Welltower Inc. (WELL) Earnings Call Transcript & Summary

Joining us. I'm pleased to welcome Welltower's CEO, Shankh Mitra, next to me. I'm going to pass it off to Shankh for some opening remarks, and then I have plenty of Q&A, but feel free, we can make this as dynamic as you want if you have any hot topic questions, If you'd like to ask, please jump in. With that Shankh?

Opening remarks -- is this thing working?

Yes. Yes. It's just clicking up for the...

Opening remarks is simple, which is business is fantastic. Cash flow is going straight up. When that happens, usually asset prices are high, right? When fundamentals are strong, asset prices are high. And you can buy assets at a good price if the fundamentals are weak. This is the first time in my career. And frankly, in my knowledge of starting history that we're seeing fundamentals are very strong and asset prices are low. So we are making significant amount of returns from what we are buying. At the same time, we're seeing significant recovery in fundamentals. So I've never seen it. I don't know you guys have seen it, but Frankly, I usually said that business is good. Right now, business is not good business is fantastic. That's all I have to say.

Appreciate that. And then maybe for the first question, you've talked many times about creating per share value for your existing shareholders and compounding that growth over time. Could you go over your guiding principles in terms of capital allocation and making money for investors?

Yes. So majority of the people who think about who invest capital to make money, understand the vague concept of returns. And we can get into sort of some of the nuances we will have in that, which is, it's easy to fake in real estate, a lot of things. Cap rates is one of them, which is a dangerous concept. But what is the 2 things you can't fake in real estate business? One is your basis, whether it's price per unit it's price per foot. Whatever you are buying, what is the real estate basis of what you're buying on a fully loaded basis, a.k.a if you're buying your value-add assets, you have to think about not only what you're paying, but also the money that you need to spend to bring it to standard. So a fully loaded basis is something you just can't fake. And there's another thing you can't fake when you sell an asset, what realized unlevered IRR you achieved? What's the total return you achieved? You bought it for $100, you sold it from $120. It doesn't matter what cap rate you bought, what cap you sold. You can buy assets at a 6 cap, sell it for a 2 cap, but you bought it for $100 and you sold it for $80, you lost money for your investors, right? So we're very focused on making money for on a partial basis. I'm going to get into partial and why we say for existing investors in a second. So that's really important, which is reward. What are you making on investor -- everybody investors understand that we have a little bit more one for you, I just talked about. The second thing a lot of investors understand which is risk. What risk are you taking to get there? right? So as most people talk about returns without risk, we think that's a problematic concept. You got to understand what your margin of safety is and what kind of risk you are taking to get there? It's very important, and we can have a long conversation about that topic. Third thing, we think -- it -- could investors think about risk. We also think there's a third element of this equation where most investors don't focus on is duration. Longevity or duration is a very, very important factor. So our capital allocation framework is -- there are 3 axis risk reward duration as we think about it. For example, today, there's tremendous amount of distress in the capital markets environment, right? And every kind of debt provider that you know is sort of evaporating from the market. I talked to a lot of sovereigns and they say, why should we buy assets at this price when we can lend at 15% whatever number is. It's right a mid-teen. They completely misunderstand that, yes, you can lend it at 15%. But in the way time when asset prices will be higher, you will be refied out, aka, that dollar that you're writing doesn't have duration. Does it mean that it's not a good investment, but you cannot think about the word only in terms of current return. You have to think about [indiscernible] in times of risk or duration, right? So within that spectrum, you think about it, we only invest capital in the space we understand. We're not trying to be everything to everybody. And not just understand the asset classes, understand the product, understand the markets. I recently gave an example, you will not see -- I do understand senor living, but you will not see I'm going to go and invest, buy 3 buildings in New Mexico. New Mexico might be a really good place, but I don't understand their market. So being within your cycle of competence is extraordinarily important. Do you understand the space? Do you understand return? Do you understand duration of the return? And then it's a simple game of optimization. In our business, right, you make money, these age old conversations that real estate about location, location, location is not true. The way you make money, in our business is very simple. It's an optimization game for 4 different variables, location, product, price point and operators. It's not maximizing one thing versus other. Optimize those 4 things, you can make a lot of money. I give you a very long answer, but it's a vague topic that's near and dear to my heart. I wrote a letter about this and it's on our investors website. It took me months to write it. If you're interested in this topic, please go read it.

Maybe, just kind of thinking about just like just where you can allocate capital today? Like how are you thinking about like senior housing for MOBs? Like where -- what is giving you the best return risk and duration?

Yes, so well, as I mentioned on the call, look, the Fed has taken out about $1 trillion of cash out of the system in the last 12 months, right? Everybody needs money everywhere up and down a capital structure, all product. That's just the reality. Where we see the greatest opportunity matching those 3 things I talked about, risk, reward, duration, is in U.S. senior housing. That's why we all got the opportunity is. And we are seeing there are really 5 groups that we competed against always that if we lost something we lost it to. And these are the people who have a tremendous respect for, and all 5 of them have come to us and said, we need liquidity. We have massive outflow queue. We need liquidity U.S. liquidity, right? So we're sort of never seen not only this volume of opportunity, but also that these are the core funds. The Best quality assets that we know that exist in our space that we compete against or we have lost to. So I -- we're like describing it in our board meeting a couple of weeks ago, this is like a 7-day Indian wedding. You can't like finish eating enough, right? But frankly speaking, I've never seen anything like this, not just the volume of opportunity, but the quality of these are trophy assets. One of those groups has sent us 93 assets, I think Nikhil is giving them bids on 14. At least half of those assets are really, really good assets, right? So we're not opportunity constrained. We're capital-constrained. And this quality of assets from core funds, I have never seen. Not just -- it's not even counter market. They have sent me their entire data tape of everything they want and say, give me liquidity. If you look guys look at odyssey Index, which is a core rail study mix. Odyssey right now has $35 million outflow queue. That hasn't happened post Lehman. The stress in the system, not just from the debt side, I think everybody understand the stress from the debt side. From the equity side is unprecedented. And it's due to the denominator effect. And we are -- we're there to provide 2 things to close an asset, you need 2 things, cash, obvious, and operators because a lot of these operators are shutting down. And so you need both and the sellers are very, very cognizant of the quality and next person because they're on the hook. The business works -- it's -- until the day I take over, it's on them. Quality, replication, everything. And these are very well-known institutions, they can't afford to have a PR risk, right? So you think about it all from that perspective, not only the people we competed in the tent are the ones who are actually selling, but there's no tent. They send their entire data [indiscernible] to us and we're like shooting fish in a barrel.

You've talked about the use of data science and AI to drive decision making. Could you provide some high-level comments on the development of the platform and how it's being utilized. And then love to connect it to just like your past comments and you even mentioned it before, it isn't about location, location, it's about location, product, price point and operator through your data analytics tools.

Yes. So for the last 12 months, you probably have noticed that I never used the word AI because it's sort of -- I'm really afraid that we have taken something that's an important advancement in the human history. And just create an unnecessary hope land bubble around it, which is why I stopped talking about it. Last time we did Investor Day, where 4, 5 years ago, I think that was the topic and some of you have covered our company for a long time know that we have been on this for 8 years at this point, right? We hire more stats PhDs than MBA. That's what our platform is. And we have built for something very simple. Our process started something with a very simple idea. We all came from outside this business. I'm a fundamental believer, this industry standards are too low. So I don't keep people from this industry. And so we wanted to know, aka, we give up on sort of the tribal knowledge because we didn't think that was worth much. That's a good idea, but you need to know what works. So we started this truth-seeking mission. So what works, right? And we realized a majority of the sort of rollouts [indiscernible] in this business, such as blatantly wrong, right? So that's why we started about 8 years ago. And since then, we have built a business where today, we -- we have 10 million micro markets in the United States, 0.25 mile 0.25 mile. We can tell you everything about who lives there, where they play golf, where they buy their handbags, where they shop, are they Neiman customer, are they NorthStar customer, where they buy, what kind of medications they take, everything you want to know about your customer for the whole population can tell you that. Why is that important? Because in our business, most people don't realize, it's a business that the buyer, resident, and the decision maker, aka, the buyer is different. If you're a resident is an 85-year woman, she's not the buyer, her 55 years old daughter is the buyer. Sometimes we see big influencers are also grandkids. So you're going to understand every aspect of that population and then what do they want? Real estate is a business of demographics. So we thought for last 40 years. Demographics is the ability to pay. That does tell you nothing about willingness to pay. I might have the ability to pay for buy an expensive car. I'm really cheap. I'll never buy an expensive car. It doesn't tell you anything about my willingness to pay. Every other business that we know from retail to private bank to credit card industries to insurance to financial services, technology, all works and psychographics. Have you ever seen 2 Costco's open next to each other? No. Two apartment buildings get bought and sold to each other or each other's rent. That's not how businesses work today, right? So we're very focused on that. Then we brought in with the major breakthrough was 3-plus years ago when we bought in cell phone data into it, right? What is the in migration? What's the out migration? Why are people leaving? Why are people coming, Who are these people? Where they want to live within the context of that block road 0.25 miles. And then finally, we brought in mobility data which is how people drive. So all these things are evolving, and now since John Burkart has come over our COO, these all macro data, investment data, performance data is now getting made with simple operating data. What is an operating data? You come to -- generally speaking, you are buyers of senior housing as a product, you are rather buyer's of lifestyle or you are buyer of care. I want to know when you hover on my website, where you hovered more. We'll spend time more. Why am I selling you care when you're looking for your mother and you are saying, okay, can she live in a place and she is 72 years old. Can she play golf? Can she date? Can she go to movies blah-blah-blah and I'm selling you care, right? It doesn't make any sense. How do I know that? Are you interested in 2 bedroom, 1 bedroom. How do I know that? These are the operating data that finally, with all the things I mentioned, is now getting integrated into our system. So we have a very clear view of how we're on to price. If you sit down with Kevin Stoltz, our Chief Data scientist, he will tell you, he will sit down in a meeting room like this. And any rental housing units, he will bet his left hand that he can predict you to rent within $10. Any place multifamily, single-family rental, senior housing, no matter what, he will bet you his left hand that he can -- you will tell the location, this is the age, this is a number of bedrooms he'll tell you what the rent is, blind test. We have gotten that close. So that obviously helps us to think, okay, we see hundreds of assets, we can underwrite hundreds of assets. So he first go through our data science platform, I'm afraid to say after what happened in the last 12 months, data science platform and say, okay, these are the things that are interesting. So it's a big, massive filter and then obviously, it goes, what's the predicted rent, what's the predicted NOI. And then Nikhil team picks over all the deal teams. We have only about 100 people in our deal teams and then go through, okay, they visit every single asset. We don't buy assets that we don't visit. We do not think this is a finance business. This is the real estate, is a product business. You need to go walk every single building so you have to buy, right? So we go through that and eventually we give people offers. And there are 2 reactions, either you are insulted and you're so insulted, they do walk away or you are insulted they sleep on it, you realize that you have to trade. So you trade. Simple. But it always starts with that you're insulting.

Maybe just a capital allocation environment. You talked about asset prices being low. And it feels like just the commentary I've heard just since the 2Q call, it sounds like that opportunity set continues to expand. Could you provide some just color on what you're seeing on deal flow and economics today?

The economics, frankly speaking, hasn't changed much, okay? So we were targeting, call it, double-digit unlevered IRR in senior housing, it has not changed much. What has changed is the risk to get there. When you are buying assets at 60% occupancy, 50% occupancy, a negative 2 wheels or positive 2-wheel and you think you can get to an 8, that is one risk proposition than you are buying the exact same asset at the exact same basis, but now you're buying at 80% occupancy when the industry occupancy is today with an in place of 6, right? So you have the same end results with much lower return. And the other aspect is what I was saying, and these are core funds own these assets, they're brand new assets, 3-year old assets, 4-year old assets. So none of that has changed. What has changed is the trajectory to that IRR car because now we're starting with a significant amount of cash flow, but we are ending at the same place, right? I mean stable yield perspective. So we are comfortably hitting in our underwriting an 11 -- 10, 11, 12 IRR. And we assume that John Burkart adds no value. And if he does add value, then the 1 or 2 things happen, we should make more money. If it doesn't, he and I will be gone. So our shareholders will make more money. So it's a natural hedge, from that perspective. But that's kind of how we're kind of thinking about that we can do it. In MOBs, today, we think the business is should be priced given the growth profile closer to a 7% cap, right? It's a very simple idea that a 7% plus 2.5% gets you to 9.5%, minus 15% CapEx, you're kind of back to like the mid-8% to 9% depending on where you are. That's why the asset class is priced, call it, 8.5% to 9% IRR. Obviously, it depends on what the in-place rent is and what the occupancies. I'm saying generally speaking, 9% feels like a right number, and skilled where we play in the debt stack, we think that business sort of a 12% to 15% unlevered IRR. And again, that business were not -- we don't play in the equity stack, we mostly play in the debt stack. And there, the duration is shorter. So we're thinking about, okay, can we -- how do we increase the duration? Can we go for equity upside, warrants or on the flip side, can we lower risk. If we don't get an equity upside, can we ask for a view on the assets, massive amount of personal guarantees on all sorts of things, right? We're happy to do both. But if the target return is call it, 12 to 15 unlevered either I want a significant amount of guarantees that guarantees me, for lack of a better word that I'll get that beyond the assets I'll say, I'll take the risk, but I want to warrant that gets me to 17, right? That those are the kind of ways we're thinking about it on both sides of the medium.

And turning to senior housing fundamentals. Could you provide us like an update on what you're seeing? And this is typically, I think, the strongest period of the year. Just kind of -- is it kind of what you're expecting on occupancy rate expense?

I don't really know what to say about these things when CFO is standing here. He's going to literally kill me if I say something that I'm supposed to not. It's not supposed to say, but I'll only say that I'm pleased with what we have seen so far. And some of you know me for a long time to know that I'm not easily pleased. That's all I can say. Anything else you need to ask him.

Maybe on the margin side, senior housing NOI margins have improved over the past couple of years. I guess how should we think about the trajectory going forward in the spread between RevPAR and expense PAR growth continue to expand from current levels? And then could you also just talk through about the incremental margin as the portfolio has that 90-plus level?

This is probably the most important question if you want to understand our company. What matters all there's too many things, large company, lots of things happening. But if you want to understand where numbers are going, and you want to focus on something very simple. The only thing you need to focus on the difference between X and Y. Import minus Export, the question you just asked. That's the only thing that matters. And I believe that it can expand even from its current expanded level, if that's a proper English? I do think that, that number can expand as we go into '24 and '25.

Is that -- how much of that margin expansion would you attribute to John Burkart and the things that he is working on?

A lot, right? This is like if you think about it, we have favorable beta in the business, right, after a long time. It has been a wind on our face for, call it, 10 years. Low demographic growth, frankly, flat demographic growth for the silent generation last 2010s and massive supply growth and both has flipped, right? So it has -- the beta of the industry is good and it's getting better, not interesting. You guys don't pay us to provide you exposure to beta. You guys provide us to take market share. And first time through ops and asset management, we're taking market share. Our performance relative to the industry is widening and it will continue to widen. And that's because of all the things that John and his team is doing. First time in our business, we have a real operator who has built a real team, and we are focused on not reading newspapers aka when numbers hit the P&L, understanding before the newspaper was printed. What is going on with the root cause? How do we change that? Those are the things.

And I guess from an outsiders perspective, I know like there's obviously a secret sauce going on inside the company. What should we be looking for as far as like seeing evidence that the operating platform is like going as kind of expected and maybe even better than expected? Or...

Yes. I think it's just a question of you guys know there is industry data, right, NIC data. There are other industry participants, right? And you can take an average of that and to say this is what's kind of what the industry is doing. Where is Welltower results? And that's the Welltower, that's coming, that's the alpha we create. And historically, that alpha has been strong. but I think that alpha will get stronger, right? And I would say that a lot of things that John is doing and have accomplished, not John is doing -- have accomplished. I am seeing it but you guys are not seeing it. Why? Because they are adding operator by operator level. It's a very large company, right? It's a $1 billion-plus EBITDA 1,000-plus assets in the shop portfolio. But I think starting '24 really going into '25, you're going to see that.

Okay. And then recently transitioned some properties to Oakmont and Avery. Could you give us an update on how that transition is going? And I mean just the background for context of why that transition happened?

The background or transition lies in the question that you asked before, which is our data science platform. We have said that, as I mentioned, that is a game of optimization game and the fourth piece is the operator. We have a view of what building that we own or a potential deal potential investment opportunity should be run by who. And these are the algorithmic-driven sort of decisions. So we didn't go and do it the first time, right? We first moved 6 assets, right? You have seen 2 years ago, exactly 2 years ago, 2 years, 1 month ago. 12 months, 63% occupancy, $1 million NOI. 2 years later, those assets are 90-plus percent generating $18 million of NOI. 18x we made, and we're not done yet. But next summer, we'll probably make $24 million, $25 million from those assets, right? So we said, okay, we have a view. And if you go back 2 years ago when we did it, we did a slide and we said our data science predictive stabilized margin and rents are 22% higher. You will see that we have disclosed that finally achieving the summers, right? Now we know it was not like a black box, the box works in practical. So we did another 28, right? So, that's how we are doing. We said, okay, we have a view. Let's see, let's test it out. It's A/B testing, simple A/B testing, work, let's double down, right? There is no -- this is not a concept of operator A is better than operator B or Operator B is better than operator C. That's not the conversation. Conversation is who is the best operator for that location for that product type, AL IL memory, whatever is the product type for that price point and the service level. And then -- that optimization game is how we make money. So this is why those transitions going on, how the transitions are happening, are working for last, call it, 2 months, right? It's too early to comment. It's going extraordinarily well. In fact, we mentioned on our earnings call, this is the first time we -- I said 6, 9 months ago, sometimes 2, 3 quarters ago, that John has thought on how to do this right, so we don't lose a lot of money. I did a big transition 4 years ago, you will have no idea how much money I've lost. but I learned, when I lose a lot of money, it physically pains me, and I learned but I didn't know how to do better. John has taught us how to do better. So last 2 transitions, not these 2 that you are asking about, we lose money. We have been able to protect the house that we did in 2022. We've perfected the model, touchwood, base transitions we hit it out of the park on day 1. Actually performing better than when we gave the assets to -- which should not happen. There's a lot of disruption. But are these 2 anomaly? I don't know. But we sort of have gone through that period of losing a lot of money, losing less money, losing no money to losing -- now making money right out of the gate. But we're not doing it to do that. I've said it a million times that I will take any amount of short-term pain to get to the right long-term returns. But that only applies in the short term and the long-term diverges, right? In this case, thanks to John and his team in their expertise, they didn't have to devote. They're actually hitting it out of the park right away.

So on the earnings call, you mentioned that you expect a multiyear period of double-digit NOI growth. What gives you the confidence that this level of growth can be generated over an extended period of time?

It's a simple mathematical equation. I forgot to mention one thing you asked before that actually applies to this question. Which is we think there is significant occupancy upside. We're sitting at 80% occupancy or whatever we reported. And we think the stabilized occupancy of this business is meaningfully, meaningfully higher. And what -- that comes with it is a very significant incremental margin. So at 80% occupancy, that's the question you asked, I forgot to answer. At 80% occupancy, your incremental margins, I call it, 75%. And mid-80s, it goes above 80% and above -- around 90% occupancy, incremental margin is above 90%. So you have a margin hockey stick right? 80% occupancy is the worst occupancy if you're going down is the best occupancy if you're going up, because that's the occupancy level, your communities are fully staffed. So a lot of the money falls to the bottom line and that carve it sort of a car, right? That's why we think that we can make a lot more money from these communities with all the things that John is doing, like operating platform build-out, having proper technology packages, CRMs, ERPs, things that you'll think is common in every other industry hasn't happened in our industry, right? So there is an element of demand, supply, beta market share and all of those things, but there's another element, which I think I'm sort of most excited about, which is changing your business and bringing it to 21st century, right? If you think about it, we're not trying to change the bag fries that this sort of Recro and McDonald's rather sold. What we're trying to do is to change -- make these diners get to a business process of McDonald's. That's what we're trying to do, right? So that structural change along with the beta of the industry. That we all know about. And finally, we talked about for 30 years. I mean, give me a break. Finally, we are there. Market share we talked about. But on top of that, the professionalization of the business, bringing basic business to all of our communities work as an island despite their run by national platforms or regional platform, they will work as an island. And this happened in all other asset classes. It happened to multifamily 30 years ago happened to storage 15 years ago happened to single-family rentals 7, 10 years ago, right? What sort of late in the journey, but that's a structural change as a sort of happening. And you're going to see that will come through for a long time to come.

So turning to the balance sheet. Leverage has come down meaningfully over the past 12 to 18 months through organic growth and just equitizing deals. How are you thinking about that company's longer-term debt-to-EBITDA target? And just from a psychological -- or physiological or a certain standpoint, leading into the balance sheet of appropriate since as you said before, the balance sheet should not be treated as a vintage Aston Martin.

I'm glad you remember that. So we think our balance sheet as a countercyclical tool. I have not much to add to this topic. If you're very interested. Jamie Dimon actually wrote a letter 3, 4 years ago, maybe, sometimes in last 5, 7 years. about this topic, you should read it extraordinarily well written. We think about balance sheet as a countercyclical tool which means we'll lean into balance sheet when we think that's the best time to create value on a partial basis. We will do that. Or generally speaking, our debt-to-EBITDA that we have, you said, go, right? What's the right word you used? What do you use? And goal is 5.5% to 6%. And our -- when COVID hit in 2021 impact flow through COVID hit in 2020, the impact was 2021, our debt-to-EBITDA went 7-plus. I forgot exactly what it troughed, but let's just call it low 7s, mid-7s, something like that. I don't remember. And we said that we will bring it down to our target level, call it, 5.5% to 6%, and we brought it down, right? It just sort of, we're in the business of track record and reputation, we don't get everything right, but we generally, what we say we're going to do and do it. And that's where the balance sheet is. But it aggressively deleveraging because obviously, our EBITDA is going straight up, right? So it will deleverage. I have never thought about balance sheet as a vintage, Aston Martin. So I can tell you, I have it and you don't. We only think of our balance sheet as something we can lean into and create value, and that time will come, and we'll do it again. We have done it, and we'll do it again.

So my last question is, you've mentioned that one of your biggest concerns or what keeps you up at night as people. Can you provide some perspective on the culture of Welltower? And how do you think about incentivizing the team and also your operating partners?

Yes. It's -- so look, there are things that you can do in that from a culture standpoint that no technology platform, no amount of machines can do. And we are more quantitive in the real estate space than any company you will ever meet just because of our background, right? Came -- most of us came from [indiscernible] shops, right? So that's what we're very focused on. And that thing is culture. And what is our culture, we've a very simple culture. This is a company that doesn't have a mission statement, doesn't have a vision statement, doesn't have a strategy department, I've gotten rid of all. And we maintain something so simple. And our idea, our motto is very simple, we want to make money on a partial basis for existing investors. And that comes from long-term compounding, and that is a pursuit of continuous improvement. Every day, we wake up to think, how do we do things differently? How do we make more money for our owners from what we own. And that culture is everything we got. I am happily [Audio Gap] proud of it. RIDEA 2 was structured, first time I wrote 7 years ago, so proud of it, that I killed it, and I personally blew it up. Because I thought we could do better. That culture that every day that I do every 3 months, I do all company call and one of our young associates asked me on all company call -- why are you never satisfied? Why there's always a push to do better? And I said, look, that's just who we are, right? This place is not for everyone. We're not complacent that we can outperform NIC data or you pick anybody. That's not what we're after. Our goal is very simple. When we are done as this team, we want to be known as a company that created most compounded value one of the most compounded value in the history of U.S. capital markets. So many of you who know me closely, I said you want to understand the culture of a company, read a book by William Thorndike called outsiders. And we said from whether you are so our internal board at Welltower, that's really quite reading. And we said we want to be the 9 chapter of the book. That's our goal. Can we be delusional, a real estate company can get that, we can be. We're shooting for 150th floor, maybe we'll end up at 97. But our goal is not getting to third floor and say how we did better than X, Y and Z. That's not our goal. And that pursuit, we are not modeling ours -- and you Josh, know for a long time, how do we better than XYZ in our space? So these are the best capital allocators in the history of U.S. capital markets. What have they done right? How can we learn, right? You think about why do we have a model that says, we want to go deep now go broad. Whose business model is that. That's Walmart's business model, right? Why do we have to come up with new ideas when we can steal ideas from the best companies, and we can study the history of businesses. How do you think I got this idea of you need to bring in John Burkart to this business? An idea came from the railroad industry? Who fixed the railroad industry, the short-haul tracking guys fix the railroad industry, right?. So we are focused constantly on history of businesses, how can we do better? How can we create a compounded partial value for our owners, that's not confined to this view of real estate is a low-return business, so we should be happy with the low plats. That's the culture of the place. It's not for everybody. And frankly speaking, I don't want to be everything to everybody. But that's sort of -- in some place, you might say you have a dilution view could be right. Some might say, you just have a view that can play out, but not so much. All of those are fine. What is not fine is mediocrity. These companies that accept location, location, location, we'll make money by providing a little bit more leverage if we're a little bit better than everybody else, what happens is that it creates a culture of mediocrity. And that culture of mediocrity, you know what happens. A people hire B people and B people hire C people. You've got all your good people leave, right? So going back to a point that culture of continuous improvement, the concept that we are can be and are the best in this business, and we've got to strive further every day to remain at that very best position because there's going to be another company who was hungry like I was 8 years ago, will come from behind and overtake us. Success is the beginning of failure, it's called perpetual seesaw. If you are complacent, that's the beginning of downfall or companies, right? You can see what the average duration of a company in S&P. It's not a very long time. That culture and bringing the right people to that culture who sort of has that lollapalooza effect is what we're trying to build on every day.

We'll leave it there. Thank you.

Thank you very much.