Earnings Call: Q2 2022

Oct 14, 2021

So thank you everybody for joining. My name is Scott Allen. I'm Chairman of B2Go. We're really grateful for your time. I'm joined today by Ted Fujiza, who is our Lead and Director. Yes. Hello, everybody. I'm the independent team of external board member and the Chairman of Audit Committee. So normally, I keep very quiet. But if you have any questions, please address me. I'm very happy to answer any questions at the external Board. Thank you. Thank you, Ted. And also, we have with us Dan Morizaku, who is a senior member of Finance team and our Head of Global IR. Hi, I'm Dan Morizaku. I have calls with many of you before and excited to join the Q of our conference is outstanding here in Tokyo. So thank you for joining with us. All right, let's get started. I'm working off of the presentation. It is on our website, FY 2022. So it's the February 2022 fiscal year H1 first half corporate presentation. Again, thank you so much everybody for joining us. We're grateful for your time. Let me turn to the first page of the presentation, which is Page 8. Probably the most important thing that has happened is actually not on this page, which is broad on COVID. So this quarter, so the Q2, it's the June, July August quarter in which Japan experienced an unprecedented surge of cases and fatalities was an extraordinary difficult time for the country. And since the and so that in August and since then, there's been this equally extraordinary collapse in cases and fatalities. Delta is all over Japan just like it's all over the world. We're still trying to figure out why exactly this has happened. But we are sitting today in October together here in Tokyo and those around the world. But in Japan, we're in a totally different world than we were in Q2. At this point, 90% of those over 65 or older have been vaccinated. It's 66 totally vaccinated, 66% for the country, twice and 75% of March. So it looks like Japan is going with relatively low levels of vaccine hesitancy. It's looking like it's going to go over 80% to possibly go as high as mid-80s. So that's apologies, that's not on the page because that's not about Ichigo, but it is about the country and the environment operating. So Japan, knock on wood, has turned the corner in a very, very powerful way, which changes everything for us going forward. And so it's not the most important thing, it's the most optimistic positive thing I can tell you. We're glad to be in Japan, which is back and each go is going to come back hard and fast. So turning to what's on the page, hotel earnings recovery is slower. What was what I spoke to you in July, we were reflecting on that Japan seem to have turned the corner on COVID before this explosion in delta of the cases. And there was looks like it was going to be the case that we're going to have a recovery both in hotel occupancy and an activity in hotel buy sell market and that didn't happen. But things turned really, really grim. We had a plunge and both that state of emergency and much of the country had a plunge in activity. Those people would say, hey, we're interested in bus and buying hotels, but they all canceled. So the hotel earnings recovery has been pushed back. And we think it's that's the answer that it has been pushed back and therefore kind of more possibly in 3 months to 6 months. Given what's happened at this point, we're clearly in a state where the hotel earnings are going to rebound, they're very substantial. There has been a minimal COVID impact on midsize offices, which is overwhelmingly where we play. I will talk about the one big asset we have at Paladagoul, which is big and important, which is in a very different world. We're having extraordinary strong stable NOI out of our mid sized offices and Odaiba is different. It's a large office. There are challenges leasing it up and I'll speak to that in some more detail. Clean energy is growing extraordinarily well. That is, of course, fully unlinked to the economic cycle and to COVID. And so that's really exciting. We were for the 6th year in a row chosen for inclusion of the JTX CK400, which is arguably the index of Japan's premier companies. It is thought by the JPX Nikkbe the index of Japan's premier companies in terms of value creation. And we think since we exist substantially, it's great value for the world, including our shareholders. That makes it the premier index in Japan. And we qualified for the TSE prime market. So we won for that on April 1, 2022. Page 9 speaks to highlights on earnings. And by the way, this was a light quarter as expected. So in the first half, it's light. We have floor earnings that come out of our value add business that move around. We do not spend a lot of time trying to position those earnings in any one quarter quarter. We think that's the way you lose money rather than make money. So it was a light first half. And then last, the firm has got very durable earnings. Stock earnings, so those effectively fixed earnings come in at twice our expenses. You see on the right side, some decrease in stock earnings in stable real estate. So this is primarily rental income and this is Odaima. This is our one big asset, so we're speaking to is experiencing more vacancy than we would have expected. Asset management on the other hand is up 17% and Green Energy is up 14%. Turning to Page 10. What's I think is most interesting about this as it speaks very directly to the difference between accounting, reported earnings and we would describe as economic earnings or which are linked intimately to cash generation. So to be clear, we are all about rigorous, systematic, relentless focus on cash generation. So the headline accounting numbers look poor. They were as expected. Those accounting numbers will improve very substantial. But as I said, you've got OP down 22%, you've got net income down 38%, you've got cash and PS selling down 2%. And that speaks to the fact of the matter is that accounting had a whole bunch of non cash stuff lying around in it. And so what's important to see is despite the significant drop in earnings. I mean, accounting earnings, of course, are linked to total earnings. We continue to have very, very robust cash generation. So that's a way of saying, when the categories go up and they will go up, your cash flow is going up also very substantially. Page 11 gives you the sector breakdown. OP, you've got asset management up 27%. That's primarily on increase in H2O office based asset management fees. Stable real estate business has got stock earnings down. That's primarily on depreciated expenses. So those are non cash up in the course that hit the OP line. And that's down 7% and the rest is a significant drop off. In flow earnings, that is effectively entirely because we did more value add sales in the first half of last year and we're going to do more in the second half. So nothing to worry about there. Clean energy continues to grow very, very well. We had our first power plant we brought online this year and that is for diminishing earnings. Looking at Page 12. I think it's probably the most important to focus on what's changed between Q1 and Q2. And so I won't go into particular detail on that, on the unchanged part. So stock earnings are relatively unchanged from Q1. Very, very high impact on hotel. Not a lot of impact at all in either office, as I described. And however, I should say that's primarily midsize office. So we have one big asset, Odaiba, it's large scale office that is experiencing more of an impact. Since most we own is midsize office, we're speaking to that on this page. Residential clean energy, of course, are having no impact. When I say, of course, energy, no impact. Residential, Cinchabat has done a very good job checking income. There has been no impact on that performance. Turning to flow. The big change is in office or the two changes in office and retail. Those markets are clearly coming back. What was unexpected and what I just touched on was we thought hotel in terms of buy sell activity. So floor earnings are about buy sell activities in these asset types. We thought hotel was coming back. It was coming back. And then a sharp U-turn to wait a minute, we're not sure we want to own these assets anymore and let's see what happens. Given that we've got FX, as I said, we've broken the backs of Delta in Japan at this point. We expect that tail activity to come back, probably push back 3 to 6 months. Pages 14 and onwards speaks to the business model and I've touched on this before, so I won't go into a great thing, but happy to take any comments or questions in Q and A. It's both a stock plus floor earnings model. Stock earnings massively cover our expenses. So we effectively are structurally, earners. And on top of that, we have, we think, robust and high value, high quality floorings. Page 15 shows you the embedded forward earnings. So again, it's important to understand that and we're fine with this, but it's important for investors to understand that full value creation is not reflective in accounting earnings, not only about the cash generation being different, but it's also that we do value add. And it creates value. And that value is only recognized both on an accounting on a cash basis when we do the sale. And so what that implies is you have significant unrealized gains that are on the balance sheet that are in earnings bank for future periods If you turn to and currently these are external third party appraisers. I think we've got about $64,000,000,000 of unrealized capital gains on the balance sheet that's against book right now about $100,000,000,000 so plus 60% against book value. If you turn to the next page, it shows you that we systematically outperformed what the 3rd party of creditors bank in terms of the actual value created. Generally, it's between 22.5x of what the 3rd party appraisers say we're going to earn. If you see in this year, H1, we actually have a very low level one by 4x that's linked to us deciding to dispose of a bulk kind of regional residential portfolio that we didn't experience and experiment on didn't make much money, but the fact that we exited that at no real profit. So we think the systematic normalized trend continues to be about 2x to 2.5x what the primary phrases are saying. So even as low as 2x given corporate uncertainty that implies we've got about $130,000,000,000 at least of unrealized gains announced balance sheet from real estate. Again, that's lower that's more than our current shareholder equity. That does not account for what we think is a very, very large amount of unrealized gains in our clean energy business. And I'll speak to that later. Page 17 also speaks to how we're very focused on robust cash generation and it shows up in our economic operating cash flow systematically being higher than our income. Payday team shows our financial base, continue to borrow very long. So we have the ability to finance our assets through kind of very long time. You'll see that there's been some drop off in the period of kind of the remaining loan maturity. That's linked to the fact that each of those owners business is an increasing large part of our business. I'll speak to that later again. Average holding period in this business is less than a year at 0.8x, what's that? So think about 9 to 10 months. And so we tend to borrow in that business around 7 years. We don't need 7 years. We're actually very conservative, making sure we have a balance sheet that's goal improvement. So that explains some drop off from But again, robustly, massively longer period of maturity of liabilities to finance our assets. You can see there needs to be a drop off in the interest rate that we've hedged. Page 20 is acquisition and sales during the first half. Almost entirely on the acquisition front, let's each of the owners. Again, that's a business that does prime, arguably super prime, almost entirely Tokyo residential. And as South Tokyo, it's kind of in the prime equivalent and brand new residential assets, super, super liquid, good value. And for investors, this has been a very, very attractive asset given how robust performance has been despite COVID. It is worth pointing out that sales have been 11,000,000,000 dollars but we did a large sale, which we already disclosed to the market, about 18,000,000,000 yen of 16 residential assets out of owners to a domestic buyer. So that's been contracted and double closed in November. So those the wasting the earnings from that are coming in and again we'll hit meeting Q3. On the page, net acquisitions slightly higher. And this is again residential for the owner's business overwhelmingly. It's worth pointing out that the residential sale that we did here of 5,300,000,000 yen was an experiment and we do experience. And we think that's valuable and important. This was arguably a failed experiment. We bought kind of a normal kind of so the owner's business is brand new assets in great locations. It's going to get arguably super prime. We thought it was worth looking at whether or not we could generate value in regional, residential kind of the typical kind of age 10 to 15 years kind of old multifamily perfectly functional, proved to be a harder business all over the country, not great economics in terms of cost structure for us in order to maintain kind of a drive value there. So over a number of years, we sold out of this portfolio. It was primarily over $10,000,000,000 to $100,000,000 in U. S. And we did the final exit of it. So we are now completely gone out of used regional residential assets. Page 21 gives you a view on what's happening with owners over time. This is a business we set up about 4 years ago. It's going extraordinarily well. We have and there's an engine, right? So you buy assets and then you want to sell them. And so we all obviously want to be buying assets because we have robust sales pipeline and sales activity. At this point in H1, the progress against our target for acquisitions here is 72%. That on executed contract basis, if you include kind of pipeline of we think we're going to get this done, it's about 90%. So owners feeding the owners engine is going quite well. Page 22 speaks to kind of the value add business, the sustainable real estate. I will go in too much length because I'm pretty sure once you're familiar with this, it's worth pointing out the NOI uplift in our sustainable real estate business has been about 20% it's been 25%. That's weighted average. And what it gets at is the fact that we're selling these assets at a profit is intimately because we make the asset more profitable. So you push up the NOI by 25%, you sell the asset up 25%, you're just selling at the GAAP rate that you bought it at. When it's become a better performer, you generally get a premium for assets that are performing better. So you can see that the gross product profit margin in the multi asset business, so that's got an average hold of 3 years. It's been 32%. Owners is a much higher turnover business. We like that. I mean, you're not taking risk on a holding period. It's less than a year. It has a GPM about 11%. They are different assets, different asset classes. Multi asset is at this point doesn't do much residential, primarily it's office, it's hotel, it's retail, owner's city is exclusively high end, brand new. Again, openly Tokyo residential chronic areas. Page 23 speaks to what's happening with the 2 Inchigo office and Inchigo hotel, along with Inchigo Green, our solar power our listed solar power producer. It's worth noting that Inchigo office is on route to being the 1st JREIT. We think it we'll have to see if someone beats us there. But it expects to go convert over to 100% renewable electricity and primarily solar and wind by April 2022. That would make it the 1st Japanese REIT to achieve that. Across the firm as each ago, we expect to hit that by $125,000,000 I mean arguably we're already there. But the RE100 rules don't allow you to count your production. They only so we're producing the energy we need renewable energy we need to fix solar and wind in order to do everything we need for ourselves. RE1 doesn't count production on accounts, but what you buy. Anyway, but the niche of luxury will be what we think will be different to get to 100% renewal. Page 24 shows what's happening in the clean energy business. On top of the pipeline that we have here on the far right hand side, which is the kind of aurora blue part of the graph is green biomass, which we're working on. We also expect will be a significant kind of our news driver. That is a brand new business. We're actually pretty conservative in the way we think about how we discover pipeline. So it's not in here. But we fully expect that to begin to happen in the next 18 months. It's also worth pointing out that there was a truly spectacular announced transaction where NOS, a big Japanese oil company, is buying the solar primarily solar well, actually it's not primarily renewable portfolio, solar and wind from Japan Renewable Energy at about 200,000,000,000 yen Their current that business is current revenues are less than ours. So P is less than ours. They have a stated pipeline, which is bigger than ours, but it's actually worth pointing out. You can see on this page that the average fit, we have 31 yen. And the current and so and currently, if you are selling solar power, for example, it's going to be about a third of that. So it's a way of saying we were involved in this business very early with very high tariffs. And so it's you should so for example, we've got currently 130 megawatts going under using the current fit that would be something that looks more like 400 megawatts. So the economics are radically different for portfolio cars that has super normal returns and deaths to them. So anyway, we think that's a super exciting transaction. We need to do a lot more work on it. It does speak very directly to we think about very high possibility that the market is systematically very significant under grabbing under our clean energy business. Page 25, trade appeal Adiva. This is the large asset that I spoke to. It's so big, it's actually it's about 10% of our total assets. It's 40% of our ARS portfolio, which means it's a minor, but big. That's really, really important. We got an S rank, which is the highest CASB. So this is a renewable sustainable building certification. It is our second asset, which is one of the SREC. Why do we do this? We do this because we care. Each goal works to be good for the world. Not only do we care, but our investors and global particularly global investors, the increasingly Japanese investors care. I point this out because it's not clear at this point that tenants really care. So when you do work to make a building more sustainable, it's good for the world. It's good for all of us. It's good for growing asset value. But what I'm telling you is when it's not necessarily good for growing NOI, meaning it's not clear at this point and we hope this will change. The tenants will increasingly realize the value of being in the building, which is right for the planet and right for society. But we don't get a premium rent on it. But we do get a premium in terms of value creation. What I'm telling you is it is effectively low cap rate. So we think this is a very robust portfolio for diabas. And then this is a page about kind of a diabas sustainable building. But it's worth pointing out that we are experiencing a very different leasing environment for this. So this has got floor size generally kind of 5 to 10 bigger than our midsized assets. And it's clearly the case that our primarily kind of SME tenants and more smaller floor plates, they're not moving, they're willing to pay higher rents. In the largest size floor plate micro diamond, you're seeing significant increases in vacancies. This is a harder deal in the lease. We think we will lease it up fully. We thought we're going to get it done sooner rather than later. I think I guided everybody to about a year from now, but it may take longer than that. We're looking carefully about what we need to do for the asset. I mean, to give you an example, it competes with it's a former headquarters building. It's beautiful. It's super high spec. Not only is it sustainable, it's super high spec. And it's tall. It's a tall building. And it generally competes with kind of tall buildings in the middle of Tokyo. And so what's the difference between this tall building and the tall building in Tokyo? Take a look at the picture on the page. This tall building doesn't have anything around it. So if you wanted to kind of differentiate and explain why this asset is more interesting than the central Tokyo asset. Central Tokyo asset is like a central it's like a tall building in Manhattan. You generally don't get a view unless you open the park. In this case, it's got a view. I mean, like a spectacular view. And so, again, trying to understand what is distinct and valuable, distinct and value meaning kind of distinctive and therefore valuable to people. Distinctive is need to be valuable. It isn't important. So we're working on this. But this has been the good news is we're overwhelmingly in small midsize office. It's what we've done. It's what we continue to do. We're beating the business plan on this asset, but it is proven to be a very different leasing environment than everything else we have. Page 25 I'm sorry, Page 26. For the 6 year in a row, we're going to dip the XDA 400. Page 27, we believe in doing buybacks when the shares are cheap. That's been ongoing and we fully expect to continue to be ongoing. And Page 28, we have a J League Shareholder Program. We are a top partner for the J League that supports Japanese football league or soccer league, depending which word you want to use. And which was relatively shut down during COVID, but it's about to come back. So that's really exciting. We get all these tickets and generally companies, Japanese companies, people give tickets and give them to staff and I don't know, use them for business events. We work for shareholders. So we've chosen to give these all away to our shareholders, not only of this company, but for 2 weeks and obviously some of our silver carbon producer. So those are my prepared remarks as it were. Thank you so much, everybody. I'm going to turn to Q and A, and I'm supposed to guide you through this. So hopefully, if we're ready with Zoom, you can either click raise hand if you're on the app or the browser. And I think you actually have an ability to do something interesting if you're on the phone. Are we going to show that page? On the phone, you also can enter star 9 and then re enter star 9 to respond to questions. Questions. So those of you who are on Zoom or on the phone, we are open for Q and A comments. We rarely get comments, but we actually we do value them. We work for all of you. So anyway, looking for anything from anybody. Greg, do you have a question? Yes. Can you hear me? Yes. We got you. Thanks so much. Yes. I have a couple of questions, please, Scott and the team. First, you made a comment regarding the gain on sales as a multiple of appraisal value. Yes. In presentation, it says 1.4 times for the more recent period, but you expected that to go back to 2 to 2.5 times. So I'm sure because the latest standpoint of sales, so to speak, is not very representative, is it too small to matter? Is that correct or? That's right. I mean, we disposed the regional residential portfolio affecting their costs. So and it's a one off and so we think 2 to 2.5 is the right metric to think about us going forward. Understood. So that was affected by the residential portfolio. Okay. And then my second question is, as you pointed out, the boutique owners continue to be very strong. My understanding is it's not fairly hard to actually source properties to buy and obviously price per tuguo have gone up. Are you seeing that we are kind of near a peak at least in terms of volume? Do you see things slowing down a little bit after COVID? Or are we continuing on the same trend? Thank you. Greg, we're seeing no slowdown at all in the owners business. Meaning, it's interesting. COVID has been terrible for the world. But as you look at stock markets, you look at real estate prices, it's not been terrible for them. So you have slightly different tendencies in the various asset classes. But because Japan, by the way, is experiencing, as you know, absolutely no inflation. So it continues to have interest kind of floored at 0. The implication is that you get no return out of bonds. And so people adjust for yield. And residences have been performing so well. We have just massive demand for those assets. As you know, our business model is we so how is it we earn the return that we do in this business? We agree with developers that will buy. And so these are very small and vast developments, multifamily in good areas. So we'll do due diligence on under development. We'll agree to buy it 18, 24 months down the road. We don't take the development risk on it, needs to be built to spec. In return for us agreeing to buy it, these tend to be relatively smaller developers. They can take the contract from each go, go to a bank and get it financed. So that's one thing we do is we enable these smaller developers to get kind of better financing, and they're willing to give us a spread for that. And the second thing we do is we lease these up. So we'll buy them empty and we'll lease them up. We've got very good leasing team. And so those 2 are what we do. And so one, we have what we're doing to our final client is we're delivering kind of the economics that come from that better pricing from the developer, the economics of the risk in taking on leasing. And we don't think there's a lot of risk there, meaning kind of we do do this on these assets and understand what we can do with them. We're very experienced in leasing. And it's a value add that we create. The third one is we're professional growth chain investors and we know these assets and locations really, really well. So our investors are paying us for that. The gross margin is a little bit of 10%. They're not paying us a lot. So we think it's actually extraordinary good value for the investor and the investors agree. So at this point, we're doing about I told you our acquisition, we expect to do about $30,000,000,000 it's a little bit less than $300,000,000 per year. I think likely, Greg, that grows to more like $40,000,000,000 yen 50,000,000,000 yen. It's a very successful business model. It's yes, I seem to slow down. Understood. Thank you. Thank you. Happy to take other questions or comments? I'll have another one if no one is asking. I'm just pausing. It looked to me, Greg, that you had a question. I was waiting to be told that you do. Thank you for announcing yourself. Go for it. Yes. So just on the green energy business, as you mentioned, this transaction for GRE by Eneos is quite huge. Do you expect we see similar transaction from other utilities trying to make their asset or their business greener? And are you trying to kind of step up in terms of investment on that front to try to accumulate an attractive portfolio there? Thank you. Yes. What's interesting is I think the answer is yes. I mean, energy companies all over the world are feeling tremendous pressure from 0 carbon as they should. And so trying to figure out a path forward that's not dependent upon fossil fuels is important literally to their survival. So that was a great transaction to see. We need a bunch of work on understanding it. The headline megawatt numbers on that is basically kind of 5 fold bigger than us. I just told you that the true economics are going to be in terms of the true economic size is going to be substantially smaller than that. It also includes Taiwanese assets and we understand kind of those economics better. Japan has had kind of much, much better returns to it. So understanding the amount of that, the amount of kind of offshore wind, which is not very profitable. On that basis, we'll have a better understanding of how our portfolio positions relative to Jerry. But it has been our view that we have clearly somewhere between we think kind of 50,000,000,000 yen 100,000,000,000 yen of unrealized gains in our clean energy portfolio. This would suggest that, that view is accurate and going to the high end or perhaps above the high end would be poor. And so on the second point, if we want to do more, yes, we're actively involved in doing more in a sustainable and what we call lean energy. Understood. Thank you. Thank you. We have a question from Richard. Richard, are you there? Hi there. So can you hear me now? Yes, yes. Can you hear me. Okay. Perfect. Thanks for this. Yes, I was wondering, could you elaborate a little bit on the rise in depreciation costs for your sustainable real estate? It was a significant jump. And was it just purely for the Odaiba building? And yes, was this unforeseen? Or maybe you can elaborate a little bit on that, please. Yes. So I mean, depreciation is a non cash expense You have a little bit of maintenance CapEx in it, of course. So what I'm telling you is that the accounting depreciation, which is a tax shield, and that's why we like it, is much, much higher than the actual economic depreciation. And so this is actually we're not kind of existing buildings that we have that suddenly have higher depreciation. This is us bringing online. It's primarily we brought on 2 brand new hotels in the not series, a brand new hotel in Hiroshima and a brand new hotel in Sapporo last year. And that's where the new depreciation allowance is coming from. Okay. So this is basically using the current accelerated depreciation tax scheme for those 2 new assets and basically yes, okay. We prefer to call it a tax shield rather than tax scheme. But it is part of the tax rules. It helps protect cash for all of you. And yes, that's exactly what it is. Let's see. I think we have William. William, are you there? Yeah. Hi, Scott. I asked a question on the iPad and text. So I'll just repeat those. You missed it. Yes. The just quickly, I heard so hotels were beneath or below expectation, but just maybe a quick recount of in the second quarter, what was below expectation? Or basically, was it in line with expectation despite the low, I guess, 4% margins on the asset sales or a bit of anomaly? It's happened in the past once or twice, but that was an anomaly. So excluding that, what would you say is in line or beneath expectations in the Q2? And then roughly for the second half, are there trends that you saw in the second quarter that are going to continue that are disappointing? Or are you pretty much confident in the second half? So that would be question 1. And then while I'm at it, the second question is related to green energy, which everyone's asking about. And I always ask this, but I'm going to prod you again. I mean, isn't it that transaction that Goldman does, obviously using the market, the robust market to exit at the right time, isn't it tempting to maybe exit a little bit of your portfolio in order to perhaps reinvest in other opportunities? That's the second question. Thank you. Okay. So H1's first half, Will, was bang on exactly as so the numbers that you see here were there's no disappointment and no kind of particular upside relative to our expectations. So going forward, 2 negatives, 1 I already touched on. 1 is that the hotel market looked like it was returning and then like it just got crushed by the surge in COVID cases. And so we think and now again, the surge of COVID cases and stuff has been crushed. So we think hotel earnings have probably been pushed back And that's too full. That's one occupancy. So it's as we push back, whatever it is. We'll find out together what the government does. We'll go through travel, etcetera, as it's been pushed back 3 months, 6 months. Could be more because particularly Arnott, which is boutique hotel series, it's been proven extraordinarily attractive for inbound tourists, primarily U. S. And European. So we don't think we're going to get full economics out of particularly the knot in Shinjuku Tokyo and Hiroshima until we have inbound back. So that will happen at some point, presumably in the next 2 years. So anyway, we had a little bit of pushback in hotel revenue, a little bit of pushback in time in sales activity to hotels. And I think we'll all find out together. But given that, Japan has now got 3 months ago, people were excited about buying Japanese hotels when we had COVID cases that were massively higher than there today. So I think it's probably a reasonable assumption we'll find out together that that market comes back and we'll be again be selling hotels at the levels that we think are saleable in the next 3 to 6 months. So that's just kind of probably a 3 to 6 month delay on hotel earnings, which will impact the second half. And the second thing that's a negative is, well, that was probably harder at least in the way we had expected, meaning that we're seeing kind of bigger vacancy in other large scale assets and other owners trying to fill those assets. Assets. So very specifically what's happened is we've had a few cases where we've had tenants kind of been assigned effectively, envy will be the wrong word, but say, okay, we're going to move to you. We need to kind of issue our notice to our existing landlord and then see the lab the existing landlord kind of provide a very, very counter powerful counteroffer to it. And it tells you and that's not happening at all for us in our in small offices. So the large office space, unfortunately, it's only this is it's big enough to map. It's 10% of total assets, but it's only 10%. For those folks who own a lot more large office, it's a very difficult period. And we'll have to figure out together whether or not this is a particular point in time with COVID or in fact work from home has had an impact on large office that's a distinctively that's a significant. On the business side of things, owners is roaring bad. We're worried about our ability to buy assets and there has been some increased competition, but actually we are proving to be more than competitive in getting assets at the levels that we want. So that is a surprise on the upside and will be a driver for earnings going forward. 2, I mean, the fact of the matter is that COVID is kind of receding in Japan means the country opens up. The collapse in cases has been much more rapid than we thought was going to happen than we thought was going to happen in the last few months. And that implies actually an acceleration of economic activity that will be powerful for hotels. So it's a little bit of a counter example to what I just said about the earlier pushback in hotel earnings. Broadly speaking, I mean, for us, it's we have been waiting out on COVID. And so there are maybe an example of sustainable energy space. We go do we're super community oriented. We'll never do a power plant without local community approval. It's been hard to meet with municipalities over the last 6 months because of COVID. And so there has been a pushback in development of our clean energy pipeline because we like if we're not if we come from Kentucky, we're not going to be and so that is opening up. That's super exciting. And so to your question is whether that we the timing might be appropriate for us to do something in clean energy. Yes, it could be. I mean, we are very open that. We'll do lots of work on it. We're certainly I don't know that it's the case that we're going to announce on our earnings call on the plan is, but they're certainly capable of doing a large transaction and a direct economics. We will do that large transaction. So again, we love this any else JRE transaction. Did I get your questions? Okay. Yes. Thanks very much. Thanks, Will. Happy to take more questions or comments. Will, I think you're back. Yes. I mean, what's the most attractive space right now for investment in your view in just terms of asset class? And why, I suppose? Yes. That's a good question. If we can get slower done, that's clearly the best. I mean, those continue to this has so our view and it's a hypothesis. And you test your hypothesis against kind of evidence as it emerges is that the market continues to substantially underprice post fit earnings of these renewable energy assets. So in other words, you had a 20 year fit. There haven't changes to that. But for those assets that still qualify for the fit and of course all of ours It's like, okay, after 20 years is up, what are your economics going to be? And it's so clearly the case that Japan can't meet its sustainable energy goals without more ongoing and growth in sustainable energy that we think those economics are likely to be very powerful. And so and solar is, well, I've questioned the most cost competitive. There are regulatory changes underway to allow, for example, more agricultural land if it's on dual use, for solar. We like wind a lot too. Land based, not ocean based. And I've talked about that before. Japan has this huge fall off in the continental shelf and it's really, really tough to make the economics work. We think offshore wind is about 7x more expensive than solar. So that's the place to be and we're working on it. And still, it's been hard to beat people during the COVID period. So I've become out of the COVID freeze. No, that's a place where we want to be very, very active. In terms of more classic real estate assets, yes, real estate is so specific. I mean, it's not only kind of what area, it's like one building. And in our case, what we can do with the building. But we think small and mid office is very compelling, in part because the challenges I described in large offices, which are a huge part of the market and impact investors in the office market, have kind of scared them off. And we're seeing totally different economics, total different durability and uplift in rents available. So we really like office a lot. Hotels are going to be a growth engine when COVID comes back. The reason why I'm not mentioning hotels right now is because we have possibly for inbound to come back, which is going to be the big driver what we think, full auto economics in Japan, particularly for us. I don't know. I mean, we'll have to figure that we'll learn together. Is that a year away? Is that 15 months away? Probably not 6 months away. So any action risk around it. We've clobbered Delta for the moment. Is there going to be something else that comes up? So because of the volatility of the sector and the terrible current economic performance, we're not kind of deciding to make a big bet there. Great. Thanks very much, Scott. Thanks, Bob. Thanks for your presentation. Thank you. Thank you for joining. We're very grateful to all of you. Okay? I think we're done. Thank you, everybody. We appreciate your time. It's and it's still it's a tough time world. So everybody, take care. Be safe. Have a really good day.