Alexandria Real Estate Equities, Inc.
Q3 2017 Earnings Call Transcript

Published: 1 Nov 2017

[Operator:]

Good day, and welcome to the Alexandria Real Estate Equities Third Quarter 2017 Financial and Operating Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Paula Schwartz with Investor Relations. Please go ahead.

[Paula Schwartz:]

Thank you and good afternoon, everyone. This conference call contains forward-looking statements within the meaning of the federal securities laws. The company's actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's periodic reports filed with the Securities and Exchange Commission. I now would like to turn the call over to Joel Marcus. Please go ahead, Joel.

[Joel Marcus:]

Thanks, Paula, and welcome everybody to our third quarter call. With me today are Dean Shigenaga; Steve Richardson; Peter Moglia; Dan Ryan; and Tom Andrews. The Harvard Business Review, September/October 2017, had a really great quote that seems to exemplify this quarter's performance and it is neither great leadership nor brilliant strategy matters without operational excellence. And so to the women and men of the Alexandria family, thanks to each and every one of you from the bottom of my heart for a truly great third quarter 2017, a truly operational excellence. Some of the notable accomplishments this quarter, we're pleased that the Green Star designation by GRESB was granted to Alexandria. It's actually quite hard to achieve for laboratory property type that operates 24/7 as opposed to traditional office. And we were given the number one in the United States for health and wellbeing module, a very great kudos to our team in that regard. We're also very proud of our total return to date from IPO through the third quarter of 1211% compared to the RMS of 546% and the S&P 500 at 334%. Common stock dividend is up 8% over last year at this time and the balance sheet as Dean will talk about is in the best shape ever in the history of the company. Revenues for the third quarter and year to date were up about 23%. 50% of our annual revenue is from investment grade tenants, really an industry-leading standard, not standard, but industry-leading stat. Our average lease duration is about 9.4 years, coming from the top 20 tenants which are about 45% of our annual revenue. We made significant progress in bringing down our preferred stock outstanding to now less than about $75 million in the aggregate and we're working hard to achieve over time an upgrade in our investment grade rating. Importantly, our margins were up 200 basis points to 71% from a year ago at this time, Cash same store NOI at 7.8% and leasing spreads per renewal is up 24% GAAP, 10% cash, strong contributions from both San Francisco and Greater Boston. We see we have continuing and consistent strong demand in our key life science markets. On the industry side, the NASDAQ biotech index is up about 18.5% this year. On the NIH funding at about $34 billion is very strong and the Senate currently has a bill to increase that next fiscal year up to $36.1 billion, and the House has a bill, $35.2 billion, so we feel we're in very good shape. The FDA has a new really superb commissioner, Scott Gottlieb, who we hosted about two weeks ago. He's breaking old barriers, less time for approvals, and trying to decrease the cost of clinical trials. All of which will be very, very important for not only the industry, but patients. This year approvals to date 35 and we're on track potential to receive 40 drug approvals. About 46% are Alexandria tenants. Biomedical research this year will contribute on the philanthropy side, about $33 billion to overall funding which is a historic high. And venture capital funding this quarter were almost at $6 billion, the highest quarterly investment ever and on track to break $15 billion for the year for life science venture capital. Worldwide total biopharma R&D is about $160 billion, and according to most IMS stats, to increase about 2.5% per year through 2022, which is a good sign. And also for the first time, U.S. scientists working in a lab had edited disease causing gene mutation out of a human embryo, a real amazing breakthrough and promises to really revolutionize disease treatment. As you recall, for much we said before, there are about 10,000 diseases known to mankind and only about 500 have been addressed medically. So we're at a 5% level really in the early innings. On health insurance, keep the following in mind. About 67.5% are private insurance provided by employer or purchased directly by the consumer, 37.3% are government coverage and about 8.8% are uninsured. That's the playing field for 2016. On external growth, we're on track to deliver this quarter

[Dean Shigenaga:]

Thanks, Joel. Dean Shigenaga here. Good afternoon, everyone. We're pleased with our continued strong execution by our team, again, quarter-to-quarter and year-to-year. And remain on track to deliver 9.3% growth in FFO per share as adjusted for 2017. We are in an excellent position today in five key areas

[Joel Marcus:]

Operator, we'll go to Q&A.

[Operator:]

Thank you. We will begin the question-and-answer session at this time. [Operator Instructions] The first question will come from Sheila McGrath with Evercore. Please go ahead.

[Sheila McGrath:]

Yes, good afternoon. Joel, I was wondering if you could give us some insight on the revisions upward on the leasing spreads, how much of that was driven by tenants wanting to renew earlier than expiration? And do you see this trend continuing?

[Joel Marcus:]

Yeah, let me have Dean comment on that, Sheila.

[Dean Shigenaga:]

Hey, Sheila, it's Dean here. Yes, the key drivers of the growth in leasing or rental rate growth in the current quarter was driven primarily by early lease renewals. Like I said in prior quarters, it's pretty difficult to project early leasing activity on renewals. It's really contingent on the tenants' needs. But 61% of our re-leasing activity this year was driven by early renewals that go out over one to three years forward beyond the current year. Looking forward, I suspect we'll continue to have opportunities. But they're really hard to predict and project at the moment.

[Joel Marcus:]

But I think that underlines a - I think in a number of the key markets the tenants focus on trying to lock down space at current fair market rental rates and not kind of play the lottery for the future. And I think that bodes well for us.

[Sheila McGrath:]

Okay. Great, and then, just as a follow-up, on the - I think this is guidance related for you, Dean. On the 91,000 square feet to be placed in service in first quarter, for 100 Binney, is that part of the driver of the higher capitalized interest in fourth quarter that you cite in kind of the footnote on guidance?

[Dean Shigenaga:]

Yeah, Sheila, so the comment on our guidance page on Page 5, as it relates to being on the upper end of our range guidance for capped interest and on the lower end of the range for interest expense in net, which is the number reported on the income statement. It's actually really related to the acquisition of future value-creation opportunities. I think the way to think about it Sheila is, as we acquire future value-creation projects, we're required to capitalize interest while we entitle the project. But these projects are actually funded with long-term capital and because by and large there is very little to no income at the moment, we equity fund the acquisitions. So we have growth in capped interest, but no corresponding growth in interest cost. But the third point I'd probably make is that when you think about FFO per share, it's basically relatively neutral to earnings, because you're getting about a 4% yield from the capped interest on the investment. But you're having to equity fund that long-term for the moment.

[Sheila McGrath:]

Okay. Thank you.

[Joel Marcus:]

Thanks, Sheila.

[Operator:]

The next question will be from Manny Korchman with Citi. Please go ahead.

[Emmanuel Korchman:]

Hey, guys, good afternoon. Maybe going back to just tenant growth plans and so the way they're approaching space, given the tight markets you operate in, sort of how are tenants thinking about the space they're going to need? And in those situations where they look around and there is just nothing new coming, how are they solving for that sort of need without having new space to build into?

[Joel Marcus:]

Okay. So maybe let me ask Steve to address that.

[Stephen Richardson:]

Yeah, hi, Manny, it's Steve. Yeah, a good example is the recent renewal and expansion that we had in Mission Bay with an existing tenant. It was in fact an early renewal, but it was also in combination with an expansion. So where we had existing tenants in place adjacent to this one dominant anchor tenant, they've gone ahead and committed at the end of the expiration of the adjacent tenant's terms to go ahead and expand into that space and through the long-term lease. So we're seeing a combination of - as Joel mentioned, locking down space, but then also controlling adjacent space for expansion.

[Thomas Andrews:]

Yeah, Manny, it's Tom. Manny, it's Tom Andrews. I'll expand on that little bit too. I mean, in Cambridge, certainly, it's a very, very tight market. The current lab vacancy in East Cambridge is only about 1.5%. And so consequently, we're seeing tenants and their brokers get out into the market sooner than they normally would to look at their options for space. We're certainly seeing some tenants select different sub-markets, whether they're sub-urban or other urban sub-markets other than East Cambridge, because of the tightness of the market. And we see some tenants try to figure out growth strategies that involve maybe trying to do some of their work remotely and having multiple locations. Sometimes it's a suburban location and an urban location together. So, tenants are doing different things to try to solve, and we're obviously working closely with our group of tenants and the prospects there in the market to try to help them solve their - for their space needs.

[Emmanuel Korchman:]

Thanks for that. And then, Joel, maybe one for you, just in terms of succession, it's a topic we've spoken about on our prior calls. Can you give us an update on when we might find out more? Is it going to be at the Investor Day or do we need to wait until next year to find out sort of more on that plan?

[Joel Marcus:]

I think I've said, I mean, that's a board ultimately timing decision et cetera and sometime on or before March 31, but you'll see, it will be totally seamless, so it should be great. As I said, we've been in the process for over two years, been coached by Jim Collins and we're very comfortable with the kind of the process.

[Emmanuel Korchman:]

Okay. Thanks, everyone.

[Joel Marcus:]

Yeah, thank you.

[Operator:]

Our next question will be from Rich Anderson of Mizuho Securities. Please go ahead.

[Richard Anderson:]

Thanks. Good afternoon. When you have Pinterest, Stripe and Uber, including them I guess up and running, where does your tech exposure get you to as a percentage of the total portfolio? And maybe describe your level of comfort at that range.

[Dean Shigenaga:]

Rich, it's Dean Shigenaga here. The percentage will creep up a little bit as we approach the end of the year. But I think all in all, you've got so much growth coming on line over the portfolio that it will mute that impact a little bit. We're probably going to approach somewhere around 10%. I don't have the exact statistic in front of me, but it's in that general range, Rich.

[Joel Marcus:]

Yeah, in general, we meet with the - because they're all private companies. We meet with the companies quarterly, the senior management teams. Lot is written about each of these companies. They're well known. We think each one is a highly disruptive or disrupter in their space that is not a flash in the pan. These are not dot-com companies from the last generation. Stripe has proven itself to be an amazingly broad-based company with amazing talent. I think Pinterest as well. Uber, you read a lot about, I think once they get their self-straight at the board level, I think they brought in a new CEO that I think will be able to rationalize the company. It's certainly is an important company and one that - whether it's worth $70 billion or $55 billion, I don't think it's much of an issue. I think what they're doing in the marketplace and how they continue to execute, we see in their markets, I think is a testament to the company. But obviously, we pay a lot of attention to these companies and we have on staff several people who have our trained engineers and underwriters. So we're pretty good at understanding these companies be on the financial - I mean, any company obviously look at management, you look at financial strategy and you look at the niche, and so we pay a lot of attention to that.

[Richard Anderson:]

Well, Pinterest is definitely disrupting my household, I'll say that…

[Joel Marcus:]

Your wife's busy on that, right?

[Richard Anderson:]

This year, you combined asset sales and equity issuances as a one line item in your guidance, and most of that is come through equity channels, not to kind of tap you for in 2018 guidance number. But it seems to me, much to sell from a property perspective. Is that correct? I'm not looking for a guidance number, but just wondering, is there a non-core portfolio that's brewing behind the scenes that we're not seeing right now.

[Joel Marcus:]

Well, I think, there is always a few odds and ends that are some legacy assets. We do hope to extricate ourselves from China and few other assets. But I think, the joint venture route is one that always - we used that pretty heavily a couple of years ago. So I think, we have multiple options out there. And we feel pretty good about, where we are today.

[Richard Anderson:]

Okay. And last question. Drug company stocks have done okay, in terms of business, but their stocks have taken a little bit of a hit lately. I don't know if that's an Amazon risk about them getting into the business. I'm just curious, Joel, if you have a view about Amazon entering the business and being a disruptor, so to speak, and if that weighs on your mind at all at this point.

[Joel Marcus:]

Yeah, I think, that's focused. I mean, pharmaceutical sales at the end point retail pharmacy sales are kind of where they're looking to disrupt. And so that's different than research driven manufacturers. And I've always thought that current system is pretty inefficient, when you have PBMs, the pharmacy benefit managers between the manufacturers and the ultimate users and so forth. So I think, to me, I think, it's going to rationalize the system. But I don't think that's weighed so much on drug stocks, I think, each one has been somewhat individual. Celgene made a pretty major change in their 2020 guidance on overall revenues, Merck had an EU issue with Keytruda, their new cancer drug. I mean, each one is kind of the explainable. As I said, Vertex has kind of knocked the ball out of the park this year. A recent M&A transaction Kite, was purchased by Gilead for almost $12 billion, and just got approval on the second cancer immunotherapy. So I think, we're pretty comfortable, the index, at least, on the biotech side is up, it was at almost 19% year-to-date, which is certainly outpaced many of the other industries. So I think, we feel pretty good, I think, the regulatory side is super positive with Scott Gottlieb. I think, the tenor [ph] in Washington is constructive, and I think, there is a positive business climate behind it. And if the - whatever shape the current tax bill takes place and we're able to - the industry is able to repatriate both at the biotech and pharma level, hundreds of billons of dollars, maybe between $100 billion and $200 billion or more from overseas cash that's going to be a net positive for the industry. So I'm pretty bullish.

[Richard Anderson:]

Outstanding. Thanks very much.

[Joel Marcus:]

Yeah. Thanks, Rick.

[Operator:]

The next question will be from Jamie Feldman of Bank of America Merrill Lynch. Please go ahead.

[Jamie Feldman:]

Great. Thank you. I guess, just taking with Richard's question or a similar topic. Just to throw into that, how do you think about the risk of just pharmaceutical pricing and all the rhetoric around trying to take pricing levels down? And how that will…

[Joel Marcus:]

Well, the reality is, drugs account for only about 10% to 15% of total healthcare spend, and they're the only sector that actually can drive cost down. Hepatitis C is a great example that disease is now curable. The problem is, and the reason that there was a lot of concern about, when Gilead came out with their cure product, Sovaldi, was that insurance companies, they capture you as a patient for a year. And if they have the choice of buying a cure for you or just maintaining you, because you maybe in somebody's health plan next year, what do you think they're going to do? So it's less the price of the drug, because it's clear, if you can cure a disease, the downstream cost effect is huge. And then, if you translate that to metabolic diseases, you translate that to neurodegenerative diseases, imagine if we could cure, prevent or treat effectively Alzheimer's, dementia, the cost of the system way weigh down. So I'm not too worried that, ultimately, high-quality drugs are going to make measurable impacts, are going to be well received in the system. The system needs some changing and the intermediaries are part of this issue that disaggregate, because PBMs typically want to see higher drug prices, so they can increase their margins on sale, because they get a benefit of the difference between the drug price and what ultimately the list price and what they sell it at. So there's a number of misaligned incentives. And so it's the drug companies, the pharmacy benefit, managers and the manufacturers - the research manufacturers are able to kind of align themselves, and I think the system is going to actually work really well.

[Jamie Feldman:]

Okay. And then the net effect is no dollar is getting squeezed out of - on your side of the business?

[Joel Marcus:]

Yeah. I mean, the problem with the industry historically has been a lot of companies have historically just had incremental products that they extend life three months, five months, six months, 10 months. That's not a real important drug. And I think those will fall by the wayside, as they should.

[Jamie Feldman:]

Okay. That's helpful. You guys mentioned net effective rent growth up year-over-year. Can you just talk through the major markets and how much you think it is up year-over-year and whether you think that growth is sustainable?

[Dean Shigenaga:]

Well, sustainable is always a fun one to talk about and predict the future, Jamie. So maybe I'll just say that fundamentals remain solid, which is a great backdrop to enter into and going forward. But if you think about Cambridge, Mission Bay, South San Francisco, and even down in San Diego, I'd say, on average, you're upper - you're almost at top of the single-digit range for year-over-year growth in net effective rent. But what I also mentioned in my commentary that's important is TIs and leasing commissions are fairly nominal on leasing renewals and releasing a space. So the net effective rent, you're seeing is really growth in rental rate, but they're one and the same as far as the growth year-over-year. So concessions are not impacting our markets today.

[Jamie Feldman:]

Okay. How much are construction costs up over that same time? I know, they're less of an impact for your TIs, but just generally?

[Joel Marcus:]

6% on average. That may vary in New York, maybe higher because of Hudson Yards and some of the big projects. But by and large, I think, we've given that number before, I think, across the country, we'd say 6% would be a reasonable average.

[Dean Shigenaga:]

Yeah, unfortunately, Jamie, as we talked about on my commentary, the pipeline under construction and the pipeline that we have to lease right behind at about 1.3 million square feet that's really near-term stuff, we're still projecting about 7% overall cash yield on our total investment. So rents are definitely keeping up or outpacing the cost of construction for us.

[Jamie Feldman:]

Okay. And then last for me, the 279 East Binney, you mentioned a tenant, I think, you said in the portfolio that's interested in that space. Would that leave some space behind?

[Joel Marcus:]

I'm sorry. You may have misspoke. 399 Binney or 279 East Grand?

[Jamie Feldman:]

I wrote it down quickly.

[Joel Marcus:]

I thought you said 279 East Binney.

[Jamie Feldman:]

I may have. The project where you said, you've got a tenant who's looking at 50% of the space and but be coming from the portfolio.

[Joel Marcus:]

Yeah, that's the current tenant, a Google subsidiary fairly whose in the campus.

[Jamie Feldman:]

So they'd just be expanding?

[Joel Marcus:]

That's correct.

[Jamie Feldman:]

Got it. Okay. All right. Thank you.

[Joel Marcus:]

You're welcome. Thanks, Jamie.

[Operator:]

The next question will be from Michael Carroll with RBC Capital Markets. Please go ahead.

[Michael Carroll:]

Yeah, Joel, how do you notice an uptick in competition, when acquiring and developing high-quality lab space, particularly from the other REITs, so just seeing that several REITs have recently highlighted the new focus on the lab space?

[Joel Marcus:]

Yeah, I don't think, it's any different that we've seen over the last couple of years. Every market, there's a different set of competitors for different reasons, doing different things. I think, our view of the world is, we try to do, what we do and be the best in the world at it, and not be distracted by outside issues. And in underwriting, if we can't get to where we are, we don't buy it or build it. And so I think, that's how we continue to operate.

[Michael Carroll:]

Okay. And you're not seeing any increased competition from outside the REIT pool has been pretty much the same over the past few years?

[Joel Marcus:]

Yeah, I mean, I think it varies from time-to-time. I mean, I think, we still see there has been, although, maybe less this year than last year a large pool of private capital, particularly from overseas or the pension funds, I think, that's waned a little bit this year. But, if you have - if you're an institutional investor and you have - you need to put money to work, you're going to gravitate to the great markets. So there's not a surprise about that.

[Michael Carroll:]

Okay, great. And then, Dean, off of Sheila's question earlier, I know, you have been highlighting over the past several years that tenants are electing to renew their leases early when they have an expiration in a few years out. I mean, has that started to wane? I mean, have you pooled a lot of those tenants forward already? Or is that still pretty strong?

[Dean Shigenaga:]

Well, I think, if you look at the mix of early renewals going back several years, Michael, it's typically our leasing activity for renewals and re-leasing a space has been about equal or to maybe a 50% greater number of volume wise relative to the contractual expirations at the beginning of the year. So typically, we're anywhere from 7% to 10% with contractual expirations. The renewals are doubling that number. So we're getting anywhere from 15% to 20% of the portfolio being attacked annually through leasing activity. So we historically have had this recurring volume in recent years. Hard to predict the future, but it's been pretty consistent.

[Michael Carroll:]

Okay, great. Thank you.

[Joel Marcus:]

Yeah. Thanks, Mike.

[Operator:]

Our next question comes from Jed Reagan with Green Street Advisors. Please go ahead.

[Joseph Reagan:]

Hey, good afternoon, guys. In terms of the mark-to-market rent spreads, the increased guidance gets you to about 12% or so - for this year at the midpoint. Is that a fair estimate where you'd say the overall portfolio sits relative to market today?

[Stephen Richardson:]

Jed, hey, it's Steve Richardson. Yeah, that's roughly in line the overall portfolio gap is a little north of 10% there, so that's pretty consistent.

[Joseph Reagan:]

Okay. That's helpful. And I think, you guys mentioned that 399 Binney is almost spoken for. Have you gotten incremental leasing done beyond the 73% of LOIs that was talked about in the supplemental?

[Joel Marcus:]

Well, I think almost all of the spaces under lease negotiation Tom can give you some further color.

[Thomas Andrews:]

Yeah, the 73% reflects the three signed letters of intent that we have right now that we hope to convert into leases over the next few weeks.

[Joseph Reagan:]

And then there are additional conversations beyond that?

[Joel Marcus:]

Yeah, I mean, I'll just let Tom speak in a moment. But I think what we were excited about is we saw pretty large demand for 100 Binney. And so, as we kicked off 399, we felt that there was enough momentum in the market that we would see a pretty receptive audience. Tom, you could give other color.

[Thomas Andrews:]

Yeah, and at the same time, I'll mention, the balance of the One Kendall Square development, where we have a number of opportunities to convert office space to lab space, also to take leases that are currently well under market and re-tenant them at market rates. We're making good progress on that right now. That is a very active corner of Kendall Square right now, between the 399 Binney new construction and which is just kicking off and the re-develop or the re-tenanting of portions of the balance of the One Kendall Square campus.

[Joseph Reagan:]

Okay. I appreciate that. And then, just last one for me. Your capital plan has about $850 million of development spend this year. I know you're not offering specifics on 2018 at this point. But kind of ballpark; is the $850 million sort of a reasonable range of development spend to think about as we go out over the next few years?

[Dean Shigenaga:]

No, I don't think it's fair to comment about each of the years going forward over the next few years, Joe. So maybe as it relates to 2018, stay tuned for Investor Day and every few quarters we give a little more color on what the pipeline is starting to look like, which will give you that visibility beyond. But it's a little early to talk about 2019 and 2020.

[Joseph Reagan:]

Okay, fair enough, thanks.

[Joel Marcus:]

Thank you.

[Operator:]

The next question will be from Dave Rodgers with Robert W. Baird. Please go ahead.

[David Rodgers:]

Hey, Joel, just wanted to ask about Seattle, you did some leasing at Dexter this quarter. I wasn't sure if that was lab tenant or not. But I realized you don't have a lot of space left there. Are you seeing just the lab tenants pushed out of that market by what's happened in the tech activity or are you seeing any interest in kind of moving further South either into San Francisco or San Diego from that market and do you have any longer term discussions with your tenants there that might be pushing out of the market and looking for somewhere else.

[Joel Marcus:]

Well, we did sign a lease there with ClubCorp. I think we indicated that and we're down to a final about 31,000 feet which were in late stages of discussions, which we expect them to take that. They've had some good news based on the Kite acquisition. And the valuation of that company certainly puts in a pretty nice position. I think Seattle is a tough market. It's a super-low cap-rate market, as you know. It's a tight market. The behemoth Amazon obviously has lots of that their home base and lots of activities going on. So I think companies are always looking at opportunities. But I think we see, we have some unique land resources and locations inside Seattle in the best of locations in South and East Lake Union. So I think we're looking forward to meeting the demand of our tenants and maybe even some that are not tenants over the coming few years. I would say people are probably more migrating from the Bay Area to Seattle, then vice versa, given cost of living and tightness in the San Francisco Bay Area.

[Peter Moglia:]

Hey, Joel, it's Peter. If you wouldn't mind, I'd like to comment a little bit. One of the things that we have seen even though as Joe mentioned, it's been a slow growth market for lab, we have seen the entrance of Celgene and bluebird into the market and they have steadily increased their presence and they've brought basically the vacancy of Seattle lab to low single digits. There is also a number of large research institutions in Seattle. They've been fairly dormant growing over the past few years and that's been driven by a lack of NIH growth, funding growth. But we are seeing now some potential demand coming from the institutions as well. So I think it's stacking up that Seattle may restart itself a little bit better on the lab side and the fact that the tech industry is in there gobbling up space is probably only good news for rental rates on the lab side. That's it.

[David Rodgers:]

Thanks for that color. One more for Dean, Dean, looked like you used some ATM in the third quarter if I saw correctly. But you said, then you have the forward still to settle in the forwards, was that a function of pricing or just some form of execution. I just wanted to understand that better. And then with regard to maybe are you putting that timing around the remaining preferred that's outstanding?

[Dean Shigenaga:]

So a couple of questions I think embedded there, the current ATM usage really had to do with an opportunity to fund our needs this year. And so at $120, we felt the cost was attractive. On the forward timing, I think for your model, probably best to think about December and that is more to do with spending anticipated in the quarter. All things equal, those transactions probably simply will be funded mid-quarter. But then we also have earnings contributions from our project deliveries, which are on average about November - I'm sorry, mid to late November on average. So we're just trying to match the timing of the settlement with these other two considerations.

[David Rodgers:]

Okay. Thank you.

[Joel Marcus:]

Yeah, thank you.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Joel Marcus for any closing remarks.

[Joel Marcus:]

Thank you all very, very much and we look forward to talking to you about 2018 on Investor Day November 29. Thanks so much.

[Operator:]

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