This interview took place as part of the REIT Virtual Conference: Investing for Yield and Total Return on March 7th. A webcast of the entire conference, including presentations by Alexandria Real Estate Equities (ARE), DDR Corp. (DDR), EPR Properties (EPR) and National Retail Properties (NNN), can be accessed here. Mike Salinski is a director at RBC Capital Markets covering REITs in the multifamily, industrial, and self-storage sectors.
Crocker Coulson: Mike, to start off can you give us a little bit of background on yourself and how you came to focus on the REIT asset class?
Mike Salinski: Sure. I've been covering this space for about ten years now. Initially I came in covering multifamily and storage, subsequently picked up industrial. As you mentioned I worked both at RBC, I've been here since 2006, and prior to that was over at Key for three years.
Crocker Coulson: Thanks. So at a big picture level for investors who are maybe new to the REIT space. What are the top reasons that they should consider REITs as part of their overall portfolio?
Mike Salinski: Well really three reasons. I mean I think first of all diversification. If you look at the real estate space it's not as volatile as some of the stock market. You've got a much more predictable income stream with contractual rents, so that gives a nice little bit of a steadiness there. I think too is income obviously, agree to pay a dividend, so you're getting real income there that you may not get with the tech sector or some of the more volatile sectors. Then I'd say three is security. These are much more stable, steady states of income here. So I think it provides a nice benchmark there in the portfolio kind of as a hedge to the more volatile sectors.
Crocker Coulson: You mentioned volatility and relative stability, but I was looking back yesterday at one of the tracking indexes: the Dow Jones equity all REIT index, and back when the financial markets had a heart attack that index had been as high as 350 in 2007 and then lost 75 percent of its value, went down to 87 in March of 2009. Since then we've had a very nice rebound, it more than doubled. But as we're thinking about volatility in the sector, how much has changed since 2007? If we had another hiccup in the financial markets, how do you think REITs would respond?
Mike Salinski: That's a great question. First of all, the major concern from REITs is two-fold. First of all is supply pressure and second of all is financial pressure; as you mentioned it was a financial downturn. Had you not had the financial pressure, supply was fairly much in check so I would've expected the REITs to outperform. But because of the financial pressure obviously REITs being dependent upon the debt and equity markets, that's what caused the volatility. So if you go back to 2009 to today I think you've seen significant progress on the REIT front trying to decouple themselves from some of the financial markets. You had leverage at the peak of the market for many of the REITS, for the actual REIT index around 48 percent.
Today we've deleveraged down to 42, 41 percent in some cases, and I think you're going to continue to see that compressed down. We've also seen a significant improvement in portfolio quality. Many of the REITs have gone through and really cleaned up the portfolio of some of the secondary, tertiary properties, and really improved the asset quality, which can reduce some of the volatility there.
Also I think you look at some of the risky activities that some of these companies were doing, mezzanine investments, JV investments. We've seen a significant amount of clean up in that as well. So with leverage lower, risk spectrum lower, I think these guys are much better positioned to migrate a downturn.
The other thing I think is typically real estate generally tends to, probably with the exception of lodging, tends to navigate the economic cycle fairly well. It's really not until you get a real boost in supply that you start really getting concerned on the real estate side. I think from that standpoint REITs typically are less volatile, but when you add a financial pressure that's what caused the volatility there if you go back to kind of '08, '09 frame.
Crocker Coulson: It sounds like the management teams really did take the lesson from the financial crisis to heart and are a lot better positioned. Talking to investors, particularly retail investors, I think a big attraction is the yield that REITs provide. Just on today's call we had companies that were yielding anywhere between 2.5 and 6.5 percent, and I know that in the case of mortgage REITs many of them yield now north of 10 percent. As you're thinking about your recommendations, how do you balance yield versus capital appreciation?
Mike Salinski: Obviously yield is a very important term and is a very important component of any investment portfolio quite frankly. But if you look at the vast spectrum of REIT investors looking at hedge funds, mutual funds, etc., most of them tend to be total return focused. Yield is important, but I think equally as important is how well covered is that yield. So going out and picking up companies yielding 7 percent, 8 percent you have to ask yourself how well covered is that yield and are they paying at a dividend yield that's too aggressive to where they can't grow the portfolio and grow that dividend yield over time?
If you go back to the downturn a lot of REITs reduced their dividend, and over the last couple years we've seen very nice growth in that. Payout ratios today are generally kind of in the 70 to 85 percent range by and large, so I think your coverage metrics look really good. And you have some of the more volatile sectors, lodging, storage, multifamily, typically pay at a lower payout ratio but drive a much higher percentage through growth. In summary I think your yield should be dependent upon the amount of risk, and I think really the focus should be much more on total return than specifically yield, which is where you see a lot broader opportunity there.
Crocker Coulson: It's all about balancing growth prospects with yield and both factors in to play in your analysis.
So you mentioned the different sectors for public REITs and it's actually pretty broad. You have residential, office buildings, malls, industrial, lodging, self-storage, and even mortgage REITs. How should investors think about choosing the right sectors to invest and is there anything they should know in terms of the risk and return profiles of these different subsectors?
Mike Salinski: Sure. Great question. Real estate, there's different sectors within real estate -- perform differently during different phases of the economy. Typically during an early recovery lodging stands to benefit. They drive off of different factors. Multifamily drives off of employment growth. Typically CBD office fills up then suburban office fills up. Industrial is usually an early recovery play. Suburban office is usually a later cycle recovery play. Storage performs well during downturns as well as up cycles. Then you have triple net lease which is very, very stable long term. So it really depends upon the cycle there.
As a team right now we're bullish on multifamily. Looking at the fundamentals we're bullish on net lease. Looking at the spread opportunities there. I think it depends upon the cycle right now. Kind of where we're at middle innings today, multifamily would look good, industrials had a nice run as of late, so those are the sectors that we're bullish on at this point.
Crocker Coulson: So on that note: last week I think RBC put out a note saying that in the commercial sector investors should think about overweighting triple net space and underweighting regional malls. Can you just give us a sense of the thinking behind this strategy, and then maybe pick out a few of the names that investors should be looking at seriously right now?
Mike Salinski: Sure, great question. Our call on net lease on malls is a little bit non-consensus at this point. But with the net lease space in particular you look at where they can go out and raise capital today, generally implied cap rates in the 6 percent range. You can go out and raise debt, call it 4 to 5 percent, maybe even a bit below that. Meanwhile you're buying at an 8 percent cap rate. So you're talking about a 200 to 300 basis point positive spread on initial investment with a lease that is 25, 30 years in some cases with options of extensions. It's a very, very steady, safe stream of cash flow. And there's plenty of opportunities in the market right now: the 1031 market's quite big at this point. So you're investing at a very positive spread.
Meanwhile in the mall space quite frankly this is a call on valuation. The space had a great run in 2012; it was one of the best performing sectors out there. Meanwhile you're not seeing a whole lot of new mall development, very little in fact. They're doing redevelopment to drive growth but you're not seeing a significant amount of external growth. Organic growth will be good, kind of in the 3 to 5 percent range but it doesn't have that up side that the net lease space has today because they could find so much in the acquisition front and can finance it at the current spreads today. So that's the basis of our call.
Names that we like in the net lease space right now: we have first of all EPR Properties, which I believe was talked about earlier as a name that we have an outperform on. Here's a company that's generating great earnings growth and very good dividend growth as investment grade. National Retail Properties is a company that we like a great deal. Kind of the same story: finding great acquisition opportunities.
Realty Income Corp. (O) is another great play. They've really been ramping up acquisitions, have been one of the best performers over a long period of time in the REIT space.
Crocker Coulson: Yeah, National Retail Properties also presented this morning and I think they said they had 23 years of increasing dividends. So I was impressed with that.
Let's dig in a little bit more on the space that you cover, or one of them: multifamily residential. How do fundamentals look there right now in terms of -- what you're seeing in terms of rent growth, occupancy, new building? And as you kind of look at the demographic picture does that help or hurt the category?
Mike Salinski: Sure I'll start in reverse and kind of work there. I mean if you look at the demographic picture you go back to the prior -- you go back to kind of the 2000 to 2010 decade: fundamentals are clearly benefiting single family housing. You also had very lax lending laws. You look at very lax lending which precipitated the rise in single family housing, the bubble that was created.
Kind of going forward demographics for multifamily actually look much more favorable. As you look at that age 22 to 35 demographic there you really see a nice surge in that. And also as the baby boomers kind of coming back into the city: their kids had left, they want more of the communal experience moving back into the other urban locations. So you've got those two demographics, your primary renter cohorts which look favorable there.
You've also got restrictions on lending. You can't go out and buy a house today with no money down. People coming out of school age 22, 23 often have school loans and don't have the money to put down a $25,000, $30,000 down payment. Meanwhile a lot of the multifamily REITs have really upgraded the quality of their portfolios over the last few years. Moving into more urban markets, reducing second and tertiary market exposure, so they're playing off of that.
So fundamentals in this space, your rent growth in multifamily did peak in 2012. That said, as you look ahead to '13 and '14 we still expect growth to be about 200 basis points above long-term historic averages. And there's a myth out there that multifamily and single family can't coexist, which quite honestly is not true. If you go back to the 1990s both multifamily and single family existed very well. And as long as you have a balanced housing policy and you have favorable demographics the multifamily space should continue to perform well.
One of the things is the multifamily space over the last couple of years has benefited despite not having significant job growth. The reason for that has been a limited amount of supply. If you look forward over the next couple years your supply level should normalize in this space. So to generate the kind of growth that we've seen the last couple years you really need significant job growth. Our forecasts for '13 and '14 call for healthy job growth, not robust job growth. Meanwhile the supply is picking up, and that's why we expect a little bit of moderation in this space. But overall growth prospects for the space still remain quite healthy.
Crocker Coulson: Okay you paint a pretty compelling picture. Before we dive into some of the individual stocks I wonder if you could just kind of give the listeners a little bit of a primer on the financial terms used in REIT investing. And as you look at these stocks what are the metrics that are the most important? Is it yield, growth in FFO, net asset value, the implied cap rate? What do these ratios mean and which are the ones that investors should really hone in on?
Mike Salinski: That's a great question. NAV I think is one of the more important metrics. Net asset value -- it's basically you look at the gross value of real estate less liabilities to get to a value that what is the equity of the company worth today? What is the net equity value, essentially?
FFO is just funds from operation. It's simply earnings, kicking out sales gains, adding back deprecation in a nutshell. There's other adjustments to it but that's kind of there. And it's important for real estate because you're trying to find what is the recurring cash flow, because that's what they're paying the dividend on.
Implied cap rate is just if you take the current stock prices and then looking back into what the stock's trading at it's really the inverse of a multiple. If you look at the REIT dedicated accounts today, the REIT dedicated community they tend to be more NAV focused. But each sector trades off different metrics.
One thing that I think is also important to look at you didn't mention is leverage. The higher leverage vehicles typically have a little bit higher volatility so you'd want a lower multiple for them; you'd want a higher dividend yield for them just to balance risk.
Metrics that we look at, again it varies from sector to sector but multifamily tends to trade more off of NAV. If you look at the storage space it's probably a combination; I would say it's more multiple-based. Industrial, pretty much NAV, the net lease definitely more multiple base, and the office space both multiple and NAV. So it does vary from sector to sector. But when I'm looking at metrics NAV is an important metric, as is earnings growth, quite frankly.
Crocker Coulson: That's very helpful. So one of the biggest pieces of news in residential last year was when Archstone's portfolio was bought by Equity Residential (EQR) and Avalon Bay (ABB). And they bought those assets for $16 billion out of the remnants of Lehman Brothers. Before that Archstone had actually been queuing up to do a pretty sizable IPO. Do you see this deal as a game changer for either of those companies?
Mike Salinski: I see it as a game changer for both of them. I mean you're talking about a $16 billion enterprise that was bought by two of the largest multifamily REITs. Archstone had very quality assets in a lot of the target market. For EQR in particular yes, they bought $8.5 billion of assets but they're also funding it with another $4 billion of asset sales. So you think about the long-term growth rate, you know, being able to sell in the markets like Orlando-Tampa, which are good markets but generally don't grow at the same rate as a New York City or San Francisco and being able to reinvest in those markets. It will enhance the long-term growth rate of the company.
Meanwhile as you're shedding older assets, picking up the Archstone assets you're improving overall portfolio quality. With Avalon, if you look at their exposure they had significant concentration in the Northeast and Northern California; they didn't have quite as much in the DC metro area as well as Southern California. So that transaction really balanced out the portfolio more. EQR obviously selling assets to fund the transaction, while Avalon went out and raised a bit more equity. Avalon can now continue to develop, which is where they generate a lot of their growth and value creation. Meanwhile EQR was able to really restructure their portfolio within a short frame of time. Is it a game changer? I definitely think it improves the long-term growth prospects for both companies.
Crocker Coulson: So you would see this as a reason to be in the stocks rather than standing on the sidelines while you see how the digestion and integration goes?
Mike Salinski: I think over the long period of time you have a transaction that increases the long-term growth rate of both companies. They've both been very aggressive in deleveraging the portfolios to take risk off the table. So I think as a long-term investment both Avalon and EQR make a lot of sense in a diversified portfolio.
Crocker Coulson: Great. You've just talked now quite a bit about location. As you think about that sector, multifamily in particular are there regions that you think investors should really try to be exposed to? Or should they be looking for names that have a broadly-balanced portfolio? How do you think about that right now?
Mike Salinski: Great question. You know, I mean there's two different real schools I think within the multifamily space: there's the bi-coastal strategy and the Sunbelt strategy. Bi-coastal is basically going to these high barrier markets, be it San Francisco, New York, Boston, L.A. -- may not generate as much job growth but generally speaking are much more restricted to supply. While as the Sunbelt REITs typically play in markets which are a little less resistant to supply but generate very big job growth.
And interestingly enough if you look at the recovery over the last couple of years it's been kind of a mix. We've seen the best job growth in the tech space and in the energy space. So not surprising that the San Francisco/San Jose area has done very well, as has Seattle, and as have the Texas markets and Denver markets. And Boston's also been among the better performers.
Looking out over the next couple of years we would expect Southern California to recover as you see manufacturing pick up. Northern California should remain strong as should Seattle. Texas will have a little bit more supply but as long as the job growth remains strong I see no reason why you should avoid that market.
There is quite a bit of supply coming online in the Washington, DC area. That is the one market that we are a bit concerned about for the next couple years here, especially with the sequester and just a lot of uncertainty around employment growth. If employment growth remains healthy in the DC market we think it can absorb the supply but if you get a combination of slowing employment growth and rising supply that could great a pretty tough picture in the DC market.
New York and Boston should remain healthy but it will slow a bit here or there as there's been some challenges in the financial industry as of late.
Crocker Coulson: Well I was down in Northern Virginia last week and I can tell you there was a lot of anxiety in the air about furloughs and layoffs and the impact that was going to have on the local economy. So I think your concerns are well-placed.
Another name I want to talk about: you have a buy on is Apartment Investment and Management Company (AIV) and I think you gave that rating when it was down a little under $26 and it's now almost hit your target of $33. Do you still like that name here?
Mike Salinski: You know, AIV is a story that is really turning things around. I mean the company last year made significant progress in the deleveraging front. They've also been cleaning up the portfolio last couple of years. It is a name that we like a great deal here. They have good exposure in coastal California, specifically in the L.A. area. As that market recovers over the next couple years here we would expect big growth from there.
Their properties in the DC market tend to be more class C so they will be less impacted by new supply in the market. They're also engaged in a $200 million redevelopment program which should drive nice, incremental growth there. And I think as leverage comes down I think this becomes much more of an institutional quality portfolio. They're also selling some of their affordable properties and you get the benefit of higher multiple from both portfolio cleanup and lower leverage. So this is a name that we do like.
Crocker Coulson: Got it. Another name you've been pretty constructive on is BRE Properties (BRE). I think some people were surprised by their downbeat guidance that they gave recently for 2013, especially relative to Essex Properties (ESS) which is a pretty close peer. What's your view on that?
Mike Salinski: BRE is a company in transition, quite honestly. They've got quite a bit under development which will deliver in late '13, '14, and '15 and drive nice growth for them. But they're also cleaning up a lot of the portfolio. I mean if you look they just recently sold a portfolio in Denver and Phoenix; they also sold out of some South San Diego assets last year. I think you're going to continue to see them recycling. They have $300 to $400 million of assets they'd like to sell over the next couple years and recycle that into development, you know, properties that'll grow at a much faster rate. Their balance sheet's in great shape; they have very moderate leverage, they maintain a real conservative balance sheet there.
They did just increase the dividend slightly and I'd look for further dividend growth over the next couple years here but I think they're moving in the right direction, cleaning up the portfolio, delivering developments on-time, on-budget. And quite frankly they're in the right markets. I mean if I'm looking at it over the next five years in terms of where I want to be in multifamily Northern California and Seattle we mentioned were two. But I think you're also going to see good growth out of Southern California as manufacturing recovers here. L.A. in particular should be among the better-performing markets we believe in 2013. And they have about 60 percent exposure to Southern California in total.
Crocker Coulson: Another name I want your thoughts on was Camden Property Trust (CPT). It's got very nice momentum growing in terms of their FFO per share. I think they do have some exposure to DC; should that be a concern?
Mike Salinski: No. It's interesting when you look at their DC exposure and you look at where most of the supply is coming online in DC. Quite a bit of the supply is coming online in urban DC, so actually Washington, DC proper, and the Alexandria/Arlington area. If you look at Camden's portfolio it tends to be a bit more Northern Virginia. They actually only have two properties in the Washington, DC area and are building two more currently. So if you look at the Northern Virginia market you don't have as much supply coming online, so looking at that I'm not as concerned about DC for them as several of their peers.
Meanwhile they have quite a bit of concentration in Dallas, in Houston, in Austin, markets we expect to be among the better performers over the next couple years. They also have a nice development pipeline delivering yields anywhere between 6-1/2 percent to 8 percent versus current acquisition cap rates in the markets general of about a 5-1/2 percent. So you're getting a nice return in value creation there on the development side.
They've also raised the dividend double digits over the last couple years and I expect to see very good growth from them kind of going forward over the next couple years. So it's a name that we think has had a good momentum and can continue to deliver very good growth both in the earnings and in the dividend there.
Crocker Coulson: Thanks. I want to change topics a little bit and talk about industrial REITs. Prologis (PLD) I think that's a name that a lot of people know: $30 billion in enterprise value. But it seems like you're a little more positive on the smaller name First Industrial Realty Trust (FR). Why do you like that stock?
Mike Salinski: I like that stock because I think much like our Amco call it's very much a turnaround at this point. Bruce Duncan and team have done a great job of really cleaning up the portfolio over the last couple years. They just reinstated the dividend. So I see great progress on that.
It trades at a discount valuation versus the rest of the peer group today. So again, it's really a turnaround story that we like. We see good progress there. We generally like the industrial space. We look for improving rent rolls in 2013 and 2014; occupancy is continuing to climb here. And they're also doing a good job on the leasing front; they've got a goal of getting the portfolio to 91-92 percent occupied. And over the last several quarters we've seen very good progress on that. So again, a turnaround story making good progress.
Crocker Coulson: You mentioned the management team there. Just a little more broadly: you know, one of the advantages of investing in REITs is that instead of having to go out and collect the rent yourself on an apartment you can actually benefit from professional management. How do you go about evaluating the quality of a management team in this space?
Mike Salinski: Great question. Well you know, I mean I think you have to look at execution first and foremost to value a management team. Are they delivering or exceeding what they said they were going to do? How does the long-term track record of the stock look versus peers? What does the forward growth prospects look like? Did they have to significantly reduce the dividend? How did they manage the balance sheet? I think the hallmarks of a good management team are the ability to deliver comparable if not better growth while managing a conservative capital structure. Oftentimes these names do trade at a little bit of a premium but at the end of the day you also have a lower risk. So that's I think how you kind of balance it out.
Crocker Coulson: I want to shift gears now. I think another sector that you cover is self-storage REITs. This group trades at a pretty significant premium to net asset value right now and I think also has slightly lower yields in some cases. What do you like about these names and which would be your top pick?
Mike Salinski: This is a space that if you look at, over the full cycle, generally performs very well. It actually got one of the highest growth rates of any of the spaces over the last 10 to 15 years. The balance sheets across the entire space are in very good shape. It's not like it's overlooked, but it has delivered very big growth. Looking at fundamentals for the space they remain very attractive. You have very little supply coming online over the next several years. Meanwhile there's significant consolidation within the industry.
Then you had extra space by over $700 million of assets last year in both Sovran Self Storage (SSS) and CubeSmart (CUBE) are also very active in the market last year buying properties. The REITs by and large control about 10 percent of the overall market, so there's a lot of consolidation opportunities within the industry. Rent growth should remain above average again in '13 here, so I think part of the valuation is justified by the very strong growth prospects this space should enjoy over the next couple years. As you mentioned they do trade at a pretty decent premium to NAV, but given the opportunities and the faster growth I think that some of that's being priced in.
Crocker Coulson: Okay. That gives some good context to understand that. I have one last question and then we're going to open it up to questions from our listeners, so I would encourage, we have a few questions here, but anybody who has a particular question for Mike, please go ahead and submit it now. So my last question is from what I've seen the capital markets pretty much had turned off the spigot back during the crisis, but they've been wide open for a year or two in a lot of capital markets activity both on the equity and the debt side. What does it mean for these companies' capital structures, and then given this amount of capital coming into the market, does it mean we're gonna see a lot more intense competition for the quality assets going forward?
Mike Salinski: That's a good question. I'd say first and foremost the capital markets are definitely open and quite frankly the REITs are using that to their advantage. They're aggressively raising capital and de-risking their balance sheets, looking at growth opportunities, investing that in growth vehicles. To your earlier question there, they're de-risking themselves from the financial markets by going out and raising capital, taking advantage of low interest rates. The question that's often posed to me is what happens if interest rates rise, because we've been in declining rate environment for the last couple years.
If interest rates rise and it's because of an improving economy, over a long period of time the REITs will benefit because growth is a much more important vehicle than simply interest rates. If interest rates rise in a vacuum that's not a good category. That's not a good driver for the REITs. We would expect the valuations to fall.
If you think about it you only had a couple REITs that defaulted during the downturn. In both cases it was because they couldn't roll over the debt. It wasn't because they couldn't service the debt. If you think about competition now as the lending channels continue to open, we do expect to see increased competition, but keep in mind the REITs have much greater economies of scale, much greater efficiencies, so they can bid on these properties much more competitively than, say, you or me, who aren't running the operating systems, can't negotiate big contracts accordingly.
So the REITs are still with the competitive advantage on that case there. Also you look at REIT valuations, who's had a nice run-up, so the cost of equity for these guys is pretty attractive relative to their private peer space. So I think the REITs should remain competitive. I think a more balanced market though does help the overall market for real estate and hold valuations a bit better.
Crocker Coulson: So we have one question coming in from Lisa Hanson and she wanted to know as an individual investor do you think it's more advisable to purchase REIT stocks directly or go through a mutual fund or ETF? What's the best approach?
Mike Salinski: I think generally speaking for a new investor I think the mutual funds give you a nice diversification. You get professional management throughout the cycle there. So from that standpoint if it's something you don't want to actively manage, I think going with a professional mutual fund manager makes a lot of sense. I think there's also ETF that can give you a nice bucket to play around with there.
If you're looking and trying to make a call on residential or suburban office, you can play some of the names within the spaces there. If you believe storage is going to outperform in '13, making an investment in a high quality company may make sense. So I think it depends upon how active you want to be.
Crocker Coulson: Okay, that's helpful. Next question comes from Diva Maria and she wants to know which three REITs do you think are the best candidates for growth within the next three years as we move through recovery?
Mike Salinski: Growth over the next three years as we move into recovery? I think it's going to vary within the sectors quite frankly. If you look at sectors that we're overweight right now, we're overweight multifamily, we're overweight net lease, and we're overweight hotels, so we're looking at a pretty good economy the next several years. Just focusing within those spaces I would say a net lease, you know, an EPR is a name that we like a great deal. I think this is a name that will give you very big growth as well as very good appreciation in the dividend.
In the multifamily space bullish on Post Properties Inc. (PPS) at this moment. Here's a company that's delivered 20-plus percent core earnings growth last year, traded at pretty reasonable valuation, and should see nice dividend growth.
Then finally in the lodging space our top pick in that space is Host Hotels and Resorts (HST). Here's a company in many of the major gateway cities. They've got an expanding presence in Europe and Asia. Those are three names that I know that were bullish in there, but I think within each of the sectors you can find unique names that are going to deliver very, very big growth, and even with the mall space Simon Property Group (SPG) is a great name to own. They've delivered quite an impressive track record there of growth.
Crocker Coulson: Okay. Those are sounds like the three compelling picks and you've spoken in detail about a few of them. Another question which may be a little bit outside your focus, Lisa Hanson again asking, "Can you please speak to mortgage REITs? They appear to have very high yields relative to other REITs."
Mike Salinski: Mortgage REITs honestly are not a sector that we follow quite closely. It's much more of a financial strategy and an asset strategy if you think about the mortgage REITs, generally going out and buying paper and financing it there. They perform much more like banks than they do REITs. It's not a space that I follow in great detail, so I'm hesitant to give any kind of opinion on it. I would defer to a mortgage REIT analyst on that because it's much more interest rate sensitive, much more sensitive on that basis, just not a space that we cover very closely.
Crocker Coulson: Okay. Great. So I think that we've covered pretty much all the questions that we got today on the call and we certainly covered a lot of interesting names and we got some very astute big picture advice from you about how to think about the market.
So with that, Mike I'd like to thank you for participating in this conversation this afternoon and thank all of our listeners, and I hope the day was productive for you and encourage you if you miss any of our sessions you can always go back and listen and replay.
Mike Salinski: Thank you, Crocker. I appreciate it.