PS Business Parks, Inc.
Q3 2017 Earnings Call Transcript

Published: 25 Oct 2017

[Operator:]

Good day, ladies and gentlemen and welcome to the PS Business Parks Third Quarter Investor Conference Call. At this time all participants are in listen-only mode. Later we will conduct the question-and-answer session. [Operator Instructions]. As a reminder this conference is being recorded. Now I'll turn the conference over to your host. John Petersen, Chief Operating Officer. Please begin.

[John Petersen:]

Good morning, everyone and thank you for joining us for the third quarter 2017 PS Business Parks investor conference call. This is John Petersen, Chief Operating Officer. Here with me are Maria Hawthorne, CEO and Acting CFO; and Trenton Groves, Vice President and Controller for PSB and Todd Andrews, Vice President and Controller for Public Storage who's providing additional support while we search for a new CFO. Before we begin, let me remind everyone that all statements other than statements of historical facts included in this conference call are forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond PS Business Parks' control, which could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. All forward-looking statements speak only as of the date of this conference call. PS Business Parks undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For additional information about risks and uncertainties that could adversely affect PS Business Parks' forward-looking statements, please refer to the reports filed by the company with the Securities and Exchange Commission, including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K. We will also provide certain non-GAAP financial measures. Reconciliation to GAAP of these non-GAAP financial measures is included in our press release which can be found on our website at psbusinessparks.com. I will now turn the call over to Maria.

[Maria Hawthorne:]

Thank you, JP. First I'll discuss the company's results for the quarter along with updates on investment. Todd will provide financial updates and then JP will provide details on operations and market. Same Park NOI increased 5%, user demand in general leasing institutions across five out of six of the major markets we operate in, can be characterized as healthy with landlord favorable dynamics and no loss of momentum. Small users are abundant and we continue to see the typical broad array of customers seeking phase these into renew or expand in our park. Our strongest performance is in our flex and industrial portfolio. Leasing volume was good in the quarter and year-to-date we've executed 5.6 million square feet. Quarter round occupancy improved by 70 basis points sequentially. Even as we continue to push rent growth with both new and renewing tenants, in dealing so we have also been pleased by the consistent retention we've see with a year-to-date average of 67%. The positive trends created by employment growth, strong corporate earnings, landlord favorable markets and little to no competitive constructions, especially in our infill locations has facilitated the competitive market conditions. These trends give us the ability to keep occupancy strong along with good rent growth and easing concession. The leasing team is continuing transaction cost, which were $3.51 per square foot on executed deals. Leases up $0.29 per square foot from last quarter as we were seeing success in leasing our office product in Washington DC. Highgate at The Mile which opened on June 1 had an outstanding quarter. As of September 30, we were 46.3% leased and 41.8% occupied. This was up from 9.9% and 9.1% respectively on June 30. We're encouraged by Highgate success and continue to work with Fairfax County on rezoning the remaining 40 acres we own at The Mile. On the investment front, we have no acquisition till now. We will continue with our disciplined approach and look for value add opportunities at below replacement cost pricing. Competition for quality assets in our markets continues to be fierce as cap rates on industrial and flex product is at historic low. Over the last four years, we have refined our portfolio and focused on our core market. Now we look within these markets to identify candidates for asset recycling. We have studied the merits of our office presence in our Orange County and identified three office park for this position. These assets comprise approximately 700,000 square feet and generate approximately 3% of the company's NOI. To potential buyer, they will offer excellent locations and stable occupancy with improving conditions in a gateway market. There are many unknowns at this point as we're early in the process, so there isn't much to share beyond the fact that we're in the early stages of marketing. I would like to take a minute and recognize Ed Stokx and then nearly 14 years, he spent with us here at PS Business Park as CFO. We thank him for his contributions and wish him well in all his future endeavor. Now I'll turn the call over to Todd.

[Todd Andrews:]

Thank you, Maria. We reported core FFO of a $1.54 per share for the third quarter a 7.7% increase from a $1.43 in the third quarter of 2016. The growth was driven by Same Park NOI combined with lower preferred equity distributions. Third quarter Same Park NOI growth of 5% was driven by a 4.4% increase in revenue due mostly to higher rates. Third quarter Same Park operating expenses were 3.2% due to higher property taxes and repairs and maintenance costs. For the nine months ended September 30, we incurred $38.7 million in total capital expenditures compared to $24.2 million in the same period in 2016. $8.4 million of this increase relates to cost incurred on our recent acquisition in Rockville, Maryland as we complete the repositioning of the asset and prepare a space for occupancy, which JP will report on shortly. The balance of the increase occurred in our Same Park portfolio and it was driven by leases executed in 2017 as well as carryover from prior years. For the nine months ended September 30, our dividend payout ratio was 73% compared to 65.8% for the same period of 2016. We generated free cash of $29.3 million for the first nine months compared to $39.6 million in the same period of 2016. The decrease in free cash relates primarily to the first quarter increase in our common dividend as well as increased capital expenditures. Even though operations have commenced on Highgate we still have some construction to wrap up, which we expect to complete by the first quarter of 2018. Through October the balance outstanding on the construction loan we provided the joint venture is $66.7 million. We anticipate funding the remaining construction cost over the next few months with the construction loan, which has a limit of $75 million. We reported an equity loss from the unconsolidated joint venture of $376,000 during the quarter. This was driven by $107,000 in net operating income less $483,000 of depreciation. On September 21, we closed on 5.25% Series X Preferred Equity offering. With the underwriters exercising the full issue, net proceeds were approximately $222 million. Using these proceeds we were paid the outstanding balance on our credit facility and end of the quarter with $133 million of cash. In the quarter we called for redemption $220 million of $350 million of our 6% Series T Preferred stock which will be completed on October 30. We'll borrow on a line of credit for the remainder of the redemption cost that we don't have sitting in the bank. This partial redemption combined the redemption of Series S earlier this year offset by the issuance of the new Series X has reduced our preferred distributions by about $4 million net per quarter. We will however have some dilution in Q4 because we had both the Series X and Series T Preferred outstanding in the month of October. Now I'll turn the call over to JP.

[John Petersen:]

Thanks, Todd. During the quarter market conditions except Washington Metro maintain their landlord-friendly posture. Job growth is healthy, interest rates are low and their core small business user is doing well. As a result in the third quarter we signed 1.8 million square feet of leases with cash rent growth of 5.7% and retention of 76% as we take care of our growing customer base. Year-to-date over 100 existing customers have chosen to expand within our portfolio. I will now take you through third quarter statistics by market beginning in Northern California. [Indiscernible] remained strong and our team continued to drive superior result. Once again we capitalized on these fundamentals in Northern California. Leasing volume with 521,000 square feet from 81 deals. This includes a 150,000 square foot as if long-term renewal with a credit company which included 38% rent growth. Northern California was 94.2% occupied with 22% rent growth. Regarding the 200,000 square foot industrial space in San Jose we took back in April touring volume is healthy. Our Southern California team was also busy and signed 166 leases totaling 442,000 square feet. Blending Southern California occupancy increased 40 basis points to 95.3% with San Diego leading the way at 97.6%, San Jose at 97% and Orange County at 93.6%. Rents in Southern California increased by 3.3% and retention was 79% as the overall economy continues to be strong. Market trends in Seattle remain healthy with usage demand robust landlords have the upper hand at the lease negotiation table. We operated real estate at 97.3% occupancy in Q3, down 90 basis points sequentially as we lost 20,000 square foot customer at our 212 Business Park. We've since released this space with 25% rent growth. In total, we signed 62,000 square feet and drew rents 12.1%. Retention was 56% as we lost few users because we could not accommodate their growth. In South Florida and in spite of Hurricane Irma more on that later, we capitalized on robust demand and maintained occupancy of 97%. We completed 192,000 square feet of leases and 69 transactions with rent growth of 5.4%. Regarding Irma, we were fortunate that MICT did not take a direct hit. As result of detailed preparations by our Florida team, our management office was open on Monday following the storm, helping our customers put things back together. Within two weeks of the storm, the business community in Miami was back in full operation. Our damage was primarily focused on roofs, landscaping and roll up doors. Most repairs are on progress as we will experience somewhat higher repair and maintenance cost in the fourth quarter. Moving to Texas, we signed 241,000 square feet in 73 transactions. Driven by strong economy because of the small users, we grew rent in Austin over 13% and over 4% in Dallas. In Austin, where demand in tour volume has been strong all year, occupancy increase 170 basis points to 95.9% with retention of 71%. In Dallas occupancy increased 90 basis points to 91.2%. Finally in Washington Metro, the suburban office market remains lethargic. Having said that, our DC team is outperforming the market by nearly 10% in terms of occupancy and they were able to sign 127 leases totaling 395,000 square feet. Sequentially the Same Park occupancy improved for the third consecutive quarter adding 180 basis points from Q2 to 91.2% aided by strong retention of 77%. As has been the case for some time, we needed to be aggressive with rents was declined 11.6%. A large GSA user I mentioned last quarter will now stay with us through November, two months longer than I anticipated on the last call. This tenant generates approximately $300,000 per quarter. Now for a quick update on the 226,000 square foot two building acquisition we completed in Rockville, Maryland in the third quarter of 2016. Our repositioning efforts are complete and the market has responded favorably. As of today, we're 39% leased up from 18% in acquisition. The three Same Park buildings we own in that office park are currently 94% leased and I'm confident we will achieve the same occupancy levels at the two new buildings over the next several quarters. As we head into Q4, we still have occupancy upside in DC and Dallas in addition to capitalizing on the health and growing space needs of our existing customers. Across the portfolio we're focused on growing rents, improving credit quality and lengthening lease terms. To that end, we're encouraged that we have 1.7 million square feet approximately 6% of our portfolio expiring in the first quarter. Now we will open the call for questions.

[Operator:]

[Operator Instructions] our first question is from Manny Korchman of Citi. Your line is open.

[Manny Korchman:]

Maria, maybe just an update on the CFO search, sort of what type of candidate are you looking for internal, external sort of laying on the PSA relationship or just kind of looking across the board?

[Maria Hawthorne:]

Well we're evaluating all the avenues. We're looking for a CFO that will be looking forward to joining a company with our sort of balance sheet and capital structure. We want someone who can strategic. Be well known within the capital market and at the same time work collaboratively with JP and with me. And if you think about the CFO of this company have had from Ron Havner, to Jack Corrigan and Ed Stokx, all three of those people have exemplified all of those attributes. We're looking internally and we're also doing a full search outside of the company.

[Manny Korchman:]

Great and if we turn back to your comments on the dispositions you have in the maybe, can you walk us on path, how you decided to market those properties and how you look at your overall portfolio sort of for those I guess value plucking opportunities.

[Maria Hawthorne:]

Sure, you know as I had mentioned, we - and if you think over the years, we exited Houston, Arizona, Sacramento and Portland, Oregon. So those were and even many, many years ago, we exited Kansas, Tennessee, Oklahoma. So now the six major markets that we're in those we consider all core markets they are all markets that we have a presence in that could go much, much deeper before we could be consider to have any sort of huge presence. But even within those core markets, we look at every single asset how does it perform, is it accretive or dilutive to our NAV and if you look at our Orange County office space just look at the rent growth, where in third quarter we were at 0.4% rent growth compared to the rest of our Southern California portfolio which was anywhere from 3% to 10% in various parts. So that's really what it is, it's consistently evaluating the Park and because we're long-term holders of our assets we have a lot of data points to look at, which includes over the years our cash on cash return.

[Manny Korchman:]

Great. Thanks for that comment, Maria.

[Maria Hawthorne:]

And just to finish up on Orange County too. Right now it's a very strong investment environment. And as I said in the comments, it's really a gateway market.

[Operator:]

Thanks. And our next question is from Craig Mailman of KeyBanc. Your line is open.

[Craig Mailman:]

JP, just a quick one on the numbers here. You noted higher repairs and maintenance in 4Q related to the hurricane. I mean is that all going to be able to be pasture the tenants like should you rate, basically your margins be okay because you can recoup that or you can have some margin erosion.

[John Petersen:]

Yes, good question Craig and you're right on. We should be able to recoup most of that as everyone was well aware of storm and the potential damage and damage it did cost, so we will pass most of that back to our customer base there in Miami and South Florida, you're right.

[Craig Mailman:]

Thanks for that. And then just Maria, you guys are looking to sell a little bit here, not a lot you can obviously put that towards the redemption of the preferred. I don't know, do you put that towards incremental redemption above the 220, do you think or do you just use that to kind of pay down the balance that you're going to run up to pay off, what you guys have already kind of called for.

[Maria Hawthorne:]

That's a really good question Craig. Obviously, we're or maybe not obviously but just to state the fact that, if we do complete the sale, whether it happens in Q4 or into next year because they may not close until 2018. The question would be special dividend or because we would have a big, big tax gain. And our goal would be to identify assets to protect that tax gain, but then of course there is paying down on the additional preferred. So we're looking to find assets, but as I mentioned earlier we definitely and despite some in Orange County we will not use it as an tying to over pay for remaining assets.

[Craig Mailman:]

I guess on that point, we've talked about in the past you guys try to buy stuff below replacement cost, that's a hard cash these days but, isn't there sort of opportunity to arbitrage the valuation that the public markets affording new on replacement cost value of your portfolio versus selling Orange County being able to maybe redeploy into assets that ultimately will better growth longer term, maybe not totally just hold your nose and do it, but a reasonable kind of swap scenario.

[Maria Hawthorne:]

Yes, Craig that's exactly what JP, the board and I are evaluating. Especially JP, me with Coby Holley with in charge of investments and we'll look at that like I said, we've got a great team. Our goal would be to buy assets in any of the markets that we currently own and so that would be the goal, but I will tell you there is a feeding frenzy going on right now in the markets that we operate in.

[Craig Mailman:]

Is there just given you kind of pension for repositioning assets I mean, should we expect to maybe office as a place for you guys to look today or is it just industrials more of interesting asset class for you?

[Maria Hawthorne:]

I think in this case, we thought the office and the idea would be the cycle out of the high finish, higher capital annual requirement and to our flex and industrial niche.

[Craig Mailman:]

And then just one last one, you guys did $230 million on the Series X just given that you knew you wanted to redeem the $350 million Series was the market just not there, pricing that was attractive to you and that's why you guys went smaller or did you just want to - I don't know just kind of walk us through the thought process there.

[Todd Andrews:]

Yes, this is Todd. There just wasn't enough volume out there. We could get the $220 million, but that was about it. So it wasn't a conscious decision to keep it lower. We would have gone for more, but the current market, the current volume it just wasn't there for us.

[Craig Mailman:]

Great. Thanks guys.

[Operator:]

Our next question is from Eric Frankel of Green Street Advisors. Your line is open.

[Eric Frankel:]

I know you want to give too much regarding the marketing of the Orange County office portfolio. But can you provide I think there is some disclosure regarding the NOI and the financial of the portfolio that you're attempting to sell. So one, I think it reports the occupancy is lower than what disclosed in 3Q, I was hoping you can comment on that and then secondly, the NOI is meaningful lower then we probably estimate just based on your disclosure based on percentage of rent by market and was hoping that you can comment in operating margins in your office portfolio versus your industrial and flex portfolios.

[Maria Hawthorne:]

All right, so Eric good morning. The assets that we're talking about are 94% leased, so if you think about LA and San Diego and some of the other assets in Orange County, JP reported those over 97% and higher and then, the other thing is if you think about the sort of rent growth that we've been able to extract, we've had better success lately in the industrial and flex. These assets though like I said they're about 3% of the company's NOI and operating margins are good actually not that far off from other higher finished flex that we own in the market. Is that what you were looking for?

[Eric Frankel:]

Yes, I think disclosure is maybe, I know that your disclosure is generally adequate but I think we're probably little bit off in our estimate of percent of NOIs but for that portfolio, we thought it was more like 4%, 4.5% of your portfolio. So perhaps that's just our mistake. I think the release also mentioned the occupancy of this portfolio was 87%, so I was just hoping that you can, if that was a mistake or if there is a big tenant move out that we're not aware of, that would be helpful.

[Maria Hawthorne:]

No, like I said today we're standing about 94% occupancy, and then when I talked about 3% that is the entire Same Park PSB portfolio.

[Eric Frankel:]

Of the - yes, okay. I guess there is no disclosure, I think the disclosure requires an estimate for a guess to figure out what percent of rent comprises of the - does the Orange County office portfolio comprises in total. So, okay that's fine we can make it estimates in there. And then given that you're commenting that Orange County the reason why you're selling, you're going to recycle is that, it just hasn't been a great return on investment over a long period of time or you feel it's more CapEx intensive then you might desire. What are your thoughts on DC, in [indiscernible] Maryland and Virginia portfolios overtime? Obviously fundamentals have been really soft there for a while. It certainly doesn't seem like things are going to turn around there just based on your leasing results in terms of the rents you're getting. Is there a capital recycling plan there?

[Maria Hawthorne:]

Eric, right now and the difference between Orange County and DC, is that the Orange County office market is hot for investors and there is a lot of investor interest. On the other hand, investor interest in DC suburban outside of the Beltway asset, suburban office asset is cold and in my opinion and every else here PSB, the fact that you're seeing sales cap rates in DC suburban office that are at much higher than even tertiary office markets in the Midwest, in Ohio, Tennessee, Northern Florida to us is a disconnect, right now just a market disconnect because yes it's true not a lot have happened in DC over in the last few years, but reality is the markets that we operate in are have 3.3% to 3.5% on employment, tremendous demographics, tremendous wealth, there is still in the top wealthiest counties in the United States. You have the education, business friendly climate. So selling right now just doesn't make sense while the investment community isn't interested in office product in suburban DC right now, that will change and when it does we'll look to potentially recycle. The other thing is, if you think about our bases and most of our assets there. We have a very low bases and so you know we still have accretive return. And so, we can afford to be very patient in DC.

[Eric Frankel:]

Okay, I'll jump back in the queue. I'll let others [ph] to participate. Thank you.

[Operator:]

[Operator Instructions] our next question is from Anthony Paolone of JP Morgan. Your line is open.

[Anthony Paolone:]

Just on the capital market side in terms of transactions and what you're seeing out there in the market. Can you get a little more specific in terms of where on the stuff you're underwriting, look at cap rates are shaking out relative to your bids, like how far off the mark are you, give us a census to some of your key regions where actual clearing CapEx are?

[Maria Hawthorne:]

That's a really good question and I will tell you, here's how things kind of work in capital markets. Very often never is there a sales price when these properties go out for sale, but you can call the brokers and get guidance from them. And so, we have gone out if we think it's a good asset in a location we want to buy in. we've been very aggressive because we've recognized cost of capital gone down, we see our stock prices and so, we're right there, guidance on second round will be at the top of guidance and what I think is been happening now, is that usually there is a first round, then there is best and final and then there might be one other round, but in certain products, in certain markets there's four and five rounds as people literally will come in and the brokers themselves are surprised at - it's almost like auction like bidding and the pricing that they're getting is far, far above guidance, their guidance and expectations of the owner. So for that reason you're seeing in LA, Seattle, Northern California industrial, Miami industrial. You're seeing sub-four cap rates with stabilized assets many of which are in historic high rents and if you look at the underwriting. Underwriting often includes 15% to 25% rent increases for the next four years, that sort of underwriting we cannot get comfortable with. Even in Dallas, probably one of the most famous markets that can go boom bust, where you're seeing historic high industrial sales prices, historic low cap rates and we'll be patient. There eventually will be a correction and that's when with our balance sheet, we'll be ready to go and buy.

[Anthony Paolone:]

Okay, thank you. And then in terms of operation, as we look out to the 2018 expiration schedule. How should we think about where our occupancy can go and you think about whether you have any at large either no move outs or tenants can accommodate kind of like what you have in the Silicon Valley or how should we think about that as we look into next year?

[John Petersen:]

So we have our typical amount for the portfolio expiring in 2018, we do have some larger expirations that hit us. We have an industrial expiration in Florida hitting us mid-year next, we'll have price slice and dice that one. We've got a few larger office expirations in the fourth quarter of 2018 in the DC area which we're proactively working on. Nothing really in Northern California or Seattle that is significantly material, nothing really in Southern California and we have one or two in Texas that we're working on, right now they're mid-year 2018. So nothing really unusual, if I would say there's anything maybe it's in the fourth quarter of 2018 and we're actively talking with all of these existing customers trend, renew them as well.

[Anthony Paolone:]

Okay and do you think same store or occupancy next year that could run higher, lower than where you've been trending at 94.

[John Petersen:]

Yes its' a great question I mean, my job is to push occupancy as you know, as high as we possibly can while growing rents, which we've been able to doing, we're right now in mid 90s and my goal is to keep it there, but we do have expirations in next year that are large. We always do, but those are going to be challenging for us for sure, but our team's up to the task and we're driven to keep them.

[Anthony Paolone:]

Okay and just last. I guess more bigger picture question, you have a larger-small tenant portfolio, any opinion on what cash reform could potentially do for your tenants or if you think there would be any pushable [ph] outcome if that were you through in terms of current demand or how they behave?

[John Petersen:]

Yes, good question and we don't - right now what we do know is there are customers small and large for the most part feel very good about their businesses as I mentioned in my remarks, they're growing. How is tax reformed if it happened, going to affect them? Don't know. How it's going to impact them? I don't think it would be my opinion, is but I think it will be a bad thing. But you know we'll wait and see there is a lot of volatility in the areas you know, so we're just focused on getting to our customers early renewing them and [indiscernible] like I mentioned.

[Anthony Paolone:]

Okay, thanks appreciate the color.

[Operator:]

Our next question is from Eric Frankel of Green Street Advisors. Your line is open.

[Eric Frankel:]

JP, maybe just circle back for a couple of quarters ago and because it's kind of related to tax reform and the change in government control. I guess, the last year or so. Has - in your tenant surveys, has there been any comment or any regulatory changes other than taxes that have increased or decreased the tenant demand or confidence?

[John Petersen:]

Yes, I need to follow-up on that Eric, so [indiscernible]. I was surprised that's the first time around. There was in a whole lot of commentary in our surveys as you mentioned we do, we've quick surveys [indiscernible] with our existing and new customers. We get between 5% and 10% response, so which I think is pretty good actually. But we're not getting a lot of commentary on that even though we asked from our customer base, so I think my view is, they're kind of - it's wait and see attitude relative to what the government's been doing with the tax reform or anything else, with the volatility that comes out of Washington these days. I think our small business users are focused on their customer base and not worried about things they can't control in Washington.

[Eric Frankel:]

Okay. No, that does. That's helpful. Thanks. I don't have much else other than Maria, obviously you've certainly commented on sort of hard to buy assets and return requirement across the board's going down that kind of translates at the higher land values overall. Maybe you could comment, especially DC area, if there's any conversion type of opportunity than what you're doing in Tysons, whether those might pop up over the next couple of years?

[Maria Hawthorne:]

Yes, Eric, that's a good thing, that we are looking at. I wish we were under construction for a second phase in Tysons right now. And then, as we do have other locations in different municipalities. And we are looking at a couple more that could be on a longer horizon, more in the three to five-year range. And those are in DC for additional, like two more apartments parks, I should say that are also located upon either on the existing metro lines and even out west, where the metro line is going to be opening in about three years near the airport. So we're looking at it. But I have to say, Eric, it's not like we're going out and acquiring apartments or acquiring vacant lands to build apartments. That's not what we will do, but if we have these opportunities with some of these older office buildings that - I mean, just based on what we're seeing and what we own, and more importantly where we own, that's definitely an avenue that's now open to us.

[Eric Frankel:]

We can talk about this offline at some point, but is there any particular sort of expertise that you've probably picked up as a company going to the [indiscernible] process that will really help you down the road or is it more kind of really sight dependent.

[Maria Hawthorne:]

It's a combination. These things are very political because you're dealing residents and poor voters. So it's not always just what the guidelines in the various zoning issue, so relationships are critical as we have [indiscernible] in Tysons, the other thing that's critical is what are you building. People might say, certain areas in DC are over build, but most of those are high rise towers and what makes us unique is that, we did deliver a mid wise, which allows us to have a definite competitive advantage on the cost to build. So it's what we can be built versus what we can we build and rotation for the residents is critical. I mean, it's been real estate it's always about location, so it is site dependent.

[Eric Frankel:]

Okay, thanks for the color. Appreciated. That's all I have.

[Maria Hawthorne:]

Sure, thank you.

[Operator:]

Thank you, this is the Q&A portion of today's conference. I turn the conference over to John Petersen for any closing remarks.

[John Petersen:]

Thank you everyone for joining us on the call today. We'll talk to you next quarter. Have a good day. Thanks.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. We now disconnect. Have a wonderful day.