Q4 2019 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Good afternoon, and welcome to the Columbia Property Trust fourth quarter 2019 conference call all participants will be in listen only mode. After today's presentation. There will be an opportunity to ask questions. Please note that this event is being recorded I would now like to turn the call over to Matt Stover Director Investor Relations. Please go ahead.
Sure.
Thank you good afternoon, everyone and welcome to the fourth quarter 2019, Columbia Property Trust Investor Conference call.
The call with me today are Nelson Mills, President and Chief Executive Officer, Jim Fleming, Executive Vice President and Chief Financial Officer.
Members of our senior management team.
Our results released this afternoon, and our quarterly supplemental package, which can be found on the Investor Relations section of our website.
Filed with the FCC on form 8-K.
We filed our 10-K with U.S.C.C. This afternoon and an audio replay of this call will be available by this time tomorrow.
Statements made on todays call regarding expected operating results and other future events are forward looking statements and involve risks and uncertainties.
A number of factors could cause actual results may differ materially from those anticipated, including those discussed in the risk factor section of our most recent form 10-K.
Forward looking statements were made based on our current expectations assumptions and beliefs as well as information available to us at this time.
Columbia undertakes no obligation to update any information discussed on this conference call.
During this call will also discuss certain non-GAAP financial measures reconciliations to comparable GAAP financial measures can be found in our supplemental financial data.
With that I'll turn the call over Nelson Mills.
Thank you, Matt and thank you everyone for joining us today.
This afternoon, we reported another quarter of strong results capping a banner year for Columbia property Trust.
This was the strongest year in the company's history, demonstrating the power of our unique strategy.
The exceptional quality of the portfolio with assemble.
And the dedication and capabilities of our expanded team.
I'm very pleased to welcome the enormity team to Colombia at this exciting time as we continue to move our company forward.
After several years of successful strategic steps, we're now realizing the benefits of having more the best positioned portfolios and the entire office sector.
Our portfolio, both modernize properties with attractive for plates and amenities and some of the most desirable neighborhoods within high barrier gateway markets.
Many of today's most forward looking growth companies have turned to Columbia property trust to meet their facilities needs and their quest to attract retain and inspire the dynamic workforce they require.
You can see proof of this and our impressive tenant roster and increasingly and our solid operating metrics and financial results.
2019 was a terrific year for us.
One in which we raised our initial guidance for normalized AFFO three times.
Strong demand for our properties drove more than 400000 square feet leasing during the fourth quarter, pushing our full year leasing to over 750000 square feet.
We ended the year with a lease rate of 97.1% and just as important.
Releasing spreads remained very strong.
During the fourth quarter, we released at a 20% spread on the cash basis, and a 52% spread on a GAAP basis.
Our eighth consecutive quarter of double digit releasing spreads.
The transformation we've accomplished at Columbia is the direct result of a well defined strategy to strengthen our platform grow our cash flow.
We enhanced our net asset value.
And ultimately create shareholder value.
We've been proactive yet disciplined and execution of our strategy, particularly as it relates to capital allocation.
Investment selection.
And leasing decisions.
I like to walk you through some of the mini recent examples that embodies this approach.
Our disciplined investment process is designed to create value for our shareholders, while balancing compelling investment opportunities against market and execution risk.
A recent case in point was our acquisition of to a one California Street in San Francisco's financial district for $239 million.
This is an exceptionally well located 17 story class a office tower at the corner of California and front streets.
It's 99% leased with an impressive roster tenants and with emplace rents averaging more than 15% below market, we expect to capture significant growth in cash flow over the next four to five years.
Our fifth property in the Bay area to one, California is a terrific fit for our strategy.
With its prime location attractive structural attributes and amenities.
Our talented local team is laser focused on optimizing the performance of this latest addition to the Columbia portfolio.
We also recently completed the acquisition of 101 Franklin Street previously known as to 50 Church Street for $206 million.
Through our joint venture partnership with Normandy fun for.
Our full redevelopment of the 16 storey office tower and New York's Tribeca neighborhood is now underway and on track.
As a reminder, one on one Franklin as in the heart of a high end residential submarket with very little New office supply.
Similar to our vision for seven nine on Broadway, we're creating modern boutique office space that will greatly appeal to attractive tenants at impressive rental rates.
Speaking of 799 Broadway the structure is rising quickly already at six stories and expected to top out near the end of this quarter.
Tour activity is strong and ramping as the building rises and we hope to announce our first leases over the next several months.
We're pleased to see how levels of interest from a great mix of companies eager to embrace the buildings top of the line features in its compelling location in this terrific live work play neighborhood near Union Square Park.
Another exciting project just underway is our vertical expansion and 80 M Street in Washington DC.
This is a truly innovative project the first office building in DC to utilize cutting edge and environmentally friendly mass timber construction.
We'll be adding three new floors or 105000 square feet. So the topic. This class a office building in the desirable Capitol Riverfront District.
Each new floor will feature dramatic 16 put ceilings and 12 foot high windows and will connect to an additional 4000 square feet of outdoor amenity space.
We have already leased more than half the new space to a terrific tenants looking to move its new headquarters by 2022.
Speaking of leasing our talented and motivated team continued to deliver.
We successfully leased 418000 square feet during the quarter, including a 332000 square foot renewal with Pershing and 95, Columbus in Jersey City.
This lease which includes a substantial increase in rental rate may expand to 410000 square feet at the tenants option.
We're very pleased that Pershing made the decision to keep its global headquarters in this building through 2037.
We also had a very productive leasing year in San Francisco, which brought our bay area portfolio to 90% leased.
We executed almost 190000 square feet of new and renewal leases in this market during the year with average rent roll ups at 50%, reflecting the unique appeal of our properties in this well performing market.
We expect our team to continue to capitalize on San Francisco's high demand and limited supply with double digit rent roll up opportunities at all five of our bay area of properties.
Before I turn it over to Jeff to walk through our results and our updated guidance.
I want to express how excited we are to have completed the acquisition of the operating platform and real property interest of Normandy real estate management.
As described last quarter. This was a relatively modest transaction in terms of size when a key strategic step for Colombia, that's significantly enhances our capabilities relationships and pipeline of opportunities in New York DC Boston.
We knew that our two companies would have a strong operational and cultural fit and we're off to a terrific start as a combined platform.
Our progress on seven nine on Broadway and one on one Franklin continues right on schedule as we absorbed several other exciting projects and perspective opportunities for our investors.
We also announced several key leadership appointments this quarter and introduce doesn't need a very talented new team members to the Columbia organization.
We also announced as part of the Enormity acquisition, an agreement to commit $53 million to the terminal warehouse joint venture alongside Enormity Fund for.
LNL holding.
And a very impressive group of capital partners.
LNL and Colombia will co managed the terminal project.
Which spans a full city block just south of Hudson yards.
Similar to Chelsea market, we envision turning this brick and be hundred 25 year old industrial warehouse into a vibrant 1.2 million square foot class a office and retail destination.
With the acquisition of Normandy, and the addition of our latest projects in investments.
Lumpy a is that even more formidable competitor in New York City, Washington, DC, and Boston with deeper execution strain and greater access to capital.
I'll summarize by noting that 2019 was not only another solid year for Columbia financially, but also a pivotal year in our multiyear transformation and we couldn't be more excited about the future.
The combination of embedded growth in our existing properties, which fueled our recent dividend increase.
Our expanding list of exciting value add projects.
Our strong balance sheet and now our expanded team.
We're better positioned than ever to unlock value for our shareholders.
I want to thank our hardworking team for the creativity and drive they bring to the business each and every day as we continue to demonstrate the effectiveness of our investment strategy.
We are honored by the trust of our shareholders and we'll continue to work very hard to reward you with the financial results you deserve.
I look forward to updating you on our progress throughout the remainder of the year.
I'll now hand, the call over to jump to walk us through our results in more detail and share our updated outlook for the new year.
Thank you Nelson and thanks, everyone for joining us today.
Our fourth quarter kept a strong year for Colombia with normalized AFFO was 35 cents per share, bringing the full year figure to $1.51 Penny above the high end of our latest guidance range.
Our year end lease percentage of 97.1%.
This is a testament to the quality of our portfolio and it was consistent with our 96% to 98% guidance range.
Despite low vacancy unlimited rollover heading into the year, our team least roughly 780000 square feet during 2019.
Including 418000 square feet during the fourth quarter.
Our leasing spreads remained robust at 20% on a cash basis and 52% on a GAAP basis, which continues to fuel our in July and AFFO growth going forward.
We outperformed on our operating efficiency with our corporate DNA expense coming in at $32.8 million.
Which was better than our outlook range of 34 to 36 million.
Our same store NOI for 2019 was a robust 7.6%.
Slightly below our estimated range of 8% to 10% only because of two factors our decision to hold the seventh floor of ATM Street in Washington, DC vacant.
Ahead of the vertical expansion, we're embarking upon now as well as the deferral of attacks abate, but at 114 fifth Avenue in New York from 2019 into 2020.
However.
Now that we're expecting this tax abatement in 2020.
We're raising the bottom end of our same store NOI guidance range for 2020 from our previously announced 8% up to 9%.
Which should again put us at the front of the pack on this key metric.
Columbia continues to have a strong balance sheet, providing us capacity to execute our plan to create shareholder value through compelling value add development and redevelopment projects in our core markets.
We ended the year with net debt to adjusted EBITDA of 6.3 times and net debt to gross real estate assets of 34.7%.
Other than a small construction loan on 799 Broadway, we have no debt maturities until 2022.
And we have more than $4 billion unencumbered properties.
Our financial strength allowed us to repurchase $33 million of our common stock during the fourth quarter at an average price of $20.72.
Which I will note is a 22% discount to the convertible preferred units, we issued to complete the enormity acquisition.
We continue to consider our stock a compelling value and we had $166 million remaining at the end of December available under our repurchase authorization that went into effect in August.
In December we issued our preliminary guidance for 2020, including normalized FFO of $1.46 to $1.51.
And same store NOI growth of 8% to 11%.
Today as I mentioned, we're raising the low end of our same store NOI growth range, providing a new range of 9% to 11%.
And we're confirming our normalized FFO range at $1.46 $2 51.
In addition, we're introducing guidance throughout our year end lease percentage of 95% to 97%.
Full year DNA expense of 35 to 37 million, reflecting the recent enormity acquisition.
And weighted average diluted shares outstanding of 118 million.
I want to emphasize that although our normalized AFFO guidance range for 2020 is roughly in line with what we produced in 2019 things have changed materially from last year.
First we have sold both Atlanta properties and ill Pittsburgh property.
And we expect to sell our Pasadena asset very soon.
These sales have focused our portfolio into just our four key high barrier markets.
To replace these we bought one to one Franklin in New York, which has not yet producing income and to all on California in San Francisco, which has a much lower initial yield than the properties we sold.
The reason our AFFO is remaining at about the same level.
Is that our cash flows are increasing substantially in our core markets because of the successes we've had over the past few years with their value add projects and our strong leasing results.
Now that we finished exiting non core markets. Our continued success is should lead to solid future growth.
In closing I'll Echo Nelson starts to 2019, which a tremendous year for Colombia, we outperformed our original expectations and made significant progress optimizing our portfolio and finding new ways to create shareholder value.
Our team also continued to capitalize on opportunities with their hard work throughout the year.
Colombia is going into 2020 in the strongest position in its history in terms of our team.
Our portfolio our growth opportunities.
And our financial strength.
With that operator, we'd like to open the call for questions.
As a reminder to ask a question you wanting to press star one on your telephone to withdraw your question press the pound or hash key.
Please standby will be compiled acuity roster.
Your first question comes from Vikram Malhotra with Morgan Stanley. Your line is open.
Thanks for taking the questions. So just as you mentioned.
You, you've sort of gone go out and gone through or sold all the non core assets I'm just sort of wondering if we look at some some of them or maybe markets, where you have a smaller footprint like say Boston. For example are you still looking to come maybe narrow the footprint and said it sort of the one off Boston and you know maybe I know you just.
We renewed its purging, but like New Jersey asset.
Yes, the from Hi, Thanks for the question so.
We only have one property Boston Normandy has a couple of projects there and fund three and four.
But in terms of our shareholders ownership, we really have one property, it's been a great performing property.
Given their team and capabilities that relationships in Boston is a market we will explore.
But very much like San Francisco very challenging market to to win opportunities. So we'll see today were about 40 were 40% Manhattan over 30% San Francisco.
Twentys low 20% DC.
In that range and then property Boston, So officially we're saying we have four markets, but we'll see how that goes we're not going to bother just for the say goodbye now we find the compelling opportunities, we'll do it but.
We'll see in time, we may we may very well just focus on three key markets.
Let's turn to determine.
That's helpful. And then just the the 20% Mark to market that you reported I'm, assuming most of that is exposing so bushing took less space or they give back some space. But then is the so is the four foot great theater and use it it renewed as that hires that the 20%.
Hey, good from this is Jim.
Yes.
Pursing was a big part of it because they were obviously such a large square footage. We did have some other roles that were larger roll ups.
But pursing was it was a big part of it and they did renew at a higher per square foot rate, even though they're giving back some space.
Okay, great and.
And then just last one any update on a kind of how tendencies or tenants or are looking or looking at the new developments in New York.
Well the trend continues and it's been that's been the case for a while now.
That there are certain submarkets within within the than the Midtown South West Chelsea.
Continue to.
Certainly have the strongest demand, particularly for tech and media tenants.
The other and that continues we continue to see that happening and we think our portfolio well positioned for that.
About two thirds of our tenants, our tech and media and where it located in those markets, but the other the other bifurcation in the market, which I think your questions really getting at the group is new redevelop new and redevelop properties versus.
Existing and we continue to see.
Strong demand and premium pricing, bringing rental rates for for new construction, obviously be well located well design, but that.
Thats, where that's where a lot of the demand has been we expect to take advantage of that is seven nine on Broadway and.
101 Franklin.
And terminal terminal warehouse as well.
Okay, great. Thanks, so much.
Thanks become.
Your next question comes from Michael Lewis with Suntrust. Your line is open.
Great Okay.
What do you assume for timing for the for the Pasadena sailing should I assume that that there is no other acquisitions or dispositions, besides cranberry woods and Pasadena and the guide.
So for guidance purposes, we in reality, we expect to sell Pasadena, that's all that's on track.
To sell for the number we've got it too and.
These deals are never done until they're done, but we do expect to get that sold in the next month or so.
Hopefully and.
In terms of other.
Assumptions and the actual guidance I don't believe there's any anything else. There. We continue to have an active pipeline, we continue to look for opportunities.
Obviously.
If we do any significant further acquisitions or developments it would most likely include bringing.
Partners to the table. So we don't expect to use a.
The use of a large portion of our balance sheet on new investments. This year, but we are at keeping it we do have an active pipeline. We continue to look for those opportunities, but in the guidance Jim can weigh in that's been the got US I don't think theres anything in there except just to sell Pasadena.
Hi, Michael that's right Oh.
We do have the terminal warehouse investment that we're assuming will get done this year, but that's really not going to contribute anything this year and we don't have any other acquisitions or dispositions in the guidance this year.
[laughter] and.
You are guiding to no increase in corporate CNS could you talk about the incremental norm at the expenses I assume they're being allocated it elsewhere.
The asset management of property management expenses.
Yeah. It's a good question, we have provided a guidance range for this year for corporate Gionee, that's Oh a million dollars higher than our guidance range was last year, so roughly flat just slightly up.
And that's a function of.
They've been a number of separations from Columbia, There there was some overlap between and as it were from nobody there were some overlap between the teams and so we lost some folks in are losing some folks.
Oh on both sides and so that's reduced some of the headcount at some of the costs on the Columbia side. We've added some folks from woman. He also obviously, they're gonna be working on the corporate side.
Jeff Groaning, the C.C., Idaho, and a number of others.
And those came close to offsetting it's a little bit of an increase but not much. The rest of the expense really is going to fall into what we're going to call management fee expense will collect management fees for property management asset management construction leasing all that sort of thing as normally has done in the past and as we've done some odd through our joint.
Interest with some Blackstone will collect management fees and will assign what we think an appropriate the appropriate number as in terms of personnel costs and other expenses to that business. It's really a separate line of business then.
So owning and operating our own real estate.
And that will be net positive, we think and we've sort of signal. This bye.
Enough to make the whole deal accretive slightly.
Oh, and so that's kind of where we are so that there will be costs associated with that business and those of course were underwritten when we looked into the enormity transaction.
Okay, and then lastly from me I just wanted to ask about.
The rationale and how it came together for the vertical expansion in DC.
It looks like your pre leased about half of the expansion, but the building I think his list today.
Only 80% lease which means there's roughly that amount of space.
In the building I realized that it might not stack up so the way the tenant wants it but maybe you could just talk through that rationale little bit in a market that has new supply and has a little bit of insurance.
So.
Michael This this really this idea this does overbuild.
Yeah, I'm really came to US a couple of years ago through our brokers and others.
As you know that Submarket, Catherine Submarket had been very strong.
And but but as you mentioned that there is plenty of new supply in DC. So to just build standard commodity space with them, but any sense and to build something without pre leasing.
Wouldn't make any sense, we we got a terrific terms and rates from a good tenant on that property, it's a little over half I guess about 60% of it as pre leased.
And I think you just based on having a pre leasing based on the the uniqueness of the opportunity.
It is in a special space is differentiated from other other typical commodity space D.C.. We think we can capitalize premium rents in fact, we know we can we just demonstrate that would first.
But it it was never something we were going to do want to spec basis. We.
We were bringing along this tenant prospects at the same time, we were exploring.
The opportunity.
Do you have activity on the rest of the Skus.
And Michael Hey, This is Jim just on the other part of your question you're right, it's showing up about 80% leased that was actually intentional. So the building right. Now is seven floors were going to build eight nine and 10.
And.
The way. This came together is the seventh floor tenant was rolling.
And so we in order to add on the additional floors, we have to use that seven floor for staging and for construction work and that sort of thing. So it had to be vacant to be it's not easy to add on to topple building. So we had to have it vacant. So weve held that space opening a good chunk of 2019, and it's going to remain on lease but.
While but that's that's where the vacancy and that's really a.
The bulk of the existing vacancy so that was really about that.
Uh huh.
Certainly my question.
Thanks, Michael.
Your next question comes from frankly with BMO. Your line is open.
I can you provide us with an update on to current situation with we work at your 149 Medicine project now that there's new leadership in place.
Yes so.
It's.
Pretty much in the same same position we were in over the last few quarters. They are building up we work is building up the space.
What has changed several months ago.
Their plan was to move to other subsidiaries into the space.
With their repositioning of the company and divestiture of those subsidiaries. They are now going to use the building a and they're more traditional sense, we understand there'll be some combination of enterprise.
Their plan is some combination of enterprise tenants and want to traditional co working they continue with the build out of the.
Based building.
They've done some of the tenant improvements as well, but I think you're waiting.
They're waiting until they have a better feel free to tenants are going to be before they move that forward rents began in July.
And we've been in regular contact with we were.
Including the leadership and.
They're giving us a strong indication that.
They have every intention of keeping this property paying the rent for the long term and as we understand.
Their expectation as to.
To build.
Rebuild the business around just these kinds of properties these well located.
Anyway.
BD location so.
As we said before it wouldn't really concern us to get the property back it on <unk> on that right right economics.
But we don't think we're going to have that option.
We think we expect them to occupy and.
By the space and pay the rent. So that's that's the latest but obviously, we keep a very close out on it.
Okay, Great and then you did some buybacks in the quarter, how how should we think about the peso repurchases going forward and their amount of buybacks baked into your 2020 guidance.
So Frank the.
I don't know that we can really comment too much on the pace. What I will say is we weren't able to buy shares back. The first three quarters of last year, because it is pending Normandy acquisition once that cleared we did buy shares as you know in the fourth quarter.
And we thought they were compelling value down and we think the stock as a compelling value now we we do look at buybacks.
Alongside other investment opportunities and so.
It'll depend on our balance sheet it'll depend on a you know in terms of the pace and the amount will depend on the balance sheet and available the capital and other uses for capital, but I will say, we still view it as a compelling opportunity we do think up even though it's not strategic it does boost the shareholder value.
And so.
Well, that's so sort of our thinking on it we don't have a lot factored into our guidance just to let you know that but Don.
Thanks could come up but another acquisition or disposition.
Pretty unlikely.
At this point, but some share buybacks could happen.
Okay. Thank you.
Again, if he would like to ask a question press Star one on your telephone. Your next question comes from Sheila Mcgrath with Evercore. Your line is open.
I guess good afternoon.
Could you give us an update on the 799 Broadway that leasing activity and when that building you expect completion of that project.
Oh, Yes, hi, Sheila so the building is is coming right along things we mentioned.
We're at the six floor and we expect to top out to full 12 stores within the next.
Couple of months.
So or two to three months and.
There is a lot of activity the more the further we progress with the physical construction.
The more real that interest is getting.
We're being we're intentionally holding off and.
We think the right Tom to to just start to secure some leases will be.
Probably the summer.
Mike.
So we're very excited about that it continues to get a lot of interest and we're very confident we're going to be able achieve our expectations on on rents. So the building gets completed.
Later this year.
And occupied will you know I'm, probably the fall or late in the late in the year and we hope to have leasing done.
Much of leasing done, but then as well we do have a investor day coming up on February 27th encouraged.
All of you become if you could we're going to in addition to meeting the enormity team.
It's been some Tom you could you get to know them.
Well actually tour that property and as well as terminal warehouse. So we look forward to showing you a show you that more first hand.
Great and then on I'm terminal warehouse that was my next question I think you said it was 50 million or 52 million investment what percentage of the project will Colombia.
There is what will your interest based Sheila.
That's only about 8% so the way that deal the structured we are who managers koji patients with Oh, No Enormity fund for so there is a three way general partnership we normally from for Colombia, LNL and it's really a two way co management between Colombia.
I will now since it's a management teams at Columbia, Enormity combine combined but in terms of the investment it's a relatively small percentage less than 10%.
And we we know we looked at the.
This was separate and apart from the Enormity Act platform acquisition, but we did look and that we think it's a very attractive investment.
We think coming in as the GP.
Gave us some opportunities.
Or you know that from Baird filling for investors so.
Okay, great and all that structure.
And then Jim can you.
We we explained that tax abatement that you mentioned in New York I'm not sure fate fully understood that.
Sure Sheila there's that tax abatements available in the number jurisdictions and yield New York, It's called I cap and it provides uh huh.
A reduction in AD valorem taxes and this is one that has been held up for a while because of some saab work that had to get finished.
Which has now been finished but it didnt get cleared at the end of last year and saw the tax abatement didn't kick in in 2019. It will is now expected to kick in in 2020 and so it's just was.
I'm, a little bit of income and same store NOI that got pushed from one year to the next so it actually helps 2020 and it called 2019 back just a little bit.
Okay, Great and one last question Jim with the other.
Net sales.
Closing shortly.
Well, Oh or just recently, what do you think roughly leverage net debt to EBITDA it looks like at year end.
Contemplating no other acquisitions just your current guidance.
Yes, Sheila that's a great question, we're we're in that.
Early in the low sixs at the beginning of the year.
Without any other real activity, well, we'll invest a little bit internal warehouse.
But we should be in the sixes.
This year.
You know obviously, if we went.
Lets without a whole bunch of stock back that can drive it up a bit.
But we expect to be in the sixes.
And you know nominal leverage somewhere in the mid Thirtys.
Okay and actually one other question on 80 M Street, maybe it's in the supplemental did you get did you outline the cost on expansion and roughly the yield on cost that you're targeting.
She will I don't know if we have outlined a full cost it's.
Yes.
The yield on it we expect kind of pull the incremental yield on the overall building to be seven to a little bit better than that.
And that really takes into account the new space and some changes being made to the building itself.
And I'm just looking to see if we've got I don't think we have it in our development pipeline will put that in their next quarter because it hasn't really begun yet I suppose is the reason.
Okay. Thank you and that and that yield that Jim mentioned also.
Takes into account the vacant seven floor space.
So a pretty conservative.
Calculation, we get to 73%.
Okay. Thanks.
There are no further questions at this time I will now turn the call back over to Nelson Mills for closing remarks.
Well. Thank you all so much for joining us and thanks for the great.
Three questions. We always appreciate I appreciate your time and interest.
Obviously, you can tell we're very excited about our current position and on our opportunities going forward to create value and.
And ER and the team we've assembled to do so.
We do hope, we really do hope to see you at our Investor Day on February 27, coming up in New York as I mentioned.
It'll be a chance to meet the expanded team.
And talk a bit more about our strategy going forward and we have an exciting property tour on some then on Broadway or new new ground up construction as well as terminal warehouse, which is.
Very interesting.
Oh, probably if I hope you can come join us and thank you again for your time and please don't hesitate to reach out to any of US. If you have any questions had a great evening.
This concludes today's conference call you may now disconnect.
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