Chartwell Retirement Residences (CSHUN) Earnings Call Transcript & Summary

Ladies and gentlemen, and welcome to the Chartwell Retirement Residences Q2 2024 Financial Results Conference Call. I would now like to turn the meeting over to the CEO, Vlad Volodarski. Please go ahead, sir.

Thank you, Juel. Good morning, and thank you for joining us today. There is a slide presentation to accompany this conference call available on our website at chartwell.com under the Investor Relations tab. Joining me are Karen Sullivan, President and Chief Operating Officer; Jeffrey Brown, Chief Financial Officer; Jonathan Blake, Chief Investment Officer and Chief Legal Officer. Before I begin, I direct you to the cautionary statements on Slide 2 because during this call, we will make statements containing forward-looking information and non-GAAP and other financial measures. Our MD&A and other security filings contain information about the assumptions, risks and uncertainties inherent in such forward-looking statements and details of such non-GAAP and other financial measures. More specifically, I'll direct you to the disclosures in our Q2 2024 MD&A under the headings 2024 outlook and risks and uncertainties and forward-looking information for a discussion of risks and uncertainties. These documents can be found on our website or on the SEDAR website Turning to Slide 3. Our teams delivered another quarter of strong operating and financial results in Q2 2024, achieving year-over-year same-property occupancy growth of 660 basis points which drove operating margin expansion of 280 basis points, same property net operating income growth of 20.6% and funds from operations increase of 45.3%. We expect this occupancy growth momentum to continue and forecast September 2024 same-property occupancy of 88.7%. It is our conviction that to achieve long-term sustainable value creation in our business, we must focus on delivering exceptional services and quality care to our residents, which we believe will generate high resident satisfaction rates and resident referrals. This, in turn, will drive high occupancies and strong profitability. Such resident experiences can only be delivered by highly engaged employees who are committed to our vision of making people's lives better. That is why I am grateful to the leaders in our residences for the great work they have done, promoting a positive, inclusive and rewarding work environment. Their success was evidenced this year by our employee engagement score reaching 57% highly engaged. Remember, in our survey, we only count top box responses on the 5-point scale, and this core comprises of the average responses to 25 core engagement statements. The combined score of highly engaged and engaged employees, those who mark Boxes 4 and 5 in our survey was 86%. Our 2024 score of 57% represents a 3 percentage points increase from 2023. And remarkably, it is 2 percentage points higher than our 2025 aspirational target of 55%. It is wonderful to see the fruits of our team's labor in so many aspects of our operations. And I will now turn the call to Karen to provide some more color on our ongoing initiatives.

Thanks, Vlad. Moving on to Slide 4. In Q2 2024, our marketing strategies led to an increase in personalized tours for marketing sources of 22% compared to Q2 2023. And an overall increase of 6% quarter-over-quarter. Leasing activity continued to be strong with year-to-date ahead of 2023 and a steady increase in closing ratios. We hosted 2 open house events in Q2, 1 in April and for the first time ever, another in June, both of which helped us to drive new leads. Our marketing strategies now include Facebook ads and we have also improved the volume of Google ad conversions and continue keyword optimization, which resulted in an increase to the click-through rate and a decrease in the cost per click. In Q2, we introduced a new more comprehensive approach to sales training designed to set up our new retirement living consultants for success from their first day through month 12. We also held sales training for all of our ROCs in Q2 and redesigned and improved our competitive analysis process. We are also pilot testing an online post-tour survey for prospects to complete after they have visited [indiscernible]. As occupancy continues to recover, we're determining property-specific pricing strategies, which include faster growing market rates and/or eliminating recurring discounts for communities with high occupancies, targeting specific suites for incentives to accelerate lease-up or in select cases continuing with broader incentives depending on occupancy levels and competitors' rates. Turning to Slide 5. We reduced our staffing agency cost by 60% in Q2 2024 compared to Q2 2023 through focused recruitment and retention activities. This agency spend continues to be below pre-pandemic levels. We have also fully redesigned our Resident Manager onboarding program, which is designed to reduce turnover and improve performance of these key leaders in our residences. Although always a difficult decision to close the property, I'm pleased to say that we have found alternative accommodation for all 186 presidents at Chartwell Heritage Glen and we expect to have all residents relocated by mid-August. Finally, the operations team has been busy integrating the 5 new homes that we recently purchased in Sherbrooke, Terrebonne, Saint-Jérôme, Saint-Jean, Sieur de La Salle and [indiscernible] region in Quebec. Being agile certainly mattered in this case, as we only have 30 days to close this transaction and transition these residences into our key systems. By all accounts, including feedback from the teams at these 5 homes, this transition was a success. We are also excited to be welcoming 5 more properties to the Chartwell family later this year with our new partners, group [indiscernible]. I will now turn it over to Jeff to take you through our financial results.

Thank you, Karen. As shown on Slide 6, in Q2 2024 Net loss was $2.8 million compared to a $7.5 million loss in Q2 2023, primarily due to higher resident revenue, lower G&A expenses and higher net income from joint ventures. Partially offset by higher direct property operating expense, absence of income from discontinued operations due to the completed LTC transactions, deferred tax expense in Q2 2024 as compared to a deferred tax benefit in Q2 2023. Net loss on asset sales as compared to net gain in Q2 2023, and higher finance costs and higher depreciation of property, plant and equipment. FFO from continuing operations increased 72.6% and total FFO increased 45.3% in Q2 2024 compared to Q2 2023 from strong operating results in our core property portfolio. FFO growth also benefited from $4.2 million of lower G&A expenses primarily due to the CFO transition costs that were incurred in 2023, lower compensation costs as we continue to execute on our plan to achieve efficiency improvements, partially offset by higher unit-based compensation costs due to the increase in value of our trust units. In Q2 2024, our same-property occupancy increased 660 basis points to 87.2% and our same property adjusted NOI increased by $10.4 million or 20.6%. Slide 7 summarizes our same property operating results for each platform. All of our platforms posted occupancy gains in Q2 2024 compared to Q2 2023, which positively impacted our results. Our Western Canada platform same-property adjusted NOI increased $1.9 million or 11.4%. Our Ontario platform same property adjusted NOI increased $6 million or 21.6%, and our Quebec platform same-property adjusted NOI increased $2.5 million or 43.3%. Turning to Slide 8. At August 8, 2024, liquidity amounted to approximately $341.9 million, which included $41.9 million of cash and cash equivalents and $300 million of borrowing capacity on our credit facilities. For the remainder of 2024, we have $152.6 million of mortgage debt maturing at a weighted average interest rate of 6.58%. We expect to renew or refinance these loans during the year. At August 2024, 10-year CMHC insured mortgage rates are estimated at approximately 4.1% and 5-year conventional mortgage financing is available at approximately 5.0%. Moving to Slide 9. With the continuing strong prospect traffic and leasing activity, we expect occupancy to continue to grow in 2024. We now forecast to achieve 88.7% same-property occupancy by September of this year. We have been using targeted incentives in certain markets to support this rapid occupancy growth as more residences achieve higher occupancy rates, we expect to gradually reduce the use of these incentives. We believe that improving occupancies, combined with lower new supply come in to market will support higher than historical market rate increases over the next several years. We expect these dynamics will result in the growth of our adjusted operating margins from the current levels. I will now turn the call to Jonathan to discuss our recent acquisitions and portfolio optimization activities.

Thank you, Jeff. Turning to Slide 10. Over the past couple of months, we announced the acquisition of several newer high-quality residences in the province of Quebec. On July 22, 2024, we closed on the acquisition of a portfolio of 5 modern residences totaling 1,428 suites in the Greater Montreal area, Gatineau and Sherbrooke for a purchase price of $297 million. We are working towards closing the acquisition of a 50% interest in a portfolio of another 5 beautiful residences totaling 1,805 suites in Quebec City in Shawinigan, and look forward to a successful relationship with our new partner on these assets. Further, we've acquired an 85% interest in 3 state-of-the-art residences totaling a further 1,053 suites in Montreal and Quebec from our development partner, EMD Batimo. On Slide 11, you can see more pictures of these residences. All of these newer high-quality assets are located in strong markets and are complementary to our existing portfolio, which allows for efficient management, lower incremental overhead costs and smooth transitions into our management platform. We acquired these high-quality assets at attractive pricing, significantly below replacement cost. Occupancy at most of the acquired properties is at stabilized levels averaging 95% with 3 properties in lease-up supported by NOI guarantees as part of the structured acquisitions. We expect higher market rate growth out of these assets than our same-store portfolio over the medium term, which will generate strong investment returns. These acquisitions totaling over $750 million at share and over $1 billion of assets taken on under management represent Chartwell's strategic objective to grow in our markets with newer quality assets. This is shaping out to be a record year of investments for Chartwell. We're not done with a number of exciting strategic acquisitions being evaluated and at various stages of negotiation. We want to take this moment to express our gratitude to our investors and our investment banking syndicate members for their strong support in our recent equity offering of $345 million to finance these important transactions. We appreciate the strong investor demand for this offering and are glad to see our investors being rewarded with the meaningful appreciation in our trust unit trading prices post transaction. I'll turn the call back to Vlad to wrap up.

Thank you, Jonathan. Moving to Slide 12. We believe we are now at the front end of what is going to be a multiyear of growth in retirement living in Canada. Demand for our services should continue to grow for decades driven by the senior population growth and lack of long-term care accommodation. With persistently high cost, new construction has been virtually nonexistent which combined with the obsolescence of some of the existing inventory is creating shortages of new suites. These dynamics are likely to result in growing occupancies, market rates and profitability of the existing operators, is 1 of the largest participant in the senior living sector, Charlie stands to benefit from them. As shown on Slide 13, we are not just waiting for the rising tide to lift all boats. In addition to delivering on our 2025 aspirational targets and resident satisfaction, employee engagement and occupancy, we are focused on transitioning our management operations into an agile and scalable management platform. This will be achieved by further empowering the teams and our residences to take charge of developing and executing property-specific strategies and adapting to changing market conditions while delivering exceptional resident experiences. Such empowerment will be aided by enhanced training, coaching and targeted support delivered by our corporate teams as well as more robust performance-based monitoring incentives. We believe with such agile and scalable platform, we will be better positioned to innovate, make decisions and take actions faster, generate management cost efficiencies and ultimately outperform. We will also continue to focus on optimizing our property portfolio to make it more efficient and resilient to future competition. We're doing this through acquiring newer properties in strong locations which generates higher rental rate and operating margin growth and require lower capital investments. We will also continue our program of disciplined dispositions of older, less efficient properties which often require a disproportionate amount of management time and higher capital investments. And we continue focusing on asset management, repositioning properties to be more successful in their markets. These repositioning projects so far have taken many forms from changing service offering to cater to specific ethane communities to invest the capital to upscale some of our residences to offering additional care services, including government-funded care or alternatively moving towards more independent living options, all driven by local market demand and positioning of each residents in their respective markets. These are exciting times to be in the retirement living sector in Canada and even more so to be the part of the dynamic customer-focused and evolving Chartwell. I will now close our prepared remarks with a story from 1 of our residences that's pictured on Slide 14. Recently, we celebrated Canadian multicultural day across our residences with Chartwell Gibson hosting a particularly vibrant cultural Appreciation Day. The event featured captivating performances traditional attire and a diverse array of cousin from around the world. residents, staff and local community members came together to dance, dine and celebrate the many cultures that enrich their residence. Vita Galia, General Manager of Charlie Gibson, along with her dedicated team, has been organizing similar events for several years, aiming to create an environment where everyone feel welcome and respected. As Vita observed, understanding our differences and similarities helps unite us and educate us and sentiment that resonates deeply within our communities. By organizing and participating in these events, we reinforce our ongoing commitment to diversity and inclusion value central to Chartwell's culture and success. These efforts help foster a sense of belonging and connection among our residents allowing them to engage with diverse cultures and perspective. This enriches their daily experiences and strengthens the overall well-being, supporting our mission of making people's lives better. Thank you for your attention this morning. We would be pleased to answer your questions.

[Operator Instructions] We will take the first question from Jonathan Kelcher, TD Cowen.

First question, just digging into the same-property NOI growth by region a little bit. Quebec really stands out at 43% maybe give a little bit of color on what drove that versus the other 2 ratings?

Sure. Jonathon, yes, and we did you highlight is strong growth in all platforms this quarter. One of the things that did lower the growth in the Western Canada platform was -- we did have a onetime staffing cost reversal in Q2 of 2023 at $1.7 million that would have impacted that year-over-year comparison.

In Quebec, in particular, they have very strong occupancy growth and I think they've done a very good job of managing labor costs and reducing the reliance of agency costs. Those were Quebec in particular, has been -- it will continue to be a problematic region, but they've done amazing job reducing the reliance of these agency costs and the labor costs helped with this outsized NOI growth.

That's helpful. And then just on your margin overall, and I think -- I don't think I heard it, but I think 38% is still sort of your target for 2024 on a same-property basis. But like going forward, how should we think about that as occupancy gets closer to 95%.

Sure. Yes. We do believe that we still -- we'll be able to hit that 38% -- we delivered 37.9% in the quarter. And as we get into future years, we expect that to continue to grow as occupancy grows above current levels.

And we also believe that there will be potential as the properties achieve higher occupancy rates, there will be a potential to increase market rates at a higher pace. Because the supply and demand dynamics are such given low construction starts and continued growth in demand that would allow all existing operators to do that. And so the margin should be positively impacted by that.

Okay. So would it be unreasonable to think low 40s, if you're close to 95%.

Yes, that's reasonable.

The next question is from Fred Blondeau from Green Street.

Three questions for me. First, maybe for Jeff. In terms of the balance sheet, I was wondering where do you see the debt-to-EBITDA ratio heading at the end of 2024?

It probably will move up a bit from current levels because we did have the equity raise that brought it down ahead of closing on some of the acquisitions planned for the year. So we closed in half times at the end of Q2, but that will increase a bit as we get to the end of the year.

And also depending on the level of acquisition activity. As Jonathan pointed out, we're looking at several interesting opportunities there one-off, and we feel that we have balance sheet room to do these acquisitions without any external financing. At this point in time. And so if we're successful negotiating and getting those deals, they will also move that to EBITDA a little higher for a short period of time. This will obviously be offset by the earnings growth and our goal is to run the company at about 7.5x debt to EBITDA, and we are continue moving down this graph, and this will be achieved through primarily growth in our EBITDA.

Fair enough. And then just looking at 1 of your most recent acquisitions that Regain Quebec City, I was wondering -- I mean, I understand it's relatively recent, but how is the asset performing so far? And whether you're seeing supply in Quebec City becoming at risk or not really since demand is so strong?

Track Array is performing extremely well. It's high 90s occupancy. And in terms of the supply in Quebec City, there is -- just like in the rest of the country, there's not a lot being built. So we do not see Quebec City supply being riskier situation than anywhere else in the country.

Okay. And lastly, on the stencil agreement with [indiscernible] the 3 properties, maybe you could share your views on this for, I guess, for the second half of the year since it's coming due in January?

Sure. So these properties are attractive properties to Chartwell. We currently manage them, and they're performing well. as part of these acquisitions, we did buy 3 properties from EMD Batimo in the year. And so as part of these acquisitions, Batimo agreed to stand down from many of its put rights on the balance of any of its properties for the balance of the year. And so everything would revert back on January 1 in 2025. But again, I would emphasize that these are all great properties that we want to bring into our portfolio. We just -- this was just a question of timing and part of the overall transactions that we had with that.

Next question is from Lorne Kalmar from Desjardins.

Maybe just following on the Batimo line of questioning. With the 3 properties stabilize and presumably, you'll take those in, in the not-too-distant future. And I guess it will just be just the 1 left in the pipeline. Is there an expectation for that to sort of be the end of the relationship with Batimo or do you guys expect them to initiate additional projects that then we'll be able to take in?

We don't expect that to be at the end of our relationship with Batimo. We have a very strong and collaborative relationship with them, and we have a number of different projects that we are in discussions with them on. So we would expect the pipeline to continue.

Are those projects, would they be still predevelopment -- or would they be ones there they have now and they're just not part of this pipeline?

There are predevelopment projects that we are talking about and redevelopment projects.

Okay. Perfect. And then maybe moving off of the acquisition side of things. You've done a couple of one-off dispositions. Could you maybe give us an idea of the quantum of disposition do you expect to do over the balance of the year and into 2025?

We continue to work to evaluate all our properties, and there's certainly going to be some, but we are not prepared at this point to give you the quantum of this all dependent on the timing of the disposition. We want to make sure that we generate value that is appropriate to us when we're selling these properties, so we continue going through the process of valuation our portfolio and determining what will be the appropriate time to sell properties that we decided to sell. But you should expect us to continue to dispose noncore assets in 2025.

Could you maybe give us an idea then of how big of a bucket this noncore asset pool would be?

Well, it depends what you use as a measurement in terms of the value to overall company, it's not going to be material. It may be quite a few sites -- but in terms of value, these are, as we said, noncore properties, older, their -- the valuations are not as high as on the rest of our portfolio.

Okay. Fair enough. And then maybe just last one. We've obviously seen the headlines around slowdown in the housing market. And I know, obviously, retirement is a needs-based business. But I was just wondering, do you think because of the slowdown has been so material, that it's creating some pent-up demand that could continue to drive even higher occupancy growth as things start to heat up or not so much?

I think we're seeing pretty strong demand right now and the housing market slowdown. Remember, we talk about this the slowdown from the record levels of sales and pricing. And so it's not really slow in any kind of historical comparison, just slow compared to the peaks that the market was at. And so we do not, at this time, see any kind of pressure from the slowdown on the demand and remember, our business also predominantly needs driven. People come to us because they need some sort of assistance or foresee that need. And yes, maybe an ability to sell their house may delay their decision, but it's not going to be a long delay. So from that perspective, we're not seeing much pressure at this time.

Next question is from Himanshu Gupta from Scotia Bank.

So let's just start with G&A. I mean it came in lower in Q2. Is this the new run rate?

Himanshu, this is a good run rate for us. We didn't have any efficiency related severance costs this quarter but do expect those to come in future quarters this year as we move to exit the Welltower JV. So that would increase above the current run rate when those do occur.

Okay. And does this incorporate any savings from like exiting the LTC platform?

Yes. All costs that related to LTC platform or a transition to the new cost, it was actually the platform itself was transitioned to the new manager. There were some incremental savings on the kind of back office stock perspective, but those costs are out of Chartwell systems.

Okay. And then this Quebec acquisition, which should be closed in Q3, that will not lead to any G&A increase as such.

Nothing significant.

Okay. Now let's talk about NOI margins. Same property NOI margin, good to see expansion in Q2. Like what led to margin expansion in Q2. I mean you were already seeing staffing -- agency staffing reductions and rental rate increases, but what happened in Q2?

Just that occupancy growth, rent increases and good control of other expenses. We also have been beneficiary of lower utility costs all the year. That helped a bit for the margins as well.

Okay. And what about incentives? Are the incentives was the word used in your prepared remarks quite a bit. Is it like the incentives were lower in Q2 versus Q1? Or do you think that is something in the future where incentives can be lower than what they are at [indiscernible]

That's more applicable to the future once property is achieving occupancies in then we're pulling back discounts. And at that point in time, as I mentioned, we think that the ability to grow market rates, not the rates to our existing residents, but market rates for new residents will be much better.

Okay. And on the incentives, is it like focusing like [indiscernible] kind of markets in tough markets or very property specific across the board?

The incentives are that we use are property specific and different properties have different programs that they use and it all depends on the local market conditions. That's why we talk a lot about this empowerment and local approach to sales and marketing. There is no 1 recipe that could be applicable to everyone property to every home in our portfolio. And so there's a lot of detailed work that goes behind to figure out the appropriate pricing and appropriate level of incentives for each individual property. So it's really tough for me, Himanshu, to all kind of brought trucks and averages they are receiving in this case.

Okay. Fair enough. Okay. So maybe the last question is around the growth buckets and margins in particular, right? I mean, thanks for clarifying same-property NOI margin at 38% for the year. Is there a reason that margin expansion and growth bucket will be different compared to same property portfolio?

It's -- also difficult to answer that question, Himanshu growth bucket contains properties that are recently acquired or have recently been developed. Often, they are not yet at stabilized occupancy levels, and that bucket changes constantly during the year as we buy new properties that are being put in these buckets. So it's really a mishmash of many different properties with many different specific features that also depending on the timing of where the properties are in lease-up will affect the margins. So generally, they should be increasing just like the rest of our portfolio. Generally, probably they should be increasing faster. Because many properties in that bucket are in lease-up stage more so than our existing property portfolio. But those are very broad generalization of a very eclectic mix of properties.

Fair enough. And is it fair to say that the ultimate growth bucket margin should be much higher than your same-property NOI margin? I mean, given the average age of your growth bucket is like significantly lower than your same property.

That would be correct. On a stabilized basis, these properties should deliver higher margin than our same-property portfolio.

[Operator Instructions] the next question is from Pammi Bir RBC Capital Markets.

You're clearly making some good occupancy traction. I think you're on pace to pick up maybe another 100 basis points in Q3 but as you tackle maybe some of the more challenged properties, how do you see that maybe that cadence trending over the next few quarters? And maybe just a second part to that question is really what gives you the confidence that you'll get to 95% by the end of next year?

So the challenging properties, again, every property has a different story. There is no 1 answer, how do we see driving these occupancy faster with ongoing focus on every property that we have in our portfolio. And in some cases, the world goes in to optimize the pricing because we're at stabilized occupancy and those market rate increases or pulling back discounts that I talked to you about is the focus of the teams. In most other cases, the focus continues to be occupancy growth. And so how we're going to do this through doubling down on the strategies that we saw working in other properties, local marketing, focus on sales, making sure the pricing is right and competitive in the environment and making sure that we deliver great services to our residents, so they continue to refer their friends to us. So that's kind of again, a pretty generic answer, but every property has their own story, and we're focusing on each 1 of them separately. What gives us confidence to get to 95% occupancy. Well, sort of the traction that we have for the last 2 years have been pretty strong, and we expect it to continue. The leading sales indicators continue to be strong, so we continue to see good demand out there. And the overall backdrop of growing demand, no construction starts, continued shortage of long-term care beds and continuing closure of some of the existing obsolete properties that we expect to see over the next couple of years. All of that is positive for all operators in senior housing space in Canada, including Chartwell. The other parts that we continue to do that we talked about is optimizing our property portfolio, properties that cannot achieve 95% occupancy or really 100% occupancy in this kind of environment probably not the right properties to be in Chartwell portfolio. And so that's to the question of dispositions of noncore properties. That will continue.

That's helpful. Just last 1 for me. Just on the strategic acquisitions that Jonathan mentioned that you're contemplating, can you maybe just expand on that? What sort of quantum are you thinking maybe the geographies and any sort of comments on where pricing seems to be at this stage? I mean you've just done a bunch, but I'm just curious if there's any real changes as the competitive landscape maybe picks up a little bit. And then I just want to clarify that you're not referring to the Batimo to properties.

That's correct. We were not referring to Batimo properties. We are looking at a number of different opportunities across the country. And again, it's too early to talk about because we don't have firm deals as soon as we do, you know all the details about them. The pricing seems to be in line with what the market is today, kind of on a stabilized basis, low to mid-6 cap rates is what we're looking to achieve on these acquisitions. Some of them may not be at stabilized levels and we are prepared to take some short-term dilution for a long-term gain. All of them that we're looking at will be a great fit for our portfolio and a certain level of upgrade to what our current portfolio is.

And are any of these vendors or deals that you're working on, would these be any sort of not distress to maybe capital structures that aren't working? Or is it just maybe recycling capital out of some other funds.

I mean same answer I gave on a property, every story is different. So the answer is yes to all of it. It depends on the situation. But yes, some of them are restructuring, financing. Some of them are looking to recycle capital to continue developing all of the above is applicable.

Next question is from Juliano Tamil from National Bank Financial.

Just on the obsolete supply that you guys commented on, is -- would this be potentially be used for a cheaper alternative for some of the somebody looking for retirement housing and what kind of percent of the inventory do you consider to be this obsolete supply?

Well, if you look at Cushman & Wakefield report that Sean and Heather and their team did recently this year or maybe a little earlier this year, think they use something like 10% of inventory being obsolete over the next 10 years. And probably, they are right. I mean they know better than I would know. So about that, can they be used for cheaper alternatives? I don't think so. The cost of operating smaller buildings are high. You have inefficiencies in terms of the staffing you have significant capital requirements and maintenance costs for older buildings. And so it's difficult to make them affordable enough to attract people to those kind of live in the regimens because they're not as good as the new ones. So my view would be that not many of them can be used for that more affordable segment of the market. That would be my view at the present time.

Okay. And then M&A has been pretty featured on this call. But looking towards the next year, would your preference to be towards returning capital or future M&A?

It will all depend on the market conditions and opportunities that we have in front of us. So we want to make sure that we have all options open for us when it comes to capital allocation. In the environment where we see multiyear growth in our sector. given the overall factors that I just talked about, adding high-quality new properties to our portfolio that can generate significant long-term returns and to make our overall portfolio better positioned to do that. That would be our preference. But who knows what future holds, we'll evaluate these opportunities when the time is right and when they are in front of us.

There are no further questions just on this time I would now like to turn the meeting back over to you, Mr. Volodarski.

Thank you, and thank you, everybody, for joining us. As always, if you have any further questions, please do not hesitate to give us a call. Goodbye.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.