In this conversation from January 12, 2021, Deidre Woollard interviews Mark Hamilton, CEO and co-founder of Hamilton Zanze about multifamily real estate and the opportunities available in the market for commercial real estate investors.
Deidre Woollard: Hello, Fools. It is two o'clock Eastern Time. I'm Deidre Woollard. I'm the Editor over at Millionacres, which is the real estate investing arm of the Motley Fool. We always do our Millionacres Real Estate Hour on Tuesdays, and we have a special treat as Emily said. I'm joined by Mark Hamilton here. He is the CEO and Founder of Hamilton Zanze, a firm that acquires multi-family properties around the country. They work with accredited investors to provide opportunities that generate cash flow and achieve appreciation. So I'm really excited to talk to you about all things multi-family and crowdfunding today. But let's start off with a look back at 2020, very odd year for residential real estate in general and for multi-family in particular. What did you see?
Mark Hamilton: A lot of dislocation, obviously. Not so much in the capital markets. The capital markets became very much more accommodative. It's relatively straightforward to borrow right now at really attractive rates. Where we saw disruption was in household movement. Certainly, if we're also expecting that there really truly was an exodus from a lot of major gateway cities, it's true, it's borne out by the facts. People were on the move. I think with some cohorts, that was a move into suburban home ownership. With other cohorts, it was a move, really, from one part of the nation to a very different part of the nation. Our business was fairly stable, but a lot of the urban in-fill, A-plus vertical properties certainly had a lot of disruption in terms of their occupancy.
Deidre Woollard: Let's talk about that. I know you're talking about big cities like New York and San Francisco that were really probably hardest hit by that. Do you feel that that's a temporary trend or do you feel like maybe a second half of this year once we get more people vaccinated, is there going to be that move back?
Mark Hamilton: I think cities exists for reasons, right? We love cities. We're social creatures. We like efficiency. We like the amenities and resources that cities offers, they can be very efficient. But I think right now in terms of the occupancy of a lot of apartment properties or multi-family properties in major cities, personally, I think the occupancy story might get worse before it gets better. I don't foresee the same level of movement, of people relocated. But I do think that although vacancy, we're able to track levels of vacancy in really any metro, and we're able to track rent levels. What's much harder to track is delinquency. You're going to have one delinquency number in Los Angeles, you're going to have a different delinquency number in New York City. You're going to have a different delinquency number in Portland, because there is effectively a nationwide moratorium on evictions, landlords have no opportunity really to force the issue with residents. As we get better, as we recover societally and recover in terms of our health, we should regain the opportunity as an industry to recover possession of units where there are people who are not paying. That will arguably inject at least a modest increase of vacancy. I think 2021 will be a year of sorting out. I think '22, '23, '24 will be a year of building back. I do think that that cohort that drove urban apartment occupancy over the last 10 years, that cohort, those specific people have maybe moved. But the next generation will come in and I do foresee them going back into cities. It's going to differ depending on the city, but I think in San Francisco, which is where I live, I think it'll be a years long process. If the summit is getting back to the fourth quarter of 2019, in terms of performance, I think it will be a years long process of that recovery.
Deidre Woollard: Interesting. Do you feel that it is absolutely tied to the work-from-home and the remote work thing, and are you watching that trend as well as far as how it correlates to multi-family?
Mark Hamilton: I think it definitely correlates to that for sure, and that's going to have a larger impact on urban office buildings. A lot of the class A-plus stuff has got long leases. But I do think there will be a retrenchment in the office building sector for the multi-family business. Well, let's just say it's been a very long time since we were an urban operator. We're really much more of a suburban operator and ex-urban operator. While we've seen vacancy spike in the coastal gateway cities and rents collapse, we haven't seen that in our own portfolio. In Seattle, we're not in Seattle, that's King County. We're in Snohomish County, we are Thurston County, we are in Pierce County, which are the suburbs. That would generally be true of any city that we're in. In Denver, we're not in Cherry Creek, we're in the suburbs, and our delinquency numbers have been digestible. I think I did the math yesterday, and based on what I'm getting from our asset managers, our delinquencies only up 7/10 of one percent. The suburban thesis is a little bit different than the urban thesis, and I do think part that come back to your question about work-from-home, part of the reason that the suburban has held up is because people are happy where they are and they can tell a commute to work. They don't have to drive, they don't have to take the bus, they don't have to take public transportation. I think that work-from-home has already help those of us who are second city or suburban operators. I think perhaps it hurts urban landlords because with sky high rents, if you can move to a suburb and still do your job and have a little more use of the outdoors, that sounds like a pretty good deal, you're going to pay lower rent. I do think that the urban phenomena is been damaged more by relocation, and I do think that the suburban market has perhaps even been helped by some amount of work-from-home.
Deidre Woollard: Has it changed how you feel about the types of multi-family in general, thinking about larger buildings versus smaller garden style complexes. It seems like the multi-family ones with larger shared amenities and things like that are becoming less desirable. People are more interested in these smaller communities. Is that something that you're seeing?
Mark Hamilton: I think you're spot-on in terms of what households want. They want something that's more intimate. They definitely want something, in terms of a home, that's more insulated from the pandemic. If you've been living in a urban high rise and you park your car in the garage, you ride the elevator up, you go to the lobby, you ride the elevator up again, you walk down the hallway, I think that that spooks a lot of people. Certainly, it's going to be the case with hotels as well. Whereas, if you're in a property that you go right into your parking space, you walk across the garden, you opened your front door and you're done, I think that it's very compelling, and I think that's both a safety element and an intimacy environment. It's a little bit more of an intimate living experience. Again, to come back to your point, work-from-home is in there, work-from-home is in that equation. I started out a million years ago, and the first property that I ever got my arms around was a duplex that my wife and I bought and what was then a pretty rough and tumble part of San Francisco, that was so rugged that it made her mother cry.
Deidre Woollard: Oh, aw. [laughs]
Mark Hamilton: Could still let me marry her daughter. But she was upset by the sight of the thing. Over the years, we've purchased bigger properties, we've gone to more localities, and on our portfolio today, the average size of one of our properties is going to be about 225 units. So it's neither super big nor small, but they're almost all suburban, and they have the same amenities. They have the swimming pool, the fitness center, the clubhouse, and all. A lot of the amenities are outdoors. In terms of the indoor amenities, it's a clubhouse, you go in, you go out, or you don't go in at all. You don't have to walk through the lobby. I think the interest or the appetite in amenities is the same, but the biases in favor of suburban are probably a little stronger right now. I suspect that with homeownership, people are more interested in moving to Boise, or Bend, or Bozeman, Montana, or one thing or another, and that's a completely different lifestyle shift. In terms of apartment households, I think it's really going to be governed more by the ability to avoid the commute and the ability to avoid having to mill around a lot of other people.
Deidre Woollard: Yeah, I think that's an important point. I also wanted to ask you about Class A and Class B, multi-family this year and last year because I feel like last year, there was a little bit of a pull away from Class A, which is your top-tier luxury rentals, and more toward Class B, which are you're still nice rentals, but not your top-tier. Is that something that you're keeping an eye on as well?
Mark Hamilton: An interesting question. Historically, we've viewed ourselves as a Class B Plus operator, and I'll say a little more about that. We've generally avoided the Class A Plus stuff because it's just so expensive. In our view, investors will overpay to get that and accept smaller returns because they view those returns as being bulletproof. The pandemic turned that on its head. Those are the properties that ended up getting hurt the worst in terms of their scheduled income. But when we think of Class A, or B, or C, usually, you're really talking about more than one thing. Certainly, you're talking about location. If you're in Seattle, it's Seattle. If you're in the Bay Area, it's Palo Alto. If you're in San Diego, it's La Jolla. It's the blue-chip communities. Those will be viewed as Class A or Class A Plus communities. Another factor that goes into it certainly is amenities and scale. A bigger property is going to have more amenities, and vintage also goes into it. I think institutional investors, over the last 10 years, have flocked to the urban vertical stuff. That's what we refer to as core real estate. We're a little more of a core plus or value add, which means we're looking for slightly better returns, and so we're not going to join the feeding frenzy to buy something that can pay a three percent cash flow. I think the urban core stuff. Well, I mean, just what we would call core. Core apartment properties, certainly, the ones that are located in urban centers are the ones that are really being hurt right now. If it's a core property in Orange County, that's more of a suburban, it probably isn't suffering as much.
Deidre Woollard: Interesting. In terms of these different types of properties with different types of amenities, are you seeing more toward interest in suburban? I wanted to ask you also about 1031 exchanges, and right now, I know that that's come up with the new administration. So there's some concern about 1031 exchanges becoming less of a perk for investors. Is that something that you're also taking a look at it? Obviously, it's way too soon to know what's going to happen there but it's been said that that's something that President Biden we'll be looking at.
Mark Hamilton: We follow that very closely. You're right, I do think that the reemergence of that in the public discussion owes to the fact that the new administration has said they're going to be looking at it. We've actually done, not only do we do a lot of business that's relevant to that, that derives from that, we've also done a lot of research on it. There are good academic papers on the subject in terms of why it's an important part of public policy. I think that discussion probably falls outside of the discussion that we're having today. But I do think you correctly point out that the reemergence of that as a talking point in the tax discussion, I think you're spot on with that. Historically, we've done a lot of that. We go back a very long way from the origin of my activity in this business, which was 1985, to the origin of our company which is Hamilton Zanze in 2001. We've always worked very closely with a lot of friends, family, colleagues, referrals, a lot of people who've had long careers in real estate and are just tired of dealing with it. Tired of dealing with the phone calls, and the vacancy, and the repairs, one thing or another. A lot of those investors, over the last 20 years, have come to us, they're generally people that we know. We have done quite literally many, many hundreds of 1031 exchanges with clients. It's probably 2,000-2,500 exchanges that we've done or assisted with. We think it's a very important part of public policy that's probably misunderstood, I think it's generally being merchandised right now as just a loophole. I do think it's a very important economic driver. There's data on that, there are academic papers on that. In my personal opinion, it's also a very important driver of the tax base for cities, counties, states because if you could sell an asset, and temporarily defer the payment of those capital gains taxes and reinvest it, that's a transaction that a city, or a county, or a state is likely to benefit from because of the transfer tax. Whereas if the 1031 goes away, you might not want to do it. I think if they were to throw the 1031 away altogether, cities and counties would be the big losers. They are under plenty of strain right now. They rely on those transfer taxes. But I also think that the 1031, again, we have the data. It drives jobs, it encourages additional net investment, and what we've seen is that when people do a 1031, for most such investors, it's not an add in for an item iteration, they will eventually expose those gains to taxation. But in the meantime, and in some, not only do they place those funds back into properties participating in the tax base, they also make additional investments to improve the assets. It's definitely a jobs driver and an economic driver. We'll have to see where it goes. I'm not going to lose any sleep over it, we're going to get what we're going to get. What's been discussed is the strategy that would make it less easily used by people who are very high wage earners.
Deidre Woollard: Interesting. You mentioned you've been in the business since 1985, and that means you've seen a lot of interest rates, right? You probably have never seen interest rates like we have right now, [laughs] where we've already hit, I think the Freddie Mac PMMS, we already hit one record this year so far, we had, I think, 14 last year. How is that impacting what you're doing in terms of acquiring, and what is the lending environment looking like for you right now?
Mark Hamilton: Let me take the second one because it's easier. It's a very accommodated lending environment. Rates are down more than they've ever been. I mean, we've borrowed in the high 2s for the long-term fixed rate debt. Generally, I suspect we would say that our borrowing range right now is somewhere between 2.75-3.25, but those are historic lows. We almost passed out a few years ago when we actually borrowed at like 3.06, we couldn't believe it. But it makes it easier to underwrite income with interest rates where they are. These interest rates are definitely supportive of values. I was reading something just this morning by a famous real estate economist whose name is Peter Linneman, he just says the next seven years are going to be a golden era for real estate. It won't be that simple because there will be blood in the streets. There will be hotel operators, or retail operators, [inaudible 00:19:11] operators who get hurt. Low interest rates solve some problems. They're also very conducive to value. Historically, inflation is not a one edged sword, it's a two edged sword and it can drive income. But Linneman point was that it's really going to drive values, and we're seeing that. Anybody that has assets, they are more valuable this January than they were last January, because rates of return have compressed. We have a portfolio of approximately 90 communities. We're generally transactional with that. In any given year, we'll sell a few and buy a few more. We tend to be a net buyer. But on the one hand, it's a little bit of a congratulations, I'm sorry for not. Because on the one hand, it makes what you have more valuable. But when you sell it and want to replace it, whether it's through a 1031 or otherwise, you're going to pay more for what you're buying. It doesn't change things for us all that much because our practice is, while we might buy $600 million of apartment buildings in any given year, we're really almost more of a spot market buyer. We're in 15 states, we're in 28 metropolitan markets, and we are constantly turning over rocks to find the things that can give us the returns, really stress tested for expenses as we know them. It doesn't hold us up all that much, but it does make it harder to be a buyer.
Deidre Woollard: Interesting. Did 2020 change some of that idea of where you want to invest? It sounds like you have your target markets, you're pretty sure what those are. Are you shifting the weights a little bit? We've seen a lot of movement toward the Sun Belt states, that's something that a lot of different companies, some of their REITs we watch are invested in that. We're also seeing some of the home builders concentrating more in the Carolinas and things like that. Is that something that's also a factor for you?
Mark Hamilton: A bit. Yeah. For example, of Seattle right now. Seattle is very expensive. The returns are going to be low. You're going to be buying it either because it's a piece of the rock. You're going to buy it and keep it and feel that it makes you secure, or you're going to buy it and bank on appreciation. Appreciation is tricky to bank on, especially, with interest rates this low. As interest rates go up, that won't help at any sort of appreciation strategy. But a lot of the cities that have emerged recently as significant cities, whether it's Denver or Phoenix, or Seattle, or Salt Lake City, it's very hard to buy in those markets right now because they're just so fully priced. We have been buying more in the Mid Atlantic recently. We've purchased probably more property in Maryland and Virginia, and then the DC Suburbs than any other than market. However, we are in the process of buying two properties in Portland right now, because we found Portland's market where we've done well. We'd like it and feel like we understand it, and we were offered two assets, one each from a different seller that we've worked with, that we were able to underwrite. Again, it really just comes back to turning over rocks. We're not afraid of secondary cities, we're not afraid of tertiary cities. Boise is a market that we like a lot, Fort Collins, Colorado, Colorado Springs, and we just go about the business of having the conversations with people every day and looking at what they sent to us, and then pouncing on the ones that we want.
Deidre Woollard: Yeah. Boise was on our list of top places for rental property investors in 2020, so that's one we've been watching a lot. I want just to go back and talk a little bit about the aging of landlords, because I think that's something that we're seeing. There is this demographic shift, there is the great wealth transfer that's going on overall. But that's happening in real estate too, where the average age it seems, of landlord is going up. Is that something that you're seeing a lot? [laughs]
Mark Hamilton: Yeah, and I am part of that crowd. As I mentioned earlier, historically, a lot of our clients have been people who have some decades of experience owning property on their own. For a lot of people, it just gets to a point where they just don't want to do it anymore. For a long time, I've said that apartments are a strength in numbers and a pain in numbers business, and the pain in numbers, is that if it's 300 unit property, you got 300 door knobs, you got 300-600 toilets, you got 300 kitchens. You've got a parking lot where people are coming and going, it's a full time job. There's a lot of stuff that has to be tended to with bigger properties, it's all beyond, it's vastly beyond what anybody can do themselves, which is why you have site teams. But the strength in numbers, part of it, is that if you have 300 units, even though you only have maybe 30 days to 360 days of lease security, our experience has been that if you meet the market, you are going to stay full. Your income targeting, you may not get exactly what you want. We didn't have major shifts in our rents last year, although we did have more delinquency. Again, our experience has been, if you show up for work every day and have people who like the work and want to do the work, you're going to deal with the headaches because somebody has a job. Actually, many people out of property have a job to take care of the real estate and to take care of the residents. The reward is that if you have decent real estate or better and you do the work, people will stay with you. That's what we experienced in 2008, 2009, and 2010, that's what we experienced last year. But yeah, people will want to get it out of their hair, and that's where we come in.
Deidre Woollard: Right. You work with accredited investors. Do you also work with institutional investors? Are you working with family offices? Individuals? Who are your clients right now?
Mark Hamilton: Historically, probably 75 percent of our capital has been private capital from accredited investors including ourselves. My partners and I, senior staff and our families are our number one investor. We have more capital on the portfolio than in any other single investor. Again, it's families, but still, we practice what we preach and we're the number one investor. Typically, about 75 percent of our capital will come in that way. It could come in from people doing 1031 exchanges, it might come in from people simply investing from taxable accounts and making investments. It very frequently comes in from retirement accounts. Probably, another 10 percent of our investment capital comes from a high net worth investors or family offices. We work with probably 6-10, maybe even more than that, probably, 6-15 different families. Then the last 15 percent will come from institutional investors, many of them household names because they might be an insurance company or a fund or one thing or another.
Deidre Woollard: Thank you. As we wrap up, I know that your firm has some green initiatives. I want to talk to you a little bit about climate change, because I think that's something that you can't be a real estate investor and not think about climate change and the ways that it could change things going forward. What's that looking like for you?
Mark Hamilton: I would just parse that into two questions. One of it's going to be about geography. We don't have any assets that have significant C-level rise exposure. That doesn't go to the things that we're trying to do in terms of being good stewards. Except we are stewards for investor's money, so we have to be careful about that. Again, as we are in second cities not gateway cities, we're going to have less exposure to that kind of stuff. But in terms of actually being responsible business operators, every single one of our acquisitions will get an audit for telling us what the Green Initiatives are that we can run. Also, we don't build new. We've never developed. We will build facilities on our properties, but we've never built a new property. It's not like we're going out, tearing up a field, turning up Greenville and building an apartment community. We're taking things that are already existing and then making them more efficient. I would say, probably 80-90 percent of our financing, we sign up for what they call the "green product", which means that we're going to have a mandate to spend a certain amount of money increasing energy efficiency, increasing the efficiency of water use and the like, and it's all garden variety initiatives. It could be something that says modest as retrofitting or redesigning the landscape watering system, the irrigation system, so that you're using a lot less of it. In many locations, we install landscaping that allows us to detect if there's a storm coming, if there'll be rainfall. That'll go into the calculus in terms of whether or not properties are getting water. You'll have flow restriction, water fixtures. You'll have flow restrictions on toilets, you'll have a lot of those kind of things. Then you'll also have energy efficiency. Energy efficiency is going to be primarily light bulbs, sometimes light fixtures. They may be inside the individual units, they may be in your common areas, in your clubhouse, in your fitness center, one thing or another, and very frequently it'll be outdoor lighting. It's the lighting on the parking lot, it's the lighting on the exterior of the units. Ultimately, when we borrow with these green loans, we sign up for a very specific program of things that we're going to do that seem to be contributory to cleaner living, to greener living, and then we take care of the work.
Deidre Woollard: Are you seeing a move away from the use of gas ovens, gas heat, gas stoves? Because one of the things I've seen is that, in some cities for new construction, they're saying, electric-only and things like that. Is that something that's come up for you?
Mark Hamilton: We're only going to have that issue where that element just based on what we're buying. You can go buy things. We certainly purchase properties that have an all electric kitchen. Those were popular way before you came along. I mean, even I was little, you had the GE display at Disneyland with the kitchen of the future. The all electric kitchen is not necessarily a brand-new phenomena. I think a lot of people really prefer cooking with gas but I do think that when we buy newer product, it's much more commonly going to have electric appliances rather than gas. Water heaters, you're going to get them both ways. You might have a gas water heater, you might have an electric water heater. If we were building, we would be thinking more about what the appliances are.
Deidre Woollard: From the investor side, are you seeing people ask about that? We've seen the trend for ESG and socially responsible investing. Are your investors also asking those questions about the units themselves?
Mark Hamilton: Yeah. People want to know that and I think they want it mostly as a reassurance, not necessarily as something that's binary, either you're doing it or not. Our private capital investors definitely want to know that we're informed and doing certain things. High net worth investors and family offices are also going to want to know that we're being informed and that we're doing the things that we can. Then with some institutional investors, they may have a mandate. They may not touch it unless it has a green emphasis. For the most part, those considerations get resolved for us by our borrowing strategy.
Deidre Woollard: Are you concerned about the overall aging of apartments in general? Certainly, we've seen it with the housing stock. The average houses keep getting older and older. There's not enough housing stock that's replacing existing stock. Is that also something that's happening on the multifamily side? Are you concerned that the aging of the stock means that there's more repairs and things like that needed?
Mark Hamilton: It's actually a very interesting question and the answer is counter-intuitive. As I said, once upon a time, my wife and I brought a broken down duplex and we ended up buying a lot of stuff in San Francisco that was old. Then we started investing in Oakland and we bought stuff that was not quite as old, but it was very routine for us to be buying something that's 40 or 50 or 60 years old. Properties do wear out, let's be honest. Historically, there have been landlords who just won't spend money on their properties. They're going to squeeze every nickel out that they can in distributable income and they are not necessarily going to put money back. Our approach has always been to put money into the properties and make them better. What's happening right now that might really be a little more of a social or governmental concern is that because so much of the apartment stock that has been built in the last 10 or 15 years has been what I would call the super A plus stuff.
Deidre Woollard: Yes.
Mark Hamilton: It's got all the bells and whistles, the rents are going to make your eyes water. What's happening is that that's created a marketplace for renovation, or I should say it's boosted the marketplace for renovation. Historically, as properties age, they become more affordable. It's what we would call affordable with a lower case a rather than an uppercase A. It's just affordable by default, that's its market premium. But what's happening is that a lot of the older housing stock from the '70s or '80s or maybe even the '90s right now, is not being left to take the path of its natural life cycle and become more affordable, it's actually being renovated. When those are renovated, people will pay a higher rent. You get something more of a premium. There's, again, been discussion not only in the industry, but from a standpoint of policy about what do we do to replenish that housing stock, which might otherwise become more affordable housing because nobody is building. If they're building, they are building the super A plus stuff, nobody is building the B minus or C plus stuff, it's just not getting built, it can't. That's probably more of a concern in the industry right now, is how to provide enough housing.
Deidre Woollard: I know that that's also been discussed on the federal government Level 2 of how to do that because it's a big problem in a lot of cities. I know you're based in San Francisco. I feel like that conversation almost started in San Francisco where there's so many people. Those supercomputers that are doing a two-hour commute just so they have a place that they can afford to live in.
Mark Hamilton: Yes.
Deidre Woollard: Yeah, definitely.
Mark Hamilton: You would see that in major metropolitan area. There are certainly a lot of cities in the Midwest, that I don't know anything about but in any metropolitan area with MSA, Metropolitan Statistical Area of 250,000-350,000 people or more is going to have that. It's going to have a need for more diversity in the housing stock, and right now, there's less.
Deidre Woollard: Yeah, that is very true. As we wrap up, one last question. What is your overall forecast for this year and coming into the next year for multi-family and what would you tell investors who are maybe looking at some of the multi-family REITs or something like that. What should they be thinking about?
Mark Hamilton: It's going to be a good year to be an owner and we talked about that a little bit because values are full. Values are very full right now and the financial markets and probably the Fed are not really that concerned about asset valuation bubbles. They're more concerned about people having paychecks. On the capital side, it's going to be very friendly to people who have assets. It's going to be more of a challenge to get into the market because pricing is high. On the operating side, again, you're going to have a tale of two cities. New York operators are going to have a lot of work to do. Suburban operators, probably, we don't have as much recovery that we have to accomplish. Again, our collections in 2020 were not really that down. Whereas if you are a New York City or Boston or Los Angeles landlord, you definitely had collection problems. The 1031, I think that will get tossed around. Do we see something on that this year? Remains to be seen. Then I hope I don't have to eat my words at a later date. I believe that there's something of a reset right now. This is something of a reset year. Interest rates, they're not going to go lower. I've called that wrong for 30 years.
Be advised. I don't mind if they go down, I don't think they will but in terms of operations, I do think that this is the trough, and if you're in suburban or secondary or tertiary cities, the trough isn't that far off from a peak. If you're a hardcore urban operator, you got a lot of work to do but I think operations for all of us will firm up as the pandemic recedes. We all want that, we're all waiting for it. I do think once we're all vaccinated, we will all slowly creep back to our old norms. That could take years, I do think you're going to see masks. The mask is on, the handshake may be gone, the hug may be gone, I don't know. But I believe we will slowly recover our old norms. It's a process of recovery from where we are now. In terms of a peak, will we get back to the peak of the 4th quarter of 2019? History tells us that we do, just like the stock market. The stock market got halved in 2008 or 2009 and then it took off again. I do think we'll recover our norms. I think change and recovery is going to be incremental and I think the adoption of the old lifestyles is going to come slowly.
Deidre Woollard: Thank you so much for your time today. This was a really great look at multifamily in general.
Mark Hamilton: Well, I'm honored and really gratified to have been invited, Deidre. Thank you so much.