Cousins Properties Inc Q3 FY2021 Earnings Call

Good morning, and welcome to the Cousins Properties Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Pamela Roper, General Counsel. Please go ahead.

Thank you. Good morning, and welcome to Cousins Properties third quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer; Richard Hickson, our Executive Vice President of Operations; and Gregg Adzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8-K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website, cousins.com. Please be aware that certain matters discussed today may constitute forward-looking statements within the meaning of federal securities laws, and actual results may differ materially from these statements due to a variety of risks and uncertainties and other factors, including the risk factors set forth in our annual report on Form 10-K and our other SEC filings. In particular, there are significant risks and uncertainties related to the severity and duration of the COVID-19 pandemic and the timing and strength of the recovery therefrom. The company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise. The full declaration regarding forward-looking statements is available in the supplemental package posted yesterday, and the detailed discussion of potential risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly.

Thank you, Pam, and good morning, everyone. We began the third quarter with the expectation that our customers would begin bringing their teams back to the office post Labor Day. Since then, the Delta variant hit the Sun Belt hard and created delays. However, as cases have now significantly declined, we're increasingly hearing from our customers that they plan to return toward the end of this year or early next year. We are encouraged. Our team delivered strong financial results during the third quarter. Here are a few highlights. On the earnings front, the team delivered $0.69 per share in FFO. Same-property NOI on a cash basis increased 3.6%, and importantly, we leased over 597,000 square feet, including over 500,000 square feet of new and expansion leases with a 7.7 years weighted average lease term and a net effective rent of $24.06 per square foot, which is higher than our 2019 average. Second-generation cash rents increased 23.1%, our strongest rollout since 2015. And we ended the quarter with a net debt to EBITDA of 4.54 times. While the macro narrative around office remains ambiguous, our leasing performance highlights three office sector trends that are becoming quite clear. First, innovative and growing companies recognize that they are stronger in person at least most of the time. In this persistent remote environment, employee attrition is at an all-time high. Contrary to many media headlines, forward-thinking business leaders are connecting the dots between the great resignation and eroding corporate cultures. Thus, companies are firming up plans for their return strategy and making long-term real estate decisions that they were not prepared to make just a few quarters ago. Second, the migration of the Sun Belt has accelerated. Cisco, Visa, Arc, and Tesla are just the latest examples. There are more in the pipeline. The rapid urbanization in places like Downtown Austin, Midtown Atlanta, and the south end of Charlotte have changed the equation for companies previously located in more dense, larger cities in the Northeast and West Coast. Sun Belt cities now offer a dynamic urban experience in addition to an attractive climate and a lower cost of living and doing business. It's the best of both worlds. Lastly, the flight to quality has intensified. Earlier this week, I toured our recently completed Norfolk Southern headquarters project with a local business leader. His feedback, 'Much better than working at home,' he said. It was simple and spot on. The development includes innovative collaboration space, neighborhoods for private working, state-of-the-art technology, and countless amenities, all in the heart of Midtown Atlanta. Our customers recognize that interesting and inspiring space will be a competitive advantage in retaining and recruiting talent as well as rebuilding culture and connectivity. At Cousins, we have a unique and compelling strategy that positions us at the intersection of these trends. As the market moves faster, we are responding. Most recently, we acquired Heights Union, a 294,000 square foot office property in Tampa for a gross price of $144.8 million. The Heights neighborhood has emerged as one of Tampa's signature gathering spots, providing a unique live-work-play experience. The two 6-story buildings, which were completed in 2020, are highly amenitized, authentic, and efficient. Including Heights Union, we have invested approximately $1.1 billion in new acquisitions and development since the start of the COVID-19 pandemic. We are excited about the railyard in Charlotte, 725 Ponce in Atlanta, Domain 9 in Austin, and New Hawk in Nashville. They are representative of the office of the future in our differentiated products in their respective markets. During the same period, we have sold approximately $1 billion of noncore properties, including Hearst Tower and 1 South End, Charlotte, and Burnett Plaza in Fort Worth. The net result of these strategic transactions are value-add returns on a blended basis and a trophy portfolio positioned to capture outsized customer demand and a reduced CapEx profile. As I mentioned earlier, we have completed the Norfolk Southern headquarters project. The development was highly profitable for Cousins and a great outcome for our customer, a true win-win. Nonetheless, we are excited to transition to the other side of this unconventional transaction. The declining development fee stream has created challenging year-over-year earnings comparisons, and the 370,000 square foot lease expiration on December 31 at 1200 Peachtree created uncertainty. Looking forward to 2022 and beyond, our story simplifies, and we are already making great early progress on our re-leasing efforts at 1200 Peachtree as we are approximately 40% committed including LOIs. Richard will touch on this more in a moment. In closing, Cousins is well positioned for the future. We have assembled a trophy portfolio in fast-growing Sun Belt markets. We have organic growth opportunities within the portfolio as we drive occupancy gains and rental rate increases. We have external growth opportunities in our $663 million development pipeline. Additionally, we have a well-located land bank that can support another $2.6 billion in development, including over 3 million square feet of trophy office and over 1,500 multifamily units. Importantly, we have a rock-solid balance sheet that provides financial flexibility and a highly capable team to execute on the strategy. Before turning the call over to Richard, I want to thank our entire dedicated Cousins team who work hard every day to bring outstanding service to our customers and their talents to our company. They are the cornerstone of the company's success. Thank you. I'll turn it over to Richard.

Thanks, Colin, and good morning. This quarter, we continue to observe economic recovery in our core markets, accompanied by an uptick in leasing and transaction activity. Overall, our third quarter operational performance was strong. Although the pandemic persists and the Delta variant has delayed the return to the office for some, we are encouraged by the demand for high-quality office space in our markets. Due to the Delta variant, our portfolio level utilization did not significantly rise this quarter. However, we noticed a marked increase in activity and energy at most of our properties compared to last quarter, as demonstrated by a 27% rise in transient parking revenue quarter-over-quarter. In terms of third quarter results, our total office portfolio lease percentage and weighted average occupancy stood at 91.3% and 89.8%, respectively. Our lease percentage improved by 30 basis points this quarter, driven by new and expansion leasing activities at Terminus and 3350 Peachtree in Buckhead, as well as at Domain Point in Austin. Conversely, weighted average occupancy saw a decline of 120 basis points due to the previously disclosed move out of Anthem at 3350 Peachtree. Regarding general leasing activity this quarter, our team and portfolio achieved fantastic outcomes. We executed 43 leases totaling 597,000 square feet, with new and expansion leases representing 84% of total activity. Net effective rents reached $24.06 this quarter, marking an improvement from the second quarter and $0.24 higher than our reported net effective rents for the entirety of 2019. Rent growth was remarkable this quarter, with second-generation net rents increasing by 23.1% on a cash basis. Similar to last quarter, we continue to see positive activity in our leasing pipeline for both our existing portfolio and new developments. Tour volume in our portfolio rose consistently in the second quarter and has maintained that level since. We also remain optimistic about the recovery in our Sun Belt markets compared to the overall U.S. economy. In Atlanta, JLL reported positive net absorption this past quarter for the first time since the pandemic began, totaling 756,000 square feet. In our nearly 8 million square feet Atlanta portfolio, we signed an impressive 299,000 square feet of leases in the third quarter, which includes a 123,000 square foot lease with Visa at 1200 Peachtree in Midtown, establishing it as Visa's new Atlanta office hub. We also have a final letter of intent for an additional potential customer at that property for 31,000 square feet. This activity at 1200 Peachtree reinforces the prime location and quality of the repositioned asset. Another highlight is our redeveloped Buckhead Plaza project, which has generated 121,000 square feet of leasing activity year-to-date at record rental rates. Our overall Buckhead portfolio performed well, contributing 43% to our Atlanta leasing activity, which included new and expansion leasing of 29,000 and 50,000 square feet at 3350 Peachtree and Terminus, respectively. At 10,000 Avalon in Alpharetta, one of our latest assets, we signed a 51,000 square foot new lease after the quarter ended, bringing the building to 99% leased. In Austin, population growth remains robust this quarter. CoStar reported a 496,000 square foot decrease in total Class A sublease space available this quarter. The unemployment rate in Austin is at its lowest since March 2020, and average asking rents in the market continue to rise. Our Austin portfolio is currently 95% leased, with the core of the domain at 100% leased. We signed 236,000 square feet of leases in Austin this quarter, including a 73,000 square foot lease with a growing technology company at Colorado Tower that will fully backfill the expiration of Atlassian at the end of January 2022. In Charlotte, our 1.4 million square foot uptown and South End portfolio is well positioned at 96.1% leased, with very little space available. Similar to Austin, CoStar indicated that Charlotte experienced a significant 139,000 square foot decline this quarter in total Class A sublease space available. In Tampa, where we recently acquired Heights Union in the downtown area, third quarter activity was strong, according to JLL. The CBRE's 2021 Tech Talent report ranks Tampa as the tenth largest tech talent market, with its millennial population growing by 14.5% since 2014. While average direct asking rents are down 2.5% year-over-year, many Class A buildings in the Westshore submarket have seen asking rates rise to or above pre-pandemic levels. We signed 41,000 square feet of leases in Tampa this past quarter. In the Greater Phoenix area, unique among U.S. cities, there are now more jobs than before the pandemic, with recovery at 102.6% since April 2020. Year-to-date data shows Phoenix as the second fastest-growing metro in the country after Austin, based on the Greater Phoenix Chamber's annual economic outlook. Although our completed activity in Phoenix was limited this quarter, our recovery is reflected in our pipeline, where we are currently negotiating leases for 95,000 square feet of new and extension leases at our $100 million new development. Before I hand it over to Gregg, I want to express my gratitude to the committed and hardworking Cousins team. They consistently deliver excellent results and superior customer service. I appreciate everything you do.

Thanks, Richard. Good morning, everyone. I'll begin my remarks by providing a brief overview of our quarterly financial results, including some detail on our same-property performance, our development pipeline, and our transaction activity followed by a quick discussion of our leverage position before closing my remarks with updated information on our outlook for the balance of 2021. As you can tell from Colin's remarks, we've been extremely busy. However, we don't want all that positive transaction activity to take attention away from our very solid operating performance during the quarter. Leasing velocity in particular was outstanding, while second-generation cash leasing spreads were up the most since the fourth quarter of 2015. Over the past two quarters, we've signed almost 1.1 million square feet of leases, with almost two-thirds of that total representing new leases. The ability to attract so many new customers to our properties is a powerful indication of our Class A Sun Belt strategy. However, it's a big decision for a company to open a new office, especially if they're coming from out of market. It's not easy from space planning to construction management, to the endless logistical details surrounding moving existing employees, hiring new employees, and establishing a new address. It all takes a lot of time, which means the typical period between lease signing and revenue recognition is extended compared to a simple renewal. A significant portion of the new leases we have signed over the last six months do not begin revenue recognition until late '22 or early '23. Attracting new customers in the Sunbelt is our competitive advantage. It often just takes time for this to translate into revenue. Turning back to the third quarter results, our same-property performance continued to generate a significant and constructive change in trend. NOI on a cash basis increased a very healthy 3.6% over the last year, and excluding the single large move-out that Richard talked about, Anthem's departure from our 3350 Peachtree property in Buckhead to a new consolidated campus in Midtown Atlanta. NOI on a cash basis would have increased 5.3%. The largest variable in our same-property performance remains parking revenues. After bottoming during the fourth quarter of 2020, same-property parking revenues are up over 20% in the last three quarters, but still remain 20% below pre-COVID levels. Focusing on our development efforts, one asset, Domain 10, an office property primarily leased to Amazon in the Domain submarket of Austin was moved off our development pipeline schedule and into our portfolio statistics, while another asset, Neuhoff, a mixed-use property in the Germantown submarket of Nashville was added to our schedule. Total development costs for Neuhoff are estimated to be $563 million, with our joint venture interest representing 50% of that amount. The current development pipeline represents a total Cousins investment of $663 million across 1.9 million square feet in four assets. On the transaction front, as Colin laid out at the top of the call, we've been very active. As this series of transactions has unfolded, we've maintained our net debt-to-EBITDA around 4.5 times, as we've done with very few exceptions since 2014. We believe this leverage profile provides both defensive support during challenging times as well as offensive firepower to execute compelling transactions when the opportunity presents itself. If and when we commence additional developments and/or acquire additional properties, you should expect us to continue to fund these investments on a leverage-neutral basis over time. On the capital markets front, we closed a $312 million construction loan for our Neuhoff development joint venture during the third quarter. This new loan matures in September 2025 and includes a potential one-year extension option. I'll close by updating our 2021 earnings guidance. We currently anticipate full year 2021 FFO between $2.73 and $2.77 per share. This is up a penny at the midpoint from our previous guidance. This guidance includes all the transactions that have been discussed on this call. There are no other dispositions, acquisitions, or development starts included in our guidance. The most significant variable behind our guidance remains parking revenue. Our customers continue returning to the office during the third quarter, and we anticipate maintaining this trend into year-end. Our current parking revenue assumptions reflect this outlook. With that, let me turn the call back over to the operator for your questions.

The first question comes from Dave Rodgers of Baird. Please go ahead.

Wanted to start with Colin and Richard, maybe a big picture question. I guess you guys are making a number of trades within the portfolio upgrading, also changing some locations, changing building quality as you guys have done this research during COVID and have decided to kind of make some of these changes. What are the factors that drove that? And I guess I wanted to understand a lot of the acquisitions that you've made or the potential developments seem like, I would call them boutique-type offices. But what drove you to those decisions is that historically wasn't the direction that most companies went in and do you continue to expect to go that direction?

Dave, it's Colin, and I appreciate your question. For us at Cousins, our investment strategy, I'd say, is firmly driven by feedback from our customers and the decisions that they make around their real estate and what's important to them as they think about the right product and the right environment to go recruit and retain talent. So as you mentioned, we have been very active throughout the pandemic. But candidly, we were very active prior to the pandemic, executing the same strategy, which has been to meet our customers kind of where they are and the type of product that they want. Today, we continue to see a shift from our customers into newer, more interesting, inspirational, experiential and amenitized-type products in kind of unique mixed-use settings, whether that be in an urban area like downtown or out at a place like the domain. And so we have with our investment strategy, it really has been, I'd say, a balance between strategic acquisitions of existing properties and some pretty compelling new development that, from our perspective, blends to really attractive value-add returns. I'd say we have largely funded that with the sale of older vintage assets. So that has positioned us at the end of the day, delivering those value-add returns, but with a trophy portfolio that, as I mentioned in my remarks, is positioned to generate outsized demand and certainly with a lower CapEx profile. I don't think just kind of generally speaking, the type of properties that we've been buying and developing on average have been kind of 300-plus square feet. So I don't know that I'd characterize them as boutique. I would characterize them as exceptionally well located, with a lot of really attractive amenities and really interesting, and as I said, inspiring environments.

Next question comes from Anthony Powell of Barclays. Please go ahead.

So the second-generation pricing was very strong. And we look at other markets, coastal markets where we see vacancies and sublease space impacting pricing like in New York. Could you go over, I guess, the subleasing of vacancy that most of your major markets and describe how that's maybe impacting some of the pricing you're seeing in those markets?

Well, it's Colin. As Richard mentioned, we have seen a decrease in sublease activity across many of our key markets, particularly in Austin, where the sublease inventory fell by nearly 500,000 square feet in the last quarter alone. I would describe this reduction primarily as customers deciding to withdraw their spaces from the market while they reassess their return to the office strategies. Some of this space was leased by new customers, but what sets the Sun Belt apart, especially in our vibrant urban submarkets, is the influx of new companies looking for alternatives to the West Coast or Northeast. Our markets often have less dependence on mass transit and long commutes, which are often hindered by a lack of affordable housing. This advantage facilitates a smoother transition for our customers moving to Austin or Atlanta as they embrace a more extensive in-office approach.

And how do you look at development versus acquisitions at this point? Given the supply chain issues, you had some development activity, obviously, in Austin and Nashville. Are you more likely to pursue new acquisitions in the near future given it's harder to get started and completed or is development still attractive to grow the company right now?

Yes, we continue to look at both. Again, looking at our recent activity, it has been a blend of both acquisitions and development. You are right that there are supply chain issues throughout the country and candidly throughout the world that are impacting a lot of businesses. It’s certainly something that we keep a very close eye on. But I want to congratulate our team, who’s done a fantastic job throughout the pandemic and the supply chain issues continuing to deliver products on time and on budget. We’re doing that by being more intentional in our work, coordinating more closely with our general contractors in subs, in some cases, stockpiling materials well in advance to allow us to stay on those schedules. I think we’re here at Cousins benefiting from our 60-plus year track record and a lot of deep relationships with our construction partners and certainly leveraging those relationships to do our best to continue staying on time. As we look forward into 2022, we’re hopeful given the migration that we’re seeing into our markets to take advantage of some additional development opportunities.

The next question comes from Jamie Feldman of Bank of America. Please go ahead.

Very impressive leasing spreads this quarter. Is that sustainable heading into next year? Or is that more one-time based on the mix this quarter? Or maybe just talk about your mark-to-market?

Jamie, this is Richard. If you look at our pipeline, we feel comfortable that we will continue to be able to post good rollups. This was a pretty exceptional quarter. I think the best that we've posted in something like 6 years, I think, Gregg said. So I wouldn't expect this every quarter, but we feel good about continuing to roll up.

I think the pipeline of activity across our markets continues to be strong. Obviously, the timing of leases and how those work themselves out and ultimately get executed from quarter-to-quarter, so you can see some variability in volume from quarter-to-quarter, certainly depending on our exploration schedule. However, this is the second quarter in a row where we've driven what I would broadly characterize as pre-pandemic levels of leasing. As we look at the pipeline of activity in front of us, it remains strong.

And are you able to estimate the mark-to-market in the portfolio right now?

We have said for quite a long time that the mark-to-market in the portfolio is somewhere between 8% and 10%. We said that before the pandemic, and we've delivered on that on average, that range going all the way back to really just after the Parkway transaction. We’re obviously doing a lot of leasing and bringing some of our inventory to market. But again, we’re seeing market rental rates continue to move in certain of our markets. So again, we are confident as we look forward over the next year or two that we will continue to have variability quarter-to-quarter, but positive mark-to-markets.

And then as you think about the types of products you want to own and the type of product you all now. What percentage of the portfolio would you say is currently noncore? And I assume we should expect to see more dispositions and kind of portfolio repositioning acquisitions going forward? How should we be thinking about that?

Again, we have had a strategy to invest capital into newer vintage primarily, but interesting type properties and have funded that largely to date through noncore sales. I certainly would not say there’s a specific percentage that is noncore. I think as we see new opportunities to upgrade and can do it in a financially compelling way, we will try to take advantage of those opportunities. I do think stepping back, just looking at the work that we've done from the Parkway transaction, the Tier transaction, and some of the specific property acquisitions and developments. We feel very fortunate here at Cousins that we have assembled one of the newest, youngest portfolios across the office sector with an average age of 2004. The overall portfolio quality is terrific. But again, as we see opportunities to upgrade and can do it in a way that financially is compelling, we will look to take advantage of those opportunities.

So by financially compelling, you mean are these neutral? Or what's your definition of financially compelling?

Jamie, there are various metrics that we look at in addition to upgrading the quality and certainly thinking about earnings, both on a short-term basis and a long-term basis. When we see properties that perhaps over time could have risk to their earnings stream based on the demand profile for that building, we certainly take into account short-term earnings, long-term earnings and are also focused on net asset value. So it really is a balance here at Cousins that we work very hard. As you look back over the last couple of years, we've been able to do some recycling in a positive way for our shareholders.

And finally, considering Midtown Atlanta, which has been very active in terms of job opportunities, how do you view the conditions there in the next few years regarding supply? I know you're making good progress at 1,200, but are there any supply concerns? Or are you feeling optimistic about the direction things are heading?

Yes, we continue to feel very good about Midtown Atlanta. It is, as you mentioned, incredibly dynamic in the market. The reasons for that are companies are recognizing that they can attract and retain some of the best tech talent in the market, and also attract diverse talent. This has been a really positive win-win for the market and talent base here in Atlanta. I would expect to see that continue. The power and the draw of Georgia Tech is very strong, and it's real, so the demand profile, we think, continues to look attractive. As we look at the supply picture today, it's actually relatively muted. With the delivery of our Norfolk Southern building, there are really just two projects under development today in Midtown and one of those is over 50% pre-leased to Invesco. So the supply/demand fundamentals are actually pretty strong, on a historical basis.

The next question comes from Daniel Ismail of Green Street Advisors. Please go ahead.

Colin, you mentioned earlier about having prep levels of leasing as well as business leaders looking more towards return to the office and making decisions. I'm just curious how that phases out over the next year or so. Is it your sense that leasing volume across our markets returns to pre-COVID levels? Or will there still be a big quality bias with A, winning, and B, lagging?

Well, yes, I think there's a clear flight to quality, and it is intensifying. I do think we will see continued bifurcation between the highest quality A product and B product. As it relates to the return to the office, we are hearing from more of our customers that they are making plans to return, and I think that is translating into more leasing activity. How that ultimately plays out will take some time. We will see various fits and starts, and the COVID virus will highly impact how that plays out, whether there's a resurgence or not. However, many business leaders want their teams back together as I said most of the time. You could see some companies adopt a hybrid model, but it remains to be seen how much impact that actually has on demand as companies look for even in a hybrid model to generally have their teams together at the same time. So it will play out over some period of extended time. However, we are encouraged to just see the leasing activity return as those business leaders start to plan for the future.

Is it your sense for that '22 leasing volume and aggregates across the Sun Belt will be lower than pre-target averages?

Well, I don't want to prognosticate too far forward, but what I can share is as we look at our pipeline today in our markets and both from the early stage and later stage, it continues to be positive. How that ultimately plays out will be highly influenced by the virus. But at the moment, we continue to feel very good that activity is strong, and we're optimistic that without future flare-ups, we will continue to be very positive.

And then last one for me on developments underwriting. Can you touch on this a little bit earlier, but construction costs heading up, land prices likely up as well. Is this about being offset by rental rate increases or pro forma rental rate increases?

Yes, that certainly would be our hope. We are certainly trying to remain disciplined in our development yields. As construction costs increase, our hope is that rental rates increase with that. At the same time, we have seen in the capital markets, cap rates for trophy properties continue to compress. I do think that will have some impact on development yields as folks think about the spread and the margin between development yields and cap rates. However, between those two levers, the increases in rental rates and some cap rate compression, I think we're optimistic to try to get some additional development started next year.

We have a follow-up question from Dave Rodgers of Baird. Please go ahead.

Earlier. I'll go back and read it. Unfortunately, I got cut off, but I'm back. I had a question, and if you already addressed this when I was out, just let me know. With regard to 1200 in Midtown, obviously, that transaction you executed pre-COVID. Did you pursue a single tenant strategy there, one? And then two, I guess, was there a change in how you would anticipate the tech tenants looking at that? I guess, meaning with this movement towards ultra-high quality from kind of the high tech companies. Did that make that less attractive all of a sudden to kind of that group of tenants than maybe you would have thought two or three years ago? So maybe a couple of questions rolled up in there about your tenant that you expected 1200?

We’re really excited about what we have going on at 1200 Peachtree. I do think it will continue to attract tech interest. I think kind of the overall mixing role of what customers find compelling. Oftentimes, it is newer vintage properties. Some exceptionally well-located assets, a key intersection like that in Midtown with some of the redevelopment and repositioning that we’re doing, we're very confident we can transition that asset into the sweet spot of customer demand. If you look at our most recent lease with Visa, obviously a financial services company, but they view themselves as a tech company and a fintech company. That's a large driver of their move here into Midtown Atlanta. We’re hopeful to see interest from a lot of different industry sectors, but I think we’ll see some additional technology in that context. We are open and interested to a single tenant. When the opportunity came up with Visa, the quality and strength of that company, it was too good of an opportunity to pass up.

This concludes our question-and-answer session. I would like to turn the conference back over to Colin Connolly for closing remarks.

Well, thank you all for your time this morning and your interest in Cousins Properties. We'll look forward to having the opportunity to visit with many of you here in a few weeks at May REIT. In the interim, please feel free to reach out to myself, Gregg Adzema, or Roni Imbeaux, if you have any follow-up questions. Have a great weekend.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.