PS Business Parks, Inc.
Q3 2015 Earnings Call Transcript

Published: 28 Oct 2015

[Operator:]

Good afternoon. My name is Amy and I will be your conference operator today. At this time, I would like to welcome everyone to the PS Business Parks’ Third Quarter Investor Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I would now like to turn the show over to Mr. Ed Stokx. You may begin.

[Ed Stokx:]

Thank you, Amy. Thank you for joining us for our third quarter 2015 PS Business Parks investor conference call. I am Ed Stokx, CFO of the company. And with me today are Joe Russell, Chief Executive Officer; Maria Hawthorne, President; and John Petersen, Chief Operating Officer. Before we begin, let me remind everyone that all statements other than statements of historical fact 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 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 Joe.

[Joe Russell:]

Thanks, Ed and good morning everyone. Today, I will briefly touch on the business drivers tied to Q3 results, then offer our perspective on the investment market and then hand the call to Maria. On that note, as previously announced, Maria has been promoted to President of PSB and I want to officially congratulate her on this important step in her career. Many of you have gotten to know Maria as she has successfully tackled a variety of important initiatives here at PSB and I have no doubt she will be equally, if not more effective, as President. For the third quarter, overall results were good with Same Park NOI up 4.8%. Year-to-date, Same Park NOI has improved by 4% compared to full year 2014 growth of 2.2%. 5 of our 6 major markets showed no sign of slowing down giving us the opportunity to exert more command as we lease space. Specifically to the quarter, over 2.5 million square feet and 570 lease transactions took place with rent change of 5.5%. This is the highest cash rent change since the third quarter of 2007. Thus, the combination of PSB’s well-positioned park concentrations and in-house leasing and property management teams is driving our ability to grow rent levels, optimize occupancy and reduce transaction capital. Now, to the acquisition disposition environment, we have yet to close an acquisition in 2015 as we find ourselves competing against buyers for too much cheap capital willing to take on risk with elevated price levels. At the moment, there seems to be sufficient investor demand across all three of our product types, which has lessened our ability to take – or to make sense of the majority of assets in the sales market. As I mentioned last quarter, we have accretive uses of our substantial cash balance. And as planned, we redeemed a $75 million preferred equity issuance this month. Today, we sit on $178 million of cash that has been earmarked to fund the Highgate multifamily development and pay off the $250 million Northern California CMBS loan next June. On a minor note, the remaining single building, which was part of our Phoenix portfolio, has been sold. This finalizes the disposition process we identified several quarters ago. Also we disposed 2.4 million square feet of assets for total proceeds of $253 million and eliminated our presence in Portland, Phoenix and Sacramento. We feel the rebalanced portfolio with 100 well-located parks and our chosen West Coast, Texas, Washington, D.C., and Florida markets, gives PSB exceptional opportunities to drive future results. Now, I will turn the call over to Maria.

[Maria Hawthorne:]

Thank you, Joe. I would like to spend a bit of time talking about the PSB game plans and our small user strategy that enable us frequently to be submarket specific. Year-to-date leasing is strong as we have executed nearly 1,800 deals for 7.4 million square feet with the range of occupancy from moderate to very favorable and Same Park occupancy at 93.9%. We have different directives based on market conditions as follows. First, we are focused on increasing rental rates and executing longer term leases in the superheated market of Northern California, Austin and Seattle. Year-to-date, these three portfolios have had double-digit rent growth and combined are 14.8% positive for 2015. The fact that these markets account for 28% of next year’s expirations is additional opportunity. Second, in Northern California, Florida and Dallas, we are balancing rental growth, which is still positive at 4.1%, while also growing occupancy to 92.8% in the third quarter. With these portfolios accounting for 46% of 2016’s expirations, the next step will be to push rates and term as we feel confident about achieving higher occupancies. We are seeing improved metrics, job growth and little to no competitive new construction. Third, in DC, it is all about growing occupancy. We have seen growth over the last three quarters. However, there are still headwinds given the lack of large users in the market. It is definitely a tenant market and competition is fierce. Our focus on smaller users has allowed us to build occupancy, while lowering transaction costs. Small users below 10,000 square feet represent over 55% of our DC portfolio. And the primary goal is aggressive outreach to existing customers to achieve high retention as this market accounts for 26% of next year’s expirations. JP will go into more details on the specific market metrics and our outlook, but overall, I am encouraged by the ability to push more parks into the zones Northern California, Seattle and Austin have produced. And here is a quick update on Highgate, our multifamily development at Metropolitan Mile in Tysons. I am pleased to announce that construction has commenced and we have demolished the prior vacant office building on this 5-acre site, which is within our 45-acre park. We intend to deliver Highgate in 2017 and we are confident about this development for a variety of reasons. It is located in McLean, Virginia, one of the most exclusive ZIP codes in the United States. The newly opened Metro ridership is far exceeding expectations. As I mentioned last quarter, the products we are developing fits an underserved part of the market. Highgate will offer a mid-rise apartment complex with modern and upscale amenities that include two public dedicated parks for the benefit of both Highgate residents and PSB office customers. Now, I will turn the call to JP.

[John Petersen:]

Thanks, Maria. I will walk through some specific stats and give a quick look at what I see for the remainder of 2015. First, Same Park occupancy increased 80 basis points from Q2 to 93.9%. This represents our highest quarterly Same Park occupancy since the third quarter of 2008, with the biggest moves coming in Texas and Southern California. In Texas, we completed 81 deals for 527,000 square feet and Same Park occupancy for the quarter was 90.7%, up 230 basis points from Q2. Leasing activity is solid and we are focused on continuing this momentum and improving occupancy at our Los Colinas flex assets, where we have a few larger vacant spaces. Rent growth is over 10% in Austin and 1.6% in Dallas for the quarter. In Southern California, not only were we able to drive rents up 4.4% in the quarter, we also signed 153 deals for 422,000 square feet, an average deal size of 2,800 square feet. This volume helped to push occupancy up 100 basis points from Q2 to 94.2%. Northern California had a strong quarter completing 143 deals totaling over 800,000 square feet. Retention was 62%. And our teams posted outstanding rent growth of 17% in Q3 and has maintained occupancy of over 95% during the course of 2015. Florida was also busy, completing 68 deals averaging 4,800 square feet with occupancy in the quarter at 95.4%. MICC occupancy is 96.2% with rent growth of 6.5% as the South Florida economy keeps humming along. By comparison, Washington DC market conditions are difficult, but we continued to maneuver around GSA-related practices that are constraining traditional leasing dynamics. Despite these headwinds, the Washington Metro team executed 102 leases for 433,000 square feet, an average deal size of 4,200 square feet. Retention was 70% and rents declined 6.1% as we continue to make progress on keeping our customers while improving occupancy to 91.4%, up 80 basis points from Q2. As we conclude 2015, I fully expect the same set of positive dynamics to help drive solid metrics in the majority of our portfolio. Our teams are clearly focused on pushing rents, lowering concessions and taking occupancy to levels not seen in many years. Now I will turn the call over to Ed.

[Ed Stokx:]

Thank you, JP. Adjusted FFO for the third quarter of 2015 was $1.20 per share compared to $1.20 per share for the third quarter of 2014. Adjusted FFO in the third quarter of 2015 excludes $0.07 per share in non-cash distributions related to the Series R redemption completed last week. Comparative FFO was flat as a result of the asset sales completed over the past 12 months. Total portfolio NOI for the third quarter increased 7.5% over the same period of 2014 driven by Same Park NOI growth of 4.8%. Same Park revenue increased 3.8% in the quarter as a result of 130 basis point improvement in occupancy and continued improvement in rental rates. Comparative Same Park expenses for the quarter were up 1.7% or $451,000. Recurring capital expenditures in the first nine months of 2015 were $31.6 million compared to $32.7 million in the same period of 2014. Total retained cash after capital expenditures, debt service and distributions for the nine months ended September 30, 2015 was $30.5 million, a decrease of $2.8 million from the same period of 2014, which is reflective of the previously announced 20% increase in our quarterly dividend. With the redemption of Series R completed, we now have $920 million of outstanding preferred equity with an average in place coupon of 6%. The redemption of Series R reduces our quarterly distributions by $1.3 million. When combined with our planned June 1, 2016 repayment of the $250 million mortgage, these two transactions will lower our quarterly distributions and interest costs by $4.7 million, generating nearly $0.13 in quarterly FFO per share. We will now open the call to questions.

[Operator:]

[Operator Instructions] Your first question comes from the line of Brendan Maiorana of Wells Fargo. Your line is open.

[Brendan Maiorana:]

Thanks. Good morning. Ed, just to start with you on that capital plan, so if you would rollout the $250 million that matures in June, I would compare that to your current cash balance and then the spend on Highgate, how do you guys balance the difference, it seems like retained cash flow wouldn’t quite get you there, so are you guys planning a preferred issuance or some other form of capital?

[Ed Stokx:]

Brendan, we don’t have a preferred issuance if we are immediately planning. It is something that we are looking at and we will keep all options open. But we would anticipate that at the end of next year, we would be slightly out on our line of credit, somewhere in the range of say, $40 million to $70 million out on our line of credit. So certainly, we think we have the capacity and the tolerance to do that. On the preferred market, we are encouraged by where our outstandings are sitting today. We have 70 – or $920 million outstanding that has an average coupon of 6%. Today, those are trading at about 5.9%. And as of yesterday, we also got an upgrade from Standard & Poor's to our corporate rating of A minus, which takes our preferred rating to triple B flat. So we are encouraged by that and think that that is a good indication of where we could probably issue preferred. So I think the pricing on that would be attractive today.

[Brendan Maiorana:]

Okay, that’s helpful. And then, Joe was there any in the summer and late early in the fall kind of spreads widened out on a lot of debt issuances that were being talked about and borrowing costs. Did that cause any kind of hiccup in terms of asset pricing that was out there or deals that got delayed and do you think if spreads remain wide or widened out that it could loosen up the acquisition market for you guys?

[Joe Russell:]

Yes. Brendan, I think it’s too soon to tell. I couldn’t point to a single deal I am aware of either re-traded or slowed down or re-priced just to get on the shorter window of that kind of impact to capital cost. So again, there is as I mentioned a lot of aggressive money out there that’s very tied to very low interest rates. So if there is some movement there, it could ease up the competitive activity. But at this point, it’s just too soon to tell.

[Brendan Maiorana:]

And is the landscape where there is a lot of opportunity that’s out there, but it’s just your – that cost of capital, the returns that buyers are looking at aren’t competitive with the returns you guys need or is it there is a lack of product and aggressive buyers?

[Joe Russell:]

There is a decent amount of product out there Brendan. I would say the seller attitude, again is it’s a good time to put market – or product out into the market, because again there is a lot of active interest and buying activity going on. So that’s been I think consistent through the last few quarters. And again I wouldn’t tell you that I am sensing that there is less or a different level of product that’s out there to underwrite, take a look at. There is a number of assets that we have seen and liked and pursued from a bidding process. But timing again, it’s just gone into a zone that for us completely made no sense. So we have been very disciplined about that. And again we will continue to track as things play forward here.

[Brendan Maiorana:]

Okay, great. Thanks. I will get back in the queue.

[Joe Russell:]

Thank you.

[Operator:]

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

[Eric Frankel:]

Thank you. I was hoping you can comment on types of tenants that are entering your portfolio, are there any particular industries that are more active than others?

[Joe Russell:]

Hey, Eric. Not typical, as always we have got professional business services. We have got healthcare, some education, but there is nothing again it focuses on small business America where we always have found our sweet spot. I mean that hasn’t changed and frankly I don’t expect it to change, as you know I recommend that’s what’s driving the economy right now in all of our markets.

[Eric Frankel:]

For sure, for sure. Ed or I guess any of you can answer this question obviously the preferred market seems to be in a healthy shape at this point. But if asset prices are were they are which can consider additional asset sales?

[Joe Russell:]

Yes, I’ll take that one, Eric. Again, what we’ve done as you saw us do and the way we just completed is, I think we’ve been transparent about anything that would get to the point of a formal process. So at this point there is nothing that we would talk to and like mentioned strategically, we’ve done a good realignment of our market concentrations and feel that the company is highly optimized in regard to the market presence that we’ve got, in the markets that we chosen to stay deep in. And at this point, I wouldn’t point you anything specifically.

[Eric Frankel:]

Okay. And then final question Maria, congratulations on your promotion. I was hoping if you can give some color.

[Maria Hawthorne:]

Thanks, Eric.

[Eric Frankel:]

Yes, sure. I was hoping you can give some color on the multi-family supply picture in the DC market or Northern Virginia obviously that you referenced that you are building underserved development, but there seems to be a lot going up in that pocket of Virginia. So, hope you could comment? Thank you.

[Maria Hawthorne:]

Sure, I’d be happy to take that one a little bit. I know everyone gets a little this made when they look at the number of approved apartments in Fairfax County, and I think the number out there now is about 16,000 units. But I think that what you really need to focus on is the fact that – of that only about 5,000 have final development concept phases, and 1,000 are ready to either, they are either under construction, ready to go under construction between now and the balance of this year. So, when you really drill down to it it’s a much more manageable number. The other thing that I want to, because we’re focused on Tysons obviously is the fact that what has delivered have been towered. And there has been very strong demand and very good absorption within the Tysons market and the ridership of the metro is already at the 10 projected level. So based on that, we still feel confident especially given that even within the Tysons submarket, we’re actually in the smaller portion that is McLean, which is where the executive housing is in that area of Northern Virginia and even in the part of DC.

[Eric Frankel:]

Okay, thank you very much. I’ll jump back in the queue. Thank you.

[Operator:]

Your next question comes from the line of Emmanuel Korchman with Citigroup. Your line is open.

[Emmanuel Korchman:]

Maria maybe you’ll just take to Virginia, Maryland for a second and your other comments on sort of, I’ll call softness in the GSA. Are you guys seeing any sort of changes in the market at all or when do you guys think about internally stabilizing maybe even getting it better?

[Maria Hawthorne:]

Okay, I think what I would say is I were forced to make a prediction is that what we are seeing this year is probably going to be the same course for next year. We’ve been able marginally to increase our occupancy and outperform the submarket. Because, we focused on our strategy of the small tenants and, we’re fortunate that over 50% of our portfolio there is small customer. And then we know that we can, we can reach the space. If you think about it, Maryland and Virginia really the only problem are the large tenant. And demographics they are still really good, you have job growth and unemployment in our market is about 4.3%. So, we’re finding that with our focus on small customers we are able to lease and we are still able to produce and still able to grow our occupancy.

[Emmanuel Korchman:]

Great. That’s it from me. Thank you.

[Operator:]

Your next question comes from the line of Craig Mailman of KeyBanc. Your line is open.

[Craig Mailman:]

Hey, guys. Just wanted to talk about what you guys are seeing in Northern Cal, Austin and Seattle obviously these have been three other the hardest markets for you guys, but they are also more tech heavy. And I know it’s not necessarily or your tendency but given some concerns more recently about the healthy of – of those tenants and DC funding. Just curious maybe just bigger pictures, bigger picture on your thoughts on that market, if you guys are seeing any degradation at all on the credit side. And just I guess bigger picture too, you guys have really put through kind of mid-teen rent spreads here more recently. So is that something you think if it can continue given where in place rents are, what’s expiring next year?

[John Petersen:]

Hey, Craig, it’s J.P. So, quick overview on those markets, they are not too similar in some ways but different in many ways as well. And as you know our portfolio of existing customers is not tech heavy, not in anyway. And what’s happen in Northern California specifically is as some of these tech users expand they displace other kinds of businesses, as their businesses need places to lead space. We are still focused on our tried and true small businesses that are ancillary to tech and most of the time not even tech-related it’s small manufacturers, small businesses from throughout the bay area. So even until Silicon Valley, we do not have a tech heavy portfolio. And that would be the same in the Kent Valley and in Redmond in Washington. It’s not tech heavy, there are some tech related companies, but that’s not our target market. And then in Austin, again tech heavy, but the tech, the software the – the gaming companies in Austin are not renting space from us. We’re still going to our business services our light manufacturing our distributors, those kind of things that’s we target and that few rents are once reflect spaces. We’re not going after the software developer, they don’t want to rent our space. So, going to market rent growth, look we are going to push as hard as we can and we are fortunate that our parks are full in those markets. I mean we’re basically full in Kent Valley and Redmond. In Northern California we’re operating 95%, 96% which is essentially full. So we have the chance to push rents, can we get to the mid-teens, we’re certainly going to try and that’s one of the benefits of having our type of portfolio we can get to market quickly. Look I’m pushing our teams to get there to those ranges, can we do it, we’re certainly work hard and unfortunately we are not seeing any signs in our – the credit worthiness of our customers any signs. In fact we’re aiming to upgrade our tenant base right now. We’re taking the opportunity to bring paying rent, we’ll get something better to rent there.

[Craig Mailman:]

So really no degradation at all, is that what you are saying?

[John Petersen:]

Yes, correct.

[Craig Mailman:]

Okay. And just what’s the push back been there, trying to lengthen these terms in those markets and then kind of as a portfolio for instance other places to do the same?

[John Petersen:]

Yes good question. That’s a strategy and tactics we’re putting in place. We do get push back from time to time. Smaller users are less sure about their business going out three, five, three, four, five years. But, when the market to tell like that, we have the leverage to ask for a four or five year deal and where we can we’re doing that, and if they are not interested in doing that in those market specially, there probably is another tenant that is interested and willing to commit to a longer term lease. And that’s we’re extremely focused on pushing out these leases right now where we can. And not in every case we can do it, but our teams are focused on it right now.

[Craig Mailman:]

And then can you guys just remind me your, the cost of Highgate and kind of what your portion of funding is?

[Joe Russell:]

Sure Craig. Our commitment on that from a cash standpoint is about $85 million. And we’ll fund that, over the next 18 months or so, pretty radically over that period. So, as Maria said that development has started and we’ve began funding that, but it’s about $85 million in aggregate.

[Craig Mailman:]

And I guess just Ed as you kind of look at financing, it doesn’t sound like you guys really need to do a preferred deal in ‘16. Maybe you wait and let the line get to $125 million, $150 million in ‘17 before you do something. Have you guys evaluated – I know you traditionally avoided debt, but now that you are A- rated kind of a longer term debt deal versus preferred?

[Ed Stokx:]

It’s certainly something, Craig, that we talk about and we track all activity out there, but it’s not something that we have felt compelled that we need to do. Our strategy has worked well for us and we expect that it will continue to work well.

[Craig Mailman:]

Great. Thank you, guys.

[Joe Russell:]

Thanks, Craig.

[Operator:]

Your next question comes from the line of Mike Mueller of JPMorgan. Your line is open.

[Unidentified Analyst:]

Yes, this is [indiscernible] for Mike. Are there any other development opportunities like Highgate in the portfolio?

[Joe Russell:]

At this point, we wouldn’t again directly point to anything that’s close to or in the same trajectory from a timing standpoint that Highgate is. Again, if you look at the timing and the processing, typically you have to go through the re-entitled and existing site to take it through government approvals and the whole range of issues that might include current tenancy, etcetera. Again, these repurposed sites are again a site that we can look to redevelop are tough to do in that context. So, nothing right now is on the dock. We do have, having said that, some very well located parks that over time, should give us opportunities to continue to pursue this as a strategy. But again, we would be transparent about that and signal that we have identified and have taken a particular park through a process similarly just on the Tysons. So at the moment, it is just Tysons and the Highgate development.

[Unidentified Analyst:]

Thank you.

[Joe Russell:]

You bet.

[Operator:]

And your next question comes from the line of Eric Frankel with Green Street Advisors. Your line is open.

[Eric Frankel:]

Thank you. My only final question is I think most of your acquisition activity in the last couple of years has been around Texas, specifically Dallas and so I think at a better understanding of pricing there for the types of assets that you were previously pursuing. Has the bidding process for those type of assets have they – have that significantly increased?

[Joe Russell:]

Yes, Eric. It’s ticked up there too. The – again, the investment activity and the realization that the overall economy in Dallas is strong. There is good business migration into that market. Obviously, you see a lot of headlines around bigger name companies moving in there, but all the ancillary benefits of that are playing through, too. So, it’s again an active investment market. There is again a lot of competitive activity. I would tell you that we have seen some decent assets there over the last few quarters, but been surprised by the pricing, because as you know that is one market that we have been more recently active in our acquisition activity. So, we are tracking it hard and we have been frustrated that pricings at a level it is today, but that at the end of the day is so different than what we are seeing in all of our other markets.

[Eric Frankel:]

Can I ask what yields current buyers are paying for relatively stabilized assets and the product types that you typically pursue?

[Joe Russell:]

Yes. It can be a range anywhere on the most aggressive basis in the hottest markets. I mean, to see something with a low 5 handle isn’t surprising any longer. And then it can tear into the 6s and then maybe on a more un-stabilized basis, low 7 sometimes, but even those deals seem to be farer and fewer between. So, the cap rate compression is strong. And at the moment, it’s sticky. I mean, it’s staying right down in those very low ranges.

[Eric Frankel:]

Interesting, interesting. I just did think of a follow-up question, so obviously your portfolio is getting to an occupancy level where there isn’t much left or obviously you have some pockets to fill in, in the DC area, but have you thought – is the development at all starts depends on any markets if there is land around your business parks that where you could end?

[Joe Russell:]

We have a very small existing land inventory that we use as, again, a metric to test, understand and evaluate, is it worthy of the appropriate risk and the timing commitment, etcetera. So again, we haven’t and we would be transparent when and if we get to a point where we would decide to go and look at a particular development opportunity. But at the moment, I couldn’t point you to anything.

[Eric Frankel:]

Okay, that’s it for me. Thank you.

[Joe Russell:]

Okay. Thanks, Eric.

[Operator:]

Your next question comes from the line of Brendan Maiorana of Wells Fargo. Your line is open.

[Brendan Maiorana:]

Thanks. I had a couple of follow-ups. So one, first one, expenses have remained pretty constrained in the portfolio, I think it sort of hovered around maybe plus 1%, which is driving given the revenue increases is helping drive a nice increase in same-store. Is there pressure on same-store operating expenses that we might see that move up relative to what the trend has been recently?

[Joe Russell:]

Brendan, it’s the area where we have probably seen the most pressure in certain parts of the country is on property taxes. Certainly, in areas like Austin, they have been very, very aggressive on assessed values, so that we are seeing pressure there. The other area where we have a little less control and have seen some volatility is on utilities. But I think we have done a good job managing that. And I don’t foresee that we will have significant pressure on operating expenses. It’s something that we will monitor and manage pretty closely.

[Brendan Maiorana:]

Okay, that’s helpful. And then just probably for JP or Maria, but so you guys mentioned kind of increasing term, do you think that from just a current TI level leasing commissions, where you guys have done a nice job moving that down over the past several years, if you are looking for longer terms, are we likely to see higher TIs in leasing commissions in the near-term given some of the leases that you are targeting carry longer durations?

[Maria Hawthorne:]

Brendan, I think that’s a very good question. And how I would answer that is to say, we are well occupied. And the good news is, is that as you look, we look forward to renewals, those tend to have lower transaction costs. And then also just I know we keep saying small customer, but a lot of the small customers, they don’t always have brokers themselves. So, I don’t – I wouldn’t foresee any spikes in transaction costs due to increasing term really.

[Brendan Maiorana:]

Okay. And is it fair to think that from a TI perspective and you guys kind of run your model and tend to do sort of based TI work and that’s kind of in the spaces sort of regardless of term?

[Maria Hawthorne:]

Yes. I mean, if you think about it, let’s say for instance, like even if we get a large space and then we will look at what the market metrics are and where our sweet spot is for the space, whether it’s flex, office or industrial. So, there is always that capital outlay if we do slice it down. However, the good news is that once we have made that capital investment, then afterwards, it’s literally just carpet as we move them in and move them out.

[Brendan Maiorana:]

Okay, great. That’s all I had. Thanks.

[Maria Hawthorne:]

Thank you.

[Operator:]

And at this time, there are no further questions in the queue. I turn the call back over to Mr. Stokx.

[Ed Stokx:]

Thank you. Thank you everyone for joining us this quarter and we look forward to talking to you in the future. Have a great day.

[Operator:]

This concludes today’s conference call. You may now disconnect.