Q2 2023 Blackstone Mortgage Trust Inc Earnings Call
Participants
Anthony Francis Marone; CFO, Treasurer & Assistant Secretary; Blackstone Mortgage Trust, Inc.
Katharine A. Keenan; CEO, President & Director; Blackstone Mortgage Trust, Inc.
Timothy Paul Hayes; VP of Shareholder Relations; Blackstone Mortgage Trust, Inc.
Donald James Fandetti; Senior Analyst; Wells Fargo Securities, LLC, Research Division
Douglas Michael Harter; Director; Crédit Suisse AG, Research Division
Jade Joseph Rahmani; MD; Keefe, Bruyette, & Woods, Inc., Research Division
Sarah Barcomb; VP & and Commercial Mortgage REITs Analyst; BTIG, LLC, Research Division
Stephen Albert Laws; Research Analyst; CIMB Research
Steven Cole Delaney; MD, Director of Mortgage & Real Estate Finance Research & Equity Research Analyst; JMP Securities LLC, Research Division
Presentation
Operator
Good day, and welcome to the Blackstone Mortgage Trust Second Quarter 2023 Conference Call. Today's call is being recorded. (Operator Instructions) At this time, I'd like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead, sir.
Timothy Paul Hayes
Good morning, and welcome, everyone, to Blackstone Mortgage Trust's Second Quarter 2023 Conference Call. I'm joined today by Mike Nash, Executive Chairman; Katie Keenan, Chief Executive Officer; Tony Marone, Chief Financial Officer; and Austin Pena, Executive Vice President of Investments.
This morning, we filed our 10-Q and issued a press release with the presentation of our results, which are available on our website and have been filed with the SEC. I'd like to remind everyone that today's call may include forward-looking statements, which are subject to risks, uncertainties and other factors outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our most recent 10-K. We do not undertake any duty to update forward-looking statements. We will also refer to certain non-GAAP measures on this call, and for reconciliations, you should refer to the press release and our 10-Q.
This audiocast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent.
For the second quarter, we reported GAAP net income of $0.59 per share, while distributable earnings were $0.79 per share. A few weeks ago, we paid a dividend of $0.62 per share with respect to the second quarter. Please let me know if you have any questions following today's call.
With that, I'll now turn things over to Katie.
Katharine A. Keenan
Thanks, Tim. Since the onset of the rate hike cycle, BXMT has consistently delivered for our shareholders with the strength of our business moderating the impact of credit headwinds. This quarter's results again underscored our continued resilience. For the second quarter, we earned $0.79 of distributable earnings per share, up 18% year-over-year and covering our dividend by 127%. We delivered this result while reducing leverage and growing liquidity to a record $1.8 billion, and our book value was stable as retained earnings offset our reserve build.
The enduring credit performance of the vast majority of our loan portfolio is a critical ingredient to this outcome. We've highlighted in the past the importance of our low LTV strategy, asset, borrower and market selection and thorough underwriting informed by the deep knowledge and experience of our platform. This put us in a strong starting point coming into this cycle.
Today, we are directing our rigorous forward-looking approach to actively managing our portfolio, executing on numerous deal-by-deal transactions with a focus on enhancing our credit position and reinforcing sponsor commitments, an outcome we achieved through paydowns, recourse and additional sponsor cash equity. When sponsors step up to commit more dollars, we can give them more time to complete their business plans, and in certain cases, some economic relief to lighten the burden of carry. It's a win-win for these deals, reducing our credit exposure and maintaining our interest income at coupons well above our expectations at origination, while putting our borrowers in a more stable position.
In the second quarter, our borrowers invested or agreed terms on over $700 million of incremental equity subordinate to our loans. We closed 10 transactions where we reduced our basis by 11% on average through paydowns or principal guarantees. We have deals to address over 80% of the 4-rated office loans we had on our watchlist at the start of the quarter with paydowns or incremental equity on each, significantly reducing the risk of near-term credit deterioration and further protecting our investment position. These asset management wins are the latest examples of a proactive derisking strategy we've pursued for over a year. Each deal requires a bespoke approach, something we are particularly well positioned to do, given our deep bench of 26 dedicated asset managers globally and the real-time data and observations we collect from across Blackstone's vast real estate footprint.
Our portfolio also benefited this quarter from green shoots in the broader capital markets. We collected $1.5 billion of repayments, a strong indication of the refinanceability of our loans as well as the liquidity of our underlying collateral assets in the market. These repayments reflected a healthy mix of sales and refis and notably included over $350 million of office loans. We also took the opportunity to bring forward repayments by selling 2 loans essentially at par.
We still have more to go on the credit cycle and U.S. commodity office remains extremely challenged. Our office downgrades this quarter reflect these dynamics. But we have a diverse portfolio with nearly 200 loans, and watchlisted and impaired office to remain a small portion, just 10%. I mentioned earlier the credit enhancing modifications we've achieved on many of our previously 4-rated loans. On our 5-rated loans, still just 4% of our portfolio, we are taking a tailored approach. This means near-term sales for some assets, which we are pursuing in several cases. But we have also set up our business with long-dated liabilities and plenty of liquidity to afford us the flexibility to reinvest and reposition assets where we feel it is most accretive, leveraging Blackstone's skills as a highly experienced real estate owner to maximize recovery over time.
Away from office, we continue to see good performance across most other asset classes. This quarter, we upgraded 8 loans, including 2 loans from 4 to 3, as a result of both cash flow recovery and significant paydowns from our sponsors. On the multifamily side, which is 26% of our portfolio, we are benefiting from our selective approach to sponsors, assets and submarkets. While we expect rent growth to decelerate in some markets, it remains positive, continuing to support cash flow in the underlying assets and the performance of our loans. Our U.S. traditional multi-assets are in locations with market rent growth 35% higher than the national average and new supply 22% lower than their respective markets as a whole. As a result, our multifamily loans, which averaged 66% LTV, have demonstrated NOI growth of over 25% on average since origination with many value-add improvements still in process. And this quarter, we saw $317 million of multi repayments through agency refis at valuations implying a 10-point decrease in our LTV from 2021 origination to today.
Industrial remains robust. Essential retail is doing well. Hotels and resort and many urban locations, like New York City, are demonstrating sustained RevPARs above 2019 levels, and capital markets are open. Just last week, a $363 million hotel loan, one of our largest, repaid with the SASB CMBS execution 40% higher than our loan basis, implying an LTV for our position of just 39%. This loan was watchlisted during COVID as pandemic travel restrictions took a severe toll. But we worked closely with our borrower to chart a path through a tough period, and in time, demand snapback for this high-quality asset, paving the way for a refund.
While real estate capital markets are signed, they will likely move in fits and starts, and office liquidity remains scarce. Credit outcomes for more challenged assets will take time to play out, and we may see more pockets of deterioration along the way. But through over a year of this dynamic, BXMT has consistently generated outsized dividend coverage and protected book value, evidence of our business model at work.
Over the past 12 months, we've retained nearly $120 million of distributable earnings in excess of very healthy dividends, bolstering our liquidity, reducing our leverage and preserving our book value even as we add reserves to reflect the market environment. With term matched asset financing and no capital markets mark-to-market, we've created a durable net interest margin on performing loans. And through active portfolio management as well as natural turnover, we have maintained near record liquidity levels throughout this period, while at the same time, preserving a low-cost liability structure with no corporate debt maturities until 2026. Our positioning affords us valuable optionality to navigate this volatile environment.
Liquidity is returning in pockets of the market at new normal levels of return, turning over balance sheets and advancing an orderly deleveraging cycle in many areas. The bar for new investment remains high, but the opportunity set is expanding. We're seeing increased loan requests and have evaluated multiple loan portfolio acquisitions over the past few months. With the scale of the Blackstone platform and our pool of dry powder, we are uniquely positioned to source deals and financing when we deem it attractive. But given our strong earnings and dividend coverage, we have no pressure to redeploy capital.
Running our business with more liquidity and a more conservative balance sheet puts us in an advantageous position to manage a range of economic outcomes and maintain our war chest to capitalize on truly differentiated opportunities. We will continue to proactively manage our business for resilience as we progress through the cycle, prioritizing optionality, capital preservation and our consistent attractive dividend to our investors.
Thank you for joining us, and I will now turn the call over to Tony.
Anthony Francis Marone
Thank you, Katie, and good morning, everyone. In the second quarter, BXMT again delivered strong results with our distributable earnings, or DE, of $0.79 per share, in line with 1Q levels. We continue to benefit from the impact of rising rates on our floating rate business model, which generated an incremental $0.03 of earnings this quarter relative to 1Q levels. On the other hand, 2Q earnings faced a modest headwind in the form of loan modifications, cost recovery accounting and net portfolio contraction, which had a collective downward impact on earnings of about $0.03 relative to 1Q levels and offset the benefit of rising rates. These transactions generally occurred later in 2Q, and we would expect a larger impact of around $0.06 per share on a full quarter basis.
To unpack these elements further, we have made proactive loan modifications with certain of our borrowers to trade lower rates for partial repayments or borrower equity contributions to reduce our risk in these loans. We view this as a prudent strategy in the current environment and believe the benefits of long-term reduced credit risk far outweigh the modestly reduced earnings power of these loans.
In terms of cost recovery accounting, all of our 5-rated impaired loans continue to pay interest this quarter, $12 million in total. However, we reflect those payments as a reduction to our loan basis rather than income. As I've highlighted in prior calls, this income will eventually be recognized if these limits recover or will otherwise reduce future realized losses should credit continue to deteriorate.
Our loan portfolio decreased by $1 billion as repayments outpaced loan fundings, which were limited to fundings under existing labs. Note, this includes 2 opportunistic loan sales at our carrying value of 99.8% of principal outstanding where we effectively brought forward the future par repayment of these loans. We remain selective with respect to new investment originations and focused on maximizing optionality by running our business with more liquidity and lower leverage. With the strong dividend coverage generated by our floating rate portfolio today, we can easily absorb this modest earnings headwind over the near term in favor of maximizing stockholder performance in the long run.
We closed the quarter with $1.8 billion of total liquidity, a record level for BXMT and one that puts us in a strong position for both offense and defense as the commercial real estate markets continue to evolve. Our adjusted debt-to-equity ratio of 3.4x continued its downward trend from 3.5x last quarter and 3.6x at the start of the year, reflecting our prioritization of balance sheet resiliency in this uncertain economic environment. Our balance sheet continues to benefit from our stable capital structure with no corporate debt maturities until 2026, no capital markets margin call provisions across our term matched credit facilities, and fully non-mark-to-market provisions on the majority of our liabilities.
Turning to credit. We booked an incremental $28 million CECL reserve this quarter, which does not impact DE, but reduced our GAAP net income to $0.59 per share from $0.68 per share in 1Q. Similarly, the CECL reserve impacts our book value. However, our ability to retain excess earnings over our dividend fully covered this incremental reserve and contributed to a slight uptick in book value to $26.30 per share from $26.28 at 3/31. Our CECL reserve this quarter includes 1 new asset-specific reserve on a 5-rated loan, bringing our total specific reserves to $214 million, which is about 20% of the related loan balance and implies a 50% decline in underlying real estate value from origination.
In addition, we further increased our general reserve by $11 million to $166 million this quarter, or 74 basis points of our loan portfolio, double our reserve level in 2Q 2022. Our aggregate CECL reserve of $380 million, or $2.20 per share, reflects our comprehensive review of the risks in our portfolio and current market conditions for commercial real estate lending in our key markets and asset classes. Overall, our portfolio is 96% performing with relatively limited tough credit situations, which we have reflected in our risk ratings, CECL reserves and cost recovery accounting for impaired loans.
We continue to see somewhat barbelled credit migration in our portfolio with some assets hitting challenges as the credit cycle continues and others improving with cash flows -- excuse me, and others with improving cash flows and completing their business plans as expected. We see this in our risk rating migration with 1 new 5-rated loans and 4 new 4-rated loans on one hand, but 2 upgrades of prior 4-rated loans to 3 on the other. Overall, we have a balanced 8 loan upgrades and 7 downgrades this quarter and maintained our portfolio's average risk rating of 2.9, consistent with last quarter.
We remain focused on actively engaging with our borrowers to proactively identify and address risks in our portfolio and maximize long-term value for our stockholders. To that end, we enjoy the benefit of operating BXMT within its broader Blackstone real estate business, giving us unparalleled access to information and insight into the markets in which we lend and allowing us to make the best credit decisions possible, as well as unique relationships with banks and other lenders, allowing us access to scale capital on attractive terms to support our business across market cycles. Last week, Blackstone announced hitting a milestone of $1 trillion of assets under management, which reflects the scale of the broader business supporting BXMT.
We are proud of our 2Q performance and look forward to continuing our strategy of actively managing our business through the credit cycle and delivering reliable, long-term value for stockholders. Thank you for your support, and I will now ask the operator to open the call to questions.
Question and Answer Session
Operator
(Operator Instructions) We'll move to our first question, which is Steve Delaney with JMP Securities. I'm sorry. That's Doug Harter with Credit Suisse.
Douglas Michael Harter
Hoping you could talk about the decision to sell the 2 loans in the quarter given that you already had a very strong liquidity before those loan sales.
Katharine A. Keenan
Sure. Thanks, Doug. So we had an opportunity to sell these loans essentially at par. And just given the uncertain market environment, we felt it was prudent to execute, really just bringing forward repayments and giving us more optionality for redeployment or accretive use of that capital. We don't expect to see a lot of this, but we're always going to be open to options to maximize value for our shareholders.
Douglas Michael Harter
And then can you just give us some details as to what those loans were, what the underlying collateral, what the maturity was just to better understand kind of the outcome there of getting essentially par?
Katharine A. Keenan
Sure. So one of them was a large mixed-use office asset where we've been confident in the credit performance of the asset, but it is a large building, and again, had the opportunity to transact essentially at par. The other was a large parking portfolio where the overall portfolio had been exploring the market for a sale, got some very good value indications. Ultimately, the sponsor decided not to transact in terms of selling the portfolio. But the value indications, I think, helps confirm the very safe credit position of our loan and pave the way for essentially a par sale.
Operator
And moving now to Steve Delaney with JMP Securities.
Steven Cole Delaney
Appreciate the question. High repayments, Katie, this quarter, fairly high. Two things. Were there any significant fees associated with those repayments that we should be aware of? And what's your outlook? What are you seeing in purchase and sale activity? Kind of what's the outlook for repayments over the balance of the year?
Katharine A. Keenan
Thanks, Steve. So on your first question, no significant prepayment income or outside prepayment income in the quarter. As far as the second question, I think we really are seeing an increase in transaction activity and liquidity. Still low levels relative to historical trends. But if you look at our portfolio, really in different asset classes, different executions, I mentioned we saw some agency refinancing activity. The SASB market is opening for very high-quality assets. We're seeing insurance getting active, and even some bank deals and a couple of sales as well.
So we are seeing, I would say, a reemergence. There's obviously been some big office trades mentioned in the market recently in contrast to the first quarter where there was really no liquidity whatsoever for office. So I think that as the Fed gets a little bit more -- a narrowing range of outcomes of interest rates, and the market feels a little bit more certainty around what the sort of range of path forward could be here, I think you're naturally seeing more liquidity come into the market, and I think that's what was reflected in our repayment.
Steven Cole Delaney
That's very helpful. And one quick follow-up to Doug's question. These loan sales that you were able to negotiate, are you seeing an increase in what I guess I would call opportunistic loan-to-own type strategies? Is that -- are you seeing real money, deep pocket money, or are these just more one-off property-specific situations?
Katharine A. Keenan
So these were not loan-to-own situations. These are well protected credit situations where we had just created an attractive return profile for -- that investors were interested in. And because of the duration of the loans and our overall portfolio management strategy, it was something that was attractive to buyers but also made sense for us. I think more broadly, I think people are looking around for loan-to-own, but I'm not sure there's been that much transaction activity in that area. But again, I think overall, there really is an increasing level of, I think, capital looking to deploy as the range of economic outcomes seems to be narrowing a bit from the perspective of what's going on with interest rates and the Fed.
Operator
And our next question is from Sarah Barcomb with BTIG.
Sarah Barcomb
So I was hoping we could dig into some of the assets on the watchlist. Specifically, I was hoping for a little bit more detail on the Miami office. Just a bit interesting to see that migrate from the 3-rated bucket to the 5-rated pool. Was just curious what was going on in the ground there. Is it related to insurance or some other issues? So hoping you could speak to that asset.
Katharine A. Keenan
Sure. So on that asset, that's an older vintage asset in an old fund in one of the few Class B assets in our office portfolio, which is generally 92% Class A. I'd say ultimately, there were some challenges around that asset specifically, but it is small relative to our portfolio. Really doesn't move the needle. And I think big picture, when you look at the overall portfolio, 10% of the portfolio is watchlisted or impaired office, and the rest of the portfolio is really performing quite well and producing these earnings, dividend coverage and stable book value. The overall portfolio is really mitigating the impact of some of these small pockets of deterioration.
Sarah Barcomb
Okay. And as far as the assets that were already watchlisted, but have final maturities this year, I was hoping you could kind of speak to any updates there as well, specifically the Woolworth building and the South Wacker office. There's also the retail asset in Chicago maturing this year. If you could give any color on those nearest-term maturities in that 4-rated group, that would be helpful.
Katharine A. Keenan
Yes. So as I mentioned in my script, we have deals on 80% of our 4-rated office at the beginning -- assets that were 4-rated office at the beginning of the quarter, we succeeded in getting deals on 80% of them with our borrowers moving to a more stable place. That's generally going to look a lot like what I mentioned in the call script. Paydowns, additional equity contribution, stabilizing the asset and giving more time for execution. We are seeing good progress in terms of business plan execution on some of our assets. There's been leasing. We have committed sponsors, which you can see through the equity coming into the deals. And so it really makes sense from our perspective to collect some of that equity in the form of deleveraging, make sure the assets are well capitalized to continue the leasing and giving more time to our sponsors, which are really working these assets.
Operator
And Jade Rahmani has our next question. Jade is with KBW.
Jade Joseph Rahmani
I was wondering your thoughts on the following. Given Blackstone's strength, broad platform, and BXMT's generally low LTVs and basis, why not consider offering borrowers preferred equity to buy them some relief while giving BXMT economic upside beyond book value in the turnaround? The equity -- preferred equity would be considered as total equity by lenders, and so would make refinancing away from BXMT more feasible while providing BXMT an economic participation in any upside. Do you have any thoughts on that?
Katharine A. Keenan
Yes. You're asking about the BXMT providing preferred equity to our borrowers to stabilize credit situations? Just so I understand the question.
Jade Joseph Rahmani
Yes.
Katharine A. Keenan
Yes. I mean, look, I think it's certainly something that we look at. As you know, historically, our business model has been very focused on senior lending. But in this environment, we are a very creative and opportunistic lender, and we're looking at a lot of those types of situations across the business, whether it's in BXMT or other platforms. And I think that you're exactly right that there is going to be opportunities for GAAP financing, rescue capital, whatever you want to call it, where you have the situation where an orderly deleveraging is required. Otherwise good assets, but loans that are too high leverage relative to where they should be. Maybe a previously 65% loan is now 75% or 80% today. There's a need for capital to come in at an accretive investment level. You might have a borrower that's like less able to invest capital.
I think the good news is for our portfolio, when we've seen those types of situations come up, we've seen our borrowers want to make those investments. So a lot of these paydowns look a lot like that. They're effectively buying the bottom of our loans at a reasonable return in order to delever their capital structures. And because we lend to borrowers that have a lot of capital, they are able to invest their capital themselves. But I do think that could be a very interesting opportunity in other portfolios as a new investment opportunity going forward from here.
Jade Joseph Rahmani
And on the new investment side, since you have such great credit performance thus far and such a strong liquidity position, why not kick start originations to capture some of these outsized opportunities? And if you were to do so, where do you see the greatest opportunities? Would not office be the best opportunity since there's still very few lenders out there looking at office and you can make such strong risk-adjusted returns there?
Katharine A. Keenan
Yes. So I mean, I think we're really pleased to be in the liquidity position that we're in, which gives us a ton of optionality in terms of looking at new investment opportunities or really just continuing to maintain that optionality. We start from the perspective where we have very strong earnings power, very strong dividend coverage, and so we can afford to be patient and make sure we have a very high bar for giving away some of that optionality. But it's certainly something that we're looking at.
As far as where we like the investment opportunity, I think we are seeing really attractive fundamentals in industrial, in data centers, in certain multifamily markets. We've talked in other venues about the attractive nature of the fundamentals in European industrial and the dislocation of capital markets from fundamentals in that market. And we've actually done some of that going back a quarter or two in BXMT. So I think we're going to look more in those areas. I think office is certainly an interesting area, and we're spending a lot of time thinking about how and when investment would go on there. But I do think that from a portfolio management perspective in BXMT, we're going to look to be more active in some of those other sectors that I mentioned.
Operator
And our next line, Don Fandetti with Wells Fargo has our question.
Donald James Fandetti
Yes. Katie, if you kind of step back and think about what's happened in office, I mean, the performance of the company has been pretty stable. And I was just curious if your base case is that we kind of stay in the zone where there's provisioning, but book value remains pretty steady. Or is this a type of situation where there's just enough lumpiness that we could come in and there's a big quarter where the book value's at risk? Or do you see more of like a steady path based on your ability to modify and things of that nature?
Katharine A. Keenan
Thanks, Don. I think that it will still take time for this to play out. But I think we have made a lot of progress in terms of just working through the issues that have come up, as you mentioned. We've had a lot of situations where we've seen assets that are in more challenged position, and we've worked with our borrowers to stabilize them. As I mentioned, sort of 80% of the 4-rated office coming into the quarter, we have secured deals with our borrowers in terms of more equity coming in and putting those assets, moving them from sort of an unknown to a known in terms of what we're going to see going forward from those assets.
We'll continue to see some issues crop up. In a portfolio of 200 loans, there's always credit migration, both positive as we saw this quarter and negative as we also saw, and I think we'll see that continue. And I do think there could be some lumpiness because we do have some larger loans in the portfolio. But overall, I think the experience we've had to date, it's a good indicator for what we could have going forward. And while we may have some lumpy quarters here or there, I think in the fullness of time, the earnings power of the portfolio as a whole provides such meaningful cushion against these pockets of deterioration that I think, again, when we sort of zoom out from the potential quarter-to-quarter, the strength of the business, the sort of inherent insulation of the business from having this earnings power, offsetting what we're seeing in a small portion of the portfolio, that dynamic seems to be working well.
Operator
And our last question comes from the line of Stephen Laws with Raymond James.
Stephen Albert Laws
Want to start, Katie, with I think it was referred to in the prepared remarks, kind of barbell in the portfolio. But when you think about identifying the problem loans -- or maybe how should we think about velocity of rating changes going forward? Will they slow down as you really identify the problems? Or kind of how much unidentified problems do you feel are left? And how much does that have to do with when you start originating new loans?
Katharine A. Keenan
So I think that we certainly have progressed through a lot of this. In the last -- we've been going through this rate cycle for over a year. We've certainly seen some of the challenges concentrated in older assets, so a lot of them have sort of come to the fore. And at this point, we've -- nearly all of our Chicago, San Francisco, D.C. office, we've already watchlisted. We've taken impairment on some of those appropriately, just given the environment. And I think we have made a lot of progress in the watchlisted assets of moving them into a more stable position, narrowing the range of outcomes. But as I said before, we do have a large portfolio. In the history of the business, we've always had credit migration, and so I think that we will see that continue. But the more we work through the portfolio and start bringing on new loans or not, but just working through what we have in the existing portfolio, again, I think we're really narrowing that range of outcomes.
Stephen Albert Laws
And then as a follow-up, I wanted to touch on the CECL reserve. I know -- I think of the $27 million increase, $7 million was on the new specific loan or 5-rated. But it looks like $9 million increase on non-U.S. loans. Can you talk about what drove that increase on the non-U.S. loans and what you're seeing there?
Anthony Francis Marone
Sure. So the general reserve changes, yes, as you probably are aware, those are not impairment decisions where we're making decisions loan by loan. That's where we're pooling these loans. Generally speaking, our loans are pretty comparable from a credit perspective across the U.S. and outside the U.S., but we do run our CECL math on 2 pools because of the natural geographic differences. So I'd say it's really movements in the macro metrics that drive our general reserve, things like the assumption around repayment date or the timing of future fundings and things like that, that we just saw move the needle a little bit more in the non-U.S. general reserve relative to the U.S. general reserve. So I wouldn't read too much into that other than how some of those data metrics move quarter-over-quarter.
Stephen Albert Laws
Appreciate those details.
Operator
And now we'll turn the call over to Tim Hayes for closing remarks.
Timothy Paul Hayes
Thank you, operator, and to everyone for joining today's call. Please reach out with any questions.
