WP Carey Inc (WPC) 2014 Q1 法說會逐字稿

Good morning, everyone, and welcome to W.P. Carey's first quarter 2014 financial results conference call. (Operator Instructions.) Please also note today's event is being recorded. I would now like to turn the conference call over to Mr. Peter Sands, Director of Institutional Investor Relations. Sir, please go ahead.

Good morning, everyone, and thank you for joining us on this conference call to review our first-quarter results. Joining us today are Trevor Bond, President and Chief Executive Officer, and Katy Rice, Chief Financial Officer. An online rebroadcast of this conference call will be made available in the Investor Relations section of our website at wpcarey.com, where it will be archived for 90 days.

I would also like to remind you that some of the statements made on this call are not historic facts and may be deemed forward-looking statements. Factors that could cause actual results to differ materially from W.P. Carey's expectations are provided in our SEC filings.

Now I'll turn the call over to Trevor.

Thanks, Peter. Welcome, everyone on the line. We had a strong first quarter, and in a moment I'll turn the presentation over to Katy, who will walk us through the numbers in more detail. First I'll discuss some of the quarter's highlights, the investment climate, and our outlook for the rest of the year.

As we discussed on our last call, we closed our merger with CPA-16 at the end of January, and in connection with that, we issued close to 31 million shares. We believe most of that overhang has been absorbed based on the average daily trading volumes, which have settled in a fairly consistent range.

Subsequent to the February earnings call, we issued $500 million worth of senior unsecured notes and paid off a portion of our secured indebtedness. So we are on track with the long-term goal of becoming mostly an unsecured borrower.

Among other highlights, our portfolio occupancy remains high at 98.3%, with a very diversified portfolio. We had a robust quarter for both investment activity and fundraising on behalf of our managed REITs, and we're off to a strong start in 2014 on many fronts.

Turning briefly to the financial highlights, first, we generated adjusted funds from operations of $118 million, or $1.31 per diluted share. Now, I want to emphasize that you shouldn't use this as a run rate for the year. We're maintaining our guidance at the levels discussed in prior calls. Katy will discuss that in a moment. Clearly, the figure's higher than the one you'd arrive at by simply dividing the guidance by four, primarily because investment volume has been faster than the pace we had initially expected to complete by this point in the year, which is in itself a real positive.

Another highlight of the quarter was the dividend we paid in the amount of $0.895 per share, raising our annualized rate to $3.58 per share. That represented our 52nd consecutive quarterly increase and exceeds the figure that we had said would be our minimum anticipated annual dividend following the merger.

Investment volume for the first quarter totaled $417.9 million. Of this amount, we structured $375 million of investments on behalf of the managed REITs. 44% of our total volume was in the US; 58% was in Europe. And by total, I'm including the asset that we purchased on behalf of W.P. Carey, Inc. If we include transactions that closed subsequent to March 31, our year-to-date investment volume is approximately $574 million.

As I said, fundraising on behalf of our managed REITs was also strong. Gross offering proceeds for the first quarter totaled about $417 million. This included $399 million on behalf of CPA-18, which brought that fund to being 75% subscribed. We also raised approximately $18 million on behalf of CWI as part of its $350 million follow-on offering. So we continue to have sufficient capital relative to the opportunity set that we're seeing.

Turning to the outlook for the remainder of the year, we're quite focused on executing our capital plan, which involves selling non-core properties and both paying down secured debt and reinvesting in new transactions. I should note that our definition of non-core is somewhat fluid. We regularly monitor the criticality of our properties to the operations of our tenants. And in the event that over time we feel that a property has become less critical, and therefore that the likelihood of renewal decreases, we may begin to explore sale opportunities unless, of course, we also determine that holding the property and re-leasing it would be a better outcome, which is certainly the case some of the time. So in this sense, our core properties are the ones that have the best residual risk profile, either based on likelihood of renewal or based upon fundamental real estate value.

Currently, in many of our markets, it's been a good time to be a seller, and we have taken advantage of attractive pricing wherever possible. During the first quarter, we disposed of nine properties, primarily in the US, for total proceeds of $128 million, some of which we had acquired as part of our merger with CPA-16. And our transaction team continues to work on the existing disposition pipeline.

At the same time, based on our existing acquisition pipeline, we're more positive about the investing outlook than we were back in March. That's due to a number of factors. And we're comfortable that we can reinvest the capital, plus the proceeds of future sales, in properties that have longer lease terms and/or less residual risk.

In some cases, that will mean selling at cap rates that are higher than the cap rates at which we're buying, which makes sense, because we're making explicit tradeoffs between yield and lease term -- for example, between properties that are less critical versus those that will be essential to tenants for years to come. The goal here is obviously just to continually improve the quality of revenues and to reduce portfolio risk. And all these factors are continually baked into our guidance.

We also continue to proactively engage our tenants in lease extension negotiations. Year to date, we've negotiated about 470,000 square feet of extensions. In these transactions, the weighted average new rent was approximately 88% of then prevailing rent. For the remainder of 2014, we have 15 leases expiring, representing approximately 1.8% of total annualized base rent, excluding operating properties. In 2015, we have 33 leases expiring, representing approximately 8.3% of total annualized base rent, a large portion of which relates to Carrefour, and as we've discussed before, Carrefour is one of the largest food retailers in the world. And as most of you know, they are among our top 10 tenants based on annualized base rent.

Specifically, 12 of our Carrefour distribution facilities located throughout France have leases expiring in 2015. As noted last quarter, we remain in an active dialogue with the company to finalize a plan for each asset, and we'll have more certainty soon. Depending on the specific outcomes, we may dispose of some of the centers or possibly the whole portfolio. As matters progress over the coming months and quarters, we'll update you as appropriate.

Turning now to the investment climate, as I just said, the US domestic net lease market remains competitive, particularly in the warehouse distribution segment. But the supply of opportunities does appear to be rising, perhaps because sellers are trying to lock in relatively low cap rates -- relatively lower cap rates, that is -- ahead of an expected rise in interest rates. As a result, we expect cap rate compression to moderate within the more opportunistically priced segments of the market in which we invest.

And as I said on the last call, the landscape in northern Europe continues to be attractive from a buyer's perspective, and we're still finding good risk-adjusted returns there. We still get, in most cases, leases that adjust upwards according to the local inflation indexes. CPI increases haven't been a big contributor to rental growth in recent years, given the low inflation rate. But if that increases in the future, as it's likely to do, we'll benefit, because 71% of our portfolio has rent increases that are tied to inflation. In any event, even if inflation remains low for some time, just having that inflation hedge endows the portfolio with significant intangible value, in our opinion. The balance of the portfolio does have fixed bumps that are averaging, actually, in excess of current inflation right now.

I'd also like to note that the European debt market is at a different point in its cycle. The ECB has pursued its own version of unconventional monetary policy -- different from the Fed, that is -- and therefore, the dynamics that we've seen here in the US with respect to the Fed tapering its quantitative easing program has not had the same impact on the bond markets in Europe. As a result, rates are currently more attractive there, and we believe that having an active presence there and a large flow of euro revenues will enable us to tap into lower-cost unsecured debt now that we have received investment-grade ratings from both S&P and Moody's.

And with that, I'll now let Katy go into the results and the portfolio summary in more detail.

Thanks, Trevor, and good morning, everyone. I'll start by briefly reviewing our first-quarter financial results and some key portfolio metrics, followed by an update on our balance sheet and capital structure.

As you all know, our results this quarter are the first since we closed our merger with CPA-16 on January 31. Accordingly, they reflect two months as a combined company. Next quarter will be the first quarter showing the full impact of the merger. We did, however, provide 2013 pro forma financials for the CPA-16 merger in the first quarter for comparative purposes.

As you may have already noticed, this quarter we've done some work to improve the layout and organization of our supplemental report and enhance the information provided. For example, in light of the recent bond issuance, we've included information on our unencumbered pool of properties. Over time, we intend to further evolve this document with a goal of providing greater transparency on our businesses and their performance. And we have slightly revised our earning release with some of the same goals in mind.

Turning to our first-quarter financial results and starting with AFFO, for the first quarter of 2014, we reported AFFO of $118.2 million, or $1.31 per diluted share, an increase of $40 million, or $0.19 per diluted share, compared to fourth quarter of 2013. This increase was driven primarily by two months of increased lease revenues as a result of closing our merger with CPA-16.

As Trevor mentioned, it was another robust quarter for acquisition volumes on behalf of managed REITs, and therefore structuring revenues were very strong, which is not typical this early in the year. Accordingly, it is important to note that we do not view our first-quarter AFFO as a representative run rate for the remainder of the year. We are maintaining our full-year AFFO guidance of between $4.40 and $4.65 per diluted share. However, we do not expect it to be evenly divided among the four quarters, given the lumpy nature of certain items such as structuring revenue, which is dependent on our acquisition volume.

Turning to our owned portfolio of real estate, at the end of the first quarter, our portfolio consisted of 700 net leased properties with approximately 83 million square feet leased to 230 different tenants and four operating properties. Approximately 68% of our annualized base rent comes from properties located in the US, with the remainder coming from our international investments, primarily in western and northern Europe. Our portfolio occupancy rate was 98.3%, and our weighted average lease term was 8.7 years.

Turning to the balance sheet and capitalization, on prior calls I've noted that over time, we intend to migrate our balance sheet to primarily unsecured borrowing sources. During the first quarter we took an important step towards that goal by successfully completing an inaugural $500 million senior unsecured note offering with a 10-year maturity, a 4.6% coupon, and a 4.645% yield to maturity. We're very pleased with the execution on our inaugural bond transaction and with the strong support we received from institutional investors. And now that we have successfully completed our inaugural issuance, we are excited about the flexibility that access to the unsecured markets will provide going forward.

We've continued to pay down mortgage debt and build our unencumbered pool of assets. During the first quarter, we prepaid $117 million of non-recourse mortgages and an additional $53 million through the end of April. At March 31, our unencumbered pool of assets included properties with approximately $169 million of annualized base rent, which will continue to grow as we acquire assets and mortgages mature, providing strong support for any future unsecured debt issuance.

We view our debt maturities over the next few years as very manageable and that we have ample liquidity. Specifically, at the end of the first quarter, mortgage debt maturing through the end of 2016 ranges from approximately $182 million to $270 million per year compared to liquidity of over $1 billion, comprised of approximately $884 million remaining on our revolver and close to $200 million in cash or cash equivalents.

At quarter end, the weighted average cost of our non-recourse debt was 5.2%, and our overall weighted average cost of debt, including our senior unsecured notes and amounts outstanding under our credit facility, was 4.8%.

At the end of the first quarter, our total equity market cap was approximately $6 billion, and we had an enterprise value of roughly $9.5 billion. Accordingly, at March 31, our net debt to enterprise value stood at 37.3%, and total debt to gross assets was 43.9%.

And with that, I will open it up for questions.

(Operator Instructions.) Vinnie Connor, Capital One Securities.

Just off the bat, could you talk about the acquisition competitiveness in the various geographies and product types and where cap rates sit?

As I had mentioned in my remarks, we're finding that the US continues to see substantial flows of capital into the net lease space, or I should say capital which remains in the space, looking for investment opportunities. And particularly in large portfolios, we continue to see what we consider a portfolio premium.

That said, in our more opportunistically priced segment of the market, those types of deals that require more due diligence and perhaps more structuring, we're finding that the supply of opportunities is increasing somewhat. And as I mentioned, because I think sellers may be taking advantage of what they believe is a closing window to get a better deal.

In Europe, and the reason that we've had more acquisitions in Europe this year is because it still is a more attractive investing environment. And you have sellers who are reaching the same conclusion with respect to that window of opportunity, perhaps, and also in some cases, more demand for capital, less access to debt. So for a variety of reasons, that continues to be a strong market area.

In terms of property type, mostly what we're seeing is that the warehouse/distribution type space is still quite competitive, because there are funds that are quasi-net lease funds/industrial funds that have targeted industrial. And what we've seen is that they tend to focus on properties that have shorter lease duration because there's a higher yield that you can get with shorter lease duration, even though there may be exposure to step-downs in rents after a few years. But because of the desire for yield there, there are some that are targeting that approach. And generally speaking, industrial has been a strong category, especially with the recovery of the economy.

So I would distinguish what we typically call industrial space, and I'm referring to it as warehouse/distribution. I distinguish that from the industrial category, which is assets where things are actually made. And in that category, that's something that's always been somewhat of a specialty for us. We think that opportunities there will broaden in the next few years as the economy continues to recover.

All right, well, thanks for that. And then just more on the leasing side, for the lease maturities in 2014 and 2015, I know you talked about this a little bit, but could you touch on the split between leases with no options, first-time options, and those with renewals? Sorry (inaudible).

I don't have that particular breakdown in front of me.

Okay. And then just last question for me, could you talk about the capital-raising trends on a month-to-month basis through the first quarter and just how it's been generally, year to date, for the managed REITs?

As I mentioned in my remarks, we were about 75% subscribed in CPA-18, which for us is somewhat ahead of schedule. And so we're pleased with the progress. In fact, we're beginning to dial back on that a bit. We'll be stopping the sale of what we refer to as the Class A shares, which are the full commission shares and shifting to just the sales of the Class C shares, which have a much lower initial load. And we're doing that quite consciously so that we can keep the equilibrium between funds raised and opportunities that we're seeing so that we're not limited in terms of capital by -- capital, I should say, won't limit us, our purchasing activity. We have ample capital, dry powder, in the managed funds. And I hope that answers that part of the question.

With respect to CWI, we've raised about $18 million this year because we only recently kicked off the follow-on offering for that fund.

Sure, all right. Well, thanks for taking my questions.

(Operator Instructions.) Dan Donlan, Ladenburg Thalmann.

Trevor, we're just curious if you, when you say that you're 75% subscribed to CPA-18, what are you basing that 75% off of? And how much equity are you looking to raise in that fund?

That's the $1 billion. So that would mean approximately $750 million.

Okay, okay. And I think you're closing the A-class share at the end of June? Is that correct?

Yes.

Okay. And if you're already closing 18, or if you're almost there with 18, are you planning on CPA-19? What can you offer us there?

It's a great question. We have nothing filed now with the SEC and nothing on the works. I think that we like the optionality, going forward, of having the ability to delay CPA-19 as long as we need to. We'll think more about that as we get to the end of the investment period for CPA-18. Also, we have a modest amount of capital still left in CPA-17, and so CPA-17 and -18 are co-investing on some deals.

And I think that from management's point of view, the risk of not having a CPA-19 tied up is not a problem, because we can always shift deal flow toward W.P. Carey, Inc., if we're ever in a period where we are out of the market. And I think that would then further our goal of growing our balance sheet because the transactions that work for the funds are clearly going to be very accretive for W.P. Carey, Inc. And so it's something that, as we get closer to the end of the investment period for CPA-18, we'll be faced with that decision.

I'll also say that now that we're focusing on creating new product silos for our investment management platform -- the hotel fund, which was been successful to date, is one example. We also have an active self-storage business, as you know, which is folded into the CPAs, but we could have a separate fund for them. And then we are always considering other product silos with capable, experienced sponsors in other product types.

And so I think that it's probably better for us to focus more on that type of new product, really, in the medium term, to enhance the value of our platform. And so that will continue to be one of our areas of focus.

Okay. A lot of interesting comments there that probably poise more questions. But just so I'm clear, the reason for slowing down the fundraising of CPAs is because you raised it quicker than you expected, and not necessarily that you think the investment climate is maybe not as attractive, such as when you slowed down capital raising in 2005 and 2007?

That's correct. Inherent in the question, there's a caution that's inherent in the decision. And the reasons for the caution may partly stem with competitiveness in the investment environment and things like that. So I just think we have enough capital available to meet our goals. And as I said, the downside of suddenly running out of CPA money is not that high because we can shift to our balance sheet. So there's a lot of moving parts to that analysis.

Sure, sure. Yes, I actually just heard that Annaly announced that they were going into triple net leases, so that's just another competitor. But I guess, going back to the question, historically you guys have always done non-traded REITs, managed them yourself. It sounds like you might be, based upon your comments, you might be interested in maybe bringing another sponsor in, somebody that might have expertise in a particular sector that you guys do not. Or would you still, if you raised funds, you wouldn't have a sponsor? Any clarity there would be helpful.

Clearly, we want to maintain the quality control. I think that's been a hallmark of our approach from the beginning. And whatever arrangement we struck with a potential sponsor would have to include the features that we're accustomed to with respect to quality control in terms of the investment process and things like that and maintaining the discipline.

That said, there are a number of very seasoned, sophisticated investors in a wide variety of property types that have the ability to originate and execute transactions that we currently don't have the skill sets for. So the specific nature of the relationship would have to be determined.

We have a sub-advisory agreement on our hotel fund with Watermark, which is a seasoned -- Michael Medzigian is a very seasoned, experienced hotel guy. And we have a board of directors which is comprised entirely of seasoned hotel veterans. And so we figure out ways to box the risks that are involved with bringing a new product on.

But we think that there's considerable interest in this particular type of distribution channel that we have, and there are considerable barriers to entry to this particular line of business. And we want to get more value out of the platform, and so that is something that we'll focus on. But again, the first premise is that we have to be able to deliver good risk-adjusted returns to the investors in those funds.

Okay. Thank you for the commentary. And maybe shifting gears a little bit to the dispositions you did in the quarter, I was a little bit late getting on the call; I apologize. Did you provide an aggregate cap rate for the $128 million that you sold?

We did not. Right, Katy?

No, and Dan, it really is pretty variable, depending upon where they're located, what asset type, and frankly, the amount of lease term that's remaining. Obviously, the assets that we're selling are usually things that we're de-risking the portfolio by selling. So oftentimes they may have higher cap rates than is typical.

So just for modeling purposes, on a GAAP basis, maybe 8% or 9%? Or if you want to stay away, that's fine. I'm just curious.

Yes, I'd say this quarter it was in the 8-ish percent range.

Okay, perfect.

On a weighted average basis.

Thank you. And then on the G&A, Katy, what type of run rate should we assume there? I think the G&A came in a little bit lower than I was expecting, not that my projections are accurate all the time. But could you give us some clarity on what you're looking at for the rest of the year on a combined basis? Or if you want to separate stock comp versus cash, that's fine as well.

Yes, and we have separated stock comp now. So the G&A number, that is a pretty good run rate. Obviously, we've had some movement when we bought CPA-16. We do allocate a certain portion of our G&A to each of our managed funds, so that allocation, obviously, went away. But as 18 grows, obviously, they'll get more of their fair share in CWI as well.

Just to touch back on this quarter's AFFO, to your first discussion with Trevor about the acquisition volume, the biggest driver of the larger-than-run-rate quarter was the high structuring revenue. This quarter it was about $17 million. That, as we've said in the past, is a very lumpy number. If you look historically, it's in the $6 million to $12 million a quarter range. So that was the driver.

But in addition, in the first quarter, like many other companies, our stock comp plans have their vesting date in February. So this can generate -- typically, it generates a loss in our taxable REIT sub, or a tax benefit. This quarter, though, because the structuring revenue was so high, we effectively didn't have a benefit, so AFFO was even higher than forecast because of that. So there's a couple effects.

And then lastly, there were a few one-time items, like termination fees and deposits, that we're keeping for a variety of reasons. So there were a few smaller, one-time items that drove it up as well.

Just on that point, how much did you have in lease term and deposits?

It was just under $1 million.

Oh, okay, not too much, then.

Not too much.

Okay. All right. I'm still going through the disclosure, but I really like what I see here. So I appreciate all the changes that you made.

Great.

Thank you.

(Operator Instructions.) Paul Adornato, BMO Capital Markets.

Sorry, I joined the call late, so if you mentioned this -- Trevor, I was wondering if you could comment on the distribution network and the consolidation that's happening at the independent broker-dealer network level.

You mean with respect to Cetera and others that have been purchased -- that roll-up?

Correct. And do you see any impact for distribution of your non-traded REIT product?

Yes, that's a good question. No, we don't. We don't see any negative impact to that, in our judgment. Because our biggest distributors would be Ameriprise and LPL-Commonwealth. And so within their boardrooms, perhaps there's talk about the increased competition and the effects of consolidation and what-not. And it's a business that we're related to, as you know, as wholesalers. And so we view those particular distribution networks as like the grocery store. And so we compete for shelf space within those grocery stores. And as such, our shelf space is unaffected by these changes today.

We had -- a few of the firms that were brought into that consolidation are distributing our products, but not to a significant or material degree, I would say.

And so if you see your direct competitors buying up the shelf space, would they have an incentive, therefore, to exclude your products or not? How do you see that shaping up, perhaps?

I think it's a very good question, and it really works both ways, that if we're distributing through the grocery store owned by our competitor, then I think we would stop distributing, whether they asked us to or not. And again, because these consolidations have not affected, and we do not expect that they will affect, the total flow of funds that we're getting, it's not a question that particularly concerns us right now.

Okay.

Also, it's a very tricky, challenging business unto itself. And we prefer the wholesale side of that business.

Okay, great. Thanks for that.

Nathan Crossett, Evercore.

My question's on the dividend. You have a long track record of quarterly increases, and I was just wondering how we should think about dividend growth and if you were targeting a certain payout ratio.

As you saw from the first quarter, we raised our dividend to $.0895. So the run rate, the annualized run rate, would be about $3.58. That's the big jump, obviously, from the CPA-16 merger. As you'll probably recall, what we guided people to on the merger at the low end was $3.52, so we're above that at this point. And I think our expectations are to maintain a fairly conservative payout ratio. It's very low this quarter because of the high AFFO per quarter that we had, as we've already discussed. So the payout ratio looks pretty low this quarter. But we're trying to pay out 100% of our taxable income. We will probably always have a slightly lower payout ratio, just because of the taxable nature of a lot of our activities on the investment management side. So I'd say in summary, we got the bump on the dividend from the CPA-16 merger in the first quarter, and we'll probably see more modest increases in the coming quarters this year.

Okay, that's helpful. Thanks.

Dan Donlan, Ladenburg Thalmann.

I just wanted to go back to the investment management side again. Trevor, as you look at that sector going forward, how do you think about structuring future products, that the C-class share is fairly unique in that the upfront load is significantly lower, but then it pays out over the term? Is that something that you're going to try to use on a going-forward basis? And given what may or may not happen with the FINRA legislation, and what has been the reception to that C-class share from the FA community as well?

That's a good question. Clearly, we developed that class of shares specifically in anticipation of potential changes that were occurring, and we've been trying to stay ahead of the curve on that from the start.

With respect to -- and I do believe that the rule will be adopted. I think it's just a question of when. FINRA's right now working on addressing industry concerns, and we expect, though, in the end, that it will be adopted. So we believe that that class of shares will become more popular, although I should put quotation marks around the word popular, because to get to the other part of your question, some FAs really won't like it because it will involve earning lower revenues upfront -- obviously, lower commissions.

But there's a large swath of the financial advisory community that really will appreciate it and, I think, does appreciate it, because they see themselves as more like Registered Investment Advisors. In many cases, they actually are Registered Investment Advisors, where a fee is earned on a portfolio basis -- year to year, a lower fee, but on the basis of assets instead of transactions.

So we think that it is a change that's good for the business, and we're fully supportive of it, and we think we're well positioned to thrive in that new environment that's coming.

Okay. Yes, it's one of the discussions we've had with FAs. They like the recurring revenue streams. I think you're probably right on that. And then, just lastly, in terms of the valuation I think the market ascribes to your investment management business, I think it's fairly low relative to probably what it would be on a standalone basis. I was just curious, number one -- I don't really think it makes much sense to ever break that out, but have you ever had that discussion? What's the thought process there? Should we always assume that the investment management business is a core part of W.P. Carey as a REIT?

I'm sorry. To clarify, did you say it is a poor part?

No, a core.

I just wanted to be clear, Dan.

Yes, core, definitely core.

I was thinking like a poor cousin. It is core, and that said, we're constantly trying to refine the way we look at the business. It's a profit center, as is our core REIT business, and so we're continually refining our cost allocation so that we can begin to present a clearer picture to the market as to exactly how profitable it is on a standalone basis. And that, in turn, would begin to clarify our G&A load generally so that you could allocate more clearly to the REIT side and see where we stack up with REITs that don't have that investment management business. So from management's point of view, there's that question of better communicating the true EBITDA revenues and things from the business and therefore bringing clarity to the valuation question.

Strategically, I think we still consider it very valuable. As we've said in many different venues, it's a great way to grow revenues without issuing equity. But that said, we recognize that it adds a complexity to our business model which is not as appealing to REIT-dedicated investors. And because of that, it's likely that it is undervalued relative to what it might be if it was on a standalone basis.

So for now, I would say that it does afford us with tremendous advantages of being able to look at other product types. We think there's room for growth there, and it's a good, steady source of fee income. And that can help smooth out some cyclicality that we might experience. So we like that part of the business. But we're always looking at that and what our strategy will be for it going forward, because we think it is undervalued now.

Okay. Thank you, Trevor. Appreciate it.

And, ladies and gentlemen, we've reached the end of today's question-and-answer session. And that will conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.