Q1 2021 Simon Property Group Inc Earnings Call
Good day, and thank you for standing by welcome to the first quadrant Paul.
In 'twenty, one Simon property Group earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. The asked a question. During the session you will need to press the star one on your telephone and if you require any further.
This time, please press star zero and.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker of today, Tom Ward Senior Vice President Investor Relations. Please go ahead.
Thank you Laurie.
Thank you all for joining us and.
Presenting on today's call is David Simon Chairman, and Chief Executive Officer and President.
And also on the call of Brian Mcdade, Chief Financial Officer, and out of war and.
Chief Accounting officer before we begin a quick reminder, that statements made during this call maybe deemed forward looking statements within the meaning of the safe Harbor of the private Securities Litigation Reform Act of 1995, and actual results may differ materially due to the variety of risks uncertainties and other factors. We refer you to today's press release and.
The SEC filings for a detailed discussion of the risk factors relating to those forward looking statements. Please note that this call includes information that may be accurate only as of today's date reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are in.
Clearly within the press release in the supplemental information in today's form 8-K filing both of the press release and the supplemental information are available on the IR website at investors thought Simon thought from.
For those who would like to participate in the question answer session. We ask that you. Please respect the request to limit yourself to one question and one follow up question. So we might allow everyone the opportunity the interest the opportunity to participate.
The prepared remarks, and pleased to introduce David Simon and good evening.
And I'm pleased to report that our bids.
The business has significantly improved.
After having addressed in the impacts from COVID-19, including the restricted the governmental orders that have forced us to shut down.
As well as reduce our operating capacity and thankfully those restrictions are now being lifted.
And I'm pleased to report our continued improvement in our profitability and cash flow generated for the first quarter first quarter funds from operation was $934 million or $2 and 48 per share.
The increased approximately of 150 million or <unk> 31 per share compared to the fourth quarter of 2020.
Our international operations continued to be affected by governmental closure orders and capacity restrictions and in fact, the quarter was negatively impacted by.
By approximately eight cents per share compared to our ex day expectations.
Expectations, given the closures that have occurred internationally.
We also recorded additional COVID-19 impacts in the first quarter of approximately seven cents per share from based upon basically domestic rent abatements and uncollectible rents, we generated 875 billion in cash.
From operations in the quarter, which was an increase of 18% compared to the prior year period, we collected over 95% of our net build rents for the first quarter and are in line tenant collections are back to pre COVID-19 levels and the approximate 90.
8% range, our operating metrics in the period were as follows more.
All in outlet occupancy at the end of the first quarter was 98% down 50 basis points compared to the fourth quarter of 2020. This 50 basis point decline for the quarter is approximately 70 575 basis point.
It's less in the average historical seasonal decline from the from the fourth quarter of the first quarter average base rents was $56 and seven up 60 basis points year over year leasing spreads declined for the 12.
Trailing 12 months, primarily due to the mix of deals that have fallen out of the <unk>.
Spread calculation.
And have resulted in an increase to the average closing rate by approximately $8 per square foot for the trailing 12 months pricing continues to improve with the average opening rate per square foot for the trailing 12 months of approximately $60.
And.
The per foot and as you can see in the lease exploration schedule included in our supplemental our expiring rents for the next few years or less and $60 per square foot keep in mind.
That the opening rate included in our spread calculation does not include any estimates for variable lease income based on sales.
And in certain circumstances in addressing tenant COVID-19 negotiations last year, we in certain cases agreed the lower our initial base rent in exchange for lower unnatural sales breakpoints, allowing us to participate in.
The improved sales performance as the.
The economy.
And it recovers now we think that will end up being in a very smart move on our behalf. Those deals are are included in the average opening right at the lower base minimum rent and does not include our estimation of what the.
<unk> rent could be and will obviously believe those contributions in time will will add to our cash flow leasing momentum.
It has continued across our portfolio, we signed 1100 leases for approximately 4.4 million square feet and we have significant number of leases in our pipeline our leasing volume in both number of leases and square square.
The square feet was greater than the volume in each of the first quarter of 2020 and 'twenty in 19.
The improving domestic economic environment shopper sentiment have increased shopper foot traffic and sales across our portfolio as I mentioned increased and traffic for our open air and suburban centers.
It has been very.
Encouraging and retail sales continue and approve across the portfolio.
With higher sales volumes in March compared to 2019 levels are we.
We opened west Midlands designer outlet or second outlet in the United Kingdom. In early April. This was behind schedule was supposed to open in the fall of 2020, but was delayed due to COVID-19 restrictions.
And we're pleased that this has now been lifted and we're now able to open and serve the shoppers during the first quarter. We start of construction of our fifth <unk> premium outlets in South Korea, we're excited about that opportunity.
And hopefully by now.
With respect to our brand and retailer investments.
<unk> seen that we've been able to.
The add significant value there.
Our global brands within spark outperformed their plans in March and April on both sales and gross margin led by Forever 21, and the Aero per cell for the two months combined spark outperformed the sales plan by more than 130.
$5 million and our gross margin plan by more than $75 million.
We're also very pleased with the J C. Penney early results.
And they continue to be above our plan, our company's liquidity position and Penny is strong at $1 $2 billion and balance sheet is in very good.
Shape with leverage of less than 1.2 times net debt to projected EBITDA, we continue to add new brands.
Two to that to the Jcpenney portfolio, and we expect growth to be our focus going forward.
Just a quick update on Taubman and we're very pleased with our partnership in the results in the first quarter. Our teams have collectively of shared and implemented many best practices and are adding value to the assets. We expect the step up redevelopment plans.
And with mixed use the opportunities throughout the DRG portfolio capital markets.
Very similar to what we always do we're very active we completed $1.5 billion.
Senior note offering at one point and nine 6% weighted average term of eight four years. We also completed a 750 million dollar euro or Euro notes Shouldnt say dollar at one and in 8% coupon at a term of 12 years.
We used those proceeds to completely repay the $2 billion.
The unsecured term facility associated with the Taubman deal as well as pay off of our AR $550 million Senior notes, we have also refinanced.
Six mortgages for $1 3 billion, our share of which is 589 and in average interest rate of 3.36 and that market is continuing to improve.
And at the end of the quarter with all of this activity, we have eight $4 billion of liquidity consisting of $6 9 billion available on our credit facility $1 5 billion of cash, including our share of JV cash and Rick.
Binder that is net of $500 million of U S. Commercial paper outstanding at quarter end, we pay the $1 30 per share in cash and.
In terms of our dividend on April 23rd and then finally as you've seen.
Given our first quarter results.
We are increasing our full year 2021, <unk> guidance from $9 and 50.
And that's two $9.75 per share to 972, nine and 80 per night.
And I $9 80 per share. This is an increase of 20.
Per share at the bottom end of the range and five cents at the top end of the range or a 13% our 13th and increase at midpoint and that represents a six 5% to seven 6% growth rate compared to our 2020 results.
So in conclusion pleased with the results in.
Encouraged with what we're seeing in terms of sales traffic and retail demand.
And the you.
We continue to.
True.
The continued increase our performance in our profitability and ready for questions.
Our first question is from Rich Hill of Morgan Stanley. Your line is now open.
Hey, David Good afternoon, I had a quick question on in the guide.
Look we have argued that the guide looks.
It looks pretty conservative because I think if you assume no NOI growth versus 2020, you can sort of get to the high end of the prior range and so the the revision looks fairly conservative to us I recognize there was some lease termination benefits in this corner. So maybe you can just walk us through.
How you think about the cadence of that of that guide in.
In two Q3 Q and in <unk>.
Well rich.
You can't blame us for being Conservative can you after notice dealt with after the outlet for 14 14 months.
We did we did not just a couple of things.
We are.
The lease settlement income was kind of in our plan.
One on the other in hand, we did not when we gave our initial guidance. We did not expect the negative results that we are in.
And that we saw in Europe.
Primarily they set so that hurt us by eight sets in.
You know that's still going to underperform given the restrictions for the rest of the year.
Because of that locked down.
The amazingly took a lot longer and in and lasted a lot longer.
So unfortunately in Europe.
There are still dealing with COVID-19 that will happen and impact.
And then I would say, we as you know in the first quarter, we did still have some day.
Net and some bad debt so to speak that also affected us of seven cents. So we still think were you know there may be some.
Further activity and that we don't know it's pretty much behind us at this point, but we're conservative we've got Europe.
I think the comp NOI, we didn't give you a number but we expect in the U S to do better than what we initially thought and I hope you're right I Hope, we're conservative and I hope, we do better than what we've.
What we're guiding to but you know it's just been it.
True.
<unk> time for.
And this company and our folks and you can't blame us.
Understood and one follow up question and hopefully I'm not putting words in your mouth, but I think on the last earnings call. You had talked about total core portfolio ex taubman being in the 3% to 4% range for 2021 and I note that total total portfolio was plus four in this quarter include.
Taubman I read it correctly so.
So.
How should we think about the total portfolio growth going forward recognizing you havent guidance is that three to four still still accurate, meaning that there should be of pretty significant ramp over the next several quarters well, let's separate the two I think when we talked about.
Our cop, we felt we're going to be in the four ish range.
And just comp excluding taubman.
No.
You know to be to be clear at least that's what are in my intent was when we had you know our.
Year end call, we expect to be a little bit above that I mean, we still don't know as I mentioned to you because of COVID-19 and some of the negotiations with retailers were betting in a little bit more so to speak on the come.
Because of the sales aspect of it but we would hope could be around 5% on that you know as we look at it and then help in.
We're just putting that in based on our plan they are off to a pretty good start.
And that's where you get the portfolio of numbers, so the comp NOI should.
Should be in the 4% to 5% hopefully on the high end of that range and then we itemize taubman, because we didn't want to confuse people and we were just kind of show you. Those results then next year 'twenty.
'twenty 'twenty, two and we'll just have the <unk> portfolio and our cost so youll see tab in the rest of the year of the way it's outlined.
Did that.
Does that in good guys.
It does I can follow up with the with Brian and Tom offline on some wonky accounting questions, but that's helpful color I'll get back in the very well I pride myself and be in a walk so.
Yes, if youre ever bored you can call me any time alright.
Alright, Sir Thank you and thank you.
Yes.
Our next question is from Steve <unk> of Evercore ISI. Your line is open.
Thanks, Good afternoon, David I was wondering if you could just comment a little bit more on kind of the leasing momentum in and you talked about the $4 4 million fees done in Q1, maybe just give us a little bit more color of kind of what the pipeline sort of looks like what types of tenants are you seeing.
Is there.
Our focus whether it be food, whether it be on apparel, whether it be on the entertainment. Just you know what are you seeing on the leasing of today.
Well.
You know keep my fingers crossed but we're actually seeing really good demand.
Across the board.
The very interestingly the restaurants.
Demand is at the at the.
You know at the very high.
The very high level.
We're seeing a lot of restaurant tours.
And that for some of the fixed space that was vacated they want to come in retrofit it get opened quicker.
So we're seeing really good demand there I think some of the strong retailers are growing their business significantly you know of American Eagle is a great example.
You know of urban Outfitters is of great. Another Great example of.
Two companies that just pop to mind that have.
We have multiple deals in the works on.
We're probably 80% done Steve on our renewals thus far.
And you.
You know I'd say.
And we generally feel pretty good and much better than we felt.
You know in a long time, and I and I just think.
No the.
We're seeing a resurgence in brand so, let's let's take a great example of.
You know.
You know of company Crocs Crocs was hot a decade ago people thought it lost its Mojo maybe in AD you know, it's now killing it and so we're seeing footwear, we're seeing of payroll.
And we're seeing another a lot of brands in the that are new that are coming into the.
One great retail real estate.
So I've seen basically of resurgence across the board and our team is very very active we're also seeing demand from entrepreneurs local regional so pretty good pretty good.
Pretty good pretty good results or come in that that I think you know.
And you'll start to see in the upcoming quarters.
Okay, Thanks, and I guess that sort of dovetails into sort of my follow up when you think about kind of the occupancy trend and I appreciate your comment.
That's the drop sequentially was maybe less and then what you'd normally see seasonally but do you feel like occupancy at this point is now at the bottom and you start to see that kind of improve throughout this year into next year in and then same with kind of leasing spreads is does this kind of marked the bottom here in leasing spreads well again.
We gave a rather lengthy explanation on leasing spreads and the thing I would focus on it is mix driven.
So that's the first point the other thing is as part of COVID-19.
And we were doing renewals.
Where we had lower base rents and more and natural breakpoints, which I think you know hopefully based on sales trends are going to actually.
We're going to actually have made a pretty good bet on that.
So I don't think you'll see the as the mix changes and get more stable and that's why you.
And we pointed out the kind of what you see expiring.
I would hope for that.
See that essentially that decreased go away with time as that goes out.
So that's that's the first point and then I think occupancy I would think we would see improvement clearly where reward at the end of the end of last year by the time, we get back.
Back up to a year and so I would expect the.
A reasonable improvement on 'twenty.
'twenty versus 21, we're not going to get back the 19 levels in 'twenty, one we look kind of more in 'twenty two 'twenty three level.
That's a little bit of a.
A guesstimate, but the demand frankly.
And I don't want to oversell. It you know that's not my style, but.
No I mean.
We've got and I don't like naming names but.
Even though I named two already.
And.
You know, we're just we're just making deals with the across the board with a bunch of people. We do have some still have some difficult.
The relationships and negotiations that were.
Dealing with and again I won't name names, but you know.
So to the extent it's not.
The occupancy uptake is not as robust as you think it's primarily because we've taken the tactical rich.
The response that look we're not.
We're not we're not going to you know.
And if they're not paying what we think is fair. We're just we're just rather sit on the empty space and.
That's the judgment that I hope.
The investors.
Well appreciate that having done this for quite some time, we're not always going to get it right, but the fact of the matter is you know we're going to we're going to try and do fair deals, but to the extent that it's too one sided.
We're just kind of will sit on the space. So we still have a few of those kind of scenarios that will probably play out in 'twenty one.
Great and Thats it from me thanks.
Steve.
Our next question is from Caitlin Burrows from Goldman Sachs. Your line is open.
Hi, there and maybe just following up on the occupancy point the lease termination fees were significant in the quarter and I think you mentioned that with kind of your plan.
And what made you comfortable allowing the tenant or multiple of tenants to move out early and Simon and take that termination income rather than not and keeping that in Tennessee.
Yeah, that's a really that's really in all.
It's a good good really good question, it's really in art versus science.
It's really is a function, we don't really like to do it but you know in some cases, we think the space is really good and we will be able to ring.
Ring the bell on the lease termination income in and lease it up and so.
And we get the benefit of both are in.
If I get the present value of that lease.
The stream more or less and then I have the space to lease that's pretty good business for us to do and.
And and that's the case and that's what we saw in Q1, and so we basically and a lot of cases took the net present the.
100% of the net present value of that the lease got the got you know got the money got the cash then we have the space and then we'll lease it up and that's pretty good came in and Thats pretty smart to do pretty thoughtful to do our space isn't going anywhere our malls aren't going anywhere.
Where theres still great real estate demand is picking up so you know in some cases, we'll that's the kind of trade will make we're not taking real discounts in NPV.
And you know and obviously.
We're very sophisticated in running the math to see what the fair deals.
Mhm.
Okay, and then maybe on the acquisition from time and raised the equity later in 2020 and I think some of it was the earmark for possible property acquisition and just wondering what youre seeing in terms of the opportunity and I guess willing sellers and.
Is there any commentary on whether you are more interested in potential U S or international property.
Well I think.
<unk>.
We have built a great.
And.
Portfolio over a long period of time we.
We don't need anything to you now.
And to continue.
To run profitably and grow earnings now after of having.
<unk> dealt with the 14 15 months of other.
Of COVID-19.
On the other hand, if theres. Some you know of few properties here and there that make strategic sense were will enable.
<unk> of that are the sellers you know the ebb and they flow in and you know.
Sometimes of our expectations arent.
Where we think they should be.
Obviously, we're very active.
But with Calvin we think that's going to turn out to be of very very good deal for everybody involved. So it's not like we haven't done.
The significant transaction.
And.
We think there's lots of upside in <unk> and.
The portfolios we were.
Work with the the Taubman to you know to recover from COVID-19. So we're we've got our eye out.
We've got a great network.
We can always enhance it.
But we also are looking at content.
And you know where and why do I mean by contract well.
We'll see.
The point out to the value creation in some of our content deals over the this year or next you'll see our ability to create significant value off balance sheet.
And now that I think.
Helps us with content and what we're trying to do in terms of.
Positioning of our real estate in the future.
Okay. Thank you.
Sure.
Our next question is from Alexandra Paul fly off of.
Piper Sandler your line is open.
Hey, good afternoon, David how are you good how are you doing.
Oh Fabulous Fabulous its earnings we got a bunch of stuff still going on life is good.
So two questions here.
Saw the Eddie Bauer news and the bi.
Our ability to read English is correct. It looks like you did that in the traditional AVG and <unk>.
<unk> wrap or not in the stack so to partner from my first question just I know last time in the call. You said this back we will do a lot more than just traditional retail, but maybe just walk through you know.
And that's on how the stuff goes into just from minus have stopped goes into the AVG wrapper versus the back and then to the disclosure on page 16, which you guys and for a while but it does show the benefit from these retail investment starting to come through which released shows that hey, These things are making money, but to that point just sort of curious.
And how much of the brand's NOI is coming from Simon.
Centers versus coming from non Simon centers.
Well, we don't we don't really go through that but.
No. These are retailers that have the essentially a very broad portfolio and and.
And so they get a lot of other they get a lot of their profitability from.
You know from.
Stores and e-commerce outside of our portfolio so the.
Just to touch on your last one so.
Just a quick note on the.
Eddie Bauer and so Eddie Bauer.
Well, we will partner with AEG to buy the IP.
Which we think is terrific.
It's been around a hundreds of years celebrated 100 year anniversary I think last year.
It was the first.
First the company to create the down jacket.
And.
In 19 of $786 million in sales.
And we are we're buying in the IP and a.
Fraction of multiple.
A lot less than.
The one times and if you look at where brands are being priced you will have noticed that.
And we get it we will do a great deal. In addition, we are buying.
The spark will buy the operating the company, which we're partners with.
AVG on for essentially the working capital.
And.
And we will operate the stores and we think.
No.
Again, theyre going to add $30 million to $40 million of EBITDA the spark.
Spark this year projected we'll do about $130 million of EBITDA that doesn't really come through because we have depreciation we don't add that back and breadth of <unk> and <unk>.
And the like but.
And.
And so spark is doing fantastic Eddie Bauer, adding.
That's the spark will be really beneficial and then were.
We are beginning to create kind of a.
All of whole outdoor apparel with.
The brands that we have the nautica and and so on.
And then.
And then I think the IP of Eddie Bauer and will be.
We'll be we'll have growth associated with it under the AVG umbrella.
Yes.
But as far as like your thoughts of this going into there so.
So in the stack really just for more like technology or efficiency cost and investments not about retail.
The.
The this this was not in the stack. The spec is available to do kind of what we told the market.
Things outside but this is like a core AVG spark transaction that.
You know in the synergies associated with folding in the same to spark doing the following the same game plan that we've done with all of the other brands. We bought is essentially a no brainer.
Okay second question and as David ESG.
Certainly of growing.
You know investment outlook and.
A lot of funds looking for it but yeah theres more talk.
And in in retail.
And the efficiencies of of physically.
Versus online clearly individual boxes being shipped you know intuitively doesn't make sense driving trucks, whether gas or electric true neighborhood doesn't sort of compete versus bulk shipment to the to the malls and shopping centers. So what are you guys doing to address this not just on the White paper you did a few years.
And we got more collectively whether individually or in industry to really highlight and showcase the environmental benefits of physical retail to the investment community and and to the local communities as a whole versus just you know what the industry is that before which as I say you've done the white paper et cetera.
Alex.
<unk>.
You know.
This reminds me of the.
If you could set hesitation.
Because your consensus frustration.
The physical shopping and Questionably is better for the environment and E Commerce.
And we have written studies on it.
We have discussed the.
And.
Right now nobody cares, it's our job to.
Half of the communities care and.
And I think part of.
Why people cared less was obviously because of COVID-19 and.
Our priorities were focused elsewhere, but I think it's a real focus for us in the future.
Display and the mayor.
Of our physical footprint.
And what it means for carbon footprint.
Physical stores are these.
These of the e-commerce not dimension.
You know all of the.
All of the energy cost server costs et cetera of packaging.
You can go on and on and on.
About the cost associated.
And the carbon footprint of e-commerce.
Compared to physical and I will review of any one and I.
I think others and thrive to say the ecommerce as has the less.
Less carbon footprint is that just is not true so, but we of our job to do much reminds me.
We got and get the government the care, we gotta get governments to act.
And in reminds me and I've been around enough to know that e-commerce Internet sales taxation.
We we talked we talked we talked everybody said Youre right right right Nobody did anything until you know thankfully the Supreme Court overturned the quill decision till.
And the level the playing field.
There is no reason in addition to that.
Net retail real estate should be cash.
10 times.
What what the warehouse and distribution facilities are cash 10 times, but hopefully when we give our pitch to local jurisdictions real estate assessors and government.
Authorities and so on and they will care we do.
And you know, but you know I'm open to ideas on how to get the message out of the message is clear to me.
Hopefully people will care.
Okay. Thanks, David Thank you.
Our next question looks from Michael Bilerman of Citi.
Your line is open.
Great Good afternoon, David.
I wanted to ask you about sort of development and redevelopment spending.
Obviously, I think enthusiastic as all of us are about the recovery and everything happening.
How do you think about increasing the deployment of capital either in new assets or into the existing assets. If you look on page 25 of the supplemental.
Think that 430 million may be the lowest I've seen in years and I think back I think over the last decade, David you've put in like $8 billion to work in your assets to how should we think about deployment of capital in the next couple of quarters or at least the announcements of investing more capital. When you also think about the investments.
And you can make in todman and assets, which I think the schedule of excludes.
Yeah.
Absolutely.
You know a very valid observation I mean, with COVID-19 and we shut things down with frankly stopped construction and certain projects in midstream and one is because we had too because the governmental orders to us.
No we didn't we didn't necessarily see any light at the end of the tunnel when you and your.
And basically of 230 property shut down across the country. So.
The good news is we're able we were able to do it we did it.
And without incident, and we did it.
<unk> fairly appropriately.
And now we're starting back up Michael we're still growing.
We're still a little conservative on that front and primarily we still have.
Concerns about.
We just wanted to make sure we're through the COVID-19 the crises that we've all had to deal with.
But it is our goal of ours and our focus focus of ours.
The crank this up now the good news, it's there it's ready we've rethought some projects I think I've mentioned in this last time.
A couple of the California projects, we get more retail and.
And then we probably will now.
And.
We're evaluating supply and demand when it comes the other mixed use components of it.
The good news is.
Without question the silver lining.
And surviving this.
Yes.
Very tough time for all of us.
Has been that that you know it wasn't too long ago and in flight Crocs.
And it wasn't too long ago, where you know suburbia was like forget about it right. So to me and I mentioned this I don't know of two calls ago Suburbia and his heart.
<unk> is the place to be.
And we just have the behalf.
Now a lot of great.
Well located in suburban real estate that we.
Tend to take will tend to take advantage of and I don't think this is the short term.
The scenario I think this will play out for several years. So we've got some really.
Good stuff and you know the.
And our redevelopment pipeline will will pit will pick up and I think you know our experience and the.
Knowledge and execution will clearly help in the other.
Talbot and portfolio is great the suburban real estate more or less.
And you know there'll be great opportunities to true.
And just to add to that we're already working on as an example.
You know they have they had the big really big development in Cherry Creek.
We will end up in a major mixed use opportunity for the for T. R. G. The.
We're there to help.
The partners of sort through.
As it develops.
So when we're thinking about the slide at the end of the year do you think it could be easily be at let's say a 2 billion dollar run rate. When you include todman and all of the projects that Youre accelerating I'm just trying to get a sense of how much and also just given your overall enthusiasm about the result, and where you see traffic and sales and leasing.
I'm, just trying to get a sense of how much of that will translate into incremental capital above and beyond what you've already identified.
Again.
All of that all of valid questions I would say to you by year end and.
This is the guest and Brian and I was looking at in the Shake and we said no but.
And I.
I would when you look and we've got a couple of things in Europe that will probably do.
And when you put it all together I would say again the spend will be over a year plus we'll end up having a pipeline.
Probably at about $1 billion of stuff.
And that will have committed to by year end.
Again don't hold me to that number but that would be kind of my gut feel.
Paul.
It's off to Michael So don't forget about that piece of it because of the projects that get deliveries for the year that will ultimately reduce that number.
Right right.
And then just as a follow up.
Clearly, there's a lot of people going out and doing things and I don't know, if it's revert and shopping where stimulus shopping but there are certainly much more people going out and shopping how are you.
Are you able to discern how much of this in.
Just that just like we've been stuck around for so long and I just need to get out and do something and I wanted to go shop versus something that's longer lasting and are you able to sort of tease out anything from the.
And the data analytics in terms of dwell times or conversion rates or any certain retail categories that youre seeing.
More of a long lasting benefits than maybe one type of shot in the arm.
Well I think that's the big question right. So that's why we continue to be conservative because.
You know between being cooped up between being locked and locked down between the stimulus.
Between celebrating.
You know that were in the country is still around and we're still we're still going to.
And try to get back to normal.
There is clearly some level of.
Euphoria around that.
And.
It would be impossible for me to tell you what percent that is.
But that's why we you know we're being conservative on the other hand, we're still seeing pockets of the country.
You know that you know haven't really.
<unk> seen that yet.
Who California is a great example.
You know parts of the New York region.
There's still no international tourism.
Which we would expect to see in 'twenty two so even if it kind of even if it's kind of like.
Stabilizes or or you know just kind of normalizes there'll be other pockets that I think will pick up.
As is the entire country reopens I mean.
Now lets take lets take California versus Florida, I mean, this new world has been opened nine months.
And definitely and I think just dope right.
You know, California has the nine month lag and you know we've got.
We've got in a real.
Real presence in California.
No.
That will see the benefits of.
And then and don't underestimate I do believe.
No.
Assuming.
And this is the.
Global.
Issue, but I do think people are going to start the traveler.
And then globally, probably won't happen you know much until the.
And of this year or certainly in 'twenty, two but you know we're going to see a pick of that pick up of that we might see that in you know.
And we might see that in the in Europe, just because of the Chinese and stayed at home.
You know with the Chinese come here and we could see the ear. So there are elements.
That will pick up the slack to the extent that the.
Last couple of months of the Ben.
And I really.
Really nice to see.
Okay. Thanks for the color David sure.
Our next question is from Derek Johnston of DB. Your line is open.
Hi, everybody and thank you Hi, David.
So we touched on this a bit but our store checks are pointing to a pretty high level of online order fulfillment from the mall or the retail store itself and is this the tenant last mile of approach that youre seeing gaining any type of traction and especially since distribution space of <unk>.
Got in sow cost rates are retailers talking about this and could there be a growing trend at work here and kind of the merger between online and in store.
While there is no question that.
Most of the sophisticated retailers really wanna be.
And want to use all of the buzzwords, but the seamless between online and in.
And ship from store pickup in store all of that stuff.
It's interesting.
And when we talk to retailers and the majority of and want to do that sunlight to fulfill its still in the distribution.
You know facility. So it's not it's not uniform across the board, but they all want.
And they all want and seamless experience they want to be able to offer clearly pick up in store.
Or deliver from store and a lot of cases with shipping and delays that's much more.
The advantageous to them.
A handful of would prefer to execute out of their distribution facilities, but I'd say the vast majority of moving toward seem.
Seamless.
Pick up ship from store using that as so to speak of.
You know a ability.
The ability to fulfill from the physical stores of real advantage to them in terms of.
Delivery cost and so on so yes.
And so there's a few that find it more efficient to do otherwise so you know.
It's like everything else in retail and there's not.
One size fits all but the.
It's a good trend and I think they need their footprint with the connection for the retailer lots of retailers will tell you the.
That's a that's the the.
The repetitive, but you know as we've said and others and said look when they close the store and that's the store in that marketplace and I lose the e-commerce business or vice versa. When they open the store their ecommerce business goes up so.
Look at it in totality I think with all of the ability now the study of the consumer better with all of the data we were able to do a much better job.
And thank you that makes sense.
Can you expand on some of the early reads from the J C. Penney investment I know you spent some time on forever 21, and arrow and even called out JC Penney.
The fleet.
What are you seeing importantly of JC Penney How's the trends held up there are there any re merchandising wins or early successes that you'd like to expand on.
Well I think we've been mostly like all of our deals when we buy of retailer out of bankruptcy.
And we're in the stabilization mode and.
And the capital preservation mode.
We've accomplished both of those are already as I mentioned to you in the call. We've got the $1 2 billion of liquidity.
And and Undrawn ABL. So we're in good shape, we are bringing new merchandise brands to it but importantly.
Some of the other brands that were nervous about us.
And when I say nervous not about Simon and AVG, but nervous when you go through a bankruptcy.
And reestablishing those relationships.
And giving the vendors comfort that we're going to be around and able to pay for the goods has been really rewarding and.
We're seeing more and more.
Confidence.
From the vendor community. So because you know when you go through bankruptcy the not only landlords get burned the vendors get burned.
And so it's very important for us as new owners, taking penny out of bankruptcy that we give the vendors comfort that we're gonna be around to do it now the.
The the ultimately move toward growth is that is the future of what we're working on we're not there yet we stabilized that we are bringing in new brands, we've got lots of ideas.
And that and what.
What to do there but.
The first goal is to right size the company.
Strength in the financial.
Capabilities of repair any vendor relationships that we need to do.
Stabilize the morale and so on and obviously that's harder to do in COVID-19 when people are working remotely.
But we've I've been proud of the.
You know the execution.
And so far the results of our plan is the above.
Where we thought it was going to be so that's very encouraging.
But in order to turn and Jcpenney into a 21st century retailer.
That's still work in progress.
Understood. Thanks, David Thank you.
And all of our next question is from Craig Schmidt of Bank of America. Your line is open.
Thank you.
I'm thinking about sales per square foot.
If you were to annualize.
One Q sales.
Are you within spitting distance of your of pre COVID-19 sales per square foot.
Still a ways to go.
Well the best.
And would say depends how far you spent craig.
And you play it depends if you play baseball.
And what do they call them when they have the.
To the right.
Is it.
Mike spoke to.
For two and that's the word on the report.
So just to give you a sense.
And <unk>.
And.
The best way for Us to look at it is March.
You know March of 19, two of March of 'twenty, One I mean, we're way over March of 'twenty. I mean were you know were 130% above March of 'twenty, but the put that aside because that you know I would say to you when you put.
And it all together in.
March.
Of.
'twenty, one compared to March of 19 comparable.
So the same basically stores were like a little under.
You know, we're like minus seven and 8%.
Now I think April will be ahead of <unk>.
So when you look in April and March together, I think we're gonna be a head of sales.
For April March of 19 April March of 'twenty, one okay that helpful.
Yes, and that's very helpful.
And I think that's the way to do it so yeah I think.
I think.
And I think we're in we're in spitting difference different and I think we'll be ahead by.
And as April sales.
Come rolling in in the if you put the two months together wont be ahead.
Great and then I know you've talked in earlier about possibly ramping up redevelopment and development.
You think more would be spent in mixed use efforts or anchor repositioning.
I think we'll end up.
<unk>.
Given the move towards the suburbs and what's happening there and away from the <unk> I actually.
I mean again this is just the gut feel so I actually think they'll probably be more toward mixed use and I really do.
Okay and then just.
And finally.
Are you planning to introduce a lot of your years of spark.
Our brands into the Jcpenney like D C of O.
Eddie Bauer Department and in J C Penney future.
I think it's the it's not just sparked branch, but it could be AVG brands remember AVG owns a lot of.
And they have good IP for a lot of different brands. So the answer is without question.
There'll be you know it takes time, obviously design it.
Manufacturer and get it in there, but I would think in 'twenty two.
Maybe even late 'twenty, one we'll start to see a lot of the a b G brands and up in J C. Penney.
Okay. That's it from me thanks, Thank you.
Our next question is from Floris van dichotomy of comp.
Your line is open.
Afternoon, guys. Thanks for taking my question.
David maybe.
And obviously.
The very encouraging so far.
Talking about comp sales of 4% to 5% this year for your.
The historical SPG portfolio, presumably Paul.
And it's going to see something similar are you working on any initiatives in the <unk> portfolio.
And I'm thinking more of one of the things that set of SPG apart from some of its peers is your focus on.
Specialty leasing.
Yeah.
Kiosks and things like that or is that going to be more of an element in the <unk> portfolio or are they going to be you know remain a eight.
And more traditional high and.
Retailer or where do you see the revenue opportunities in <unk> in particular and could that same store growth actually be higher as a result of not having some of these things that the SPG has had in the past.
Yeah, I think I think the short answer is without question we've actually.
Yes.
It wasn't that day or.
First of all you can you can execute any problem. The program, we have and still maintain a high and mall.
But put that aside the the we just had this we just have a lot of you know.
We have a lot of resources to bear I mean, we've got a big field operation.
And we're basically in the most all of their markets.
And I think by doing local leasing and specialty leasing sponsorship.
The rate and at the level that we do we're going to see significant upside in <unk> and in fact, we.
We basically implemented in many cases.
The the existing SPG.
Sales force for no better word to start.
Selling our product.
To that portfolio, so that's actually.
And then implemented and we're at work on it so.
And in the working relationship to execute that was.
Honestly, great and a lot easier than what I had the deal with Chelsea folks.
And when we came in.
So.
And and.
And I think it's been very it's in.
And you know the relationship the coordination on leasing and development.
You know me and Rick and the Taubman and doing all of that stuff has been excellent.
And yes. The short answer is there is upside and we've got that.
We're limited in resources frankly to do it.
Not out of neglect or.
Out of or out of.
The different point of view of it just didn't have the.
The people the scale of the do it here. We go so we're at and we're doing things like insurance that you know that we.
We have more scale.
They are so there is all sorts of those things.
And that we're bringing to bear without.
And with open arms on both sides. So.
So I do think.
You know the debt portfolio will have a little bit higher up tick with time and probably yes, because you know we already do it and they don't.
And so you know, we'll hope to see some of the benefit of that in the future.
Great. Thanks, and maybe maybe one one follow up.
If you could maybe comment you're you're now in both sides of the of the table. If you will the.
Land Lords and yet you also own these retailers does your confidence that you're exiting in this call partly stemmed from the uptick that you're seeing in the retailers that you've made the investment in and and maybe if you could share some of the some of the growth in and maybe sales.
For those retailers and.
And you sort of comment a little bit of about that but also the the the.
Growth in EBITDA that you potentially see going forward for the for the retailer part of your business.
Well I mean, obviously.
That's data that helps us so I mentioned in the call for us that.
Literally just two brands.
The two brands in spark forever 21, and.
And and narrow per cell or the literally 135 million.
Over the plan.
Alright now they their February it wasn't as great.
As you know remember February had a lot of uptick in COVID-19.
But.
And so it's sure I mean, it does it.
Great reference point and it does give us confidence we're in.
Same similar good results and Penny.
But and importantly, our guys.
Cross the board talked to all sorts of retailers you know from luxury.
The moderate to department stores.
People are feeling pretty good.
No.
And they'll.
And look at the retail stocks I mean, you know the retail stocks of blown past us.
I had Tom do it thing for me.
And where we're still below our COVID-19.
The pre COVID-19 price, yes, the retailers are you now and in many cases 200 person.
<unk> higher.
And in what they were so.
The answer is yes, we have a lot of data.
We understand the consumer better than ever but importantly, we have where we have content now the.
You know allows us flexibility and knowledge that you know that we didn't we didn't necessarily have before.
Thanks, David.
Sure.
Our next question is from Mike Mueller of J P. Morgan Your line is open.
Yes, hi in.
In terms of the seventh sense of COVID-19 reserves, and abatements and was there any prior period collections that were positive offset within the peanuts.
Nothing nothing material, we did we did collect deferred rent of how much Brian yes, the deferrals and collected $100 million of previously deferred rents, but but that was earnings that we recognized last year. It was simply working capital adjustment Michael Yeah, So that didn't flow through the P&L, but you know.
It's always good to see a collection of deferred rent so.
But no that's not.
Not anything noteworthy at all Mike.
Okay that was it thank you.
<unk>.
Our next question is from Linda Tsai of Jefferies. Your line is open.
Hi, just looking at your NOI of your disclosure on page 16, and it looks like your share of NOI from retailer investments and also corporate and other NOI sources were down a bit sequentially what was driving that.
Well Linda it's Brian.
Respect to the NOI from retailers and you got to remember the seasonality of the retail business typically first quarter is the low mark and so youre actually seeing a positive contribution here relative to historical.
And sequentially versus fourth quarter, you would be down because the fourth quarter is obviously the biggest point and in the year with.
With respect of corporate and other NOI sources, we do provide the breakdown of that.
And what you see as the coming through that line is in increase in lease settlement income and then offsetting that is some sort of further.
<unk> from our auxiliary lines of business in the first quarter relative to the first quarter of last year. So Simon business ventures, those kind of businesses were down relative to a full quarter last year.
Thanks.
In terms of the strength in.
And one key leasing can you just talk about who the backfill options or are they existing retailers for more new to market.
Oh agonist of the question one.
Some of them soon.
Well there is that there's there's a lot I mean, it's.
There are I hate naming names, but you know you've got a lot of the day to see guys that are growing their business.
And.
You know I mentioned, the U American Eagle is growing the business urban outfitters and growing their business.
And.
So.
We're we're it's really across the board in restaurants.
And the luxury folks Prada Gucci.
Moving on I mean, it really it really is encouraging.
You got it.
It is really encouraging to see it.
In one particular category, but you know across the board Levi's Route 21.
A lot of rock.
I mentioned, the Aerie, Marc Jacob's Bottega Veneta.
The San Juan.
No of spark is growing some some opportunities and you've got the you know we had the Golden Goose open more be Parker.
The Crag hoppers of U K outerwear brand I really Miss Rick when when when this happens okay. So.
I'm going to have them come in for a cameo okay. I don't do as good of job as Rick, but what's the when it comes to that but it is across the board.
Thanks for that.
Sure.
Our next question is from.
Thanks, Paul.
Of Mizuho your line is open.
I guess that's me. Thank you for taking the question Hi, David.
And you're doing.
Doing both and I hope you are too.
Thank you the question on occupancy and you talked a bit earlier about rebuilding the occupancy the timeline, but I guess I was more curious specifically from a cash paying perspective, I think you said you'd be back in 2019 occupancy levels by perhaps 2022 of 23, but what do you think you will see the cash flow impact of that is that another year out. So maybe this is more like <unk>.
<unk> thousand 23.
While there is clearly the lag lag impact yeah. So.
So I think that's fair.
Fair State and I mean look we've run lots of numbers.
When do we get past our 19 numbers you know.
We're certainly not going to get there. This year, we're certainly and that's going to get there next year.
Could could it be 'twenty three 'twenty four and you know look it's so dependent upon the economy and.
And what's out there, but I think.
The the ability of CS at closer than what we thought a few months ago in there. So that's the goal.
And.
And in what you know.
Sure.
Every day, we're we're grinding to make that happen.
Fair enough fair enough. Thank you for that and.
And just a couple of follow up on the on the guide I understand the restrictions that are still ongoing and beyond your control of the international portfolio, but I was just curious maybe you could talk to me about what's implied in the guidance off of international. This year you mentioned the eight drag in the first quarter and that a level, we should expect again.
And again in second quarter, and when do you expect that to improve in.
And also one for Bryan I was curious about the level of.
Bad debt reserves, you're carrying at the end of the first quarter here and.
And maybe speaking to the broad industry exposure of probability of recovery of some of that in anything implied in the guide. Thank you.
Well I'll do Europe, I mean in Europe, we will see further.
Impact in Europe.
The Q2.
Against our plan and my guess is probably in the for the five range if I had the guess.
And then I'm hopeful we'll be on plan.
The rest of Q3 and Q4 is the picks up now to the <unk>.
Extent that.
And if theres anything like the U S where there's.
Some of some.
Pent up demand, we may see that you.
You may see a little bit of outperformance in Q3 and Q4, but we're not.
We're not anticipating in that but clearly.
We're going to see in the four of five cent range compared to our plan and our guidance you know the <unk>.
Europe Internet and when and then when I talk about international it's really Japan as the squishy is because of.
The COVID-19 and the caution obviously with the Olympics coming up so you know that.
And that could be another couple of cents international.
And now with respect to your other question about Recoverability of of the reserves I mean, that's a good quarter and we were appropriately reserved as you heard US day that we did not get any positive impact in the first quarter from that and that's our expectation from the balance of the year. The reserves that we're establishing we expect to be true reserves and write offs not of.
Rick.
Yeah.
Okay and.
And that level again, sorry, what was that at the in the first quarter.
It was consistent with prior years, we're not giving out individual levels.
Okay fair enough. Thank you.
Our next question is from Kevin Kim of true in your line is open.
Thank you good evening so.
And just going to your top tenant list noticed some decreases in the store count for at least for your top five.
And it gets a little bit of in the open ended question here, but just curious if you can provide any color and.
Should we expect some further fallout.
Well I mean look I think all of the retailers and.
And we're very conservative in.
And.
And in dealing with COVID-19 in and if these leases happen to expire.
During that the awful shut down and you know of the restrictions and all of that I mean, they closed stores. So yes, there's going to and the like I said earlier, I mean, theres going to be a few retailers that.
No.
We're not gonna be able the to find a happy medium with and we may lose their entire fleet.
And that's you know I mean, we're ready for it and.
It's a lot of our expectations are already in those numbers. So.
You know, we will see but yeah I think.
You know it.
Oh.
There'll be for some of the big Big retailers, they've announced public store closings and I don't want to get into which you know that all of that's out there for the public.
But you know, they're all spending their fleet and the fact of the matter is.
Well, if they do they do and.
And we're used to loose enough space.
Okay and can you just comment about some of the lease clauses in language, that's being used today for the new lease deals and I'm just in particular more curious about and.
And as have more out.
And I know you mentioned.
More percentage rent deals at the hit breakpoints, but I'm just curious if there are some other language with regard to make future pandemics and things like that that Mike.
From variability.
Not really I mean, there's always the lease here or there with 20 plus thousand leases.
No theres always some variability, but the reality is we.
Yeah.
During the COVID-19 renewals those were difficult discussions and everybody was under enormous pressure.
And in some of those cases like I said earlier, we reduced our.
The base rents of that on sales and we'll see maybe we'd get a better deal.
And then.
And then what what we thought we had done at that time, okay. The loopnet I preferred to have had the higher base rent.
But no one is.
You know there is no. There there is very few very focused on pandemic language.
And at.
At this point there is there's no material or even meaningful trend in that language and I would say generally lease terms you know at the <unk>.
<unk> on the retailer and maybe in some cases, they're very similar to what they were.
We're very focused on lease terms and we do.
The Willy Nilly, just do a deal to do a deal.
And there's a lot of give and take and I would say the AR.
There is no real.
Super trend that's going on in the lease terms you know theres always the.
Theres always the give and take but nothing of note that's.
I think we should share at this point.
Okay. Thank you.
Sure.
Our next question is from Vince the bony of Green Street. Your line is open.
Hi, good evening.
And how sensitive is your NOI this year to tenant sales it would be helpful. If you could provide guideposts. There for example, just if the tenant sales. This year came in at 2019 levels, how different would it be if let's say tenant sales were 10% higher this year in 2019.
Well it is.
It's very complicated.
And.
And it's very complicated because of its lease by lease where there.
Natural or unnatural break is it's when it hits.
No it's what they tell us what we audit.
And so the simple answer Vince as much as I'd like to tell yet.
And we don't really guide to that we do it in our own budgets.
But we're a big company sophisticated company lots of ins and outs.
And I think that's how we want people to think about us as opposed to you know.
And of what the percent rent is here versus there and then I would.
And it kind of ebbs and flows.
And we'd like people to think about us a little the bid.
But in a more broader.
Context.
That's the over like any rough ballpark as it gets in a 20 bps impact if that 10% swing in sales are the two or 3% I mean, any kind of rough sense, because I mean tenant sales obviously, the kind of the one of the big markers were falling but just trying to get a sense of how much of truly matters for <unk> of our NOI This year.
Well I mean, I'd say simply if we end up in 19 sales we'd be happy how's that.
Stephen Sare smiling okay.
Okay fair enough and does not smile and it takes them it takes them a lots of smile.
One more from me it looks like temporary tenants continue to take more space in the portfolio could you discuss the overall strategy as it relates to back filling space with the lower rent paying temporary tenant in this whether you expect the square footage leased to the temp tenant to move higher or lower from here.
Well look.
I mean, frankly events, we have more space so.
Because you know we've lost space. So remember as you know, we don't add that into our occupancy and unless its a year lease.
We also like.
Again, we like.
Doing business with local and regional entrepreneurs that.
All of our bootstrap their way up to try and build the business we've had.
No I mean, our most famous.
The retailer and that is the finish line you know when they came in and you know it's it's it's you know finish lines from Indianapolis, but.
All of those guys started with one store and they grew obviously they were just bought by JD sports, but you know I mean, we don't know who the next finish line. We did the same thing with lids.
Where are they started with one or two store. So you never know.
We like that business and also.
Create true.
Uniqueness to the to the to the real estate and the local I was actually just reviewing the book.
And that our specialty leasing folks put together for me every quarter and I.
And the mix and you know the customer.
Care of that these people have with there.
And with their communities is great the.
Product is getting better and better so.
It's an important part of our business, we have more space to fill.
Because of either bankruptcies or some of the larger folks.
Because of COVID-19, reducing the store counts.
And so we're proud of that business.
We are we you know.
We like working with entrepreneurs and we like finding the next finish line in the next lids.
We don't know where it will be but you know that's that's what our people try and do and.
And it also makes the the real estate, the look and feel better than that then of vacancy.
And if you if you walk one of our centers.
And I hope you feel like you know.
And obviously, there's frictional vacancy because if youre building out of the store somebody's moving in or out, but you know I want people to feel like it's full.
And the last thing and you want to do as you know.
You walked down in Madison Avenue.
And you know theres kind of a problem of it right. So.
And when they walk them, all I want them to feel like.
You know it feels good so.
And you know it.
It's just a good solid part of our business I'm proud of what we do they're proud of the people that we lease to.
And.
You know that's the business will continue to.
The two to foster and again, it's not always it doesn't always work out for the entrepreneur and for us but.
You know.
It's something that we liked the we'd like to focus on.
Makes sense. Thank you for the time.
Thank you Beth.
Our next question is from Juan Sanabria of the.
And while the capital markets. Your line is open.
Hi, good evening.
I was just hoping to touch on Michael Bilerman earlier question on the development and redevelopment schedule and just.
So all of the expected yields come down a tick and a couple of the different buckets and I was just curious if that was more of a mix issue or.
And the underwriting has changed.
Our expected rents or the timeframes have widened out as a result of the COVID-19. If you could provide in that kind of that'd be helpful.
And wanted Bryan. This is simply mix you know every time, we produced the schedule every quarter, there's projects that come in and out and so it's a it's a mix change over time from that from the fourth quarter.
Great and then the second question is just on the retailer.
EBITDA contribution I believe you spoke to.
$260 million number for 2020 one.
Curious on kind of what your sense for that number is now.
Kind of pre Eddie Bauer, if you have it handy.
Well, the Eddie Bauer and won't close the it'll be higher but Eddie Bauer won't close.
And until.
Two months.
So it'll be higher how does that is that helpful.
So.
And I think the 260 included our share of everything.
Including Penny.
So we're above that now so we're going to hopefully again retail is no.
It does have its ebbs and flows but where we.
We're projecting to be greater than that already without Eddie Bauer and then I think Eddie Bauer.
You know once it closes will will clearly add to that I mean, it's going to be a very good deal for spark there on the loan.
And all nervous because of spark my guys of the spark and have done a great.
The job Mark Miller, CEO, David <unk> CFO.
Our thoughtful conservative great stewards of the brands.
Great partners of me and the Jamie.
Jamie Salter of a B G.
Just nervous because they were really excited about Eddie Bauer and I'm like you guys are never excited about anything now of nervous okay, but no. The way they think it's kind of be of Great addition.
And one just one thing to point out obviously is relative to our retail and investments we don't add back depreciation and amortization. So the <unk> contribution is much less in the EBITDA contribution.
Yeah got it thank you very much.
Of course.
Our next question is from Greg Mcginniss of coach and Scotiabank. Your line is now open.
Hey, David just to maybe touch on that last question a little bit differently in the last call. It was the 15th 20 contribution of <unk> from the retail investments. So is it fair now that there is.
Higher number of assumed for the contribution of the guidance.
Yeah, I think that's to say I don't I don't know Greg what the number is off the top of my head but.
And it should hopefully and we'll outperform our initial budget.
Okay, and then just kind of rounding out the guidance questions.
Could you tell us what's built in regarding additional lease cancellation income.
Nothing.
Nothing material.
For the balance of the year, nothing that and Greg.
And nothing nothing nothing.
Nothing really on our in our radar.
Okay. Thank you very much. Thank you thanks Craig.
And there are no further questions on queue and I will turn the call other baskets of David Simon for any closing remarks.
Thank you and thanks.
Thanks for your interest and all your questions and.
The look forward to talking to you soon take care.
Yeah.
Ladies and gentlemen, this concludes today's conference call.
You may all disconnect. Thank you.
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