Q1 2022 Independence Realty Trust Inc Earnings Call
Hello, everyone and a warm welcome to the Independence Realty Trust first quarter 2022 earnings were <unk>. My name is Emily and I'll be coordinating your coat today.
At the end of todays presentation, you have the opportunity to ask a question by pressing star and then one on your telephone keypad when prompted and now have the pleasure attending the call over to Al Hi, Lauren Torres. Please go ahead.
Thank you and good morning, everyone. Thank you for joining us to review independence Realty Trust's first quarter 2022 financial results on the call today are Scott Shafer, Chief Executive Officer, Ellen Kneeland, Chief operating Officer, Farrell Ender President of IRT.
T and Jim <unk>, Chief Financial Officer.
Today's call is being webcast on our website at www Dot IRT living dotcom, there will be a replay of the call available via webcast on our Investor Relations website, and Telefonica <unk> beginning at approximately 12 P M Eastern time today.
Before I turn the call over to Scott I'd like to remind everyone that there may be forward looking statements made on this call. These forward looking statements reflect irt's current views with respect to future events financial performance and the merger with steadfast apartment, REIT, which will be referenced herein as star acts.
<unk> results could differ substantially and materially from what IRT has projected such statements are made in good faith pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Please refer to Irt's press release supplemental information and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations participants may discuss non-GAAP financial measures during this call.
A copy of Irt's earnings press release, and supplemental information containing financial information other statistical information and a reconciliation of non-GAAP financial measures to the most direct comparable GAAP financial measure is attached to Irt's current report on form 8-K avail.
Global at Irt's website under Investor Relations Irt's. Other SEC filings are also available through this like IRT does not undertake to update forward looking statements in this call or with respect to matters described herein, except as may be required by law with that it's my.
Pleasure to turn the call over to Scott Schaeffer.
Thank you Laura and thank you all for joining us today.
After an exceptional 2021, when we more than doubled the size of our portfolio and accelerated our deleveraging efforts. We are pleased to report that our momentum continues as we delivered 16, 2% combined same store NOI growth and almost 40% core <unk> per share growth in the first quarter of 2022.
Our December 2021 merger with Star resulted in the combination of two high quality portfolios in non gateway markets with outsized growth fundamentals and now more than two years since the onset of the pandemic. We continued to deliver strong results that reflect the resiliency of our markets and the success of our strategic initiatives.
We have increased our exposure to non gateway markets in the Sunbelt region, which currently represents approximately 71% of our NOI our markets continue to see high residential demand as population growth exceeds new supply. These trends are expected to continue with the sunbelt area benefiting from outsized job creation and increasing wages as people seek a lower.
Cost of living better tax policy and growing economic opportunity.
We believe IRET has a long runway for growth whether that be through investing in our existing communities. We're expanding our presence in current priority markets. We have a sizeable renovation pipeline will continue to invest in our redevelopment efforts through our long standing value add program.
This program has historically generated unlevered ROI of approximately 20% and should provide over $800 million of incremental growth and shareholder value. In addition, we will explore new investment opportunities and look to advance our joint venture relationships.
We have been exploring single family home rental development opportunities and recently closed on a joint venture that acquired development in Huntsville, Alabama. This JV marks our entrance into the single family home rental space and Theres a notable scale in a market. We know well. This is a natural expansion of our strategy and will be focused on the same non gateway markets in the Sunbelt region.
Joint venture already owns and operates 178 homes in a single community is in the process of completing the second phase of the community with another 222 homes.
In addition, we're excited to announce that in April we acquired the first multifamily property in Nashville that was completed through our joint venture development program farnell going into greater detail on these transactions, but they're both exciting opportunities, which reflect accretive capital allocation at attractive cap rates and value creation at IRT in two markets that we have targeted for additional investment.
Looking ahead, we are confident in our ability to implement our strategic initiatives, capturing incremental growth and strengthen our total company platform with increased economies of scale. This is reflected in our increased guidance for the full year 2022. As we are now targeting 12, 5% combined same store NOI growth and 25% core <unk> per share growth each at the midpoint of our <unk>.
Guided ranges, while we continue to be mindful of economic headwinds, we have strong visibility on delivering these results as we head into peak leasing season, we will remain patient and disciplined in our efforts to create long term value for our stakeholders I'd like now to turn the call over to <unk> for an operational update thanks Scott.
As Scott touched upon we kicked off 2022 with strong operating results led by our ability to maintain high occupancy levels at our communities and drive rent growth in the first quarter. Our average occupancy rate was 95, 4% up 10 basis points compared to a year ago.
And we delivered a 10, 4% increase in our average effective rental rate on a combined same store property basis.
On a lease over lease basis for the combined same store portfolio, new lease rates increased 15, 7% and renewals were up 10, 2% during the first quarter, yielding a blended lease over lease rental rate increase of 12, 8% for the leases expiring in Q1 2022.
We're pleased to note that the strong trends continue in the second quarter to date with new leases for our combined same store portfolio, having increased 15, 8% while renewed leases are up nine 5%. So far in Q2, our resident retention rate is 54, 6% up about 370 basis.
<unk> from Q1 2022.
As mentioned last quarter, our property management and revenue management system integration is complete and we are on track to deliver $31 million in synergies as we implemented best practices from both companies.
This includes $8 million of annual operating synergies and $23 million in annual corporate expense savings.
I would now like to turn the call over to Farrell to provide you with an update on our investment opportunities.
Thanks, Alex.
Since the inception of our value add program in 2018, we remained focused on renovating our existing properties, where we see the potential for outsized rent growth.
This continued in the first quarter as we completed renovations on 143 units, which is lower than anticipated due to a higher resident retention rate.
For these 143 completed renovations our renovation costs was $12436 per unit and these units achieved an average of $331 increase in monthly rents over comparable on renovated units.
This yields an unlevered return on investment of 32%.
Our value add program currently has 12 communities undergoing renovations with an additional 10 community that will be added this year.
We've also designated seven community is completed.
Have a pipeline of approximately 20000 value add units, which includes about 12000 former star units. This.
This year, we expect to renovate 2000 units from the combined portfolio and ramp up to 4000 units per year thereafter.
As Scott mentioned earlier, we're excited about the progress of our joint metric program, which focuses on new multifamily development and now single family rentals.
Recently, one of these investments being full cycle in September 2021, we invested in a joint venture that was developing three communities in the national market.
Just last month, we acquired a first of this community from the joint venture for $25 4 million.
This price translates into a five 4% to 7% effective economic cap rate.
Other than current market transactions and as an example of how these joint venture investments provides value to our shareholders.
As our first investment in the single family rental space on March 31, we entered a joint venture referred to as virtuoso.
<unk> of a two phase development with 400 single family home rental units located in Huntsville, Alabama.
The development of 170 homes in Phase one was completed in late 2021 and is 85% occupied today.
The average rental rate for leased homes is $563 per month or $1 79 per square foot.
We expect the development of the remaining 222 homes in phase III to be completed and acquired by the joint venture in the second quarter of 2022.
Irt's investment is expected to total $37 1 million.
Of which $16 $4 million was funded on March 31.
Our virtuoso joint ventures, ideally positioned in the hospital market with easy access to major retail and a commute to the Cummings research park in less than 10 minutes.
As an update construction efforts are progressing well across the three of our joint ventures, and we are pursuing several other opportunities in our existing markets.
You provided an update on our joint ventures on the investment and development activity page of our supplement.
As of the end of the first quarter, we've identified two properties as held for sale.
One of these properties is located in Louisville, and the other in Terre Haute, Indiana.
We expect a blended economic cap rate of these dispositions to be three 9% with an expected close in the third quarter of 2022, and then tend to recycle the net proceeds to properties in markets with more attractive long term growth prospects.
I'd now like to turn the call over to Jim.
Thanks, Paul and good morning, everyone, beginning with our first quarter 2022 performance update net income available to common shareholders was $74 6 million up from $1 1 million from the first quarter of 2021 during the first quarter of 2020 to GAAP net income is inclusive of $94 $7 million of gains on the.
And for real estate assets, and a $29 million, one time amortization expense associated with in place leases from our star merger as we highlighted in our 2021 year end earnings call. These assets for sale and the proceeds used to delever the combined balance sheet post merger.
During the first quarter core <unk> grew to $57 $7 million.
Up from $18 million, a year ago and core <unk> per share grew 39% to <unk> 25 per share up from <unk> 18 per share in Q1 2021. This growth as a result of the completion of our merger of the scar and the related accretion as well as the sizeable organic rent growth we've experienced throughout the combined portfolio.
Irt's first quarter combined same store NOI growth of 16, 2% driven by revenue growth of 11%. This growth was driven by a 10, 4% increase in average rental rates with an increase in other income generated by star communities.
This NOI growth includes value add communities, we did see similar NOI growth of 16, 1% at our same store non value add communities, which reinforces the fundamental strength of our core markets.
On the property operating expense side combined same store operating expenses grew three 2% in the first quarter led by higher contract services and personnel expenses. The increase in contract services was driven by expenses for resident Reimbursable services as well as some snow removal costs.
For example, during Q1 2022, we've continued to rollout our valet trash services to residents, particularly at Starz community. The increase in contract services for this Reimbursable service was more than offset by higher other income from the billing of those services the residence on.
On payroll expenses the increase in the quarter was driven primarily by increased incentive compensation to our community personnel as well as inflationary pressure.
Nearly this incremental incentive compensation as a result of our positive portfolio performance before moving onto the balance sheet, we would like to highlight appendix a in our supplement where we provide our Q1 2022 combined same store results broken down between legacy Iot Headstart community as you will see the $19 two.
2% NOI growth of stars community as a result of strong rental and other property revenue growth as well as the execution of our operating synergies that we identified as part of the merger.
Now turning to the balance sheet as at March 31, our liquidity position was $457 million.
Approximately $24 million of unrestricted cash $383 million of additional capacity through our unsecured credit facility and $50 million ATM proceeds available from forward equity sales or net debt to EBITDA was seven six times at quarter end down from eight two times a year ago. We're excited on the progress.
On the deleveraging front and still expect to achieve our leverage target of the low seven by the end of this year and mid sixes by year end 2023.
Regarding our full year 2022 guidance, we are updating our outlook on continued strong fundamentals the economic strength of our market and our seamless merger integration efforts. Our guidance now includes an EPS range of 50 to 52 per diluted share and core <unk> per share range of $1 four to $1 six.
The midpoint of our core <unk> per share guidance of $1. Five is an increase of <unk> <unk> from our previous guidance. This increase is a result of improved expectations on property NOI performance and lower Q1, 2020 to interest expense and how it impacts the full year.
For 2022, we now expect NOI at our combined same store portfolio to increased 12, 5% an increase of 150 basis points at the midpoint. This guidance reflects expected combined same store revenue growth of nine 6% at the midpoint for 2022, we are guiding average occupancy to be 95, 6% at the midpoint.
With an increase of 10, 5% and our average rental rate.
Moving on to expenses the increase in our guidance on controllable operating expenses is primarily due to the incremental expenses, we are incurring related to incentive compensation and costs associated with enhanced Reimbursable resident services as.
As well as some inflationary pressure at this point it is still too early to update our guidance on real estate taxes until more information is received from tax assessments later this year.
Regarding our transaction and investment volume expectations, we are providing updated assumptions given the investment activity, we've announced to date as well as the two assets. We've identified as held for sale. The proceeds from dispositions will be used to invest in communities in our targeted markets consistent with our historical capital recycling activity now ill turn the call back to Scott Scott.
Yes.
Thanks, Jim in closing I'd like to thank our team for their incredible efforts. The past two years brought about unexpected challenges, but <unk> emerged as a stronger company in the multifamily sector and since the completion of our merger in December we've notably increased in size and realize meaningful synergies, which will drive growth. We are confident in our strategy which is.
Focused on capitalizing on continued macro trends and resident demand accelerating our organic growth profile through our value add program and continuing to refine the portfolio and expand our presence in core high growth markets throughout our capital recycling and joint venture development initiatives. We thank you for joining us today and we look forward to speaking with many of you at NAREIT.
In early June operator, we'd now like to open the call for questions.
Thank you if you would like to ask a question. Please do so now by pressing star followed by one on your telephone keypad. If you change your mind and wish to withdraw your question from the queue. Please press Star and then case, we ask that when you're preparing to scale question. Please ensure that your device is unmeasured lately.
Our first question today comes from Austin, <unk> with Keybanc Austin. Please go ahead.
Great. Thank you and good morning, everybody.
Scott over the last few years.
Added various investment opportunities to the Arsenal.
And you've now dipped your toe into single family rentals.
Historically <unk> been patient and disciplined in your approach, but can you just help us understand how long you and the board has considered FSFR as an investment consideration and then how you how you prioritize your capital uses today.
So far as maybe fit within that within that ranking or a framework.
Sure Austin and thanks for the question and yes, we will remain patient and disciplined.
We've been looking at single family rentals for some time now.
When when this.
The space with that.
Products started it was it was a different business than it is today.
We're considering it where.
Our build for rent in one location. So we look at this as multifamily. It's just horizontal multifamily it's 400 rental units all in one location.
And as homeownership becomes more out of reach for the typical person.
We think it's an opportunity opportunistic next step for us to take advantage of these opportunities again in markets that we have a presence where we want to grow and have management capability.
So.
It's something that we're trying out here, we are looking at some other opportunities but.
It's all along with our existing.
Capital allocation strategy.
Are you planning to take operations in house and down the line and I guess what build out.
Within the ops platform is necessary to take that on.
We don't think theres any build out necessary again this is multifamily.
And yes.
We will take it in house.
We have a purchase option, where we can buy out our JV partner.
In the in the near future and.
When we do that we will take over management, but we think it fits right within our existing.
Operational platform.
And then just last one for me how deep is your investment pipeline in single family today and are you more focused on.
One one off type single family purchases are more and more of the entire projects like you did with the Huntsville deal and then I'm also curious what price point are you focused on relative to Canada, primarily class B strategy in multifamily.
Not a very deep pipeline, it's something we're looking at again this was an opportunity in a market that we know well.
There are some other opportunities.
Again, an existing Iot markets that were considering but its not a very deep pipeline at this point.
Got it thanks for the time.
Thank you.
Our next question comes from Nick Joseph with Citi. Your line is open.
Thanks.
Maybe following up on Austin's question for single family.
Obviously capital scarce and you guys have done well in terms of redevelopment and acquisitions in some of these JV more recent JV deals. So how do you think about the entrance into a single family from a return perspective, maybe you can rank stack up against some of the other potential uses of capital.
We look at it as.
Returns that are very similar to our other investments in.
The JV program, where we're able to buy completed.
Operating.
Rental housing at cap rates that are are higher so a lower cost per unit higher.
Then what is available for just one off transactions of existing product. So again for US. This was opportunistic we expect when it's all said and done and we buy out our partner it'll be depending on values at the time, but.
But if we were to do it today it would be a five cap or slightly north of that so when you compare that to a very heated acquisition market where.
10 to 15 year old product is trading at three five caps, we see this as very attractive.
And when Youre doing your IRR calculation for this deal specifically what sort of rent growth are you assuming on the single family side versus if you are buying multifamily at the same market.
Well I'm going to let Farrell talk about the rent growth, but I'll tell you Nick.
I really we don't really use irr's, because we don't know what the whole period is going to be when we're making the investment and.
And we don't know what the exit cap is going to be so we're looking more at year, one year two cash flow return on equity when.
When we're making investment decision.
We're underwriting these.
Not really.
As far as specifically, but what's going on in the market and what are the other SSR community is getting these deals one in specific was over the whole period, 3% to 5% annual rent increases.
Thanks, and then just finally I think previously in terms of the merger integration you talked about over $28 million of synergies now it sounds like its 31.
The additional.
What's the additional $3 million there and then is the 31 the final number or is there still an opportunity for more.
And you guys continue to push that love. It. So I think yes, the $31 million and obviously the final number.
There's always a little could be a little bit more but it's not going to be materially different. The final items came from a variety of just small services small things odyssey's tax fees professional services for a variety of different things that we use it type services. So it was really amalgamation of small things 50000 here 100000, there may just kind of continue to add up.
To a large dollar amount so it's good.
Thanks.
Our next question comes from Neil Malkin with capital one now. Please go ahead. Your line is open.
Hey, everyone. Good morning.
Good morning, Neil.
First one for me.
Traditional multifamily or apartment community that we've heard given the rise in rates.
The buyer group has impacted the most is the leverage buyer seems like they're taking.
Tim on the sidelines and see where everything shakes out.
Given that they are the.
A larger part of your I guess competitive set when youre looking at a product are you seeing opportunities to come in.
<unk> re trades or just maybe the market backs up a little bit and come to you.
Obviously your stock prices done tremendously well cost of equity.
Stork low.
It is now a time or do you think youre going to have an opportunity over the next.
Three to six months to.
Kind of be more aggressive on acquiring value add.
Yes, we are at that you're actually exactly right. We are seeing that is impacting leverage buyers.
We're not seeing the opportunity yet we're confident that they should start showing themselves in the next two or three to six months, what we're seeing we're still seeing that for the well located well constructed property in our markets Youre still seeing enough people.
In the transaction to get to where.
With a strike prices are some of the tertiary markets and inferior locations youre starting to see re trading.
And we're just we're being patient and seeing how this all plays out over the next couple of months.
Yes.
Okay.
Okay. Thanks, and then.
In terms of.
The JV.
The development side and you talked about.
Wanting to grow that seeing opportunities.
In targeted market can you, maybe just elaborate a little bit on how deep that pipeline is.
The kind of markets Youre looking at the size scale economics.
Deal structure.
That'd be great. Thank you.
So the markets that we're looking at are all of the markets that we currently operate in.
The Sun belt region.
We think it's.
Yeah.
A strategy that is his.
Yes.
We will play out well.
Doing it a little different than some of the other.
Companies that are in that space.
US we're coming in.
Two a development program when all of the pre development work is done it's shovel ready so it's a limited.
<unk> frame from the from what make our.
Until there is a CEO .
Usually 18 months give or take versus a development from start to finish could be four years five years.
In the current environment.
So my goal here was to limit our exposure to two changes in the cycle.
And you do that by coming in when that the building will be complete again within a reasonable timeframe, a year and a half give or take.
And because we're coming in at that point and we're putting.
Some some capital at risk we ended up with this purchase option.
At a much better price.
Then we would you would be able to buy that if we just waited and came in.
The transaction once the building is complete so it's.
I think an accretive allocation of capital for us It will continue.
Have a deep pipeline.
But we are clearly prioritizing it.
In.
Markets and developers and.
Other aspects, where we think we can.
Limit the additional risk by coming in in that space.
Yeah.
Okay, Great and last one I noticed that.
The renewed.
Renewal rates kind of tick down a little bit I think that just given loss to leases.
The rights.
We are not pushing as hard on renewals.
Wood wood.
Signal that there's more opportunity or more runway to push for longer and push higher can you just talk about what youre seeing on that and if there is a reason for the.
The back off on the renewal side. Thanks.
Yes, Thanks, Neil and of course, it's still early in Q2, but as we look forward the mix of new leases will help increase the blended rate increases later in the quarter, who are utilizing our boots on the ground Intel and our revenue management system and believe we are we're really well positioned to drive lease <unk>.
<unk> growth into the peak leasing season, but still as you said, Neil leaving a little bit of gas in the tank, which I think is particularly noteworthy in light of the potential economic softness that many people see coming but with our loss to lease of about 14, 5% and the demand for moderate income apartments in our non gateway markets that pricing power.
Really sets the foundation for the raise in our 2022 for full year guidance that we had for property revenue growth and NOI growth that youre exactly on point.
Okay. Thank you guys very much.
Thank you. Thank you.
Yes.
Our next question is from Anthony Powell with Barclays. Anthony. Please go ahead.
Hi, good morning, I guess.
Question on move ins.
I just think a lot of I guess, a way more to try to push rates pretty aggressively or are you seeing gubins from I guess comparable of partners.
Markets.
Migration trending into your markets just curious what you would be kind of.
The profile of the new tenant for you guys right now.
Yes go.
As I say, we're definitely seeing inbound migration into our markets and it's interesting because I think we've been a leader in taking some of these target markets, but you sort of pick up the Wall Street Journal in the last couple of weeks and they highlight a lot of our markets.
Being markets that people are migrating into I think they picked Austin, Texas, Nashville, Raleigh, They pick Florida and they are picking it because those are the cities, where we're seeing household formation. We're seeing inbound migration, we are seeing companies move into those markets and one of the reasons. We've always pick them is because they are business friendly population job growth.
Quality of life low taxes. So yes, we are clearly seeing demand increase of net but the interesting thing thats, giving us our pricing power. If you are not seeing supply keep up with demand.
Got it and then maybe follow up on that just are you seeing more maybe you can talk about class b being a sweet spot because.
It kind of catches both people trading up trading down are you seeing any any trends with that as rate increases kind of.
Across the board.
And again Youre exactly right because the moderate income B class apartments have always been very sticky very seldom will someone in an a b class a apartment move up to an a if they get a raise but you clearly see in soft economic times people that can't afford and luxury brands moving into the market. So we've always had.
That sort of inflation protection in the <unk> market in good times and in Bad times. So yes, we continue to see demand and I think it's not just that the gateways the non gateway markets that we're in but it's a moderate income rent because most of working America can afford a NRT apartment and thats, what theyre looking for Theyre looking for well maintained.
Well positioned near good schools near businesses apartment and today clearly the fact that our rent to income is about 19% gives us a bigger audience of residents.
Alright, Thanks, and maybe one more from me.
Okay, Great maybe one more on the single family I guess opportunity.
What's the supply outlook and the development outlook for these kind of highly or monetize kind of communities being built just curious it seems like it.
It's not traditional single family, obviously, it's kind of.
Built for purpose are you seeing more Johnny please being where are you seeing more developers getting into it Im just curious about maybe the long term opportunity for you in this space.
Seem to make sense, given given kind of the Jimmy I'd say for I don't know that.
Yes.
So I think that's what's attractive about this space is that.
To get any type of what we're seeing is smaller developments and if you want the 80 to 120 units. If you want larger developments are moving further outage with today's work from home.
There's a lot of demand for that.
These mostly arent highly monetized they might have a clubhouse and a pool, but they don't offer the amenities that are typical.
Apartment community offers in regards to.
Pet spas and car washes and whatnot.
But the demand.
I think it is going to far exceed supply at least in the near term I mean, they're looking at and this went from basically no no product to about 8000 units a year now and maybe we will get to 'twenty. It's predicted the demand is three four times debt in the next several years. So we think there is.
Good opportunity there, which is why like Scott said opportunistically in the markets. We're in if we see something Thats attractively located.
We will pursue it.
Alright, thank you.
Our next question comes from Peter Abramowitz with Jefferies. Please go ahead.
Yes. Thank you just wondering if you could kind of quantify some of the return metrics.
Youre looking at between the assets that Youre looking to call from the portfolio.
And then the acquisitions that you are underwriting I guess did.
Just you talked about.
Kind of the difference in growth prospects. So I'm wondering if you could sort of quantify that.
When we do the capital recycling, we really try to match them up.
<unk> seen.
This market is I said this before it's capital kind of agnostic.
So we've been able to trade out of what we think are inferior markets and may be more challenging assets into.
What we feel are better growth markets and better assets in the past and we will continue to do that and we think we'll be able to sell and buy right around the high 3% cap rate range.
So neutral to earnings so just to be clear the recycling again is where we're trading out of assets in and cycling that capital into two different assets that we think have better growth prospects.
For allocating capital otherwise.
That's where we're looking at these JV programs.
Because it's just a much better return and frankly I'm not interested in going in and being part of.
A widely marketed bidding process for a 15 year old property that is going to trade at three 5%. So we would rather avoid that in the current environment.
See where cap rates settle out.
With these.
<unk>.
Increased interest rate increases coming in.
And allocate our capital to the value add and too.
Well located.
Joint ventures and development.
Right I guess I'm, just trying to get a sense of where your underwriting growth for the assets that you want to want to bring in.
From an NOI and a revenue perspective versus <unk>.
Versus those that you're selling.
Selling out of the portfolio.
Yes, I mean again, we're trying to buy in markets that we think is long term.
Better long term growth prospects. So we are underwriting their revenue growth much higher than we would budget for the assets that we're selling.
It's also an operating cost analysis as well, it's not just it's not just revenue growth.
But we're trading out of the older assets that are much more expensive to run.
So they'll have a lower the ones, where we're trading into will have a lower capex costs going forward.
Alright, thank you.
Thank you.
Those are all the questions we have for today. So I will now turn the call back to the management team to conclude today's call.
Thank you again for joining us and we look forward to speaking with you again next quarter.
Have a nice day everyone.
Thank you everyone for joining us today. This concludes our call you may now disconnect your lines.
Okay.
Yes.
Okay.
Okay.
Yes.