Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Simon property Group incorporated fourth quarter 2019 earnings Conference call. At this time, all participants are not listen only mode.
After the speaker presentation, they won't be a question and answer session.
Good question during this session you'll need to press star one on your telephone please be advised that today's conference is being recorded.
If you acquire any further assistance. Please press star Zero I would now like turn the conference your speaker today, Tom White Senior Vice President Investor Relations. Please go ahead Sir.
Thank you Joe Good morning, Thank you for joining us today, because they know todays call, David Simon Chairman, Chief Executive Officer and present.
I'll turn the call or Rick Sokolov, Vice Chairman, ROI, Mcdaid, Chief Financial Officer, and I don't really Chief Accounting Officer.
Before we begin a quick reminder, that statements made during this call maybe forward looking statements within the meaning of the Safe Harbor, the private Securities Litigation Reform Act would like to notify huh.
Actual results may differ materially do a variety of risks uncertainties and other factors. We refer you to today's press release, it or if you see filings for a detailed discussion of the risk factors relating to those forward looking statements. Please note that this called foods information that may be accurate only as of today the.
Reconciliations of non-GAAP financial measures for the most directly comparable GAAP measures are included within the press release, the supplemental information to today's form 8-K filing.
Okay. That's really from a supplemental information are available on our IR website and investors, that's probably been dot com.
Prepared remarks, so please introduce Dave its time.
Good morning, everyone. We had a very busy productive quarter, two and another successful year for a company.
Our full year 2019 funds from operation per diluted share was $12.04, which includes a 33 cents charge for the early redemption of our poor series of senior notes.
Adjusting for the debt charge or full year FFO was $12.37 per share at the upper end of our initial 2019 guidance comparable FFO per share for the year increased 4.4%.
It is a testament to our relentless focus on operations cost structure active portfolio.
Management commitment to our strategy that we achieved the upper end of our initial range, even with the number of headwinds we faced.
During the year, including retail bankruptcies.
Nitpicky downtime to do two major redevelopment that many of our properties and the reduced overage from tourism spending, including the negative impact from the continued U.S. strong dollar as well as they continue trade pensions limiting visitors for the fourth quarter.
Her reported at the FFO was 1 billion, a 45 1.04 or 5 billion or $2, a 96 cents per share comparable FFO was three point.
$293.29 per share an increase of 2.8% year over year, we continue to grow our cash flow and report solid key operating metrics, including our comp NOI, which grew with our international properties grew at one point.
7%.
Our top end of life for domestic properties increased 1.4% for the year retailer bankruptcies impacted our content of why by roughly 120 basis points and lower overage rent due to reduced.
International Tourism and mentioned earlier increased impacted our comp in Hawaii growth by 30 to 40 basis points. We're pleased to report that retail sales momentum again accelerated in the fourth quarter.
We reported retail sales per square foot for a malls in premium outlets was $693 per foot compared to 661 in the prior year period, an increase of 4.8% keep in mind. This is on top of more than 5% increase for the prior year, we continue to be.
Weve reported retail sales are understated and are negatively impacted by internet returns at retailers process, but our brick and mortar locations for the recent holiday period. Some media reports quoted in store sales growth of less than 1.5% that's contrary to our.
Number which was more than 3% and again impacted by.
The Internet returns that that occurred at the in our stores. These sales results further reinforce the benefits retailers, we experienced from opening operating in high traffic highly productive well located real estate, we generated a record of over one.
<unk> point $1 billion and gift card sales, which was an increase of more than eight <unk>, 18% year over year leasing activity remained solid average base rent minimum rent was $54.59 the malls and premium outlets recorded leasing spreads of $7.
83 cents, which was an increase of 14.4% our malls and premium outlet occupancy at the fourth quarter was 95.1%, which was an increase of 40 basis points compared to the occupancy it'd be ended the quarter third quarter down 80%.
80 basis points compared to prior year, which was impacted roughly by 200 basis points from buys the bankruptcies that we process through the year. We have successfully re leased approximately 60% of those bankruptcies already on an annual why weighted basis.
Our operating metrics were as follows retail sales on an annual why weighted basis is eight $884 per foot compared to 693 occupancy would be 96% and average base minimum rent would be $73 now.
Just to move to do developments, we opened one new development in 2019 in Mexico construction continues on five new outlet developments and leading markets, including for international destinations and one in the U.S.
Malaga, Spain, which will open this month, Bangkok, Thailand, West Midlands, England, England, and its 2021 Norman de France in Tulsa, Oklahoma very few companies that I know of could open in Thailand, and in Tulsa and throw in France for fun.
Completed a number of redevelopments and expansions across our portfolio in 2019, including for redevelopment of former department stores spaces, We had a very busy year on the expansion of several high performing international outlets, adding approximately a 410.
Square feet.
In aggregate to centers in Seoul Korea.
Can't England, and Vancouver, Canada, We currently have 15.
Former department store redevelopment projects under construction our share of those costs are roughly $850 million. We have 20 more in our pipeline and at the ended the fourth quarter redevelopment expansions densification projects were ongoing at more than 30 properties or.
Costs all of our platforms in the U.S.
Internationally with our share of that net cost of approximately 1.3 billion. As a reminder, we fund these accretive projects through our internally generated cash flow and just to give you a sense of the magnitude of some of the downtime we are.
Dealing with with respect to our redevelopment.
Projects that we have under construction that will open in 2020 will contribute approximately 70 million.
Incremental NOI in 2021 as they always stabilized so again.
Hi, land, France Tulsa.
The 30 projects under development 1.3 billion 70 million of and Hawaii that will be generated in 2021.
Good comp NOI, given a few headwinds and the just to put it in I know, it's a lot of numbers and a lot of going on but it's important for everybody and I understand it now let's talk about arrow.
Her style in a b G. Because again, we see a lot of misinformation out there and.
I just I think it's important just to give you a sense of our smart.
Capital allocate allocation decisions that continues differentiate our company we completed our third full year of owning arrow put style. So I would like to take some perspective on on that investment I'm going to simplify this I know, it's a lot of information I'm going to simple.
And focus on our cash investment our cash investment in Aero Opco was approximately $25 million.
We've already received 13 million of distributions. So I have $12 million of cash invested in Aero Opco at that time. After time, we bought it it was producing a negative EBITDA of $100 million and had over 500 stores today today.
We expect Aero Opco to produce EBITDA free royalty from 575 stores.
Approximately $80 million of EBIT Dot, we believe arrow is approximately if you put a market multiple on it.
$350 million today.
And our ownership is 50%.
12.
Two 3% to 50% of 350, that's the that's the math now with respect to AB G.. We invested we made a recent investment in it. So we have the total.
600, our sorry $67 million and.
Aging GE authentic brands group at the time of our original investment, which was roughly $33 million a BG produced EBITDA of approximately a $150 million.
Today, our value is worth 190 of ours 67 million in a BG is expected to produce EBITDA, well north of $350 million and the values growing every day.
Which leads me to forever 21.
As you read recently, we have recently participated with Brookfield and authentic brands group on behalf of the Newco Spark group F 21, LLC and a stalking horse bid for certain assets and liabilities in a going concern transaction under section 363.
Three of the bankruptcy code our group successful turnaround Aveiro after pointed out of bankruptcy in 2016 gives us confidence with our ability to do the same with forever 21 Forever 21, as a story and well you well widely recognized brand with over two.
Billion dollars in global sales, we believe at 21 similar to Arrow presents a very interesting repositioning opportunity. If the transaction is consummated the new co contemplates. The continued operations of many of forever 21 stores and E commerce busy.
Yes, and maintaining many jobs our interest in the new venture will be approximately 50% the aggregate purchase price acquisition price is approximately $81 million plus the assumption of certain ongoing operating liabilities. The process is subject to a go shop period.
The auction is expected to be completed in mid February with closing shortly thereafter, now we're not dot sorry.
Where balance sheet. So yes, you know we were very active in 2019, we completed three.
Trot senior notes of $3.5 billion with an average weighted that coupon of 2.61% 15.9 years, we will retire $2.6 billion of senior debt and our liquidity stands at $7.1 billion. We continue to have the strongest.
Credit profile in the right industry.
Our net debt our net debt you and Hawaii is 5.2 times or interest crab coverages.
5.3 times in our long term issuer ratings of 88 to continues to be the highest in the retail sector. We paid a record dividend in 2019 of $8 in 30 cents, a 5.1% increase over 2018.
We paid approximately $3 billion in dividends in 2019 at we have paid over more than $31 billion.
[music].
In total dividends as a public company will be well over 33, this year and today, we announced the dividend of.
$2.10 per share for the quarter, a year over year increase of two of 2.4%.
For the first quarter now, let me turn to our outlook for 2020, let me just briefly summarize 2019, we posted another record year of results revenues cash flow FF FFO per share dividends. All records, we continue to strengthen our company through innovative disciplined investment active.
Cities that will allow us to continue to deliver long term cash flow growth phone dividend growth. As a reminder, our 2019 results also included 19 cents per share in income related to insurance settlement at our operating mills moving on to 2020 our guidance.
Range is $12.25 to $12.40 per share this range rack.
Range represents approximately 1.7% to 3% compared to our FFO of $12.04 or range is based on the following assumptions major redevelopment is occurring in many properties, resulting in significant downtime the impact from.
A continued strong U.S. dollar versus the euro and yen compared to 2019 levels comparable and allied growth from our combined malls outlets mills and international platforms.
1%, approximately 1% no planned or acquisition.
No planned acquisition or disposition activity and a diluted share count of 354 million shares.
To conclude.
We had another very busy and successful year, our company and portfolio is well positioned as ever and now will only improve with our ongoing investments given our track record of earnings growth and Hawaiian cash flow generation an increase in increase.
Leasing dividends, we continue to be curious to see the yield of our stock 500 basis points higher than the 10 year Treasury.
This is an ongoing overreaction to the negative sentiment however.
Regardless, we remain undaunted throughout our history, we have said when others exact and those moves have served us well on the extremely confident of where our business is and about the growth prospects of our company ahead, and we're ready for questions.
Thank you.
Linda to ask a question you will need to press star one on your top on to withdraw your question Pest Apache. Please standby when we come out of Canada.
Our first question comes from Craig Smith with Bank of America. Your line is now open.
Thank you.
I wanted.
You could characterize the outlet results.
It did they seemed obviously that did have an impact from the lower traffic, but it also seemed like to a number of store closings that impact the outlet.
If you could just tell us where the outlet relate to the ism all business.
Well the Allied business had a very good year I mean, the only the only I mean, it was infected affected by.
Certain bankruptcies.
But we had significant top end of why growth it was higher than the mall business and the only real shortfall occurred like I said in the overage rent and that was primarily at our bigger centers due to the strong dollar and tourism. So.
The outlet business, we're projecting again for our cap and aligned the higher than the mall business again, Craig don't don't get caught up in this narrative.
We're seeing really good result, the outlet, we'd like a little weaker dollar more tourism.
I believe that's temporary.
It's good to see that the you know obviously, we've got to bigger picture going on with.
You know with Corona virus, and tourism I assume that will be temporary however, it's great to see the China in U.S. and completed their trade discussions and the assuming we get a through this grown a virus scenario, we expect or overage.
Continue to be dominant or at the growth in our outlet business and we have no warrants are concerned at all about our outlet business toll says leasing normally these leasing bangkok's leasing.
West Midlands in and even with Brexit next it whenever you want if leasing ashfords leasing.
You get Vancouver's leasing.
You know so I hope that gives you a flavor so don't believe the narrative.
You will understand what we're doing.
Okay, and then on the the 1% comparable in Hawaii guidance.
It is.
Lower than you achieved in.
2019.
What would you say other major drivers that number.
Oh, well I would say primarily because of the downtime if you're in a few again, where we're a big companies. So it's a little harder for everybody to understand all that's going on but if you see that significant redevelopment that we have we have downtime and the reality of that is we think and.
2021 that we could sit here and we don't have far away years, you know our philosophy.
Well, we do have significant downtime that analyze and we've got.
It takes a decrease in these are big malls like at Burlington, and North shore and all that stuff a lot of that thats coming on in late 2020, we expect 70 million as I mentioned just from those redevelopment to come on into 2021, obviously, we're projecting a stronger dollar so.
Were muted on our overage rent calculations with our outlet business.
And those are the primary and then obviously, we've got some retail retailer restructurings that are suffering some of that's related to a you know the the a newer rent in.
You know thats likely to occur with the F 21 stabilization from other restructuring. So you know you put it all in and that's 1%.
Now I'm not overly worried about that number.
Like it to be higher but we've got we've got some things to deal with them we're dealing with.
Okay and then just did you have with the leasing spread was just for the fourth quarter in 2019 and was that result, somewhat a timing related.
We don't we just do it on a rolling 12.
Okay.
That's a number you know that's a number only posted is appointed as we don't we don't the we don't say too much brace over it.
Just like sales I mean, you know we had this discussion on sales and there was the most important thing now I understand it's the least important thing.
So again kind of know our view, which is the sales are interesting.
They are not determinative, because again, we can replace retailers that aren't performing a and then we do think car sales per foot or muted by by the returns okay.
Okay. Thank you sure.
Thank you. Our next question comes from Christy Mcelroy with Citi. Your line is now open.
Hey, it's Michael Bilerman here with Christie.
David I want to go through some of the investments you're making in retailers another sort of tech platform initiatives and the numbers you gave had on Aero.
Surprise, you to encode Adam Sandler again were not too shabby right 15 times multiple on Aero.
Highly impressive when you step back how do you think about all these investments whether it was arrow and potentially forever 21, and then yes lifetime constraints ally arms Soho House [laughter] I know some of the maybe varied how do you think about the investment itself versus driving.
Disproportionate leasing we can find into assets relative to all the other a retail landlords right. So how much of it is a benefit not only potentially of turning these retailers around like you did with arrow versus how much of that incremental leasing that you're going to get out of your assets.
Our protection of stores relative to everybody else.
First of all let me let me, let me just part of a retailer investments.
We would not have done an arrow or you would and we would that be attempting to do forever 21.
The sole purpose of maintaining or correct.
And that's the biggest misnomer out there when I read.
Various publications and analysts notes and media notes, we do it we make these investments for the sole purpose of we think Theres a return on investment now the fact that matter we did all this.
Narrowing the reality is they kept pay us threats. So that's like the though.
Yes, that's a obviously beneficial and I don't want to undertake that that's not what we do it at the same time where that 21.
You know, we do think there is a a business there, but it's got to be turned around and I'm not going to project today to you what what those numbers are but we've got our work ahead of us, but if we are successful and turning around.
We will make money at at 21, and you know and we'll get paid our rent, but again the sole purpose is to is to make a investment in our.
You know for the benefit of our of our company now the rest of them, we're creating a flywheel of.
Unique entrepreneurs that understand the benefits in physical space understand the benefits of.
The new consumer today, and the whether its pinstripes or E gaming or the deal that we did with.
RG GE ruling guilt, and what's going on with shop premium outlets and.
The deal, we did with harm and nazarian that the SB.
This is a flywheel that no other company in our industry can do.
We expect to to get to the benefit of.
Return on those investments, but additionally, the ability to make us a better operator.
And also bring those kind of ideas to our to our portfolio. So we learn how to be better operator, we make money on the investment and ultimately in some cases they.
Bring their product to our.
You know to our physical portfolio. So I can't imagine you know a better scenario for us, but I'm you know we're in early days on all of this stuff, but we expect a we expect to prosper from these kind of investments.
Underlying though is we want them to add value to how we operate as well as to ER to our portfolio and we're doing it I mean, if you if you've seen as an example, I mean go at chapter and verse on the stuff, but if you see well what lifetime brings with their new concept to our portfolio you'd say.
Yes. It you know what I rather have that then as you know than a moderate a on under invested the department store in the answer is come on so it's a no brainer.
Right second question I had was if you think about where you're in a wide breakdown is today between the malls outlet smells and international which is the Pie chart. You have on slide 17, and you sort of married up with the Pie chart, where you're spending your capital which is slide 28.
And then you add in a lot of each other types of investments that you're making weird and let's say three years out or maybe five years out.
Where does the composition of your income and asset base shift to from effectively Nonretail Usiminas Reggie hotel.
Office.
The collaborative the totality of all these sort of investments that you're making and then the traditional retail business.
What do you think split would be.
I mean, if it's really it's you know we benefit you know you could you could argue with.
Hi, there way, but we benefit from B. I think we really benefit from being a large company.
And is it's obvious that we're able to make investments and pay our dividend without you know without having to finance or dividends et cetera. So.
So when I looked at it.
You know we win even when we look at Tesaro non retail real estate I mean to get to the NOI is.
So over 5%, it's going to take a lot of war, but we do like that we do like the diversity.
Of our geographic geography, our product pipe mills outlets malls or mall business of under 50% of are at a wide today, we love the international business that's been highly profitable.
And.
I think we've got a pretty interesting company because it's so the first and so big and so well finance.
You know like I said at the end I mean, we can take what others AG.
That would sake I always get can either way, okay wait wait so we can take when others that you know we can bad what others are say, maybe that's the answer.
And then we have our whole <unk> our whole additional portfolio of other investments that you know maybe one day.
We have a spin off of that maybe one day were batteries, maybe one day you know we're just the just as a diversified interesting company that people.
Well, we'll finally say hey, it's about a bad company not too shabby.
Hey, sorry, because what we said that we did have not too shabby Index conference, but you know.
We took it out but if we can't use.
Hey, David, especially if I could just added I follow that on Craig's question, how comp NOI. So at realizing that you are now including international and I assume that's on a constant currency basis. I'm wondering if you could provide sort of an apples to apples comparison with 1.4% growth and 29, King I guess.
In North America, and then just a clarification here your comp NOI growth exclude start with larger redevelopment projects is that correct.
Only a only a.
A few of those so not all of them. It depends on the size of we have a definition to that we have a size of it.
And so that not all of them.
It just depends on some of that so that it doesn't really international marginally helped it if not a big deal you know what do you you know I.
I would suggest to you that the biggest thing affecting our car as I said to you earlier.
Is that we do have a lot a redevelopment that are affecting.
Our cash flow I go.
And that you know when they come on will be $70 million 2021. There is downtime I don't think people appreciate that because you know were.
You are used to dealing with smaller companies frankly, and you know that they leasing out lot the X y Z. It moves the needle were a little bit different.
And what we there's no denying we've got some you know leasing to do words or occupancy down a little bit by the way. If you believe that narrative, you think or occupancy year over year would be down 500 basis points. It's down 80, we've already leased 60% of it so.
I'm not you have we look at ourselves a little bit different we give you year by year number we don't have for away years or 1% I think is good to be fine and if we get a little uptick and overdraft will be better if we don't it well and get our worldwide will go on.
Thank you.
Thank you. Our next question comes from Jeremy Metz with BMO capital markets. Your line is now open.
Thanks, Good morning.
David just one quick one to go back on Forever 21, and just given that Ed how they shared there's still a process getting run here and there's some different outcomes that could come on additional.
Interesting areas, you're acquiring guy he built around all stores staying open and just operating at a reduced occupancy costs. One was that the base that you don't care in here.
No again, given our size and given our historical results, we don't get into specific retailer or rents to restructurings. That's for other folks that's not for us.
Okay. That's fair and then we do you think about sort of the add inflow of closings in bankruptcy as we've seen 2019, obviously, a pretty big year.
2018 was down from 17, though so you look at the landscape today, you look specifically at your outlet immoral portfolio, obviously, what happened last year and what could be into pipeline factored into the 1% compound that but more high level, how do you feel about.
The landscape here today, given you know, there's still obviously plenty of over Levered retailers out there.
Yeah, I think look I think we're projecting it could be lower than last year for sure.
But it's our our point of view and you know there are no certainties Ah, but I would I would certainly.
My best judgment call would certainly be to be dramatically less than last year last year was a very difficult year. When it came to that you know if you look at historically 17 was a high year 18 was below year 19 was a high year.
So I'm, we're we're anticipating the lower certainly a lower amount.
But that's you know that's our best estimate of what we've seen today.
Okay last one from manager said as we look at where the stock as you mentioned the misperceptions out there, they're getting yield spread to cash or you've been able to generate you know how are you thinking about further stock buybacks at this point just given the redevelopment pipeline and opportunities there that you outlined.
You know maybe we should go private it's really what we should do.
The reality is look it's in our it's in our.
You know, we we do have the opportunity to do that we're obviously.
Waiting to see kind of what transpires and the in the global World right now, but it's something that will obviously.
Continue we do think our company's undervalued and I would expect us to continue to to play into that it's not in our numbers and you know we'll see how the next to know how the next period of time evolves.
Thanks for that I'm sure.
Thank you next question comes from Alexander Goldfarb with Piper San <unk>. Your line is now open.
Hi, good morning.
Change I mean, it morning, I'll change up the interest because he called me out on that out there last time, but I will say to Bilerman thing. He mentioned that you didn't do not too shabby would point out they bought Meg said and which maybe the first in Greenland to mention makes it a why I keep saying, we're a little bit different than the rest of the folks okay, but.
Well I.
But by the way I think it I think it'll uptick sales in Vancouver, though so they'll be a benefit.
Okay, well, if you could be a little less different if you go back to the seven am release time that would be appreciated.
No.
We had a technical difficulties so it wasn't as bad as the Iowa caucus, but it was a little bit of a technical difficulty. Okay. So two questions. David I appreciate that you're not going to comment specifically on on an individual tenant, but we didn't notice that [noise] forever 21 dropped out of your top.
10 in the fourth quarter, but third quarter, obviously and Hawaii in the fourth quarter was a lot weaker than previously so maybe you can just in aggregate talk about what.
To the extent even talk about the impact in the fourth quarter and then what your bad debt credit is for 2020 and versus what the actual was in 2019 just to get a sense for how much the 1% is impacted by maybe a change in bad credit first historical versus other things.
Well look we are we certainly it's it's not surprising to you and again I know, you're very kind and you're very smart. That's why you would you want me to answer these that 21 questions but.
Yeah, I don't really want to answer, but I will answer this.
Our fourth quarter was clearly impacted by.
The reductions that us and others.
Provided the F 21 to help stabilize their business okay.
And that was and and that is that new scenarios one of the reasons why they dropped out of our.
Top 10 or so.
So was it you know weve wasn't like we wanted it didn't drop.
Out of our top 10, but that's just the math.
Two is and I again, I I I have to impress upon everyone out there you know we we do a overage rent is an art not if not a complete science and it is backend.
Waited for the fourth quarter in the outlet business. We actually are you know, we're way behind and overage rent and all the way up and we made some of it back but we didnt make what we had originally budgeted. So when you put the two together you know that's why we were a little short.
Mystically the gets more 2% original budget I mean that there's no I didn't know there's no denying that but you know that is an art and science now that's why we've been extra conservative I'd say on the.
No the overage in the outlet business.
But you know there's a lot going on right now tourism is way down in the United States I don't control that.
You know usually were beneficiary of that but sometimes we we run into a headwind, but that has nothing to do with the long term viability of this great real estate and these great properties and that's what we have to as a investors and as you as analyst in essence operators all have to kind.
To overlook these temporary things.
So we did so in summary, I hope I answered the question in summary, our court or Q4 was impacted by you know what we did with at 21.
Was impacted this shortfall in the.
In.
In the overtime with the outlets were projecting to a similar scenario next year. So hopefully we'll be conservative on that but you know time will tell and and obviously that does the restructure of at 21 as it is what was a big.
Big retailers does have it it does flow through 2020, as well I hope that answers on the bad debt, it's basically pretty pretty flat from 19, which was a pretty decent size here. So you know that but again there is no longer bad debt. It's just you don't get the income you're talking again, okay. It from an accounting point of view.
Being an old the.
Yeah Accountants I still.
Scratch my head on that but the reality is it's no longer bad debt you just don't get all the income you thought you were going to get revenue.
Okay.
Todd.
And then the second question goes to add the dividend you you, obviously highlighted where your yield is relative to the tenure you guys always point out your sort of mid single digit Yo dividend increases over the years, but maybe that mirrors your taxable dividend increase in which case it will it won't be lower but just given it seems like your comments that the mark.
It's not appreciating your dividend and the you know guidance coming it a little short of where the street is should we brace ourselves that maybe you don't increase the dividend this year or maybe the increase is nominal maybe 1% or your view is to continue growing it in this sort of mid single digit even if the market doesn't appreciated in the stock price well look.
I think we'll continue to grow our dividend word that we have earnings growth next year or this year I should say 2020, or we grew 2.4% Q over Q. So that's certainly a signal to you that you know, we're not backing off or dividend growth I mean will be as high as eight or 10% like it's been.
You know over the last five or six years made probably not.
But you know again I don't think I looked at it I guess, if you were in my.
True.
Yeah, I when I hear the word bracing I just want to explain to you. We're not we're not breaking here my friend, where we're on the off threats, we actually feel good about our company, we feel great about or our dividend, we feel great about our balance sheet.
Feel great about these other investments we're going to make we're gonna hopefully turnaround at 21 and make money. So that there's less think the last word you will never see in our and our hopefully I shouldn't say never but we don't we're not bracing there okay.
Yes, we have some leasing to do given the high amount of bankruptcies, we've already at least 60%, yes, I'd like to see tourism come in you know strong dollar does limit spend of and you'll see that from other retailer. The retailers that are you know that have an important exposure to tourism.
We have all that redevelopment in 2020, that's ongoing that takes properties down I mean at a mall at North gate.
You know that did $18 million have been a white the zero zero today, you know zero and 'em, we accelerated that and you know we had development rights that could make that property worth a billion dollars again.
You know, we don't have throw away years or Alex as you know and so yeah. This year will be not as you know not as robust growth as maybe some of the years in the past that doesn't mean, we're bracing no bracing here.
Not in our vocabulary.
Okay. Okay.
Thank you. Thank you David sure.
Thank you and next question comes from Channel with Morgan Stanley.
Okay.
Hey, David Good morning.
Quick quick quick clarification, I think what you said was F 21 is still in the pool, it's just a lower tenant and therefore should we assume at 21 has a tenant is included in the 20-F O Guide.
Yeah, Yeah, Yeah, it's yes.
We and others adjusted their rent for the fourth quarter and because of the base rent. It just it's number 11 or 12. What is 12 12 12 forever 21 is in our top 12, okay.
Got it that that's helpful. Let's I promise you that last question I'm going ask about Forever 21, no problem. We had no problem with 80 question anybody wants that.
Sure. So actually it's just staying along this line of your investments and retailers and I appreciate why they've been really attractive investments for you. So two questions.
First of all our these held in the Trs I think they are and then number two do you have to since for how high you could go with your retail investments before you got up here you know hair care your non Korea.
Limit and the Trs.
Yeah. They are in our Trs and no there's a lot going on.
You know technically about this that they reach working on I'll, just defer that because it's a little arcane, but.
We've got plenty of room.
And given that it's in our Trs we've got plenty of room that we're not gonna there's no issue about maintaining read status or in a bad income or gross asset test and all the all of that all of the various.
I've read a test that you have to you have to me. So we've got we've got plenty of room to run.
Yeah, and I was I was really saying that not from our you're hitting the limit but it seems like this is.
Attractive investment pool that that might make more in some further consideration in the future. Yeah look I think I think we but were right I guess rich what I'd say to you or grounded in.
Real estate, but we we have over time.
On that we can do other things reasonably well.
And that is our goal to do that.
You know we've had success we haven't been perfect.
And you know if we are if we do end up.
Buying with Brookfield and authentic brands fruit forever 21, I mean, obviously, that's going to be a lot of work.
That's a you know that that is a big restructure ahead of US and you know that that will want to make sure that that's a that's done right or no guarantees on that.
So.
Don't expect another retailer you know that will pop up until we get that you know stabilized but same time, we're always looking at additional investments I mean, we're very excited about the long term prospects that we have with or basically our merger with.
Org and we're just starting that whole process and that's a that's a whole mother Avenue for this company in terms of E Commerce and.
And relationships and retailer loyalty and all the other stuff that comes with that.
And there were just you know that feel literally just closed in November so you know and and we've merged our operations into those and there were just starting to improve or a shop premium.
Marketplace. So I mean, there's a lot of growth ahead of that as well and then you've got all the mixed use stuff that we're doing you know whether its northgate.
And whether its fits you know you go down the list I mean, there's a lot going on and that's why we feel good about where we're position.
Got it now and just to two final thing for me on on Forever 21, I I knew I knew it no I told you I wouldn't.
Ask about that again, but I can't help myself your 50% investment should we think about that at 50% on top of your 25% investment our top even 50% investment in a b G. What does that 50% include the look through on a bitchy.
No just it's actually a little under 50 to be technicals approximately 50.
No. That's that's a separate standalone additive as nothing it's got with our investment in and we were are 80, we only own around a little over.
6% of EG Okay.
Okay got it.
And then you know you didn't buy back any shares this quarter. Despite what puts stock prices down is that just a simple capital allocation decision given your discussions you're having on have 21.
Oh I think we are we got busy.
No no real good reason, obviously it unfortunately, we make about a three to not to buy back right but.
I just think we were in busy in the fourth quarter and everything else.
Got it to shape. Thanks, guys I appreciate it thanks.
Thank you. Our next question comes from Nick Yulico with Scotiabank. Your line is open.
Thanks, just going back to the guidance or can we get what the total and a wide growth embedded is and as well are there any onetime charges that are dragging down the I phone number.
No not not that Ah that's nothing material no.
And what about the total NOI growth number.
We this is what we give it's consistent with our past practice.
Okay, I guess I'm just wondering if there's anything else. That's you know if if the number is gonna be similar to your carcinoid number like it's been or yeah. I mean look I think on some of these that are in our non comp pool.
No. We have we had this downtime that I've alluded to I mean, I, we can quantify for yet, but we all kind of put it in the blender.
And that's where our guidance is I mean, we had significant put it. This way we expect in 2021 to generate around 70 million of international in Hawaii.
And most of that is Dell dealing with our downtime that we've got expansions that are opening up worldwide, which usually come in you know the strategy. There is a little bit different you know lease up is not 95% then tend to be a little bit lower. So you know you. We just have one of these years yeah.
That's because of all the activity you're not man, it's not manifesting itself in the growth.
But we don't have a pro and yet we're still going to grow earnings were still going to grow our dividend, we're still going at the best balance sheet, there's still going to make these fund investments, we're still going to keep moving the portfolio and it just.
No I mean, the people do have a year that doesn't necessarily you know have terrific.
Growth because we're making all these investments it's you see it elsewhere, we were a static company.
I get it but we're not we're we're really did.
Does that help yeah, and then David It is helpful to get that 70 million dollar benefit 10, Hawaiian 2021 from the redevelopment.
Coming online later this year I guess, what we don't know is what this ongoing drag from redevelopment could be meaning that it was actually be purely a benefit in 2021 or there's still some of this redevelopment downtime.
To deal with I guess I'm wondering is at some point. It would you think about maybe providing some sort of an ROI bridge I mean, it's something the office Reits have done to deal with.
Lumpiness and and tenant move outs and tenants being refilled and.
And it'd be pretty helpful to understand what that how that plays out to get to the growth of the company over the next couple of years, Yeah. I mean, it's possible. We don't you know we we.
Like people just to see what we're doing and then the results of it manifests itself, but this is an active year of.
Investment in redevelopment and you know the growth will have some impact.
To do that you know we've also had a history of outperforming our guidance and you know I mean, let's face it we're being conservative Theres a lot of noise around the world from an economic and obviously.
It's an election year you know we've got this.
Terrible situation on the you know on the virus and we don't know what that means so there's a lot there's a lot going on but I'd go I'd go back to.
I think Alex that race I mean, we're investing in the future and we feel really good about cut all the stuff that we're doing it manifests itself in 2021, and <unk> and beyond but you know like Fips I mean Fips is a great example, I mean, the mall as you know torn up and that stuff is.
Got to come on late 21, so that's not even in that number. So so but your your point is valid we've never wanted to do that because we've never wanted the you know.
Had people think we're having to throw away here, but this will be a somewhat of.
No a year of investment if you know that happens with you know I mean.
It's happened with them that they compare us to Amazon, but what's happening with.
The big companies that say, yeah their investment I mean, so that's what we're doing well see where it shakes out.
Not unusual.
All right Thanks, David sure.
Thank you Hi next question comes from Michael Mueller with JP Morgan. Your line is now open.
Yeah, Hi, just a quick one where the rent spreads trends in the fourth quarter outside of Forever 21 stable would you characterize them as.
Yeah, we had a very we had like I said, we underperformed.
Our overage all year with the outlet business and they had a really good fourth quarter. Just didnt you know because if you understand how over its works you got to get over the break point.
And you got to do it so we caught up on that we actually were underperforming all the way through the fourth quarter. They had a very good fourth quarter.
We didn't see any real retailer.
Ah changes too much and what I'd say sales were pretty good and we leased up space. We Didnt think we would get a 95, we got a little over 95, one so I think we had a pretty good fourth quarter.
So all things considered I mean again.
I don't do your models, but I look at I know I, though my business pretty well and the reality is that like we had a pretty good fourth quarter.
Got it and then I think you mentioned you could quantify the redevelopment drag on that 1% seem throughout same store outlook can you do that.
Yeah, well, we'll we'll do that at some point.
Got it okay. There was a thank you.
Thank you next question comes from Linda Tsai with Jefferies. Your line is now open.
Hi, I shared with us very broad strokes steps you took to get Errol EBITDA positive and how these processes might translate to getting forever 21 in similar place I mean in your opinion is retail distressed somewhat formulaic and what's holding back retailers from fixing themselves.
Well every retail every retailer has its own particular.
Set of issues I think forever 21, really the biggest issue that it had historically was that it took a child football primarily because of its international.
Growth.
And and none of it you know created a another brand it took us eye off the ball.
And.
And then obviously the store size got too you know I've got two big so.
We are really good at sourcing and that's where authentic brands group is fantastic and sourcing.
Product, we think in Forever 20 ones case, it was fast fashion and the <unk> and the time that it got for delivery of goods.
With shock you in terms of how long it took so it's kinda took the fast fashion out of fashion.
And obviously forever 21, or I'm, sorry, Abby genius graded Randy I mean, if you look at the you know we're in Investor in Sports illustrated they bought the sports illustrated IP.
As seen kind of how they've already created all the buzz around sports illustrated is a great example of what they do.
You look at how they branded the Shaquille O'neal as an example, you know there that that's what they do so they bring all that marketing and brand awareness expertise to two to bear Ah. We did the same thing with Aero. So each you have to diagnose the problem.
There's a lot to restructure it at 21 on the other had it is a brand that does.
Close to $2 billion of volume, even with the all that's going on so I mean that.
That was what we looked at era when arrow when we took it over $900 million he started like $50 million business. So.
I guess is it gives us.
A tougher and its sourcing marketing, it's a better efficient more organizations and better technology.
And you know, it's just common sense being better operator in between the you know war or or and it's also been an owner that can withstand.
You know just withstand stuff right. So you don't panic.
When you just you keep your head down and he plan when we did that with Arrow. We told Arrow, we don't care about top and Hawaii tops comp sales, what we care about as building the.
The business for the future focus on EBITDA margins focus on gross margins focus on increasing the quality of the product and we don't care about comp sales now you know, it's a little bit like our business. There's a too much of a focus on no quarter to quarter comp NOI.
Growth, we get it we focus on it because we'd love cash flow, but the same time, you've got to make investments for the future that will accelerate that comp. There's no. There. There's no difference. The only difference is that we don't panic and others do and that's why we're here.
Fell into that.
Do you think the timeframe forgetting forever 21, EBITDA positive will be similar to that apparel.
It's I would say that's a good question and I would say, it's a little more complicated and a little bigger business.
And the is it depends on a.
Whether one or two of my guys are going to spend all this time in Los Angeles, So I'm negotiating that right now going to stay tuned.
And just one other follow up given this environment of closures, how you're thinking about the credit worthiness of the new tenants you're signing on sort of process do you go to really get comfort around their brand relevance and stability and liquidity.
Well.
Historically, we've been very focused on that were very we're very ER, but that's not to say, we don't think flyers here there, but we're probably.
If the if you asked around we're probably.
Ah onez thoughtful on that as anybody in our industry and it's very important to us, especially if we you know make a any kind of tenant improvements.
We're very focused on pay back from credit worthiness, we don't at a thousand there, but we are it's extremely important to us.
Thanks.
Sure.
Thank you Hi next question comes from Steve Sakwa with Evercore ISI. Your line is how often.
Hello.
Okay, let's go to that.
Thank you Hi next question comes from Handoffs and Justin.
Hi, Your line is open.
Hey, good morning, Thanks for taking my questions.
So oh first one gonna be developing I'm looking ahead to 2021 and what appears to be a positive inflection in your earnings growth helped by the expansion of the redevelopment last year up too.
It was 1.8 billion.
Well above the one point lower one did then my last couple of years.
And hopefully some of that incremental NOI growth.
I can help change the now to run stock I guess my questions on the sizing of the pipeline beyond this year.
Our intention to keep the redevelopment pipeline size around where it is not one when you blend what's been over the past here are you more inclined on reducing that actually the level that run over the past few years in a low 1 billion and maybe preserving more cash look or other uses and potentially unanticipated other tenants event or even opportunistic investments.
Well again, a good question I would say to you this weather.
Because of our diversity and product right.
Hi, Griffey et cetera every incremental investment.
Can and will stand on its own.
So we don't feel compelled.
You know to save an asset because we're worried about the.
You know the or hitting our numbers or anything else. So.
We're making all of these investments with an eye toward incremental return and.
You know if we do expect as we said historically, yeah, we're gonna be busy and because we're going to get the ability to get a lot of a great real estate that hopefully have reasonable prices that we can add accretive returns to so I.
I don't I don't I don't view it is zero sum game and I also don't think that it's.
No there we don't have the ability the firepower to make additional investments.
Outside of or what I'd say, our core businesses. So but the important thing is I don't feel compelled to say Oh. This small vital to this I got to do a low return deal just say that I mean, the reality is.
No. They work that we don't we don't invest the Bakken, it's not going to it's not going to really caused the too much of a detriment. So we are looking at other investments that are you know outside of kind of the traditional bricks and mortar and I think we'll continue to do that.
But we'll also continue to make investments in brick and mortar because there's nothing to shaved about that's a good business.
Oh, just yes, it's and you know we're running through a cycle here, that's not as robust as what it's been in the past, but you know you've got to remember we've been doing this for a long time and then you know we weathered a we weathered the no different storms.
Got it got it. Thank you for that second questions on the 2020 guide first another income or is there anything contemplated in the guide for other income anything that could materially move that Apoquel guide this year, one way the other and DNA looks like it was down 10 million last year, what's embedded in the guide Virginie this year.
You are short GNS similar to what fourth quarter is.
So right gosh, Yeah, and I do we don't have anything real extraordinary and the other income.
ER in 2021, that's like unusual we as you know we had the we had the big settlement from the insurance company Opry important in a nice and 2019 in the first quarter. So that will you know our first quarter compared to first quarter Q.
120, 20 look.
Different than Q1 2019, because that's when we got to settlement from offering.
Yes.
And only took US you know seven eight years, Okay [laughter] that's another school.
[laughter].
Thanks.
No worries.
Thank you Hi next question comes from Ki bin Kim with Suntrust. Your line is how often.
Sounds good morning out there.
When you like when I look at your lease expirations for 2020. It doesn't seem like you made much headway. It's just one quarter from going from Threeq to Fourq you, but.
It went down 30 basis points when I look at last year, you made much more headwind or headway closer to 100 basis points like I say I know, it's just one quarter, but I'll just curious if there's anything to read into that or high tenant.
Just making decisions on little bit later.
No. It just process you know there's no absolutely nothing to read into that it's all process no issue.
Okay, and I'm, just going back to forever 21.
You're talking about a flywheel and I think we all get it.
But that flywheel is also very different for assignment on store first is if it was owned by a different landlord or.
So how do you balance those things.
I mean, how we look I think.
The only.
<unk> history, we really have on the other zero when I think if you ask the other landlords they said.
We were great partner, so no issue there interesting question, but we really no I mean every store at arrow basically spend on its own or we were not really involved in it. We now was all delegated to a you know the team that the operating team at Arrow. So we do.
Not get involved in that you know I sneak it the F 21 to extent the we get it.
We you know wont wont mall adopt a similar thing we in fact in air It Forever 21, because of the need to move 'em, probably a little quicker than that arrow.
And that the case moving a little bit quicker will probably higher third party just to go do it.
Okay. Thank you.
Thank you. Our next question comes from Vince to volatility in sheet Advisors. Your line is open.
Good morning, you mentioned earlier, you have 15, former department store redevelopment projects underway with the total expected span of about 850 million that equates to about $55 million per box when just thinking about longer term capex need is $55 million per department store boxes.
Fair a fair assumption.
No.
And you can't get out there that that math, you really can't do.
And I think that it's not.
Yes, I would say to you it's not necessarily.
Capex, it's incremental opportunity so and I've said this before but just to put in perspective.
You know if we don't own the department store and that's Department store owns 10 acres.
Then we now have 10 new acres that we are that we can develop its not like when we say capex people think you know new rooms, Newtyle, new this new that it's incremental opportunity because we don't necessarily control that space and even if it were on a long term lease.
If we can have the we got that at least we cannot control that space. So its new incremental space that we did in other words fab.
Right, but I'm just trying to get a sense of so that includes you know probably a lot of other non retail usage. So when what would be a fair run rate of just trying to think about longer term. If we're expecting more department stores to close I mean, it just from a cat maybe not from a capex burden perspective, but just how much capital you're gonna have to spend every.
Year to keep due to unlock these opportunity that's what I'm trying to get out well what I think what you should do we can give you order of magnitude I mean, I could do a chapter and verse now, but I'd like for you.
You can call up or you can call up and get woven in order of magnitude like take an example at 50.
This is 300 plus billion dollars, okay, but Midland part, Texas was 5 million. So it. It you know it's all over the place, but if you want the best thing for you to do best to get a handle on it is to you know Northgate you know we could spend six 700 million dollar.
Okay. So you know a certain boxes or 10 million just you know ticket box over release that you know that's kind of thing so really really is real estate.
Specific but you know maybe you'd go through our 8-K and Tom can you give your order magnitude, but but that's a great. Examples of former belt Department store that was a lease.
Where we let them terminate the lease.
For a payment and then we're spending literally 300 and little over 300 to build you know a hotel office or lifetime and additional retail.
All in that same spot.
And so that can skew numbers pretty significantly.
That makes sense, that's really helpful. I'm sure. He did can you just discuss quickly how the overage rent threshold are reset each year, just trying to get a sense of like the lower percentage rents paid in 2019 creates an easier comp for 20 or that's not the case, they kind of increase and a five fixed amount each year.
Ah it's it usually.
Got it balances out so there's not a lot of volatility other than the outlet business a number of our bigger retailers. There are basically on percentage rent with a very low base. So that's the one that tends to you know tends to have a little more volatility in the mall business you know we tend to mark the realist.
They if they're in overage, we tend to get that.
As it renews and then others come in so it's relatively.
You know consistent.
So you have overage and then they go they are leases expire you go to basically Oak Ridge, plus the base rents to get to the total rent.
And then a whole lot other slew of retailers will go into overage, yeah that tend to be a little longer leases a little lower.
Base and therefore, they don't have as much turns so therefore, the the overage rent tends to be a little more volatile in terms of you know what the what the math ends up being.
Great. Thank you.
Yeah no worse.
Thank you.
Next question comes from Christy Mcelroy with Citigroup. Your line is how often.
Hi, Thanks, a follow up I'm, just say I follow up on Forever 21, sorry, just in terms of the approach can making these retailers profitable again in terms of solidifying advertisements I think going concern you answered Linda's question, but how does your approach differ and it's perhaps much healthier for Reed.
Telling longer term than the traditional private equity approach 10 retailer carrying around can you know in addition to store closures I mean efficiency in technology and marketing and operations that you discussed feel what pitching for rent rents to start of course panic sales for a period of time to get landmark tomorrow partner.
These retailers.
I would say you know it depends on the scenario I think it definitely want to stabilize or we might have to do that.
For a period of time.
There are no. We are you know they did a lot of the work on the landlords.
During the bankruptcy process it was a little quicker.
So we don't have a lot of time to do what they did additional things so it depends on.
It really depends on the scenario.
And its certainly a tool.
That you know that's available to us and.
You know and there's ways to handle what I think the landlord community will support us to the extent that were successful in the.
In the auction.
Okay, and then just a follow up on fences Capex question to you you had about 192 million of T.I.s that share in 2018 course <unk> billion dollars of redevelopment and development spend how should we think about that that capital outlay in 2020, and so when you look at used to free cash flow and especially as you know that that the turnover is elevated.
Hi, shaft, T.I.s and you know with everything that you had and the value creation pipeline coming on later this year and in Q.
I mean look I think that T. I went up like $20 million. So yeah. So to me that's not going to really.
You know change or you know, we're doing more restaurants, a little more entertainment. So you see you know the other thing that.
That really spiked that number was we did a number of.
Kind of the best Brians luxury.
Retailers and I don't want to name names, but you know they tend to have great filled out no. It's great for the properties, but you kind of the Hooper luxury folks.
Their investment in their.
In their stores tends to be a little bit higher so I think you'd get a though we did some great work last year on that so you were seeing a little bit of spike.
But the T.H. not really much of an issue in the development again I.
I don't know what else to tell you other than.
You know that we are going to have these opportunities from department stores. We think there you know net that's going to be beneficial to our company into the existing real estate.
And you know the role that we play in the community is unbelievable. So give me an example.
Between sales tax and and real estate taxes at a place like Roosevelt field, we pay $135 million and the warehouse down the street pays basically nothing.
Oh, we did a study that said warehouses distributions paid less than 110.
What we pay in real estate taxes. So they know that that's what's interesting we're making these places better for the community better for the taxpayers spot get a we had they were doing believe it or not yeah. We're doing a set of activities that others are in terms of what gives you, though we do believe.
Strongly.
And we refuse others that that suggests otherwise but are we do think we provided.
Greener atmosphere for a poor or for commerce and there's just so much we're doing that that that.
Is that maybe not necessarily appreciated, but we know we're doing for these communities. We know we're doing for the.
The the taxes for sales and real estate taxes, and we're also making a real estate better and that's fine, we'll we'll take that responsibility on.
Hey, David It's Michael Bilerman speaking you earlier in the call you talked about that buying real estate that bricks and mortar obviously still has a great future and that's yeah, you're not going to deviate from that in.
When buying makes sense you would do it sort of paraphrasing a comment you made there was a headline that came across on Bloomberg during the call that.
You potentially had merger talks a top men.
Eventually broke off given the market volatility can you comment on that please.
Well if you you know we don't comment but.
We don't comment on those market rumors I haven't seen it you know we've been busy on this call. So.
Not sure what you're referring to but but are you know we'll check it out.
Okay. Yeah. So it's just helpful to sort of get the views on whether something could happen or not and you know I know the stock buyback wasn't happening during the fourth quarter.
So if you know whether there was something else going on that would have done that.
No other than you know we.
Well, obviously made the right traded stock went down so.
We could buy cheaper now.
Thank you.
Sure.
Thank you Sir our next question comes from Steve Sakwa with Evercore ISI. Your line is now open.
Oh, I'm, saying, sorry about the early or technical difficulties or I guess, David just to maybe piggy back Ras Michael's question Little definitely just in terms of like acquisition opportunities. Obviously, there's really a lack of capital that a you know devoted to them all states today.
You know everybody's kind of fleet on the institutional side are there opportunities that you see to potentially deploy capital outside of your existing portfolio.
Well I would say you generally yes, I mean, we tend to.
We would tend to I mean, I think the worldwide. I mean, you know retail real estate is way out of favor worldwide.
Not just in the U.S. and.
You know as you know we built our capacity to do this we don't have to do that we've got lots or.
You know if anything on this call and I know, it's you know what's the dragged on here, it's like a college football games.
But we I feel really good about where we're at so.
We don't have to on the other hand, you know as I said earlier, we say when other zagg are we sag with other sick and.
You know, sometimes we usually land on our feet not always but.
We are our industry is way out of favor worldwide. That's interesting to note, but we know what these properties generally means the community into the consumer into the retailer.
ER Brixham order or imports.
These real this real estate is greatly located so.
And you know that we had cut all the other stuff that we're doing.
In conjunction with our core business and you know, it's a unique time for us to.
Take what we want to do in the future.
Okay, and then not to beat the dead horse on the on the earnings guidance and the lost income, but I do think it would be helpful to the extent that you have you know intentionally take a properties offline similar to what you did a norske <unk> last year I think it would just be helpful. It's kinda know what that drag is in within your guidance number.
This year as it you know a couple of pennies and nickels and Dimes I think just to kind of frame out you know kind of why you know when you look apples to apples you know at the midpoint guidance is down a little bit.
Yeah, well I I think that's a good good points and we tried to do that you know maybe not as artfully as we should have but we tried to do it by showing to you that.
No. We're gonna have a $70 million pickup next year when the stuff comes on line, but I guess, what we didn't do is it gives you a sense of the decrease that we go this year, but then I I'd just tell you that northgate certainly.
It's a good example, there was a property doing 15, 16, 17 18 in that range and it's basically going to be no zero for the next future. It that won't pick up in 2021, [laughter] because it's a long term projects, but you know will will wont be grade in the future and it's also face.
So in a week you know we've we've got as part of property here that we could add to use is incrementally depending on demand. So it's not like we get overseas basketball worlds.
Okay. That's it for me thanks, Thank you.
Thank you. Our next question comes from Michael Mueller with JP Morgan. Your line is now open.
Oh, Hey, I'm, good I tried to get out of the killed.
No I hope, we Didnt offensive [laughter] yeah. Thanks. Thank you. My next question comes from Michelle and Morgan Stanley. Your line is how often.
I think rich drop too okay, I think that's it.
Thank you for your time, an interesting roll up we'll talk to you soon.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[noise].