Q2, preserving pre COVID-19 rental rates with 13 comparable new and renewal leases totaling approximately 50000 rentable square feet with an over 9% increase over prior rent on a cash basis, and almost 15% increase on a straight line basis.
The weighted average.
Poor term on these leases was 3.6 years with just over $7 per rentable square foot and T I's and incentives.
We experienced a modest small tenant attrition during the quarter due to COVID-19, resulting in a net loss of approximately 16000 rentable square feet or less than a half a point of occupancy none of which was lost to a competitor.
Our outlook moving forward as 1 of positive net absorption with tour and proposal activity picking up significantly.
At this point in time, we are seeing smaller tenants willing to commit to longer term leases at favorable rental rates.
Even more exciting is the push to return to the office and the emerging large tenant activity and competition for quality larger blocks of space.
Least markets, including San Diego in Bellevue, which we have current availability inactive prospects.
Our continued strategic investments in our current portfolio will position us to capture more than our fair share of net absorption as the markets improve.
The renovation of 2 buildings at Torrey Reserve is near completion.
We have aggregated large blocks of <unk>.
<unk> selected to meet demand and take advantage of pricing power and we have active large deals negotiations on both buildings.
The final phase of the renovation will include a new state of the art fitness complex and conference Center, both serving the entire 14 building Torrey Reserve campus.
Construction is in full swing on the redevelopment of 1 Beach Street in San Francisco.
Base with delivery in the first half of 2022 and construction is nearly complete on the redevelopment of 710, Oregon square in the Lloyd's Submarket of Portland.
1 beach will grow to over 103000 square feet and 710, Oregon Square will add another 32000 square feet to the office portfolio.
As Ernest mentioned construction is well.
And tower 3 of them Jolla Commons with expected completion in Q2 Q3 of 2023, and we are encouraged by the emerging large tenant activity and competition for quality large blocks of space and UTC.
Finally leasing activity is robust for our upcoming availabilities at Eastgate Office Park in suburban Bellevue, even prior to executing the exciting.
Underweight Asian plans under development to take the special property to the next level of quality and customer experience.
In summary, our office portfolio is on offense as we move forward into the rest of 2021 and beyond.
Operator, I'll now turn the call over to you for questions.
Ladies and gentlemen, if you have a question or comment at this time. Please press the star then.
Sitting around a key on your Touchtone telephone.
Your question has been answered or you wish to move yourself into the queue. Please press the pound key.
Our first question comes from Handel, St Joseph Missouri Mo.
Hi, this is on behalf of.
From now congratulations Adam.
First question is can.
Can you discuss status.
Laguardia coming.
Okay.
And how are you thinking about the UTC market.
Okay.
Why don't you handle the construction and then Steve will handle.
Alicia sure sure I think so right now we are.
Bar at the bottom of the hole as Ernest mentioned earlier and we are beginning the first phases of flooring are Matt foundations.
To <unk> point, we remain on schedule and on time and on budget.
Our first concrete pour is going to be over 3500 cubic yards of concrete in almost.
430000 pounds of rebar, so theres a lot of work to do between now and August 14th, but we remain pretty confident in.
Our ability to execute this and I think as we pointed out before we were fortunate enough to buy it or buy it out during the last quarter of last year and construction costs have escalated.
So what it would cost us more substantially if we were to buy to date, Steve why don't you describe your strategy of holding out for that.
They are a tenant well.
As we've said before you have not only life science.
Capital flowing into San Diego at record rates, but also technology.
Venture capital is flowing in as well you've got Apple Amazon Google.
Facebook you've got you've got the big Tech companies, taking advantage of the quality.
Student population.
Net net exporters of talent for years and now these big companies are coming to take advantage of that.
The market dynamics are.
I'd say favor, we're the only pure office.
Development coming out of the ground the rest of the new developments, our life science or lab.
<unk> targeted buildings.
Furthermore, in the 3 adjacent Submarkets of.
Del Mar Heights, UTC in Sorrento Mesa, approximately 3 million square feet of office product has.
In our is being converted to lab. So that's taking away competing inventory. So we think we're well positioned to take advantage of that the market demand continues to be strong for those big users and there's not going to be much available product. That's the prediction for 2023, when we're delivering.
This building to the marketplace.
So we're confident we're going to do well and leasing that building.
I hope that answers your question and please say hi to handle for us.
Yeah, that's very helpful. Thank you.
I have a quick follow up which office being the largest portion of ABR NOI are you at all worried about work from home.
Adding to your offices exposure at this time.
I think our strategy is to be in markets that are buoyant I think if we were in markets that were not buoyant I would really.
Have more concerns than we do now, but I think our strategy of having <unk>.
Top notch office, the best and some of the.
Capex in the countries will allow us to.
Performed better than many of the markets that will not perform as well.
Because growth is growth and we are in the path of growth.
Anybody want anything to that.
I think you covered it well.
Best of luck, it's a good question no everybody's asking what's going to happen with people return.
Don't return to office, it will be different but I think that.
Well located office in the path of growth, we will do extremely well and that's our strategy.
Thank you. Our next question comes from Todd Thomas with Keybanc.
Okay.
Hi, Thanks.
Good morning.
First question I have is on the mixed use on the hotel and hotel retail.
Bob I appreciate the color on June and it sounded like performance.
<unk> has continued into July can you.
You just provide some additional detail around July and maybe talk about the outlook for August and September in terms of bookings and and I guess the outlook for occupancy and rates.
Yeah, Good morning, Todd.
In terms of the data points for July we're still getting that in but what we can.
See as we can see the pent up demand we can see.
The pace of bookings.
That are generally we can see we have a vision into about 90 days out so you know.
July August September is the high season for the embassy suites hotel so.
It is seasonal so then it will generally.
Go down a little bit in the fourth quarter, and then pick up at the end of December but for July August and September we are expecting a similar if not greater breakout at the embassy.
<unk> seen in just the last half.
June.
Just as additional color if you recall Todd we use the app.
The the pandemic downtime to refresh the rooms paint the exterior and deal with the Spalling. So we're ready when Steve.
That was a market does recover and we expect a strong recovery.
Okay, and I guess, how should we think about the results in the quarter and and.
I guess sort of thinking about.
What youre experiencing there relative to what you were.
Expecting.
For 'twenty, 1 or 'twenty 2 when we look at that NOI bridge that you've provided has the outlook for the mixed use asset.
Changed as we've moved further into the year.
Well on that on that bridge that we've shared with our investors.
The research analysts over the last.
Last year or so is that we tend to update that at the next conference or the next presentation.
Basically my comment in there Todd was that if you look at the cash total cash NOI and you just use that to.
As a run rate and you're about 200.
<unk> hundred 38, and you can adjust that down from 4 so nonrecurring.
Collections debt.
Occurred in.
In the second quarter. So even then even if after the adjustments to that you are still significantly high.
In our 2019 cash NOI.
Debt, we ended with so really all we're doing is saying hey. This is this we are seeing the recovery we are now.
Head of 2019.
Pre COVID-19.
Cash NOI and from here.
We expect to build upon that Bob's bridge has given me a great confidence in saying that we're going to come out of this better off than ever so.
Hum.
Alright, and then on the in the retail portfolio I was wondering if you could comment on the negative leasing spreads in the quarter and.
Talk about the outlook for for leasing going forward.
Selling you want to handle that.
No.
It just went out for a cup of coffee that flow to the Master line.
Total Android.
Doug Your question was with all those little low the negative leasing spreads on the can you.
Because he can you hear that Todd because he has quite a ways from the microphone.
Yeah.
Was just looking for a little bit of detail on the negative leasing spreads in the retail segment during the quarter and if you could talk about the outlook there.
40 of those numbers are.
Because you're not buying that.
Much Quicksilver. These days quick silver has had some struggles out there.
At Beach walk with us so as their lease was coming to an end and we were having troubles with them.
Replace them with the first line and bank and so there was a drop in the lease rate between those as those rates.
Rates were done at a time.
Historically very high and so as we brought in the new.
Lease rate with first Hawaiian Bank there was a drop there we also as I know.
<unk> Beach walk in the Middle of Beach walk, we have Peter that Art Gallery. There. There was also wondering historically a pretty high lease rate and we had an opportunity.
Facility to bring another quality gallery in.
To cover that space.
Good day market rates I don't remember exactly what it was a SaaS covered debt to a whole that would've been in our 50 yard line and reoccupied. So unfortunately as leasing has picked up and things have definitely gotten better when you take out a couple.
Key deals or lease rates. It can leave a mark I was surprised that the market lap, but Fortunately I think thats a temporary event just because of the QB.
No.
And also too to what Chris was saying Todd is that when we replaced a quick silver on the end cap kawakawa.
<unk> on Waikiki Beach walk in.
Waikiki.
The.
The net impact of bringing in the bank was less than half a penny.
And the reason for that is because by replacing quick silver.
We also terminated.
I think our we terminated the sublease debt, we had with the bank at that point in time.
Sublease rent on that was a $1.7 a year so that goes away.
It's actually a win.
Follow up on that transaction.
From a macro point of view, we've always said that 75% of all the properties in Hawaii are subject to a ground lease we had 1.
<unk> about the size of this.
The room worrying now now 100% of our property.
When.
We have fee simple and and entitled So.
Very high quality portfolio.
Okay.
And just looking looking ahead.
Are you expecting more.
Roll Downs within retail or do you think youre through that it sounds like.
<unk>.
Retail just more broadly.
Rents have firmed up and fundamentals are firmed up quite a bit are you seeing that across your retail portfolio as well.
Yes talk for the most part things are starting to stabilize theres still going to be hit and Miss there's still there's still some categories that are still.
Operating as we're going through the turbulence of Covid, which unfortunately is not over but.
Looking out we are in pretty good shape, but there's still going to be a little bit of turbulence.
I know you've been to our Beach Beach walk property and been out there to Hawaii, but it really is an impressive rebound that we're seeing.
I am pretty bullish I always say as we sit in this new conference from when I looked out on that free way and I see it get more and more jammed. It was school coming back on and back to school is coming up it's going to be very big quarter for retailers, So I'm very bullish compared to where I'm spending a year ago.
Alright. Thank.
Thank you.
Thank you Todd Thanks for your interest.
Our next question comes from Craig Schmidt with Bank of America.
Good morning, Kurt Thank you good morning.
I was wondering when you think occupancy may return to <unk> 19 levels.
By the different sectors.
For which property you're talking about.
I just.
Retail auto property type family.
Yes.
<unk> multi from multifamily is going to be there.
It's almost there now is a matter now yes.
1 of our properties, which were repositioning us is 100.
Percent leased rehab to move ins.
Pacific Ridge.
Portland, Your guess is as good as mine, but things are getting better.
And not worse, which is which is the right direction as far as office goes we've never had a decline in occupancy to.
If anything.
It's on the upswing, we've had we've had some attrition over the last year and I can go into detail on that but.
If you want.
Looking from from Q2, 'twenty, 1 to Q2 'twenty. It was about 139000 feet of attrition.
Speaker of about 21000 feet, our amenity spaces that will will be absorbed if you will in the next 2 quarters, we're taking spaces and adding amenities to buildings, but we re measured buildings as well we just from measured 2 projects in our portfolio..1 is growing by 26000 feet and the other is growing by 11000.
So.
That will work itself out some was just transition our strategic but in terms of losing tenants. We had 23 tenants averaging 4000 feet that debt either downsized in place or left about a third was related to COVID-19, but 2 thirds was.
What all cost.
Cycle, it's part of the office cycle. So we had a big institutional financial firm at City Center Bellevue that had been a floor and a half for over 20 years. They renewed their lease at rents that were 65% higher on 1 floor and they just came back in June of 9400 foot suite.
On the 20th floor and we are actively touring that space right now and we think we're going to achieve the $65 rent versus the 39 dollar ending rent. So these vacancies part of the business cycle provide opportunity to ratchet rents up further that's why you see our NOI continued to grow even though we've had some attrition in square footage leased.
So that's that's kind of a take line, it's been largely smaller tenants.
We had another law firm the 2 named partners decided to retire after 4 years, the silver lining of that as they vacated 16000 feet and we did a new 5000 foot lease with their younger partners. So our portfolio is solid we have great assets.
We continue to generate increasing rents even through Covid and it's as I said in our remarks I expect net absorption in our office portfolio moving forward substantial net absorptions. So we're bullish I think that strategy is going to produce substantial shareholder accretion to value.
And that's our strategy in order to achieve these increased strength, we have improved the properties and we manage the properties better. Thanks to Steve's leadership. So we're optimistic about our office and are putting our money where amongst as they say in French and selling.
Selling you want to ask answer something on retail.
I mean, it's a steady.
Client, but I can't say, when we're going to recover to where we were.
Q4.19.
It could be a year out.
Sometimes it's 1 step forward 2 steps back 3 steps forward 1 step back.
It's going to revolve on consumer spending, which I think will be good.
It will get there are retail properties.
Our well positioned our management and.
In spite of trip.
Excellent and I say debt in retail, we will do as well as anybody because of the Ada management and B locations. So if you look at the industry and we will do as.
Is anybody in the industry and <unk>.
Of course, you know as well as I that there is a fair amount of uncertainty.
But thats a great question growth.
Okay and then just.
Maybe just a little more color.
Is there enough pent up demand on domestic travel to Hawaii to make.
Up for Japan.
It doesn't sound like it could get really started until November or later.
But it sounds like.
Just given the short time as the reopening.
So while I'm just wondering if you think there is enough domestic demand to compensate for the absence of Japan.
Well that.
Embassy suites has been a very pleasant surprise during the Covid it broke even and that was so much better than that.
And all of Us expected.
There has been a rebound now from domestic demand, but the way I described domestic demand that's the cake.
On the cake is Asia.
Asia and so as that unfolds, we will return to pre Covid levels, Yes, let me add to that Craig is that yes to answer your.
And yes, there is sufficient demand on U S West and Canada to maintain.
A high 80% occupancy or our strategy at the embassy.
C is to keep it around 80, 788% occupancy and then we push rate.
And there is less and less.
I don't want to call it it's less wearing.
On the house.
If you have 100% occupied if you have something 100% occupied whether its a hotel.
Apartments, youre not charge at them.
We keep it at 88 per cent for the most part and then push the rate, but June was all U S U S west.
And I can see on our Star report and I can see in our our bookings 90 days out that's where it continues to be.
Sure.
Great. Thanks for the color guys alright, Thank you Greg.
Sure.
And I'm not showing any further questions at this time I'd like to turn the call over to our chairman Ernest Rady for any closing remarks.
Again, thanks for your patience, we're glad to have the dividend back to where it was pre.
With.
We wish we didn't have to go through this COVID-19 and reduce debt.
With the dividend, we're glad to have it back we were upset that we had to but we thought that survival was in.
And conserving the cash what's most important as you all know we had a bond offering which is.
<unk> times oversubscribed, we now have substantial liquidity, we will look forward to employee net.
And projects that will continue to increase our net asset value and shareholder wealth. Thank you for your confidence and we look forward to a great future. Thank you.
Ladies and gentlemen, this does conclude today's.
You may now disconnect and have a wonderful day.