Vornado Realty Trust (VNO) Earnings Call Transcript & Summary

Great. Welcome to Citi's 2021 Virtual Global Property CEO Conference. I'm Michael Bilerman. I'm here with Manny Korchman from Citi Research. We're extraordinarily pleased to have with us Vornado Realty and CEO and Chairman, Steven Roth. The session is for City clients only. If other -- media or other individuals are on the line, please disconnect now. Disclosures are available on the webcast. [Operator Instructions] I think we're going to turn it over to management to introduce the company as well as who is in the room today, and then we'll start with our questions. So Michael, do you have some prepared remarks or is it Steve?

We are going to introduce ourselves first.

Good. Okay. So I'm Michael Franco, President and Chief Financial Officer.

Steve Roth.

Glen Weiss, Executive Vice President, Cohead of Real Estate.

Tom Sanelli, Executive Vice President and Chief Administrative Officer.

Great. So we've been starting each one of these sessions by asking each company coming out of this pandemic, if an investor were to choose only 1 real estate stock to own, what are the 3 reasons why they should invest in Vornado?

Okay. I'll take a stab at that, Michael. Three reasons. One, our stock is cheap, and I would say, it's one of the better recovery plays out there. Everybody is down on New York. They're down on office. I think both, they're going to surprise in the upside and return to normal or near normal a lot quicker than everybody thinks. Two, when you look at a number of the steps we've taken or leases signed, we think our earnings growth over the next 2, 3 years is going to be -- I don't know every other company, but I know ours is going to be one of the highest, certainly in our sector and maybe more broadly. Three, I think we have the largest and most -- largest and best development opportunity in the country with the Penn District. You guys -- obviously, you saw the plans beforehand. You haven't seen it in person. More recently, you haven't seen the experience center we referenced on the call. But everything we're doing there is exactly what tenants want in this new world that we live in. It's in the bull's eye of New York City, and we couldn't be more excited about what that's going to deliver for our company. So those are the 3 reasons. Anything you'd add there?

No.

I think when I asked Steve this last year, he said cheap, cheap, cheap. So it's broadly consistent.

No. I mean if you think about it in a traditional investing way, our buildings and our stock -- our stock has been rocketing over the last 3 or 4 days, it's up $10 in the last week, I think. But our stock -- if you price our square footage in our stock, it's somewhere in the neighborhood of bigger number, $600 a foot. The replacement cost of similar real estate is probably $1,300 a foot. So the -- you can find the buildings at a discount of 50% by buying the stock, number one. Number two is, traditionally, the best time to invest is when we're coming out of a recession, which is I believe where we are now. And the third thing is New York has adjusted mightily. So apartment prices -- apartment rentals are down 25%, apartment occupancies are down 25%. Now that will probably bounce back when we get back to normal, but it probably will also not bounce back all the way. So traditionally, those 2 or 3 different points that I made, in addition to what Michael made, have been the technical good buy signal, the most important one being when you can buy the buildings at a steep, steep discount, which is the same as stupid, stupid, stupid. And steep, steep, steep discount gets me back to replacement cost. That's generally in our industry the buy signal.

How do you think about emulating that value for the myriad of pieces that Vornado still loans, right? And I think the company has done a remarkable job at simplification and focus, but there are still pieces that are getting probably a bigger discount to the whole to what you're talking out relative to that implied value per foot. So I guess, are there ways structurally or through dispositions to help narrow that gap that you're working on?

Well, you're talking about gap, but you're also talking about -- that we've done a wonderful job, thank you, you're right, in simplifies as a company, but we're still not as simple as we would like to be. We are very -- understanding the fact we have some lingering assets that we are -- all of which are on the for-sale list, all of which we will act upon when the markets are correct to receive them and we can get proper pricing for them. We may just sell a few with a little bit lower than what proper pricing might be just to clean up. But in terms of focus, I mean, we are highly focused on the Penn District, on our office portfolio and renting up our remaining retail assets. So the fact that we may have a few lingering assets that may offend you or annoy or bother you, that doesn't affect our focus at all.

Yes. So it's not bothering me. I just think it sometimes leads to a larger discount on the whole given those individual pieces, right? So let's just take -- if we took retail for example, the likely sort of impact of owning retail sort of impacts our office business, even though they may be disconnected from each other.

Well, our retail business continues to be a large business. I mean, obviously, our history in retail is very similar. We had a very large business in retail. We were experts in it. We still are experts in it. We were the first, I think, in the whole universe to identify the secular change that was coming to retail, and we dumped our malls and we spun our strip centers, which was getting -- which was divesting a very significant chunk of assets at very significant, very, very good pricing. We then -- we retained our street retail in Manhattan, and then we sold 50% of that at fine pricing, what was that, 18 months ago?

Two years now, yes.

Two years now. And I don't want to comment on that, but we sort of -- we completed that deal just as the market was declining significantly. So we're happy with all that. We're proud of all that. Now we still have a slug of retail, and we own it. We're going to fight it out. We're going to -- and we're going to rent it up. We believe that assets on Fifth Avenue and Madison Avenue, et cetera, Union Square Park will regain their value, not what they were at the peak, but will regain significant value in the future.

Steve, can you talk a little bit about sort of reopening New York? Your overall view of the city coming back? The stimulus plan passed the Senate. It has some benefits for New York. But just talk a little bit about what you're hearing from your sort of network on the city's return?

That's almost an unknowable question. Most of the people that I talked to believe that work-from-home is an interesting tech-based -- tech-enabled phenomenon, which will stay in some measure. We can't tell what the measure is, okay? Will half of the universe of employee of office workers across the country work from home, not a chance. Could 3% or 5% work from home? Sure. Could 3% or 5% work from home in a hybrid kind of a thing where they work from home 2 days and they were from the office 3 days? Sure. We don't know how that's going to play out. The people that we talk to, who are the bosses, they want their people back in the office. They want to get back to normal. They want their teams working. When somebody is working on their kitchen table day after day, week after the week, month after month, they have no interaction with the rest of their colleagues and the only thing that they're good for is processing, they are really not in the flow of a business, and the bosses that we talk to know that. So I really can't tell you when that's going to happen. I can tell you this that the return to the office has been delayed and delayed and delayed. It's been delayed basically over 2 things: the schools are closed, and there's still a very, very concerning health issue. No CEO that I know of, including our firm, will ask their folks to return to work en masse if they're not comfortable individually returning to work because of the health scare. So in our business, I mean, we're talking our book. In our business, we have an A team and a B team so that we are not -- we are triply socially distance. And we have asked everybody to come back to work. After all, we are an office company, we want our people in the office. But we have set a caveat to that, if you don't feel comfortable because of the health risk or you don't yet feel comfortable commuting, you don't have to come back to work. That will all change in the fall, I believe.

Mike, I'm going to put a slightly -- maybe add a Little bit to what Steve said, which is...

You want to say slightly different.

Maybe just slight -- no, slight variation, kind of a little bit different, which is I think the tenor, in my mind, has changed a little bit in the last couple of weeks, right? So I mean I think you're in the city, periodically. There's a noticeable pickup in traffic in the city.

I'm in the office 4 days a week.

Michael, you get the gold star.

Yes. It's good, Michael. So I think there's a noticeable pickup. And in my mind, and I'll let Glen talk to this. I think -- up until 2, 3 weeks ago, I think the city was coming back Labor Day. And now, I think a few things have happened. One is that I think government started putting a little bit more pressure, like we need to start getting the city back reopened for the sake of our businesses. We've learned enough about the health side, there's a balance here. You're starting to see the restaurants reopen at 25% indoor. The arenas are open, albeit modestly. But it's to get the muscle memory going again. Secondly is the big news that everybody who wants to get vaccinated, by the end of May, will get vaccinated, right? And so that's a much different sentiment than by the end of the summer. And so with that mindset, I think companies are now saying, you know what? We don't have to wait until Labor Day. I think the big real opening is still coming Labor Day, but I think you're going to start to see a more gradual ramp in that. And so -- and obviously, the third thing is the stimulus package, which when it gets done, knock on wood here, is New York is a big beneficiary of that, both at the state and the city level, and -- for stalling either some of the more difficult budget issues, facilitating school reopenings, et cetera. So I think all that is good in terms of getting this going sooner than we think. And by the way, 3 months matters, right? Because it gets people, in my mind, certainly by Labor Day, it really is rocking and rolling again. I think Glen is starting to see some of that in some of the tenant dialogue.

Look, Michael, New York is an ecosystem, okay? New York is 400 million square feet office space; dozens and dozens of world headquarter spaces; the financial capital of the world; probably the entertainment media capital of the world, et cetera; it's the second largest concentration of legitimate theaters in the world; it's got 8 professional sports teams, 2 of each category; it's got the largest tourist attractions; largest tourist input -- not input, traffic in the world; and on and on and on. It will take some time for all of that to get cooking on all cylinders, okay? But the fact of the matter is that notwithstanding the fact that it is taking time, it's delayed, it's annoying, we are collecting almost all of our rents and everything will be fine. Whether it happens in this quarter or next quarter or the quarter after is of enormous moment to you, it's of not such enormous moment to me. But it will happen. There's no doubt about it. And the fact that New York has such a complicated, varied ecosystem, it's different. If you go to some of the other fine second-tier cities, they have 1 or 2 of the 17 things that New York has. So we're dying to see the restaurants reopened. Restaurants are not going to reopen until the people come back. So it's all a mechanism. The other thing is it will all happen, and it will happen more quickly than you think it will.

Is there an element, Steve, to that comment that they have to happen in an order that's not going to be supportive? So is it a matter of the restaurants we're waiting for the office workers and everyone else to come back, but the office workers are waiting for the restaurants to reopen, and so we're stuck in this trap of everyone is waiting for something else to happen before it actually makes the city as vibrant as it was?

That's too sophisticated and complicated, meaning no, okay? It's all going to happen. So people are going to come back to the office because they want to make a living, they want to get advanced, they want to see their colleagues, they want to get out of their damned kitchens, okay? The restaurants are going to open because, first of all, it's very easy to call back the people and open a restaurant in 3 days. So it's all going to happen. I don't particularly give a hoot whether A follows B follows C or -- I don't care what the order is as long as it happens, and it will happens. It's sort of beginning to crawl back to happening now. By the way, everybody that I talk to is a little bit fed up with being in their kitchen.

Is the kitchen in New York or is the kitchen in Florida?

We're definitely seeing the sea change in behavior. So what I have my keen eye on and ear on is my communication with the senior brokers at our tenant base, not what the newspapers are saying. So we're seeing a change. It's happening. We're seeing light. Tour volume is up a lot. Lease proposals are in, and we have lease negotiations going on in all the buildings. That's number one. Number two, anecdotally, you talked about why do they come back? So I'll give you an example. We have one large financial service tenant on Park Avenue. They never let their employees work from the office. They set up 2 bubbles around the country. Michael, you go to bubble A; Manny, you go to bubble B. You want to take your family, great; you want to take your dog, great. You're going to A or B, pick one. So they've been in those bubbles. But those bubbles are equivalent to offices. You're working with your colleagues in a protected area. You're not at home, right? So you're still working together. That particular company has had a record-setting historic year completely outpacing their competition, and they attributed to working together in those places. That company has told their employee base you'll be back in that building on April 1. That's one example. Example 2. Last week, Facebook placed a video in the Wall Street Journal online constructing their new spaces at 770, at Farley and in Hudson Yards with a Facebook spokesperson speaking. I think that was a message.

Why did they do that?

I mean why do you think they did that?

Why did they do that?

They're telling everyone we're coming back. We believe in New York and we believe in the office. So -- and are in constant communication with their tenants, as Steve said, when they're coming back in April, May, June or September, it's going to be in that range of time. And until everyone gets back, settles in, reads and calms down and gets organized, then we'll see about who's going to work hybrid, how much space do we need. Do we need more? Do we need less? Do we need the same? What does our lease expire, next year, in 3 years, in 5 years? All that normal stuff will start. But first, they got to get back. So that, I think, Manny, to your question on order of what's happening, that's a real-world, on the ground, what we're seeing.

What we're seeing in the leasing market is 1 of 2 things. Either people are going about their business, renewing space and committing to space as they normally would or people are a little confused, which is a natural result of what's going on. So some of the confused people are sort of stalling it a little bit, which is okay, too. What we're not seeing is wholesale giving up of space. That is just not happening. Okay. What's next?

How about the designer space? So how are the tenants that you're working with that are going to bring them back, how are they thinking about the physical plan for their people?

Glen?

Yes. So we've been reviewing construction drawings of some of our major tenants in the last 2 weeks, some technology tenants, some financial, some other. I've seen 0 change in that program, 0 from prepandemic.

No change to their office layouts?

Michael, before the pandemic, people had gone more towards the informal kind of office space culture. So the concept of partners offices on the windows and isolated spaces, that's kind of been off the table for half a dozen years now. And people still like that and are still doing that, okay?

We talked -- you talked a little bit about the Penn District in your opening comments, Michael. I guess, where do you sort of stand in terms of the capital spend and the return on that in terms of whether the market is giving you credit for it or not? And I guess, how do you sort of think about that holding relative to the entire company?

Look, Michael, I think that you don't know how investors are valuing pieces of the company, but I think we very clearly think that they're not giving appropriate value to the Penn District. I think the market is underappreciating what we're doing there and what that's going to deliver. And maybe that's because we've taken earnings offline, and so they're applying a multiple to earnings. And it's not only low, but it's down because we've taken it. There's no earnings coming off Farley, et cetera. And so it's a little bit of an analogy Steve used to talk about on Alexander's with Bloomberg, 731 Lexington, stock didn't move until they actually moved in, right? The rumors were out there. The lease was signed. Stock didn't react until they actually moved in. So ...

And then it went up 5x in 2 weeks.

So that may be the case on Farley. But if you think about Farley, PENN 1, PENN 2, Farley is done other than the retail piece, so that income will kick in '22, by and large. A little bit in '21, mostly '22. PENN 1 will roll in as we turn over those tenants over a 5-, 6-year period, really beginning let's call it next year. And then PENN 2 won't be done until '23 and probably not cash paying until late '24, '25, right? So these are longer-dated items for an investor base that typically is much shorter term, and so we don't think the market is giving credit for what the power of that income is, notwithstanding the yields are out there, et cetera, which we just updated. So we published the capital all spend, we publish the yields, and our confidence in what we're delivering there and what we're going to achieve is high. And so look, we're down -- notwithstanding the recent rally, we're still down, I don't know, $18, $20 from where we were last January. And we didn't think that was giving appropriate credit for Penn. Well, now we're -- 15 months later, we've signed a major lease, the biggest lease in the city, maybe in the country. We're further along on when that space on PENN 1 is going to be done, and so that's how I conclude the market is not rewarding it.

Have you been able to accelerate plans during the pandemic in terms of a lot of the infrastructure and things like that over the course of the year?

No, we've been full speed ahead, rolling right through it. Our business plan is to devote focus and capital to Penn District that we haven't wavered or lost our conviction or stopped or paused for 1 minute during the pandemic. We believe in the recovery, we believe in the Penn District, and we believe that's where our attention and a large slug of our capital should go. Now just to give you an idea, I think it was 2 weeks ago or maybe 3 weeks ago that Albany announced in a fairly major press release a GPP, a general project plan, for the Penn District transportation network, which includes development surrounding the Penn Station, which obviously is the largest train hub or transportation hub in America. And there was a line delineating the properties, they were over NATO properties, okay? So there's an awful amount of attention, both political attention, economic attention and we find tenant attention as well. So that's in process. And that's something that, obviously, we've been working on for a while now. I think we -- I don't know whether this has been announcement -- I think we announced it in our last earnings call. We opened a major experience center, which is really a sales center in 1 PENN, which is exactly where it should be, which is just absolutely marvelous. It really tells the entire story of what we're going to do currently, medium term and long term. And Glen has been having a field day taking his customers, his brokers through, and it's just it's amazing. We will open that up to our investors, our shareholders and our analysts when some of these pandemic restrictions go. And I believe you will be just awed by what you see. So I mean, we couldn't be happier. Now if you take the fact that PENN 1 is going to have a very large uptick in market rents -- and we're seeing that now, we're leasing in PENN 1. And we just approved the lease yesterday, the day before, which hits our budget right on, no wavering at all. In PENN 2, we basically have the building empty, except for one large tenant who is paying a very, very submarket rent. And so that -- all of that income will come in as that develops. And then you've got that Facebook income that's going to come in, in a year, as Michael said, and on and on and on. So we couldn't be more optimistic about it.

Does that -- are you close enough? I know you've talked a little bit about having a tracking stock for the Penn District. I guess, does that -- where does that sort of sit today?

It's still on the table. And it's very much -- it's still on the table. It's even probably ahead of the table.

How does Hotel Penn fit into everything?

You'll know about that when my letter comes out.

Brick by brick?

You'll know about that when my letter comes out.

April 15. It's right around tax season usually.

Whenever it is.

He let up from scratch this time, it's going to have to look different.

How do you feel about -- you mentioned Albany, and obviously, we have the New York mayor race. How important is the mayor or leadership for New York? And I guess, do you -- are you guys leaning one way in terms of backing a candidate or not?

I mean, look, political leadership is extremely important in any jurisdiction, whether it be national or local, and New York is no exception. The -- I was actually talking to somebody about this topic today, and we're continuously talking about it. My big issue with this is -- it's not the taxes, et cetera. That's the second issue. The single biggest issue that I have is that New York is skirting on the edge of being business unfriendly from a political point of view, okay? Now if you are the CEO of a large company and you have to make a decision, you want to make that decision and invest capital and bring your business here, expand your business here to a jurisdiction that is going to be friendly to the business. Now the politicians should be friendly to business because business is what pays the bill. So business employs the population and business pays the taxes and business pays the bills. So the problem that I have is I think that what happened with Amazon is the stupidest damn thing I have ever seen in all of the years I've been working. And the sequel to that is some of the politicians and some of the people involved in that, they still don't understand how stupid it is -- or it was. So anyway, the single most important thing is for the political leadership to basically embrace business, embrace the fact that we need business, embrace the fact that we need the revenues and we need the employment. And so you're going to see a lot of people wanting to focus and hammer on that point. That's the single most important thing in my mind.

I got a few questions here in the audience queue. What do you anticipate will be...

Let me just add on to what I just said, okay? New York, San Francisco, et cetera, they go in cycles. It's the king of the world. It's the devil. It's the king of the world, it's dirty. It's the king of the world, the taxes are too high. So it goes -- everything goes in cycles. Right now, there's a perfect storm where people don't seem to like New York, okay? You dislike New York at your peril. New York is still the capital of America and likely the capital of the world. The infrastructure that's in New York in terms of its business community, its leadership community, its financial community, all of the different infrastructure in New York, it's -- there's nothing like it anywhere else in the world. And so I'll say once again, New York is here to stay, and it will thrive, and it will grow and it will get bigger and better.

Why aren't we getting more leaders, Steve, to step up and yell that from the rooftops? I mean it's been going on -- like it's been a year of this pandemic, and I would have expected more of the major employers, the major users, the major owners.

Michael, it's not the pandemic, okay? The -- there's an organization called the New York Partnership, which is all the big employers. They are working their butts off in terms of the safety and health of the community, in terms of philanthropy, in terms of organizing and what have you. What I said before earlier was no CEO wants to basically, I'm going to use this as a jarring term, order his employees back to work while there continues to be a health scare. That's just -- it's not necessary because everything is functioning with working from home. Working for home is not a long-term solution to anything, okay? But -- so that's my feeling. And I know all of the people that I interact with, who are CEOs, they -- everyone feels basically the same thing. Now you have to admit, there are politicians who feel differently. There are politicians who think their job is not to support business but to support the working families. Well, the working families are not going to thrive unless the business community is there to employ them and for them to succeed. So anyway, it'll -- it's all going to work out.

So Steve, when you said that people -- I'm going to answer the word hate, hate New York, have left New York for whatever it is, why hasn't that either driven more dislocation opportunities for you to take advantage of and buy into that? Or the flip side of that, if people have done it in the public markets but on the private markets, why haven't you sold more into that?

Michael, you take that one.

Yes. Look Manny, I think that if you think back to the great financial crisis, right, the number of assets that came out in that 18-month period, I think they were like 3, right? This time, I think there have been 0, right? Now why is that? Interest rates are lower, right? LIBOR went down to effectively 0. And many borrowers aren't floating rate debt, and so they're carrying their properties, right? And there really haven't been much in the way of maturity issues that have come about. So -- and if there were, I would say, generally, this is unprecedented for everybody, right? Lenders work with borrowers and say, all right, we'll kick it out a year, 18 months, et cetera. So I think the fact with rates so low, unless you got a major tenancy issue, you're continuing to carry your assets. Obviously, hotels, that's a different category where there's been major distress. But again, lenders don't want the assets. They've been working with their borrowers. And I think everybody's view has been time is going to heal things or at least allow for stability. So the general view has been unless you have something that's forcing you to sell with the lack of data, either in the sense of when are tourists coming back or when is -- when are office workers is returning or what are lease comps, et cetera, there's been a hesitancy to put assets out there. By the way, many of the investors come from around the world, they couldn't travel to see assets. So there's not investors to market to, which is one of the things we found out in 1290. And so the general view is why sell today when the market is not there for a variety of reasons? And there just hasn't been as much -- there hasn't been a forcing mechanism that results in.

Look, you guys screwed it all up.

We?

You screwed it all up. The stock market is telling everybody that we're going to come out of this in a boom, okay? Not -- we're not going to sneak at in this pandemic, we're going to come out of it in a boom. Washington is spending trillions and trillions of dollars to create that boom. So the psychology today is totally different than it was in 2008. In 2008, we were on the verge of having a total meltdown of the total worldwide financial system, okay? And that lasted for 3 or 4 years, and that's what caused a great deal of dislocation, which created opportunity for those who were strong enough and had the capital to do that. In this particular instance, you screwed it up. The stock market and the stimulus and everything, in other words, the world has gotten smarter. The world has understood that the American economy is not going down. The American consumer is not going down, and New York is not going down. The stock market is beginning the fall in love with New York, again. Now in our business, the product types that are under the most distress are, ranking them from higher to lower, hotels, okay? So hotels are in enormous distress. Now it's not impossible that if 20% or 25% of the hotels in Manhattan closed forever that the 75% that remain will be doing just fine, okay? So we can't predict that. I have no idea what's going to happen with business travel with the advent of Zoom. I mean why would you go from L.A. to New York to have a meeting that -- an hour meeting if you can do it on Zoom unless it was critically important. So we just don't know how that's going to shake out. So for the moment, it would take an unbelievably spectacular buy for us to invest in hotels. Now our style is not to invest in a single hotel. That doesn't create a platform, and that doesn't do very much for our business and our stock. So the hotel business is sort of like out in the left field. The second largest distress is in condominium apartments for sale. Well, we know how to do that. We know how to -- I submit we know how to do that probably better than anybody else does. But the reward to a public company for onetime income versus repetitive income, et cetera, et cetera. So we're looking at a couple of things, but we're not really excited about it. Quite frankly, retail values have not come anywhere near what it would take for us to invest, and that leaves office. And there has been not that much in the way of office that's available. And so the answer is that nothing of the quality or the scale of like the Mendik acquisition that we did about 20 years ago has come up, although we are looking very, very hard at that. For the moment, if we only end up developing and building out our Penn District, that will create enough value for everybody, even you.

All right. I appreciate that, Steve. We are in overtime, so I'm going to go through these rapid fire very quickly. Michael, when we're sitting physically together in Florida a year from today, what will be the one thing that will have surprised people the most about your business over the prior 12 months?

The unbelievable, dramatic comeback of New York. You got to remember...

What do you think...

Hang on, let me finish. You got to -- I'm sorry. I thought I was running the meeting, not you, and I apologize for that, okay. You got to remember that New York is on sale now at $0.75 on the dollar. That will have an enormous effect.

I think, Michael, to be more specific to what Steve just said, I think the biggest surprise then is the comeback. I think the bounce back in leasing is going to be a lot bigger than people think. But by the way, that's in office and retail. That's my view.

Okay. What do you think your corporate travel budget will be in 2022 as a rough percentage of 2019?

You're asking the wrong guys. Our business is in New York, so our travel is from here to the Penn District, that's a $6 cab.

But that's a good question. I expect across the board travel budgets and those kinds of T&E, you got to remember, there's no restaurant T&E, to be at least 50% of what it was.

Okay. Same-store NOI growth for office and retail in 2022 for the overall sector, not Vornado specific?

I have no idea, and you better not answer that.

All right. Last one. 10-year treasury a year from today? It's 1.6% today. And Steve correctly, many years ago got the call right going as low as it did.

He usually does.

Maybe it's going to float between 1% and 2% for the next year.

Yes. I think that's right.

Okay. All right. We always appreciate...

Long term, it's going to stay low -- I'm sorry, short-term rates are going to stay historically low. And the 10-year is going to float between 1% and 2%. But -- and then somewhere in the 2, 3 years from now, it's going to break 1% again, go lower than 1% again.

All right. Well, thank you guys so much for the time. We're excited to go out and see the marketing center. And everyone, you should go check out the Moynihan Train Hall when they're back in New York.

Have you been there, Michael?

I have. I'm in New York every day. All right. Thank you so much.

Michael. Thank you. Manny, thank you. See you. Thank you. Have a good convention.

Thank you.