Q1 2020 Earnings Call
[music].
Welcome to Washington, Real estate investment trusts first quarter earnings conference call.
As a reminder, today's call is being recorded.
Before turning the call the work so the company's President and Chief Executive Officer Mr.
Any Hopkins Vice President Investor Relations, whereby some introductory information any please go ahead.
Thank you and good morning, everyone before we begin please note the forward looking statements made during this discussion.
Statements involve known and unknown risks and uncertainties, including those related to the effects of the ongoing cobot 19 pandemic that may cause actual results could differ materially we undertake no duty to update them an actual events unfold.
First certain of these red 65.
Please turn to the GAAP and non-GAAP financial measures disgusting call are available and our most recent earnings press releases financial supplement which were distributed yesterday and can be found any investor relations page of our website.
Just sitting in today's call will be Paul Mcdermott, President and Chief Executive Officer <unk>.
<unk> Executive Vice President and Chief Financial Officer parents fielder Senior Vice President and General Counsel True Hammond, Vice President Chief Accounting Officer, and Treasurer, and Grant Montgomery Vice President head of research.
Now I'd like to turn call over to Paul.
Thank you Amy and good morning, everyone.
Thanks for joining us on our first quarter earnings call.
The past few months have certainly been about.
And while we posted excellent first quarter results.
<unk> everyone's focus today, including ours.
Tom the coping banking pandemic.
Before discussing our near and longer term outlook and the operational financial impacts we are experiencing.
But first like to discuss our priorities as we manage through this unfortunate at unprecedented situation.
As a company wash rate has always prioritize and will remain committed to the safety of our residents tenants employees and each of their families.
We continue to closely monitor recommendations from health care authorities and the worst from our local governments as we are following their requirements and being proactive.
In one we have not had government direction to do so.
In the early days of this global crisis, we created the task force to evaluate developments and deliver recommendations designed to ensure the security of our workforce or tenants and our residents.
As a result, we acted in advance of jurisdictional orders to move our business to remote work capabilities.
The on safety, we're focused on business continuity.
Four years ago, we embarked on a plan to develop the tools and resources to allow us to perform nearly all of our corporate functions from remote location.
Our critical assessment critique and enhancement of those capabilities has positioned us well for continuing to perform during these challenging times.
We are very competent and the companys ability to maintain this productivity.
I'm extremely proud of how the wash REIT team has reacted to these circumstances.
Everyone has shown incredible commitment and dedication.
Especially our central property staff, who is extraordinary efforts at our properties have shown during this outbreak.
We started to see the first signs on the impact of the virus on our tenets ability to pay rent about three weeks ago, and we're still in the midst of assessing the full economic effect that this crisis they have.
Therefore, while we will share will be observed thus far and how we plan to continue to monitor and operate as the situation further unfolds.
We're obviously not in a position to predict the ongoing magnitude or protracted impact of this global pandemic.
However, what we do know and what we plan to focus the majority of this call discussing is what we're doing operationally to support and protect our stakeholders as we manage through this and how the company as well position to come out the other side of this.
These events absolutely confirmed the importance of de risking and we believe that the actions we took in the last five years to mitigate risk at the critical.
We sold 75% of our retail and a wide last year.
Including our riskiest retail assets.
And allocated that capital to grow our multifamily business.
Additionally, we entered the current year with plenty of liquidity and as of today have no major capital requirements for the balance of the year and access to additional liquidity if needed.
Following the sale of John Marshall to $57 million on April 21st.
Which was a critical execution as we continue to de risk our portfolio.
We have further improved our liquidity position.
As a landlord we're focused on supporting residents and tenants during these difficult times.
So our multifamily residents thus far we have aligned our policies to the recommendations from the National multi housing council and confirming our processes to the requirements of all applicable jurisdictions.
We are temporarily freezing rent increases lease renewals waving late phase.
One thing ambitions and offering a payment plan to residents who have been adversely financially impacted by cope with 19.
And the commercial sector.
Price primarily of office tenants were similarly, confirming our policies and processes as necessary to meet jurisdictional requirements.
Anticipating that April would be a challenging month for some of our commercial tenants. We quickly appointed a second task force to evaluate and address the needs of these tenants.
The task force, what the support of our I teaching developed a proprietary application system to solicit information from these tenants to evaluate their situation on a case by case basis.
We will be working through these applications and credit evaluation through the end of the month and if appropriate.
Sorry on terms.
For those tenants your demonstrate true financial hardship from the crisis, we are evaluating their credit their participation in government backstop programs and appropriately working together to create the best long term outcomes for those tenants and our shareholders.
We're also assessing federal stimulus programs.
Quoting the cares act as well as regional resources and we are monitoring their belief that they are able to provide for tenants in our residents as well as our own business.
We have appointed a third task force dedicated to understanding the Marriott programs available and we are also sharing resources to help tenants accept the information about these programs.
We believe that many of our tenants are pursuing near term assistance through national and regional resources designed to support businesses. During this pandemic.
TJ wash, where he has not received any federal aid as clarified details on many of the cares Act provisions on Federal reserve stimulus packages are still being worked out.
Therefore, we believe that it's too early in the process to determine whether or not the company will directly benefit from any of the federal programs.
We're also evaluating regional resourcing to determine whether those may offer some interim relief.
Now I'd like to put into perspective, how we're positioned heading into this period of economic uncertainty.
We reported very good first quarter results, even though the shutdown occurred in March and we entered the second quarter with good occupancy and are well positioned balance sheet.
Although the crisis began to impact our tenants some residents toward the end of March.
Quickly Institute, an operational expense saving initiatives that reduce cost significantly and our first quarter results were inline with our exploration prior to the cobot 19 outbreak.
<unk> expense saving initiatives have carried over into the second quarter.
Well in the near term these economic conditions have slowed growth.
We believe our path to growth is still there.
Well, we are spending or full scale renovation programs until we can resume achieving rent increased premiums. The renovation pipeline is still in place to provide up to five years a future growth.
In office it was crucial that we executed so much leasing and 2019.
And while in some cases are 2020 lease commencements are likely to be Wade.
They will ultimately provide growth.
Once in place.
Although physical tours have stopped for now we continue to progress leases and have signed new leases in April.
Our tenant improvement build outs for the near term lease Commencements are expected to continue uninterrupted.
In some cases the tenant improvements are controlled by the tenants and a subset of those projects are not moving quite as fast. However, we are seeing project completions.
For example, we have a tenant at Silverline Center recently completed their project work and we'll be ready to move in one's government restrictions are lifted.
In the meantime, our buildings are functioning with alternating skeleton crews, we are realizing savings on operating and utility costs.
We delivered phase one of the trove than the first quarter and while breakeven occupancy will likely be pushed the end of twentytwenty. It should provide another layer of growth.
As it continues to lease up and then stabilize going forward.
The supply chain for phase two has been minimally impacted and we are moving its expected delivery too early in the fourth quarter of this year.
Given the uncertainty in the current environment, we do not plan to break ground on the herbicide development project and 2020.
We believe that the strength of our residential assets will be further confirmed as we have invested in strong sub markets with solid long term economic drivers.
Our capital allocation has always been research based in our affordability gap investment strategy, let us to allocate capital into submarkets with wider than average gaps between class a class B ranch.
With opportunity to create value through the execution of renovation programs.
The sub markets provide a cushion during periods of flatbreads or even modest rent declines.
Within the Washington region class a units are priced at a 23% premium class B units.
However, class a effective market rents and wash reach submarkets are priced at a higher premium.
Up to 30%.
Providing flexibility to continue renovation.
Select projects, that's part of our water capital allocation program.
The decision to continue with our renovation program will be determined to on a property by property basis with particular attention paid to localize demand.
In place property performance and occupancy metrics.
With right gaps of $400 are more between class, saying class B units.
Got a $250 discount to a product class b remains a good value proposition in a market with insufficient affordable housing for mid market renters.
In addition to our position of strange heading into this crisis and embedded path to growth there will be realized as conditions improve.
Our focus on the DC Metro region as a positive one in times like these.
A recent Yardi analysis ranked the top 50 U.S. Metro's in terms of industries that are expected to see the most job losses and ranked Washington, D.C. as the least expose due to our diversified economy driven in large part by the federal government.
The Washington, D.C. region has experienced less volatility and the faster recovery than pure markets. During recent downturns as a result of counter cyclical demand drivers, which remain the dominant tenant base as of today, including government defense and intelligence agency and contractors effect.
Really countering losses from other sectors.
As part of it would review of the Corona virus impact on our performance.
We analyzed the employer industry composition of the residents of our multifamily portfolio based on available data.
And the results support the view that our DC Metro focus is a relative strengths.
In terms of pandemic induced economic contraction on a national scale.
Leisure and hospitality retail and personal maintenance and enhanced services have been.
Most directly impacted thus far according to George Mason University with a near total shutdown of these industries by mid March.
In terms of regional job losses.
We have seen that retail sales and hospitality and leisure have been most impacted by mandated business closures have reduced demand.
These sectors represent approximately 19% of the regions workers and 8% of the regions gross regional product.
Resonance in our multifamily portfolio had a lower exposure for these industry than the Washington region overall with less than 13% employed in these industries.
Approximately 6% of our class a residents are employed in these directly impacted industries and nearly 13% of our class B residents.
Likewise, our multifamily resident employer industry concentration shows less exposure in the industry that have been impacted the most by immediate job losses.
Approximately 61% of our employed president working the professional and business services government education and finance industries.
With data from one monthly payment cycle Corona Priors began impacting employment and then columns for which approximately $600000 was not collected in Brent some industries have outperformed and share of residence with non payment while others have underperformed.
For example, professional and business services, while comprising 24% of our employed renter base only accounts for 14% of our residents with late payment.
Likewise government in which 17% of our employed residents work comprises just 9% of our residents with late payments.
Given the immediate and dramatic pullback in leisure and hospitality.
We have seen that despite comprising just 7% of our renters.
Residents working in this industry comprise nearly 16% of our late payment residents.
We will continue to monitor patterns closely and our dressing residents' ability to pay through our deferred rental payment program, which I will discuss in further detail later in this call.
We also analyzed the industry composition for office tenants in order to monitor the more adverse segments of the portfolio.
We evaluated our office portfolio and our findings indicate that the professional information services health care.
Finance and insurance legal services in public administration sectors comprised approximately 75% of our total office base rent.
Folio consists largely of strong credit tenants and based on what we're currently seeing the segment should prove to be relatively stable.
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Our Cove it monitoring focus will be the most heavily concentrated on tenants and were in retail trade accommodations, and foodservices and nonprofit organizations, which represent less than 20% of office base rent.
While 91% of our office tenants paid rent in April we plan to continue to monitor tenants for ongoing Brent payments as we evaluate rent deferral requests.
Mr rent payments, and we will adjust our watchlist categories appropriately as the situation continues to evolve.
While it's clear that every industry and metro area will be impacted by the decline in economic activity.
Like everyone else it is difficult to predict the impact on our residents and tenants and what <unk>.
Would not be prudent to do so, but we're confident in the resiliency of our assets and the strategy that we're implementing to shape. The best long term outcomes for our tenants residents and shareholders.
And with that.
I would like to turn the call over to Steve to cover our liquidity position, our first quarter financial performance and to further discuss how we are addressing and assessing the impact of covert 19.
Thank you Paul good morning, everyone.
We entered 2020 with a strong balance sheet, which has proven to be even more important than usual as of March 30, Onest 2020, our net debt to EBITDA ratio was six times at the lower end of our targeted range and we have no secured debt following the pay off our final mortgage in January.
In early April we prepaid handful without penalty our 250 million dollar 4.95% bonds that were scheduled to mature in October 2020.
As of today, we have approximately $370 million of available liquidity.
Consisting of the remaining capacity under the company's 700 million dollar revolving credit facility in cash on hand.
Moreover, we are engaged with members of our bank group to add even further liquidity through an additional term loan of up to $150 million that we'll have a term of one year with extension rights for a second here.
We have received commitments from the administrative agent for $50 million and the other banks are targeting to commit later this week.
Assuming the term loan of $150 million, our liquidity is expected to increase to approximately $520 million.
With no significant capital commitments for the balance of the year and only $150 million of debt maturing in 2021.
[noise] further as I will detail, we're reducing our capital expenditure plans as well.
We currently expect to remain well within our bank and bond covenants and to have access to the remaining line of credit if needed.
Based on our current projections, we have reduced 2020 assume capital expenditures for the balance of the year by approximately $40 million.
Included in this amount is almost $30 million of lower assume capital expenditures and $11 million less in development spending as we are as we no longer expect to break ground on the Riverside development. This year.
Our capital expenditure reductions include non essential building improvements tenant improvements in leasing cost for speculative leasing.
As well as lower multifamily renovation capex.
Our future multifamily renovation pipeline remains intact, although as Paul said, we're suspending the program until after the market disruptions subsides.
We plan to allocate the renovation capital of the later date when unit turnover accelerates and we can resume achieving rent increased premiums.
Well, we have strong liquidity and no major capital requirements, we will continue to proactively assess all forms of additional liquidity available.
We have a completely unencumbered balance sheet with no secured debt and the ability to access the agency debt market using a portion of our unencumbered more multifamily portfolio.
Based on our exploration the market is open to us at attractive rates if needed. Although we do not project needing additional capital at this time.
We did not expect delays for the remaining construction of phase one of trove or current build outs for office leases that are expected to commence later this year.
As we navigate through the second half of the year, we will continue to explore opportunities to further reduce non essential capex spending and opportunities to further bolster our liquidity, especially if the economic disruption lingers further.
Looking forward, we feel confident in our ability to execute on our short term goals of providing payment flexibility to residents and tenants in need.
While retaining the operational flexibility necessary to execute on our long term goals.
As Paul mentioned.
We had a strong first quarter and I will discuss those results before addressing the impact that we are beginning to experience.
And assess related to covert Nite TV.
For the first quarter, we reported core AFFO of 37 cents per diluted share inline with our expectations.
On a year over year basis core AFFO per share declined by seven cents as expected.
Due to our 2019 commercial asset sales, partially offset by our multifamily acquisitions or the assembly portfolio and Cascade, which were all part of our capital allocation de risking execution.
Overall same store NOI declined 1.6% year over year on a GAAP basis, and 1.1% on a cash basis due to a same store office into why decline of 6.6% on a GAAP basis, and 6.1% on a cash basis as well as an increase in bad debt at a retail properties.
The same store office in a wide decline was driven by couple of known move outs and lower Cam reimbursements due to timing differences compared to the prior year.
Our multifamily same store NOI increased by strong 6.8% year over year above our expectations driven by stronger than expected rental rate growth.
So repairs and maintenance expenses.
Oh or real estate taxes.
The company achieved 2.3% a blended year over year lease rate growth comprised of 4.8% of renewal rate growth, partially offset by 0.9% of new lease rate declines for the quarter.
New lease rates grew 1.5% of March and our same store multifamily portfolio is currently over 95% occupied and fleets.
Same store NOI decreased at our residual retail centers, which we report as other by 4.5% on a GAAP basis, and 3.2% on a cash basis, driven primarily by higher write offs for bad debt, which included amounts due from tenants impacted by cobot 19 deemed not likely collectible.
And lower recoveries compared to the prior year period.
Excluding those impacts other into I would have increased 1.3% year over year on a GAAP basis, and 2.8% on a cash basis, the combined write offs.
Impact of covert 19 was approximately $78000 and the cash impact was approximately $16000.
Turning to leasing activity for the quarter, we signed approximately 46000 square feet of New office leases and 43000 square feet of office renewals in the first quarter.
We achieved solid rental rate increases of 8.8% on a GAAP basis, and 5.2% of the cash basis for new leases.
And 6.7% on a GAAP basis, and 0.7% on a cash basis for renewals.
Driven by solid rent increases spread across class, a and class B office assets, both in the district in Northern Virginia.
We signed approximately 15000 square feet of new retail leases and 19000 square feet of retail renewals in the first quarter.
And generate a rental rate increases up 18.7% on a GAAP basis, and 8.2% on a cash basis for new leases.
And a 9.3% on a GAAP basis increase and a 1.5% decline on a cash basis for renewals.
Well rents were substantially paid for March before government regulations were imposed and social distancing efforts were implemented we began to experience lower tenant used to their space when non essential businesses were ordered to shut down in March but.
At that time, we began operational cost savings initiatives, which reduced operating costs in march by approximately $450000, including a 40% reduction in utility consumption at a commercial properties.
And lower tenant event and amenity expenses as well other expense reductions.
We also began to experience lower parking fee income during March.
And with that I'd like to transition to how we are addressing in evaluating the impact of social distancing caused by the cobot 19 global pandemic.
Obviously these are unprecedented times and while we began to experience operational and some financial impacts in March.
The first significant impact for us began in April.
We are only three weeks into the month.
Not yet have the financial results for April and have substantially collected rents due through April.
Furthermore, it is nearly impossible to predict the ultimate degree of impact or longevity of the economic and pandemic disruptions and given the uncertainty and limited credit loss experience to date.
It would not be prudent to provide further financial guidance for this reason.
It is difficult to forecast with a reasonable degree of accuracy the impact of covert 19, when our near term financial performance. However, we recognize the importance of communicating with shareholders in providing transparency.
Especially in situations like we are now.
So I will do my best to explain where we stand today, what we're experiencing now we are managing it and how we plan to assess those impacts going forward.
First in our residential properties 90, 594% of our residents paid their April rent, including almost 97% of our same store residents that tracks well relative to national averages reported at 89% for the National multifamily housing Council.
We also entered April at a stable occupancy level above 95%.
As Paul said, we're not increasing rents on renewals for the second quarter, which is expected to lower our NOI growth as we normally would be achieving significant rental increases during the strong second quarter leasing season.
Especially since we have such strong lease rate growth in March.
As a result, we expect a marked increase and renewal retention.
This higher renewal retention will help maintain occupancy and preserve our seasonal rent role during these uncertain times.
Until market rents occupancy and retention stabilizes, we're suspending our value add renovation programs.
We will be closely monitoring each program and we'll be prepared to allocate capital to our residential value add Turk programs when turnover reserve resumes renewals begin to decline and we have a higher degree of confidence that the marketplace will provide adequate returns.
We believe we're preserving opportunities for future growth in multiple ways.
First for our same store apartments, the flexibility offered to our communities will help drive higher resident retention and will not negatively impact seasonal portfolio exploration management strategies, thereby preserving our ability to achieve strong recovery growth.
For non same store properties, we see an opportunity to potentially cut in half. The typical two to three year transition to correct that lease expiration schedule inherited that acquisition.
Additionally, while we were unable to predict when the economy will resume we believe that operating expense saving initiatives will substantially offset the reduction to multifamily rental income due to lower new and renewal lease great growth lease rate growth in 2020.
That said.
We would expect fee income to decrease.
We're committed to supporting our residents and are providing flexible payment options to defer a portion of Brett over the next several months for those who have been financially impacted.
Due to the slowdown in new leasing activity, our property managers have the capacity to execute our deferred payment options effectively which requires evaluating enrollment request monthly on an individual basis, well forming relationships and working closely with residents.
Our overarching goal is to help residents were experiencing temporary financial hardship to remain in their homes.
Which we believed to be though the best long term outcome for both our residents and our shareholders.
Clearly forecasting bad debt is challenging at this time. However, we are using many tools, including monitoring what industries. Our residents working in the likelihood that they could be impacted using data from the history of pass economic downturns and closely monitoring our collection efforts and tenant responses.
We have been closely monitoring credit card payments as a percentage of rent and I'm not experienced an increase.
Our leasing and management teams have been in communication with residents who have not people ready to make sure. They are aware of the deferred payment option.
Some residents have indicated that they plan to pay April rent with no further deferral, we will continue to track this.
Uncollected rent for the month of April is approximately $600000.
It may not represent what we experienced a mayor beyond but we do expect to workout payment plans with many tenants to collect deferred rents over the next few months.
We will continue to monitor this impact.
In terms of leasing activity.
As we manage slower leasing volumes, our focus has shifted to maximizing resident retention and addressing their emerging needs.
Well guided tours for prospective residents of stop due to stay in place regulations from governments.
We are utilizing our virtual touring capabilities to provide virtual tours and online leasing.
Applications normally would be about 1% to 1.5% of our unit count each week.
So far in April we are running about 60 basis points of units and entirely through virtual leasing tours, which are available at all of our apartments.
Although traffic is down those electing to tour virtually are motivated doubling our typical closing rate.
While we reasonably expect retention to increase.
There will probably be negative impacts on occupancy tied to the decrease in traffic.
We expect occupancy to remain at 95% through April and likely dipped to between 90, 494.5% by August.
Overall, we had previously expected significant multifamily growth in 2020.
That growth is clearly going to be lower.
We have a five year pipeline of strong value add renovations once conditions improve.
And it is appropriate to resume such growth.
We also still expected future NOI growth from the true, which I will cover next.
As Paul mentioned.
We still believe the trove will deliver phase two of the project. This year. Although the completion is now expected to occur in the fourth quarter instead of the third quarter.
Our lease up had just begun and social distancing measures grounds physical Turing to a halt.
However, we have been successfully converting virtual tours in the signed leases well virtual touring is having success, we expect lease up to take longer and are likely to incurred loss of between 600 $700000 in 2020 with growth expected in 2021, assuming we reach breakeven occupancy near you.
Your year end.
Which we believe to be a reasonable expectation based on where we stand today.
Now moving on the commercial all of our office assets are located in the district in Northern Virginia, where non essential businesses have been shut down.
We collected 91% of office rents for April thus far.
The remaining outstanding rents, we expect that approximately $300000 is related to tenants, who are capable of pay but or perhaps trying to be opportunistic.
For whom we expect to collect this rent.
While we plan to evaluate the remaining outstanding amount for potential deferral.
As Paul explained.
We are accepting applications from tenants requesting rent deferral who've been financially impacted.
Our evaluating the financials and access to stimulus relief among other factors.
We do not plan to defer rent for those who are capable of pay and who are simply being opportunistic.
It is very difficult for us to protect bad debt with so little data, thus far and not knowing the future extent or duration of disruption.
However, our assessment of this early stage of processing of the tenants who have requested rent deferral.
Well, who have not pay for rent will be they are likely to be able to meet their future rent obligations.
For the remainder.
We have reserve most of their balances to normal accounting practices. We will continue to evaluate this as we gain more information.
We also know that parking revenue is down as people are not driving to their offices. Our current projection is that parking revenue will decline by $2 million that estimate could change the shutdown as more protect protracted than we've assumed.
Once the economy returns.
We could experienced an increase in parking income from higher utilization as tenants transportation preferences shift away from public transportation.
Also.
Fortunately much more leasing was done in 2019 2020 was expected to be the year of lease Commencements, which is expected to build into 2021.
And have included some additional leasing that had been progressing nicely.
We don't know the duration or continued severity of this disruption and while some deals are still being executed tour volume has slowed.
Well most buildouts control bass are progressing we now believe lease commencements will be pushed out further in many cases.
Our previous 2020 guidance included approximately 1.3% of revenue speculative lease commencements.
That leasing was projected for some of our most highly quality space.
Because of that.
We believe that leasing as a matter when not if it will commence.
Well, we cannot presently estimate.
The overall impact of lease commencements or payment delays only 20 days into experience an impact on collections from this disruption.
We will continue to monitor both closely.
As we experienced in March.
We expect to continue to find cost savings to partially offset the lower income and likely bad debt for lower collections through initiatives to save and utilities cleaning and other operating expenses.
Finally for our retail assets, which represent less than 7% of our total NOI. We are evaluating approximately $500000 of April rent payments not received for potential rent deferral.
As we said.
These are very early days in an unprecedented global pandemic economic crisis.
And we cannot yet provide 2020 guidance as predictions for when the spread of the virus will peak.
How long social distancing measures will remain intact.
And what the ultimate told when the economy will be.
Continue to vary.
Therefore, we have withdrawn or previous guidance and currently are not playing to update it.
With that said, we have shed light on what we could experience based on where we stand today and the actions that we're taking to create the best long term outcomes for our stakeholders.
And with that I.
Ill now turn the call back over to Paul.
Thanks, Steve.
In conclusion, while we are operating in an environment that continues to rapidly change.
We are confident in our ability to effectively manage through this period of uncertainty.
Our 29 changed strategic capital allocation and strong liquidity position will help us to stay position for long term growth as we navigate through this economic shutdown.
Although we like everyone will need to absorb the near term impact we still have well located residential units and the path of growth when the economy reasons.
And a 3000 unit five year renovation pipeline that will provide gross.
Although the lease up of the true will now be more protracted.
The troops still provide substantial growth once it begins to stabilize with much of the investment already made.
Furthermore, we have office leases to provide year over year growth and 2021 and beyond once those leases commence.
All in all we remain confident in our ability to manage through this while remaining in a position to expand and grow our business post cobot 19.
Now we would like to open the call to answer your questions.
Thank you at this time when we conducted a question answer session. If you like next question. Please press star one.
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Let me first start you if you will let you move your question in the queue for participants using speaker equipment. It may be necessary to pick up your handset before person start keys. Our first question comes on line of Blaine Heck with Wells Fargo PC with your question.
Great. Thanks, Good morning, guys. So Paul when you consider the disruption that we're seeing on the investment sales side of the market. You know how are you thinking about your overall plan of shifting from office and retail into multifamily.
You have any sense of the price dislocation that you know maybe you're expecting to see in each one of those sectors and ultimately you know how does all of this effect the timing of that shift towards multifamily.
Worldwide.
Just looking back on the last 30 to 45 days, obviously, a world has changed in the transaction market is virtually stopped I mean I.
I think I was really yesterday the failure rate in transactions in March.
Six times of normal average and every multifamily deal that we were looking at.
In the first quarter that probably had bids do you know in March or early April pulled.
So I also outside of.
Jan two I also had a lot of.
Office transactions.
Executed so I think it's tough without effect pattern.
Do you know really.
Talk about movement in cap rates and.
What the what the inventories is going to look like.
I think a lot of people that we love the owners and operators that we've talked too.
Our waiting and pulled back assets that were going to come to the market. We're taking a harder look at the recent refinance market, which is also.
Obviously been highly impacted I think the lenders or are becoming much more selective bunch of rifai deal that don't get refinery I think the ones that are going to be on sale and.
Those are obviously ones that we're going to take a look at Adam in terms of going I don't see wide cap rate swings in the multifamily space and that probably say that you know we're not in it but I'd say, that's probably the industrial space also I do think office you know because people are definitely going to be looking at certainty as cash flow and duration.
And that's going to be much more important and in terms of retail.
I think that's that's just going to be a bit more protracted and I don't anticipate that we're going to see a lot of retail trades.
Coming up in the and 2020.
Got it. Thanks, that's that's helpful commentary.
Steve last quarter, you guys that said you expected to be into high eighties on your payout ratio. During 2020, you know I know you guys aren't giving guidance, but can you give us any sort of updated expectations on that metric and and whether any of the impact of the corona virus can tend to have any implications as far as the dividend.
Is concerned.
Thanks, Wayne I Hope you and all of years are going okay. Good to hear from yet so we really have given.
A lot of our guidance, but we couldn't summing up or three parts of it I might maybe at the end of answering this I'll recap that because we threw a lot of people.
So we haven't given a full AFFO guidance. So by application, we haven't given fad guidance I think there's multiple aspects to that but maybe I should just kind of reiterate and summarize a sort of the broader.
View on our on our guidance.
And and the lack of it what we have commented on and then I'll try to I'll try to get back to you know just that if that's okay. Because that we really didn't throw a lot of people today that sort of unusual call. So you know weve actually not suffered what I would say isn't material impact the date through April and have actually.
Not that I think this is likely things were to resume right now we would not.
We've also given a lot of visibility shared many parts of the potential impact.
What we think is not prudent to do.
Okay as the projected duration the impact of the school global pin debit shutdown.
No one in our view no one really knows and we've done a lot of research how long and how impactful it will be.
But maybe if I recap a few things that we have brought clarity to it might help.
As you model since we haven't answered the full question.
And let's just you know we've been we've been transparent about a lot of things and realistic about things that were maxing, but we're not ready to project.
I think I misspoke, unlevered quarter remarks, but we've actually collect that 95% of our multifamily rents overall 90 cents per month of April.
And 97% of the same store multifamily through April.
And for context, that's within 1% of last April and 1% of March.
So we really haven't had much disruption there.
I also understand just a little while goes told we expect to collect another 2% of our office rents for April today, So I could update that our expectation is that we'll be at 93% of our office.
I think we've shared.
So relative impact of multifamily that we're suspending rent increases, but we are operating expense savings. We net net think those will generally offset each other but that clearly cut said to the growth. There you know in that aspect of it.
So really what's been most difficult I think we'd given many of the parts would have given before but what's most difficult to quantify.
Although we are certainly modifying modeling many scenarios ourselves is who will not pay that's actually paid so far and how long will it take before people resumed touring and are ready the commenced leases in the commercial space.
And when we think about that there's another aspect and that is okay. We're evaluating some other commercial it's only $700000 so far.
In off in the office portfolio $500000 in the residual portfolio.
Our GAAP income deferrals, and and we right now, but leave a lot of that will qualify and that probably won't affect our numbers that much if they do.
But other impacts or <unk> that we haven't been able to quantified as well as were timing really matters as much as anything.
For example, and maybe this will help it's probably a little bit more quantification that I gave in the in the prepared remarks, but we sign leases that have not commenced as of now that represent another approximately 3% of occupancy.
So we don't know when people can go back to their offices and we can get those reasons. So so weird.
That we aren't able to feel confident we could have an opinion on that so.
Further we signed our wise for commercial leasing representing another approximately 3% of occupancy.
That's all good than we were feeling great about it until we were disrupted.
We also said Oh, we have previously expected to have revenue from speculative leasing representing about 1.3% of what was in our previous revenue guidance. So that represents about $4 million, we're not sure how much of that will be impacted because touring basically stopped.
70% of that was in our very best assets like Watergate 600, Arlington Tower, Silverline, and our space plus and in the space plus leasing.
Has so far been able to move and commence up with minimal downtime. We just don't know when that resume so we've been transparent about that so.
But for those things I think we'd given a lot I.
I think the other thing affecting.
You know the dividend question to get back to your specific question is.
The ability to pay well we have.
A lot of liquidity, you know, where we think we'll have our commitments tomorrow.
But we will we have to see you know on the rest of that liquidity and close fairly soon.
That would be 520 million.
I can't give you the fad number because I haven't given to the total number but we're not worried about our dividend, we're not thinking about our dividend right now and Ah. We certainly have the ability to pay it. We think most that liquidity is gonna be attack, even if the ended the year with only 150 million, there and and quite frankly, we're poised and ready to go to the.
Capital markets and term out that at a time of are choosing we don't have to it because we have liquidity, but we'd love to talk about that and that will just increase our liquidity, partly because we pay down our line. The next year's maturities that they do that so ability pay is fine or we don't know what the near term earnings are I think dividend decisions or a long term.
Capital allocation decision and we still believe that all of our many of our growth.
Drivers are intact and kept intact and we've always felt good about the growth that we that we got coming.
So we think a right now where the dividends just not in question for a company.
Alright, great appreciate the additional detail there Steve a very helpful. Last on for me you know can you just talk about the drivers of the operating expense savings you guys are are seeing and expecting to continue to see on the multifamily side and maybe quantify.
The amount of of savings, we should expect to see.
We haven't quantified them on a run rate basis.
I'd say.
We experience.
Maybe three three weeks of reduced utilization of our commercial space. It started the drop off fast in March and that month, we say $450000. Our operating team has obviously been an action longer than that in our own models, we have substantial savings, but that really again to tell you how much.
That would really depends on how well how long we think that the the a thing is protracted to go so we haven't get we haven't quantified that.
But.
It's it's.
I would say, we think that we found additional opportunities beyond what we experienced in March I think that's as far as we can go right now.
Okay, great. Thanks, guys.
[laughter].
Our next question comes on line of Michael Lewis with Suntrust Robinson Humphrey. Please proceed with your question.
Yeah. Thank you.
Did you guys share concessions that you're offering on new leasing I know you said the you know obviously the volume is down but the success rate is up is there anything you know anything you're doing to entice.
Those people that are looking for new apartment.
And Michael.
For the units that we are doing I believe we're offering in months luxury are the ones that are just coming on line.
Right now that's true.
We're offering amongst three per year term.
Okay on the development lease up that would probably be pretty typical but even on the even on the existing operating portfolio month free.
No. We haven't we haven't yet given detail on you know I think thats going to vary asset by asset and Submarket by Submarket.
Okay understood and then on that the office portfolio.
You know how do you think about you know obviously, there's but we know all about the having new supply in class A's and the and the rent spread there given what's going on now I mean, how do you think do you think the positioning a class b buildings.
It's still relatively better than the ace or do you or maybe that do you think that the tenants in the bees, maybe or a little bit more at risk. When you think about credit losses in rent to permit and that sort of thing.
Well I think the people that are our into be states. You know are there because there are economically conscious I mean, I look at our RBC space downtown right now and you know are.
Amount of tenants that asthma.
I haven't seen any any tremendous differentiation between the amount of tenants and I didn't pay branch in the versus any.
And I think that right now you know price points sensitivity I think more people like our average.
Great and our de space, Michael was 50, 150, or so and I think a lot more people want to take 50 150, they want to pay 71, just yet.
So the credit credit profile is.
A good one that's that's a good question, but again I think that there is intended to tenant we have some very high profile credit tenant the R&D space.
And again I think that.
People are going to be more more sensitive to price at a time like them.
And before we came into this fantastic so.
Sure that makes sense and then last for me.
Not to kind of believer, though the guidance point I think Steve Steve If we could answer but the decision to withdraw the guidance it certainly understandable.
But I think if if anybody was gonna do was going to keep the guidance I thought you know you guys are very data trim and research.
You're obviously and thoughtful about this you've got plans on a great detail a lot of the underlying items <unk>. What is the biggest unknown here credit losses. I know you mentioned some of the yellow lies with the convert and that's sort of thing and then I guess the real question for me is what do you need to see the thing to no reason.
Fabulous died.
I'll take a crack at it Michael I Ah I think we I.
I think we really laid out it a bit and I think.
We followed up our reputation of being transparent, but why do we pull it.
I do think that's the three things that I said I think when I was talking to Blaine I think <unk> number one is credit loss, so I'll get specifically to your point there.
And then number two is timing really matters on lease commencements because this year was about lease commencement for us we've got 3% of leases that we had an original schedule that would commence that were already sign and 3% available wise that we had built into our expectations before and we had another 4 million of spec leasing in some really good assets.
Space plus that we were we were getting tremendous traction with in many cases and all of a sudden nobody's physically out there anymore and it's really hard for us, but this year to project when that happens.
I think credit losses of really is a really tough thing to forecast. When you don't have any okay. I mean, we are we statistically not really experienced material credit loss and we do have tremendous resorts were running models and data about who might default, but now we're guessing.
Who might not be able to pay the rent that's actually paying the rent so far.
And we're going to monitor closely and and I you know, we actually came into preparing for this call hoping that we'd have some conviction to go ahead and update guidance, but you know quite frankly, our view is if we guide it needs to be based on facts and data and not just an opinion and we have no actual material credit loss data to project that will.
And I think we're trying to be responsible when we take that approach.
But if you if you stop this today.
We don't look bad Okay, we haven't had a material. It. It's just we're supposed to guess something that's unprecedented you know how far it'll go on now if we start to experience that add our data is there we're going to be more confident about projecting our losses. If we can get a better sense, a when people resume and what reentry looks like I think we'll get a.
A better sense for that something tells us that it's going to take a little while to know how fast people were going to be comfortable Reentering society, and logistically resuming office space for us to get more confident about what dates and times to assume those leases will actually commence.
But I think that's a lot of it right there.
That helps and if we get it I think we if we get it I think we want to put it out there.
But the other I'll just say one other thing about credit loss and accounting. Okay are you not only have to guess who's not going to pay you. That's been paying you. Okay. But then you've got a logo looking okay. It really matters, who that is because they could have straight line balances that are multiple times the amount of rent, they're not paying it and I'd like to know.
So you know and guidance range to guests and in potentially take a hit for that and be able to guide to it we're being thoughtful about that and trying to be not mislead our investors by thinking that we we know something that we have no facts.
So that all makes a lot of her thanks.
Our next question comes on line, a bill Crow with Raymond James. Please proceed with your question.
Hey, good morning, I appreciate the time.
Paul I guess two questions number one what are you hearing about the potential impact to new supply.
Multifamily an office in your market given this current environment and a number two would be.
Well the discussions on your office portfolio has been the the success of the will of locations near mass Transit I'm, just wondering how you're thinking about.
That going forward I think you in the prepared remarks, you talked about that there's an opportunity to potentially capture more parking revenue with people choose not to use mass transit et cetera.
I guess those were the two questions.
Okay, Bill well look I'm wondering at times, just in terms of new supply a lot of the Sean was already in the water office in DC already.
And so buildings that are our emotion.
And again supply chain disruption side I think those building those are going to continue to deliver and that will be that will be what we all deal was in terms of you know new absorption, but and the same with multifamily made I take US for example, we're finishing out the truth.
Expediently minimal supply disruption.
We will be delevering the balance of it at the back ended this year in terms of new development and new supply coming on after that I'm already seeing lpds walking from commitments.
And I'm, even you know not anecdotally in Washington, DC proper per se, but I've also heard some developers like Jamie My season, I'm out because you know just kicking that kicking the leasing strategy out taking them out of the promote.
So I do think there's going to be disruption, obviously, a new supply I don't think you'll see a lot of people announcing multifamily was clearly, though a hot ticket, Washington, Oh, I do see a lot of a new multifamily starts being announced for the balance of this year.
In terms of mass transit I think it's a good observation, but I would probably bifurcate that to urban versus suburban.
There are people when you're in dense locations like downtown Washington, I think people.
Our really trying to use.
The public transportation, our Metro system is a good one on a relative basis with other.
Other gateway city markets.
I think people are going to gradually either way back in bill.
I think I think the bigger bigger question you know recognizing that our world changed is how people are going to use office and and what is the one to the fundamental shifts taking place.
I think I told you in my remarks, we we put together a re entry task force there now, but I would break it down and to kind of two two views. One is you know your commitment obviously to the based only on the modifications that need to take place there and then the tenant space once you get into that space itself.
On our based buildings you know we are really focusing on kind of the access points reception been elevators parking I'm looking at a lot of trust was technology.
Age you know the H.B.C. systems, obviously, we're looking looking over but looking at overall building wellness, but I think thing that just transporting building transportation to the Boeing but getting into the building I mean, it's going to take time to get into buildings, there will be cues for elevators, Oh, I think yeah cleaning.
The way, we look at cleaning a lot of apps lot of that's all all the touch points a lot of that's going to change and then progress that you're getting into the tenant space itself. You know you and I could work every day, it's it's where we live profession way I think you're going to have a lot of people evaluating two columns a city office, a prioritization who's a sensible who.
In work from home.
Do you have read teams blue teams and our tenants were already having dialogues with our tenants and they are.
Being pretty thoughtful, but giving putting forward or their own social distancing programs inside your space, which involves less density.
Variable traffic patterns, so one silver lining coming out of the that's definitely seeing a lot of increased communication between the the tenant and landlord and you know I mean, you look at the last 30 days with your TV, probably talking more people. Virtually then you you might see a on a daily basis, but you know I think.
Transportation and doing operations some of it may be doing the same things differently and a lot of it may doing different things, which is still evolving I look at you know the crishman's JLL CVR either the world.
They're publishing thoughts thoughtful re entry publications real time.
And we think that you know you don't be it'll be some kind of some combination of all the above but I don't think public transportation is going away and if anything I think it'll probably Uh huh.
Get get some much needed monetary infusions to make it Oh, you know to make it a more accommodating a ride for sure tenants are resins and or employees.
That's helpful. So if he had to.
Through a guess out there three to five years from now.
Paul do you think we have more square footage per employee or less sure or it stays neutral because some are working oh, but others are or more spread out your thought on where we go.
I think that you know it comes down to there there is no one one size fits all bill.
I think people are going to take social just something very seriously.
Because I think to you know what part of part of the experience of working in the office number one you want to be comfortable coming in but number two is not the social interaction in the camaraderie and I'm not trying to be pollyanna, but having been locked up and helps for six weeks I mean I'm really.
I like my colleagues I'm, just tyrosine them on a screen right.
But I do think people will I do think people are going to be very sensitive to their space and I don't think that right. Now people are going to talk about dramatically increasing your footprint, they're probably going to talk about how do you.
Use your existing footprint.
More efficiently and better.
And you know.
The tenants that we've talked here over the last three to four weeks of all talked about.
No one is called and said Hey, we really want to expand but they spent a tremendous amount of time asking about a thoughtful reconfiguration. So I don't have an opinion and whether it's going to be more or less I think it really depends where we are economically.
Great. Thanks appreciate it.
Thank you Bill.
Our next question comes a lot of Joel Dempsey with Stifel. Please proceed with your question.
Hi, guys. Good morning, Paul Good morning. Thank you. Thanks for taking my question.
Just wanted to start off with sort of a modeling question interest expense came in at about 10.8 million. This quarter I know your prepaid the $250 million note that have increased the line, which looking at the stop has a lower cost of debt is it safe to assume that the interest expense will will trend down for the rest of the year.
Yeah, I think we're giving enough disclosure that without us, giving a specific guidance point. There. If you work off of what we told you won we prepaid.
The debt so that was 4.95% bonds that are no longer there as of April 2nd.
Two we've.
Got amounts on the line.
Three I think we've said that we expect another term loan that we disclosed in terms of that are at LIBOR, plus one and a half with a LIBOR floor of 50 basis points.
So we haven't told you what we're going to do but if you wanted to model what it would be safe to assume we draw that and pay down our line and just increase our liquidity on our line.
And then the thing that we the thing we can't tell Ya because we don't know yet is but we are ready any day that it makes sense and is good for our shareholders. The go to term out that we're poised to go we we don't have to go at a time, that's disadvantage that would be a disadvantage to our shareholders, but if we.
Do we would we would take advantage of that whether it's the bond market or other things that we keep exploring every day and a and then when we do that we'll be paying down a line that and probably some.
Some of next year as a $150 million that would mature. So that's that's all the right now that's the potential for us to move in the in the in the comments that we've made [laughter].
Perfect sounds good and then just a follow up on lanes earlier question and I know you mentioned the office sales market kind of coming quite into a hawk looking forward, though with the sale of John Marshall and the trove stabilizing when this is all over hopefully sooner rather than later could this be an opportunity for will Washington.
<unk> to become a net acquirer and possibly.
Take advantage of market disruptions that you're seeing in the market.
Apps, absolutely I mean look our original guidance for this year was really.
As you know we had only had one transaction opportunity highlighting that was the sale Ajay into I think we will always be opportunistic like like we've tried to do in the last several years.
I do think that there are going to be opportunities because I think that there are a re fi deals where there may be elevated equity requirement that wont pencil out.
And there's going to be a shortfall on proceeds and I think that those are precisely the assets that may turn back to the market and yes, I just I mean first and foremost and at times. Like this is you know and I've had my Chief Financial Officer beat it ends in the protect the balance sheet and that's that's first and fourth.
Most and be able to you know.
Cover our ratios and maintain our liquidity, but absolutely we will try to be as opportunistic as we possibly can and I think we know our market. We noticed submarkets that we want to be in.
And if we see some type of distressed activity you know I can assure you will be taking a look at it.
Perfect Perfect and then just last one from me I'll take you provide the multifamily in off collections numbers I know those are top of mind for a lot of people <unk> and I know, it's early but sort of generally speaking you know what are some high level thoughts you have around may collections and what though.
Might look like.
Just given that the pandemic really started in earnest in late March do you think may maybe more effective put about collection standpoint that than April was.
Sure the Steve <unk> I'm going to start it but I I mean actually kick it over to grant or head of research just to tell Ya since we've been collecting all along what our advanced research is telling us about that the profile of the people in our portfolio, which I think is more indicative than what we've experienced because keep in mind.
We are like within 1% of what we experienced a year ago, we're within 1% of what we experience in March when when no. One was acting like there was a disruption.
And the other thing is one of the things that we monitor is what percentage of people pay you know by there their credit cards and that hasn't gone up which is all good side. So no I mean, when you're basically at normal and people have been locked in their homes for what would then be.
Six to eight weeks.
You have to assume it's going to get worse I think we do a lotta research there are lot of different things out there about V shape and U shape recoveries or you know we have we have research perspective on all in terms of how either one of those could affect us, but we think we're okay either way, but so again, we now are gonna have to project using.
Analysis, and and grant can talk about that and maybe that the composition of our portfolio up because they pay the so far so grant maybe you could add a little color to that.
Sure happy to when we've been looking at this week as Steve alluded to we've been really looking and digging into the share of industries that are residents work in and those that we have overexposure under exposure and so first off over to say that to find out to live.
Listeners that I'm in the same way that Washington is different than the country. When we've dug into our data our properties are different than even Washington for example, so for the the more immediately expose industries of leisure and hospitality and retail those comprise nationally about 20.1%.
Of all jobs in the Washington region, that's around 19%.
And digging into our class D portfolio, we just have 13% exposure to those immediate industries doesn't mean that other industries won't be more widely impacted but those.
The first ones that we watched and in terms of the data that has come in thus far for late payment in April there have been a group of industries that have outperformed and those that underperformed I think we pointed out his job to some extent I'm in the call.
You know one that really shows up well I guess talked a lot about as Washington to exposure to government unemployment and we have a an outsized share of that in our portfolio and those.
Residents are paying so for example, there's 17% of our household that are employed but there are only 9% of our uncollected share. So that's an example up as well as professional business services.
Like 24% of our employee of our employed residents and it's only about 14% of the uncollected share. So we've had some some stronger sectors like that and we have outsized exposure to those which we think.
Going forward, we'll continue to track that they seem to be holding up early and then we have less exposure to some of the ones that have done I'm more immediately impacted but that's the that's the framework that we're really looking at [laughter] continue to monitor as we got him or data like and we've been saying, we really only have one dataset, but as we move towards <unk> will be obtaining that that's moving forward.
Okay that helps.
No that that's perfect. Thank thank you guys. So much for the color I really appreciate they feel right.
You too.
Our next question comes on line of Chris Lucas with capital One Securities. Please proceed with your question.
Hi, Good morning, guys. So that's not where afternoon now sorry, Oh I guess, just one of the bigger picture question, just as it relates to sort of rent accommodations, when you're thinking about that rent deferral approach as it is it a strictly going to be a payback or time or you're looking at least.
<unk> expenses as a possible accommodation as well.
Chris I I'm going to ask me, but the last part faded out could you just repeat it so that I'm clear what yeah, yeah no. So so so when when you're dealing with rent accommodations are you looking primarily at.
A payback over a period of 12, a time 12 18 months whatever or are you. Looking also asked essentially doing lease extensions <unk> as a sort of trade off for that for that deferral.
Sounds good I think we really have a three approaches that were and again. This is early days, we've built a proprietary system of application and review and were engaged I'm talking about commercial tenants right here.
And so we're engaged in that process with a with the ones are representing the numbers that we talked about on the call.
We look at it this my personal they've got to be capable pay and have done the things that make us feel like it's worth a working you know with it from a financial standpoint, but.
We think the majority of people Chris are going to get a differ a deferment and we're going to look at their ability to pay in terms of how long are willing to go I think many are going to fall into the buckets within this within the first 12 months, if some or if it's appropriate some could be longer than that but they are likely going to.
Help pay and interest cost or something if they go beyond that.
We really if it makes sense and it's a tenant where are we really wanted to an extension and they're really strong, but they they'd like to trade off a little rent relief now and those scenarios, we would look at a blend and extend where the where there can be some abatement. We think that's not going to be a huge majority of what weve.
<unk> seen so far but those are that's how we think about it I think in all three cases, you know you have to look at Collectability that that that governs everything and that's where it comes back to you know it it's more than just the rent if they've got straight line rent balances and I don't know people are accommodate that when you when do you expect to see something guidance, but it's it's required.
Okay under gap.
And then <unk> other than that it's it's really ability to pay.
And and then if it if there's something in it that that they can pay and we want them to stay longer and everyone's agreeable than we'd look at extensions.
Okay. So that's even then Paul just kind of going back to Bill's question about sort of.
The future of sort of uses of office and out of your thought about how are you guys thinking about space plus.
At this point.
Well I mean, so first off in terms of states plus itself, we actually thing that it's going to be up probably getting a little bit of shot the army here, Chris I'm, we've actually were experience that.
We've got folks that are trying to go out of open plan benching co working spaces, Interstate plus because space. What do you know has its own suites.
Let's face plus you know just just in terms of a mass really only take so just approximately over 8%.
Our of our commercial portfolio as I think we said in the past from you don't want to.
The only cottage industry inside our commercial portfolio, but I do think Chris we're going to see more of a need for space plus as people continue we just signed dependent at 2000 and we work.
From the exact so that exact reason they don't want to be a big open plan and benching wants to earn privacy and that was kind of the.
This is faceless was really people, graduating and of that that add maybe 10 to 12 people and wanted to their own their own design suite, but I think space plots and in terms of you know the credit profile only 1% of our uncollected rent or in April was space plus.
So we are you know and that that particular deferral won't Trojan the same way same protocols that Steve.
Do you just answered on.
<unk> <unk> <unk> the apartment portfolio.
97% on the same store portfolio implies about 91% on the recently acquired.
Our non same store portfolio is there any characteristics that you can point out that you know sort of imply or work gives us a sense as to why there was that gap is it geographic is it.
Accrual and no.
Just to make the tenants.
I'll start it but I think the makeup of the tendencies Curtis the grant pretty fast because because I I would have said you might want to.
I have some perspective on that.
Yeah, I that would that would tell you that a disproportionate.
Out of what hasn't been collected this is slightly airing in that favor and I think for the most part it is because they have a higher exposure to the industries that have been a little bit more impact that but I think that we'd be generally the answer I mean, we're still very please chris with what we've collected and.
And we're in discussions with tenants and so they're working with US. We just what's hard is how how much harder will be for them or some people that might be disrupted probably don't even have a all their federal resources and hand, yet such as there they're federal stimulus check a this.
Yes, the bonus or they may not even be fully in the unemployment program and then there's extra bonus money coming out of the government programs for them in that regard and and so.
Those are the kinds of things that if you are disrupted that probably factor into guessing what may all be like but I think the main thing. It's just there's a little bit of difference in terms of degree of exposure to impacted industries and grant can cope give you color on that.
[laughter].
Yes, the composition is slightly different as you would expect between class a and class B. So just in terms of the to immediately impacted industries, which we've really called out of retail trade and leisure and hospitality overall for our portfolio is I think we set in the the prepared remarks.
It's about 12.3% of our employee renter base, but there is a a dichotomy between a and b that's about 13% exposure in class B and about 6% exposure and class a so there is a.
Slight difference there.
On the on the plus side, though for class B, we actually have I'm slightly more exposure to government in class B than we do in class a and that's one of the more solid industries, thus far in terms of payment history.
Okay. Thanks for that number just last question for me.
We're going with it.
Sorry, [laughter] actually you know what Oh this move on thing.
Okay Chris.
[noise] Cisar no further questions left in the queue I'd like to turn the floor back over to management for any closing remarks.
Thank you operator.
I would like to thank everyone for your time today.
We appreciate your continued support during these challenging times and we hope that you all stay safe and healthy.
Thank you and have a good day.
This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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