Greetings and welcome to the American Homes 4 Rent First Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stephanie Heim. Please go ahead.

Good morning. Thank you for joining us for our first quarter 2019 earnings conference call. I'm here today with David Singelyn, Chief Executive Officer; Jack Corrigan, Chief Operating Officer; and Chris Lau, Chief Financial Officer of American Homes 4 Rent. At the outset, I need to advise you that this call may include forward-looking statements. All statements other than statements of historical fact included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC. All forward-looking statements speak only as of today, May 3, 2019. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A reconciliation to GAAP of the non-GAAP financial measures we are providing on this call is included in our earnings press release. As a note, our operating and financial results, including GAAP and non-GAAP measures, are fully detailed in our earnings release and supplemental information package. You can find these documents as well as SEC reports and the audio webcast replay of this conference call on our webcast at www.americanhomes4rent.com. With that, I will turn the call over to our CEO, David Singelyn.

Thank you, Stephanie. Good morning, and welcome to our first quarter 2019 earnings conference call. Before I begin, I would like to read an announcement I forwarded to the American Homes 4 Rent team members this morning. B. Wayne Hughes, our founder and Chairman of the Board, will retire after next week's annual meeting. Wayne is a legend in the real estate industry. In 1972, he founded Public Storage, one of the nation's largest real estate investment trust. He served as its CEO until his retirement in 2002 and as a trustee until 2012. Wayne also founded American Commercial Equities, a private real estate company that owns retail and office properties in California and Hawaii. 8 years ago, in May 2011, Wayne approached me with his idea of acquiring and managing single-family rental homes. Wayne purchased the first homes in Las Vegas that May. And that concept in those homes were the beginning of what is known today as American Homes 4 Rent. Wayne's vision and leadership were instrumental in making American Homes 4 Rent a leader in the single-family rental industry. Today we own nearly 53,000 single-family rental homes, providing quality housing to 200,000 residents, at more than $1 billion of annual revenue and are leading the industry into its next chapter with in-house development and construction of single-family homes. Tamara Gustavson, Wayne Hughes' daughter will remain a member of the Board of Trustees and continue the Hughes family legacy and counsel to the company. Wayne's vision, counsel and leadership will be missed, but I'm grateful for his guidance and support during our formative years. We wish him well and continued success. Next, a couple of additional comments before we move on to our first quarter earnings. Our annual meeting and quarterly board meeting will be held next week.…

Thank you, Dave, and good morning, everyone. Beginning with revenue growth. As Dave mentioned, we are off to a strong start for 2019. For our same-home portfolio during the first quarter, we achieved a 95.5% average occupied days percentage, up 70 basis points from the first quarter of 2018. Average monthly realized rent was up 3.2%, resulting in a quarter-over-quarter increase in same-home core revenues of 4.2%. Turning to operating expenses. First quarter 2019 core property operating expenses were up 2.1% year-over-year, largely driven by a 4.8% increase in property taxes, which was in line with our expectations, offset in part by decreases in R&M, turnover and property management expenses. Our first quarter 2019 cost to maintain a home, including R&M and turnover cost plus recurring capital expenditures, totaled $487, down slightly from last year. Although we continue to see inflationary pressures, this decrease was driven by improved retention and reduced vacant home inventory, combined with last year's above-average expenditure levels. As a reminder, this year's cost to maintain a home includes higher cost related to preventative maintenance as our program has expanded year-over-year. In summary, it was a strong operational start to the year. We are on track with the expectations we laid out last quarter. We're carrying positive momentum into the spring leasing season with strong April same-home average occupied days of 95.8%, up 60 basis points compared to last year, and blended rental rate spreads for April of 4.9%, an increase of approximately 20 basis points compared to last year. Turning to growth. As Dave mentioned, we have increased our focus on our build-for-rent programs as the best risk-adjusted opportunity for accretive growth. This initiative adds new assets that are in demand and provides better near- and long-term economics. During the first quarter of 2019, we added 320 homes for a total investment, including renovations, of approximately $85 million. 101 of these homes totaling $26 million were added through our build-for-rent programs. For 2019, we remain on track to take $300 million to $500 million of homes into inventory, with about 80% expected to be from our build-for-rent pipeline and the rest from our other channels. We expect these additions to be weighted toward the back half of 2019. Further, as previously noted, we expect to invest an additional $200 million to $400 million into our development pipeline for future year deliveries. Turning to dispositions. We continue to strategically prune our portfolio where it makes sense for operational reasons and recycle capital into opportunities with better long-term returns. At the end of the first quarter, we had approximately 1,800 homes held for sale, which we expect to generate between $350 million and $400 million of net proceeds over the course of this year and next. During the first quarter, we sold 180 homes for net proceeds of $33 million. Now I will turn the call over to Chris.

Thanks, Jack. In my comments today, I'll briefly touch on our first quarter operating results, update you on our balance sheet and capital markets activities, and finally provide you with our current view on 2019 guidance. However, before we get into our operating results, I'd like to bring you up to speed on a few GAAP disclosure changes in connection with the new lease accounting standard. As we discussed last quarter, in consistent with the rest of the real estate industry, we adopted the new lease accounting standard at the beginning of this year. As a reminder, the primary difference under the new lease accounting standard is that a larger proportion of our internal leasing costs, are now included within property management expense rather than capitalized. As we indicated last quarter, applicable prior year non-GAAP metrics within the supplemental information package have been presented on a conformed basis to comparably reflect the new lease accounting standard. Additionally, as part of the new lease accounting standard, there are 2 notable changes to our existing GAAP disclosures that I would like to make you aware of. First, our previous revenue line items of rents from single-family properties, fees from single-family properties and tenant chargebacks will now be presented as a single line item labeled rents and other single-family property revenues. This change will apply to both current and prior year periods within our GAAP income statement. Second, bad debt expense, which was previously included within property operating expenses for GAAP purposes, will now be included within our new revenue line item, rents and other single-family property revenues. Please note that our computation of bad debt expense remains completely unchanged and that the GAAP financial statement line item reclassification only applies to the current period. To clarify, within our GAAP financial statements for…

[Operator Instructions] Our first question comes from the line of Jason Green with Evercore.

A question for you on development. Of the 80% of acquisitions that you guys say is going to be development, how much of that is on-balance sheet AMH Development versus in partnership with homebuilders?

I would say of the approximate 1,200 homes that we expect to come through are newbuild. 1,000 of them will through -- be through our balance sheet AMH Development.

Okay. And then geographically, are you able to expand on what markets the build-to-rent is focused on?

It's focused on several markets, most of the ones we've been growing in, on the West Coast, Seattle, Salt Lake City, Boise, Las Vegas. I might be leaving out one. And then on the East Coast, Charlotte, Atlanta, Nashville, Jacksonville -- all the Florida markets. So that I think covers it.

Okay. And then last one for me. You said you're getting a 100 basis point premium on the developments. Given the additional strong jobs sprint this morning, what are construction costs doing to that number?

Construction costs materials have actually come down over the last 6 to 9 months, number went spiked for a while and then now has come back down. In terms of labor costs, they are increasing probably in the 4% to 5% range.

Our next question comes from the line of Nick Joseph with Citi.

Maybe just following up on that, I know a lot of the deliveries are back-end loaded, but how's the build-out going so far versus expectations, in terms of overall cost and then budget -- versus budget and then the delivery timing?

Yes. We -- in terms of the direct cost of the vertical build and horizontal build, we're right in line with what we originally budgeted. We probably underestimated a little bit [Technical Difficulty] being allocated over a smaller number as we grow the platform and grow the number of houses that we're building, then a long-term issue. So we're running probably at about 4% and 4.5% soft costs. And I think once we're at a -- the right cadence of deliveries, we'll be somewhere in the 2.5% to 3%.

So then the delivery timing is as expected so far?

Yes. A little slower because of some of the rain, but pretty close to what we expected.

And you walked through the yields, from a resident demand perspective, how's the lease-up going for the ones that have already delivered versus the rest of your stabilized portfolio? In other words, you talked about the premium yield. Is it more cost-driven? Or is it rent- and margin-driven?

It's both, but in general, we're leasing them at or slightly above our pro forma rents, but we're not really pushing the rents on the initial rent-up. So I think we'll have some room for it moving up in the future.

Our next question comes from the line of Shirley Wu with Bank of America Merrill Lynch.

So on R&M and churn cost, you mentioned slightly higher cost for preventative measures. So could you give us a little bit on how much that incremental is for this year? And what's being done for the home?

Well, I'll talk about the program. I'll let Chris give the numbers. Back in late 2017, we initiated what I call phase 2 of our in-house maintenance program. And that really is exterior maintenance of the homes, which we can do when the house is occupied or unoccupied. And that's basically, I would say, 60% to 70% of it is exterior painting and trim, including staining decks and that type of thing. There's some landscaping involved and just other exterior maintenance.

And then Shirley, this is Chris. Probably the best quantification that I could give you. If you go back to some of our comments on last quarter, on just kind of a regular way cost to maintain increase, we're expecting kind of on a full year basis of 4% to 5% increase. And then if we talk about last quarter, the majority of our preventative maintenance program is going to be going into the CapEx line item. And on a full year basis, we see that running kind of close to 9% or so. And so you can squeeze the difference there and see the component is related to the preventative maintenance program.

Got it. And so [ off selling it ] build-for-rent, so it's been a few quarters since you started that program. Could you talk a little about the things that you've learned since the inception? And has there been any changes in economics from here, perhaps efficiencies?

Well, we've definitely gotten more efficient as far as we've learned a few things: One, we're building with wider staircases. And because people are moving in and out of houses, and you have less damage if they're moving through a little wider staircase. We put more sturdy doors into the walk-in closets and keeping all the water hookups on the ground floor. So that if there is an issue with water, that it doesn't hurt the whole house.

And Shirley, it's Dave. I think the things that we have learned are going to have more benefits in reducing our future cost to maintain, than they do in the immediate reduction in current construction cost. So the things that Jack is mentioning are going to allow us to turn the properties quicker and more efficiently and have less maintenance. So the wider doors, the better -- the different quality materials all really will benefit us in the future.

Our next question comes from the line of John Pawlowski with Green Street Advisors.

On the build-to-rent over a longer period, is the $600 million to $800 million aggregate investment still the target?

This is Dave. Yes. That is correct. Just to make sure that we have clarity as to what that is, that's really split into 2 components. So we'll have deliveries this year of $400 million to $500 million. And we're going to have some investment into construction and process that will be delivered in future years of couple hundred -- $200 million to $300 million. But the -- those numbers, $600 million to $800 million are still the target range.

Okay. And again over that $600 million, $800 million, is it still accurate that all the land parcels are already entitled?

Jack?

By the time they're acquired, they're entitled. So we may go under contract and -- but won't close on the land until it's entitled.

Everything on our balance sheet's entitled.

Okay. And of that $600 million, $800 million, what percentage of that are you laying roads, cultivating land, laying sewer lines and doing the land development part of it?

Probably and I don't know that number exactly, but my best guess would be somewhere in the 2/3.

Okay. Last one for me, turning to operations. Given the issues last year with employee retention in the field as peak leasing season unfolds, how are turn times going to unfold versus a year ago?

Well, I would expect them to improve. One of the things that we've done is built in some redundancy, so that we have what we call spot teams that if we do have turnover in one area, we have ability to send the team out to take over until it's stabilized again.

John, the other thing, it's going to benefit turn times is just the fact that we have strong occupancy. We have continued better retention statistics leading to less turns. And we should be in very good shape for the leasing season.

Our next question comes from the line of Hardik Goel with Zelman & Associates.

I just had one on the cadence of the investment that you guys are doing in your own -- the in-house investment specifically, on build-to-rent. How difficult or easy are you finding it to acquire the kind of land that's attractive to your underwriting? And how do you compete with builders in those markets that have probably cost efficiencies they've developed over many, many years? How does your underwriting compete with theirs? If you could give some color on that, I'd appreciate it.

Yes. I mean we're -- and I think the builders are having harder times finding developed lots, although that's gotten easier over the last 6 months or so. As far as efficiencies, we actually think we're more efficient because we're -- we don't have change orders. It's -- the building per our spec, and our specs aren't changing with -- they don't have owners coming in and saying, "We want this flooring or this wall or this other option." So we think we're actually more efficient as a builder than the national homebuilders.

Hardik, it's Dave. Let me add just a couple of things. One is we are -- today, and this is go through cycles. Today we're actually seeing more finished lots being available to us from homebuilders as we don't have some of the same economic considerations that they do with the exit side of the business. We know who's going to own the property and that's not a variable for us. On the economics, one of the things we have as a benefit over the homebuilders, we have no sales and marketing component in our cost structure. So our costs are more favorable than theirs for a finished product because we don't have all the cost component that they do.

No, that's helpful and I appreciate that. Would you also say that you have a cost of capital advantage?

Yes, I would. But I think -- the way the question was outlined is on the completion of the cost of building, I still think we have an advantage there as well, but our cost of capital with our investment grade and the fact that most of our assets are revenue-producing assets, yes. It is a very, very different risk profile than a homebuilder.

Got it. Yes. I meant the original question on operations, so you answered my question there.

Our next question comes from the line of Ryan Gilbert with BTIG.

Just on the 2019 same-store revenue guidance. I think it makes sense to hold off on making any changes before you get through the spring leasing season. Just as you said today, the first quarter number came in at the high end of the range, April leasing statistics looks strong. And so, I guess, what would you need to see in the market over the course of 2019 that would get you to the low end of the guide or even to the midpoint of the guide from where you sit today? So what would you need to see in the market? Or are there any changes in the composition of the same-store portfolio that we should be thinking about?

Ryan, it's Dave. I think you've kind of answered the question almost for me in the question. It is early in the year. We had a very good first quarter. We, as Jack and I indicated, April is continuing that same trajectory. But our guidance is not a number, it's a range, and we're very comfortable with those ranges. And we have a lot of leasing season left in 2019 and we'll continue to review it. And as we get a little further down the -- into the year, we'll be making comments on guidance. But today, we're maintaining the ranges.

And Ryan, it's Chris. Just to point out one other thing on the quarter. As you think about the composition of our 1Q revenue growth, bear in mind that 70 basis points of that is occupancy pickup on lower average occupied days of -- in one quarter of last year, which will begin to more normalize out as we move throughout the year. So just keep that in mind on a quarterly basis as well.

Sure, of course. Although, your April average occupied days were up [ 60 ] basis points as well, which is a very strong result.

Yes. You're right.

Was -- did turnover continue to decline in April?

It was slightly lower than last year, but not materially.

Okay. And then just one more on the repairs and maintenance and property management reductions. Is there any way you can quantify or kind of weigh, how much of the decline in those numbers was due to lower turnover and higher occupancy, versus just lapping some elevated expenses in the first quarter of last year?

It's tough to bifurcate out how much of it is due to the turn effect this year. I can tell you, I can point you back to some of the numbers that we talked about last quarter in that we know that we had about $2 million or so in cosmetic investment last year, kind of in the first, call it, 4 months of the year that ran through April. So you can use that to kind of directionally back in to the numbers, but it's not, not kind of perfect amount.

Ryan, just -- I mean, just to reiterate what you had said. Just to -- we've had 9 quarters where our turnovers were coming down. And turnover is a benefit, not only to the revenue line, but you hit it right on. It is a benefit to our expense line as you don't have to refresh the homes. And that's so -- that's a very, very important trend that we are seeing and that should benefit us on both the top and -- top line as well as expense controls going forward.

Our next question comes from the line of Douglas Harter with Crédit Suisse.

Just touching on the strong occupancy improvement that you've seen in April. Can you just talk about how you're balancing occupancy versus pushing for more rent at this point?

Yes. I think we have a pretty good balance. We're at -- in terms of renewals, we're maybe slightly above inflation and right in the 4% range. And then we try to get market rents when we re-lease something that's been vacant. We haven't seen a material decline in the marketing period. So I think we're kind of just hitting it right. But we're also moving into the period where we can raise rates a little bit more because of the demand. And -- so I would expect something similar to prior years in terms of re-leasing rates. And renewal rates are still very strong at about 4%.

And Doug, it's Dave. Let me just add one thing. We mentioned April, we're in the 5% area. But as Jack indicated, the -- and as I indicated earlier, there's a balance between retention and getting these things leased because it impacts both the top line and the expense line. And we are getting higher than inflationary numbers now. And may be the -- and we are pushing a little bit more than we did at first quarter as evidenced by the 5%. But we are going to be very measured as in our rate management, not to impact negatively the retention that may impact -- will impact revenues and expenses.

Our next question comes from the line of Jade Rahmani with KBW.

I wanted to see if you can comment on home purchase trends. Has there been any change in demand or retention rates based on the slowdown in home sales? And also if you could you comment on move-outs to buy if that's lower than a year ago?

Jack, do you want to take it?

Yes. The -- it appears to be slightly lower than a year ago. I think we got as high as, at one point, as the high 30%, maybe even up to 40% of our move-outs were related to buying a house. It's closer to 30% now, so that may be helping with retention. I would think that it is. Repeat the rest of your question.

No, I think that was it. I mean If you're seeing any change in demand trends, any acceleration or strengthening in demand based on the slowdown in the housing market and the home purchase market that we've seen?

Yes. But on the other hand, we're disposing of houses, and they're selling pretty fast. So -- and a lot of them at list or better. So -- I'm not sure that the demand for housing on the buy side or the rent side has really subsided.

Okay. And just wanted a comment or ask about strategically, how you consider M&A? And if your increased build-to-rent strategy changes that calculation? Obviously, most of the large portfolios are older on average than yours. There's a company Front Yard Residential, that has an activist in the stock calling for strategic changes. So just wondering if -- how you consider M&A relative to build-to-rent?

Jade, it's Dave. I don't think the build-to-rent plays into the calculus. If it's the right opportunity at the right price, no different than a year ago, 2 years ago, we will consider it. But as we have mentioned in the past, we do have a target tenant that we are looking for, which takes us to a target type of property. And there are portfolios out there that match it, and some that are a little more challenging for us to acquire. But the build-for-rent component is just a growth channel for us. It's a -- it's one of many. And I don't think the -- that has an impact as to whether we would entertain M&A. M&A is a quality of assets price and really where our capital is trading at the given time.

As a follow-up, can you give a little color on the NOI margin differential between the newer homes and your existing portfolio?

The newer homes will have probably a little higher NOI margin. That really depends on the property tax rate in the -- in, but if you're talking about homes in the same area, same property tax rate, it should have a higher margin because your maintenance expenses in the first 10 years are going to be lower than you would on a house that we bought.

Yes. The margin's really driven higher. It is higher. It's driven by a little bit of premium rent and definitely lower maintenance cost. The rest of the line items are pretty consistent.

Our next question comes from the line of Ronald Kamdem with Morgan Stanley.

Just a couple of quick one. The first one was just, maybe can you talk about a little bit maybe the ancillary revenue opportunity for the company, in terms of how you guys are thinking about it? What's the low-hanging fruit? And when should we think about that as something to look forward to coming through the numbers?

On the ancillary revenue, there is a few pieces. There is couple of things that are running through. We -- our rent today, there's some additional pets -- not pets, but pet opportunities. We're getting additional pet revenue that we hadn't seen before. And so the ancillary revenue, there's a little bit out there, but it's not going to be the driver of your revenue line. It's still going to be rent is the driver. That's the primary component. That's -- the lion's share of the revenue line is going to be your annuity of rent.

That's great. That's helpful. And then maybe on the technology front. Maybe on -- can you just talk a little bit about, I think, you guys are piling a little bit more of -- some of the mobile apps or the self-guided tours. How is that progressing? Is there any sort of technological efficiencies that you could see for the company?

Yes. Technology is a key to our success. It has been from day 1. You cannot manage 53,000 homes in the -- with the infrastructure that we have and the number of personnel that we have unless you're leveraging technology. We are continually enhancing the technology. We have technology improvements over the last year and during 2019, in the logistics side, that's improving our in-house maintenance programs and intake processes or maintenance calls coming in. So that leads to better execution, a more efficient execution on maintenance. With respect to homebuilding, which is still relatively new for us, there is continued enhancements in that area that should benefit us into 2020 and later years in making that process more efficient as well.

Great. The last question from me was just if we could take a step back, it just -- if I look at the market performance so far year-to-date, maybe is there any markets that are maybe perform better than you would have expected? Or any markets that are lagging? And sort of a follow-up to that would be, what are some of the markets that, if you could, you're trying to get more presence in? And maybe what are some of the markets where you may be looking to reduce?

Yes. This is Jack. A lot of the western markets are outperforming. At Phoenix, we're getting really strong re-leasing rates. In Las Vegas, and they boast a very highly occupied Salt Lake City, Boise, Seattle, all -- they're all markets where we're acquiring land and planning to build in and grow in. As far as markets that we're getting out of, we've really only gotten out of tertiary markets, the ones with -- I think the biggest market that we're getting out of is Oklahoma City with -- I think, we had about 400 homes there.

And Ron, if you want the detail of the markets that we're looking to exit out of, or just the properties in general that we're disposing off, you can get that on Page 18 of the supplemental. There are a couple of smaller markets behind Oklahoma City that we're exiting out of would be Corpus Christi, Augusta, Georgia and then the Central Valley of California. But you can also -- you can see it all on Page 18 in the sup.

Our next question comes from the line of Buck Horne with Raymond James.

On the AMH Development, so just one last one here. On locations, how would you characterize the locations you're building in? Maybe whether it's average distance from the existing portfolio or some other metric? And kind of what are the challenges or synergies with managing those new locations versus the existing portfolio?

We're not going on the outskirts of the city. We're building right in our footprint. So really, the only difficulties that we've seen is when we built larger developments and having the right cadence of deliveries for absorption and kind of it's -- it's kind of at least for the initial fill up, it's kind of a hybrid between a large apartment complex and our regular marketing. So we've had to adapt a little bit there, but I think we've kind of figured that out now and our larger developments are leasing up. Just we need probably a better cadence on and that's what we're doing -- planning our cadence on deliveries so that they get absorbed as they're delivered.

Buck, it's Dave. We're in our core markets, we're not going into new markets inside our footprint. And many of them are inside the area where we're finding small developments. On the new developments, they may be right at the edge of the market, but they are contiguous to other homes that we have recently purchased that are doing very, very well. So they are really in our markets. So we're not building in any new areas from that standpoint.

Great. That's very helpful. And on the homes in the disposition pipeline, what are you seeing in terms of portfolio buyer interest? Are these homes -- are the buyers here looking at them on a stabilized cap rate basis? How are they pricing those assets? And what kind of buyer interest are you seeing in the market?

We're seeing -- we're marketing to bulk buyers when they're occupied. And then as they become vacant through natural attrition, then we market just through the traditional MLS channels. And we definitely are seeing small portfolio buyers. And I think our biggest one that we have under contract is about 200 homes.

And are they looking -- is there a cap rate range that there it's priced at, or is it more of a price per unit kind of thing?

It's a combination of cap rate and market value.

Our next question comes from the line of Drew Babin with Robert W. Baird & Company.

This is Alex on for Drew. Are renewal notices today being sent out at that 4%-ish rate bump you quoted a few questions back. And -- just curious generally, how much pushback are you receiving from tenants?

Well, we get some pushback or questioning. And we have pretty good renewal agents that explain that property values are increasing at greater than that level, and property tax rates are going up. And so, overall, we're able to achieve that. We'll probably go out slightly higher than 4% and back off if we need to a little bit.

Got it. That's pretty helpful. And then on the expense side, it looks like HOA fees [ have ] continue to trend upward quite significantly. Curious if that's being driven by certain markets? Or is that more of a broader industry trend? Do you know, as you develop in or buying homes in newer, nicer neighborhoods, should we expect HOA fee growth to kind of continue?

Yes. I'm going to -- I was expecting that question a little earlier. So I kind of prepared an answer. We've experienced some inefficiencies in our HOA process. It's been a very manual process. We have -- we deal with 12,000 different homeowners associations that have different ways of communicating. And it's been very -- anyway, our prior process was fairly inefficient, resulting an above normal levels of late fees and penalties. It's not a material component of our cost structure. And we're in the process of addressing the issue through the automation of the process. We expect to see some continued impact through 2019. But once the process is fully automated and we're through reconciling all the accounts, we expect it to be much more efficient going into 2020.

Yes. Drew, it's Dave. This kind of goes back to a prior question on technology. This is one of the areas that technology is going to assist us in. The costs are admittedly a little higher than they should be right now. And we would see that as that technology rolls out throughout the year to -- we would see significant benefits from that technology as it rolls out later this year. So that's where we are on that.

Understood. And then one last question for Chris on the balance sheet. Where does 6.9x leverage today when you include preferreds land on your guys' internal range? Obviously, you're really well-capitalized. But is that a 7-ish times a good run rate going forward where you guys feel comfortable?

Very much so. As we've laid out before kind of the 2 internal targets that we have is one on a net debt-to-EBITDA basis and one on a debt including preferred shares basis. On a net debt-to-EBITDA, our kind of comfort zone is 5.5x or below. And then on a debt including preferreds, kind of at a 7.5x or below. So we're comfortably within the range that we like to see.

We have reached the end of the question-and-answer session as well as the conclusion of today's call. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.