Sun Communities, Inc.
Q2 2021 Earnings Call Transcript

Published: 27 Jul 2021

[Operator:]

Greetings. Thank you for joining us today for Sun Communities Second Quarter 2021 Earnings Conference Call. . I would now like to turn the conference over to your host, Gary Shiffman, Chairman and Chief Executive Officer. Thank you. You may begin.

[Gary Shiffman:]

Good morning, and thank you for joining us as we discuss our second quarter 2021 results. We are pleased with the continued outstanding performance of all our business segments. In the second quarter, we delivered 61% growth in core FFO per share to $1.80 as compared to the second quarter of 2020, exceeding the high end of our guidance of $1.63 as our ongoing momentum accelerated beyond our forecasted expectations.

[John McLaren:]

Thank you, Gary. Sun delivered a strong second quarter across the board, outperforming our prior expectations in RV, marinas and manufactured housing. Our results reflect the combination of the stability of our best-in-class portfolio as well as the incremental benefits of our growth initiatives across our 3 business lines. For the second quarter, combined same community manufactured housing and RV NOI increased 21.6% from the second quarter 2020. The growth in NOI was driven by a 22.5% revenue gain, supported by a 160 basis point increase in occupancy to 98.8% and a 3.3% weighted average rent increase. This was offset by a 24.7% expense increase compared to the second quarter of last year when we had implemented expense saving measures, including furloughs of properties impacted by COVID-related closures. Same community manufactured housing NOI increased by 5.4% from 2020 and same-community RV NOI increased by 85.1%. The RV growth reflects both the impact from COVID-related delayed opening of 44 of our resorts on last year's results as well as the incredibly strong transient demand this year. Given the stay at home orders that were in place during the second quarter of 2020, we think it is helpful to look at these results relative to the second quarter of 2019.

[Karen Dearing:]

Thanks, John. For the second quarter, Sun reported core FFO per share of $1.80, 60.7% above the prior year and $0.17 ahead of the top end of our second quarter guidance range. Outperformance was achieved across all business lines. Our manufactured housing business experienced higher-than-forecasted revenue, including rental home revenue and other community-related fees and charges as well as lower-than-expected operating expenses. Annual RV revenue as well as transient and vacation rental revenues drove strong results in the RV segment, partially offset by higher operating expenses including wages and benefits, utilities and supply and repair costs. And the marina business was bolstered by higher boat slip, storage and service revenues, offset by higher payroll costs as well as utility and repair costs.

[Operator:]

. Our first question comes from the line of Nick Joseph with Citigroup.

[Nicholas Joseph:]

Gary, you mentioned the robust acquisition pipeline. So I'm wondering if you're seeing any differences in competition for assets or relative value between the different business lines?

[Gary Shiffman:]

Nick, the competition stays pretty similar as to what we've expressed in the past. There are a number of newly formed platforms that we're encouvering out there, small to midsize looking to grow their portfolios. We announced the sale of 2 properties as dispositions in our earnings release that went to a group that is certainly growing their platform. Lots of competition out there in the MH, the RV side, and we're starting to see it a little bit on the marina side. Cap rates, although I know it wasn't part of your question, seemed pretty similar to where they've been and what we've shared in the past. The MH and RV all falling generally for us in the 4% to 5% cap rate range, and we're seeing them dip even sub-3% in some cases. So a lot of capital looking to acquire fewer and fewer available assets out there today.

[Nicholas Joseph:]

That's helpful. And you mentioned the dispositions. How many more properties are noncore? And what should we expect you to sell into transaction market?

[Gary Shiffman:]

I think that John would share these sentiments and feel free to add anything that we, from time-to-time, do a very close look at our assets and generally where we find assets that don't fit the growth pattern of the rest of the portfolio. We'll look at the potential disposition. You'd have to go back, I think, all the way to 2014 or '15 to the last dispositions that we do. I think in assembling best-in-class RV and MH platform over the last 10 years or so in the industry, they're is just a little bit of calling that will take place every so often when we don't meet those growth trajectories or have other reasons for selling assets.

[Nicholas Joseph:]

Are there any more properties right now that aren't meeting those criteria that could be sold in the near term?

[Gary Shiffman:]

There's a handful of fiber under properties that were identified on our disposition that may remain non-transact in the near future.

[Operator:]

Our next question comes from the line of Wes Golladay with Robert W. Baird.

[Wesley Golladay:]

Just wondering with the strength you're seeing in the transient RV, does it make sense to hold back some of the annual RV sites at certain locations?

[John McLaren:]

Wes, this is John. Yes, I mean, reiterating some of the metrics that we shared in the prepared remarks, I mean, the traffic that we're seeing come into our community in terms of web traffic, the 80% increase in first-time guests versus 2019. I think one of the more sort of significant drivers that's contributing is we've talked a lot before about having 11 million registered RVs out there against about 1 million sites. But when you have platforms like Outdoorsy and RVShare, like I mentioned earlier, that really makes that number feel a lot higher than that. We don't know what it is. It could be 12 million, it could be 13 million as vital RVs are engaged throughout America. But -- so the activity is pretty incredible. With that said, we have always been in that realm of 1,000 to 1,100 conversions that we would do. And one of the things that we do on a continual basis throughout the portfolio is look at each property on a site-by-site basis and kind of derive the right balance between revenue on a per site basis versus whether it remains a transient side or it becomes an annual site. And as you can see, we had still and we'll continue to grow the annual side of the business as well because we have converted over, I think, 744 year-to-date, which is actually tracking a little bit elevated from what we do on a normal year basis. So in a nutshell, it really is kind of a balance on a property-by-property basis, which we will be watching vigilantly as we always do for execution.

[Wesley Golladay:]

Got it. And then when we look at the marinas, you obviously acquired another pretty fast clip here. Have you started to redevelop any of the sites that you've acquired already?

[Gary Shiffman:]

Yes, it's Gary. Absolutely. There is a -- as we discussed a higher demand for bigger slips, longer slips as both being sold tend to be longer in length. So where we can convert smaller slips into those in higher demand, the longer slips that continually is taking place. Not-too-distant future, we will look to open a brand-new marina development, which strategically is directly across the river from the Lauderdale Marina that was just acquired. So we'll be able to expand that marina facility. So it's an ongoing process that Safe Harbor management has done very, very similar to Sun's MH and RV platform of studying the existing assets and creating value out of redeveloping and reinvesting capital where we can.

[Wesley Golladay:]

Got it. And I just have one quick modeling question. You have that new metric, the SRDE. There's a lot of seasonality to it. Should we expect 3Q results to be largely comparable to 2Q?

[Karen Dearing:]

Yes. The Q3 results, as we've mentioned, are highly driven on transient RV and marina. So in the marina side, it's service really that's driving it. And on the RV side, it's retail dining, entertainment and other fees and charges. So I would expect continued outperformance from those areas in Q3.

[Operator:]

Our next question comes from the line of Keegan Carl with Berenberg.

[Keegan Carl:]

I think just given all your recent transactions in the marina space, is there a percentage of the business that you actually cap marina revenues at? Or are you going to continue to be aggressive just given the attractive cap rates you're seeing?

[Gary Shiffman:]

Keegan, I think what we shared when we acquired and announced the transaction with Safe Harbor that the Safe Harbor rental income would represent about -- at that time, it was about 17% of Sun's rental revenues. If you fast forward to today, even with all the acquisition that's taken place, it represents about 18% of our rental revenues. The goal initially shared with our stakeholders similar to what we did in the RV business. We grew our RV rental revenue from about 11% in the mid-2000s to about 25%, 30% to date. And we would be prepared at the time, my remarks were to go to 20% to 25% of rental revenue in marina. But as it happens, we've been very successful with the continued strong pipeline in the MH and RV side. So we moved the needle about 1 percentage point with all the marina acquisitions to date.

[Keegan Carl:]

Got it. And then as far as the marina acquisition strategy, should we expect more yacht-focused marinas in the future? And how do the cap rates compare on these just to a traditional marina?

[Gary Shiffman:]

Yes. Similar to real estate, it's all about location and demand in any given area. And I'd share a big picture that very similar to what we accomplished at Sun in RV and MH. We focused on the East Coast. we are very strong -- we're very strong in Florida as Safe Harbor has moved up the coast to the north all the way to Maine as Safe Harbor is doing to create a footprint that the members at Safe Harbor can travel within the system of Safe Harbor. We think that's true and a differentiator, if you will, from the strong platform the Safe Harbor has created and creating. And then we will move to the West Coast, very similar to what we did in MH and RV. We've already begun our efforts there with several acquisitions on the West Coast, and we will look to create membership pattern and traffic up and down the West Coast as well from areas like Seattle all the way down to San Diego. And the goal, again, is to create a consistency and a quality of expectation throughout the Safe Harbor membership. So the goal is they actually will never want to stay anywhere but a Safe Harbor marina if we can provide the footprint for them to do so.

[Keegan Carl:]

Got it. And just one final one on the investment-grade ratings that you guys received. Can you maybe go through the process you went through working with the ratings agencies? And was it ahead of your internal expectations to receive them?

[Karen Dearing:]

I'm sorry, could you ask the question again? Was it ahead of our internal ...

[Gary Shiffman:]

Yes, we worked through it. I think it was, if anything, faster than we would have expected. When we made the decision, and it's something we review as part of our first quarter review with our Board of Directors and senior management, reviewing all things Sun, including the balance sheet. We determined that the timing seemed right and I think that all the work that's gone into Sun's balance sheet, its history and the fact it was investment-graded -- investment-grade rated prior to 2004 assisted in a very fast approval and the investment-grade rating that we saw. Our goal is to continue to work with the agencies and demonstrate a process that can improve the rating as we move forward.

[Operator:]

Our next question comes from the line of Samir Khanal with Evercore.

[Samir Khanal:]

Gary, I guess my question is around the acquisition pipeline. I mean, you've been very active on that front. Looking at the numbers you could do more than $1 billion this year. Do you think that's sort of sustainable into even next year as we think about your growth profile over the next 12 to 24 months, just given the amount of capital chasing deals today? I just want to kind of get your view on that.

[Gary Shiffman:]

It absolutely is a great question, Samir. Each year we're faced with that same question externally and internally. We've been very fortunate have a great acquisitions team, and now we have a great acquisition teams, if you will, . The marina acquisition team at Safe Harbor has joined the company, along with our existing MH and RV team. It's getting harder and harder. There is more and more competition from small investors, as I said earlier, all the way to big platforms that are out there that are well capitalized. The 1031 exchange competition that's out there has made it more and more difficult. In general, one of the things that has succeeded -- helped us succeed in our acquisitions is the deep relationships, the deep history, the fact that we've been so acquisitive for the last 10-plus years. So there really isn't a transaction that happens out there in the MH and RV space that Sun doesn't have an opportunity to take a look at or isn't brought to that transaction first. Some of them are off market, and that's where we've been very, very successful. They're not brokered. They come directly to us. And others, we're very competitive in the auctions with the brokers, but we're not chasing things that don't work for our growth pattern. So the short answer is, it's becoming more and more difficult. I think we will continue to be successful. The view that we have in the pipeline right now is pretty similar as we've shared over the last few quarterly calls. We will look to continue to ramp up our new community development. I've indicated we've got about 8,400 sites currently under contract in various forms of either closing or entitlement and rezoning efforts and where we can build communities to high single-digit unlevered IRRs on stabilization. We will look to continue to ramp up that business over the next 3 to 5 years. And if we should fall short at all in the acquisition area, we think we'll more than make up for the growth on the new community development level.

[Operator:]

Our next question comes from the line of Joshua Dennerlein with Bank of America.

[Joshua Dennerlein:]

Gary, Karen and John, I hope you're all well. Curious on the RV side. I know at NAREIT, we discussed the rollout of your Campspot RV revenue management system. How much of a contributor of that is driving the strength in transient RVs?

[John McLaren:]

Josh, it's John. It obviously is a significant contributor more than anything else with Campspot from the reservation process and the fact that the system itself has a built-in algorithm that adjust for the most efficient rate and occupancy equation helps kind of -- as I've described before, I mean, every time, every weekend that comes along every week in the portfolio, it's sort of like putting the jigsaw puzzle together. And so this maximizes that grid automatically within the system. And that's just -- but that's just a piece of everything that's contributing on the RV side because it can also go the other way, which is from a revenue management standpoint, if we've got some lower occupancy weekdays, we can actually adjust the rates downward to fill more occupancy in the community. And so what we're able to do then just like we've done historically for years, Sun's had a significant focus on the shoulder months associated with our Snowbird season. Now we have sort of shoulder days associated with every week. And so we're seeing those contributions come in by moving up and down in terms of rate as well as the grid in the occupancy within a given community.

[Joshua Dennerlein:]

Okay. No, that's great to see. And then if I look at Page 22 or sub, there's a column in the table called growth projects. I don't know if that's new or not, but I noticed it was 2019, it was a lot smaller than it was in 2020 and 2021. Curious if most of this -- most of these growth projects are being driven by the marinas?

[Karen Dearing:]

Well, Josh, you noticed this. It used to be called revenue producing. And when we brought the Marina portfolio and we changed it to growth projects. So you're correct. There is a piece of this is what these projects are or projects that are either revenue-producing or expense savings. So they include things like our solar project, other utility conservation projects. From the Safe Harbor side, it includes the slip configuration, the dry storage improvements and some of their water suite rental boats that they're including. So about $11-plus million of it is from the MH, RV side and the remainder of it is Safe Harbor.

[Operator:]

Our next question comes from the line of John Pawlowski with Green Street Advisors.

[John Pawlowski:]

I just like to follow up on Josh's question there, John, I'd just like to hear how you think through the intermediate term trajectory of just total RV and net dollars? So you've got Campspot rolled out some of this transient demand will probably go away, but other sources of demand in a post-COVID world will stick. So will absolute RV dollars go down over the coming years? Will it go up? Just help me think through the stickiness of this demand you're seeing?

[John McLaren:]

Yes. Great question, John. I appreciate it. I mean I've got a whole bunch of metrics I can go through here, which is to say, you look at the growth we've had in RV same community NOI up 85% in the second quarter. If you look at the Memorial Day, the holiday revenue growth that we've had from Memorial Day and 4th of July up 39% and 35% versus 2019. You look at a really healthy split and how that growth has happened between occupancy and ADR we have in the community, our web traffic being up 80% versus the first half of 2020, 158% versus 2019. We have an 82% increase in travelers aged 18 to 24 and a 39% increase in travelers aged 35 to -- or excuse me, 25 to 34. 1.3 million followers on Instagram, TikTok and Facebook. RVIA, the RV Industry Association estimates that there will be 575,000 RV sales in 2021. And if you look at it, an 80% increase in the first-time guests to the Sun. I mean, for sure, some people were revert back to old vacation habits. They'll take trips, they'll get on airplanes. We're seeing that today. You can't read a paper without seeing how much airline travel has picked up. I'm heading down to the airport tomorrow. I'm glad I'm on clear because hopefully, I'll get through faster because I have heard how busy it is at the airport. And -- but the prospects for RV, frankly, have never been stronger. And just the fact that there's so many new people that have come in and enjoyed the outdoor asset class we will retain some, okay? So it's incrementally better for us. And then finally, I think you really have to consider the new entrants in the space that are getting a lot of capital behind them like Outdoorsy and RVShare for all those RVs that are sitting down in people's yards and driveways they are being activated again. So instead of 11 million RVs for every 1 million sites, there are, it really feels like a lot more than that. I think we're seeing that come in. So I've said it for a number of calls here, but -- and Gary has too, this discovery is for real. And it's all good because incrementally, we'll pick up more than we had before.

[John Pawlowski:]

Understood. That's certainly a powerful statistics. So your sense if you had a bet on it, is your sense that just take year-to-date $170 million in RV revenue. Is that a sustainable base to grow off of these next few years?

[Gary Shiffman:]

Yes, I think we're all . We have been growing for the last 10 years at a very healthy rate. So as John said, if we just continue growing the way we've historically grown and have any incremental percentage of all the available demand going forward, even if some of it subsides. We should be able to continue to deliver very good returns to the shareholders. And I just want to add one thing to it. I think that I wouldn't want anyone to under -- overlook, let me put it that way, overlook the strategic planning that goes into our acquisition activity, I touched on it a little earlier, building traffic patterns on both coasts, north to south, south to north and east to west. When we're out there acquiring , we're just not acquiring to become larger. We're acquiring to create the set of assets to keep people, much like Safe Harbor does within the Sun RV Resort program. John, we haven't touched on it, but we have a big loyalty program and a lot of branding efforts and things that you'll see roll out over the next 12 months or so that are very much associated with generating more sustainable loyalty within the brand. So I think we feel very, very positive as best we can looking out as to the growth we can continue to sustain here.

[John Pawlowski:]

Understood. Just last quick question for me. Do the Safe Harbor folks expect drought or any other severe kind of weather-related impacts on revenue in the near term?

[Gary Shiffman:]

That's a great question. The answer is we do not, okay? But that being said, it's hard not to pay attention to all the climate concerns that are out there today. And certainly, we're very focused on it as an entire company. When it comes to Safe Harbor, you may recall, even reviewing the transaction at the board level. We focused very much on climate thoughts and process and climate change and the financial impacts. The first thing that we did was to look at increasing our property and casualty insurance related to name storm impacts. So we've done that already. Post acquisition, Safe Harbor had done a Brown University study and climate control. It was headed by a professor, I think his name was Kurt Falling . And it indicated on a present value worse case scenario, looking out over 15 years, there could be $10 million of ground damage and I just suggest that's due to the fact that 90% of the marina assets are on the water and they float up and down with the water level. It's an impact on what happens on land. And then subsequent to the acquisition further focus, we -- Safe Harbor has reengaged with Brown University, and we're expecting over the next quarter or so the results of new updated climate impact on the Safe Harbor Marinas. So we're looking forward to sharing that with everybody as we get that completed over the next quarter or 2.

[Operator:]

Our next question comes from the line of Michael Goldsmith with UBS.

[Michael Goldsmith:]

Marina NOI doubled from the first quarter to the second quarter. I think the guidance at the beginning of the year called for a 60% sequential increase. You've acquired more marina since then, but can you, like, help break down where that outperformance came from?

[Karen Dearing:]

I would think in referring to the increase in marina NOI is really based on seasonality, right? So your marina seasonality is probably lowest in the Q4, Q2 -- I mean, Q1. Q2 and Q3 are the highest marina NOI generations. So I think probably looking at a seasonality aspect to that growth as well as what you mentioned their acquisitions.

[Michael Goldsmith:]

Okay. Okay. We could discuss that offline. But the guidance for the implied fourth quarter core FFO of $1.19 to $1.25. The midpoint is a little bit lower than what you guided to at the beginning of the year. Or what was implied with that? Is there more than just share issuances and wage increases in the fourth quarter? And then that amounts to 3% to 8% core FFO growth on the -- on a more normal comparison? Is that a good way to think about kind of the future runway rate of FFO growth?

[Karen Dearing:]

To your first point, in Q4, again, I think there's some misalignment of seasonality on estimates in ours and analysts. I think the impact of the equity offering, as you mentioned, is in there in Q4. And there is not only the higher level payroll costs, there's also $4 million of costs associated with the branding of our RV platform that Gary mentioned and some higher corporate wages and incentive comp based on outperformance that we've been experiencing as an organization. And I'm sorry, what was your other question?

[Michael Goldsmith:]

So the implied fourth quarter FFO growth, it implies 3% to 8% growth over 2020. So is that kind of like a sustainable way to think about how FFO could grow going forward?

[Karen Dearing:]

Yes.

[Operator:]

Our next question comes from the line of Brad Heffern with RBC Capital Markets.

[Bradley Heffern:]

On marinas and sort of a follow-up to the prior question. You've done all the acquisitions, and you mentioned that the underwriting has been exceeding -- or sorry, the performance has been exceeding the underwriting expectations. Can you give any sort of like round number as to where you think run rate NOI is as we sit here today?

[Karen Dearing:]

I think what I could say is that for the second quarter, marina outperformance was higher than our internal estimates by about $9.5 million. I think going into the remainder of the year, our guidance range of $0.31 includes about $0.09 to $0.10 of our guidance raise -- range, I should say, of $0.31 includes about $0.09 to $0.10 from the marinas segment.

[Bradley Heffern:]

Yes. Okay. Okay. Got it. And then you all mentioned that you have a new development -- newly developed marina coming online across from Lauderdale. Is that likely to be a significant source of organic growth going forward? Is that sort of just a one-off? Or is it something that you're going to deploy more capital to newly developed marinas?

[Gary Shiffman:]

I'd like to think we have more opportunity there. But due to the difficulty and length of entitlement and the ability to build new marinas. It's likely to be more of a one-off, and I would expect we'll have other one-offs. But not a lot of opportunity to build new marina and that is one of the things that attracted us to the marina platform very similar to what attracted us to manufactured housing and the RV platform.

[Operator:]

Our next question comes from the line of John Kim from BMO Capital Markets.

[John Kim:]

John, you mentioned the typical 50% increase in revenue you get when you convert transient RV to annual seasonal. But can you talk about the conversion rate? Has that changed or come down dramatically just given the change in demographic of your transit RV customers?

[John McLaren:]

No. In fact, it's running, it's tracking ahead, 744 that we've done. I mean, I think some of this is a product of the increased demand that we're seeing in the asset class with more people coming to the resorts and more activity and interest in the resorts. But also, frankly, just to -- I've talked about this for years, the experience that they're having. And it's a pretty logical thing for people that really want to be in the outdoors and rather than coming to a resort and perhaps staying at a different site every time you come and you start to gain friends, people that you hang around with in the resorts, and they like to congregate together. And so we're really pleased with the success. And I would actually say that I would think that we would do a little bit better than the normal 1,000 to 1,100 that we do on an annual basis.

[John Kim:]

So you had 17% same-store revenue growth in annual season. Is there upside to that number in future quarters?

[Gary Shiffman:]

It's a tough question. We look forward to reporting third quarter and sharing that with you, but I think that our underlying message would be that on top of the type of RV, MH and marina growth, but just sticking with the RV for a moment that we've been experiencing with the expansions and with the development, in particular, in the RV space. Anything that we gained from the wind at our back under the unfortunate circumstance that was perhaps a direct result of the pandemic and different travel choices and patterns. And this movement to outdoors will help us sustain, if not improve the kind of growth we're seeing right now.

[John Kim:]

Okay. I noticed your net debt-to-EBITDA went down a turn this quarter to 5.1How much is this going to jump around going forward? I realize it's a trailing 12-month EBITDA number, but I'm not sure if there was something unusual with service, retail and entertainment NOI this quarter. Also, I noticed that the EBITDA included asset sale gains, and I'm not sure if you're going to do a lot of dispositions going forward? Like how much of this 5.1 going to move in upcoming quarters?

[Karen Dearing:]

The drop is really from basically seeing the impact of Safe Harbor and other acquisitions in our EBITDA. So fully finally having the EBITDA in our earnings because it's on a trailing 12 months, we didn't have that. So if you did it -- if you looked at that 5.1 today and you fully loaded it for additional EBITDA that's not in that trailing 12, it would be about 4.8x. We've said before, we're comfortable in the mid-5s, but going to those levels is going to be transaction related. So it shouldn't be jumping around too much now, except for based on acquisition EBITDA.

[John Kim:]

Okay. Gary, can you clarify -- I'm not sure if you stated it, but the cap rates were in your two MH dispositions this quarter?

[Gary Shiffman:]

Yes, average 4.3 . So we were very pleased with the fact that the market supported that type of cap rate for those properties.

[John Kim:]

And the rationale...

[Gary Shiffman:]

Multiple bit of -- I'm sorry, go ahead.

[John Kim:]

I was just saying the rationale is there were, I think, slower growth, but are you also making a statement about some of your Midwest exposure?

[Gary Shiffman:]

Not at all. Our asset management just really looks at the expected 5-year growth within the core portfolio. And then this goes with our acquisitions as well as our dispositions. We try and match so that things are equal to or accretive to the core portfolio. That's why we always say when we're acquiring something, cap rate is important, but more important are the growth patterns and how we can achieve equal to or greater growth in the portfolio to continue to support our historical returns on a per share basis. Same with dispositions, these would be ones that typically wouldn't support that type of growth or would require a significant amount of capital investment to do so. And therefore, John and his team determined we could redeploy the capital in better ways.

[John Kim:]

Okay. My final question is on your 80% increase in website traffic to Sun RV Resorts website. Can you talk about the advertising dollars that you spent to generate that traffic?

[John McLaren:]

I don't have those figures in front of me right now, John, but we can certainly circle back provide some detail on that to you.

[Operator:]

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

[Gary Shiffman:]

Thank you, everybody. And we certainly were very, very pleased at the first half of this year and look forward to sharing with you progress on the next quarterly conference call. Be safe. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.