Red Rock Resorts [RRR] Conference call transcript for 2022 q3
2022-10-30 09:44:09
Fiscal: 2022 q3
Operator: Good afternoon, and welcome to the Red Rock Resorts Third Quarter 2022 Conference Call. All participants will be in a listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Stephen Cootey, Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts. Please go ahead.
Stephen Cootey: Thank you, operator, and good afternoon, everyone. Thank you for joining us today at Red Rock Resorts' Third Quarter 2022 Earnings Conference Call. Joining me on the call today are Frank and Lorenzo Fertitta, Scott Kreeger and our executive management team. I'd like to remind everyone that our call will include forward-looking statements under the safe harbor provisions of the United States federal securities laws. Developments and results may differ from those projected. During this call, we will also discuss non-GAAP financial measures. For definitions and complete reconciliation of these figures to GAAP, please refer to the financial tables in our earnings press release, Form 8-K and investor deck, which were filed this afternoon prior to the call. Also, please note that this call is being recorded. The third quarter represented another strong quarter for the company by any measure. In terms of same-store net revenue, we had our best third quarter in the history of our company. And in terms of adjusted EBITDA and adjusted EBITDA margin this quarter was our second best third quarter ever, only surpassed by last year's strong quarter. On a consolidated basis, excluding great management fees, our third quarter net revenues was $414 million, effectively flat when compared to the prior year's third quarter. Our adjusted EBITDA was $182 million, down 1.3% from $184.3 million in the prior year's third quarter. Our adjusted EBITDA margin was 43.9% for the quarter, a decrease of six basis points from the prior year's third quarter. With respect to our Las Vegas operations, excluding the impact from our closed properties, our third quarter net revenue was $411.6 million, up 1% from $407.4 million in the prior year's third quarter. Our adjusted EBITDA was $199.9 million, down 2.1% from $204.2 million in the prior year's third quarter. Our adjusted EBITDA margin was 48.6%, a decrease of 16 basis points from the prior year's third quarter. This represents the ninth quarter in a row the company has delivered same-store adjusted EBITDA margin in excess of 45%. We continue to prioritize free cash flow converting 55% of our adjusted EBITDA to operating free cash flow, generating $99.4 million or $0.96 per share. This brings our year-to-date cumulative free cash flow to $325.7 million or $3.13 per share with virtually every dollar being reinvested into our Durango project or return to our stakeholders. During the quarter, we remained operationally disciplined and stayed focused on our core local customers as well as our regional and out-of-town guests. When comparing our results to last quarter, visitation remained flat, and we continued to see strong spend per visit across our portfolio, allowing the company to enjoy near record profits across our gaming segments. The trends across our database in the third quarter were similar to those we saw in the second quarter, and those trends have remained consistent throughout the beginning of the fourth quarter. Turning to the non-gaming segments. We saw continued growth in food and beverage and hotel as both segments delivered their most profitable third quarter results ever, fueled by the strength of our regional and out-of-town businesses. With regard to the group sales and catering business segments, the recovery of these business lines continues as we saw the third quarter represent the fifth consecutive quarter of double-digit year-over-year growth in this business line. We continue to see our lead pipeline grow into 2023. On the expense side, we remain operationally disciplined and continue to look for ways to become more efficient while providing best-in-class wages and benefits to our team members and delivering best-in-class customer service to our guests. While we recognize the headwinds in the economy and the adverse impact inflation has on both the company and our customers, our actions taken over the past 10 quarters and our focused efforts to control the controllables have allowed us to continue to generate strong adjusted EBITDA, maintain adjusted EBITDA margin and return over $1 billion in capital to our shareholders since we reopened in June of 2020. Moving forward, while we remain vigilant to macroeconomic trends, we will continue to stay disciplined and focused on executing and investing in our core strategy, including offering new amenities to our guests, such as the highly anticipated November openings of our new high-limits slot room and local favorite Lotus of Siam restaurant at our Red Rock property as we continue to refresh our amenities across our portfolio. Now let's cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the third quarter was $101.1 million. The total amount of debt outstanding at quarter end was $2.91 billion, resulting in a net debt of $2.81 billion. As of the end of the third quarter, the company's net debt to EBITDA and interest coverage ratios were 3.8x and 6.8x, respectively. Given our low leverage, low cost of capital and no short-term debt maturities, our strong balance sheet allows us to focus on executing on both our longer-term growth opportunities and on returning capital to our stakeholders as we move forward. Also, during the third quarter, we made distributions of approximately $71.3 million to the LLC unitholders of Station Holdco, which included a distribution of approximately $41 million to Red Rock Resorts. The company used the distribution to make its third quarter estimated tax payment, pay its previously declared dividend of $0.25 per Class A common share as well as partially fund the purchase of approximately 496,000 Class A shares at an average price of $38.33 per share under its previously disclosed $600 million share repurchase program. Under the current share repurchase program, we have approximately $313 million of availability for future share repurchases. The third quarter purchases bring the total number of shares purchased under the program and through our 2021 tender to approximately 14.2 million Class A shares at an average price of $45.29 per share, reducing our share count at quarter end to approximately 103.9 million shares. Combined with our third quarter dividend, we returned approximately $46 million to our shareholders during the third quarter and over $223 million year-to-date. Capital spend in the third quarter was $97.2 million, which includes approximately $72.8 million in investment capital, inclusive of our Durango project as well as $24.4 million in maintenance capital. For the full year 2022, we now expect to spend between $65 million and $80 million in maintenance capital and an additional $275 million to $325 million in growth capital, inclusive of our Durango project. Now let's provide an update on development pipeline. Starting with our Durango project, as we have mentioned before, we're extremely excited about this project, which is situated on a 71-acre site ideally located off the 215 Express Way in Durango Drive in the Southwest Las Vegas Valley. The project is located within the fastest-growing area of the Las Vegas Valley with very favorable demographic profile and no unrestricted gaming competitors within a five-mile radius. The project is progressing nicely as we topped out in early October and expect to have the structure fully enclosed by the end of February. The project continues to remain on schedule with an anticipated opening in the fall of 2023. As mentioned on our prior earnings call, we expect to spend approximately $750 million, which includes all design costs, construction hard and soft costs, preopening expenses and any financing costs associated with the project and are currently operating under a guaranteed maximum price contract which represents approximately 70% of the total project costs. As the project stands now, we?re approximately 82% of the project, including the purchase of long-lead FF&E has been secured. We will continue to execute on our early procurement strategy in a manner which seeks to minimize supply chain and inflation-related issues. As stated on our previous calls, the company expects the return profile for this project to be consistent with the past greenfield projects within our portfolio. Turning now to North Fork. As we noted last quarter, after favorably resolving all of its other litigation, the tribe has only one pending case in the California courts. As we also noted last quarter, we do not believe that any decision by a California State Court who deprived North Fork of its ability to game on its federal trust land. We continue to work with the tribe to progress our efforts with respect to this very attractive project, including working toward the approval management agreement, continuing to work with on development and design and having preliminary talks with our prospective lending partners. We will continue to provide updates on our quarterly earnings call. And in September, we announced the permanent closure of our Wild Wild West property. The facility is scheduled to be demolished and the land will be repositioned for future development. With the closure of Wild Wild West, along with the eventual purchase of the 67-acre gaming site at Losee in the 215 Expressway, our land holdings around the Las Vegas Valley will amount to almost 630 acres. These strategic holdings will serve as the foundation for the future growth of the company and represent a continuation of our 46-year history of growth through the development of gaming sites located in attractive high-growth areas with superior ingress and egress along the major beltways in Las Vegas Valley. We are currently working through the planning entitlement and zoning processes for several of these holdings, including our Inspirada and Sky Canyon parcels, while concurrently looking to divest certain land parcels as we continue to reposition our real estate portfolio for the next chapter of growth at Station Casinos. Lastly, on October 27, 2022, the company announced that its Board of Directors had declared a cash dividend of $0.25 per Class A common share payable for the fourth quarter of 2022. The dividend will be payable on December 30 to all shareholders of record as of the close of business on December 15. With our current best-in-class assets and locations, coupled with our development pipeline of seven owned development sites located in the most desirable locations in the Las Vegas Valley, we have an unparalleled growth story that will allow us to double the size of our portfolio and position us to capitalize on the favorable long-term demographic trends and high barriers to entry that characterized the Las Vegas locals market. While the quarter presented a return to normal seasonality, significant economic uncertainty and record inflation, our disciplined approach to running our business, coupled with our unparalleled distribution and scale resulted in near record high EBITDA and EBITDA margin, even as we continue to execute on our long-term growth strategy and continue to return capital to our shareholders. As we do every quarter, we would like to recognize and extend our thanks to all of our team members for their hard work. We understand and appreciate that the guest experience starts with them, and they are the ones who make our property so special and bring our guests back time after time. We'd also like to thank them again for voting us the top casino employer in the Las Vegas Valley for the second year in a row and making us the employer of choice in the Las Vegas Valley. Finally, a special thanks goes out to all of our guests for their loyal support over the past 46 years. Operator, this concludes our prepared remarks for today, and we are now ready to take questions from participants on the call.
Operator: We will now begin the question-and-answer session. At this time, we will pause momentarily to assemble our roster. The first question today comes from Joe Greff with JP Morgan.
Joe Greff: Iâd like to ask a question about margins performance in the 3Q here. They were better than what we and consensus had all expected sequentially flat and down unlike a competitor quarter-over-quarter. Can you talk about what you're seeing on expense creep on cost inflation overall, maybe what you're doing differently now versus before on the expense side that might be incremental in mitigating some of that? And then as a Part 2, related to this topic, Steve, in the fourth quarter, would you expect to experience sequential revenue and margin performance similar to history, where revenues were up sequentially and margins were up a couple of hundred basis points sequentially fourth quarter versus 3Q?
Frank Fertitta: Yes. I don't think we want to have a crystal ball and to or want to project into Q4. But you're right. Historically, Q3 has been the company's weakest quarter, and typically, Q4 is one of our two best quarters, between Q4 and Q1. So, I mean, we don't see anything that would suggest that, that will be any different than it's been historically other than last Q3, where we had a bunch of stimulus money in the economy that may have made things a little bit harder to read.
Scott Kreeger: Yes, Joe, this is Scott Kreger. Maybe I can add a little bit more color. First of all, the management team continues to be operationally disciplined and we focus on margin every single day. And I think the results of the consecutive quarters of performance kind of show that. But when we talk about the influences of margin and inflationary pressures, there's probably three areas that we can touch on; labor, cost of sales and reinvestment. So, from a labor perspective, our wage rates are competitive with best-in-class competitors in the valley. And we are seeing some wage inflation. But that wage inflation is offset by active management of workforce labor. And so net-net, we've been able to mitigate any of that labor or wage inflation, and we seem to see that plateauing over the last couple of months. Secondarily, we are seeing some cost of sales inflation in predominantly the food and beverage areas. So, we are seeing cost per cover going up in the teens. But at the same time, through dynamic pricing and menu engineering, we've been able to offset that with a 25% increase in revenue per cover. And as that brings its way down through the department, our total food and beverage revenues are up 8%, and we had record profitability in that business segment. And then lastly, from a reinvestment and promotionary basis, we continue to see rationality and stability in the promotionary market, and we're enjoying being able to reinvest in our products, our team members and to bring new amenities to our guests. So, all in all, in all of these measures, we've been able to control these pressures and still produce margins that are top of the class.
Joe Greff: And Steve, corporate expense was a little bit higher. Is this a good run rate for you guys to be in for the near term.
Stephen Cootey: Yes. I think it is, Joe. As you know, last quarter, we articulated our growth strategy for the future. And so, what we did this year is we did a slight reallocation, a recalibration of corporate expenses because we wanted to really allow the investors to see and from our management team to manage the true property allocation versus the allocation of corporate that's designated to growth in other enterprise-wide initiatives. So yes, what you're seeing right now is a good corporate run rate.
Operator: The next question comes from Carlo Santarelli with Deutsche Bank.
Carlo Santarelli: Steve, to the extent you guys could talk about it a little bit, but as far as the development right now is going, obviously, you guys are nicely out of the ground and moving through kind of the harder construction. When you look out to kind of that fall 23 opening and between here and now, what are some of the areas where perhaps there's a little bit more uncertainty around the construction schedule and timeline. And that remaining kind of cost bridge to get there, what does that look like just in terms of the schedule of cash flows?
Stephen Cootey: Yes, the scheduled cash flows, the way we're looking at it right now, to date, we spent about $124 million as of 9/30 out the door. So, it's a $750 million project. You figure there's probably about $75 million of retainage that will extend into 2024 and the remainder will be spread out, probably most likely in the first half of 2023. So again, the majority of the construction, we're well on the way of construction. As I mentioned, we topped out in October. We?re expected to be fully enclosed by February. We're going to have the plant, the building, powered up by March. So, in terms of hiccups in the schedule, we're on schedule, and we're working hard -- it's a day-to-day fight to keep this on schedule and on budget. But from a cash flow perspective, Q1, Q2 most likely are going to be the biggest outflows of capital from a construction standpoint.
Carlo Santarelli: Great, thank you, Steve. And then if I could, just a follow-up. You guys obviously talked about two of the drivers that are -- or one of the drivers, I should say, that's a little bit less kind of obvious as to how it impacts the business is that of inflation. And to the extent you guys have seen cycles before, and it's probably a long time since we've seen inflation like this. But when you think about what you're seeing in the housing market today and how sticky the customer remains relative to kind of the inflationary environment and the impact that could have, which of the two would you say from your lens is a little bit more concerning for the outlook at this point?
Scott Kreeger: Well, I think we've been living through inflation for the last several quarters. And the performance has been fairly consistent even given those headwinds with inflation. So, we don't see anything at this point in time that would have us change our outlook that we've had on the company.
Operator: The next question comes from Shaun Kelley with Bank of America.
Shaun Kelley: Maybe just wanted to go back to the broader call out on wage inflation. I think that's the key topic that we're all keeping an eye on. I believe the comment was that things are actually -- you're actually starting to see things plateau a little bit. Maybe if you could just give a little bit broader background on what's kind of going on in the Las Vegas Valley right now on the hospitality side, that would be helpful.
Scott Kreeger: Yes. So just to follow on with that. We do see pockets specific job classifications where we have to adjust rates on a time-to-time basis. But overall, we are very competitive. We think we offer a best-in-class package of benefits and wage to our employees. And I think the important thing to note is we're able to staff all of our business verticals at 100%. So, we don't see any impact to our ability to operate. And at the same time, we don't have a crystal ball, but we're hoping that we've seen the most of the wage increase at this point.
Shaun Kelley: And then as a follow-up, just thinking out to the development side a little bit. You talked about the site purchase that you made, and obviously, there's a few different, I think, portfolio moves that are happening here. Could you -- I mean, I know you?ve probably got a very long-term plan behind that. But can you just talk a little bit about the acreage purchased and kind of how you're thinking about it?
Scott Kreeger: Yes. I think from a purchasing standpoint, there are two predominant purchases that I can highlight. The first of which is located on Losee and the 215 in North Las Vegas. So that is one of the fastest-growing areas of the Las Vegas Valley. There's a UNLV campus going in over there and a large medical campus. And it fits our thesis of being right on the Beltway and in a high development area. So, we look at that as probably farther down the development cycle than some of our others. But we're really excited to be able to close on that property in the next month. And then secondarily, we purchased a large piece of property on the south side of Cactus, which sits between the I-15 and Las Vegas Boulevard. We already owned a parcel on the other side of the street. But when this parcel became available, we looked at the key tenets of success for our development, which is ingress and egress and the ability to have optionality of master planning based on the acreage. So, we're super excited to be able to move across the street and acquire that piece of land. When we look at the demographic profile of that area, it's very similar in structure to the Durango project. So, while it has a bit more competition than the Durango project does, it's still a really exciting piece of land, and we have closed on that.
Frank Fertitta: And then we have 180-plus acres of real estate that we're currently actively marketing.
Operator: The next question comes from Stephen Grambling with Morgan Stanley.
Stephen Grambling: Following up on Carlos' comments on the macro, realizing you're not seeing anything concerning yet. If you did see any kind of decline in demand, what levers do you have, given the labor cuts made already, and how might your approach to buyback and perhaps tolerance for leverage change?
Lorenzo Fertitta: I wouldn't classify as labor cuts. I mean I think we've just done a good job as Scott explained, this is Lorenzo, on just being efficient and making sure that we're scheduling labor according to demand. Beyond that, I think as you see that we're generating very high margins relative to historical numbers, if you did start to see a degradation in revenue, obviously, we would have the ability to manage labor and various other levers that we could look to maintain margin at higher than historical levels. So, we're hoping that, that doesn't happen. And like we said, I mean, what we're seeing right now is fairly consistent with what we've seen in the last couple of quarters. So -- but we manage this literally on a daily basis.
Stephen Cootey: Steve, it goes without saying this is the same operating team that managed through the 79-day shutdown with 0 revenue. So, these guys -- they're very comfortable managed both on the downturn and also the ability to capture the upside. And from a leverage perspective, we have a $1 billion revolver, we have ample liquidity. We're prepared to weather a storm if one was to come.
Stephen Grambling: Makes sense. And maybe an unrelated follow-up. Can you just remind us maybe how the management agreement for North Fork is either structured or how to frame the potential contribution from that asset once up and running compared to some of the other management contracts you've had in the past?
Stephen Cootey: Well, I think it's still being developed and worked on. So, I imagine it's going to be consistent with --
Frank Fertitta: It will be a seven-year contract but we're still in -- basically meeting with the National Indian Gaming Commission going through the management agreement and what the final outcome of that will be.
Stephen Cootey: From a projection standpoint, we think of it more of a Gun Lake than a Graton.
Operator: The next question comes from Jordan Bender with JMP Securities.
Jordan Bender: Great. In the current operating environment, can you comment on your share repurchase outlook in the face of pretty elevated CapEx over the next four quarters?
Stephen Cootey: Sure. I mean, guys, I think it all starts with the balance sheet. Again, as I mentioned, this is Stephen, we're very comfortable with our liquidity position. We have a very solid balance sheet, very low cost of capital, no short-term maturities, very flexible credit agreement. So, I think the position the Board and management team is taking is still a balanced approach, and we feel that we can accomplish both our long-term growth objectives, which Durango is the one staring us right in the face as well as opportunistically and systematically return capital to shareholders.
Jordan Bender: Great. And then just my follow-up -- Yes.
Frank Fertitta: Go ahead. I'm sorry.
Jordan Bender: Yes. Sorry, just on my follow-up. You mentioned last call that you wanted to get Durango up and running before you started your next new build project. Is there a scenario where the supply demand becomes attractive enough for you guys to start building on one of your parcels before Durango is finished next year?
Frank Fertitta: No. We want to be very disciplined in what we do. And we are working on programming. We're working on entitlements in order to be in a position to be ready to go on future projects. But until we get Durango up, operating and hitting stride, we're going to be patient and make sure Durango is working before we move forward with the next project.
Operator: The next question comes from Steve Wieczynski with Stifel.
Steve Wieczynski: So, I want to ask about the older demographic and maybe what you guys saw there during the quarter in terms of visitation and spend patterns from that demographic? And if there were any material changes to what you've witnessed over the, let's say, the last six months or so. And then maybe how you're thinking about that demographic moving forward given the higher rate environment?
Scott Kreeger: Yes, Steve, basically, in a nutshell, when you talk about 55 plus, there's two factors. One, we look at that segment of our business as stable at this point. And we've also kind of looked at that part of our business over the past quarters as having essentially fully returned. And so, when we look into the future, we see a lot of dynamic growth in the 55 and 65 plus ranks in the Valley; both from an incoming resident growth where they're about 4.5x the growth profile in the next five years as the under 55s. And in our own database, we're seeing about twice the spend per visit. And we're also anticipating over the next five years about a 16% increase in their household income. So we continue to have that as our core customer base, and we continue to market to them. And we're seeing stability in regard to their visitation and spend.
Steve Wieczynski: Okay. And then second question, I'm not sure, Steve, if you'll comment or not comment on this, but can you give us an indication as to how October has trended so far relative to September? And I guess I'm just trying to gauge if there have been any material deviations? I would suspect that answer is probably going to be no.
Stephen Cootey: Yes, I think we said what we wanted to say in our prepared remarks.
Scott Kreeger: We don't see anything that's changed our outlook for the business.
Operator: The next question comes from Barry Jonas with Truist Securities.
Barry Jonas: Can you give more color on how the sales process is progressing in the current environment for the closed properties as well as the other land that you're marketing?
Scott Kreeger: Yes. So, we are what I would classify as active. So as Frank mentioned, we have about 186 acres that are currently being marketed. And all of those properties have interested buyers that we're in discussion with at this time.
Barry Jonas: Got it. Any update on the closed properties still seeing healthy interest there?
Scott Kreeger: Those are part of --
Stephen Cootey: Yes, those are part of the $186 million.
Barry Jonas: Oh, I got you. Okay. And then just as a follow-up question. I don't think you've talked too much about your downtown Fremont project. But curious if you could talk about the strategy there and if we could see more smaller projects coming down the road.
Frank Fertitta: Scott, maybe you can talk a little bit about -- we do have a small property.
Scott Kreeger: Yes. Yes. We have our core six large properties, and they have a unique age demo to them. And then as we look at diversifying different products across the brand as you go from large properties to kind of smaller regional market and then even down into the micro markets, you start to see a different customer profile in age and behavior. And so, the Wildfire brand for us, which we've had for a while, is something that we're focusing on and growing both existing assets in the form of capital improvements and then the Wildfire Fremont property, which will be the newest flagship of that brand category. So, we opened at the end of the year here or --
Stephen Cootey: Right before Super Bowl.
Scott Kreeger: Sorry, right before Super Bowl. And we're excited to continue to invest into this brand because it's got a bit of a younger demo. While it still has really good crossover with our core properties, it allows us to penetrate into smaller submarkets in the Valley.
Operator: The next question comes from Chad Beynon with Macquarie.
Chad Beynon: With the convention business and tourism coming back on the strip at a pretty high clip. Are you seeing anything in your spillover properties, I guess, namely, Palace Station that's benefiting? I know you talked about F&B and hotel growth continuing in the quarter, but wondering if you're starting to see a positive benefit from any compression nights on the strip.
Scott Kreeger: Yes. We're seeing very favorable growth in hotels, both on the ADR side and the RevPAR side, we're up in the mid-teens in both of those categories. And then as we continue to see reoccurring quarter-over-quarter growth in catering, we are looking at probably somewhere in the order of a 40% increase in that segment of the business. And then as we look forward into our forward bookings, we're about to surpass the pace that we were at, at pre-quote levels as far as sales and group business.
Chad Beynon: And then on sports betting, the September numbers came out in Nevada today, very strong from a handle, from a hold standpoint. We've been seeing strong hold mainly because of single game parlay on the mobile side, but this was probably a little higher than what we expected in Nevada. Are there things you're able to do to kind of help that hold rate or maybe even offer some of the single game parlays that people like around the country, offered in more of a retail fashion.
Scott Kreeger: Well, I think it starts with the fact that we book our own business, and we have a really skilled group of guys that do our book-making we have a lot of confidence in what they do. We're always trying to provide as many different ways to wager on sports. And if we feel that there is a need in the market for a new vehicle, we would work on that. And a lot of that has to do with it being able to be programmed into our mobile application, which we are seeing a lot of conversion on.
Operator: The next question comes from Cassandra Lee with Jefferies.
Cassandra Lee: You mentioned in prior calls, potential to double your portfolio by 2030. And I want to get your thoughts on some of the factors that may delay or accelerate that time line. For example, what kind of performance do you have to see from Durango to feel comfortable moving to the next phase?
Stephen Cootey: Look, I mean, generally, that's kind of what the plan is. Obviously, we've got some great pieces of property that, as Frank has mentioned, we're working on entitlements. We're working on the master plans. And the idea is to get Durango up and running and get it stabilized, generating an acceptable return or a target return that we have been able to achieve historically on our portfolio. Then from there, it's going to be dependent upon how strong the overall macroeconomic market is and what those different micro markets look like. So, I mean, right now, we're very bullish on our ability to develop those properties. And I guess, for lack of a better word --
Scott Kreeger: The long-term secular trends.
Stephen Cootey: The ability to roll it out. You may have some ebbs and flows here and there, but I think we feel very strongly that the long-term secular trends of the Las Vegas Valley are going to continue, which is projected to have a very strong growth, not population, but the mix of population is growing here or moving here tends to be at higher income levels and particularly in the areas where we actually own these undeveloped pieces of property, many of which are in the highest growing areas with the highest income areas of the Las Vegas Valley. So yes, the intention is to continue to develop and roll these properties out. And as Frank said, though, we're going to take an approach that allows us to get each development up and running and stabilize before we start the next one.
Cassandra Lee: Great. And if I may follow up, there's been some expansion plan announced recently in the Southern Las Vegas area. How may that impact your planned investment there?
Stephen Cootey: I don't think it affects our planned investment or timing. I think it's actually probably a good sign. I think you're referring to the Resort who announced a hotel expansion and I think maybe they may be expanding food and beverage outlet and some convention banquet space. To us, that's a great positive, which it means that they're very bullish on their business and the trends that they're seeing are very positive in their ability to drive rate and occupancy out and that part of town, I think, bodes very well for the positioning that we have out in Inspirada and on the Cactus piece of property. So, we think that's a positive.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Stephen Cootey for any closing remarks.
Stephen Cootey: Well, thank you, everyone, for joining the call, and we look forward to talking to you next quarter. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
