Apollo Commercial Real Estate Finance Inc (ARI) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen. I'd like to remind everyone that today's call and webcast are being recorded. Please note that they're the property of Apollo Commercial Real Estate Finance and any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our earnings press release.

I'd like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections.

In addition, we will be discussing certain non-GAAP measures on this call, which management believes are relevant to assessing the company's financial performance and are reconciled to GAAP figures in our earnings press release, which is available on the Investor Relations section of our website. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.apolloreit.com, or call us at (212) 515-3200.

At this time, I'd like to turn the call over to the company's Chief Executive Officer, Mr. Stuart Rothstein. Sir, you may begin.

Good morning, and thank you for joining us on the Apollo Commercial Real Estate Finance First Quarter 2018 Earnings Call. Joining me in New York this morning are Scott Weiner and Jai Agarwal.

Building on the momentum from our record year in 2017, ARI committed to $922 million of new transactions during the first quarter of 2018. Notably, our portfolio surpassed the $4 billion mark, ending the quarter with an amortized cost of approximately $4.1 billion or weighted average all-in unlevered yield of approximately of 9.2% and weighted average remaining term of just under 3 years. Importantly, our pipeline remains active as we continued to identify attractive risk-adjusted investments across a broad spectrum of property types and geographies. Our business continues to benefit from generally stable underlying real estate fundamentals, continued strong transaction volume in the commercial real estate market and ongoing fundraising and investment by opportunistic and value-add real estate funds.

The 7 transactions closed during the quarter were all floating rate and all but one were first mortgages. The loans had a weighted average unlevered yield of 8.4% and a weighted average LTV of 54%. Of the $922 million ARI committed, the company initially funded $489 million as several of the transactions are construction loans with future funding obligations.

ARI remains selective with respect to construction exposure, focusing on transactions with well-capitalized, experienced sponsors in primary markets. Over the last 5 months, 2 of ARI's larger New York City construction mezzanine loans, totaling approximately $370 million were repaid, significantly decreasing ARI's current construction exposure. ARI earned a weighted average IRR of 14.7% on the construction loans that repaid.

Notably this quarter, ARI closed the company's first transactions in both San Francisco and Seattle. In San Francisco, ARI provided $115 million first mortgage loan for the construction of high-end condominiums in the south of market submarket, which continues to be one of the tightest housing markets in the country. In the Greater Seattle area, ARI provided $265 million of first mortgage and mezzanine financing for an office campus located in a strong submarket not far from downtown.

ARI also remained active in London this quarter, completing 2 additional transactions totaling GBP 235 million. At the end of the first quarter, approximately 16% of ARI's portfolio was secured by loans in the United Kingdom, comprising 6 different loan transactions.

Shifting now to the other side of the balance sheet. ARI completed an accretive 15.5 million share common stock offering, including the full exercise of the green shoe at 109x book value, raising net proceeds of approximately $276 million. In addition, following the end of the quarter, ARI upsized our credit facility with Deutsche Bank to $800 million, which includes incremental borrowing capacity in both pounds and euros, further supporting our increased investment activity in the United Kingdom and, potentially, at some point more broadly in Europe.

Before I turn the call over to Jai, I would like to take a few minutes to comment on the current interest rate environment and what, if any, impact it is having on market conditions and, specifically, on ARI's business model. As we have consistently highlighted over the last few years, 80% to 90% of ARI's portfolio is comprised of floating rate loans, which has resulted in positive impact on ARI's net interest income. In terms of new originations, ARI's pipeline primarily consists of floating rate opportunities, so we expect this trend will continue. Consistent with my prior comments on last quarter's earnings call, we have, however, seen some spread compression in the market as borrowers are focused on their overall nominal cost of borrowing, which has increased with rising short-term rates.

With respect to the long end of the curve, while the 10-year U.S. Treasury's action around the 3% level has generated significant headlines, the impact on our business and the broader real estate business to date has been muted.

As a reminder, during 2013 and 2014, the 10-year crossed 3%, and the impact on ARI's business and the industry was negligible. Ultimately, we believe what will or will not impact our business and the industry overall is underlying economic data driving interest rate movements. If the Fed and the markets are reacting to continued strength in the economy that we believe economic growth should result in continued positive underlying real estate fundamentals and continued real estate transaction volume, both of which provide opportunities for ARI. Certainly, as we sit here today, there is still a healthy level of acquisition, refinancing and recapitalization activity in the commercial real estate market. As always, the market remains competitive, but given what has been accomplished in ARI's 9-plus years as a public company and the strength of Apollo's real estate credit platform, we remain confident in our ability to find investments that meet ARI's target criteria.

And with that, I will turn the call over to Jai to review our financial results.

Thank you, Stuart, and good morning, everyone. For the first quarter of 2018, our operating earnings were $47.8 million, or $0.43 a share, as compared to $38.6 million, or $0.41 a share, in 2017. GAAP net income for the same period in 2018 was $42.6 million, or $0.38 a share. This compares to $37.8 million, or $0.41 a share, in 2017.

Operating earnings this quarter were impacted by the late quarter deployment of capital and proceeds from the common equity offering in March. As you know, our dividend policy expand across several quarters and, as such, we continue to remain confident in our ability to provide a well-covered dividend to investors in 2018. Our portfolio remains well-positioned for rising short-term rates, as almost 90% of our loans are floating rate and every 50 basis point increase in LIBOR would result in an additional $0.10 of net interest income per share.

With respect to leverage, we ended the quarter with a modest 0.8x debt to common equity ratio. Last week, we extended and upsized a credit facility with Deutsche Bank to $800 million. And as of quarter-end, we had over $600 million of liquidity on our secured facilities.

Our book value per common share remains constant this quarter at $16.31 compared to $16.30 at the end of Q4 and $16.05 at Q1 of '17.

While our capital base continues to grow, our G&A expense ratio has essentially remained flat. Annualized Q1 G&A as a percentage of equity was only 30 basis points, which continues to be one of the lowest amongst our peer group.

Finally, I wanted to highlight our dividend. Based on Wednesday's closing price and our recent dividend run rate of $0.46 a quarter, our stock offers an attractive 10.2% pretax yield. Our board will meet again in mid-June to discuss the Q2 dividend, and we'll make an announcement shortly thereafter.

And with that, we'd like to open the line for questions. Operator, please go ahead.

(Operator Instructions) Our first question comes from Steve Delaney from JMP securities.

Stuart, we're all hearing about competition in bridge loans and a lot of new debt funds that have -- are still being raised. It seems like every week in CMA, there's another new private bridge loan fund. So my question was going to be where else are you looking in the market for opportunities to allocate capital. And it looks to me from the -- from reading through your deck that the answer to that question might be construction loans and a fresh look at the U.K. or Europe. Am I on target there? Or is there anything else that you and Scott are looking at these days?

No, I'll actually let Scott answer.

It's no secret, there is a lot of capital in the market. Yes, the existing entrant to the REIT is debt funds and, obviously, as you read, certain people in the equity space looking at the market. I would say that we continue to find opportunities. Yes, U.K. has been a good source for us. We have an active equity and debt business over there. So I think that we're seeing a lot of good opportunities. To date, it's been primarily London, but we are looking on the continent, and we have financing facilities that would allow us to go there, as we mentioned. In the States, construction has always been something that we've looked at. I would say, we've really moved probably more toward senior and whole loans and mez on construction, but we will do both in major markets as well as the transitional loans that we've talked about. I think what we -- where we have our competitive advantage is just the certainty of execution and relationships that we have. And just given our size, we're able to find enough deals that work for us. As we've talked about before, we're not trying to be a huge bank that's got to put out $20 billion or $30 billion a year. So I think we're able to navigate the market. But yes, there is a lot more competition out there.

Good color. And that leads me into the 2 large payoffs. It sounds like there's -- if you've got large mez loans that are being taken off your books that tells me there's a lot of -- still a lot of liquidity in the market for developers. Would you be able to specifically identify those 2 loans that did pay off? I'm assuming, was one of them possibly the 111 West 57th?

111 West 57th is not paid off, Steve. If you recall at the end of last year, our largest mezzanine loan, which was $235 million, if I'm correct, for a project on the west side of Manhattan known as 1 West End paid off. And again, when you're doing these condo transactions, you're typically getting paid off post construction through sell downs?

Yes.

So that one was paid off and then another one of our sizable New York condo projects, which is known as Gramercy Square for those that have picked it up in rags or whatnot, has paid off recently in the second quarter.

Okay, great. And then your new -- in the first quarter, your $80 million condo construction loan in New York. Could you tell us what part of the New York that's located in?

Scott, do you want to...

That would be, I would say, Upper Manhattan. As we look at our condo exposure, we're very sensitive within New York to different markets, whether it be Upper East, Upper West, Tribeca, Chelsea. We also look at it from not just price per foot, but size of units and price points.

The other comment I'd make on the condos in New York, Steve, and I know we are -- people love to talk about the Steinway project. If you put the Steinway project aside, most of what we do in New York is we are lending somewhere between, call it, in and around $1,000 a foot of last dollar exposure or something that is expected to get sold maybe from the developer's expectation of somewhere between $2,000 to $2,500 a foot, and from our expectations somewhere from, call it, $1,800 to $2,000 a foot. But other than the Steinway project, which I know has gotten its share of media coverage, we have tended to shy away in New York from these super high-end stuff and most of what we do is our exposures of $1,000 a foot and someone's looking to sell for around $2,000 a foot, recognizing that's still a high price point compared to what goes on in the rest of the country. But in New York, that tends to be in the sweet spot of the market given where the transactions have taken place.

So somewhere near 50% of value, but maybe a little less than that on cost based on what you're describing.

Yes. I mean, at the end of the day, we tend to think around, call it, somewhere in the neighborhood of 50% to 55%, somewhere -- some blend of cost and then expected net sell-out value. And we use net sell-out value as an ultimate value.

Our next question comes from Stephen Laws from Raymond James.

To follow up a little bit on Steve Delaney's questions, I wanted to look at the origination mix. The unlevered yield was down sequentially. Obviously, I think that was due to the much higher mix of first mortgages originated in Q1 versus 4Q. But can you maybe expand a little and maybe talk about levered return you expect on originations. You mentioned competition and borrowers looking more at absolute cost. But can you talk about what trends you've seen over the last quarter or 2 from a levered return standpoint on new originations?

Yes, look, at a high level, I think this is not unique to us. To the extent there's been, call it, spread compression on what we're originating, we like, I think most in our space have been the beneficiaries of more attractive ways to finance our books. So if anything, you haven't seen much movement in levered ROEs at all. And if anything, if you think about max leverage available, which, to be fair, we don't always use max leverage available to us when financing something, one could actually argue that ROEs have gotten more attractive over the last few quarters just given those who finance themselves with the CLO market. I think the action in the CLO market has benefited those who borrow on repurchase facilities or other bank facilities because it's forcing the banks to be more competitive. So look, we've always generally looked at our book as trying to, on a capital basis, achieve at a high level, call it, 11-plus percent ROEs. And I would say, given what we've been able to originate, we still feel very comfortable that we can create those sorts of levered ROEs on our capital as we're putting it into new transaction.

Right. And then obviously, I mean, one of the reasons that describes that time is not just competition, it's because the base LIBOR rate is now at 2%, right? So a lot of people are absolute yield focused. So clearly, if we're financing a first mortgage position, the LIBOR rate also impacts our cost of funds on what we finance. But for a big chunk of -- for what's not financed, obviously, we get the full benefit of that kind of LIBOR.

Yes. Appreciate the comments. This leads to my next question with regards to leverage. And I realize with the capital raise here recently, this quarter has a few moving parts to it. But looking over the last year, say, from first quarter of last year, the loan mix of senior loans versus mez has increased from 62% to roughly 75%, but we really didn't see leverage change that much over the last year. Can you maybe talk about leverage targets? Are you looking to use more leverage than maybe historically, now that we see a much higher mix of senior loans? And that may lead to Jai's comments in the prepared remarks around the dividend. I mean, with the higher mix of senior loans, clearly, you'd need higher leverage to support that $0.46 dividend. So maybe some comments around leverage and portfolio mix that we've seen shift over the last year.

Yes, look, obviously, the premise behind your question is, all things being equal, more senior loans versus mez should lead to a natural rise in leverage overall, which it has not to date. I think we've always tried to be opportunistic on the equity side. We have certainly always viewed the windows where one could build our capital base on the equity side as more episodic than what's available on the credit side. So we've probably been out -- ahead of ourselves vis-à-vis the equity credit mix. I think as we think about leverage long term, we certainly, as a first step, increased our capacity on our repo facilities, which, as you appropriately picked up, indicates more first mortgages coming in our pipeline. I think as it pertains to a longer leverage strategy, we've always said publicly, we'd be comfortable running the company at, call it, 1.5x leverage, maybe slightly higher than that. We've also been pretty resolute in that we will not put assets-specific leverage on mez loans. We will, obviously, put asset-specific leverage on our senior mortgage positions. We're also at a point right now where we do want to keep our flexibility. We have a convertible note outstanding that matures in the first quarter of next year. I think we continue to debate internally the merits of asset-specific financing with the bank community versus longer-dated leverage that may be available in the high-yield notes market. So I'd say, the form of leverage is still to be defined. But I, generally speaking, would agree with your sort of assumption that as we continue to grow and as more of our originations come in the form of first mortgages, you will see a natural rise in the leverage of the company overall.

Our next question comes from Jade Rahmani from KBW.

below that are cash flowing -- hello?

You're cut off at the beginning, Jade, so I didn't hear the beginning of the question.

Sorry about that. On the assets in your portfolio that are cash-flowing and with the tracking of borrower business plans, are you seeing a deceleration in rent growth and NOI growth or business plans lagging expectations? Some of the REIT results seem to be continuing to show a decelerating trend. So wondering if you're seeing that.

I mean, it's tough to make a broad conclusion across a bunch of different property types at a high level. I would say, hospitality continues to perform well. And again, these are broad generalizations. But generally speaking, I think hospitality continues to perform well. We don't have a lot of exposure in the industrial sector. But again, I'm probably giving you a little color from ARI's book and also a little color from what we're seeing in our private equity business as well. Obviously, industrial remains strong. On the office side, I would say, our exposures are performing fine. We're not in a lot of office transactions that I would describe as lease-up plays right now. But generally speaking, across the portfolio, assets are performing fine. We've commented previously on some of our condo exposures. We've commented previously on our one significant retail exposure in Ohio, where I would say, there continues to be leasing activity. I would say, we're optimistic about the pipeline of prospective tenants right now for what's known as the Liberty Center project, and there seems to be good dialogue. I think we'll know a lot more in the coming months. But generally speaking, broadly, I would say, the activity is as expected. I don't think we've seen any significant changes. Again, we have a small subset of stuff that I think would be comparable to what you might be hearing from the REITs in terms of what they own and what they're managing.

And so with that in mind, with additional Fed rate hikes anticipated, how many rate hikes would you say the market could absorb before we start to see noticeable pressure on cap rates and potentially credit?

Look, I think, ultimately, the question is, are they raising rates because the economy continues to hum along? Or are they raising rates just because they kept them short for too long and they're now playing catch up? I think if it's the latter situation, latter being l-a-t-t, situation, and they're just playing catch up with not underlying economic activity, I think that's particularly concerning, and you'd see an impact on the market sooner rather than later. We don't expect that. I think to the extent you're seeing rates rise because there is continued economic activity, I think we -- again not that we spend a ton of time forecasting this, I think we expect several more raises this year, whether that's 2, 3, don't know exactly what that would be. But I think if it's on the back of continued economic activity, we would feel comfortable from a credit perspective. And I think you might see some marginal weakening in cap rates just as people start seeing attractive alternative uses of capital elsewhere. But I don't think you would see 75 basis points in short-term rates having any sort of meaningful impact on cap rate, more on the margin.

I would add -- we have -- and again, it depends on asset class and location. But I would say, we've seen in certain instances cap rates going up. I mean, I think, as you look at -- if people want to comp to the public market, clearly, the REITs have traded down. So I think we're certainly seeing larger portfolios, which used to trade at a premium, certainly not trading at a premium anymore, maybe at discount. And in certain stuff, we're seeing definitely cap rates are high.

By 25 basis points or higher than that?

I mean, it depends what you're talking about. I mean, look, we're in the market buying assets for our private equity funds as well, I would say, depending on the asset. And again, to draw a conclusion across different property types in different geographies is a little bit risky. I think, look, where have you seen things back up? I think you've seen things back up in multifamily, certainly in the Southeast, Southwestern part of the country, again, not relevant to our business. But if we're talking about cap rates, that's where you've seen the move. You probably haven't seen any move on the industrial. If anything, industrial has gone the other direction and things are probably as tight as they've ever been. I think office is, again, episodic depending on what market you're in. And you've actually seen a little bit of softening in what were the hottest markets, i.e. New York, San Francisco, Seattle, but nothing of note. I'd say, more within the 25 to 50 basis points range. And then retail, again, you've certainly seen retail widen. I think, the question on retail is more not a lot of overall transaction activity right now.

Okay. Was wondering if you could just touch on the Bethesda, Maryland loan. It looks like, I guess, the maturity was extended, and there is a modest pay down on the loan. Can you just comment on that?

Yes, I mean, the loan at this point -- the maturity date is somewhat irrelevant because all we're doing is selling condos and paying ourselves off, so to speak. So when we originally took the reserve, it's a 50-unit project. When we originally took the reserve, they were roughly 24 or 25 condos sold at this point. We're now at a point where there are 34 of the 50 have been sold. And as we continue to sell additional units, we're basically just paying ourselves down. I think there is a scenario where units sell for a price, where we are able to pay ourselves down and potentially recover the reserve we took, there's also scenario where we just sell the units and pay ourselves down and that's the end of the story. But we will know a lot more about that project over the spring and summer selling season, obviously, which is effectively sort of kicking off over the last few weeks.

Our next question comes from Rick Shane from JPMorgan.

When we look back a year ago, we would've seen interest rate sensitivity charts that are similar to the ones we're seeing now. And the reality is that the rates have moved, but we haven't seen full manifestation in terms of earnings that those charts would suggest. Obviously, some of that's a function of spreads tightening, but I'm also curious if some of that's been hampered by poor rates on some of the loans?

I mean, I think it's a mix of things, Rick. I think the reality is, in most documents, right, things don't adjust immediately in a loan as quickly as you're seeing it on a Bloomberg screen. So I do think there is a bit of a lag effect in some respects. I do think your comment on spread compression or some spread tightening is relevant as well. So I do think it takes a little bit of this to run through the system. Look, I think, we continue to position ourselves for growth. I think the other thing that impacted us somewhat is also just the pace of payoff and the lag in getting capital redeployed. I think we're happy with the overall deployment levels. But as you saw in the first quarter here, a good headline number, but timing matters. And again, there's just a little bit of inefficiency in a business that is based on, call it, private transactions because you can't force timing as much as you would like. So I think it's a little bit of everything. But I do think the biggest component has probably been the balance between what you're seeing in LIBOR rates rising and the combination of some spreads compression and just some lag that takes place in a loan document before something actually does adjust.

Got it. Turning to construction lending. Look, it's -- there's a little bit of a feeling that -- if you listen to the conference call, it almost feels like 100% of the companies we follow are going to gain market share in construction lending. Obviously, that's not possible, that doesn't end well. Is there just such a surge in construction? How can we see the growth across the industry in construction lending and not have it ultimately manifest into a problem?

Look, ultimately, it comes down to individual credit decision. I think before you talk about how it doesn't end poorly, I do think there has been a fundamental shift in real estate borrowing these days, and I do think through this cycle, we have proven that whether it be for pure construction or things that have a high degree of business plan execution risk, borrowers seem more comfortable in many instances borrowing from entities like ARI or its peers because they are borrowing on a principal-to-principal basis, and they know who is on the other end of the phone when things go better than expected in a business plan and they want alternate loan terms or when things go worse than expected in a business plan and they want to modify loan terms. So I do think there is a natural trend for construction and, call it, high touch redevelopment transactions going in favor of ARI and its peers. So I do think we have a lot to look at. I think, obviously, 9 years into a recovery cycle, there's just more construction, in general, going on. I think like any cycle and any investment business, ultimately, tough to generalize about the sector as a whole, but it will depend on credit-by-credit decisions in each entity.

Stuart, that's a great point. It's a market size issue. It's an individual market share issue. But the point about the business shift and basically shifting the addressable market for the mortgage REITs is an important one as well.

Our next question comes from Ben Zucker from BTIG.

Building off of Steve's first question on your international exposure, it now stands at 27% of your book versus a year ago at 13%. And I think it makes a lot of sense to pivot overseas because the European property market still lags the U.S. recovery and the global Apollo platform, which seemingly give you guys a competitive advantage over there. But are you comfortable taking this exposure a bit higher so long as your interest rate exposure is hedged? Or is there a level that you're going to start looking to cap this eventually?

Yes. This is Scott. I mean, again, we really look at everything on a deal-by-deal basis. With respect to the hedging, we absolutely hedge. I think you meant currency. We're not hedging the interest rate. We are hedging the currency. Clearly, we're doing a senior loan. We're also borrowing in that currency. So then we're hedging our net equity, if you will. Yes, we are focused on the major markets in Europe. Again, as you said, we do think interest rates would be low there for a while. We still think there is, depending on the product, room to run. They're clearly behind the U.S. in terms of the recovery. We have boots on the ground. We have a very, very large European real estate equity business, also been active in the debt business for a number of years for ARI's and also for other vehicles. And I think, we've been able to -- in the U.K., specifically, we have office, we have condo inventory, we have some, call it, predevelopment loan, where they're going to redevelop stuff in Central London into a mix use project. We have senior living portfolio. So we've been able to build up a diverse portfolio. We've got and closed some deals in the continent. One reason or the other, we have not executed, but we do continue to look. So I don't think there is a hard and fast rule. And just no different -- I think what you'll start seeing also is repayments in the portfolio, which we've already had, right? We had a one large condominium predevelopment loan already get repaid. But I think as the U.K. portfolio was a little younger than the U.S. portfolio, you really haven't see the repayments coming. So I think, over time, you'll have those repayments come and so as loan come off, new loans will go on. But there's -- we have no hard and fast rule. And we're looking at other geographies, well -- Apollo has a global business. That's the name people continue to look in other geographies, but I think, in the near term, it would probably be more Europe than other areas.

That's a great color. Appreciate that. Turning to the repayment front, I saw the fully extended repayment schedule on the slide deck, but I was wondering if you would provide any insights into your actual expectations for repayments for 2018. And I ask this totally understanding that with your large loans, this is a really tough number to pin down. But with the moving rates, do you think some of your specific borrowers maybe won't be looking to exercise those extension options you include in the deck because I know each loan is project-specific, which is why I kind of wanted to tee this off to see what you guys are seeing in your own book.

I mean, look, I think our experience has been -- there are things we are 100% positive that will pay off and they end up not paying off, and there are things that we think will be out for a while and they end up paying off. Look, I think, we put the information out there. I think our expectations at a high level are we've got a $4 billion book with a roughly 3-year average duration. So if you think about it on an annual basis, you're in and around $1 billion to $1-plus billion a year. I don't know exactly where we'll come out this year or next year, but we kind of go into each year thinking that we sort of need to do somewhere between $750 million to $1 billion just to sort of cover what's going to repay.

Right. And that's also one of the benefits of structuring loans for the future funding since we have that capital committed going forward. But also whether repayments -- the absolute dollars is also important, but so is the competition, right? Because a mezzanine loan of $100 million, right, pays off. So to replace that from an entry perspective, that's either $300 million of a mortgage or another $100 million of a mez. So we're really probably focused more on the net equity invested, if you will, than the absolute dollar return.

And I think that's a great point. You have to focus on equity being returned, not just the loan balance repaying.

(Operator Instructions) Our next question comes from Dan Occhionero from Barclays.

Can you just touch on the components of the book value change this quarter? I guess, I would have thought the equity raise would have been a little bit more accretive and was just curious if there was an offset for that.

Yes, sure. This is Jai. What you're missing there is RSUs. So we have 1.6 million RSUs outstanding as of March 31, which -- when they vest, which will be 1/3 -- which will be about 750,000 in January of '19, will reduce book value as the share count will drop. So just looking backwards, what you're missing there is, we had about 600,000 RSUs that vested in the first quarter of this year that reduced the share count -- increased the share count, therefore, reduced the book value.

I'm showing no further questions at this time. I'd like to hand the conference back over to Mr. Rothstein.

Thank you, operator, and thanks for participating today.

Ladies and gentlemen, thank you for participating in today's event. This concludes the program. You may all disconnect, and have a wonderful day.