Good morning, ladies and gentlemen, and welcome to the Killam Apartment Real Estate Investment Trust second quarter 2021 financial results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a Q&A session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 5th, 2021. I'd now like to turn the conference over to Philip Fraser, President and CEO. Please go ahead.
Thank you. Good morning, and thank you for joining Killam Apartment REIT's Q2 2021 conference call. I am here today with Robert Richardson, Executive Vice President, Dale Noseworthy, Chief Financial Officer, and Erin Cleveland, Senior Vice President of Finance, and Nancy Alexander, Vice President of Investor Relations and Sustainability. Slides to accompany today's call are available on the investor relations section of our website under events and presentations. I will now ask Nancy to read our cautionary statement.
Thank you, Phil. This presentation may contain forward-looking statements with respect to Killam Apartment REIT and its operations, strategies, financial performance, conditions, or otherwise. The actual results and performance of Killam discussed here today could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding forward-looking statements. For further information about the inherent risks and uncertainties in respect of forward-looking statements, please refer to Killam's most recent annual information form and other securities regulatory filings found online on SEDAR. Unless otherwise stated, all forward-looking statements made today speak only as of today's date. Unless otherwise stated, all forward-looking statements speak only as of the date of which this presentation refers, and the parties have no obligation to update such statements.
Thank you, Nancy. We are very pleased with our strong financial and operating results for Q2 2021. We are hopeful that all non-vaccinated Canadians will continue to book appointments to receive their first or second dose and that provincial restrictions will be lifted by this fall. Nonetheless, we are seeing increased leasing activity throughout our portfolio and increased activity in our seasonal MHC and commercial businesses. Our 2021 targets are outlined on slide three, showing the year-to-date performance. We have made good progress in the first six months of 2021 with all of our targets. We've produced positive same property net operating income growth for the 29th consecutive quarter and increased our same property NOI target to exceed 3.5%, up from our initial target of + 2%. Dale will take us through Killam's second quarter financial results, followed by Robert, who will discuss our recent acquisitions.
I will conclude with progress on both our newly completed developments and development pipeline. I will now hand it over to Dale.
Thanks, Phil. Highlights of Killam's solid Q2 financial results can be found on slide four. Strong fundamentals for the multifamily rental market is reflected in both same property growth and CAD 134 million in fair value gains on investment properties following cap rate compression in Ontario, Nova Scotia, and Victoria, BC. Overall, we achieved net income of CAD 136.7 million, 3.8% FFO per unit growth, and 4.5% AFFO per unit growth in the quarter. Killam's AFFO payout ratio decreased 400 basis points in Q2 to 75%. Please refer to slide five. Killam's same property portfolio achieved 4.5% NOI growth in the quarter and a 20 basis point improvement in operating margin from the second quarter last year. Year to date, same property NOI is up 3.6%. Killam's key revenue levers are charted on page six.
Apartment leasing and occupancy have been trending up since the beginning of 2021, and we achieved 96.9% same property occupancy in Q2. Rental rates were also higher in the quarter, up 3.1% from June 2020. Although we've seen an uptick in rental incentives in the last year, these incentive offerings remain limited to 0.7% of rental revenue and are currently focused primarily in Alberta and specific properties with occupancy challenges. In addition to top-line growth from our apartment portfolio, we realized strong revenue growth from both our MHC and commercial portfolios. Revenue for our MHC portfolio was up 8.5%, driven primarily by our seasonal resorts, which realized revenue growth of 20%, as we didn't face the same COVID-related operating delays and capacity restrictions as last spring.
For the commercial portfolio, same property revenue was up 4.5%, following new leasing activity and a reduction in COVID-19 related tenant abatements versus Q2 2020. Killam's suite repositioning program is an important revenue driver that has remained resilient during the pandemic. Slide seven shows that we are on track to meet our target of 550 repositionings for 2021. Of the 287 repositionings completed in the first half of the year, the average investment of CAD 25,000 resulted in an average ROI of 13%.
Killam only commences repositioning once its units become vacant. The capital investment on these repositions not only support rental growth and attractive returns, but can also improve the efficiency and modernization of the property. With unit repositioning processes, designs, and trusted contractors in place, we are successfully completing and re-leasing most of these repositioned units in under a month. Turning to operating expenses on slide eight, we realized a 3.3% increase in same property expenses for the quarter as to higher general operating expenses were modestly offset by lower overall property tax expenses. The operating expense increase was largely due to higher on-site staff salaries and higher repair and maintenance work versus the same period in 2020, in part due to COVID-19 related restrictions last year. Slide nine highlights our debt maturity profile, including average apartment mortgage rates by year versus prevailing CMHC insured mortgage rates.
We realized a 69 basis point reduction in interest rates on CAD 14.9 million of maturing debt in the quarter. Based on current CMHC insured mortgage rates of between 1.8% and 2%, we expect to continue to refinance. Slide 10. Debt as a percentage of total assets was 44.5% at June 30th, below our target for the year of less than 47%. In addition, Killam finished the quarter with acquisition capacity of over CAD 250 million. I will now turn the call over to Robert, who will provide color on our recent-
Please refer to slide 11. Killam continues to expand its portfolio coast to coast, and today we own more than 18,000 apartment units, 1,500 MHC sites in 39 communities, and approximately 1 million sq ft of commercial premises. Killam houses over 35,000 residents, and these residents are 700 employees, valued unit holders, and broader stakeholders, are kept top of mind when we execute Killam's long-term growth strategy, specifically growing earnings from our existing portfolio, acquiring accretive properties as we diversify our portfolio geographically, and developing high energy efficient, high quality properties in our core markets. Killam has made impressive gains with each of its three growth strategies year to date in 2021. Q2 2021 was a record quarter for acquisitions, led by a purchase in Ontario. Our core Ontario markets include Ottawa, the GTA, Kitchener-Waterloo-Cambridge, and London.
We anticipate acquisitions, plus new developments will make 2021 a year of record growth for Killam's asset base. On June 30th, 2021, we closed on a 785 unit portfolio in Kitchener, Waterloo. Please refer to slides 12 through 15 for acquisition details. The acquisition price was CAD 191 million and represents a cap rate of approximately 3.5%, was completed with cash on hand, plus new first mortgage financings totaling CAD 123 million, having a weighted average interest rate of 2.08%. We are very pleased to add this 11 building portfolio to our KWC asset base. These properties have been exceptionally well-maintained, are in sought-after neighborhoods, and provide excellent opportunities for Killam's suite repositioning program. Recent leasing activity highlights the portfolio's strength and underlies the ability to move rents on turnover.
Slide 12 shows The Estates, a 137-unit mid-rise concrete building in Kitchener that is currently 99% occupied with average in-place rents of CAD 1.53 per sq f t or CAD 1,320 per month. Market rents on turnover are more in the CAD 1.70 range. The next slide profiles Heritage Place, which consists of two mid-rise buildings totaling 160 units in Kitchener. It is 99% occupied with in-place average rents of CAD 1.58 per sq ft or CAD 1,170 per month. We are generating leasing rental rates more in the CAD 1.85 per sq ft ange. The KWC region is one of the fastest-growing regions in Ontario over the last several years, with incomes that are ranked amongst the highest in Ontario.
It has undergone major renovations and revitalizations in downtown residential and commercial buildings to house its growing technology and innovation sector that counts Google, Toyota, and OpenText as some of its largest employers, to name a few. The region was ranked fourth overall out of 20 locations in Canada as surveyed in CBRE's 2020 Scoring Tech Talent report, ranking it first place for quality of labor and talent quality to cost metrics. By the way, Halifax scored 8% overall on the same survey. KWC has a large university base, being home to the University of Waterloo and Wilfrid Laurier University, and boasts improved transportation infrastructure with its new light rail transit system, plus the all-day GO Transit rail service in. Slide 16 shows a map of Kitchener-Waterloo-Cambridge. The green balloons represent assets that Killam has owned in this region prior to our recent CAD 191 million acquisition.
These highlighted properties include 440 units in four apartment buildings in Cambridge, two of which were built in the last six years, as well as Westmount Place, a 300,000 sq ft commercial property with its national grocer anchor, retail plaza, and office tower. More importantly, this site has two acres of residential development opportunity on which we plan to break ground in late 2021. Phase one will have 130. A 25% interest in Charlottetown Mall, taking Killam's total ownership now to 75%. As well, Killam added a 40-unit apartment building in St. John's, Newfoundland. Both are shown on slide 17. Charlottetown Mall is a stabilized, grocery anchored, enclosed mall located on 32 acres in Charlottetown, adjacent to the University of Prince Edward Island campus. Killam's former joint venture partner, RioCan REIT, sold their 50% interest on June 1st, and Killam acquired its additional 25% interest for CAD 10.1 million.
The remaining 25% interest was sold to a local PEI real estate company, APM MacLean. This local partner is strategic as it brings a regional leasing perspective, further development expertise, and community-level involvement to assist in revitalizing the center. Killam now manages the mall and is identifying opportunities to reduce the property's operating expenses and carbon footprint in the near term. The 40-unit, four-story apartment in St. John's, Newfoundland, is located beside an existing Killam property. Killam paid CAD 4.2 million for 38 Pasadena Crescent, which is fully occupied and has average monthly rents of CAD 860.
Before Philip concludes the formal part of this conference call with his development update, I want to reiterate Killam's commitment to the continued health and safety of its employees, residents, commercial tenants, and communities. Killam's COVID-19 management has included policies and procedures to reduce the spread of the virus, and this commitment is ongoing.
We offer in-office rapid COVID-19 testing and are pleased to report very high rates of vaccinations among our staff. We greatly appreciate the excellent work and dedication of our committed employees across the country, especially these last 16 months. I will now hand you back to Philip. Thank you.
Thank you, Robert. Leasing activity has been very strong for our three recently completed developments. As shown on slide 19, we have all but two units of the 349 units leased today. All three had a short and successful lease period despite the COVID-19 environment. Impressively, they are contributing to FFO growth within six months of completion, and during Q2, generated CAD 0.3 million of FFO. Slide 20 shows the operating margins and the annual NOI contribution of these assets. For the second half of 2021, the three properties are projected to produce CAD 1.2 million of FFO, and for 2022, approximately CAD 3 million of FFO. Our development pipeline provides us with an excellent opportunity to add high-quality real estate assets to our portfolio. Currently, we have five developments underway in the following cities: Halifax, Mississauga, Kitchener, and two in Ottawa.
Slide 21 shows the 497 units which will add CAD 240 million of new properties to our balance sheet over the next 18 months. The CAD 240 million is the total cost, not the IFRS value of these high-quality assets. Killam has invested CAD 6 million of equity into these developments, and we expect to achieve approximately CAD 0.07-CAD 0.08 of FFO per unit on a fully stabilized basis. We are pre-leasing The Kay in Mississauga and The Quay in Ottawa, and expect both to be open by Q1 2022. As shown on slide 30, the first phase of Westmount in Waterloo is expected to commence construction in Q4 of 2021. This is a 139-unit development and will be located at the corner of Erb and Dietz Street, and is next door to our existing Westmount Plaza.
We are building in markets where the demand is strong, and the market cap rate compression is still allowing for a healthy 50- 150 basis point spread between construction yields and market cap rates. For reference, slide 31 breaks down Killam's future development pipeline, totaling approximately 4,000 units or CAD 1.3 billion in new product that is in various stages of development or pre-development. I am pleased to report that yesterday, the Board of Trustees approved a CAD 0.02 per unit increase in the distribution, bringing the annualized unitholder distribution to CAD 0.70 per year and making it the fifth consecutive year of a distribution increase. To conclude, I want to thank our residents, employees, and unitholders for their support and investment in Killam. I am very pleased with our ability to make meaningful progress in all of our priorities and create value for our unitholders. Thank you.
I will now open up the call for questions.
Thank you. Ladies and gentlemen, we will now begin the Q&A period. If you have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, please lift your handset before pressing any keys. One moment for your first question. Your first question comes from Mark Rothschild with Canaccord. Please go ahead.
Thanks, and good morning, everyone.
Good morning.
Thanks. In regards to the development portfolio, it obviously leased up well. Can you just talk a little bit about how the rents were versus your pro forma? also, if there was any thought or impact on the rents that you were charging with considering that government rent controls have been getting stricter and perhaps could be stricter for longer.
The first part of that question, our pro forma is what we started pre-leasing. We kept those throughout the whole lease-up period once it was open on all three developments. The second part, we believe that those rents are market rents today. Basically, one of the properties is in PEI that does have rent control. One is in Alberta. There's no signs of rent control, and we believe that rent control is not in the picture for Nova Scotia as well.
Okay, great. Thanks. Maybe this question might be for Dale, I'm not sure. Can you talk a little bit more about the process this quarter with arriving at the cap rate and fair value change? To what extent do you believe that's really reflective of current markets? Obviously, it's a sizable move.
Yeah, sure. We know there's been some sizable transactions in those markets where we took those gains. Certainly, we found a lot of competition with our acquisition in the Kitchener-Waterloo region, but you've seen some of our peers buying in London and Victoria as well. We felt there was, looking at what cap rate those traded at, a lot of time spent digesting that and looking at which of our assets fall into those categories. That was a big driver for us. I think in those markets, based on the information that we have, we feel that the cap rates that we've picked are reasonable. It's been pretty specific in those markets when we looked in the quarter.
In addition to that, you would've seen our revenue growth on the rents, so that's always a factor too, that comes into play when we look at those fair value gains. Those increases, of course, are more across the portfolio, as you would've seen reported, but those specific areas, they relate to the transaction activity we've been seeing.
Okay, great. Thanks so much.
Your next question comes from Jonathan Kelcher with TD. Please go ahead.
Thanks. Good morning.
Good morning.
First question's just on, Phil, you're talking about you've started pre-leasing at the Kay and Latitude. How is that going?
It's going as we expect. Basically, we have some already have signed up. Again, it's a little bit early, but we started these two properties earlier than we typically do. We're very pleased of the interest in both properties.
Okay. Just switching gears, I guess, on Kitchener, Rob, you outlined very good uplifts there. Does that include your repositioning program, or would your repositioning program be on top of that?
Yeah, the repositioning program would be on top of that 100%. We didn't do any repositionings with those increases.
Okay. What's the turnover like in those properties? How long will it take you to sort of realize those gains?
We haven't had it long enough to really know the turnover at this time, Jonathan. We need a bit more time with the portfolio. We can answer that for you next quarter, maybe.
Okay. I'll make sure I ask it next quarter. Lastly, just Dale, I guess, the R&M was higher in the quarter, and obviously that's due to a catch-up from COVID. What can we expect there for the balance of the year?
Sorry, in terms of what?
Well, is R&M going to be-
Oh, R&M. Sorry.
Yep.
I think what you saw in Q2 is not representative of what you'll see the rest of the year. When we look at Q2 last year, we had a lot of very extreme differences of what was happening in Q2, so I think you can expect much more moderate expense growth for the second half of the year.
Okay. That's it for me. Thanks.
Thank you.
Your next question comes from Matt Logan with RBC Capital Markets. Please go ahead.
Thank you, and good morning.
Good morning.
Thanks.
Would you guys be able to give us some color on how your leasing velocity is trending into the kind of fall leasing season, and maybe some color on where the committed occupancy for the portfolio is tracking for August and September?
Yeah, I can say that the velocity it's been really strong on the leasing front. When we look in terms of the fall, numbers are looking strong and I'd say kind of more in line with what we would've seen two years ago before COVID. We've even seen those students come back sooner than we would've. When we look at those student-focused markets, we saw a big push in May and June, kind of earlier than we would normally see. We're feeling pretty bullish on the occupancy trending for the fall. I can say even when we look over the last six months, seven months, we've seen those occupancies improving every month.
Peninsula Halifax is one we've talked about on the call since this time last year when we started to see a little bit more of the vacancy kick in because of students staying home. We've seen that come back in a big way, just as one example. St. John's is another one. We've made fantastic gains in the St. John's market. You would've seen that in our numbers this quarter, and that trend is continuing as well. Overall, there's lots happening on the leasing front.
In terms of any of those differences by region, would you say there's more strength in some of those harder-hit segments, or is it fairly equal across the board in terms of demand?
I'd say that St. John's is one that is standing out compared to where it was. I don't think it's totally equal across, but I'd say that we are starting to see more movement in the downtown of Alberta than we had seen. I don't think it's quite what we're seeing in Halifax and some other regions, but it's definitely stronger. not totally even, but I'd say improvement is pretty consistent across the board.
Yeah. The two areas that Dale just mentioned would be our two weakest in our complete portfolio, sort of the downtown Alberta cities and St. John's.
Appreciate that, Phil. Maybe changing gears a little bit towards your same property NOI target. Would you be able to give us some color on how your breakdown by segment for your apartment, MHC, and commercial portfolios?
Sure. When we look at the apartments, I think that one probably kind of three to four range when we look for the second half of the year. I think we're seeing those rent increases we've seen already are going to continue, and we have some occupancy gains to be made on that front. As I already mentioned, and we're not going to see the same expense pressures we saw in the second quarter. I think on commercial and MHCs, those could have the potential to be higher than the apartments. On the MHCs, we were still as seasonal. You saw that big lift in this quarter on the seasonal assets. Q3 last year, we were still dealing with COVID and, we're still dealing with COVID, of course, but on the seasonals, we would've felt it more last Q3.
commercial, we've had good lease-up on our commercial spaces. I think all those things are going to come into play, that those segments have the potential to outperform apartments in the second half.
Well, I appreciate the commentary. I'll turn the call back. Thank you.
Thank you.
Ladies and gentlemen, as a reminder, should you have any questions, please press star one. Your next question comes from Joanne Chen with BMO Capital Markets. Please go ahead.
Hi. Good morning. Thank you. Just maybe on that, could you talk to some of the drivers that you're seeing that drove such a big improvement in your St. John and New Brunswick markets? What are some of the trends that you're seeing there?
Students would be one. When we look at the St. John's market in particular, the students. We've also grown our team there from a leasing perspective. I'd say that's one of the biggest factors in that market.
We're seeing some employment gains as well, especially in St. John. The Irvings are very busy, and they've built a new office building, and they're seeing an uptick in their employment for sure. That's going on. I think forestry's doing well, relatively speaking, and that's another contributor to what's going on in the marketplace. Economically, all three major centers in New Brunswick are seeing good activity. As Dale said, a big part of it is returning students is certainly helping the market.
That's good to hear. I guess, more broadly, how should we think, I guess right now, the mark-to-market opportunity for each of your major markets right now?
Overall, we'd have about a 15% mark-to-market, we'd say kind of coast to coast on average. Some markets are better than others. The Halifax market continues to be strong as mark-to-market. I think also Newfoundland's come back in a big way. St. John's is surprisingly strong, and so I think there's an opportunity now as the market tightens up to see some gains there. New Brunswick's been a big winner this last year. It really has been, and so there's probably more opportunity there. Not so much in the West.
Certainly when we look at the Kitchener-Waterloo's in Toronto, and London's another one. Those Ontario markets, of course, we're seeing that as well. It's always a question of where do those units turn and how long is it going to take to be able to.
Right. For sure.
Actually.
I guess if we were to move to the west side out, with Alberta, I guess there was a little bit of a pickup, I guess, with the rental incentives, but how has that trended since Q2? Are you seeing some improving conditions there since Q2?
We are.
Okay.
Yeah. Better leasing in the downtown. Downtown Calgary's made a good gain. We've had some staffing improvements, and we're seeing the markets get stronger.
Yeah.
As an indication, we started the year with our new development that we were part of the building of it, but buying the remaining part the 1st of January. We leased up 233 units in six months, and that's suburban sort of Northwest Calgary.
The vibe in downtown Edmonton also has done well. It's come on strong since the end of the quarter.
Okay. That's helpful. I guess maybe just switching gears, last one from me, to the acquisition side of things. How are you thinking? You guys obviously have had a very busy Q2, but what do you think the pipeline is looking like for the remainder of the year, given how competitive some of the pricing environment is right now?
There is good sort of supply in terms of what is being offered or is about to be offered right across the country. As you also mentioned, it's very competitive. We've got basically our eyes on a couple other opportunities in Ontario and out west, and we're even looking here in Atlantic Canada again at a couple opportunities.
Okay. No, that's helpful. Thank you very much. I'll turn it back.
Thank you.
Your next question comes from Matt Kornack with National Bank. Please go ahead.
Good morning. Just a quick follow-up on the last question with regards to the pipeline. It seems like you're saying there's still a fair bit of product on the market, but have you found that as the operating environment has gotten a little easier and, well, who knows what happens with capital gains, but that some of the private sellers have shied away from selling? Is it still the same sort of volume of acquisition [crosstalk] opportunities that we saw?
The number of opportunities is probably greater, but it's not the midsize portfolio opportunities that were available between reporting first quarter and now. Those all have sort of been digested and basically bought or are under contract or closed. When I talk about opportunities, you're back to looking at single-asset opportunities in these markets.
Okay. No, that's fair enough. On the affordable housing focus that you noted, you have 828 units, 5% of the portfolio, you want to grow it by 20% by 2025. Is that going to come in the form of acquisitions, or would you potentially develop new product or even add affordable units to existing development projects? Just interested in how you scale the affordable housing component.
Sorry. I think it's going to be both. For instance, once we start our first phase of Westmount, that will have an affordable component attached to it. We're looking at opportunities that have affordable housing already there that you can buy from existing developers. Even on the drawing board, we've got a couple more that we'd be looking to see if we can make that affordable or a portion of it as well.
Okay, thanks, and congrats on a solid quarter.
Thank you.
Your next question comes from Yash Sankpal with Laurentian Bank. Please go ahead.
Good morning.
Good morning.
Just want to better understand your development projects. Those three projects that are fully leased now, what was your pro forma leasing period?
Sorry, you asked what was our pro forma leasing period?
Yeah. What were you modeling before?
You know what? We probably, even from a budgeting point of view, eight months on all of them.
Okay. Given this leasing success, how much NAV impact do you think? Could you give us some numbers, like in terms of what you paid or your cost versus how much lift you expect from just the mark to market?
Sorry, are you talking about the increase-
Those three projects.
in value?
Yes.
Yeah. Well, we're still working on that. Basically, what we have to do is get it stabilized, and again, we have them fully leased, but up and running. We got to basically go through at least a full cycle in terms of the operating expenses, and some of them vary because we've got solar power on the roof, and we're just trying to figure that out. Once we get that, we're expecting fairly good lifts from the cost yield versus what they're worth from an IFRS point of view.
Would that be between 25%-30%?
25 would be about 125 basis point difference in cap rate. I think that's kind of where it goes in.
Okay.
I think some of them, we've already taken some lifts, just to be clear. When we're doing development, we would take some lifts throughout the process. Some of those increases have already flowed through from the fair value. Once we start developing and we hit certain hurdles, we'll start taking some of those gains. There is still some to be taken, but some of it has already flowed through. With all of our developments, you'll see that come in throughout the piece, and then we'll kind of wait for the final, once we've had it for a year and see what those rents actually end up being, what the margins end up being that we-
No.
take that last.
The accounting part, I'm not too worried. I was trying to understand real economic impact between the cost you paid and the value you will get after these projects are-
Yeah.
fully stabilized.
Yeah. Well, I think that a lot of that information is disclosed when you look at our developments, what our actual yield is that we're expecting versus the cap rate. I believe it's on the slides generally for the developments that are down the pipe, so those kind of spreads. Yeah, we do include that. Sorry to share all that.
Those are expectations. This is actually happening.
F or the end of Q3, our reporting then, we will give exact sort of numbers of what we think we're going to be able to do on the sort of the increase in value of those three properties.
Okay. Now, given the success you have had with these projects, has your outlook about your development strategy changed in any way? Do you want to take on more projects, or do you want to accelerate your existing pipeline? Any change in your view?
Well, I think that thought basically occurred to us a number of years ago, which has translated into the five current ones that we're doing. In terms of the overall dollar amount of those three compared to the five that we have basically in the ground today, and a number of them that are going to be finished within 12 months, as I said earlier, it's CAD 240 million of cost, and we will have CAD 60 million of equity in the ground. Through the slide deck, you can sort of see what we're thinking in terms of creating value just from those five projects. Our share is 500 units. Then in behind that, from our pipeline, we've got the next three or four that we're working on now.
As we finish up this batch or round of these developments, we'll have a number of new ones hopefully started in the next 12- 18 months.
Do you have any internal threshold that you don't want to cross in terms of how much investment you put in your development bucket?
Well, we've always lived by, it's less than 4% or 5% of the balance sheet.
Okay. That's good color. Thank you.
Thank you.
Thank you.
There are no further questions at this time. Please proceed.
I would like to thank everyone today for listening and participating on our second quarter call, and we look forward to reporting our results in November on the results of our third quarter. Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day