Brickworks Limited (BKW) Earnings Call Transcript & Summary

Ladies and gentlemen, it's 12 noon. So we'll kick off. I'd like to start by thanking you all of coming to our beautiful in Studio and listening to our results presentation, and I'd like to welcome all those people that are online. A lovely photo there of the Maersk building at Oakdale West, some 28,000 square meters and a 5,000 meter spec just decided. So I'm very happy with how that state is going. Today, I'll start providing an overview of our results and our key achievements for the first half. Mark Ellenor, our Chief Operating Officer, will provide an overview of divisional performance. Grant Douglas, our Chief Financial Officer, will then take you through the financials in more details. Then I'll return to talk to you about the outlook and take any questions. We always like to talk about our safety performance first up, and we've come a long way in the last 20 years, I have to say. Our total recordable injury rate, which is the injuries per million hours was slightly up to 10.8% in the first half, up from 10.0% in the same period last year. Across our operations, there was one lost time injury during the half in Australia and two in North America. Over the longer term, sustained decrease in injuries have been achieved through disciplined implementation and safety management systems and procedures, together with behavioral leadership and safety training. The behavioral leadership is one of the more recent key areas of focus that we've been working on, and we really have to be successful in that area were to get the safety statistics down into the areas that we really want to achieve. But having said that, at this point, I'd say I'm very proud of where we are because I think we're equivalent to most top companies in Australia, and it's particularly hard, of course, in a manufacturing environment. Looking at the headline results. As we announced in December, we incurred a significant noncash devaluation within our Property Trust during the period, and there was a small loss on a [ 1 passband ] and M7. If we hadn't put that through, our earnings would have been approximately, I'd say approximately about $100 million after tax. And how that resulted in that devaluation resulted in the group [indiscernible] loss of $52 million and an EBITDA loss of about $40 million. If we excluded the property revaluation and the sales, the EBITDA was about $210 million. And we'll go into that in more detail a bit further on. I'm very pleased to announce that the EBITDA increase in Building Products, both in Australia and significantly in North America. And I think that's quite an achievement considering that the conditions that we are facing out there. Net debt was reduced during the period, and our gearing remained stable at 18%. The slide on the screen provides further details on earnings across the group. The property revaluations. There was a large positive in the first half in '23 and a large negative in the first half of '24. And that distorts the relative operational performance across the two periods. The first half last year also benefited from the sale of Oakdale East into the Industrial Property Trust and delivered $263 million profit. This year, there was a minus sale, which delivered a $16 million loss. I mentioned a moment ago, excluding the impact of those property revaluations of property sales, the EBITDA was $210 million, down 9% on the prior period. Across the operating divisions, Building Products EBITDA was up, as I said, in North America and up 43% North America and also up in Australia. Within property, a continued increase in the net trust income was more than offset by the decline in development profits as the Oakdale West state nears completion. Investment earnings were also down on the prior period due primarily to lower contribution from the New Hope Corporation. Looking at dividends. We're very proud of our dividend history. And over a very long period of time, we've been able to provide stable dividends. And as I've mentioned to you many of you before, there was only the 1 year at 975 that level went down and other that they have been steady or up for now 48 years. So now this year, in the first half, the dividend was increased by further $0.01 to $0.24 or approximately 4%. The record date for that dividend is the 10th of April payment on the 1st of May. In addition to the dividend growth, we have achieved a superior long-term return for our shareholders. Based on the share price at the end of the period, the company had delivered shareholder returns of 4.9% per annum for 25 years, incorporating both dividends and share price appreciation. That means $1,000 invested in Brickworks in 1998 would be worth over $20,000 today. And if you look at all those periods, we've managed to exceed the oil Ords accumulation index. Our strong shareholder return are supported by long-term asset growth. Our assets include investment in Soul Patts, which is valued at $3.3 billion. In the Property Trust with net assets of $2 billion. Our building products operations in Australia and North America. We're just looking here at net tangible assets of $608 million. And we've identified 3 large parcels of land within building products that are identified for potential development. And on as-is-where-is type basis, they've been valued independently at $384 million. So if you add up that and then take out debt of $615 million off. That gives us a net assets of about $5.6 billion or about $37 a share. On the right-hand side of the table is you see a little fewer lines there. And a few a comments that lets that the difference between that and what our net assets per share are in the books at $19.34. And that includes that we don't have the full market value of some of the development land as well as our investments and of course, our deferred tax liabilities is the difference. Okay. I'll now hand over to Mark, who will give you an update on the operational performance.

Thank you, Lindsay. Looking at Property. Despite the impact of devaluations on the reported results, there are a number of key achievements for property during the period. A highlight was receiving development approval for Oakdale East Stage 2 in Western Sydney. Given the limited supply of appropriately zoned and approved land in Western Sydney that is available for large-scale industrial development, this is a significant milestone, and it comes at a time when other major developments are facing delays. As we have previously announced, we have already secured a significant lease pre-commitment for the first facility at this estate. Development work continued at Oakdale West during the period, and this estate is now approaching completion, with a gross asset value of $1.7 billion, this is our largest estate and its completion by the end of the current financial year will represent the culmination of over 5 years of development activity. Looking at the property results in more detail. Strong demand is driving unprecedented growth in market rent for industrial property in Western Sydney. Rental incomes across the portfolio during the period was up 17% to $81 million, driven by contracted increase and new developments. However, high interest rates resulted in a significant increase in borrowing costs. After including borrowing and other costs, net trust income was $51 million. Brickworks' 50% share of this income was $25 million, up 4% on the prior corresponding period. As I just mentioned, development activity within the industrial JV trust was focused on the Oakdale West estate, including facilities for Maersk and EBOS as well as two speculative units. Progress on these facilities resulted in a development profit of $48 million being recorded. In December, we announced the sale of our 50% interest in the M7 Hub, one of the estates held by the industrial JV Trust. This sale delivered $117 million in gross proceeds to the Brickworks and resulted in a $16 million loss due to the sale value being below the 31st of July 2023 book value. The transaction was able to be executed quickly, tax efficiently and with limited transaction costs. The M7 Hub was one of the first sites developed within the industrial JV Trust and is the smallest of the fully developed estates. When all facilities were completed in 2012, Brickworks' 50% interest in the M7 Hub was worth $46 million. Therefore, the sale represents a 154% increase since that time. The noncash devaluation was $233 million and resulted from an independent valuation process completed in December. The valuation loss reflects an increase in cap rates across the portfolio to 5.1% from 4.1% at July 2023. The devaluation in the first half follows $615 million in revaluation gains that were recorded in the prior 5 years as rates compressed. Including the revaluation and property sales, Property delivered an EBIT loss of $178 million for the first half compared to a profit of $453 million in the prior corresponding period. The total value of leased assets held across the Property Trust was $4.3 billion at the end of the period. The trust also holds a further $971 million in land that is currently under development. After including borrowings of $1.3 billion, total net asset value is $3.9 billion. Brickworks' 50% share of net asset value is almost $2 billion. Gearing was 25% at the end of the period. The gearing increase following the sale of the M7 Hub with the sale proceeds being distributed to Brickworks and existing debt maintained within the trust. Additional borrowings were also used to fund the continued development activity at Oakdale West. As I said and on the screen is a key highlight for the period was receiving development approval for Oakdale East Stage 2. The main master plan of the estate is on the screen. With Oakdale West almost completed, the Oakdale East Stage 2 precinct will be one of the only large-scale shovel-ready industrial developments in Western Sydney. Brickworks proactively brought forward the release of this estate by consolidating brick manufacturing at Horsley Park in recent years. Work is well underway on the rehabilitation of the site. The initial 58,000 square meter pre-committed facility is forecast to be completed by mid-2025. Strong demand for service and land capable of accommodating facilities of over 30,000 square meters provides an opportunity to develop the remaining 193,000 square meters of gross lettable area within 4 to 5 years. Land supply challenges are also exacerbated by increasing construction and financing costs and a range of planning and approval issues. All these factors have driven up for prime rent industrial property in Western Sydney by 55% in the past 2 years. We estimate that the current passing rent within the Industrial JV Trust of $147 a square meter is now 35% below the average market rent of $225 a square meter. Including the Brickworks Manufacturing Trust, the current annualized rent across our portfolio is $172 million. At market rents, the rent potential of the Property Trust assets once fully developed is around $340 million. This includes an additional $31 million in rent from the completion of Oakdale West. This will be realized over the next 2 years as facilities are completed and tenants are secured. At this estate, 78,200 meters squared of new facilities are already committed to tenants leaving to 63,500 square meters available for rent. An additional $57 million in rent is expected from Oakdale East Stage 2. This will be realized over the next 5 years as this state is built out. A mark-to-market rent uplift of currently leased assets would deliver an additional rent increase of $79 million. This will be progressively realized over a longer period upon lease renewals and reviews. Around 35% of existing leases have read increased caps, which has the potential to extend the time to achieve full market rent on those facilities. The forecast growth in rent will require no further capital from Brickworks, with the value of our land contribution at Oakdale East being matched by development funding from Goodman. In addition, the low gearing levels within the industrial JV Trust will allow debt funding as required. Just turning to investments, which includes a 26.1% interest in Soul Patts and a 16.5% interest in FBR Limited. Investments delivered an underlying contribution of $76 million for the half, down 24%. During the period, cash dividends of $48 million were received from Soul, down 13% on the previous corresponding period. The prior period included a special dividend of $14 million. Excluding this, cash proceeds from normal dividends were up by 17%. The combined value of our market investments was 3.261 billion at the end of the half, up 4% or $140 million. Our shareholding in Soul Patts takes back to 1968. Soul Patts is now Australia's leading publicly listed investment house with a broad asset exposure, as shown on the chart on the left of the screen. Soul Patts have delivered an outstanding returns with annualized total returns, including dividends of 13.8% per annum for the last 25 years. This represents our performance of 5.2% per annum versus the ASX of All Ordinaries Index. In Australia, building commencements continue to decline in the first half of 2024 financial year in response to high interest rates and a reducing pipeline of work from the homebuilder program. Nationally, detached house commencements were down 18%, with declines of 10% or more across all major states. Although the decline in commences has been significant over the past 12 to 18 months, there have been a healthy pipeline of projects under construction in most stages' throughout the first half. Over the past 2 years, building time lines have been extended due to supply chain delays and labor constraints. As a result, the usage of bricks and roof tiles on site is now typically adding commencements by 6 months or more. Nationally, multi-residential commencements have stabilized following several years of decline and nonresidential building activity has varied significantly across the country with increases in New South Wales and Western Australia, offset by declines in Victoria and Queensland. Revenue for the half year ended 31st of January was down 11% to $323 million. Excluding the impact of closed operations in Western Australia, revenue was down 9%. The decrease was broad-based with sales volume adversely impacted by the lower building activity in key markets. EBIT was $23 million for that period and EBITDA was $52 million, up 5%. Improved margins were the result of price increases and productivity improvements across most operations. In addition, the closure of our brick operations in Western Australia largely eliminated the significant losses associated with those operations. The exit of brick manufacturing in that state, followed by the closure of Austral Precast and the sale of Auswest Timbers in recent years as the business focuses on portfolio optimization and margin improvement. A range of additional initiatives were impacted during the half to further streamline operations. This included the consolidation of Austral Bricks and Austral Masonry into one operating division, a restructure of Bristile Roofing and a rationalization of divisional support functions. In total, these initiatives are expected to deliver annualized savings of $15 million through a reduction in headcount of approximately 100 staff. Commissioning work progressed at the new Plant 2 at Horsley Park during the first half. The plan is meeting expectations and is now operating at about 95% of our design capacity. Turning to North America, where activity has been mixed during the period, varying significantly by region and segment. A 12% increase in single-family segment was offset by a 15% reduction in multi-residential and a 14% decline in nonresidential commencements. Our key regional exposure in the Midwest, the Northeast and the Mid-Atlantic combined with D.C. regions which make up about 19% of our total sales revenue. Building activity in the Midwest and Mid-Atlantic regions has been relatively strong over the past six months compared to the lag in Northeast. Brick sales volume in North America was lower during the period due primarily to a significant reduction in sales to the oversupplied Texas homebuilder market. Despite this decline in sales volume, revenue of $224 million was broadly in line with prior corresponding periods due to a combination of price increases, a mix towards higher-value products and strong sales growth through our vertically integrated retail divisions. EBITDA for the half was up 43% to $21 million, and EBIT was also up significantly to $6 million. Margins are recovering following the implementation of strong price increases in response to significant cost pressures across the supply chain over the last 18 months. The business made strong progress on key strategic priorities over the period with a 5-year rationalization of our plants now complete, culminated in the closure of our landmark stone plant in Kentucky in December. This subscale and highly manual operation produced a complementary range of bricks, but with increased labor cost was no longer viable. In the first half, he dry upgrade was completed at our Mid-Atlantic plant. With strong demand for our unique molded product. This plant is expected to return or has returned to full production from this month. Before I move on, I'd like to expand briefly on the significant steps we have taken to reshape our building products business, both in Australia and North America. In Australia, we've made significant new plant investment over a number of years, and this program is now largely complete. We now have world-leading brick and masonry plants in Western Sydney. This follows prior investment and consolidation in Victoria and major upgrades at our brick plants in Queensland and South Australia. Looking ahead, we will require limited new investment in our brick plants over the medium term. We have also simplified our business with the exit of underperforming operations in recent years. This has resulted in a more focused portfolio of higher returning assets. Since 2018, there has been a reduction in operating sites from 33 to 20 and following the most recent restructuring, a reduction of around 500 employees equating to 35% of the Australian workforce. In North America, our plant rationalization program has resulted in the closure of 9 plants, and we have now integrated new bolt-on acquisitions. While disruptive to the business in the short term, the end result of the process is a more efficient plant network and a more focused capital investment program. As shown on the screen, the program has resulted in an increase in brick utilization of 75%, up from 46%, a significant reduction in the average age of [indiscernible] and a 29% head count reduction across this business. Now I'll hand over to Grant for the financials.

Thanks, Mark. As Lindsay mentioned, the underlying group EBITDA, excluding revaluations, and land sales was $210 million for the half. Underlying EBITDA was a loss of $40 million after including the large noncash property devaluation. After depreciation and amortization, the underlying group EBIT was a loss of $84 million. Total borrowing costs were $39 million, and there was a large tax benefit of $87 million. This resulted in underlying net loss after tax from continuing operations of $37 million. Significant items decreased net profit after tax by $15 million, and I'll discuss these more in detail in a moment. In addition, discontinued operations contributed an after-tax loss of $1 million for the period. This is primarily related to closure costs as we finalize our exit from Astra Precast. Turning to significant items. The table on the screen shows the significant items in more detail. The key items are restructuring and site closure costs of $6 million net of tax, mainly relating to employee severance payments associated with the restructuring activities in Building Products, both here and in North America. Client relocation and commissioning costs of $6 million associated with the new Horsley brick plant through the half. A noncash impairment rent of $3 million, mainly related to the closure of the Landmark Stone plant in North America and wind down of our Wacol roof tire plant in Queensland. There was also a $10 million cost in relation to deferred taxes for Soul Patts holding, and we picked up our share of Soul Patts significant items, which was $14 million. From a cash flow perspective, our total operating cash flow for the half was $54 million. That was up 16% from $46 million in the prior period. Although higher cash generation was impacted by the plant commissioning, restructuring costs and the higher borrowing costs, together with an increase in working capital. Capital expenditure of $37 million was incurred. This was down on the same period last year. This included construction of the new brick plant in Sydney. So the finalization of that, major projects at Rocky Ridge and Adel in North America. As Mark mentioned, the major capital program has been ongoing for the past few years and is now largely complete. We made dividend payments of $64 million in the half. From a key financial indicators perspective, net tangible assets per share were down 3% over the period to $19.34. This reflects the impact of the statutory loss on the dividend payments made in the period. Shareholders' equity decreased by $86 million to $3.5 billion, which represents $22.87 a share. Net debt was down to $615 million, down $37 million over the period, and gearing remains steady at 18%. I'll now hand back to Lindsay to discuss the outlook.

Thank you, Grant. While we can never forecast what sort of a black swan events may happen, each of our businesses is in a very strong position for the longer term. As we've seen in the property trust the last number of years, there's this trend to e-commerce, and I'm sure each of you fines and your households, there's more parcels turn up every week. And that, of course, requires warehouses behind it. What we're also finding in that market is that there's quite a supply of under 5,000-meter type warehouses, but there's a great shortage in parcels of land for larger warehouses. And we went to a lot of trouble to accelerate the movement of our Plant 3 to the new Plant 2, but that allowed us to release the Oakdale's property and means that we're on the market with virtually no competition in that particular segment. The other competing areas, Memory Road is a couple of years away. There was a big sale that went through last week, near Badgerys Creek Airport. And once again, it's a few years away. So we've got a couple of years when I think we can take advantage, and we're in a lot of discussions with interested parties on larger-sized warehouses. In our operating divisions, the Building Products in Australia and North America, we have completed this major investment program and have also completed the major rationalization of the operations over the last 5 years, and that puts us also in a very strong position there. Looking more closely at the situation in Australia, you'll all see the daily reports about the level of immigration. It's mostly the highest it's been since World War 2. We see that there's very little rental vacancy, and we see that construction has been winding down. So that puts us in a situation that housing has got to run strong to the end of the decade. Otherwise, there will be rows of tents in hard park because there's just nowhere for people to live. And I anticipate that things will turn once we start to see interest rates drop for people who can't afford it, but I'd say that there'll be a number of people out there at the moment who are prepared to commit for a house as long as the interest rates don't go any higher. And what we're starting to see reports start to come in here, particularly here in Sydney of people that are interested in buying. They can afford it. As long as interest rates don't go on be higher and the numbers are starting to pick up through the display homes here. In North America, we've spoken previously about how 70% of the people who have a mortgage have a mortgage that's under 4%. The current mortgage is about 6.5% in the U.S. but actually stabilized some 18 months ago in late '22 because they run off the 30-year bond rate. And so what that has meant is there's virtually no existing housing coming on the market, once again, high immigration, very low vacancy rate in most areas. I mean it's a big country, there's variation across the country, of course. And so if you want to house anyway you can get one is to buy a new one and you look at all the volume builders, we have seen very significant upturns, 30% and 40% in the demand in the last 6 to 12 months. And of course, infrastructure has been very strong. We measure that by what's called the Billings Index, the Architectural Billings Index, and that has been running strong. And in the areas that we operate, where Mark and I were just looking at some graphs this morning there as we've operated, where there had been a bit of softness, it's returning. So that's very encouraging for us because a lot of our product, mostly 2/3 of our product goes into that premium part of the market. And finally, of course, our investment Soul Patts is expected to continue and deliver stable and growing stream of earnings over the longer term as they have had done for the last, basically, it was at 55 years and then [ fabless ] investment for Brickworks and they've done a billion job over there. So that's all I've got to say at this point in time. So if there's any questions, I think, Mel, you're going to call them out.

Would you like to do online questions first?

Yes, the [ market ] with the middle the way.

Question from Collin Dennis. Can management please explain more why the M7 Hub state, clearly, a prime property asset was sold off for a growing property trust, that decision and reasons given so far do not make good commercial sense. Quick tax-efficient and limited transaction costs barely centers.

Yes, good question. Thank you for that question. When we did the Oakdale East, the value of that property was such that we had anticipated that we would get a cash balancing payment, if you like, as we put that into the JV. Now at the time, about 18 months, 2 years ago, that construction finance was very tight. And we realized that we wouldn't be able to get the finance for the construction of these warehouses and these commitments that we've got today, I think we've turned over the first parcel of land there. So that was left us about $100 million that we didn't receive. And then at the same time, the plant that we're building so we could get off that site cost us about $70 million more. And there's some other things we did, including a part because we're leading our land go, we bought a part of land for future play reserves. So all of that meant that we're in a high debt level that we're happy with, particularly as we're heading into a downturn. We evaluated all our available properties. We didn't want to sell any that had significant upside through development. But this particular property was the original estate. It was the oldest one. They're all smaller scale, 3,000 to 5,000 meters. So it may be an area that is more competitive, but that all received significant rental increases. And the fact that we could transact quick and not pay tax, we may have looked at it a little bit different to others, but it cost us $46 million, and we sold it for $117 million. So we're really quite happy with the outcome over that period of time.

A question from Lee Power at UBS for you, Lindsay. Please talk more on the rent increase caps on current leases, level of cap sites they apply to and how long they last.

That's quite a detailed question because as you know, there's a lot of properties in the Trust and it may be one lead that we can handle better at the analyst presentation where we can go through the properties property by property. But generally, I've got meeting here somewhere in the Orleans. Percentage have got a cap, 25% to 30% will have a cap 35%. The others are either inflation or set, but it depends also to how long the leases. And so there's the varies from ones that the rents are rolling over and now to others that have got quite a significant period of time on it.

Also from Lee. How long do you believe the air pocket will last in Australia before we see the significant building boom in your outlook commentary?

Well, I think the main concern we have with us building enough homes as a matter of fact, building enough if anything, is the length of time it takes for the approval process. The bureaucracy has really slowed this down, it's not just housing, it's everything, its gas, electricity, everything. So that's a major problem that the government really needs to focus on. I know there's a lot being done here in the state government by cookie cutting designs and rezoning entire stretches of areas on main roads where there's a metro. So I'm hoping that those planning changes will come through, which will help things accelerate and maybe make housing more affordable. But I would anticipate that if we've got greater interest in display homes now that would translate into increased work in the New Year. And if we see a lower interest rate than has been talked today that there may be some interest rates this year. That will then bring in another group of potential buyers once they start seeing interest rates fall.

Question from Liam Schofield at Morgans. The weighted average number of ordinary shares has a deduction for their reciprocal interest we sold $17 million shares. I can't recall this deduction in the FY '23 result. What does this relate to?

I think I had that one greater things.

Yes. So that is obviously a change we've made this year, and we have restated the comparatives. So historically, we've always dealt with the circularity of earnings, but we haven't adjusted for the circularity of the actual shares that we own in each other. That historically hasn't been a problem because you are using a higher denominator effectively to work out your earnings per share. So in a profit situation, you're reporting a lower EPS than you would be if you had removed the circularity. Given we went into a loss this period, we took the view that we would get that corrected because effectively, it would have understand that the loss that we were reported. It's a similar reciprocal change that you see in Soul made a couple of years ago as well. So we're basically lighting practices there. And it's the most conservative calculation. And it's complying with the strategy, correct.

Question from David [ Lockgiyar ]. Any updates on the unutilized land at Craigieburn and also in the U.S.

Well, the one in the Mid-Atlantic part of land, we're trying to get approval to increase the height of the size of the warehouse that we can build. If we can increase the height, what we have approved at 37, 38 feet, we want to go to 45 or something. If we can get that extra high, it obviously means that the land's worth significantly more. And so we're holding off to get that. Yes, I know the Craigieburn1 has been a long story. Those of you who have been following us would know that we consolidated the factories in Victoria in the Northeast, and that made that land available. Initially, we thought we would be able to get residential, but the government had a different opinion on that. It's a great block of land. It's got a freeway through the middle of it. We then were moved across looking at industrial and industrial values have come up in Victoria. So it's maybe not as significant difference between residential and industrial as we might think. And so we're working in partnership with Goodman to see if we can get that reason. But I still think it's most probably a couple of years away. It will be a great parcel by the way, when it comes through. It's a huge parcel of land, 180-days. I think you can take Megan can you correct me, 600,000 square meters. Is that right? More? 600 close level area. Yes, it's a massive part of a brand.

No further questions online, Lindsay.

Okay. To the audience here, any questions? One over here.

Yes. Just on the cap rates, where do you see that you see that dropping back down to 4% of all sectors more to stand likely.

Good question. I guess most people have been concerned in the last six months that it might go out a bit more. But because of those rent increases coming through, I'm hopeful it's going to hold where we are. It's just a matter of seeing some transactions in the market to come through so the values don't have to go back to first principles. They can do it by that. But I got asked earlier in the day about that went up but why aren't we seeing that? If the rents have gone up so much? Why haven't we seen it? I said if we were down at say, 4%, we're going to 5%, that's a 25% increase. And so we haven't got that much of the rent. So if it wasn't for the rental increases, that cap rate expansion were much more. Any more questions, yes?

[indiscernible], is that still the case or has it changed?

So 70% of the value uplift, you're saying 2 developments you're talking about all of the rental? I don't think our position has changed to that Megan do you think we'll get 70% of it in that period of time.

[indiscernible] 25% and in terms of how you look forward, you've got the one big oil Oakdale East development for Stage 2 that's still going ahead for the next couple of years. Do you see that gearing any different going forward? Or you're happy with how it's at?

Look, I'm happy where the gearing is, we wouldn't want to see it too much higher. But at the moment, leisure was explaining in the previous question is that land had no facilities completed on it. So it was nothing to borrow. So that's why we left the money in that to do that as initial development. So the first few developments, we don't need any borrowing. There was the cash in that particular state to cover the construction. It will only be in the latter stages that we'll need to take on borrowings to complete the construction in the later stages and that becomes a bit hard to predict in 3 to 5 years what the interest rates, cap rates and everything are some. No other questions? Okay. Well, thank you very much for joining with us, ladies and gentlemen. We'll be here for a while to answer any one-on-one questions you might have. Thank you.