Highwoods Properties Inc (HIW) 2017 Q2 法說會逐字稿

Ladies and gentlemen, good morning, and welcome to the Highwoods Properties Conference Call. (Operator Instructions) As a reminder, this conference is being recorded today, Wednesday, July 26, 2017. I would now like to turn the conference over to Brendan Maiorana, Senior Vice President, Finance and Investor Relations. Please go ahead, sir.

Thank you, and good morning. Joining me on the call this morning are Ed Fritsch, President and Chief Executive Officer; Ted Klinck, Chief Operating and Investment Officer; and Mark Mulhern, Chief Financial Officer.

As is our custom, today's prepared remarks have been posted on the web. If any of you have not received yesterday's earnings release or supplemental, they're both available on the IR section of our website at highwoods.com. On today's call, our review will include non-GAAP measures, such as the FFO, NOI and EBITDA. Also, the release and supplemental include a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. Before I turn the call to Ed, a quick reminder that any forward-looking statements made during today's call are subject to the risks and uncertainties and these are discussed at length in our annual and quarterly SEC filings. As you know, actual events and results can differ materially from these forward-looking statements. The company does not undertake a duty to update any forward-looking statements. I'll now turn the call to Ed.

Thanks, Brendan, and good morning, everyone. Each quarter, we typically start our call with a few brief comments regarding the economy and business conditions. In reviewing my prepared remarks from the past few years, the commentary has been consistently consistent: Economic growth at around 2% has been positive, albeit below the long-term trend; inflation has been nominal; interest rates have remained low; job growth has been modest, and the capital markets have been accommodative for well capitalized companies. At the risk of sounding like a broken record, or a podcast stuck on repeat, the current conditions appear once again in sync with the recent past. While seemingly stuck in second gear, this backdrop has proven to be a positive for our business.

Office absorption has remained net positive, speculative new supply has been held in check and well below past peaks, net effective rents have continued to improve and demand for highly pre-leased development has been healthy. We believe we're well positioned to continue to capitalize on this monotonous macro-economic environment. Our portfolio of BBD-located office properties continues to garner strong rent growth, our development projects will continue to strengthen our cash flows and drive value creation, and our balance sheet has never been stronger.

Other than the length of the cycle, we don't see any indications that the current economic conditions soon change. In addition, we believe we're well positioned if and when conditions were to change. Our BBD submarkets are typically the last to de-lease in a down market and the first to re-lease in an up market, our strong balance sheet provides us with the flexibility to pursue prudent growth opportunities via value-add acquisitions and our strong and proven development program.

Turning to the second quarter. We delivered $0.90 of FFO per share, 10% higher than this same time last year. The quarter included $0.01 from debt extinguishment gains. Our strong financial performance was driven by better NOI in our same property pool, accretion from recently delivered development projects; and savings from lower average interest rates. Given our positive results, we have increased the midpoint of our FFO per share outlook by $0.01 after factoring $0.02 of anticipated dilution from planned dispositions not previously included in our forecast.

In summary, we are pleased to deliver steady FFO growth while continuing to recycle out of non-core properties.

On the operational front, we posted strong same-property cash NOI growth of positive 5.3%. Cash rent spreads on signed leases were a positive 1% and GAAP rent spreads were a positive 15.3%. This quarter was the fifth consecutive quarter of positive rent spreads, double-digit positive GAAP rents spreads.

Our occupancy was 92.7% at the end of Q2, the same as at the end of the first quarter. An increase in occupancy in our same property pool was offset by placing in service our unoccupied 131,000 square foot industrial development project in Greensboro.

Behind the scenes, disposition activity was heavy during the quarter, and we expect those efforts will translate into closings that will occur in the latter part of the year. Therefore, we increased the low end of our disposition outlook from $50 million to $105 million. The $105 million includes the $13 million sold in the first quarter, plus another $92 million of properties that are under contract with nonrefundable earnest money deposits. We have additional properties entering the market for sale that could bring the total for the year to the high-end of our guidance of $150 million. We anticipate dispositions will be dilutive to 2017 FFO by $0.02 per share, with the impact primarily coming in the fourth quarter.

As a reminder, in keeping with our strategic plan, we routinely evaluate our portfolio for noncore properties and expect to continue to be regular recyclers of assets.

We kept our outlook for acquisitions unchanged at $0 to $200 million. The acquisition market is slow. For the few BBD-located, Class A properties that have come to market, we concluded pricing was out-of-sync with our view of the risk profile. We continue to evaluate on and off-market opportunities with a focus on prudent investing.

Our development program continues to be a core competency of our company. At $225 million of 82% pre-leased development starts encompassing 769,000 square feet announced so far this year, we've already exceeded the high-end of our original outlook of $220 million. This $225 million includes $99 million of new projects announced subsequent to the end of the first quarter.

In addition, during the second quarter, we placed $208 million of 96% leased development in service and signed a total of 245,000 square feet of first gen leases. Our development pipeline now encompasses 1.5 million square feet, a total investment of $440 million, and is 76% pre-leased. The largest of our recent development announcements is the $65 million, 219,000 square foot, third building for MetLife's Global Technology campus in Raleigh. This announcement comes less than 2 years after we delivered their first 2 buildings. This 50% expansion announcement is a flattering endorsement of the Triangle area and MetLife's confidence in the Highwoods team.

As part of yesterday's earnings release, we announced Virginia Springs I, a $34 million, 109,000 square foot, 34% pre-leased office building in the Brentwood sub-market, a Nashville BBD. Construction is scheduled to commence in the fourth quarter and the building will be built on company-owned land, which we acquired last year. Brentwood has vacancy of 7%, and there is no office development underway. Our 1.7 million square foot portfolio in Brentwood is 92.6% occupied. At our $107 million, 299,000 square foot Riverwood 200 development project in Atlanta, shell construction is complete and our first customers moved in during the second quarter. We're now 79% pre-leased 2 years in advance of pro forma stabilization. Shell construction is also complete at Seven Springs II, our $38 million, 135,000 square foot project in Nashville. We increased the pre-leasing percentage to 63% during the quarter, and have a number of active prospects. Stabilization is projected for the third quarter of 2018.

We continue to see a pipeline for potential, highly pre-leased development projects. While it's always difficult to forecast if and when a sizable user will commit to a development, we're encouraged by the conversations and level of activity and therefore, have increased the high-end of our development announcements from $220 million to $275 million. Our average development project announcement is around $50 million, so the high end of guidance includes the potential for one additional announcement before year-end 2017. Again, development is a core competency for us and an ongoing engine of strengthening cash flow and earnings growth.

The combination of strong operating fundamentals, a solid balance sheet, and the delivery of well pre-leased development projects sets the table for continued growth over the next several years. Ted?

Thanks, Ed, and good morning. We had solid activity this quarter. Fundamentals across our markets have remained consistently healthy over the last several quarters. We continue to see long-term dynamics benefiting our markets. Simply stated, people enjoy living and working in the southeast where population and job growth are routinely above the national average.

Raleigh had major employment growth announcements from numerous companies this quarter. Included in these are more than 1,000 expected new hires from both Crédit Suisse and Infosys, a new entrant to Raleigh, plus MetLife's planned growth at our campus for them.

Nashville has been our highest growth market this cycle, and it continues to attract new residents and employers, and its existing companies continue to expand their office footprint.

Atlanta, our largest market, has garnered many corporate relocations and the organic growth of large corporate users has been strong. With limited new speculative supply and solid growth, the outlook in Atlanta continues to be bright.

This past weekend, a New York Times article highlighted Pittsburgh as a growing tech center. Demand from leading tech companies, such as Google, Uber, Facebook, Amazon and Apple, will help drive office absorption across the market. There is also healthy demand from legal, financial and professional services firms as well as corporate users. The combination of a palpable urban vibe, affordable cost of living and steady stream of graduates from local universities has Pittsburgh on the map for employers seeking well-educated talent.

Turning to our stats for the quarter, total portfolio occupancy held steady from Q1 at 92.7%, and office-only occupancy increased 50 basis points to 92.9%. As Ed noted, rents continue to move-up and this was the fifth consecutive quarter with both positive cash rent spreads and double-digit positive GAAP rent growth. Further, our in-place cash rents per square foot are up 2.6% from the prior year, even with Bridgestone's 500,000 square feet where we're not receiving cash rent as this lease is still under early possession GAAP rent recognition.

We leased 575,000 square feet of second gen office space with an average term of 6.1 years this quarter, and year-over-year asking rents continue to move higher. TIs are generally moving up with escalating construction costs, but we've been mostly successful in recouping these costs with higher rents. Over the last 4 years, average net effective rents on second gen office leases signed have increased approximately 25%.

Turning to our operational performance in the quarter, we grew same property cash NOI by 5.3% over the prior year. We attribute this to higher average occupancy and in-place rents, plus lower operating expenses. We expect NOI growth will moderate in the second half of 2017 due to the timing and seasonality of operating expenses and previously disclosed move-outs. Overall, we're pleased we were able to increase our same property NOI growth outlook again this quarter. Our updated outlook is 3.0% to 3.75% growth, which we view as positive considering average occupancy in the same property pool is projected to be modestly lower year-over-year. We ended the quarter with 92.7% occupancy and our year-end outlook remains unchanged at 92.2% to 93.2%.

I'll first start with a brief update on our work to backfill some of the larger 2017 move-outs we have previously disclosed. In Nashville, at the end of Q1, we had re-let 37% of the former 210,000 square foot HCA space. We're now at 44% and have strong prospects that would take us above our year-end goal of 50% re-let.

In Richmond, we mentioned last quarter that we already released 39% of the 163,000 square feet that SCI is scheduled to vacate in the third quarter. We move that -- the re-let percentage to up to 64% at the end of the second quarter, and we have prospects for approximately half of the remaining space. We feel good about the level of interest we're seeing.

In Atlanta, as previously disclosed, we'll get back 136,000 square feet in 2 blocks in the third quarter. These move-outs are heavily driven by customer M&A activity. The positives are the blended in-place rents are approximately 10% below market and there aren't a lot of large blocks of Class A space available in Buckhead.

Sticking with Atlanta, we continue to generate strong rents as evidenced by GAAP rent spreads of positive 30.5% on signed deals in Q2. The positive backdrop of fundamentals and the quality of the blocks of space we will soon have available combine to make us confident we'll drive NOI upward as occupancy normalizes.

We've seen the most year-over-year improvement in our Tampa portfolio, where occupancy is up 420 basis points. Our occupancy is 93.1% and activity remains healthy. We signed 96,000 square feet of second gen leases in the quarter with GAAP rent growth of 19%.

According to JLL, asking rents in Tampa are up 3.8% over the last 12 months. At SunTrust Financial Center, we're now 89.7% occupied, up from 77% when we acquired it less than 2 years ago. With no new speculative office construction and healthy demand from a diverse group of users, we expect solid fundamentals to continue.

In Raleigh, the market continued to show steady growth. Per Avison Young, Class A rents are up 5% year-over-year and vacancy is down 140 basis points to 9.0%. Our portfolio is 93.3% occupied, up from 91.9% a year ago. We've been watchful of the new supply, which is now 2.1 million square feet, or 4.5% of the market. At 38% pre-leased and spread across the numerous sub-markets in Raleigh and Durham, we believe the level of supply is meeting market demand. Less than 1 million square feet of this supply is competitive to our BBD-located office portfolio.

Finally, in Nashville, leasing activity and rents remain strong. Per Cushman and Wakefield, market vacancy is 6.9% and 6.0% for Class A properties. Class A asking rents are up 10% year-over-year. New supply is 2.5 million square feet, or 6% -- 6.7% of inventory, which is approximately 60% pre-leased. New supply levels are down from the peak in 2016 and net absorption was robust in Q2 at 667,000 square feet. The market's study demand suggests the remainder of this new product will be appropriately absorbed. Our portfolio occupancy is 95.7%, up 150 basis points from Q1, and we posted solid GAAP rent spreads of 15% in Q2.

In conclusion, the positive fundamentals across our markets offer a healthy backdrop for our business. Solid demand for our well-located BBD office product should support strong organic NOI growth going forward. Mark?

Thanks, Ted. During the quarter, we delivered net income of $37.6 million or $0.37 per share, a 16% increase year-over-year, and FFO of $94.5 million, or $0.90 per share, a 10% increase year-over-year. Rolling forward from the $0.80 per share of FFO we delivered in Q1, the increase in Q2 was driven by the following items: NOI from our customer's early possession of Bridgestone Americas headquarters of $0.04 per share; debt extinguishment gains of $0.01 per share; the normalization in G&A that equated to $0.02 per share. As you know, our first quarter G&A is customarily higher due to the routine expensing of equity incentive costs under our long-standing retirement plan.

Sequential improvement in same property NOI of $0.02 per share, much of this improvement is driven by seasonality that we usually see in Q2. And as Ed noted, there were also other lower-than-anticipated operating expenses in the quarter; and finally, lower interest expense of $0.01 per share. These items make up the $0.10 increase in FFO.

Turning to our balance sheet and financing activities, we ended the quarter with leverage of 35.3% and debt-to-EBITDA of 4.56 turns. Importantly, while we are committed to grow on a leverage- neutral basis over the long term, we are able to fund the remaining $271 million of spending on our development pipeline without the issuance of new equity and still maintain a debt-to-EBITDA around the midpoint of our stated comfort range of 4.5x to 5.5x.

We had several important financing transactions this quarter. The first is a new, $100 million secured loan with a 12-year term that carries a 4% interest rate. These proceeds were used to pay off a $108 million maturing secured loan with an effective interest rate of 4.2%. This refinancing extends out our maturity ladder at a competitive fixed rate while further driving our unencumbered NOI to a record level for us at 96%.

Second, we entered into floating-to-fixed interest rate swaps through January 2022 with respect to an aggregate of $50 million of LIBOR based borrowings, which effectively fixes the 1-month LIBOR at a weighted average rate of 1.69%.

Third, as I mentioned on our last call, we obtained $150 million of forward-starting swaps that effectively lock the underlying 10-year treasury at 2.44% with respect to a forecasted debt issuance before May 15 of next year.

As Ed mentioned, we updated our FFO outlook to $3.33 to $3.38 per share, a $0.01 increase from the previous midpoint of $3.345 per share. As noted in our earnings release, this increase incorporated anticipated dilution from planned dispositions we forecast will close in the remainder of 2017. Most of this dilution will affect our fourth quarter results.

When factoring in this $0.02 of estimated dilution, our apples-to-apples FFO outlook is up $0.03 per share at the midpoint. While these dispositions are dilutive to FFO, we don't expect they will alter our trajectory of strengthening cash flows in 2017 and beyond.

It's worth considering a few modeling items for the second half of 2017 and going forward: Our same property cash NOI growth is expected to moderate in Q3 and Q4 due to the timing and seasonality of operating expenses, and the back half of the year impact of the known vacancies that we have discussed. Other income is projected to drop due to the nonrecurring debt extinguishment gains realized in Q2 that are not forecasted to repeat in the second half; higher interest expense due to lower capitalized interest; and higher share count. With that, operator, we are now ready for your questions.

(Operator Instructions) Our first question comes from the line of Manny Korchman.

So given the positive remarks you had about both sort of Nashville and Pittsburgh, if we were to push you really hard and say what's going to be the next market that you go into sort of the way you did Nashville, what would that be in?

So a new market for us or where new dollars would more likely be invested?

Sure, both.

So the answer on the first with regard to new markets, where we look at markets, as you know, that aren't gateway cities. So we're not interested in trying to elbow our way into New York or L.A. as examples. So we'd like to be kind of the big dog on a medium-sized portion in mid-tier cities. We also like cities that have demographics that outperform national averages and we've seen that in our current footprints, so we would look for cities that mimic having demographics that outperform national averages. And then proximity to our current footprint makes a lot of sense. So let's say that Portland has really good demographics, it's not a gateway city, but geographically, it doesn't make sense to us. So we have routinely looked in markets that basically go from D.C. over to Texas and that leaves you with about half a dozen or more markets in that footprint that we routinely look at for a right opportunity to enter as we found in Pittsburgh but we haven't found pricing or assets or scale to be in alignment yet with our investment objectives. And then with regard to just dollars invested going forward, you would predominantly be in this part of the cycle on the development side given acquisitions is pretty quiet right now. And we're looking at a good handful of additional developments in addition to what we have in our current development pipeline, but it's very difficult to tell what may or may not come to fruition on, on the build-to-suit side. But I can tell you that of the handful that we are pursuing, it crosses 5 different markets for us.

Great. And then if we think about the move-outs that are coming in, in the latter half of this year, how much capital do you think you'll have to put into those spaces to get them released?

I think it's probably the biggest disproportionate amount, Manny, would be -- and I know this is reaching into next year, would be the FBI because we have a heavy dose of Highwood-tizing that we need to do there, and we'd get that space back in February '18. But as far as the HCA space and the SCI space, we've already invested the dollars in both of the HCA buildings, which was divided 1 33 22 and the other ramparts. So those improvements have been -- the common area Highwood-tizing improvements have been complete. And then the TI dollars will just be in sync with market. There's no unusual aspects of that or at SCI in Richmond.

Our next question comes from the line of Jamie Feldman with Bank of America Merrill Lynch.

I guess, just sticking with some of the Atlanta vacancy to come, can you maybe just talk about asking rent then specific leasing pipelines or tenant interest breaking out the Buckhead space, the 2 Buckhead spaces, and then also from the FBI, just how we should be thinking about timing and what that demand (inaudible) looks like today?

Sure, Jamie. This is Ted. First, in Buckhead, I think we're asking rents in Buckhead in those buildings, generally mid-30s, which is about a 20% below than the Three Alliance building, new construction just got delivered. So we're signing deals in that range today. Feel like the market, there's nothing else under construction, so we take the market and there aren't a lot of new big blocks under -- available in the market. So we feel pretty good about leasing that up. Again, just a reminder, we get about half the space back at the end of this month, and about half at the end of August. We've already had numerous showings on the space. So I think, we're going to lease that up in due time. With regard to the FBI, they vacate February 1, '18. We're already starting to show that as well and seeing a lot of activity including a strong prospect for about 18% of the space. So we feel real good about leasing that up in our fair amount of time as well.

And then with regard to your question about where it stands in the market, combined, the 2 tranches that we'll get back in Buckhead are about 10% below market and the FBI space is basically equal to market today.

Okay. And the FBI space, was that something that you would break up?

Absolutely.

Yes.

It's a good question, Jamie, because you would normally think that it's a field office, so it'd be a single customer building, but they actually occupied 136,500 square feet of a 228,000 square foot building. So it is a multi-customer building today. So yes, we would absolutely lease 5 [floor]. In fact, we have a good prospect for 8 floor at this juncture.

Okay, great. And you didn't talk a lot about Orlando. Could you just update us on what you have going on there? Is that a market you want to stay longer term? Just latest thoughts.

Sure. Yes. It's a core market for us, no doubt. Our investment in Lincoln Plaza, we have a site downtown that we have schematic drawings for a -- but what we can do up to a 300,000 square foot build-to-suit right across from our capitalized 1 and 2 with integrated structured parking. Yes, it's -- you may remember, we bought DLF out a number of years ago. We think that, that -- the basis in which we bought that 1.3 million square feet, very attractive. And Orlando has been slower to come back after the recession, but we're certainly seeing that market show some positive signs. Akin to what we've experienced in Tampa, the Raleigh, Nashvilles, Atlantas came back quicker and Tampa was slow to do it, but now Tampa is I think, Ted said in his comments, is probably one of our hottest leasing markets right now and we're hopeful that Orlando's not far behind that.

Okay, and then just last question is, I think you had mentioned 5 potential build-to-suits you're working on. Is that all on Highwood land and what is that mean for yield?

All but one are on Highwoods land. And the yield, what we have said in the past is we don't like to speak to anything specific because in the competition, those were recording from project to project, but we've consistently averaged 8 plus on a GAAP return for our development projects.

Our next question comes from the line of Dave Rodgers with Baird.

Mark, maybe just start with you on Bridgestone. Was the contribution in the second quarter a full quarter contribution? I guess other way of asking that, is there any incremental contribution in the third quarter?

No, Dave. Yes -- there was a full contribution in the second quarter and will be -- similar number in Q3.

And I assume the big [break] line rent had it -- the Bridgestone addition. I guess, maybe as we roll forward over the next quarter, 2 or 3 and into '18, can you talk about kind of what the straight-line rent adjustment would look like, both with the assets sales but maybe you're looking at maybe some older, higher CapEx sales, as well as the Bridgestone roll-off and roll-on to cash rent?

Yes. So Dave, the Bridgestone lease, obviously, will convert to cash in 2018 here. So that straight-line rent will decline. Again, it was about $4 million a quarter in Q2 and Q3. The dispositions will be dilutive to FFO, as we've noted in the release. But from a cash flow perspective, not really impacting any of that and so that should be positive again from a net cash flow basis and going forward.

Okay, that's helpful. And maybe for Ed or Ted, I think the year-end occupancy guidance is right below 93% at the midpoint. Do you feel that there's still room to push occupancy here in the cycle over the next couple of years, or are we getting to that point of kind of a frictional vacancy rate within the portfolio? Just curious on your thought on that.

Yes. I think it's fair to consider equilibrium in the current environment to around 93.5%. And obviously, the -- view of us placing in service the 131,000 square foot warehouse in Greensboro that's unleased has an impact on what -- where we may be by the end of the year.

Okay, that's helpful. And then just given the strength of the office markets where you are, any thoughts on moving forward more speculative development on the office side like you've done on the industrial, like you talked about and talk about any activity that you might have on the industrial building you just mentioned. So, sorry 2 more.

Sure. So on just the spec development, we did announce in yesterday's release Virginia Springs I, which is 34% pre-leased building. So there's obviously a spec component to that. Prior to that, we had announced 751 Corporate Center in Raleigh. Again, about 1/3 pre-leased. And then before that, we had announced CentreGreen -- 5000 CentreGreen, that was a pure spec building. So, I think we've done it in a very cadenced manner, and we'll continue to look at those opportunities. And we look across how much do we have that's build-to-suit 100% pre-leased versus how much spec do we want to take on, so we look on it -- looked at it, not just by market but in the aggregate across the portfolio. And I think the cadence in which we've done that would be a fair way to consider how we will continue to do it in the future. The second part of your question, with regard to the -- the building we're referencing is Enterprise V. It could be confusing because we also recently announced Enterprise IV. Then they're both about the same size, about 130,000 square feet. Enterprise IV, we announced 63% pre-leased. Enterprise V, which we started a year before, we started spec. And it's still, as I mentioned, unleased. But we feel very good about it. In Enterprise Park, we have 660,000 square feet, that's 96.7% occupied. And in Greensboro, we have 2.4 million square feet that's 95.8% and the market itself is 114 million square feet, that's 95.5% occupied. So when you look across whether it's ours in the park or in the market or the market as a whole, the occupancy is 95-plus percent, so we just haven't met the right customer yet and the total investment is only $7.6 million, so we're not losing any sleep over that one yet.

(Operator Instructions) Our next question is a follow-up question coming from the line of Manny Korchman with Citi.

Just a follow-up. The operating expense savings in 2Q, can you sort of discuss what they were and how they differ from the ones in 1Q? And I was under the impression they are sort of more deferred in nature and will actually be recognizing in 3Q or 4Q, so maybe just some details on that?

Yes, Manny. It's Mark. What I'd say is obviously, we -- the second quarter is milder weather so our utility numbers were a little modest compared on a comparative basis. We had some property tax savings that we were able to get through the property tax appeal process. So I would say those were the primary drivers of maybe the decline. What we're cautious about is we did have some repair and maintenance expanding that we think will shift into the third and fourth quarters so we do anticipate again a moderating of that same store NOI number as you go into Q3 and Q4. We're coming off 2 quarters of 5-plus percent growth in cash NOI, and you see what we did to the guidance. So yes, we do anticipate a combination of a little higher OpEx and then some of the impact of the vacancies impacting those numbers.

Our next question is a follow-up question coming from the line of Jamie Feldman with Bank of America Merrill Lynch.

I'm just curious to hear your latest thoughts on how much you may need to raise the dividend based on the developments in the pipeline and cash flow growth?

So Jamie, as you know, we kind of make a periodic evaluation of the dividend, we've got a lot of good things happening here with respect to putting, as you noted, the developments in service and the cash flow improving over time. So I do think that the CAD numbers and certainly the free cash flow will strengthen over time. And we'll get in and make that decision and discuss it with the board, obviously, and make some evaluation, but it's a little early for that. We're just coming off a 3.5% increase that we made in Q4 of '16. So I think we'll get to that but I wouldn't tell you what that is right now.

There are no further questions on the phone lines at this time. I'll turn the conference back to you.

Thank you, everyone, for dialing in. Thank you for the questions as always, if you have any follow-up questions, don't hesitate to give us a call. Thank you.

Ladies and gentlemen, that does conclude the conference call for today, we thank you for your participation and ask that you please disconnect your lines.