Matt Elkott: That’s very helpful, Tom. And then as you guys are expecting another strong year of secondary market activity, any insights on where you see your leased fleet — can you maintain the same size of fleet, I guess, as you take advantage of a very strong secondary market? And will that come using your existing supply agreements in manufacturing because I would imagine it’s very challenging to add in the secondary market given how strong it is?
Paul Titterton: Yes, so this is Paul. I’ll start, and I think Bob may chime in as well here. But, yes, I mean, at the end of the day, first of all, we’re economic animals. So, we are going to invest and divest based on what the economics tell us. And so, we’ll buy when we can generate a positive NPV from buying, and we’ll sell when we can get a higher price than our hold value. So with that having been said, we are conscious of the benefits of scale in our business, and we believe we can maintain those benefits of scale. And I’ll add actually that within in the secondary markets, we are seeing some increasing ability for us to be successful while sticking to our investment discipline. And so, I’m cautiously optimistic that we’re going to see more success in the secondary markets. Certainly, the indications are that we’re seeing that right now.
Bob Lyons: Yes, Matt, and just to add to Paul’s comment too, I’ve been encouraged actually on both sides of the secondary market as 2022 unfolded. And we’re seeing, I think, similar trends here in the early part of 2023 for opportunities to sell, but also to be a little bit more successful in our bidding activity on the buy side.
Matt Elkott: Is this — are these encouraging signs for potential acquisitions in the secondary market coming from larger fleets, Bob and Paul, or smaller privately held fleets?
Bob Lyons: It can be either. And given our activity and our presence in the market, we see portfolios and we see the — kind of the offering packages from both, the big and the small sellers. So, it’s both. And we’ve seen, I would say, that the success rate has also been driven by the fact that we’ve seen some offerings of assets that are of particular interest to GATX in where we have a set view and a very, potentially, unique view on trends over the longer-term. So, we’ve been able to ferret out some pretty good buying opportunities.
Matt Elkott: Bob, are you surprised that secondary market valuations have held up so strongly despite the interest rate increases?
Bob Lyons: Well, at a high level, I’d say yes because, I guess I wake up being pessimistic. But you would think with rising interest rates that that would somehow eventually lead into less activity in the secondary market, but we haven’t seen it. And currently, investors, clearly they’re still searching for hard assets with a very good yield attached. And we have high-quality assets with high-quality customers on long-term lease, very strong high-quality cash flow. And so, there’s still a robust market for those.
Paul Titterton: And I’ll just add too. This is Paul speaking again. We’ve been very successful recently attaching more cash flows to those assets in our portfolio. We’ve used this strong market to originate attractive leases which will allow us to sort of restock the portfolio of potential sale, going forward. So, that’s one of the benefits of a strengthening market like this is it allows you to continue to reload your potential future secondary market offerings.
Matt Elkott: Got it. Thank you, Paul. Thanks, Bob, Tom, and Shari.
Bob Lyons: Thank you.
Shari Hellerman: Thank you.
Operator: The next question is from Allison Poliniak with Wells Fargo. Your line is open.
Allison Poliniak: Hi, good morning. Just want to go to that algorithm that you guys have historically provided in terms of rail velocity and cars needed online. I know you were — sort of come up broken last year, but as we enter this year how are you viewing that? We could be in a situation of, I would think accelerating velocity, potentially, and freight coming down the other side of it. So, would just love your perspective on that, if that’s a risk as we look out to the back-half? Thanks.
Paul Titterton: So, I think, with respect to velocity — this is Paul speaking again. First of all, what I want to say is it’s going to be difficult to predict railroad velocity. And so, the railroads obviously are trying to hire, they’re trying to improve service right now. We’re certainly not in a position to predict on behalf of the railroads what’s going to happen with velocity. We do continue to have the view though that there is — we refer to as freight on the sidelines, freight that is not moving right now that could move in the network if service were improved. So, when we look out and look at the possibility of improved velocity, improved network fluidity, we don’t necessarily see that as a downside as we might have seen in the past because we think there’s freight that wants to be on rail that will move on to rail once the service is available to take it.
So, I would describe us as more optimistic in the face of potentially improving velocity than we might have seen in other cycles.
