New Mountain Finance Corp (NMFC) 2017 Q1 法說會逐字稿

Good day, and welcome to the New Mountain Finance Corporation's First Quarter 2017 Earnings Conference Call and Webcast. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Rob Hamwee, CEO. Please go ahead.

Thank you, and good morning, everyone, and welcome to New Mountain Finance Corporation's first quarter earnings call for 2017. On the line with me here today are Steve Klinsky, Chairman of NMFC and CEO of New Mountain Capital; John Kline, President and COO of NMFC; and Shiraz Kajee, CFO of NMFC. Steve Klinsky is going to make some introductory remarks, but before he does, I'd like to ask Shiraz to make some important statements regarding today's call.

Thanks, Rob. Good morning, everyone. Before we get into the presentation, I would like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of New Mountain Finance Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our May 8 earnings press release. I would also like to call your attention to the customary safe harbor disclosure in our press release and on Page 2 of the slide presentation regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those statements and projections.

We do not undertake to update our forward-looking statements or projections unless required to by law. To obtain copies of our latest SEC filings and to access the slide presentation that we will be referencing throughout this call, please visit our website at www.newmountainfinance.com.

At this time, I'd like to turn the call over to Steve Klinsky, NMFC's Chairman, who will give some highlights beginning on Page 4 and 5 of the slide presentation. Steve?

The team will go through the details in a moment, but let me start by presenting the highlights of another successful quarter for New Mountain Finance. New Mountain Finance's adjusted net investment income for the quarter ended March 31, 2017, was $0.34 per share, in the middle of our guidance of $0.33 to $0.35 per share, and once again, covering our quarterly dividend of $0.34 per share. New Mountain Finance's book value was $13.56 per share as compared to $13.46 per share last quarter, a $0.10 increase per share. We are also able to announce our regular dividend for the current quarter, which will again be $0.34 per share, an annualized yield in excess of 9% based on last Friday's close. The company had a very productive quarter of deal generation, investing $349 million in gross originations. Repayments in the quarter were $99 million. The significant increase in activity was partially funded by the $82 million equity offering we completed in early April. I, and other members of New Mountain continue to be very large owners of our stock with aggregate ownership of 8.7 million shares or approximately 13% of total shares outstanding.

In summary, we are pleased with NMFC's continued performance and progress overall. With that, let me turn the call back over to Rob Hamwee, NMFC's CEO.

Thank you, Steve. Before diving into the details of the quarter, as always, I'd like to give everyone a brief review of NMFC and our strategy. As outlined on Page 6 of our presentation, NMFC is externally managed by New Mountain Capital, a leading private equity firm. Since the inception of our debt investment program in 2008, we have taken New Mountain's approach to private equity and applied it to corporate credit, with a consistent focus on defensive growth business models and extensive fundamental research within industries that are already well-known to New Mountain. Or more simply put, we invest in recession-resistant businesses that we really know and that we really like. We believe this approach results in a differentiated and sustainable model that allows us to generate attractive risk-adjusted rates of return across changing cycles and market conditions. To achieve our mandate, we utilize the existing New Mountain investment team as our primary underwriting resource.

Turning to Page 7, you can see our total return performance, from IPO in May 2011, through May 5, 2017. In the 6 years since our IPO, we've generated a compounded annual return to our initial public investors of 12.2%, meaningfully higher than our peers in the high yield index and well over 1,000 basis points per annum of a relevant risk-free benchmark. Page 8 goes into a little more detail around relative performance against our peer set, benchmarking against the 10 largest externally managed BDCs that have been public, at least, as long as we have.

Page 9 shows return attribution. Total cumulative return continues to be largely driven by our cash dividend, which in turn, has been more than 100% covered by NII. As the bar of the far right illustrates, over the 6 years we have been public, we have effectively maintained a stable book value, inclusive of special dividends, while generating a 10.5% cash-on-cash return for our shareholders, fully supported by net investment income. We are very happy to be able to deliver this performance over a period of time where risk-free rates have been effectively 0, and we'll strive to continue this performance. We attribute our success to: one, our differentiated underwriting platform; two, our ability to consistently generate the vast majority of our NII from stable cash interest income; three, our focus on running the business with an efficient balance sheet, and always fully utilizing inexpensive, appropriately structured leverage before accessing more expensive equity; and four, our alignment of shareholder and management interest. Our highest priority continues to be our focus on risk control and credit performance, which we believe over time, is the single biggest differentiator of total return in the BDC space. If you refer to Page 10, we have, once again, laid out the cost basis of our investment, both the current portfolio, and our cumulative investment since the inception of our credit business in 2008, and then show what has migrated down the performance ladder. Since inception, we have made investments of over $4.6 billion in 198 portfolio companies, of which only 7, representing just $112 million of costs, have migrated to non-accruals, and only 4, representing $42 million of costs, have thus far resulted in realized defaults . This $42 million figure includes our $27 million realized loss in Transtar which has now been fully incurred and the balance of position monetized.

Approximately 97% of our portfolio at fair market value is currently rated 1 or 2 on our internal scale.

Page 11 shows leverage multiples for all of our holdings above $7.5 million when we entered an investment and leverage levels for the same investment as of the end of the most recent reporting period. While not a perfect metric, the asset by asset trend and leverage multiple is a good snapshot of credit performance and helps provide some degree of empirical, fundamental support for our internal ratings and marks. As you can see by looking at the table, leverage multiples are roughly flat or trending in the right direction with only a few exceptions. 2 loans show negative migration of 2.5 turns or more. One, which we have discussed for a number of quarters, is Sierra Hamilton, where restructuring talks continue and underlying business trends are improving. The second is a high-quality business that has faced certain end market challenges and where we expect financial metrics to approve -- to improve in coming quarters. The company has significant cash flow and liquidity and should have no issue servicing its debt for the foreseeable future.

The chart on Page 12 helps track the company's overall economic performance since its IPO. At the top of the page, we show how the regular quarterly dividend is being covered out of net investment income. As you can see, we continue to more than cover 100% of our cumulative regular dividend out of NII. On the bottom of the page, we focus on below the line items. First, we look at realized gains and realized credit and other losses.

As you can see, looking at the row highlighted in green, we've had success generating real economic gains every year through a combination of equity gains, portfolio company dividends and trading profits. Conversely, realized losses, including default losses, highlighted in orange, have generally been smaller and less frequent and show that we are typically not avoiding non-accruals by selling poor credits at a material loss prior to actual default. Despite our first significant realized loss since our IPO, we continue to have a net cumulative realized gain of $11 million highlighted in blue.

Looking further down the page, we can see that cumulative net unrealized appreciation, highlighted in gray, stands at $22 million and cumulative net realized and unrealized loss, highlighted in yellow, is at $11 million, an improvement of $7 million from last quarter.

I will now turn the call over to John Kline, NMFC's President, to discuss market conditions and portfolio activity. John?

Thanks, Rob. As outlined on Page 13, the credit markets are stronger today than they have been since we went public in 2011. Spreads are uniformly tighter across all of the leverage finance asset classes in which we invest including first lien, unitranche, second lien, bonds, mezzanine and preferred. While pricing premiums for middle market assets still exist, the spreads compared to the syndicated market have narrowed. Leverage levels for the highest quality companies have not materially changed in recent quarters. However, more lower quality companies are getting access to the highest levels of leverage, which makes credit selection extremely important. Investors are aware of this increased risk, but still view direct lending strategies as an attractive, relative value compared to index credit and equities. While banks are not active lenders in our market, they do play a large role in the continued decline of CLO liability spreads, which are powerful driver of broader market loan pricing. More than ever, we rely on the importance of our disciplined focus on defensive growth industries and differentiate access to deal flow afforded to us by the broader New Mountain platform.

Turning to Page 14, NMFC continues to be well positioned in the event of future rate increases, as 86% of our portfolio is invested in floating rate debt. Meanwhile, we have locked in 42% of our liabilities at fixed rates to ensure attractive borrowing costs over the medium term. 3-month LIBOR has increased to 118 basis points, which is slightly above the average LIBOR floor on our floating-rate assets. As the chart on the bottom of the page shows, given our investment portfolio and liability mix, NMFC is very strongly positioned in the event of an increase in short-term rates. Even a moderate increase in base rates of 100 basis points adds $0.09 or 7% to our annual net investment income.

Moving on to portfolio activity, as seen on Pages 15 and 16, consistent with the strong pipeline that we mentioned on the last call, we saw robust new origination activity in Q1. Total originations were $349 million, offset by $99 million of repayments and $35 million of sale proceeds, yielding net investment income of $215 million. Our new originations were highlighted by HI Technology, AmWINS and CRGT. All 3 investments highlight the advantages of NMC sourcing platform. HI Technology was sourced through our private equity team's relationship with the founder; AmWINS is a former NMC Fund 3 portfolio company; and CRGT has made a long-term NMFC investment where we have partnered with the company and the sponsor to steadily grow through acquisitions. Since the end of the quarter, despite the very competitive deal environment, we have continued our strong investment pace with $112 million of new investments, offset by $110 million of sales and repayments. Based on our pipeline of both committed and anticipated deals, we expect to maintain our solid new investment momentum into the summer months.

Turning to Page 17, we show the breakout of investments by asset type. While our repayments were relatively consistent with our historical mix, our originations by asset type were impacted by our large preferred stock investment in HI Technology. Excluding this investment, our mix was consistent with our historical experience.

As shown on Page 18, in Q1, asset yields on new originations were a bright spot for us. NMFC had an average yield on new originations of 11.4%, which enabled us to maintain a portfolio yield, inclusive of the impact of the forward curve, in excess of 11%. Going forward, given the competitive deal environment, we expect modest spread compression compared to our historical portfolio spreads. However, we believe that any spread compression could be offset by rising base rates, leaving nominal yields on our portfolio stable.

On the top of Page 19, we show a balanced portfolio across our defensive growth-oriented sectors. In the services section of the pie chart, we now show a breakout of subsectors to give better insight into the diversity within our largest sector. On the bottom of the page, we continue to maintain our targeted mix between senior and subordinated investments, and on the lower right, we show that the vast majority of our portfolio continues to perform at or above our expectations. Finally, as illustrated on Page 20, we have a broadly diversified portfolio with our largest investment at 5.8% of fair value, and the top 15 investments accounting for 42% of fair value.

With that, I will now turn it over to our CFO, Shiraz Kajee, to discuss the financial statements and key financial metrics. Shiraz?

Thank you, John. For more details on our financial results in today's commentary, please refer to the Form 10-Q that was filed last evening with the SEC.

Now I'd like to turn your attention to Slide 21. The portfolio had approximately $1.8 billion in investments at fair value at March 31, 2017, and total assets of $1.9 billion. We had total liabilities of $934 million, of which, total statutory debt outstanding was $745 million, excluding $122 million of drawn SBA-guaranteed debentures. Net asset value of $947 million or $13.56 per share, was up $0.10 from the prior quarter. As of March 31, our total -- our statutory debt-to-equity ratio was 0.79:1.

On Slide 22, we show our historical leverage ratios, which were broadly consistent with our current target statutory leverage of between 0.7 and 0.8:1. Although, we finished the quarter at the high end of the range, the ratio has come back down to the low end of the range with our most recent equity offering. We also show our historical NAV adjusted for the cumulative impact of special dividends, which portrays a more accurate reflection of true economic value creation.

On Slide 23, we show our quarterly income statement results. We believe that our adjusted NII is the most appropriate measure of our quarterly performance. This slide highlights that while realized and unrealized gains and losses can be volatile below the line, we continue to generate stable net investment income above the line. Focusing on the quarter ended March 31, 2017, we earned total investment income of approximately $43.3 million. This was slightly down from the prior quarter due to a decline in nonrecurring fee income.

On the expense side, interest in operating expenses were modestly higher from prior quarter. To cover a shortfall in premium incentive fee operating income, the investment adviser waived a portion of his incentive fee. Also, as in prior quarters, the investment adviser continues to waive certain management fees, such that the effective annualized management fee is 1.4%. It is important to note that the investment adviser cannot recoup fees previously waived. This results in first quarter adjusted NII of $23.4 million or $0.34 per weighted average share which is in line with guidance and covers our Q1 regular dividend of $0.34 per share. In total, for the quarter ended March 31, 2017, we had an increase in net assets resulting from operations of $30.4 million. As Slide 24 demonstrates our total investment income is recurring in nature and predominately paid in cash. As you can see, 95% of total investment income is recurring and cash income remained strong at 93% this quarter.

We believe this consistency shows stability and predictability of our investment income. As mentioned earlier, you can see the decrease in investment income this quarter was driven by a decline in nonrecurring fee income.

Turning to Slide 25. Our adjusted NII for the first quarter covered our Q1 dividend. Given our belief that our Q2 2017 adjusted NII will fall within our guidance of $0.33 to $0.35 per share, our Board of Directors has declared a Q2 2017 dividend of $0.34 per share, in line with the past 20 quarters. The Q2 2017 quarterly dividend of $0.34 per share will be paid on June 30, 2017 to holders of record on June 16, 2017. Finally, on Slide 26, we highlight our various financing sources. Taking into account SBA-guaranteed debentures, we had a little over $1 billion of total borrowing capacity at quarter end with no near-term maturities. As a reminder, our Wells Fargo credit facility's covenants are generally tied to the operating performance of the underlying businesses that we lend to, rather than the marks of our investments at any given time.

With that, I'd like to turn the call back over to Rob.

Thanks, Shiraz. It continues to remain our intention to consistently pay the $0.34 per share on a quarterly basis for future quarters so long as the adjusted NII covers the dividend in line with our current expectations. In closing, I would just like to say that we continue to be pleased with our performance to date. Most importantly, from a credit perspective our overall portfolio continues to be healthy. Once again, we'd like to thank you for your support and interest, and at this point, turn things back to the operator to begin Q&A. Operator?

(Operator Instructions) The first question comes from the line of Jonathan Bock of Wells Fargo Securities.

So when we're looking at the last equity raise, at $81 million or so, give-and-take, and then we look at the math, when you include credit losses, you effectively make that accretive from an NOI perspective, understanding that you wouldn't do anything that's not accretive from a NAV perspective. Looking at new investment yields, with first lien at 7%, second lien at 9%, help us in terms of how we bridge the gap to that effective cost. I know you've talked about the potential for rate rising, et cetera. But what are some of the other plugs that you're using to effectively raise net return on the portfolio to hit what would be the effective cost of capital of that recent equity brought on balance sheet?

Sure, Jonathan. So there are a couple of things, right. There is, obviously, the rising rate environment. There's always the mix when you think of things that we're doing when you look at what we did in Q1 with an 11%, which is meaningfully in excess of our target range. We also have the second SBA license expected to come on board as we have mentioned before in the (inaudible). That's obviously, very accretive. So it's really the accommodation of all those things, and we're not talking about dramatic swings, right? We've been very, very consistent in the rate at which we've deployed the capital. And so the other thing that's really important as the private credit market continues to evolve, is our scale is increasingly allowing us to get access to lead positions in deals that we otherwise wouldn't have had. So that scale is also generally accretive to the overall ability to source and execute on the deals that we want to do.

And Rob, you've got about $30 million of additional capacity under the SBA. I think we'd be -- maybe it would be a thought that a lot of that could have been used up perhaps by now. And you talk about the second license coming online here in the very near future. What are some of the limiting factors to effectively deploying that capital? Are just finding not enough deals that necessarily fit the SBIC bucket? Or are you finding that it's just a matter of audits, et cetera, sometimes that can slow the process down?

Yes, I mean it's a number of things. The important thing is we never do a deal to fill a bucket, right? We only do deals in businesses we know well through the private equity platform, and based on that knowledge, we feel very, very good about their prospects. So we always resist the temptation to say "Oh, we have a more accretive bucket we can put something in. Let’s do a deal to pull it -- put it in that bucket". That being said, we did have -- we basically finished the open capital with the Alegeus deal that we did in late April that you can see on Page 16, where we put the full $22.5 million allowance into the SBA entity. So we're pretty ramped that we can get a repayment tomorrow, who knows? But we don't really have any room left there, so getting that second license will open up some meaningful incremental capabilities for us.

And then just a small account question, I was reading this. What was the reasoning behind the Net Lease corp consolidation on the balance sheet this quarter?

Shiraz, you want to talk about that?

So we continuously review all of the consolidations every quarter with our accountants to make sure we've got the right approach to how we go about doing things. So looking at the ramp on the Net Lease, we've only done 4 deals to date. Those deals look to be slightly more passive in nature than active, in terms of creating it as an operating company and not consolidating it. So we made the decision to consolidate it at this point but that could change in the future.

So the commission allows you to effectively go back and forth? I mean, the next item is, would it be fair to say that you wouldn't consolidate it if you did not see additional growth in that vertical on a forward basis, right? Because the point was to get higher-yielding returns than what you would be receiving, which is why the reasoning was to keep it off balance sheet, or am I missing something?

Well just to be clear, Jonathan, this is purely an accounting non-substantive issue. Remember that the Net Lease entity invests down at individual SPVs, where each lease resides and where we have non-recourse leverage. That leverage is not consolidated, whether we do or do not consolidate the REIT. There's no impact on our leverage ratio, whether we consolidate the REIT or don't consolidate the REIT. Because, again, we're leveraging the individual assets with nonrecourse debt down at individual lease-by-lease, or property-by-property SPV's.

(Operator Instructions) The next question comes from the line of Paul Johnson of KBW.

My first question was in regards to the fee waiver, approximately $1.8 million or so that you guys waived during the quarter. Was that something that's totally voluntary? And I guess, what was the motivation behind it and is it something that we would expect to see in the coming quarters as well, if needed?

Yes, look, Paul, first of all it's clearly -- it's totally voluntary. We always say that covering our dividend out of NII is one of our absolute primary drivers with the business. That and avoiding losses are really the 2 fundamental tenets of the business. So it's a lever we have to pull on. We're certainly not going to sit here and say that we're committed to doing that every quarter. But we do have a long history as you know, of shareholder-friendly -- and transparency and it's all part of that continuum. So I think we feel that the business is capable, in the coming quarters, of being in the $0.33 to $0.35 range. But it's certainly an option we do have if we were to have another shortfall down the road. And again, remember, it's really the core was fine. We had a little bit of volatility around the nonrecurring -- we had virtually no prepayment income that quarter, which is -- this quarter, which is obviously, very volatile. So we're talking about pretty small dollars. And it's just another tool we have to make sure we're delivering on what we sort of covenant to, to our shareholders.

And just to be clear, that was outside of the regular, agreed-upon, fee waiver that you guys have in place? This was something that was done voluntary by management?

That is correct. It is incremental to the thing we've been doing since our IPO in terms of the senior assets that initially were in a different well facility where we get more of the return through leverage and always had been charging on the leverage of that facility. And then as you recall, we consolidated that facility and then have been waiting on those assets ever since. So yes, so we have, the 1.75% sort of headline fee is really, historically, consistently been about 1.4%. That's on the base management fee, and this was a 100% voluntary waiver of some increment of the performance fee.

Okay. That's great, thanks. My other question had to do with your investment in HI Technology. Roughly, $100 million, obviously a large investment. I was just wondering if you guys could give a little color on kind of what attracted you to the company to make such a large investment. And also a preferred equity investment versus what you've done more historically, with the debt, the senior debt positions you've taken?

Yes, absolutely. So this is something we're really excited about. I'm glad you brought it up. This is a transaction we've been working on for virtually a year on the private equity side, and something that we initially -- it's in one of our core spaces and we've identified the company as a real sort of niche market leader and we're able to -- it's a founder-owned and controlled, relatively large business, and the founder was really interested in working with us because of some ability we had to potentially help him with some customer acquisition. And so as we went through the rest and did all the diligence on private equity and thought about different transaction structures, ultimately, it didn't fit into our classic controlled buyout mode, just because the owner was not yet ready to make that move. So as it kind of became more and more of a smaller sort of PE fund, minority type investment, where the founder was also very focused on dilution, we really kind of morphed it into a great contractual return opportunity. And we still have -- we have one of our PE partners is on the board now. And so we still have a great strategic dialogue with the company, but this is really, I think, shows the power of the platform to deliver, in a tough credit environment, to deliver a differentiated, very proprietary opportunities that are both attractively structured and attractively priced. And the other element was from our credit -- with our credit hats on, is very low leverage. And we're talking about a sub 4x leverage through the preferred in an enterprise that is worth a double-digit TE multiple. And then on top of that, we are always looking for opportunities to build book value through capital appreciation. And in addition to being a contractual return type of security, it also has a convertibility feature to it such that if the business does some of the things we actually expect it to do, based on our privately equity underwriting, there's real upside from a capital gain perspective. So this is really one of the most compelling opportunities we've seen and that's what drove our desire and willingness to do it in the scale that we've done it in.

I have 2 shorter questions if that's okay, about different stuff. One is just a smaller one, as I kind of look at your interest income year-over-year, it comes down from about $38 million to, I guess, there was a little bit dividend income in there as well, $38 million to $36 million year-over-year. I mean I know there's a lot of originations in the quarter, is that mostly because of a timing thing with the originations being linked with the latter half of the quarter? Or is what we see now a better run rate of what the interest income's going to look like on the portfolio or do you guys have anything around that?

Yes, it's a combination. Yes, we were definitely skewed towards later in the quarter from the origination side versus the repayment side was skewed earlier in the quarter, so there's some of that. There's also some mix there. And when you think about the interest income and the dividend income, I mean those dividends numbers are also very -- that's effectively contractual, those are not sort of nonrecurring dividends. Right, because you're looking at -- and if you look, you can see it better on Page 24, where we talk about kind of the cash interest, and you can see much greater stability there. And then you can -- we've obviously been allocating more capital to the SLP as we ramped up SLP II. And so there's mix issue, right? It's a bigger percentage of the balance sheet. So you've really got a look at that recurring cash investment income line on Page 24, I think to see the more meaningful trend from an operating metrics perspective.

Got it. That make sense. My last question is just about the Net Lease corp. I guess, just -- if you had any commentary on what your plans are for growth there, if any. And then also just kind of a side question to that is, if you guys planned on providing any more disclosure on that, I guess, in the future, if you were to grow it more, to the NAV?

In terms of our plans for the medium term, it's really just doing more of what we've been doing, and again, being disciplined and opportunistic and again, not trying to fill up a bucket for the sake of filling up a bucket. We're out in the marketplace, the Net Lease team here, which we added last year as you know, is actively looking at new opportunities that are consistent with our criteria around risk and return. And when we find those opportunities, we'll execute on them, and when we don't, we won't. And so we don't have -- we're not slaves to some nonobjective growth target there. We will see where it goes, and it does provide a nice outlet for incremental kind of proprietary quality deal flow. In terms of disclosure down the road, I feel like we're giving pretty good disclosure. I think if it were get more material, we could certainly talk about increasing the level of disclosure there, but given the current materiality, I think, we feel pretty comfortable with what we're laying out.

Can you just remind me what your target leverage is within the Net Lease corp?

So again, the assets are leveraged down at the individual SPV so there's no actual leverage at the REIT itself. The individual assets tend to be levered at about 60% to 65% loan-to-value.

(Operator Instructions) Your next question comes from the line of Chris Kotowski of Oppenheimer.

Just on the disclosure and on the Net Lease corporation, I'm looking at the 10-Q Page 17. And there, you break down the individual investments, and a couple of questions on that. First, I add up all the dividend income and divide it by $27 million, I get around an 11.5% yield. So the first question, is that roughly what we should see going forward? Is that kind of a run rate?

Yes. That's pretty -- that is consistent. You recall the Net Lease, one of the things we like about it is there are escalators built-in to leases, unlike commercial loans. And there's real duration there. So these are 15 year, plus or minus, leases. So all else equal, that number should actually trend up over time. The escalators aren't huge. They're 1.5% to 2% per year, but that compounds on itself. But yes, you're thinking about it correctly.

Okay. And then secondly, you said they were 4 deals, I see 5 here.

One of the deals was 2 components. There was a U.S. piece and a Canadian piece, so they have 2 separate SPVs but it's the same company.

Same borrower.

Okay. And then, in the future, let's say, you want to do another $15 million of deals in the second quarter or third quarter, whatever. Should we expect to see more in terms of your disclosure? Should we expect more capital flow into the $27 million equity that we saw at the start or will they just show up as individual investments?

They'll show as individual investments. Yes, so you'll see new SPVs.

Okay. And then finally, just when we look at this like, you look at the APP Canada, you see $7.3 million. That represents your equity commitment to that, right?

Well yes. That's the portion of the $27 million effectively that was down streamed from the REIT to the SPV.

And then that $7.3 million is leveraged 60% to 65%?

Yes so it represents a roughly $20 million purchase of a building, or set of buildings.

This concludes our question-and-answer session. I would like to turn the conference back over to Rob Hamwee for any closing remarks.

Just want to, as always, thank everybody for their interest and attendance, and look forward to speaking to everybody in a few months.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.