American Assets Trust Inc

NYSE:AAT

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2022 American Assets Trust Inc. Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker Mr. Adam Wyll, President and Chief Operating Officer. Please go ahead, sir.

[Adam Wyll, President and Chief Operating Officer]

Thank you, Operator.Good morning, everyone, welcome to American Assets Trust First Quarter 2022 Earnings Call. Yesterday afternoon, our earnings release and supplemental information were published to the SEC on our Form 8-K. Both are now available on the Investors section of our website, americanassetstrust.com. 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 uncertainties discussed in our SEC filings. You are cautioned not to place undue reliance on these forward-looking statements as actual events could cause our results to differ materially from these forward-looking statements, including due to the impact of COVID-19. And with that, I'll turn it over to Ernest Rady, our Chairman and CEO to begin discussion of our first quarter 2022 results. Ernest.

[Ernest Rady, Chairman and Chief Executive Officer]

Thanks, Adam, great job, and good morning, everybody. Thank you for joining us. Over the past two years, I hope you heard me say that I truly believe that American Assets Trust would come out of the pandemic as good company, if not better. And actually, I think what I said better than when it all started. I believe that to be the case as we have strengthened our balance sheet, continued upgrading and improving our irreplaceable properties. And we are optimistic about the buoyant leasing interest across the portfolio and all segments, including the continued recovery of our retail properties and strengthening retail rates at our Multifamily properties.

In first quarter 2022, we made great progress. And actually, we had a 50% increase in FFO over 2021. We are pleased to see better than budgeted financial results on our portfolio, significantly driven by our performance of our recently renovated Waikiki Beach Walk Embassy Suites. That performance was notwithstanding the continued lack of Asian travels -- travelers who have historically been approximately 40% of all tourists vacationing in Oahu.

We encourage that as travel from Asia to Hawaii continues opening up later this year and beyond, that our ADRs or average daily revenue and occupancy at Embassy Suites will continue to climb, and we will hopefully reach and eventually surpass our pre-pandemic 2019 numbers at Embassy Suites. Meanwhile, we are cognizant of the inflationary challenges in this business environment across our portfolio. And although we are confident in the thesis of our portfolio being an effective long-term protection against inflation, we remain vigilant and focused on managing our expenses and operating margins to the best of abili -- our ability.

We have a tailwind now of inflation behind us in real estate time, optimistic about the outcome of that effect. In March, we purchased Bel-Spring 520, an approximately 93 thousand square feet multi-tenant office campus, less than five minutes from downtown Bellevue for $45.5 million. We now sit with over one million square feet in Bellevue, an office market that we remain very bullish on and we expect long-term growth as we look to push rents, create economies of scale, and certainly upgrade our properties. I also want to mention that the Board of Directors has approved the quarterly dividend of $0.32 a share for the second quarter, which we believe is supported by our financial results and is an expression of our board's confidence in the embedded growth of our portfolio this year and beyond.

The dividend will be paid June 23rd to shareholders of record June 9th. Finally, on the development front, both La Jolla Commons and One Beach Street remain on time and budget. And remain optimistic about the leasing prospects that we do not have any specific new news to share on that front. At this time, Adam, Bob, and Steve will go into more deeper detail on our various asset segments, financial results and guidance update. And I will be available for any questions you may have. At the conclusion of our prepared remarks. On behalf of all of us at American Trust, we thank you for your confidence in allowing us to manage your company and for your continued support. We are proud to have that role. Thank you. I am now going to turn the call back over to Adam. Adam, please.

[Adam Wyll, President and Chief Operating Officer]

As Ernest mentioned, it has always been a focus of ours to continue enhancing and improving our properties to remain a best-in-class option for our tenants and guests that has never been more important than it is now over the past few years. We've made meaningful capital improvements to our properties that have been very well received by both our existing and new tenants and guests, including upgrades and beautification to our San Diego multifamily portfolio, a full room renovation of our Embassy Suites Waikiki and modern state-of-the-art amenities and ESG elements at our office campuses. Something thing we know is crucial to helping our office tenants bring their employees back to the physical office.

Along those lines, we currently estimate that our office tenants aren't about 45% to 50% physical occupancy at our office campuses with an expectation for that to continue increasing as we reached the summer months. This is based on feedback from our tenants management teams who tell us how important having their employees back in the office is for their innovation, collaboration, culture, and ultimately their financial results. Of course, we realized there is an evolution of sorts with respect to the workplace right now.

But we believe the demand for premium office space like ours will remain strong. And you'll hear more about our successful office leasing activity and new office capital projects from Steve Center shortly. Regarding our multifamily portfolio in San Diego, we are seeing vacant units lease at an average of over 20% over prior rents with little to no concessions offered.

Note that renewal rates are capped just below 10% based on California laws. So we are maximizing the rental rates on vacant units to the full extent of our capabilities, all the while managing expenses as Ernest alluded. At Pacific Ridge apartments, we are expecting our occupancy to dip into the low 70% by June 30th due to the expected seasonal move out of units primarily occupied by students. Pre -leasing for the upcoming fall season has already begun with new lease agreements being signed for move-ins in Q3. We expect our occupancy to rebound back into the low-to-mid 90% by the end of August, as University of San Diego starts their fall session before Labor Day.

Meanwhile, though our Hassalo on Eighth Multifamily in Portland came in above our internal expectations in Q1, the Portland Multifamily market remains slow relative to San Diego. However, we remain optimistic on that asset as major employers in the market have spoken to hiring campaigns in Portland in 2022 and beyond, which we hope to contribute positively along with some less extreme weather. On the retail front, as Ernest mentioned, we do sense a rising tide with renewed interest in many of our vacancies. For instance, we recently signed a lease with the regional sushi restaurant at our Waikiki Beach Walk for over 5,000 square feet of second floor space, certainly a sign of the optimism surrounding depending return of our Asian customers.

Meanwhile, our retail sales at Waikiki Beach Walk's are meaningful double-digit increase over February and March, clearly demonstrating an increase in customer traffic and expenditures. We understand that airlines have started adding more flights from Japan to Oahu, and tour companies are resuming sales of packages from Japan to Hawaii after a more than two-year hiatus. All good news. Additionally, at Alamo Quarry, Whole Foods and Nordstrom's have recently renewed their leases. And we're excited for Total Wine to open at Carmel Mountain Plaza in the next few weeks.

Finally, in the next week or two keep your eye out for our 2021 sustainability report, which covers our 2021 operations and highlights our initiatives and commitments across a range of topics, including environmental, social responsibility, corporate governance in human capital. And we are proud of our meaningful improvements in collaborative team efforts today, we remain at the early stages of progress and others much more work to do with that, I will turn the call over to Bob to discuss financial results and guidance in more detail.

[Bob Barton, Chief Financial Officer]

Thanks, Adam. And good morning, everyone. Last night we reported First Quarter 2022, FFO per share of $0.57 in first quarter 2022, net income attributed to common stockholders per share of $0.18, first-quarter results are primarily comprised of the following. To actual FFO increased in the first quarter by approximately $0.03 to $0.57 per FFO share compared to the fourth quarter of 2021 primarily related to lower G&A in the fourth quarter. The fourth quarter had higher G&A mostly related to year-end compensation expense.

Same-store cash, NOI was strong in Q1 2022 ending at approximately 18% growth year-over-year for the first quarter what's even more important from my perspective is add if you exclude the collection of rents received in Q1 2021 related to rents that were previously build and uncollected in 2020 of approximately $1.2 million same-store cash, NOI growth would have been approximately 21% instead of 18% as reflected in our supplemental. Same-store cash NOI growth on a sector-by-sector basis for the first quarter of 22 would have been as follows.

Office would have decreased from approximately 12% to 10% retail would have increased from 2.5% to 13.4%. Multifamily would have increased from approximately 13% to 18% and mixed use would have decreased to 18, 6% to 7%. From my perspective, this data also reflects a more accurate presentation that retail growth is much stronger on a comparative year-over-year basis. For the first quarter, excluding the change in accounts receivable that was generally immaterial pre -COVID. Lets talk about liquidity. at the end of the first quarter of 2022, we had liquidity of approximately $474 million comprised of approximately $74 million in cash and cash equivalents, and $400 million of availability on our revolving line of credit.

Our leverage, which we measure in terms of net debt to EBITDA was 6.8 times. Our objective is to achieve and maintain a net debt to EBITDA of 5.5 times or below our interest coverage and fixed charge coverage ratio ended the quarter at 3.9 times. Let's talk about 2022 guidance. We are increasing our 2022 FFO per share guidance range to $2.13 to $2.21 per FFO share with a midpoint of $2.17 per FFO share. From our initial guidance issued on our Q4 2021 earnings call, that had a range of $2.09 -- $2.17 with a midpoint of $2.13, which is approximately an 8.5% increase at the midpoint over our 2021 actual of $2 per FFO share.

Let's walk through the following two items that make up the increase in our 2022 FFO guidance over our previously introduced 2022 FFO guidance. First, the Embassy Suites at Waikiki Beach Walk contributed $0.02 per FFO share of out performance in Q1 2022 that was not previously included in our 2022 guidance. Embassy actually outperformed our team in Waikiki's internal expectations each month for the first quarter. And second, Bel-Spring 520, which is our most recent office acquisition in Bellevue from the first quarter and was not included in guidance. Bel-Spring is expected to contribute approximately $0.02 per FFO share in 2022.

These adjustments when added together will be approximately $0.04 per FFO share and represent the increase in 2022 over our previous '22 guidance. While we believe the '22 updated guidance is our best estimate as of this earnings call, we do believe that it is also possible that we could outperform this revised guidance range. In order to do that, tourism in Oahu needs to continue to return in full force, including our guests from Asia. We are cautiously optimistic that the Embassy Suites Waikiki has the potential to continue outperforming, but there are more -- there are many variables to that, and we prefer to take a wait and see approach.

As always our guidance, our NOI bridge and these prepared remarks exclude any impact from future acquisitions, dispositions, equity issuances or repurchases, future debt refinancings, or repayments other than what we have already discussed. We will continue our best to be as transparent as possible and share with you our analysis and interpretations of our quarterly numbers. I'll now turn the call over to Steve Center, our Senior Vice President of Office Properties for a brief update on our office segment. Steve.

[Steve Center, Vice President, Office Properties]

Thanks, Bob. At the end of the first quarter net of our two redevelopments, our office portfolio stood at approximately 94% leased with approximately 7% expiring in 2022. Netting out our three recent acquisitions in Bellevue, our same-store portfolio was approximately 96% leased. Momentum in our office portfolio continues. In the first quarter, we executed 19 leases totaling approximately 170,000 rentable square feet, including approximately 13,000 rentable square feet of comparable new leases with increases over prior rent of 30% on a straight-line basis. Approximately, 91,000 rentable square feet of comparable renewal leases with increases over prior rent of 16% on a straight-line basis including renewing Autodesk and 46,000 rentable square feet at Landmark in San Francisco.

And approximately 66,000 rentable square feet of non-comparable new leases with Torrey Preserve in San Diego and City Center Bellevue, accounting for 52% and 27% of this activity respectively. Throughout our office portfolio, we are reaping the benefits of the multiple initiatives we have been employing to drive occupancy and rent growth, including renovating buildings with significant vacancy and or rollover, furthering amenity packages, aggregating and white-boxing larger blocks of space where there is scarcity and improving smaller spaces to be turnkey and move-in ready.

Notably our San Diego portfolio is now approximately 94% leased in large part due to new leases in our two recently renovated buildings at Torrey Reserve at rents that exceeded our projections. We have an additional 25 thousand rentable square feet of new leases and lease documentation in Bellevue, we signed approximately 18 thousand rentable square feet of expansions with another 5 thousand rentable square feet of new leases and lease documentation, City Center Bellevue as 96% leased with an additional 1% up per signature. We have established new market rents that are recent acquisitions in Bellevue and expect our Bellevue portfolio to provide opportunities to grow NOI through renewals and new leasing activity ever.

Placement rents that we believe to be meaningfully higher than expiring rents. For example, most recently we entered into a 6 thousand rentable square foot expansion at corporate campus fees, three with an increase over the existing premises rent of 25% on a straight-line basis. As mentioned, we continue to invest in our properties which will help position us to continue to capture more than our fair share of net absorption at premium rents as office markets rebound. Specifically, we are moving forward with the following new projects.

Major renovations at Eastgate office park, a new fitness center, and by cub was showers and lockers and a conference center at Steve Center buildings, renovations, and common area enhancements [Indiscernible] and new amenities at corporate campus east three. Meanwhile, Q2 is shaping up nicely with 12 deals totaling a 172 thousand rentable square feet of new and renewal leases, and lease documentation. I'll now turn the call back over to the Operator for Q&A.

[Operator]

[Operator Instructions] Thank you. As reminder to ask a question, [Operator Instructions] Our first question comes from Todd Thomas with KeyBanc Capital. Please go ahead.

[Todd Thomas, KeyBanc]

Hi, thanks.

[Ernest Rady, Chairman and Chief Executive Officer]

[Indiscernible]

[Todd Thomas, KeyBanc]

Good morning. Out there. Morning, first question I just wanted to dig in a little bit on the guidance. If we look at this quarter's result and utilizes to 228 a share and some of the $0.02 of accretion that you you talked about from Bell spring 5-20 doesn't really show up much in the first quarter since it was acquired in March. I heard the comment about the temporary dip in occupancy at Pacific Ridge that's anticipated but what other offsets should we be thinking about throughout the balance of the year to get back down towards the revised 213 to 221 range that we should be thinking about. [Indiscernible]

[Ernest Rady, Chairman and Chief Executive Officer]

[Indiscernible]

[Bob Barton, Chief Financial Officer]

That's a good question. On the -- As it relates to the guidance, we have not increased the guidance for the remainder of the year at Waikiki Beach Walk, so we're hopeful that that does increase. Just to give you -- put it in perspective, our original budget at Waikiki Beach Walk, the mixed use or the Embassy Suites was 54% pre-COVID from a NOI standpoint. And with the update in the first quarter that gets us to 74% of pre-COVID NOI. We think that we will exceed that, but we got to do a wait-and-see on that. So we have not adjusted our guidance to reflect that. We -- Like I said in the comments, we do have a fairly good shot at exceeding our current guidance, but we're still -- we just -- there's volatility out there.

One of the longest department that the Embassy Suites got for the month of March, our occupancy was 80% of paid occupancy, so that -- compared to the first quarter, which was 73%. Our ADR is -- it seems to be consistently over 300. So for the first quarter it was like $333 for the first quarter and similar for the month of March. And our REVPAR, which is what we also follow, is around 243 to 262 that's a number. We also focus on. That's like an NOI to us and we Pre - COVID we were above 300 on that REVPAR.

The other thing is that as of Monday this week from Japan update, Japan vaccination data was 81% of the total population. And that's for both the first and second shot. Boosters have been administered to 38% of Japan's population. And the Japanese government is speeding up the rollout of those booster shots. One last, one last comment that we've recently seen the eastbound air seats are on the rebound.

And if you compare, well, just the increase over the prior year's what we're seeing that is out there, is that April's the seed east balance seats from Japan are 13% higher than April. So 13% higher end April 22 versus the prior year. And in July we expect them to be 74% higher than July 2021. And the same thing for pre -owned. And I think that's telling the story that there is a very good shot at exceeding the portion of it comes from the embassy.

[Todd Thomas, KeyBanc]

Okay.

[Ernest Rady, Chairman and Chief Executive Officer]

Pray for no more Omicron variant. Also, any dying thing could happen. So we hit the account nickels before they're in the bank.

[Todd Thomas, KeyBanc]

Okay. Now certainly. I guess it just sounds for the mixed use asset, the leasing at the hotel retail. That should be recurring. And then, Ernest, your comments suggested that you do expect to see higher occupancy and daily rates at the hotel throughout the balance of the year, and it sounds like you're encouraged by what you're seeing on the ground. But I guess Bob, that -- it sounds like that that outlook is not in the guidance. Can you maybe talk a little bit more around what that translates into for occupancy and sort of daily rate assumptions that are embedded in the guidance as we look ahead for the next couple of quarters?

[Bob Barton, Chief Financial Officer]

Yeah. I don't have it in front of me. Go ahead, Ernest.

[Ernest Rady, Chairman and Chief Executive Officer]

It depends how our prayers are answered. Can pull if everything comes together, it's going to be wonderful. And it's -- and if there's another variant, it's not going to be. And that's why it's just to count those nickels until we make our deposit slips, it's in the bank. But it's a great property. It's in a great location. It's going to come back. We're just not sure when and to what extent.

[Todd Thomas, KeyBanc]

Okay. Maybe we just switch gears and talk about acquisitions. You've been pretty busy. More recently, you talked about some of the transactions in Bellevue where you own a million square feet today, company is still sitting on about $75 million of cash. Just curious if you can talk about the investment pipeline a little bit and the company's appetite to continue deploying capital today.

[Ernest Rady, Chairman and Chief Executive Officer]

Todd (ph), we're finding that the market for acquisitions is so buoyant that we haven't been able to focus on anything that we could acquire that you would be proud of. There's just so much money out there. So -- and we have a great portfolio and we have most of our money invested. Cap rates are extremely low and interest rates are rising. So I think the best thing we can do is just kind of sit and improve what we have. Keep our eyes open, but we don't have any specific target at the moment a friend of mine just sold property and he's got some 10-31 many to invest. So I sent them all the offerings that I get.

And he said, Ernest, have you had a shot at any of these because I've tried them. These as I can acquire any of them at a reasonable price. So I think our strategy now is to make what we have as profitable as we can. Keep our eyes open and hopefully it will be an opportunity we're going to we are opportunistic and we're going to examine opportunities that come up. But there's nothing in the pipeline now that I could talk about.

[Todd Thomas, KeyBanc]

Okay. And just lastly, Bob. Any update on the City Center Bellevue maturity in November?

[Bob Barton, Chief Financial Officer]

Yes. We're looking at it. I mean, obviously that matures in November, $111 million. It's a secured mortgage. The only reason it is secured is that we try to cover the negative tax basis on some of our OP unit holders. So we'll refinance that, a portion or all of it and we'll probably have more news about that in the second quarter.

[Ernest Rady, Chairman and Chief Executive Officer]

But certainly, there's no issue in the financing or the availability of cash, Todd. And that's a good question and thank you.

[Todd Thomas, KeyBanc]

Yeah. But you expect to unencumber that asset?

[Bob Barton, Chief Financial Officer]

Well, yeah. That would be the goal, is to put a secured mortgage on a smaller asset and free up the value on that asset compared to where it was when we initially bought that. What that would do is that would enhance the unsecured asset pool and assist with the combined leverage.

[Todd Thomas, KeyBanc]

Okay. All right, great. Thank you.

[Ernest Rady, Chairman and Chief Executive Officer]

Thank you, Todd.

[Bob Barton, Chief Financial Officer]

Thank you for the question.

[Operator]

Thank you. Our next question will come from Richard Hill with Morgan Stanley, please go ahead.

[Adam Kramer, Morgan Stanley]

Hey guys. You have - Adam Kramer on for Richard Hill. Hope you're all doing well. I appreciate a comment earlier on cap rates and what the market looks like and acquisitions wondering if you could maybe comment on what are unlevered IRRs now in the market, what are you guys buying out of your recent acquisitions and how do you kind of see the unlevered IRRs in the market currently?

[Ernest Rady, Chairman and Chief Executive Officer]

That's such a broad question, I don't know how to answer that. The cap rates in residential are somewhere between three and four, probably closer to three. In office what we what we acquired, there's room for improvements and the cap rates were I guess give or take, Steve could comment on that. But we see upside as we amenitized a newer English language and improved the properties we acquired. And those are really the markets that we're in, is retail, cap rates seem to be five - ish, 4.5 to 5.5. And we're not as hopeful about acquiring good retail with upside. So we're looking for upside. Our strategy is to increase shareholder wealth. Due to that, we have to buy something that we can improve, and the opportunities we see now are fairly limited. And we're pretty well invested with good properties and we love what we have and we're just going to make the most of it. That's our problem, I thought in the short-term.

[Adam Kramer, Morgan Stanley]

[Indiscernible]

[Bob Barton, Chief Financial Officer]

Adam, this is Bob.

[Adam Kramer, Morgan Stanley]

Hey, Bob.

[Bob Barton, Chief Financial Officer]

Let me just add to Ernest 's comments. It's that -- the cap rates, I just wanted to add a point. In our acquisition to underwriting, we underwrite also and put a lot of emphasis on our unlevered IRR. We look at it in relation to our weighted average cost of capital. And we see the acquisitions, obviously that many other criteria. But we want to make sure that they exceed an unlevered IRR of 7% or more, because that really points to the growth of that asset over the long term. That's been the strategy.

[Ernest Rady, Chairman and Chief Executive Officer]

That's a good Todd, Bob, thank you.

[Adam Kramer, Morgan Stanley]

That's all really helpful, guys. Thanks. Thanks for the color on that, Larry, I guess kind of related question. What's kind of the rising interest rates in recognized kind of, you guys balance sheets. It's a really good spot and cash on hand, etc. to come through acquisition. But boy wondering kind of the rise in rates changes, your capital allocation decision-making. You mentioned, right, cap rates haven't really kind of moved yet intended on with this rise in interest rates. So just wondering kind of how the, how you guys view the rising rates with regards to your capital allocation.

[Ernest Rady, Chairman and Chief Executive Officer]

While we were fortunate, a year-ago to, as you know, most of our debt came from private placements. And when that became more expensive than public issuance, we were fortunate enough to offer $0.5 billion with a bond. And we were 4.5 times oversubscribed and picked up $500 million at 3 and 3, 8% prepayment for ten years. Those rates will not be available to us today. So if we had to finance an acquisition, it would be more expensive and we don't see the cap rates on acquisitions coming down. So it's kind of out of balance in the short run. And I think our strategy now is to just improve what we have. I hope that answered your question. If not, please explore further.

[Adam Kramer, Morgan Stanley]

Yeah, it does. And wondering about kind of appetite for buybacks maybe I think it's been addressed on past calls, but figured I would kind of asking you in about kind of the appetite for buybacks in order to Steve, you've some public filings that you're buying wondering about kind of buybacks for the rate.

[Ernest Rady, Chairman and Chief Executive Officer]

Well, the board makes those decisions is, but I have no plan to encourage by buyback. We're mid-sized, right? But on the smallest side. And as Bob pointed out in some of his prior information is made available, we would like to grow, but we have to grow in a way that enhances our shareholder value. So we want more assets and we don't want to do it at the expense of growing smaller. So that's kind of -- that's my, that's my personal view.

[Adam Kramer, Morgan Stanley]

Okay. That's all really helpful, guys.

[Bob Barton, Chief Financial Officer]

Let me add to ask. Adam earlier this last comment there is that we really they're using. Ernest just said, but I think in terms of allocation, is that why we are improving our assets now? In terms of capital and we always continue to do that. We still favor commercial real estate, commercial office, and we think that as specifically as Eikon add to the Suez that we're not looking for commodity space. There's a big difference between commodities space and newer space that either been recently built or we're building or stuff that's relevant to today's marketplace. And when you look at what we're doing to One Beach on the North Waterfront, making it current and relevant to the marketplace.

You look at the [Indiscernible], Steve will talk more about that. I think these are great assets and we continue to see opportunities up and down, whether it's in Bellevue or down the volume to CalTrain line from San Francisco south to [Indiscernible] to opportunities down here in San Diego. So we do love office, we love Multifamily, but right now we're over 50% allocation to the office sector. Steve do you -- As [Indiscernible] Jan to that.

[Ernest Rady, Chairman and Chief Executive Officer]

As part points out, that the things that we really love is wealth creation. And so, we have this marketplace as Bob pointed out geographically. And we'll only do something that enhances the value of our stock and creates wealth. So that's our strategy. And there's sometimes that you pass, and sometimes you pant, and sometimes you run. Right now, we're just going to improve what we have until we see a significant opportunity. I've been buying stocks as I tell people, I can buy real estate cheaper on Wall Street than I can on Main Street.

[Adam Kramer, Morgan Stanley]

That makes a lot of sense, and appreciate the football reference with the NFL draft coming up this week. Thanks for the time, guys. I appreciate it.

[Ernest Rady, Chairman and Chief Executive Officer]

Thank you for your interest.

[Operator]

Thank you. And I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Ernest Rady for any closing remarks.

[Ernest Rady, Chairman and Chief Executive Officer]

Okay. Thank you, Operator, and thank you all for your interest. Thank goodness we're getting to the end of this pandemic and we can see each other again. We're going to [Indiscernible]. We'll hope we'll have a chance to visit with you all. Thank you for your interest. We're doing the best we can for you, and we'll continue to do that. Again, have a good day. Thank you. And thanks you guys in San Diego for doing such a great job on this call.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.