BrightSpire Capital, Inc.

Greetings and welcome to the Bryce Fire Capital Inc. Third Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce David Palame, General Counsel. Thank you, David. You may begin.

Good morning, and welcome to Brightspire Capital's third quarter 2023 earnings conference call. We will refer to Brightspire Capital as Brightspire, the RSP, or the company throughout this call. Speaking on the call today are the company's Chief Executive Officer, Mike Mazzei, President and Chief Operating Officer, Andy Witt, and Chief Financial Officer, Frank Saraceno. Before I hand the call over, please note that on this call, certain information presented contains forward-looking statements. These statements, which are based on management's current expectations, are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties could cause the company's business and financial results to differ materially. For a discussion of risks that could affect results, please see the risk factors section of our most recent 10-K. and other risk factors and forward-looking statements in the company's current and periodic reports filed with the SEC from time to time. All information discussed on this call is as of today, October 31st, 2023, and the company does not intend and undertakes no duty to update for future events or circumstances. In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release and supplemental presentation, which was released yesterday and is available on the company's website, presents reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors. Finally, during the call, management may refer to distributable earnings as DE. With that, I would now like to turn the call over to Mike.

Thank you, David. Welcome to our third quarter earnings call, and thank you for joining us this morning. I'll start by making some brief comments about the third quarter and then turn the call over to Andy. Everyone is well aware of the current geopolitical and economic issues. Therefore, I'll keep my macro remarks brief. Let's first turn to BRSP's results. For the third quarter, we reported gap debt income of $12.4 million, or $0.09 per share. Distributable earnings of $31 million or $0.24 per share and adjusted distributable earnings of $35.8 million or $0.28 per share. Our dividend coverage for the third quarter was 1.4 times. Our liquidity as of today stands at approximately $348 million. This is comprised of $183 million of current cash and $165 million under our credit facilities. During the quarter, our overall leverage stood at 1.9 times flat with the second quarter. Quarter over quarter, our underappreciated book value increased by 2 cents to $11.55, largely driven by the 1.4 times dividend coverage this quarter. Turning briefly to the financial markets, many believe the Fed is most likely done increasing the Fed funds rate. However, interest rates are becoming less anchored to the Fed's tightening policy and increasingly tied to U.S. fiscal policy. If you look at the term premiums associated with longer-dated Treasury yields, they are starting to become unhinged from the Fed's monetary policies. The U.S. Treasury market is now becoming more preoccupied with Washington's out-of-control deficit spending. This has led to the federal debt increasing by $600 billion in one month, bringing it to nearly $34 trillion. This deficit spending is another reason why inflation has been very difficult to tame. With the old long bond trading below a dollar price of 50, this will mark the first time that the U.S. Treasuries have had three consecutive years of losses. Today's Treasury bond issuance calendar is now larger than ever. Therefore, it makes sense that interest rates have been very volatile. The 10-year treasury yield has had intraday moves as much as 15 basis points and hit 5% just two weeks ago. Should that yield stick above 5%, that could be the threshold for a risk-off environment. Set against this context, BRSP will continue to proactively manage our loan portfolio and look to maintain our cash liquidity as we navigate through these circumstances. With that, I would now like to turn the call over to our president, Andy Witt. Andy?

Thank you, Mike, and good morning, everyone. Throughout the third quarter, the Bright Spire team has remained steadfast in our focus on proactive asset and portfolio management. During the third quarter, we received $58 million in repayments across two investments consistent with expectations, as repayment volume has been relatively muted. Year to date, we have received approximately $321 million in loan repayments. Looking ahead to the fourth quarter, we anticipate repayments to remain relatively low. Overall, our weighted average risk ranking increased slightly from 3.1 last quarter to 3.2 in the third quarter, with 82% of our loans risk ranked three or better. Our weighted average risk ranking for the four prior quarters has remained relatively consistent at 3.2. We now turn to our watch list update. Sequentially, the number of watch list loans increased by net three. We had one loan upgraded off the watch list for $28 million, and one loan was removed as we took ownership of the property underlying the Oakland office loan. Five loans were downgraded to a risk ranking of four, totaling $145 million. The loans that were downgraded were as a result of properties falling meaningfully behind on their business plans and where the borrower may not be in a position to support the asset. In addition, one loan was downgraded from a risk ranking four to a five. The multifamily property collateralizing this loan has faced operational challenges. Despite the borrower's recent efforts, to raise additional equity for debt service and capital expenditures, it now appears they are unable to secure the incremental funds needed to execute the remainder of the business plan. However, as of today, this loan remains current and performing. Additional details regarding this quarter's watch list are included in our supplement. In terms of specific loan updates, we anticipate taking ownership of the Washington, D.C. Risk Rank 5 office loan asset during the fourth quarter. Once we take control of the property, we expect to commence the sales marketing process. Our current carrying value is $20 million. With respect to the San Jose Hotel property, we previously noted that a sales process was underway for the hotel annex tower, comprised of 264 rooms. The borrower anticipates the sale and corresponding partial pay down of our loan to occur in the fourth quarter. The loan remains risk ranked four. We will continue to maintain the current ranking on the remainder of the loan until we see a clear path to resolution. This loan financing advance rate is less than 50%. As of September 30, 2023, excluding cash and net assets on the balance sheet, the portfolio is comprised of 92 investments with an aggregate carrying value of $3.1 billion and the net carrying value of $874 million, or 80% of the total investment portfolio. The average loan size is $34 million. Our weighted average risk ranking is 3.2%. And the loan portfolio has minimal future funding obligations, which stand at $200 million, or 6% of outstanding commitments. First mortgage loans constitute 97% of our loan portfolio, of which 100% are floating rates, and all of which have interest rate caps. The multifamily portion of our portfolio remains our largest segment with 53 loans representing 52% of the loan portfolio or $1.6 billion of aggregate carrying value. Office comprises 32% of the loan portfolio consisting of $1 billion of aggregate carrying value across 30 loans with an average loan balance of $34 million. The remainder of our loan portfolio is comprised of 9% hospitality with industrial and mixed-use collateral making up the remainder. With that, I will turn the call over to Frank Cerasino, our Chief Financial Officer, to elaborate on the third quarter results. Frank?

Thank you, Andy, and good morning, everyone. Before discussing our third quarter results, I want to mention that our third quarter 2023 supplemental financial report is available on the investor relations section of our website. As Mike mentioned, for the third quarter, we reported adjusted DE of $35.8 million or $0.28 per share. Third quarter DE was $31 million or $0.24 per share. DE includes a specific reserve on one loan of approximately $5 million. Additionally, for the third quarter, we reported total company gap net income attributable to common stockholders of $12.4 million or $0.09 per share. Quarter over quarter, total company gap net book value decreased one half of 1% from $10.16 per share to $10.11 per share. However, undepreciated book value increased from $11.53 to $11.55 per share. The increase is a result of adjusted DE and excess of dividends acquired, partially offset by increases in our CISO reserves. The third quarter change in adjusted DE of 28 cents versus the $0.25 recorded in the second quarter was driven by the impact of rising interest rates and income from our operating real estate portfolio. Turning to our dividend, for the third quarter we declared a dividend of $0.20 per share in line with the second quarter. Our dividend remains well covered at 1.4 times. Looking at reserves, our specific CECL reserves decreased to $35 million from $55 million. The decrease was driven by the charge-off of the Milpitas California MSB note and our taking ownership of the property underlying the Oakland office loan. This was offset by a specific reserve increase of approximately $5 million on the Washington, D.C. office loan. As Andy mentioned in his comments, we expect to take control of the Washington, D.C. office asset in short order. Finally, no specific reserve was required on the multifamily loan downgraded to a five. Our general CECL provision stands at $55 million, an increase of $3 million from the prior quarter. The increase in the general CECL was driven by economic conditions, as well as specific inputs on certain office and multifamily properties. The combination of asset-specific and general CECL reserves at third quarter end was $90 million, or 268 basis points on the total loan commitments. an overall decrease from $107 million or 311 basis points from the last quarter. As a reminder, these are point in time assessments that we evaluate each quarter. Looking at watch list highlights, our two risk rank five loans represent approximately 2% of the total loan portfolio carrying value. 10 loans equating to 16% of the total loan portfolio carrying value are risk rank four. While Orvis-ranked for loans are current performing loans, we see potential for increased risk and accordingly are monitoring these investments and working with sponsors to ensure the best possible outcomes. Moving to our balance sheet, our total at-share undepreciated assets stood at approximately $4.5 billion as of September 30, 2023, steady with last quarter. Our corporate leverage levels remain at the low end of the sector. Our debt to assets ratio is 63%, and our debt to equity ratio is 1.9 times flat quarter over quarter. We have no corporate debt or final facility maturities due until the second quarter of 2026. That concludes our prepared remarks, and with that, let's open it up for questions. Operator?

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Sarah Barcom with BTIG. Please proceed with your question.

Hey everyone, thanks for taking the question. So you discussed in the prepared remarks, you know, the decision to downgrade some of those multifamily loans. I'm just curious what the debt yield is on those roughly and were there any modifications on those agreements during the quarter?

Hey Sarah, how are you? Thanks.

First of all, all those loans are current pay right now and we've had I think on most of them, an indication from the borrower that they're going to continue to support the asset. In fact, in one case, we have preferred equity that's stepping in as well, supporting the asset. So all those loans are current. I think where we have an issue is that there is some execution issues at the property, property level. And so, in an abundance of caution, we've downgraded the loans. I think we've commented before that our biggest concern is going from a 3 to a 5, where there's a default on a loan. And while that can happen, and anyone can be surprised, we want to demonstrate to the market that we're erring on the side of being conservative. So those properties, we're expecting new equity to come in. They fell behind on their business plan. Some of them fell behind on their occupancies. But everything we're hearing from the borrower, in one case, the preferred equity, is that they are going to step in. And as I said, all those loans are current. We had one loan that was a risk rate rated four that we upgraded to a three because the occupancy picked up dramatically over the quarter. And the loan that we downgraded, the multifamily loan that we downgraded to a five, that borrower, in fact, raised equity very recently. But there are real execution issues at the property. So to comment on the debt yield, really, if there was a real execution in terms of bad debt, and turning around the units for refurbishment. And so at this point, despite the fact that the borrower raised equity and the fact the loan is still current, we downgraded the loan because we're going to plan on taking action around that asset. So really regarding the debt yields, all these properties are transitioned, and the issue has been execution at the property level. But as I said, every indication we have at this point, even with the downgraded loans, is that the borrowers, or in this one case, the preferred equity, are going to support the asset and get it back on track.

Okay, great. Maybe just switching gears to office for a second. It appears this specific CECL reserve on the five rated DC asset increased during the quarter and you're now anticipating taking title. Could we see a charge off in excess of that specific reserve taken in Q3 during Q4 results? Just trying to see how that will shake out in the model. And then what's the occupancy on that building if you have it?

Well, first let me tell you that we expect to foreclose on that building in November. And it doesn't matter what the occupancy is because that building we believe needs to be converted to residential based on where it's located and based on what's going on in the DC office market. There is occupancy now there that covers expense. The leases are all very, very short. So unlike other office properties where one of the issues with conversion is simply the rent roll that the rent roll doesn't allow it so we think this is going to be a conversion and the markdown that we took is an anticipation of that and since we really valued the loan a little ways back what's happened that there's a thinner market for construction loans and so we effectively marked the loan at what we think is pretty close to certainly land value on a square footage basis for office and close to land value on for square footage basis on FAR for a resi conversion. So we plan on foreclosing in November and probably market the property for sale in the new year.

And to answer the second half of your question, yes, we would charge off the CECL related to that in the fourth quarter.

Thank you. Anything else?

Our next question comes from the line of Stephen Laws with Raymond James. Please proceed with your question.

Hi, good morning. You know, just wanted to touch base really around how you think about capital allocation decisions, you know, a number of options, you know, CRE loans, you can repurchase capital. Part of your capital stack, common or debt, you can look at liquidity and paying down lines. And Mike, it seems like that's what you kind of pointed to maybe in your prepared remarks is just maintaining liquid given this environment. But you can also look at things outside of CRA loans, other equity investments or securities. So, you know, when you look out there at this opportunity set, kind of, you know, what do you think looks interesting? And, you know, what do you think the timeline is of starting to maybe do more new originations?

Thanks. I think what looks the most interesting to us is closing the gap between market value and book value. Right now, the market is clearly pricing in uncertainty, so our job is to provide as much transparency and certainty and execution on the assets and the balance sheet to close that gap. So, in terms of allocation of capital, first and foremost, it's liquidity. and staying working with our warehouse lenders and working with our borrowers to make sure we know what's coming and we have ample liquidity to address anything that may be required. Secondly, when you look at the opportunities out there, yes, there are going to be a lot of opportunities. The regional banks are all cutting back. They are the largest component of construction lending in the market. So with them cutting back, we expect construction loans to fall dramatically. which will be beneficial for the market as they work through vacancies, especially on the multifamily side over the next couple of years. So we think the opportunities out there between regional banks cutting back and between this Basel endgame that's going to be enforced at the bigger banks, there'll be plenty of runway to execute on new transactions. But right now, I think our best focus is, as I said, is closing the gap between market and book value for our shareholders. And that's really – that bridges a bridge of liquidity.

Great. Appreciate the comments. And maybe as a follow-up around the modifications, you know, it seems like at a simple level it's, you know, bars putting in more capital in return for more time. But can you talk about some of the other gives and takes that you're seeing come up consistently and, you know, around – floors and the loans, you know, if you're not moving those to market in the modifications, you know, have you thought about using some of your, you know, high coverage on the dividend to maybe buy your own floors in case, you know, rates move the other way and kind of lock in some of the outsized asset yields?

So why don't we, for the modifications, why don't we turn that over to Andrew and then we'll go from there.

Great. Hello. In terms of modifications, I mean, they've been relatively consistent with what we've seen in previous quarters. Some of those modifications are just addressing at maturity a rate cap and interest reserve to carry the loan through the subsequent term. Others are more complicated and may include, you know, a pay down, some modification of future hurdles, and so forth. But I think in terms of what we're seeing quarter over quarter, it's a lot of the same types of modifications, giving the borrower runway to complete the execution of their business plan and ultimately get to a better capital markets environment. So that's what we've been trying to facilitate. And we do that in connection with the borrower. you know, generally doing something to move the asset forward, whether that's a pay down, whether that's funding reserves, buying interest rate caps, which is a prerequisite for extension. So it's really an effort that we, you know, go through with each borrower in each particular instance.

Our next question comes from the line of Matthew Hallett with B. Riley. Please proceed with your question.

Thanks for taking my question. Just on the, you know, you guys are always very conservative with the way you sort of look at the watch list. I mean, is that sort of what you guys did this quarter with the multifamily? It sounds like you may be getting equity, but you're just being cautious with marking them as watch list names.

Yeah, thanks for the question. The answer is yes. And you've heard us say this in previous calls. This has been a focus of Sarah's as well. We really, as I said, we want to make sure that we don't have anything that leapfrogs from one risk ranking to a default. And by being conservative on the risk rankings, even though these loans are current, and even though these borrowers all have a plan in place to raise more capital, and as I said, in one case where the preferred equity is protecting, they believe that there's equity there. worth preserving. So all those loans are current. But yes, when we look at the property level behind it, we have a, and this is also the case with the office loans that we've downgraded. You know, there's something going on at the property level where there's good news, borrowers are committed, but there's also something going on where they've fallen behind enough in a business plan execution, whether it's a combination of bad debt at the properties, and that has been an issue across the entire sector. because of the moratoriums that were put in place that came out of COVID-19, or operating expenses going up. And it's just not insurance, it's utilities, it's taxes, it's payroll. So those may have fallen enough behind where there's a lot of work to get done. So we erred on the side of caution to downgrade them. As I said, we had one that we upgraded this quarter. We downgraded it because the vacancy really fell off. We really don't want to move them back and forth. And so, in this case, we downgraded loans to be cautious. On the San Jose loan, for instance, the hotel loan, there is something going on at the property, as Andy described in his prepared remarks, where maybe in the next 30 days, we have a sale of a portion of the hotel that would result in a pretty decent pay down of the mortgage loan. I even think after that occurs, we'll continue to have that loan risk ranked a four and we will not upgrade it. That hotel still has to get to stabilization. So even when there's good news that it may occur at the asset level, for instance, with that loan being our largest, I still think we'll err on the side of keeping it a four. We don't want to play ping pong with the risk ratings. So if it's out of four, we'll probably keep it out of four until we really feel comfortable that it's not going to revert back.

Yeah, look, I really appreciate the conservatism. I know everyone has – risk ratings mean something different for everyone that puts them out, and you guys are just being very conservative historically, so I appreciate that. And on that loan, I mean, on that San Jose hotel, you mentioned the advance rate under 50%. I mean, what do you think that will free up in terms of liquidity? And I think you said last quarter that the entire hotel may be marketed. Any update there?

All right, so I have to be careful about what I say there because we don't own the hotel. But as I said, I can't speak on behalf of the borrower, but there is a process. It's a public process. It's in the newspapers, so you can read about it in the various local Berkeley or San Jose papers. The buyer is supported by the ultimate user of the tower, and that ultimate end user is San Jose University. We're not privy to exactly the structure between the buyer and San Jose and the entity that's going to buy it. That will result in a pretty good pay down of the loan, and we'll get a decent amount of that capital back to us because, as you said, there's a less than 50% advance rate. I think it's like 47%. With regard to the rest of the hotel, that really is up to the borrower. There have been protective advances that have been made. There's a mezzanine on the loan. The mezzanine has made protective advances. The operator of the hotel has helped and assisted the borrower where they could. But I do think ultimately there has to be a resolution on the larger asset, the remaining asset. I can't speak on behalf of the borrower. That could be a sale in the second quarter of next year. It could be a substantial recap of a hotel sale. where some of our loans stays in place and new capital comes in. In a sale, obviously, we would be taking out in full, and that would be a lot of capital that would come back to us that we can redeploy.

Look, it could be a windfall for you. And on that final note, I mean, you know, we're scratching our head with it.

Yeah, there would be, yes, there would be, it could be a substantial amount of liquidity that comes back. But then if the borrower were to recap the entire property such that it would be

attractive for us to stay in the financing we would we could consider that at that time but we'd have to be presented with the facts when that happens like you're maintaining the dividend and covering it but the disconnect with the stock price and nav which which actually was up in the quarter how how eager are you to to start buying back stock you foresee a scenario you look at 2024 and you know liquidity you're getting more liquidity from the portfolio Could you commence a buyback? I mean, it seems like that would be the best way to kind of close the gap between NAV and stock.

You know, there are differences of opinion on that. We have seen folks buy back stock, and it's a great investment, and we think it's a very compelling investment at these levels, given if you just do the math, book value versus where the stock is trading and what the implications of that are. So we think there's a massive gap there. Having said that, the best way to harvest that gap, to close that gap, to harvest the discount here, is liquidity. And so kind of buying back stock is a one-time thing that really, at the end of the day, it might move the needle for a day, or it might have a nice halo effect for a quarter. But in terms of the long-term mission of really closing that book gap versus market substantially, We think you need the liquidity to do that. And so spending money on a one-time purchase of stock, the metrics look fantastic. It's still something that from a corporate finance perspective, we would err on the side of the longer-term view, maintain liquidity so the market has confidence in your balance sheet, and we think that will have far greater impact on market price than buying back some shares.

Look, and these times it makes a lot of sense.

Our next question comes from the line of Steve Delaney with J&P Securities. Please proceed with your question.

Good morning, Mike, Andy, and Frank. Appreciate the question. Excuse me. Air distributable EPS estimate for the third quarter was $0.16. That was the low. It included, based on your commentary on the second quarter call, it included an estimated realized loss of $11 million or $0.08 per share. on the Oakland office loan. Um, and I don't want to get into like too much nitty gritty accounting, but air just to explain air practice had been, uh, obviously Cecil reserves, whether specific or general have no impact on distributable EPS, but two things I guess could happen. You could sell a loan at a loss that hits distributable EPS. Um, you could just, uh, with foreclosures, um, we understand that REO is carried at fair value. And generally, we have had an impact on distributable EPS when a loan with a specific reserve has been foreclosed upon. And the CESA reserve goes away, but we take a charge at that time. So I'm just curious, I guess, looking at distributable EPS, whether it's the base or the adjusted that's 4 cents higher. Can you just, Frank, talk about what impact there was, if any, on third quarter results on the foreclosure of the Oakland office building. Thank you. If I said hotel, apologies.

So the foreclosure of the office building, so the specific reserves, when we take a specific reserve, that hits our distributable earnings in the quarter that we take it. Right? So we took, we foreclosed on that. during the quarter. So we took a specific CISO on that in the second quarter, and that came through distributable earnings in the second quarter and gets added back in the third quarter. The change in CISO related to Oakland is not an income statement item. It's just a balance sheet charge off. The only impact in the third quarter would be any earnings that potentially came off that property once we took ownership of it. That would roll into our distributable earnings for the quarter.

Got it. We'll talk about that offline. I mean, you're obviously, I apologize for not recalling the prior charge to distributable earnings, but we have other companies that are having their specific reserves, but they wait until they foreclose and have it in our REO to take the charge against distributable EPS. But thank you so much for explaining. And then on the DC Hotel, should we understand that When you foreclose on that in the fourth quarter, which sounds like that's likely to happen, would there be an impact on distributable, or would your specific reserve previously established have already covered that? Will it be treated the same way as Oakland?

That's correct. We don't expect that foreclosure to have any more effect on our distributable earnings. The additional $5 million we took this quarter should cover that.

Okay, great. And just remind me, the $0.04 difference between distributable and adjusted distributable, what is that item?

This is Kurt, head of corporate finance. It's just incremental specific reserve on the DC asset that we took during the quarter.

Got it. Okay. Thank you for the comments, and we'll talk in a bit anyway. We'll go into this a little more. Thank you very much.

Our next question comes from the line of Matthew Edgar with Jones Trading. Please proceed with your question.

Hey, guys. Thanks for taking the question. So you have $71 million in fully extended maturities this year, 58 of which come from two separate office properties in Miami and Bluebell. Can you talk a little bit about those and if they're expected to pay off on time and just kind of the overall thoughts on those two loans, I expect?

We're working with those borrowers on extensions on those properties.

Gotcha. Thank you. And then is there any update on the Long Island assets? I believe that you guys were stabilizing them last quarter and then eventually going to mark for sale. Are those in part of the REO for sale, or are they still being held?

The REO is always for sale. Those are the Long Island City assets and Queens. So we've taken back two assets there, the Paragon and the Blanchard buildings. They are literally on each side of the Long Island Expressway, right at the foot of the Midtown Tunnel. We are getting, we put a new property manager in place since we took back those properties. We are getting pretty solid inquiry with regard to the Paragon building. That building sits more proximate to Mass Transit. It is 100 feet away from one subway station and one block away from another. and sits right above the Long Island Railroad Station, which is pretty actively used. So there's been a lot of interest in that asset. In particular, we have two full office building users that are looking at the property and we're working closely with right now, but it could take about 90 to 120 days to see if there's really any substance there. But we are getting some good inquiry activity with regard to that. With the Paragon building that I'm talking about now, I think what we'd like to do is see if we can get some traction with those potential leases. We do have some other partial building leases that we're looking at as well. We would like to get some traction with those leases before we put the asset up for sale. So I would think that we'd like on that one asset to let it play out for the 90 to 120 days to see if we get anything going on there. With the other asset there, the Blanchard building, that asset does cover operating expenses. And so that could be a little bit of a longer play out. But that one we're probably going to sell without having any leasing traction in it. There is a chance that some of those tenants looking at the Paragon building also care about the building across the street, the Blanchard building. So we're going to let that play out a little bit as well. to see if there's an opportunity there. But, you know, we will look to sell both buildings as quickly as economically beneficial. These are not long-term lease upholds. We'll sell them as soon as we get some clarity around the assets.

Got it. Thank you.

That concludes our question and answer session. I'd like to hand the call back to Michael Mazzei for closing remarks.

Well, thank you all for joining us today. As always, feel free to contact us if you'd like to have a one-on-one conversation or meeting and dig into more of the details. If not, please have a great holiday season, and we will see you in February.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.