SL Green Realty Corp. (SLG) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to our Global Real Estate Conference roundtable session with SL Green. My name is Camille Bonnel, and I'm the office REIT analyst here at Bank of America. I'm also joined by Jeff Spector, who heads our team; and Andrew Berger, who works closely with us. Speaking today from the company is CFO, Matt DiLiberto; CIO, Harry to and Head of Leasing, Steve Durels. We'll pass it over to Matt to give some opening remarks on who you are, just given many people are flying in this week, and then we'll open it Q&A.

Good afternoon, everybody. Thanks for joining us here in person and listening online as well. SL Green, for those who don't know us, we are the largest office landlord here in New York City, own about 30 million feet with interest in several million feet beyond that. We've been a public company for about 27 years now, supplementing our office portfolio, which is concentrated around Grand Central, Park Avenue. We have a lending business, special servicing business, an observatory/entertainment business. And we are -- you're going to hear over the next 30 minutes or so, a story of a city in clear recovery, in a market that is set up well for the portfolio that we have in place and a business that is gaining momentum. So feeling very good where we are, where we are coming out of challenging last 3, 4 years, and what's yet to come.

So we're going to all the fun operating updates in a second, but it's seems fair to say that New York City is really starting to find its footing again. But I don't think that really explains how well SL Green has done year-to-date, especially in the context that leasing volumes are still well below pre-pandemic level. So curious, Matt, what's changed in your perspective?

I mean, there's a whole host of things. Steve Durel's here to my right, can expand on leasing momentum. That's probably been the most notable. And we called kind of a pivot in the market in 2023 that materialized and probably accelerated in the areas where our portfolio is concentrated, I said Grand Central and Park avenue. Park Avenue is the tightest submarket in the country, with availability of 8% or sub 8%. That is where the bulk of our portfolio sits, anchored by One Vanderbilt at 42nd and Park and up to 450 Park, at 57th and Park, seeing the ability to increase rents, seen a lot of trajectory. And what I think has gained even more momentum at least in the people's conviction in the market improving is that, that is broadening out beyond just Park Avenue. Park Avenue has seen clear strength but you're seeing now overflow as we report updated leasing to date of 1.7 million square feet to date. We were just at 1.4 million feet in mid-July, so we've done 300,000 feet since then. Our pipeline continues to stay very full at 1.3 million square feet today. That was 1.2 million, somewhere between 1.2 million going all the way back to last December. So it's refilling as we're signing leases faster than we expected and it's in the corridors that are not just Park Avenue. So the strength of Park Avenue kind of encourage people to take another look and feel better about where the market was headed. But to see tenants on Sixth and Lex and Third Avenue feedback in the market and not just the highest rent payers, but the more commodity tenant is what's become an even more compelling story for the city. Steve, do you want to expand on that?

Well, an interesting stat is that year-to-date leasing in Midtown. Manhattan's leasing story is largely centered on Midtown, Manhattan is 50% ahead of where we were last year. So this is going to be a very strong leasing year overall for Manhattan, but the focus is clearly on Midtown. And within Midtown, Grand Central, in particular, is seeing a lot of activities. And just to jump ahead a little bit, what we've really seen evolve over the past 2 years, I guess, is a change in the narrative where all of the headlines we're focused on leasing in new construction or marquee-level buildings, the best of the best. Then it started to migrate to the better quality buildings in the overall Midtown market. Now we're starting to see real strength come to light in the value part of the marketplace, that mid-price point building, with a lot of the focus being on the upper half of those buildings. That's where it starts to really get interesting because you start to see bigger velocities, more absorption in the marketplace. And when the overall availability rate starts to trend the line down, you start to see more pressure going on rents being raised on a broader basis.

Steve, how would you -- what's the percentages for the SL Green portfolio based on those buckets?

Percentage of what we own or where we're seeing the leasing went well? I'd be guessing as to if -- we have 30 million square feet, and I would put into the kind of the new construction in marquee. I'm going to guess that's probably 4 million to 5 million square feet of our 30 million, the best of the best class. So maybe more than that. It's going to 7 more. It's going to be One Madison, One Vanderbilt, 10 East 53rd Street, buildings like that. But then there's a host of buildings, everything from a Graybar Building, 810 Seventh Avenue, 919 Third Avenue that are, call it, mid-market buildings. And that's where we're seeing a lot of activity right now. That's what's driving our increase in overall occupancy and it's across the board. It's not limited to one geographic location.

My math is closer to 1/3.

And we welcome questions from the audience. So if you have any, feel free. But as part of that leasing update, I think One Vanderbilt, you've got that to 100%. Is that the key now to unlocking that valuation? And any updates on where you are in that process of selling a stake?

It's great news from Steve, but it didn't really have much. Building was 99.5% ahead of that so it didn't have much of an impact. We are nearing completion of a transaction and hope to have more news to share shortly.

Okay. And I imagine, iconic assets like that aren't easy to come by, and it's a once-in-a-decade opportunity. So as you look through your portfolio locations, how much of that do you see as a potential to create something like One Vanderbilt again?

Well, I mean from a One Vanderbilt ground-up development perspective, we don't have anything that sets up for that. We'd love to find the next opportunity to build a One Vanderbilt in that area. It's something we're highly focused on. In the meantime, we take buildings like 245, which is, as you look at One Vanderbilt and One Madison, now 245, that's the next big step we're taking on Park. And that's renovation of an underappreciated, undermanaged building that we took ownership of in a unique way but have seen a lot of leasing strength, mark-to-markets in the somewhere between 30% and 50% range, including a 300,000-foot lease on in July on renderings at a plant to redevelop it but we haven't redeveloped it yet. Those types of opportunities, we'll continue to look for short of finding the ground-up development. Now with 245 where it is from a leasing perspective, which is north of 90% leased with some additional leases in the pipeline, but that largely is done, we are going to go back out to market, just launched for another 25% interest sale, and we would hope to achieve pricing. Our goal is to achieve pricing better than what we did when we sold the 50% last year because the market backdrop is better, the asset is performing better. So it sets up well.

And just going back to the goals that you set at the beginning of the year and that guidance range, if you were to really pin down targets really define that low to high end of your guidance, what would they be?

Of our FFO guidance?

Yes.

We leave ourselves room for the unknowns. I mean as we sit today, I think we're sitting squarely in it. We've raised guidance so that we continue to stay in that midpoint, we didn't need to we were still within the range, which would be at the upper end. I think there's more trajectory to the to the upper end from a business perspective, particularly things like our special servicing fee-based businesses, where timing can be difficult to predict. But when they come, they can come in big waves. We have more of that to come, whether it happens in '24 into '25 is one wildcard into where we end up in the guidance range. Downside, at this stage of the game, fairly limited, it's much more execution of something like a 245, which obviously, we have a high degree of confidence around and that it will be timing. Does that happen in '24? Or given where we are in the year, does that slip into '25? But feel really good about the guidance we're entering right now.

Okay. And on the point where you say you feel comfortable in the other range, is that on the core side? And how is that tracking today?

So the core, from a property perspective, we are trending ahead on leasing, and we fully expect to meet our occupancy target of 91.5%, up from just south of 90% at the end of last quarter. From an earnings perspective, that takes time to flow through, particularly when you're filling vacancy. It's probably 12 months out before you start to see that roll through. So that gives you a good runway into '25 and beyond for the occupancy pickup. Between now and the end of the year the opportunities to hit beyond the midpoint are much more limited to that fee-based income, but that business has been growing dramatically.

So maybe can you talk to the opportunity on that side, also the debt fund that you've been working on?

Yes. On the special servicing side, that's a business that we've been rated by S&P since 2006, Fitch 2009 and Morningstar just actually a few months ago. So we've been active in that business for quite some time. We made a very concerted effort at the beginning of this year to really pick up the activity within that business, just given the number of opportunities. We started the year with approximately $5 billion or $6 billion of named special servicing where we sit today. With 2 deals in the pipeline that are in paperwork, we should be at about $13 billion. So we've doubled that number of loans under management just in 7 or 8 months so far. The types of clientele that we serve everyone from Nuvve and BlackRock, AIG, we were just appointed asset managers, so a slightly different role of a property asset manager for Goldman Sachs at the TSX Hotel. That's where lenders have taken over assets, REO, and brought us in. So we continue to see growth in that business. As Matt said, the fees come in typically based on restructuring, so a little bit outside of our control. but we continue to see a lot of growth in that business, far out surpassing what we were expecting beginning of this year. And I think the most positive sign there is the people that have brought us in for 1 or 2 or 3 assignments, we're now seeing it grow up to 5, 6, 7 assignments. So I continue to see a lot of growth for that business for us. On the debt fund, as some of you may know, we launched our fund raise for our first credit fund focused on investing at the intersection between credit dislocation and fundamentally performing real estate that fundraise is in process now. We expect a first close very shortly. Our goal was $1 billion of raise the first close, which we're expecting imminently is -- will be approximately $500 million and then the balance of the raise through the end of the year, early next year. But we're on target for our expectations on the fund raise, should be a little bit out surpassing what we expected. And then finally, just to close the loop in terms of pipeline for that fund. We're seeing plenty of opportunities now in the credit space. We are going to start to pursue -- you may read about some of those opportunities. We're going to start to pursue some of those deals on balance sheet ahead of the fund closing, but then we'd expect to put those into the fund once it closes.

It was in the press recently that you took over a loan from, I believe it was RFR. And so given that the debt fund hasn't closed, does that fit within a different parts?

So I'm not going to comment on specific deals that might be rumored in the press. But to Harry's point, we did telegraph that we -- there's a pipeline of opportunities in front of us. The window doesn't stay open forever. If we need to close these on balance sheet ahead of the fund, we will do that. And then when the fund closes, you can contribute those in because our expectation is to be 10% of the fund. We can do that in funded equity or in contribution of investments to make ahead of the closing.

Is there a reason to close the fund in 2 parts, I guess, the first $500 million? Is it the second lien?

I would say that's fairly typical for a fund structure. I mean there's typically an anchor investor that will do the first close, set the terms and then we'll use those terms to close out the balance of the investors. There's one specific investor that we are expecting to close in the second phase. And they, by design for whatever their structure is set up, they actually cannot close in the first round of a fund. So -- and that's not the only group that has that constraint.

And since you've been tracking ahead on refinancing, building liquidity, has that changed your appetite to put more into the debt fund?

Not specific to the debt fund, 10% has always been our target, but it has definitely changed or it's consistent with our plan to pivot away from this defensive posture we've been in since really 2022. In the face of rising rates, uncertainty around the markets, the financing markets being in disarray, we went much more defensive and to manage the balance sheet, doing asset sales and exclusively repaying debt to the tune of several billion dollars, roughly 1/3 of our debt taken out by the end of this year upon consummation of the transactions that Harrison is working on. So we're going to pivot back to offense. So from a cost of capital perspective and the investments that are in front of us, we now see -- and the balance sheet being rightsized and comfortable from a leverage and liquidity perspective, we fully expect to go back on offense as we close out '24 and particularly into '25. That's debt investments, there are potentially interesting equity investments out there. It's time to go back on offense.

And before we move further on to that point, just around the special sits business, I'm not as familiar with how that is and the structure of it. But what's the typical like percentage or structure of those? Like are you earning a 3% fee on AUM?

Special servicing business? It's a fairly standardized structure. Special servicers make a 25 basis-point taking fee on the outstanding loan amount, and then a resolution fee that ranges between 50 basis points to 1%, each negotiated as part of the underlying TSA or the Trust and Servicing Agreement. So those will each be negotiated ahead of us being appointed a special servicer. In some cases, not in all, special servicers are also entitled to a portion, if not all, of the default interest that's earned as well. But that is specific to single deals, not necessarily all deals.

Okay. And from the asset management side, would it be a more traditional structure? Matt is nodding, for the webex.

I'm sorry. Yes.

I was just going to follow up maybe with Steve on the leasing. I want to just follow up on that. Is it...

That's fine.

I guess could you just talk about where the strength has been coming from? How it's changed as the years progressed? Where do we stand today between the different profile of tenants?

Yes. So it's similar to what we've been saying, I think, probably for the past 2 years that it's dominated by financial services led by legal firms, business services. And the new news is we're starting to see a reemergence of tech demand. There's somewhere between 5.5 million and 6 million square feet of known tech tenants searching the market right now. That's up almost double what it was a year ago. Where those tenants land is TBD and whether that is a demand driver that's going to stay for the long term, it's still early days, I think. But I think a lot of the tech guys sort of reset their footprints over the last couple of years as they changed their head counts. Now they're back into hiring, some of it is driven by AI demand. And they're starting to come back into the market. There's a couple of big requirements out there that are in the 200,000 to 600,000 square foot range. And then after that, a lot of it is driven by tenants more in the 20,000 to 50,000 square foot range. Beyond that, financial services still is probably a solid 40% of all the demand that's currently in the marketplace. The good news is, as far as overall demand, there's 1 million square feet of active tenant searches greater today than there was a year ago. So we're seeing it a broadening of sorts -- a little bit of broadening of the profile of the tenant. There's more square footage that's being searched for. They're going into the -- some of this demand is migrating into the mid-price point buildings, and it does not seem to be centered on one particular geographic location. Yes, Park Avenue South is super hot right now. It's a landlord's market. We've raised rents 4 times over the past year within our portfolio on Park Avenue. We're starting to see some price appreciation on Sixth Avenue. And as I said earlier, I think we'll start to see across the portfolio in the upper floors on all price point buildings, we'll start to see some rent depreciation in the not-too-distant future.

Have we completely, at least in New York City, move past the conversation around tenants downsizing versus expanding? Like where do we stand?

Yes. So I mean, from the narrative side, COVID is in the rearview window. Downsizing as a result of hybrid work environment or work from home, I think, is largely in the rearview mirror. It's not to say that some industries, some tenants won't deploy some level of it, but it's nowhere near what the naysayers were saying a couple of years ago as to what work from home or highway work environments would mean just the opposite. We're seeing more business leaders tell their employees you must come back into the office. And in order to facilitate that, the tenants are largely allocating more square footage per employee they're driven by how much space they'll give a particular employee to work, but then also later on, the fact that they need to provide amenities in a different work environment for their employees after they lever off whatever amenity as a landlord they provide for common shared use. But I think right now, I think it's safe to say that we've come up to -- as far as the space allocation per employee, we're probably in that 300 to 325 square feet per employee versus pre-COVID. There was a thought that some banks would go as low as 200 square feet per employee. And that maybe there's one or two tenants to achieve that, they really never panned out. And I think most of it, we can give up the idea of high desking. There's some tenants to do it a little bit. But by and large, that's gone by the wayside as well.

You mentioned you're going to play offense, thankfully, your share price has done quite well. We wanted to be winning side on playing offense. What would you need to consider issuing equity to achiving the opportunity?

It depends on what the opportunity is. So the equity has done well, and it's ended up in a little bit of a tweener kind of spot. It's still a discount to NAV. That's not insignificant. So it's like, well, it's a potential buying opportunity. But for the right opportunities, and we're seeing them start to materialize, it might be -- it's certainly a more cost-effective source of capital than it has been any time in the recent history. So I think having the tool in the toolbox is nice. We way back when were users of ATMs. And then we flipped the page and went to buybacks. And we're back to that point where we have ATMs just kicking around for the opportunities when we need incremental liquidity. So I think we're good from a leverage point. I think we're in a good liquidity spot. On the margins now, we'll be sourcing liquidity for incremental investing and maybe the stock is getting to a place where that's an attractive source.

Where do you think you may be in?

Nice try. Higher. Higher than wherever we are today. I'll let you say that.

What's it going to take for a Midtown South to come back for that cycle? How is that -- where do you want to be on sales revenue? Is it anything you fill up in Midtown for that submarket to be attractive again? Or is it the transportation in these buildings, or it just needs to be better?

I think there's 2 drivers. If you look at -- what we've experienced at One Madison Avenue, right, it's a 1.4 million square foot building. The top of the building is new construction, 530,000 square feet of brand-new construction, we have fully leased up the tower of the building at rents that range between $140 and $180 a square foot. And that was by and large financial services or fintech type businesses. So I think if you've got great product and the size footprint of what tenant demand is, the market is fine for Midtown South, as evidenced by that. I think life will be easier when we say tech come back in scale because certainly, for us, we have remaining at that building, our large footprints. And there's been a shortage of large tenants shopping in the Midtown South market. That's historically been the tech guys. So I think it's a broader array of types of tenants in the 20,000 to 30,000 square foot sized tenants. But when you get to big footprints, it was historically the tech guy. So if they come back, then life will be a whole lot easier.

Is it 20,000 to 50,000 per foot per tenant, they want to...

They're still Midtown South. I mean, Apple will probably end up staying in the Penn Plaza area only because that's where they are today and they'll expand. I think Amazon is likely to be more Midtown because that's just where their headquarters building in the old Lord & Taylor building. So let's just -- there happens to be where they are, so they will be convenient for them. But the rest of the market that's been shopped has largely been focused on the Midtown South market. But those have been sort of the smaller type tenants. They haven't been the 100,000, 300,000 square foot type tenants. When we see that kind of kind of tenant come into the market, then it's game on.

Do you ever talk to some of your peers about their markets?

Never.

Not York City, but just in general on the whole office conversation, right? It would help the entire sector, right? In every city you're starting to seeing what New York City has been seeing the past year, it was helpful. Is New York City still unique? Or do you look at other cities and see or hear from your tenants that are changing their mindset in other cities?

I really don't. I mean my conversations are limited. Our business is Manhattan. My conversations are limited in Manhattan. I'd be fully I said I have a real strong point of view as to what's going on in the rest of the country other than the feedback that we get from folks like you guys that things are slower than the rest of the country. And when you ask why is New York special is because what we've always known for a long time. New York is a special place. Employees want to be here the diversity of type of businesses that are here. We're not a one-trick pony with one industry dependent on our marketplace between health care and education, a lot of other drivers of what happens in the city. It makes it a special place, and therefore, the businesses come back here because this is where people want to live and work.

Maybe we'll take that same question in terms of capital. I mean, what's their attitude on that?

There's a huge differentiation right now. I mean it's -- especially with foreign capital. I would say, starting with foreign capital the demand and the differentiation that they've created for New York is significant. A lot of meetings that I'm taking now, whether it be in Asia, Middle East or the rest of North America. The first thing you hear is we're not doing investing in any other city, but New York, let's discuss. And I think that, that is because they're chasing yield to some extent, they see opportunity in the office sector, but they're not ready to take the risk for good reason in some other cities. Domestically, I would say, you're not seeing that as much. I think some of that is because some of the large LPs are in cities that still have struggling office markets. and they're not in New York that often. And I think it's harder for them to figure out that differentiation. I think it's some extent, you're also seeing people that are still licking their wounds from previous exposure they had to other office markets. So for us, most of our capital in LP base has been foreign. So it doesn't really any impact on us whatsoever. But I think that we'll continue to see us travel outside the U.S. to find most of our LP investors.

And then I guess taking that same question down to just New York City, Steve, I mean at least for me, the new messaging is this broadening out from Park Avenue, Grand Central to these other avenues and other parts of the city. Do you have any -- do you have a big picture view on New York City as a whole when we may see more equilibrium? Again, there's pockets of landlord market but just as a whole that we hear between supply that help New York state or New York City?

Well, the one thing that we haven't talked about today is the impact of office to resi conversions. So that's going to be -- that's a big headline change for our marketplace. There's 22 million square feet of known conversions that have either actively in place right now or are in the planning stages. The expectation is probably another 10 million to 20 million square feet of likely conversions behind that. So if you're a 350 million to 400 million square foot market, you take off 20 million to 40 million square feet, that's a massive dynamic to get to that closer to that equilibrium. And I think it's -- there's no new supply coming on the market for the foreseeable future. And from a macroeconomic point of view, all the narrative that we hear back from our tenants is they feel confident about their business as they continue to hire. -- profits are good. And the trend line is that absorption is taking place, the supply the supply is coming off the marketplace and the demand remains steady. So I think it's a matter of time before we're back in a very healthy place.

So all the concerns over hard landing or recession, you've been running, pacing for a long time. We're not seeing any sign post any early signposts of your customers starting to pull back in recent weeks?

No. I think it's a little bold to say that, that won't change because it's always something unexpected that comes around the next quarter that changes the world from a macro perspective. But we're hearing nothing of -- we're hearing those signs of caution from our tenants, just the opposite. They're saying, I want to use my space differently. I want to bring my employees back. I'm willing to spend capital to make my space better. And in order to make that happen, I need to make long-term commitments, and I'll pick up and go to a better quality of building, and I'll pay the rent commence in order to achieve that.

And can we spend some time talking about Summit. You extended the operating hours there, potentially opening a new site. I think it was in Paris. Just talk about the operating or pricing model there and how much that can scale?

Yes. Summit has continued to outperform it outperformed our expectations for the first half of the year was part of the contribution to our earnings guidance revision upward. And through the 2 months since then, it's continued to outperform those expectations primarily from an attendance perspective. The hours and the days of operation are pretty standard at this point. So it becomes a question of price. We are pretty much at max capacity. It's a self-imposed limit on capacity to in the experience for the visitors. So if you're at capacity, then it's just a function of price. So we're looking at what pricing looks like for the holiday season and into '25. Relative -- our price point relative to other options still puts it at the more cost-effective level. So there is room. There is the growth out of Summit at One Vanderbilt. And then I think we're even more excited about the prospects to grow Summit as an entertainment division elsewhere around the world. Summit has been -- Summit Paris has been announced. We haven't given a lot of details on it, but those will come. Our goal is to have another location announced this year. We're working on several international and domestic locations hopefully, one of those would get to a point of announcing before the end of the year, we'll see. But there will be several locations, and they'll all have a similar Summit kind of DNA in them, but then they'll also be very specific to the geographies. That's a growth trajectory that looks out several years from now, but it's very exciting. It's these -- I put Summit and our special servicing or fee-based businesses, which is super high margin, high multiple business, potential casino, all of these things are diversifying income streams as exciting as the recovery on the office side of our business.

And you said attendance is tracking well. So you're not seeing any signs that like with the consumer getting a little more cautious?

None. Our attendances continue to track above our expectations. It's a very strong summer for Summit in the City from a tourism perspective.

We're coming up to time soon.

Maybe just one more big picture, again, back to office. We hear the media talk about extensions and some also extended which we heard over the financial crisis on '08. What are your thoughts on that? Like from an extension standpoint smart export, like things are improving at least here? Again because it's this negative headline, people see it, right?

Yes. Look, we made a concerted effort to break the portfolio into 2 pieces, the ASP portfolio and the core portfolio. Within the core portfolio, we have a goal of $5 billion of debt extensions. We've completed all but 2 of those, the other remaining 2 are near the finish line, and we expect to fully expect them to be done before the end of the year. And in all of those assets, we are investing into or extending debt that are fundamentally performing and see no reason that when interest rates start to come down, they'll trade at levels at or above where they were in 2019 or 2018. I mean there's really no other reason the buildings are near stabilization. The expenses are managed. They've been invested in. And so really, the debt that we're extending is to get to a clear path of where the interest rate environment is.

And in doing these extensions, people were fearful of, well, what is the paydown going to requirement? What's the spread change? On $2.6 billion that we've done to date, $50 million of paydown. That's it. And no change in spread on any of it. That's -- not everybody can tout that.

And you've -- like as a result, you've managed to raise the bar on guidance that year. So do potential investors recognize this when we look forward to your earnings in 2025 and look past the implied deceleration? Or is there something in your pocket where you can drive another $2 per share in earnings next year?

Well, if I heard, I triggered on implied deceleration. I don't know what the implied deceleration is because in our minds, we're on acceleration of the portfolio, occupancies headed this direction rents are headed this direction. That's acceleration. The fee-based business is increasing. So I don't see any areas of deceleration and I think the consensus generally as rates are coming down, so that will benefit the liability side. I think we're set up as well as we possibly could be heading into '25 and beyond.

We have 3 rapid fire questions before we wrap up.

We'll answer one or two of those.

First, do you expect real estate transactions to increase if the Fed cuts? And if so, when do you expect it to pick up? Fourth quarter of this year, half of next year or back out?

These are increased and already in process. I think coming out of Labor Day, we've seen a significant pickup in activity discussions, phone calls, negotiations. The market feels putting aside a short window in '21 where just debt was cheap and free and everyone was just going bananas. I would say now things feel the best they felt in at least 4.5 years. And we're seeing some significant activity out there.

And how would you characterize demand for today? Increasing, steady or weakening?

Demand from a tenant leasing perspective?

Yes.

I think it's it feels much like we're back to a pre-COVID demand level. And I think that that's going to hold steady as far as we can see you looking forward.

Would it be down for increases or steady?

Things are strong and steady.

That's not good. You have to give an answer.

Increase.

And lastly, how would you characterize your AI spending plans for next year? Higher, lower, no change?

I have to ask ChatGPT.

No change.

No change.

Okay. Thank you.

All right. Thanks, everybody.