American Assets Trust, Inc. (NYSE:AAT) Q1 2024 Earnings Call Transcript

American Assets Trust, Inc. (NYSE:AAT) Q1 2024 Earnings Call Transcript May 1, 2024

American Assets Trust, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning and welcome to the American Assets Trust, Incorporated First Quarter 2024 Earnings Call. As a reminder, today’s conference call is being recorded. Please note that statements made on this conference call include forward-looking statements based on current expectations, which statements are subject to risks and uncertainties discussed in the company’s filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements as actual results could cause the company’s results to differ materially from these forward-looking statements. Yesterday afternoon, American Assets Trust’s earnings release and supplemental information were furnished to the SEC on Form 8-K. Both are now available on the Investor Relations section of its website, americanassetstrust.com. It is now my pleasure to turn the conference over to Mr. Ernest Rady, Chairman and CEO of American Assets Trust. Please go ahead, sir.

Ernest Rady: Good morning, everyone, and thank you for joining us. As we reflect on the first quarter of 2024, I am pleased to report – no, very pleased to report that despite the challenging economic backdrop, American Assets Trust had a healthy start to this year. Our financial and operational performance met expectations in quarter one and we are increasing our guidance for the rest of the year, no doubt a testament to the resilience of our diversified asset strategy, and of course, our people as well. In navigating through market turbulence, our strategy honed over the years has proven to create a stable foundation. We owe this resilience to several key factors, the strength of our diverse portfolio spanning irreplaceable assets, a conservative balance sheet bolstered by ample liquidity, an efficient operating platform and just as important – no, more important, our talented team.

Each element guides us in exercising prudent business decisions, ensuring we maintain discipline in all aspects of our operations. This is important as ever right now, particularly in the face of stubborn inflation and the unpredictable timing of the Fed’s rates cuts, if not even the potential for the Fed raising rates. We strive to position ourselves as best as possible to be ready for whatever economic circumstances may arise in the future. Candidly, I have long believed that inflation is a tailwind for commercial real estate, particularly as replacement costs for properties like our resort and rents continue to rise over time. Of course, diversification has long been central to our strategy. It not only provides income stability, but also diversifies our tenant base, offering portfolio flexibility and acts as a hedge against economic uncertainties.

Additionally, it sets up for potential capital growth opportunities while bolstering our overall competitiveness in the market, especially during periods when public investors seek high quality portfolios. My colleagues, Adam, Bob and Steve will cover our various asset segments, financial results and updated guidance shortly. But first, I’m pleased to announce that our Board of Directors – your Board of Directors has approved a quarterly dividend of $0.335 per share for the second quarter. This decision reflects our confidence in our financial performance and underscores the Board’s belief in our continued success. The dividend will be paid on June 20 to shareholders of record June 6. I’d like to express our sincere gratitude for your confidence and support in allowing us to steward your company.

Now I’ll hand over to Adam to commence a deeper dive into our quarterly performance and future outlook. Adam, please.

Adam Wyll: Thank you. As Ernest mentioned, there is undoubtedly an ongoing flight to quality in commercial real estate. We fully embrace the sentiment, acknowledging the appeal of our exceptional properties that are highly sought after by both our tenants and their customers. Situated in prime locations near world renowned universities and innovation centers, our properties offer top tier amenities, sustainability features and readily available transit access, solidifying their status as premier offerings within our markets. And it certainly helps that we have the balance sheet to give tenants and brokers comfort that their tenant improvement allowances and leasing commissions will get paid, something that meaningfully differentiates us from many of our competitors.

Along those lines, in our office portfolio, almost 50% of which has LEED platinum designation, we have continued to see a rise in office utilization across our over 4 million square feet of office properties since year-end. We are told by our tenants and their employees that the increased usage was driven meaningfully by our upgraded and repositioned buildings, functional outdoor spaces, fitness centers, integrated technology and conference centers, and cafe offerings at our office campuses that are enhancing the user experience. We also worked very closely with our tenants to further motivate their employee base to spend more time at the office. We believe this has translated into higher utilization than competing projects in our markets and we will look to continue helping our tenants justify the commutes to the office.

Specifically based on estimates that we receive from both tenants and our own records, office utilization by our tenants in San Diego is between 70% and 80%; in Portland, it’s between 65% and 75%; in Bellevue, it’s between 60% and 65% and in San Francisco, driven by our two anchor tenants at Landmark, is holding steady at about 70% to 80%. No doubt, foot traffic and use of amenity spaces at our properties have incrementally increased over the past several quarters. On the retail front, which comprises 27% of our portfolio NOI, we are about 95% leased and have already renewed more than half of the retail lease expirations in our portfolio this year, with none remaining in excess of 5,000 square feet that aren’t pending execution. As expected, our comparable retail leasing spreads have maintained their positive trajectory with a 2% increase on a cash basis and a 22% increase on a straight line basis for Q1 deals.

For what it’s worth, excluding our renewal of one tenant at Kalakaua in Oahu, that revised rents from $50,000 a month to $40,000 a month, our retail leasing spreads would have increased 6% and 28%, respectively. We believe our retail portfolio has been a source of resilience with its ability to generate steady if not reliable growth as we achieved our highest ever average base rent for our retail segment in Q1 since our IPO. Certainly, this is a testament to our best-in-class and efficiently managed retail properties that are absolutely dominant in their trade areas. Moving on to our multifamily portfolio, and specifically with respect to our San Diego communities, in Q1, we ended the quarter with an occupancy percentage of 95% and leased percentage of 97%.

We saw leases on vacant units rent at an average rate of an approximately 5% decrease from prior rents. This due in part to prior comparable master leases and prior month-to-month tenancies with higher rents and several affordable units leased in Q1 included in the calculations and general softness in Q1, while rates on renewed units increased an average of 6% over prior rents, for a blended average just over flat, with minimal concessions offered. Net effective rents for our San Diego multifamily leases are now 7.5% higher year-over-year compared to the first quarter of 2023. January began with softer rents as expected. However, we’ve seen those rates picking up over the last month and are hopeful that trend will continue into our stronger spring and summer leasing seasons.

Of note, a little over one-third of our San Diego apartments have had the same tenant for over three years, and those rents are on average about 24% below current market rates, so we expect the opportunity to push rents on those renewals to continue for the foreseeable future, particularly with the state imposed rent caps in place. In Q1 in Portland, at our Hassalo on Eighth multifamily community, we saw a blended decrease of approximately 2% between new move ins and renewals as we work to push our lease percentage to just under 97% as of the end of Q1 with minimal concessions offered. We are hopeful that lower availability will enable us to continue to minimize concessions and help us push rents into Q2 with a goal of seeing a flat or possibly a slight increase in rates on a blended basis.

Net effective rents for our multifamily leases at Hassalo are up 1.5% year-over-year compared to the first quarter of 2023. No doubt Portland has had its share of challenges the past few years, from regulatory and political issues to labor shortages and civil disobedience. But there are some silver linings. First, Portland’s new multifamily developments are getting absorbed with a small pipeline for new deliveries in Portland after this year, which could set the stage for future rent gains in the market later this year or next. Second, Portland remains very affordable compared to other major West Coast cities, not to mention with its beautiful natural surroundings and parks. And third, population loss in Portland based on its challenges attributable to some degree due to poor government policies on drugs, homelessness and police force has begun improving.

We think eventually Portland heads towards a gradual economic recovery and growth as it rebounds from some of the issues it’s been facing, particularly with the current Mayor not running for a reelection this fall. Meanwhile, it’s worth noting that our multifamily portfolio achieved its highest ever average base rents in Q1 since our IPO. Finally, you’ll note that we added a property into our redevelopment pipeline in our supplemental and that is for the potential addition of multifamily units at our Lomas Sante Fe Plaza retail shopping center in Solana Beach. There’s nothing imminent on that front, but we have started a process in which we identified existing assets in our portfolio that we could potentially densify into mixed use properties.

Many of our properties are encumbered by REAs, CC&Rs are zoning that prohibit multifamily uses. So we’ve begun clearing those restrictions. And we know for coastal opportunities like Lomas Santa Fe Plaza, we will have to work through both local municipality as well as California Coastal Commission requirements. These processes could take four to six years, if not longer, to get the entitlements, even in the areas starved for housing. The goal is for these potential developments to present compelling and accretive opportunities down the road when all the entitlements are achieved. It’s all part of our barriers to entry thesis. These are truly irreplaceable infill development opportunities, particularly with the regulatory burdens that one must overcome to build.

With that, I’ll turn the call over to Bob to discuss financial results and updated guidance in more detail.

Bob Barton: Thanks, Adam. Good morning, everyone. Last night we reported first quarter 2024 FFO per share of $0.71, first quarter 2024 net income attributable to common stockholders per share was $0.32. First quarter 2024 FFO increased by approximately $0.14 to $0.71 per FFO share compared to the fourth quarter of 2023, primarily due to the following: First, we received a $10 million cash settlement in January regarding specific specifications for one of our existing buildings in the UTC submarket of San Diego as previously mentioned on our Q4 2023 call, which contributed approximately $0.13 per FFO share in Q 1. Second, our multifamily properties contributed approximately $0.01 of FFO per share of outperformance in Q1 2024 that was not previously included in our initial 2024 guidance.

Third, our mixed use properties contributed approximately $0.01 per FFO share of outperformance in Q1 2024 that was not previously included in our initial 2024 guidance due to higher than expected revenue at our Embassy Suites Waikiki Beach Walk. And lastly fourth, as noted on our earnings release, we reduced FFO by approximately $0.01 due to non-recurring costs incurred in prior periods related to construction in progress for then-prospective construction within our Retail segment that we determined to have no further value during 1Q 2024. Same-store cash NOI for all sectors combined was 1.5% growth year-over-year for the first quarter. As noted in the earnings release, excluding the non-recurring construction in progress write off, same-store cash NOI would have been 2.3%.

Breaking it out by segment, our same-store office portfolios NOI was flat in Q1, primarily due to a contractual renovatement related to renewal at our Landmark at One Market property. Our same-store retail portfolios NOI was basically flat in Q1, primarily due to the one-time write off of certain construction and progress expenses that I previously mentioned. Absent that write off, the retail portfolios same-store cash NOI grew by 2.9% compared to the prior period. Our same-store multifamily portfolios NOI was a positive 5.1% in Q1 compared to the prior year period, primarily due to higher revenue at our San Diego multifamily properties, particularly Pacific Ridge. And our mixed use portfolios NOI grew at 10.4% in Q1 compared to the prior year period, primarily due to higher revenue at the Embassy Suites Waikiki.

Specifically, Q1 2024 paid occupancy was approximately 90% compared to 82% in Q1 2023. Q1 2024 RevPAR was $320 compared to $302 or $302 in Q1 2023. Q1 2024 ADR was $356 compared to $369 in Q1 2023. And lastly, Q1 2024 NOI was approximately $3.5 million compared to $3.2 million in Q1 2023. Our liquidity at the end of the first quarter, we had liquidity of approximately $499 million, comprised of approximately $99 million in cash and cash equivalents and $400 million of availability on a revolving line of credit. Additionally, as of the end of the first quarter, our leverage, which we measure in terms of net debt to EBITDA was 5.7x on a quarter annualized basis and 6.4x on a trailing 12 month basis. Our objective is to achieve and maintain a net debt to EBITDA 5.5x or below.

Our interest coverage and fixed charge coverage ratio ended the quarter on a quarter annualized basis of 4.1x and at 3.6 on a trailing 12-month basis. Let’s talk about 2024 guidance. We are increasing our 2024 FFO per share guidance range to $2.24 to $2.34 per FFO share with a midpoint of $2.29 per FFO share, an approximately 1.3% increase from our previously stated guidance issued on our Q4 2023 earnings call that had a range of $2.19 to $2.33 with a midpoint of $2.26. Let’s walk through the two items that make up most of the increase in our 2024 FFO guidance. First, our Office Properties contributed an additional approximately $0.02 per FFO share from new leases and renewals signed in Q1 and Q2 that are not previously included in our 2024 guidance.

Second, our multifamily properties contributed additional approximately $0.01 per FFO share of outperformance in Q1 2024 that was not previously included in our 2024 guidance. While we believe the 2024 guidance is our best estimate as of the date of this earnings call, we do believe that it is also possible that we could perform towards the upper end of this guidance range in order to do that, first, the majority of the office and retail tenants that we reserved for must continue to pay their rents through the year. As of the end of Q1 2024, we have approximately $0.07 of FFO per share reserved related to various tenants, which we believe the risk probability is more likely than not to occur in 2024. We continue to update our allocation of a percentage risk probability to those tenants that we are concerned about.

Note that of the $0.07 in reserves, approximately $0.03 relates to office and $0.04 relates to retail. Second, we need to outperform our multifamily guidance by continuing to see increasing rents and occupancy and or less expenses. Third, tourism and travel to Waikiki needs to see more meaningful return from our Japanese guests, which we are cautiously optimistic about, if not later this year than in the ensuing years to come. It’s just a matter of time. Unfortunately, the Japanese yen has fallen to a decade’s low relative to the U.S. dollar, which is stifling Japanese rebound travel to Hawaii. However, it is worth noting that in a recent report issued less than two weeks ago titled Honolulu, the Aloha [ph] Lodging Life, Green Street ranked Honolulu as one of the top rated lodging markets in the USA, with the highest long-term growth prospect for long-term investors.

Citing three unique demand drivers is tourism, which relates to leisure and international demand, business orientation as it relates to transit bookings and regulation on short-term rentals. On top of that, we would further note that over 70% of commercial real estate in Honolulu is on ground leases, but our properties in Waikiki and Waipahu are on fee ownership where we own both the land and the improvements, which is certainly more additive for long-term investors. As always, our guidance, our NOI bridge and these prepared remarks exclude any impact from future acquisitions, dispositions, equity issuances and repurchases future debt refinancings or repayments other than what we’ve already discussed. We will continue our best to be as transparent as possible and share with you our analysis and interpretations of our quarterly numbers.

I also want to briefly note that any non-GAAP financial measures that we’ve discussed, like NOI, are reconciled to our GAAP financial statements in our earnings release and supplemental information. I’ll now turn the call over to Steve Center, our Senior Vice President of Office Properties, for a brief update on our office segment. Steve?

Steve Center: Thanks, Bob. At the end of the first quarter, our office portfolio was 86.4% leased, an increase of 40 basis points over the prior quarter. While we continue to experience right sizing of existing tenants and a few small office closings, they were more than offset by Q1 leasing activity as follows. In the first quarter, we executed 18 leases totaling approximately 125,000 rentable square feet as follows. Three comparable new leases for approximately 23,000 rentable square feet, with rent increases of 14% on a cash basis and 19% on a straight line basis, including leases with institutional tenants for approximately 10,000 rentable square feet at Lloyd Center Tower in Portland and approximately 10,000 rentable square feet at the Coastal Collection at Torrey Reserve in San Diego.

We executed nine comparable renewal leases for approximately 58,000 rentable square feet, with rent increases of 6% on a cash basis and 8% on a straight line basis, including renewals with institutional tenants for 19,000 rentable square feet at La Jolla Commons 1 in San Diego, approximately 10,000 rentable square feet and 18,000 rentable square feet at the Coastal Collection at Torrey Reserve in San Diego. And we executed six non-comparable leases totaling approximately 44,000 rentable square feet, including leases with institutional tenants for approximately 15,000 rentable square feet at City Center Bellevue, 8,000 rentable square feet at La Jolla Commons Tower 3 in San Diego, and approximately 8,000 rentable square feet and 7,000 rentable square feet at Oregon Square in Portland.

And the leasing momentum has continued into Q2 as follows. We’ve executed four leases today totaling approximately 32,000 rentable square feet. We have 10 prospective deals in the lease documentation phase totaling approximately 65,000 rentable square feet. And looking ahead, we also have eight prospective deals in the negotiation and or planning phase totaling over 100,000 rentable square feet, which includes two prospective deals totaling approximately 36,000 rentable square feet at La Jolla Commons Tower 3. Though there are no assurances these deals will all close, we remain optimistic based upon our current discussions. And while we are not immune to continued additional attrition due to current conditions, we believe that the attrition is waning and is currently being more than offset by the new leasing activity just discussed.

We’re down to approximately 4% rolling in 2024 given deals signed year-to-date with the average deal size of the remainder of approximately 5,500 rentable square feet. And we have approximately 7,000 feet – 7% of the portfolio rolling in 2025 with the average deal size of approximately 6,600 rentable square feet. I’ll now turn the call back over to the operator for Q&A.

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Q&A Session

Operator: Thank you. [Operator Instructions] And the first question will come from Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Todd Thomas: Hi, thanks. Good morning out there. First question, Bob, you noted in your guidance commentary that the office segment outperformed in the quarter by $0.02 versus the original guidance from new and renewal leasing in the quarter. And Steve, your commentary sounds encouraging around the pipeline, do you feel that the office segment has turned the corner just given the pickup in demand here? Are you feeling better about the balance of 2024 and the 2025 outlook?

Steve Center: Yes. In fact, two of the deals that were in proposals went to letter of intent yesterday. And then one of the leases that were pending signed this morning. And we just got one of the RFPs for a full floor at La Jolla Commons through last night. So, yes, it’s picked up and tenants are responding more quickly. They’re getting deeper into planning and really getting into the details. So we’re encouraged by what we’re seeing and the pipeline is strong. [Indiscernible]

Todd Thomas: Last quarter you talked about 317,000 square feet of spec office leasing that was pushed out beyond 2024 into 2025. I think it was about $0.05 that it was weighing on 2024. How much of this leasings from that 317,000 square foot spec office bucket? And is there – is some of that traction from that square footage specifically?

Steve Center: It is in fact, there were three deals. One was a deal at Torrey Reserve for 10,000 feet that was not planned. Another was a renewal at the full floor at La Jolla Commons, one that wasn’t planned. And then lastly, the first new lease at La Jolla Commons III, which wasn’t in the forecast. So, we were being conservative, taking deals that weren’t facing us at the time that we reviewed it and pushed them out. If we didn’t have a – if we weren’t in proposals, we pushed it out to the next year. But we had several deals that just happened very quickly, which is great.

Todd Thomas: Okay. In your discussions with these tenants with brokers, what’s kind of behind this potential change in demand that you’re seeing and sort of the urgency it sounds like to execute leases? I believe what are you hearing or what are you sensing from them?

Steve Center: Well, first, you’ll note that the deals that are signed are longer term. You see our weighted average lease term has gone up. So, people are now making decisions on their longer-term futures. Second, there is the flight to quality. They’re coming out of existing spaces that may be commodity spaces, older buildings. So, the flight to quality to the amenities, but also to newer product or repositioned product. And in particular at La Jolla Commons III, it’s about efficiency. So, for example, I was on the phone with one of our brokers yesterday, and the question from a tenant that he represents, he’s on our landlord side, but he’s also a tenant rep broker. The question from the tenant is what is the cost per seat, which is different than price per foot, which speaks to the efficiency of the floor plate of the building, but also a desire to rationalize moving into a trophy versus a commodity building. So, that’s what we’re seeing.

Ernest Rady: Of course one other factor too is location. Hey Steve.

Steve Center: Oh my gosh, yes.

Ernest Rady: This is not – we are not in downtown, San Diego, which is a difficult place to where we are is at the forefront of where people want to be.

Steve Center: It is in fact we were on the phone with a tenant yesterday that spoke about how unique UTC is and that has many of the attributes of CBDs, but it’s also got the best attributes of a suburb because in San Diego, Todd, as you know people drive, they want to park their car and go to work. And so we have ample parking at the projects in UTC versus downtown, which is parked at one to two per 1,000. They can’t accommodate everybody.

Ernest Rady: There’s some thought that UTC might be the new center of San Diego and we believe we have the best building in that market and with excellent location.

Steve Center: Well, you’re right, Ernest. To speak to that with the several prospects that we’ve got at La Jolla Commons III, two are life science financing based or technology or life science consulting firms that stand on the floor of the building and look at many of their customers. All the life science product that surrounds La Jolla Commons. So we’re right in the middle of it. So the office guys can survey the life science perspective customers all around, both in UTC and [indiscernible]. It’s just from the mall to the transit has been added to just being right in the middle of the best housing markets in San Diego. It’s just a great location.

Ernest Rady: And with all due immodesty [ph], Steve’s doing a great job.

Steve Center: Thanks, Ernest.

Todd Thomas: All right. Thanks. And just one last one for Bob. Just curious if you can share any updated thoughts on the 2025 maturities, I guess, how you’re thinking about refinancing those today. Ernest touched on the uncertainty around Fed rate decisions and interest rates going forward. Any changes at all to your thought process around financing?

Bob Barton: Yes Todd, thanks for the question. I don’t think it’s changed since our last call. I mean, we have the ability to either write a check for the July maturity or draw on the line of credit. There’s nothing outstanding on the line of credit as we speak. I think one logical scenario would be is to draw down on the line of credit for $100 million and then push that out. And then again we’re looking at the rates weekly and we have the ability to put together up $425 million or $525 million and take out either a five-year or 10-year treasury. But we’re taking a look at that. A lot of that’s already been priced into our future modeling. So I mean, I think we’re okay. We’re not concerned about it. I think from the big picture, we’re in pretty good shape. I mean, everybody that goes through a refinance in 2025 or 2024, 2025, is going to – it’s going to be an increase in interest expense, but we’ve already modeled most of that.

Ernest Rady: That’s a good question. Thanks, Todd.

Todd Thomas: All right. Great. Thank you.

Operator: The next question will come from Haendel St. Juste with Mizuho. Please go ahead.

Ernest Rady: Good morning, Haendel.

Ravi Vaidya: Hi, good morning. Hey, good morning. This is Ravi Vaidya on the line for Haendel. Hope you guys are doing well here. I just wanted to ask about the office leasing. It’s kind of interesting where we noticed that the renewal TIs are greater than the new lease TIs. Is this something that you expect to continue? We’ve just seen the opposite happen with retail leases within your portfolio, within your period. So just wanted to follow up on that.

Bob Barton: It’s a good question, and there’s a good answer to it. Many of these renewals, these tenants have been in their spaces for 20 plus years and with very little update TI spent along the way. In fact, one of the tenants we renewed, California Bank & Trust. The total contribution over, I think, a 20 year period was $38 a foot. So when it came time to renew them for 10 years, it was essentially a new lease where they had to move out. We provided swing space for them and they gutted the space and completely rebuilt it. We gave them $10 a foot per year or $100 a foot in allowance. They spent another, was it $150 to $250 of their own money to outfit the space. And we got a premium rent for the deal. So the deal penciled all day long, but so we’re small enough that you have three or four of those in a quarter.

It’s going to escalate the weighted average TIs for that period. On the flip side, we just did a new lease with a tenant that I just talked about, a 10,000 footer where the TIs were built out seven years ago. But they were so well done that our contribution to a new seven-year lease is less than $10 a foot. So you got to look at it case by case. You can’t really read it as a trend and just depends on the vintage, the quality of the space that’s being approved.

Ravi Vaidya: Got it. That’s helpful.

Ernest Rady: Information is a factor in the [indiscernible] for sure. Oh, no questions. Costs are up.

Ravi Vaidya: Totally. Just one more here. How are you thinking about the Series F note that’s coming due later this summer? And I guess like not saying that you would necessarily, I know you mentioned that you’re going to draw down the revolver and you have some different options here, but what do you estimate your cost of incremental new 10 year money to be today?

Bob Barton: Well, Ravi, it’s a good question. I think we just answered that with another research analyst. But yes, we’ll – for the maturity coming up in July, likely we’ll draw on the line of credit. We have nothing outstanding today on it, and we have still have $100 million plus in cash on the balance sheet. So I think overall we’re in pretty good shape. I mean, I think if you look at it, the short term cost is, you’re going to put a spread on the line of credit. You’ll probably be in the 6% neighborhood, but then longer when you come to the refinance of other debt that matures in the first quarter, first and second quarter of 2025, likely we’ll approach the market with either a five year or 10 year or something that’s appropriate that we’ll discuss at the board.

And we have a history of getting the best rate at the bet [ph], during whatever time we’re in. I can’t tell you what that will be. It fluctuates. We see so much volatility in the last four months of the year. But I can tell you we’ll do the best we can in terms of refinancing those debt maturities, and we’ve already modeled that into our 2025 and 2026. So we’re comfortable where we are. Obviously, we’d like the interest rates to be lower, but we’re as good shape as anybody else.

Ernest Rady: And if interest rates stay high, and then create opportunities for us that we visualize the uncertainty in the world, we live in today is really significant. Thanks for the question.

Ravi Vaidya: Got it. Just one more here. Just speaking about Hawaii, I know that Japanese tourist hasn’t fully come back here, given weakness in the Yen, but what are you seeing from demand domestically at your property? There’s a lot of concern regarding health of the consumer, but there’s just wanting to see if that’s translated to foot traffic and visitation in Waikiki.

Ernest Rady: What’s the question? Domestic tourism to embassy.

Bob Barton: Oh, at the embassy, yes. Ravi, I think it’s still somewhat muted. We’re seeing Japanese tourism come back slowly. But if you look at the Japanese Yen, I looked at it yesterday, it was what, 157 to the dollar, and pre-COVID it was 108. So it’s difficult from a pricing power for the Japanese to come to Hawaii at this point in time. But those that can afford it. Love to come back to Waikiki. So what’s been interesting is that the U.S. west has really supported the occupancy. I mean, we had, I think what it is, I think we had 92% occupancy in the first quarter, compared to something like 82% in first quarter of the prior year. So we’re still, we still have occupancy, but we’re just not having the same tourism or the same, same guest experience.

Ernest Rady: It’s a great property and it’s going to get occupied by one way or another. So we’re glad we had that property, let me tell you.

Ravi Vaidya: Got it. Thank you so much.

Ernest Rady: Thank you, sir.

Bob Barton: Thank you, Ravi.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Ernest Rady for any closing remarks. Please go ahead.

Ernest Rady: Thank you guys for your interest in our company. You know, we do the best for you and we’ll continue to do that. And we hope we come through this with finding some additional opportunities in addition to enjoying the quality of the properties that we do have. So thank you.

Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.