Kite Realty Group Trust (KRG) Q1 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Kite Realty Group Trust Earnings Conference Call. My name is Larry, and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to Mr. Dan Sink, Chief Financial Officer. Please proceed.

Thank you, Larry. If you did not receive a copy of the earnings press release, please call Kim Holland at (317) 578-5151, and she'll be happy to send you a copy. Our first quarter supplemental financial package is made available yesterday on the company's website at kiterealty.com. The filing has also been made with the SEC in the company's most recent Form 8-K. The company's remarks today will include certain forward-looking statements that are not historical facts and may not -- constitute forward-looking statements in the meaning of Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown facts, uncertainties and other factors, which may cause the actual results of the company to differ materially from historical results or from any results expressed or implied by such forward-looking statements. The company refers you to the documents filed by the company from time to time with the SEC, which discusses these and other factors that could adversely affect the company's results. On the call with me today from the company are Chief Executive, John Kite; and Chief Operating Officer, Tom McGowan. And now, I would like to turn the call over to John.

Thanks, Dan, and good morning, and welcome to our first quarter earnings call. We had another productive quarter. FFO as adjusted for the quarter was $0.11 per diluted share, while our retail portfolio was 93.4% leased, reflecting a 110 basis point increase over the prior year. We have disclosed FFO as adjusted to reflect a onetime litigation charge of $1.3 million relating to an arbitration ruling in the first quarter in favor of a former tenant. The former tenant claimed that the company unreasonably withheld its consent to an assignment of the tenant's lease to a third party. In reliance on advice from outside litigation counsel, the company believes that its actions related to the requested assignment were proper. We have recorded the full charge in the quarter. We achieved another positive NOI growth in the quarter for the portfolio. Our same property NOI was up 5.4% over the prior year. This is the fifth consecutive quarter of strong NOI growth. In addition, our cash rents spreads for the quarter were 7.2%, our 10th consecutive quarterly increase. We also continue to see consistent growth of revenue from property operations as a result of our development and leasing efforts. Property operating revenue was up 9.8% over the prior year. On the balance sheet, our finance team has executed on several important objectives. Last month, we amended and restated our line of credit to improve the interest rate by 35 basis points. We also extended the maturity to June 2017, inclusive of a 1-year extension option and modified several provisions within the document. Simultaneously, we closed on a new 7-year, $115 million term loan that we plan to expand to $125 million later in the second quarter. We were able to secure attractive pricings, ranging from LIBOR plus 210 to 310 and project an all-in rate after the execution of a hedge in the low to mid-4% range. The term loan and line of credit modifications have significantly improved our debt maturity schedule over the next several years. We have no remaining maturities in 2012, and more importantly, our annual debt maturities will not exceed $48 million between 2013 and 2015. In addition, the weighted average maturity of our debt increased from 4.2 to 5.4 years. We will also improve our balance sheet metrics, including the reduction of our floating rate debt, from 42% to approximately 26% upon the planned closing of the term loan hedge in the second quarter. The execution of the term loan provided an opportunity to significantly increase the size of our unencumbered asset pool and achieve additional financial flexibility by retiring the debt on 5 of our shopping centers. In addition, we paid off a 7.38% loan on the Plaza at Cedar Hill withdraw on the line and subsequently reopened our 8.25% Series A perpetual preferred generating $31 million of net proceeds to reduce the balance on our line of credit. With the execution of these transactions, we increased the unencumbered asset pool to approximately $475 million, which is 40% of our total assets. Turning to quarter, we also executed on our disposition strategy by selling Gateway, Marysville in the Seattle area, consistent with our planned asset sales noted in our 2012 guidance. We're analyzing other assets in geographic areas where we don't anticipate future growth or the specific assets don't possess a long-term growth profile. On the development side of the business, we continue to make significant progress on several major in-process project. At New Hill Place Phase 1 in Holly Springs, North Carolina, we finalized the anchor line-up by closing on the sale of land -- of a land parcel and executing a site development agreement with Target. The leasing momentum on this project has increased quarter-over-quarter, as the leasing committed percentage increased to approximately 11% from 65% to 76.2%. In addition to Target, we have executed anchor leases with Dick's Sporting Goods, Marshalls, Michaels and Petco, totaling approximately 100,000 square feet. We received a loan commitment from one of our relationship banks and anticipate closing the construction loan in the second quarter. At Delray Marketplace, the construction schedule is on track for the November 2012 opening. The site work and foundations are nearly complete, and vertical construction will commence this month. Four Corner Square located in Maple Valley, Washington, a Seattle suburb, increased to 83.5% pre-leased. We have executed leases with 3 anchor tenants totaling 68,000-square feet at this redevelopment. We've also received a loan commitment from one of our other relationship banks on this asset and anticipate closing the construction loan in the second quarter. Oleander Place in Wilmington, North Carolina is progressing on schedule, as Whole Foods is planning for a late May opening. During the quarter, our consolidated CIP balance was reduced by $10 million to $138 million, primarily as the Whole Foods at Cobblestone Plaza opened and the related costs on the development were moved to fixed assets. Our objective is to continue to reduce our CIP balance as a percentage of our total assets to less than 10%. We expect the CIP balance to grow during the construction of the 5 in-process development projects, and will likely peak in the third quarter of 2012 prior to several project openings. However, upon the completion of the in-process development, the consolidated CIP balance remaining will be approximately $50 million or less than 5% of total assets. We're reaffirming our 2012 FFO as adjusted earnings guidance with the full year range from $0.42 to $0.46 per share. I'd like to reiterate the primary goals that we're focused on for the remaining -- remainder of 2012: opening Delray Marketplace in the fourth quarter of 2012; preparing New Hill for a spring 2013 opening; partially opening the redeveloped Four Corner, Maple Valley in late 2012; pursuing opportunistic acquisitions to increase NOI or reducing our debt-to-EBITDA; continuing our strong leasing momentum; and selling non-core assets to provide capital for acquisitions or reducing debt. In closing, I'm pleased with our team's efforts and execution to start the year. We've substantially strengthened our balance sheet and enhanced our financial flexibility with the term loan and line of credit extension. Our developments are progressing well, and our high-quality properties are attracting best-in-class retailers. While we've been focused on blocking and tackling over the last few years, opportunities are beginning to surface, and we believe we can simultaneously further improve the balance sheet and grow the company. This concludes our prepared remarks. We're ready for questions, operator.

[Operator Instructions] And our first question comes from the line of Nathan Isbee of Stifel, Nicolaus.

Just focusing on the guidance from -- the same-store guidance was I think 1% to 2% for the year. You clearly came in significantly stronger than that in the first quarter. Can -- are you maintaining that 1% to 2%?

Yes, we are maintaining that, Nate. As we have been talking about over the last couple of quarters, same-store NOI, obviously, won't hold up in the 5% range as we begin comparing quarters over previous strong quarters. So we're going to maintain that and it's going to -- as we've said, begin to kind of come down from an elevated level, and then we want to try to maintain the guidance of that 1% to 2%, but more likely towards the higher end of that.

Sure. I mean, just looking at the numbers, I mean, your rent spreads are generally positive. What are you assuming in terms of occupancy for the rest of the year?

I mean, I think we -- the occupancy guidance we gave was 93% to 94%. Right now, we're a little above 93%, so we're assuming we're going to be within that range. And again, it's -- the push is more likely to be on the small-shop side. So that's why it's probably a little more difficult to project because the small-shop deals can -- when they happen, they can happen quickly, and we're pretty focused on trying to move that needle. So I think we're trying to be reasonably conservative, but I think it's fairly accurate to say that we'll be in that range towards the higher end of that.

Okay. And I guess that's a good segue to small-shop leasing at Delray. The leasing went up, I think, 140 basis points this quarter. What's in the near-term pipeline? What should we expect in terms of leasing progress over the next few quarters?

Tom, you want to?

Yes. Nate, this is Tom. From a leasing standpoint, to start off, second quarter-wise, where we'd like to see the percentage get to is about 80%. And then our goal, as we work through the third and the fourth quarters, to really try to drive somewhere between 85% and 90% upon the end of the year. So we have a good pipeline as it ties back to deals in the works, and we're going to hopefully continue to drive that effectively through the end of the year.

Okay. And then just -- could you just remind me on the land parcel you sold to Target. How does the price you've got compared to your original cost?

I mean, Nate, that's the deal where it's actually a sale and a site development agreement, so we kind of combined how that works relative to -- it's actually -- we're entering into an agreement. There's an exchange of the property, and then we, of course, will be doing site work that they are going to be paying for their pro rata share. So it's not as simple as just saying we're selling a parcel of land. So it's really -- from an accounting perspective, it's part of the total cost of the asset, I believe.

Yes, and you pick up a lot of off-site improvements as well.

Our next question comes from the line of Carol Kemple of Hilliard Lyons.

What was the spread between lease and occupy at the end of the quarter?

At the end of the quarter, it's about 250 basis points. And the majority of that are tenants that have signed leases, have not occupied. We only have a couple -- we have one dark figure in -- at Tarpon Springs and then maybe another small -- a couple of small shops that are paying a rent that aren't -- they're not occupied. But the majority of it is, say -- for instance, say, DSW or a HomeGoods that we have at the Plaza at Cedar Hill where the leases are signed, but they don't occupy till the end of the year.

Carol, that number is down, obviously, because, at the peak, that was over 300 basis points. So the number is coming down fairly rapidly as tenants opens in these development deals. So historically, we -- that number is going to be more like 100, 150 basis points as we mature. But that's really -- that's all upside, so that's a good thing.

So at this point, would you think it's reasonable to assume it'd be 250 basis points at year end?

Probably. I mean, probably in that range, maybe -- depends. It could be slightly better, slightly higher, but in that range.

Okay. And I noticed your reimbursement from tenants was a little bit higher than it's been in the past. Do you expect it to stay at that level?

I mean, I think this quarter is probably representative of the type of reimbursements we'll be getting. So I think it's -- we're -- I would do a run rate on this quarter, because as we have, our infrastructure is allowing for these developments to come on in the income statement without having to add the dawn of additional costs. So I think it'd be a pretty consistent run rate this quarter.

[Operator Instructions] Our next question comes from the line of Rich Moore of RBC Capital Markets.

On the $125 million term loan, Dan, are you going to swap the whole thing out?

Our objective is to swap it out, Rich, in the -- at the end of the second quarter.

Okay. And you don't do that for the whole term, do you? You do that for a shorter period of time, I assume, right?

Our objective would be do it for the whole term. Because right now, with the rates and how attractive they are, with the swap in place, we think it's a good piece of paper to lock up for the 7-year period.

Okay, all right. And then, John, on the construction loan front, it seem like -- it seems like you guys are getting them all over the place, and I think that's great. I wasn't -- or you had said to me before and said to us before that, construction loans, you were seeing a loosening there. But it sounds like it's really loosening here. What are your thoughts on construction loans as you go forward here?

Yes. I think -- yes, we did. We've been talking about it for the last couple of quarters, that construction loans are available in the right circumstances. And I think you've got a couple -- you've got a litmus test that starts with the sponsor. I think construction loans related to these type of deals are very important as to who the sponsor is, the quality of the project, the tenancy, the pre-leasing, the equity. So when you look at that and then you look -- as Dan have talked about many times, the strength that we have -- the strength of our relationship with these banks, which goes back over 20 years, that's why we're in a position to get these deals done. And I think it makes a big difference that when you look at us as a company, they can look back at a long history of completing projects on time and on budget and having very high-quality product at the end. So I think as I've tried to say, maybe even last year, this is going to be our advantage, and now we're seeing it come to fruitions. Not only are we getting the loans, Rich, but if you look at that terms that we're getting, that also kind of gives you an indication of the quality of the assets. So we feel like it's going to continue.

Yes, I know. Very impressive, I agree with you. So you mentioned that you have some opportunities that are beginning to surface. And would those be also more developments, you think?

No. But, Rich -- I mean, I think, really, our focus is more on executing the existing developments that we have. We have, as you know, 5 ongoing, and we have a few coming in behind that. So we have enough development in our own hopper right now that we don't have to go looking for a lot of new stuff. When I look out over the next 3 years and you look at NOI growth, we will generate significant NOI growth from our organic pipeline. In terms of the opportunistic things that are out there that we're seeing, we see some great opportunities to acquire assets. We're working on several deals right now that are very interesting. And our ability to acquire something and add value to it is the differentiator that we have that a lot of the -- we have a lot of peers that are great at acquiring assets at the highest price, but we're more focused on finding deals that are different, that we can add a lot of value to and make a bigger spread. So we're -- it's interesting. It's just all -- in the last few months, it's really changed. And so that's why I'm feeling optimistic about our ability to significantly grow and delever at the same time.

Okay, good, John. And then the last thing I had is -- really, there's only -- as far as I can tell by the way I kind of look at it, there's only 3 projects in the future development pipeline that are sizable. One is the second phase at New Hill. So the other 2, Broadstone Station and Parkside, any thoughts on where you at with those?

We're -- because we're pretty conservative about what we're going to say on these future projects relative to where we are, but suffice to say that each of those, we are very actively working on and have activity on each of those. In particular, I would say that Parkside is a JV, as you know, with Prudential and it's in Raleigh. Obviously, we're finding a lot of leasing success in Raleigh, in Holly Springs. So it's only natural that, that kind of flows into Parkside, as well as Apex, the Broadstone. So yes, I feel like they're coming exactly the way we anticipated they would. We've got -- and I'll let Tom elaborate, but we definitely have good momentum that's moving about the ball forward, and they'll be happening just like in-process are happening. Tom, you want to?

Yes. And then -- as it relates to Parkside, the population, the growth, the completion of 540, the Outer Loop, all these things continue to improve our real estate, as well as Research Triangle Park. So the good thing for us is the market continues to improve. And as we really dig in to the development process, it should line up, from a timing standpoint, to make for a very good project. So things are starting to align, and we're going to spend the -- basically, the rest of the year really trying to align these points to get a project ready to go.

Our next question comes from the line of Quentin Velleley of Citi.

Just sticking with some of the opportunities that you've seen, the new acquisitions, I guess, with some redevelopment upside. Sort of given where your cost of capital is, what kind of return expectations will that be, project yield or internal rate of return, you sort of need to get for these deals to make sense?

Quentin, I think it's going to depend on really what the transaction is. I mean, I don't want to say that we are only looking at acquisitions that have major redevelopment associated with them. So to the extent we're looking at acquisition that would have major redevelopment associated, I think you'd might be looking at it on a kind of on IRR basis. And those generally before acquiring an asset that has a major redevelopment and we acquire that somewhere in the kind of mid-7 cap range to higher-7 cap range, you could expect to get an IRR in the teens, depending on what sort of leverage you'd be using, if any. So if you weren't using any leverage at all, then you'd be more looking at a cash-on-cash, call it in the 9 range. So -- and then I think there are some opportunities that we're into right now that we are finding, kind of a couple off-market opportunities that are pretty strong centers that have just been overlooked, frankly, and are locally owned. That -- there might be an opportunity just for us to enhance the tenancy, which, by its nature, enhances the rents. So both of those things, again, we're finding. I mean, I think what's happening is you've got so many large companies out there trying to do major portfolio deals that you find some of the smaller deal falling through the cracks. And we're happy to go out and buy a $15 million center on a one-off basis that we see upside in. Whereas, a pension fund advisor or actually one of our peers would look at that and say, "I'm not sure that worth the effort." So that's where -- that both of those buckets, we're seeing opportunity.

Any sort of like, just over this year, you sort of thinking 2 or 3 $10 million to $15 million deals? Or are you thinking about something potentially larger than that?

I think we're looking at it one at a time. But as we do that, we're starting to see opportunities that are bigger than one at a time. So to the extent that -- it's hard to line things up perfectly right in terms of where the capital markets are and where the acquisitions are, but we will -- if we feel like we see something that's large that we could do something with, as I mentioned in the past, we definitely have institutional investors that would want to partner with us. So I think what we do is we start underwriting these deals and then we look and see what the capital structure needs to be, and that's how we make a decision on whether or not this is something we'll just do ourselves or bring in a partner. But I definitely -- we are interested in finding opportunities to accelerate our deleveraging. So these acquisitions can help us do that. And to the extent that we think that we're going to give -- we're going to get the shareholders a good long-term return, we want to be aggressive where we can.

And then I think you mentioned some of the asset sales. Are you currently marketing anything at the moment? If so, how many assets?

Yes. Dan, you want to?

Yes. We've got an asset in Chicago that we're marketing now that is -- the recent development that we did up there was LA Fitness and Toys“R”Us. And that currently is being marketed, and we hope to sell that middle of the year this year. I think some of the other things that we're marketing, Quentin, are some of the unanchored strip centers that we'd like to sell and recycle some of that capital into kind of the acquisitions that John's talking about that we're seeing, where you've got anchored properties with good long-term growth and markets that we want to be in. So I think our objective is to continue to look to sell some assets that are unanchored or don't fit the overall growth -- long-term growth profile that we're looking for.

Quentin, I think we're still comfortable with the guidance we gave in this position. If anything, we will exceed it. And if we exceed it from a capital perspective, as I've said, we'll first be looking to redeploy the capital. And if we can't redeploy it in an accretive way, then we'll reduce debt with it, but I think we have enough going on. And we're seeing enough opportunities that, to the extent we sell 2 or 3 more assets than we thought we would, that's can probably be a good thing, because we're going to be moving up the scale in quality and growth. So I'm feeling pretty good about that.

Okay. And then just lastly for me. In terms of guidance, I think you had the term loan bank swapped at around 5%.

We did, and we assumed $80 million on that.

Right. So you've -- okay, so you're going to look at doing a high volume but at a lower rate?

Yes, correct.

Yes, correct. So it probably washes out a little bit in the end.

[Operator Instructions] Our next question comes from the line of Todd Thomas of KeyBanc Capital Markets.

This is Grant Keeney on for Todd. I know you touched on small-shop occupancy, but could you just elaborate on some of the trends you're seeing in small-shop leasing year-to-date?

Sure. I mean, this was a -- the quarter was -- we -- I think we did 13 shop deals in the quarter that were new deals. And generally, we did a combination of national deals, regional deals and local deals, as we have been for the last several quarters. The national and regional deals, we're -- we did more of those than we did local, but it was a small enough sampling that I wouldn't look at that as -- looking through that in terms of major macro things. But again, the trends are good. The -- our ability to continue to negotiate is good. Supply and demand characteristics just get better by the day for landlords. I've been saying that for over a year, and that continues to be the case. There continues to be very, very limited supply, and we have high-quality assets. I want to emphasize to everybody that they need to kind of look at our -- go on our website, look at our portfolio, look at our demographics, look at the asset quality, look at the architecture, look at the tenancy. I'm not sure we talk about that enough. And we just have a high-quality portfolio, and we're going to continue to do well. So I feel good about that down the road. We have an emphasis on the shop side in terms of what our goals are for the company, and we'll continue to push that.

Only thing I'd add as it relates to new developments, Tom talked about supply and demand. If you look at a project like our New Hill Place project in Holly Springs, North Carolina, there's so little new supply in that market that we really able to pick out momentum, probably as far beyond what we expected. And with the Target deal on 100,000 square feet of boxes executed and now momentum on the small shops, with 9 months to go before we open the project, we're actually in a position to be very selective and push rents. So the supply and demand factors been very important on ground-up development.

Okay. And then In terms of development, I guess. For Delray, I know you mentioned it's on track to open in November. But if I remember correctly, I think you're hoping for the vertical construction to start in March, and now, it kind of appears to be set for sometime this month. Is there any potential delay that we're -- we should be aware or what's going on with that?

I mean, these -- projects like these always ebb and flow, but we are on schedule, for sure, and we feel confident that will deliver. You got issues with weather and things like that, that make things move around and tenants changing coming into the mix that we do different layouts for. But from my perspective, that's what we do. So we will deliver it.

That's a good way to say it. And any delays that occur just tie back to permitting and those issues are behind us. And the fact that foundation slabs and coat walls' in a position to go up, that puts us in a comfortable position to get this done on time.

Okay. Okay, good. And then real quick. I'm not sure if you mentioned it. But can you just provide us with the current line balance today following the new term loan? And is the balance of the line fully available?

Yes. The line balance right now, after the term loan paydown, is about $108 million and we -- well, that's before the additional $10 million that we're anticipating. So will be sub-$100 million once that comes into place. The full amount of the line is not available. We still have some room. As John mentioned, when we acquire assets, to put them in the line to give additional availability. I think right now, the amount that's available is probably in the $160 million to $170 million range.

Yes. I think right now, we have about $70 million of liquidity between availability and cash, and so we feel comfortable with the year. And we obviously project out over the next 2 years, and we have adequate liquidity to execute what we're doing. And I think, if anything, we continue to add to that liquidity over the next 2 years vis–à–vis. these transactions. It of course, ebbs and flows with PI and things like that, but we're in pretty good place right now.

Our next question comes from the line of Tammy Fique of Wells Fargo.

I was just wondering, the property that you sold during the quarter, what the cap rate was on that sale?

That cap rate was below 7.

Below 7. And then for the remaining properties you're looking to sell this year, should we expect similar cap rates, or what kind of cap rates are you seeing on unanchored strips?

Well, I mean, you've got -- yes, obviously, you've got -- we're selling some different types of product. The assets that we're going to sell, likely to sell in Chicago is more of a kind of low-7 cap-type transaction. Unanchored strip centers, depending on markets, are probably more like in the 8-something range. And again, we're not looking at the unanchored strip cap rates to be the driver of that decision. We're looking at exiting centers that we just don't see growth in. So we don't want to be too focused on that. I think if we sell centers like that, we're going to be NAV accretive in the end, because we're going to end up with better assets. And then so any other types of centers that we would put up out there is going to depend on what they are. I mean, Power Centers, depending on location, are kind of trading in very low-7 cap range, and then grocery anchor centers are trading in the 6s, essentially. So again, when you look at our pool of assets, it's why it's a little frustrating from a perspective of misallocation between stock price and our asset value.

And then what portion of for your portfolio do you think falls into that unanchored strip bucket?

It's small. I mean, we're talking maybe 10%, if.

Okay. And then one more question. So on Oleander, I'm just sort of curious. The lease committed rate dropped from the end of the year to the first quarter, but also the GLA dropped. So could you just sort of remind us what's going on there?

I'll answer real quickly. The only reason the GLA dropped is because we typically allocate 4,000 square feet for our lots. We're negotiating a deal with a user that will ultimately have less square footage. So we made that modification. So that's the GLA question. The reason the lease percentage went down is we have one tenant that did not renew and another tenant that took a slightly less space. So the net impact was only 2,300 square feet. It's just a sensitivity that ties back to the size of the center. But this is a project, being a Whole Foods-anchored center, that we're very comfortable that this deal will be 100% leased by the end of the year.

Our next question comes from the line of Josh Patinkin of BMO Capital Markets.

My question is on Best Buy and the 2 locations there. If you've had any discussions with them, and how you perceive those?

Yes. We have one of them that they will vacate.

Okay. And how do you feel about that space going forward? Are you positive on releasing it?

Yes. I feel -- it's in a -- it's a new SuperTarget anchored shopping center, center strong and we feel very good about it. There's a long-term lease in place. I think it goes like in the teens, 2018s, something 2020, something like that, 2019. And so we've got plenty of income from them to -- for us to out and find a great -- a better -- frankly, a better tenant and have capital from them to put the tenant in. So again, I've always said it's all part of the business. The real estate always outlast the tenant.

Okay. And then on Naples and, more generally, South Florida. How do you view that market going forward? Are you positive on it or there had been a sweet spot or a general weakness?

No, it's not a general weakness. I mean, Naples is obviously an important market to us. We have been in the market for several years. We're positive on it. We're seeing improvement, generally, in Florida. Frankly, we're bullish on Florida. People have to remember, we still got 18 million people there. It's a strong market in the state of Florida, I should say. But as far as Naples itself, all of our assets there are the best in their submarkets. I mean, everything we have in Naples is either anchored by Publix or Target. We have one in Fort Myers, basically, that's a Lowe's anchored center. But other than that, everything's very strong. So we feel good, and we're seeing the residential market there actually pick up, which is obviously important. But we never saw the commercial market turn down as violently as the residential market did, which really was a fact that -- for us, that we had the best assets in the market. This is the thing people forget is, in a major downturn, it's when it's really important that you own good real estate. When things are great, kind of -- it kind of flattens out. People make dumb decisions and go into bad real estate. But when things are tough, they only go into good real estate. So that's why we're doing well.

[Operator Instructions] With no further questions, I'd like to turn the call over to Mr. John Kite for closing remarks.

Okay. Thank you very much. We really appreciate, everyone, joining us for the call, and we look forward to talking to you next quarter. Have a great weekend.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may disconnect at this time. Have a great day.