Iron Mountain Incorporated (IRM) Earnings Call Transcript & Summary

The 8:50 a.m. session at Citi's 2020 Global Property CEO Conference. I'm Mike Rollins with Citi Research, and we're pleased to have with us Iron Mountain and CEO, Bill Meaney. This session is for investing clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available up here and on the webcast on the Disclosures tab. For those of you in the room or on the webcast, you could sign into liveqa.com and enter the code Citi2020, that's with the capital C, to submit any questions. Or you can just raise your hand or push the button on the microphone, and we'll get you involved in the conversation. Bill, I'll turn this over to you to introduce your company, the management team that's with you today and provide the audience with 3 reasons why investors should buy your stock today, and then we'll jump into our Q&A session. Thanks for joining us.

Okay. All right. Well, thank you. Thank you for having us. Thank you for pitching up so early in the morning. So first, let me introduce the team. So right next to me is Barry, who is our Chief Financial Officer. And on either side of him is Investor Relations. So Greer runs Investor Relations for us and Nathan works for -- with Greer. So this is the team that you have in front of you today. So we'll hopefully answer your questions as best we can. So starting off with 3 reasons why we think the Iron Mountain is a compelling investment story. So first, let's start with the assets in the company. The company has 2 massive assets, and it really comes with the traditional side of the business which a lot of you have probably known us for decades, which is our document and tape storage business. And the assets associated with that is, first and foremost, the customers. So we serve 950 of the Fortune 1000 customers in over 50 countries across the globe, with 25,000 fellow Mountaineers that are addressing their requirements. And we've been doing that for decades with less than 2% churn. So it's a very stable customer base, and it's very deep and it's built on trust, which in information management these days is something that a lot of our companies that we partner with, quite frankly, are very jealous of because that level of trust -- we never have a customer that says, "Can we trust you with our data, whether it's electronic or physical?" The other aspect about that business is the financial strength. And I think one of the drags on the stock is, I think, a lot of people would say that's not a financial strength. It's a melting ice cube because a lot of it is physical storage and paper document. And if you look -- listen to our Q4 call, we actually, I think, take you through what's driving that, and we can talk about that over Q&A if you want more. But it's a -- it's what we call a second-derivative phenomenon. It's not -- every single customer that we have today, that 950 of the Fortune 1000, are sending us new boxes every year. Some of them, though, their growth rate is changing, which creates a little bit of noise in terms of the physical volume that were coming in. But on a revenue basis, we more than offset that with price increases. So if you look forward the next 10 years is we like to call that business the financial beast. On one side, it's a 75% gross margin business. We don't see anything that's going to disrupt that model in terms of creating cash over the next 10 years based on what we see, both volumetrically and what we're able to do with price. And the -- and it gives us the opportunity to fund the dividend at over $700 million a year, whilst at the same time, take money and put that into the new areas, which comes to my second point of why to invest in the business. So we put between $200 million and $350 million a year into data centers, which allows us -- last year is that business grew on a base of about 100 megawatts of leased-up capacity. We booked another 17 megawatts on top of that. So a good mid-teens organic growth on that business. And we can easily fund that level of growth with the $200 million to $350 million a year that we can actually put across. So that financial beast really helps us fund that. And we can do that without issuing equity, which is really important to us. The other part of it, though, is before we went into data center, and some of you have been watching the story said, "You were kind of slow off the mark." I would say we were very deliberate when we looked at investing in the data center because we wanted to make sure, from an investor standpoint, it made sense for them to be exposed to data center through Iron Mountain rather than a pure-play data center, because you can all invest in data centers without coming to Iron Mountain. So we wanted to convince ourselves, and then obviously convince our investors, that 1 plus 1 equals 3, which comes back to the other part of the asset that I started the discussion with, that 950 of the Fortune 1000. We wanted to make sure there was a real cross-selling opportunity between those 2 that was built on trust in those relationships over decades. And we have found repeated proof points for that. First, with the Crédit Suisse outsourcing is we're a competitive fight out for that. And actually, we won by not having the highest bid for that Crédit Suisse asset. But more recently, if you look in 2019, 3 of the 4 quarters in 2019, 40% of our sales leads for the enterprise customers for our data center business came from our legacy sales force. In the last quarter, it was about 24%, 25%, more just to do with the customer mix that came through that quarter. But if you think on any given quarter, any given week, any given month, somewhere between 20% and 50% of our leads for our data center business come from those relationships. The buyers are different but the relationships the same. And the intelligence we get by serving those customers, for instance, with their tape backup is we actually see even before, sometimes our customers see when they're starting to move load to, say, public cloud, which is a trigger for moving into a private cloud or into a third-party data center business. So that's kind of the second aspect of reason why to invest in the business. First, we have the financial beast with the customer relationships. The second thing is we're finding very interesting areas where we can punch above our weight and get very good returns and growth in adjacent businesses using both that cash in those customer relationships. And then the third thing is -- the third reason, which is obvious, we're sitting here at 8% dividend yield. So a business that's growing organic EBITDA, at say, 4%, and we've been doing this consistently over the last number of quarters, in AFFO, probably more about a point higher than that, so let's say, call AFFO about a 5% organic growth. And this is all before Summit, which is a cost improvement program or transformation program, which is about a $200 million boost to EBITDA and AFFO over the next 2 years. So let's hold that aside for a minute. But just in terms of what I'd call the base steady-as-you-go growth, if we're delivering 4% organic EBITDA growth, 5% AFFO growth and we're sitting at a, I don't know, we'll check when the market's open, somewhere between 7.5% and 8% dividend yield with a flat multiple, is we're sitting at a 12% -- 11%, 12% TSR with a beta of 0.9 from the stock. So it seems like it's also a mispriced opportunity or an opportunity to get in at a reasonable price.

Well, the first question that we've been asking at each session is on the topic of ESG, which is of increasing importance for all companies' stakeholders. What is the one thing that your company is doing to improve your overall ESG score over the next 12 months?

Yes. So it's a great question. And ESG, I should say, is not just important for customers, it's important for our employee base. If you want the best employees and you want employees engaged, you need to have not just the ESG story, but there has to be real substance and passion in the company and your culture above that. So the thing that I think really stands out for Iron Mountain, we're engaged across the board on ESG topics. But the thing that probably stands out the most for our investors and our customers is what we're doing around green power. And with green power is we're more than 100% covered on our data center. And data center is super important because the thing that not too many people realize is that data center now contributes more carbon into the atmosphere than global aviation. So it's a major, major issue. So -- and we were the initiator of the Green Power Pass. So not only do we have a 100% coverage for our power for data center is we can actually pass that on to customers. So the 3 customers we can mention publicly on the data center because we've been able to offset their carbon footprint in a very meaningful way: The Boeing Company, Crédit Suisse and Goldman Sachs. So we're very proud to be able to mention them as customers, but we're able to do that because we've been able to help them in a major way on their ESG mention -- mission. The other thing I'd just say in total is we're a member of the RE100, which says that by 2050 that we will be -- 100% of our electricity will be covered by green power as a company.

So one of the things that you brought up was the pivot that the company's making over time or the evolution from the roots, which you described now as a financial beast to some of these areas like the data centers or the digital initiatives that you have. Can you just frame how the company thinks about the pace at which it should make this transition? And where you are in terms of kind of the milestones that you're looking to hit over the next 3 to 5 years in terms of mix, whether it's assets or revenue or profits?

Okay. No, it's -- I think the thing is, it's a good question because you can always say you're never doing it fast enough, especially if you look at -- we're not getting the full, I would say, full value for what we've done to date. That being said, is we're really strict on capital allocation. Our view is that you invest money like it was yours, and you want to make sure you're getting the right returns. And you also have to look at human capital, how fast can you grow with the human capital that you've got. So if you look at data center is we'd love to grow data center faster. That being said, I think at kind of mid-teens growth -- right now, we have a land bank that would take us up to about 350, 357 megawatts, depending on density. Okay? We're sitting -- at the end of 2018, we had 100 megawatts. As I said, we booked 17 megawatts last year. So we have a very good runway, and we think that adding 20 to 30 megawatts a year of capacity in managing, we actually have quite a high stabilization utilization rate of around 90%. Continuing on that kind of march is probably the right path. So you can do the maths and say, "Okay. For the next 7 years, it's going to take us roughly to fill up that capacity." But if you look at the human capital that's required to do that, I think they're pretty well matched. It may -- and that means that you're getting into the high teens as a percentage of our EBITDA is going to be coming from data center in, say, 5 to 7 years. And we think that's about the right mix because, to our point, it's not about changing the valuation of the company by having that grow faster. We think the company is undervalued based on where the cash is coming from to do that. And the relationships are coming from that because that business is also rock solid. It may not be as interesting and sexy because it's not a new area, but it's rock solid. And we think that level of change is something that we can manage with our labor force and not take our eye off the ball, off the goose that's laying the golden eggs every day, which is that maybe not as interesting than that legacy business. You need to be loyal to your customers and where those customer relationships come from. The other thing I would say is, even as we're sitting here today, that 4% EBITDA growth rate that I mentioned is about -- almost 1/3 of that is coming from data center today on a consolidated basis. It's only 7% of our sales, but because of the higher EBITDA margins, when those stabilize, it's 55% EBITDA margin coming from data center. And it's growing, as I said, in the mid-teens. You put that together is about 1.2%, 1.3% on a consolidated basis of EBITDA growth coming already today from data center of the total of 4% organic EBITDA growth.

And just thinking through the legacy business, you mentioned that the components of volume as well as price in terms of what's driving performance. And can you maybe unpack that, the volume differences maybe you're seeing in the U.S. market versus your international markets? And how you're using price as a lever to manage overall revenue performance?

No, it's also another great question because it is important to think about price in this equation. I was talking a little bit more about volume. But -- so if you -- let me kind of, again, quickly give the 2 parts. So volumetrically, in North America, is roughly minus 7 million cubic feet on a 500 million cubic foot basis. So a little over 1% negative volume growth. We get about 3 points of price in North America, low inflation market, and we're consistently getting 3 points of price. So that gives you a little bit less than 2% of -- a little less than 1%, I should say, of organic storage revenue growth out of North America, slightly negative volume, pricing more than make -- making up for it. And we see that to be a very stable metric. We've been getting that kind of level of price increase regularly over the last, I would say, 3, 4 years. We rolled it out 5 years ago, but I think it's been consistently coming through over the last 3 or 4 years, has it ramped in and we feel really good about that. If you look at Western Europe, Western Europe is kind of flat, slightly positive volume growth. I think, over time, it's going to look more like North America, quite frankly. But it's -- we have a little bit of bigger mix in the middle market. So it looks a little bit different than North America. So we're happy for that. But let's say, it's going to be kind of flat volume growth is we're about 2 years behind on the revenue, on the pricing in North -- in Western Europe. But you're starting to see that come through and you'll start seeing a similar 3% trend in terms of revenue or pricing on top of the flat volume growth in Western Europe. And then if you look at the rest of the world, the rest of the world, we started rolling out revenue management or pricing initiatives a little over 2 years ago, and you're just starting to see that come through. So as we're sitting here today, and if you look at the last 2 years, volume growth in those markets was mid-single digit. So very strong volume growth, and that's driven by both GDP and companies are earlier in their outsourcing. When I go into those markets, typically I'm less talking about how we do things about -- better than our competitors. I'm more explaining what our industry does because they're earlier in adoption. Most of these people are still storing things in-house, even very large banks. So I'll give you an example. There's a large bank in India, a PSU, where they were storing 30 million cubic feet in-house up to about a year ago. Remember, North America, we store -- total Iron Mountain, we store 500 million cubic feet. This is one customer in India, and they decided to outsource about 1/3 of that. We got 60% of it, and one of our competitors got 40%. So the discussion with them was to get them to outsource. Now -- so we're getting -- if you look at the storage revenue growth in those markets, it's driven mainly by volume. But over time, because we started about 2 years ago, you'll see that going a little bit faster as we add more pricing on top of that. So we're in earlier part of the game in terms of pushing price in those markets.

In freer international markets, how do you handle currency fluctuations? Do you do any hedging? Do you try to bring in more international debt is a natural hedge to what could happen with currencies?

The great thing about Iron Mountain is that we operate in over 50 countries, but we really operate in over 50 countries. In other words, our cost and our revenue are matched. So there's not a margin issue. There is the translation issue. So on the translation side, to areas that we can is we'll put debt on the balance sheet in local currency. You're not always able to do that in some emerging markets. And it's not about cost, right? So I'll give you an example is about 5 or 6 years ago, we borrowed a significant amount of money in real in Brazil, which looked really crazy because I think we're paying like 11% or 12%. And then the real tanked, so then we looked like geniuses, right? Then -- so we kind of looked -- there's a reason why interest rates are higher in these markets, it's because of the inflation in those markets. And at the end of the day, our shareholders take dividends in dollars. So we do hedge translation to the degree that we can, and we were able to do it in Brazil. But there are a number of countries where they are quite chauvinist in terms of issuing local currency debt to foreign companies. So we can't always do it. The good thing is, from a margin standpoint, we're always hedged. But from a translation, some countries we can do it better than others. I mean the biggest fluctuation in the last year was really more around paper prices because that -- we took $30 million hit in EBITDA over the course of 2019 because we went from an all-time high in January, or say, December '18 paper price to an all-time low in December '19 in paper prices. But at the same time, it is that the shred business is a relatively small portion of our business, and $30 million hit on almost a $1.5 billion EBITDA business is -- it's annoying, but it's not -- it's something that keeps me up at night.

And just one more question on this topic of international e-markets, where there are higher inflation rates. You mentioned Brazil as an example. Can you get better escalators in those markets as well? So if you're getting 3% in the U.S., on average, can you do better than that in a market like Brazil?

Yes, I love high inflation markets because it's much easier to push. If you think about it in this market, when I said 3 points of push, okay, it's -- you're talking about at least 200 basis points above inflation -- core inflation, right? And it may be more, although, here, people expect that logistics inflation is a little bit higher. But on a 75% gross margin business, remember, all I can get, most of that goes to -- or I should say, a big chunk of it goes to margin expansion. So for 75% gross margin business, pricing is super important. And to your point, if you have a double-digit inflation business, it's easy to get 400, 500 basis points spread between where inflation sits and where your pricing sits. And [ Antin ] is a great -- been a great market for us. And they are -- monthly we are changing our pricing. So you're absolutely right. People are less sensitive to a couple hundred basis points in a market where the inflation rate is quite high.

Okay. And so when you think about what you're doing and to layer on additional services, can you frame for us just the breadth of services you're doing beyond just the data centers to help your customers and try to get a bit more wallet share from them?

Okay. Yes, I think that -- obviously, we're looking for ways to continue to build and strengthen our relationships with our customers in new and different ways. So one of the great ways that we did it is in 2019, we were the AI, Machine Learning Partner of the Year for Google. And the reason why is that it was like a perfect match. Google has the artificial intelligence expertise and machine learning expertise. We have the customer relationships, so that we found each other, and it comes back to that level of trust. You can think about us being, at one level, is the middleman like the old Swiss lawyer that had a number of bank account. Only they knew who their customer was behind the number. It's a little bit like that, right? Because the number of companies that don't fully trust some of the big cloud providers -- I'm not saying that they shouldn't, I'm not saying that these cloud companies aren't trustworthy, but people are nervous about sharing their private data in those clouds. So what we do is -- at one level, is we act as the go-between to make sure that when we're using those compute environments, which are super powerful and it's -- and can be really game changers in terms of the insights that you have around the information that you have in your company, but do it in a way that protects the privacy and security of that data and with a partner that's been doing that for them for decades. To give you a very concrete example of where we do that is that -- there's a large European bank that was looking to improve their results on car lending in North America. So this is a project that we're doing right now with the InSight platform, which Google is the -- the Google cloud is the engine behind the scenes. We're ingesting both physical data that we're storing plus electronic data that the bank has on those loans, and we designed algorithms which we then put into the computer -- the computing power of Google and give them a better and faster result on loan decisions for auto loans. And that's important for a couple of reasons. First of all, auto loans -- generally, the person who wins is a person that says yes to the customer first. And then the second thing, of course, you want to do that with the same or better credit results or charge-offs. So it's really a great area. We've also talked to a number of media companies, where we're allowing them to not only understand their inventory better in terms of what they have stored, but to actually -- once you digitize their content, you can search that in a way, and you can say, "I want to see a player or I want to see a player wearing certain sponsors' equipment doing -- scoring a goal." Right? We're able to do that in seconds or milliseconds, whereas before, it would be a very manual exercise, and it allows them to monetize that data in ways that they couldn't even think of monetizing it before. So it's super interesting. And for us, it's quite -- it's still a small part of our business. But I think it's also a situation where we recognize our customers, and all of us are going to be living in a hybrid physical digital world for a very long time. So I think we have an opportunity at Iron Mountain to provide some services that allow people to bridge those gaps and come up with better insights around their information. And over time, we will be the go-to partner even when the stuff is 100% digital. And we do have a couple of customers where all the stuff that we're manipulating is already in a digital form.

And just a reminder, if you'd like to ask questions, you can lay up your microphone or submit into the live QA bucket here. You mentioned earlier Project Summit, and the goal to take some costs out of the business. Can you frame the background or genesis of this initiative? And how you expect the results to play out for the business over the next couple of years?

So let me deal with the first part of your question, and I'll ask Barry to talk about the -- how we see it playing out financially and more broadly over the next couple of years. The genesis was -- and I think we talked about it on the call at the end of '18 or the beginning of '19 that we were setting up a strategic account. So part of the walk you just took us all on was what we're doing on data center, what we're doing on these new services. We came to a view that we needed to have a different way that we engaged our customers from a selling standpoint and really about solution selling. So we needed to set up a strategic accounts team. When we went to set that up, it was going to require putting another matrix onto the company. At the same time, because what we had organized at that point is a single business line, which is our records management business across 2 business units, 1 for developed markets, 1 for the rest of the world. So now you're setting up strategic accounts, that person is going to have to manage those 2 silos. The second aspect, the head of one of those silos we knew was due to retire and still due to retire at the beginning of 2021. So you kind of put that into the mix. And we said, "Does it make sense to replace that and continue those 2 silos? Or should we put it under one leader?" And we came to a conclusion that we're going to put it under one leader. Once you do that, it's like pulling on a ball of yarn, right? You start pulling on that string and you realize, well, we don't need 2 SVPs of Finance anymore, you need one. You don't need 2 SVPs of HR, you need one. You don't need 2 VPs of IT, you need one. You now have a very much simplified strategic accounts reporting to that particular person. And we said this is an opportunity. And when we put all that together, guess what, 45% of the Vice Presidents and above come out of the business, right? Now there's a part of it that's also accelerated because we said this is an opportunity to go from over 40 billing systems down to a handful, 4 instances of sales force to a single instance of sales force. Because if you want to really have strategic accounts work properly is everybody should be looking at the same customer data the same way and have a CRM tool that is fully seamless, right? So there were a number of things that we need to invest along the way. But that gives us a really opportunity is that, and I'll let Barry talk a little bit more about the cost savings which is the thing we've highlighted on the call. But to me, the real benefit of Summit, it gives us an opportunity to operate the company differently. If you're taking out 45% of the Vice Presidents and above in the company is the company already feels different. And our customers are already feeling that difference because 70% of that work was done in November and December. So we're already starting to feel the difference. Barry?

Sure. So Project Summit will yield us, we think, $200 million of EBITDA benefits in totality, and it will cost us about $240 million in onetime restructuring costs. Let me break that down. In the fourth quarter of '19, we spent about $50 million for restructuring activities. This year, in 2020, we expect to incur about another $130 million with the balance of the charges to occur in 2021. As it relates to the benefits, this year, based on the activities we did in the fourth quarter of '19, we anticipate yielding $50 million of EBITDA benefits. And that worked to Bill's point around the headcount reductions, et cetera. That's been done. So that first $50 million is sort of in the bank. And then we anticipate generating another $30 million of Summit savings here this year that's embedded in our 2020 guidance. And that's more back-half loaded because that is work that we're doing in the year that will show up and therefore be a run rate incremental benefit into 2021. By the time we get through 2021 and into 2022, we expect to have the entire $200 million of savings showing up in that year. And so when you think about how that projects through our financial model, together with the adjusted EBITDA organic base business growing to the points that Bill made earlier, it really gives us a nice glide path to deleveraging the business over the next few years. As the Summit charges come off, those are cash charges, they start to ebb after this year, and we get into also yielding all of the benefits from Summit. So it's a very nice cost program but also has those strategic benefits that Bill was mentioning.

Where is the -- where does the dividend yield end up at the, sort of, if you kind of run the model out -- I'm sorry, dividend payout ratio of AFFO end up at the end of this horizon?

Yes. So our target for the payout ratio as a percentage of AFFO is mid-60s to low 70s. And last year, we were obviously elevated above that. And as we work through and yield those Summit benefits, obviously, that benefits both EBITDA as well as AFFO. We're growing -- we expect to grow AFFO modestly faster than EBITDA on a, if you will, organic basis. This year, our AFFO guidance is for a 9% to 12% increase. As we glide toward that payout ratio, Mike, we do anticipate, as we've said, that we'll continue to grow the dividend, albeit modestly. Last year, we increased it a little bit over 1%. And if you work with modest raises to the dividend over the next couple of years, together with those Summit benefits coming through and the organic business continuing to grow, we'll glide into that payout ratio. And then importantly, as we get out beyond the Summit time frame, the model would suggest that, at that point, just to maintain the payout ratio, we need to be growing dividend in line with AFFO. So I think it yields a very nice set up over the next few years.

Bill, I just wanted to jump in. I know this is a small part of your business, but you entered the valet self-storage business with MakeSpace. And I'm just wondering if it's been a little over a year now, I think, maybe just maybe what are a few sort of positives and negatives you've seen as you've -- I think it's a way to kind of leverage the logistics you have in place and use it for alternative storage, I guess?

Yes, thanks for the question. You're right. I would say it's more R&D at this point, but it's actually already proven quite helpful. And we have a similar experience with LOVESPACE. We don't have -- in the U.K., we don't have an equity arrangement, but we're doing the same back-end logistics for them. So the one thing that we've learned, and we actually learned it before we even merged our original company in with MakeSpace that took a minority stake in it, is that we've cracked the logistic side. We -- when we went into the business, we knew that the trick was how do you actually tackle the demand gen. But we were pretty confident that we could manage the back end and make money doing that. And we continue to prove that out. So what we found with LOVESPACE in the U.K. and now with MakeSpace here is that, given what MakeSpace pays us for storage on the back end and for logistics and also knowing that these customers stay in the facility for shorter period of time, so it's a different duration, is we can make those economics work. So that's really, really good. Now that it's just a matter of can MakeSpace and, in the U.K., LOVESPACE actually grow fast enough that it moves the needle for us? And I think both of them, I think they -- that you spoke to them is they're making good progress, but it's still progress against a target that they haven't achieved yet in terms of the cost of customer acquisition. The cost of customer acquisition is still something that, I think, when I look at both of those players, are still working on or also a clutter here in the U.S., they're all working through that. That being said, I'm the eternal optimist, is I do think a market that is growing 5% to 6% a year just in North America alone tells you that there's about $1.5 billion to $2 billion a year of new consumer storage that's up for grabs. In what we know from our own market research, a number of customers would prefer a valet storage for that than schlepping stuff to a self-storage locker themselves. So we do think there's a market requirement that we're really confident about. I think the MakeSpace and, as said, looking at what's going on across the pond, I think both companies, whilst they're making progress, I don't think they've hit the sweet spot on customer acquisition cost. On our side, we're making money doing the back end of it. So that's good because we've been able to prove that out. We just want more.

Appreciate it. Can I have a question just in terms of ownership of real estate? It seems like you only own 31% and then leased the majority of the properties. Since we're in the real estate conference, can't help to ask, like, long-term basis, do you have any view in terms of increase the ownership for real estate?

So I think a couple of things, and then I'll let Barry talk about it a little bit. So first of all, if you think about on the industrial, the data center real estate, we own or control virtually 100%. I mean there's a little bit of variations on that, but slightly different strategy. But if we're looking at the industrials, so let's just focus on the industrial real estate because that's where you get your 30-plus percent that's owned versus leased. So if you think about an industrial, on average, it costs $50 a square foot to build the shell. For us, it's about $100 per square foot in total because we own 100% of the racking that goes inside, but we don't -- as you correctly point out, we only own about 1/3 of the shells that we operate in real estate. But we actually have those on long-term leases. So we actually control that property over a very long period of time, with rent renewals that are market based. So whether you own it or you lease it, it's the -- the real economic cost to us as a company is the same because if you own it, you also have to look at the opportunity cost. And that's what's driven some of our recycling. More in 2018 that we did more infill. Last year, it was more sale leaseback. But we do look for infill opportunities if we think that the real estate is more valuable in different use. The -- coming to your point, I think we're probably a net more seller right now with a leaseback than we are a buyer right now of industrial. But that's just our opinion. We just think that cap rates in industrial look pretty high. So we think that -- and we have -- we think the cap rates are more favorable in data center. So if we have an opportunity to take capital from there and recycle it towards data center, we think we're in a better part of the cycle between those 2 assets. So there's a little bit of -- I mean I'm not saying we're going to do kind of wholesale selling of the industrial footprint. And when we do sell, we typically do, what I recall, Tier B or Tier 2 cities rather than our Tier A or Tier 1 cities. But we do think that there's an opportunity to move across the average classes.

I think in light of timing, I'll just add that we embedded in our guidance is an assumption that we'll recycle about $100 million from the capital this year.

Thank you for your time today.

Thanks a lot.

Thank you.

Thank you.