Service Properties Trust
NASDAQ:SVC
Earnings Call Analysis
Q4-2023 Analysis
Service Properties Trust
As we review the latest earnings call, it's clear the company has faced a mix of challenges and opportunities, much like the broader lodging industry. Demand has softened and profits are squeezed by rising operating costs. However, the company is preparing for a brighter second half of 2024, banking on economic recovery and increased business and international travel.
Given the current market softness expected to persist through mid-2024, the company has strategically decided to use this period for significant reinvestment into their properties, anticipating subsequent performance improvements and attractive returns. Hotel revenue has seen a slight decline, with RevPAR (Revenue per Available Room) falling by 2.2%. This has been primarily attributed to 23 ongoing renovations that have disrupted operations. However, when excluding properties under renovation, RevPAR was stable, edging down merely by 0.3%. Interestingly, it's the Food and Beverage (F&B) sales that led the total revenue increase of $7.1 million.
Breaking down performance by hotel type reveals varied results. The full-service hotels actually increased their RevPAR by 0.4%, boosted by strong group and contract business segments, notably in major cities. The select service hotels, however, faced a significant RevPAR drop of 5.8% due to the high number of renovations. The extended stay segment also saw a modest decline in RevPAR by 2.8%, but this was largely because of market-specific factors, differing from city to city.
There's been an observable shift in revenue segmentation, with transient stays accounting for a reduced 72.5% of total Q4 revenues. Concurrently, group and contract segments are on the rise. The company expects a promising uptick in group business, forecasting a 22.5% increase, translating to an additional $19 million in 2024.
Looking ahead, the first quarter of 2024 is projected to deliver $77 to $80 in RevPAR with hotel EBITDA estimated to be in the $28 million to $31 million range. The company has strengthened its balance sheet by securing new financing and extending its debt maturity profile. It currently holds $5.6 billion in fixed-rate debt at an average rate of 5.94% and possesses strong liquidity with $100 million in cash and a fully undrawn $650 million credit facility.
The company remains assertive in its investment strategy, having allocated $106 million for property improvements in the last quarter. A continued aggressive renovation agenda is outlined for 2024, with expected capital expenditures between $250 million to $275 million. About $80 to $100 million is budgeted for maintenance, while the remainder is earmarked for the renovation of 36 hotels across various service levels. To maintain shareholder trust, a quarterly dividend of $0.20 per share has been announced, backed by a robust 48% normalized FFO payout ratio.
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Good morning, and welcome to the Service Properties Trust Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Stephen Colbert, Director of Investor Relations. Please go ahead.
Good morning. Joining me on today's call are Todd Hargreaves, President and Chief Investment Officer; and Brian Donley, Treasurer and Chief Financial Officer.
Today's call includes a presentation by management, followed by a question-and-answer session with analysts. Please note that the recording, retransmission and transcription of today's conference call is prohibited without the prior written consent of SVC.
I would like to point out that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on SVC's present beliefs and expectations as of today, February 29, 2024. Actual results may differ materially from those projected in these forward-looking statements.
Additional information concerning factors that could cause those differences is contained in our filings with the SEC, which can be accessed from our website at svcreit.com or the SEC's website. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call.
In addition, this call may contain non-GAAP financial measures, including normalized funds from operations, or normalized FFO, and adjusted EBITDAre. Reconciliations of these non-GAAP financial measures to net income as well as components to calculate AFFO are available in our supplemental operating and financial data package, which can be found on our website.
And with that, I'll turn the call over to Todd.
Thank you, Stephen, and good morning. SVC's fourth quarter results reflect themes we are witnessing across the lodging industry as demand has moderated and high operating costs are impacting profits.
While we expect market softness to continue during the first half of 2024, we are optimistic that the back half of the year should improve due to macroeconomic factors and improved business and inbound international travel. We are using this time to invest capital into our hotels, which we expect will lead to improved performance and an attractive return on investment.
Now on to our results. During the quarter, we experienced a moderate top line decline in our hotel portfolio as year-over-year comparable ADR growth was offset by reduced occupancy, leading to a RevPAR decline of 2.2% and reduced hotel EBITDA largely due to disruption from 23 active renovations during the quarter. Excluding the hotels experiencing renovation impacts, RevPAR was flat, decreasing by 30 basis points from the previous year quarter, while total revenues increased $7.1 million led by F&B sales. We expect the pace of renovations to remain elevated during 2024.
Our portfolio of full-service hotels gained 40 basis points of RevPAR over the previous year quarter, led by gains in our group and contract segments, which were up 6.2% and 10.2% year-over-year, respectively. Strong group business was driven by corporate demand at our hotels in Cambridge, Las Vegas and San Francisco and contract revenues fueled sizable ADR increases at our Sonesta-branded hotels in Redondo Beach, San Juan and Kauai. The notable $7.1 million of increased revenues mentioned earlier was mostly the result from banquet and catering as well as expanded hours at our F&B outlets in our 3 downtown Chicago Royal Sonesta properties.
Our portfolio of select service hotels experienced the most disruption during the quarter, leading to a RevPAR decline of 5.8% year-over-year as 18 of our 61 hotels were under renovation. Our Sonesta Select portfolio grew RevPAR by 1.3%, much of which was driven by airline contract revenues in the Atlanta, Phoenix and Los Angeles markets. Our extended stay portfolio experienced a 2.8% decline in RevPAR year-over-year when excluding 3 hotels under renovation.
This segment has seen reduced occupancy from non-repeat long-term extended stay business for medical-related and project-based accounts while shorter-term stays with higher ADRs have increased. The results in this segment were largely market-dependent with positive RevPAR relative to 2022 at our extended stay hotels in Boston, San Francisco and Sunnyvale, offset by declines in San Diego, Reno, Dallas and Atlanta.
Segmentation in our portfolio shifted away from transient, which represented 72.5% of total revenues in Q4 due to a continued softening in leisure demand while group mix increased 1.3% year-over-year to 18.1% of revenues and contract mix increased 80 basis points to 7.3%. 2024 full year group pace is up $19 million or 22.5% over the same time last year with strong growth across all our operators.
OTA revenue as a percentage of total revenues decreased from 27.6% to 25.9% year-over-year during the quarter. And our operators continued to focus efforts on driving bookings to their websites to lessen the dependency on third-party channels that charge commissions.
Sonesta remains focused on building its brand through spend on advertising, marketing and IT initiatives. Travel Pass continues to see increased consumer adoption, evidenced by the mix of room nights in Sonesta full-service hotels increasing by 16.5% year-over-year.
Heightened operating expenses are impacting margins. And while our operators lessened their reliance on contract labor by filling open positions, below the GOP line expenses have increased, notably real estate taxes up $2.5 million from Q4 2022 and insurance costs up $2.4 million from increased premiums as well as deductibles paid on a higher number of claims.
We expect near-term disruption in our portfolio as renovations are completed during the upcoming quarters. However, we are already starting to see the benefits of these renovations at some of our recently renovated hotels with substantial RevPAR increases. And we are expecting upcoming renovation hotels to also benefit from these much-needed improvements.
Turning to our net lease portfolio, which represents 45% of SVC's portfolio by investment. As of December 31, 2023, our 752 service-oriented retail net lease properties were 97.1% leased with a weighted average lease term of 8.8 years. Our lease maturities are well laddered and only 2.1% of our net lease minimum rents expire prior to the end of 2024. The aggregate coverage of our net lease portfolio's minimum rents was 2.46x on a trailing 12-month basis as of December 31, 2023.
The decline sequentially is largely driven by softer EBITDAre reported by TA for Q4 2023. Notably, the increase in fuel margins that TA benefited from post pandemic due to increased trucking activity has returned to more normalized levels, consistent with levels immediately preceding the pandemic. And these properties remain some of our most stable investments as rent payments are guaranteed by investment-grade-rated subsidiary of BP. Rent coverage for our other retail net lease tenants was stable at 3.7x.
Transaction activity during the quarter consisted of no acquisitions and 9 net lease dispositions for an aggregate sales price of $8.8 million. As we have discussed previously, we continually evaluate opportunities to optimize our portfolio, specifically trimming our lodging portfolio of lower-performing hotels that have been a headwind to overall EBITDA.
After careful analysis, we have begun to market 22 Sonesta hotels totaling 2,832 keys for disposition, including 9 Sonesta ES Suites, 5 Simply Suites, 7 Sonesta Selects and 1 full-service Sonesta hotel. These hotels have a net book value of $162 million and an aggregate reported negative EBITDA of $4.7 million during 2023.
In addition, each of these hotels were slated for renovation in future years, which should reduce our overall CapEx spend. We expect that aggregate RevPAR and hotel EBITDA margins for the remaining hotel portfolio will improve with the removal of these subset of hotels. We also have 1 other hotel under contract to sell for $3.3 million that is part of our Radisson agreement.
To wrap up my comments before turning it over to Brian, we are confident that the hotel portfolio will see improved financial and operational performance as renovation capital is invested and after the expected dispositions of the 22 hotels that I discussed.
In addition, our net lease portfolio provides consistent, dependable cash flows with 68% of annual minimum rents coming from an investment-grade-rated tenant in BP. With over $750 million of total liquidity and a large pool of highly valuable, unencumbered assets, our balance sheet is well positioned with no debt maturities until 2025.
I will now turn the call over to Brian to discuss our financial results in more detail.
Thanks, Todd, and good morning. Starting with our consolidated financial results for the fourth quarter of 2023, normalized FFO was $50 million or $0.30 per share versus $0.44 per share in the prior year quarter. Adjusted EBITDAre decreased 6.2% year-over-year to $141.2 million.
Our results this quarter as compared to the prior year were impacted by higher interest expense, a decline in hotel EBITDA and lower rental income recognized. Rental income decreased by $4.1 million this quarter compared to the prior year, largely as a result of our percentage rents recognized last year under our historical lease terms with TA, partially offset by increased minimum rental income recognized under the revised terms of our leases with TA following the BP transaction last May.
Turning to the performance of our hotel portfolio. For our 219 comparable hotels this quarter, RevPAR decreased by 2.2%, gross operating profit margin percentage declined by 210 basis points to 26.3% and gross operating profit decreased by $6.4 million from the prior year period. Below the GOP line costs at our comparable hotels increased $4.9 million from the prior year, driven primarily by increased property insurance and real estate tax expense.
Our 221 hotels generated hotel EBITDA of $43.6 million, a 19.3% decline from the prior year and below our guidance range of $45 million to $49 million, driven by higher expenses and renovation disruption. By service level, hotel EBITDA year-over-year declined $6.1 million for our 49 full-service hotels, $3.1 million for our 61 select service hotels and $2.8 million for our 111 extended stay hotels.
Turning to our expectations for Q1. We're currently projecting full quarter Q1 RevPAR of $77 to $80 and hotel EBITDA in the $28 million to $31 million range. We will continue to see softer seasonal results through the remainder of the winter months before activity picks up in the spring. Our portfolio will also see continued disruption in 2024 at hotels we have under renovation.
Turning to the balance sheet. During the fourth quarter, we successfully executed on a new 8-year $1 billion senior secured notes offering at 8.625% and repaid all $1.2 billion of unsecured notes that were scheduled to mature in 2024. Interest expense is projected to be $91.5 million for the first quarter of 2024 following these financings.
We currently have $5.6 billion of fixed rate debt outstanding with a weighted average interest rate of 5.94%. Our next debt maturity is $350 million of senior notes maturing in March 2025. We currently have $100 million of cash and our $650 million revolving credit facility is undrawn for total liquidity of $750 million.
Turning to investing activity. During the fourth quarter, we sold 9 net lease properties for a total price of $8.8 million. We made $106 million in total capital improvements at our properties during the fourth quarter and we expect to make capital expenditures of $250 million to $275 million in 2024 as we continue to ramp up our renovation program within the hotel portfolio.
Of this capital spend, we expect $80 million to $100 million of maintenance-type capital with the rest going towards renovation capital. We expect 36 hotels across all of our service levels to be under renovation throughout 2024. In January, we announced our regular quarterly common dividend of $0.20 per share, which we believe is well covered, representing a 48% normalized FFO payout ratio for the year ended 2023.
That concludes our prepared remarks. We're ready to open the line for questions.
[Operator Instructions] Our first question comes from Bryan Maher with B. Riley FBR.
Just a few for me. On the hotel renovations, can you try to quantify for us what you think that, that's going to do to hotel margins and/or RevPAR throughout the year? And then maybe drill down a little bit on the non-maintenance CapEx spend, what type of level of activity is going to go on at those 36 hotels? And does any of that include the Nautilus that you bought last year in South Beach?
I'll start. Thank you for the question. As far as quantifying the disruption and potential activity, it's going to be a little choppy. In Q4, we had 23 hotels under renovation. And we saw a significant reduction in RevPAR for the hotels in the 20% range and EBITDA pretty much eroded for that hotel portfolio set. As we look forward, we're going to have hotels coming out of renovation, where you get the nice lifts and the expected improvement of position of the hotel and RevPAR index and so forth.
So we're going to have some ups and downs. Net-net, we're projecting RevPAR, it won't be as drastic as the 20% RevPAR decline for the 23 subset. So overall, we're projecting about a 1% to 2% disruptive displacement in RevPAR for the full year. So again, we're going to have stuff going down, stuff coming back. There will be some offsetting going on. So it won't be as material in our view today for the year.
And as far as what we're spending, we've got the 17 Hyatts that were in full swing in Q4. And those are expected to wrap up in early Q2. And that's everything from guest rooms and public space and some exterior work. And the same is going to be done for the renovation capital in the Sonesta portfolio. We've got a couple of full-service hotels.
Our Hilton Head property, for example, we're doing all the rooms offseason in the winter months here now. We're going to do the public space at the end of the year when the summer season is over. And we have a full slate of select service and extended stay hotels that we're doing the same thing. We're going through the rooms, the public areas, some facade work and so forth. So it's a pretty comprehensive program.
And Nautilus?
So the Nautilus, the maintenance capital that we mentioned does not include a lot from the Nautilus. The majority of the Nautilus is likely going to be completed in 2025. So it does not include any maintenance or renovation related to that.
Okay, two more. I mean, you made some comments about TA. And I get it, the year-over-year stuff. But you talked about the guest margins getting back to pre-pandemic levels from the elevated that we saw over the last couple of years. I just want to clarify though that given the lease structure you have with BP, none of that is really relevant to you and what you get rent-wise. It maybe just impacts what the coverage is. But with BP as a credit, it's kind of like who cares, right?
Exactly right, Bryan. We're just illustrating that we do report coverage for our whole portfolio. And it's such a high weighting in that calculation. But you're 100% right. And we have -- we sleep well at night knowing we have the credit behind us in those lease payments.
Okay. And then lastly, and I'll hop back in the queue, we don't talk much about your net lease assets outside of TA. But there's been a lot in the press regarding retail and retail demand seems to be strong for real estate. And I know that you've been selling a few assets, kind of smallest non-core properties. Can you just give us a little bit of color on how many more sales there are to go, kind of what you're selling? And when you do go to re-lease those properties, what kind of rent roll-ups are you seeing?
Sure. So yes, there's a lot of good points there. We're seeing the same thing on the retail side. We're starting to see more demand, especially in the investment sales market. The -- our portfolio, specifically over the past few years, you've really seen us sell mostly vacant properties as we really haven't really been buying anything, and we've just been selling properties as they become vacant and we don't think we have a good sense of leasing those.
What you might see us do going forward now that we're getting back into -- they're still volatile but a little bit more stable capital markets and buyer activity out there, is you're likely going to see us sell -- potentially sell some more stable assets. I think we've cycled through most of the vacant stuff that we knew were issues when we bought SMTA back in 2019. But we have -- I think we have about 20 vacant properties left. There's a handful more that are probably coming. I think we're up to 97% occupancy in terms of number of properties.
So -- and then in terms of the rent roll-ups, generally, we've been at least maintaining rents or rolling up rents. There are some situations, you see it a lot with the movie theaters, if we re-lease those, a lot of those were very high rents on a per square foot basis for the size of those properties. There was a lot of TI amortization in those rents as well. So that's why you might see some rent roll-downs.
Some of the longer-term sale leasebacks that the previous owner had done, a lot of times, those rents tend to be above market as well. So you see some rent roll-downs there. But generally, we're -- I think if you look back to last few years, we're probably averaging about 2% rental growth for that portfolio per year.
Our next question comes from Dori Kesten with Wells Fargo.
Assuming the 22 Sonestas are sold, what would your 2019 pro forma RevPAR and hotel EBITDA margins be?
Sure. I can pull that out for you. So as I mentioned in the prepared remarks, our EBITDA was actually negative for those 22 hotels. It was about negative $4.7 million. So if you take out those hotels for the year, EBITDA margin would be 18.3% and RevPAR would be $92.18 just for the Sonestas.
Yes, the sale of hotels in '19 generated about $19 million of hotel EBITDA.
In 2019, the 22 Sonestas generated $19 million in EBITDA, is that what you said?
Yes, some of them were under different flags. And pre pandemic, that was the full year hotel EBITDA.
Okay. And is there -- you've previously talked about returning to prior peak EBITDA margins once the renovation program is complete. Is there anything going on internally at Sonesta now that gives you confidence that perhaps you will exceed those prior peak margins, holding to the side the upside from the dispositions?
Sure. Yes, I mean, that, Dori, it's a good question. That's one of the reasons that we are selling some of these hotels. We've identified these hotels as ones that we don't think would return to those margin levels. But Sonesta continues to be very focused on expanding the brand awareness, expanding their loyalty program. They're putting -- they're not taking any money out of the business. They're putting everything they get from management fees paid by us, franchise fees they get from their other franchisees.
All the cash flow they're getting from all their owned hotels, specifically the hotels they own in New York, which are doing very well, all that's going back into the business. So we are seeing the right things in terms of the number of loyalty members they have, the percentage of revenues that are booked through the loyalty program. They continue to put money into their revamped website, mobile app, customer relationship management system. They still have a lot of room to go there. I think a couple of -- and we haven't seen it for all of our hotels in terms of performance yet. Again, I think we will see it once the renovations are complete.
But the other thing we are seeing, too, when we talked about the segmentation, they've really done -- started to do a good job of building out their national sales platform. And you're seeing that with the increase in group business that they are starting to pick up. A lot of that is driven by sales and distribution channels rather than a lot of the transient is booked through not only the website but also through the OTA.
So to answer your question, we still fully expect to get back to those margin levels. The renovation, I think we'll see immediate impact from those renovations at the Sonesta hotels. There's a number of hotels, specifically a lot of the Royal Sonesta and full-service hotels, that they are performing well with. And they are competing and outperforming the market in some cases. So again, it's something -- and I think we've talked about it on previous calls, it's again back to the sales.
We're looking at the entire portfolio. And any time we put any money into these hotels in terms of renovation, we're looking at what that return is going to be. We're going out several years in terms of what we expect the operating cash flows to look like. And then we layer on the CapEx, not just the renovation CapEx but the maintenance CapEx. And if we don't think we're going to get a return on the incremental capital and/or back to margins that we think will compete with the market, that's why they ended up on the sale list.
Okay. And I may have missed this. What did you say the -- I think it's a 3-year program. What will the total capital spend be including ROI and maintenance, assuming the Sonestas are out?
We didn't give the multiyear number, Dori. But I think for the next 2 or 3 years, we're going to see these elevated levels. As I mentioned in the prepared remarks, it will be $250 million to $275 million this year. And we're going to continue to evaluate and make sure we -- as Todd mentioned, we believe the investment makes sense. So we'll continue to provide updates as we go along here and move hotels on to the list and start moving projects forward.
[Operator Instructions] Our next question comes from Tyler Batory with Oppenheimer.
This is Jonathan on for Tyler. First one for me, maybe a follow-up on the CapEx. Can you help us think about how much of that is potentially spillover from this -- from 2023 last year? And any color on the cadence over the year? I mean, I assume it's largely front half-weighted.
Yes, it's a great question. I think I would say probably $25 million to $40 million is probably deferred from 2023. And as far as how the allocation by quarter will go, it's a little hard to predict. But I think you're right, it's Q1 and Q4 bookending the year is where we'll see the most activity as we try to plan these renovations around the peak seasons for us, which, generally speaking, starts in early spring and runs through early November.
Okay, very good. And then switching gears to maybe more recent demand trends for the hotel portfolio. Todd, I believe you maybe noted some market softness in the first half of the year. I mean, any additional color on that and any pockets of weakness or slowing that are worth calling out? Anything out there that potentially gives you pause as you look out?
Sure. It's mostly related to leisure travel, but we're also seeing a slowdown in business travel. We -- business travel still is probably in our portfolio at least around 70% to 80% of where it was in 2019. In the previous quarters, we have continued to see that tick up. And that's really slowed down to flattened out.
A lot of our resort hotels, we've seen declines year-over-year in RevPAR, which isn't surprising, given the large increases that we saw back in '21 and '22 for those hotels specifically. But yes, the softness is mostly in leisure and business. And we have a lot more exposure to business. And again, another factor in how we identified the hotels we wanted to sell, most of those are business-oriented hotels.
Okay, excellent. Then maybe last one for me. Can you maybe provide some additional color on per occupied room expenses and where labor expense has trended as of late and your general expectations for expense inflation this year?
Sure. In terms of -- we talked about insurance and taxes. But in terms of rooms expense, it is labor. Labor is just overall the largest expense by far. What we're seeing there is most of the open positions have been filled in our portfolio across all our operators. So there's a lot less reliance on contract labor, which is a positive. And it gives us, as an employer, more negotiation in terms of wages and salaries.
What is impacting labor to increase it is that you're continuing to see significant year-over-year hourly wage increases even for noncontract labor, specifically for housekeeping, front desk, F&B attendants, those types of positions. So that really hasn't slowed down. Maybe it slowed down a little bit, but it's still well above historical norms. So we're a large -- outside of the taxes and insurance, that was probably the largest increase we saw to -- that was impacting margins this past quarter.
Our next question is a follow-up from Bryan Maher with B. Riley FBR.
Just a quick follow-up on your asset sales, can you give us a little bit of thoughts on the timing of those, how they play out through the year, kind of what you're thinking on pricing relative to book value? And who are the buyers of these assets? Are they more locals? Just a little color would be helpful.
Sure. So the 22 -- well, let me start with the first -- the one that we talked about briefly on the call was we are selling one Radisson hotel as part of our Radisson agreement. That is under contract to sell for $3.3 million. That is expected to close in the next 40-or-so days. That one was an outlier in that portfolio. It was the only one that was producing negative EBITDA. Both us and Radisson wanted to sell it. We're taking it out of the agreement -- the management agreement. But we are the owner's priority and the guarantee are not getting touched so that remains the same.
But back to the 22, which is the larger part of the portfolio. Both -- all 22 of those are in the market now. We haven't called for first round offers yet. We'll probably do that towards the end of March, beginning of April. It's likely -- my sense is those are likely -- it's not going to be one portfolio buyer. My sense is it's probably going to be anywhere from five to eight buyers if I had to guess, buying one-offs or portfolios of three, four, five hotels.
A lot of the buyers -- so in terms of timing, my guess is you'll start to see some close in the second quarter, probably the majority in the third quarter. The buyers for those hotels, a lot of them are the same buyers that we had back in 2021 and '22. We are marketing these encumbered brands. So we're selling them, expecting buyers to enter into long-term franchise agreements with Sonesta, just like we had done a couple of years ago, where the majority of those were sold brand encumbered.
So it's a lot of the same existing franchisees that have had good success and understand the Sonesta brand. So what we've seen so far has been a lot of interest, which isn't surprising again because we have that group of previous buyers. But also the transactions that are occurring, it's either the very, very high-end hotels or it's the hotel was kind of at the lower price point, more select service and extended stay hotel, so not too different than what we -- a lot of interest there, at least preliminary.
In terms of pricing versus book value, it's -- there's a few variables there. Number one is it still is a volatile market environment. You had negative EBITDA for the last year. So you're not really throwing an in-place cap rate on it, it's more of a basis play. So the other variable there is how much [ hit ] per CapEx that a buyer is going to put into their underwriting in terms of what their overall cost and overall basis would be.
So my sense is we may not get all the way to book value. But I don't think it's going to be too far below that. Again, we haven't -- I'll caveat that with we haven't received offers yet and it's a volatile environment. But given where our expectations are and our valuations are, I would say we'd probably be somewhat slightly -- somewhat below that but not too far.
This concludes our question-and-answer session. I would like to turn the conference back over to Todd Hargreaves, President and Chief Investment Officer, for any closing remarks.
Thank you, everyone, for joining today's call, and we appreciate your continued interest in SVC.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.