Summit Hotel Properties, Inc. (NYSE:INN) Q4 2022 Earnings Call Transcript

Summit Hotel Properties, Inc. (NYSE:INN) Q4 2022 Earnings Call Transcript February 28, 2023

Operator: Good day, and thank you for standing by. Welcome to the Summit Hotel Properties Q4, 2022 and Full-year Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Wudel, Senior Vice President of Finance, Capital Markets and Treasurer. Please go ahead.

Adam Wudel: Thank you, Kevin, and good morning. I’m joined today by Summit Hotel Properties’ President and Chief Executive Officer, Jon Stanner; and Executive Vice President and CFO, Trey Conkling. Please note that, many of our comments today are considered forward-looking statements as defined by Federal Securities Laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings. Forward-looking statements that we make today are effective only as of today, February 28, 2023, and we undertake no duty to update them later. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at www.shpreit.com. Please welcome Summit Hotel Properties’ President and CEO, Jon Stanner.

Jon Stanner: Thanks, Adam, and thank you all for joining us today for our fourth quarter and full-year 2022 earnings conference call. 2022 was a year of meaningful growth for Summit as we augmented rapidly accelerating operating fundamentals with the acquisition of more than $900 million of high-quality hotels, reinstated our quarterly dividend and made our initial strategic investment in the high growth Glamping segment. Today, Trey and I will discuss our results from last year, our outlook for this year and how our recent transaction activity position Summit to continue to be a leader in the lodging recovery. Overall, we were extremely pleased with the improving operating trends throughout our portfolio, which exceeded our expectations for the year.

Pro forma RevPAR increased 38% year-over-year, driven by a 10% increase in and a 26% increase in average rate. In our portfolio of 92 hotels with comparable 2019 data, RevPAR recaptured 90% of 2019 levels and 85% of 2019 EBITDA levels led by average rates, which exceeded 2019 by 2%. Importantly, these RevPAR recapture rates improved sequentially each quarter from 80% in the first quarter to a post pandemic high of 97% in the fourth quarter. Leisure demand led the recovery, as weekend RevPAR for the full-year surpassed 2019 levels by 3%, driven by average rates, which finished the year 12% higher than 2019. Midweek and corporate demand began to improve meaningfully in the second half of 2022, most notably post Labor Day weekend. The acceleration of business transient midweek and urban demand helped drive October RevPAR to $130, our highest nominal RevPAR since the pandemic started.

While the natural seasonality of our business resulted in lower nominal RevPARs in the last two-months of the quarter, our December RevPAR recapture for our 92 comparable hotels was 97%, another post pandemic era high. Fourth quarter pro form a RevPAR increased 18% year-over-year, driven by a 3% increase in occupancy and a 14% increase in average rate. Despite the normal seasonal decline in demand experienced in the fourth quarter, average rates were essentially flat quarter-over-quarter, and 6% above 2019 levels, demonstrating our ability to maintain strong pricing power even in softer demand periods. While leisure demand remained robust during the fourth quarter, as weekend ADR surpassed 2019 levels by 16%, week day RevPAR improved sequentially throughout the year and finished the fourth quarter at an 88% recapture to 2019 levels, with ADR surpassing the comparable period of 2019 midweek.

Our asset revenue management teams continue to drive impressive operating results, as RevPAR index for our pro forma portfolio finished both the fourth quarter and full-year at 112%, primarily driven by strong occupancy premiums and further demonstrating our ability to capture market share, while maintaining pricing power throughout the portfolio. Trey will provide more details on the cost side of our business shortly, but we have been successful growing margins despite well documented wage and cost pressures, as we add back critical staff, services and amenities to address the rapid acceleration of demand across the portfolio. The improving operating trends we experienced throughout 2022 have continued into the first quarter of this year. Our preliminary January RevPAR increased approximately 28% from the prior year despite being negatively affected by cold fronts across the country and severe rainstorms and flooding in California in the first half of the month.

Similar to last year, Presidents Day weekend served as a catalyst for a meaningful acceleration of demand with RevPAR results exceeding 2019 and 2022, by 15% and 11% respectively for the holiday weekend. February and March are pacing up 26% and 21% respectively month-over-month, putting us on-track to finish the first quarter with RevPAR growth between 17% and 19% year-over-year. We continue to be confident in the favorable demand back drop for our portfolio, particularly with our concentration of newer hotels and key high growth Sunbelt markets. As I mentioned, 2022 was another extremely successful year for Summit on the transaction front. In the first quarter, we acquired a high-quality portfolio of 27 hotels and various other assets from NewcrestImage for a total consideration of $822 million, through our joint venture with GIC.

Our basis in the hotel portfolio is just over $200,000 dollars per key, which represents a meaningful discount to estimated replacement cost, and compares quite favorably to recent rates of comparable quality hotels. The portfolio has performed ahead of our initial expectations despite a labor intensive transition period during which we implemented numerous operational initiatives such as complexing multiple hotel operations and creating sales clusters to optimize revenue. When excluding the Canopy New Orleans, which opened subsequent to the initial closing of the transaction, the portfolio was more than 3% ahead of our underwritten hotel EBITDA and resulted in a hotel EBITDA yield of just under 7% in 2022. We have emphasized repeatedly that much of the hard work needed to position these assets for future success was completed in 2022, and we believe we are just now starting to see the real benefits from those efforts.

For example, in the fourth quarter, RevPAR recapture in the NCI portfolio increased to 97%, an eight percentage point increase over the third quarter culminating with 102% recapture rate in December. The 800 basis point improvement and recapture rate in the fourth quarter compares to approximately 150 basis point improvement in our same store portfolio. Our outlook for the portfolio remains extremely positive, and we expect it to generate outsized RevPAR and EBITDA growing in 2023 compared to the same store portfolio, as our operational initiatives drive better performance and the newer hotels continue to ramp. As you will recall, many of these hotels are newly constructed and have never participated in a traditional RFP season, creating ample opportunity to grow midweek negotiated business in 2023.

In June, we closed on our equity purchase option to acquire a 90% interest in the 264 guest room AC element dual branded hotel in downtown Miami’s Brickle neighborhood, at evaluation of $89 million or $337,000 per key. The hotel features the acclaimed Rosa Sky Rooftop bar, which has been a resounding success generating on average nearly $500,000 of revenue per month since its opening in March of last year. The hotels have ramped quickly since their December 2021 opening, generating a full-year 2022 hotel EBITDA approximately 50% higher than our initial underwriting and generating a 7.5% hotel EBITDA yield. The long-term outlook for this market remains incredibly positive, and our attractive basis in the asset demonstrates the value creation potential of our unique mezzanine lending program.

In October, we announced the acquisition of a 90% ownership stake in our first High-End Glamping Asset, a distinctive 11 unit property in Fredericksburg, Texas. In 2022, the property’s first full-year of operations on Fredericksburg generated RevPAR of approximately $440, hotel EBIT margin – EBITDA margins of more than 60%, and a net operating income yield of approximately 17% on our initial cost basis. Alongside this transaction, we announced a strategic partnership with Onera, which includes a right of first refusal on their next 10 projects, designed to be a growth pipeline for the company. Yesterday, we announced the initial development of our next two Onera branded projects, the expansion of our Onera Fredericksburg site, and a newly funded mezzanine loan for a separate Glamping project, both of which are expected to open in 2024.

Photo by Christian Lambert on Unsplash

Combined with our initial acquisition of the Fredericksburg property, we expect to invest between $40 million and $45 million in these first three projects, which are forecasted to generate mid-teens unlevered stabilized yield yields. In addition, we have several other exciting projects under review that feature similar return profiles to our existing projects, and would allow us to continue to scale our investment in this rapidly growing segment of our industry. In our earnings released yesterday, we also announced several pending asset sales through three separate transactions, including the sale of four non-core hotels and Suburban Chicago and Suburban Minneapolis. The sale of two hotels located in Atlanta and Kansas City, and the sale of a vacant land parcel in San Antonio.

The six hotels under contract for sale generated a combined RevPAR of $78 in 2022, a 30% discount to our overall portfolio, and EBITDA margins that were nearly 18 percentage points below our total portfolio. Proceeds from the sale of six hotels totalled$78.6 million, which equates to a 4% net operating income yield on 2022 results. Importantly, all six of these hotels are due for significant renovations, and the sales would allow us to forego near-term capital expenditures of between $35 million and $40 million. Including the foregone capital spend, the equivalent 2022 net operating income yield is approximately 2.7%. We expect the two transactions for the sale of the six hotels to close in the second quarter, and the land parcel sale to close in the fourth quarter.

Our recent transaction activity highlights our ability to identify opportunistic and value accretive transactions. Since the onset of the pandemic, we have acquired 32 high quality hotels located in high growth markets, totaling nearly a billion dollars of assets with minimal capital needs. Again, excluding the Canopy, New Orleans, which was delayed in opening, our acquisition portfolio finished 10.5% ahead of our 2022 underwriting, generating an additional $6 million of EBITDA compared to our expectations. Roughly one third of these assets open in 2019 or after, and are still in the early stages of ramping towards stabilization, implying considerable growth and upside remain. In total, our acquisition portfolio generated a full-year 2022 net operating income yield of more than 6%.

This compares favorably to our recent and pending dispositions, including the 2022 sale of the Hilton Garden in San Francisco, which collectively totaled nearly $155 million of gross proceeds equating to a 2022 net operating income yield of approximately 3% or sub 2% net of the estimated deferral of nearly $45 million of near-term capital expenditures. With that, I will turn the call over to our CFO, Trey Conkling.

Trey Conkling: Thanks, Jon, and good morning, everyone. Throughout 2022, our portfolio demonstrated significant improvement across all location types. While urban hotels lagged in the first quarter of the year relative to 2019, these hotels demonstrated strong recovery beginning in the second quarter as RevPAR recapture rates increased from 72% in Q1 to 92% in Q4. The recovery in our urban portfolio was driven by robust pricing power due to the acceleration of business travel, professional and college sporting events, and citywide group and leisure demand in markets such as Dallas, Boston, Miami, Nashville, and Chicago. This resulted in 2019 ADR recapture rates of 105% and 107% in the third and fourth quarters of 2022 respectively versus the 93% recapture rate in the first quarter of the year.

The fourth quarter was highlighted by October, a month which typically produces the portfolio’s highest nominal RevPAR as our urban hotels generated $135 RevPAR representing a 5% premium to the pro forma portfolio, and a 93% recovery to 2019 levels. Strength was particularly evident in Dallas, our largest market, where our comparable hotels posted a fourth quarter recapture rate of 102%. Nominal RevPAR for these hotels grew 20% in the fourth quarter in comparison to last year, driven by a $19 or 15% increase in average rate. RevPAR for the non-urban portfolio was $109 in the fourth quarter, representing a recapture rate of 98% to 2019. This was driven by continued strength in our resort properties, which generated a fourth quarter RevPAR of $132 an increase of 11% compared to 2021 and 104% recapture rate to 2019.

Additionally, the suburban portfolio experienced the largest year-over-year growth of any location type, as fourth quarter RevPAR increased 18% compared to 2021, driven by a 4% increase in occupancy and a 13% increase in average rate. Shifting to portfolio segmentation. While seasonality translates to slowing room night demand in the fourth quarter, average rate for the fourth quarter exceeded 2019 levels in all segments apart from the negotiated segment. Notably, the group segment saw improvement relative to 2019, as occupancy mix increased by 30 basis points on a full week basis, and average rate increased by $4 or 2.4%, primarily driven by weekend rates, which finished $12 or 8% ahead of the comparable period in 2019. Our asset management team continues to deliver strong results despite a labor market dynamic that has resulted in material wage growth and challenges adding back necessary staff, services and amenities over the past year.

These cost increases appear to be moderating, as evidenced by operating costs per occupied room in the fourth quarter that increased only 1.4% from the third quarter despite a lower occupied room base. As a result, fourth quarter gross operating profit margin and hotel EBITDA margin for the pro forma portfolio were 44% and 36% respectively, which were in-line with the prior quarter despite a decline in absolute RevPAR of approximately 4.2% from the third quarter, due to natural seasonality. Fourth quarter hotel EBITDA margin in our pro forma portfolio was 120 basis points above 2019 levels, largely attributable to favorable property tax returns. We have demonstrated an ability to grow margins relative to 2019, in months with higher nominal RevPARs, driven by strong rate growth.

GOP margins in our comparable portfolio exceeded 2019 levels in September and October, and hotel EBITDA margins exceeded 2019 levels in three of the final four months of the year, by nearly 100 basis points. We were encouraged to see periods of margin expansion in our portfolio relative to 2019, despite the significant expense growth experienced throughout the industry in 2022. Expense growth was particularly acute on the labor side, where the industry experienced well documented increases in hourly wages and outsized reliance on more expensive and less productive contract labor. Looking ahead, we expect wage growth to moderate in 2023. Pro forma hotel EBITDA for the fourth quarter and full-year 2022 was $62.1 million and $243.9 million respectively, representing increases of 27% and 63% year-over-year.

Fourth quarter and full-year adjusted EBITDA was $46.1 million and $180.8 million respectively, which reflects increases of 62% and 100% from 2021. Adjusted FFO in the fourth quarter was $30.3 million or $0.25 dollars a share, an increase of $15.5 million from the fourth quarter of 2021 and full-year adjusted FFO was $114 million or $0.94 a share, an increase of $77.2 million from 2021. From a capital expenditure standpoint, in the fourth quarter and for the full-year 2022, we invested approximately $27.7 million and $76.5 million respectively in our portfolio on a consolidated basis, and approximately $22.2 million and $63.6 million respectively on a pro rata basis. CapEx spend for the full-year and fourth quarter was driven by the completion of significant renovations at our Hilton Garden Inn, Houston Energy Corridor, and the Hya Place, Orlando Universal Studios, as well as ongoing transformative renovations at our residents in downtown Portland and our Hilton Garden Inn, San Jose Milpitas.

We continue to ensure the quality and relative age of our portfolio positions the company to drive profitability and market share. Turning to the balance sheet, our current overall liquidity position remains robust at more than $500 million pro forma for the four pack and two pack asset sales that John discussed earlier. The $79 million of gross proceeds from those asset sales continues to further deleverage Summit is balance sheet. In addition, during the fourth quarter, we defies our only remaining 2023 debt maturity, a $32 million CMBS loan set to mature in August of this year, which eliminated all remaining debt maturities until the fourth quarter of 2024 after consideration of extension options. The defeasance unlock $7 million of restricted cash and is accretive to AFFO given net cash savings of approximately $300,000 over the next six-months.

In combination, these transactions demonstrated strong progress towards our long-term stated leverage target of 3.5 times to 4.5 times net debt to EBITDA. Finally, in the fourth quarter, we Summit notice to exercise the first four six-month extension options available under our $400 million senior revolving credit facility. The extended maturity date will be September 30, 2023, and when considering all available extension options, the facility has more than two-years of remaining term with a final maturity of March 2025. From an interest rate risk management perspective, our balance sheet is well positioned, including an average pro rata interest rate of 4.5% and approximately 65% of our pro rata share of debt fixed after consideration of interest rate swaps at year end 2022.

In addition to address the recent maturity of $200 million in notional swaps, we have recently entered into two $100 million interest rate swap agreements that fixed one-month SFR and carry fixed rates of 2.6% and 2.56% respectively. These new swaps will mature in January 2027 and January 2029. This extends the average duration of our swap portfolio from less than two years to over four years. The swaps became effective in January of 2023 when accounting for the company Series E, F, and Z preferred equity within our capital structure, we are approximately 70% fixed. On January 26th, our Board of Directors declared a quarterly common dividend of $0.04 per share or an annualized $0.16 per share. The current dividend represents a prudent AFFO payout ratio leaving ample room for meaningful increases over time.

Included in our press release last evening, you will note we reinstated full-year guidance for 2023 operational metrics in addition to certain non-operational items. This outlook is based on management’s current view and does not account for any unexpected changes to the current operating environment. For the full-year, we anticipate RevPAR growth of 6% to 11%. The high-end of the range assumes continued strengthen leisure demand and accelerating growth in business transient and group demand. The low end of the range reflects an economic slowdown that would result in low single digit RevPAR growth in the back half of the year. RevPAR growth of 6% to 11% translates to an adjusted EBITDA range of 190.4 million to 205.9 million, and an adjusted FFO range of $0.92 to a $1.05 per share.

The midpoint of our RevPAR guidance range implies hotel EBITDA margins to be essentially flat year-over-year. We expect interest expense excluding the amortization of deferred financing costs to be approximately $85 million Series E and Series F preferred dividends to be $15.9 million, Series Z preferred distributions to be $2.6 million and pro-rata capital expenditures to range from $60 million to $80 million. It is also worth noting that given the increased size of the GIC joint venture, the fee income payable to Summit now covers nearly 15% of annual cash corporate G&A expense, excluding any promote distributions Summit may earn during the year. I also want to point out that we have furnished a new financial supplement as part of our fourth quarter earnings.

We believe this supplement will more clearly outline the performance and relative contribution of our various portfolio ownership structures. We have also outlined additional detail on our balance sheet, which has continued to be a strength for the company and allowed us to acquire nearly a billion dollars in acquisitions since July, 2021. And with that, we will open the call to your questions.

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Q&A Session

Operator: Our first question comes from Austin Wurschmidt with KeyBank Capital Market. Your line is open.

Austin Wurschmidt: Hey good morning guys. Jon or Trey, I guess I’m just curious on the six-pack hotel for sale, can you just speak to how you guys arrived at the number of assets that you selectively marketed presumably, and the amount of proceeds you were looking to solve for?

Jon Stanner: Yes. Sure. Good morning, Austin. First of all, the first thing I point out is there is two separate transaction involves here. There is a sale of the four pack, the two suburban Chicago and too Minneapolis assets and a separate sale for the asset in Atlanta and Kansas City. Look, I think, we have talked for a while now about exiting some of these suburban assets that are lower RevPAR hotels, lower margins and particularly in Minneapolis, which has been a market that has been much slower to recover, we just felt like it was a prudent and opportunistic time to exit those assets. I think, the one common theme that you will see across the six assets is just the need for significant capital to be spent across those for the next – over the near-term, over the next probably 12-months to 18-months.

And so between the six assets, we think we will avoid spending somewhere between $30 million and $35 million over that time period. The other thing I would just point out is I think where we have seen, well, it is not the easiest transaction mark today where we have seen the most liquid part of that transaction market has been for some of these smaller hotels and some of the more secondary and tertiary locations, where it appeals to a smaller owner, a local owner operator that can finance it through a local lender that isn’t reliant on big money center banks for the CMBS market to get a financing done. And so, we feel like the execution here is the appropriate one. I will caveat this with as we did in our press release by saying that, these deals have not closed yet, they are under contract.

We are optimistic that they will close. And we are happy with the execution if and when they close.

Austin Wurschmidt: Thanks for the detail there. And then how do we think about the other side of that coin in capital deployment this year. I know you guys are very focused on returns more so than maybe markets, but are there any specific assets or markets you currently have your eye on, if pricing makes sense. And given some of the benefits you highlighted in your opening remarks, about putting assets into the joint venture. I guess how do we think about sort of wholly-owned purchases down the road versus continuing to use the joint venture vehicle with GIC?

Jon Stanner: Yes. We still really like the joint venture. I think Trey highlighted the fact that, it is getting to a size where particularly the fee income has become a meaningful source of income for us. They have been wonderful partners that allow us to execute on transactions that we otherwise wouldn’t be able to execute on. So we still like that as a vehicle. We don’t have to put everything into the vehicle. I think it will be a case-by-case basis. As we have said, I think a lot historically, we don’t necessarily have a map with a bunch of dots on it that says that, we need to be in certain markets. You can see through our transaction activity post pandemic. We have had a bias towards investing in some markets that we like.

The demographic changes, where we see more migration of people, more corporate relocation, that is put us in places like the Sunbelt, that is put us in some of these mountain towns that have performed really, really quite well since the onset of the pandemic. But we are certainly opportunistic. And again, through some of these dispositions, we will create some capacities continue to be opportunistic where we see just better risk adjusted returns on a relative basis.

Austin Wurschmidt: And then just the last one for me, maybe for Trey. You mentioned that the midpoint of guidance assumes roughly flat hotel EBITDA margin. Can you share what that range is at the high end, low end?

Trey Conkling: Yes. I think if you look at the high and the low end of the range, we would say, that is kind of minus 50 basis points to plus 50 basis points from 6% to 11% was kind of flat at the midpoint.

Austin Wurschmidt: Perfect. Thanks, guys.

Operator: One moment for our next question. Our next question comes from Bill Crow with Raymond James. Your line is open.

William Crow: Thanks. Good morning, guys. Just looking for a little bit more detail on the expense expectations for this year. I think you mentioned that, wage rates would be growing at a slower pace, but you also have higher FTEs, I assume, at least to anniversarying those that were added last year. So how are you thinking about overall expense growth? What is going on with property taxes, what you actually were able to appeal, but what do you expect there, property insurance, et cetera?

Jon Stanner: Yes. Sure, Bill. Thanks. And good morning. As we said in the prepared remarks, we do expect to see some moderating of expense growth. I think as we have gotten later into last year and the first part of this year, we have seen some of particularly on the wage pressure side of a fair amount of that moderating. Tray articulated a little bit on spent on a per occupied room basis at the operating level was up less than 2% in the fourth quarter are actually aggregate dollars of expenses in the fourth quarter, actually declined from where it was in the third quarter. So we have started to see some moderating there. I think you can tell by as Trey just mentioned, our implied margin guidance, which is flat at a midpoint of 8.5% RevPAR growth still does contemplate some level of expense pressure of persisting into next year.

And I think what we will see that is a little unique from this year is if you look at our results in 2022, our EBITDA margins expanded more than our GOP margins. Our expectation is that that will flip into 2023 as operating expenses moderate. But we did, as you alluded to, we had some nice successful property tax appeals, which helped our EBITDA margins in 2022. And we will feel some pressure on expenses on the insurance line in 2023 that we will make our EBITDA margin expansion lower than our GOP expansion was or is in the year.

William Crow: And then, follow-up question for Trey, what was the cost of the two swaps on the a $100 million debt pieces?

Trey Conkling: The rates there were 2.6% and 2.5% – 5.6 -.

William Crow: Yes. But what was the actual cost of getting that transaction done?

Adam Wudel: Bill, this is Adam. Those are settled on a monthly basis going forward. There is no initial out-of-pocket.

William Crow: Alright, very good. I appreciate it. Thanks, that is it for me.

Operator: Our next question comes from Michael Bellisario with Baird. Your line is open.

Michael Bellisario: Thanks, good morning guys. Just want to go back to the asset sales and dispositions. I guess if the six hotels do close on your expected timeline, how much EBITDA in 2023 might be sold for the remainder of the year?

Jon Stanner: Yeah, well some of that is going to depend on the timing of the sale. Mike, we have kind of outlined that we expect them to close in the second quarter. We will update our guidance at the time that they close. Our expectation on where we sit in the year is somewhere probably between $3 million and $5 million of reduction in EBITDA.

Michael Bellisario: And then maybe this is served just on the margin or not margins, but on the margin. Just as these asset sales are completed, the pro forma remaining portfolio will RevPAR be benefited, will be diluted the growth that is and margins to what is kind of the growth impact in 2023 from these six asset sales?

Jon Stanner: Yes, it is relatively marginal, Mike. It is slightly accretive to both RevPAR growth and our margin expectations for 2023, not enough that I would expect us to materially change our guidance range as a result of these. Again, these are relatively smaller, as we mentioned, the prepared remarks, they run on average about 30% discounts to our nominal RevPAR levels. And again, we expect this to be accretive from a RevPAR growth perspective. The one thing I will just kind of point out and reemphasize again, is that part of the rationale for these sales is that we are — while the per key prices aren’t as high as maybe you would expect the cap rates here are quite low. Combined with the asset sale in San Francisco last year, we are selling $155 million of assets at a three cap, and if you adjust for the deferred capital needs, it is sub 2%.

And so one of the things that we like is it is going to allow us to continue to bolster the balance sheet without giving up a ton of in place earnings.

Michael Bellisario: Yes. Understood. And then just one more, just thinking about the bottom portion of the portfolio. I guess maybe how many more 60,000 a key, or maybe it is $75,000 or $700,000 per key type of assets do you guys have left in the portfolio?

Jon Stanner: Yes. Look there is some, I mean, I think, there is always kind of a bottom 10% of your portfolio. Like we don’t have a ton of what I would describe as real non-core assets. I do think, we will try to continue to look opportunistically to sell assets. I think, the execution again on these six plus the sale on FFO last year represent a really, really compelling execution, particularly with where we think we — and where and how we can redeploy those proceeds. And we have shown, again, I think, a really nice delta between the yields on what we have sold versus the yields on what we have acquired. And so, I think, you can expect us to continue to look opportunistically for asset sales as we go through 2023.

Michael Bellisario: Got it. And then last one from me for Trey, probably just year-end net leverage, where did it stand, and then what would that have been on a pro forma basis if those six asset sales plus the land sale were completed at 12.31?

Trey Conkling: Yes. I think, if you look at our leverage, what I would say is that pro forma for the asset sales and the kind of $79 million that we anticipate bringing in from that standpoint and kind of what the midpoint of our guidance range is we are probably right around five times. That is obviously about a half a turn higher than where we — what our target is. But I think it is good progress that we have made over the last year as we have kind of recycled out of some of these non-core assets as well as the EBITDA growth that we have seen.

Michael Bellisario: Got it. Thanks everyone.

Operator: And I’m not showing any further questions this time. I would like turn the call back over to Jon Stanner, President and CEO for any closing remarks.

Jon Stanner: Yes. Well thank you all for joining us today. We are obviously very encouraged by our operating results for 2022. We are excited about the prospects for the acquisition activity that we completed in the year and we are optimistic about the future of Summit. We look forward to seeing many of you as we progress through the year. Thank you all again for joining. Have a good day.

Operator: Ladies and gentlemen, that is concludes today’s presentation. You may now disconnect and have a wonderful day.