Hello and welcome to today's ACRE Q4 2022 earnings conference call. My name is Bailey, and I'll be the operator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, John Stilmar. Please go ahead when you're ready.
Good afternoon, and thank you for joining us on today's conference call. I am joined today by our CEO, Bryan Donohoe, and our CFO, Tae-Sik Yoon. In addition to our press release and the 10K that we filed with the SEC, we've posted an earnings presentation under the Investor Resources section of our website at www.arescre.com. Before we begin, I want to remind everyone that comments made during the course of this conference call and webcast, as well as the accompanying documents, contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may, and similar such expressions. These forward-looking statements are based on management's current expectations of market conditions and management's judgment.
The statements are not guarantees of future performance, condition, or results and involve a number of risks and uncertainty. The company's actual results could differ materially from those expressed in the forward-looking statements as a result of a number of factors, including those listed in its SEC filings. Ares Commercial Real Estate assumes no obligation to update any such forward-looking statements. During this conference call, we refer to non-GAAP financial measures. We use these measures of operating performance, and the measures should not be considered an isolation from or a substitute for measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like title measures used by other companies. Now I'd like to turn the call over to our CEO, Bryan Donohoe.
Thanks, John, good afternoon, everybody. This morning we reported fourth quarter results, which included the second highest level of quarterly distributable earnings in our history of $0.44 per share and capped off a strong year, where our annual distributable earnings of $1.55 per share matched our previous record in 2021. Throughout 2022, the overall strength in our distributable earnings was driven primarily by the continued benefits of our nearly 100% floating rate, interest rate sensitive asset base. In addition, we hedged or fixed approximately a third of our liabilities. 2022 was a very successful year in which we fully covered our regular and supplemental dividends from distributable earnings at 110%. We made a conscious decision to bolster our liquidity and further strengthen our balance sheet throughout much of the year.
While our strong distributable earnings benefited from the tailwinds of higher interest rates, these same higher interest rates have also led to some headwinds for the overall commercial real estate market. Specifically, we're seeing many property owners take a pause on executing business plans as they adjust to these historic increases in market interest rates. At the same time, certain markets are experiencing weaker leasing and occupancy trends. As has been well-publicized, the office market in particular was facing challenges from shifting demand in a post-pandemic economy. Although we believe our senior loan-oriented portfolio has been carefully constructed, we aren't immune to the effects that these market headwinds present. As you'll hear from Tae-Sik, these industry-wide movements have resulted in higher credit reserves, a greater number of loans in default or on non-accrual status, and elevated risk ratings.
We are very focused on maximizing the outcomes for these situations, and we believe we are well equipped to handle them. It's important in the context of these broader industry headwinds to take a minute to review our positioning and capabilities. At Ares, we believe we have a demonstrated playbook on navigating volatile markets and capitalizing on illiquid environments. Our approach during these periods is first and foremost to operate with additional liquidity while keeping an eye towards opportunistic investments. The Ares Real Estate Group has over $51 billion of assets under management and more than 2,000 properties globally managed by over 240 investment professionals. This provides significant advantages to ACRE in helping understand markets and in tapping into extensive asset-level experience.
These insights led us to shift into a more defensive posture in 2022 and puts us in a better position to navigate a more complex real estate market going forward. Our overall liquidity was enhanced by $823 million in principal loan repayments during 2022, a new record for our company. In addition to these loan repayments, we realized more than $38 million of proceeds from the sale of the Westchester Marriott in the first quarter of 2022. This was a property where we became the owner in 2019, successfully navigated operationally through COVID, and executed the business plan for the property. This led to a positive return through the total life of the investment and highlights one of the many ways we can achieve successful outcomes with a property operating below plan.
In terms of our investment activity during 2022, we originated $725 million of new loan commitments with more than a third of such new commitments in the multifamily sector. Additionally, we invested opportunistically in AAA securities backed by a diverse pool of underlying loans. Looking forward, there is significant uncertainty regarding the commercial real estate market and property values. Our focus will be to resolve certain situations to maximize outcomes while prudently deploying capital into attractive new investment opportunities. We believe our liquidity and property level expertise position us well to successfully navigate and ultimately capitalize on the current environment. With that, let me now turn the call over to Tae-sik to walk through some of our financial highlights and further details on our portfolio and capital position
Great. Thank you, Bryan, and good afternoon, everyone. For the fourth quarter of 2022, we reported GAAP net income of $2.9 million or $0.05 per common share and distributable earnings of $23.9 million or $0.44 per common share. For full year 2022, GAAP net income was $29.8 million or $0.57 per common share, and distributable earnings were $80.7 million or $1.55 per common share. For full year 2022, similar to 2021, we more than fully covered our dividends through distributable earnings at 110% as we continued to build on our long-term track record of having distributable earnings per share in excess of both the regular and supplemental dividends.
Most notably, we have delivered a consistent and growing dividend throughout the life of our company with no history of dividend reductions or delays. Turning to our asset base, we ended the quarter with a loan portfolio consisting of 98% senior loans and an outstanding principal balance of $2.3 billion diversified across 60 loans. During the fourth quarter, we collected 99% of our contractual interest due. In terms of our other credit quality metrics, 80% of our loan portfolio had a risk rating of 3 or better, which declined from 90% in the third quarter of 2022. This change primarily reflects the negative migration of one office property loan and one mixed-use property loan, which were downgraded from 3 to 4 due to our outlook on their respective business plans and our macroeconomic view of their respective submarkets.
As it relates to CECL, we increased our total reserve by $19.4 million during the Q4 2022, and our total CECL reserve stands at $71.3 million, or about 3% of our total loan commitments at year-end 2022. Shifting to post-quarter-end activity, in January 2023, we successfully resolved a senior loan backed by a residential property located in California. Through our structuring capabilities and the experience of our asset management team, we were able to recover approximately 98% of our cumulative cash investment in this loan. On a GAAP basis, we expect to take a $5.6 million realized loss in the Q1 2023.
As we held a specific reserve on this loan as of year-end 2022 in the same amount, we do not expect any material net GAAP loss in the first quarter of 2023 in connection with the resolution of this loan. This loan was our only risk-rated 5 asset at year-end 2022. Since year-end 2022, driven by some of the broader market dynamics that Bryan mentioned earlier, three additional senior loans experienced maturity defaults, including two loans backed by mixed-use properties and one loan collateralized by an office property. While we have different paths to pursue for each of these three loans, our asset management team is highly engaged with a goal of maximizing the financial outcomes of each situation.
Our confidence stems from our experience and capabilities in managing underperforming situations and the strength of our balance sheet, which should provide us flexibility and liquidity as we seek to maximize outcomes. We remain in a very strong liquidity position with more than $200 million of available capital as of year-end 2022, including cash and amounts available for us to draw on a revolving credit facility. Our debt-to-equity ratio of 2.1 times, amongst the lowest of our peer group, provides us additional balance sheet strength and stability. Finally, this morning, we announced a first quarter 2023 regular dividend of $0.33 per common share, as well as a continuation of our supplemental quarterly dividend of $0.02 per common share. With that, let me turn the call back over to Bryan for some closing remarks.
That's great. Thanks, Tae-Sik. Despite rapid changes in interest rates and significant volatility across credit markets in 2022, ACRE delivered compelling distributable earnings and strong dividend coverage. We believe there are three key factors that helped us successfully navigate this environment and position us positively for 2023. The first is the strong operating capability of our platform and property level expertise. The second is our low leverage balance sheet and strong liquidity position. The third is our use of non-mark-to-market financing. Let me close by saying that we are deeply grateful to our investors for the trust and confidence they have demonstrated in Ares and their support of the company. I'd also like to thank our entire team for their hard work and dedication in 2022. With that, I'll ask the operator to open the line for questions. Thank you.
Thank you. If you would like to ask a question, please press Star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press Star followed by 2. Again, to ask a question, please press Star followed by 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question today comes from the line of Steve DeLaney from JMP Securities. Please go ahead. Your line is now open.
Thanks. Hello, everyone. Appreciated your comments. To start off with, you know, we noted that the portfolio did actually shrink fairly meaningfully in the first quarter. I think you had $56 million of originations and a little over 300 repays, so a net of about a shrinkage of 263. That was 11% of the portfolio. As we think about that, I know, you know, things can be chunky and it can be anomalies, but looking out, you know, to mid-2023 or even the end of 2023, we're in this more cautious period. Should we, from a modeling standpoint, expect some continued shrinkage, or is it your goal to try to maintain the portfolio at relatively close to the current size? Thank you.
Yeah, thanks for the question, Steve. I'll get started, Tae-Sik can obviously jump. Well, I think I wouldn't point to that as enough of a data set to identify.
Sure.
I think overarching, we sit here today in what we believe is a pretty enviable position of having liquidity both to be defensively positioned for assets that will need some capital, as well as to attack an environment that is candidly one of the best relative values or highest relative values that we've seen in the past couple cycles. I don't think it's something to point to that we expect the portfolio to continue to shrink, but rather we're positioned to take advantage of idiosyncratic risk positions in a very fruitful market.
That might be a great lead-in to my next question. You know, we noticed that you made just one new loan of $56 million. Given the backdrop and all the chatter about office, maybe we were a bit surprised to see that the one loan that you chose to make in the quarter, you know, was an office property in the upper Midwest. Does this tie into your comments about, you know, being opportunistic? You know, what caused you guys to think that's an attractive investment for your loan portfolio? Thanks, Bryan.
Yeah, absolutely. I think, look, we noted the headwinds in office, and I think we spend plenty of time debating that really as an industry group, right? I think there's.
Right
... there's certainly assets in the cash flow profile of this building. Continued cash infusion by the borrower made it an attractive risk return for us. As we've touched on in prior quarters, I don't think you're gonna see generally our office footprint increase over time. There are one-off asset situations that are attractive as you continue to see industry-wide. I think the headwinds are not insignificant, but that doesn't mean there aren't assets that will be successful.
Got it. Thanks for the comments.
Thank you. Appreciate it, Steve.
Thank you. The next question today comes from the line of Jade Rahmani from KBW. Please go ahead. Your line is now open.
Thank you very much. In terms of the credit trends that we're seeing, you know, the mortgage REITs consistently have been taking an uptick in credit reserves and experiencing, you know, an increasing number of one-off maturity loan defaults. How would you characterize the overall environment? Are you seeing sort of a broader and widespread downturn in commercial real estate credit? Do you believe that this is focused within the debt fund and mortgage REIT space, or do you think banks and life insurance companies as well as CMBS are experiencing the same?
It's a good question, Jade. Appreciate it. What I'd say first and foremost is the factor that is uniform throughout all types of real estate lending is the precipitous increase in base rates, right? I think, you know, certainly we saw assets benefit from lower LIBOR, SOFR, going back two, three years. The stress in the system when you have a 400 basis point increase in rates obviously hurts from a coverage perspective, but also eventually cap rates as well. I think the advantage, if I could point to one with respect to the mortgage REIT or private lending space, if you will, is the more active asset management that is available to us without some of the fee loads that you might see in the CMBS sector as you work through some of these issues.
I think the capitalization obviously and, is a bit different. Tae-Sik, turn it over to you for anything you might wanna add as well.
Yeah. Brian, just to maybe add to some of your points. Jade, I think what we're seeing is, you know, and borrowers who are, you know, most impacted by the movements in interest rates, you know, are the ones that are being obviously the most impacted given the dramatic, you know, volatility first in the drop in rates and now the sharp increase in rates. You know, we're also seeing maybe a second category of borrowers who have, you know, what we define as, you know, maybe a little bit more challenging business plans that are harder to execute, again, in a market where not just interest rate volatility, but, you know, different trends happening in terms of, for example, office utilization, you know, more supply coming on into certain markets.
Really those are, I would say, the two general trends or buckets of challenges we're seeing. You know, those that are really impacted directly, and I don't say just by changes in interest rates, but primarily by changes in interest rates. Those that have, you know, a bit more challenged or difficult business plans that are just more difficult to execute, again, in a more macro challenge environment.
Thank you very much. The risk 4 and 5-rated loans, I believe those would be considered the watch list. Can you talk to the percentage of those that are funded on credit facilities and that are funded within CLOs and what the liquidity requirements therein would be from ACRE's available capital?
Yeah. Tae-Sik, do you wanna take this one?
Sure. Yeah. No, absolutely. Thank you, Brian. Jade, it's a great question, and obviously, you know, when we look through our portfolio, you know, as you know, we are very, very careful about making sure that when we finance an asset, that we know that if something goes wrong with that asset or there's a challenge with that asset that, you know, that we have the liquidity and the capability to, you know, to resolve that. One of the things that we mentioned is obviously the amount of liquidity that we have available to us today, you know, more than $200 million in our opening remarks. Certainly one of the potential uses of that is to potentially deal with any loans that we have in either CLOs or on one of our warehouse lines.
You know, the loans that, you know, have been status four or status five, the one loan that we hadn't satisfied, the, you know, the ones that we have had on for a while, you know, those are either unlevered in some situations or, you know, we are clearly working with the warehouse lender on those situations. Again, we have the liquidity to handle those types of situations. The more recent ones that, you know, have had some maturity default issues, the three that we mentioned since year-end, again, it's a mixture of loans that are either in warehouse lines or in our CLOs. Again, you know, given our liquidity situation as well as the diversification of financing vehicles that we utilize, you know, as you know, we have two different CLOs.
We have, five different line lenders. We make sure that, you know, that we have diversification by those, by those financing vehicles. We feel, you know, we're in a pretty good spot to be able to deal with, you know, the leverage of our senior loans that are risk-rated fours at this point.
Yeah. Maybe I'll just add one thing, Jade's question, just some specificity around it. You can assume roughly half of those risk-rated four or five loans are unlevered. I think that speaks to the approach we've consistently taken as Tae-Sik was outlining.
Unlevered including both CLO and credit facility?
That's correct.
Thank you very much.
Thanks.
Thank you, Jade.
Thank you. The next question today comes from the line of Rick Shane from J.P. Morgan. Please go ahead. Your line is now open.
Thanks everybody for taking my questions, and hope everybody's well. When we look at the K, what you disclose is that at the end of the fourth quarter, there were $45 million on non-accrual. As you also discussed on this call and in the K, there's an incremental $150 million of maturity defaults at the beginning of this quarter. I'm curious if the $150 is additive to the $45 million of non-accruals, or is some of that $150 already on non-accrual?
Tae-Sik Yoon, I'll let you take that.
Sure. Rick, thanks for your question.
Yep.
No, thanks, Brian. Yeah, no, Rick, the loans that are on non-accrual as of 12/31/2022, does not include any loans that we mentioned, the 3 loans that went into default in the first quarter of 2023. You know, we will obviously continue to evaluate those loans. We certainly evaluated them as of 12/31/2022. Obviously, we've now had a subsequent event to that. We will evaluate it. But to answer your question, none of the non-accrual loans as of 12/31/2022 included the 3 loans that subsequently went into default.
Got it. Not to be too cute here, but when I read the accounting policy, it doesn't sound like there's any discretion on defaulted loans for nonaccrual. Unless there's resolution by quarter end, that $150 million will be on nonaccrual, correct?
Yeah. I think, you know, we will look at each situation. You know, basically we have historically put loans that have, you know, some of the loans that are on non-accrual have not been in default, and we're still paying interest. I think going forward, you know, we will certainly evaluate these 3 loans that are now in maturity default, you know, as well as any other loans. There is time between now and end of the quarter to, you know, work with each of the situations to, you know. Each situation is quite unique, but we will continue to work with each of the 3 situations.
I do think it's too early to maybe make a forecast or some sort of estimate of, you know, the non-accrual status potentially of those 3 loans that are in maturity default today. Again, we will certainly work through very carefully all 3 situations and, you know, make the proper assessment, you know, at quarter end, at the end of first quarter.
Got it. Okay. That's obviously there are a lot of moving parts there. There's discussion with the accountants. There's potential resolutions, potential visibility to outcome that impacts all that. That said, if we were to assume that they were placed on non-accrual, $150 million, assuming roughly an 8% yield, that works out to about $3 million a quarter in contribution from an interest income perspective. Is that the right way to think about it?
Yeah. I mean, each each loan, you know, I think you can tell on our sheet, you know, will have its own, you know, interest rate. Yeah, that sounds roughly about the right calculation. Again, as you mentioned, you know, I think we will be, you know, scrutinizing and certainly paying a lot of attention to all 4 rated loans, right? Certainly those 3 included. I think you outlined the considerations that we will take into account, you know, particularly what we believe, you know, is the ultimate outcome of these of these loans. I think, you know, one thing that Bryan mentioned in his opening remarks, is that, you know, each one of these, particularly 4 rated loans, you know, is a very sort of individual situation.
A four rating doesn't indicate a loss, doesn't indicate non-accrual, it does indicate, you know, a loan that deserves and warrants higher scrutiny and attention. I think we should leave it at there at this moment, just given that it's sort of mid-quarter. Suffice to say that, you know, these loans are getting, you know, very strong attention from our asset management team, very strong attention from our finance and accounting team. You know, we believe we will make the appropriate decision closer to, you know, closer to quarter end about, you know, what is the appropriate classification of these loans going forward.
Fair enough. I appreciate the fact that with all of the different interests involved, negotiating with the sell side analysts on the resolution on a call, probably not your intent.
Thank you, Rick.
Thanks, guys.
Thanks, Rick.
Thank you. The next question today comes from the line of Stephen Laws from Raymond James. Please go ahead. Your line is now open.
Hi. Good morning. I guess good afternoon. To follow up quickly on Rick's comment, you know, how much are we Is this already reserved for as far as the Q1 events in general that'll move to be reallocated as a specific reserve in Q1? Or do you expect material increases in the reserve? Yeah, how should we see that flow through in Q1?
Yeah. Tae-Sik, why don't you get started here, if that's all right. Sure. No, absolutely. Great question, Stephen. You know, I think one thing that is important to recognize is that, you know, when we look at our CECL reserve, you know, close to $50 million of that $71 million balance that we carry at year-end is related to four or five level, you know, four or five rated loans. You know, we did resolve the five rated loan, as we mentioned, you know, the residential loan out in California that was resolved, and that it was $5.6 million of the total reserve. Overall, at year-end, you know, just under $50 million or about 70% of the reserve, you know, was, you know, was tied to the four or five rated loans.
It doesn't mean obviously that that reserve isn't going to change up or down, we do believe that, you know, certainly, you know, a strong majority of our reserve is focused on and is allocated to and derived from the 4 or 5 rated loans. There is clearly a connection between the risk ratings and the reserve amounts. Again, that doesn't mean there won't be any change. In terms of, you know, migrating from general to specific, you know, thus far in our company's life, you know, we've only had the one specific reserve, you know, which again, was the residential loan in California that was rated a 5. We carried a specific $5.6 million reserve against that asset.
Obviously, once it was resolved, the realized loss came very close to the specific reserve amount. We believe we have classified that appropriately through its life. Again, I think it's too early to forecast or give you any further insight. Certainly as of year-end 2022, we do not believe that there was any other basis for specific reserves on any of the 4 rated loans or otherwise. Again, we will continue to evaluate all the loans, particularly those that are rated 4, to see if any migration from 4 to 5 from general to specific is warranted. I still think it's again too early in the quarter to make any general forecast or assessment.
Thanks for those comments, Tae-Sik. To touch base on the office exposure, you know, I know 1 of the 3 loans I believe was office, other 2 mixed use of the 3 loans that went into non-accrual in Q1. You know, it looks like 3 of your 4 largest office loans have a maturity date in Q1. You know, can you talk about those loans or those discussions? Do you expect repayments or extensions or modifications? How do you expect those, I guess it's loans, 1, 2, and 4 in the office exposure?
Yeah. Good question, Stephen. I think we're working through and we're in dialogue with those folks. I think similar to what we said at the outset, there's not enough of a data set necessarily to point to with those three loans. They each have different profiles in terms of where they're at in their business plan, and some of the normal discussions you'd expect to occur are ongoing. I think it'll be a bit dynamic, but things that we're working through in normal course at this point.
Okay. Great. Thanks, Bryan.
Thank you.
Thank you. The next question today comes from the line of Eric Hagen from BTIG. Please go ahead. Your line is now open.
Hey, thanks. Good afternoon. I hope you guys are well. Hey, in the downgraded loans where you're seeing, I think you noted a deterioration in the business plan. Can you get more specific on what you're seeing there? Like, how much of an additional funding component is associated with those loans? How the weaker business plan in general just kind of affects the debt yield or the value of the asset in general. How are you guys thinking about hedging interest rate risk from this point forward? Like, what are some of the variables that you're looking at to either maybe put on some more hedges or potentially lighten up in that department? Thanks.
Good question. I'll start on the business plan and then, you know, share the mic with Tae-Sik a little bit with respect to your latter question, Eric. Thank you. Yeah, I think as I said in the opening remarks, right, we're seeing these just the macro headwinds in certain sectors. Office obviously being the point of the spear to a degree. What that means is either renovation or value add component of the business plan is taking longer. In certain instances throughout our broad industry function of supply chain issues and increased costs associated with those renovations. As you know, in general, our industry would have completion guarantees, things like that associated with those business plans.
They are at times taking longer, and I think while the benefit I noted earlier of lower SOFR and lower LIBOR for a period of time benefited these capital structures were where the cost of carry is simply higher than what some projected, by next underwriting their assets. When you combine that element of stress at the capital structure level with some slower leasing intervals in certain assets, that's really what I'm speaking towards. Tae-Sik, you wanna talk through on the interest rate side what our thoughts are and some of the impacts that we've seen from what we did proactively a couple years ago?
Sure. No, absolutely. Eric, great question about, you know, our thoughts on interest rate hedging. Just a little bit of, you know, context and history, and I'll just keep this very, very brief. You know, our, you know, our thoughts on liability management has always been focused on match funding, right? When we have 98% floating rate assets, you know, we wanna match that with floating rate liabilities. Really the reason, you know, we did a very, very large hedge, you know, about two years ago, was not really to forecast which direction interest rates would move, but again, consistent with our policy and consistent with our goal of match funding.
You know, we had the fortunate situation where we had significant in-the-money, interest rate floors on our assets, such that even though technically they were floating rate loans, they were economically behaving like fixed rate loans, because we were so deeply in the money with LIBOR floors that were, you know, 150 to 250 basis points when LIBOR was, you know, 10 to 20 basis points. They were behaving like fixed rate loans, and so we felt it very consistent and, very appropriate to therefore match fund our now economically behaving fixed rate assets with some fixed rate liabilities. That's when we entered into a very large, you know, interest rate hedge, about $1.3 billion, if I recall, about two years ago.
Obviously we were very fortunate to have done that, not knowing, of course, which directions interest rates would move. You know, of that, you know, we still have around a third of that, about $410 million of notional amount of, you know, hedges in place today. In addition, you know, we were, I think, you know, taking advantage of the interest rate curve. When we refinanced, I'm sorry about my voice here. $150 million secured term loan, we did decide to take that on a fixed rate basis, and we're able to lock in a very low interest rate there as well.
I would say going forward, you know, I think we'll continue to be guided not by our prediction of where interest rates are headed, but really our policy of match funding our assets and liabilities. Right now, again, we have a 98% floating rate asset base, and so I think we will focus in the future on a floating rate liability base.
Got it. That's helpful detail. Thank you guys very much.
Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star followed by 1 on your telephone keypad. Our next question today is a follow-up question from Jade Rahmani from KBW. Please go ahead, your line is now open.
Thanks. Just a quick clarification. I think Rick Shane said there's $45 million of loans on non-accrual as of year-end. I thought the value was the carrying value was around $99 million. Just wanted to check that number.
Jade, I think it's a good point. We had, you know, 1 loan that's $57 million, a second loan that is $35 million, The 1 loan that has been subsequently resolved, again, the L.A. residential, the Los Angeles, California residential asset of about $14 million. I think those are the 3 loans that were on non-accrual at year-end. Obviously, the California loan has been resolved, the other 2 are remaining.
Okay. Thanks very much.
Yeah. I think the $45 million was as of year-end 2021. Maybe there was some thought. It is $99 million as of year-end 2022.
Thanks.
Thank you. There are no additional questions waiting at this time, so I'd like to pass the conference over to Bryan Donohoe for any closing remarks. Please go ahead.
Appreciate it. I just wanna thank everybody for their time today. We appreciate your continued support of Ares Commercial Real Estate, we look forward to speaking to you again on our next earnings call. Thanks, everybody.
This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.