NNN REIT Inc (NNN) 2004 Q1 法說會逐字稿

Good afternoon, and welcome ladies and gentlemen to the Commercial Net Lease Realty first quarter earnings conference call.

At this time I would like to inform you that this conference is being recorded, and that all participants are in a listen-only mode.

At the request of the company, we will open the conference up for questions and answers after the presentation.

I will now turn the conference over to Mr. Craig Macnab.

Please go ahead sir.

Thank you Tiffany.

Good afternoon, and welcome to our first quarter 2004 earnings release call.

I am the Chief Executive Officer of Commercial Net Lease Realty.

I have with me on the call Kevin Habicht, our Chief Financial Officer, who will report on our first quarter financial results.

I will then follow Kevin’s remarks.

Thanks Craig.

Let me start off with our customary and cautionary comments that we’re going to make certain statements that might be considered to be forward-looking under Federal securities law on this call.

The company’s actual future results may differ significantly from the matters discussed in any forward-looking statements.

And we may not release revisions to these forward-looking statements to reflect changes after the statements are made.

Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company’s filings with the SEC and today’s press release.

With that, thank you all for joining the call.

As indicated in the press release, FFO was reported at $18.4m, or $0.36 per share for the first quarter of 2004.

That compares with $0.35 for the same period last year, and represents a 2.9% increase over year ago amount.

First, a quick note on our financial statement presentation.

As we have previously indicated we would do, we have begun to consolidate our taxable REIT subsidiary balance sheet and income statement onto the REIT financial statement beginning January 1 of ’04.

Accordingly, some of the items – some of the line items and amounts look a little different than what you may have been used to seeing.

However, it does not produce any changes to the capital structure of the company, since there is no third party debt and there is no impact on the bottom line net income.

So with that preface, looking at some of the individual income statement line items, total revenues for the first quarter were $35.9m.

That represents a $10.4m increase from a year ago.

The increase in total revenue is primarily a result of the rental revenue increasing $5.1m, largely as a result of the acquisitions we made in 2003.

Total occupancy at quarter end decreased 30 basis points from year-end ’03 to 96.7%.

And our new reporting format, we have also begun to report real estate reimbursements separately, on a separate line item, much of which - $1.2m of it – comes from our Washington, D.C. office building.

Additionally, since we have consolidated our taxable subsidiary, we are reporting the gains on the sale of the properties held in inventory down in that subsidiary, which – those gains increased $2.4m over prior year amounts, again, primarily as a result of the properties in our build-to-suit development program.

We sold four properties there for a gain of $3.4m.

As we have indicated, there will be choppiness in this number from quarter to quarter, depending on the timing of those sales.

Lastly, on the revenues, the interest and other income increased $1.9m.

This is primarily from the additional interest income from our mezzanine loan investment that we made in October, 2003 on the California office portfolio, which produced about $1.6m of income for the company.

Property expenses increased to $3.4m compared to last year’s $1m.

Again, this increase was nearly all related to the Washington, D.C. office building.

G&A expense was $5.9m and, as I alluded to earlier, now includes all the G&A from the REIT, as well as the development and acquisition activities down in our taxable subsidiary.

This is a $1.4m increase from the same quarter last year, but actually represents a $400,000 decrease from the immediately prior fourth quarter of 2003.

We expect G&A on this consolidated basis to be approximately $23.5m this year, running about $5.9m per quarter.

As a percent of revenues, the G&A declined a bit – 120 basis points – compared to the prior year.

Skipping down to interest expense, it increased $1.2m from year ago levels, to $7.7m.

That was relatively flat with the fourth quarter ’03 - $7.6m as a result of modest increase in debt outstanding.

The equity and earnings from our unconsolidated entities was $1.2m on the P&L.

That’s fairly flat with prior year.

With our taxable subsidiary now consolidated in a REIT, this line item largely represents primarily interest income and some mortgage investments we’ve made that are held in LLCs that we have an interest in, which are capitalized with 100% equity, as well as we own a 25% interest in our headquarters office building.

This line item we anticipate to be fairly consistent over time.

Lastly, with regard to the income statement, I will note that again we’ve included with our press release some additional disclosure, to allow you to adjust the various income statement line items, so you can see the P&L – what the P&L would look like if FAS 144 had not been applied, and which treats – as you are aware, 144 treats property sold from the REIT core portfolio as discontinued operations.

With regard to guidance for 2004, we are revising our guidance down to 145 to 148, largely due to the difficulty we see in meeting our planned acquisition volume, and timing in 2004.

We were below plan in the first quarter, and not particularly encouraged at the moment about the second quarter, to date, and for the remainder of the year.

And while we might be able to make up some of the volume before year-end, we obviously won’t be able to make up the timing.

So that’s the primary reason for moving the guidance a little bit lower.

Additionally, this lack of investment is probably going to produce a little bit below plan gain on sale of properties in our taxable subs 1031 exchange business.

With the rising rate environment, we might get some help on this problem at the margin.

But we don’t think we can bank on that factor helping sufficiently at this point to make up for all the lost ground, particularly, again, on the timing front.

We have typically hit our guidance fairly consistently.

We’re disappointed with the downward revision.

And we’re looking at a range of potential alternatives to improve these results.

We continue to see the year back-end loaded, largely as a result of the timing of the sale of these inventory properties.

And we are not really changing our quarterly guidance, offering up, really, a kind of a broad range of $0.35 to $0.39 on a quarterly basis, again with this somewhat back-end loaded to the second half of the year.

Additionally, this guidance that I just gave you does exclude one-time charges that we anticipate with the senior management changes announced over the past couple of months.

The bulk of these charges will take place, we believe, in the second quarter of 2004.

We currently estimate the total charges to be approximately $3.2m in 2004.

And we’re estimating 80-85% of that will take place in the second quarter.

And approximately half of that will be non-cash charges.

As a result – I mean as always, these projections are based on a number of factors and uncertainties discussed in our public filings.

Quickly moving to the balance sheet, there was little change in the capital structure during the quarter.

In February we issued 953,551 common shares, in exchange for an 80% interest in a joint venture which we manage and owned the other 20% interest.

The JV was formed in ’97, and owns nine properties.

We don’t anticipate that the acquisition of this JV interest to have a meaningful impact on our per share results, as the accretion from the property acquisition is largely offset by the loss of management fee income.

We finished the quarter with $516m of total liabilities.

Of that, $165m was mortgage debt.

On a total debt to total asset basis – and we look on kind of a gross book basis before accumulated depreciation – debt to assets was 38.8%.

That’s up slightly from the prior quarter, but down from year ago amounts of 40.7%.

We do, I will note, have $100m of unsecured notes that come due in June of this year – 2004.

And we anticipate refinancing that with ten year notes.

And I will point out that on February 11 of 2004 we hedged this refinancing.

On the interest coverage front, interest coverage for the first quarter of 2004 was 3.6 times.

Fixed charge coverage was 2.8 times for the first quarter.

And we’re pleased with these coverage amounts.

But they may moderate a bit with interest rates ticking up a bit.

In closing, I think while the acquisition environment has not been exactly what we would like, we are kind of redoubling our efforts to improve the long-term operating performance.

However, I want to point out the company is in very good financial position.

And the core property portfolio is performing well.

And my last note I did want to point out on Eckerd, which has been one of our largest tenant concentrations over the years, Eckerd Drug is slated to be sold, as you are probably aware.

And we anticipate that our 11% Eckerd exposure will become a 7% CVS and 4% Jean Coutu concentration in our tenant roster, which frankly we view as a net positive for the portfolio.

That’s all I have for my prepared remarks.

I will turn it back to you Craig.

Kevin, thank you very much.

As you are aware from our press release of earlier this week, our former President and Chief Operating Officer, Gary Ralston has resigned from the company for personal reasons.

And we wish him great success in the future.

Gary made an enormous contribution to our company, overseeing our growth from $15m in assets in 1992 to approximately $1.25b at the present.

And I personally want to thank Gary for his significant role in creating the very strong company that we have today.

I am excited to be part of the Commercial Net Lease Realty family.

And I would like to highlight some of the attributes that attracted me to this terrific company.

Firstly, we have a well diversified, high quality tenant roster, that contains some of the finest retailers in the country.

In addition, our Washington, D.C. office building, that has the U.S. government as its tenant, is a great asset.

And we’re very proud of it.

With the benefit of hindsight, this excellent property is worth considerably more than we paid last year, given the value we have added, and the environment we are pricing for these high quality assets in and around our capital is very aggressive.

Thirdly, our high quality portfolio produces an extremely predictable cash flow, that provides us a sound financial footing.

And of course, as Kevin mentioned, our balance sheet is compatible with that same high quality foundation.

These core strengths have allowed us to produce shareholder returns of 13.3% per annum over the last 10 years, which compare very favorably with the returns of all the major market indices.

Finally, in the brief two months that I have been here at Commercial Net Lease Realty, I have been overwhelmed with the quality and the caliber of the people on our team, as well as the strength and participation and interest of our Board members.

As Kevin indicated earlier, the acquisition environment on which we are substantially dependent for external growth is extremely difficult.

And we’re being true to our heritage and exercising prudent judgment, focusing only on high quality acquisition opportunities that are accretive to our shareholders.

If interest rates increase, the competitive acquisition environment may ease off a little bit, as some of the participants that compete in the market may have more difficulty arranging the high loan to value financing that they have previously been able to obtain.

We think that this may assist us in the future.

We’re moderating the amount of acquisitions that we’re projecting for this year.

And we have a stretch objective to close between $150m and $180m of acquisitions during this calendar year.

In the first quarter, we closed approximately $38m of investments.

And at this point, we have under contract a letter of intent approximately $45m of acquisition transactions.

I would add that our [deal float] [ph] continues to be strong.

But more importantly, in the last month or so, we’ve seen improvement in both the quality and the amount of opportunities that we are evaluating.

In our taxable subsidiary, the 1031 exchange business has not met our expectations for the first half of the year.

While demand for these assets are strong, we’re not satisfied with the amount of product that we have acquired to sell into this market.

The improvements that we are currently seeing in our acquisition pipeline should enable us, however, to take better advantage of the 1031 market in the second half of this year.

Our build to suit operation continues to execute on budget.

And the outlook for that business remains promising.

As we are all aware, spreads in development are wider than acquisitions to the extent that we are manufacturing product on a wholesale basis.

In our case, we have a fairly modest development portfolio, which does have the potential to result in lumpy performance on a quarterly basis.

At the present time, it appears that the second quarter may be weaker than some of the previous quarters, for realizing gains in our build to suit division.

However, the rest of the year looks promising, based on the current properties that we have under development, and slated for sale.

In addition to these projects, our build to suit team continues to grow our pipeline of new opportunities.

With respect to the future, the highly predictable foundation of Commercial Net Lease Realty is not going to change.

We’re going to continue to prudently grow our company, generating shareholder returns over a multi-year timeframe.

Having said that, we are in the early stages of evaluating all segments of our business, which will take place over the next approximately four months.

And we will and are developing strategies and tactics to expand our return on invested capital.

We will continue to focus on quality real estate assets, while prudently evaluating opportunities where we determine the risk adjusted returns are acceptable.

By way of illustration, we are currently pursuing triple net lease acquisitions, on assets that include market leading automobile dealerships in major metropolitan markets.

In addition, I have no doubt that over time we will also selectively add other retail property types as well.

At this juncture, it is appropriate to mention that in my opinion we’re in a marathon to build long-term shareholder value, and not a sprint, measured in brief quarterly increments.

I am committed personally to continuing the long-term track record of success that I have inherited from Jim Seneff and all my colleagues here at Commercial Net Lease Realty.

Tiffany, we would like to answer any questions please.

Thank you sir. (Caller instructions.) Our first question comes from Eric Rothman with Wachovia Securities.

Please state your question.

Good afternoon gentlemen.

I am curious.

Are you going to be replacing the COO position?

I don’t think so.

Craig –

Certainly not in the near term.

Uh-huh.

As the new CEO, what mark do you intend to leave on Commercial Net Lease?

What, from your background, are you going to draw upon in particular as you kind of turn this company around?

Well, I appreciate the question.

And most recently my background has clearly involved the management of a company that had a broad, diversified retail portfolio.

It did include multi-tenant retail.

That is one of the options that we are evaluating.

But I think in the near term, it is not likely to be a priority.

I think our focus is going to continue on the same as what it has been – the consistent, highly predictable performance, focusing on a well diversified, high quality tenant roster.

I think that we, as I mentioned in my earlier remarks, we are going to explore broadening the types of assets that we’re going to acquire.

I think in the near-term, it’s fair to say it’s keep the ship on the same steady course it has been.

When you say broaden the types of assets, are you meaning going outside of the office industrial and retail property types?

I don’t think so.

I am sorry if I gave that impression.

As I mentioned earlier, we are looking, for example, at automobile dealership properties.

So that could be straight down the middle, triple net lease, high quality, credit worthy tenants that are retailers.

The industrial acquisition environment is something which we have yet to make an acquisition in.

We have most recently come very close on a high quality industrial portfolio that somebody just wanted more badly than we did.

In the near term, the cap rates that people are paying on high quality industrial assets are very aggressive.

But I think the intent earlier to broaden the type – the categories of assets that we’re going to play in, which includes office and industrial, at different times in the cycle, will give us opportunities.

But in the near term, it would appear to us that the better opportunities are in retail and selectively in the office arena.

I understand.

And in terms of the cap rates that you’re seeing in all three of those areas, or quality tenants that you might go after?

Well obviously office is a little more aggressive than retail.

But in the first – in the current environment, and consistent with that in the first quarter, our acquisitions were at cap rates of around 9%, say a range from 8-3/4 to 9-1/2 percent.

And those were all retail acquisitions?

They were.

Yes sir.

And what type of cap rate are you seeing on the office that you’re passing on?

Well, let me answer it slightly differently.

In the assets that we currently have under letter of intent or under contract is a small, high quality office acquisition, with an A-rated tenant, where our team responded very, very quickly to a market opportunity.

And that cap rate is in the 8-1/4 type percent range, with opportunities to increase it.

Just one or two more questions before I yield the floor.

Would you consider moving down the quality curve to enhance returns, the tenant quality curve?

We’re going to focus on risk adjusted returns.

And obviously, as we move down the quality pipeline, those returns, by definition, need to go up.

But I think we’re more interested in focusing, perhaps slightly broadening the boxes that we have been playing in, to include other retail opportunities.

And I don’t want to convey the impression that automobile dealerships are going to become a primary asset.

That’s not the case.

But I would observe that there are several very well capitalized public companies that play in this space.

And at the margin, if we can add a couple of acquisitions in that segment, they will more broadly diversify our portfolio.

Those are not lower quality assets.

And the cap rates are very compatible with the ranges I mentioned earlier.

And I think Eric, just to jump in, I think we have always taken the approach of it’s not just kind of one-dimensional risk analysis.

I mean tenant credit clearly is a component of it.

But real estate quality is of paramount importance to us.

And so at times we have been able to take a below investment grade kind of credit risk, because we felt very comfortable with the underlying real estate value.

And it represented a reasonably small portion of our portfolio.

So we really try to kind of blend a number of factors together in evaluating credit risk – it’s not in isolation – to produce the risk adjusted returns Craig was talking about.

Thank you very much.

Just two very, very quick housekeeping questions.

The inventory for property available for sale in the build to suit was what at quarter end?

Hang on one second.

Completed projects in the build to suit was $19m.

And we had $45m in the development pipeline, $21m of which was completed, $24m yet to fund.

And how many projects is that?

Completed projects are – there is four different projects.

And then under construction we have seven.

Great.

And then just lastly, occupancy?

96.7% at quarter end.

It was – we anticipate the year will be just above or below – 97% is kind of our general base projection there.

All right.

Thank you very much.

I will yield the floor.

I appreciate all your time.

Thanks Eric.

The next question comes from Jeff Donnelly with Wachovia Securities.

Please state your question.

See, we’re starting to dominate.

I guess first off, I want to just extend our best to Gary.

We sincerely wish him the best going forward.

Thank you.

And he, I am sure, appreciates that.

Thank you for saying that.

And second, I guess Craig, welcome to the fold.

I think you’ve done a good job so far highlighting your plans to reinvigorate a focus on ROIC.

Hopefully in further quarters, you will be able to put a finer point on the specific moves.

I guess the first question really, and in that regard, to accelerate your ROIC for the company, are there methods for you to do this through disposition rather than acquisition of business segments, or portfolio specific assets with maybe the proceeds you recycled into other assets, or even into share repurchases?

Jeff, that opportunity does theoretically exist.

It’s certainly on our list of things to evaluate.

The acquisition market is difficulty, which means that the disposition market is something that we need to take a look at.

Yeah.

I mean we look at our portfolio in terms of dispositions.

We do actively harvest value from time to time.

I mean we have obviously been most active on the build to suit front, where we develop some properties that can produce returns.

They are a little bit below what we would prefer in our portfolio.

But understand that the marketplace is willing to pay a whole lot more for them than we can build them at.

And maybe Walgreen’s is a great example.

And so in that sense we’re harvesting value through dispositions.

But we do have an active program, looking at all of our properties.

And some of it won’t be just increased return on investment capital.

Sometimes we’re disposing of properties to improve the quality, or to deal with what we perceive might be a potential problem, where the – for example, during the quarter we sold one steak and ale property – you know, steak and ale, we have two or three properties that we got in the [cap tech] [ph] portfolio.

And we’ve been looking to try to lighten our position with that a little bit, if we can.

And we were able to sell one of those at an 8.9% cap, which doesn’t help or hurt the numbers a whole lot one way or the other.

But we do think it’s the right move to make from a qualitative standpoint.

Okay.

And I think you’ll see a little bit more of that going forward, depending on the market environment.

And we’ve done that, as we’ve talked in the past, with like Good Guys, for example, was an exposure that we wanted to lighten up on.

And so we are active in terms of disposition.

Okay.

And just two last questions.

First, I guess on your list of strategies that you are weighing, are you pursuing the mezzanine loan business in that?

And, if I may ask, have you considered just an outright sale of the portfolio?

Of the mezzanine?

No.

I mean – first, pursuing the mezzanine loan business.

And in fact, outright selling the broader NNN company.

Well, on the second one, clearly, I have no comment.

And that is not something we’re going to do.

In terms of mezzanine, I think that structured finance is an attractive opportunity.

I think in terms of Eric’s earlier question, that is an area in which I personally have a high level of familiarity, and where we are exploring opportunities in that area on a selective basis.

We did, as you know, put on a fairly significant amount of mezzanine loans against a high quality office portfolio in the fourth quarter last year.

I think my vision of structured finance is perhaps slightly different to that.

And even though I think that is a terrific transaction for us, very well underwritten, high quality asset base, with very good risk adjusted returns.

Just to say one more thing, in terms of the detail there, we still have to do further analysis and evaluation internally, and make sure we’re appropriately planning for that approach.

I think the key for that business for us has been that we do it in a measured way.

It’s not going to become a dominant portion of our balance sheet, if you will, by any means.

And then secondly, just again it goes back to real estate – underwriting the loans in a fashion that we would be prepared to own the properties, is maybe the way to put it.

And so we’re not going to be going to that kind of structured finance on exotic properties we wouldn’t consider owning anyway.

Okay.

Just one last question I guess.

Craig, do you, I guess, bring a change in thinking about the dividend policy?

Is it something that you want to manage differently than it has been in the past?

No.

I do not.

We’re very proud of our track record.

The dividend, the way we see it, is very, very safe.

And we’re proud of our long-term history of raising dividends.

Having said that, in terms of your earlier remarks at the beginning of your questions, to the extent we can over time, in a risk adjusted fashion, increase our return on invested capital, we may have the opportunity to reduce our dividend pay out ratio over time.

However, the law of big numbers works against us.

And, at the very best, that will be a gradual approach.

Okay great.

Thank you guys.

Thanks Jeff.

The next question comes from David Fick with Legg Mason.

Please state your question.

Good afternoon gentlemen.

Unfortunately, there are four simultaneous REIT earnings calls going on.

So I had to jump back and forth a little bit.

Hopefully I haven’t missed anything of importance.

Can you talk a little bit about the G&A impact of the senior management transition?

What might we be looking at here this quarter?

I mean beyond the – I did give a note on that.

And I will just repeat, I guess, what I said, was in the second quarter we do anticipate that, with the senior management changes that we announced over the last couple months, that we would be taking a charge in the second quarter of 2004.

We currently estimate that charge to be about $3.2m, estimating that about 80-85% of that will take place in the second quarter.

And approximately half of that will be non-cash.

And so yes, there is a one-time impact from the changes that have been made.

I am terribly sorry to have you repeat yourself.

Thanks a lot guys.

No problem.

David, thank you.

The next question comes from Ross Nussbaum with Smith Barney.

Please state your question.

Hi.

Good afternoon everyone.

The first question, on Eckerd, CVS, I think, has announced that they’re planning on closing a couple hundred stores.

Have you been notified of any of those being in your portfolio?

We have not been notified of any of those.

As I mentioned in my comments, we probably view it as a net positive that CVS will be taking over about 62% of our Eckerd stores.

Our quick kind of estimate shows that, of our 52 Eckerd stores, we have about six that are within a mile and a half of a CVS.

That doesn’t mean they’re necessarily going to get closed.

But it’s just probably whoever has the better real estate is probably liable to get closed.

But again, from a financial standpoint, they are obviously obligated to continue paying rent.

So that becomes an opportunity for us to, to the extent they do close the store, to find a new tenant and hopefully negotiate some sort of advantageous termination fee.

Okay.

And Kevin, what were the guidance numbers for this year again?

Can you just repeat those?

145 to 148.

Okay.

And I guess the last question is the comments you’ve made on this conference call regarding the strategy going forward here, I mean this is now, for all intents and purposes, the third strategy in about a year for this company.

We went from strictly the retail to a mix of retail office industrial.

And now I am hearing retail with select office, and hey, we may do some auto dealerships.

Obviously I know with the change in senior management there are going to be changes.

How is the focus of the organization and the morale of this organization?

And I guess more importantly, do people at CNL feel as if they are in tune with you Craig, and the changes that you want to occur here?

Ross, appreciate the question.

And I think it’s the right question to ask.

I think firstly, in terms of the current strategy, I would point out that from my perspective, which of course may be different to yours, this is not the third strategy.

This is a continued – we do plan to continue to stay primarily an owner of retail assets.

We had previously announced that we’re going to augment the portfolio with office and industrial.

We continue to look at – evaluate opportunities in those areas.

I think that in the retail arena, let me give you another example of the type of asset which we will continue to evaluate.

Historically, I don’t believe that we have acquired in any size things like convenience store retail assets.

That might be something that we should consider prospectively.

But let me be very clear that the essence and strength of this company is its focus on real estate fundamentals.

And that is the core of the strength of this company.

And that is something that we’re going to preserve, and that will not change.

Internally I believe that we have a great team.

We’re all energized by the opportunity we have to build shareholder value over the next several years.

And let me just jump in I guess.

I guess – and maybe we have miscommunicated a little bit in terms of our diversification strategy.

I did not want to suggest that we were going to be going out and buying retail office and industrial properties in a certain kind of pro rata percentage format.

I mean one of the benefits we see of diversification, it does allow us, from time to time, to do a bit of sector rotation.

There are times when it may not make sense to buy industrial properties.

And we probably lean a little bit to the feeling that maybe that’s more of where we are now than at other times.

So the fact that we’re not – don’t have anything tee’d up there, or that doesn’t – won’t be necessarily the emphasis this year, we – clearly, as markets change, that could become the emphasis a year from now.

And so I don’t want to have that construed as a different strategy.

It’s really taking advantage of identifying and underwriting the real estate fundamentals Craig was talking about, that’s most advantageous for [rent] [ph] and shareholders at the time.

Are there any thoughts on changing the balance sheet policy going forward?

And you guys have been pretty conservative in financing the growth historically.

And in fact, you’ve taken your leverage down in recent years.

Craig, I’d be curious to hear what your thoughts are on the current position of the balance sheet.

Ross, we’re very proud of our balance sheet.

And I think in the near term, there are unlikely to be any changes in that.

I think there are some other tactical initiatives that we’re going to pursue – nothing that’s very profound.

They’re all at the margin.

Collectively they will make some differences.

But in the near term, increasing the amount of leverage on our balance sheet is not something that I see happening.

And the mix between secure and unsecure, are you still comfortable with the primarily unsecured strategy?

I think it’s the right way for us to go.

Yes sir.

Thank you.

Thank you. (Caller instructions.) Your next question comes from Eric Rothman of Wachovia Securities.

Please state your question.

Yeah.

Just two real quick follow-ups, one on Ross’ question.

Employee turnover, with – at the corporate level, was that significant in the first quarter?

Almost non-existent.

That’s good news.

And then I know at one point the plan was to add a permanent and full-time IR position.

Is that something, Craig, that you think you will pursue?

Or have you put that on the back burner?

I think in the near-term, that’s certainly not a priority.

I think that Kevin has done a great job.

He’s got a couple of colleagues who work with him.

And I am very impressed with him.

Great.

Thank you very much.

Thank you Eric.

Thank you. (Caller instructions.) If there are no further questions, I will turn the conference back to Mr. Craig Macnab.

Tiffany, thanks very much.

We appreciate all of your interest.

And we look forward to talking to you in about three months time.

Thank you very much.