STAG Industrial Inc (STAG) 2017 Q2 法說會逐字稿

Greetings, and welcome to STAG Industrial second quarter earnings call. (Operator Instructions).I would now like to turn the conference over to your host Matts Pinard.

Thank you. Welcome to STAG Industrial's conference call covering the second quarter 2017 results. In addition to the press release distributed yesterday we posted an unaudited quarterly supplemental information presentation on the company's website at stagindustrial.com under the Investor Relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include statements relating to earnings trends, G&A amounts, acquisition and disposition volumes, retention rates, debt capacity, dividend rates, industry and economic trends and other matters. We encourage all of our listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of nonGAAP measures contained in the supplemental informational package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. STAG Industrial assumes no obligation to update any forward-looking statements. On today's call, you will hear from Ben Butcher, our Chief Executive Officer, and Bill Crooker, our Chief Financial Officer. I will now turn the call over to Ben.

Thank you, Matts. Good morning everybody and welcome to the second quarter earnings call for STAG Industrial. We're pleased to have you join us and look forward to telling you about our second quarter results. Presenting today, in addition to myself, will be Bill Crooker, our Chief Financial Officer, who'll discuss the bulk of the financial and operational data. Also with me today are Steve Mecke, our Chief Operating Officer, and Dave King, our Director of Real Estate Operations. They'll be available to answer questions specific to their areas of focus. This was a great quarter historic acquisition volume, millions of square feet leased and per share accretion coupled with a material reduction in leverage. We acquired 286 million in the second quarter, the largest acquisition quarter in the company's history. And more than 200 million above any previous second quarter. We leased 3.3 million square feet and in just the first 2 quarters have exceeded the leasing volume accomplished for all of last year. We produced 7.9% Core FFO per share accretion, while reducing leverage from 5.5x to 5.0x today as compared to the same quarter in 2016. Our strategy and investment thesis have remained constant over 6 plus years as a public company. Our company is built to identify, analyze, acquire and operate industrial real estate transactions across 60 plus markets, across the U.S. Our risk-adjusted probability based analysis allows us to continually identify great relative value, granular transactions found across these markets. Over the past 18 months we've improved our data capabilities, streamlined processes, added to our acquisition platform and enhanced our market presence and reputation with brokers. These factors have contributed to our increased pace of acquisitions and to the size of our pipeline of transactions being considered. Even with the increased pace of acquisitions our hit rate, which is our closed transactions as a percentage of those fully underwritten, is still expected to be approximately 10% to 12% for the year. This is reflective of our continued investment discipline and adherence to our internal investment return thresholds. During the quarter we acquired 21 buildings for $286 million at a cap rate of 7.2%. This slightly lower cap rate, which is just a point-in-time measure, is a reflection of the long average lease term, 9.1 years, and other attractive parameters of the assets we acquired in the quarter. It is not a reflection of any diminution in our investment discipline or return thresholds. As we look out for the remainder of the year we continue to see ample acquisition opportunities. Our pipeline tipped at $2 billion, given this sizable near-term opportunity set we are raising our previously provided acquisition guidance to a range of $600 million to $700 million in acquisitions for 2017; up from the previous $550 million to $600 million. We expect cap rates to be approximately 7.5% for the year. The industrial sector on an aggregate basis continues to be very healthy. We continue to see demand outpacing new supply in the markets we are active in, and believe this will persist for at least the remainder of the year and likely beyond. During the quarter we leased 3.3 million square feet and experienced cash rent change and GAAP rent change of negative 3% and positive 6% respectively. Our tenant retention for the quarter was 60%, slightly lower than anticipated due to a couple of operational choices to accept vacancy in search of higher rents or advantageous season sales. As a result of this quarter's lower number we expect retention to be in the 60% to 65% range for the year. Our balance sheet is in great shape, reduced debt to EBITDA to 5.0X at quarter end through our significant capital markets activity. We raised $224 million of equity in the quarter, primarily through the efficient use of our ATM. A portion of the equity raised, $18.6 million was through OP unit issuance. This tax advantage component was a significant factor in our acquiring a high quality functional building in San Diego. With that I'll turn it over to Bill to provide some more detail on our second quarter results.

Thank you, Ben and good morning everyone. We're very active with acquisitions during Q2, acquiring 21 buildings for $286 million at a 7.2% stabilized cap rate. The disclosed cap rate reflects the inclusion of 3 build-to-suit takeout transactions that closed this quarter. These are brand new buildings with long-term leases and little to no CapEx requirement for the foreseeable future. The cap rate was also driven by higher contractual rental bumps across all the leases we acquired. During the second quarter we sold 3 buildings for $7 million. We continue to expect to have noncore and opportunistic dispositions between $40 million and $80 million in 2017. Subsequent to quarter end, we sold a vacant asset to a user. This user sale was possible following nonrenewal in Q2 for a tenant that moved into an expansion we completed for them at another site. This resulted in unlevered IRR of 18%.At quarter end, we owned 342 buildings with a total of approximately 68 million square feet. Occupancy for the operating portfolio stands at 94.8%, with an average lease term of 4.8 years. The average lease term of the operating portfolio increased by almost half a year during the quarter. Cash NOI for the quarter grew by 18% from the prior year. Same-store cash NOI decreased by 30 basis points over the prior year second quarter. Same-store Cash NOI was down 50 basis points on a year-to-date basis, excluding termination income, and was up 12 basis points over the same period when including the impact of cash termination income. The quarterly same-store decline was driven by an average occupancy reduction of 1.1%. It's important to note that our same-store pool represents only 73% of our total portfolio, the 27% of our operating profile excluded from our same-store pool is 96% occupied and has annual fixed rental bumps of approximately 2%.As we've said in the past, our primary focus is on the bottom line Core FFO. During Q2, we grew Core FFO by 40%, compared to the second quarter 2016. On a diluted per share basis, Core FFO was $0.41, an increase of 7.9% compared to $0.38 cents per share last year. The growth in our per share metrics coupled with growth in long-term cash flow remains a primary focus for our company and is a central consideration in our acquisition and operating decision-making. Our G&A for the quarter was $7.9 million. We expect full year 2017 G&A to be between $33.5 million and $34.5 million. As Ben noted, we raised equity of $224 million in Q2 and delevered down to 5.0x on a net debt to run rate EBITDA basis, the lower end of our promulgated leverage band. Our fixed charge coverage ratio is at 3.9x, and our liquidity is $321 million. At quarter end we'd approximately $1.1 billion of debt outstanding with a weighted average maturity of 4.9 years, and a weighted average interest rate of 3.6%. All of our debt is either fixed rate or has been swapped to fixed rate except for our revolver. Subsequent to quarter end we executed a $150 million 5.5 year term loan which we fully swapped out for an all-in fixed rate of 3.15%. We also paid off 3 tranches of secured debt with a principal balance of $88 million and an interest rate of 6.1% percent. These properties will now be part of our unencumbered asset pool. These subsequent debt transactions have increased our liquidity to $384 million; more than enough liquidity to meet our increased 2017 acquisition guidance. With that I will now turn it back over Ben.

Thank you, Bill. STAG sits in an enviable position. We have a proven investment thesis, ample opportunity to execute on it, and attractively priced capital to deploy. We will continue to demonstrate the discipline in all phases of our business, acquisitions, asset management, and balance sheet management. At the same time, we're cognizant of the current and persisting opportunities to deploy capital, both in our existing portfolio, and on accretive acquisitions. Our focus remains on delivering bottom-line performance for our investors. As previously noted, our core FFO per share grew 7.9% over the second quarter of 2016. We've consistently demonstrated a commitment to providing our shareholders not only with growth, but also income. This continued focus and demonstrated capital discipline, combined with the abundance of accretive acquisition opportunities, make for a very bright future for our company. We thank you for your time this morning and for your continued support of our company.

At this time, we'll be conducting a question-and-answer session. (Operator Instructions)Our first question is from Sheila McGrath with Evercore.

Yes, good morning. Ben, I was wondering if you could discuss the build-to-suit takeout transactions in a little bit more detail. Is there more of that business? How competitive is it? And is it similar IRRs? And that's why you're willing to take a lower cap rate?

Yes. Thank you, Sheila. Good morning. Yes, the essence of this build-to-suit takeouts is that they're long, clean incomes. So I think the average lease term across build-to-suit is 14 years. Obviously, they're brand new, so very little capital expenditure over the beginning years. So you get that clean income, they're also pretty good credit. So we're expecting, again, to get most of the income that is contractually owed to us over that time without diminution from having to spend money on roofs or whatever. The market for build-to-suit is very competitive, and so you won't likely see us doing a build-to-suit with an investment-grade credit in the Inland Empire, because other people are willing to pay more for that. We are maintaining our IRR long-term cash flow threshold in those assets and because of that although we love the transactions. They probably won't be more than say 10% of our volume in a typical year. We continue to look for them, but maintain our pricing and return discipline as we undertake them.

Okay, great. And one follow-up. Can you discuss the tenant retention in the quarter and outlook? Were there any large lease nonrenewals of note? And any on the horizon for the balance of the year?

Yes. I think the nonrenewals were not large leases, there were a couple, maybe 3 leases including the one that Bill referenced where we actually were able to sell the building to a user at a very attractive return, an 18% lever return. And that return is just on that sale; it doesn't relate to the returns derived from moving that tenant into the new expansion that we did on the other site. So there's nothing big and chunky up there in terms of lease expirations or nonrenewals. We expect to have a pretty good second half of the year and nothing unusual to note.

Our next question is from Michael Carroll with RBC Capital Markets.

Ben, can you talk a little bit about your acquisition strategy today and how has it evolved? Just looking at the 2Q 2017 investment, it looks like you're acquiring assets from some of the larger markets including Dallas, Houston, Chicago, will this be a trend going forward?

Yes, I think what we do is look across the 60 or so markets that we're active in, define the individual transactions that meet our return thresholds and that's what we acquire. So the fact that we're finding them in some of the larger markets is probably reflective of our exposure to brokers and sellers in those markets, our time working to identify assets in those markets. And I think the basic inefficient nature of the single tenant industrial market that the assets don't always trade for perhaps where they should trade the anomalies of, say, creditor term or something may cause not all the buyers to show up at a price, so we can achieve a price that'll allow us to derive our returns. We're only again buying about 10% of those that we fully underwrite and we only fully underwrite about a quarter of the ones that we initially identify as potentially interesting. So it's a pretty selective process. I think that the -- as we described in the call, a little bit lower cap rates that were -- you saw this quarter are reflective of the longer lease terms and other things perhaps like market location, but our return with thresholds have not changed.

Okay. And can you provide some color on how many acquisitions that the STAG platform could support a year? I guess, given your previous commentary it seems like you're running near full capacity now, do you need to add more people to support this deal volume?

Well, one of the good things about and I should say one of the things as a manager that you do is you look at your organization and try and figure out what the constraining inputs are, constraining variables are. And as we've gone through the years, we've increased the number of analysts supporting our acquisition, people to allow our acquisition, people to spend more time in the markets. Our acquisition people have spent more time in the markets, have gotten to know the brokers and the brokers have gotten to know them better. Our internal systems, the way we handle data and move data around internally has gotten better. There's just a variety of things that have removed constraint. And so I think, we probably told you last year that our practical limit was somewhere around $750 million for the year, that number it feels to us like that number just organically moves up with very little in the way of additional G&A or spend, it just goes up because we get better at what we do. And indeed, the market is better at recognizing who we are and what we buy and so we get to see, if you will, more and better transactions from the market.

Our next question is from Dave Rodgers with Robert W. Baird.

Maybe on the size of the backlog, I think it's just under $2 billion, 35 million square feet. Can you talk about maybe the inclusion of more portfolios in that backlog, is it still one-off assets kind of what you're seeing in that backlog and the confidence obviously that you have in the guidance increase for the rest of the year?

Hi, it's Steve Mecke. The mix of the portfolios versus granularity of this is very similar to what has been in the previous quarters. So we're not seeing a wholesale change in the pipeline for that. In terms of sort of what's on the pipeline? As we said our pipeline is very dynamic. So every week, we're adding more and more deals to that pipeline and those deals fall off. So we're comfortable with the guidance for the year and I think the pipeline is in good shape to achieve that.

Are the capacity additions that, Ben, you just talked about driving that backlog higher or you are seeing just a substantially higher number of market offerings at this point in the year?

I don't know there's necessarily more market offerings. Again, I just think that our reputation and our position and our knowledge of the market and the market knowledge of us has increased. As well as I alluded to the internal improvements in our system as to how we handle -- we're just more efficient internally and that allows our 6 or 7 outward facing people to be in the market more in their respective markets, more in developing those relationships and seeing those assets et cetera.

You talked, Ben, a little bit about seeing increases or larger portfolio bump than in the assets that you acquired? I guess I tied 2 things together. One is, can you talk about the leasing spread; anything anomalous in the current quarter that you just reported in terms of just kind of the slight decline in the leasing spreads? And then kind of tie that into also what kind of bumps you're seeing in your core portfolio versus what you acquired?

Hey, Dave, it's Bill. From what we acquired this quarter, the average bumps in those leases were around 2.3% which was above 40 basis higher than the bumps we acquired last year. And so that was positive. Generally, our portfolio has a little higher than 2% bumps for 70% of the portfolio. And then for this quarter, the leasing spreads that was driven primarily by 1 lease where we extended the lease to a total lease term about 14 years. So they're going in cash-to-cash roll down, but overall it's a -- it's an attractive transaction for the company and shareholders.

Especially on a GAAP basis.

Right.

Right, because of the long term...

Yes, exactly. Last question Ben, maybe on the dividend. I know that you've been trying to work your AFFO payout ratio lower as you look forward with the increased amount of acquisitions and the higher share price that you've been able to tap into the ATM off of, can you talk kind of thoughts on the dividend?

Yes, we have committed to staying on a -- an annual increase, but keeping the increase relatively de minimis as we push that down to something in the range of 80% of AFFO less nonrecurring or which is essentially equivalent to [CAD], obviously these are less well-defined terms. And we're committed to continue to do that. The duration of that operational strategy depends a little bit on the pace of acquisitions and equity price and a number of other things. We can't give you a firm number as to how many years we will be involved in that, continuing to push that number down, but when we get through that, it's, I don't know, it's somewhere between -- I hate to guess -- less than 5 years and more than a year, I'll leave it as vague as that. But when we get to that point then you would expect our dividend increases to go back to sort of our AFFO per share increase levels on an annual basis. We're not looking to drive that number down below the 80%, we're taking it down to 80% and then we'll sort of march in concert with our AFFO per share growth at that time.

Our next question is from Mitch Germain with JMP Securities.

I just wanted to get some insight on the pace of acquisitions, obviously really big quarter, though nothing done since then. So should we think of the next I think it's around 300 or so or 250 or so you kind of being more back-weighted in the year?

Yes, Mitch, it's Bill, I think Q3 will probably be a little lighter and Q4 will probably more than the average Q4, so definitely back and weighted.

As you know Mitch, we've always been or the pace of acquisitions is definitely cyclical and the fourth quarter is typically our largest acquisition quarter, it has been I think virtually every year. So we're expecting a little bit of back weighting, but we're going to have a pretty good third quarter, I'm not diminishing what Steve and his team have accomplished and are accomplishing through this quarter.

Great, that's helpful. And then with regards to the yields, obviously you took them down a little or I guess you're kind of talking about more in the midpoint. Is that really just a reflection of what happened in the second quarter or is this also looking out in your pipeline, is that including more of the build-to-suit and transactions with higher contractual ramp-ups?

Well, I think that the second quarter, as Bill discussed, it was affected by the fact that we had the 3 build-to-suits, the longer lease term overall. Again we're expecting the same sort of average cash flows in IRR resulting from that acquisition activity. The second half of the year is going to have we think slightly higher cap rates probably reflective of slightly lower average lease term as set out under the parameters. But we're buying the same overall quality of assets and overall quality of returns to just -- the samples include different things and -- but we're looking at 7.5 for the year which would tell you that the next few quarters are likely to be pretty solid.

Got you and last one from me. I think first quarter you had a move-out that was immediately back filled way on retention, this quarter I know is the user sales. So if we kind of back those circumstances out, it seems like that would kind of bring you back toward more historical levels, is that the way to think about it?

It is and we still think that 70 is a good number. As we go forward I think the remainder of the year may run around that number, but the average for the year is going to be pulled down by those eventualities you just mentioned.

Our next question is from Bill Crow with Raymond James.

Certainly an active quarter. I think, Ben, you called it a great quarter. The pushback we get from our clients is that to be a great quarter there's going to be some same-store growth. And as the same-store portfolio gets bigger and bigger and bigger and its industrial fundamentals continue to be terrific, just help us to explain why there's still no material same-store growth?

Well, I think that the same-store obviously is a number that's derived out of a couple things, 1 is it's 2 data points, it depends where lease has started to where they're going today. I won't go too deeply in that, but same-store remains for us as our portfolio gets bigger, our acquisition pace is essentially keeping pace with it. So we are still running -- our same-store portfolio is still in the mid-70s of our overall portfolio, and so the assets that we have that aren't in the same store portfolio are highly leased and there's going to be some occupancy normalization. So you have the 2 vectors if you will struggling against each other, is occupancy normalization, a 100% occupied assets in total will degrade down to the mid-90s, at the same time you have contractual bumps and then on lease rolls, you have rent growth. The fact that we project and have continued to project sort of flat to slightly negative same-store is reflective of very healthy underlying conditions, albeit with this occupancy normalization headwind against it.

But the peers are 94% to 95%, they're running 70%-ish sort of retention rate, right? And so did you compare the markets or you're just not getting...

No, we mentioned in the last call and again it's CBRE Econometric Advisors, who's not infallible certainly, but they are one of the more respected data sources in the industry, is projecting that the mix of markets we have is going to outperform the primary markets by 50 basis points on a compounded annual growth rate over the next 5 years. There's nothing wrong with the markets that we're in, indeed we own, I think a selection of the better assets in those markets and depending on where you are in the cycle, the primary markets will outperform during the expansions phases of the cycle and during the less expansive phases of the cycle, the secondary markets will outperform the primary markets. We believe we're moving into the less expansive portion of the cycle where our markets will outperform. But I think that the biggest factor remains this occupancy normalization. Our peers are not growing, we're growing and the fact that we're growing in the same-store, and we have everything in our same-store, we don't remove redevelopment assets in any great amount, we don't take out vacancy, it's something that lease guys do et cetera, this is a real number. And flat to slightly negative is a good result given the occupancy normalization headwind.

Yes, Bill, just the other point as I mentioned on the call, 27% of our portfolio is not included in our same store. So when you run that at 27%, which is at 95%, 96% occupied, that's the normalized occupancy and that has 2% rent bumps in it. So when you start layering that onto our same-store number you see a much more normalized same-store number.

Yes, and I buy into the strategy in what you say, but is there a time as you look forward as you do your longer term budgets when you think that same-store would turn appreciably higher?

Well, yes, I think that that happens when we stop growing 20%, 25% a year as we have pretty consistently since our IPO. We're at $3.5 billion of assets or something like that today, growing 25% a year gets harder and as that happens the same-store layering on will have less of an impact and will become more of a static portfolio, but there are years to run yet before that happens and once that happens, the occupancy normalization does not happen overnight, it happens over a period of 4 or 5 years. So that occupancy normalization wait will still be there for a period of time. So we do not expect to have same-store numbers comparable to the static pools that most of our peers have and I mentioned earlier, it's same-store and leasing spreads are sort of derived out of point-to-point point numbers. If you lease the building back in 2012 at some discount to get occupancy, and you're now rolling that over, you might expect to get really good leasing spreads. We don't have a lot of that in our portfolio, we never actually ran the -- during that time we never sort of ran the let's gain occupancy by discounting rents model. So we would tell people as we have before, look at our bottom line metrics, look at our Core FFO per share which as we've pointed out is growing even while we're delevering and I think that's, well, that continue to be our message and it's always incumbent on us to continue to deliver that kind of performance if we expect people to not focus on things like same-store or leasing spreads, which again we think are interesting statistics, but they're interesting statistics primarily for companies that aren't dynamically growing like we are.

Our next question is from Dan Donlan with Ladenburg Thalmann.

I think we kind of belabored the point on the occupancy, but I just wanted to ask one more point on that. If your same-store pool stayed as it existed today, where do you think you are versus market occupancy, I think you ended the quarter at 94.5%, do you think market occupancy is any closer to that or do you think it may be in the 93% range, just kind of curious assuming that portfolio stayed static.

The last statistic that I saw for industrial vacancy in the U.S. was 4.9%. There are different numbers out there depending on how you define what goes into your denominator in there and obviously your numerator. So if the whole market is circa 5% I'd say we own a little bit better assets than the whole market. So I think practical occupancy may be close to 96, we think we will run 94 to 96 sort of consistently. Obviously, we're at a very healthy portion of our time in the market today. So I think that moving in the middle to the upper part of that 94 to 96 range is where we expect to be.

Okay. And then going back to Mitch's question. If you exclude the 3 leases that you chose not to renew in the second quarter, what would the tenant retention ratio have been?

Closer to 70.

Okay. And then on the acquisitions, I thought you said that the guidance was around 7% cap rate, did I miss that, and we think you said in response to (inaudible).

No, 7.5…

Oh, 7.5%, okay. Okay, that makes more sense.

Yes.

And so there isn't really any cognizant decision, I don't want to use the word agnostic, but to maybe go after longer weighted --

I will.

To go after longer-weighted average lease terms, it just so happened that that's the opportunity that came to you; there's not a direct decision to kind of maybe chase longer walls?

No, I mean we are -- and we'll forgive the word of the use agnostic. We're agnostic to all the parameters individually. We're not agnostic to the collective effect of the parameters. And so I can remember being in net lease conferences making the statement that lease term doesn't matter and it really doesn't if you can take in on a rational basis the effect of a lease expiration in your analysis. A 3-year lease term where the tenant is highly likely to renew may produce significantly more likely will produce significantly more cash flow than a 10-year lease term to a tenant who may or may not renew in 10 years. The rent you receive over that the 10 years may be significantly higher because the cap rate on that 3-year lease is going to be significantly higher. So we look at -- when we think on a rational basis on a probability weighted basis, the cash flow to be derived from owning that asset over the next 10 or 20 years, and we are –- have return thresholds. And if we can find those returns in longer term leases and we did obviously this quarter, we had the build-to-suits which helped stretch that average duration out, we will, if we find it in a bunch of 6-month and 18-month leases, which is not likely because there's a big cash flow impact to potential non-renewal. We're likely to find most of the value in sort of the middle term leases. We've historically have had acquisitions that's somewhere in the range of 5 to 7 years. This quarter was a little longer again affected by those build-to-suits. But we don't -- we're not telling you that next quarter is going to -- it'll be what it is. We're going to buy assets, they're going to produce great cash flow over time and the lease term will fall out of that, as well frankly the cap rate will fall out of that, because cap rate is just a point-in-time measure, and we're really focused on long-term cash flow.

Our next question is from Barry Oxford with D.A. Davidson. Please state your question.

Ben, real quick, we see statistics from a construction standpoint ticking up all this year in 2017. Are there any submarkets that you guys are currently in where you're like getting concerned about the building that I'm seeing going on around me in this particular submarket?

There really isn't -- most of that building is taking place in super primary markets. The one area where we might have some concern is Eastern Pennsylvania; there's been a lot of new supply coming online there. But in general, we don't see the supply threatening our markets. One of the interesting things, Barry, is when you first started asking the question, I thought you were talking about construction costs ticking up, and obviously construction costs ticking up are good for people that own a lot of real estate like we do.

Right.

We are at almost 70 million square feet of real estate which is interestingly makes us larger than a couple of our peers who appear a lot larger than us, we're a pretty sizable portfolio of solid fungible real estate.

Right, exactly.

Our next question is from Joshua Dennerlein with Bank of America Merrill Lynch.

Curious on the San Diego deal that you won with the OP unit, give us a little background on that, and I think you've also said in the past that issuing OP units is a pretty rare event. Do you think this is the start of a new trend as that gets more recognition in the market?

It's always been our hope and belief that the market would find or sellers would find more reason to use OP unit transactions, they're not easy transactions our legal department you know has to spend a bit more time et cetera on them, and obviously the seller is going to need to hire their attorneys and advisors to understand the transaction and its complexities. We still don't believe that it's going to be a big factor going forward, there is some chance that, if you read the details of the various and sundry tax law proposals, there's some chance that it could go away. So we don't expect it to be a big factor going forward, it was a big factor in this acquisition because it enabled a tax advantage transaction for the seller.

(Operator Instructions) Okay, we have reached the end of our question-and-answer session. I would like to turn the call back to Ben Butcher for closing remarks.

Thank you very much. And thanks to all of you for your questions and for joining us this morning. We're very proud of our performance, our ability to grow our bottom line metrics while accomplishing significant deleveraging, I think is a pretty attractive result over the past year and the past quarter. We believe that we're well set up for a successful second half of '17. And we look forward to delivering those results to you. Again, thank you for joining us today.

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