Preferred Apartment Communities, Inc.
Q1 2018 Earnings Call Transcript

Published: 1 May 2018

[Operator:]

Good morning and welcome to the Preferred Apartment Communities First Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, that today's event is being recorded. I would now like to turn the conference over to Jeff Sprain, Executive Vice President and General Counsel. Please go ahead, sir.

[Jeffrey Sprain:]

Thank you for joining us this morning and welcome to Preferred Apartment Communities first quarter 2018 earnings call. We hope that each of you have had a chance to review our first quarter earnings report which we released yesterday after the market closed. In a moment, I'll be turning the call over to Dan DuPree, our Chairman and Chief Executive Officer for his thoughts. Also with us today are Lenny Silverstein, our Vice Chairman, President and COO; Mike Cronin, our Executive Vice President and Chief Accounting Officer; John Isakson, our Executive Vice President and Chief Capital Officer; Jeff Sherman, our Executive Vice President and Director of Multi-Family Investments; Joel Murphy, the President & Chief Executive Officer of New Market Properties; Paul Cullen, the Chief Executive Officer of Preferred Apartment Communities; Boone DuPree, the Chief Executive Officer of Preferred Office Properties; and others from our executive management team. Following the conclusion of our prepared remarks, we'll be pleased to answer any questions you might have. Before we begin, I'd like everyone to note that forward-looking statements may be made during our call. These statements are not guarantees of future performance and involve various risks and uncertainties and actual results may differ materially. There is a discussion about these risks and uncertainties in yesterday's press release. Our press release can be found on our website at pacapts.com. The press release also includes our supplemental financial data report for the first quarter with definitions and reconciliations of non-GAAP financial measures and other terms that may be used in today's discussion. We encourage you to refer to this information during your review of our operating results and financial performance. Unless we otherwise indicate, all per share results that we discuss this morning are based on the basic weighted average shares of common stock and Class A partnership units outstanding for the period. Before I turn the call over to Dan, I want to remind everyone that our annual meeting of stakeholders is scheduled for this Thursday at 9

[Dan DuPree:]

Thanks, Jeff. Before we begin, I'd like to say a word or two about our Co-Founder, John Williams, who passed away two weeks ago on April 16. John was a mentor to so many people during his career, a number of whom are in the room with me today. He was a leader in our community and in our industry. His vision and leadership inspired countless associates over the course of this 50 plus year career in real estate spanning two public companies and countless private ventures. Most of all, he was a great friend and partner. We will miss him but he helped build this company on a rock solid foundation and we will move forward and continue to strive for excellence in all that we do. Moving to our financial performance for the first quarter; I'm extremely pleased to report that we had another solid quarter. In fact, our Company operated successfully across the board which is a direct reflection of both, our management team and our associates diligence and hard work. As you will hear in a moment from Lenny, our first quarter portfolio results compare well to the first quarter of last year. These financial results had allowed us to pay a healthy increase in dividend to our common shareholders while at the same time maintaining a low payout ratio. Since our first common stock dividend payment following our IPO in April 2011, we have increased our dividend 12x and produced an annualized dividend growth of just under 15%. In addition, we just announced that we are again increasing our quarterly common stock dividend another 2% to 25.5% per share payable to stakeholders of record as of the close of business on June 15. This is effectively an 8.5% increase over Q2 2017. During the first quarter we also sold 527,000 shares of our common stock for an aggregate of approximately $7.2 million in connection with the exercise of warrants issued under our Series A preferred stock and unit offering. We continue to focus on the three key elements forming the foundation of preferred apartment communities, that is our product, our associates, and our customers, or PAC. We remain focused on our multi-family community operations including our student housing and we continue to invest a portion of our assets and non-multi-family properties such as grocery anchored shopping centers and office buildings. Although I will talk about specifics in a moment, I want to highlight that we have acquired an aggregate of approximately $1.1 billion of assets since January 1, 2017 and $175 million just since January 1 of this year. These assets were onboarded with favorable debt terms and as is customary for our business strategy with no guarantees, upstream to pack or our operating partnership or any cost collateralization of any mortgages on these properties. As we grow our asset base, we continually review our holdings for strategic sale opportunities. Since the beginning of 2017, we have sold four of our oldest multi-family assets with an average age of 20-year plus reducing the average age of our portfolio to 5.6 years. We believe this to be the youngest portfolio in the industry. The sale of these four assets represented an aggregate sales price of approximately $201 million. We believe the continued sale of our older multi-family communities will reduce the financial stress on projected capital expenditures for which we believe it is unlikely we can receive a return on that investment. For the first quarter of this year alone we sold one multi-family asset for $43.5 million which happened to be our oldest multi-family asset at 21-years resulting in an average annual rate to PAC of 19%. We expect to sell additional assets overtime as part of the strategic plan. We have continued to strengthen the experience and depth of our management team through our management training programs called the Soar & Serious [ph]. We remain committed to training our associates not only in technical skills and customer interactions but also on leadership skills. To put this in perspective during 2017, and the first quarter of 2018, PAC is onboarded and trained over 146 associates. We now have over 650 associates who are committed to doing the very best they can for the benefit of all of our stakeholders, residents, tenants and partners. I'm very proud of their accomplishments, in fact I'm pleased to announce that our efforts to continue to build our Company's unique culture, workplace environment and training programs were recently acknowledged by our associates when we were named one of the top places to work in Atlanta for 2017. Let me know call on Lenny to walk you through our numbers. Lenny?

[Leonard Silverstein:]

Thanks, Dan. Overall, we once again produced very good operating results for the first quarter in line with our internal budgets and tracking with our guidance. Our revenues for the first quarter were almost $90.4 million or almost 36% greater than the revenues for the first quarter last year. Our FFO for the first quarter 2018 was approximately $14.7 million, or $0.37 per share compared to approximately $9.6 million or $0.35 per share for the first quarter of last year; this represents a very solid 5.7% increase in FFO on a quarter-over-quarter basis. This is even more impressive, in fact as of March 31, 2018 we have almost $40.2 million weighted average shares of common stock and Class A units outstanding which is 12.3 million weighted average shares and units outstanding since 2017 or 44% more shares and units compared to that time period. Based on these results we are reiterating our FFO guidance range for the year of $1.43 to $1.47 per share which represents the 28% and 12% increase in FFO year-over-year. The midpoint of the ratings reflect a continuation of our historic performance. But the first quarter this year we paid our common stockholders and unitholders in dividends at $0.25 per share representing a 13.6% per share increase over the dividend we paid to our stakeholders in the first quarter of 2017. In addition, our first quarter 2018 dividend payment represented an FFO payout ratio of only 68.5%. Switching to other financial statement metric, we continue to add quality assets to our portfolio in a meaningful way. Remember though, if we believe that the appropriate prepack [ph] to acquire an asset that may not initially be increasing to our stakeholders -- our advisors prepare to wage some of it's ongoing fee and in fact has done so on occasion. For the first quarter our total assets net depreciation were $3.4 billion or approximately $850 million greater than at the end of the first quarter last year. This increase of $850 of new assets from March 31, 2017 is net of the favor of two assets which aggregated $87.5 million in gross proceeds. In addition to increasing total assets, our cash flow from operations this quarter was $31.4 million which represents a 71.9%, almost a 72% increase in cash flow compared to the first quarter of last year. Although interest rates have risen somewhat the last year, they have been on decline [ph]. At the end of the first quarter our leverage on our assets based on the undepreciable value was down 53.9% which represents a 6% reduction in leverage compared to the first quarter last year. And however, we mentioned leverage against the market value of our assets instead of undepreciated book. We've laid our leverage ratio would be substantially lower. We'll continue to closely monitor the relationship between interest rate and cap rate in determining what we believe is the proper financing leverage in connection with our ongoing asset acquisition strategy. As you may have read on our earnings press release last night, tax-ability [ph] to continue to raise capital through independent broker dealers and registered investment advisors from the sale of our Series A and Series M preferred stock give us two wonderful channels and support of our expected continued acquisition activity; a key component of our strategic plan of our investment programs. So now let me call back on Dan to provide some more color on our acquisition activity, our loan investment program and our pipeline

[Dan DuPree:]

Thanks, Lenny. We continue to actively pursue investment opportunities through acquisitions and real estate investment loans across our several property types. Multi-family properties, our foundational asset class remain our preferred target but as cap rates compress for these properties and interest rates rise, we'll also look for opportunities in our growth re-anchored in office platforms. As I mentioned, we continue to be active in the acquisition and investment in best-in-class Class A multi-family and student housing communities. With the two multi-family communities we acquired in the first quarter this year, we now own and manage those at the end of March, a total of 31 multi-family communities representing 9,768 units in 18 cities across 10 state with a number of opportunities in our active pipeline. We also owned as of the end of the first quarter four student housing communities in each of Arizona, Florida, Georgia and Texas representing 891 units or 2,950 beds. We are unique and fortunate that we do not solely depend on the sale of our common stock to raise money for our new investments. Our Series A and Series M preferred shares were created to ensure that we have a source of capital independent of sales of our common stock in the public market. When the specked [ph] is on on Wall Street, money can be raised fairly easily, but when it is off or when reached stocks have retreated well below their NAVs, capital is just too expensive. It is hard to make investment commitments when there is uncertainty of capital availability. Because we have the ability to sell our preferred stock at a pace of $35 million to $45 million each month, we enjoy a competitive advantage as we pursue strategic assets. This advantage plays best to a platform that has some product diversification. A second major differentiator for our Company is our real estate loan investment program. These loans typically are structured so PAC receives a 10% to 16% aggregate current and accrued interest return on the investment which is very accretive to our FFO. They also provide us with an option to acquire assets on which we originated these loans at a discount to the market value of these properties at stabilization. This has provided us with a steady stream of new properties at attractive prices. Till we create this [ph] and the first quarter, we exercised our purchase option to acquire the Green Park multi-family property in northeast Atlanta. To determine the price that we would pay, we also had to determine what our discount should be. To make this determination we had two appraisals completed along with two BOVs, brokers' opinions and value. The result was a discount of $5.8 million, a terrific, and not a typical result. Our frustration is that this discount while it positively impacts our balance sheet has only nominal impact on our P&L and to that extent understates earnings. Going forward, we will address these discounts in a way that will allow us the opportunity to reflect the true value of these discounts in our P&L as these discounts combine with the interest we received are the integral component parts of the cost saved to us by the borrower. During the first quarter of this year we also closed on two real estate loan investments. The first was the loan investment of upto $3.5 million in support of a small mixed use project in North of South Carolina. The second was the closing of a much larger real estate loan investment of $137.6 million in support of a 551 unit multi-family community in San Jose, California; and approximately 37,000 square feet of commercial space being developed by Western National, a premier multi-family developer and manager. If you recall, when we previously reported that we had originated a $31.5 million real estate loan investment with Western National during the second quarter last year in connection with the acquisition of the land for this development. This amount was rolled into the new loan investment. We acquired one office complex in Atlanta in the first quarter representing an aggregate of 187,000 square feet. As of the end of March, we owned five Class A properties, representing an aggregate of $1.5 million rentable clear feat. These office properties are collectively and importantly approximately 98% leased with tenants having a weighted average of more than 8 years of contractual lease term remaining. Under our real estate loan investment program we now have outstanding real estate loan investments aggregating slightly over $600 million in commitments as of the end of the first quarter 2018 comprised of 23 projects totaling 5,835 units and 4,145 student housing beds. This program continues to generate excellent cash flow that few other investments can duplicate and create a tremendous pipeline of new multi-family and purchase opportunities aggregating over $1 billion in estimated market value and represents potential significant embedded value through the discounted purchase options PAC receives at the time of origination of these real estate loan investments. Subsequently quarter end we originated an aggregate $30 million real estate loan investment for a new 302 unit multi-family development in Alexandria, Virginia. And we received a purchase option discount in connection with the origination of this loan investment. This project is located within walking distance to the Blue Line Passenger Rail heading to Washington DC. We're excited and delighted to enter into this market with such a strategic transaction. As you know, as part of our business we also invest in grocery-anchored shopping centers through our new market platform. We've been very active in this regard, I'd like Joel Murphy to discuss these activities with you now. Joel?

[Joel Murphy:]

Thank you, Dan. We have an exceptional senior management team at the new market subsidiary which has a proven track record for executing the tight strategy to grow our sunbelt grocery-anchored portfolio and for operating at the high level performance. We continue to build our bench by adding talented associates to support this growing portfolio in all areas, including asset management, acquisitions and finance. We continue our focus on the operating results of our portfolio including tenant retention, new leasing, leasing renewals and capital improvements to our centers. In the first quarter we outperformed on our internal goals for both net operating income and leasing. Our portfolio, which is the end of the first quarter totaled 39 grocery-anchored centers with 94.1% leased and 16 of our 39 centers were 100% leased. We now have three centers in our portfolio that are in different stages of value add phases or redevelopment. And as part of our remerchandising strategy at two of these centers we are being more selective on which tenants we renew, so we're actually moving some operators out, electing to extend some tenants only on short-term arrangements, so allow us to maintain maximum flexibility as we work to improve the tenant mix and execute on our value-add strategy in both of these centers. In the third center, we are currently underway with the planned redevelopment of an anchor space. When we acquired this center at April 2016 we factored this into our underwriting scenarios and we proactively backfilled the majority of this space with all -- and did a higher rent with very little downtime in CapEx. We are now under construction and we expect OLD to open by the fourth quarter of this year. We are pleased to welcome OLD [ph] to our list of Top Tier grocery anchors. The core portfolio of 36 properties excluding these three properties is 97% leased at the end of the first quarter, an increase of 40 basis points compared to the fourth quarter of '17. We're also particularly pleased with momentum of our leased renewals this past year, both anchors and in-line tenants. We continue to proactively manage our anchor leased rollover. Of the 10 centers with 2018 or 2019 anchor expirations which totaled 640,000 square feet; all of our 2018 anchor renewals, approximately 343,000 square feet are now complete. This leaves us just shy of 300,000 square feet of anchor renewals remaining for 2019. During the first quarter we executed on 51,700 square feet of inline renewals, and we approximately 135,000 square feet remaining to execute on for the balance of '18. We are very pleased to have all of our anchor rollover in such a good percentage of our inline rollover handled this early in the year. We're also actively adding value and upgrading each of our shopping centers with the execution of capital projects including LED lighting, landscaping upgrades, signage, new parking lot and roof replacements. We executed on all cylinders in the first quarter, released vacant space, we kept our centers leased, we've renewed at higher rates, we've managed our expenses, had very little bad debt expense and we grew our pipeline. The combination of these positive trends allowed our new market subsidiary to upstream outstanding results to PAC. After the close of the quarter, in fact just this past Friday on April 27, and as you may have seen in our press release, yesterday before the market opened; we acquired two public anchor shopping centers having aggregate investment value of approximately $32 million. One center is located in suburban Atlanta and one is in suburban Nashville [ph]. We are pleased to add these two centers to our asset base in these two growing markets. These centers are excellent examples of your focused strategy. Anchor by a market leading grocer that has a high sales per square foot store and located in the solid sunbelt sub-market with excellent demographics. As of today, we now own 41 grocery-anchored centers and 7 sunbelt states in 18 market totaling over 4.2 million square feet with nearly 700 independent operating leases. 20 of these centers are anchored by public and 11 are anchored by the [indiscernible] banners, both public and Kroger [ph] companies are market share leaders. Each of them has generated approximately $2 billion in earnings this past year. We remain active in the marketplace, our acquisition pipeline is very healthy and we are focused on new opportunities but we are also very diligent on staying inside our tight geographic and product tight strategy while also being very disciplined, a better due diligence and our pricing. Now let me turn the call back over to Lenny.

[Leonard Silverstein:]

Thanks, Joel. Despite the ups and downs of the marketplace our team has continued to do a great job building a carefully constructive platform and executing on the strategies and vision that John, Dan and I put into place back in April 2011 at the time of our IPO. We have many hours in our quiver [ph] which have allowed us to be innovative, nimble and effective. Overall, I believe we delivered on each and every promised financial goal we've set and performed extremely well. We also believe our multi-family communities are among the most attractive in the industry, are hardly in menopause [ph] and are the youngest in the industry. Our investment in student housing, grocery-anchored shopping centers and office buildings have complemented our focus on multi-family and quite frankly have performed very well in our own right. We continue to believe that all these investments together with the cash flow generated by our real estate loan investment program and the potential embedded value we've created through our discounted purchase options place PAC at the forefront of our industry. With that, I'd like to thank you for joining us on our earnings call this morning. I'd like to now turn the call back to our operator and to open the floor for any questions or talks you may have. Operator?

[Operator:]

[Operator Instructions] And the first question comes from Michael Lewis from SunTrust. Please go ahead.

[Michael Lewis:]

Let me first say how sad I was to learn of John's passing, it feels a little maybe soon to ask this but I wanted to ask, first Dan, do you see yourself in the CEO role for a long time for multiple years? Is it something you want to do? And then along those lines as well, is there anything that changes at the Company; it sounds like maybe now in terms of vision or strategy but maybe even more on a tactical level or do you think you can continue with the plans that were in place?

[Dan DuPree:]

As to the first part of the question, I don't think it would be a good plan for the Company to go from John to an Interim CEO situation, so the role understanding that I was going to stay as long as the board will have me within reason. To the second part, yes, I'm in a really kind of a unique situation and that I may be the most uniquely qualified person to step in a role in this way as I became President and cousins [ph] properties were invested in 1995. So I think I have a keen appreciation for the things that need to be done when you step in for an iconic leap and John was certainly that. In terms of strategy; John, Lenny, Joel and I had collectively developed a strategy that we've employing for the last 7 years now, going on 7 years. And we believe wholeheartedly in it, it is predicated on trying to make good real estate decisions because all of our background really are in real estate first public company and finance, probably second. So the strategy -- I think you can expect a strategy to be very, very similar. In terms of tactical tweaks; yes, everybody has their own kind of twist on things and we're no different, I mean there are some -- maybe not so noticeable things and we'll begin to look at -- might involve buying more assets on cash and keeping dry powder in that respect but I mean these are all things that we'll figure out overtime. But I would tell you, yes, tactical tweaks, strategic consistency and we're taking the long view from the standpoint of the management team.

[Michael Lewis:]

My second question, I wanted to ask about a lot of REITs this quarter has seen, sizeable increases in property taxes; you guys had a little bit of a unique situation this quarter and that expense item was down a lot. But I wanted to ask more kind of the trend -- are you seeing pressure on the tax side? And what could we expect maybe for the rest of the year?

[Dan DuPree:]

Well, let me tell you we're extraordinarily proud of the effort that we've made around not only property taxes but insurance, I give a lot of the credit to that, to [indiscernible] before to has asset management along with Bill Lieshman [ph] and Ron Gayle [ph] in property management. It is a major, major focus and we recognize for the fruits of that effort. You know, municipalities have figured out that they get the least amount of political backlash by raising property taxes, particularly on commercial properties. And as their needs for capital increase, I think we increasingly become a target; so it's just really important that we're smart about -- one, it's important that we underwrite our deals with a silver eye on what property taxes are going to be but we need to be very proactive in deciding property taxes that -- particularly where we think they are not appropriate.

[Michael Lewis:]

Lastly for me; it looked like the preferred sales or maybe a little bit later in 1Q than they were in 4Q '17. So I just wanted to ask you if that had anything to do you think with interest rates going up during the quarter or if maybe there was another reason or if it was just -- one quarter doesn't make a trend and then kind of what you expect to sell on the preferred side, again for the rest of the year?

[Dan DuPree:]

Lenny, take a crack at this.

[Leonard Silverstein:]

Yes. No, I mean, it's a fairly simple -- I answered last year in the first quarter '17, we are closing out our $900 million Series A offering of the Series A preferred stock and as is typical in those types of transactions you see a little bit of a rush towards the end which accounted for the increasing numbers for that. We also -- this time around I don't think interest rates for first quarter of '18 really had much of a negative impact on us, in fact -- and I would just at a major conference yesterday in Chicago, what I'm hearing back from the broker-dealer community and RA community is they appreciate a steadiness and the consistency of that 6% dividend on the Series A preferred stock, as well as a consistency and reproducibility for the M shares which are at the slightly different format but again, for therefore assumes -- they are trying to be the best fiduciary for their own clients. So that steady, predictable type of return for them is very, very solid and it more than seems to be outweighing the increase we've seen in just interest rate in the marketplace.

[Dan DuPree:]

I want to tip it on your question just a little bit. I've been involved with public companies since 1992, and I made a comment and more prepared remarks about -- when the spike is on, the spike is on; when it's off, it's off. A great strategic advantage we have is that we can be active in pursuing deals, frankly with although they have lesser amount of competition because their certainty of close with us because we have a clear vision towards capital and it's going to be there when we need it. So actually addressed absolutely nothing in your question but I feel better about having said it.

[Operator:]

And the next question comes from John Benda from National Securities Corp. Please go ahead.

[John Benda:]

Just quickly on the Green Park takedown, it seems like that one was taken down right on schedule, can we infer that the other purchase option windows will also be exercised on schedule or is that kind of a unique case?

[Dan DuPree:]

I think where we are right now, I'm looking down the table to see if somebody is going to disagree with me but I think we're pretty much on target for the purchase option windows that exist out there. Most of the project -- we were looking at the [indiscernible] this morning and by and large, we're in the high 90% leased across the portfolio, there are one or two that are newer as one deal in Orlando and just started leasing but by and large, we're in really good shape on the lease effort than those loans.

[John Benda:]

And then quickly, I think in the earlier comments you made statement about not earning a return on the CapEx but aren't dollars invested in CapEx somewhat naturally -- and can you argue that you're earning a return through maintained cash flows for the properties? Can you please elaborate on how you're kind of look at CapEx spending from a larger perspective?

[Dan DuPree:]

Yes, probably more specifically what we're saying is if you have a portfolio of assets, i.e., pushing 20 years in age. You're looking at a portfolio assets that are going to start to need new routes, they are going to need new parking lot and you're not going to get anymore rent from putting on a new route. So tenants expect to have a roof and be dry, so that's what we're talking about. And when you look across the competitive field for us, and you look at some of the really, really, really good multi-family companies; you're also looking at some really, really good multi-family companies that have really, really old portfolios and are going to have outsized capital expenditures. The fact that our portfolio is something in part because of the mezzanine loan program that's a feeder, is a keen advantage from the standpoint of CapEx.

[John Benda:]

And just lastly, do you -- would you say that for 2018 we're going to see the same kind of investments in terms of percentages to retail, multi-family and loans as we did in 2017 or that going to shift in some way?

[Dan DuPree:]

We're going to play it by year. I mean, we're unique and by raising money every month it's coming in. And some level of diversification was necessary because if the money was coming in and cap rates were compressing on multi-family which is clearly our preferred project. How you've got cap rates compressing, interest rates going up, money coming in; it's -- it is not a scenario that allows for continued growth and by having the opportunity to invest in Joel's retail centers which we're buying right now at probably 100 basis points better going in cap rates for Boone's office buildings that are right now even greater differential than that. We have the ability to actually take that money and invest it in accretive ways and also pay attention to what our 10-year IRRs are; we're not in this for the short-term, we're in it for the long-term, and we are -- I mean, we're into trying to distance ourselves from the competition.

[John Benda:]

And then just real quick for Joel. Joel, you had made a comment about selectively not renewing some plans in the retail portfolio; can you give us specific example if there has been a plan that you haven't renewed and why?

[Joel Murphy:]

Sure, John. Those are in -- well, it could occur actually in any of our 41 assets but specifically in the comments I was saying, we have three that are in different value add phases, so what we'll do is we might keep somebody -- let's say somebody is coming up to the another term and they want to stay and they want to do a five-year deal, we'll say -- we'll know because we might want to put their space together with the space that's adjacent to them that's coming up in a year; so we might give them a one year deal or you might even choose not to renew because then we know the space available next store because we can then put those two together and get somebody a bigger space at a much higher rent. So the goal then also could be that we look around in some market and say I will -- that is a good restaurant operator but there is a better one down the street and what we would rather do particularly in these local sub-markets and say let's don't renew that restaurant but accept a little bit of downtime and move the better operator into our center at better rate.

[Operator:]

[Operator Instructions] Seeing there are no further questions, this concludes our question-and-answer session. I would like to turn the call back to Dan DuPree for any closing remarks.

[Dan DuPree:]

Well, I want to thank you for joining us on this earnings call. I'd like to kind of explain to you that we have multiple business units here and they are captained by some of the best people in the industry. I felt the group of folks yesterday that had the opportunity to work with some great folks in the industry, both at [indiscernible] that was new market; but I've never been associated with a group of people that are more talented than the folks we've got here. So I hope you all can take comfort in the fact that John's legacy here is that he put together an outstanding deep team and we're going to bust our tails to perform for all of you. So I'd like to turn the call back to operator; no, I'm not going to do that because we've already done it. With that, I'd like to end the call. If you have any additional questions or comments, please don't hesitate to give me a call. Thanks.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.