Piedmont Office Realty Trust, Inc. (PDM) Q4 2016 Earnings Report, Transcript and Summary

Greetings and welcome to the Piedmont Office Realty Trust Inc. Fourth Quarter 2016 Earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Robert Bowers, Chief Financial Officer at Piedmont Office Realty Trust. Thank you, Mr. Bowers. You may begin.

Thank you, operator. Good morning and welcome to Piedmont’s fourth quarter 2016 conference call. Last night, we published our quarterly earnings release and we filed our Form 8K containing our unaudited supplemental information. Both of these items are available on our website, under the Investor Relations' section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters which are subject to risks and uncertainties that may cause the actual results to differ from those we discuss today. Examples of forward-looking statements include those related to Piedmont Office Realty Trust’s future revenues, operating income, and financial guidance, as well as future leasing and investment activity. You should not place any undue reliance on any of these forward-looking statements, and these statements speak only as of the date they are made. We encourage all of our listeners to review the more detailed discussion related to risks associated with forward-looking statements contained in the company's filings with the SEC. In addition, during this call, we'll refer to certain non-GAAP financial measures, such as FFO, core FFO, AFFO, and same-store NOI. The definitions and reconciliations of our non-GAAP measures are contained in the supplemental financial information available it's also on the company’s website. I'll review our recent financial results after Don Miller, our Chief Executive Officer, discusses some of the quarter’s operational highlights. In addition, we're also joined today by various members of our Management team, all of whom can provide additional perspective during the question-and-answer portion of the call. I'll now turn the call over to Don.

Good morning, everyone, and thank you for joining us on today's call. Before I begin my quarterly comments, I want to thank those of you who are able to attend our Orlando Investor Day event on January 17 and 18 before the weather was perfect for us to showcase our premier position in the Orlando CBD market and a great opportunity for the attendees to get a first-hand view of what is materializing in Lake Mary's TownPark mixed-use development. Our 500 TownPark build a suite project was completed on budget and a month ahead of schedule and the 88% occupancy began moving in on January 1. One of the intent to take away from the event was not just about our Orlando operations however, but also the success overall of our concentrated ownership strategy and how that same approach is being employed in other major markets such as in Boston and Burlington, Dallas submarket and in Washington DC along the RB corridor. I hope you take the time to watch the presentation we made during our Investor Day. It's available on the website for your review. Now as we review our quarterly and annual 2016 financial and operational results, you may have seen in our filings last night that the fourth quarter was an active period for us from both the leasing and transactional perspective. Regarding leasing, the amount of executed lease agreements for the fourth quarter totaled approximately 400,000 square feet, which pushed our annual total to over $2 million square feet 2 million square feet for the year. With low expirations in 2016, these completed leases allowed us to end the year at 94.2%, well above our original goal of 93%. To delve into some specific fourth quarter leasing highlights the largest two transactions for the quarter were an approximately 100,000 square foot renewal and expansion of Children's Hospital of Los Angeles' lease through 2026 at 800 North Brand Blvd. in Glendale California and 8560 Upland Dr. near Denver Colorado, a leading cable and broadband communications company signing approximately 65,000 square foot 10-year new lease. A more complete list of the larger leases signed during the quarter is detailed in the supplemental information filed last night. Overall, we're very pleased with the breath of activity that we saw all in almost all of our markets during the fourth quarter, especially late in the quarter after results of the election were known. Looking forward we want to remind you that our reported lease percentage was revived to 91.6% on January 1, 2017, primarily due to approximately 700,000 square feet being transferred from the development and lease-up classification into our in-service portfolio. The additional square footage includes enclave place in Enclave Place in Houston, 3100 Clarendon Blvd in Arlington, Virginia as well as the additional 500 TownPark in Orlando, Florida. With low lease expirations in 2017 and 2018, these development projects along with other properties such as One Independence Square, and 1201 Eye Street in Washington, DC and our recently acquired property in Las Colinas all provide us with great opportunities for further organic occupancy growth in 2017. Regarding capital transactions, we had provided guidance throughout 2016 that we had intended to be a net seller of assets. Must of that forecast hinged upon our success in closing on the sale of one of two large deals, either the 606,000 square foot two independence square property in Southwest submarket of Washington DC, that a 100% occupied by NASA or the 800 North Brand property in Glendale, California, which is anchored by Nestlé. Many of you read speculation about the Washington DC sale on the real estate trade publications over the past few months. The property is under contract with limited contingencies and is expected to close during the first half of 2017. The potential sale to two independents will allow us to decrease our ownership concentration in the Southwest Washington DC submarket. If the sale closes, we plan to use the proceeds from the disposition to pay down debt and free up capacity on our line of credit for strategic acquisitions. Given Nestlé's recent corporate headquarters move announcement, we plan on re-tenanting the 800 North Brand building over the course of the remaining term of the Nestlé lease, which runs through 2021. During the fourth quarter of 2016, we did close on two dispositions and two acquisitions. First, we completed the sale of Braker Pointe III in Austin Texas for approximately $50 million. We're particularly pleased with this sale to an owner occupant, which garnered a stabilized valuation and allowed us to exit this Austin Texas market and also allowed us to accretively recycle this capital into a value-added Dallas acquisition at 750 West John Carpenter Freeway. The Las Colinas building is approximately 315,000 square feet constructed in 1999 and 78% leased primarily to two tenants CVS Health and IBM. The acquisition also entail the purchase of a 3.5 acre adjoining developable land parcel for approximately $1 million. A strategic capital deployment presentation with more details regarding this capital recycling project is available on our website in the Investor Relations section. Additional capital transactions during the quarter, included the purchase of the 89% leased 432,000 square foot Galleria 200 property, a sister building to our 300 Gallery asset in the Northwest perimeter submarket of Atlanta. Also, we completed the sale of our four-story 100,000 square foot corporate headquarters building here in Atlanta for $14 million late in the quarter. I will now turn the call over to Bobby to review some financial and balance sheet highlights for the quarter and the year. Bobby?

Thank you. Don. While I discuss some of the financial highlights, I encourage you to again please review the earnings release and supplemental financial information, which were filed last night to more complete details. For the fourth quarter of 2016, we reported FFO and core FFO of $0.44 per diluted share, a $0.03 improvement over the same metrics last year. Core FFO for the year was a $1.67 per share, up from a $1.60 per share in 2015. This increase was delivered despite the sale of 11 assets since October 01, 2015, including Aon Center in the fourth quarter of 2015. The significant decrease in FFO associated with those sales was more than offset by earnings growth from our occupancy gains, from acquisitions of a strategic assets over the same time period and from our opportunistic share repurchases. AFFO was $45.6 million for the quarter and $189.4 million for the year, up from the comparable periods in 2015 and well in excess of the declared 2016 dividends. Same-store cash NOI for 2016 was up 4.8% compared to the previous year, primarily driven by the commencement of new leases and expiration of rental abatements and as Don mentioned earlier, we ended the quarter at 94.2% leased, a 270 basis point improvement over a year ago. We did not have any significantly new or different financing activity during the quarter and our debt to gross asset ratio was approximately 36.9% as of year-end. Our average net debt to core EBITDA ratio was 6.4 times for the fourth quarter of 2016. Two Independence Square sales we pro forma this debt to EBITDA ratio to drop below sixes or upper five times ratio in 2017. We had $178 million outstanding on our $500 million line of credit at year-end and our next debt maturity is a $140 million mortgage that opens for prepayment in August of 2017. We intend to pay off this debt with proceeds from net disposition activity during the year. At this point, I would like to reaffirm our annual 2017 guidance that we released during the Orlando Investor Day. The range is a $1.70 to $1.80 per diluted share for core FFO. That range incorporates assumptions related to same-store NOI growth of 5% to 8% on a cash basis and 5% to 7% on a GAAP basis. It also assumes net disposition activity of $200 million. The target year-end leased percentage is expected to be in the mid to upper 92% range. It is important to note as you prepare your own financial models for Piedmont that our quarterly earnings can vary by a penny or two based upon the timing of our capital markets activities as well as annual one-time expense items. With that, I'll now ask the operator to provide our listeners with instructions on how they can submit their questions. We'll attempt to answer all of your questions or we may determine it more appropriate to issue a public disclosure later. Please try to limit yourself to one follow-on question, so that we can address as many of you as possible, operator?

Thank you. [Operator instructions] Our first question comes the line of Jed Reagan with Green Street. Please proceed with your question.

Hey. Good morning, guys. In terms of the pending Two Independence sale, are there taxable gains there that you need to consider for sustaining at 1031 or a special dividend and then can you talk about maybe a pipeline of acquisitions you're pursuing potentially?

That actually worked out well for us. There is some possibility that we would have to make a distribution at the end of the year if we were unable to manage our tax considerations going forward for the rest of the year, but it's a little too early to tell given that so much is yet to happen, but the gain is very substantial on the asset. As it relates to acquisitions, I think we budgeted and we'll always be careful about budgeting acquisitions because it's so hard to give concrete guidance on that but I think we budgeted 300, help me sorry, 325 of acquisitions for '17 in our strategic cases, but obviously, we usually give guidance off of a combination of base case and strategic and so those are not critical to our success in achieving our numbers for the year.

Okay. Just trying from that is, is that imply that on top of Two Independence, you might sell somewhere in the neighborhood of another $200 million of assets this year, does that sound about right?

Yes, I think if you do the math guiding to a $200 million net disposer, that would mean that there is ballpark in other couple $300 million of disposed, but you we're going to be as opportunistic on the disposition side as we must be. So, we'll have to see. We're going to try to move as much as we can of nonstrategic product, but in terms of budgeting process and making a forecast, that's the better estimate we come up.

And how many non-core market exits could that imply potentially?

Let me count, two to three probably.

Okay. That's helpful and then does the current FFO guidance for the year include the Two Independence sale and I guess do you feel comfortable at the midpoint of guidance inclusive of that sale?

So, if you think about it, you saw that our guidance is a little wider than normal this year. A lot of that had to do with when and if we sell the asset. If we don't sell the asset obviously, we're pushing towards the upper end of the range. If we do move forward and sell the asset, the earlier in the year we sell it, the lower our FFO will be by definition. Just gives the size of the asset. But I think if we sell it in the first half as we said, then I think we would expect to be in the midpoint of the range.

Okay. Great. Thanks. I'll get back in the queue.

Thank you. Our next question comes from the line of Michael Lewis with SunTrust. Please proceed with your question.

Thank you. Good morning. So, you had strong 4Q results. I was looking for your filings. Those big four lease expirations over the next 12 months are upon us now. I think you went through them on the 3Q call, but maybe you could provide any updates now a few months later on Arlington 1201 Eye, 2 Pearson Connection Drive.

Yes, Mike, I think there is -- I don't know if there is concrete -- obviously we would only announce it to the extent we've got leasing going, but activity is fairly strong at multiple of those assets and you combine that with other vacancies in the portfolio, I think probably the easier thing rather than specifically get into those assets given that we've got activity going on at multiple of them is to focus on the overall lease percentage of the portfolio. I think we've said, we expect to go from what is now upper 91 when you include all of our development assets being brought into the portfolio on January 1 to mid to upper 92 and that includes obviously the fact that we have two of those leases totaling about 225,000 feet vacating this year. So by definition our projections include picking up reported occupancy of half the 1% over the course of the year, despite the fact that we're losing those two leases. So, that gives you some estimate of our optimism around what we think happens broadly in the portfolio rather than trying to address those two individuals because we've got things going, but I don't want to indicate what they are given the competitive market issues.

Okay. That helps thanks. My follow-up, you don't have much lease over the next couple of years but a big part of the 2017 expirations are Washington DC and so, as I think about -- you did a good job in the schedule here with some abatements throughout your portfolio that are burning off. What are kind of the -- is anything shifting in DC? We talked about the election I think on the last call, but do you think you might be essentially replacing some of those abatements with new ones because DC is simply a market where you still need to give concessions to compete?

Yes, let me have Bob address the Washington market issue, the real quick answer to the -- clearly when we leaseback up those buildings in DC given that that is probably the highest concession market we're in now, there will be some abatement time, but remember that's only a couple 100,000 feet as compared to what I think is about 800,000 feet of space that's currently in abatement across the portfolio. If you look at the abatement schedule in the supplemental, you'll see that disproportionately most of the large abatements in our portfolio burn off here in the next few months, which is a part of the reason why our same-store GAAP and same-store cash NOI numbers look so strong this year as I think a lot of people have been confused by the issue of the fact that we had a lot of free rent burning off in the first half of '17, plus we had a lot of leases commenced during the course of '16, which wouldn't have given us full year '16 GAAP NOI, but they’ve given us full-year '17 GAAP NOI. So, the combination of those two things is what's contributing the really strong same-store GAAP and same-store cash numbers. So, if you -- even if you translate those the two 100,000 footers that are vacating in DC into free rent, that doesn't anywhere near come to meet the amount of free rent that's burning off here in the first half of this year. So, Bob have you give us all the market update on Washington if you don't mind.

Sure. I think the DC market is generally more optimistic certainly since the election, but I think there's sectors that are expected to do better than others from a positive side, the legal lobbying groups are expected to do well along with the defense and cybersecurity and I think generally the thought is that healthcare GSA and some of the nonprofits may suffer a bit. But given that bigger context, the East End where we have our 1201 and 1225 Eye Street assets has been historically the most active part of the market and we continue to see that with some good and bad to that in that the GSA tenants are starting to get priced out of that market, but there is activity more in the private sector backfilling that space and we're seeing that 1225 a lot of activity over the past 12 months. In 1201, we have a continuing group of proposals that are coming through the market that will I think deliver some results this year. Interestingly the Southwest market, which is typically all federal employee -- federal contractors and users, has been pretty active for us principally through the advanced acquisition program that the GSA uses here in the national capital region and that process hadn’t been used much for the past two years, but we have seen a lot of activity in our 400 Virginia Building as well as 253 East Street through that program, which has been very good for us.

Great. I appreciate the color. Thanks.

Thank you. Our next question comes from the line of John Guinee with Stifel. Please proceed with your question.

Great. Thank you. First, looks like, good morning, looks like your lease number, you're going from 94 to 91 now to 92 by year-end and then down into the 89, 90 in the first quarter if these two Gallagher and Goldman Sachs move out. Is that accurate and then second is the lease, the economic occupied to least tends to run about a 700 basis point GAAP, is that an appropriate run rate about a 700 basis point GAAP between lease and economic occupancy.

John, so first question, John, I think if you were to say yes, if were to do no leasing activity in early 2018, then -- and you took both Gallagher and Archon out of the portfolio, then in theory if you go from mid to upper 92 and you lose the square foot of those two leases, I'm trying to the math here, but that would be close to 3%. So, you would be probably maybe from you maybe if 90 if it's not 89, but maybe it's 90, but it would be a net ballpark if we did no leasing. So yes, I think that mathematically you're correct on that. The second -- the answer to the second question I'm sorry was the…

The gap between leased and economic occupancy appears to be about 700 basis points for the last few years, is that accurate and a good run rate going forward?

Yes, John so that is exactly accurate, what is reflected is that heavy lease activity that we've seen for the last three or four years and we've done 7 million square feet of leasing maybe 40% of our portfolio in the last three years alone. Obviously, some or much of that comes with some amount of free rent and so that lost lease if you want to call it that, it has been persistently high. The point I think we were trying to make earlier -- on the other question, was because we have so much leasing -- so much leases that are in free rent at this very moment that burn off here in the first and second quarter of this year, I think that number comes down pretty dramatically in the second half of 2017. Frankly I hope it stays high if only because that means we've done a lot more new leasing, but obviously, I am afraid, we can't do as much new leasing as we have free rent burning off and so as a result, we think that number comes down fairly materially over the course of 2017.

And then you sold your headquarters building, did you sign a long-term lease there or are you going to move?

I knew you would ask that John, I knew it, no, we actually have about a year left on the leases. It was as was structured on the sale, but we built in some flexibility to move earlier or later. Undoubtedly, over the course of time, we'll probably be moving to another building in our portfolio here in Atlanta.

And any idea when, Johns Creek is closer to Charlotte than Atlanta, isn’t it?

Yes, it might be closer to North Carolina line maybe, but now we -- obviously, there is a lot of us to live up in this area and so it's convenient for many of us to commute this particular building, but we'll have to think about the best interest of all of our employees before you make that decision.

And your shareholders.

And our shareholders.

And then the last issue is you can raise your dividend, when was last time you raised it and when do you expect to raise it again?

We raised it, it was fourth quarter of '15 I believe is correct. We have some room to raise it, but we like to make sure that we're maintaining a conservative dividend policy and so we don't have any near-term decision to raise the dividend any further, but we certainly, we have capacity to do so, if we decide to do that.

Great. Thank you.

Sorry John. I misspoke, that was fourth quarter of '14, not fourth quarter of '15.

Oh! Okay. So, it's been a couple years then. All right. Thank you.

Thank you.

Thank you. Our next question comes from the line of Richard Schiller with Baird. Please proceed with your question.

Hey. Good morning, guys. Thanks again for hosting the Investor Day down in Orlando. A question for you guys, did you guys break out the 5% to 7% on a GAAP basis and 5% to 8% on a cash basis, the NOI growth there and to its components with the one moving occupancy and what you guys expect for the change in rents?

Yes, well breaking it down it gets a little more complicated, I want to try to address the big contributors to it and hopefully that gives you a little more perspective without trying to build your model too much detail. On the cash side, clearly, the biggest contributor by far is the burn off of the free rent that I was just mentioning in the call from John Guinee. We have 800,000 feet of free rent burn off in the first quarter, first two quarters of this year and that's a material contributor to the cash step up and obviously just overall occupancy pick up and otherwise it's been very strong contributor. On the GAAP side, the biggest contributor would be a combination of the fact that some of those leases that are in free rent, are net leases and as a result, your operating expenses that are also because they're grocery rent, those operating expenses coming into the portfolio will contribute to same-store GAAP in addition to same-store cash, as well as the fact that we had a lot of leasing done these days. We're just talking about in '14 and '15 where they commenced in '16, but we didn't get a full year's benefit of the GAAP same-store in '16 and now are getting it in '17 and so the numbers we produce by five to eight cash same-store NOI growth in the five to seven GAAP same-store NOI growth, we still feel very confident about. Obviously, there's always some amount of leasing you need to get done to contribute to those numbers, but as we've been able to do in the past, we've usually outperformed the numbers we've given you early in the year. I'm not suggesting we're going to do that this year. I am just saying that we've always tried to be cautious in our guidance.

Awesome. Great. Thanks guys.

[Operator instructions] Our next question comes from the line of Anthony Paolone with JPMorgan. Please proceed with your question.

Thanks. Good morning.

Good morning, John.

Good morning. On the Glendale assets, you mentioned that there was a potential sale but then you talked about focusing on leasing over the remainder of the Nestlé lease. What exactly is the plan in understanding with Nestlé now with that asset?

Good question. So, there is about 350,000 feet that Nestlé occupies in the building today. If you notice, we did a 50,000-square foot wraparound that we call wraparound lease internally where Children's Hospital took 50,000 feet of Nestlé's lease post the expiration of Nestlé's lease in 2021 and extended out for five years on that lease and then did a 10-year renewal or five-year extension of their lease that also expired in 2021. So now we have 100,000 feet in the building going up to 2026. We hope we'll be able to do a fair amount of those kinds of leases going forward for a variety of reasons, not the first of which is Nestlé has a substantial amount of term left in their lease. They go out so early 2021. Number two, they're at a substantially below-market rent. Their last lease renewal was done really right at the bottom of the Glendale market and so there's about a $5 difference between what they're paying today and what market rents are in the marketplace as evidenced by the Children's lease. And then third, I think they’ve got a lot of motivation as do we in trying to get as much recovery from their lease commitment to us in Glendale as possible and so we think and we hope we've had plenty of conversations with them about it already that we will be working together to try to find tenants to backfill their space and go longer term with us. So, given that they're below market and they’ve got a fair amount of term left, it's going to be a very interesting opportunity for us that we hope create some fair amount of value going forward. The only thing I'd add that we haven't disclosed I think is valuable to just mention on the call is they do have a contraction option for two floors that are about 50,000 feet that they could exercise here in the coming months, they would require them or would allow them to get out of two floors or 50,000 feet in middle of '18 or so. There's a fairly substantial penalty on that, so if they take it I don't know if that is necessarily a bad thing for us. In fact, they're excited if they did because I think it would allow us to stagger out some of that leasing activity, but overall, we're very excited about it and think it's a really interesting opportunity to create a lot of value for us.

Okay. And then I guess just make I understand during this process it sounds like this will not be much of a sale candidate in the near-term then?

Well you never say never, just because there could be somebody who sees the same opportunity that we have and is prepared to pay us for that opportunity and we always are keeping our ears open on those kinds of opportunistic sales, but it's not a core part of our plan over the next year or two as we try to realize the re-tenanting of the building?

Okay. And then my other question is can you talk a bit about just what you're seeing on the acquisition side in terms of deal flow and pricing and how the pricing feels okay for you all and whether you think you'll find some opportunities in that?

Hey Tony, it's Ray Owens. As we've proven I think over the last couple of years, we've really got laser focused on trying to find opportunities that bolt on to where we have an asset. So, we're continuing to stay diligent in that regard. What we've seen in the fourth quarter and first quarter this year, is kind of a slowdown. People have been, both on a buying and selling side have been somewhat cautious. So, it hasn’t been able to pull the trigger because they're not sure where one, interest rates are going to go or what the election was going to do. I think investors are having some of that same uncertainty. So historically you would always see a lot more activity in the first part of the year, but in our conversations with principals and with brokers there haven’t been as many deals coming to the market. Now what we're starting to hear is that people are getting a little more comparable with making those decisions. So, we anticipate over the next quarter or so more opportunity but the real important thing is to remember we're going to stay laser focused on the asset in the submarket similar to what we've done previously, making sure that we're bolting on to assets that would add to the existing portfolio.

Okay. Thank you.

Thank you. Our last question comes from the line of Jed Reagan with Green Street. Please proceed with your question.

Hey guys. Where would you say you're in place where rents are versus market at this point? We had about a 1% mark-to-market cash rent spread in '16 is at a decent betting on for '17?

It's always hard to forecast Jed what the number will be over the coming year without knowing what leases we're going to be executing on. I think we have said recently and we still believe that the portfolio on average is around 5% to 10% under rented today. And obviously in some markets it's more than that and other markets it's less and so it really comes down to which particularly leases we get done, but I think when you look at our -- when we do our mark-to-market across our portfolio, market rents in place existing rent, it's about a 5% to 10% under rent today. I think they will see some quarters that are much higher than that and some quarters that are quite a bit lower than that depending on the lumpiness of the leasing.

Okay. That's helpful and then you've got the $140 million of secured debt coming due later this year and a term loan maturing early next year, can you just talk about how you're thinking about those two notes?

Yeah I think that the $140 million probably is clearly paid off by NASA assuming the deal closes and the timing of that works out well and then of course we also have $180 million I think as of year-end about $180 million on the line and so if we execute the sale as we anticipate we would probably pay off both of those, clear out a fair amount of debt off the balance sheet and then we're in great shape to either refinance -- either in the bond market or in the bank market with that term loan coming up next year:

Okay. That's helpful and then just last one, just curious what -- how things are looking in Houston? Any signs of life for leasing up enclaves and as you think about that, is there at some point do you consider just selling that project and letting someone else fight the battle or do you keep soldiering on?

I would say the signs of life are closer to Mars than Earth in Houston right now, but obviously just like we talked about -- there was a Nestle deal if the right opportunity came along, we certainly would consider it and we are constantly paying the market when we're trying to evaluate whether we should sell something that we're constantly watching what else gets done and talking to market disciplines and see if anybody feels like the assets worth more than we do and if it was, then we would probably do something with it.

So, higher oil prices having necessarily resulted in a pick-up in leasing velocity in that market?

I think the last quarter for certain has been fairly very stagnant. I think there is probably a little bit better pick up as you get closer into town, but not it's strong anywhere right now.

Okay. Makes sense. Thank you.

Thank you. We've reached the end of our question-and-answer session for today. I would like to turn the call back to Mr. Miller for closing remarks.

Thank you, operator. I think the only thing I wanted to point out to everyone before we get off is that we do have the webcast of our Orlando Investor Day out there. If you haven't listened to it, we really strongly encourage you to do so, the reason being is that so many, we had so much opportunity to talk about the culture of the organization, the strategy of the organization and hopefully a succinct format that allows you to really get a much better flavor of the organization than it does through either of these quarterly earnings calls or the speed dating that we do at NAREIT. So, we strongly encourage you to take a look at that, listen to it and hopefully you get a much better flavor for how we go about our business each day. So again thank you to those of you who attended and we look forward to seeing you all at our next call and various conferences. Thank you.

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.