Centerspace
NYSE:CSR
Earnings Call Analysis
Q4-2023 Analysis
Centerspace
The company finished 2023 with $4.78 core funds from operations (FFO) per diluted share, representing a robust 7.9% increase compared to the previous year. The jump in performance was aided by a significant 9% rise in same-store net operating income (NOI) and streamlined general & administrative (G&A) expenses. Despite a year marred by economic uncertainties, softening real estate fundamentals, and a CEO transition, management was able to deliver impressive results and is poised to face the expected challenges in 2024.
Looking forward, the company provided guidance of same-store NOI growth ranging from 1.5% to 3.5%, with expectations for core FFO to be between $4.68 and $4.92 per diluted share. This guidance is set against a backdrop of economic volatility and pressure from the high supply in the multifamily real estate market.
Year-end weighted average occupancy stood at 94.8%, with a slight blended rate increase of 0.1% despite facing negative new lease spreads. To counter the low lease volumes and to stabilize renter demand, the company has opted for prioritizing physical occupancy over rent growth, which they believe will enable more aggressive pricing strategies later on.
Part of the strategy included optimizing the portfolio through both operational improvements and asset disposition; embarking on a busy year, the company sold 13 communities for approximately $226.8 million and purchased a promising community in Fort Collins, Colorado. Additionally, arrangements have been completed for the sale of 2 underperforming Minneapolis communities for $18.9 million, with incoming proceeds aimed to reduce the line of credit.
The company is showing its confidence in future performance by increasing the quarterly dividend by $0.02 to $0.75 per common share. They also highlighted an implied cap rate of 7.6% on their current portfolio, indicating potential for shareholder value through authorized buybacks, albeit with some pullback anticipated in 2024 to maintain balance sheet flexibility.
The leverage position is displayed by a 7.1x net debt-to-EBITDA ratio, a notable improvement over the previous year. The capital structure is further solidified with a well-laddered debt maturity schedule, ensuring no pressures from debt maturities until mid-2025. This positions the company to maneuver and potentially capitalize on opportunistic repayments and value-add investments.
Projected expenses are expected to increase, notably on-site compensation and insurance, which have seen year-over-year premiums surge by 25% to 30%. These costs create pressure on expense growth, projected at 6.25% at the midpoint for 2024. Despite these headwinds, the company remains committed to external growth opportunities, ensuring sufficient funding for their value-add program.
In analyzing individual markets, Omaha and North Dakota are expected to outperform the 3% to 5% revenue growth guidance. However, softer performances are expected in the Other Mountain West, with markets like Rapid City and Billings cooling down after a significant rise in rents. The company is prepared for these variances and is making strategic adjustments, including the use of concessions, to maintain a strong demand profile even in a tapering market as seen in Denver.
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Hello, everyone, and welcome to the Centerspace Q4 2023 Earnings Call. My name is Harry, and I'll be coordinating your call today. [Operator Instructions] Now I'd like to hand the call over to Josh Klaetsch from Centerspace. Josh, please go ahead.
Centerspace's Form 10-K for the year ended December 31, 2020, was filed with the SEC yesterday after the market closed. Additionally, our earnings release and supplemental disclosure package have been posted to our website at centerspacehomes.com, and filed on Form 8-K.
It's important to note that today's remarks will include statements about our business outlook and other forward-looking statements that are based on management's current views and assumptions. These statements are subject to risks and uncertainties discussed in our filings under the section titled Risk Factors, and in our other filings with the SEC. We cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements.
Please refer to our earnings release for reconciliations of any non-GAAP information, which may be discussed on today's call. I'll now turn it over to Anne Olson for the company's prepared remarks.
Thanks, Josh, and good morning, everyone. Thank you for joining our call. With me this morning is Bhairav Patel, our Chief Financial Officer; and Grant Campbell, who leads our investment in capital markets activities. Last night, we reported $4.78 of core FFO per diluted share for 2023, representing growth of 7.9% over 2022. These excellent results were driven by strong year-over-year same-store NOI growth of 9%, together with significant outperformance of our projections on G&A items. During 2023, we faced macroeconomic uncertainty, softening multifamily fundamentals and a CEO transition. This was a lot of uncertainties. I'm so pleased with how our teams responded, our financial performance and the efficiencies that we have harvested on the G&A side of the business. We feel well positioned as we head into 2024. It will be a difficult year given continued economic volatility and multifamily supply pressures. But we feel great about the relative position of our portfolio with attainable average rents and geographic exposures in the mid- and Mountain West, which we think will translate into growth in 2024.
At the midpoint, our 2024 projections include same-store NOI growth of 2.5%, driving overall core FFO growth of 0.4% with guidance at $4.80 per diluted share for the full year. While Bhairav will provide more detail about our 2024 guidance, I want to share some recent results and trends that give us confidence that we will be able to achieve growth in 2024, even after the sale activity and repositioning that we undertook in 2023.
We ended the year with weighted average occupancy of 94.8%. During the fourth quarter, we realized an average decrease of 2.9% on same-store new lease trade-outs and an average increase of 3.7% on same-store renewals, resulting in a 0.4% blended rate increase. January provided optimism for 2024 as we are pleased to see market rents holding. With 5% of our leases expiring in January, we realized an average decrease of 1.9% on same-store new lease trade-outs and an average increase of 3.2% on same-store renewals, resulting in a 0.1% blended rate increase.
While Q4 and January showed negative new lease spreads, this is not uncommon historically, and it is worth noting that the percentage change in January was 100 basis points stronger on average new lease rates than December. We have prioritized physical occupancy over rent growth through much of Q4 and Q1 to date, and will continue to do so until we see renter demand rebound to a level sufficient to drive the necessary new lease volumes and put us in a position to implement more aggressive pricing on both new leases and renewals.
Less so than some other parts of the U.S., we are seeing supply pressures in Denver and Minneapolis. However, today, both of those markets have shown resiliency and absorption, particularly notable, CoStar sighted Minneapolis as having the second strongest absorption in the nation in 2023 through the third quarter, with a ranking in the top 3 nationally for both 2022 and 2023. At the same time, most of our secondary Midwest markets have minimal, if any, new supply and range from 0 to 3% of existing stock under construction.
With the industry experiencing challenging operating fundamentals due to elevated supply and moderating the continued expense pressures, there is a dearth of transaction activity. We focused on portfolio improvement in both operations and through disposition and it was a busy year on that front. During 2023, we sold 13 communities for the aggregate price of $226.8 million. The communities sold were located in St. Cloud in Minneapolis, Minnesota, Omaha and Lincoln, Nebraska, and Minot, North Dakota. The proceeds of the sales were used to acquire community in Fort Collins, Colorado, and for the repayment of debt.
Additionally, during the fourth quarter, we were able to successfully close on a mezzanine loan that includes the purchase option, funding a new multifamily development of 244 homes in Inver Grove Heights, a demographically strong submarket of the Twin Cities.
To date, we have funded approximately 40% of our $15.1 million commitment. This community is scheduled for delivery in summer 2025. These transactions highlight our commitment to continued refinement of our portfolio, its age, quality and market exposure as well as maintaining a strong balance sheet. Subsequent to year-end, we entered into sale agreements for 2 communities in the Minneapolis market comprising 205 homes for aggregate consideration of $18.9 million. Limited by size and age, these communities were not able to provide us with the NOI margin or growth we expect from our portfolio. The transaction should close in the next week and proceeds of these sales will be used to pay down our line of credit.
Regarding share buybacks, since we reported our Q3 results, we have acquired approximately $9.5 million of our common stock at an average price of $53. With continued lack of asset transaction volumes, and our demonstrated execution on 2023 sales of certain of our less efficient and lower-growth assets at a weighted average cap rate of 6.5% based on prior 12-month NOI, we like buying our current portfolio at an implied cap rate of 7.6%. We do have some capacity remaining in our authorized buyback program. We will prioritize maintaining balance sheet flexibility while calibrating market factors affecting relative asset valuation.
As I mentioned earlier, this may be a tough year for the multifamily sector, but we believe we will perform well on a relative basis given the work we have done on our portfolio composition and operating platform. Our Board shares the belief that we will have strong results, coupled with discipline on executing our strategy, and has declared a $0.02 per common share increase in our next quarterly dividend, raising it to $0.75 per common share.
Before I turn it over to Bhairav, I want to thank our team. 2023 was a great year because of our organizational commitment to better every days, and I appreciate their hard work and dedication.
Now I'll ask Bhairav to discuss our overall financial results and details of our 2024 outlook.
Thanks, Anne, and good morning, everyone. Last night, we reported core FFO of $1.22 per diluted share for the fourth quarter of 2023, which was driven by another strong quarter of operating results, with same-store NOI increasing by 7.6% over the same quarter last year. Our operating results for the quarter were in line with our expectations, while core FFO exceeded expectations. The outperformance in core FFO during the quarter was driven by lower-than-projected G&A, primarily due to lower IT-related spend and higher interest income, including approximately $150,000 at origination fee received upon the close of the mezzanine loan that Anne discussed in our remarks earlier. This capped off another strong year of earnings growth for the company with same-store NOI growth of 9% for the year and core FFO of $4.78 per diluted share, an increase of almost 8% compared to the previous year. Other notable activity during the quarter included an impairment charge of $5.2 million related to the 2 communities in Minneapolis that Anne mentioned we expect to sell next week and an additional charge of $1 million for prejudgment interest related to the litigation settlement earlier in the year. Both charges are excluded from core FFO.
On the capital front, we are well positioned with a strong and flexible balance sheet. We ended the year with $235 million of liquidity, and leverage of 7.1x net debt-to-EBITDA, which is 0.5x lower than at the beginning of 2023 because of our capital repositioning activities during the year. In addition, we have a well-laddered debt maturity schedule with no debt maturities until the middle of 2025, weighted average time to maturity of 6.3 years and weighted average cost of 3.54%. This balance sheet strength allowed us to opportunistically repurchase shares, which we believe are currently trading significantly below the true value of our assets in the portfolio.
During the quarter, we repurchased nearly 92,000 shares, bringing our 2023 repurchases to 216,000 shares at an average price of $53.44 per share. After year-end, we repurchased an additional 88,000 shares at $53.62 per share.
Turning to guidance. We introduced our 2024 expectations in last night's press release. For 2024, we expect same-store NOI growth of 1.5% to 3.5%, with relatively healthy top line growth of 4% at the midpoint. The projected revenue growth is driven by an earn-in of 1.7% at year-end and projected blended lease growth of 2.5% at the midpoint. It is further fueled by incremental revenue following the completion of our RUBS rollout and continued investment in our value-add program. We spent almost $30 million in 2023 and expect to invest an additional $25 million to $27 million on value-add initiatives in 2024. Although expense pressures have moderated, we still expect expense growth of 6.25% at the midpoint to exceed our revenue growth in 2024. The growth was primarily driven by on-site compensation as the labor market remains remarkably resilient and insurance expenses driven by premium increases of over 25% year-over-year. We expect core FFO of $4.68 to $4.92 per diluted share with the midpoint of $4.80 per diluted share, a slight increase year-over-year despite the impact of approximately $130 million of net dispositions during 2023. Please note that although our guidance equates to core FFO of $1.20 per share per quarter, our core FFO during the first quarter is expected to be below that average and projected to increase in each subsequent quarter. This is primarily a result of sequential revenue growth from lease expirations during peak leasing season in Q2 and Q3. The guidance range incorporates all the buyback activities since the end of 2023 that I highlighted earlier and approximately $19 million of proceeds from the sale of 2 communities in Minneapolis. It also assumes that the mezzanine loan of [ $13.1 ] million will be fully funded by early Q3. No further investment or disposition activity is assumed in the guidance.
Lastly, as noted in our press release, our Board of Trustees announced an increase of $0.02 per share in our quarterly common dividend to $0.75 per share. The common dividend will be paid on April 8, 2024, to shareholders and unitholders of record at the close of business on March 28.
To conclude, we are proud of the results we achieved in 2023, not just on the earnings growth front, but even more so in advancing our key strategic priorities of improving our balance sheet, portfolio quality and market positioning. This is only possible because of a considered effort, commitment and discipline across the organization, and I would like to thank our entire team for their hard work and focus throughout the year. We look forward to building upon these results in 2024. And with that, I will turn the line back to the operator to open it up for questions.
[Operator Instructions] And our first question today is from the line of Brad Heffern of RBC Capital.
Bhairav, you gave a couple of pieces of the revenue guide in the prepared remarks, but I was wondering if you could also give occupancy, loss to lease and market rent growth as well.
Sure. Yes, so with respect to occupancy, we are projecting about 95%, which is roughly in line with what we had for the year. With respect to loss to lease, at the end of January, we were sitting at about 3.5%. This is roughly in line with where we were about 12 months ago. So we do expect rents to grow from here. However, we don't really expect them, at this point in time, to reach the same peak that they did last year. So market rent growth will be a little bit muted, but it will still grow from here as we enter the leasing months.
Okay. Got it. And then on the repurchase, I guess, how do you think about weighing the attractiveness of that versus some of the downsides like obviously shrinking the company and increasing leverage, et cetera?
That's a great question, Brad, and 1 we spend a lot of time on. So we really are looking to balance what the best use of our capital is, particularly paired with the year where we had a lot of dispositions and so a lot of proceeds, and how we want to effectuate a strategy of external growth and maintain real balance sheet strength. So we felt like this was a good time. We had the proceeds from the sales. We have 2 more sales this year scheduled. But as I stated in the prepared remarks, we really are trying to balance that maintaining balance sheet flexibility. And I think you'll see us really pull back on the buybacks going forward here into 2024.
Our next question today is from the line of Connor Mitchell of Piper Sandler.
First, maybe just following that line of questioning and your ending statement there. As you guys are going to slow down on the buybacks, could you just give us a better idea of maybe you'll allocate that more towards acquisitions or pay down some more debt, whenever you guys see the best use of capital in that case?
Yes. We really are looking to have very strong capital allocation. And so as we look into 2024, we would really see prioritizing opportunities for external growth. With not a lot of transacting volume and still a pretty big disconnect in the market on pricing, that may be difficult. But we want to make sure that we fund our value-add program sufficiently. We have $25 million to $27 million this year slated for that. And with no maturities until mid-2025, it's a little bit difficult for us to get at any debt pay downs. So that is 1 of the considerations that we had when we looked at doing the buyback was that opportunity wasn't as available to us as it might be into the future.
But external growth is really a priority of ours value-add as well and keep strategically repositioning the portfolio, getting better market exposures, increasing the quality of the portfolio, I think, is high on our priority list.
Okay. Appreciate the color there. And then maybe just thinking about the Colorado deal that you guys executed back in the fourth quarter. Just want to make sure we understand the GAAP implications on earnings. It seems the amortization of the assumed debt is being added back to core. So just curious if you guys can give us any more details of what we may have missed regarding the GAAP implications or any bigger pictures on the impacts from an earnings perspective?
Sure, Connor. On Page 16 of our supplement, we kind of break down the components of our guidance. In the adjustments to noncore, you will see the amortization of assumed debt. That's about $1.1 million, and that's the amount that will be added back to core with respect to the debt amortization. Does that answer the question?
Yes. I guess just to make sure I fully understand, that is primarily related to that Colorado deal in the fourth quarter that was executed?
That's correct. That's -- most of that amortization relates to the deal that we are talking about.
Our next question today is from the line of John Kim of BMO Capital Markets.
I had a question on the mez loan. The rate of the loan, I think Bhairav mentioned an origination fee, I'm assuming that's paid by the borrower, and if it's your intention to exercise the purchase option on the asset?
Good morning, John. I'll have Grant take that one.
We're earning a 10% interest rate with accrued -- or excuse me, with interest accrued and compounded monthly on that transaction. On the back end, related to the purchase option, that option to acquire the stabilized community comes with prenegotiated terms that include a 7% discount, but then market value of the community at stabilization. Our intent to exercise the purchase option, we enter entities with a desire to acquire the completed stabilized community on the back end. We will continue to sit in the lender chair, monitor funding, monitor asset performance and make that decision in mid-2024.
Other opportunities for mez investments in some of your other markets? And I realize, in the past you looked at Nashville as a potential entry market, but it seems like you're overweight Twin City's exposure already. So I was just wondering if you saw a similar investment opportunities in some of the other markets that you're interested in?
Yes, we are talking to folks in other markets about this execution. Broadly speaking, it's harder to make development underwriting pencil in this environment. We will continue to seek opportunities with this book of business that do make sense. We do view it as a complement to our other capital allocation strategies. These opportunities provide good returns and direct visibility on asset performance and potential future acquisition timeline via that purchase option that we referenced. This direct visibility is beneficial when we think about portfolio recomposition initiative. So yes, we are having conversations in other geographies. It's very hard to make these pencil in today's environment, but we'll continue to seek them.
And John, from a purely financial standpoint, we like to have a certain portion of our capital allocated to the mezzanine funding. These are difficult deals for us to get done at our size. And so you have seen us do them in Minneapolis because this is a place where we have very deep connection. Our headquarters are here. We have a large team, and so we probably just see more opportunities here and have more relationships with developers that have longer standing. But it definitely doesn't preclude Grant from spending a lot of time trying to find those deals in other target markets of ours.
And you mentioned Minneapolis has the second highest net absorption, or had the second highest net absorption last year, which I didn't fully appreciate and so you mentioned it. What's driving that demand? I realize there's a lot of supply in that market as well, but what is -- what's driving this?
I mean there's probably a lot of answers to what's driving it. But I'd say a couple of things and then Grant can jump in here, too, but really strong economy, low unemployment. We have -- Minneapolis has a very good job base, lots of Fortune 500 companies. So the market itself is a little bit more stable. So while we are seeing a good amount of supply here, we have the fundamentals to fill that space and drive absorption. I think we've also seen less single-family home starts than we had in the past. So there's been a little bit of shift in permitting from -- if you look at the total housing universe, we have less single-family home communities and a shift into the apartment communities, which is driving some lack of availability of single-family home options. Grant, you have...
Yes. I would echo Anne's comments on incomes in this market depending on how you cut it. We consistently rank top 10 in terms of income profile. That income relative to the affordability of renting apartments is very attractive. High presence of med tech, banking, finance, et cetera, jobs are very prevalent in our market. And then just to touch on the supply comment. The supply pipeline in Minneapolis has -- we've seen a taper over recent quarters. So currently, we're sitting at about 4.5% of existing stock under construction that is down from 6% here over the last couple of quarters. So a measured supply story that, again, has been tapering.
Our next question today is from the line of Rob Stevenson of Janney.
Can you talk about how much of the 3% to 5% same-store revenue growth guidance for '24 is from marking to market rents versus the continued uplift from some of the operational technology and other improvements that you've been instituting within the portfolio?
Rob, I'll give you the components and then Anne may chime in on some of the other components. But overall, 4% at the midpoint, 3% is really what's being driven by mark-to-market rents, about 0.5% is being driven by RUBS rollout, which is now fully complete. So we have about 80% billback in the RUBS. And then the remainder is being driven by some of the value-add initiatives. We obviously expect to invest about $25 million this year, but we invested over the course of the year. So the impact on revenue for the year is going to be about 0.5%.
And on the technology front -- go ahead, Rob.
No, no, I was going to say that was very helpful.
Yes. And just on the technology front, we did -- in 2023, I think we really saw some great strides on gaining efficiencies and making sure that we're fully executing on the platform. That work is going to continue. But in our projections, we're not projecting that it's going to materially move anything. We do have a couple of initiatives that may provide some cushion and/or outperformance for us, but we're very early on in some of those. So I would say really we feel stabilized on the platform that we implemented over the past 2 to 3 years, and feel like we're in good shape in using that.
Okay. That's helpful. And then can you just give a quick review of your markets? I mean, other than Denver, there're not a lot of markets that you guys have that there's other public peers in, so less data there. I mean, which of these markets are you expecting same-store revenue growth to be above the 3% to 5% guidance for the company overall and which below? Can you just talk a little bit about that as to how we should be thinking about the markets individually?
Yes, that's a good question. One of the -- we are a good data provider on some of those markets. We're the largest owner in a couple of them. As we look to 2024, I think we're going to continue to see some outperformance in Omaha, Nebraska, North Dakota has been performing really well. And then I'd say Minneapolis and Denver is kind of coming in, in the middle of the pack there. A place where we're seeing some softness is what we call the Other Mountain West. That would be Rapid City and Billings. They had, if you recall, just a massive run-up in rents in '21 into '22. We really started to see that cool last year, and we are seeing that continue to cool off and believe that will hold through 2024. So I'd say Omaha at the top and probably Billings, Rapid City at the bottom.
Okay. And then just Rochester and St. Cloud, are they middle, bottom? How should we be thinking about those?
Yes. I'd say they're right in the middle. Rochester has had some supply, a little bit of supply there, nothing that has concerned us. And we have come off some great value-add projects there that really raised our renter profile and our customer experience there. So I think that, that will continue to perform well. And St. Cloud, that portfolio, as you know, we sold some of the assets out of that this year. So we feel really well positioned there to kind of be right on the average.
Okay. That's extremely helpful. And then, Bhairav, when you take a look, where was bad debt for you guys in '23? And what do you have baked into the '24 guidance?
Sure. With respect to 2023, we were about 25 to 30 basis points, which we consider normalized, pre-COVID. And with respect to 2024, we are at the midpoint, projecting about 35 basis points. So kind of sticking around what we experienced in 2023 as we haven't really seen anything that makes us think otherwise.
Okay. And then I guess a similar vein, what did you guys do this year, or '23 in terms of unit turnover? And are you expecting any real upticks or downticks in that given what you're seeing today in terms of the renter profile?
Sure. With respect to unit turnover, we had seen a lot of costs escalating at the end of 2022. So with respect to 2023, we were slightly down versus 2022. With respect to 2024, what we have seen is material prices have kind of, I would say, normalized in the sense that we can expect some inflationary increases there. And then labor, though, is running a little bit higher than we would like, so we would still expect a slight increase over 2023. But then 2023 itself was a reduction over 2022.
And with respect to -- yes. We did see a little bit of an uptick during 2023 in resident retention, so just overall had fewer turns in '23 to '22. But our projections do include kind of our -- the standard that about 50% of the units will turn during the course of the year.
And what -- given material and labor cost these days, what does a turn typically cost you ex the downtime?
I would say roughly about -- the cost would be about $1,000 a turn thereabouts. Again, from a portfolio perspective, that can differ as you look at different markets, but roughly, that's what we kind of see on an average.
And our next question today is from the line of Barry Oxford of Colliers.
Great. One thing I was looking at was same-store expenses being down in 4Q. What can I be looking for as it relates to same-store expenses in '24?
So with respect to 2024, there is 2 major line items that will be driving our expenses in 2024. One is on-site compensation. As I said, the labor market is still pretty strong. We -- I mean, although we are in a much better place in 2023 compared to 2022, it's still hard to fill some of those positions. So we do expect that to run slightly above what you would consider normalized or inflationary. And then the other line item that is really driving up cost is insurance. Our premiums year-over-year increased by 25% to 30%. That's 2/3 of the insurance line. So those are the 2 major categories driving year-over-year expense growth.
Okay. Great. And then, what was causing some of those numbers to be negative in some of those cities like Omaha in 4Q?
Some of the negative -- yes, sure. Some of the negative numbers related to some real estate tax-related accrual adjustments. In certain years, we have upticks in certain years, we have some credit from -- some credits from appeals. So that's really what's driving some of the credits that you see on a year-over-year basis in Omaha. The other line item that is also comparing favorably is the nonreimbursable losses where we really had an uptick in those losses in the fourth quarter of 2022 and they kind of normalized in 2023. So that's what is driving the Q4 '23 versus Q4 '22 comparison.
[Operator Instructions] And our next question is from the line of Wes Golladay of Baird.
I have a quick question on the Denver market. We're starting to see some slowing out there in the job growth, but then you did make the comment that multifamily disappeared and maybe taking share with the fewer single-family starts in 1 of your markets. Is that happening there as well? Just overall, what are you seeing from the demand side in Denver?
We'll have Grant help you out on that one.
Yes. So I agree with your job growth comment, have seen some slowing in that market here recently. We do think long term, the demand fundamentals in Denver and Colorado more broadly are very robust, and continue to believe that, over time, what we've seen in the past decade will continue to play out.
When I think about Denver a couple of ways from a fundamentals perspective that we think about it. On the supply side, it is our market with the highest levels of existing supply and existing new construction. So I referenced 4.5% in Minneapolis earlier, that would be about 9.5% today in Denver. It may be the case in this environment that all of that supply in that pipeline does not complete given capital markets and fundamentals headwinds. Concessions is another way that we really focus on what are we seeing in all of our markets, including Denver, and I would say our concessions profile and concession story on the ground in Denver today is very favorable. We've been using concessions and very targeted and specific instances today in Denver, that 1 community in our portfolio, which is a function of new supply in that submarket. So have seen slowdown in job growth. Fundamentals are tapering, but that isn't unique to Denver. That is happening nationwide. And long term, believe that the demand profile remains.
And we have no further questions in the queue at this time. So I would like to hand back over to Anne Olson for any further remarks.
Thanks, everyone, for joining, and have a great day.
This concludes today's call. Thank you all for joining. You may now disconnect your lines.