PENN Entertainment Inc (PENN) 2003 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Argosy Gaming Company 2003 results conference call.

At this time, I would like to introduce Erin Williams, Vice President of Investors Relations and Treasurer. Who will introduce the other speakers. Thank you.

Ms. Williams, you may begin your conference.

Thank you, operator. Good morning, everyone, and welcome to the Argosy Gaming company conference call. Speaking today are Dick Glasier or President and CEO and Dale Black.

We will be making forward-looking statements as defined in the Private Securities Litigation Act of 1995. We caution you that forward-looking statements are not guarantees of future performances and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in comments.

These include, but not are limited to, construction delays, the markets we operate in, approval of cash flow cause Kodiak by gaming boards and commission that is regulate the company, the effects of future legislation or regulatory changes on the company's operations, as well as other risks and uncertainties that are detailed from time to time in our filings.

The information in this call related to forward-looking statements may be relied upon subject to previous Safe Harbor statements as of today and may continue to be used while the call remains in the active portion of our web site. We undertake no obligation to update forward-looking statements that we will be making today whether as a result of new information, future events or otherwise.

With that, I'll turn it over to Dick.

Thank you for joining us this morning. Looking back at 2003, I think we've positioned ourselves nicely for the future. Wee completed about $150 million of expansion, capital projects, existing operations, we're very pleased with the result. The product enhancements and expansion have already been well received by our customers. We look forward to the full year benefit of those projects in '04. Let me quickly go through those projects.

Early in the year, we completed a $6 million expansion of our barge facility in Sioux City. EBITDA this year at that property is up 20%. In the middle of 2003, we completed a new casino in Joliet, I think it's the most exciting casino in the area, and it really leveled the competitive playing field in the Chicago mini market.

Perhaps most importantly, in December we opened up the $105 million expansion of our Kansas City property. This is the first casino in Kansas City, with all new ticket in, ticket out equipment. We have 1750 new TITO slots. It's about a 50% increase in capacity.

So far, the revenue has exceeded the capacity increase that we put in, perhaps just as importantly early indications are that we're growing the Kansas City market. Throughout the company, we've made a concerted effort to be a leader in our markets in the introduction of TITO, about half the company's slot machines are TITO operational now. We are on track by the end of the year to be essentially 100% TITO. That does depend on the approval process in Illinois.

Current indications are that Illinois will give us the final go ahead in the second quarter. It is very interesting, the situation in Illinois, because every month passes that -- every month passes without TITO benefits Missouri. About this time last year, we told you that the market we are in would grow in the single -- low single digits.

In Riverside, we expect because of the construction disruption for revenues to be down 5 to 10%. As it turns out, Riverside revenues were down about 2%. And a few of other reports did a little better than our own internal forecasts. Sioux City had 9% increase and Lawrenceburg's revenues were up 10%.

We also had some challenges in 2003. Things obviously didn't turn out as we had expected in the Illinois properties because of tax increase.

Following the tax increase in Illinois, we turned to our data warehouse technology to focus our marketing efforts solely on our most profitable customers, our revenues declined but our actions we think enabled us to maximize EBITDA performance.

Last year at this time, we gave you guidance that EBITDA margin for the company as a whole would be about the same in 2003 as it was in 2002. Excluding the impact of higher taxes. In fact, that's just what's happened. And we did this even with the contraction of revenues at the two Illinois properties.

Unfortunately, taxes are part of life, but one of the things that I think we do at Argosy quite well is to adapt to changes in new environments. Our results in Joliet over last year clearly indicate how successful these measurements have been. The management team at Joliet has done a great job. For the fourth quarter, we actually were able to increase EBITDA on lower revenue base, and EBITDA margin in Joliet was 30%, which is, as many of you know, is quite good. The situation at our property at Alton, Illinois is quite different.

It operates in the St. Louis market and most of the competitors are in Missouri. Those casinos operate under a much more favorable tax environment than in Illinois. There's no position limits, and they do have TITO. Furthermore, a few of the St. Louis casinos are engaged in a marketing promotion war.

Despite the decline in our EBITDA in Alton, the property still generates a great return on investment. The return on investment is about, a little over 30%. We have about $65 million invested there. And the first month or so of 2004, we are seeing some favorable trends as we continue to refine our marketing programs in Alton.

The response to our new casino in Kansas City really has been phenomenal. Revenues are up in excess of capacity increases since we opened, as I already mentioned. The retail casino business is up significantly and that's especially profitable segment of our business. In the early indications that Kansas City, the Kansas City market is expanding and we're just not stealing share. I want to thank the management team in Kansas City for an excellent opening and acknowledge the construction team for building a fantastic new facility.

Some of you on this call have seen the new Kansas City casino. You know how creative and exciting it is.

Let me turn to Lawrenceburg, we are very pleased with the results in Lawrenceburg. You may remember that early in 2003, we commented on the call after the first quarter that we were a little perplexed with the revenue trends there. They were not as strong as we had expected, after the property was able to go to dock side operation.

Our marketing teams took a long hard look at how we should market the property. We made some changes and they've really turned out to be quite profitable for us. The last ten months of 2003 were very strong for Lawrenceburg. Should point out the quid pro co for being able to go to dock side is tax increase and we need to focus on getting flow-through incremental revenues.

Again, our team in Lawrenceburg did a great job. Excluding gaming taxes, Lawrenceburg achieved a 90% flow-through on incremental revenues in 2003. That's terrific. Finally, starting this month we've anniversaried out on the gaming tax increase on Lawrenceburg, so the tax rate in 2004 should be essentially comparable on a year over year basis.

All in all, we've had some pretty substantial achievement this year. We're very proud of them. The strong operating results at our existing properties will serve us well as we move forward in our good foundation for our development efforts going forward.

With that, I'd like to turn the call over to Dale who will go over some key numbers, give you a update on our refinancing and also give you some guidance for 2004.

Thanks, Dick. Good morning, everyone. I'll first talk about the fourth quarter, then give summary comments on '03 and finally talk a little bit about 2004 with you. As you know, if you've read the press release, for the quarter we reported diluted earnings per share of 46 cents, versus 56 cents last year.

Revenues in the quarter were 231.9 million, up 6.7 million, or 3%, from last year. Couple of significant components to this were revenues in Lawrenceburg were up $10 million or 11 and a half percent in the quarter, due primarily to some changes in our marketing programs and overall market growth.

The two Illinois properties combined were down $6.3 million, or 8%, due primarily to our response to the tax increase in Illinois and our efforts to maximize our margins and our EBITDA there. And also to competitive pressures in St. Louis that Dick mentioned. In Kansas City, revenues increased 7%. year over year, in spite of the fact that we were under construction until the opening of our casino on December the 10th.

During the days that the casino were open, from December 10 through the end of the year, revenues were up over 56%, compared to the same period last year. Or in 2002. Our EBITDA during the quarter was $57.7 million, versus 61.8 million last year.

Offsetting our $6.7 million revenue increase, were ten and a half million dollars more in gaming and admission taxes. About a million dollars that we spent during the launch of our Kansas City property. And an increase of about $900,000 in corporate.

For the year, our revenues increased 2.4%, to 959 and a half million dollars. Lawrenceburg we increased 9.2% due to the dockside and changes to marketing. Joliet revenues were impacted positively by the opening of our new barge facility in May, which turnaround was offset in the last half of the year due to our response to the tax increase, and finished down about 3% for the year.

As we mentioned earlier, Alton has been impacted by the Illinois tax situation and the competitive situation in the St. Louis market. I think Dick mentioned this in the Sioux City our $6 million investment in our facility there helped lead to a 9% revenue increase. In Kansas City, we were down a modest 2%, even with the construction disruption that we had throughout the year.

Our EBITDA $33 million to 224.5 million in 2003. Our margins decreased to 23.4% from 27 and a half percent. 3.1 percentage point decrease.

However, our gaming and admission taxes increased from 30.9% of revenues, to almost 35% of revenues this year, or over 4%. Taxing that out our margins were flat or actually improved by a 10th of a point for the year.

Also, remember that in the second quarter we recorded a six and a half million dollars asset write-off in Joliet which impacted our results. A couple other things impacting our 2003 earnings was $6 million decrease in interest due to lower borrowings and lower ratings or lower interest rates on our floating rate debt.

Depreciation and amortization expense increased just under $5 million due to accelerated depreciation in Kansas City primarily on planned retirements and due to, as Dick mentioned, we placed over $150 million of new assets and service throughout the year.

A little bit on our capital structure. We ended the year with $67 million in cash, and approximately $870 million in debt. We spent cash spent during the year was about 136 and a half million dollars on capital improvements. The difference if you will between the 136 that I'm talking about here, and 150 that Dick mentioned, has to do with these projects spanned over more than one year.

In 2003, our capital improvements consisted of about $30 million of maintenance capital, and $106 million related to the expansion capital. We estimate that the remaining cash payments in Kansas City are approximately $24 million.

From this point forward, the only planned capital expenditures that Argosy has is about 35 to $40 million in maintenance capital. I think if you followed us in the past you know that likely what will happen is we will use our significant free cash flow to deliver until we find the right investment activity through our development activity.

Most of you probably know that we announced a pending transaction to refinance our $350 million of 10 and 3/4 notes and we intend to complete that shortly.

Looking into 2004, we think the following items will impact our financial results. We believe that the recently opened facility in Kansas City will have a positive impact on revenues as our capacity there increases approximately 50%. We do expect, however, that revenues at our two Illinois properties will continue to decline the first half of the year and are continued response to the tax environment in Illinois.

We expected our EBITDA margins will be similar to 2003, due to the increased operating efficiencies at our properties offset by the increase in our effective gaming and admission tax rate, which we expect to be about 39% in 2004, compared to 35% last year.

We think that our corporate expense will increase approximately 6 to 8% from the 2003 annual level, due to our continued development activities, some additional staffing at our MIS, largely related to our expanded data warehouse and we've been seeing a lot of like a lot of companies, higher insurance costs.

In connection with the refinancing, we expect our interest expense will decline after the refinancing, however, I should mention that we expect to take in approximately $27 million pretax charge in the first quarter related to premiums and expenses related to that refinancing. We think the depreciation and amortization will rise by about $10 million, due to full year impact of adding on the Kansas City and Joliet projects.

As I mentioned before, our maintenance capital should be about 35 to $40 million. We take all these things into consideration, including the refinancing charge which we estimate to be approximately 53 cents impact on the company's earnings. We are comfortable, or we estimate now that our earnings will be in the range of $1.62 to $1.72 or approximately $2.15 to $2.25 without the impact of the refinancing charge.

We'll open the line up for questions

Thank you. Your first question comes from Larry Klatzkin of Jeffries & Co..

Hi, guys. A couple questions here. If you don't find any investment alternatives, any chance you guys consider paying a dividend?

Our board has looked at that numerous times in the past year. We'll tine continue it look at that and I think that's a very good question. We do have to see how things look as we move later through the year in '04, so there is that possibility, but time will tell.

I guess the expansion opens in April. What do you see the effect on Lawrenceburg, if any?

From what our people are saying, the hotel expansion should not have really where we don't expect it to have much of an impact in rareness burg. Those resumes are going to be different, they're going to be aimed more at the convention business, that's not where we focus our attention.

Okay. As far as cap ex goes, for '04, you're saying 35 to 40 plus for the first part of the year, you'll have 24 million left in KC to pay? That is correct.

So cap ex in the first quarter will be 24 plus 8 and the rest of the year will be divided up evenly the rest of the 40?

Close, yeah, I mean spending patterns change, depending on the needs of the properties, that's a pretty good assessment.

Okay. Everyone's looking at UK, expansion. Are you looking anywhere outside the United States, or just (inaudible) in?

Looking outside the United States, so far has not been a focus. We are actually looking at a few things, but it has not been our focus. The focus has been in the U.S..

All right. The last thing is, on the corporate, basically you're saying that maybe take the fourth quarter number and that's probably a little higher than that going forward?

I think what we said was if you to 6 to 8% above the annual total.

Okay. That's fine. That's it.

Thank you, Larry.

Your next question comes from Joe Greff of Fulcrum.

Good morning, guys. Two questions. One is with regard to Joliet, and then one is with regard to Riverside. You had actually a nice improvement in EBITDA margin from Joliet and seeing more of the impact in terms of what you could do from a tax mitigation perspective. And you know, a little bit below where our friends over at Hollywood aurora are. Do you have much more in the way of tax mitigation, or is that sort of a good level kind of going forward?

Then, with respect to Riverside, were there any kind of one-time or can you quantify any of the one-time sort of promoting or marketing or operating expenses associated with the opening, I guess, of the expenses in the quarter, related to that, how much of that really depose away going forward in Riverside? Thank you.

Let me comment on Joliet and Dale will talk about Riverside. They have, in aurora, there is some structural benefits in terms of their cost structure compared to Joliet. The management team has done a very nice job; they actually surprised us in the fourth quarter. So they're optimistic. But I think your comment about is the fourth quarter, a number close to a run rate? At this point I'd say yes, but I'm optimistic.

and to speak about Kansas City, we mentioned we spent about a million dollars in marketing there, kind of the launch of the program. Most of that goes away, there will be some continued marketing into the first quarter, because our actual big public grand opening was in January.

Secondly, I'm sure that there was some increased labor time getting everybody trained and everything right up prior to the opening. Quite frankly, I don't have an estimate as to exactly how much that is, but it would be a fair amount and a lot of that obviously goes away as you move forward and start operating the property. We added about 250 jobs there, I believe, so it takes some money to get those people trained and be ready to put on a floor when you open the doors.

Maybe I can ask the question a different way. Once you kind of get to a level of stabilization in Kansas City, what kind of flow-through do you see, you know, going to the EBITDA line once you're at full stabilization?

I don't think we've really given that kind of specific guidance for the property going forward. We have said in the past that we expected, you know, somewhere in the 15 to 20% return on the investment, we spent in Kansas City on a normalized rate.

Thank you very much.

Joe, let me just comment on another point about Joliet. Just to clarify, not everybody knows the total background there, but we're really underutilizing that property right now because of the Illinois tax situation. And you know, we are optimistic that there's going to be some more focus on economic 101 in Illinois, and if we do get the roll-back in '05, that property has a lot of potential. We're just not utilizing the facility given the way we need to run it right now.

Thank you.

Your next question comes from John Birch.

Thank you. Two separate questions. What is the anticipated savings on earnings per share basis from the refinancing to be realized in '04?

I'll know more about that -- I don't mean to be crass, but once we get through the marketing and figure out where the deal is going to price. We do expect that it will be rather substantial savings based on some of the trades that our competitors have been able to do in the last few months.

But you build some range of estimates from that savings into your guidance?

We have that. I mean, if you look at other deals of companies similar to us in the last several months here, I think you would look and say that there's going to be a lot of those have been in the 7ish range. I don't know. It depends on marketing conditions when we're in the market.

Okay. The second question is just building up the components of free cash flow.

or actually less than 7.

Okay. You said D&A would be up so it's about 62 in '04?

Yeah. And net income using kind of midpoint of your guidance there, 29.3 million shares, that's about 64 million in net income.

Before the charge, so using 2.20 because that's -- well, is that -- are you paying out, how much of that charge is cash versus noncash?

It's almost all cash.

Almost all cash, okay. So what I'm really calculating is the recurring cash flow number not what you'll realize in the year and cap ex of 35 to 40 million you said?

Right.

Thank you.

OPERATOR Your next question comes from Robin Farley of UBS.

Thanks, guys. Two questions. First, I also want to say we really appreciate seeing a company that treats preopening and developing expenses like the expenses that they are. There's a lot of creative accounting out there and it's nice to see you treat expenses like expenses.

Two questions. One is do you have any thoughts of what the impact of the Iowa ruling, the difference in tax between the riverboats and tracks and Iowa and what that might mean and how you think we should think of that heading into '04, and also I wanted to clarify one of Dick's introductory comments talking about the revenue increase in Kansas City, being ahead of the position increase. I know that was the case in Q4, does that comment also apply to what you've seen in January?

The Iowa ruling is out now about 24 hours. Background there is that the issue is whether or not the taxation can be different to the casinos versus the racetrack. This is an issue on the table for some time.

Also, the U.S. Supreme Court looked at it, gave an indication that he felt that it was appropriate, that it was constitutional that you could have two different tax rates, but they did not make a decision, they remanded it pack to the state because the state needed to go through a procedural review through its Supreme Court. The Supreme Court in Iowa actually said that it had to be the same. I think the result of this will be one, there will be some delay in resolving this.

In all likelihood it would go back, well, let me say, good chance it's going to go back to the U.S. Supreme Court, who had a 9-0 ruling on this that there could be two different rates. I just got a briefing on this, that's why I know this amount of detail. But even if it was upheld, that the racetracks would have to be taxed at the same rate, the impact I'm being told could be about a 4% or a 5% increase in the tax rates to the casinos.

Again, I don't think that's going to get resolved in the near future. And as you know, to Argosy as a company, that's not really a big operation for us in Sioux City. So I don't think it's something that should at this point be on your radar screen, at least not very high on the radar.

The numbers are not out in, for January, they'll be out in the next couple of days, I believe, for the Riverside or Kansas City market. We are pleased with the results and we do have some indication that that market is expanding based on just what I would call G-2 intelligence of understanding some of where our competitors are. But we don't have all those numbers in yet.

I'm sorry, just in terms of your Kansas City property, is the revenue there still in that excess of the capacity increase?

Yes.

Through the month of January? Great, thank you.

Next is Jon Wolff of Argon Capital.

What should I be using for the consolidated tax rate going forward?

Essentially, it's the same as what we have in -- as has been in '03. You run into a couple unique situations when this coming up with our refinancing. And because it's treated a little bit differently it won't be quite at the same tax rate. But as far as what you apply to our existing operations, it would be the same going forward as it's been.

So 46 and a half is a reasonable expectation?

Right.

Okay. And I'm sorry, I missed just one of the answers you gave earlier, but did you indicate that the actual cash premium on the tender of the existing notes would be roughly in line with the accounting charge?

Yes, roughly.

Like I said, these are estimates right now, because, you know, we haven't completed everything, but yeah, roughly in line with that.

Okay, thanks very much.

Your next question comes from Ray Chessman of Jeffries & Co..

Dick, I wanted to make sure I absolutely understood, you answered Robin's question a second ago, I know she kind of asked it a couple different ways so I want to make sure I got the answer. You said that the revenue continued in January to grow faster at Riverside than the capacity expansion. I just want to make sure I got you correct.

You did hear that correct.

Okay, super, fabulous and congratulations. Secondly, let's change radar screens, how about an issue probably very high on your screen. With Illinois seemingly having a process that is moving forward toward possibly putting the temp license out, do you have an internal horizon, do you think it's a '04, first half of 5 event, and is there a possibility that the temp license could be pulled into a temporary facility such as the law could kick in and roll backwards in obviously this is worth many millions of dollars to you.

That's a possibility. Our internal plan something based on the fact that we expect the tax to revert back to the old rate of July 1st, 2005.

We have our fingers crossed.

Exactly.

The other thing I had, Dale, was can you tell me how much of the revolver was used and what's available right now?

Well, as of the end of the year --

That's what I meant.

Yeah, outstanding revolver was (inaudible) million dollars and there's 72 available under the covenants

Our next question is from Kevin Farris.

Just a couple of quick questions. One, I think you gave maintenance cap ex number but what was the cash from operations in '03?

Let me look it up just a second so I get it exact for you. Our cash flow from operating activities was 162.8 million.

Okay. The next question I had was whether there was any update in Indiana. I know that you guys are, I believe, the only property in that state that, you know, is accruing for excess state income taxes. I was wondering if you could just comment if there's any new development in that state.

There hasn't been any change in that. In April it will have been three years since the oral arguments were heard in that case, and everybody is sort of awaiting a decision.

Right.

As you know, ASTAR is kind of the only case that's been heard. Everybody else has been assessed the tax in an audit and ASTAR is kind of the bellwether case. Once it reaches there it flows on down.

Okay. But you are continuing to accrue for the tax, correct?

Yes.

and what, pending a successful resolution, not there's necessarily going to be one, what would that do to your overall tax rate?

It would drop it probably 5 percentage points or so.

Okay. At the end of the year, we have about $15 million accrued.

Okay, thank you.

OPERATOR Your next question is Dennis Forst.

Good morning. I wanted to understand why corporate expense was up 900,000 in the quarter.

Basically, if you look at what we've talked about going into '04, the reasons are sort of the same. We've stepped up our development efforts over the year, we have experienced some increases in our insurance costs and also we have added some staff throughout '03 in our MIS area as we've really expanded the use of our data warehouse.

Okay, but Dale, that would lead me to believe that maybe that 6-8 is a run rate number, but your guidance.

Also a couple smaller things in there related to severance that won't be going forward.

How big was that?

It affects that number, but it's big enough to where you notice in the quarter, but it won't be significant going forward.

Okay. Then lastly, you said that had the game tax was going to go to 39 this year maybe, versus 35 last year?

Yes.

The number I've got is 33 and a half percent. I just took your gaming tax, game being and admission tax divided by casino revenue. Is that the number we're looking at or do I have the wrong denominator?

These are percentages off of net revenues.

Net total revenues. Okay, rather than casino revenues.

Just because everywhere we discuss things, we discuss net revenues as opposed to casino.

Gotcha.

I think the key there that Dale and I were talking about earlier is that through the actions of our operations, we expect to be able to absorb that and that's why we've indicated that our margins year over year will be in the same range.

Right. Good, thanks a lot, Dick. Thanks, Dale.

Your next question is from David Vas of Banc of America Securities.

Good morning. Can you get back to corporate expense a little bit. It seems to be kind of a trend amongst casino players that corporate expense is going up. A lot of people talking about development. Can you talk about your domestic prospects in terms of what markets are interesting, what you look for in a market when you're looking to invest?

Well, the key is that it is really a long-term investment. Obviously, getting a long-term return that is truly higher than our cost to capital, cash accretive in the next few years, and our focus has been looking for opportunities in the changing or expanding legislation, for casinos. We have a few areas that we're looking at buying existing property. There has been a few properties that have sold this year, that we looked at carefully and we didn't think it would give us the kind of return that we thought was appropriate. And under the right circumstances, a management contract in Native America is something that we're spending some time on.

Okay. Great. Also, can you talk about your thoughts on expanding capacity at Lawrenceburg, and how that plays versus Kentucky and Ohio gaming expansion.

Well, you know, in retrospect, Lawrenceburg should have been expanded years ago. That is a market, our position there is incredibly strong. We have begun a conversation with the city to adjust the rent payment so that we could move ahead expeditiously with an investment there.

We have been up and down with the city, we've had in the past few weeks I think a very positive discussion, we've had post discussions before, and we do have several different plans that we're looking at to literally expand the casino floor.

That would be something that we would love to do. The right investment, the right size investment, and support to the company from the city would go a long way for us to make that decision faster.

We think that there are things that we can do to make the property even more competitive even if there is a gaming in Ohio or Kentucky, as you know, both states in the past have talked about it, but there's been very little progress made.

Okay. A couple of other things. In Kansas City, we're hearing mixed signals in terms of the promotional environment, not necessarily what you guys are doing, but amongst your peers. Do you have any read on it for us?

It is not like in St. Louis where there has been a battle between a couple of the casinos in St. Louis to achieve market share. And we have not seen to date any significant new action by the players in Kansas City.

Okay. I think that about does it for me, thanks.

Your next question is from Michael Rosenthal.

Good morning. I know you're sort of loath to disclose this but maybe if you could give a range, in terms of the expected gaming tax rate, including adult Alton and Joliet this year.

We won't disclose that by property. We'll talk about the overall rate for the company. I did indicate that Lawrenceburg some number would be the same year over year. But as Dale said, to go property by property, we're not doing that. We have given you the overall rate for company. Does that help you out?

Well, no, but -- I understand why you'd be loath to give the exact number, but even within 1 percentage point at different properties? Okay. Thank you.

Your next question is from Todd Scott of Morgan Stanley.

Hey, good morning. Just a quick follow-up on your comments on Illinois. Any read from the governor on whether he -- you think he would or is he thinking of trying to pass new legislation once that rolls back to maintain the current tax levels given that it seems like the bids they're getting for the licenses are below what they were hoping for initially?

You know, the results are, this is going to have a lot of attention in the newspapers over the next more than several months, and I think everybody just needs to be patient to see how it plays out.

They are in the process, I think it's the third week of maybe 23rd or so of July, of February, rather, that they will have their next announcement and we'll see how that plays out. But in terms of what happens with tax rates, the existing legislation says it rolls back when the temp license is operational, which could be on a temporary basis, or as Dale indicated, in July of '05.

Okay, and then just one other quick question. Maryland seems like if anything got through their talking about a 70% tax rate. At that kind of level, would you guys be interested even if something did go through?

Well, I don't think it's 70%. We think that once the tax rate is much above 60%, it's pretty tough to get a good return. Depending on what other -- the size of the market and so on, even at 60% you can get a return. 70%, unless you don't put much of a facility there, doesn't make much sense. And you've seen what's happened in New York, which I think is at 75%.

I think even having said that, we've talked a lot about even at those kind of rates shall, you really have to watch the capital that you invest in one of these properties in order to make it work.

Okay, great, thanks, guys.

There are no further questions. Do you have any closing remarks?

Thank you for joining us. The management team will be available if you would like to call us. Thanks.

This concludes today's conference call. You may now disconnect.