Embassy Office Parks REIT (EMBASSY) Earnings Call Transcript & Summary

Good evening, everyone. A very warm welcome to all of you for Embassy REIT's Second Quarter FY 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to hand the conference over to Ms. Sakshi Garg, Head of Investor Relations for Embassy REIT. Thank you, and over to you, ma'am.

Thank you. Welcome to the second quarter FY 2025 earnings call for Embassy REIT. Embassy REIT released its financial results for the quarter and half year ended September 30, 2024, a short while back. As is our standard practice, we have placed our financial statements, earnings presentation discussing our performance and a supplemental financial and operating data book in the Investors section of our website at www.embassyofficeparks.com. As always, we would like to inform you that management may make certain comments on this call that one could deem forward-looking statements. Please be advised that these actual results may differ from these statements. Embassy REIT does not guarantee these statements or results and is not obliged to update them at any time. Specifically, any financial guidance, [ truth story ] and pro forma information that we provide on this call are management estimates based on certain assumptions and have not been subjected to any audit review or examination procedures. We caution you not to place undue reliance on such information, and there can be no assurance that we'll be able to achieve the same. Joining me today are Aravind Maiya, our CEO; Amit Shetty, our COO and Abhishek Agrawal, our CFO. We'll start off with brief remarks on the business and financial performance and then open the floor to questions. Over to you, Aravind.

Thank you, Sakshi. Good evening, and thank you all for joining us today. Q2 was yet another remarkable quarter for us. Before we get into the details, let me start with certain key highlights for the quarter and half year. We leased a total of 2.1 million square feet for Q2, recording our highest ever H1 leasing performance of 4 million square feet. Signed 1.3 million square feet of new leases, 0.4 million square feet of renewals at an impressive 71% spread; grew occupancy to 87% by area and 90% by value, up 4% year-over-year on a higher base of 38.3 million square feet; delivered 0.6 million square feet office tower in Bangalore, which is 100% preleased to A&C; raised the leasing guidance for the full year from 5.6 million square feet to 6.5 million square feet; increased the hotel occupancy to 67%, up 14% year-over-year with the 3 Hiltons at around 70% occupancy; and lastly, grew our NOI by 12% year-over-year and our DPU by 5%, keeping us on track with our annual guidance. Moving to more details on our Q2 leasing performance. We leased a total of 2.1 million square feet across 22 deals and expanded our occupier base to 260 blue-chip clients. This included 1.3 million square feet of new leases, 0.4 million square feet of renewals and [ 0.4 ] million square feet of pre-commitments. The renewals included early renewal of leases totaling 0.2 million square feet in Embassy Manyata, where over 80% of renewal spreads were locked in around a year ahead of actual lease expiry. The pre-commitments included 0.2 million square feet signed by a leading cybersecurity U.S. company for the upcoming Block 8 in Embassy TechVillage and 0.2 million square feet of expansion option exercised by an Australian bank in the D1/D2 redevelopment project in Embassy Manyata. The latter also signed an additional expanding option of 0.3 million square feet, which needs to be exercised by June 2025. And with this, the whole 1.4 million square feet tower is pre-leased to them, including their expansion options, making this our largest build-to-suit project till date. This quarter, around 50% of our leasing demand was driven by global captive centers, or GCCs, primarily from BFSI and technology sectors, and over 30% of the space was leased to multiplex operators. Bangalore continued to lead the demand and contributed to over 75% of our quarterly leasing. As indicated by us in last quarter, our Noida demand has started to pick up. We signed over 300,000 square feet of leases in Embassy Oxygen, bringing its occupancy up to 70% or 8% increase within a quarter. We noted 0.6 million square feet of tenant exits in Q2, mostly from IT service occupiers, who now contribute to less than 10% of our rental portfolio. Also, of the total 1.5 million square feet exits noted in the first half, we have already backfilled over 40% area at 61% higher rents, and remaining vacant area offers a 19% mark-to-market potential. During Q2, we also received 0.3 million square feet of additional exit notice from 1 of our IT services tenants in Pune. This was part of the potential risk that we had highlighted back in Q4 of FY '24 and a portion of which had materialized in Q1 with 0.4 million square feet of exit notice from the same tenant. Despite these additional exits, we anticipate our year-end portfolio occupancy to close at 88% by area or 92% by value on a total enhanced completed portfolio of 40.3 million square by March '25. A little more insight into our city-wise occupancy. Our Mumbai portfolio is now at 99% occupancy, Chennai at 95% and Bangalore at 91%. Noida and Pune are at 78% and 70%, respectively. 7 of our 14 properties are now recording stabilized occupancy levels of over 95%. If you break down our total 5.2 million square feet vacant area, 2.2 million square feet is in Bangalore, for which we have a strong GCC pipeline and expect to reach stabilized occupancy levels of mid-90s in this city in the next year or so. Around 1 million square feet vacancy is in Noida, which is at our Embassy Oxygen asset. This asset has seen a good pickup and demand, and we are confident of increasing its occupancy to the mid-80s in another year's time. Finally, on Pune, where in 1.9 million square feet of our current vacancy resides. A majority of this vacant space is in Embassy Quadron. The current leasing traction at Hinjewadi and especially around Embassy Quadron continues to be slow, and we expect that it will take us some time for leasing demand to return in this micro market. Having said that, we want to highlight that the pro forma vacant area at Embassy Quadron by the end of the year represents only 1.4% of our total portfolio by value. Also, just in the last 12 months, we have successfully de-marketed and de-notified around 5.3 million square feet area, and we have already leased over 80% of the same. Another 1.4 million square feet is in the process of being converted either to non-SEZ or non-processing area. On our development portfolio, our current development portfolio pipeline now totals to 8 million square feet, comprising 9 projects across Bangalore and Chennai. Till FY '26, 5 towers spanning 5.2 million square feet are scheduled for delivery, and we have already pre-leased 71% of this area, including expansion options. Our ongoing 8 million square feet development is a highly attractive yield on cost of around 19% and is a key growth lever for the REIT's NOI and DPU in the coming years. As we look ahead a bit on the macro front. Pan-India leasing activity maintained a very strong momentum with 50 million square feet already leased out in the first 9 months of the year. With this record leasing performance, calendar year '24 absorption is on track to reach all-time record highs. This outperformance continues to be driven by faster closure of large deals as well as continued strong demand from GCCs and Flex operators. Large-scale office parks with world-class amenities, excellent connectivity and vibrant ecosystems are becoming the preferred choice for these GCCs for attracting top tier talent. Such total business ecosystem asset of ours, like Embassy Manyata, TechVillage and GolfLinks, stand out in this current environment. We are committed to creating maintaining and acquiring similar infra type office parks to maintain our portfolio and tenant quality. Finally, I am delighted to announce a few leadership changes. Amit Shetty, our current Head of Leasing, has been elevated to the REIT's Chief Operating Officer; and Rishad Pandole, our Co-Head of Commercial Leasing, has been promoted to Head of All India Leasings. I want to congratulate both Amit and Rishad and wish them continued success in their enhanced roles. I will now hand it over to Abhishek to present the financial updates.

Thank you, Aravind, and good evening, everyone. Let me take you through the financial highlights for Q2. Our revenue from operations and net operating income both grew by 12% year-on-year to INR 997 crores and INR 805 crores, respectively. The increase was mainly driven by new lease-up at high releasing spreads, contracted rent escalations, new buildings delivered and acquired during the period and a continued ramp-up in our hotel business. This was partially offset by the impact of exits in our office portfolio and a decline in our solar revenue due to reduction in government tariffs as well as a seasonal reduction in solar unit generation. We declared distributions of INR 553 crores or INR 5.83 per unit for the quarter, representing a 5% uptake year-on-year. This was driven by an increase in our NOI, which was partially offset by an increase in our interest costs. We have raised INR 2,000 crores of coupon bearing debt at an average rate of around 7.95% to repay the nonconvertible debentures, which were due for maturity last week. The funded included issuance of INR 900 crores of NCDs, which saw 3x subscription; INR 850 crores of term loans from leading banks; and INR 250 crores of commercial paper. As of September '24, our net debt book stood at over INR 18,000 crores, implying a 31% leverage ratio at 7.82% interest cost. Post above refinance, the interest cost has increased marginally to 7.99% with 51% of the debt book now at floating rates. All our recent debt raises and refinancings have been aimed at optimally managing our interest costs and locking in rates for shorter durations, positioning us well to take advantage of future rate cuts. Next on our independent valuation. As of September '24, our gross asset value increased by 12% year-on-year to INR 59,104 crores and our net asset value by 4% to INR 415.84 per unit. The increase was mainly driven by new deliveries, Chennai acquisition and our ongoing development CapEx. Lastly, an update on our FY '25 guidance. Based on our YTD performance, I am pleased to reconfirm the financial guidance that we had provided at the start of FY '25. We continue to expect our NOI to be in the range of INR 3,215 to INR 3,345 crores, and our distributions to be in the range of INR 22.4 to INR 23.1 per unit. At midpoint, this guidance implies a 10% growth in NOI and a 7% growth in DPU on a Y-o-Y basis. The guidance is based on certain key assumptions for the year, which includes a revised total lease-up of 6.5 million square feet, including 4 million square feet of new leasing, 1 million square feet of renewals and 1.5 million square feet of pre-commitments. Year-end portfolio occupancy of 88% by area and 92% by value, and an increase in the total interest expense for the year by 18% to 20% year-on-year. We have consistently delivered our annual guidance every single year, and we remain focused on delivering this year's growth numbers to our 1 lakh plus investors. With this, let's move to Q&A, please.

[Operator Instructions] The first question is from the line of Puneet Gulati from HSBC.

And congratulations on an uptick in DPU once again. My first question is with respect to the divergence between NOI growth and BPO growth, especially for 2 assets, Manyata and TechVillage, with Manyata at least on NDCF sites seems to have contracted 17% despite an increase on the NOI side, while Embassy TechVillage, on the other hand, had expanded NDCF on a lower growth or NOI. If you can help us explain some of the discrepancies there?

See, Puneet. The way I would answer this is not to look at the DPU asset-by-asset, because what happens is the loans that we have taken, not necessarily the loans we have taken in 1 particular entity, is utilized for the same particular entity. So it is all mixed up between the SPVs and the rates. Having said that, for this quarter, Manyata's DPU is lower because we have paid the property tax for the full year of Manyata in this particular quarter.

And Puneet, also that kind of explains the divergence between 12 and 5, which is this quarter, there's been additional outflows of property tax, unlike last year, where we had splitted during Q1, Q3, we took the benefit of certain rebates and credit between Q1 and Q2. So that's the reason why you see the divergence. But overall basis, if I could just straight take the question and answer it in terms of guidance, we believe in terms of NOI, we'll be probably be at the lower end of the NOI range. But in terms of DPU, we believe we'll be at the higher end of the range come FY '25 end.

Understood. And will it be fair to say that a large part of property tax you're paying is done in Q2 and Q3, Q4 should see less of the impact?

Yes. So most of the property tax we have already paid between Q1 and Q2.

Understood. And secondly, if you can also explain what's driving the dividend growth on the GolfLinks side and then how should one think about it getting into next 2 quarters?

So Puneet, actually, as we have said in the last quarter call also for JLSP, what you should do is not look at quarter-on-quarter because the distribution there depends on the cash availability that they have. The way we can look at is, as I said, that the run rate of Q1 is a run rate we should see for the full year. So it would land somewhere around [ INR 260 crores ] types, and the report of [ INR 260 crores ].

Understood. And lastly, if you can talk what is the additional 1.4 million square feet that you've put in for conversion, where exactly is that area? And what are these assets?

It's across a few assets, Puneet. But there is 1.4 million again, I can split it as 0.7 million. We're looking at de-notifying lands itself. One is in Pune and 1 is in Embassy TechVillage. And the balance, 0.7 million square feet is floor-by-floor demarcation again, largely between Manyata, TechVillage and Oxygen.

[Operator Instructions] The next question is from the line of Murtuza from Kotak Securities.

Just a question from my side. If I look at the mark-to-market spread over the last few quarters, it has been shrinking and that's because your in-place rental is obviously being realized at a higher rate, but the market rentals haven't moved, right? So that's 1 larger observation. And more specifically, if I were to look at it from a geography perspective, most of your mark-to-market is concentrated in Bangalore. And when I look at the final sort of data points, Pune and Noida actually running a negative mark-to-market. So 2 parts to it, given that in general, real estate prices have generally been on the up. And like you pointed out, most of your geographies are seeing fairly healthy occupancies, barring, let's say, Pune and Noida. Shouldn't we see an uptick in market rentals at some point in time as well? That's 1 part. And the second is how should one think of negative mark-to-market? Whenever those contracts do come up for leasing, how should one think? Or you would like to believe that even those cities will play a catch-up on market rentals and so the mark-to-market is just a number of which may not actually be realized?

Yes. Let me answer this little macro, little micro, and I will also request Amit to add -- Amit Shetty to add a little on the market flavor. A big picture Murtuza the market trend, what you see in the overall MTM computations, which are given, are purely based on the market trends given by our valuers, which is Cushman over here, right? So I mean, if you look at the big picture of Bangalore, they've given a market rent of 97% for both Manyata and TechVillage. All I would want to say is all the leasing in both these assets range from 100% to 110%, and some of them are a little higher than that also over the last 6 months, #1, right? So while the valuers give a market trend, they try to give it for that specific micro market and not necessarily for our asset. So some of these MPMs, which are mentioned here, I would say are understated, right? And I would say it's a similar story for our Mumbai assets, where our leasing is happening much above market rates. And I would say that's a similar story even for our Noida assets, where the rent which we are achieving are way higher than the number which is mentioned, which is 48. Potentially only in Pune and also in Pune, I would say, Techzone and Cubics largely, we are a little above the market it was mentioned. Quadron is something, where we've seen no leasing traction and hence, I can't comment much. But in terms of overall market trends, probably I can request Amit also to chip in what he's seeing overall in the market.

Thanks, Aravind. Just to add to Aravind, the overall leasing absorption has been very healthy in the country. I think YTD has been about 54 million square feet of leasing. The supply in the country is also contracting compared to -- I think, there's a 17% drop compared to the last year. So this again reinforces the fact that the rental values are just going to go North across market and across cities. I think the top 3 cities again, like last year, continues to be Bangalore, followed by Hyderabad and then Delhi NCR. And Chennai is a close fourth in terms of overall absorptions. So I think from a Bangalore perspective, if you see just the absorption on the GCC side, about 65% of the GCC volume in the country is in Bangalore itself, and that's where our biggest portfolio sits. So I think that kind of sums up the dynamics in the market.

Sure. If I could just put in 1 more question. How do you think of some of these exits, which we are still seeing? If the market dynamics are so tight, how should one read into the broader sort of exits as opposed to getting into specific training city or micro market?

Actually, probably you can speak with a little more conviction as Murtuza because beginning of the year, we had expected a total exit of around 1.5 million. Now that 1.5 million has gone up to around 2.5 million. Having said that, at the beginning of the year, only we had said that this 1.5 million does not include a potential risk tenant in Quadron, which was almost 630,000 square feet, right? So if you see the increase from 1.5 million to 2.5 million, a 1 million increase, of the 1 million, 0.64 million is coming just on this tenant, which we had highlighted as a high risk. And if I were to remove this out, it is just 1 additional tenant in Bangalore TechVillage, which has given up another 200,000 square feet. Besides this, there are just another 2 or 3 small exits. So you can see the exit slowly rationalizing. And taken together with the new lease up, you are seeing occupancy going up.

Sure. We appreciate the vacant -- overall vacancy area coming down and occupancy is going up. So that's broadly good, but it's nitpicking on some of the numbers.

The next question is from the line of Parvez Akhtar from Nuvama Group.

Congratulations for the great set of numbers. So my first question is regarding Splendid TechZone over the next 7 quarters, roughly about 1.6 million square feet space will become available there. So how do we see the leasing pipeline in that city because this is a sizable amount for Chennai. So just wanted to get your thoughts there.

Parvez, probably you can just finish off all questions, so that then I can redirect the teams to answer specific, unless you don't have anything else?

Sure. The second question is, I mean, you did mention that IT services now want to go to less than 10% of your portfolio. But at a sectoral level, when do you see it's been ending in that space? And also now that we have seen occupancies improving in Noida, to which sectors do these incremental leasings happening?

Why don't I request Amit to take the first question on Chennai.

Thanks, Aravind. Chennai, we have a very strong pipeline that we've built over the last quarter plus. There are large demands, especially from the GCC sector again in Chennai, given the talent that is available in Chennai. So we see this as a great opportunity given that currently, we are at 95% occupancy and just to further consolidate and strengthen our position in that market.

And in terms of IT services, honestly, 2 perspectives on this, Parvez. One is it's already dropped below 10% and 1 tenant will leave in the next couple of quarters. With that, it will drop to probably 1% more. And then I see it largely stabilizing there for our portfolio. But overall, I mean, just seeing from the results and seeing from some of the conversations, 2 issues, which have been there in the past. One was work from home, which I think is a done deal. They've all called people back to office. And there are actually a few RFPs in the market, where IT services need more space. Having said that, one thing to call out for clearly is that IT services will continue to be a little more conscious on the rent they pay and some of the parts which we own, especially in Bangalore, might not necessarily be a solution, which they would want to take considering the rents which have moved up to over there. And Noida overall demand traction, what we are seeing, honestly, is coming from a lot of GCC players only across, I would say, Tech, BFSI. Yes, these are the 2 growth, and health care, these are the 3 broad sectors, where there are GCC players coming -- taking up more space. And also the demand in Noida is a factor of lack of availability of Grade A total business ecosystem type park, which is what Oxygen is. The buildings over there are more, we would say, it's Tata-owned or Grade B supply. So as GCCs enter this particular market/micro market, we -- our parks become at least the first [ port ] of call for them.

The next question is from the line of Pritesh Sheth from Axis Capital.

The first 1 is on your I would say leasing traction that you see in Pune and Noida, what's the outlook there? Like you guided for mid-90s occupancy in Bangalore by next year. How do you see in trajectory for Pune and Noida going ahead considering that we are finally now seeing some traction on leasing there? So that's one. Second, probably our NOI growth this year should be around 10%, as per your guidance. Considering the positive commentary on leasing that you've given, plus the new developments that are coming in, in this year, directionally whether FY '26 should see a better growth run rate versus 10% this year? And third, on interest cost, which is expected to increase by 18%, 20% this year. Next year, it should be in line with where the growth should be? Or there's some bit of impact still left on that interest cost? Those are my questions.

I think on the first 1 on leasing traction. Noida, I did mention a bit, but giving a little more color. Galaxy is already at 99%, so we have nothing to lease. Oxygen is currently at 70%, and I did say that we expect that 70% to grow above mid, say, call it, mid-80s in the next 6 to 12 months. That's where we see overall Noida heading, so positive. In terms of Pune, honestly, with the exits coming up in Quadron, directionally, Pune occupancy will drop in the next 6 months. Honestly in the next 6 months, we might see some very marginal leasing in a couple of other assets, which is TechZone as well as Cubic. TechZone is already at 81%, which is fine and Cubic is close to 70%. There might be a little bit of marginal leasing here, but nothing beyond that. So overall, 4 cities will be very strong of to 5. There is as only Pune, which will lag a bit. And I did call out that overall from a value perspective, this is a small component. On your other 2 questions, Pritesh, honestly, both overall direction and interest costs, while I might be akin to answer this, I will just refrain and hold on until we give better guidance probably end of the year.

The next question is from the line of Mohit Agrawal from IIFL Securities.

So my first question is on the occupancy level. Aravind, you mentioned that you are still looking at 88% debt occupancy levels by end of FY '25. I just want to understand the math a little better considering that while we have increased the leasing guidance, there's also been an increase in the exits, right? So -- and the guidance increase also has a large portion of e-commitments like forward leasing. So if you could just help me understand the math that how do you still see an 88% kind of occupancy level on area by the end of FY '25?

Do you want to finish your question?

Yes. Okay. Yes. Okay. My second question is, if you could elaborate a bit on the notes in the financials about the restructuring of the SPVs, which holds the Quadron assets and also the hospitality assets. So what's the thought there? There have been India articles around both these businesses. So some color on what you plan to do. That's the second question. If I may just squeeze in a third. What is your view on -- you've talked about Flex operators. We have taken a large space this quarter. Now almost 7% of your portfolio, this used to be about 2% during COVID. Just wondering how do you think they do in terms of sustainability? Also, if there's some sort of an overlap in terms of timings and all of that. So just your thoughts on basically flex being the large part, a meaningful part of your portfolio now.

Sure. I think starting with the occupancy. One of the key missing links could be Mohit the fact that of the 1.9 million square feet, which is getting delivered in the next 6 months, 1.3 million is already pre-leased, right? So we don't give that as additional lease up for the next 6 months. It's only what lease-up we consider in the balance, 500,000, what is left in parcel 8 of ATV, which gets included. What that means is, call it, 1.9 million gets added to supply and potentially something very close to 1.9 million could get added to on the numerator as well. I think that could be the missing link when you do the walk from [ 87 to 88 ] after factoring in the exits. But we can -- if you're still not able to arrive at, Sakshi can take this offline and help you on this math. So that's one. Second is, why don't I cover Flex first, and then I'll go into the question on restructuring. Big picture, it's a well-thought through strategy, Mohit. And the reason I say that is if you see majority of this flex lease-up has happened in our Manyata asset, #1. #2, the reason why we did this is a lot of these are also in a way kind of back to back. Literally, it's different GCCs looking for solutions, and some of these GCCs are very clear that they want end-to-end managed office and they would like to go with some of these flex operators to take up space. So because of that and also the last part is some of these tenants have clearly called out to these operators that we wouldn't want to be in and around Manyata. So what that means is that's a very big positive for us. There's been a huge demand from literally all flex operators asking for space in Manyata. So having said all of this, I think strategically, we'll be selective on how much we give space to flex operators overall. Today, we are around 7% of our portfolio. Across India, Flex is around 10% of overall available office. But when you look at it on a quarter-on-quarter or even on a year-on-year basis, flex leasing is ranging from 15% to 17%. So they're growing much faster than others. But all I would say is big picture, we will be flex taken together as an overall portfolio, we would like to be below the industry average. I think that's the big picture strategy we have on flex. And the last 1 on restructuring. A couple of things on this. Firstly, we are long-term owners of assets, and our strategy has not changed on that, #1. #2, having said that, I think there is stress in our Embassy Quadron asset, and we can't shy away from that fact. As responsible asset managers, all we are doing is evaluating what is best for this asset, when we look at it more long term. And we are still in a very evaluation phase. We've not made up any mind. But the structure today, the way it is, is in this entity called Quadron Business Park, there are 3 assets. There is the Quadron Business Park of Pune, the Embassy One asset, as well as Four Seasons asset. All 3 are part of the single entity. So what we thought was, at least structurally, let's be ready eventually, we don't know where this will head. We could, for all, you know, continue to hold these assets. But structurally, if there's an opportunity where we get good value for some of these assets, and we would like to divest and recycle capital. We don't want to take another 9 months to start a process then. That's the reason why we thought of this restructuring. And along with this, considering the stamp duty and other implications, which are there in the restructuring, it makes sense to combine a couple of restructuring, then the cost of restructuring reduce. With this in mind, we thought why don't we keep the hotel assets of Embassy Manyata also separate, then effectively, we're keeping hotels in a different structure. So it's just enabling structure of keeping hotels separate, nothing beyond that.

So what eventually you plan in terms for Quadron , I understand. But eventually for the hospitality business, do we think that you want to, at some stage, monetize that portfolio?

I don't have a firm view on that, Mohit. I think, big picture, again, these hotels are great amenities. Standalone, these hotels now are doing great. I mean, they are giving -- they are almost reaching stabilized occupancy other than Four Seasons. So honestly, there's no reason for us to sell these assets. But as we always say, if somebody is ready to offer 2x the price, why not? But that's just hypothetical.

Okay. And 1 clarification, Aravind, on the flex part. You said that a lot of demand is coming from Manyata. So despite you increasing your share of Flex, the overall share of GCC as a percentage of your Manyata tenants won't change meaningfully, right?

It won't. Manyata is a 13.5 million square feet park with another 3.5 million getting delivered in the next 3 years. So what we've done is, I think, put together around 600,000 so.

The next follow-up question is from the line of Pritesh Sheth from Axis Capital.

Just 1 question I had. On the pre-commitments that we have increased in our leasing guidance, is that related to the upcoming development that we are delivering in Manyata or something we look in Chennai because that is also closer to delivery by probably next year in 6, 9 months. So just to comment on that.

Keep at Chennai, Pritesh. That keeps Chennai.

Okay. So 1 million square feet, we are going to deliver there. So 0.5 million square feet is what we are expecting to be pre-leased in next 6 months?

Yes.

As there are no further questions, on behalf of Embassy REIT, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.