Q4 2019 Earnings Call
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Good day, everyone and welcome to the Mack Cali Realty Corporation fourth quarter 2019.
<unk> earnings Conference call today's call is being recorded at this time I would like to turn the call over to my Coogi Demarco Chief Executive Officer. Please go ahead Sir.
Good morning, everyone and thank you for joining the Mack Cali fourth quarter 2019 earnings call. This is Mike Demarco CEO Mack Cali I'm joined today by partners watch It takes a general they find a multi family operation.
Davis went down on the CFO.
Nick held in I'll eat VP of leasing.
Illegal note I must remind everyone that started information discussed this call may constitute forward looking statements within the meaning of the federal Securities law.
We believe the estimates reflect to these statements are based on these assumptions.
I cannot give assurance that they did their results should be achieved.
Oh, you up dressings annual reports filed FCC risk factors that could impact the company.
Yes, Bob a supplemental disclosure and as always be five days, David when any further suggestions.
We've done before we undertake to pull down the phone sections, well make smoking walks.
I will discuss the leasing performance I view the markets going forward, we believe 2020 shake up to be a very good year Marshall will provide insight on that spend operations, which are really benefiting.
Went up for construction and the strategy or the waterfront market regarding weight and velocity, David will recap on operating results and I would call just dominance.
We had a very good operating quarter multifamily office is we delivered positive results across all operating metrics, we had another quarter with a great deal transaction activity that allows us to continue executing our plan regarding sales or just in financings, we expect the upcoming quarters.
Equally robust as we execute a plan on evolving to just waterfront property, we haven't continue to make progress.
Executing our vision for the waterfront I couldn't be happier.
That vision simply to be the largest kweisi multifamily what a selected core group of office, regardless of the fine live work and play in all markets.
Regarding the New Jersey office rocket as discussed before several times as of June Thirtyth 2019, the governor did not approve the continuation grow New Jersey incentive.
Ongoing disagreement between the governor legislative branches regarding the size and scope in new program now whether that appeal.
Whether they should be a program.
Other branches of government any jersey democratically held recent articles and direct conversations we've had indicate to comment is that come on top of my eyes to be forthcoming I expect tour activity to be like until the certainty around these programs. However, we do have several new deals in the marketplace that weve history and expect to get into next 12 weeks.
The next quarter so.
Well I don't know overall office portfolio with the right price have the right locations.
As we exit the suburbs, which we intend to do 2020, I still believe doesn't make him a strong 2020, especially regarding the waterfront, mostly due to 10 expansions.
Got it on multifamily platform like to make some brief comments before my partner Marshall well able to push rents in a multi family business. As we can he was passed an eye product as well. It is what it was a brand new developments.
So renovating to a first class level over 30 month opponents per month as an older product in Jersey City.
Just sitting at Hudson County, well, they're coming into play situation tends to live based on affordability in transportation.
1300 units delivered last year, and what is going into the city of fully rented.
Have they continue to trend up quarter to quarter got coming supply is right for the next several quarters, which we monitor very closely we all are modeling I product an older buildings in order to capture the iOS arbitrage data have been style. It is not excellent which mashable elaborate on look forward to except in deliveries of our 2020 products, which has already started.
Happen and moved its definitely adds what classy holdings you can also expect us to announce three new towers, two towers in Jersey City, one important pretty only upcoming quarters.
As I've stated before starting now in 2020 continued your doesn't 20, you product that we deliver Paul Thomas I Plaza, one which is rapidly coming to completion.
25, Christopher Columbus, which is rapidly rising to the skyfence developing side and the plan retail changes in how decided to push the whole foods, which is expected open in 2021. Several other restaurants. We told you changed the way I'll address your operational work that we will expand into restaurants in allocations have kind of quotas. Additionally, new Marriott important premiums you were talking last spring.
Discontinuing deposit impacted to find out market hasn't necessarily capital to complete a pilot with Steve a little over.
David will talk about a plan sales for 2020 as you know we announced a we're exiting the suburban business its entirety.
We are ahead of schedule, we're in the prices, making heavy suburban office assets for sale. These efforts are going very well, we expect if they progressed upsets wallboard in March.
And this transaction for additional sales beyond passivity, Andrew all the philosophy has agreed to December.
And the board approval. The sales we expect sales will be completed by the third quarter 2020, We will update you on these efforts on next call. The poultry sitting sell as David will elaborate will be used to repay outstanding debt.
We in certain circumstances will be aggressive waterfront multi.
Jeremy Veeva Tenthirty wanted the tax situation wants it.
Before.
And how plan for 2020 leverage will continue to come down on a form of repayment of a lot of credit and then we plan to redeem Abbas next year with future sales.
It's hard to my point and Nick disgusted overview of leasing.
Thank you Mike.
Across our portfolio, we posted a solid fourth quarter in 2019, signing just over 169000 square feet of transactions, which resulted in our core and waterfront portfolio, finishing at 80.7% leased at year end.
Are these transactions approximately 30% or 51000 square feet renewal leases.
70% or 118000 square feet were in place renewals.
Across all core markets, our rents on Q4 deals rolled up 6.5% on a cash basis and 19.9 present on a GAAP basis.
We committed $5.41 per square foot per year of lease term.
In comparison to last year, our rents on 2018 deals rolled up 6.9% on a cash basis and 23.1% on a GAAP basis, we committed $5 in 88 cents per square foot per year of lease term.
Looking back at 2019, as a whole our core and waterflood portfolio saw over 648000 square feet of transaction side with the overall cash and GAAP roll ups at 8.1% and 19.1% respectively.
Now we do not formally provide guidance on total leasing activity, we beat our internal projections of approximately 584000 square feet by 11%.
As we turn our focus to the specific markets. The waterfront closed just over 27000 square feet of new transactions, finishing the fourth quarter at 77.8% leased and we can do and we continue to see a positive rent push with increases of 17.1% on a cash basis.
27% on a GAAP basis.
Looking at our current activity level, we have approximately 500000 square feet of new transactions currently in active negotiations across a diverse tenancy Max.
Putting financial services pharmaceutical co working and shipping to name a few.
The improvements we've made and continue to make within our waterfront development are translating to steady interest in touring activity.
Looking ahead.
We have a limited amount of lease roll was always 61000 square feet expiring in 2020.
As a result, we expect to make continued gains as we improve the overall occupancy levels on the waterfront.
Our suburban portfolio also posted a strong fourth quarter, specifically, we executed over 141000 square feet of transactions, achieving a positive rent push with increases of 5.3% on a cash basis and 19.2% on a GAAP basis.
Turning to 2020, we have over 403000 square feet expiring in our suburban portfolios of which over 128000 square feet are included in our Morris County portfolios, which will be sold this year.
The 275000 square feet remaining in our suburban portfolios, we know that 59000 square feet were 21% will vacate.
We're confident in addressing the balance of this rollover.
As we are already in active negotiations with over 229000 square feet of transactions across the suburban portfolio.
With that I'd like to turn the call over to Marshall.
Thanks, Nick Roselands 4200, 87 years same store portfolio on a GAAP basis experienced at 5.4% quarterly increase in a wide generating annual NOI grew to 3.4% increase annual analyzed result of the 2.2% increase in revenues offset by a modest intensive.
<unk> percent increase in operating expenses largest contributors revenue growth in the portfolio Irby in Jersey City inquiry plays in Westchester.
During our renovation properties same store NOI growth for our portfolio was 10.1% with a 6% increase in revenues are active renovation programs in Monaco and more bad represents a complete repositioning those modernizing the units common areas and amenities initial tenant feedback has been positive as reflected by release units achieving 18% rent.
During the quarter Roseanne completed dispositions, the altera and she's communities, which completes the asset swap from suburban Boston Liberty Towers in Jersey City Ussix hundred 48 high rise community in our core residential geography.
Following the swapping along with continued improvements in our operating portfolio.
It has an estimated in $82.25 billion Mack Cali share. This figure after netting out Rockaway participation is 1.79 billion nearly $18 per outstanding Mack Cali share transactions recently discussed over the last four years, reflecting the basket composition. It rose last anybody 76% of any of these.
That's waterfront anyone presented any views and operating we're in construction assets and less than 1% of any of these unsupported interest.
And he's 1900 42 or unit in construction portfolio is projected to generate $62 million are stabilized NOI initial deliveries of 1100 92 years or scheduled within the next 12 months, including the recent start at lease up at the ever read Overlook Ridge initial four weeks since opening you signed 38 leases representing 12% of.
Building at rents in excess of our profile.
As a result of capital invested in the fourth quarter Roseanne's remaining capital obligation to complete this in construction portfolio is $47 million down from 70 million last quarter. This obligation along with future requirements. We sourced from a combination of roselands cash flow refinancing proceeds select dispositions in rock what's remaining capital.
Commitment as admitted.
Other properties English currently in construction, including the Charlotte 750 unit Tower, which is located in Jersey City is waterfront I wish it were Columbus drive.
673 use in port Imperial that both the Rewalk and Riverhouse nine or last delivery Riverhouse 11 is 97% leased and he up in a short hills hundred 93 unit luxury community you want to New Jersey from your municipalities adjacent to the short Hills Mall looking ahead in 2020, we as scheduled three dozen waterfront stores.
Including Harborside eight centers in nine years highly amenitized allergy historical orders your harborside three second phase of RV ever pose 796 unit, our adjacent to our successful Irby project with the highest rents per square foot in Jersey City and the park parcel at Port Imperial 302 years ago uncovered.
It was a degree views of Manhattan.
You. This series of recent transact is at transaction as an active in any construction commitments will further expand our market leading decision of luxury housing interest waterfront community excellent access to me.
I'll now turn the call over to Dave.
Thanks, Marshall Ive, a few brief highlights before turning the call back over to Mike.
A quarter came in largely as expected and there were some key trends that continue to emerge that give a glimpse of what the company will look like after the disposition of it suburban office assets.
We reported core AFFO per share for the quarter 44 cents versus 45 cents in the prior year included in the fourth quarter was three cents about that related to let's say over there will be tax credit.
As we projected off this cash same store NOI turn positive and increased by 3.5% in the fourth quarter as we now anniversary quarters that have the full effect of the 2018 waterfront move outs.
So that's the same store NOI was plus 5.4% for the quarter and we finished above our initial and revised guidance ranges due to better than expected tax an operating savings.
The transaction side, we disposed of two suburban office buildings during the quarter or building enough to new Jersey for $26 million, which was fully occupied and traded at $145 per square foot and five would hollow in parsippany for $29.2 million, which was only 65% occupied at closing and traded at $92 per square foot.
These assets were part of the 6.6 million square feet of suburban office dispositions announced in December.
We completed our 10 31 reverse exchange with the sale of Altera and overlook ridge multifamily assets in suburban Boston for $411.5 billion in the quarter and closed the sale to development parcels in Philadelphia that we chose not to develop for 17.9 million.
Turning to the balance sheet.
During the quarter, we paid off our sole remaining term loan with the availability on our credit line.
Corporate debt now consists of.
$300 million over April 22 bonds in 275 million number may 23 bonds and we ended the year with 329 million drawn on our credit line.
Total over $904 million of corporate debt.
Execution of the suburban asset sales at the midpoint of our Navy table would provide $946 million up liquidity enough to retire all of our current corporate debt balances.
The sale the suburban office assets will greatly enhance the company's liquidity.
We have no principal maturities in 2020.
Assuming retirement of our outstanding bond issues with suburban office sale proceeds we will have no corporate or office debt maturities until 2026, what the exclusion of our credit line maturity in 2021.
The net debt to EBITDA metric was 9.7 times at quarter end and at 12 31 19 as Marshall mentioned, we were into the construction loan portion of all five development projects totaling 1 billion in construction costs. We therefore expect this metric to remain in this range of close to 10 times until the Dell development pipeline begins to stay.
Dave lies in our vacancy is really.
I want to take a second now to walk through our discontinued operations accounting and then 2020 guidance on December 19th the company announced that as a result, or the five years of its shareholder value Committee that the company would exit its entire 6.6 million square foot suburban office portfolio.
Decision to sell the suburban office portfolio was deemed a strategic shift and therefore in accounts with GAAP accounting for disk discontinued operations. Its results will be reported separately from our continuing operations on our income statement.
As you hope we saw last night with our supplement we will continue to show all relevant line items on the income statement in regards to the operations of the suburban properties until they are disposal date.
Got it.
Our initial core FFO guidance is $1.24 to $1.36 per share.
This assumes an initial same store NOI guidance on the residential side comprising revenue growth of 2.2% to 3.2%, which includes over 150 basis points estimated drag on revenue from the renovation activities at Mar Bay in Monaco that we've been talking about.
We model in expense growth of wanting to have to 2.5%, resulting in an NOI range of 2.2% to 3.3% inclusive of renovation drag.
With respect to office exceed the same store office cash NOI, which is importantly, now just our waterfront assets coming in in a range of 3% to 7% driven by increased occupancy and the benefit of a full year of cash rent payments on our 2018 2019 sign blend and extend deals at heart.
Decide to layer three.
Based on information available today, we believe modeling proceeds from the annual sales of our R&D tax credit for roughly 2.6 million a Mack Cali share in the third quarter is put it.
Now for dispositions the biggest swing factor in our guidance by far.
We think the best way to view the one to 1.2 billion dollar asset sale range of our support suburban office portfolio is in conjunction with our and Avi schedule Groupies, we see the bulk of the sales occurring within four major geographic portfolios and that are non core bucket.
Our 70 and draw the portfolios are now broken out separately from our other suburban properties with 2.4 million square feet and are on which are under contract for 288.5 million with an expected closing date between March 31st and May 15th.
All right bucket, one Monmouth county, or Red Bank.
It's really one office park, it's part of our suburban bucket 648000 square feet. It hasn't expected timing cells timing of mid Q3 to Q4.
Ill get to short hills part of our class a suburban bucket 829000 square feet with a projected timing of Q3.
Bucket three remodeling the sale of Metro Park, with 1.1 million square feet towards the middle to the end of the fourth quarter.
Bucket for our remaining suburban assets and also touch on our non core assets today, we have two assets totaling $80 million in gross proceeds under contract.
These include one GW bridge, and our class a suburban bucket and our wegmans retail property in our non core bucket so to be sold around the ended the quarter are very beginning of Q2.
The remaining for suburban properties totaling 766000 square feet are made up of two Princeton properties. One in four in park in one single tenant building in Wall Township, the Princeton properties should close at the end of Q2 and the others are expected to close in the second half of the year.
While we will not give individual cap rates on sales being negotiated the in place that ally provided on a cash basis in our innovate and Avi table is a decent guide.
Outrage the corresponding GAAP cap rates right about 20 to 30 basis points higher than the cash.
We've given ourselves a wide range. So we can so we can execute these sales opportunistically as we are moving as quickly as possible to crystallize, our suburban office values and repay our corporate debt, which we believe despite the short term dilution places the company and a stronger financial position for the long term.
After completion of this final disposition exercise, we will be left with six operating office assets and 22 residential operating properties based on the midpoint of our Navy be average asset size will be 209 million and we believe that all of these properties will have positive net effective rental growth for the four.
Seeable future lastly, I want to thank our Chief Accounting Officer, John to Barry and Chief Technology Officer, Knickman or a tender for navigating us through a year that included burdensome discontinued operations accounting and inflammation implementation of a new accounting system with that I turn it back over to Mike.
Thank you David and closing as my colleagues have outlined I continue to believe was set up to have a solid 2020.
Execution point of view would result, showing up in the years going forward. We have a good deal work to do which we're doing each and every day. Our focus is David outlined is now when I understand the waterfront, which means going on multifamily business. For example, we intend to exit our DC joint ventures and has made great progress and those transactions, we expect to have them done.
This year.
It is land sales in Philadelphia, and the last two quarters, and then cell sites in suburban New Jersey, which we don't expect to build on the being marketed currently we still expected to close the upcoming quarters. All this goes down to pay down debt will fund our development, but it really contributes to our focus on what we intend to do which is focused on that to county.
Finally market. We additionally, our in process is selling there are many portions of our Boston assets. This year, we look forward to purchasing additional assets has a county, the continental development if available.
We're very excited about operating portfolio and I will continue to grow with excellent new products real key to our plan is creating an extensive placed on the waterfront. We can see real change everywhere, we look I'm confident that total effect.
Coordinated efforts on development and the weak and the remodeling by assets as the efforts from other developers office retail multi will produce excellent returns in short and long term for Mack Cali, One last point, our chairman Bill back to an 80 today.
All of us wish him the best.
He has decades more healthy and happy birthdays as we all know Bill Taylor Welty portal quite a while ago.
Unfortunately, this will make dose subject to our mandatory time age policy for directors of 80 years old debate, which means he will not be able to continue to serve in the board. After 2020 annual meeting of shareholders.
Personal note I can tell you he will be missed his actually on his intelligence is wit and Tom.
Definitely critical to the place, which in the very best today and going forward with that ought to take some questions operator. Please.
Thank you, Sir ladies and gentlemen, if you would like to ask a question at this time, please signal by pressing star one on your telephone keypad.
If you are using a speakerphone. Please make sure your mute function is turned off so now you're signal to reach our equipment. Once again. Please press star one at this time to ask your question.
Well now take our first question from Jamie Feldman from Bank of America. Please go ahead.
Thank you and good morning, and now we appreciate all the details in color. It seems like you guys wasn't that easy to collect all the information. So thank you.
I guess, you know thing a lot of volatility in the market. This week a lot of fear is out there.
Can you just give us a better sense of starting I guess, what the guidance.
What's kind of baked in what's kind of Don when you think about where your occupancy needs to be any office side to hit your same store numbers.
And then similarly with the with the asset sales I mean, I know you said, you've got parsippany and draw the farms under contract, but just how can we kind of handicap certainty to close on some of these given the market seems to be changing pretty rapidly and if you could kind of talk through some of the are there any laid out the four or five other buckets.
How do you feel about that.
Well Jim This is part of our strategy on the go first and David will answer the questions about about the same stores. Our strategy was done in anticipation of the fact that we didn't want to wait to the last minute to sell the suburban assets. You think about aware placement income is coming next year for multifamily. So we take a dip this year in earnings.
Yes.
Not as great as people think.
What's the timing will be toward the back end of the year. It will have an effect less effect on cash flow because your sign.
Relatively high income assets with high cost associated with them leasing Capex base building, so and so forth and moving into multi which has a better format, especially if it's brand new.
But we took the view when it was really set up about the election that we wanted to be in front of the card. We felt the 2021 had the potential from a political point of view to be somewhat disruptive. So we took the bold step of saying, let's sell the asset in advance of other replacement income.
Regarding.
Positivity and while there are we have our deposit I talked to the buyer.
Weekly if not biweekly. He's confident is closed his finance has been a range, we expect to close or the next few months on the other sales that we've have.
Wegmans, Andy George Washington Bridge at the same view on.
One of the buildings got hit by him Princeton University on the buy sell so we said that will close.
The other ones I think we'll close to certain buyer groups. The market still remains very open for financing rates have dropped to a unbelievable low spreads have actually narrowed to some degree as muddy wants to go into fixed income. So I think the financing will be there.
No. We don't have any really discuss validation from tenants. So our view is as fast as possible.
Get it done as quickly as possible you have to lead a few dollars on the table, okay with that because we moved a bit of level and as we pointed out we have a little bit of accretion. We have 947 Ko 959, six is that about 44 million about 5%. If we had to basically take it you get to the same place, but this was a strategy with the the.
He is coming online as Michael pointed out the first multifamily limited and though Malta numbers here.
Short hills to be the summer ended a summer is port imperial into different projects and then next year is Jersey city and all those should be great. When is for US I will turn to David now that enters the conversation.
Hi, Jamie so with respect to guidance, we feel like we said a very conservative Mark as we always try to do and specifically on the office guidance.
Baked in at the midpoint is only a 135000 square feet of lease executions 65000 of which are already out for signature as Nick also pointed out we only have 61000 square feet of rolled this year and most of that is weighted towards the end of the third and fourth quarters.
It is also interesting so they get from the 165 or to get from the 65 of the 135 with just one lease that we feel pretty good about within a pipeline of deals that nics looking at over 300000 square feet.
We would hit our guidance and our cash cash same store NOI guidance is pretty much baked for the year based on what we already have signed in place.
Okay. That's very helpful. And then how do you think about died distribution or dividend coverage. After it if you get to these new run rate of.
That's a FFO and then you have any thoughts on what and fulfill might look like at that lower level.
Jamie It's Mike again, if AFFO as I said earlier, we're probably not as a greatly affected is.
FFO was because you're selling assets in a suburban business, which always had a high income level, but the net was lower because of Capex ti and leasing commissions and vacancy which would then sometimes be Paul.
So we pay 80 cents I think we'll continue to pay any sense foreseeable future we need the 80 cents for tax distributions reasons for next year, we look at our model for 2021, and we clearly cover the 80 cents by great margin. So this is a slight blip in 2020, which gets recouped in 2020 Watt don't expect this effort.
Dividend change in policy.
Okay, great. Thank you.
Gotcha.
Next question operator.
Certainly, sir ladies and gentlemen, if you do find that your question has been answered you may move yourself in the queue by pressing star too.
Well now take our next question from.
Korchman from Citi. Please go ahead your line is open.
Hey, good morning, guys.
Just thinking about leverage and the fact that these are our higher.
Yielding assets.
You know.
Recycle the Capex you just talked about.
How do you actually.
Yes bring down the leverage, especially with new developments that are now slated to come online at harborside.
So many we always talked about that we bring to do a recap of sometime in the future we needed to do some event.
The base to recapitalize the company I've always argue that we need to do it once we had a portfolio said I think we're getting very close to having that moment when the portfolio will be said so after we sell everything we're down to the 28 assets maybe goes to 33 30 forward. Some other acquisitions, primarily be multifamily that has been a good performer excellent results.
Can actually look at the market and say Hey, this is not visible continue to grow. We also believe the waterfront. It's got its turning point and also will grow if not we also but let me just a rock as we have two buildings a for sale in the waterflood. Currently listed so we're looking at exiting that if we the right price on each one.
That point, you'll be looking at a multifamily portfolio it will be well into the 70% of your and a wide basis, maybe at higher and that's the point of view to say, okay. Private recap public is it the numbers our standalone business when we invested in office over the years. The question was always will be getting the right result, we were able to improve.
[music].
Cash and GAAP numbers quarter over quarter for five years, but it doesn't mean it was a great business to be and because it was a difficult business to transact the waterfront from all experienced the last four years has had excellent results both in rental growth and velocity and an appeal to tenants. So that's a business. So we think going forward will be love it highly.
On we have another piece of that that that we can pay off and we can take either equity partners and it's really a joint ventures or we can take it in his through additional equity incidence and get down to a real level, but will be a wheel company that you want to invest in as opposed to a business that was a hodgepodge included wax suburban spare adventures in a real estate business. It just wasn't.
Put out so it took us a while to get there, but I think we'll get into point now that you can deal with the leverage going forward.
Thanks, and Dave It sounds like you guys think that 2020 will be a trough year for AFFO, but assuming that all the sales have been through the year.
And developments are starting even though you've got some to delivering.
It's 2021, not going to be lower is it getting lower on Africa, but not I AFFO, how do how do we think that sort of the trajectory just going a year forward.
Yes, thanks, when they said depending on the timing of asset sales during the year as we all know if we thought everything in the first half of 2021 wouldn't be that bad. So the first thing that is going to factor in on the question is when we get ourselves executed this year, but you're correct as we head into next year.
We'll be developing that won't really affect our AFFO, but what will be coming online as the billion dollar pipeline that Marshall talked about our chip projecting about a 6.2% deal that 60 million of.
Analyze and with debt at current rates were probably projecting other high given what's going on but you get about 40 cents to AFFO. So the way, Mike and I really think about it big picture is if you sold let's use round numbers a billion a suburban office assets at a nine cap paid down debt at four we'd lose 50 cents apropos on a run rate.
We're going to bring back on 40 cents of apartment apropos have some DNA savings in organic growth. So we'll replace that 50 cents on an annual basis with apartment that NOI and some real savings in EBITDA and then to Mikes point, what he is trying to drive home our dropdown from FFO. This year was one dollar.
62 to one dollar owed to.
On our residential side, it's maybe 10 to 15 million tops as you go or 10 to 15 cents to share on that portion of our FFO to AFFO as you go forward. So 21, if we sell Les would then become the Troughed here. So let's wait to see the timing of the sale this year, but 21 could very well be.
You bet Troughed here, but then as these developments come online in stabilized definitely on a stable basis, we get up to a full levels that are much higher than they are today.
Thanks.
Well now take our next question from Derrick Johnson from Deutsche Bank. Please go ahead.
Hi, good morning, everybody and thank you.
I mean, just quickly getting back to leasing didn't really talk too much about it but.
How is leasing traction with life science companies any news on that front that you can discuss and I guess the other half of this question would would be with only 61000 square feet of waterfront lease expirations, you know as you've mentioned a couple of times.
Does the occupancy guidance field beautiful or at least conservative at this time around.
Good question, Derek given everything that's going on we did take a conservative bent to one numbers, which it was appropriate.
We had been aggressive or thoughtfully aggressive on on leasing the last several years and weve common hit on numbers, but not exceeded them and people have expected us to do more.
So this year given the sales, which are obviously dramatic given the nature of exiting the suburban portfolio. We took a very very joined as you have waterfront leasing is a lot of things going on if you give me a minute. Its will give you. Some update so as you know combi probably trials has a building nearby that Persian division, which is part of bank in New York very large operation close after that.
Streets trade basically renewed extended out forward.
Selling period of time bank parent rather than the market, we look to basically take them from a building they decided to stay but they're expanding from jobs in New York on AG, which is related but I think it to deals complete isn't it moved 300000 square feet entity Goldman Sachs building, we were very close to get them, but we didn't have 300000 griffey can take listen Goldman did we felt good about that.
Building showed incredibly well and we know where the price point was so you look at a couple of trade that what's your financial situations in AG is moving off of Pine Street. They sold at building and I think they didn't want to call the Goldman Express and I'm moving into the World Financial Center and then using.
The.
Excuse me the ferry as a means going back and forth and then moving jobs from suburban New Jersey, Two Jersey City on all good sites right. It was a guy who knew the business understood the market and knew how to build a platform.
We have on our books, a couple of tenant expansions, which we'll announce going forward with us and that's again people expanding in our place wanting to do watch 10 to 12 50 deals.
We have a couple of tenants that we have signed smaller spaces have four here quarter for companies that are also growing from people indicated they want to spend by floor too we have that really put those numbers into our guidance just felt that given past history, it's better to have an announced and announcing that half so to answer your questions Weve.
Actually gone on on a conservative brand. We also feel given all the other noise about it we wanted to make on numbers easily and have more upside potential in than downside.
Okay, great that that's helpful. And then just on the multifamily development opportunity Liam priorities.
Specifically as you can address you know the potential in the plan.
Of the residential land bank that we don't really talk that much about.
Right. So one good thing is the price of lackadaisical lumping them, but and the metropolitan areas that we deal and so whether its weehawken westy off Hoboken, New Jersey City land prices have gone up and washing lies partnership by almost 100%. They were 40000. When we first started together 45 any probably totaled 90.
Aren't going to 100.
This is for straight rentals not not.
Not condos you may ask why that is with Derek rents have gone and our experience as a partner is shipped from $40 to $54.
Five years, you take the $14 on base rent, even with construction costs, which have gone up still gives you a lot of room to pay more for land.
Ill holdings, we have a concentrated ones around harvest side, and obviously around port Imperial and and we've built out what we're going to building new England for the next development deals in the older ones foreseeable will be and not to county area. So as we pointed out there's a building asked I know if it's when those are those who visited the office core plus eight we got approval from the city to go forward.
With a 640 units so project spectacular piece of land great returns, we want to Atlanta for a long period of time.
Maybe too which is really the project next or maybe we have a view about starting that going back to the city and getting site plan approval, which means the zonings already been baked it's already been pre approved we just have to worry about.
Getting aside from the new guidelines, but we want to place exits and he greystone so forth.
Marshall has done a great job getting a project going forward called the park, which is one of the end of the Weehawken site, it's really hundred yards, maybe from a whole foods and a light rail station importers based leads and Hoboken, just becomes maybe a quarter mile away.
I will say 270 degree views of New York City things to be real when at 300 unit project and it's built around a series of public improvements that we all can did for park swimming pools will feel sense of what those are the next three projects after that want to seven Morgan likely Pos in nine maybe possible for aid is a couple other states in.
Port Imperial and that will finish this out in the next three to four years.
Okay. Thanks, guys.
Okay.
Well take our next question from Steve Sakwa from Evercore. Please go ahead. Your line is open.
Thanks, I just wanted to circle back maybe on Jamie's question about just maybe Mike the confidence level of getting the suburban sales I know you I can't mention names of buyers, but just how deep is the buyer pool for some of those different pools that you've talked about and you know the types of financing an equity and leverage that they're using two to Peru.
She sees.
The pool is actually.
Relatively deep I mean that not truly deep like 75 names, but maybe half dozen too late 15 names.
We've done business with a number than before so far we have a history of knowing what we can and can't accomplish.
The key is to look at it in totality, Steven we had about a billion three to do we started on we've done about $200 million already in various sales in the past year.
Of that remaining we have a big chunk.
Two other farmed in parsippany and as David mentioned on his remarks, we have several other buildings and already been contracted for in the box. So other remaining a billion. One we have about 550, Don give or take well below the 50% category. That's assuming the contracts stay in one of those with Princeton, which hit us on a buy sell although.
As have serious deposits for people to arrange financing I feel really good about the first 55% last 45, I feel that a call last night.
No at 930 from a buyer wants to buy an asset group. We have another asset we think it's really going to get done that's gonna be only down to like 15 buildings I think we can get six or seven.
Committed to by the next board meeting, which would leave us with six.
And that's six I still feel very good about I think we have good process. We started this a year ago. We worked on it judiciously I would point out we started with 295 buildings are going to get down to 30 never not sold in building and the last five years, we've been as a team we bring it to market, we get it done one way or the other so I still feel good.
Okay. Thanks, and then maybe David just taking a step back and trying to just think about cash needs I realize some of this will be you know mortgage or construction financing, but as you sort of think about 2021.
Maybe hardie glad to 22, but as you think the next two years you know what is your development spend.
You know Kelly share.
Looking forward.
Outcome to go quicker than the turn of the David Steven We had $70 million disclose last quarter, it's $47 million disclose this quarter. So goes down by about four or $5 million per month, which we handle from cashwell. So put that aside at thats. Good does that does all of what's in the ground already we basically finished and as far as capital and I'll, let David talked about the.
The three projects.
As Steve.
So we all set closely with our Roseland partners and we modeled out what we call. The next wave of developments so beyond what's in the pipe. We have another 800 million our share roughly to come that's irby too.
You guys, all know RV pause or eight out mikes window in the park Parsow up in.
Port Imperial Weehawken, so based on what we call within our residential bucket kind of our noncore asset sales that includes hotels things that aren't in Jersey. So Boston NDC. We think we have that entire equity covered with our even drawing down this additional rock point.
And so we think on the capital side and Roseland from cash flow within that joint venture in the recycling of assets not in our core geographies, we have the equity in place and when you sell assets that anybody that's equity at any movie to develop out that next wave of developments.
Okay got it for example.
Next call out we're not sure.
Well now take our next question from John from Stifel. Please go ahead your line is.
Great. Thank you.
Little bit like Casa Blanca or on the waterfront I've seen this movie before.
Basically you guys say, you're going to get down to 22 assets.
Well that family assets takes office assets and then.
You implied five or six acquisitions, because it necessary tax protection.
David up the 946 million of asset sales how much of that we'll.
I have to be reinvested intent the at 10 30 ones for tax protection.
Got it it's Mike it's about.
85% to 90% of its going to be Paydown of debt, it's maybe 10% to 15% was struggling with we might have it little bit of issue about where the tax come out there may have to invest with a 100 million at the end of the billion one or maybe 150 that much more.
Says, but then you off 155 or six acquisitions.
No I didn't give credit with incentives.
No John we didn't say that we said that we had six office assets 20.
822 multifamily assets were totaled 28.
I guess is down and I would think that I may sell waterfront asset that may have tax implications I may have to buy a building Ford will get down to 30 to 33 assets at ended today.
How much more.
And when you're talking about tax protection. There is there to tax protection is one is tax protecting the common shareholders.
Right store common that you'd like.
What.
It's all comment John.
That unit assault on it.
This is what is a deal that we owned 20 years and I have looked at the end Johnny given of more expensive.
Answer when we first started we get to basically move things around the it's easier because you're talking about assets you get down to the last couple of doesn't you move of your tax basis problems into a select few when I sell those few I start the same problem, which I just postponed that were a read issue not a unit issue from three years ago I now to deal with.
I just have to move into something else.
Just had it not a big deals we've done as you point.
Right now and I will.
Yes, but but we want to the discussion really is UK when you do a special dividends or a dividend out you're only.
Dividending out your gains when you do at 10 31 too.
Protect your basis, you have to reinvest a 100% capital and there's a huge difference between the two in terms of year sources and uses.
And what I'm getting at is how much of this is going to be tax protection that ends up being a transfer 100% of the capital into a new assets. What you told me is only about 100 or $150 million that correct.
That's correct, John Max could be less.
Then the second thing is I think you mentioned a will be a real company.
With someone will want to invest Dan.
In the multifamily world that usually means five times net debt EBITDA or less than a 25% debt to total enterprise value. That's really what it takes to get on the last in the multifamily world.
You get down to five times net debt to EBITDA or below and how do you get to a 25% debt to TV.
Excellent point, but John Everything's done in sequential when we started we won't even close to be to multifamily company. So now we have a portfolio. It actually looks like a multifamily company performs like the multifamily company, but has the warm leverage I think you'd Grammy those points right. We have out relatively excellent development yields and usually.
Expressed that in the past we've had good solid rent growth in our markets over the last several years. The question is structure, what's the right leverage what's the right Tom will do it when it comes up we'll do it sequentially. The point is would you rather have his own a bunch of suburban assets and stay suburban company, which you answer was no we've been able to because.
Capital growing Navy.
Well for FFO, and AFFO and get the right spot. If we're not the perfect Company. Then we will be sold and will be acquired by a public or private entity will rise, but they will not acquire Ross with a billion three or billion one of suburban assets. So a gating item, which is a term I'd like to use is you need to exit the suburban get to a box which has only sick.
So maybe last one for assets, we may sell one or two.
I have a larger multifamily portfolio that has gone from land to see IP and see IP to stabilize and someone says hey, I'm at a point now I will purchase that them for a number that actually is.
Beneficial to the shareholders.
Sticking around waiting for the ought to help you sort of bigger strategy.
Great all right on so that's that's a great segue so.
Net asset value is your goal is your boards goal. It every shareholders goal that everybody on this call's goal.
Everybody wants to see the share price get up to anybody.
If you took an acceptable cost to capital run the business do you have a timeframe at which you're going to either get there or throwing the towel.
I wouldn't call joining a town John it's a little defeat is what is the question is.
I think we made the right staff. So we went and has done an excellent job of pruning the asset portfolio and building multi out.
We made bold statement I said it last year, when I get approval and we talked about a couple of times on a one to one basis that we would sell the suburban we're doing that we will the largest suburban company. When I took over 30 million square feet Mytrition my products as a touted on effective when the largest companies and space whatever we're exiting suburban business exiting suburban business into that.
Other than 20, which I think it to a degree of certainty at that point, that's inflection point when the suburbans, Don you really left with a multi business, which has excellent growth potential, but maybe as you point out so eloquently not perfect for the public markets.
And hopefully a waterfront business if were good and maybe we'd cut it down a little bit or leased up the with therefore sellable, what's producing a REIT income that's the inflection point I wouldn't call. It the Talbot, let's use inflection every online.
So is it is it fair to say that year end Avi in your supplemental sorta north of 30 by the end at 20 Twond eight you've gotten.
Sold the suburban assets that inflection point isn't any at north of 30.
And your continued business at usual or at point in time, you up let's not say throwing the towel, but you look at a different alternatives.
Kind of but they're not essential right.
2100%, 100% underbrush, one it was done on a 1% correct, but John can I can I do little Matthew that you've done with me before when we started PBC judge us by square footage, we worth 100000 square foot 120 Bucks a square foot for suburban that's highly valued us that's metric has gone, let's assume we're done right.
We've sold and we agreed that we get rid of the the debt and we're really left with Justine Roseland NPV and the office, let's do a simple math.
We have 5 million square feet of water front office picking up let's say 200 Bucks a foot, which is $56 lower than we charge that we have it is anyway, which is substantial it's 15%.
$300 times 5 million square feet. It's 1.5, we have $400 million of secured debt. We will have no other debt as it relates already explained oriented that has gone that's $11 if any the at 300 Bucks.
Okay $11 you add my Roseland number if you think it's a good number which people indicated in his 11 plus 18 is 29. It gets you a 30 number let's just say Mike I think your whacked I don't think relevant worth what it's worth it okay. What if that's the case tell me, where we're trading at $25.
Well if you take my my NPV for the waterfront and say, Okay I'm. Good on the 3500 Bucks, but I want to buy the company at 25 blocks that means you're buying a multi at a six and a half cat yield would an unbelievable pipeline that is actually robust they started to come a clearer view for someone to have about value. It's now.
Model by saying I can get to this but after by a billion three of suburban that suburban is gone. It's a clearer picture, it's better to better strategy. We had to at least two farms that came in gave US report and both of them said exit to exit the suburban business, which I had been advocating they agreed and we're doing that but to your point.
This is this train is going down a station and the next station is it have won two names to it it's either you're trading at any of your normalized company or you're no longer listed in New York Stock Exchange.
Well thank you.
I love it.
Let me to John all the best.
Well no take our next question from Daniel Ishmael from Green Street Advisors. Please go ahead.
Okay.
Great. Thank you just given this business following up on our last question can you talk about the appetite out there for a full at any level of deal. These days.
I'm, sorry, Jim I couldn't hear you Danny needed speak stable modalities, yeah, just to follow up on the last question just given the recent headlines in the disposition plan can you talk about the appetite out there in the market for an entity level deal. These days.
We don't see it we don't we don't get inquiries that makes sense to us we get people come in and say.
We want to do I believe for questions. We ask people want to come in and everyone takes a meeting with us because they all say they took me. This is my is counted as open for anyone to tells me want to meet.
The four questions a very simply what's your range of price you know Where's your equity sources committed.
Debt to replace the amount that we will we have a pretty good structure you consume most and fourth most importantly is it a corporate or as there is a real estate deal and we've never got any wondering answer the questions correctly, when we get people to come in and say well, we want to spin something out of the shelves or get value will this will trade up that said, we want to drop one energy we think it should.
And then start with cash someone came in and say, it's a price will take this off your burden. It's earlier than you expect but at a couple of dollar discount instead of getting the 30, you guys something less rational totally open for business, but I think that bid becomes more clear and more available to people and it hasn't been a ton of M&A activity in a general and the read space.
When we exit a suburban business because as you know Danny it will make us cleaner and easier to analyze 30 deals right 30 deals and all of them averaging over $200 million.
And not that complicated no probably know ground leases of any consequence, not no major jvs no subordinated interest we've done a great job of cleaning this thing up.
Right.
And at the shareholder value Committee.
You discussed before potentially with your words were different bowing to company. If it's not trading your any D. Just wondering if the liquidation on the table, let's say a year or two from now the companies do not trading any D.
I understand I, just I just said at the John.
We look at it and the board has a view that we have a commitment to get the eyes and Avi.
Strategy that we we inherited was a suburban strategies, which not getting the right number we've used our resources to create a multifamily business inside of it we've gone from 295 assets to 30 of those 30, I think only four or five are ones that we originally started with its a complete if a company. The one thing we couldn't correct was leverage we needed leverage in order to be able.
To do this box right because we haven't got out and issued equity in a long time, we've paid down debt and even though we'll have a so say a 10 times debt level. It will be secured no covenant based recovered interest coverage by three times I wouldn't say well fortress group, what the was a lot higher there when we first started.
Yes, and maybe just one for Dave on same store NOI guidance.
Can you talk about how office expenses should trend and are expecting a continued benefit on a same store basis from overall expense growth.
Thanks Denny.
One I read your node and try to clarify my prepared remarks for same store NOI guidance for 2020, it's just the waterfront.
In the revenues and expenses are really in line, that's not driven by.
Expense savings next year I see expense growth.
About inflation or what inflation should be a two to three per se.
Okay. That's helpful. Thanks, guys.
Well now take a follow up question from Jamie Feldman from Bank of America. Please go ahead. Your line is open.
Great. Thank you I just wanted to dig a little bit deeper into the waterfront leasing pipeline you guys mentioned I think you said.
Financial services co working pharma shipping.
Can you just talk about the size of some of those deals and you know what what the hold up is that going I think you've talked about all of them in the past and is it contingent on gross New Jersey, and if you. If we do see that come into effect does deal finally get signed or is there something else holding up decision making.
Couple of them go across the board Jamie This is Michael turnover to make an imminent.
The shipping company is clearly based on grow New Jersey, they've been hanging around for a while they're moving out of another port city to port Elizabeth, but I want to have the headquarters in Jersey City.
The pharma company is just strategically making this decision they take the time, it's a relatively decent commitments about 100000 square feet. Maybe 80 80 to 100 sourced two to three floors in a building that weve a designated for them.
A few others are just expansions that just go through the process. We're very close on those on one of them is a co working company that's already attentive Alison wants to expand Wouldve been trading paper on it so we're well too long, but Nick if you want to add to my commentary.
Sure as as we talk about sort of the low end as David mentioned.
Obviously technology online gaming, they're looking to expand.
Bye bye for too.
We've got engineering financial services.
In that so call it 20 to 25000 square foot range.
And then as we move towards the high end, it's Mike alluded to pharmaceuticals shipping construction.
All north of about 50000 square feet.
So we feel we feel pretty good there and that would be new leases right. And then we also are looking at some some renewals and expansions in the insurance sector.
Technology financial services. So we just that's the reason for the for the positive Jimmy one last comment to add on to Nick also getting a good bit some smaller tenants for the first time it sort of been here 10, 15000 square feet. We had about six of those which add up to about 90000 square feet, which is significant in the coming from people.
At either have moved to the Hoboken, New Jersey City area, including a brownstone, who want to run the business in a close commute.
We also had expansion from the gaming companies that operate their platforms in this area. So William Hill.
Half kings and others that expand gives us that's the type of tenants are seen lately.
Operator next question anything.
Well no take a follow up question from Emmanuel Korchman from Citi. Please go ahead. Your line is open.
Hey, it's Michael Bilerman here if Manny.
Mike you talked a little bit about I think in your comments to an answer you said, we had two parties in here recently.
Which I assume were two parties potentially in multifamily company in a private.
Real estate company that were examining potential transaction can you sort of just elaborate a little bit more on that process that the board went through and.
You know why you decided not to.
Go down the road and what would the considerations.
No problem actually not what I said I had two consultants that came in that was Goldman on Merrell, who basically gave me advice, but you had your question still valid Michael in it its worthy of an answer I'll be happy to answer it both to go through the whole thing Goldman and Merrell, both advise the company.
Goldman advice to Special Committee Merrell has already been an advisor hours also Senator especially committee.
Ultimately recommendations about strategy in process.
Both an informal you talk to the marketplace and wide basis unsolicited degrees of interest from people. When it came back that the gating item was had been in always had been on the suburban leasing suburban office excuse me that was why the board made a decision to exit the suburban market. The way, we did and made the announcement regarding what you've talked about.
What has happened was I was approach by Tavares, it's documented in the letter they published last Sunday.
Which came in to see US I gave them. The four questions that I alluded to earlier asked him very simply Tom I'd Love to deal with you I wish I had meetings with them before about buying assets. He never bought an asset from us yet.
Well I said to him could you. Please identify the price he wasn't willing at that moment I mean equity sources of capital raise it dead. He commented it can get it from a bank and question was about structured and really alluded to the fact, they wanted to do.
What I would've thought it would have been a complicated real estate deal. He also expressed interest in trying to get the Max to roll over their equity and stay with him and so forth that I would tell you is probably a nonstarter I don't speak to build back but they did a bill macro turnover has taxation and his fortune to someone else is probably not something I think is of high possibility.
The read that was mentioned I won't mention a name because they've never actually form we acknowledge I don't think they should observed there.
Obviously that company was never in the picture I never saw a document that basically said hey, this is being cc to somebody who is the docking on it does Tom risk which had the.
I wouldn't say your density, but the interesting quality of sending me a tank sheet am I spent my career being a CMBS expert on Brexit pretty good at it the term sheet actually said this is not attention. This is actually said this is not for this is not for distribution. The shouldn't go out signed by it a junior guide a bank.
And how to number one at 1.8 billion, which has no association with anything on my portfolio.
All the exhibits we're missing and or blanks in it and he put out in front me instead of what I have the money.
Look if he wanted to run he wrote a very longer bilateral on Sunday right. Now you could say goodbye and a lot less words right and you had spoken to a friend of mine who is one of the bankers. There may have great respectful, who was told the hundred want to be hospital, but Sunday night letter is the idea of hostility.
If Tom wanted to be serious he would have sent a letter and said here's the letter we sent into you which is just ended M&A practice that didn't have it right. He doesn't that if I as parties in the latter for good reason. He does it have you thought it to do so that board is will more than willing to take any serious offer that comes in.
And the letter that we May publishing you'll probably get to publish this is waiting for someone asked a question that we will at least as an E. Mail sorry is press release Tomorrow is the letter we send to him basically saying we welcome. A response. He is the rules you need to answer the questions. We can't thank you come in startup process without knowing that you have your equity.
All you who you are buying group is and how they want to raise the money where your debt is coming from and more importantly is it really enormity of transaction, which is at corporate deal or is gonna be some convoluted real estate deal, which has a spin and assets left behind which we've added we'd rather do it on problems and do that but the board is 100% open and it's more to move.
I'd have conversations.
[laughter] sort of sort of like I know, a guy who knows the guy who knows we guide and I may be able to get the thing done.
Yes, and recanted that was the response and that's the as you know you cover the industry as long as I have it it just wasn't a rational process, but look we're open but the one thing I would comment he did get a meeting with today, you've gotta meeting immediately as did cushion as it both street you called out you say you want to come and talk I make my schedule opened for you.
But you got to have a real deal otherwise there's no reason has a conversation.
And then.
No. That's why don't I did point is we yes.
Hey, what can you please bush, which still Mac happy birthday, who are you going is it see you downsizing or board or is that going to be a vacancy where you're going to add a new member to the board.
We're not allowed to under Marilyn War to basically downsize aboard it's a purely out of it. So bills MCE seat will be open will be nominating someone new for that spot.
We will be a insider or is that now going to become an independent.
I can't speak to the board I am not the nominating governance committee to be has been a personal note I'd be highly unlikely that will be an insider extremely unlikely.
Okay, and then as you think about executing the suburban asset sales to effectively.
Become a multifamily in Jersey waterfront Office company.
Is there any reason why you wouldn't be sort of pursuing.
That potential sale of rose land today.
Or recapitalization or spin of that or peak to sell the Jersey waterfront office business to a potential buyer, who may see that is strategic to their other holdings I'm just wondering why not try to do everything today.
Got it and sell the suburban and then wait and sort of see where the stock is relative to maybe if you know ultimately you want to get there.
Why not try to do all the pieces at once.
Yes, there will be a little complicated lots to do putting that aside there's some serious tax implications that you can't do it. So you need in order to get out of the tax problem, we have which is assets that we've owned for 2030 years that like the building I sit in which has a basis like 100 million dollar value of like $800 million you need to do a spin.
And a sale at the same time or sale on it fell at the same time.
You can't do one in the other we've had consultation with both Goldman Merrell. Other advisors came back to the same situation get rid of in suburban then you left what options you have either seven spin selling so stay one of the Threeq one of the three options, which is what we're planning to do.
But it has becomes an option because.
Normally we would which we think roseland itself of 100% do I think the office on the waterfront as we cut it down as several 100% can we do it right now independent of doing the suburban no I need to get rid of the suburban first.
We stated that it wouldn't be able to do it under the covenants and the banks and the bonds to basically do the sale in the span pay them off which means that it to devote sale proceeds from one to the other and bangle sheltered have to wait and so and so forth. This has been considered well thought out the easiest into most direct way to get the right spot.
Right and you have to roll hundred 50 million from a tax protection perspective from an accurate this is relating to dinis.
Question.
You will see to enroll so.
You have to go a little bit, possibly but Michael goes into Roseland, which is a series of roles and I wrote about 10 deals and wells on already was just access issues right. I mean, a lot of the deals lands, we bought what deals that we had very taxes issues right. So we already have that we already have that problem. That's why we need to.
Sell rose land in a spin or sale and as part of it the solution as opposed to keeping it if we just sold Roseland today, and we let's say someone's L., we got a billion a we wouldn't get a billion would get a billion eight that we'd be grows on NPV and we'd be pay a very large tax bill it could be as much as.
A billion dollars. My CFO is now they think is 900, but it's about the right number and that tax though would be paid by the shareholders at the entity level, which means I cant distributed to you if I sell it and sell it within the same time and it's just a solution I give your money and you don't pay the tax because its left behind the other guy picks up the basis issue.
Yep.
Okay I appreciate the color Mike Yes.
And I hope you have a great we got planning music next week.
I got to offer you Mike.
I look forward to it.
Ladies and gentlemen, this concludes todays claims question and answer session. Mr. Demarco I would like to hand, the call back over to yourself for any additional closing remarks.
As always we thank everyone for joining us we know it's a time constrained world, We live and we look forward to seeing hopefully all our investors next week at Citibank over the weather will be perfect and we'll be in a perfect mood have everyone have a great weekend. Thank you.
Ladies and gentlemen, this concludes today's call. Thank you for your participation you may now disconnect.
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