Q4 2022 Five Point Holdings LLC Earnings Call
Greetings and welcome to the five point holdings, LLC fourth quarter and year end 2022 conference call.
As a reminder, this call this call is being recorded.
Today's conference May include forward looking statements regarding five point's business financial condition financial condition operations cash flow strategy and prospects forward looking statements represent five point's estimates on the date of this conference call and are not intended to give any assurance as to actual future results.
Because forward looking statements relate to matters that have not yet occurred. These statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause five point's actual activities or results to differ materially from the activities and results anticipated in forward looking statements.
These factors include those described in today's press release, and five Point's SEC filings, including those in the risk factors section of five Point's. Most recent annual report on Form 10-K filed with the SEC.
Please note that five point assumes no obligation to update any forward looking statements.
Now I would like to turn the call over to Dan had again Chief Executive Officer.
Thank you Joe.
Good afternoon, everyone and thank you for joining our call.
I have with me today, we have key our interim Chief financial Officer.
Mike Alvarado, our Chief legal officer, and Kim told our Vice President Treasury and tax Stuart Miller, our executive Chairman is joining us remotely.
I am pleased to update you today on the progress of the company through the fourth quarter and for the full year of 2022.
I'll also update you on our team's focus as we move through the current real estate market down cycle and our strategies for 2023.
Next Leo will give an overview of the company's financial performance and condition.
Well then open the line for questions to our management team.
It is notable for a first time were reporting our earnings within three weeks of the close of our quarter.
We are in control of our business.
As I wrap up my first year as CEO of five point I'd like to recognize the extraordinary efforts of our team and they say I'm very proud of them.
2022 was a year of organizational transition well.
Operating through the impacts, resulting from the federal reserve's aggressive increase in interest rates.
Through it all the team has remained focused on our operational priorities.
Turning to our financial results consolidated net income in our fourth quarter was $22 $5 million and our SG&A was $13 1 million or <unk>.
$4 5 million a reduction in SG&A compared to Q4 2021.
Consolidated SG&A for the year was $54 6 million, a 29% reduction from 2021.
We ended the year with cash and cash equivalents of $131 $8 million.
Two key successes contributed our fourth quarter positive results there.
The first was our execution of our commercial land sales strategy.
The Great Park venture closed on a very strong sale of approximately 42 acres of commercial land for $240 million or $5 $7 million per acre.
As a result of this sale and a strong cast a shadow cast system at the Great Park venture.
Received distributions and incentive compensation payments from the Great Park venture of approximately $67 million.
Our second key success during the quarter was the renewal of our development and manage the grant with the Great Park venture.
Which is now extended through the end of 'twenty 'twenty. Four this extension reflects the strong value add that our management team brings to the partnership.
Okay.
As we start the new year.
And being well aware that increased interest rates have changed the market dynamics will be focused on three main priorities Gen.
Generating revenue.
Managing our capital spend and managing SG&A.
Execution on these priorities should generate net positive cash flow for 2023.
And provide the liquidity to allow us to capitalize on the opportunities that we expect to be available when the market stabilizes.
The establishment of our commercial land business, we now have two potential source of meaningful revenue.
Residential and commercial.
During 2023 we anticipate that the fed interest rate tightening cycle and in the housing market will adjust to the new interest rate environment, expanding buyer demand as the year progresses.
Although we see 2023 is a transition year in residential.
The one reality that cannot be Tonight is that in our California markets housing is still in short supply and there is still demand for well located homes and master plan communities well.
We will remain patient and manage our business realities of the current market.
To that end, we'll be looking to work with the builders to sell land at prices that reflect the balance between current market conditions and the scarcity of entitled land inventory in our markets.
Following the successful commercial land sale at Great Park last quarter.
We remain optimistic and moving forward with our unique commercial and offerings at the Great Park and Valencia.
Both of which are positioned with land constrained position within land constrained markets.
Additionally, we continue to have historically low vacancy rates in the industrial market, coupled with continued rent growth, which we expect will continue to drive demand in this preferred asset class.
Or have the land in our initial commercial offering with Great Park already sold.
And continued interest in negotiations on our remaining sites remain confident in the continued demand in the commercial markets for not only industrial uses but for other uses as well.
In many instances, we have the only entitled and ready to develop commercial and industrial land of its kind in the market.
Our desirable communities and our niche assets are complemented by a balance sheet that enables us to maximize value with patient offerings.
At quarter end, our balance sheet reflected $131.8 million of cash on hand, and $0 drawn on our $125 million revolver.
Kim has available liquidity of $256 $8 million and a debt to capitalization ratio of 25, 1%.
We also have no principal debt repayment obligations on our senior notes in 'twenty to 'twenty, three or 'twenty four.
I'll now provide some updates on each of our communities.
The open builder neighborhoods at the great part continue to sell homes, but at reduced absorption rates compared to last year.
As has been the pattern in prior new home sales slowdowns coastal California holds up better than inland markets and that is what we're seeing at our communities.
During the first fourth quarter builders and our Great Park community sold 113 homes up from 82 homes in Q3 and for the year sold 326 homes.
So as park, which had its first model complex opened in July of 2022.
We have 636 homes remaining to sell at the original 849.
Even though these numbers are small by historic standards.
Just on the current pace of home sales and typical time period for builders move from land acquisition to omni model homes. We believe that there will be a need for the builders began by Atlantic and at 2023 and position themselves for new home sales in 2024.
Our next residential community in Great parts District, five South which is community of 719 homes and 11 neighborhoods will be our focus in 2023.
We previously brought this community market right before the Federal reserve began its aggressive rate increases and after initial strong interest neither builders pause their land purchases.
We've got new conversations with builders and would anticipate moving forward on some of the sites this year.
On top of the ongoing residential opportunities at Great Park, we're actively engaged in selling the balance of our initial commercial and offering our.
Our commercial parcels offered to the South County market something that's not been available for years large parcels of entitled land for flexible zoning allows a multiple of uses including life Sciences, R&D office and industrial among others.
In Valencia, New home sales by builders totaled 49 homes during the fourth quarter down from 166 homes in the third quarter, reflecting the limited available inventory.
For the year Golar is sort of a total of 594 homes with 11 of 18 programs now sold out.
And currently only 323 remaining homes available from our initial 12 on a six eight home offerings.
Brokers continue to work on their models for Nextera, Valencia, which encompasses eight new neighborhoods and 58 598 homes.
These neighbors are expected to open in the second and third quarters. This year, creating additional inventory to drive builder sales.
We did not close any home sites in 2022.
Well, so engaging with the builders who are currently looking at opportunities to add single family for rent and most multifamily for rent products to our mix of offerings.
In particular multifamily is a strong real estate segment that could provide housing options for residents and land revenues for us even during his time when the for sale residential market is under pressure.
Finally, we also have commercial opportunities in Valencia, and we plan to bring our prime 35 acre site to the market in the first quarter of 2023.
San Francisco remains a priority for five point and for the city and county of San Francisco.
It is irreplaceable land, along San Francisco Bay, with a broad mix of approved development opportunities.
As we start the new year, we have initiated the process to obtain approval of a plan that rebalance as a current development entitlements to facilitate candlestick moving forward ahead of hunters point shipyard.
While still maintaining the overall community development mix.
Concurrently, we're working with the city to update the existing tax increment financing timeline to account for the Navy delays at hunters point.
2023 will be a pivotal year for San Francisco as we work through these issues and set the groundwork for the Standalone development Candlestick as the first phase of the larger mixed use community.
In an effort to provide some context to the coming year I feel it would be helpful to provide some sense of how we see this next year progressing.
Clearly there remains much uncertainty amid these challenging market conditions.
Therefore, my comments will be more general in nature.
First I'd like to reiterate that the positive finish to 2022.
Confidence in our commercial land strategy, we expect to have commercial land sales at Great Park and Palencia during 2023.
Further as you reengage with our guest builders over the next few months, we expect to be able to find mutually beneficial ways to structure and price are valuable residential lands.
At this time, we don't feel would be prudent to provide estimates of the number of commercial acres are potential homesite sales. We expect a majority of 2023 land sales will occur in the third and fourth quarters.
Generally for the first half of 2023, we expect to generate cash from all sources of between 80 and $100 million.
Offset by.
By total capital expenditures of $45 million to $55 million.
Debt service payments and other accruals of approximately $45 million and other expenses of $10 million for our cumulative expenditures of between 95 and $110 million.
And by anticipated SG&A expenses of between 12 and $13 million per quarter or approximately $25 million for the first half of the year.
We will continue to look for additional savings opportunities in our SG&A.
While our cash flow for the first half of the year is expected to be mildly negative we continue to make constructive progress to a cash flow positive model, which we believe will be attained obtained by the second half of the year and into the future.
In summary over.
For the last half of 2022 was challenging for the entire industry.
And we are well aware of the headwinds we are still facing.
We are cautiously optimistic about the opportunities available to us in 2023, and we're confident in our ability to capitalize on them.
With a focus on accountability, we're looking to drive bottom line performance create positive cash flow and fortify our balance sheet, while building shareholder value.
We will continue to monitor the impact of rising interest rates and inflation on buyer demand for housing and we will adjust our plans proactively to preserve and maximize the value of our master plan communities.
Despite the recent challenges created by market conditions, we have positive momentum and are feeling more optimistic about our future.
Now, let me turn it over to Leo who report on our financial results.
Thanks, Dan.
A summary of our financial results was included in the earnings release issued earlier today, and which we reported consolidated net income of $22 5 million for the quarter.
We recognized $17 million in revenue that was mostly generated by our Valencia and management company segments.
Selling general and administrative expenses were $13 1 million, which represents a reduction of 25, 5% compared to the same quarter last year. The decrease reflects a reduction in head count as previously reported during our first quarter earnings call.
Equity in earnings from our unconsolidated entities was $26 2 million and was primarily a result of recognizing our share of the net income generated from the commercial land sale at the great part venture that Dan described earlier.
Turning to the balance sheet and liquidity.
Our net increased inventory for the quarter was $9 6 million.
This increase includes accrued capitalized interest on our senior notes of $12 3 million and a decrease of $27.7 million for reimbursement from our communities facilities district, our cfd for certain public infrastructure cost that have been incurred as.
Part of the development process at our Valencia segment.
This is the first cfd reimbursement we have received since we started the current development and Valencia.
As a community grows.
The qualifying costs are incurred we expect to receive more reimbursement.
We paid semiannual interest of $24 6 million on our senior notes and we paid $4 1 million, including 700000 of interest against our related party E B five reimbursement obligation.
Distributions and incentive compensation of $66 9 million was received from our interest in the Great Park venture and we also received a distribution from our interest in the gateway venture of $8 6 million.
As recently reported on an 8-K filing our development management agreement with the Great Park venture was renewed through December 31, 'twenty 'twenty four.
The compensation payable to our management company during the renewal term remains unchanged and includes a monthly basis, which includes a monthly base fee payment and incentive compensation payments equal to 9% of any distributions made by the great Park venture to holders of percent intra.
<unk>.
Total liquidity was $256 8 million at quarter end. This is comprised of $131 8 million of cash and cash equivalents and $125 million of available borrowing capacity under our revolving credit facility.
No borrowings or letters of credit were outstanding as of December 31.
Our debt to total capitalization ratio was stable at 25, 1% and our net debt to capitalization ratio after taking into account our cash balance was 29%.
The company has four reporting segments, Valencia, San Francisco, Great Park and commercial.
Segment results for the fourth quarter are as follows.
The Valencia segment recognized a $509000 loss for the quarter. There were no land sale closings in Valencia. However, the segment did report revenue of $3 8 million.
Most of this revenue related to changes in estimates of variable consideration from the amounts previously recorded on prior land sales, including profit participation that we collect from our homebuilders.
Segment revenue was offset by selling general and administrative costs of $3 1 million that were mostly comprised of employee compensation as well as selling and marketing costs in support of our active development areas.
The San Francisco segment recognized a 1.2 million loss for the quarter. This loss is comprised of general and administrative costs incurred to support the segment's continued focus on reassessing the development plan and the approval process for our San Francisco assets.
Our Great Park segment reported net income of $93 7 million for the quarter, which is comprised of $5 1 million and net income generated by our management company and net income of $88 6 million from the venture's operations.
As it relates to the management company five point recognized $13 million and management fee revenue during the quarter $3 million of which was from monthly base fee payments and $10 million of which was from noncash revenue recognized for changes in estimated incentive compensation payments.
I expected when the venture makes future distributions.
Offsetting these revenues were expenses of $7 9 million comprised of $2 2 million for the cost of providing management services, primarily the project team compensation as well as $5 7 million of amortization expense associated with our development management.
Intangible asset.
The ventures operations recognized revenue of $244.4 million during the quarter. This is mostly comprised of the sale of approximately 42 acres of commercial land for a purchase price of $240 million.
Offsetting these revenues where cost of land sales of $140 6 million S.
SG&A of $2 5 million and related party management fee expense of $14 7 million.
Management fee expense is comprised of $3 million of monthly <unk>.
Base fee payments, an 11.7 million increase in accrued incentive compensation, resulting from a change in estimate of aggregate payments probable of being made is the venture makes future distributions.
We own 37, 5% interest of the Great Park venture and 100% of the management company.
Although the Great Park segment reports to full results of the Great Park venture are investment is reported under the equity method of accounting and therefore, the assets liabilities and results of operations and cash flows of the venture are not consolidated within our financial statements.
The company's equity and earnings from the Great Park venture after adjusting for investment basis difference of $7 2 million was $26 one.
$1 million for the quarter.
The Great Park venture is a self funding operation with no debt and had a cash balance of $149 million at the end of the quarter.
Moving to our commercial segment, we had a net loss of 192000 for the quarter. This included a 300000 loss from the operations of the Gateway commercial venture and 100000 in income from there for services provided by our management company.
The venture is a self funding operation and had a cash balance of $5 million at the end of the quarter.
We own 75% of the gateway commercial venture and 100% of the management company, our investment and debenture is reported under the equity method of accounting and therefore, the assets liabilities cash flows and results of operations of the venture are not consolidated in our financial statements five.
Points equity in loss for the quarter from the gateway commercial venture with 224000.
With that I'll turn it over to the operator for questions.
Thank you.
We'll now be conducting a question and answer session.
We would like to ask a question. Please press star one on your telephone keypad.
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One moment, please while we poll for questions.
Yeah.
Our first question comes from the line of Alan Ratner with Zelman and Associates. Please proceed.
Hey, guys good ROE Alan.
Yeah, Dan good good to hear you. Thanks for thanks for all the information very helpful, especially kind of the cash flow buildup for.
For 'twenty three I think that's hopefully helpful for people and I know, it's more more information that you've provided in the past so I appreciate that.
I guess before we drill into some of the details on that.
Just in terms of the builder appetite for land clearly the fourth quarter was a pretty challenging environment and I think yeah.
Last quarter, you had kind of signaled maybe you would get some residential lot sales in the quarter and obviously that didn't happen, but you know.
It seemed like the news flow is getting a little bit better here over the last handful of weeks.
Builder sentiment improving rates continuing to move lower.
Normal seasonal uptick.
Starting to kick in here ahead of the selling season.
I'm curious if you've had any more recent conversations with builders since the new year.
Any indication that the.
The builders are looking to maybe dabble back into the land market after kind of moving to the sidelines in the back half of last year or do you feel like Theres still in wait and see mode.
You know kind of trying to figure out how the selling season unfolds.
You know Alan that's a that's a real good question and the answer is that we actually all of the builders that were engaged.
Prior and what we call D. Five south we've already had conversations with them this month.
A number of them are sharpening their pencils and starting to underwriting again.
We actually have one sale that we were we were in negotiations last year that actually is still in process. It's kind of kicked over this year that we're still actively trying to wrap up the final pieces of that.
But you know that.
Isn't it doesn't jump out at these numbers, especially if you think about the great Park in particular.
We had 18 sales last week at the Great Park.
The available inventory, it's soulless, that's all that's left in the Great Park. It will be sold out by year end. So all of the builders. We're talking to are all thinking about their 24.
Having the product available in 'twenty, four and as you know it's not too early to start working on that so long answer to your question, but yeah, we have four or five builders actively re underwriting right now and so we would expect to do well there.
Great.
Really helpful.
Yeah.
Sorry, Anna.
The signs are positive I mean, so I would tell you. The early signs are very positive, but obviously, we're going to wait and see hopefully next quarter I can tell you more but early signs are positive.
Great I do have a couple of quick housekeeping questions I'll, just ask quickly hopefully we can check through them.
Number one I might have missed it did you gave the cash balance number in great Park at at year end I think that's the number you've provided in the past.
You mean in the in the Great Park partnership in the adventure Yeah, Yeah Yeah.
How much is remaining honored $49 million 149 million Island.
And should we think about the cadence of the distributions kind of like the last few years I think it's been more in the back half of the year or maybe after a lot of land sale. So should we think about that similarly in 'twenty. Three if you have a land sale in the back half of this year that should coincide with another distribution.
You know I don't I don't yes, I mean, certainly as we have the year end land sales, we would anticipate additional distributions, but it isn't necessarily all tied to that because the the partnership is very conservative.
<unk> made a conscious decision.
At the end of the year to hold on to additional cash as they see how this year sorts out. So I think you know we were are not necessarily tied to land sales as much as we're tied just like everyone else a little better clarity on how the market is moving forward.
Got it that makes sense.
Another.
Quick question here.
So you mentioned the plan for San Francisco, It sounds like I'm looking to move forward with with Candlestick there.
Just thinking through the cash flow.
Yeah.
Assuming once you guys get that plan approved or we get to move forward with it there's going to be some development expenses that need to occur. Obviously before you book any revenue is that contemplated at all in your 23 expectation for cash flow to have any development expenses, there and if not what do you expect those expenses to look.
Once they do begin to kick in.
Yeah.
Well the first part of your question, we are not expecting any of those expenses in 2023.
And you know that.
What it's going to take to kind of kick that off obviously, we'll have a lot more clarity as we get closer to that point in time, but getting to the first commercial pad because of candlesticks relationship to the 101. If you remember <unk> been active ballpark people could get off one O. One and go there is actually compare.
A lot of projects not that extraordinary.
Money I don't want to mislead you at all but.
To try to estimate what that would be right to smoke will just be a little bit early but but it's the first pad is very accessible from the 101 freeway.
Got it okay. That's helpful.
And then final question I think you said in that cash buildup that you expect about $80 million to $90 million coming in the door in the first half of the year can you kind of just break that up a little bit is that are those commercial land sales in the apartment sales residential.
Distribution to any any additional guidance you can give on that.
Yeah.
It's a combination and it really in one of the I'll start at the bottom extra you finished I mean, we are expecting an interim distribution in the first half of the year.
Based on our view of the of the market. So it's really a combination it's a combination of operating revenue a cfd reimbursements and recoveries.
Sales that we are currently working on and then obviously the distributions I just mentioned and so within that basket of opportunities. We see if we have visibility to $80 million to $100 million in the first half of the year kind of in that basket and how it finally settles out I can't tell you right this second but where.
Feeling very good about that kind of a basket of opportunities.
Perfect all right well. Thank you for taking all my questions here I appreciate the time and best of luck with everything.
Thank you Alan.
Okay.
Yes.
Our next question comes from the line of Gordon Johnson with <unk> also at manageable. Please proceed.
Hi, Thanks for taking my questions today.
Sure Hi, Barry Yes.
Yes, and we can thank you.
I was just wondering if you could talk a little bit more about the management agreement and what material changes there. Besides the no.
Economic side and can you talk a little bit about why there's a change control added to that.
So from the economic side of it it really is.
When we did the one year extension last year.
We kind of changed the economics.
From a standpoint of kind of reimbursement of costs there.
Just to set them up.
The management fee.
And so that part has remained exactly the same that's just rollover exactly as it is.
And it and we had basically two years and there's been no change to our preferred return or anything in connection with that so that it's really the bigger.
One change was really that.
Adding those.
You know actually just adding the time.
On your question about the change in control.
Our.
Partners in that are obviously.
No.
Senior folks and we have spent a year and I've spent my year working with them and really.
Working on that relationship and you know they actually really like the management team in place today.
And so one of the things that they've kind of.
They've kind of said is hey, you know, we really like how everything is working today and we want to be sure that if if you Dan or Mike or Stuart.
Aren't engaged that we have an opportunity to speak into that because we've got a very good.
Operating relationship today are going together, so it's really kind of more around kind of that key man question.
And the change I'm pretty cool is.
That's gonna also it's also continuity issue for them, they really want continuity because of what we've been able to achieve the past year.
That makes a lot of sense I really appreciate all that color.
And can you talk a little bit about extra access to liquidity. If you guys have a more prolonged.
Slowdown and maybe if rates don't really move in building kind of frees us up for a little bit longer.
Okay.
Well yeah.
Obviously, we have the $125 million line that has zero drawn on it.
You know as we kind of project out the market and where we're going we don't have.
The thoughts that additional liquidity will be needed.
And certainly if if if the market doesn't recover we will be reducing costs materially right now we've got capital for revenue opportunities later this year and into 2024. There is some capital although we're being very careful about it that needs to be spent.
If we really believe there wasn't an opportunity to generate revenue, we would stop all of that which would clearly help liquidity.
Very good thank you very much for answering all my questions.
You're welcome Thanks, Dan.
Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
And our next question comes from the line of Robert Haimowitz with Concise capital. Please proceed.
Hey, I just wanted to start by saying as Stuart I started my career in IR at Mannar and I learned so much there and you really have the hardest working and world class Treasury and accounting teams.
So now on to Dan can we expect that you guys might build more homes to a fee build program you know.
This was a very successful program. When you guys did it and you know it would emphasize to your guest builders out there that you guys are working with scarce resources, if they don't prioritize you will.
You know Robert Yep.
Help me on what is your last comment I'm not quite father, if we don't prioritize they will what what are you thinking there.
With you guys had a fee build program, where you guys were able to recognize good profits on and so you guys could go ahead and do that again, if your guest builders don't purchase the land from you.
Okay, Alright, Thank you I understand you know.
That's I mean, that's a good question. It is certainly I take nothing off the table and in my career I have done fee builder extensively.
Use it at a different life to come out of the Oh.
<unk> <unk> nine.
And so it's a it's a model I am extremely familiar with.
We haven't seen the need right now based on the conversations we're having with builders, but it's certainly something that I'm familiar with and it's something that we could definitely move to quite easily if that's really where the market moves us.
Yeah.
Okay. Great next question on the related party tax liability.
S&P is including this as debt in their calculations can you speak to any potential overhang here.
Oh, I'm, sorry, I think I think are you referring to the TRA the tax receivable agreement.
Yeah, I think yeah.
I'm sorry.
Kim toddlers here can I think can probably address that question behind but you want to repeat the question to make sure that we answer correctly.
Yeah.
S&P is treating this is that now in their calculations, they're saying, they're saying they don't know if you'll recognize the tax savings and you'll still have a liability associated with it. So just like how can we how should we think about this.
Yes.
Yeah Robert.
We've actually had conversations with the rating agencies about that and clarified that the TRA is a projected obligation based on our ability to use it and our expectation today is that those payments would occur after the bonds.
Expire so it doesn't affect the collect and our ability to pay the bonds.
And I want to reiterate the.
The obligation only rises if we benefit from from saving taxes. So.
To date the partners.
The prior partners have been paying taxes that we would have otherwise paid but because of the way. The calculation is made we haven't yet benefited so just if that does that help you.
Absolutely.
I just got one more which is can we talk about the stages of completion of the various homesites that you own.
It seems like a lot of them were slated to close this year. They should all be close to completion or ready to be sold. So you know if we had how many were completely finished or how many were close to being finished like work in process.
Should kind of know the liquidity of the locks whether they could go to land banks or spec builders should custom builders have dropped out. So that's my last question. Thank you.
So Robert.
First talk about Great Park.
We had <unk> five south.
Moving right along last year and once again being prudent when the sales Werent materializing, we've got it we've got the black top down and we've got all the.
The wet sand and we stopped that drives so we can complete those lots quite easily.
So we're kind of in a we're kind of in a good place there and you know.
And it will be the next place that we next community we don't put in the Great Park, and it's and as you say, it's in very good shape to move forward without a lot of.
Additional capital, but as you know just to remind everyone that the all of that is self funded through the partnership and we've got.
Substantial liquidity to do what we need to do on those but that's actually in very good shape and then when you get to Valencia.
Valencia, we have actually some sites that are.
I can I'll call them really more of infill sites.
That we're in the early parts of the.
The mission village, which is what we kind of call. The first area. There are actually ready to go they're masqueraded all of infrastructures in them and everything is stub and then we have some other areas that we need to go back that are still.
Masqueraded streets cut.
The storm drains we're in but we're going to need to go back in and pave them out and put in Watson drives but once again, we're in the next areas. We go into there that's kind of where we're at the masquerading as state Street's or got it storm drains are and so we're in pretty good shape. There also but it'll take a little more capital there as we move.
Forward.
Okay. Thank you.
Yeah.
Thank you.
Ladies and gentlemen. This concludes the question and answer session I would like to turn the call back to Dan for closing remarks.
Thank you.
On behalf of our management team. We thank you for joining us on today's call and we look forward to speaking with you next quarter. Thanks, everyone.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.