Ladies and gentlemen, thank you for standing by and welcome to the Brandywine Realty Trust Second Quarter 2020 Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star and then zero. I would now like to hand the conference over to your speaker today, Mr. Jerry Sweeney, President and Chief Executive Officer. Sir, you may begin.
Crystal, thank you very much. Good morning, everyone, and thank you for participating in our second quarter 2020 earnings call. On today's call with me are George Johnstone, our Executive Vice President of Operations, Dan Palazzo, our Vice President and Chief Accounting Officer, and Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed during this call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurances that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release as well as our most recent annual and quarterly reports that we file with the SEC.
As we begin our prepared comments, first and foremost, all of us at Brandywine sincerely hope that you and yours continue to be safe, healthy, and as engaged as possible during this challenging time. This pandemic continues to disrupt all of our lives and has resulted in a new landscape for everyone, including every business. The duration of this crisis is increasingly unclear. On our April 23rd earnings call, we did expect a return to the workplace environment by mid-summer. Given the events of recent weeks, however, that timeline has been extended. We are continually assessing COVID-19's impact on every element of our business, and based on this detailed review, we remain confident in our ability to execute all components of our 2020 business plan.
Additional details on our approach to this crisis are outlined in our COVID-19 insert that is found on pages one to five of our supplemental package. During our prepared comments, as we always do, we'll review second quarter results and an update to our 2020 business plan. We'll also review the announced joint venture on our One and Two Commerce Square properties in the Central Business District of Philadelphia. Tom will summarize our financial outlook and update you on our strong liquidity position. After that, Dan, Tom, George, and I are certainly available to answer any of your questions. In looking at the second quarter, we continued to execute on every component of our 2020 business plan. For spec revenue, we are 99% complete with only 69,000 sq ft and $300,000 remaining to achieve our spec revenue target for the year.
We had good second quarter leasing activity, about 400,000 sq ft of both new and renewal activity, with strong rental rate mark-to-market of 19.4% on a GAAP basis and 10.3% on a cash basis. Same store numbers had been tracking in line with our business plan, the delayed opening of Philadelphia resulted in about a $2 million NOI decline from our parking operations for the balance of the year. Our parking operations are included in our same-store pool, and as such, this NOI decline has reduced our cash and GAAP ranges by about 100 basis points each. Office operations are progressing in accordance with our business plan. Our cash collection rates continue to be extremely good, and we have collected over 99% of our second quarter billings, and our July collection rate tracks very well also with about 98% collected as of yesterday.
Capital costs were at the low end of our targeted range. We have lowered our estimated full year 2020 capital ratio by 100 basis points down to 11%-12%, really reflecting the experience we're having with generating short-term extensions that require minimal capital outlays. I'll touch on that in a moment. Retention was only 37%, which was mainly driven by the known move-out of SHI in our Austin portfolio as they began occupying their newly owned building that we built for them at our Garza Ranch project. As noted previously, we have backfilled 80% of their space, which will commence later this year at a 19% cash mark-to-market. Look, while SHI was the primary driver in our occupancy decline, we had several other tenants' expirations. All of those move-outs were known and part of our plan.
Of the known move-outs, 183,000 or 51% has already been relet and will recommence in 2020. I should also note that about 70 basis points of our occupancy decline were due to removing Commerce Square from our same store pool. Most importantly, though, we do expect occupancy returning to our targeted range of 92%-93% by the end of this year. We did post FFO of $0.34, which is in line with consensus, and Tom will amplify that during his comments. In looking at our 2020 business plan. As we talked about on our last call, this crisis really embodies both danger and opportunity for our company. Our clear priority has been to assess all elements of risk and institute plans to effectively mitigate and anticipate any adverse impact.
We do remain focused forward on opportunities to enhance our business plan execution, whether that be by early lease renewals, margin-improving rebidding programs, or working with institutional partners to seek investments where we can create growth opportunities. Just a quick recap of our COVID-19 key components. We have maintained, in accordance with all local, state, and CDC guidelines, a doors open and lights on approach to our building operations. While it's a little bit difficult to quantify in some of our buildings, we estimate the current occupancy range of our buildings is around 5%-10% in CBD Philadelphia, up to about 20% in our D.C. assets. Austin is around 10%, with some pullback in that given the situation down there, and the Pennsylvania suburban operations seem to be around 15%.
The stability of our operating platform remains a top priority, with particular attention on rent collections and rent deferrals, all of which are amplified on page one of our supplemental package. One of our real top priorities has been a strategic outreach to all of our tenants. We are in extremely close touch with all of our tenants, understanding their concerns, listening to their transition plans, and providing help wherever we can so we fully understand their objectives. As such, as part of that program, while we've reached out to our entire tenant base, our particular focus has been on those tenants whose spaces roll in the next two years.
The results of those efforts are framed out on page three of our supplemental and have resulted in 73 active tenant discussions totaling about 950,000 sq ft that to date have resulted in 28 tenants totaling about 216,000 sq ft executing leases since March 15th. These leases have an average term of 24 months with a 4.2% cash mark to market and a 5% capital ratio. On the construction front, all of our markets are allowing construction activities, and we've not programmed any additional pullback in construction activity delays this year. On a positive front, we are beginning to see downward pressure in select circumstances on hard construction costs, as well as some soft costs as the overall forward construction pipeline continues to shrink. Our leasing pipeline stands at 1.5 million square feet, and we've actually had better than expected progression in that pipeline during the quarter.
Once again, our team's been in extensive touch with every prospect. The breakdown of the 1.5 million square feet is as follows. Deals progressing, but execution uncertain, economy of that uncertain, and we're targeting the next 90 day, about 24% or 354,000 sq ft. Deals progressing, but too early to tell when they would actually get executed, about 900,000 sq ft or over 60% of the pipeline. That's really the noticeable change. Since April's call, many more deals have advanced from the on-hold due to COVID-19, which right now comprise about 14% of that current pipeline into the deal progressing, but too early to call. Tenants are slowly beginning to refocus their attention on their office space requirements. On the capital front, we're really delighted to announce a joint venture on our One and Two Commerce Square buildings in Philadelphia.
The joint venture is with an extremely high-quality global institutional investor who's making their first office investment in Philadelphia, which from our perspective, further demonstrates the attractiveness of our Philadelphia market to institutional investors and really validates investors' perception on Brandywine's ability to create value. Our investor has requested that we do not disclose their name and certain terms of the agreement at this point in time. The general framework of the venture meets many of our key objectives. It's $115 million preferred equity investment, which represents 30% of the venture's capitalization at a total value of $600 million or $316 per square foot, which we believe is exceptionally strong pricing. The going-in cap rate is 5.1%. That cap rate improves based upon the rollover. We really view that as simply a data point due to the pending level of vacancy and the value creation opportunity.
Right now we're 97%. That does drop to 70% over the next 18 months. After providing for payments for transitional leases and closing costs, Brandywine received over $100 million of net proceeds, which, as Tom will amplify, added to our excellent liquidity position. The transaction is a 70/30 joint venture with shared control on decisions. While we can't close some of the specific terms, we can share that our partner's targeted rate of return on an all-in basis is in the very low double digits, so we view it as very effectively priced capital. It provides for the same level of returns on preferred equity, with a liquidation preference upon a capital event to our partner. In return for that preference, Brandywine receives a significant promote structure upon a capital event.
Both Brandywine and our partner have each committed $20 million of incremental capital to reposition the properties and retenant known vacancies. We will continue to manage and lease the property. Frankly, due to the leasing status and the price, the transaction will have minimal dilution, less than $0.01 a share on 2020 earnings, and will improve our net debt to EBITDA ratio by approximately between three and four turns between now and the end of the year. The transaction does reduce our forward rollover exposure by 1.8 million square feet in our wholly owned portfolio, and Brandywine will also recognize a gain of about $270 million on this transaction. Very important point to note in the structure. Given the state of the debt markets and the near-term rollover profile of this property, we closed the venture with the existing $221 million mortgage in place.
That's only a 37% LTV. As leasing progresses and the debt markets continue their recovery, we plan to refinance at a higher LTV, thereby affording both Brandywine and our partner another opportunity to generate liquidity. Speaking of liquidity, the company's in excellent shape, as outlined on page four of our supplemental package. We are projecting to have a $500 million line of credit availability year-end 2020. If we refinance rather than pay off an $80 million mortgage later this year, that liquidity increases to $580 million. We have only one $10 million mortgage that matures in 2021. We have no unsecured bond maturities until 2023. We anticipate generating $55 million of free cash flow after debt service and dividend payments for the second half of 2020, and our dividend remains extraordinarily well covered with a 56% FFO and 75% CAD payout ratio.
With those items addressed, let me just spend a few moments on our development set. First of all of our production assets, that's Garza and Four Points in Austin, 650 Park Avenue in King of Prussia, and 155 in Radnor, are all fully approved, fully documented, fully ready to go, subject to identifying pre-leasing. As we've noted previously, these are near-term completions that we can complete within four to six quarters, and their individual costs range between $40 million and $70 million. As you might expect, we didn't really make any significant advancement in our deal pipeline of almost 600,000 sq ft during the quarter, and frankly, don't really anticipate any significant advancement of some of these major discussions until the crisis begins to abate and there's more focus on return to the workplace. In looking at our existing development projects on 405 Colorado.
Look, this exciting addition to Austin Skyline remains on track for completion in the first quarter of 2021 at a very attractive 8.5% cash on cash yield. We have a pipeline of 125,000 sq ft, frankly, as I noted on the production assets, we don't expect any significant decision-making to occur until after the crisis begins to abate. On the Bulletin Building, delighted to report that's now been placed in service at 94% occupancy and 98% leased. The property will stabilize on schedule in the fourth quarter of 2020. 3000 Market Street is a 64,000 sq ft life science renovation that we undertook within Schuylkill Yards. As noted last quarter, we did sign a lease with one of our existing life science tenants, Spark Therapeutics, who has taken the entire building on a 12-year lease.
We expect that lease will commence in the third quarter of next year and deliver development yields slightly north of 9%. Quickly looking at Broadmoor and Schuylkill Yards. At Broadmoor, we continue fully advancing our development plans on Block A, which is 360,000 sq ft of office and 340 apartment units. We've gotten through final design and pricing, and we'll be in a position to have all that ready to go by the end of Q3 this year, subject to financing and pre-leasing. Schuylkill Yards. Within Schuylkill Yards, we really continue a very strong life science push. The overall master plan for Schuylkill Yards provides that at least 2.8 million square feet can be life science space. We really do view that we have a tremendous opportunity to establish a full ecosystem.
3000 Market and the Bulletin Building conversions I just mentioned to life science really evidences the first part of that pivot to create a life science hub. We're also well into the design, development, and marketing process for a 400,000 sq ft life science building with the goal of being able to start that by Q2 2021, assuming market conditions permit. Finally, we are converting several floors within our Cira Centre project to accommodate life science use. The aggregate square footage for that converted space is 56,000 sq ft, and we have a current pipeline of 137,000 sq ft for that space. Schuylkill Yards West, our residential office tower, is fully approved to go and ready, subject to finalizing our debt and equity structure. We have also modified the design of the office component to accommodate some level of life science use.
As I mentioned last quarter, and will mention again this quarter, the COVID-19 crisis has clearly had a big impact upon the timing of moving forward with this project and getting the financing in place. We continue to work with our preferred equity partner, but the crisis clearly slowed the pace of procuring and finalizing both that equity piece as well as the debt piece. We do remain optimistic that we'll get this across the finish line as soon as the situation returns to some level of normalcy. In general, we do continue to maintain a very active dialogue with a broad cross-section of institutional investors and private equity firms. In addition to our Commerce Square announcement, we continue to explore other asset-level joint ventures that will both improve our return on invested capital, continue to enhance our liquidity, and provide growth capital for our development pipeline.
These discussions are active and ongoing, and they certainly encompass both our Broadmoor and Schuylkill Yards projects. One final note that we noted in our press release is we would normally have provided 2021 earnings forecast during our third quarter earnings cycle. Based on the current uncertain business climate, we will not provide that 2020 guidance as part of our third quarter call, but we do plan on issuing guidance no later than our fourth quarter earnings cycle. Now I'll turn the mic over to Tom, who will provide an overview of our financial results.
Thank you, Jerry. Our second quarter net income totaled $3.9 million, or $0.02 per diluted share. FFO totaled $57.7 million, or $0.34 per diluted share. Some general observations regarding the second quarter results. Operating results were generally in line with our first quarter guidance, with a couple of items to highlight. On our portfolio operating income, we estimated $80 million in portfolio NOI. We were $1.1 million higher than that. While we did have parking being about $1 million below our anticipated reduced parking level, primarily due to the transit and monthly parking, we did have lower physical occupancy. Therefore, sequential operating expenses were lower. We experienced higher operating margins into Q2 2020, offsetting the lower parking income. Interest expense improved by $0.8 million, primarily due to lower interest rates than forecast.
Our second quarter fixed charge and interest coverage ratios were 3.4x and 3.7x respectively. Both metrics were similar to the second quarter of 2019. As expected, our second quarter annualized net debt EBITDA increased. The increase to 7.0x was primarily due to the lower anticipated sequential EBITDA outlined in the prior quarter. Adjusting for the Commerce Square transaction on a pro forma basis for the second quarter, that 7.0 would decrease to 6.7. Two reporting items to highlight for the second quarter. Cash collections. As reported, our overall collection rate for the second quarter was a very strong 99.6% based on actual quarterly billings. If we did include the second quarter deferred billings, our core portfolio collections rate would still have been a very strong 97%. Cash same store.
As outlined on page one of our supplemental, we have included $2.3 million of rent deferrals in our second quarter results. While not billed during the quarter, we feel this presentation is more accurately representing our current same store metrics with normalized ongoing forward results not inflated by the subsequent deferred cash receipts. Looking to third quarter guidance. Looking forward, we have portfolio operating income will total approximately $74 million and will be sequentially lower by $7.1 million. This decrease is primarily due to Commerce Square JV. The joint venture will result in deconsolidation of the property, and that will lower the NOI by $7.5 million. One good pickup on the other side is there's $1.2 million of incremental income for the Bulletin building, which has been placed into service in June, and the building is now 94% occupied.
FFO contribution from our unconsolidated joint ventures will total $6.5 million for the third quarter, which is up $4.1 million from the second quarter, and that's primarily due to Commerce Square joint venture, which is being deconsolidated effective with our earnings yesterday. For the full year 2020, the FFO contribution is estimated to be $19 million. G&A for the third quarter will total $7.3 million and will be sequentially $1 million lower than the second quarter. This is primarily due to lower compensation award amortization, and it's pretty consistent with prior years. Full year G&A expense will approximate $31 million. Interest expense will be $1.5 million sequentially compared to the second quarter, and will total $18 million for the third quarter, with 94.5% of our balance sheet debt being fixed rate at the end of the second quarter.
The reduction in interest expense is primarily due to the $100 million of net proceeds received from the Commerce Square joint venture, paying off our line of credit at Commerce Square mortgage debt, and then also the Commerce Square mortgage debt will now be deconsolidated. Capitalized interest will approximate $1 million for the third quarter, and full-year interest expense will approximate $76 million. We plan to extend our Two Logan mortgage beyond the August 1st maturity date, and we are looking to either pay that off or have it extended, and we'll be working on that during this quarter. Termination and other fee income. We anticipate terminations and other income totaling $2.2 million for the third quarter and $10.5 million for the year. Net management leasing and development fees will be $4 million and will approximate $10 million for the year.
We have no planned land sales and tax provisions of any significance. No anticipated ATM or additional share buyback activity. In our guidance for investments, we have only the one property in Radnor, Pennsylvania, that we will acquire for $20 million, and that is scheduled for redevelopment, so no generating of earnings of any kind in 2020. Looking at our capital plan, as we outlined, we have two development projects in our 2020 capital plan with no additional developments planned for the balance of the year. Based on that, our CAD range will remain at 71%-78%. Uses for this year will total $285 million, $67 million of development, $65 million of common dividends. Revenue creating will be $25 million, revenue maintained will be $27 million. Mortgage amortization of $1 million.
We are including the $80 million payoff of the mortgage at Two Logan and the acquisition of 250 King of Prussia Road. Sources for all those uses are cash flow from after interest payments, $115 million. Hundred million of net proceeds from Commerce Square joint venture. We're going to use the line of credit for $39 million, cash on hand of $21 million and land sales of $10 million. Based on the capital plan outlined, we're in excellent position on our line of credit and liquidity. We also project that our net debt will range between 6.3 and 6.5 . It will likely be at the low end of that range as a result of the Commerce Square joint venture, which has reduced our leverage in the second quarter.
In addition, our debt to GAV will approximate 38%, which is down from 43%, primarily, again, due to the joint venture improvement in that metric. In addition, we anticipate our fixed charge ratio will continue to approximate 3.7 on a debt service coverage and interest coverage will be 4.1. I now turn the call back over to Jerry.
Great, Tom. Thank you very much. With that wrapping up, we're delighted to open up the floor for questions. As we always do, we ask that in the interest of time, you limit yourself to one question and a follow-up. Thank you.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star followed by the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, to ask a question, please press star and then one now. Our first question comes from Steve Sakwa from Evercore ISI. Your line is open. Please check that your line is not on mute.
Oh, sorry. The Commerce Square JV, I know you provided a bunch of detail there. Obviously, the preferred structure is a little bit different than what we've seen on kind of straight-up joint ventures. I'm just kind of wondering how the discussions went when you went to bring this asset to market and sort of the pros and cons of doing it this way with maybe a bigger upside promote versus maybe protecting kind of the investor on their return. It seems like they wanted a little bit more downside protection.
Yeah. Hey, Steve. Great question. I think certainly the macro environment played into the overall structuring of the deal. I think from our perspective, Commerce Square is a wonderful trophy quality asset. We have a lot of churn, as everyone who's on this call knows, over the next several years. We knew that that would have a call on capital as well as an earnings impact over the next couple of years. We knew that was creating a bit of an overhang in terms of a catalyst for moving our stock price. We were certainly motivated to try and find a co-investment partner who would help us, number one, recognize attractive point of entry pricing.
Two, create an opportunity for us to, both through the creation of the venture as well as from the leverage aspect of it, create a capital capacity increase for us overall as a company. I think as the discussions progressed, our investor, who, again, when they announce, it'll be a well-recognizable and incredibly well-regarded name. Their focus, given the rollover in the portfolio coming up, was to have some level of liquidation preference that would provide them some downside protection. From our perspective, given the point of entry pricing we were able to achieve, the low cap rate going in, the amount of liquidity this would generate for our company, the capacity to de-lever, and then also provide some liquidity for other uses for the organization.
We thought that was a fair trade, particularly given our ability to create a significant promote structure that we think will deliver significant returns to our shareholder base once we're able to execute on re-leasing that space as we know that we would. I think when we looked at the overall cost of this equity being the very low double-digit, we thought that was very effectively priced compared to a number of other options that we see out in the marketplace.
Okay. Thanks for that color. I guess maybe just circling back, obviously there's a number of leasing issues that you need to deal with. You've been pretty transparent on laying those out. Can you maybe just walk through some of the kind of major timelines and, you've sort of talked about new leasing kind of being on hold until there's a lot more clarity on the pandemic. How much longer do you think, or how further out do these leasing assignments take and, just trying to sort of think about 2021 and sort of the risk to earnings at that point. If these things aren't going to get leased this year, sort of makes maybe the 2021 numbers a bit challenged.
Yeah, no. I think it's premature to preclude that because we're, number one, in such a dynamic climate, that no one's really sure exactly what the acceleration will be. I will share with you, I mean, a lot of our senior executive, my conversations with both tenants and with brokers who are repping those tenants, really do expect there'll be an acceleration in demand in a compressed period of time, because we're essentially looking at almost two quarters of definitive activity being delayed. That doesn't change the reality of the platform these companies face in terms of their office requirements. That's honestly, Steve, one of the reasons why we're being so active in talking to not only our tenants, but also really maintaining a very effective dialogue with our prospects, because those decision points will come.
They didn't come by July, but maybe they come by September, and I think we want to make sure that we've advanced all of those discussions to the point where we can execute fairly quickly. Look at that stat we gave on a percentage of deals that have moved from on hold from COVID-19 to basically in process, but timing uncertain. We view that as a very good harbinger for the office market in general, that a lot of tenants are really focused on, "Okay, I've got a lease coming up in 2021, or I've got this happening. What am I going to do?" We think that's a very positive sign, but I think when you bring that back to kind of the Brandywine landscape, George maybe can chime in here as well.
When we take a look at our larger leasing exposures, particularly now excluding Commerce Square, which will not be a wholly owned asset. SHI, as I mentioned, we've got about 80% done. Most that will be occupying. We had a major rollover in Conshohocken. That's for next year. That's been pretty much all put away. George, maybe fill in some of those other blanks.
Yeah. I think, at the Macquarie space, albeit now in a joint venture, 35% of their 150,000 sq ft rollover, we've re-let at favorable terms. We feel, again, high quality space. Northrop Grumman obviously is a large one in Dulles Corner, expiring 12/31/2020. Again, I think we're leaving all of our options in play there, whether that's renovating the building, potentially doing a joint venture or an outright sale of that building. We've started to see some level of touring down in that Northern Virginia market, in particular at that building, as some large requirements are now starting to at least surface, albeit their timing still to be somewhat undecided. The balance of the SHI space, which is about 35,000 sq ft, we've got good levels of pipeline there to kind of put the rest of that away.
The 80% we've already leased there commences in the fourth quarter, we get the occupancy pick up again when that rolls around. We've had, as Jerry alluded, a lot of conversations with our larger 2021 expirations and even some that are now on the 2022 horizon, who are now starting to think about, "What do I need to do?" Maybe it's just kick the can down the road 12- 24 months, and then some actually talking about doing something longer term.
Great. Thanks a lot.
Thank you, Steve.
Thank you. Our next question comes from Jamie Feldman from Bank of America. Your line is open.
Thank you. Good morning.
Hi, Jamie.
I guess, your $100 million of net proceeds from the JV, a big conversation's been raising capital for development at Schuylkill Yards and Broadmoor, bringing in JV partners. I mean, how do you think about that $100 million, and where does it get you in terms of your ability to finance more than maybe you previously expected on your own balance sheet for these developments? Can you expand the JV to raise more capital, and do you think we'll see more like this in the future to help?
I guess, Jamie, a couple of observations. One is, we felt as though raising liquidity through one of our existing assets that was really turning into a value creation opportunity, was a good thing for us to do right now. It helped us, again, create capacity and cash, and did so on a property where we had a fortunate very large embedded gain. It's a great price point for, I think, this marketplace in terms of the cap rate. We would certainly hope we have the ability to do some other things with this partner. As I kind of touched on from a broader standpoint at the end of the comments, we have a whole range of discussions underway with potential partners for Broadmoor, Schuylkill Yards. Certainly, the life science element of Schuylkill Yards has been a major drawing card for broadening our potential investor base in.
It's still an opportunity zone fund, while I think some of those deals, honestly, Jamie, have been a little slow in the gestation process. They're really beginning to re-ramp up as people are focusing on potentially a different tax climate over the next couple of years. I think we're very encouraged with the level of private equity institutional partnership potential we have out there. We thought that getting the Commerce Square transaction across the finish line, really to our shareholders would show that, number one, we've really further enhanced what we thought was a very strong liquidity position. As you know, in times like this, that having the stronger liquidity, the more opportunity set you have, whether that's for us increasing our ownership stake in some development projects, whether that be Schuylkill Yards or Broadmoor.
That has a lot of value when we're talking to some of these investors who are really focused on how committed this sponsor is economically to the project. We thought by having some additional liquidity optionality for us in these venture discussions, that would help us improve the overall economic returns we could craft because we had more liquidity to commit to those projects. It also does provide the additional liquidity for us to look at other growth opportunities, whether that's on deploying these production assets, which we have always focused on being wholly owned, or other options that may come our way in this type of market climate.
Okay, thank you. We appreciate the color on lease discussions over the next year or so. Two questions on that. Number one, as tenants have come back to you and confirmed their space needs, are you seeing a change in how they're using their space in terms of redesign, based on either more work from home or just a different build-out that they plan longer term? Has that led to either taking down more or less space? Secondly, you have this 13% likely to vacate about 100,000 sq ft. How does that compare to a normal year at this time?
Okay, great question. George, why don't we start off.
Sure.
Look, I think one of the interesting things we did, Jamie, a couple of months ago as part of our formal reach out and survey to tenants was asking them about their space. When I say space, their space configuration. Based on a lot of the feedback we've got, we've actually launched an initiative to provide free space planning services to any of our tenants who request. Now, certainly, look, some of our large tenants have their own infrastructure in place. In a company like ours where the average tenant size is at 8,000 sq ft or so, a lot of those tenants are looking for guidance.
I think general themes we're hearing are that tenants are looking for ways to create more distancing within their space, whether that is changing the profile of their workstations or increasing their six-by-six workstations to eight-by-10 and a higher profile, higher walls is a key consideration. We're certainly spending a lot of time working with tenants on creating demountable partitions that we can put up within their space. There's a clear bias, I think, on the part of a lot of our tenants to look at how they can reconfigure their space. It's too early, frankly, for us to tell whether that will generate net new space requirements. I think it will create situations where probably some of the common area space allocations in some of our tenants will be compressed and be redeployed to create workstations or private offices.
We would hope to have more visibility on that in the next 60-90 days, as we're now really at the early stages of getting some definitive feedback from our tenants.
Yeah. I think, Jamie, this is George, to amplify on some of that. The likely to vacates. Look, I think it was only eight tenants that clearly, as of today, said, "We're going to leave." Three of them consolidated into other leased space that had a longer lease life than what they had with Brandywine. Two of them were already subletting their space, so there was no hope of them renewing it. Our discussions now turn to the subtenant to try and negotiate something directly there. Two did identify that they are shifting to a work-from-home model.
One had already vacated, although still financially performing under the lease. I think, in terms of where we would be in terms of some of that forward visibility, absent COVID-19, we'd probably have more of a sample size than eight at this point. I think that's why 65 prospects and almost 600,000 sq ft are. It's just too early to make a commitment. They need to kind of understand, when am I bringing my people back? How am I bringing my people back, and what accommodations will they have to make for their people once they do come back from that work-from-home environment? So.
Okay. I appreciate the color. Thank you.
Thanks, Jamie.
Thank you. Our next question comes from Craig Mailman from KeyBanc Capital Markets. Your line is open.
Good morning. Jerry, I know you can't disclose all the details of the JV, when's the first kind of remeasurement period for the promote?
The remeasurement period for.
When would you guys be in the promote? When is the first opportunity to get a promoted interest? I know you kind of said once you get some leasing done, or is it solely on the sale of the asset?
It's primarily upon a sale or recapitalization of the assets, Craig.
Okay. If you guys put a new financing on there, at that point, you could be in the promote.
It's conceivable. Yeah. It's certainly one of the interesting bridges we built here, is that even though the debt markets have really come back, particularly for office assets with long-tenured leases, it's still not quite there yet in terms of proceeds on value-add transactions. With our partner, we made the decision to kind of close the venture with the existing debt in place, which I think as I touched on, is below a 40% loan to value. We've got new money capital committed by both Brandywine and our partner of $20 million each to reposition the asset. We would think that certainly given the pipeline even George had touched on, we should be in a good position to look at refinancing this in the next 12 -24 months.
Okay. I know we've talked a lot about Broadmoor and Schuylkill and maybe putting JV financing on those assets, but in the past, you've also talked a lot about Cira and some other kind of stabilized assets. Depending on when the debt market kind of settles out or where it settles out, are there talks about doing more of these type of JVs to finance the developments and maybe not give up as much as you might otherwise give up in pre-construction kind of joint ventures?
Yes. Look, I think as we've talked before, I think we're in an environment where every option's on the table. We have an excellent portfolio, a great management operating team, and leasing team. Just as we did something on an asset like Commerce Square, we're certainly looking at creating some other capital-raising opportunities out of other pieces of our portfolio. Similar to what we did with Rockpoint last year and Commerce this year. We're very mindful of not creating any real complications in terms of our balance sheet. We also recognize that in today's environment, some of that capital is really looking for great partnerships, good sponsorship, and the ability to grow. We are having some discussions with groups on creating growth vehicles for certain sub-markets and certain product types.
To the extent we were able to raise some additional equity for that, I think certainly as I mentioned to the other question, having that additional liquidity broadens our perspective on what we can and cannot do with some of these development transactions. That's certainly a big driving focus we have within the organization.
Just lastly, on the Cira conversion of life science, do you guys have the systems in place to convert easily, or is this going to be kind of a minor overhaul to HVAC and other kind of systems? Are there any other buildings you guys are looking to kind of benefit from the life science demand in Philly to kind of broaden your offerings?
Look, in Cira Centre, the infrastructure of that building can accommodate the life. The work to make that conversion is primarily upgrading the HVAC and some of the mechanical systems and maybe some additional power loads. Fundamentally, a fairly easy conversion. Not too dissimilar, quite frankly, Craig, on a 3000 Market. That was a building where if the infrastructure or superstructure of the building and its component parts are accommodative in terms of volume and capacity capability, it's something we can certainly do. We are looking at other buildings within our portfolio, particularly some assets in the suburban counties. In the Philadelphia suburban area, there's a growing presence by pharma and life science companies. There may be other opportunities for us to convert some of our existing assets to accommodate that use.
Okay. I think you said in the past, as you guys have looked at Schuylkill, some tenants don't want to mingle with life science. Is that an issue at all as you have some legacy kind of office tenants in these buildings? As you look to put a life science tenant in a predominantly kind of just traditional office setting, are there any issues with tenants mixing?
I think it's really a tenant-specific concern. I think when we were talking about this before, we were really engaged with one tenant who really was very focused on not being in an environment with life science or lab space. I think that's proven to be much more of an exception condition as opposed to a governing principle. In all of our dispersion of discussions with folks, whether it's life science tenants at Cira Centre or within Schuylkill Yards or some other locations, we've yet to really encounter any resistance to having their tenancy in kind of a mixed-use building that's traditional office, incubator office, or wet or dry lab office.
Okay, great. Thank you.
Thank you.
Thank you. Our next question comes from Manny Korchman from Citi. Your line is open.
Hey, good morning, everyone. Jerry, when we look at the Commerce JV, can you just give us some color on the timing of those conversations and maybe how they changed over time?
Sure. They really commenced, Manny, sometime in the March timeframe. As the macro climate changed, I think we both pivoted to reach a structure that worked for both of us.
Was there any part in those conversations to have the same partner look at Schuylkill? I see similar flavors, right? It's an asset in Philly. There's lease-up risk, if you will. There's development dollars to be put out, obviously at a different scale. Was Schuylkill part of the conversations with this partner?
Schuylkill was not really. Other than being part of conversations, it was not part of any negotiations.
Okay. Tom, a question for you. I guess Commerce now comes out of your same-store pool. Given the amount of vacancy that was going to come in that building, how much of an impact does that have on the same-store stat or same-store guidance that you guys have presented?
Well, I'll say with occupancy, we did talk about the occupancy number, that it did negatively impact us for the second quarter. It will not be an impact going forward, even though we're taking a hit initially because of the know move- out of Macquarie, which does happen at the end of July, that move-out would've been a negative impact to the same store. From our standpoint that was the case. When we looked for the occupancy. On the same store, we do expect that there will be a pickup more next year than this year on the same-store impact as opposed to this year. We moved our range on the same store by the 100 basis points. That is primarily due to the parking. Some of that parking is actually in Commerce Square.
It really didn't have a dramatic impact this year on the full year if we had put it in or out. That reduction in the same store was mainly due to the parking. Next year, though, we would anticipate as we roll out guidance that we're going to see an improvement on the same store, because those no move-outs will be out there. And that would include Reliance, which leaves at 12/31/ 2020. That space is going to go down. That's about 140,000 sq ft, starting 01/01/2021 . There definitely will be some tailwind to our same store for next year with that coming out.
I guess maybe I'm confused as to why Commerce, given the size of the building and the contribution to your overall NOI and the changing NOI situation there, why that wouldn't have provided some lift to just the guidance stat, just because the pool changed, not because anything happened with actual tenancy, but just the change in the pool. Wouldn't that have changed that guidance stat more?
Well, the guidance, I'll let George chime in. I think on the guidance, though, we're giving guidance on sort of not what the percentage change is from year-over-year. With this year, when we look at the weighted average occupancy of where Commerce was for 2020, if it was in all of 2020, and then where it will be next year, it was going to certainly be a damper if you took a look at how much contribution it would've been to the same store pool between 2020 and 2021. It was certainly going to go down with those no move-outs with Macquarie and Reliance. I don't know if that answers your question on that side. Maybe George can chime in, but that's how I think of it for 2021, how it's going to benefit.
Yeah, Commerce's same-store performance in 2020 was positive during the first half of the year because some of the leasing that we had done on vacant space in 2019, then that same-store characteristic kind of shifted to negative in the second half of the year with the no move-out of Macquarie. The two building kind of combination was somewhat of a flat same-store asset, 2020 versus 2019. As Tom alluded, it would've been a much more worse same-store 2021 versus 2020 with the additional move-out of Reliance and McCormick Taylor, even though some of the backfill will commence in 2021.
Okay. Thanks, guys.
Thank you.
Thank you. Our next question comes from Michael Lewis from SunTrust. Your line is open.
Great. Thank you. On Commerce Square, you explained the structure of the lease expiration schedule and how that impacts the cap rate and the pricing. At $315 per square feet, does this sale tell us anything about the value of the rest of your Philly CBD portfolio, or do you think this is kind of unique and doesn't give us that much information?
Yeah, look, I think the pricing at the $600 million and the $315 per square foot, I think given the near-term rollover in the property, I think says very good things about the stabilized returns that we're realizing off of our other Philadelphia-based assets. I think we're frankly very happy with the pricing. It's not too far off what we thought was very good pricing on the Mellon Bank Center deal at 1735, that was a completely stabilized asset with no rollover at all. That was $20 or $25 a square foot higher than ours. We thought it was very good pricing, quite frankly. Certainly, the cap rate, I thought, spoke very well of how quality institutions, and certainly our partner is a top-quality one, kind of viewed the growth potential within the city of Philadelphia.
I think from our perspective, the point of entry pricing where we're in that level with that kind of rollover exposure certainly from an investment-based standpoint, as I touched on, we're generating a $270 million gain or $140 a foot. Even on a gross basis based on acquisition and all capital put in, it's $100 a square foot gain. We thought that was very good, Michael. We thought it was a pop. We think it's a great read-through, to tell you the truth, on the strength of the market, because the point of entry pricing is solid. More importantly, if you take a look at the climate we're in today, to have the focus going forward of generating a great value creating opportunity we thought was very strong.
Yeah. I think everybody's wondering about value, it's good to have a data point. My second question is about leasing, kind of a short term and long term look. In the short term, I think last time we spoke, Dechert and Blank Rome have been close to signing renewals. I'm wondering if that's still the case. Kind of broader, George mentioned two tenants that are moving to work from home. Are you seeing signals in the portfolio that this is really a sea change moment in your business where there may be a wave of this coming? Any signals of that?
A couple parts to that question. We'll take George and I'll take it separately. I think on Blank Rome and Dechert, we continue to have great dialogue. No real change on that other than the passage of time and summer vacation schedules for folks. I think we continue being very positive on how those discussions will wind up. Michael, on your broader question, I honestly think it's too early to tell. I think we have in the supplemental package kind of a pie chart that talks about how tenants view the impact of the virus on their business. Most folks were fairly positive or neutral. We're hearing generally from all of our tenants that they can't wait to get back to the workplace.
While working from home seems to be an adequate way of triaging business maintenance, the level of productivity that comes from working in a dynamic, collaborative environment, it far exceeds what I think people are realizing right now. It's kind of incredibly incremental progress that companies are making right now. I think certainly as I talk to a lot of our major tenants, they can't wait to get back in. I think that the phenomenon of work from home had already been there, but it was at a lower pace. I think it's opened the eyes of a lot of companies that they can probably provide more flexibility to their workforce and not have the productivity decline that they might have feared before. They can maintain a level of productivity by having work from home being part of their kind of standard personnel protocols.
I think as we're talking to tenants today, obviously the macro situation's of concern, but then I think issues of mass transportation and schools seem to be the most often discussed topics that are governing when tenants view themselves returning to the workplace en masse. In the Philadelphia metropolitan area, we've got about 10% of the regional workforce uses mass transportation. We're certainly not as impacted as in New York City or San Francisco or some other major metro hubs. That reintroduction of mass transit's going to be, I think, a governor of when people return to the workplace. Generally, and George, you're talking to a lot of tenants as well. The ones I talk to are very anxious to get back to work. They've been very positive on all the steps that Brandywine has taken to ensure a safe return to the workplace.
Even as I mentioned earlier with one of their questions on being very proactive from a space planning standpoint. We mean the extent we can reconfigure space quickly, I think that brings people back even faster. George.
Yeah, I think to that point, I think a lot of tenants are really just thinking about how they can reposition their existing space, turning radiuses within workstation configurations. The context of the two tenants out of the 673 that we conducted outreach to, two said that they were kind of ready to make that permanent shift. I do think it's extremely early in the cycle, and I'm not sure that those two are necessarily a barometer for the rest.
Got it. Thank you.
Thank you. Our next question comes from Tayo Okusanya from Mizuho. Your line is open.
Hi. Yes, good morning. Just following up on that line of questioning. The leases signed, again, average duration of 24 months, again, which is pretty short. Could you just talk a little bit about that decision process of signing these short leases? What exactly your tenants are kind of saying to you, in regards to the short duration of the leases on a near-term basis?
Yeah. Great question. I think, the general tone of those conversations and the fact that they averaged 24 months, some simply were 12 months. Some were able to do kind of 36, 48. For most of them, it was, they've got something to think about relatively quickly because they've got a first quarter 2021 expiration and not knowing necessarily when they will be fully returning and understand everything about their own business. This was just a means to kind of move that decision down the line, and, as a result, we ended up with a lot of them just averaging that 24-month duration. It softens the expiration curve for us, gives them a little bit more time to understand how they ultimately need to renew on a long-term basis.
Well said.
I think thematically, it's not that much different than a lot of companies like ours experienced during the great financial crisis, where you had a number of tenants who were keeping an eye on kind of the macro uncertainty, who just kind of did shorter term extensions. For us, it's a win-win. It preserves our revenue stream with a little more certainty. As George touched on it smooths out our rollover exposure. Frankly, it gives our leasing teams and our property management teams another 12 to 24 to 36 months to keep working with that tenant to make sure they understand that Brandywine's their workplace solution. I don't think, Tayo, looking at the size of those tenants and kind of the composition, I don't think there's any read-through on that from the standpoint that tenants are only willing to do short-term extension.
I think these were tenancies that had within 12 or 18 month expiration. Given the pace of their business, they just didn't want to deal with thinking about what they want to do on their office space. We actually thought it was a positive sign that many tenants renewed, even for a short period of time, but kept all their square footage in place.
Right.
I think looking at it through the other window, the fact that none of these tenants were coming back saying, "Hey, I'll renew, but I'm in 10, I only want 8,000 sq ft." We thought that was a good harbinger of the thought process that we know a lot of our tenants will go through as they start to think about their long-term space planning requirements.
Great. Just one quick follow-up. The cap rate on Commerce Square, the 5.1 cap, that is last 12 months NOI before the move-out. Did I hear that correctly?
Yeah. That's based on where it is now, right?
That's correct.
Okay, great. Thank you.
Thank you.
Thank you. Our next question comes from Bill Crow from Raymond James. Your line is open.
Thanks. Good morning. Hey, Jerry.
Hey, Bill.
I appreciate the statistic on the 10% mass transit use in Philadelphia. What is that rate for your CBD tenants?
Yeah, the rate for our CBD tenants is around, I might be off here by a little bit, but it's somewhere around 50%.
50? five, zero?
Yeah. Five, zero. Yeah.
Okay, great. Have you all seen a pickup in towards the suburban assets from current CBD tenants that might be looking for either to move out to the burbs or maybe a satellite office closer to homes?
I've read a lot about that trend, Bill, and honestly, whether it's in Philly or D.C. or Austin, we haven't seen that. There's only one example that I could give you where a tenant who's a CBD tenant, did a short-term sublease for several thousand square feet in the suburbs just to get people back into an office environment because their workflow really requires people to work together. They were meeting some resistance from their tenant base about using mass transit coming downtown. An interesting anecdote data point is when we did survey our tenants, after health and safety issues, which were obviously paramount, the next most asked question we got from tenants
Could we provide short-term parking for them as they open up their offices downtown? That was one of the reasons why we were thinking that even with the anticipated opening of the city kind of in the early part of the summer, those parking numbers we had last quarter were good because the feedback we were getting from tenants was, "Hey, if they come back, they're going to want to park, drive in versus take the train." With the delay of opening up the city, I think that kind of created the result we had. Look, I do think there'll be a transition here. Our regional rail authority is doing a great job trying to get out a message of it's safe to return. Activity is picking up within the mass transit system.
Until people get a lot more comfortable with health issues, I think it's going to be a slower adoption rate than you might expect for people to take mass transit. We're fortunate where we have a lot of parking capacity. To the extent that our tenants need to use parking, we can do that. We run, as you know, several shuttle services within the city, so we can actually bring people into kind of University City to park and shuttle them downtown if we need to. We're looking at a number of different options to create mobility for our tenants other than just traditional mass transit to help them think through how they get their workforce back to our CBD locations.
Great. If I could just ask one more, Jerry. We've seen a lot of headlines of, especially in some of the Pacific Northwest markets, San Francisco, New York, Chicago, the governments may be out of necessity, having to become less business-friendly, heavier taxation things. I know you're buddies with the folks down in City Hall, just give us an assessment of where Philadelphia is on that spectrum.
Look, I think every city is facing some significant near-term financial issues, and I think almost every city is hoping that some level of federal and potentially state support could augment that. I think Philadelphia in particular, given our tax structure, where only about 20% of revenues come in from real estate taxes, the balance in from business and wage taxes is particularly susceptible to revenue variability. If you think about the folks who are traditionally working downtown, who live out in the suburbs, they pay wage tax for the time they work in the city. To the extent they are not in the city and they're working from home, they're not paying wage tax. I think cities like Philadelphia have kind of a, I'll call it an inverted tax structure compared to most cities, will probably face some more short-term budget issues.
Philadelphia did have a rainy day fund going into the crisis. They did pass a stop-gap budget that did include raising marginally, at least short-term, two elements of taxation. I think that's a bigger question every city will face in terms of how quickly the revenue base comes back and how they want to deal with that from a structural standpoint, particularly given some of the social equity and economic equity issues that are arising on a nationwide basis. We're staying as close touch as we can with city leadership. Certainly very much focused on articulating a point of view that the best pathway to economic growth is a job, and ensuring that Philadelphia has a reasonable platform for job creation. That's a much broader discussion of which I'm not even sure what all the issues are, Bill. We're staying close touch with it.
Philadelphia had been on a very good economic growth plan with job creation, employment growth, and we're certainly hoping that once we get past these hurdles presented by the virus, that we can get back on that.
Thanks for the time today, Jerry. Appreciate it.
Thank you.
Thank you. Our next question comes from Jamie Feldman from Bank of America. Your line is open.
Great. Just a quick follow-up. Can you give us your views on just the expenses of any kind of changes to buildings that tenants may require coming out of this pandemic? I know in the answer to my prior question, you talked about moving space, moving desks farther away, partitions. I assume that's not very expensive, but is there anything maybe that you found since last quarter when we talked about this that is a meaningful change? As you think about your new building designs, anything coming out that seems like it'll be a standard inclusion in a new building that wasn't necessarily there before?
Yeah, great question, Jamie. Hey, on the operating front, look, fortunately, we've always had a real big focus in our company on MEP and all the mechanical systems. We were able to really upgrade our filtration systems with really very little cost. I know, George, if you have the numbers, it's pennies per square foot. We're able to do things with our stairwells and other kind of common areas to facilitate better pedestrian flow. We actually really haven't experienced significant structural cost increases to make our buildings safe and healthy. We are looking at other situations where we can use UV technology to even improve the filtration systems. Are there robotic cleaning techniques we can use that it may have some cost up front, but less cost going forward.
We have a great operating team that works up through George that's looking at a whole range of different options that maybe he can amplify in a second. On the design standpoint, we have gone back and taken a look at all of our development projects, and identified where we think we should be thinking. I'll give you a good example, Jamie. In a couple of our buildings, we're really taking a hard look at the size and speed of elevators. People are concerned about getting in elevators. There's easy fixes we can have there by dramatically increasing airflow in those elevators. There's also opportunities to either double stack or increase the size of cabs, or increase the speed, and using destination technology to create environments where you really do have a touchless environment.
For example, at FMC Tower, our elevator systems were always destination. We've reprogrammed them that you just wave your security card to get into the building as a tenant. You don't touch anything. You wave your security card in front of the screen, it tells you what elevator to go to, you get off, and you're up. We think that's the way of the future. We're kind of moving away from revolving doors in some of our new buildings to sliding doors. Again, there's more of a touchless environment. Looking at reconfiguration of some of the lobbies. Certainly, moving to more of a WELL Building Standard versus just LEED, and looking at opportunities where we can kind of create indoor outdoor spaces that provide much more fresh air. I think that's a big topic, Jamie, within just the architectural community as well.
I know the Council on Tall Buildings is looking at a number of different iterations to kind of think about the workplace and the apartment project of a post-COVID world.
Jamie, I think just in terms of the cost, given the size of the building, the sophistication of the systems, we were looking at anywhere from half a penny a square foot to kind of $0.03 a square foot, depending, again, on how much additional filtration changes we need to make, and the like. Again, a relatively inexpensive spend, offset by some other savings that we were able to generate, while density and occupancy within the buildings was lighter during the second quarter.
Okay, thanks. As you think about the new design, what does that do to construction costs? Is it a meaningful change?
Not a meaningful change. I think one of the things we are seeing, I alluded to in my comments, Jamie, was that a lot of forward pipeline, construction pipeline seems to be dissipating. Look, you take a look at Philadelphia, 41% of our employment base is in eds and meds. There have been large building campaign programs by a lot of the anchor institutions. Certainly with what's going on in the academic and healthcare world, we see some of that slowing down. That creates a bit of a window of opportunity for us to get marginally better pricing. Where we've priced up some of these changes, they've not been so significant in scope that they've created any material upward pressure on our hard or soft costs.
Okay. All right. Thank you.
Thank you, Jamie.
Thank you. Our next question comes from Daniel Ismail from Green Street Advisors. Your line is open.
Great. Thank you. Based on your mark-to- market results and guidance for the rest of the year, it doesn't appear there's been a material change in the rental rate environment, or your expectations for change in the rental rate environment. Is that accurate? Also, can you touch on the concession environment as well?
That is accurate. I know there's a tremendous amount of commentary out there that the office rental rate market will decline. I know there was an increase in overall national vacancy in the second quarter, as you would expect. Dan, we have not seen that at a ground level at all. It doesn't mean it won't happen. I think certainly there's a prospect for more sublease space over the next couple of years. Again, that's a prospect. We haven't seen that. I think, if you think even on this early renewal program, I think we were pretty happy that we weren't really getting companies coming back and saying, "Hey, I'll renew for another two years, but reduce my rent by 10%." The leases we have in process, and frankly, the leasing activity we've gotten done has had really no COVID price concessions at all at this point.
George, maybe fill in the blanks.
I think in Austin in particular, continue to see great levels of rent growth. Again, nothing yet that seems to be COVID impacted. Most of our CBD Philadelphia rent's still growing at a good pace. A lot of the activity this quarter was along the lines of renewal. We haven't really even seen the impact, if there's going to be a significant one on kind of tenant improvement as it relates to new space. Again, I think that'll really come down ultimately to existing conditions and how much of that ultimately needs to be potentially demoed and then kind of built from new, depending on whether it's going to be a heavy office environment or more of an open air workstation environment.
Yes. I think there's certainly the possibility of some of those things happening, so I don't want to say that we're not focused on those. We just haven't seen any direct evidence. We haven't had discussions with brokers who have indicated that they're going to be looking along those lines. I do think that, and this would apply not just to Brandywine, but I think that a number of our public company peers that have really good asset bases. I do think there's going to be a continued focus on the part of tenants to really upgrade their office stock. Even the points that George was talking about in terms of our ability to upgrade our MEP systems.
That has value, I think there's certainly a lot of office buildings in this country that don't have the same capacity that some of the higher quality owners have within their existing portfolio. We do expect to see and are beginning to see some of the signs of tenants who are kind of in B-quality buildings looking to move up the quality curve because they need to deal with their employee base that's looking for a comfort from them that they're operating in a safe and secure and healthy work environment. We'll add all those things to the list of TBDs over the next couple of quarters.
Makes sense. Thanks, everyone.
Great. Thank you very much, Dan.
Thank you. That does conclude our question and answer session for today's conference. I'd now like to turn the conference back over to Jerry Sweeney for any closing remarks.
Great. Thank you very much. Thank you all for joining our call. I'm sorry we ran a little bit longer, but I know there were a lot of really good questions. We look forward to giving you an update on our business plan on our third quarter call. In the meantime, please stay safe, healthy, and as engaged as you possibly can. Thank you very much.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.