Physicians Realty Trust

NYSE:DOC

Earnings Call Transcript 2021-Q3

[Operator]

Greetings ladies and gentlemen and welcome to the Physicians Realty Trust Third Quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Brad Cage. Thank you. You may begin.

[Bradley Page, Senior Vice President]

Thank you. Good morning and welcome to the Physicians Realty Trust third quarter 2021 earnings conference call and webcast. Joining me today are John Thomas, Chief Executive Officer, Jeff Tyler, Chief Financial Officer. Deeni Taylor, Chief Investment Officer, Mark Theine, Executive Vice President Asset Management, John Lucey, Chief Accounting Officer, Lori Becker, Senior Vice President and Controller, Ian Cline (ph), Deputy Chief Investment Officer, and Amy Hall, Senior Vice President Leasing and Physician Strategy. During this call, John Thomas will provide a summary of the Company's activities and performance for the third quarter of 2021 and year-to-date, as well as our strategic focus for the remainder of 2021. Jeff Tyler will review our financial results for the third quarter of 2021and Mark Theine will provide a summary of our operations for the third quarter.

Following that, we will open the call for questions. Today's call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. They are based on the current beliefs of management and the information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe our assumptions are reasonable. Our forward-looking statements are not guarantees of future performance. Our actual results could differ materially from our current expectations and those anticipated or implied in such forward-looking statements. For more detailed description of potential risks and other important factors that could cause actual results to differ from those contained in any forward-looking statements, please refer to our filings with the Securities and Exchange Commission. With that, I would now like to turn the call over to the Company's CEO, John Thomas. John?

[John Thomas, Chief Executive Officer]

Thank you, Brad. I have to admit, this may be the most anticipated earnings call I've ever had the opportunity to participate in. Physicians Realty Trust had a landmark quarter in acquisitions, operations, and balance sheet management. The momentum has continued into the fourth quarter as subsequent to quarter-end, we sold our?3L? tags at a cash gain, continuing our progress to eventually become a REIT with 100% of our revenue generated by investments and outpatient medical office facilities. Despite the Delta variant COVID spikes, each of our facilities have remained open continuously since the summer of 2020

and rental income collection rates remain near 100%. In March 2021, we shared our expectations of completing 400 to 600 million in new investments during the year, including both acquisitions and development financing. It would've been easy to complete good investments pro - ratably throughout the year, but our investors are more interested in DOC making great investments with better long-term accretive returns resulting from our relationship focused strategy, rather than just meeting a calendar.

We appreciate your confidence through the first half of the year while we completed our negotiation with Landmark, and we're patient with our great partner in Scottsdale on our health. While they completed the construction of two of the most recent additions to the DOC portfolio. On October 1st, we announced our agreement to purchase the 15 building of Landmark healthcare facility portfolio for $764 million. A Class 8 portfolio includes 1.4 million square feet with an average building size of 97,000 feet. Each asset is affiliated with a premier health system. Including ten new system relationships to DOC. Those include the investment-grade rated University of Florida Health, Beaumont Health, and McLaren Health Care to combine for 40% on the portfolios tenancy. In total, 74% of the Landmark portfolio is leased to an investment grade health system.

And the portfolio carries over 7 years of average remaining lease term, each providing great stability for years to come. Additionally, the transaction includes a purchase option on another 46 thousand, but on-campus MOB that land market has developed. Currently with DOC mezzanine capital, and their own equity and construction financing that MOB will be completed in 2022. Upon completion of this acquisition, our share of leases to investment-grade health systems as a percentage of our gross leasable space, will increased from 64% today to 65% on a proforma basis. We're excited to add these relationships and assets to our portfolio and are well on into the final due diligence and closing process, including the transition of property management responsibilities were applicable. While one or more health systems could exercise their right to match our purchase price or other conditions could prevent us from closing, we do not anticipate a material reduction in this investment opportunity and expect to close a landmark acquisitions by the end of the year. The 2 new HonorHealth medical facilities we acquired were self-developed by HonorHealth.

The HonorHealth neuroscience facility located on their flagship Osborne campus, has 109,000 rentable square feet and is a 100% leased with a waited average remaining lease term of 7.7 years. The HonorHealth medical office facility is 60,000 square feet on the campus and attached to HonorHealth News and Oren hospital and serves that high-gross submarket northwest of Phoenix. These investments expand our total investments anchored by HonorHealth to 8 facilities, totaling approximately 459 thousand square feet. We expect to continue to grow with this outstanding investment-grade health system and the physicians aligned with them in the future. With these amounts investments we now exceed $1 billion of new investments closed or under contract during 2021. DOC 's growth has been fueled by our relationship with healthcare systems and physician groups and the developers working directly with those providers.

Those developers includes Cambridge Healthcare, the David scrutiny, Landmark, Meridian, Catalyst, and others. While there's nothing wrong with private ownership of medical office facilities, as a unique advantage, public companies like DOC have a long-term ownership of medical office facilities aligned with best-in-class healthcare providers. Most of our largest clients are faith-based or community non-profit, tax exempt organization. We're focused on access to healthcare for the next 50 years, not the interest rate in the next 5 years. Our stability and long-term approach to capital and ownership and laser-focused best in industry, customer service, and property management provide us a measurable advantage to sourcing and completing our investments, growth strategy, and goals. We believe investors want access to a publicly traded best-in-class pure play medical office rate.

And we humbly believe all the data identifies Physicians Realty Trust, our board and our management as the best option for that investment. Before I turn the call over to Jeff to review our financials, we're also excited and humbled to announce that dock is among modern healthcare's 2021 best places to Work. Our ranking of 26 in the supplier category represents our debut appearance, earning distinction while serving as the highest rated healthcare real estate provider among the honorees. DOC wouldn't be graded the best place to work without our exceptional team.

And today I want to recognize our very own Mark Diggs, VP of Asset Management, who just began his 1-year term, as Chairman of BOMA International. His leadership and attention to DOC will not waiver. At this recognition and leaderships that commercial real estate industry is a tribute to his professional and personal excellence. And we're blessed to have him on our leadership team. Would also like to recognize Mark Time, our EVP of Asset Management, and one of DOC's founders, who was recently named by Globe Street to the 50 under 40 list of people to know in the U.S. commercial real estate industry. Congratulations, Mark and Mark, and keep up the outstanding leadership to DOC as the providers in the communities we serve. Jeff.

[Jeffrey Theiler, Chief Financial Officer]

Thank you John. In the third quarter of 2021, the Company generated normalized funds from operations of $58 million or $0.26 per share. Our normalized funds available for distribution were $55 million, an increase of 5.3% over the comparable quarter of last year. And our FAD per share was $0.24. In the third quarter, the Company delivered consistent performance with same-store NOI growth of 2.5%, and same-store occupancy down 50 basis points year-over-year as strong lease spread have offset a handful of deliberate non-renewals. The portfolio saw no material impacts at all from the Delta variant and we continue to collect over 99% of all contractual rents and accounts receivable balances remained at the lowest levels in the history of the Company. Looking back over the past 2 years, although we were optimistic that the portfolio would whether the pandemic better than most real estate asset classes, has performed so well, it has even surprised us.

As we continue to invest in building the best tenant base in the industry, refine our credit monitoring process, and dispose of our limited non-core assets like we did with our recently announced LTeX sale, we see no reason why we won't continue to perform even better over the long term. The Company closed $109 million of investments this quarter at an average first-year unlevered yield of 5.4%, highlighted by the off-market acquisition of a newly-constructed on-campus MOB with HonorHealth. In October, the Company closed another a $100 million of deals and announced the $764 million Landmark transaction. The 15 building portfolio is 74% leased to investment-grade tenants and not only provides an exceptionally high-quality portfolio today, but also opens the door to ten new. Health system relationships for future growth.

Since many of our acquisitions are repeat deals often directly with health systems, we would expect it's latest transaction to provide future benefits as well. We continue to see enhanced demand for medical office properties as private market participants aggressively pursue the product. However, the difficulty of prime these assets away from health system owners is significant. Which enhances the value of our existing portfolio, as well as our platform. We had a busy quarter on the financing side of the business. We amended and extended our revolving credit facility, pushing the term-out until 2025 and reducing our current cost by five basis points. We also took advantage of our upgraded rating profile from Moody's and S&P to issue $500 million and 10-year bonds with a 2.625% coupon. We used a portion of the proceeds to repay our $250 million term-loan and expect to continue to build out our long-term debt curve over time as we grow the Company. As of now, we have only $84 million of debt coming due through 2025, providing exceptional financial stability for our investors.

We issued $53 million on the ATM in October at an average price of $18.61 as we see the pipeline continued to build for next year. Additionally, we recently signed a contract to sell our 3 long-term acute care assets for $62 million. Finally, eliminating some non-core assets that we bought in the early years of the Company. These were assets that went through the bankruptcy process in 2019 and generated some temporary negative sentiment. While we achieved a 9% unlevered IRR on our LTAC investment, we prefer the risk-adjusted returns of medical office buildings over the long term and capitalize on the opportunity to sharpen our pure-play MOB focus. Following this transaction, medical office buildings will now provide 96% of our overall NOI an increase of 2% from last quarter. Turning to other relevant portfolio metrics our third-quarter G& A came in at $9.5 million and recurring capital expenditures were $6.7 million for the quarter. So both are trending towards our full-year guidance of 36 to 38 million for G&A million to $27 million for CapEx. I will now turn the call over to Mark to walk through some of our portfolios statistics in more detail. Mark.

[Mark Theine, Executive Vice President Asset Management]

Thanks, Jeff. DOC continues to benefit from our growing operating platform and strong relationships with HealthCare partners. Before highlighting our Q3 performance, I'd like to start by recognizing two outstanding recent achievements by the team. First, Physicians Realty Trust was selected by the Institute of Real Estate Management as the 2021 accredited management organization of the year. The AMO accreditation was established 75 years ago to advance best practices in real estate management at the Company level, with 560 worldwide firms holding this prestigious accreditation. Today, we are exceptionally proud to be at the very top of that list as the 2021 Accredited Management Organization of the Year. Second, we recently announced our inaugural GRESB score of 75 in their 2021 Real Estate Assessment outperforming the international score of 73 out of 100. In addition, we received a Green Star designation recognizing the team's work implementing and measuring sustainability policies. As these achievements indicate, DOC remains committed to acting as an ESG leader as we accelerate our external growth momentum.

We continue to expand our in-house property management and leasing platforms during the third quarter, laying the groundwork for additional cost efficiencies to deliver long-term enterprise value for our shareholders. As an example, our recent off-market acquisition of 2 newly constructed facilities occupied by HonorHealth are our 14th and 15th real estate investments in the Phoenix, Arizona MSA. Through our in-house management teams, we are excited to expand this trusted partnership with HonorHealth, while also realizing the benefit of our management infrastructure through additional property management fees. Looking forward, our management structure is scalable and will continue to benefit from concentration as we invest in top quality properties and portfolios, like the Landmark portfolio that is scheduled to close in Q4. In the third quarter, we saw the power of our platform and portfolio generate both internal and external growth opportunities led by same-store growth of 2.5%, leasing spreads of positive 4.4%, and an in-house leasing team that saved over $4 million year-to-date in commissions that would have otherwise been paid to outside leasing brokers, assuming a conservative 3% fee. Our same store MOB portfolio, which again does not exclude repositioning assets, generated cash NOI growth of 2.5% for Q3 in 2021.

The NOI growth was driven primarily by a year over year 2.5% increase in base rental revenue. Operating expenses were up 7.3% and offset by an 8.4% increase in operating expense recovery revenue. Once again, demonstrating the insulated nature of our triple-net leases. Year-over-year operating expenses were up 2.2 million overall, primarily due to a $0.8 million increase in property insurance costs and a $0.7 million increase in real estate taxes. Same-store occupancy year-over-year was down approximately 50 basis points as we intentionally vacated several suites this quarter to make room for anchor tenants with stronger credit to expand the better rates and lease terms. Year-to-date, our leasing team has completed nearly 800,000 square feet of leasing activity with an 80% retention rate and positive 2.7% leasing spreads. In Q3, specifically, tenant retention was 72% across 179,000 square feet of lease renewal. With cash renewal leasing spreads a positive 4.4%.

To further drive future internal growth 80% of the leases executed this quarter contained an annual rent escalation of at least 2.5%. Notably, these results were also achieved with limited leasing costs totaling $1.47 per square foot per year across the full volume of consolidated leasing activity. A figure that's much more efficient than industry averages. Our successful net effective rent outcomes are driven by the quality of our assets and backed by the market pressures driving increases in rental rates and construction pricing. As we look at our portfolio moving forward, DOC's investments are diversified geographically, with no one state accounting for more than 15% of rent, and no single tenant accounting for more than 5.7%.

Additionally, our investment-grade quality tenants improved to 64.4% in the third quarter, from 62.5% in the second quarter. as a result of the LifeCare portfolio disposition and HonorHealth Investment. These metrics and all of our portfolio quality metrics will further improve with the acquisition of the class A landmark portfolio that is 74% leased to investment-grade tenants and includes 10 new hospital relationships. The team is focused on the due diligence and integration of this portfolio by the end of the year and overall, very excited about growing the DOC portfolio from $5 billion in real estate investments at the beginning of 2021 to nearly $6 billion in real estate investments by year-end. With that, I'll now turn the call back over to John.

[John Thomas, Chief Executive Officer]

Thank you, Mark. Now we'll take your questions.

[Operator]

Thank you. Ladies and gentlemen, [Operator Instructions]. One moment please while we hold for questions. Our first question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question.

[John Kim, BMO Capital]

Thanks. good morning. I'm here with [Indiscernible]. There's a lot going on in medical office today, including HTA announcing its strategic review this morning. I was wondering if you can comment on your interest level in participating in a potential sale process versus other opportunities that you're seeing in the market.

[John Thomas, Chief Executive Officer]

John, we're focused on our core business in acquiring new investments and investment-grade quality medical office buildings and financing developments of those facilities. Again, we see every opportunity that's publicly available and evaluate those, but we don't comment some on them to be reached completely. So thanks for the question.

[John Kim, BMO Capital]

Last quarter you mentioned John cap rates for high-quality portfolios going in the low 5, and I'm wondering if you can update us on this quarter and what you're seeing fully for those assets.

[John Thomas, Chief Executive Officer]

Yeah. Like we've seen, we think the Landmark portfolio is -- humbly is the highest quality portfolio we've seen and execute on that in an off-market basis. We are seeing portfolios trade frankly, well below in the mid-fours now today, so again, high-quality assets and kind of sizable portfolios. But we think the Landmark portfolio we acquired at an attractive price and frankly better than an openly marketed process.

[John Kim, BMO Capital]

Yeah, I was going to asked about that. So the 4-9 was negotiated a while ago. Where would that trade today if it were to be sold? And can you also comment on the refers you mentioned you weren't that concerned about it, but how many assets or what percentage of the portfolio have that option?

[John Thomas, Chief Executive Officer]

Yes. So these were all built, purpose developed for those health systems. I think one was acquired by like Mark in the process of their relationship with the health system. But all of them have a Roper's and where they are on the ground leases. We, our Landmark, or both have visited with all the health systems and starting to receive waivers back verbally and in writing. So they still have some time left in their review process, but we expect substantially all of them, if not all of them to waive those?Ropers? and complete the acquisitions. In your other question, again we're seeing prints of assets sold in the open market portfolio. So on the open market in the mid-4. Again, we think the Landmark portfolio with specifically with the quality of the billing, the age of the billings, the walls of the billings to the health system credits involved, 74% of these buildings are leased to investment-grade health system credit. So, we think we will trade in the mid-4's, but not low 4's.

[John Kim, BMO Capital]

Got it. That's very helpful. Thank you.

[John Thomas, Chief Executive Officer]

Yeah. Thank you.

[Operator]

Thank you. Our next question comes from the line of Jordan Sadler with KeyBanc Capital Markets. Please proceed with your question.

[Jordan Sadler, KeyBanc Capital Markets]

Great. So, I think the previous guidance was for $400 to $600 million. So I guess that's over with, you guys are blowing through that, any goalposts you would offer up for the remainder of the year or just on a look forward basis, John, or just kind of trying to frame up what the investment opportunity looks like. It really [Indiscernible] after the third quarter.

[John Thomas, Chief Executive Officer]

Depending on how you count, there's a lot out there available in the market and we're still evaluating some opportunities before the year-end. And I don't think we're prepared to update guidance, if you will, as we didn't blow through the 4 to 600. And included in that is we've got -- we did announce over a billion of investments which is the biggest challenge is of Landmark, of course. We do have 3 projects still under construction, one of those will break ground in the first week of December. It's a 100%-leased, beautiful facility and we think it'll be an award winner next year and in the Minneapolis market, got 1 in New York MSA under construction with Landmark, and we now have an option to acquire that building when it's completed next year and then we have projects within investment-grade tenant in the Dallas, Fort Worth market. I think we will see a little bit more completed this year and then first-quarter pipeline is really building up nicely.

[Jordan Sadler, KeyBanc Capital Markets]

Okay. And then can you speak to sort of the financing evolve this maybe Jeff, you can kind of frame up where you are on leverage right now on a pro - forma basis for all this activity and sort of where you expect to be or how you expect to get back this where the target range.

[John Thomas, Chief Executive Officer]

Sure. Thanks. Jordan. So if you look at our third quarter on our enterprise debt-to-EBITDA we were about 5.0 times, proforma for all this activity, assuming Landmark closes completely in the fourth-quarter, that would bring us to about 6 times debt-to-EBITDA. So that certainly at the higher end of where we've operated historically. However, if you look at our portfolio, we're 65% in investment grade tenancy. We collected 99% of all our rents during a terrible pandemic. We're effectively 98% triple-net lease. So there's no operating margin risk in there.

[Jeffrey Theiler, Chief Financial Officer]

We only have 4% to 6% of our leases expiring each year over the next 3 years. And we've prepaid pretty much all of our debt. So, we only have $84 million of debt to refinance through 2025. So we think we're in an incredibly stable financial position, so we'll leverage trend down from 6 times pro - forma, yeah, it probably will. Are we nervous about carrying 6 times debt to EBITDA for some period of time? No, absolutely not. So we will be opportunistic as we look at funding, it will depend a lot on the upcoming pipeline and we'll just kind of continue to evaluate it.

[Jordan Sadler, KeyBanc Capital Markets]

Okay. That's helpful. And then maybe just coming back to Landmark, but also the HonorHealth transactions, including one of the more recent ones, new construction assets at closing in. What looks like a 4.5 cap. Can you maybe speak to the merit of investing in MOB sub-5 -- at sub-5 cap rates, and maybe it would help by explaining the difference in the growth profile of the -- maybe the HonorHealth assets versus the actor's portfolio for example. Where you're getting a 5.5.

[Jeffrey Theiler, Chief Financial Officer]

Yes. I understood Jordan, you know, the Phoenix market is really as hot as it can be, pardon the pun with Phoenix. We think the rents at that -- in those two buildings are below market at this point, and certainly in the current market. We have some shorter-term leases in those a nice long Walt overall in both those buildings, but we have some shorter-term leases where we can move some things around and take advantage of some of those kind of mark-to-market and that billings. We think the kind of opportunity set there, in particular, as, as much stronger than that stated first-year cap rate. We have opportunities from reward development and more acquisitions with HonorHealth itself directly and so these were off-market transactions. They were under construction, kind of went into a pre -sale arrangement with them mid-year and it took them to allow the uncompleted, and [Indiscernible] and rent commencing. So the rationale for that I think -- I think Jeff can walk through the math and then kind of with the ramp bumps. And again, our expectation of moving some rent start more aggressively in parts of those buildings. There will be a creative in 2022.

[Jordan Sadler, KeyBanc Capital Markets]

Okay. Thanks for that.

[Operator]

Our next question comes from the line of Jason Edwin (ph) with RDC. Please proceed with your question.

[Jason Coniensky, RDC]

Hey, good morning, guys. It sounds like you have an opportunity to potentially drive rent growth higher. You've been holding back from?space?. I was wondering if you could quantify that opportunity.

[Mark Theine, Executive Vice President Asset Management]

Yes. Sure. Jason, this is Mark, As you mentioned, and we said in our prepared remarks, we deliberately did not renew a few leases this quarter to make room for our anchor tenants, in many cases, investment-grade rated hospital systems to expand and take over the full building. That's a specific example in Louisville that we have just seen. And then year-over-year, some of the other spots, we're really -- we're really picking our spots and focused on markets like Phoenix, Orlando, Dallas, where market rental rates are increasing more than the averages. So for us, our portfolio is 96% leased, but there's opportunity as you know from maybe 1%, 2% of the portfolio here to really pick our spots and trend drive, rental increases and market rents higher than normal.

[Jason Coniensky, RDC]

Okay. And then as we look into the acquisition pipeline, looking ahead to 2022, obviously 2021 is very back-end weighted. Should we expect anything similar in 2022, given you're still going to be digesting the landmark deal or will it be more evenly spread out throughout the year?

[John Thomas, Chief Executive Officer]

Yeah. Good question. As I said in my introductory remarks, you'd like to?ratably? during the year. I think back to one of the other questions, we will issue guidance for next year with their next earnings call, but we've been deploying $500 to a $1 billion almost every year and again, most years it's more ratable throughout the year. This one we just had the opportunity to capture a very large transaction and also to develop the projects that just took longer to complete than we expected. So again, I think hopefully we'll see some more ratable first quarters is building up very nice right now. And we're in negotiations with a couple of more development projects which have not commenced yet, probably commenced first quarter and we will be able to include that in our numbers for next year.

[Operator]

Thank you. Our next question comes from the line of Richard Hill with Morgan Stanley. Please proceed with your question.

[Richard Hill, Morgan Stanley]

Hey, good morning, guys. One of the things that we've noticed and certainly in our channel checks is there's a lot more interest from private equity and medical office. And I'm wondering you think about that. How do you how do you think about those competitive pressures? How do you drive accretive growth? Do you -- would you consider levering up here a little bit given your Balance Sheet? Just sort of thinking about a pretty, pretty strong background -- backdrop for medical office and how you handle allocations drive through that?

[John Thomas, Chief Executive Officer]

If you look at institutional real estate investors, whether they be public or private, look across all commercial real estate asset classes. I don't think there's another one maybe, but cell towers that collected virtually all their rents in 2020 and many are still suffering through significant declines in occupancy and high wage labor costs, which don't affect us. And so as you're allocating capital in an institutional investor, it's no surprise that some of the world's biggest private equity firms and non-traded rates are going to be very attracted to the medical office space and I'm just driving appreciation of assets, again, in a 4 or 5 a day kind of FMV of best-in-class assets. Generally a 4-pack cap rate going in, but we look at our investments on a long-term IRR basis. And so again, those investors that have a 3 to 5-year horizon, with a be private equity or other private capital. We think we compete very well against that.

We think the health systems are looking for long-term owners with the transparency about public Company and opening the business model of a public Company that's wants to be -- create situations and relationships that are win-win and that's -- we think that's how we keep getting repeat business with the likes of HonorHealth and others and had a great long-term relation with Landmark and they finally decided just to sell us all their assets and so we think that's the updating the firm to welcome to the party. We have great relationships with most of them and look from time-to-time with potential joint venture opportunities. But for the most part think, adding assets to our balance sheet is our primary focus. Jeff.

[Richard Hill, Morgan Stanley]

That's helpful guys. If I may -- i appreciate the collar on the unlevered yields for Landmark. But any thoughts or anything you might be willing to share on accretion in 2022 or 2023? I recognize it's early. Recognize you haven't guided. So, if the answer is no, I completely get it, but I figured I'd ask.

[John Thomas, Chief Executive Officer]

Yeah, the answer is generally no, but the Landmark portfolio does have some more vacancy across the portfolio than our our portfolio and we're already working on in evaluating lease-up opportunities for that space and we were talking about two or 300 basis points, but there are some shorter Walton in some of those buildings and as we talked about before, the market rent are moving more aggressively up in those markets and so again, we expect to take full advantage of those opportunities with those health systems and source new developments with those health systems.

[Richard Hill, Morgan Stanley]

Got it. Thank you, guys.

[Operator]

Thank you. Ladies and gentlemen, at this time, there are no further questions. I will. Thanks. Turn the floor back to management for closing comments.

[John Thomas, Chief Executive Officer]

We appreciate everybody joining us this morning. We look forward to follow-up calls and Nareit. Unfortunately, Zoom is next week, but we look forward to seeing you one way or the other. Thanks for participating.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.