Pennsylvania Real Estate Investment Trust (PEI) 2011 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Pennsylvania Real Estate Investment Trust Third Quarter 2011 Earnings Conference Call. During today's presentation, all participants will be in a listen-only mode. Following the presentation, then the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Thursday, October 27, 2011.

At this time, I'd like to turn the conference over to Shawn Southard. Please go ahead, sir.

Thank you, Vince. Before management begins their prepared remarks, I'd like to remind our listeners that this conference call will contain certain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends, and other matters that are not historical facts.

These forward-looking statements reflect PREIT's current views about future events and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements.

PREIT's business might be affected by uncertainties affecting real estate businesses generally, as well as specific factors discussed in PREIT's press releases, documents PREIT has filed with the SEC, and in particular PREIT's Annual Report on Form 10-K. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

It's now my pleasure to turn the call over to Ron Rubin, Chairman and CEO of PREIT. Ron, the floor is yours.

Thank you very much. Welcome to the Pennsylvania Real Estate Investment Trust third quarter 2011 conference call. Joining me on the call today are Ed Glickman, President; Bob McCadden, our CFO; and Joe Coradino, President of our Management Company and Head of our Retail Operations.

Also in the room today are Vice Chairman, George Rubin and General Counsel, Bruce Goldman. Today, we will discuss our third quarter results, the status of some of our projects, and our expectations for the balance of 2011. After we conclude our remarks, the call will be opened for your questions.

As noted in our press release, the Company has experienced its seventh consecutive quarter of same-store sales growth, with improvement at 33 of our 38 malls. This growth, during a period of economic instability, is reflective of our demographics and improvements and the quality of our assets and their management.

As you will hear during this call, the Company's efforts are being recognized by our shoppers, our tenants and by our lenders. People have been shopping and new and exciting tenants are leasing space in our properties. These efforts have been recognized by our lenders, who have participated in a number of property financings during the quarter on what we believe are favorable terms.

Notwithstanding stability in our sales and then occupancy, we understand that the recovery remains fragile and that more work must be done. With stable performance consistent with our guidance, we are making slow, steady progress in our efforts to strengthen our financial position, also to improve our operational performance and maximize the value of our properties.

To accomplish this, we are working to improve our balance sheet, to place tenants in service, to increase NOI, to improve occupancy, and to generate positive leasing spreads, all as part of our strategy to create long-term value for our shareholders.

And with that, I'll turn the call over to Ed Glickman.

Thanks, Ron, and thanks to all of you for joining us on this call. The Company had a solid third quarter with FFO as adjusted up 24%. Although we are in a market which defies prediction, our portfolio showed improved comp sales performance, occupancy and renewal spreads at a level of stability, and same-store NOI improved.

Sales per square foot increased 4% over a year ago to $362 per foot, only $2 off of our peak level reported in the second quarter of 2007. With occupancy stable and our comp sales momentum rising, we see PREIT's portfolio becoming increasingly attractive to tenants in 2012.

During the quarter, we addressed the last of our 2011 debt maturities. We are now fully focused on 2012, when $462 million of our mortgage loans mature. This includes $100 million of power center loans that can be extended by their term. Of the remaining 2012 maturities, Cap City, Beaver Valley, Cumberland and Cherry Hill Mall, $230 million represents mortgage loans on Cherry Hill Mall. Based on the strong performance of this asset, we expect our refinancing activity will generate excess proceeds. Between the excess proceeds from refinancings than the expected availability of our line of credit, we can more than cover the $137 million balance on the exchange of old notes, which comes due in May.

At present, our operating cash flow covers our recurring capital expenditures, our scheduled mortgage principal payment, and our current dividend. With the availability of our line of credit and anticipated excess proceeds, we believe we have sufficient liquidity to fund our 2012 development and redevelopment activity.

Our strategy for the coming year is straightforward. We have spent a great deal of time renovating and repositioning our assets. While timing has been a challenge, our products at our locations are strong. In 2012 and beyond, we intend to focus on our in-place investment, cautiously and diligently allocating capital, and working towards rebuilding our NOI if the economy improves.

I thank you for your continued interest in PREIT and with that, I give you Bob McCadden.

Thanks, Ed. FFO as adjusted was $29 million or $0.51 per diluted share, compared to $23.2 million or $0.41 per diluted share last year. This year's quarter includes impairment charges totaling $52.1 million or $0.91 per diluted share. 2010's third quarter included the amortization of deferred financing cost of $1.4 million or $0.03 per diluted share, and also included $2.4 million of NOI generated from the power centers that we sold in September of 2010.

Let me address the impairment charges first. We recorded a $28 million write-down at Phillipsburg Mall in Phillipsburg, New Jersey and a $24.1 million write-down at North Hanover Mall in Hanover, Pennsylvania to reflect our estimates of each property's fair value. The impairment resulted from our ongoing review of the properties and the portfolio, including an assessment of each asset's forecasted future cash flows.

Based on our assessment of existing and potential cash flows from these two properties, we determined that an adjustment to the carrying value of these assets was required. Same-store NOI, excluding lease terminations for the quarter ended September 30, 2011, was $68.4 million, an increase of $2.8 million or 4.1% compared to the $65.6 million generated in last year's quarter. Lease terminations were approximately $200,000 this year, compared to approximately $400,000 in the prior year.

Same-store revenues were in line with last year's quarter, however, we've been able to improve our operating margins and generate same-store NOI growth as a result of lower bad debt expenses and by reducing our electric utility consumption at a number of our properties.

Bad debts were approximately 50 basis points of revenue in the third quarter, compared to almost 170 basis points in the prior year quarter. On a year-to-date basis, bad debts were running approximately 1% of revenues compared to 1.5% of revenues during all of last year. Over time, we hope to move back to our historic run rate, which is closer to 75 basis points to 80 basis points of revenues.

While the portion of the reduction in utility expenses came from lower consumption, a larger portion was due to better pricing obtained as a result of deregulation and new energy supply contracts primarily in Pennsylvania. We recorded $700,000 of higher net utility income in the third quarter and about $1 million on a year-to-date basis.

Interest and other income in the third quarter included $1.5 million from a bankruptcy-related settlement pertaining to the Valley View Downs development projects in Western Pennsylvania. In both periods, other income also includes the sale of historic tax credits from the 801 Market Street renovation.

Our G&A costs were approximately $700,000 lower in this quarter, as a result of lower compensation accruals related to mark-to-market long-term incentive plans and another $300,000 related to long-term incentive plan reversals pertaining to departed employees.

Outstanding debt for this quarter, including our share of partnership debt, averaged $2.371 billion compared to $2.521 billion in last year's third quarter, a decrease of $150 million. Interest expense was lower than the prior year due to lower outstanding balances, combined with lower interest rates on refinanced mortgages, and lower spreads onto the amended credit facility, which became effective on June 29 of this year.

The average interest rate on borrowings in the third quarter of 2011 fell to 5.86% from 6.19% in last year's third quarter, a decrease of 33 basis points. At the end of September, we had $36 million of cash on hand and $195 million available under the revolving portion of our credit facility.

At the end of the quarter, 94.9% of our debt was either fixed or swapped to fixed. Our bank leverage ratio was 67.78%, modestly higher than the ratio at the end of June. PREIT's net loss for the quarter was $59.4 million or $0.34 per share. Last year, we reported a loss of $3.6 million or $0.07 per diluted share, which included a gain on the sale of discontinued operations of $19.2 million.

Regarding our outlook for the balance of 2011, we are adjusting our expectations for 2011's operating results. We expect GAAP earnings per diluted share will be a net loss between $1.70 and $1.74. We expect FFO as adjusted per diluted share to be in a range of $1.75 to $1.79 per share. This represents a $0.15 per share increase in our guidance from the end of last quarter.

We expect full-year same-store NOI, excluding lease terminations, to be roughly flat compared to the prior year. Our guidance for the balance of the year does not contemplate any acquisitions, property sales or capital market transactions other than property refinancings.

With that, I'll now turn the call over to Joe Coradino.

Thank you, Bob. We're pleased with the recent retail performance, but are seeing marked improvement in selected soft goods retailers and general improvement from other mall-based retailers. This is translated into continued sales growth in the portfolio with 33 of our 38 malls showing increases over prior year.

The number of malls in our portfolio reporting sales at over $400 per square foot increased by two this quarter to six. Three registered sales of over $500 per square foot, with Cherry Hill Mall leading the pack at $577 a square foot. Portfolio comp sales for the quarter were $362 per square foot, an increase of 4% over the third quarter of 2010 and the seventh consecutive quarter of sequential growth.

Total occupancy at the end of the quarter was 91.9%, an increase of 40 basis points as compared to the 91.5% reported for the third quarter of 2010. In-line occupancy ended the quarter at 87.8%, up 100 basis points from the second quarter and 30 basis points lower than the third quarter of 2010. This decrease is largely attributable to the closing of the Borders locations, whose backfills had not yet taken occupancy at the close of the quarter.

During the quarter, our renewal transactions with terms of five years or more were solid, registering positive spreads of 11.9%. Overall, renewals were slightly positive generating rent increases of 0.5%, weighted down by some other shorter-term deals. New leases for previously leased space were signed at rents that were 22.6% lower than what the previous tenant was paying. This contraction was driven primarily by the re-leasing of the former Borders locations to Books-A-Million. We have mitigated the majority of the impact of the Borders bankruptcy. We started the year with 11 Borders and we've all, but one backfilled.

During the quarter, we executed five deals with Books-A-Million. A sixth location is ground leased and expected to become a Books-A-Million. The other stores are to be backfilled by Raymour & Flanigan, Forever 21, and expanding regional operator Ukazoo Books.

As it relates to Gap's announcement to close stores by the end of 2013, we expect that five locations within our portfolio will close at lease expiration. We've executed a lease with Tilly's to backfill Gap at Jacksonville and signed Gussini Fashion to take their store to The Mall at Prince Georges. We are in discussions with merchants for two of the remaining three impacted locations and it is our expectation that in the aggregate, we will significantly improve upon the former Gap economics when all of the spaces are re-leased.

At Willow Grove Park, JC Penney, Nordstrom Rack, Bravo and Forever 21 will occupy The Cheesecake Factory in the former Strawbridge's box. Bravo is on track to open in a few weeks, Forever 21 following with a December opening. The space has been turned over to Nordstrom Rack for construction and will open in May of next year, and we are underway with our work for JC Penney, it will open in September of '12.

At Voorhees Town Center, Rizzieri opened their wellness center expansion in July and two of our restaurant concepts, Firecreek Restaurant and Bar and Doghouse Burgers will celebrate their brand openings over the next two weeks. By year-end, these new concepts will be joined by Spoon Me and It's A Doggie Dog World. The construction of Osteria Duo will begin shortly for a 2012 opening. Qdoba opened in the mall on September 30.

On the residential front, occupancy of the rental units is 87%. At Crossroads Mall in Beckley, West Virginia, we have significantly upgraded the center with four major tenants, PetSmart, Sheetz, Encore Books and Dick's Sporting Goods replacing several under-performing retailers. When Dick's opens next month, in-line occupancy for the center will increase to over 90% from less than 70% in late 2009. These new tenants have strengthened the center's market position and continue to improve its sales productivity.

During the quarter, we executed leases with exciting retailers, including Grand Lux Cafe, Michael Kors, True Religion, Brookstone and Zumiez at Cherry Hill Mall; Crazy 8 and Zumiez at Francis Scott Key Mall; Strawberry at Beaver Valley Mall; Crazy 8 at Patrick Henry Mall; Wet Seal at Wyoming Valley Mall; and Strawberry in an expansion of Dave & Buster's at Plymouth Meeting Mall.

A number of these will open during the fourth quarter and will be joined by Books-A-Million in six locations, Bijoux Turner, Bobby's Burger Palace at Cherry Hill Mall; Bahama Breeze at Christiana Power Center; Crazy 8 at Francis Scott Key, Patrick Henry and Wiregrass Malls; and Forever 21 and Bravo at Willow Grove Park.

With the addition of the recently executed and soon to open retailers and restaurants, the stage is set for the continued growth of our portfolio.

With that, we're ready for questions.

(Operator Instructions) Quentin Velleley, Citi.

Hi. Good morning, guys. Just in terms of the impairments, I'm just sort of curious given the values are quite low for those two assets now, whether or not when you're looking at fair value, whether that was sort of marked down to a -- close to a land value or whether it was still sort of an investment asset value, I guess, you'd say? And if so, what kind of cap rate have they been impaired to?

Well, Quentin, when we look at the fair value of the assets, there's a couple of techniques that we use, one is the discounted cash flow approach. In certain cases, we actually will go out and get third-party appraisals. An appraiser usually typically uses multiple approaches. We'll use a discounted cash flow, market comp and a cost approach and then reconcile the three.

So, if you look again, generally a cap rate that was used probably somewhere around 10% or 11% for these assets, but that wasn't a sole determination as to the ultimate value that the assets are written down. So, it's really factoring all the things that I described as well as even at a residual value, what is it worth if it's no longer functioning in its current state. So, it's multiple approaches to valuation and then trying to reconcile the various numbers that you come up with so it records the value that's ultimately agreed to by the management team.

Okay. And then with North Hanover Mall, and you'd spent a bit of CapEx on it through 2010. So, maybe if you can just sort of talk through what happened there given you'd spent the CapEx and then incurred an impairment. I don't know if anything changed in the market or the performance --?

No, but that's a little easier one to explain. If you remember back in 2006 and 2007, we were under construction with a new replacement store for Boscov's, but actually in addition to the mall and we spent roughly $17 million, $18 million on that new Boscov's. While we were under construction, Boscov's began experiencing financial difficulty and ultimately filed for bankruptcy. In the bankruptcy process, they rejected the lease for that store, which hadn't been occupied. And we've been working for the last four or five years to find some alternative uses for that box and we think we might have a possibility for use, but the rental rate that we would expect from the new use is substantially lower than what we had anticipated for Boscov's and ultimately that led to the decision to, in effect, write this asset down. So, the capital was actually spent five years ago.

Right. Okay, got it. And then, and Bob, you may have said this in your prepared remarks, but just in terms of the operating expenses, which were much lower and hence much better than what we were expecting, can you just sort of run through what the improvement was caused by? And whether or not that's sort of going to be a recurring amount?

Well, I think the two big drivers were bad debt expense, which are running at -- for the quarter at 50 basis points of revenues. All of last year, we were about 150 basis points. On a year-to-date basis, including the third quarter, we're about 100 basis points. Our historical average is somewhere between 75 basis points and 80 basis points. So, we're hoping with the recovering economy and hopefully healthy financial position of some of the retailers that we'll be able to sustain that level, not necessarily at the 50 basis points, but certainly something below where we've been running in the last couple of years.

And the other key driver was our ability to purchase the utility cost, electric utilities in the open market with deregulation in Pennsylvania, and in certain of our malls we actually redistribute those utilities to our tenants. The tenant rate is set by the Public Utility Commission and to the extent we are able to buy energy cheaper, those savings accrue to our benefit.

Okay. That's great. And [Manny Coachman] is on the line. I think he's got a question as well.

Hey guys, good morning. Just had a question for you in Moorestown, how much money have you put towards the whole liquor license initiative there?

It's not a material amount and we're coming -- we're closely coming to an end with election day a week from Tuesday.

Right.

Craig Schmidt, Bank of America.

Great. Thank you. Just looking at the average rent base, in the third quarter '09 it was 29.32%, in the third quarter '10 it was 28.92% and it's 28.55% this quarter. I'm wondering if looking out a year ahead, do you think it will still fall a little further or is that trend going to reverse itself?

Yes. Craig, this is Bob. I think one of the things that I think we talked about in prior quarters that we have a disproportionate amount of our leases expiring in the under $350 square foot properties. So, to some extent, as you've seen in this quarter, the average base rent was really concentrated in the bottom quarter of the portfolio. And again, it's really a function of where the economy is when those leases come up for renewal, because effectively we're trying to set our tenant's rental rates based on an overall occupancy cost, which is driven largely by how well they're performing in their stores.

Great. And just thinking about going from Borders to Books-A-Million. Was there any pause there and thought of getting back in the book category just given kind of the physical challenges for that space?

Well, we think in the -- this is Joe Coradino. We think in the larger format, Books-A-Million as they have obviously in addition to a coffee shop, they've introduced a yogurt shop and they have certainly dedicated less space to books there. We think it's a suitable replacement. We also think there's room for two book retailers in this country at this point. And so, we're optimistic that they're going to continue to operate and drive traffic and sales at the property.

Okay. Thank you.

Michael Mueller, JPMorgan.

Yes, hi. Just want to go back to the guidance and the Q3 [bead] again. And I mean, if we look at the guidance, how much it went up, it was the $0.15 at the midpoint and that looks to be about what the upside in the quarter was relative to the Street. If we look at the implied fourth quarter guidance, it's very similar to where most Street estimates were beforehand, so it's not that big of a seasonal pop. I mean, should we think of the NOI -- it sounds like the G&A really was a little bit lower, is that sticky? The NOI, would you consider Q3 to be a little bit more of an anomaly or is that something that's going to repeat, say, every year now in terms of just having a much bigger Q3?

I think that's one of the reasons I'd just talked about. Obviously, the other day we saw an unusually healthy result. Last year's fourth quarter, we virtually had no bad debt expense, it's again just based on the aging of our receivables. So, when you're comparing the fourth quarter this year to last year, just keep in mind that the bad debt expense was relatively immaterial in the fourth quarter of 2010, which I think was the experience shared by many of our peers, if you remember from -- if you go back into transcripts from last year-end. So, I don't think that there was anything unusual. And the other issue is, we're now in a deregulated energy environment and that's going to be a function of -- we try to buy forward for some of our procurement needs. But that's really going to be a function of where the market is at a point in time.

Okay. Okay. Thank you.

Nathan Isbee, Stifel, Nicolaus.

Hi, good morning. Ed, you had spoke on the last call about the middle market still being a buyer's market. There's a reluctance to go to the longer-term deal, and this was a bit of a reversal from the tone coming out of ICSC. Can you just characterize the discussions over the last few months, where those have gone with the tenants, especially at your -- the second and third tier malls?

Well, I would say that this year we're phasing, as you probably know from our expiration report, we started the year phasing about over 2 million square feet inclusive of about 1 million square feet of holdovers. We're likely going to be slightly below that 1 million square feet of holdovers the next year. So, essentially, as Bob mentioned earlier, we're dealing with many of the mid tier, lower tier malls by having them on -- having those tenants on short-term leases. And looking for some expansion in the economy before we get into longer-term negotiations. We've essentially exceeded our leasing expectations in terms of the numbers of square feet that have been leased. But we were faced with extraordinary levels of closing. So, I don't think the situation around the corner, property specifics have really changed dramatically from when we had that conversation.

Okay. And can you just talk about the terms of the Books-A-Million deals, how long were they?

Three to five year deals.

Okay. Thank you.

Ben Yang, Keefe, Bruyette & Woods.

Yes. Hi, good morning. Just following on the rent question earlier. You mentioned setting rents based on overall occupancy cost, but your sales have been rising in the past few years, while your occupancy costs are generally falling. So, does that necessarily imply that your target occupancy cost for new leases is falling as well? And what exactly is that target for your portfolio average?

Well, I think if you looked at our portfolio average, we should be somewhere in the 12% and 13% range. Again, I think you have to distinguish between assets that are on the top brand, which can bear properties over $400, $500 a foot, can bear much higher occupancy costs, probably in the mid-teens compared to assets that are in the lower end, which is probably 10% to 12% was the right size for many of those assets.

But overall, it looks like it's pretty broad based. I mean you comment on 33 of your malls reporting positive sales growth, but if you look at your supplemental, it looks like 27 of your malls reported declines in your average rent. So, I mean, is that occupancy cost target falling, are your retailers a little reluctant to pay what they might have a few years ago?

There's a couple things going on when you look at the statistics. Comp store sales, we don't actually include sales until a tenant is in occupancy for at least 24 months. So, many of the tenants that we've added again on the lower half of the portfolio are more regional and local tenants. And they haven't yet reported their -- it's not included in our comp store comparison yet. So, over time you may actually see some normalization of this occupancy cost in that part of the portfolio.

Plus there is a lag, I mean as you begin to see sales rise, there's a lag to be able to begin to see upward movement in rents. And essentially the number of tenants that we have coming into our portfolio that we've recently done deals with that are opening, that will A) complete the redevelopments and -- or start to complete the redevelopments or finish the redevelopment. I think it will drive rentals and renewals upward again, but there is a lag.

I totally understand the lag, but I guess after two years I would have expected it to translate into the rent by now. But based on the lag, I guess that there is some built in rent growth given that sales have been trending positive for a while. Is that a fair assessment or do you need some type of improvement in the overall economy to capitalize on some type of rent growth?

I think the answer to the question is the latter.

Okay. Thank you.

Cedrik Lachance, Green Street Advisors.

Thanks. Ed, the ICSC, I think you were talking largely about trying to negotiate leases in bulk with some of the retailers by shifting your strategy a little bit. Have you been able to -- have you had some success I guess in some of the lease negotiations? And is it going to change some of the percentage rent deals that we see from your top tenants? I think you're addressing the accounts transactions -- major account transactions and you were trying to look at perhaps addressing lease maturities a little differently and trying to negotiate a number of leases with each tenant rather than going mall by mall.

Correct.

And we're changing strategy a little bit. I'm kind of curious as to what the response has been from tenants and what it means perhaps going forward in terms of the percentage of rent deals as we see from some of your top tenants?

Yes, essentially we have approached the major account transactions differently. And we've been successful in concluding a number of those transactions. We have about 73% of our renewals completed with really three major accounts out there still open. And part of that has been really trying to drive rents. The question that was previously asked is, is really the issue. And so, we've got three major accounts, some of our -- just fit into the top-20 category. The good news is those tenants are growing sales within our portfolio, number one in those companies they're performing. So, we've taken a very hard line and hopefully, we'll have some positive results on a going-forward basis.

And in terms of the percentage rent leases, are you going to be able to reduce the amount of percentage rent leases with some of your top tenants or is it the trend that's likely to continue?

We've actually seen a decrease in the number of tenants [on a] percentage of sales basis. As those leases come to maturity, we're either converting them -- many of them we're actually converting to traditional mid-rent, plus extras leases. So, we've actually -- we felt it topping out of that maybe earlier part of this year and each month sequentially we've started to see that as well.

Okay. And you were talking about Crossroads where you've seen they've done a couple of big box deals to take away some of the in-line space. Is it something that you're going to continue to do in many of your second tier malls or is there a trend that has seen us stay at this point?

Well, it's something we've been doing for a while actually that goes back to the original acquisition of Crowne that we've begun to incorporate. We've done it at Lycoming Mall. We've gotten a number of our properties. And we think on a selective basis, particularly where there's a competitive environment where the possibility of developing a power center near the property and you have significant vacancy. As the case of Crossroads, we're opening up Dick's Sporting Goods next week. We do see that as a potential solution for some of the second tier properties. That's A) they're well located and B) they have a competitive franchise.

Okay. And in terms of rental rates, how would you compare the rents, you can get from some of the big-box tenants versus what you were getting in the in-line space?

Yes, obviously not as high. It's unusual to get rents in a mall less than $20 a square foot and you're probably in the mid to high teens with the boxes. But at the same time, you're replacing vacant space, so the comparison to the in-line tenants is certainly worth considering, but in many cases, space has been vacant for a number of years.

Okay, great. Thank you.

Quentin Velleley, Citi.

Hey, guys. It's Manny here again. Just wanted to check with Bob on your G&A, what would you consider a good run rate going forward?

Probably about 9.5% per quarter.

Okay. Great. That's it. Thanks.

(Operator Instructions) Jeffrey Lau, Sidoti & Company.

Hi, good morning. Can you just remind me the last time you guys took impairments, what those impairments were on their assets they were on, [same] like '08 and '09?

We took impairments on a couple of the development aspects, one at Gainsville and the other in New Garden Township, Pennsylvania and we have also wrote down Orlando Fashion Square, that was in '09.

Thanks.

Thank you. And I'm showing no further questions at this time. I'd like to turn the conference back over to Mr. Rubin for any closing remarks.

Okay. Thank you very much for joining with us today and for your continued support. We look forward to sharing our full-year results on our next earnings conference call in February. So, thanks again, and have a good day.

Thank you, sir. Ladies and gentlemen, this does conclude the Pennsylvania Real Estate Investment Trust third quarter 2011 earnings conference call. Thank you for your participation. You may now disconnect.