Robert Lyons: Yeah. It’s not a lot different, Bascome. In fact, it’s pretty similar to what we saw this year, whether it would be at, within GATX Engine Leasing, that’s within Portfolio Management. We invested about $267 million this past year for 10 engines. We’re anticipating being right in that same range. And based on the outlook we have for Rail North America and internationally, those markets should be very similar to where we were last year. Rail North America was north of $970 million. Maybe it’s not right on top of that number, but it’s certainly in that neighborhood. And then GRE — our GATX Rail Europe and India were both about, combined, about $400 million. We’re looking at about the same again this year.
Tom Ellman: Yeah. And Bascome, I’ll just remind you of Bob’s comments of some of the challenges of getting the assets, particularly in India. That’s one of the things that causes us to have a little uncertainty on exactly how much we can do.
Bascome Majors: Lastly on that, do you see any more assets where you could start to build a platform and maybe invest in assets related to what you’ve done before, but aren’t markets you’re currently in, or do we expect it to look a lot more like it has looked per your earlier comments?
Robert Lyons: Well, our focus on long-lived widely used assets with a service component where you need intense asset knowledge to succeed will not change. We see pretty much every M&A opportunity out there remotely related to the leasing world. But you have to pass those four criteria because that’s what works for GATX. That’s where we generate the best return for our shareholders. We did add Trifleet, the largest — one of the larger tank container lessors in the world a few years ago to the portfolio. That asset meets all of those criteria. It’s a good platform that’s scalable, but we continue to integrate that into our operations overall. But we pass on far more than we pursue, and that will not change. That discipline won’t change. And with $1.6 billion investment volume this past year and a similar outlook for 2024, there’s a lot of opportunity for us right in the markets we’re in today.
Bascome Majors: Thank you for the time.
Robert Lyons: Yeah.
Operator: Your next question comes from the line of Justin Bergner with Gabelli Funds. Your line is open.
Justin Bergner: Good morning, Bob, Tom, Paul, and Shari.
Robert Lyons: Good morning.
Tom Ellman: Good morning.
Paul Titterton: Good morning.
Justin Bergner: First question relates to the secondary market. On the one hand, you’re indicating the secondary market is strong and pricing is strong. On the other hand, you’re seeing a lot of opportunities to put money to work. So can you sort of reconcile those two aspects of the market?
Paul Titterton: Yeah. I mean, really for us, it comes down to portfolio management. As I said earlier, we’re using the secondary market to optimize our portfolio. And at the same time, the fact that we’re able to generate attractive, both economic and book gains in the secondary market, doesn’t change the fact that there is also high-quality investment available to us on the buy side. And so really for us, every decision we make, whether it’s to sell into the secondary market or to originate in the primary market or buy in the secondary market, we’re making that on the basis of deploying and harvesting our shareholders’ capital in the optimal way possible. And so in the current market right now, on the sell side, we are certainly seeing lots of attractive opportunities where the market is valuing certain parts of our portfolio on the buy side higher than we value it on the hold side.
At the same time, we’re seeing tremendous opportunity to put capital to work where there are attractive returns available. So that’s really the mindset we have. We’re constantly looking at ways to optimally deploy and harvest our shareholder capital on the buy side and the sell side.
Robert Lyons: Hey, Justin. And also, I would remind you that we have the most diversified fleet in the industry. And something we’ve talked about before is the car types we’re selling or not, the car types we’re buying.
Justin Bergner: Okay. Got it. So is it — are you buying a very balanced set of car types and selling more specific set of car types or are they both very tailored to specific?
Robert Lyons: Yeah. I would say, they’re both very tailored to specific. And keep in mind, too, when we’re in the market on the sell side, we’re typically selling in very small lots. We don’t sell 2,000 cars at a time or 1,000 cars at a time. It tends to be 50 or 100. And so it’s very, very targeted, very specific. And with a fleet our size, we can do that. And with the diversity we have, we can do that. We can really pick and choose. Likewise, on the buy side, we don’t have to buy anything. That’s always a good position. I always like being in that position. We don’t have to buy anything. We don’t need anybody’s customer base or platform or anything else. What we’re looking for is a very targeted asset type. And we’re seeing — we saw some of those opportunities last year. And we think we’ll continue to see some of those this year. And I’ll let Paul add anything to that he wants.
Paul Titterton: Yeah. And I will just say, too, I mean, that’s really the advantage of having such a liquid secondary market and so many participants within the North American secondary market is you’re going to have different participants that have different appetites for different assets. A great example is assets trending towards end-of-life where there may be smaller lessors that specialize in those assets where we may decide we’re going to be in harvest mode there and some of those buyers may offer us very attractive pricing. We will then reinvest the proceeds in modern, either new or nearly new assets, that fit our long-term portfolio approach. And that’s just one example of the many ways we think about buying and selling.
Justin Bergner: Got it. Thank you for that. On the Rolls-Royce joint venture, how does the 55% operating income versus 45% remarketing income mix that you saw this — or in 2023 and expect to see in 2024 compared to longer-term?
Tom Ellman: Yeah. So Justin, it clearly moves around just because of how much that remarketing piece can change year-to-year, but at least the most recent history, it was similar in 2022.
Robert Lyons: Yeah. The other thing I would remind folks of is that remarketing activity or asset sales activity on the engine leasing side is very different than remarketing activity at North American Rail, where we’re selling lots of different types of assets and a lower starting net book value. Engines are expensive assets. So one or two sales in a given year, three sales, what have you, in a given quarter, has a much bigger impact than kind of the steady drumbeat of sales we do at Rail North America.
Justin Bergner: Great. Thank you. Just if I could get one more in. Do you expect the maintenance level in 2024 to be above normalized levels, assuming it was also above normalized levels in 2023?
Robert Lyons: What we expect for Rail North American net maintenance expense in 2024 is either flat to up $10 million is what we have already baked into our guidance for the year, which is a little bit of an elevated level of regulatory compliance. That should pare back in years ahead. But this year, 2024 and likely ’25, we’re kind of in this range of regulatory activity.
Justin Bergner: Great. Thank you for taking my questions.
