Apr 26, 2016
Executives
Gary Shiffman - Chairman and Chief Executive Officer Karen Dearing - Chief Financial Officer
Analysts
Jana Galan - Bank of America Merrill Lynch Nick Joseph - Citigroup Drew Babin - Robert W. Baird Paul Adornato - BMO Capital Markets Jason Belcher - Wells Fargo Ryan Burke - Green Street Advisors
Operator
Good day, ladies and gentlemen, thank you for standing by, and welcome to the Sun Communities' First Quarter 2016 Earnings Conference Call on April 26, 2016. At this time, management would like me to inform you that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in this morning's press release form and from time to time in the company's periodic filings with the SEC.
The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release. Having said that, I'd like to introduce management with us today: Gary Shiffman, Chairman and Chief Executive Officer; and Karen Dearing, Chief Financial Officer.
Throughout today's recorded presentation, there will be an opportunity to ask questions.
Gary Shiffman
Good morning, and thank you for joining our first quarter earnings conference call. Thus far, 2016 is proving to be another excellent year for Sun Communities.
As we continue to successfully execute on both our organic and external growth strategies. Our team delivered a strong operational quarter on a year-over-year basis with same community NOI growing in the high single digits, same-site rental rate growth of 3.4%, a 25th consecutive quarter of occupancy growth and a 41% increase in new and pre-owned home sales.
At the same time, the team continue the pursuit of one-off acquisitions heading one manufactured housing and one RV community during the quarter, while also underwriting and negotiating the recently announced pending acquisition of Carefree. We’re particularly excited about the Carefree acquisition as it further improves the quality of our already best in class portfolio.
It increases our presence in key high barrier prime coastal markets include Florida and California and also expands our age restricted communities to 33% of our total communities from the current 25%. From a growth perspective, Carefree adds approximately 3,000 expansion sites, an increase of 42% to current expansion site inventory.
In short, this transaction reinforces our prominent position in the industry and upon the close of Carefree, Sun will control and operate an extraordinarily high quality manufactured home in RV community portfolio. For the quarter, FFO of $0.90 per share reflects a strong operational performance as we grew both rate and occupancy.
These results will somewhat offset by the dilution from our strategic disposition in the fourth quarter and the impact of two sequential quarter equity offerings. Both of the offerings were transacted above NAV and has supplied Sun with a capital to pursue transformational growth opportunities.
We believe the opportunity to acquire high caliber properties in efficient large transactions is now limited and that are incremental external growth opportunities are more likely to be smaller in scale and highly targeted to deepen our presence in key markets, along with site expansions and selective greenfield development. Before I turn the call over to Karen to discuss our results in more detail, I wanted to give you a brief update on Carefree.
We’ve made significant progress on the debt financings for the acquisition and are achieving a better cost and term structure than we initially underwrote. We are on track to close the transaction in or before July and are deeply into the integration process applying our proven practices and procedures.
We are holding proactive meetings with the Carefree management team to facilitate streamline onboarding of both communities and financial reporting, realigning our regional vice president and property assignments to strategically include a mix of Carefree and Sun properties and team members to promote and facilitate the most effective simulation of two platforms. Additionally, we are already focusing on the integration of web and digital marketing platforms to assure that our systems are all linked and ready to capture both reservations in sales Day One.
We’re extremely excited to fully onboard Carefree and resume our sector leading earnings growth once we have accretively deployed our equity capital. And with that, I’ll turn the call over to Karen.
Karen?
Karen Dearing
Thank you, Gary. For the first quarter ended March 31, 2016, we delivered funds from operations of $56 million, up 11.5% from the prior year quarter or $0.90 per share.
Our reported FFO excludes certain items detailed in today’s press release. Revenues for the first quarter rose by 12.5% to $174.6 million, an increase of $19.4 million over the same period in 2015.
The growth in revenues reflects the solid performance across all of our segments, the effectiveness of our organic growth initiatives as well as realizing the benefits of the Sun platform as we completed the integration of properties acquired last year. We were able to achieve robust revenue growth even as our total number of communities and developed sites decreased year-over-year due to our recent dispositions.
Our developed site number decreased slightly by 93 basis points, while total portfolio occupancy increased by 260 basis points to 95.5%. Taking a look at our same community performance, for these 219 communities, revenues increased by 6.6% which was primarily comprised of a 3.4% weighted average rent increase and a 250 basis point increase in occupancy from the prior year.
Same community NOI was up 6.4% compared to the first quarter of 2015. Expense growth of 7.2% for the quarter was slightly elevated due to higher than expected medical claims in our self-insured health plans and adjustments made to real estate taxes for certain updated assessment.
Our exceptional operational performance is consistent across both our MH communities and RV resorts. In our manufactured housing portfolio, same community revenues grew by 6.3%, driven by a 210 basis point improvement in occupancy and rent increases of 3.4%.
Demand to live in our communities remain strong with applications up 6% year-over-year for our same communities. Total same community RV revenues also increased by 6.3%, comprised of an 8.3% increase in annual seasonal revenues and a 3.8% increase in transient revenues.
These results are right in line with our budgeted growth expectations in both of these categories of RV revenue. The RV industry is experiencing continued growth driven by consumer’s preference for the RV lifestyle and innovative RV designs.
Our call center reservations are up nearly 6% year-over-year and net revenue book to our call center is up 11.5% compared to Q1 2015. Our summer reservations are trending strongly as we are 40% reserve for our expected transient revenues and are head of where we were at the same time last year.
The outreach to new and prospected guests through our social media campaigns continues to grow, and is driving significant traffic to our website as visits to sunrvresorts.com are up 9.5% as compared to March 2015. Another driver of our results is home sales, with total combine home sales for the first quarter of 2016 of 765 units, an increase of 40.9% from the prior year.
Pre-owned home sales increased to 699, up from 477 in 2015, while new home sales were 66 for the quarter. The average selling price of our homes also continued to increase with an average home sales price of almost $83,000 for new homes and $27,500 for pre-owned homes, up 4.3% and 13.5% respectively.
The rental program which provides an effective way to deliver occupied expansion sites and introduces new home buyers to our product, also produce sound results. In the first quarter, weighted average rent increased by 3.7% compared to the prior year.
We also moved 294 homes out of the rental program as a result of sales, for an increase of 113 rental home conversion sales as compared to Q1 2015. Occupied rental homes declined by 3.1% from March 31, 2015 to approximately 10,800 sites, as a result of the home sales I just mentioned along with the disposition of our Indiana for our fourth quarter.
On a sequential basis, rental homes increased by 130 homes, nearly all of the increase was an acquired properties that have yet to achieve full occupancy. Now I’d like to turn to our transaction activity in balance sheet.
We began 2016 by continuing to enhance our portfolio supported by capital markets activity. During the quarter, we acquired one manufactured housing and one RV community comprised of 740 sites of $37.8 million.
The communities are located in Texas in Michigan and we’re funded with cash from 1031 Exchange proceeds related to dispositions completed in November of 2015 leaving $87.1 million in [indiscernible]. Additionally, as Gary discussed, in March we announced the acquisition of the Carefree portfolio, the purchase price of $1.68 billion provide for Sun to assume approximately $1 billion of debt, issue the seller $225 million in common stock at an issuance price of $67.57 per share and pay the remainder in cash.
In conjunction with this transaction, we completed an equity offering at the end of March in which we sold just over 6 million shares of stock at a price of $66.50 per share. We are very pleased with the investor reception of this offering which was both upsized and significantly over subscribed.
Due to our intent to lock in our cost of capital relative to the anticipated closing of the transaction, we expect a quarterly impact from the offering of approximately $0.8 per share until we deploy the capital. We intent to replace the $1 billion in short-term debt that we are assuming with new debt and we’ve already rate locked approximately $850 million at attractive interest rates with a weighted average maturity of 10.3 years.
We will provide more details when the transaction is complete. Our balance sheet continues to be a source of strength.
At March 31, 2016, we had $392 million of capacity on our line of credit and $410 million in unrestricted cash due to the end of quarter capital market’s activity in anticipation of Carefree transaction, and $87.1 million of restricted cash on the balance sheet as a results of the asset sold in November 2015. We ended the quarter with an interest coverage ratio of three times and a net debt to trailing 12 month EBITDA ratio of 5.5 times, which was down from 6.6 times at the end of 2015 due to the additional cash on hand.
Debt maturities remaining for the balance of 2016 amount to $107 million and we are exploring various refinance opportunities. And now turning to guidance.
At this time, we are maintaining our annual guidance range for 2016 which we provided in the 2015 yearend release. For the second quarter, we anticipate FFO in the range of $0.79 to $0.81 per diluted share.
The second quarter guidance incorporates the impact of the equity transaction that we completed at the end of Q1 but does not consider the impact of any transaction that have not yet been completed including the Carefree acquisition. We anticipate this transaction will close by July and after this complete, we will provide you an update on our outlook for the year including the impact at the recent capital markets activity as well as these assets.
And with that, I’d like to turn the call back to the operator to begin the question-and-answer session. Operator?
Operator
Thank you. We will now be conducting a question-and-answer session.
[Operator Instructions] Our first question comes from the line of Jana Galan with Bank of America Merrill Lynch. Please proceed with your question.
Jana Galan
Thank you, good morning. I was wondering if you could provide a little color on what the acquisition pipeline looks like now, I know you mentioned smaller deals but if you could comment on quality and pricing?
And then on bigger picture, once Carefree closes are you pretty much at your target allocations between MH versus RV and age restricted versus all age communities?
Gary Shiffman
Well, good questions Jana, I’ll take them from the pipeline first and the move forward. Obviously this is a very large transaction that we have to integrate so we are going to be very cautious moving forward with regard to taking on any additional acquisitions.
We do have a pipeline currently that is similar to the pipeline in size and quality as we’ve discussed over the quarters for the last few years. We did close on two properties this past quarter for about – is it $39 million, Karen?
Karen Dearing
$37 million.
Gary Shiffman
$37 million, and we’re able to very, very selective on what we’re seeing in our pipeline and what we’re underwriting and how we’re going to approach our acquisitions moving forward. So we’ll focus on the integration and creating value in the Carefree portfolio I would say over the next six plus months, but at the same time we will selectively continue to review high quality strategic acquisitions on a one-z and two-z basis.
With regard to cap rate, very little has changed. It’s the 6% to 7% cap rate range that we’re seeing out there with 50 to 75 basis points variance depending upon the quality of the individual assets.
And we’ll pretty much continue in the acquisition team business as usual being very, very selective.
Jana Galan
And on your allocation between MH and RV and then the age restricted and all age going forward?
Gary Shiffman
Sure. I think our targeted allocation was about 25% RV, 75% manufactured housing.
We’re probably within a few hundred basis points from being there post Carefree. So right now strategically that will be our target going forward.
Jana Galan
Thank you, and I appreciate on Karen’s comments on the RV results in the quarter, I know in the press release you mentioned converting RV transient sites to annual leases. Is that something that a trend you expect to continue going forward?
Karen Dearing
Yes we do, Jana, we have been very successful in doing that over the past couple of years, last year that will call correctly probably around 400 to 500 sites we’re converted from transient to annual and in our expectations for this year in guidance we would assume a similar sort of conversion from transient to annual.
Jana Galan
Thank you.
Operator
Our next question comes from the line of Nick Joseph with Citigroup. Please proceed with your question.
Nick Joseph
Thanks. What’s going in year one cap rate for the Carefree acquisition?
And then can you talk about the opportunities for upside from putting Carefree on to the Sun platform?
Karen Dearing
Sure, let me go to your cap rate question first. So, the cap rate that we can discuss is based on the pro forma trailing 12 all-in information that’s in the 8-K that was filed when we announced the transaction, and that is up five a quarter cap rate.
We look at this going forward on the forward basis and with the type of NOI growth that we can get to kind of expand that cap rate over the first three to four years. And with this transaction it’s sort of kind of melding of everything that we’ve been successful with all of our other acquisitions.
So in this case there is occupancy gains, the MH portfolio was 94% occupied, total portfolio was 97% but MH is 94%, and then it’s like 45% of our community is running at 98% occupancy or greater. We think we’ve got some occupancy gain growth from there.
There is great gain to occur there, RV average rents are lower than hours. Certainly benefits of scale and – but there is certain key things that are core strengths that transient to annual conversion, the implementation of our rental programs, vacation rental, cottage rental program and the home sales and home brokerage business all of those are core strengths and we’d be seeking to you like those to increase the value in these properties also.
So, and besides that even future growth you’ve got all the 3,000 expansion sites that are available also, so all of those sort of mixed together to make the portfolio perform very, very well and achieve the growth expectations that we set out when we do our acquisitions.
Nick Joseph
Thanks for the color on that. And then what’s the rate on the $850 million of debt and what was originally underwritten?
Gary Shiffman
So we’re actually not discussing the rates on the debt prior to closing of the transaction, Nick.
Karen Dearing
Yeah, let me discuss it this way. When we talked about the deal, we saw we could replace their short-term variable rate debt that was at 3.7% and we thought we could fix it with 10 to 12 year debt near that rate and expect – based on the indicative pricing that we had received at that time and we have not changed those expectations.
Nick Joseph
Okay, maybe I missed that, I thought in your opening comments you said that $850 million of debt was at a lower rate than what you had originally underwritten.
Gary Shiffman
That is correct.
Karen Dearing
That is correct.
Nick Joseph
Okay, okay. And then after the Carefree acquisition is completed, what percentage of the pro forma portfolio would you consider non-core?
Gary Shiffman
Yeah, I don’t think that there is a specific percentage we consider non-core, I think we shared with those investors that we talk to during the equity raise that we have been approached by a number of other interested parties in acquiring portions of the portfolio and we will address those discussions over the next few months. Not meaning to imply that there is any intended strategy to dispose of any of the properties but certainly we’ll look at all interest and make the best determination as we wrap our hands around the existing portfolio.
So at the stands right now we think that the majority, vast majority all of the properties that fit within our core strengths and strategically fit certainly within our markets.
Nick Joseph
Thanks. And then just finally on the same store expense growth, it sounds like it was more driven by unanticipated expenses more so than timings.
Do you think it’ll still be within the full year guidance of 3.3% to 4.3%?
Karen Dearing
Nick, I would say that there really are more timing related than one time, so we have – we are a self-insured for medical claims and so we are responsible for the claims as of incurred. We estimate off of prior year and it’s really just a function of one of those claims come in.
So we are a little bit higher in Q1 than what we had expected and that may even out through the rest of the year. And the other piece is really real estate taxes, our same community guidance included a 6% to 6.3% increase in real estate taxes, and that increase really included many estimates for potential changes that could occur in assessments.
And we are about $230,000 outside of our range of guidance during the quarter but so many of these assessments are still outstanding and they may or may not have an increase, so we’ll just have to continue to evaluate that as the year progresses. But truly both of the amounts appear to be timing at this point in time, so we wouldn’t make a change to our expectation of same side expense growth.
Nick Joseph
Thanks.
Operator
Our next question comes from the line of Drew Babin with Robert W. Baird.
Please proceed with your question.
Drew Babin
Good morning.
Karen Dearing
Good morning.
Drew Babin
I was hoping that the variance between the $850 million of net locked in with the fixed rate agreement and the debt assumed the Carefree deal, that extra $150 million plus of variance there, does that for modeling purposes we should assume deceased to one way the other or is there plan to potential refinance that debt in a separate transaction?
Karen Dearing
The debt will be deceased and we’ll go on alliance.
Drew Babin
Okay. And then secondly just on the property tax increases, what plans are in place or what it sounds kind of a standard procedure for appealing tax assessments, is it something that it’s ongoing from year-to-year, is it down from [indiscernible] and I guess you could kind of just talk about the percentage of them that are appealed and then the percentage of them that are adjusted following the appeal?
Karen Dearing
Well, we’re very aggressive with the real estate taxes appeals. We appeal – I want to say if 99% of significant real estate tax increases.
Over the years we’ve been very successful with those appeal. I would estimate 60%, 70% success rate on those appeals.
Drew Babin
Okay. And then one question that’s a bit of a housekeeping question but the remaining 1031 proceeds, could they theoretically be deploy to fund the Carefree transaction or would that need to be smaller acquisitions?
Karen Dearing
No, they will be released in May.
Drew Babin
Okay.
Gary Shiffman
So they will be…
Karen Dearing
And we’ll end up using for the Carefree acquisition, Drew.
Drew Babin
Okay, make sense. Thank you very much.
Karen Dearing
Thank you.
Operator
Our next question comes from the line of Paul Adornato with BMO Capital Markets. Please proceed with your question.
Paul Adornato
Thanks. You mentioned that cost savings were coming in a little bit better than what you’ve underwritten.
I was wondering if you could provide a little bit more detail there.
Karen Dearing
We were – I think we were discussing it in terms of debt Paul, when we had – we underwrote it at a particular estimated debt then we have indicative pricing and that was a bit better than what our initial underwriting was and…
Paul Adornato
Okay, so it was on the debt side, not on the operational side?
Karen Dearing
Correct.
Paul Adornato
Okay. And was just wondering in terms of the expansion portfolio, how fluid is that number that is, if you have a really good property, can you always find extra room for additional sites and what would be kind of the upper limit of expansion if you will?
Gary Shiffman
I don’t think we have what we’ve considered not for limited, it’s always supply and demand as we’ve shared with the market before we will start an expansion and invest in it there has to be full occupancy with continued strong demand. That full occupancy as Karen indicated, for all practical purposes and today’s Sun portfolio is at levels of 97%, 98% occupancy and above.
In fact, what we shared last quarter was a 104 communities we’re at 97% and above and today at the end of the quarter 119 communities or 97%. And now those 119, 83 were at 98% and above and today they’re 102 they’re 98% and above.
So it’s at that level of occupancy that we kick and gear on the expansions and I would say that there is no real cap on how much we would expand if we had the entitled ground to do so. We would just being expanding in small sizes of about a 100 sites at a time so that we never got too far ahead of ourselves.
Paul Adornato
Okay. And then you mentioned entitlements, do you have to go back and get additional entitlements or do the entitlements generally already exists?
Gary Shiffman
So, in the expansion sites that we’re talking about the entitlements exists but as with all entitlements as time goes by there are requirements to go and make sure current approvals, current requirements are similar to what the entitlement is provided for. So you always have to allow for three to nine month period of time before you can actually start construction on something that’s been entitled long time ago and much of the expansion sites in the Carefree portfolio had entitled quite a few years ago.
Paul Adornato
Okay. And finally just on the rental home program, do the rental homes appeal more to one demographic, I mean is that age restricted or all age – where did the rental home program work best?
Gary Shiffman
I think it works in all aspects of our manufactured housing communities. I think that much of the industry and our competitors have used both in age restricted and all age for similar purposes.
And what it does is we’ve shared before it takes a non-revenue producing site and creates revenue that wouldn’t otherwise be there if operated properly, you can then go ahead and converted that renter into an owner, and recapture the capital invested in that rental home. It’s part of the reason we think that our occupancies and our communities are now 97%, 98%, 99% because the renters do convert and there is no loss of revenue or a loss of occupancy when they convert.
And we find that similar both in age restricted and all age. So not much difference from that standpoint.
Paul Adornato
Okay, great. Thank you.
Operator
Our next question comes from the line of Jason Belcher with Wells Fargo. Please proceed with your question.
Jason Belcher
Yeah, hi. Sorry if I missed this, but can you please remind me what is the percentage of age restricted communities in the portfolio?
Karen Dearing
Age restricted is 25%.
Gary Shiffman
In the Sun portfolio, Jason?
Karen Dearing
In the Sun portfolio it’ll go…
Jason Belcher
Yes.
Karen Dearing
Yeah, it’ll go to 33% when the Carefree portfolio is added.
Jason Belcher
Got you, thank you. And then on the social media front, can you talk a little bit about what you guys are doing there to drive traffic and usage and maybe comment on any new initiatives that you might have underway?
Gary Shiffman
Well, I think what we do share is that web, social, digital, mobile and traditional marketing all help to really generate the leads into our call center and that’s the key driving component for us as to capture that lead and then to act upon it. About 42% of our reservations that are being generated on mind right now and as far as what we have campaign wise this coming season there are a number of programs that really focus on converting transient RV residents into seasonal annual residents so that we have a park and play program about to begin in May where we try and encourage increase in length of stay and eventually increase from transient to seasonal, so that will be our focus this coming year.
Jason Belcher
Great. Thanks a lot.
Gary Shiffman
Sure.
Operator
Our next question comes from the line of Ryan Burke with Green Street Advisors. Please proceed with your question.
Ryan Burke
Thank you. Can you please provide some insight on what the current appetite is from Fannie and Freddie in terms of lending at to property level and perhaps just a little bit on what that means for the refinancing opportunity for Carefree?
Karen Dearing
Sure. We have been actively engaged with both Fannie and Freddie in relation to the Carefree acquisition, also live company, so we’ve had significant appetite from the lenders with respect to lending on this portfolio.
I think they’re focused on the very high quality assets and quality borrowers. And I would say very strong appetite from Fannie and Freddie on lending in the portfolio, including Freddie is doing lending on the RV side for the RVs that have significant amount of annual RV site.
Ryan Burke
Okay, would you say it’s better or worse or sort of unchanged from say two years ago?
Gary Shiffman
I would say at this time for most favored buyers it is better, and as Karen indicated earlier, we were quite pleasantly surprised with the interest exhibited by all three of the lenders types that she discussed and it allowed us to aggressively bid out the segments of the Carefree debt and tranches. And I think we could share with you that between Freddie, Fannie and live companies that is where we have locked in our rates to move forward on the refinancing.
Ryan Burke
Okay. And then in regards to what sounds like a potential disposition or joint venture opportunity on some of your assets, what’s the general profile of asset that you’re targeting there?
Gary Shiffman
I think it’s been varied, I wouldn’t Ryan want to leave anyone to believe that there is an eminent JV or anything like that but I would share that there is discussion. And most of it is coming from other bidders in the process with Carefree who remain interested especially financial funds, and some of it is coming from severance both in Canada and outside North America.
And for some we will just cautiously approach that strategy and if the proposed structure is something that we think they sense from the shareholders then we would certainly execute on it but there is no specific profile of what the categories of those segments in the portfolio might look like, just expressed interest and investing in the segment and seeing if some would be interested in proceeding engaged with continued management of those properties.
Ryan Burke
And is there interest in both portions of the Carefree portfolio plus portions of the legacy sound portfolio?
Gary Shiffman
Yes.
Ryan Burke
Okay. And then last question just on same store operating results for the quarter.
How did the Green Courte or the role in of the Green Courte portfolio in the same store will impact same store revenue and expense for the quarter?
Karen Dearing
I think the Green Courte portfolio in its kind of earlier stage in our platform and under our operation, so it performs a little bit – if I look at it on an annual basis the expectations that portfolio will perform a bit lower than what our core portfolio would do. And we would expect that it would grow to what the rest of the remaining portfolio would have as far as growth the longer that it’s under our platform and in our operations.
Ryan Burke
Does that speak towards the current operating environment for age restricted versus all age or is that more so an integration thing from yearend would you say?
Gary Shiffman
It’s really integration.
Karen Dearing
It really is integration.
Gary Shiffman
I mean it’s performing to our expectations and what we shared with Carefree going forward is that it will perform equal to, if not stronger than our core portfolio over the next three years as we integrated and the same is true I think with regard to the ALL portfolio and then we’ll [indiscernible] out three, four years out and continue to perform similar to the core portfolio. So Green Courte is performing as we budgeted and underwrote it, so there is nothing that’s a surprise to us, it’s just spending the first year integrating, it is a challenge that’s behind.
I think one of the things that’s interest about the ALL portfolio when we talk to the operators and the operational team about it they no longer segregated as a separate portfolio and considered it as part of the core portfolio in Sun. So it’s getting harder and harder to extract how it’s running as compared to the core portfolio, it’ll just be integrated with our same site portfolio.
Ryan Burke
Okay. And so it sounds like the property tax increase that we saw for the quarter was sort of more broadly based across the entire portfolio as supposed to anything specific with Green Courte?
Gary Shiffman
Yes, and in fact I’ve noticed in our competitor. We’ve seen real estate tax increases in Colorado specifically and the majority of that tax increases related to Colorado properties.
And I also would share that in any underwriting we do a very, very thorough job investigating down at the county all the way to municipal level. We’ve been doing this for many, many years.
We do underwrite four increases in real estate taxes where we can expect them, and as Karen indicated, when we’re going through this entire year after acquiring really with $1.7 billion in 2015 roughly including the full Green Courte you’ll have some ups and downs and hopefully we’ll have some estimates where we’ve provided for increases and those increases will materialize.
Ryan Burke
Okay, thank you.
Operator
There are no further questions at this time. This concludes today’s teleconference.
Thank you for your participation and you may disconnect your lines at this time.
Gary Shiffman
Thank you.