NexPoint Residential Trust, Inc.
Q2 2020 Earnings Call Transcript

Published: 4 Aug 2020

[Operator:]

Good day and welcome to the NexPoint Residential Trust, Incorporated. Second Quarter 2020 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jackie Graham, Investor Relations. Please go ahead, ma’am.

[Jackie Graham:]

Thank you. Good day, everyone, and welcome to NexPoint Residential Trust’s conference call to review the company’s results for the second quarter ended June 30. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer; and Matt McGraner, Executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the company’s website at www.nexpointliving.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as expect, anticipate, estimate, may, should, intend and similar expressions or variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding NXRT’s business and industry in general, the COVID-19 pandemic and its effect on the company, NXRT’s 2020 adjusted NOI estimate and the related assumptions, NXRT’s strategy for the third quarter and full year 2020, NXRT’s net asset value and its related components and assumptions, planned value-add programs, including projected average rent, rent change and return on investment, and expected acquisitions and dispositions. They are not guarantees of future results and forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements, including the ultimate geographic spread, duration and severity of the COVID-19 pandemic and the effectiveness of actions taken or actions that may be taken by governmental authorities to contain the outbreak or treat its impact, as well as those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in the company’s annual report on Form 10-K and quarterly report on Form 10-Q. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company’s most recent annual report on Form 10-K and the company’s other filings with the SEC, for a more complete discussion of risks and other factors that could affect any forward-looking statements. The statements made during this conference call speak only as of today’s date. And except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes analysis of funds from operations or FFO, core funds from operations or core FFO, adjusted funds from operations or AFFO and net operating income or NOI, all of which are non-GAAP financial measures of performance or total debt. These non-GAAP measures should be used as a supplement to and not a substitute for net income loss and total debt computed in accordance with GAAP. For a more complete discussion of FFO, Core FFO, AFFO, NOI and net debt, see the company’s earnings release that was filed earlier today. I would now like to turn the call over to Brian Mitts, please go ahead, Brian.

[Brian Mitts:]

Thanks, Jackie. I want to welcome everyone to the NXRT 2020 second quarter conference call. Today, we’re going to discuss the highlights for the quarter. We’ll spend some time analyzing Q2 results as well as the early part of Q3 through July. This is Brian Mitts. Let me start with the Q2 and year-to-date highlights. First, we announced last week on July 27 that the Board elected to expand the composition of the Board from 5 to 6 members. And we added Catherine Wood as an Independent Director. We believe Cathy brings significant experience and a unique perspective to the Board. So we’re glad to welcome her on. Net loss for the quarter was $9.3 million or negative $0.38 per diluted share, as compared to a $2 million loss or negative $0.08 per diluted share in Q2 of 2019. Same-store NOI increase for the quarter is $1.1 million or an increase of 5.8% as compared to Q2 2019. We’re reporting Q2 2020 Core FFO of $14.5 million or $0.59 cents per diluted share, which is an increase of 31.1% on a per share basis as compared to Q2 2019. Total Revenue for Q2 was $50.7 million and total NOI was $29.2 million, which represents an increase of 17.6% and 18.9% year-over-year respectively. NOI margins for Q2 were 57.6%, which was a 50 basis point improvement over margins in Q2 of 2019 of 57.1%. We continue to execute our value-add business plan by completing 411 full and partial renovations during the quarter, with 392 upgraded units leased, achieving an average monthly rent premium of $113 and 23.4% ROI during the quarter. Inception-to-date in the portfolio as of June 30, we’ve completed 7,325 full and partial upgrades achieving an average monthly rent premium of $95 and a return on investment of 25%. Through our equity repurchase program we repurchased approximately 2.4 million shares of stock through Q2 of 2020 at an average repurchase price of $25.70 per share. We ended the quarter with $85 million of cash. On our NAV per share, given the unprecedented disruption of economy over what is also an unprecedentedly short period of time, cap rates become difficult to judge, although we do have more clarity today than we did after Q1. Nevertheless, we’re updating our NAV based on our revised outlook for NOI and cap rates. And Matt will discuss this in some detail on his prepared remarks. Based on our updates in cap rates and NOI, we revised our NAV per share as follows

[Matt McGraner:]

Yeah. Thanks, Brian. We were extremely pleased with the operational performance of the portfolio during the quarter, especially given these difficult times. The property and asset management team to be a next point to BH and NexPoint are operating at high levels and the performance this quarter demonstrates their talents and the durability of our company’s investment thesis, namely that well located affordable Class B apartments and Sunbelt should continue to produce durable cash flows even during the most challenging operating environments. As Brian mentioned, same store NOI grew by 5.8% year-over-year, it was 20 basis points sequentially better than the first quarter. We saw strength across most of the portfolio during the quarter with 7 out of our 10 markets growing NOI assumption by 4% or better, including Dallas, Houston, Atlanta, Phoenix, Nashville, West Palm and Tampa. Notably, Tampa, West Palm and Phoenix, all grew NOI by double-digits during the quarter. On the operational front leasing activity and revenue growth were better than expected during the second quarter. New lease rates were slightly negative down 1% and down 3%, excluding rehab units, but renewals were positive and increased by 2.3% across the portfolio for a blended positive rate change during the quarter 54 basis points. Our top Q2 value added programs. Revenue growth during the quarter were Dallas-Fort Worth, Charlotte, Nashville, Phoenix, Tampa and West Palm posting 4% or better revenue growth. Houston made this list as well during the quarter surprised the upside for us. Our quote unquote weakest markets for the revenue – for revenue growth during the quarter were Las Vegas and Orlando, but were only down modestly. Las Vegas revenues were down 73 basis points from the first quarter. Orlando revenue was down 4.8% year-over-year, but only 1.2% quarter-over-quarter. Overall occupancy for the portfolio grew 90 basis points year-over-year, and finished the second quarter for us at historically strong 95.3%. Renewal retention for the quarter was an all-time high for the company as well at 57.9%. Collection activity for the quarter ended at 96.5% and ultimately finished 98.1% as of the end of July. Markets below the portfolio average worst follows

[Brian Mitts:]

Thanks, Matt. Let’s go ahead and turn it over for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question will come from Alex Kubicek with Baird.

[Alex Kubicek:]

Good morning.

[Brian Mitts:]

Hi, Alex.

[Alex Kubicek:]

Have you guys seen a material performance differential between those units, which you’ve renovated and just your kind of more core products. I’m just curious if you’ve seen the trade-down effect is more pronounced on those upgraded units versus something that might be many years removed from a recent rental?

[Matt McGraner:]

Yeah, I’d say, it’s market dependent. Obviously, markets that are stronger, for example, Phoenix and South Florida, where we can just rehab more, I think that we’ve seen – and, again, as I mentioned, demand rise in those markets. I think Dallas-Fort Worth, Charlotte, Phoenix and South Florida. We didn’t think we would budget as many during the quarter, but ultimately did increase our revised pipeline numbers, because of that demand. So I think that there are trade-down effects in these organically strong markets with $1,000 affordable rent.

[Alex Kubicek:]

Yeah, that’s helpful and then just a follow-up there. Have you adjusted your internal [hurdle] [ph] requirements that you guys are underwriting on renovations? Or how do you guys kind of adjust your expectations going forward as you’re kind of evaluating opportunities?

[Matt McGraner:]

Are you talking about in terms of adjusting what ROIs we would need to test and upgrade or…?

[Alex Kubicek:]

Correct, correct, or yeah – or kind of both on the current products that you guys own or just in future acquisitions as you’re underwriting and then kind of call it the next 6, 12 months [in the runway area] [ph]?

[Matt McGraner:]

Yeah, sure. We haven’t adjusted our internal expectations for the current pipeline. The full and partial interior rehabs that we plan to complete, we still think we can get the consistent 20% to 25% ROIs on that stock. And then, going forward, in terms of the new acquisitions that we do, if any, it will be interesting to see, but I think that we’ll hone in on markets that are showing or demonstrating the growth that we’re seeing right now like Phoenix and South Florida, Charlotte, et cetera.

[Alex Kubicek:]

That’s helpful, and then just one more quick one. Just on the accounting side, how do you guys recognize bad debt? Is it certain months of delinquency? Just wondering how you guys judge collectability going forward here?

[Brian Mitts:]

Yeah, it’s a good question. And that’s exactly how we do it. Once – we [tweaked this] [ph] a little bit given the payment plans we put in place for COVID. Once we put somebody on a payment plan and they’re 60 days or more out, that’s when we start to write it off pretty aggressively. And then, once we get past, up to 120 days, it’s completely written off unless they’ve been making payments toward it. If they’re not on a payment plan, it’s just kind of typical what we’ve been doing historically. So, you write that off much quicker. And as Matt mentioned, there is not many of those that are out there, but that’s getting flushed out pretty quickly.

[Alex Kubicek:]

Understood. Thanks for taking my questions.

[Brian Mitts:]

Thank you.

[Operator:]

Thank you. Our next question will come from John Massocca with Ladenburg Thalmann.

[John Massocca:]

Okay. Good morning.

[Brian Mitts:]

Hey, John.

[Matt McGraner:]

Hey, John.

[John Massocca:]

So I was kind of thinking about Eagle Crest, I mean, I know it’s still kind of early days for the market to kind of – for the transaction market to kind of get going again. But, I mean, is that maybe typical where you think transaction activity could shake out when the market gets a little bit more liquid?

[Matt McGraner:]

Yeah, I mean, I think it’s not surprising to us that we can still hit pre-COVID pricing given where interest rates are right now. New acquisition buyers can obtain agency financing into the 70% range at 2.75% to 3%, which you take a 4.75% cap and you layer that on, you can still produce a desirable cash-on-cash yield. Yeah, the geographical dispersion between, markets with evictions or higher bad debt, I think you’ll see harder hits to pricing expectations. But for Dallas largely, we think that 4.75% cap or the cap rates expressed in our NAV on a nominal basis are going to be pretty steady for the rest of the year. And plus for just the market being right now there’s just not a lot of product. So there is a scarcity to it, that we thought we would take advantage of and produce a little bit of liquidity, have a nice print, price discovery and really it’s a pre-COVID pricing.

[John Massocca:]

Okay. And then, kind of think about leasing in the existing portfolio, how kind of maybe total shows in applications trended, especially maybe in some of the Sunbelt states that have been, kind of hit a little harder here in the last couple of months by pandemic?

[Matt McGraner:]

Yeah, I mean, we think that in really the renewal retention, the shows were down obviously in Q2. We did see a spike in kind of new lease traffic and lower retention in July. And so we think that, that will potentially be a trend, when people start getting out more and looking for updated product. One thing to note is that our leasing, our revenue on new lease units in July basically went up 3% from where it was in Q2. So we’re positively inclined to believe that that’s a healthy sign for our market and into Brian’s point of somewhat of a trade-down effect occurring out there in our markets for affordable product.

[John Massocca:]

And when you say a trade-down effect, I mean, some of that potentially may be – kind of urban, suburban kind of switch potentially going on? Or was it more economic that people do not want to pay a rent?

[Matt McGraner:]

I think it’s both. I think you’re – the propensity for folks to want both a higher quality upgraded unit for $300 or $400 or $500 less than that what they were paying in the same MSA, you’re seeing that – and then you add to that, our product is just – has lower density. You don’t have structured parking, you don’t have 5 or 20 stories. You can drive up to your unit. You don’t have to see anyone. You don’t have to get in an elevator. So I think that that type of qualitative aspect to our apartments are going to be in the near-term, probably in higher demand than otherwise would be the case.

[John Massocca:]

Okay. And then, thinking kind of about the other income, now that some of the moratoriums are expired, I mean, is that something that could potentially accelerate a little bit here in the coming quarters, just given the ability to maybe charge some of these fees, again?

[Matt McGraner:]

Yeah, I think it absolutely will. It will increase, but it’s not in our kind of base case that I went over. We’re not assuming that’s going to be a big driver.

[John Massocca:]

Okay. That’s it for me. Thank you all very much.

[Matt McGraner:]

Thanks, John.

[Brian Mitts:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next question will come from Barry Oxford with D.A. Davidson.

[Barry Oxford:]

Great. Thanks, guys. Kind of getting back to the bad debt expense and I know it’s hard to tell. But are you able to kind of get your hands around what percentage of tenants that you have are paying rent from the government unemployment benefits? Or there – is there a way to kind of look at that or kind of getting your arms around that? And then, if so, how does that play into your bad debt expense calculations?

[Matt McGraner:]

Yeah, I mean, I think the bad debt expense, the last time we did this was at NAREIT in June and we did a deep dive in our portfolio, and I think that the results that came out of it was that at that time 2.5% of our total population in our units described themselves as having lost a job due to COVID. So at that point it was very modest. We plan to do a refresh at the end of August to see where we are based upon the stimulus expiring in July, so it didn’t really make sense to do it then. So that’s the latest kind of indicator of that metric, if you will. But in terms of underwriting bad debt going forward, as I mentioned, we thought it could reach as high as 8%, and it was about 2% or less. And then if we had 4% for the rest of the year, we still think we have positive results.

[Brian Mitts:]

Hey, Barry, on the accounting side...

[Barry Oxford:]

Yeah.

[Brian Mitts:]

What we’re trying to do is do a deep dives into all the payment plans and if people are making payments, we’re trying to take that into consideration as we think about, who may be just stops paying and never repays, and that’s how we’re arriving at the percentages of what we write-off and win. So it’s sort of evolving as we get more information. Obviously, we take a backward look also, for example, we take it all the way through July and said if these people paid and maybe hadn’t paid as of June 30, and we’ve got our slide in our supplement, that sort of talks to that, because it was quite a bit of payment for Q2 outstanding in the month of July. So we’re trying to learn as we go and take that into account, obviously be conservative in our numbers, but that’s what we’re doing from accounting perspective.

[Barry Oxford:]

Okay. That makes sense. Appreciate that. And when you guys just kind of switching gears – when you guys are looking at acquisitions, as far as the competitors are out there, has that mix changed any? Or is it still the money is roughly coming from the same group of people?

[Matt McGraner:]

Yeah, there – it really has, Barry, it’s good question. There aren’t a ton of institutional buyers right now partaking in the current transaction environment, despite the fact there’s not a ton of deals out, but they’re – the institutional bid is kind of 10% to 15% discounts to where pricing is. They’re not actively seeking to purchase right now, they’re more of a wait and see mode. The most of the buyers that are out there are private syndicators, high net worth 1031 type of money. So you will see there is – it’s interesting survey that CBRE put out across their investment sales, national platform there is more north of $10 billion of multifamily product, it’s on the sidelines that used – there was going to be launch during the second and third quarters it’s now been put on hold in their system. So when that comes out later in the year perhaps the institutional bid comes back, but for now, it’s largely just the private smaller folks.

[Barry Oxford:]

Okay. Appreciate it. Thanks, guys.

[Brian Mitts:]

Thank you.

[Matt McGraner:]

Sure.

[Operator:]

Thank you. Our next question will come from Rob Stevenson with Janney.

[Rob Stevenson:]

Good morning, guys.

[Brian Mitts:]

Hi, Rob.

[Matt McGraner:]

Hi, Rob.

[Rob Stevenson:]

Hey, how is it going? When you guys take a look at your new move-ins, where are those people coming from? Is that people trading up or down by price point? Is that people coming in from out of states? How you’re characterizing the new leases that you guys are – have been signing over the last few months?

[Matt McGraner:]

Yeah. I think, we’ve been talking about this earlier today. So the actual household income of the portfolio – of our portfolio is increasing. So that’s, I think we’re now at $65,000-ish and that’s up roughly $78,000 year-over-year, I think, so that’s I guess quantitatively telling us that there is folks that just aren’t more that they want to live in our housing. We’ve tried our best and it’s really difficult and we’re going to continue to do this, because I know it’s very germane to the industry right now to see what – where folks are coming from. What we can tell you is that of our applications during the second quarter that we had incrementally more from California and New York, and it’s not a huge number, but it is 100% or so and that’s 75%-ish California, 25% New York. So that’s modestly up, but 100%, it’s not 50% of our traffic, it’s more like 10% of our traffic.

[Rob Stevenson:]

Okay. And then given all the rhetoric that’s been going on around potential changes to the 1031 structure. Are you guys – if that winds up driving pricing up. Are you guys prepared or planning on putting additional product on the market for dispositions in the back half of the year to take advantage of people that need to close the 1031 by December 31?

[Matt McGraner:]

Yeah, I mean we would – I think we’d sell a few more, but it probably – it’s just because we like the – we’re not revising incrementally our disposition outlook as a result of the rhetoric Joe Biden’s plant. We did have – I think initially guidance to sell $100 million-ish of assets this year or more. We’ve obviously completed a bunch right before COVID that produced liquidity. So we could probably sell one or two more this year, nothing on the block, other than Eagle Crest, but the 1031 radically isn’t a catalyst for that.

[Rob Stevenson:]

Okay. And then last one from me. What are you and your partner seeing in terms of availability of labor, as well as materials cost for redevelopment projects right now? What’s going on cost wise there and availability?

[Matt McGraner:]

Yes, so the availability of workers is increased and so the work, the labor and materials costs have gone down modestly. The problem is getting crews on-site and materials on-site at the same time. So it’s really been a timing challenge and logistical challenge versus a – and availability, so to speak. You might have crews that have gotten – some folks within the crews have COVID and so there’s a 2-week delay and what those crews or what that company and those subs can deliver in terms of on-site performance in rehabs, but nothing material, but there has been a modest decrease in terms of cost on both fronts.

[Rob Stevenson:]

Okay. Thanks, guys. I appreciate it.

[Matt McGraner:]

Thanks, Rob.

[Brian Mitts:]

Thank you.

[Operator:]

Thank you. Our next question will come from Gaurav Mehta with National Securities.

[Gaurav Mehta:]

Thanks. Good morning.

[Brian Mitts:]

Good morning.

[Gaurav Mehta:]

Following up on the asset that you currently have under contract for sale. I was wondering, if you could provide some more color on how the buyer pool was like and was there an off-market transaction? Are you fully marketed that deal?

[Matt McGraner:]

It’s a good question. We obtained broker opinion of values from CBRE, JLL late last year and then earlier this year. And we’re set to launch it in, call it, March to the market, and this is just Eagle Crest, one, nothing else. Obviously, we didn’t, but as we got further into the second quarter, we had unsolicited folks with capital on hand that went to CBRE and expressed interest in value-add product in Texas. And so we were open to showing it to four or five groups and we hit our pre-COVID pricing and so we decided to transact.

[Gaurav Mehta:]

Okay. And I guess for your real estate taxes and insurance, in this market, are you seeing an uptick and what you kind of expecting for the second half as far as taxes?

[Brian Mitts:]

I think insurance, we renewed in March, and we saw increases and tried to do – pull the levers we could pull to keep that down. I think we did a fairly decent job, compared to some of the numbers we heard. I think taxes, we’re going to continue to do what we’ve always done, which is very aggressively protest and try to get those down, go to litigation if necessary. I don’t know that the recent events are going to be helpful for us. I think cities are probably more squeezed now and counties and the various places that we have properties located or probably in more trouble today than were a year ago. And I think are going to be every bit as aggressive on property taxes as they have been. So we’re not expecting that and I think you’re not going to see that reflected in any of our estimates or stress tests that we’re going to be a lot of relief around insurance or taxes in the coming years.

[Gaurav Mehta:]

Okay. Thank you. That’s all I had.

[Operator:]

Thank you. Our next question will come from Jon Petersen with Jefferies.

[Jon Petersen:]

Great, thanks. Just one question from me. I’m just curious, I know you guys give the net effective rent, but have you increased incentives for new tenants or had to offer incentives on renewals, whether it’s free rent or anything else as we think about that?

[Matt McGraner:]

No incentives on renewals, other than to say that they’ve been largely flat. And then on new leases we use from these yield store. So it’s not – algorithmic and there’s no like concessions. We’re obviously waiving application fees, in some aspects waving pet fees and other kind of other income line items, which resulted in the down – somewhat of a material down other income line. But we’re not giving 2 or 3 or 4 months away like some of the gateway coastal markets are. We’re just not seeing that. And then any sort of modestly down rent for us is $20, $30, hundreds of dollars, so it’s been pretty steady.

[Jon Petersen:]

Got it. Okay. Thank you. That’s it.

[Matt McGraner:]

Thank you, Jon.

[Operator:]

Thank you. Our next question will come from Michael Lewis with SunTrust Securities.

[Michael Lewis:]

Great, thank you. My first question is just a point of clarification. I think, I was going to ask, the casualty losses of $1,079, it looks like, it’s exactly offset by in the miscellaneous income with insurance collections of $1,079. And then in the core FFO calculation you add back $1,079 again. I just want to make sure that it looks to me like double counting, but I’m sure there is something I’m missing in there?

[Brian Mitts:]

Yeah, so the background on that is the cutters deal that where the tornado come through last October here in Dallas. And so as we rebuild that, we’re getting business interruption insurance and so what we’re doing is re-classing it from expense into the income line to reflect that revenue. And then we added back to the core FFO just reflected in there. The fact that it’s not really a part of our overall operations, but at the same time, we’re getting the income, but we’re – as we would on any casualty loss, we’ll reverse it out of Core FFO. So it is income that’s coming in from the insurance company, so that’s a true number. But then you’ve got this casualty loss that’s – we’ve already kind of recognized a lot of that. When we wrote it off, it was actually a gain, because the proceeds that we’re going to get are going to be in excess of the carrying value at the time. So that’s – which I think is why most people, it’s not everyone takes casualty out of their FFO numbers, just because it gets – it’s more of an accounting thing than an economic or cash flow item.

[Michael Lewis:]

Okay. I think I understand. Maybe the timing is a little...

[Brian Mitts:]

It’s exactly, yes. You summed it up in one word, it’s timing.

[Michael Lewis:]

Okay. My second question, on Page 5 of the supplemental, you’ve got this relatively high rent collection numbers. And then, at the bottom of the page, some of these markets with a lot of units that was delinquent. So, for example, the widest GAAP I saw was, I think at the end of June, it was something like 95% of Orlando rent has been collected, but at the same time about 20% of the units were delinquent. Is that just a function of the lower the rent the less likely people have been to pay?

[Brian Mitts:]

Well, It’s also – I’ll let Matt go into some detail here. But just high level, it’s – we have tenants that haven’t fully paid, but they paid a lot. And so they’ve got balances that they’re carrying. And that’s what we’re trying to highlight here is that most of the balances are spread across a very few number of tenants. In some cases, there are tenants that just have been completely unresponsive to our outreach. And I think are kind of writing this moratorium on evictions to our detriment, probably ultimately their detriment. But, Matt, you want to talk to the details?

[Matt McGraner:]

Yeah, Michael. The first time I saw this in this chart I didn’t like it either. And then, it grew on me, because I think what it depicts is it’s showing the progress, that’s made from quarter to – or from June to July for the units that are fully collected. And so, the way I look at this from a positive perspective is that everyone, there is only 840 residents as of the end of July that were delinquent. And then, you showed the dispersion across the markets, obviously, Vegas, Orlando were some of the larger ones. But over – most of those – most of the 840, which isn’t that much across the portfolio has paid. And then, really no payments, it’s only 70, which is 5 basis points of the portfolio, which I mentioned in the prepared remarks. And, so I didn’t like it at first. But I think it is a helpful in depiction on – in terms of progress and just breaks out by market.

[Michael Lewis:]

Yeah, I don’t think I’ve seen that chart from anybody else before. I guess, I was a little surprised how many people pay partial rent. I always thought of rent as either you pay it or you don’t. And it looks like there’s a lot of people that pay some of it.

[Brian Mitts:]

Yeah, no, you’re correct, in normal times. But during COVID with the payment plans, there has been – I mean, and we can’t evict anybody. So we do the best we can to try to collect as much as we can.

[Michael Lewis:]

Okay. And then, the last question from me, it’s obviously too soon to talk about August, but as you saw improvement in July, at the same time the cases were surging, Florida, Texas and Arizona, especially were all in the news every day, and that’s a big chunk of your portfolio, obviously. I mean, are there any signs or – I don’t know how cases match up with – exactly match up with employment or who pays rent. But does that increase in cases, does that give you any concern as we head into August, and we just had a big ramp-up in some of those markets in July?

[Matt McGraner:]

I think – and, I mean, I think July has been really strong, both from a – I mean, a relatively really strong from a growth standpoint, from revenue side and collections and occupancy. We expect that to continue into August. Our markets didn’t absorb as many job losses as the gateway markets did. So I think that that kind of makes up for some of it, but by and large most of our markets are not correlating in terms of demand. It’s down, if you will, from COVID, I think July is really hopefully an indicator of future activity in our markets and short answer is we haven’t seen a correlation between the 2.

[Michael Lewis:]

Thanks, guys.

[Matt McGraner:]

Yes, Michael, thanks.

[Operator:]

[Operator Instructions] I am not showing any further questions in the queue. I would like to hand the call back over to the speakers for closing remarks.

[Brian Mitts:]

Yeah. Thank you. Appreciate everyone’s participation. We continue to work hard and try to navigate through these times and appreciate everyone’s support. Talk to you next time. Thank you.

[Operator:]

Thank you. This concludes today’s call. Thank you for your participation. You may now disconnect.