Macquarie Mexico Real Estate Management SA de CV

OTC:DBMBF

Earnings Call Transcript 2020-Q2

[Operator]

Good morning, and welcome to FIBRA Macquarie's Second Quarter 2020 Earnings Call and Webcast. My name is Carmen, and I will be your operator for this call. [Operator Instructions]

I would now like to turn the conference over to Nikki Sacks. Please go ahead.

[Nikki Sacks;Investor Relations Professional, executive]

Thank you, Carmen, and good morning, everyone. Thank you for joining FIBRA Macquarie's Second Quarter 2020 Earnings Conference Call and Webcast. Today's call will be led by Juan Monroy, our Chief Executive Officer and answer any questions you may have at the conclusion of today's prepared remarks. We also have Simon Hanna, our CFO.

Before I turn the call over to Juan, I'd like to remind everyone that this presentation is proprietary and all rights are reserved. The presentation has been prepared solely for information purposes and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements in this presentation are subject to a number of risks and uncertainties. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. These forward-looking statements are made as of the date of this presentation. We undertake no obligation to publicly update or revise any forward-looking statements after the completion of this presentation, whether as a result of new information, future events or otherwise, except as required by law.

Additionally, on this conference call, we may refer to certain non-IFRS measures as well as to U.S. dollars, which are U.S. dollar equivalent amounts, unless otherwise specified. As usual, we have prepared supplementary materials that we may reference during this call as well. If you have not already done so, I would encourage you to visit our website at www.fibramacquarie.com and download these materials. A link to the materials can be found under the Investors, Event and Presentations tab.

And with that, it is my pleasure to hand the call over to FIBRA Macquarie's Chief Executive Officer, Juan Monroy. Juan?

[Juan Monroy, executive]

Good morning, and thank you for joining us. I hope that you are all well and managing through these challenging times.

On today's call, I will discuss our second quarter 2020 results, the resiliency of our business and how we are mitigating the impact of COVID-19. While there are many factors clearly outside of our control that are having a profound effect on the global economy, we feel comfortable with our strategy and how we are positioned heading into the second half of the year. As we have navigated through the challenges brought on by the pandemic including the related government directives aimed at slowing the spread of the virus, we have proactively managed a number of key priorities. These include bolstering our balance sheet and cash position, focusing on our customer engagement and rent collections, appropriately managing store and facility hygiene and social distancing protocols focusing on expanding our social responsibility programs as well as maintaining focus on accretive growth opportunities for the longer term.

For the second quarter, we delivered slightly growth in AFFO per certificate MXN 0. 6363, which increased 20 basis points from the prior comparable quarter. The AFFO result was primarily driven by a depreciation of the peso and the corresponding impact on our U.S. dollar-denominated revenues, with underlying income and scheduled collections remaining quite strong, which we consider to be a satisfactory outcome in the current environment. In Mexico, as we're all too familiar with nonessential businesses closed in late March in an effort to stem the spread of COVID-19. Within our portfolio, we experienced tenant closures in both our industrial and retail portfolios. As the quarter progressed and through today, the country's at varying stages of reopening. I am pleased to report that essentially, all of our industrial tenants, who temporarily suspended their operations due to COVID, are open.

In our retail portfolio, all of our shopping centers have remained open with approximately 80% of our tenants open as of today. Existing store closures related to gyms, cinemas and other entertainment related tenants that are targeting to reopen during the third quarter. We have worked and are continuing discussions with our customers to provide rent relief where deemed necessary to maximize rent collections and help our customers to uphold their lease obligations. We have maintained sound collections today and are providing agreements for rent relief to support our most impacted customers.

Additionally, we continue with a prudent accounting approach for credit loss provisioning that reflects ongoing uncertainty and have taken all data provisions in the second quarter. Please note that in our earnings release and supplemental package, we have provided additional detail related to rent collections, rent relief and account receivable as well as an update on the operating status of our retail center tenants. We have seen important stabilization relative to the early months of the shutdown. And so we are reaffirming our AFFO and distribution guidance for the year. However, we remain cautious for our second half year outlook. Given the spread of the virus still remains of concern in Mexico, and as there is still uncertainty on the impact of the general economic activity based on social distancing measures and increased unemployment levels.

In our industrial portfolio, NOI in the second quarter increased 24.5% to MXN 865 million as revenues benefited from a depreciation of the Mexican peso. We closed the second quarter with occupancy at 95.5%, whilst realizing an above inflation, 2.2% and year-over-year increase from rental rates due to contractual increases and positive leasing spreads on renewal and new leases. Even with the backdrop of a pandemic, we continued solid leasing activity. And during the quarter, we signed 3 new and 21 renewal leases, comprising 1.8 million square feet of industrial GLA. With this activity, we achieved a strong retention rate of 88.3% in the quarter and 85.5% for the last 12 months. We have now addressed more than half of these years scheduled lease expirations. And leases accounting for only 7.7% of ADR are scheduled to expire in the remainder of 2020. COVID-19 near-term impact on our industrial portfolio tenant base has moderated with new rent relief requests haven't tailed off.

Beginning in mid-May, automotive businesses, which comprise our largest single-tenant category, were designated as essential businesses and permitted to reopen. Since the start of these crisis, we have been working with our tenants to support their needs to help ensure their ability to meet the lease applications. This approach has been productive. And in our industrial portfolio, we have collected 96% of scheduled second quarter rents due, excluding deferred rents scheduled for collections in later quarters.

In respect of second quarter rents, we have provided rent deferral support for 35 customers totaling MXN 72.8 million with 99% of these second quarter deferrals scheduled for collection this calendar year. We have deemed this deferred income as still earned during the quarter. And as such, uncollected second quarter deferral rental income is included in both revenue and trade receivables. We have, however, taken a prudent approach to covering for potential credit losses and have set aside revenue credit loss provisions of MXN 23.6 million for the quarter. A step-up of MXN 16.8 million over the prior corresponding period. In our retail portfolio, we delivered NOI of MXN 99.1 million. Compared to MXN 150.6 million in the prior comparable period. Second quarter deferred rent income is included in revenue. However, discounted rent is not.

In terms of rental rates, we achieved positive new and renewal rental rate spreads, along with contractual increases, but these gains were offset by the impact of a lease termination of a prime Mexico City property in the first quarter, resulting in a year-over-year 5.7% decline in rates. During the second quarter, we signed 22 retail leases. The relatively low level of leasing activity is due to uncertainty among customers surrounding COVID-19. In light of the challenges brought on by the pandemic, we have been particularly focused on maintaining tight cost controls with regards to property level expenses. Including credit loss provisions, retail portfolio property expenses decreased by 20.4% year-over-year.

As discussed with our industrial segment, we have seen historically high levels of credit loss provisioning as part of our prudent accounting approach with second quarterly provisions of MXN 15.1 million impacting our second quarter NOI result. Similar to many other countries worldwide, Mexico has been heavily impacted by the pandemic. All of our shopping centers are grocery-anchored and defensive in nature and have remained open throughout. In recent weeks, we have seen a steady increase in the opening of nonessential businesses. Although most at reduced hours and capacity. And currently, approximately 78% of our stores are open in terms of annualized base rent. Whilst we have seen a recent uptick in shopping center food traffic, visitor levels remain subdued at around half of their pre-pandemic levels.

With regards to retail rent collections, we have been working very closely with our customers to come to a resolution under lease obligations. For the second quarter, we have collected 94% of scheduled rents after taking into account discounted and deferred rents no longer scheduled for collection this quarter. In respect of second quarter rents, we have provided rent relief for 383 customers, including MXN 43.6 million of rent relief, comprised of MXN 38.9 million of discounted rents and MXN 4.7 million of rent deferrals. We're still in discussions to come to a resolution with a number of tenants that have been particularly impacted by the closures and expect additional rent concessions to be made in respect of third quarter rents, and will, of course, report on the outcome of these negotiations to you in due course. This period is certainly one that has challenged the general Mexican commercial real estate landscape. Nevertheless, with the prime collections of our properties, the quality of our assets and the largely defensive and essential nature for customer businesses, we maintain confidence in our positioning over the long term.

Turning to our strong balance sheet position with the stabilizing outlook, we repaid $90 million of our drawn revolving credit facility on June 17, and made an additional $55 million repayment on July 24, leaving $35 million drawn as of today. Cash reserves remained high at approximately $75 million alongside our committed undrawn credit lines of approximately $200 million. On the liability management side, we enjoy a very comfortable position of having no scheduled loan maturities until 2023 and no material commitments with respect to capital expenditures. In terms of capital deployment, we are being thoughtful in light of the current environment.

During the second quarter, we neared completion on our 217,000 square foot industrial development in a prime corridor of [indiscernible]. Located right next to our fully stabilized 101,000 square feet development that was completed late last year. With that backdrop, we are pleased that our prudent payout ratio has continued to maintain a stable distribution path. With our Board authorizing the payment of the second quarter distribution of MXN 0.475, up 7% from the prior year. We are maintaining a rent control and distribution guidance for 2020.

For the full year, FIBRA Macquarie expects to make cash distributions of approximately MXN 1.90 per certificate, with 3 remaining quarterly distributions to be paid in equal installments of MXN 0.475. The current environment is certainly a tough one, but I will characterize our business as stable and resilient. With anticipated move-outs for select tenants in both our industrial and retail portfolios, we consider that second half occupancy levels might be slightly challenged from current levels, although our overall outlook for the second half of the year remains cautiously optimistic. Notwithstanding the pressure that the pandemic is creating, we do believe there are some important tailwinds for the long term. Importantly, the USMCA took effect on July 1, which provides for incentives across key supply chains to manufacture products with increased North American content. As a result, we expect to see additional investment in Mexico in the coming years. We also believe there will be opportunities over time as companies evaluate their supply chains with an enhanced focus on inventory resilience. Safety stock planning and geographic diversification.

We will remain extremely disciplined in our approach, but we have an active pipeline, and we'll be prepared to act on opportunities that meet our strategic and financial hurdles. Over the past few years, we have progressively built a resilient business with a superior capital management strategy and a strong, well-positioned balance sheet with plenty of flexibility. Because of this strategy, we are confident in our outlook to not only withstand the current challenges but to emerge with additional growth opportunities. Finally, once again, I would like to offer my sincere thanks to all of our team members who have truly stepped up throughout this time and have displayed all of our core principles and continue to work tirelessly through these unchartered quarters.

With that, I'll ask that Carmen to open the phone lines for your questions. Carmen?

[Operator]

[Operator Instructions] And our first question is from Eduardo Alvizouri with GBM.

[Eduardo Alvarez, analyst]

How do you see growth opportunities going forward? Are you exploring expansion plans after completing the current development pipeline?

[Juan Monroy, executive]

Yes. In terms of growth opportunities, I'll say, partly, we are pretty bullish in terms of the long-term fundamentals of the market. Despite of tremendous crisis in challenging times that we're going through, the long-term fundamentals from my perspective look pretty good. As I mentioned before, with the USMCA, there'll be more incentives to bring investments into the region, right, with obvious need for global supply chains to be more resilient. We'll see potentially companies worldwide diversifying away from Asia and setting shop in the region. And also with historically seen inventory levels, I think that people have realized that that's not adequate or sustainable in a world that will value resiliency more. So I think that all that in addition to the increased logistics needed in connection with e-commerce, et cetera.

We see that the long-term fundamentals of the key drivers of demand for industrial real estate in Mexico are pretty strong. So yes, as such, we are focused on ensuring that we leverage our pretty well-established platform in capturing those growth opportunities. Obviously, doing all that in a very prudent and disciplined manner. At the moment, we still believe that acquisitions look challenging, given that pricing the private market has really moved, and cap rates are still at levels. And we think that they'll say at those levels where probably makes more sense for us to develop. As we develop product, we can develop in our core markets where we see strong long-term growth potential at attractive yields. So definitely, we will continue with our expansion pipeline. And prudently, with our development pipeline, where we see healthy supply demand metrics on a market basis. And as always, we'll continue to scan the market for opportunistic acquisitions in terms of M&A.

[Operator]

Our next question comes from Alan Macias with Bank of America.

[Alan Macias, analyst]

Just a question on traffic and shopping malls, is a restriction by the Mexico City government, 30% occupancy in shopping malls, is that upheld? And are people going to shopping malls? Have you seen a comeback?

[Juan Monroy, executive]

Alan, good to hear you, hope all is well. Yes. We've seen -- well, first of all, as you know, none of our shopping centers ever closed, and all of them are grocery anchored, i.e. we need it to service, all for essential customers. So they've remained open throughout the health crisis. Number one. Number two, we've seen a healthy gradual reopening for nonessential customers. At the moment, we're about 80% reopened. And we've seen an uptick in the traffic. We monitor this on a daily basis. During the pandemic, we had traffic drops anywhere between 45% to 60%. And over the last few weeks, we have seen increases from 10% to 15%. So still, obviously, well below the pre-pandemic levels. But have seen a gradual reopening and on the back of that, a gradual return from customers into our properties.

[Operator]

Our next question comes from Nikolaj Lippmann with Morgan Stanley.

[Nikolaj Lippmann, analyst]

Look, you deferred about 8%. I think it was of your industrial rents in the quarter. And thank you for the very detailed disclosures there in terms of both discounts and deferrals. Can you talk a little bit about your -- the criteria that would bring you to write-off some of that? And also, what you're seeing as we're now into the second quarter, if you think you will have a need for a normal amount of deferrals in the second quarter as well. So that's number one. Number two, in terms of the retail space, what degree are you guys looking into potential conversion? It's been -- it appears that there's been a lot of sort of growth of online and delivery services. Is that something that you are looking at a little bit more closely, dark formats, such as kitchens and stores?

[Juan Monroy, executive]

Sure. Yes. Thanks for that comment on this disclosure, as always that driven forward, we're very focused on providing as much information as we can in being as transparent as possible. We believe transparency is -- it's very important, critically important for analysts and investors to adequately assess our company. So I'll let Simon in a moment describe the schedules that we have included in a bit more detail. We don't anticipate much deferrals, additional deferrals from industrial in Q3. In fact, I'll say, probably second half of Q2, we saw a pretty clear decline in rent relief requests, which was a relief for us as management. So yes, during Q3, we had essentially all of our industrial customers having reopened, we wouldn't expect much in the form of additional requests in retail, still a fragile environment, Nikolaj. So do expect potentially some additional rent concessions, which could be deferrals or rent discounts.

And yes, in general, I'll say that as part of our strategic focus for the next -- for the foreseeable future, we're given a strong -- we have a strong focus on what -- calling the digital shift from the way we operate internally in terms of having information readily available for our entire team to how we interact with the external world from the first point of contact in terms of leasing -- throughout the leasing process. And then more extensively, obviously with a more focus to adjust ourselves to the new reality where e-commerce has increased already and will continue to increase. So our development strategies' well focused both in the industrial and retail portfolio to capitalize on that from the bar kitchen concept that you mentioned to industrial, more of a focus on core markets that are more logistics, e-commerce type market. So I guess with that, over to you, Simon.

[Simon Hanna, executive]

Thanks, Juan. Yes. Look, I think the way we approached this -- the provisioning this quarter, we had around MXN 39 million provisioned for doubtful debt, if you want to call it, that over the quarter, which is a really good step-up from historic run rate where we typically -- that's basically 2 or 4x historic run rate. And so there has been a step up there. And where that's left us at June 30 is a net AR balance of around MXN 113 million, which more or less equates to around $0.15 per certificate, if you like, of unprovisioned amounts. So with that, we have around 60% of the book covered in terms of provisions. We feel comfortable at that level. And I think just as background to explain why around MXN 76 million of that net AR balance is to do with industrial rents that are deferred. So we've recognized the income in the second quarter.

We've taken a little bit of a provision where we thought we needed to, but that's left around $76 million book collection primarily in the second half of the year. That's a balance that we have a fairly good visibility on. We think the industrial tenants are paying at a very good clip at the moment, north of 95%. And we think that those provisions are -- or account receivables, I should say, we have strong confidence that, that will be collected in the second half of the year. So I think that accounts for most of that AR balance. That leaves you around MXN 37 million of other items, a combination of retail unpaid amounts as well as other, call it, recoveries and cans, et cetera. So, all in all, that MXN 37 million equates for around $0.05 [indiscernible]. How we've undertaken the provisioning there. It's on a very detailed tenant by tenant basis.

And in short, historically, we've quite an aging policy, which would get you to 100% provisioning on all accounts receivable balances once it gets to 90 days. That still remains the case for, if you like, tenants who are paying as normal and where we have no concerns, where on a tenant by tenant basis, we have identified potential payment issues. What we've done this quarter, we've taken a more prudent approach of accelerating that provision to 100% immediately. So -- and more or less, once we have more than 50% down on collections, we've taken that 100% provision approach for that particular receivables. So that leaves, I guess, no risk on the P&L as a result. So that has accelerated some of the provisioning for this quarter. But as I say, it gets you to that net AR balance of $113 million which we think is in pretty good shape heading into the second half of the year. Obviously, as we go through Q3 and Q4, well, this is a dynamic analysis. So we expect to collect some of that balance, but also we'll be doing additional provisioning as normal as we do the tenant by tenant analysis for Q3 and Q4. So hopefully, that provides you with a bit more background on the provisioning approach for this quarter.

[Operator]

Our next question comes from Gordon Lee with BTG.

[Gordon Lee, analyst]

Two quick questions. The first is on the marking of the assets in the investment portfolio, do you reckon that the bulk of the industrial assets are now reflecting spot FX rates? Or is still additional markups there to go? And then the second question, Juan, you mentioned in your remarks that you think occupancy might be challenged in the second half of the year. I was wondering whether you were referring specifically to the retail portfolio. Or do you also see challenges on the industrial side?

[Juan Monroy, executive]

Yes. I think that when I look at our industrial valuations, kind of talking about valuations nowadays is somewhat a thought but a bit more than usual. But I'll say, I'll give you a few data points, and will give you my perspective or implied cap for our entire portfolio is north of 8.5%, in fact, I think it's 8.6%. So I think that if anything, when you look at private market relevant data comps. I'll say that our cap rate is wide to throughout, and we'll have room for compression. Because the key question is how occupancy levels and NOI levels will look at the end of this crisis, right? Personally, I think that cap rates will continue at similar levels, potentially even I see a solid rationale to think that they could potentially compress even further given the reduction on -- in reference rates. And given what is my perception that the total capital will prefer or we're sealing business models, i.e., given a premium shorter -- sort of a tighter premiums on sustainable business models like that of REITS. So I think that the -- there is potentially even a path for cap rate compression. So the question, then, is on the cash flow, right, on the NOI.

Having said all that, I think that our valuation is maybe even conservative. There was an adjustment during the quarter. We performed an external valuation 2 times a year and what's currently reflected in our books reflects the valuation performed by an external party during this second quarter. And there was a markdown on -- a minor markdown in industrial and a more moderate one in retail. So if anything, from my perspective, perhaps a conservative number there. And with regards to your second question in terms of occupancy outlook, yes, I think so, in both, we do have a couple of known move-outs in industrial. Nothing really major, but potential anticipate a potential minor drop in the consolidated occupancy towards the next quarter and in the end of the year. So yes…

[Gordon Lee, analyst]

If I could just clarify, the 8.6% sort of implied cap rate in the markets that you mentioned for the portfolio, is that for both portfolios combined? Or is that just industrial portfolio?

[Juan Monroy, executive]

That's combined.

[Operator]

Our next question comes from Francisco Chavez with BBVA.

[Francisco Chávez Martínez, analyst]

My question is regarding the retail portfolio, the leasing activity for the coming months, what do you expect? And specifically what occupancy do you expect by year-end or the first half of the next year, considering the current situation for the tenants. And also in terms of rent, and have you seen any downward trends in the market?

[Juan Monroy, executive]

Yes. Yes, let's start with the rents. We haven't seen really much movement in rents, in fact in our industrial rents held up pretty well with a 2% increase year-over-year and a pretty healthy increase actually for the quarter, definitely sitting out inflation. And retail, has held up fairly well if we exclude the move-out from our Mexico City prime property that had an above-average rent. But in general, I think that I'll say that rents are holding up well.

With regards to your occupancy forecast, as you know, we don't include that in our guidance. What I can say is that we do know of some known move-outs in both the industrial and retail portfolio. In industrial it's really nothing major. In retail, there are a couple that are delinquent tenants that we are confident that we'll recoup that space so it should overall be a positive from a capital perspective as a couple of those spaces are prime location within a prime property. But yes, overall, we do expect a little bit of potential softness into Q3 and in Q4 terms of occupancy. Simon, you wanted to complement something there?

[Simon Hanna, executive]

Yes. Paco, I think just to also give some color in terms of the provisioning for rents on the retail portfolio. As you would have seen this quarter, we had an expense provision around MXN 15 million, which is close to 3x our historical track record, which we usually run at around MXN 5 million per quarter. In terms of how that will look going forward, obviously difficult to say because it will ultimately depend on tenant performance. What we do know as of today is that once we have shaken hands with our retail tenants on the rents going forward, we are collecting at the moment at a run rate of around 95%. So we do have good collections, which would indicate that provisioning should be softer. And so I'd expect that the level will be somewhere between our historical low of 5% and what we saw in Q2 of 15%, perhaps somewhere in the middle, might be a good guess. But I think what gives us most confidence is that the money is coming through the door, and we are getting relatively high collection levels based on the revised scheduled rents due for collection.

[Operator]

Our next question comes from Froylan Mendez with JPMorgan.

[Fernando Froylan Mendez Solther, analyst]

So based on the new disclosure you gave -- by the way, thank you so much, highly appreciated, very important in these times to understand all the moving parts. But it seems that the discount that you gave for the retail side represent around 8% of the annualized base rent, which basically implies one month of free rents during the quarter. It seems rather low versus what we heard with -- from other players. I'm just wondering what percentage of your retail clients are you pending to reach a bill with? That would be my first question. And secondly, given the comments on focusing much more on development rather than acquisitions, especially on the industrial side, Juan, can you remind us of the size and some basics of your current land bank where you could actually start developing something? And what's your land acquisition strategy going forward?

[Juan Monroy, executive]

Sure, Froylan. So yes, our development strategy is focused on a handful of markets: Tijuana, Juarez, Monterrey, Guadalajara, Mexico City and selected Bajio market. We have -- we're in the process of completing a building in our products, a market with a substantial industrial demand. In fact, Peter mentioned this, but over the past few weeks, there have been announcements from 2 players, one in the aerospace and other one in the automotive industry announcing significant investments for new plants instead of Chihuahua in cost in the quarters. And yes, our pipeline is fairly active in all of those markets. And it is focused on both logistics customers and like manufacturing customers.

With regards to retail discounts, I see Simon wanted to share some thoughts. I'll say that I'll remind you that about 40% of our tenant base is essential customers, and they've been performing better than pre-COVID levels and paying full rent on time. So that's, I think, a very important thing to remind you we have a fairly defensive portfolio. With the rest has been a fairly engaged ongoing dialogue and trying to understand what some of our nonessential customers are going through and then having them recognize that they do have a contractual obligation to pay the rent, but also finding a sort of balance between that and the reality where they've been short and with pretty trouble -- going through pretty troubled times. We'll use these time as an opportunity to also plan our portfolio from those customers that have challenged business models, and we'll focus on supporting those where we believe that have business models that are winners for the long term. Simon, you wanted to complement a bit more on the discounts in some of those numbers?

[Simon Hanna, executive]

Yes. Thanks, Juan. And I think you hit the nail on my head there with regards to identifying the key point on our portfolio is the defensive nature with around 40% of our rents, linked to essential tenants who aren't subject to any concession. So once you adjust that for along -- you sort of get to your annualized base rent somewhere just over MXN 300 million for your nonessential tenant base in retail. And so applying that same concession amount of around MXN 44 million on that nonessential ABR, that gets you closer to the 14%. So you're sort of in 1.5- to 2-month type territory.

On the nonessential tenants as opposed to the 1% or 1 month, I should say, for the retail portfolio as a whole. So that's sort of, I guess, gives you more explanation as to where the real level of discounting is for the nonessential tenants. And going forward, as we did make clear what we've reported so far is the discounts and the deferrals that we have applied with respect to our second quarter rents only. We are currently going through negotiations and are finalizing second half concessions. So you'll expect to see these numbers being updated on a year-to-date basis next quarter as well, taking into account further concessions, which we expect to apply to second half rents.

[Operator]

[Operator Instructions] Our next question is from Enrique Alcantara with Citi Group. Enrique, your line is not functioning correctly, so I'm going to turn the call back to our management for their final remarks.

[Juan Monroy, executive]

Thank you, Carmen, and thank you, everyone, for participating in today's call. We look forward to speaking with many of you over the coming days and weeks as well as updating you again soon on our third quarter 2020 results. Thank you very much, everyone.

[Operator]

And the conference is now concluded. Thank you for joining our presentation today. You may now disconnect.