Digital Realty Trust, Inc. (NYSE:DLR.PK ) Bank of America 2022 Media, Communications & Entertainment Conference September 8, 2022 2:40 PM ET

Bill Stein - Chief Executive Officer

Andy Power - President and Chief Financial Officer

David Barden - Bank of America

Okay. Well, thank you guys for continuing the comm infrastructure track here. Really appreciate to see you guys here again. Bill Stein, CEO of Digital Realty. Thank you for coming. Andy Power, President and Chief Financial Officer. I told you I was going to ask you this question also. So how are things in Austin?

It's going good or bad because we just won a new contract.

Great to have you Andy in Austin.

Yes, and now you got a golf partner. So I guess, look, the data center space has been very much in the news. Everyone is talking about it. And I think, Bill, you were one of the first guys to call out, maybe this on the fourth quarter conference call, when people were wondering about inflation. And you said that a moderate inflation environment could be a very positive thing for this industry, because it would do two things. It would kind of give you the potential freedom to raise prices on the one hand. And on the other, it would kind of raise the cost of capital for the marginal players in terms of their ability to bring new supply to the market. So I guess, we've kind of seen a lot more of what inflation looks like. It's all sorts of weird stuff. It's not all one thing. So I would love maybe if you could kind of share with us the latest thoughts that you have as the years going by and you've seen what's unfolded with inflation and supply demand and consolidation and all the rest of it.

Well, I would say it's been moderate inflation.

It's been higher than what I think everybody anticipated. I think -- I mean, the good news is that it has definitely provided air cover to increase base rates on rents, especially on new developments because our input costs are increasing, labor and materials. And customers that are engaged in self-build are well aware of that, they're experiencing the same phenomenon. And that has a read-through for re-leasing spreads, too, which is positive for same store. So it gives us pricing power both on new builds and re-leasing. Andy and his team has done a great job on the balance sheet. So we have a lot of long term debt in place and there isn't a tremendous amount of pressure on the debt front. But for particularly, I would say, private competitors that are running a more leveraged model, the inflation has clearly created pressure on long term rates. And that's increased, I think, the weighted average cost of capital and hurdle rate for the private guys. In some cases, I think it's affected the availability of debt, too, to the extent that those players are relying on the securitized debt markets.

So given that it's not moderate inflation, but it's been kind of something south of hyperinflation, I would just say high inflation. Which is the more powerful force, the impact on your costs in the short run or your ability to kind of take re-leasing spreads up? So are margins improving or contracting as a net function of this?

Well, what I would say is our returns on new deals are probably neutral. So pricing is keeping up with costs. But it's clearly positive to the extent you have positively re-leasing spreads.

And is that -- there's obviously a lot of different levels of inflation on a global basis. Can you talk a little bit more about maybe more regionally how that looks in, say, Europe versus Americas versus Asia?

Oh really, that's cool. I'm going to write that…

And I don’t know, Andy, you want to jump in here on some of the specific markets?

I mean, I think it's -- you have a confluence of events here that are called -- and I've said this before, moving that pricing pendulum back towards the incumbent providers. And some of that's just general inflation on components. Some of that is, call it, various bottlenecks, government related power deliveries, and that's been the backdrop of a robust and consistently robust demand landscape. And you could say that has happened in all the major theaters geographically. And they're certainly the major markets that it's been certainly accentuated in Frankfurt, in Europe or Paris, what's going on in Northern Virginia in just the last four or five weeks or in the country of Singapore, which totally unrelated to inflation, totally unrelated to power availability, said, hey, we're going to take a pause on data center development till a more green design and construction comes to bear. And that just metered out the supply and demand stayed constant and prices continue to escalate to probably our highest returning market.

So let's talk a little bit more about that. So you guys have a primarily pass through pricing model for power. What is happening in Europe? How quickly are prices rising, and what is the customer reaction to it?

So it's very country by country because not all of Europe is called having the same exact pain point. Certainly, there's some very hot spots and there's other markets where the source of power just allows it to be protected as well as our hedging strategy has been quite successful over time, not that we sat back a year and half ago and said, hey, this is coming. We got to lock this out. But call it, layering hedges across different countries has been proven prudent. They don't last forever. We're rolling into the next cycle of those hedges. And we're just having open and transparent conversations with these customers. I can tell you whether it's pricing on the contract or power pass-through, having it in a backdrop where everyone wakes up every day and see something more expensive than it was the day before whether it was gas pumps leading into the summer, grocery stores, we're in a new world order in many regards.

So we are, call it, 75% through our hedging. It might be closer to 80% for 2023 and the redo of next of the new layer of hedging, and we're actively having conversations with customers. Nobody would love us paying higher prices for anything. But being open, being ahead of the game, very transparent with them, and this ties back to these are mission critical applications. These are not discretionary purchases and says, the power cost is this, I'll buy a little less data center this month. It doesn't work like that. So trying to be a part in fashion with the customers and communicate and transparency has been our key and call. We think we're doing a nice job insulating from the risk and helping them through these pain points.

So you kind of talked pretty regular about comfort in the kind of relatively strong demand that's out there for your facilities. We just talked a little bit about that in our prior session. But could you kind of walk us through how that might look in a more recessionary climate, if we're not already in one?

Look, we can look back to 2008, 2009 and see how the company performed then. And some of us are too young to remember that. And I would say in some ways, that was a step function. We had some incredibly good quarters back then. And I don't believe our business is dependent. It's not a cyclical business. It's a secular business, driving demand. And so I don't think that it's going to be impacted one way or the other by the economy. Now having said that, I do think that to the extent that the enterprises decide to automate more and thus move more of their business to the cloud or to rely more on IT as opposed to income, that would be beneficial for our business in the intermediate term.

I told this anecdote earlier, but we had a meeting with our Global Head of Data Centers, who told our investors that Bank of America was cutting their IT budget 20%. But his data center budget had doubled and that he basically felt like he could go in and ask for any number, because the things they're doing with these data centers, two of those things, one of them is supporting the mobile application banking that's proliferating as people change the way they behave. And then the other is digital transformation of the Bank of America organization, moving to automated tellers and all these sorts of exercises. And during a period of recession, that doesn't slow down, it probably accelerates.

I think so. I mean, it's really both two line items on the income statement. It's revenue enhancing. It's also cost reduction.

And then I think that you talked about the step function in '07, '08. And I think that it's helpful maybe to maybe reflect on why was there a step function. And I - my remembrance of it was that it was a combination of a real desire on the part of corporations and self performers to avoid the expense and capital investment upfront of doing it themselves in combination with a multiyear period where no one was putting any money into the data center business. And so we had this vast supply demand imbalance. Do you see that as being something that could unfold if we invent -- in fact, go into recession in the next cycle?

I think so. I mean, I don't know that we've seen pressure on balance sheet yet. But that -- as interest rates continue to increase, I think you could easily see that. We were out to dinner last night with one of our lawyers who as a partner of one of the large firms here. And he was talking about lines of business that have been impacted by the current economy. And he did say that one of the business units that's booming right now in their firm is bankruptcy.

I was just going to add like the last, call it, our sector in the last downturn was really focused on core competencies. Like is my core competency owning the data center or owning my bank branches or running a financial institution. This one, the game has changed, yes, because it -- like you just said, digital transformation in a cloud era is a performance, a revenue enhancer and a cost saver, and it doesn't get cut when things are sliced. But the core competency theme does come back. Like we spent some time at a different industry conference, not investor related, and it's a new era for some of the largest technology companies for the first time ever saying business-critical travel only. We have to redirect resources, right? So I think that core competency things when capital is less robust could -- and they're not -- these companies are not going bankrupt. And they're not starved for capital, but it does take people back and saying, should I be investing in more engineers or more salespeople or other technology, or should I be investing in this, call it, physical building that someone -- I can outsource and control for a long time? So I think that could be a derivative to play out from this one as well.

And we've also seen actually record hyperscale CapEx investment in the industry. It's a little bit of a mystery whether it's intended for their self perform or whether it's to take down Digital Realty facilities or to expand in more retail facilities. How have you seen that evolve over the course of 2022? And what do you think it's -- is this trend going to continue? Because I kind of feel like it's all related, right? Business transformation is happening because cloud exists. And cloud exists because you can have big facilities and small facilities in diverse locations, but I'm interested in kind of your updated perspective.

Well, we've had record quarters in Q4 and Q1. I think that the back half of this year is going to be quite strong as well…

Is this greater than 1 megawatt type of demand?

Bill, it's out there pretty good.

Bill shared this to some more one-on-ones. Bill just spent the last week with some of these big customers and characterized -- give some color on the characterization of the commentary of where they see the future. It doesn't seem like a pullback in the face of macroeconomic uncertainty. It seems like still a long way of growth ahead quite honestly.

Yes, just the opposite. I think they're accelerating their growth. They put -- they gave us numbers, which I don't feel comfortable sharing with you. But in terms of the magnitude of growth they expect over the next half dozen years in their data center footprint, and it's substantial. And they are quite honest in saying, this is not something that we can handle on our own. We need good partners to help us.

Another topic that's kind of came up in -- that we talked about in terms of gating factors, I know you guys have weighed in a little bit on it, is the Northern Virginia Dominion power transmission situation. I kind of got lost because it was an emergency six weeks ago. And then it turns out well, it might not be in a total emergency and while we've got four five years to solve it and now we got the infrastructure money coming, and so maybe it isn't, I don't even know what we're doing now.

Andy has been point on this, I think, probably dealing with it every other day.

So I would say not a whole lot of new news to take home to the bank versus what I shared at the very end of July, early August that the surprise has happened in this largest data center market right in a, call it, data center alley of it of the Northern Virginia Loudoun County. It is a, call it, a transmission. So the poles and the wires, not the generation of the power issue. It is not permanent. It's temporary. But from what I see is this will likely play out despite the news of fixes and solving. I'm not seeing Superman come save the day on the problem just yet. And it's going to result in less supply in that market for the next couple of years. I've not seen that change just yet. We'll know more about what that exactly means for Digital Realty as a competitive set in the coming weeks.

Dominion is working through it’s, call it, all of its power requirements to the data center providers, the broader Northern Virginia community. They're talking through their -- what they could do themselves, walking through different partners. And they've committed to come back to us and saying, hey, this is what we thought you had prior to this hiccup on their side, and this is what we think we're going to be able to provide for the next several years. And they said, you don't need to wait till months and months to get that feedback. So the next several weeks, we should probably get a clearer picture on that. But what I'm seeing, it still looks like less than what would have been certainly planned. My crystal ball is foggy as anyone [indiscernible] that really plays out for digital in terms of specific new inventory deliveries. But net-net, incredibly long growing, robust and diverse market now is going to have a more metered power or excuse me, supply chain. And I think that's going to accrue to the incumbents like Digital is the largest in the market with north of 0.5 gig expansive portfolio in terms of the fair and equitable rates in that market.

So that was my kind of follow-up question was to the extent that the [V] gets impacted, can you offset it with [P], or is it a net negative because you don't have enough excess space, the terms of the leases in that market aren't going to allow you to kind of jack up prices to offset the lack of the [V]?

We don't know what the negative on the [V] is going to be yet. There's certainly potential that the negative on the volume or new unit proliferation in any given quarter or year, it could be slightly a slowdown. But net, in aggregate, I think the water is going to raise here, and the pricing is going to way offset the economic loss of delays in megawatt deliveries, quite honestly. Just -- and that's not for everybody. But that's for the vast size of our inventory footprint and the contracts we've come rolling in the next several years. So in totality, I think this is going to be a net positive for the market and for Digital Realty.

So a few topics to talk about. Teraco, where are we on that, distributor integration and the rest of it?

We just closed on August 1.

So the integration is a different concept when you're talking about a company where we own 55%. We don't own 100% of it. So there's -- it has its independent Board, it has minority investors.

They're good investors. We're happy to have them. So -- but no, I think the integration really is focused on leveraging the sales organization in digital where we have relationships that they don't. And leveraging our supply chain, leveraging our design build, it’s great -- greater efficiencies in their build processes.

I imagine that the reason that we got bought was because there was a lot of appetite among the existing customer base inside your facilities to kind of expand there. So I guess the question was really have -- are you realizing what you expected to see in terms of appetite to have conversations about moving into those facilities?

So more so. I mean so far, everything is very positive.

I mean, it strings together the connectivity hub in the circle called Africa, including what we've already had in Mediterranean and Marseille called a combination of critical inroads, subsea cable and [Technical Difficulty]. And really, in my view, is call it the keystone piece to that story with the platform, the Teraco management team and its prior investors have built there. I was just there not last week but the week prior seeing it firsthand. While a long trip, certainly worth it. And the incredible connectivity they've developed, customer density, existing infrastructure with a runway of contiguous growth in a market that is one of the most challenging to deliver our capabilities. I mean, this is a truly load shedding market. What California is experiencing right now is a year long event there and deliver that operational excellence and the momentum that is taking off there is quite astonishing. So seeing it firsthand was well worth the trip. And I think in hindsight, we're going to look back and say, very pleased with putting this together with our platform.

Digital ServiceFabric, we saw that -- I think we got that launched a little bit ago. Kind of how is that rolling out with the sales force right now, and what's the reception to it?

So hot off the press as well, I put this in the adding capabilities on the connectivity front for Digital. A bit of catch up in many regards and hopefully keep pressing the envelope in terms of what our customers are able to do on this. Certainly, tying together legacy connectivity tools, maybe Service Exchange, Cloud Connect, connecting the data centers globally, 30 plus metros. We're now focused on a few elements, obviously, exposing this to our existing customer base in terms of our go-to-market; two, expanding the footprint of it to a broader and broader reach; and three, bringing partners onto the platform. So numerous connectivity providers, bare metal providers, other different types of categories that can partner with and be part of our platform. So that's certainly -- we're off to the races. This has been in the works for some time, but we're off to the races now. And I think -- so I think it's going to be a valuable tool to make it easier for our enterprise customers, not just enterprise but particularly our enterprise customers to land and expand on our platform.

Let's talk about like portfolio optimization a little bit and return maximization. So I think you kind of made it clear there's kind of three levels. There's kind of the growth assets that Digital Realty wants to be core. There's the kind of more stabilized assets that we can offload to the Digital core REIT, and then there's assets that just aren't going to be part of the Digital Realty solution. I think we saw a divestiture from Dallas recently. Can you kind of talk us through where we are in portfolio optimization and kind of what we should be expecting to see next?

So maybe I'll work backwards in terms of your list here. So years back, we basically went through our portfolio and said, you know what? Not every one of these data centers is a 100% keeper for us for all time. And that's something we constantly review and call it, curate the portfolio. Is it in a market that we see long term growth? Is it aligned with growing and diverse customers? Is it a physical location that we can actually grow? Are there other attributes about it that we see long term customer value and pricing power and growth? We've been whittling that portfolio away. It changes its dynamic because our business is dynamic, right? We've added to the list. We've taken things off the list. We've sold several billion of this. We're now down to the shorter strokes, call it. That asset that you mentioned, $200-plus million, while a great source of capital at an attractive valuation, it was a confined partly power based building, small amount of built out space, mixed use. It had a, call it, a clothing retailer literally adjacent to the data center surrounded by houses. So we didn't -- we don't view that we need to own every data center in planet Earth, and we think that is noncore to Digital Realty. It's a fine investment. And we're, call it, down the short strokes in the, call it, the $1 billion plus or minuses left or so maybe $1 billion to $2 billion at the most. And we're not ripping the band-aid on this. We are, call it, finding the right buyers at the right time. Certain of these assets are going through a customer contract role and resigning that contract for new term maybe the best time to monetize that.

So that's where we are in that bucket. Digital core REIT got off the ground at the back half of last year, December. That is part -- those are long term parts of our business and our platform. They're certain assets that are fenced in our periphery. They are aligned with long -- with top customers. They just have a slower growth profile than the rest of Digital Realty because they're highly leased, long term weighted average contracts, lower escalations. And we think that's a great part of our business for our partner vehicle Digital Core REIT to grow its dividend over time. And we started with a nice diversified portfolio and I think we'll continue to use that to grow Digital Core REIT and use that as a substitute source of our equity capital rather than having to go to the common equity markets to fund our expensive development pipeline.

But in the end of the day, it is focusing the core Digital Realty on a slightly smaller denominator of enterprise and its higher growth attributes in order to get that growth flowing faster to the bottom line and growing our bottom line and our share price.

So let's talk about that part of it. So can we get -- so one of the big positive evolutions has been the flip in re-leasing trends for the last couple of quarters. Kind of sounds like from you, Bill, that, that's going to continue. Can you talk a little bit about some of the drivers in the sub-megawatt and greater than megawatt that's going to be leading us to those conclusions?

All that activity I just described was a lot of hard work and heavy lifting to reposition this portfolio through the things we've sold, joint ventured and things we bought to create a stronger value proposition to our customer base across 50 metropolitan areas, 26 countries. The full product spectrum included things like ServiceFabric. We've also during that time, call it, cycle through some of our contracts at higher expiration rates, right? And, call it, did a lot of wood chopping to get through those larger contracts, multiple deals over multiple deals. We've kind of cycled into this year and our view on cash mark-to-market has gradually continued to improve. We went from slightly -- we went from mid-single digits to slightly negative outcomes in 2021, we increased our guidance in a positive territory. We got a glorious streak of two quarters of cash mark-to-markets that are in the positive territory. And as I mentioned, the pricing pendulums kind of continue to move in our favor, in the incumbents' favor. So these trends to me, based on our mix and where our portfolio is growing and going and the overall supply demand dynamic seems to be intact and likely to continue for the back half of this year and into next year. I can't promise you we'll never have a negative cash mark-to-market in any given product in any given quarter. But the front view [mirror] does look like a better outcome and it's things we've done and also just the general shape of the industry right now.

Is -- because you gave this kind of prognostication about positive renewal spreads going through the rest of the year very early in the year. And that was before, I think, a lot of the inflationary pressure set in. I would imagine that there has to be maybe some, if Bill's comments are correct, some increment to -- that's on top of the supply demand driver of the positive renewal spreads that there's something incremental to that, that maybe is a tailwind?

I can vividly remember on the spring call going to positive for the year on cash mark to markets and feeling like my heels are letting up and getting over my skis a little bit. But then I had some validation when we reported, call it, less than 90 days later on the July call. And I think these pricing dynamics are continuing to maintain what we saw in July. We characterized the guidance in words instead of numbers, so slightly positive. I don't know what incremental adjective or adverb we could put on the top of that to make it even more positive. But all in all, the pricing environment is, I would say, intact to what we saw or talked about it in the second quarter call. And I'm optimistic it's going to remain so for a little while here.

And is the US the primary driver?

No, I mean, it's pretty broad based.

Really? And Bill was saying it's both in the sub and the north of the 1 megawatt markets.

It's in both places but from different angles unless the bigger deals are getting less negative and the smaller deals are getting more positive.

Got it. Okay. And -- okay. So the -- so with the raising rates, as the Chief Financial Officer on the balance sheet, what are you doing now to kind of address the interest rate environment?

What I -- holistically, I used this -- I don't think I've used this -- I've definitely done it internally, but like we, as a company, and this starts with Bill's leadership when he was the CFO and carried on since -- it's not like it just started raining, and we all just started running for an umbrella store here, right? We've pursued a financial strategy that match the risk and reward of the other side of the balance sheet and then diversifying our sources of capital, both public and private debt and equity and I call it out in our efficient pool and all the different pools of capital because if one is up or one is down, you can call it pivot. It's about making sure our debt is termed out well louder, no bar too tall, largely fixed rates. We're not the PIMCOs of the world and prognosticating where interest rates are going and really try to take the risk out of the business on that side. And this year has certainly been the toughest in my, call it, seven and half years in the seat when it came to capital markets and interest rate hedging and FX hedging. But we're following that playbook, right, which is let's look at all the menus of options of how we fund the company.

We've run into dead ends in one market. I can tell you at the beginning of the year, we had a different mix of what type of bonds or what type of market we're going to access, and we pivoted to prudent things. And we -- if you go back to the fall, we did $1 billion of equity forward at $160. That was, in hindsight, looks like a good idea. We got out of the gates early on the debt financing with north of $1 billion. We call it the low 1% at the beginning of the year for 10.5 year money of euro in Swiss. We upsized our revolver as to bolster our liquidity. We just hit the term loan market during the euro term loan. We're chipping away the disposition. So it's, call it, making sure, call it, continuously looking at ways to make sure the business can grow and support our customers' growth.

And has the euro's weakness like made you kind of think more harder about raising more money over there?

No, because if you look at -- we got north of 350 megawatts under development. Two thirds of that's in Europe. So there's a natural hedge by raising euros and develop -- investing in euros and those assets.

So yes, if the euro reverses course in 10 years when those things come due, and I refinance with the US dollar bond because for whatever reason that I'm going to regret that. But I look -- we look at Europe as a permanent growth part of our business. So I'm most likely probably refinancing that in euros. So any FX ups and downs will be neutral to the company at the time.

So you guys have been expanding globally, India, Africa. And I was mentioned this earlier, but it's been an interesting year for data centers. We saw -- I mean, just pick a couple of examples, right, American Tower buys [CoreSite] for 29 times, and then they retraded to [Stonepeak] for a minority position at the exact same multiple, which implies that they're paying a premium to the control premium that American Tower paid. And then [Ganzi] comes in and buys [Switch] for 31 times. And so multiples keep going, going up, up, up, but that's all US based. The dollar is super strong. Is there an opportunity -- are these valuations that we're watching happen in the com infrastructure space, are they an impediment to kind of expanding globally incrementally because everyone is now getting greedy, or has dollar strength and the validation of the data center model in the US kind of made you more ambitious about going overseas?

I think that our -- we've been pretty clear about this. But our expansion overseas will be organic rather than inorganic. And there are certain markets where we've already made announcements. We had bought land in Barcelona. We're pursuing a joint venture in Israel. There are others where we will hopefully have announcements relatively soon. But again, it's -- rather than a buy strategy, it's a [build] strategy.

Got it. And have you seen -- assuming these new announcements are coming up again. Is this demand driven or is it opportunistic in terms of land parcels or pieces of things are coming available, and you're just taking advantage of, again, dollar strength, financing availability and maybe higher weighted average cost of capital for some of the potential other buyers?

It's demand based in the sense that we have signals from customers that they want to be in certain markets. So we're sourcing land and we'll be building product there to meet their demands.

I mean, I would say none of the activities we're doing is purely from a financial lens or a currency or a cost of capital lens. It has a strategic purpose of this is the intersection of the next connectivity hub, subsea cable landing, a hyperscale customer wants us to grow with them there, an enterprise customer, numerous enterprise customer. It's all through that lens, any of this activity that Bill's describing.

So we've had to run through them that the things that people were concerned about. It sounds like, okay, re-leasing spreads, they were negative, now they're positive. People were worried that there's more dilutive deals coming, but it sounds like we're now more focused organically. Power costs and risk, it seems like you're pretty hedged, and it's kind of a pass-through situation. We're not worried about that one. Then obviously, Jim -- Jim's thesis about how hyperscale companies are going to eat the public data center companies alive. I think we've kind of walked through that thought process already. I guess the last one that people have, and I think I know what the answer is. But the last one people have is that there's a concern that, okay, cost of capital is going up. Millions of these software company IPOs came out. They're going to run out of money. Their businesses are stumbling. We're hitting a recession. The appetite to bring in all sorts of -- digital transformation is one thing, but the appetite to bring in all sorts of new startup entities as being my primary provider is limited. So there's a concern that we're going to watch, to your point, your dinner companions' bankruptcy practice expand. And that as these tech companies kind of recede at the margins, but somehow that affects the data center business because I think that the memory is -- remember, when Level 3 built out all that space in 2000, 2001 and Pets.com went under, they had to rip the server out and sell it for scrap. And then we turn the data center into a condo. I think that we've evolved the industry since then. But I'd love to hear you guys kind of elaborate a little bit on what you think -- if there's really any kind of risk to you guys from that?

I mean, the vast majority of our customers are very large cap companies. And I would say the small cap companies, the micro-cap companies at least when they start out and are most vulnerable from a bankruptcy standpoint, are probably doing business mostly with the cloud.

Right. Yes, I think that, that's right. I think the people 20 years ago, there wasn't a cloud. The only way to have a business was to buy a server and put it in somewhere cheap to co-locate. But now that the [Indiscernible] is so cheap, you can spend that because the core competency in a lot of these companies is not running a server or a data center, it's just letting Microsoft and Google do the compute. So their growth might go from 70% down to 60% as a function of one of these evolutions. But it doesn't really touch you guys, and you guys are such at the large end.

That risk piece that existed years and years ago with the former crash, those are born in the cloud, likely haven't even come out of the cloud type of customers. And you could say, well, maybe is the risk for the cloud providers then. But the cloud providers are actively going after the Bank of Americas of the world and massive enterprise workloads across the globe. So I don't see the degradation to our demand directly or a read-through from our cloud providers even if that apocalyptic scenario happens to those, call it, startup companies.

So it sounds like business is good. Congratulations. It must be nice.

Thank you. Business is good.

Okay. I think we ran out of time. I really appreciate it. Thank you so much for you guys coming and sharing your thoughts on the sector. And I'm glad you had a nice dinner last night.