Apple Hospitality REIT, Inc. (APLE) Q4 2016 Earnings Report, Transcript and Summary

Greetings, and welcome to the Apple Hospitality REIT's Fourth Quarter and Full Year 2016 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kelly Clarke, Vice President of Investor Relations. Please begin Ms. Clarke.

Thank you. Good morning, and welcome to Apple Hospitality REIT’s fourth quarter and full year 2016 earnings call on this, the 28, 2017. Today’s call will be based on the fourth quarter and full year 2016 earnings release, which was distributed yesterday afternoon. I would like to remind everyone that today’s call will contain forward-looking statements, as defined by federal securities laws, including statements regarding future operating results. These statements involve known and unknown risks and other factors, which may cause actual results, performance or achievements of Apple Hospitality to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. Participants should carefully review our financial statements and the notes thereto, as well as the risk factors described in Apple Hospitality’s 2016 Form 10-K and other filings with the SEC. Any forward-looking statements that Apple Hospitality makes speaks only as of today, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, certain non-GAAP measures of performance such as EBITDA, adjusted EBITDA, FFO, and modified FFO, will be discussed during this call. We encourage participants to review reconciliations of those measures to GAAP measures as included in yesterday’s earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the Company, please visit applehospitalityreit.com. This morning, Justin Knight, our President and Chief Executive Officer; Krissy Gathright, our Chief Operating Officer; and Bryan Peery, our Chief Financial Officer, will provide an overview of our results for the fourth quarter and full year of 2016 and an outlook for the sector and for the Company. Following the overview, we will have a question-and-answer session. It is now my pleasure to turn the call over to Justin.

Thank you, Kelly. Good morning and welcome to Apple Hospitality REIT’s fourth quarter and full year 2016 earnings call. During the fourth quarter, our portfolio for hotels increased comparable RevPAR by 1.8%, bringing comparable hotels’ RevPAR growth to 2.7% for the year. Continued top-line growth enabled us to realize comparable hotels’ EBITDA growth of 3.5%, and adjusted EBITDA growth of 17.6% for the full year, consistent with our expectations and in line with our 2016 guidance. Broad economic indicators posted modest gains in 2016; unemployment continued to decline; GDP growth showed some growth; consumer spending continue to increase; and general consumer sentiment remained relative positive. However, the latter half for the year was colored by both domestic and international uncertainty, which combined with increasing supply growth, resulted in moderating top-line movements as we ended out the year. In 2016, we dramatically expanded our Company through a merger with Apple REIT Ten, which added 56 hotels and 12 markets to our portfolio. The transaction involved the issuance of 49 million shares and grew our equity market cap by 28%, while maintaining the strength of our balance sheet. We also added 128-room Home2 Suites by Hilton hotels in Downtown Atlanta, Georgia. And earlier this month, added a 124-room Courtyard by Marriott in the historic Stockyards just outside of Downtown Fort Worth, Texas. Each of these hotels was acquired at opening and adds to our strategic mix of high quality relatively young select service and extended stay hotels. In order to further refine our portfolio, we sold the 226-room full service Marriott hotel in Chesapeake, Virginia, in December of 2016. And we entered into a contract for the sale of our full service Hilton in Dallas, Texas. These transactions enhance the value of our overall portfolio by increasing our geographic diversification; exposing the portfolio to a broader set of demand generators; and perhaps most importantly, focusing our efforts around our core product types where we benefit from extensive experience, a wealth of benchmarking data and economies of scale, which drive both G&A and operational efficiencies. During the past year, we also invested approximately $63 million in renovations and property improvement with major renovations at 28 of our hotels. This reinvestment in our existing portfolio enables us to maintain the competitive strength and relevance of our hotels in their individual markets. Renovations are carefully timed and effectively managed to minimize disruptions. And while we utilize our scale to drive-down total renovation costs, the scope of each renovation is tailored to specific needs of the assets and its competitive position within the market. With an average effective age of four years across our portfolio, we believe our hotels are well positioned to remain competitive within their local markets and maintain or grow market share despite an increase in completing hotel inventories. While much of the new supply currently out of construction continues to be focused around a finite number of major markets, and increasing number of our hotels face competition from construction projects likely to open within the next 18 months. During the fourth quarter, just over 60% of our hotels had one or more upper mid-scale, upscale or upper upscale projects under construction within a five-mile radius. As we entered 2017, we see meaningful increase in general economic optimism. Improving oil and gas prices bringing the possibility for some strengthening in energy dependent markets which has struggled for some time now and measures of CEO confidence have significantly improved. These two factors combined with continued consumer confidence and low unemployment bode well for our industry in the near-term. We are optimistic that proposed government actions on infrastructure, taxes and general regulations, which many sight as reasons for shifting sentiments, could create an environment for re-acceleration in U.S. economic growth. However, government under any administration tends to move slowly and we do not anticipate significant positive impact for our industry in the near-term. Given current supply and demand dynamics for our market, we currently expect comparable hotels’ RevPAR growth of between 0% and 2% for the full year of 2017. We anticipate that this will allow us to generate comparable hotels’ adjusted EBITDA margin of 37.3% to 38.3%, and adjusted EBITDA of $430 million to $450 million. It is worth noting that these projections are based on current market dynamics, and do not include any upside from potential economic acceleration, and resulting demand increases in the back half of the year. While the near-term economic future for the country is not entirely certain, we are fortunate to have positioned ourselves to take advantage of a variety of potential scenarios in ways that will continue to enhance value for our shareholders. With leverage at three times adjusted EBITDA, we have one of the strongest balance sheets in the industry. As we have highlighted in past calls, our balance sheet provides us with stability during periods of uncertainty, while also enabling us to act quickly on opportunities to create value by purchasing shares when appropriate or pursuing accretive acquisitions. We also have a shelf registration taken in place, which provides us the mechanism to efficiently issue shares when market conditions are appropriate, and use proceeds to further enhance the strength of our balance sheet in anticipation of future opportunities, or to pursue individual asset transactions. Given the size of our targeted assets, we believe it is possible for us to match capital raise with deal activity in ways which will enable us to clearly demonstrate the value generated as a result of those transaction. We continue to have Board authorization for up to approximately $465 million in share buybacks, providing us optionality should shares trade at a level that makes the purchase of our own shares significantly more attractive than opportunities available in the private markets. Our clear simple strategy is designed to mitigate volatility and maximize risk adjusted returns for our shareholders overtime. Broad geographic diversification enhanced by our significant scale exposes our portfolio to a variety of demand generators and insulates us from regional shift and supply or demands. Investment in upscale rooms focused product within the Hilton and Marriott brand families enables us to generate higher margins, which drive profitability in good times and mimic downside risk during periods of economic difficulty. Scale and focus enables us to utilize robust benchmarking data to drive operating results to the property level, and operating efficiencies at the corporate level. And our management team’s extensive experience with these brands and this product type over multiple economic cycles, in forms or decision making, for our acquisitions, dispositions and reinvestments in our hotels. It is now my pleasure to turn the call over to Krissy who will now provide additional detail regarding performance across some markets in the industry overall.

Thank you, Justin. Comparable RevPAR improved from 1.5% growth in the third quarter to 1.8% in the fourth quarter. Consistent with the third quarter, transient room nights decreased 30 basis points and transient rate grew approximately 1%. Group production was stronger in the fourth quarter with an 8% increase in room nights and approximately 2% increase in rate year-over-year. Our group room night mix increased 13% to 14%, as leisure related group bookings remained strong and our management companies have targeted additional group base in reaction to modest growth in business transient demand. As for channel mix, we were encouraged to see that the fourth quarter bookings were again stronger for brand.com than they were for online travel agents. Property direct bookings continued to decline as more guests are using digital channels to book. GDS business was down slightly, which is consistent with the slower business travel trends. We continue to see wide variability of performance throughout our geographically diversified portfolio. Considering that we want to start markets, Los Angeles, had an EBITDA contribution greater than 5% in the quarter and for the year, we would consider the upscale industry average to be as good benchmark for our portfolio performance. Our results were slightly favorable to the industry RevPAR growth statistics for the upscale category of 1.2% for the quarter and 2.1% for the year. Looking ahead to 2017, we face a tough comp year-over-year in the Los Angeles market as business associated with the Porter Ranch gas lead LED to outsized growth in the first half of 2016. However, we are pleased to see that the additional markets we added from the Apple Ten portfolio are helping to offset some of the swaps. Other growth in business transient demand continues to be modest. We are working closely with our management team to ensure that we are well positioned to capitalize on an uptick in demand should fund with the positive macro trends Justin mentioned translates into stronger business travels. Turning to profitability, adjusted hotel EBITDA margin declined 20 basis points for the quarter and the year, but remained strong at 35% and 38% respectively. Excluding the $1.8 million settlement proceeds we received related to the 2010 BP oil spill and the $1.8 million impact of retail tenant however at our New York City hotels in 2016, we would have seen a slight increase in adjusted hotel EBITDA margin for the year. Payroll expenses rose 3% for the quarter and the year, and we anticipate a similar increase in 2017. We benefited from lower utility costs in 2016, and we have factored in a moderate increase in our 2017 guidance, as well as a mid-single-digit increase in real-estate taxes. Our data driven asset management team is working diligently on minimizing margin loss in a low revenue growth environment, by identifying opportunities through detailed benchmarking, vendor contract renegotiations, implementation of new labor management tracking tools and other projects. Finally, we believe our unique management contract terms which align management company compensation more closely with operating performance, helps us maintain one of the strongest margins in the industry. We were very pleased with results in the first year of these contracts. Although, more hotels missed the budgets operating profit targets than did so in the prior year due to softer RevPAR growth than anticipated, more hotels met the target subsequent metrics by achieving a minimum savings on negative budget variances and maximizing slower positive budget variances. In 2017, we made two additional managers to the new forms and now have almost 80% of our contracts on this new form. I will now turn the call over to Bryan to provide additional detail on our financial results.

Thanks Krissy and good morning. As both Justin and Krissy highlighted, growth across our portfolio and the industry is moderated. To summarize a few numbers, with the addition of 57 hotels during the year, we increased adjusted EBITDA to $95 million during the fourth quarter and $378 million for the full year. Modified FFO per share grew to $0.37 for the fourth quarter and $1.76 for the year, representing growth of 6% for the fourth quarter and almost 11% for 2016 compared to 2015. Although, as Krissy discussed, adjusted hotel EBITDA margins were down year-over-year during the quarter and for the year, adjusted EBITDA margins improved 90 basis points and 50 basis points respectively due primarily to the structure of our corporate incentive compensation plans. The Company’s senior management performance incentive plan is based 50% on shareholder return metrics and 50% on operational metrics. These metrics were not met at the same levels as 2015. Therefore, G&A costs were down for the fourth quarter compared to the same period last year by approximately 80 basis points and down 50 basis points as a percentage of revenue for the full year of 2016 compared to 2015. With 2016 total G&A costs representing 1.6% of total revenue, and on a pro forma basis including Apple Ten’s historic G&A costs, 38 basis points of total market cap. At the end of 2016, the Company had approximately $1.3 billion of outstanding debt with a current combined weighted average interest rate of 3.4% for 2017. Excluding debt issuance costs and fair value adjustments on acquired debt, our debt is comprised of $494 million in property level debt and $845 million outstanding on our $1.1 billion of unsecured credit facilities. As Justin mentioned, during December we completed the sale of the Chesapeake Marriott for a total of $10 million, and are under-contract to sell the Dallas Hilton for $56 million with proceeds net of debt to be assumed by the buyer under the Dallas contract estimated to be $28 million to $29 million. In September, the Company established a written trading plan that provides for share repurchases. The plan is intended to comply with Rule 10b5-1 under Securities Exchange Act. Under the plan, during the fourth quarter, the company repurchased 4,000 shares at an average price of $17.71. Our Board of Directors continually monitors the plan in relation to market conditions and may suspend or terminate the plan at any time. Also, during the fourth quarter, the Company paid distributions of $0.30 per share. Our Board of Directors has authorized a regular monthly cash distribution of $0.10 per common share. The annualized $1.20 per common share represents an annual 5.9% yield based on our February 24th closing price of $20.19. On a non-financial note, I wanted to highlight that our Board of Directors has once again recommended three corporate governance proposals to be considered by shareholders at our 2017 Annual Meeting. These proposals were voted on, but not approved, at our 2016 Annual Meeting and include changes to our charter to; one, de-stagger our Board such as the current Board members terms expire, newly elected Board members terms would be one year; two, to opt out of certain provisions of the Virginia Stocks Corporation Act and among other things require a vote of two-thirds of disinterested shareholders to approve certain transactions that involve sale of the Company or similar events. By opting out a majority vote of all shareholders would be required for these transactions; and three, provide the majority on all amendments to our charter. Thank you for joining us this morning. Despite a more moderate growth environment in 2016, we continue to execute against our core strategy, and we’re able to implement a variety of strategic initiatives that we believe will enhance shareholder value over the long-term. As we began 2017, we continue to see opportunity in overall domestic travel and we remain confident and the fundamentals for Hospitality’s platform. We will now open the call up for questions.

Thank you. At this time, we’ll be conducting a question-and-answer session [Operator Instructions]. Our first question is coming from the line of Ryan Meliker with Canaccord Genuity. Please proceed with your question.

I just had a couple of things I was hoping to get some color on from you. As it relates to guidance, I fully understand the idea of taking a bit of conservative approach in terms of not building in any macroeconomic acceleration. And I appreciate the color on Los Angeles, the Porter Ranch gas leak comps. I’m just wondering if you can walk through some of your other larger markets, Houston et cetera and give us an idea of what you’re expecting from a RevPAR growth acceleration or deceleration level in ’17 from ’16? Thanks.

Houston, actually, we do expect that Houston would still be negative year-over-year. And we did get a nice benefit from the super-bowl in February. But beyond that, we are still seeing softness in that market, as well as the other energy markets. One thing that could be a little bit encouraging, but it’s not built into our numbers yet, because we haven’t seen it in the future bookings. But we have heard from our teams, our property teams that there, both in Houston, Houston as well as Lafayette, Louisiana, some in Mobile, some in Panama City that there has been some pick-up in inquiries from the energy from oil and gas companies. But moving forward we still expect you still see negative. We’re hopeful that that pick-up translates into softening or an offset in some of the pain in the second part of the year. In terms of other markets, we still expect Phoenix to be strong. There is quite a bit of project business in the Happy Valley markets related to the hospitals, strong leisure demand. Chandler recently, although, there is new supply coming into that market, it was recently announced that Intel is investing $7 billion to finish the factory that’s located conveniently next to our properties. So, we expect there, expect of around 3,000 jobs. So in the second half of the year, we expect that to help us there. In terms of other industries, ecommerce; strong ecommerce business both from Amazon and Walmart is driving solid numbers in Seattle, as well as Rodgers which is near the Walmart location; San Diego, we expect to continue to be strong city wide production; Downtown, even though variance in supply, we still have good leisure base and border patrol business; not feels the market that actually underperformed last year in Apple Ten, but we are seeing pick-up in automated supplier business, as well as source business related to college, and there is a software project at the hospitals. Other markets, Miami; we expect to continue to be soft; and Denver, is a market, especially where Highlands Ranch properties are, there is new supply there. And so, we expect that to be soft; Dallas downtown, primarily, the year-over-year conviction calendar is a little bit softer and there is a new supply picking up there; Austin, the demand is still very strong in Austin, but we have been impacted by supplies; both the Downtown market supply, which is driving less compression, and as well as supply in around our immediate properties. That is offset a little bit by the [indiscernible] merger, so our Round Rock properties are outperforming our other Austin properties. Boston is another market where we -- with additional supply and a little bit of softness in demand, we expect that one to be a little challenged. And then again I mentioned in my comments Porter Ranch we still expect this LA markets to be strong with leisure and solid entertainment business, but the rates that we were able to drive last year with the additional business is going to make that comp a little bit challenging.

From what you just highlighted, it sounds like the Huston super bowl isn’t really having a big tailwind in the first quarter, and that sounds like it's partially because of the Porter Ranch comp, but also because you guys had the super bowl in the Bay Area last year. Is that fair?

Yes. We had the super bowl. We intensified from the San Jose -- in our San Jose property from the super bowl last year. And where our locations of our hotels were in Huston, we were able to drive as much rate growth as we were located right next to where the super bowl was the current…

And then just one last question with regards to margins you guys are guiding the RevPAR growth to 0% to 2% and margins at the high-end of that range or flat. But this year you guys get RevPAR growth almost to 3%, and margins were down 20 basis points. Can you just walk us through what gives you confidence that you’re going to be able to even at RevPAR growth that’s 70 basis points lower than this year, generate margin, be able to hold margins as opposed to seeing continued deceleration?

Well, one of the things that I mentioned in my comments earlier is that we did have some time payouts that we had relative to the BP oil spill that, in 2015, that came all the way through to the bottom line, which definitely helps us in 2015 but hurts a little bit in 2016, as well as the retail tenant turning over Hotel 57. I will tell you, honestly, I am much more comfortable with margin growth when we get above 2%. And the closer we get to 2.5%, I feel a lot better, but some of the things that we are working on, we do still, even though we have solid margins, high margins, we do think that we do have some additional opportunity with minimizing some turnover in some of our markets working with our management teams on that, as well as maximizing productivity. And what are the things that I mentioned in my comments, we’re working with our management teams and trying out some different software solutions that will allow them to better forecast occupancy and adjust scheduling, and hold the management teams more accountable to the [indiscernible] property [indiscernible] and the productivity goals. We constantly renegotiate contracts and use our benchmarking to pinpoint opportunities. The biggest challenge will be with margins, especially in the first half of the year, we were able to drive double-digit rate growth in the Porter Ranch market. So, margins will be more challenged in the first half of the year than they are in the second half of the year.

And then just real quickly, just on the Porter Ranch gas leak headwind. Is that through the first two quarters, is it heavily skewed towards the first quarter balance between both quarters, help us understand the timing of that?

It is, in the first half of the year, it’s more skewed to the first quarter and the second quarter.

Our next question is from the line of Michael Bellisario with Robert. W. Baird. Please proceed with your question.

Just to follow-up on Ryan’s question on LA. If you excluded LA from your guidance, what’s kind of the basis point impact to your 0 to 2 range for ’17, if you can quantify that?

Well, it’s not a perfect science. But what we actually did was we went back and looked at what we had budgeted for LA in terms of growth. And then we didn’t quantify it down to the exact dollar what the Porter Ranch impact is. So, we estimate that on a year-over-year basis, about 50 basis points would be the year-over-year impact, approximately 125 basis points in the first quarter and 75 basis points in the second quarter.

And then how should we think about the Apple Ten portfolio versus the legacy portfolio in terms of the RevPAR growth spread? It sounds like you expect that to narrow relative to the 200 basis points spread that was in ’16. Is that fair?

Yes. And actually what I would say for, right now, what we’re seeing is a little bit of a reversal as we’ve entered the first part of this year another market, but I didn’t mentioned the Chicago. In Chicago, actually, we don’t expect a lot of strength, but we do expect that market to perform better than it did last year. But you have the ramp of Cape Canaveral asset, as well as Rosemont, which also provide some tailwind for us. Like I mentioned the Knoxville market, the Phoenix market, which is strongly have added some additional assets there that will be again offset by -- so Houston, Oklahoma City, and some of the headwinds in energy markets, as well as Dallas Downtown with the less favorable demand there this year.

Yes. But we sited out last night, we’re actually in from the Apple Ten transaction year-to-date.

And then Justin one for you, just more broadly, what do you think you guys need to do to maintain your relative cost of capital advantage, and add to your per share growth and shareholder value over the next 12, 18, 24 months, as you think about capital allocation?

I think continuing to execute on our strategy is key to that. But we, I think defined, clearly defined over the past several years, strategies that worked for us in a variety of economic conditions. If you look at the transaction activity that we’ve been focused on with the sales of the two full service hotels, and a continued effort on our part as we’ve stated over the past to continue to move those assets out of our portfolio. And to double down in essence on our core product type, the upscale product. Looking again to enhance the portfolio by entering into markets where we see outsized growth potential that will be key. Beyond that really I highlighted in my remarks that we intend to be opportunistic. We haven't placed a share buyback program to the extent our shares trade down and become more attractive than opportunities that exists in the private markets. You can expect us to be active in buying out shares to the extent that we trade out, we’ll use our shelf registration to issues shares and try to grow the portfolio with accretive acquisitions. We’re benefited by the fact that we can move the needle through a series of small transactions that enhance our portfolio, but that are easy to execute on. And we’ve shown that we’ve been able to do that in the past. So, cost to capital -- maintaining our cost to capital I think for us sticking to what we’ve been doing and continuing to enhance and do it better.

[Operator Instruction] The next question is from the line of Bryan Maher with FBR Capital Markets. Please proceed with your question.

So, little bit more strategic as you look to grow. Do you think that Ashford Trust move on Cell Core? And now the response that that deal needs cash versus all shares potentially creates an opportunity for you guys to go to Ashford with a maybe more attractive or timely bid for their basket of select service hotels, and be successful given your strong balance sheet and their need for cash to get that deal done?

Certainly, this is the possibility worth exploring. We won't, as has been our past practice, comment on specific transactions. But as I’ve mentioned in the past, our desire is to pursue individual assets and/or portfolios that are consistent with our strategy. And Ashford has a portion of their portfolio that would be a reason that we could fit. Whether or not we pursue, that will depend on pricing relative to our cost of capital and with our existing portfolio. But we would explore that as we would explore any other opportunity that fit those criteria.

So I guess maybe I ask slightly different way. It seems like M&A might be getting a little bit more interesting, a little more aggressive to get deals done. What you’ve done in the past, acquiring Apple Ten, that was fairly easy and seamless at least from our vantage point, maybe not internally. And one off, that’s kind of low hanging fruit to a degree. I guess my question is, would guys consider becoming a little bit more aggressive to grow the portfolio? Or do you want to take more of a wait and see type of approach?

Really, it depends on opportunity, specifically. We’re looking, as I’ve mentioned in the past, to add to our portfolio in ways that enhance the value of the portfolio, which means pursuing deals that are accretive to our current shareholders. And the environment continues to be much as it was last year with sellers holding firm in anticipation, I think of a reacceleration in business towards the back half for the year, which would further enhance the value of their assets. And there’re still on a lot of deals either on an individual asset basis or a portfolio basis that make sense even given our improved cost of capital. That being said, we’re continually active in exploring opportunities and having conversations with potential sellers. And I think you’ll see us act when the opportunities make sense, where they’d be individual asset transactions or margin portfolio. The biggest challenge for us with larger portfolio is really is with our existing portfolio, and consistency with our strategy. To the extent larger portfolios require us to take ownership of assets that don’t fit, we factor in disposition risk for those assets into the financial equation for acquisitions, which really creates a gap in most instances that makes it difficult for us to execute on those larger transactions.

There are very few large portfolios in the industry that we think are comparable from a quality and asset type to ours.

And then just lastly, you guys have been fairly successful at tapping into newer product that’s coming online via developers. How would you characterize your current pipeline of such deals as we look at 2017 and 2018?

Really, that’s been a consistent part of our strategy. And the pipeline that we have in place is smaller than it might be at other points in the cycle, given the cost of construction and land. We’ve been far more selective in pursuing opportunities that we feel represent or will represent long-term value for our shareholders. That being said, we’re excited about the deals that we currently have under contract, and are continuing to look at opportunity that way. How we fund these deals, I think will depend largely on where we are in the cycle and what options we have available to us. But we have the opportunity to fund them through -- with proceeds from dispositions through equity raise or especially the smaller deals and utilizing our balance sheet in the short-term. The nice thing about those acquisitions is we’re able to hand pick-up them in markets and with brands that we feel are a fit for consumers and demand within specific areas, and a fit within our product portfolio. And they help to maintain the younger age and relevance with consumers in our portfolios as a whole.

Our next question is coming from the line of Ryan Meliker with Canaccord. Please proceed with your question.

Just a quick follow-up to Bryan’s questions, I’m just wondering with the scale that you guys have now with over 30,000 rooms. When you think about acquisitions and how much time you’re spending underwriting different assets. Can you give us an idea of a breakdown of how much time -- percentage of time spent on individual assets versus portfolios right now. Are you seeing portfolio time ticking up just given your scale, or are you still very focused on one-off assets that you note to be accretive?

We will always look at individual assets. Bryan highlighted, and I think he oversimplified. But Bryan highlighted the fact that they are easier to executive on. We’re continually underwritings those deals. The reality as I mentioned before there are finite number of larger portfolios that would be a fit for our portfolio, and what we find is that we end up underwriting those portfolios over and over again, looking for an opportunity to acquire them at a price that makes sense for our existing shareholders. So, in terms of time spent, I would say a greater portion of our times probably spent on individual assets, but not to the neglect portfolios that we think would be a good strategic fit.

And then has the portfolio time picked up following the acquisition of Apple Ten, or no?

I would say it's consistent. At the time we highlighted when we pursued the Apple Ten portfolio that we were exploring opportunities with several other companies that were similar from a scale standpoint. At the time the Apple Ten portfolio made the most sense to pursue, because of the strategic fit and pricing. But again, we continue to explore those same opportunities and few others.

Thank you. At this time, I will turn the floor back to Justin Knight for closing remarks.

Thanks for joining us this morning. With the strong balance sheet and stable portfolio with the foundation and tools in place to proactively pursue opportunities to further enhance shareholder value. We look forward to the months ahead. We hope that as you travel, you take the opportunity to stay with us and thanks for joining us this morning.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.