Douglas Emmett Inc (DEI) 2016 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett's quarterly earnings call. Today's call is being recorded.

(Operator Instructions)

I will now turn the conference over to Stuart McElhinney, Vice President of Investor Relations for Douglas Emmett.

Thank you. Joining us on the call today are Jordan Kaplan, our President and CEO; Kevin Crummy, our CIO, and Mona Gisler, our CFO. This call is being webcast live from our website and will be available for replay during the next 90 days. You can also find our earnings package at the Investor Relations section of our website. You can find reconciliations of non-GAAP financial measures discussed during today's call in the earnings package.

During the course of this call, we will make forward-looking statements. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to us. Our actual results 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 are not guarantees of future performance and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations, and those differences may be material. For a more detailed description of some potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website.

When we reach the question-and-answer portion, in consideration of others, please limit yourself to one question and one follow-up. I will now turn the call over to Jordan.

Good morning, everyone. Thank you for joining us. 2016 was a very successful year for Douglas Emmett. At year end our office properties were 92.2% leased, led by solid leasing progress in both Warner Center and Honolulu.

Our sustainability initiatives continue to have an outsized impact on our operating expenses as well as our carbon footprint. During 2016 we actually reduced same-property expenses by 1% year over year.

Fundamentals in our markets are strong. Net absorption for greater Los Angeles topped 2 million square feet during the fourth quarter, the strongest quarter since 2005 and the second strongest since 1998. As a result, our Los Angeles submarkets moved up to 91% leased. The Los Angeles county unemployment rate in November stood at only 4.8%, down 100 basis points year over year. West Los Angeles led the way with unemployment in November at only 4.1%.

New office construction in our submarkets is almost nonexistent. Given our strong net absorption, dynamic economy and no new supply, we expect to see rental rates continue their robust growth.

2016 was a busy year for us. We grew our portfolio by 14% and refinanced approximately $1 billion in debt. 2017 should also be busy as we pursue additional investment opportunities against the backdrop of very strong market fundamentals. With that, I'll now turn the call over to Kevin.

Thanks, Jordan, and good morning, everyone. During 2016 we completed over $3.4 billion of acquisitions and financings. Our portfolio grew by five properties totaling approximately 2 million square feet and we further extended our loan maturities.

Turning to the fourth quarter, we closed two loans totaling $520 million. The first was a secured non-recourse $220 million interest-only loan that matures in December 2023. Interest on the loan has been effectively fixed at 3.62% per annum until December 2021.

The second was a secured non-recourse $300 million interest-only loan that matures in January 2024. Interest on the loan has been effectively fixed at 3.46% per annum until January 2022.

We used the proceeds of these loans and some of our cash on hand to pay off a $530 million loan that was scheduled to mature in August 2018. We also paid off a $15.7 million loan to a consolidated joint venture.

Our two residential developments are making steady progress. Construction of Moanalua Hillside is in full swing, with delivery of the first phase of 238 units expected during the fourth quarter. The Brentwood residential tower entitlements are progressing well. We anticipate beginning construction late this year.

Our balance sheet is strong. We have over $100 million of cash on hand, $400 million of availability on our credit line, and no material debt maturities until August 2018. In 2017 we hope to add both office and residential properties to our portfolio in our core submarkets. With that, I will now turn the call over to Stuart.

Thanks, Kevin. Hi, everyone. In 2016 we executed 726 leases for a total of 2.8 million square feet of gross leasing. In Q4 we executed 190 office leases covering a robust 773,000 square feet, including 322,000 of new leases. The lease rate for our total portfolio increased 30 basis points to 92.2%. Our same-property leased rate, which excludes the higher vacancy acquisitions we made during 2016, now stands at 92.9%.

Our leasing spreads for Q4 were 25.8% for straight line rent rollup and 8.5% for cash rollup. These numbers are somewhat lower than our recent trends due to the increased volume in Warner Center and Honolulu, which have seen smaller rent increases in recent years. On a mark-to-market basis, our office asking rents exceeded our in-place rent by 14%.

On the multi-family side, our 3,300 units were again fully leased at quarter end. Our multi-family asking rents rose more than 5% year over year. At year end the annualized asking rents for our multi-family portfolio exceeded our in-place rents by $20 million by year. I'll now turn the call over to Mona to discuss our results.

Thanks, Stuart. Good morning, everyone. We're pleased with our Q4 results. Compared to a year ago, in the fourth quarter of 2016 revenues increased by 21%, FFO increased by 15.7% to $83.9 million or $0.47 per share, AFFO increased 5.7% to $62.5 million or $0.35 per share. For all of 2016 revenues increased by 16.8%.

FFO increased 12.4% to $326 million or $1.81 per share. After excluding a one-time non-cash item from 2015, FFO increased by 15%. AFFO increased 12.7% to $260 million or $1.45 per share.

Comparing our same-property cash results in the fourth quarter of 2016 to the fourth quarter of 2015, revenues increased by 4.4%, reflecting better core operations. Operating expenses increased by only 0.4% reflecting savings from our sustainability efforts and other expense controls. Overall, same-property cash NOI increased by 6.4% and core same-property NOI rose by 5.8%. The strong cash revenue growth included in GAAP residential revenues was partially offset by a $560,000 decrease in non-cash FAS 141 revenues. G&A for the fourth quarter was only 4.8% of revenues, well below our benchmark group.

Finally, turning to guidance, for 2017 we expect FFO to be between $1.88 per share and $1.94 per share, and AFFO to be between $1.53 per share and $1.59 per share. This includes converting approximately $8 million of non-cash revenue into cash NOI. We expect core same-property cash NOI to increase by between 5.5% and 6.5%. As usual, our guidance does not assume the impact of possible future acquisitions, dispositions, or financing.

For more information on the assumptions underlying our guidance, please refer to the schedule in the earnings package. I'll now turn the call over to the operator so we can take your questions.

(Operator Instructions)

Our first question comes from Jamie Feldman with Bank of America Merrill Lynch. Please go ahead.

Thank you. Can you talk more about the leasing progress in Warner Center and Honolulu, and what happened during the quarter and how sustainable that upside is to continue going here?

Yes, Jamie. Pleased to see really good activity in the quarter from a lot of different tenants in both those markets. It wasn't one large deal in either that did it. Just continued progress in both. Happy to see that. We like the momentum we're seeing and we're hoping that continues this year.

What does the leasing pipeline look like today in terms of rents? What are you guys seeing?

I think, honestly, they're the two markets everyone asks about though the two markets aren't necessarily together. We're doing well on both of them just from a lot of hard work. I think Warner Center at the moment is showing more strength in terms of continuing to push forward than the Honolulu market. We have some good strategies for Honolulu that we think -- we've been going back and forth there a lot. But I think in terms of just core strength coming out, I seeing more of that in Warner Center than we are seeing in Honolulu.

All right. Maybe asked another way, can you tell us what's in your guidance, like year-end occupancy, in those submarkets?

No, we don't give individual submarket guidance on that.

All right. Thank you.

Our next question is from Manny Korchman with Citi. Please go ahead.

Hey, guys. Jordan or Kevin, what, if anything, has changed in your potential acquisition opportunity set? I know we've spoken at length in the past about the Blackstone properties. Is there other stuff out there that you're interested in? And then, on Blackstone, when do you think that stuff actually hits the market?

Hey Manny, it's Kevin. There is other stuff out there besides Blackstone. I feel like we keep talking about Blackstone and ignoring all the other owners in the marketplace. But we did buy a building from Heinz last year. So, there are a couple Blackstone assets in the market. We're anticipating that portfolio should clear by the end of the year.

I think there's predictable other buildings we know we'd like to own -- obviously everything at the right price -- also coming out 2017, not Blackstone, that we know we want to own.

Got it. One for Mona. Mona, last quarter we spent a bit of time talking about lease term fees in the fourth quarter and how that affected guidance. Could you share what actual lease termination fees were in Q4?

Lease termination fees in Q4 were down from where we were in Q3. We haven't provided the actual number. If you want to give me a call I can walk you through maybe. They were down and so for the year we thought that the overall lease termination fees were in line with the guidance that we had provided initially.

Okay. Thanks.

Our next question is from Blaine Heck with Wells Fargo. Please go ahead.

Thanks, good morning. Jordan and Kevin, just following up on the possible investment activity, should we expect continued investment with or without your JV partners? Can you give us any sense for the amount you'd be willing to invest? And then how should we think about the sources of funds for investments should some sort of opportunity come up?

Not to do a super long answer, but as we've told people in the past, our relationship with our joint venture investors, while there's nothing legal requiring it, morally we've agreed with them that all of the Blackstone stuff, which we all joined together initially to buy, even though it's coming out on a one-off, we would do those with them. And we will stick with that, we're going to do that.

Now, when you get to other buildings, that's a little bit more of a mixed bag, which obviously our history is to buy other one-offs. When it wasn't something so big that we worried about organizing capital, we just usually bought it by ourselves. But at the same time, we want them to be happy. That's a platform we worked very hard to create and we want it to continue. So, we have to look at it on a building by building basis to see on those, it really depends more on what they want, and us wanting them to be happy. What were your other questions? Capital?

Any sense of the amount you'd be willing to invest. And then how should we think about the funding?

It's hard to determine the amount because there's such a mix of stuff coming out. I think in terms of funding, we've done a pretty good job in the past of, when stuff was large, finding a way to get control of it with partners and doing other stuff so that we didn't stress our balance sheet. And I suspect we'll continue to take actions to make sure that we don't stress our balance sheet, regardless of whether a large amount comes out or a little amount comes out.

Okay. That's helpful. And then for my second question, can you guys give us a sense for what you're expecting for GAAP same-store NOI in 2017? It seems as though the changes in straight line and FAS 141 might be providing a little bit of a tailwind for cash same-store. Is that fair to say?

Yes, I think that's fair to say. We're happy with the anticipated growth of our cash NOI overall. But there are headwinds from lower non-cash revenue from straight line rent and FAS 141. Overall we're happy. We're converting that non-cash to cash and we're still expecting strong FFO growth for 2017.

But you called it right.

Great. Thanks a lot.

Our next question is from Craig Mailman with KeyBanc Capital Markets. Please go ahead.

Hi, guys, just a followup on Honolulu and Warner Center. Both these markets have been a little bit weaker. Now we're seeing them both get some momentum at the same time. Is it something you guys are doing differently from a tactics perspective or is it just coincidental?

We're working very hard to be successful in those markets. Hopefully our hard work is yielding some results. But, at the same time, we can't manufacture out of air tenancy. Obviously the economy and other factors in those markets are also improving and that's also one of the reasons for our success.

But when you look at our occupancy in all our markets, typically we outperform the market. And certainly the outperformed portion, because we're a large portion of all these markets, is a result of our platform and the hard work that we do. So, I suspect it's a little bit of a mixed answer.

Okay. Then just a followup, Kevin, you mentioned you're looking at office and maybe resi, too, on the acquisition front. Just curious, as you guys look at opportunities, what are the return hurdles that you're looking at to do office versus resi or vice versa, and which are you guys seeing better opportunities in now?

They really haven't changed between the two product types. We haven't bought as much resi recently as we have office but we're still targeting, on an all cash basis, the 7-plus type of IRR for either product type.

And leveraged in the 9s. That's why you see us building. (laughter) That's why we're building instead of buying residential. Although, hopefully, we'll be able to buy some, too.

Thanks.

Our next question comes from Nick Yulico with UBS. Please go ahead.

For the same-store cash NOI growth guidance for 2017, I want to see if you could give a bit of a breakdown as to what office would do versus multi-family from a growth standpoint.

The split between our office and resi would be consistent.

I suspect most of it's driven -- the office number has got to be pretty close to that number because it's 85% of it. We haven't broken it out for you guys but historically those numbers, they have to be close together because it represents such a big portion.

Okay. Then on the office side for same-store in 2017, what is the driver of same-store NOI growth for same-store revenue versus same-store expenses? I know in 2016 you got the big benefit from same-store expenses being down. And I thought there was also some of those expenses you had to then reimburse back to the tenants. So, I'm wondering how that affects your same-store office guidance this year.

For purposes of forecasting 2017, we've taken the same approach we have in prior years. We expect about a 2% to 3% increase in our overall operating expenses for office. So, we're not assuming that we have some large reduction in expenses in 2017.

In terms of the question about the impact of the CAM because of our lower expenses in 2016, we are not expecting any negative impact in 2017. We haven't had a negative impact in prior periods. We consider that as we go through the year and if we're seeing changes between actuals and what we had budgeted, that's considered within the period. So, there should not be a negative impact in 2017 related to that.

Okay. Thanks.

Our next question comes from Alexander Goldfarb, Sandler O'Neill.

Good morning out there. Two questions. The first one, Jordan or Kevin, the occupancy that you guys are looking at for this year is 90% to 91%. And looking on your market list, there are three markets that are under 90% and five in total that are under 94%. I don't know if that list on page 14 includes the recent acquisitions or not, but just given the overall strength that you're describing, is this full occupancy because there's always an ebb and flow of tenants? Or do you think that 90% to 91% could be in the 92%, 93% by the time we get to 2018?

Hi, Alex. It's Stuart. That list on 14 does include our acquisition, so the vacancy that we bought last year is reflected there and you can see that. You're right, outside of the acquisitions and really Warner Center and Honolulu, the rest of the portfolio is pretty full. With our type of small tenant portfolio we'd think of 95% as pretty full. There's always going to be ins and outs, an ebb and flow, as you said, around that.

As far as the guidance for next year, we did buy some vacancy last year, as I mentioned. And, like I said, most of the gains have to come in Warner Center and Honolulu. And we're not really assuming we're going to make tremendous gains. We're not ready to assume we're going to make tremendous gains there at this point.

We're hoping to.

So, in 2018 it doesn't sound like we should expect it to pop much?

I'm not discussing 2018 at this point. (laughter)

Look, we're making good gains but we also want to be conservative in what's going on. As you pointed out, a lot of the portfolio is pretty full. Those are the two -- we have three opportunities to make good gains in occupancy. And the history of the Company is, when we had everything working full tilt, we got to 95%, 96%, and then we just hit a functional vacancy from tenants moving around.

So, where can we make gains? We can make gains -- obviously we buy buildings with vacancy. We've been making those gains and you see that in the fact that, overall, even though we're buying vacancy, we seem to be able to hold the number up. And the other two spots where we can make gains are in Honolulu and Warner Center, and you're seeing a little bit of gains there, too.

Okay. And then just on the tenant front, we've heard from the New York landlords the uptick in tenant optimism, enthusiasm, post election, et cetera. Have you guys seen any change in your markets or it's been status quo and there's been no discernible change in status activity pre and post election?

I think it's pretty much been no change. There's not a lot of post-election time period to look at but we haven't seen any changes.

Okay. Thank you.

Our next question comes from Jed Reagan with Green Street Advisors. Please go ahead.

Good morning, guys. You mentioned some pretty upbeat comments on the Landmark entitlement process. I think you said last quarter there were several approval milestones that were coming up in the months ahead. I'm just curious how those are coming along, if you could give a little more color on that.

Okay. We went through, since we last talked, we had two big hurdles that we passed, including most recently a week or so again. That was PLUM. So, as we sit right now, what we have left in terms of the official process is to get through the city council. And then there's some waiting periods where, in most normal worlds those waiting periods would be nothing but in the modern world of people always suing you no matter what you're doing, I'm sure there will be something that will slow us down there. But, actually, the optimism you heard before was warranted and we've done very well since then in terms of big hurdle meetings.

I think at one time you'd said maybe a 20% chance of getting to the finish line. If you were trying to set a line today, any sense?

Well over 21%. (laughter) We're over 50%. We're probably over 75% now. We're moving along quite well, I would say, giving it my highest level of optimism at this point.

Okay. Appreciate that. The cash rent rollups on signed leases last year were around 11%. Is that a reasonable expectation for 2017, especially just given that there's a decent amount expiring in the Valley in Honolulu?

It's tough to predict that number. As you know, Jed, it jumps around quarter to quarter depending on the mix of leases signed. And you saw that this quarter with the volume we did in Warner Center and Honolulu. The overall trends have been very good. We expect them to remain very good. Hard to predict exactly where it comes out.

Okay. And just in general, could you comment on your rent growth expectations for this year in your core markets?

Rent growth has been very good. Remains very good. Really, there's two questions we look at with rent growth. It's the cost of occupancy, has that gotten to a point where we're pushing tenants out of the market or they can't afford to be in the market. And the answer in our markets is clearly no. We're still a relative bargain to all the other gateway markets on rent.

And then is occupancy at a point where we can push rents, and that answer is clearly yes. It is at a point where we're pushing rents nicely. We had some good occupancy gains, had some good absorption in Q4. So, all that is a good sign for continued rental growth.

So, for West LA, is that mid single digits? Upper single digits? Double digits?

It was double digit for a long time. It slipped down to single. It's very strong, though. Look, we have the same predictors you have. We've seen West LA's occupancy really move up. We know the tightest correlation, the best predictor is occupancy in terms of what rents are going to do moving forward. And that number is a fantastic number. So, we're hoping for some good rental growth out of that. But we'll see in the next 12 months.

Great. Thanks for the comments, guys.

Our next question is from John Guinee with Stifel. Please go ahead.

Great. If we were trying to value the Landmark development, if you're able to get through entitlements and actually be ready to go, what's that worth? And then what do you think it's worth if you just never get there in terms of entitlements?

If they never get there in terms of entitlements, that's easy. It's worth what it was before. It's totally entitled for a super market. Everything is ready to go. I don't think it would be very tough to lease as a super market since we've got -- even without listing it we get inbound on people that want to lease it. What's it worth as an apartment building?

Just the land. Ready to go, entitled, structured parking or underground parking in place. Is that $50,000 a unit or $400,000 a unit?

That's tough. And speaking very frankly, I'd like to finish the process before I start speculating about how much -- whether we've substantially or insignificantly increased the value. We need to get through the whole thing.

And then in your property under development, you have about $58 million, $59 million. What's included in that, Mona?

The property under development is the Moanalua project that's underway in Hawaii. We've broken ground and we're building on that.

So, that's the only asset in that line item?

Yes.

Great. Thank you very much.

Our next question is from Rob Simone with Evercore ISI.

Hi, guys. I'm just going to take a flyer at this one, but looking at your largest office tenants, Time Warner has about 10,000 square feet this year and about 420 in two years. Is there any indication or anything you can comment on regarding that lease and the likelihood to renew?

No, nothing at this point that we're going to comment on. It's still pretty far out. The larger chunk of that, that's I believe a 2019 expiration, that's a single-tenant asset that we have out in Burbank. Warner Brothers is pretty well integrated into that building as far as being right on the edge of their studio lot there. We think they want to be in that building but pretty far out to say. And then obviously there's been some merger activity there, as well. Nothing to comment on at this point.

All right. Thanks, Stuart.

Our next question is from Bill Crow with Raymond James. Please go ahead.

Good morning, folks. Jordan, earlier in the call you referenced that you were working hard on some initiatives in Honolulu. I was wondering if you might fill us in on what you're working on. And is it possible or have you entertained the idea of bringing a joint partner in that might better recognize the value of the property there?

What we're working on is we're working on trying to buy another building in that market that would be appropriate for residential. There's a huge shortage of residential. And to our estimate there's about one building too many in terms of office downtown. And we know that the downtown is woefully short of res, particularly for rent, the typical workforce, people that are working downtown.

So, we've looked at what the double impact would be. Number one, if we could get some real residential moving downtown it would improve a lot of stuff down there in terms of retail and that Fort Street and the whole thing. It may not be a fantastic money maker but we definitely think it would be an okay money maker. But the biggest impact would be then it would soak up about 5% or 6% of the vacancy in that market. That market has perpetually been between 88% and 91%. If you could soak up some vacancy, you could put a little pressure on rent, so, you'd pick up something in the rest of the portfolio, including almost immediately. If we could buy a building, we could encourage those tenants, with incentives, to say -- hey, if you move into one of our other buildings it allows us to move along a little more quickly to do this.

Now, nothing I'm saying is a secret because we've been meeting with the city saying -- do you want this? Because it's going to take a little bit of participation with the city and then downtown groups. And everybody wants it down there. They want the housing downtown. They want to deal with the parking and the traffic getting in and out of there.

So, we've got a pretty good group there that has been encouraging in terms of this plan. It's a real focus for us to try and achieve it. So, we'll see if we do. It's got a lot of hurdles. But it is what we're working on out there. And it would change the way that market works, both in terms of residential and in terms of occupancy in the downtown market.

And the second part of that question had to do with -- I think you referenced that market as not being core or long-term core for you. So, is there a possibility you could turn to a joint venture to monetize part of the investment there?

There is. And actually it's a very attractive market in terms of interest from Asia. So, those opportunities are there, too. We've definitely had -- and I'm not saying we're going to do it -- but we've definitely had interest, particularly in this plan in various forms to participate in this plan with us.

Okay. Thank you. That's it.

Our next question is from Dave Rodgers with Baird. Please go ahead.

Real quick, on the comments that you made earlier in the call with economics on your leasing, call it, deteriorating because of the mix shift to Warner Center and Honolulu, if you bifurcated that and looked at core versus non-core, could you give a little more color in terms of the directionality of lease economics for the core markets, that you would call them, versus noncore? Are they going in the same direction, are they moving in opposite directions, is it purely mixed? That's the question.

I think they're all going in the same direction. They're all moving up. When you do more leasing in markets where you haven't had as much rent growth, then you see those metrics brought down a little bit, which is what we saw. But all the other core markets' metrics look very good, and Honolulu and Warren Center's metrics are improving. We just happened to do more there this last quarter.

I've got to tell you, when we saw this, I went back and I talked to Ken about it. I think if you took that out, we go back to the numbers you guys are more used to seeing.

Okay. That's helpful. Then Kevin, maybe just a quick followup. You were talking about everybody talking about the Blackstone deals that might hit the market. I think there was also some residential assets with a servicer that were supposed to come out before the end of the year. Has that hit the market yet and is that something on the radar?

Residential servicer?

For a residential portfolio that was getting set to hit the market prior to the end of the year, Santa Monica area.

There was a portfolio of assets that was in downtown Santa Monica that had some baggage associated with it with a lawsuit between the partners. It's something that we looked at and it priced beyond a level -- they picked somebody else.

Got it. Okay, thank you.

Our next question is a follow-up from Jamie Feldman with Bank of America Merrill Lynch. Please geld.

Thank you. I'm just curious, have you seen a shift in the buyer pool since the election or any of the changes in FX rates?

I don't think we've seen a big -- the buyer pool shifts based on the asset, is it fully leased up, what the size of it is. We haven't seen any shift just because the politics have changed and therefore a new group's come in. Have we seen anything like that?

No. The only thing, and I don't think this is election-related, I think it's more allocation-related, we have seen some other core funds pop back into the market. They were on the sidelines last year.

In the same countries you've seen, no shift in which countries are more interested?

The core funds are domestic, commingled core funds. But on the foreign side it's a little bit too soon to really know.

We haven't gotten any indication that it wasn't still the same.

Right. Exactly.

They still seem to be interested.

All right. Thank you.

Our next question is a followup from Jed Reagan with Green Street Advisors. Please go ahead.

I know you're typically not really active sellers, but as you look around the portfolio, are there additional assets you might consider recycling over time? You just talked about the Burbank asset earlier since it's your only one out there. That one came to mind.

Yes, we did look around. We sold one, a tower in Sherman Oaks just a couple quarters ago. First of all, I think the group of assets we have is a very strong group. They work well together and everything is hitting it. We're very pleased with our assets.

Are there assets that could be a source of capital to us if we were trying to widen our footprint in an area where we could take, let's say, a 45% partner or something like that? Yes, there are. But we have to match that with a need. If you switch your mind over to what are our capital sources, that's definitely one of our capital sources.

Okay. Fair enough. And there's talk that 1031 exchanges might be one of the items that could be targeted in a tax reform scenario. Do you have any view on how that could impact the transaction or pricing environment in your markets? Is it something that could impact your capital market strategy at all?

I have to say, I hear 1031 more often in smaller assets. I don't hear it as much on very large assets which is where we trade in our market. I'm sure if they eliminate 1031 I think, depending on other taxings they do, it could have an impact on trades because it's something that's useful to real estate. But you don't know what all the other changes -- they could make some other change. They're definitely talking about some other changes that would accelerate the pace of transaction. So, it's hard to tell what that overall package would do.

Fair enough. And just last one, housekeeping -- can you talk about your latest yield expectations for the apartment development in Hawaii?

I don't think we've amended those numbers. I think we said in the 7. I think we're plenty comfortable that we'll at least achieve that.

Great. Okay. Thanks, guys.

Okay. I think that was our last call. Thank you all for joining us and we look forward to speaking with you again next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.