Chris Daly - Daly Gray, Inc. Jeff Fisher - Chairman, CEO, and President Dennis Craven - EVP and COO Jeremy Wegner - SVP and CFO.

Anthony Powell - Barclays.

Greetings, and welcome to the Chatham Lodging Trust Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Chris Daly, President of Daly Gray Public Relations. Thank you. You may begin..

Thank you, Melissa. Good morning everybody, and welcome to the Chatham Lodging Trust Fourth Quarter 2017 Results Conference Call. Please note that many of our comments today are considered forward-looking statements as defined by Federal Securities Laws.

These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of February 26, 2018, unless otherwise noted.

And the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our Web site at http -- www.chathamlodgingtrust.com.

Now to provide you with some insight into Chatham's 2017 fourth quarter results, allow me to introduce Jeff Fisher, Chairman, President, and Chief Executive Officer; Dennis Craven, Executive Vice President and Chief Operating Officer; and Jeremy Wegner, Senior Vice President and Chief Financial Officer. Let me turn the session over to Jeff Fisher.

Jeff?.

Thanks, Chris. Good morning, everybody. Our results for the fourth quarter were strong by most measures and finished at the upper end of our guidance range. Let's talk about a few of those highlights from the quarter.

RevPAR growth was 1.1% compared to our guidance of minus 1% to up 1%, of course, benefiting from hurricane related demand at our Houston and Florida hotels.

Adjusted EBITDA finished slightly above the upper end of that guidance range due to RevPAR outperformance as well as the incremental EBITDA contributed by the two acquisitions offset by EBITDA loss at the hotel that was sold. Adjusted FFO per diluted share was $0.36 compared to guidance of $0.35 to $0.38 per share.

But excluding the impact of the fourth quarter equity offering, the two hotel acquisitions and one hotel sold, pro forma adjusted FFO per share would be $0.38 above consensus and at the upper end of our guidance. Dennis will go into more detail regarding our operating performance.

I’m going to take a few minutes though to reflect on our strategic performance in 2017 and also talk about our plan as we move forward into 2018. Earlier last year, we set forth publically a four pronged strategic approach to add value to our portfolio. Let me just talk about those one by one. First, opportunistically recycle capital.

We are going to selectively prune assets from our portfolio that either don’t fit strategically of which there's only a few or we believe we could generate incremental new EBITDA and cash flow by selling at a lower cap rate and reinvesting those proceeds in higher quality hotels, in higher growth markets that earn a higher yield.

We accomplish this in 2017 through the sale of our Carlsbad hotel at an approximate 6.5% cap and we acquired three hotels as you know for $132 million at an approximate 8% cap.

Secondly, we want to leverage our existing portfolio via value added additions where possible to simply add rooms in hotels or markets where we already own excess land or have the ability to convert sell them use leading rooms or other spaces into existing guest rooms. We've been converting meeting rooms or other spaces into those guest rooms.

We added 32 rooms and a new tower in Mountain View, California and that addition is producing double-digit unlevered returns. And, of course, we're still pursuing our two expansion in Sunnyvale as well as the construction of a second hotel on excess land adjacent to our Hampton Inn, in Portland, Maine.

Since we already own the land and the infrastructure is in place, the returns can be very strong, as evidenced by our Mountain View addition if we can obtain the necessary approvals, and given some of the markets that our hotels are located in, that can take some time, but that's where the value comes from.

We are going to selectively develop over time just one or two hotels in certain target markets. I started in this industry well over 30 years ago by building hotels.

We’ve got the internal expertise to do that and by utilizing the operating expertise of Island Hospitality, we know we could cherry pick a market where we see opportunity, outsized opportunity that will deliver unlevered yields of at least 9% to 10% over time. And finally, of course, we will continue to invest in our own portfolio.

We’ve got to be able to compete with all the new supply and new brands that are coming into some of our markets. And so, of course, we need to ensure that our hotels look fresh and attractive when compared to the new product. 2017 was a very successful year for us.

Operationally RevPAR finished near the upper end of our range, adjusted EBITDA and adjusted FFO finished towards the upper end of our range. We participated in more Investor Relation Events than ever. We are executing on all four prongs of the strategy that I just laid out, and our balance sheet is in great shape. I’m proud of that.

Our leverage is at 34%, down from 40% a year-ago and way below our peak of over 50%. In fact, we're in our lowest leverage level since 2010 and we are well positioned to deliver further on our strategic approach and accrete value.

Jeremy will get into further detail on our 2018 guidance, but obviously as we sit here today, our guidance does not reflect any acquisitions, any developments, or reinvestment of any asset sale proceeds or utilization of additional leverage capacity.

Our 2018 adjusted EBITDA guidance is up $2.2 million or almost 2% over 2017, which is a reflection of our strategy and we fully intend on growing our portfolio and believe we can offset approximately half of the FFO decline on a fully invested basis.

We will add earnings in 2019 also from the ramping of the Residence Inn, Charleston Summerville that we should acquire as we talked about on or about June 1 of this year, which we expect will open as I said around the end of the second quarter.

Operationally, we face some tough RevPAR comps in 2018, especially in the first quarter and the fourth quarter here. Last year we benefited from having four hotels in Houston for the Super Bowl, only one in Minneapolis this year.

Also a substantial demand generated from hurricanes Harvey and Irma, especially in Houston in 2017 will be a headwind in 2018. Having said that, our hotels are in excellent condition as we've been investing in our hotels throughout the cycle.

And importantly if the new tax policy spur incremental economic growth and incremental lodging demand as the impact of new supply peaks in our markets. We are in a great position to outperform and get back to growing margins.

We are thankful that we have our affiliated manager Island Hospitality who was working tirelessly to help us accomplish all these goals. Working together, we greatly enhanced our revenue management strategies, while controlling costs and minimizing margin erosion.

We must continue to think outside of the box and push our hotels and even franchisors to implement new measures that will help owners regain some of the lost margins. Chatham still generates the highest operating margins of all lodging REITs and we’re going to continue to work to maintain our position at the top.

With that, I’d like to turn it over to Dennis..

Thanks, Jeff. Good morning, everyone. Our RevPAR growth of 1.1% in the quarter was driven by ADR gains of 0.8% to $159 and a 0.4% increase in occupancy to 75% in the quarter. Excluding our four Houston hotels, which benefited from hurricane Harvey related demand, RevPAR declined 0.5%.

Looking at our more significant markets in the quarter, RevPAR at Silicon Valley Residence Inn was up 1% in the quarter with ADR rising 0.5% $223 on occupancy of 75%. Over the last three years, we’ve absorbed 24% of upscale new supply in our market track as well as 9% of new supply in our market track.

The good news is that market supply growth has declined three straight years and despite all of the new supply over the last 36 months, we’ve managed to gain occupancy levels over 80% over that same period. Cat companies continue to drive our economy and despite all the supply demand growth continues to outface supply across the Valley.

It's a great location to own hotel and our four hotels are the perfect brand that being Residence Inn to accommodate the significant extended-stay demand in the Valley.

San Diego represents our second-largest market and we saw RevPAR decline 12% in the quarter, one of our two hotels Residence Inn, Mission Valley was under renovation for most of the quarter.

In Houston, RevPAR rose 23.5%, obviously most hotels did really well in the quarter, but I’d like to point out that our four hotels improved their market share by approximately 6% in the quarter. So we got more than our fair share of hurricane Harvey business and Island did a fantastic job maximizing performance.

The hotel teams were in constant communication with Island's revenue managers, who were then managing inventory with some of our preferred customers who specialize in disaster related accommodations.

Our growth strategy is centered on markets where RevPAR growth is higher than our portfolio average and RevPAR for the three hotels we acquired in 2017 was up approximately 3% in the fourth quarter and 4% for the full-year.

Its normal when you acquire a hotel and transition management, there can be some rocky patches that we have to deal with, but we’re all in on these hotels and expect to continue if not improved that trend. These are three great hotels and we believe we can make healthy enhancements to the top and bottom lines in 2018.

Washington DC, Dallas, and LA were other notably positive markets, while Denver was a notably weak market primarily due to new supply. We certainly have been feeling the impact of our new supply across our portfolio, but it has been trending down.

We’ve maintained that the new supply has been more concentrated in the top MSA in urban markets during the earlier part in this development cycle, and we’ve been patiently waiting for it to turn. New supply on our market tracks across our portfolio was 4% in 2016, and 3% in 2017.

This should bode well for us, if we haven't seen -- if in fact we’ve seen the new supply peak already as we move into 2018 and 2019. Our fourth quarter same store operating margins were down 220 basis points, but I should highlight that our hotel EBITDA margins were only down 50 basis points in the quarter.

We’ve been very aggressive appealing property taxes and we’re a beneficiary of quality refunds or reductions in the fourth quarter. Most of these refunds were not multiyear, so we just continue to see these benefits throughout 2018 in our earnings.

Our reported fourth quarter gross operating margins of 43.3% and our hotel EBITDA margins were 35.9%, slightly below the upper -- the lower end of our guidance range of 36%. Jeff already spoke to the industry wide pressures to raise the wages, which impacted our margins by approximately 60 basis points in the quarter.

Our biggest challenge has been finding and keeping qualified labor, especially in housekeeping and certainly this isn't just a Chatham issue, but an industry issue. Payroll and benefits represent approximate 35% of our total operating expenses and approximately 18% to 19% of revenue.

For the quarter, on a per occupied room, payroll and benefits were up approximately 4.2% and for 2017 they were up approximately 3.3%.

Since last year we’ve been proactive adjusting pay in an effort o retain our associates and as we’ve mentioned previously it's been a challenge in a very tight labor market where new hotels are trying to poach qualified labor.

As we move forward, as owners and Island as operators, we need to continue to find ways to reduce labor cost by maximizing the efficiency of our staffing model. Other unique items that impacted our margins in the quarter were higher utility costs due to colder weather and higher oil -- and obviously higher oil and gas prices.

And lastly, our R&M expense, repairs and maintenance expense was up 40 basis points as we incur an additional costs for extra work that we decided to take on during renovations that were performed during the fourth quarter.

Good news on the expense front is that our gas acquisitions cost remained flat, if not slightly down year-over-year and those should trend lower as we move into 2018 as a result for the brand negotiations with the OTAs.

On the CapEx front, during the quarter, we converted a meeting room at our Hyatt Place in Cherry Creek, Colorado into three guest rooms and two large suites, adding at least $1.5 million of value to the hotel.

Additionally, we performed a substantial upgrade to the public spaces, restaurant and fitness center, at our Residence Inn on the Intracoastal Waterway in Fort Lauderdale, rebranding the restaurant adding a beautiful outdoor seating area to it. Early feedbacks has been awesome and the restaurants are performing well ahead of past performance.

We have to continue to look at our existing assets and find ways to enhance value whether that’s to continue conversion of alternative spaces to guest rooms or enhancing our guest experience by adding, for example, small bars, while delivering attractive return.

And just another note on Silicon Valley with respect to those two expansions, our guidance for 2018 at this moment does not assume a certain construction date for either of those two projects nor any disruption related to taking those rooms out of service for the building that we will be tearing down.

I’m going to go ahead and turn it over to Jeremy at this point..

Thanks, Dennis. Good morning, everyone. For the quarter, we reported net income of $5.5 million or $0.12 per diluted share compared to net income of $2.7 million or $0.07 per diluted share in Q4 2016. Our Q4 2017 net income included a $3.3 million gain from the sale of the Homewood Suites Carlsbad.

The primary differences between net income and FFO relate to non-cash costs such as depreciation, which was $11.6 million in the quarter, one-time gains and losses which were $2.8 million and our share of similar items within the joint ventures which were approximately $1.8 million in the quarter.

Adjusted FFO for the quarter were $16 million compared to $17 million in Q4 2016, a decrease of 5.7%. Adjusted FFO per share was $0.36, which represents a decrease of 18.2% from the $0.44 per share generated in Q4 2016.

Our $0.36 of FFO per share for the quarter was within our guidance range of $0.35 to $0.38,which was provided before the equity rate acquisition and disposition that we completed in Q4. Excluding the impact of the equity acquisition and disposition, our FFO per share would've been $0.38 in Q4.

Adjusted EBITDA for the company was $26.3 million in Q4, which was flat to 2016. In the quarter, our two joint ventures contributed approximately $3.4 million of adjusted EBITDA and $1.3 million of adjusted FFO.

Fourth quarter RevPAR was up 3.7% in the Inland portfolio, which is coming off a significant amount of renovation in 2016 and RevPAR was at 0.3% in the Innkeepers portfolio which have significant amount of renovation disruption in 2017 that will continue into 2018.

After 2018, the renovation activity should be very limited both of the joint venture portfolios for the next several years. We took a number of steps in Q4 that both strengthened our balance sheet and improved the quality of our hotel portfolio.

In early Q4, we issued 0.5 million shares under our ATM and direct stock purchase plans, which generated $11.2 million of proceeds and in November 6, we priced a $5 million -- or $5 million, $110 million equity offering.

We also sold the Homewood Suites Carlsbad for $33 million in the quarter, which enabled us to eliminate $20 million of mortgage debt and generated $13 million of cash proceeds that was used to repay bank debt.

We used the proceeds from the share issuance to fund the $20.2 million acquisition of the Courtyard by Marriott Summerville South Carolina and $68 million Embassy Suite Springfield Virginia.

We also entered into a contract to acquire the currently under construction Residence Inn Summerville South Carolina for $20.8 million, once construction is completed in lateQ2 2018. Each of the hotels we acquired was built within the last four years and its unencumbered by mortgage debt.

At year end, our net debt was $531 million and our leverage ratio was 34%, which was down from 40% at year end 2016. The actions we took to strengthen our balance sheet in 2017 give us significant amount of dry powder to pursue attractive growth opportunities, if they arise in the future, while still keeping our balance sheet in great condition.

Transitioning to our guidance for Q1 and full-year 2018, I'd like to note that it takes into account anticipated renovation of the Homewood Suites Billerica and the Hyatt Place Pittsburgh in Q1, the Residence Inn Mountain View and Residence Inn Tysons Corner in Q2, the Homewood Suite Dallas in Q3 and the Residence Inn Sunnyvale 1 and Homewood Suites Farmington in Q4.

We expect to spend approximately $33 million on our 2018 capital plan, which includes the renovations I mentioned as well as other planned capital expenditures. We expect to fund approximately $6 million of this capital as restricted cash escrows with the remaining $27 million funded out of free cash flow.

Our guidance also assumes that we complete the $20.8 million acquisition of the Residence Inn Summerville South Carolina at the end of Q2 using availability under our $250 million line of credit.

We expect Q1 RevPAR to decline by 2% to 3.5% due to difficult comparisons for our four properties in Houston, which benefited from the Super Bowl in QI 2017 and our three properties in the Washington DC area which benefited from the inauguration in Q1 2017. We expect full-year 2018 RevPAR of minus 1.5% to up 0.5%.

In addition to the challenging comparisons in Q1, our four Houston properties will face a difficult Q4 comparison due to the surge in business after hurricane Harvey that benefited our properties in Q4 2017.

We expect that the impact of these challenging comparisons for our four Houston properties will impact our overall 2018 RevPAR growth by approximately 60 basis. Our RevPAR guidance also assumes current trends of healthy GDP growth combined with elevated new supply in upscale segment will continue throughout the rest of 2018.

On a pro forma comparable same-store basis, including the Hilton Garden Inn Portsmouth, the Courtyard by Marriott Summerville and the Embassy Suites Springfield and excluding the Homewood Carlsbad 2017 quarter by quarter RevPAR was $125 in the first quarter, $142 in the second quarter, $145 in the third quarter, $120 in the fourth quarter and $133 for the full-year 2017.

Our full-year forecast for 2018 corporate cash G&A is $9.6 million. On a full-year basis, the two joint ventures are expected to contribute $15.3 and to $16.3 million of EBITDA and $5.9 million to $6 million of FFO. On a full-year basis, we expect FFO per share to be $1.80 to a $1.94 with the midpoint of $1.87 in 2018.

Given the $0.27 decline of our $1.87 midpoint of our 2018 guidance from the $2.14 of FFO per share Chatham generated in 2017, I’d like to a provide a little more [technical difficulty] reasons for the decline. We expect same-store EBITDA for our wholly owned hotels to decline by approximately $4.3 million, which represents $0.09 per share.

This has been driven by top line RevPAR declines in part due to the difficult Super Bowl and inauguration comps for our hotels in Houston and Washington DC as well as an approximately 110 basis point decline in margins due primarily to a combination of increasing wages and declining revenue.

Issuing approximately 7.4 million shares in 2017 and early 2018 to raise a $161 million of equity and using the proceeds to acquire the Hilton Garden Inn Portsmouth, Courtyard and Residence Inn Summerville and Embassy Suites Springfield is driving approximately $0.08 of the FFO per share decline.

While the equity in acquisitions are dilutive to FFO share in the immediate term, they’ve strengthened our balance sheet and give us the capacity to pursue accretive debt finance acquisitions in the future.

Our 2018 guidance assumes the Residence Inn Summerville is only in our numbers for half of 2018 and we're assuming that performance for this new property doesn't achieve stabilized level until 2019. FFO per share could increase by $0.01 to $0.02 once a full-year state wide performance is included in our numbers.

Selling the Homewood Carlsbad for $33 million in late December 2017 and using the proceeds to repay debt is expected to reduce our 2018 FFO per share by $0.02. In the short-term, this has reduced our leverage, but in the future we could get these $0.02 back if we use the incremental borrowing capacity created to acquire another hotel.

We expect the FFO per share contribution from our JVs to decline by approximately $0.04 in 2018. While the underlying operating performance of the JV hotels remained strong, these portfolios have $1.6 billion of floating rate debt and we expect interest costs to increase materially in 2018 based on the current LIBOR forward curve.

For remaining $0.04 decline in the midpoint of our FFO per share guidance versus 2017 is due to several factors include an increase in G&A driven by increasing miscellaneous taxes, wages and benefit and IT costs and the impact of increasing LIBOR in Chatham's credit facility borrowings.

I think at this point, operator, that concludes our remarks and we will open it up for questions..

Thank you. [Operator Instructions] Our first question comes from the line of Anthony Powell with Barclays. Please proceed with your question..

Hi. Good morning, everyone..

Hey, Anthony..

Hey.

Could you talk about how much investment capacity you currently have before any new equity offerings? And also could you talk about how you rank your opportunities in terms of acquisitions, building the hotels, and adding rooms?.

I guess with respect to your first question, if we look at it really simply and say, hey, if we were to lever up then the proceeds from the asset sale and the equity offerings to 40%, that would allow us to buy sort of an additional $135-ish million of hotel on top of the $150 million we’ve already acquired or have under contract..

Got it..

So if we were to do or fund that with all debt under our line, that would get us sort of $0.11 to $0.13 of FFO per share sort of depending on the cap rate we acquired hotels at..

And just to comment -- I’m sorry, I was going to answer the ranking part of the question, but go ahead Anthony..

No, I was going to say, are you comfortable going at the 40% leverage at this part of the cycle?.

Yes..

Yes..

Okay.

And then on to the ranking?.

Yes, I think that first and foremost and the first piece of the strategy is successful in 2017 is really pruning a few assets and really recycling capital with a positive spread. So that’s priority number one around here, is to find hotels that are new, are in markets that are growing faster than the overall portfolio and making that kind of trade.

Additionally, I think then you come down to the second part of the story which is just looking for any opportunity to add within the existing portfolio and also we didn’t talk too much about it in the script, but really look at opportunities in some of these limited service hotels to add a few more bars, because we have done that in a couple of hotels that produced anywhere from $90,000 to about $180,000 of new bottom line cash flow in the right location where there really isn't easy access within walking to another facility, that can work well, so we’re going to ramp that effort up a little bit in some hotels that we think we have a captive audience.

And really the development of a new hotel is probably last on the list, but still as I said, maybe here or there an opportunity we're considering..

Got it and thanks. Going to the dividend, I think you highlight in the release that your payout ratio goes to 71% based on the midpoint of your FFO per share guidance.

Can you remind us what your dividend policy is? Do you pay dividends based on the payout ratio or paying on taxable income and how do you expect the dividend to trend this year?.

Yes, I mean, listen we typically have targeted it to some range of an adjusted FFO per share -- 70% is a little bit higher than that. I would tell you that if you even look at our earnings for 2017, we generally paid out pretty darn close to 100% of taxable income that will decline a little bit in 2018.

So from a return of capital perspective, we're not paying a stupid number. So I think we’re pretty comparable still at above $0.32 a share which is 70% of adjusted FFO.

We do have a pretty significant CapEx number this year, but as Jeremy mentioned in his prepared remarks about $6 million of the $33 million has already been funded into reserves, so it kind of lessened our cash flow out the door in 2018..

Okay, right. I will get back in the queue. Thanks..

Thank you. [Operator Instructions] Thank you. We'd like to take a follow-up from Anthony Powell with Barclays. Please proceed with your question..

Well, I guess, I’m the queue today. So going to.

You just stay [technical difficulty]..

All right. Just going to Houston, we’ve heard some people say that there is a bit of kind of the return of energy-related business.

Have you seen that and when do you think RevPAR comps will start getting positive in Houston?.

Yes, we have seen that, Anthony in the Chatham portfolio. But we’ve also seen it sprinkle through both our -- well primarily our Inland portfolio and there's a portfolio that is owned by -- partly by Jeff and with Colony, that has a little more exposure to oil and gas and we have seen some more business in our oil and gas markets.

If you look at our SpringHill Suites in Washington, Pennsylvania, even over the past kind of three to six months that hotel has done really well in terms of -- I mean, obviously it’s pretty small, but in terms of just RevPAR growth, we’re talking kind of 15% to 30% RevPAR growth.

A lot of that is crews that are coming back whether it's for maintenance, but it certainly has spiked up a little bit. We can say that we have seen that..

All right. And Jeff I think you mentioned that the brands could help hotel owners a bit more in terms of regaining loss of margin.

What ideas do you have that kind of -- that the brands could kind of implement to help you in that front?.

We are looking at a variety of different things. Of course, we first start by just simply looking at existing brand standards and seeing where we think it is -- there's opportunity within those standards, and it's just trimming around the edges.

It could be little things like cutting out newspapers that cost plenty of money every day to put out there, but obviously as we know most folks are reading news online these days anyway. It’s -- on the staffing front, I would say that we’re pretty very, very lean, not pretty lean.

So there's not much room there, but efficiencies in housekeeping and cleaning rooms and the number of minutes that we budget to clean those rooms is what we're looking at right now. And we’re looking at sort of a tiered bonus formula to further encourage kind of the reduction in those housekeeping minutes.

So it's things like that, brand standards, mandate, what we put out for breakfast, what we might put out during the evening social hour, they call it in a Residence Inn or our Homewood Suites, but we're actually experimenting in advance and for the brand a little bit as to beta testing in some hotels by pairing down that offering.

And we’re going to monitor our guest service scores, look at our cost per occupied room, which we're already seeing some savings in those tests hotels and continuing to work with the brands and encouraging them to take another look at what those offerings are.

So, we’re fairly optimistic that everyone's eye is on the same ball here in a flat RevPAR environment as we know we just can't maintain margins..

Got it. And, I guess, my last one on the RevPAR guidance.

Negative 1.5% to plus 0.5%, excluding Houston and DC, what do you think the kind of the unaffected guidance is and is that higher or lower than it was in '17 and when do you think that number can maybe start improving a bit?.

Yes, I mean, that brings overall portfolio RevPAR down by about 60 basis points for the year, so if you look at kind of the midpoint of our guidance, it's around basically flat 2018 versus 2017..

And that's a bit below I think some of the forecasters for upscale and upper midscale, is that just due to more supply growth in some markets like Denver for example?.

Yes, I think that’s still due to new supplies. We talked about it still kind of in that 3% range for us in 2017. We do have two more hotels that are being renovated in 2018 versus '17. We finished the -- we completed renovations on five hotels last year, we’re going to do seven in 2018.

So, there's a little bit extra there, but that's we are, like I said, five versus 7, so a little more displacement..

Got it. Okay. All right. That’s it for me. Thanks..

Thanks, Anthony. See you soon..

Thank you. [Operator Instructions] Mr. Fisher, there are no further questions at this time. I will turn the floor back to you for any final comments..

Well, I appreciate that. Hopefully the lack of questions is because we did a thorough job in laying this out. We certainly try to -- we think there's upside here as well. We tried to be conservative in our approach.

We are bullish on opportunities to work with the brands and other folks to, as I said, minimize margin erosion and of course having the affiliated operator here allows us to work very closely with them on all initiatives and on all those fronts. So with that we will move forward and look forward to speaking with you next time. Thank you..

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