Douglas Emmett Inc (DEI) 2010 Q3 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to Douglas Emmett's 2010 third quarter earnings conference call. Today's call is being recorded. At this time al participants are any listen only mode. A question and answer session will follow management's prepared remarks. At that time, instructions will be provided to queue up for questions. At this time, I would like to turn the conference over to Mary Jensen, Vice President of Investor Relations for Douglas Emmett. Please proceed.

Thank you.

With us today are Mr. Jordan Kaplan, President and Chief Executive Officer, and Mr. Bill Kamer, Chief Financial Officer. Please note that this call is being webcast live on our website and will be available for replay for the next 90 days and by phone for the next seven days. Our press release and supplemental package have been filed upon Form 8-K with the SEC and o those are also available at our website at www.douglasemmett.com.

During the course of this call, management will be making forward-looking statements. We caution investors that any forward-looking statements that are based on the beliefs of, assumptions made by, and information currently available to us. The actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they're not guarantees of future performance and some will inevitably prove should be incorrect. As a result, our actual future results can be expected to differ from the expectations, and those differences may be material. For a more detailed description of these risks, please refer to the company's press release an the current SEC filings which can be accessed in the Investor Relations section of the Douglas Emmett website.

Please note that the market data sources that are referenced in management's prepared remarks are, CB Richard Ellis for the Honolulu and Los Angeles office markets, REIT for the Los Angeles office market, MPF Research for the Los Angeles multi-family market, and Property & Portfolio Research for the Honolulu multi-family market. Once we reach the question-and-answer portion, we request that those of you who will be participating limit yourself to one question and one follow-up per person. This is in considerations of the others who are waiting on the line.

I will now turn the call over Mr. Jordan Kaplan, President and CEO for Douglas Emmett. Jordan?

Thank you, Mary, and good morning, everyone. Welcome to our third quarter earnings call. Happily, I have a lot recent activity to share with you today.

On the acquisition front, Douglas Emmett has been successful at buying in our markets throughout the economic downturn. To date, we have added approximately 2.8 million square feet to our office portfolio since the beginning of the recession, almost a 25% increase. And we continue to pursue acquisition opportunities in our core submarkets. As previously announced, we acquired a 100% ownership interest in Hawaii's largest office project, Bishop Square, on June 29. The third quarter was the first full quarter that Bishop Square contributed to our operating results. Transitioning this asset into the rest of our portfolio is going smoothly, and we are very pleased with its performance.

On October 22, our fund acquired Wilshire Bundy Plaza, an office building totaling more 310,000 square feet for a contract price of $111 million, or approximately $358 per square foot. This project is located on Wilshire Boulevard in the Brentwood submarket. Due to the fund structure, the Company has approximately a 22% interest in this well-located asset, received some fees, and has the opportunity to participate in the upside over an 8% IRR to the fund investors. This acquisition increases our market share, within the Brentwood submarket to over 50% from 41%. Our corporate headquarters was located in Wilshire Bundy Plaza for many years, so we have a very good understanding of the property. Our strategy is to acquire well-located, Class A properties at a reasonable price due to vacancy or rehab opportunity. Wilshire Bundy is a perfect fit.

We also made progress toward achieving our financing goals. On September 30, we closed a $400 million floating rate seven-year term loan that we swapped out at an effective fixed rate of 4.45% for approximately five years. We used this loan to repay the Bishop Square acquisition financing, and the balance of the loan proceeds provides us with a significant amount of cash for future corporate opportunities. We had multi-family terms loans totaling approximately $388 million that were scheduled to mature on June 1, 2012. On Monday, we finalized the refinancing of those loans, with new 10 year loans maturing November 2, 2020. The new loans bear interest at a floating rate equal to LIBOR plus 165 basis points. We have entered into swap contracts that effectively fix the all-in rate to approximately 3.65% for seven years, expiring on November 1, 2017.

As we continue to take advantage of the favorable interest rate environment, we hope to be making a series of refinancing announcements in the coming months.

With that, I will now turn the call over to Bill Kamer, who will provide additional details on our third quarter activities. Bill?

Thanks, Jordan. In the third quarter, the company reported AFFO of $55.9 million or $0.36 per diluted share. AFFO for the quarter was $40.6 million or $0.26 per diluted share. This compares favorably to our results from a year ago of $47.8 million or $0.31 per diluted share, and $35.7 million or $0.23 per diluted share, respectively. Same property net operating income in the third quarter of 2010 decreased 2.3% on a GAAP basis and 1% on a cash basis, when compared to the third quarter of 2009. Same property total revenues in the third quarter of 2010 decreased 0.7% on a GAAP basis, and increased 0.2% on a cash basis, when compared to the third quarter of 2009.

The trend in our leasing fundamentals that we've seen in recent quarters is continuing. The third quarter was our sixth consecutive quarter of robust office leasing activity. We signed 190 new and renewal leases totaling roughly 681,000 square feet of office space, compared to 167 new and renewal leases totaling 733,000 square feet last quarter. Our leasing volume included 70 new leases -- new tenant leases signed during the quarter, totaling approximately 204,000 square feet. 190 leases signed in the third quarter averages to three leases signed every working day during the quarter.

While leasing velocity has continued at a very healthy pace over the past six quarters, it has been slightly out matched by space reductions, predominately from our larger tenants, causing another occupancy decline in the third quarter. The lease percentage of our entire portfolio declined by 70 basis points in the third quarter to 88.9%. The occupancy percentage declined by 60 basis points, to 87.4%. For the REIT-owned office portfolio, the lease declined by 1.2% to 89.9% and occupancy declined by 1% to 88.7%. While we had certainly hoped for stronger results, our leasing performance is consistent with our initial 2010 forecast. Therefore we are maintaining our 2010 occupancy guidance indicating an approximate 200 basis point loss for the entire year.

Tenant improvements, leasing commissions and other capitalized leasing costs on a blended basis declined in the third quarter to $19.68 per square foot, compared to $20.38 per square foot for the second quarter of 2010. The percent leased in our multi-family portfolio remains flat at 99.3%, compared to the percent lease at June 30, 2010. During the third quarter, our mark-to-market and rent role metrics were as follows. On a mark-to-market basis, our in-place cash rents were 10.7% higher than our asking starting rents. On a straight line basis, the average rent from expiring leases was 3.4% higher than the average rent from new and renewal leases signed for the same space. On a cash basis, the ending cash rent from expiring leases was 12% higher than the beginning cash rent from new and renewal leases signed for the same space.

Now, turning to our financing activities. In conjunction with the acquisition of Wilshire Bundy Plaza on October 22, the fund assumed an amortizing term loan with a current principal balance of approximately $56.4 million and a 5.67% interest rate. This loan matures on April 1, 2016.

We have been working on three different types of mortgage debt to ladder both our debt maturities and the duration of fixed rates. The first is our traditional five-to-seven-year LIBOR floating rate debt in the bank's indicated market that we generally swap out for around five years. The second is seven-to-ten-year fixed rate live-company debt, which is particularly compelling due to current rates and significant interest from the live company market. The third is exemplified by the financing that we closed on on Monday. Fannie Mae debt on our multi-family assets on a ten-year LIBOR floater that we can swap out for varying periods. In the case of our recent financing, seven years. As previously discussed, we obtained a seven-year, $400 million term loan that we closed on September 30, at an effective fixed rate for five years of 4.45%.

On Monday, we closed $388 million term loans and entered into new interest rate swap contracts that effectively fixed the rate of those loans at approximately 3.65% for seven years. We have made net cash payments of approximately $11.9 million to terminate the existing interest rate swap contracts that were scheduled to mature on August 1, 2011, relating to the $388 million loans. As a result of these terminations, we anticipate that there will be a one-time impact to FFO of cash and non-cash interest expense totaling approximately $13.9 million in the fourth quarter of 2010. We are revising our full year 2010 FFO guidance. The new range is $1.19 to $1.23. Our previous range was $1.24 to $1.28 per diluted share. This guidance excludes any impact from future acquisitions, dispositions, equity purchases, and debt financings or repayments, recapitulations, or similar matters.

With that, I will now turn the call over to the operator so we may take your questions.

Again, in consideration of other participants, please limit inquiries to one question and one follow-up. (Operator Instructions) And your first question comes from the line of Michael Bilerman with Citi.

(Inaudible) with Michael. Can you talk about the rent spreads, they deteriorated sequentially. Were there any particular leases that impacted that, or is that just the direction of where the market is right now, at down 12%? And do you feel that that level's bottomed, or do you feel that that gets worse as you look out in the fourth quarter and first quarter?

Bill's going to be better answering this, but I think the real number we're looking at to see the changes in rents is the straight line rent to straight line rent comparison, which is actually down 3%, not down 12%. Because our rents all have escalations in them. Our leases have escalations in them. So, it's not a usual comparison to look at the ending rent at the highest point of the lease compared to the beginning rent on a new lease. But with that said, yes, rents are down.

How -- to what degree will that continue? I hope it won't, but it's all a matter of -- the first step being, when will we start seeing positive absorption? And I have to tell you, maybe I'm an optimist, but I keep feeling like we're going to start seeing that soon. When you look of the causes of the negative absorption and you compare to what's going on in terms of the incredibly strong leasing we're doing, I feel like we have to start seeing some of that in the next few quarters. And then, obviously, that's what turns rents up.

Now, you might start, you might continue to see negative spread there on the straight line to straight line, simply because on the leases that are rolling off, we're rolling into some very -- they were initiated at some - we're rolling into some very strong years, right? So, cut five years ago, 2005, was the start of a pretty strong run up in rental rates. So, you know, that's big headwinds to keep a positive difference against, against those numbers.

And maybe a related question. How -- do you feel like you're almost finished with the large tenant contractions in your portfolio? Or how much more of that do you feel like is ahead of you?

I think it's hard to say. You know -- I think as we're rolling through it, we keep feeling that we're -- as Jordan said, that we are getting towards a period of positive absorption. Really more based on the inflow side in seeing that the volume has continued, and it's broadly-based. Leasing volume has continued over a number of quarters. And we definitely are seeing signs of various types in terms of recovery or lessening of the out flow of, whether it's workout deals defaults, that sort of thing. But -- we'll be in a better position, I think, when we give our 2011 guidance when we really take in a very close, space-by-space look at the portfolio and completed that process to give -- to give some idea of that.

I'll mention one thing, which is a little counter intuitive, which is, our biggest leasing percentage loss in our submarkets this quarter was in the Olympic corridor. And the biggest tenant loss in that submarket in our portfolio was one a little over 20,000 feet, which we lost as a result of the tenant wanting to expand to 35,000 feet. And we don't have 35,000 square feet of contiguous space in our West Los Angeles markets, so we couldn't accommodate the expansion need. So that certainly was -- a difference in trend from where we're going, but nonetheless, in the short run, represented a loss in that market. And we're moving very quickly, in terms of backfilling that space. There's a lot of very strong demand. So as Jordan said, we'll have a better -- I think we're pretty hopeful that we're getting towards the end of the, of this series of (inaudible).

The negative absorption corridor.

Thank you.

Okay.

Your next question comes from the line of Alex Goldfarb with Sandler O'Neil.

Good morning out there.

Hi, Alex.

Just getting a little more nuanced onto the fundamentals. I think it was the Valley that was sort of market that was lagging the most. And there were some tenants top continuing to downsize their space requirements. What's the latest going on up there?

Well, I think again, obviously as I said before, the biggest decline we had in the submarket in the quarter was not in the Valley, it was on the Olympic corridor. And I think we are seeing stabilization out in the valley, and actually, good amount of leasing activity. The valley was down 60 basis points as a whole for the quarter, but spread out, I think we're seeing -- again I think we're seeing much more stabilization there. Coupled with continued good demand, so I -- and I think as you look forward over the next four quarters, the roll isn't particularly high in the Woodland Hills market as well. So that's an encouraging sign.

Okay. And then second question is, just following up, as you guys compete, I think you're MO is lower face rent, Lower TIs, lower free rent. Some of your competitors, maybe higher face rent but higher TIs higher, you know, free rent. From the tenant's perspective, are they agnostic, or are some of them swayed one way or the other?

Well, they usually -- typically they want to lean in the direction of just getting a lower --all, and the rate actually reflecting the transaction instead of having the free rent and all the games in there. And it's helped us in the past to give even slight -- even give almost slightly inferior economics and still win them. Because a lot of people are real uncomfortable. Just like you would be, if you lender on your house came to you and said, I have a great plan for you, you're not going to pay your mortgage for two years, but then I'm going to add it as an accelerated rate to -- the balance on your loan. Probably that's a -- that's probably an early 2000s concept that's seen its time. I have something else to add Alex, as well, which gets overlooked a lot, which is, we have our own tenant improvement construction company and do our own space design. And we work real hard at trying as much as possible to have spaces that are conventional in very -- at very, at good space to use for multiple generations of tenants. So, if space basically fits a tenant's need, they don't have as much as demand for -- for expensive TIs. Is that allows us to really compete favorably there, and then when we offer them an attractive face rent, we're in a good position to get that deal done.

Okay. Thank you .

And your next question comes from the line of James Feldman with Bank of America.

Thank you. I was hoping to get a little bit more color on the interplay between the submarkets. It seems like Century City is weak and probably getting weaker. But how should we be thinking about, and how are you thinking about, the risk of tenants moving from some better submarkets into that space if we do see a rise in vacancy? And as recovery starts to take hold, how the submarkets should interact with each other?

Well, in our portfolio, Century City was flat quarter over quarter, and I don't think we're seeing any notable decline in the submarket. You know, I don't think there's any trend that's meaningful in terms of movement from submarket to submarket that we're seeing. I think, to the extent that people are moving in submarkets, it's when the spaces don't -- on renewal don't fit their needs. So, whether with the expansion example I gave before, where they had to move to a market and a portfolio that had large contiguous spaces, or whether it's the reverse of that, which is consolidating space or downsizing into space in amounts that work for the tenant. It's more of that's the driver. It's incidental to that whether they're moving from across the submarket.

That, that's all right. I agree with all that. Although I will say something I've noticed, and I don't even know if the numbers bear it out, is that vacancy in Westwood became outsized. And I'm seeing because of that, because they just have every variety of space available now, that tenants seem to be -- when you see a tenant move submarkets, it's more often than not, seems to be that they're heading over to that market now. Because there's some extraordinary attractive deals there.

Okay. And then along those lines, as you think about next year's roll, do you have a sense of how much of that is already pretty close being put to bed?

Well, you know, one of the things, I guess, that we talk about a lot that's useful in looking at our portfolio is, our -- because we have smaller tenants, it's always true that the roll gets finalized very close to the expiration dates. So, even in terms of when you look at the next quarter, it's not necessarily all baked in at that point. Which is one of the reasons why when we look out and try to give visibility, it's hard for us to do that too far off in the future. So -- but again, I think where we sit now, we have a pretty good handle on fourth quarter, and as I said, I think we're right in line with where our guidance has been. As we look out in 2011, frankly, it's a little bit early to say. We're getting our arms around that right now ,going through the process I described to build up to our forecasting that we'll be sharing with you when we have a good handle on it.

Okay. Thank you.

Thanks.

And you're next question comes from the line of Rob Steven son with Macquarie.

Good afternoon, guys. In terms of the swaps, was there anything particular about these level of swaps, or as you refinanced debt and have swaps on those, that you would expect to see sort of similar charges going forward on that?

Well -- the issue isn't any particular charges. The issue is if you break a swap prior to its expiration date and the swap is above current market, there's a cost for accelerating those payments. In this case, the existing swaps matched up with a loan that we fully paid off and were refinancing for ten years, and for a variety of reasons it made sense to put in place brand new clean swaps at the current market rate and to payoff the old swaps.

As we go forward, like if you look at, say, the seven different loans that we have later in -- maturing later in 2012 on the office side, that match up with a total amount of $2.3 billion in debt. As of December 1, close to $1.6 billion of that is floating and not covered by swaps, so obviously, as we re-finance up to that amount, we won't be breaking any swaps prematurely. We'll be putting in place new ones. But as we go forward, and complete the rest of the entirety of the refinancing, we'll have again the choice of leaving swaps in place and doing forward starting ones or breaking them. So, we've discussed before that that choice is one that we're going to look at from time to time, and there's good reasons to do what we did and likely will continue to follow that same format.

Okay. And then as a follow-up, can you tell me a little bit about -- the depths of the transaction market in West LA and Hawaii right now? You know, are you seeing decent flows of assets? Is it trickles? Is it sort of non-existent? Can you characterize that for us, what you're seeing on pricing?

There's deals, there's stuff being worked on. Things don't move as fast as they did years ago, and I think we're seeing deals get in and out of -- more than a lot of -- in the past, I've seen deals blow up multiple times on the same building, which is almost strange, because it was with what I would think would be some pretty good buyers. So -- but there's deals, and deals that I think are gone, you know, come back because of blow ups. So, it's not as hot as it was when we were buying them like crazy in the '90s, but we've got a good pipeline we're working on stuff.

Do you think that you guys are more or less inclined today to be looking at apartments?

Well, we're always extremely inclined to look at apartments. We love apartments. I mean, this Company is almost founded more on apartments than office, even though now we own more office. But -- and we take a hard look at every apartment deal that comes up in any of our markets. As I said, I think a call ago, particularly in the Woodland Hills market where a lot of new apartment projects were built and condo projects were built that have gone bust and turned in to apartment projects, there's's just so much new supply there. And some of these kind of new deals are being sold by even the construction lenders. So you're buying a totally vacant building, and we work on those deals, but I've been surprised by how much people have outbid us. I mean, usually we're not that far behind the winning bid. So yes, we're very interested in buying apartments, but I would also say that at least, what we've worked on so far, we've been surprised at the pricing.

Thanks, guys.

Your next question comes from the line of Chris Caton with Morgan Stanley.

Hi, thanks.

Hi.

My question here is on office margins. I think there were, I guess, two things within that. One is, can you comment on the sequential job and expenses to the extent that's permanent or one time? And then two, and I suppose a portion of that's driven by, obviously, your acquisition, but then the second would be --

The sequential what expenses?

Office expenses. How much of that was just the acquisition and how much of that was a change in the --

Probably the office expenses just generally went up because Bishop Square is in there.

Yes, Bishop Square. And also that in parking and other income?

Other income is probably because Bishop Square's a triple net building and therefore you'll see in other income in the can. You'll see in the can section that you've got a lot of triple nets coming through, and same for parking.

More than half of the sequential increase in expense on the office side was simply the edition of Bishop Square. The bulk of the rest is a combination of a kick up in utility rates, electrical rates in Los Angeles that hit in the quarter, coupled with the fact that, on a seasonal basis, costs are higher in the third quarter normally, in any event. So, only that, that portion is really baked in, in terms of any kind of increase.

Yes. Thank you very much. And then just to pick up on the discussion of the deal environment, I hear you that's it flowing better, but also I would think that competition is picking up. What did you see, for example, on 6500 Wilshire in terms of the competitive dynamic? I think that went to a core fund. Are you seeing more institutional capital competing with you for assets?

Wait, are you -- you're at Morgan Stanley.

Yes, but I don't, I don't work on that side.

Well -- I mean, you could give all the stats of the deal. Are you on that side?

No, I'm not involved at that level, obviously.

The -- you mean, what do I think of the competition on 6500?

Yes. And just generally, what that means for competition for institutional-grade assets. There's an article out, actually, today on that --

I don't want to talk about 6500 in particular, especially someone else's deal on a specific deal that's not done. I will say that you are seeing, for deals like that, which are -- you know, 6,500 is literally 100% leased. I think that's 2,000 feet vacant at 45,000 feet. For deals like that, you're seeing a lot more interest and competition than you are, let's say for instance, deals like the one we bought, which is sort almost a stretch to call 80% leased, on the corner of Bundy and Wilshire.

And so, as we've said in the past, when you're effectively buying kind of a high-income lease, you know, when you're buying lease stability, lease income, we don't tend to be a winning bidder. And if you look at what happened at 6500 and the bidders that it narrowed down to, they're kind of a select group that you don't actually typically see show up as winning bidders on most of the other stuff around here. But that type of asset is very attractive to that, right? It as big, beautiful monolithic granite office building that's 60% cedars and effectively 100% leased, as I said, with extremely solid high rents. So it was -- I wouldn't totally extrapolate from that about the competition in our market for other buildings, because that building is a bit of an outlier.

Thank you.

Your next question comes from the line of Brendan Maiorana with Wells Fargo.

Thanks. Good morning.

Hi, Brendan.

Bill, for you, the guidance for Q4 there, if we look at it relative to the Q3 run rate, there's a step down. You guys had a lot lower amortization of the interest rate contracts. But I guess, is there also an expectation that there's a reduction, in terms of the occupancy and the NOI run rate, if I look at the midpoint of your Q4 guidance?

Not if particularly meaningfully. You know, normally there's -- if you look at year-over-year numbers, there's a bunching up of expense in the fourth quarter that you don't see in the run rate from prior quarters. And so that's certainly a part of it. And then another part of it is, we do have the financing, the $400 million financing that we did is -- wasn't reflected and closed that on September 30. And so that the interest on that is all in the fourth quarter as well. So that's -- and then, I know you're excluding the one timer of the termination costs and the swaps in your question, but obviously that's also another component in the changing guidance for the fourth quarter.

Sure. And so, does the occupancy, kind of rough numbers, call it effectively flat sequentially. And then in terms of $545 million of swaps that roll off, is that still expected to go to fixed --

I'm sorry, let me answer your first question and then you can state your second one.

But I just want to correct it, which is on the occupancy, the -- consistent with our occupancy guidance for the year of 200 basis points, that's a drop in fourth quarter. In terms of end occupancy is about 40 basis points. So, on average in the quarter, if you omit 0.20 basis points drops, there is a little bit of it, I wasn't suggesting it was totally flat. And then what was your second question?

Just the $545 million of swap to fixed, that is still assumed a relative floating just for the one month that it's outstanding?

Yes.

Okay. Thank you.

Your next question comes from the line of John Guinee with Stifel.

Hi.

Hi John.

Thanks. Just out of curiosity, it looks to me over the last couple of years your releasing costs have run from maybe $15, $16 a square foot and $3.25 to about $20 to $21 a square feet and about $360 a square foot. How much of that is leasing, and how much of that is capital? Because I'm going under the assumption that the leasing is pretty much a fixed, but that the TIs are a little bit more variable in nature?

Well, you're correct about what the variable component is, that's clearly true. It's mainly driven by TIs at the commission side, is pretty much fixed.

I don't have the numbers. Maybe Bill has a better handle on them, but actually, I feel like our TIs have gone a little down instead of up. So, you're telling me that you think the TIs are trending up. The commissions, as Bill just said, are flattish I don't know. I'd have to take a look going -- if you're going back four years, at what's going on with the numbers and --

To just a year and a half, two years ago. Two years ago it was $15 to $16 a square foot, and $3.25 per square foot per year. And that's run up to $20 to $21, and I'm just curious as to what component of that is relatively fixed, which is the leasing commissions, and what component is more variable in terms of ITs?

You know, we'd have to -- I think we have to look deeper into that. Although I'll bet when we do, you're not going to find that the TI component has, as a trend, gone up. As a matter of fact, when I sit in the meetings and hear what's going on, our typical, our classic TIs, which is paint and carpet, I know has come down. But as I said, I don't have that -- I don't have that answer. I don't know if Bill's in here scrambling, trying to look backwards and see whether they're the same answer.

Yes, let's say go look at it and we can talk further. I have to say, we don't see a trend at all. I mean, obviously, noise quarter-to-quarter is usually driven by whether there's -- if there's a large tenant renewal, then the renewal TIs tend to spike up in the quarter. Think when we look at it, maybe we're just starting a different time period. When we look at it over any time period, I think you just have to come to the conclusion that it's just basically comparably flat from the time -- certainly over the last several years.

You can catch -- I remember a couple years ago we had a few strange quarters with some very large leases where we did get some big TIs, but I wouldn't turn that to a trend. So I don't know.

Okay. Thank you.

All right.

Your next question comes from the line of Rob Salisbury with UBS.

Hi, it's Rob (inaudible), I'm here with Rob. Bill, I'm trying to get my arms around one number. It's the same property cash basis office revenue increase of 0.2%.

Right.

And I'm trying to reconcile that against the year-over-year occupancy decline and the negative rents spreads How did office revenues go up year-over-year against those two negative trends?

Well, it's additional -- it's rent bumps, when you you're looking on it as a cash basis. You're getting the benefit of the 3% to 5% rent bumps that we have in there. Also, we did somewhat better on CAM recoveries in the quarter. In the quarter that's -- looking at the quarter, the comparable quarter, last quarter to this one in terms of just how CAM recoveries hit. Obviously, it's not meaningfully higher.

So -- it's consistent, I would say ,with the following -- if you went back up and looked at it from higher altitude, the trend that we've seen throughout this period of time and since this financial downturn is cash staying relatively flat over an extended time period. So the rent bumps out weighing any roll down that we have. And that the decline is been on the GAAP side with the burn off of the feds 141 income and straight line income, and that's -- overall, kind of what we've been seeing, kind of taking the noise out of it from quarter it quarter.

So there weren't any abnormal lease term fees that were skewing that number one way or the other?

No. The leases that give that -- the lease term fees in this quarter were about $300,000, a little over $300,000, which is up a couple hundred thousands. As it is, pretty every quarter for us, it's not meaningful quarter in our overall stats.

So if I look across your portfolio, the average in place rent bumps contractually. What is that number, on average, to date?

Well, on new leases that we're signing, it's generally around 3%. But in place --

-- in place it's going to be between 3 and 4.

It's going to be higher.

Yes, a higher number.

Thank you

Your next question combed from the line of Dave Aubuchon with Baird.

The question I had, Bill, was when you talked about the space reductions by larger tenants, I know you didn't want to look forward, just because you're going through the portfolio. But just of the existing leases that you've seen signed this year, how much, on average, do you think those larger tenants are contracting by?

You know, I don't have a number like that that we can pull together in terms of an average. As I said, there's a component, and not an insignificant component, of tenants that are also expanding. But maybe if you just want to throw a dart at a dart board, maybe it's around 10%.

And your submarkets that have the highest exposure to large space tenants, however you want to quantify that, so it's the San Fernando Valley and maybe Hawaii?

I would call it more Woodland Hills than San Fernando Valley, because that whole Ventura corridor is small guys.

Hawaii is a smaller tenant market. Not as small as West LA, but a small tenant market. Sherman Oaks, Encino is a small tenant market. So, the relatively larger tenants tend to be clustered in the Warner Center, Woodland Hills market. But they are scattered around other markets, and we have a corridor where they go at an occupancy or contract, like we did with the Olympic corridor with this quarter, that's where we tend to see it in our numbers.

And when we say large, guys, we could be talking about a guy that's between 20,000 and 40,000 feet, which you guys still consider small.

Yes. We in our nomenclature, if it's 10,000 or more, they're bolded on our internal reports as being large.

Okay. And tenant credit , generally is that -- is the bad debt expanse of it behind us

Tenant credit and the default [side] is definitely calming down and seeing less of it. And less -- way fewer requests for any kind of work outs, and so there definitely seems to be improvement in that area. I think we're in the -- largely past that phenomena. Now we're in -- I think the last stages where, as we hit renewals of companies that have business plans that involve consolidation or space contraction, as we're hitting them, we're seeing exactly where that game plays out. So whether they're consolidating in our portfolio or consolidating somewhere else, as they downsize is sort of a question that needs to be played out in the next few quarters.

Thank you.

Your next question comes from the line of Michael Knott with Green Street Advisors.

Hi, guys. One of my questions has been answered. But Jordan, I just wanted to get your take on it. It sounds like you don't think your markets have bottomed yet, but is it your reasonable expectation that maybe in the next six months or so you might see an inflection in the underlying leasing market?

Well, when you say bottomed, are you saying bottomed in rents or bottomed in occupancy? I'm not sure -- like the rent comparison that we talked about a little earlier, I think the main thing that you see going on is that leases now that are rolling off are higher leases so they probably aren't giving you as good a sign as what's happening in the current market. Right? You understand what I'm saying about that spread increasing?

Right.

But in terms of whether I think rents are going -- just flat outgoing down, I don't get the feeling that rents are declining. But we're not going to cause rents to go up without having positive absorption. And so the real question is, when do I think we'll have positive absorption? Well a little bit, and this is totally anecdotal from talking to people -- like I have a lot of friends that work, some in your industry, but they unfortunately weren't out here, and in other industries that might have been out -- literally have been out of work for two plus years and all of a sudden now are getting three job offers. And it's to restart things we were doing. Like on the residential side, to restart mortgage-backed securities operation, stuff like that.

And so I get the feeling that some of these larger tenant space reductions that aren't necessarily just driven from people, by the actual tenant in that space, but it's one space of many of a larger company, are still operating, if you will, on an older set of orders. And my hope is that, as we go into the next year, those orders might be refined a little bit. They might, you know, relax a little. Just now re-think and say, you know what, we are feeling a little bit now more like going into a growth mode. And they're -- honestly, the 2010 orders for all of us, I'm sure you guys, too, was cut expenses, control expenses -- hunker down. And I get the impression that the 2011 orders might be a little different. They might be a little more of, we want to start looking at taking advantage of certain areas, capturing market share, whatever the case may be.

And I'm hoping that that new set of orders, as it trickle through the organizations, especially the ones with the largest tenants, takes the edge off of what we've been seeing in terms of those large tenant reductions. And when that happens, one thing we do have going is very active leasing markets. So, that headwind would calm down a little. I'm optimistic that -- my hope is that next year we start having some positive absorption quarters.

Okay. And then -- I appreciate that. And then kind of as a follow-up to that, what's your view of how this recovery, when it does arrive, what's your view of how that will look compared to prior recoveries?

Well, we've had -- I can look at two prior recoveries that -- I've lived in that I would say were major that we watched. The recovery -- the 1980s into 1990 recovery. That was a long recovery, long slow recovery with a huge amount of space that needed to be absorbed, which all the new construction that we were dealing with. And the economy was really going well for a long time before we felt like we were doing well. Because it took so much leasing to get there. Now, this recovery, our hope is that, as I said, we're going to see a new set of orders coming out next year and the orders aren't going to be cut everywhere, every which way that you can. That it will be, maybe we are willing to do a little bit of hiring to try are capture some revenue. And if that happens, we ought to be able to recover at a much better pace.

Now, that would be more akin to the recovery that we saw occur in 2002, 2003, 2004, where people -- rents really got moving, like, chit chit chit, to rates that were stunning us quarter-to-quarter. I hope that happens. I mean, I don't want to be the one that stands here and predicts it, but we -- until then, we have never seen rents move in a year, 15%, 20%. That was the first time we'd ever seen that. So now I'm sitting here going, at least I know it's possible.

Let me just add to that, Mike. I mean, two clear differences with prior downturns. One of them is, this time on recovery, it's the first one where there was no new supply of any significance that was built during the prior peak phase. So, there's not first generation space that has to be absorbed by new business activity to make that happen. That's a pretty big one.

The other thing is, I don't -- I can say pretty clearly that in prior downturns, we didn't see a protracted period of very strong tenant demand as we've seen over the past six quarters, which is a great sign in terms of activity occurring. This seems to be much more like within a fixed amount of space that we're seeing a transition and restructuring from tenants that got whacked during the downturn phase of the end of '08 and into '09, and they're working through that. And when that -- when that pipeline has run out and that restructuring happens, the underlying fundamentals are great, both on the supply side and on the demand side, in terms of a lot of new activity. So that's -- the issue, I think we're very confident of that. I think we're very confident of that kind of very good recovery. The variable is, it always seems it's kind of a quarter ahead of us, and two quarters ahead of us. And so when that turn is, is what we're waiting for. But when it happens, I think the dynamics of the recovery and the fact that it's got all the makings of a recovery that's actually a better recovery than we've seen in prior cycles, I think that seems to be pretty well in play.

Okay. That's, that's helpful. I appreciate it. I'll get back in the queue. Thank you. Appreciate the commentary.

Your next question comes from the line of Rich Anderson with BMO Capital Markets.

Hi, good morning out there, guys.

Hi Rich.

On the new multi-family debt refinance, if I do my math right, you're saving about $5.4 million in interest per year on the new rate effective rate, relative to what you're paying off. When you look at that, and then you also look at the swap breakage fee that you took -- or you'll take in the fourth quarter, do you think that you left some value on the table in the interest of, like when you do net present or whatever, leave some value on the table in interest of sort of cleansing? Or do you think when you look at that it makes -- it actually creates value for you guys?

You mean in having broken a swap --

Yes. Incurring that cost --

As opposed to doing a forward swap?

Yes, yes.

No, I don't think so. I think when you look at -- it's really a question of the time periods in which the interest expense is shown. By breaking the swaps now, given the low interest rate environment, we're -- by paying that off, it's more or less a wash between paying it off now or over the next nine months.

On the other side, on the new swaps, it's a question of, you start the swaps now, you don't have the premium of a forward swap. So, over a few years, you more than get that back, and then you have that lower interest rate working for you for a full seven years. So, you definitely come out ahead of the game in doing it that way. And then on top of that, as you suggested, it cleanses the system and you have some real clarity in understanding about where rates are.

Yes, I think for your hard financial calculation you're trying to do, I think the big thing that moves you toward breaking a swap is that your stored cash has no value.

Right.

You have no -- and I'm not just -- frivolously usually using this term, but we're getting to zero interest rate.

Right.

On the money in the bank.

Yes, that's what I was referring to about the low interest rate. You're not -- no one is rewarding you by keeping cash around.

Okay. And then this is kind of a -- I don't know if this is a question that is realistic, but let me ask it anyway. You have people thinking that this whole process of refinancing is going to take several quarters into 2011. I'm curious, is that like a log jam issue, a manpower issue, or why can't you do it sooner? Or are you just sort of giving yourself time to work through? I'm just curious why it can't happen a little bit quicker than the next two or three quarters?

Well, first of all, I'm going to tell you that Bill's been getting way too much sleep, so we're going to clear it upright now.

I don't mean to push you Bill, I mean, come on.

You know, I don't think it's actually a manpower problem. I think it's a strategy and pacing, and we're trying to do it very quickly. And it's not manpower on our side, it's -- there's a certain -- you have a product, you're putting it out, there's a certain number of lenders out there. We have a lot of very good relationships. And you've got to put it out in pieces that they can bid on and get it going and then move onto the next one. And in the middle of all that, the market's changing.

Right.

So, at one moment I think, God we should be doing larger than $300 million chunks. And you don't want to have a bunch of them out in the market at the same time or you're going to confuse them like, well, I like that one a little better than that one, or whatever. You have to do one, not compete with yourself, clear it and move to the next one. And then, as we're doing that, the playing field's changing because all of a sudden you've got a bunch of guys that want to stay our lenders and they start getting paid off when they don't win them. And they say, wait a minute, maybe we can take a bigger chunk, all of us will get-together and we'll go out. So, we're trying to figure out whether -- as this plays out. It could play out anywhere from individual $300 million, $400 million chunks to all of a sudden doing $600 million and $750 million ones, which would move things through the system faster.

The other thing is, we're evaluating having both kind of a live deal and a bank deal in the market at the same time. Now, this is all against the backdrop of the happy holiday season that we're facing when people start taking their phone off the hook, so that's why it's a little tough to figure out how long this is going to take to happen. It could happen relatively quickly, which is what we want, and we're not the gating issue there, it's the market. Or it could move slowly and say, because the holiday season, people are just done working on deals.

So, just to sum what Jordan said, to restate it in two sentences. It's a product of trying to be nimble in our strategy and change the strategy where it's appropriate to get the best possible result, the best possible pricing. Coupled, as Jordan said, with the fact that the market is evolving in terms of sizing capacity and where the best deal are. So, we're trying to stay nimble and get the best results, but at the same time move as quickly as we can.

Yes. We're, we're willing to make sacrifices for speed.

Okay. And I just -- Bill, you said $1.1 billion that is still -- that is variable without a swap attached? That's what you said? I thought you said $1.6 billion early.

$1.1 billion is currently floating on the office --

Right. That's what I thought you said. I thought you said $1.6 billion, I thought maybe I was --

I did say $1.6 billion, because $541 million becomes floating in a few weeks.

Oh, I see.

So, at that point, all that debt would be floating except for $645 million in swaps that come up next year in '12.

I see that. Okay. Thank you.

And your next question comes from the line of Srikanth Nagarajan with FBR Capital Markets.

Thank you, and good morning. I think, Bill and Jordan, I think you mentioned in you response to an earlier question on -- 3% to 5% rent bumps on your leases. Obviously, how should we think about these rent bumps as you sign these leases today versus, those that were signing in the peak?

The ones we're signing today are -- the overwhelming number of them are 3% bumps. And then looking at it historically, we -- in the absolute peak for a short period of time were able to get as high as 5% bumps. However, if you go back to prior cycles, 3% was about the best you could get at the peak of prior markets. So, compared to prior cycles we're actually at a very good point. Compared to this most recent trend, we're down from 5% to 3%.

Okay. So it's roughly 2% if you think about it. Now, let me ask you the token dividend policy question. Where is the board's head on dividends these days?

On development?

Dividends.

Dividends. Okay. So, I think basically, there's a couple things going on. We understand that dividend is one component of total return for our investors, as well as growth in the stock price, and we know that we need to balance them both. The second thing is that we never want the dividend to act as a drag on the stock price. If it becomes oddly low, or strangely low, relative to a peer group. On the other side of the coin, we don't want to -- we like retaining cash to invest and take advantage of opportunities. Now we have -- we happen to be a company that has a dividend that is probably the most covered dividend of anybody.

Right.

And maybe there's one or two out there that are a little better. But we are building cash flow at a tremendous clip, and we have cut our dividend to a number that is pretty low. So, all those factors are going to be where -- are what we've been discussing with our board, they'll all -- result in something. A change, no change. Whatever. And we'll have that answer, hopefully, in the next quarter or so.

All right. Thanks.

Your next question comes from the line of Michael Bilerman with Citi.

Two quick follow-ups. Bill, just on Bishop Square, it sounds like the office margin is lower than the portfolio. So, what is the NOI margin on that acquisition?

I don't know if the office margin on Bishop Square is different than the rest of the portfolio. I think you might be getting thrown off by the fact that they're triple net leases.

Actually, I think the cost to operate Bishop Square is almost right on with the rest of our office portfolio in LA.

Yes. If you saw, actually I think it was you guys who noted it, the -- our tenant recoveries in Q4 were about $4 million or so higher than in Q3.

Yes.

Over -- that's almost entirely as a result of the addition of Bishop Square. Because in Hawaii, the leases are on a net basis, so the tenant recoveries in Bishop Square were almost equal to the rent payment.

And so -- but you're office rental expenses also went up by $4.4 million, so you have the expenses and then you have the recovery one for one, which is why you're recovery rate looks business bigger and the offers margin necessarily then just drops?

Yes, exactly.

Okay. That makes sense. In terms of multi-family loan, which is the second question, was there any reason why you couldn't push proceeds level? I couldn't remember if this was one that was originated back in '07 at the time of the IPO, which -- or why you didn't try to get additional proceeds?

Well, it actually -- the particular loan was up sized in the summer of '07, actually six months after the IPO when the market --

He's asking, because the incredibly low rate, why don't we push proceeds now?

I don't think we're doing these re-fis -- in general, we're not doing them with the intend to push proceeds. Remember, we're thinking of reducing our debt, not increasing it.

Yes. Let me put even a finer point on it, Michael. Which is, our -- when you look at the various goals that you can achieve, in terms of financing, number one on our list is to get the best pricing and to bring our overall interest costs down in the current climate. And to the extent that, frankly, as we said many times, that we've got -- we've been building up cash, we're continuing to build up cash, we're going to deploy that cash strategically wherever we can. Wherever it's possible to drive down rate, so we're way more sensitive to the long-term rate than we are to pushing proceeds.

And you effectively -- the $600 million in total multi-family debt is against the cost, call it almost the $50 million-ish of NOI?

I don't know our multi-family NOI off the top of my head.

Yes, it's about $50 million. But it's all secured, right?

Yes, it's all first trusteed loans on propertied -- non-recourse first trusteed loans.

Okay. Thank you.

Your next question comes from the line of Mitch Germain with JMP Securities.

Hi, Mitch.

Hi. You mentioned some opportunities in the multi-family side distress, and clearly we had Wilshire Bundy. You see anything in the office side?

Yes, most of what we're looking at is on the office side. I mean -- people are pretty focused on multi-family because I got a lot of questions about it last time. But even the deals I'm talking about to your guys' world, they would be considered very small. But on the office side, there is stuff out there that's, you know, center line Douglas Emmett stuff, and we're working on it.

It is where, really, our pipeline is.

Great. Thanks.

Your next question comes from the line of Steve Boyd with Cowen and Company.

Thanks. I'm curious on the refinancing, what you think the all-in cost would have been if you had just done straight fix instead of floating swap for fixed?

Boy, I don't know. You know, we have a huge, good, long relationship with Fannie Mae, and it's kind of developed to that knowing we like these kind of loans. And -- we didn't even evaluate doing something different under that -- and then this deal with them, in any significant way, because we felt like it was a great deal and we've got -- we had a good, long relationship with them. We've been through, I want to say, four or five refinancings with them as we've added to our residential portfolio. So we -- I don't have good alternative fixed rate data to be able to give you, sorry.

Okay. I appreciate that. And just in terms -- given all the activity you've had on the refinancing side, would it be possible to provide kind of a run rate interest expense quarterly or annually, including kind of swap amortization?

I don't have happen to have that. I don't -- yes, I don't think we're doing that on this call right now.

Okay.

You want a quarterly run rate of interest expense with us, making some assumptions about what we do with --

No, no, no, not about the future. Just as you stand today, with all the activity that's occurred.

What's our interest expense in third quarter?

No. No. I guess, you know, with what you've done here in late September and everything else, but --

Well, you'll get that, you'll get Q4 as a run rate with the swap having been broken and knowing the effect of it in about -- when do we do that, in January, February?

Okay. Fair enough. And last quick question. In the Olympic corridor, I think on page 14 in the supplemental, the leased percentage sequentially went from 91%, I think, down to 84.9%. But the annualized rent didn't budge, it moved a little bit. I was just curious, are those comparing kind of two different time periods, or what would cause that?

So, it's really a factor of the annual rent bumps -- matched up to the annualized rents so the occupancy decline didn't affect it.

All right. Thank you, guys.

And your next question comes from the line of Michael Knott with Green Street Advisors.

Hi guys, just a follow-up on one of the recent questions about the types of debt and cost of debt. I think earlier, Bill, you mentioned three types of debt that you guys look at, and I think only two of those would really apply to office. And I was just curious if it's a seven-year floating rate office loan that you fixed via swap, versus just a straight fix. What do you think that cost difference would be?

Well, they're different. It's kind of apples and oranges because the floating rate debt is a shorter -- let me back up and say this. We've always preferred floating rate debt (inaudible) swap as a general rule, because you get a market value for the swap for the fixed component. And so for example, taking advantage of the refinancing that we just did when we broke swaps, we had the ability to get a true market price in breaking swaps as opposed to a formula price that you get when you have yield maintenance and you break fixed rate loans, where it can become so punitive that it can prevent you from refinancing. It can prevent you from selling a property. So, that's our general -- that's our general preference.

The issue is, the floating rate market on the office side, the maximum duration that you can get on that in the current market is seven years. Has sometimes has been shorter, but seven years on the office side. So, to take advantage of full seven-year fixed rates, seven-year, eight-year, nine-year, ten-year fixed rates, you -- it requires you to move into a fixed rate product, even though that's not our normal preference.

Now, the good news is that the current -- with current long-term rates, and a lot of competition that exists along the live cos, a lot our long-term concerns about that market are being alleviated. The cost of building and a lot more flexibility to pay off the par has gotten very cheap in the current market, which helps us a lot. And two, the long-term rates is so compelling that it causes us to be interested in taking a look at fixing fixed rates for, instead of for five years, doing it more for seven, eight, or longer. So, that gets us into that market. So it's really, we have a strong preference but in terms of getting the mix of rates and duration, we -- it requires us to take a look at both options.

Okay. Thanks. And then just, do you guys have any updated thoughts with respect to, Jordan, your prior comments about reducing debt by $300 million?Or do you guys have any kind of explicit debt to EBITDA target that you would think about? I'm just curious, any thoughts on that topic?

I can't say on a explicit debt to EBITDA that I'm targeting, other than I'd love to see our EBITDA go up and have that multiple be very low. But in terms of reducing -- working on reducing our debt, yes, that's still in our thinking and we're working our way through it. But I mean that's one more thing that's layered into this complicated process that we're going through, and we're holding that out, as I said before, to make sure that as we do that, we're getting bang for our buck and when we do it, and whether we even get bang for our buck by doing it.

In terms of timing or ordering, should we expect that you're going to get all your refinancing put to bed first and then you'll maybe worry about achieving that objective, whether it's through maybe an ATM or through an offering, or is it just --

I would more say that, well, as we go through that complicated process I talked about, like getting the debt all redone, as we see those opportunities to say, well, loan on these buildings is $600 million and we can get this great price, $500 million, it's worth putting $50 million into that and reducing that loan, or whatever. It's going to fall out from this process, and as we start discovering what's worth doing and what that number is, then we'll work out how we want to come up with that.

I mean, we obviously have cash that we can do it with, and the we can kind of rebalance ourselves also during that process as we're discovering what we want to do. Or there may be nothing. We may not to issue equity.

Okay. I have two more quick ones. I don't know if I'm the last one and the queue or not. I can come back.

You are. Go ahead.

Just you real quick on, Wilshire Bundy Plaza, do you mind sharing your expected time line of lease up and/or maybe unlevered IRR expectation? Just how you thought about it generally.

Well the investor IRR, as I said before, is going to be between a 12 and a 14, because it's to the investor. I know that because of us having to assume that loan, and we have to plan in dealing with that loan as it comes up during the term, so it wasn't able to be modeled exactly the way we typically model these things. It's -- that's good with the numbers a little bit. In terms of our plan lease up, I think the building is -- probably a little bit of a stretch to say it's 80% leased. And we've gotten to work on that. I think we'll have a better feel.

Usually our assets that are off by that, especially an asset like that in that market, I'd expect that we'll be able to do pretty well in bringing that up to par. The pace at which we do that depends a little bit on what other headwinds we're going to face in terms of other tenants that are in the building. It was hard to get in with the other tenants and figure out what was really going on because the way that the bankruptcy ran. What was your other question? Did you have three questions about that or just those two?

Oh, no, that's, that's fine. Thanks. And then my last question was just, you're thoughts on longer-term health of California and the impact, how you think about the longer-term impacts on your markets from fiscal problems? I was a little disappointed that our fellow Californians voted for status quo as much as they did last night. Just curious your thoughts on that?

Well, I still don't feel like --well, a couple things. I still don't feel like what's going on in Sacramento can play a positive or negative role in terms of recovery in California. California as an economic engine is extraordinary. In fact, I just saw a stat about just LA. LA's economy -- just LA's economy would rank as the sixth largest economy if ranked as a state, in the United States. So, the economies are very large.

Definitely, Sacramento is embarrassing us, just at every turn. Every opportunity they get, they embarrass the rest of us. But, you know, so I'm embarrassed that we're so screwed up. I don't think it's going to impact our economy, and in fact, I think our economy is in fantastic shape to take off and do well. I look at the industries that we have here, and I look at the energy. I know people on the east coast, when they think of us are still thinking of the beach boys, and it just isn't the case. So --

So you don't see those factors being sort of a structural negative headwind over a longer time period in terms of reducing the attractiveness of moving here or staying here because of punitive tax rates, et cetera, et cetera?

You know what, I actually from -- I'm not sure that we have punitive tax rates. If you compare our -- if you compare all the whole package of taxes for the state of California, and we're getting kind of far into politics here, but to other states, we actually rank almost dead-on at the 50% mark. It's just that our taxes the way we do it is just kind of odd, right? We have this Prop 13 protection that D states -- that holds dramatically down the property tax income that most states would normally live off of, and then we have this extremely high capital gains rate. We have no capital gains rate, so it's the same as our ordinary income rate, which is a very high rate that cycles up and down very dramatically. The state's revenue, as you know, in conjunction with economic turns.

And one thing I should add, Mike, is that in coming through this political year, is that early on in the year, as you know, even the hint that Prop 13, even if it was only for commercial properties would be changed, even, even that little hint of was so unpopular in polling. It was something like 65% were opposed even if it was just limited to commercial properties, that the unions that were originally talking about it didn't even pursue it on the ballot. And so it seems like that's even further buried in terms of a possibility and a risk in terms of the tax structure.

So, I think where we come out -- as Jordan said, overall tax rate, it's not that punitive. You know we really haven't seen a lot of people, unlike the early '90s, we haven't seen a lot of people leaving California. A lot of businesses leaving California, which in the early '90s happened a lot, and we had to rebuild that. And then we see it on the ground in terms of the office demand. You know, we're seeing tenants entering our market in industries that have not been very present in our markets before. And in a lot of (inaudible).

You probably saw in the paper, I don't know if it was yesterday. It was a Japanese or Chinese company that's opening up offices here with a bus that cars can drive under that runs on rails. I mean, there's a lot coming in, and I haven't seen a lot of people leaving as a result of anything having to do with the state or state taxes or any of that. But they are a mess and they have -- they've got a lot to deal with, particularly with the unions and the locked in union -- returns, state returns, pension plans.

Okay. Thanks for fielding all my questions.

All right.

There are no questions at this time.

Yes, that looks like the end. And thank you, everybody, for joining our call today. We look forward to hearing from you again next quarter. Good bye.

This concludes today's conference call. You may now disconnect.