Q1 2020 Earnings Call
Three minutes.
[music].
Since 2021st quarter Conference call.
Spencer currently in listen only mode.
Following the company's prepared comments the call would be opened up for questions.
Please note that certain matters discussed in todays constitute forward looking statements within the meaning of federal security laws.
The company believes that the expectations reflected as such forward looking statements are based upon reasonable assumptions. The company can give no assurance that these expectations will be achieved.
Such forward looking statements involve known and unknown risks uncertainties and other factors, which may cause actual results to differ materially from future results expressed or implied by such forward looking statements and expectations.
Information regarding such risk factors is described in the company's filings with the Securities and Exchange Commission, including his most recent annual report on form 10-K.
That's a sensor encouraged to refer to the company's filings with the FCC regarding such risks and factors as well as for more information regarding the Companys financial and operating <unk> operational results.
The company's filings can be found on its website now I would like to introduce Stuart Tanz, the company's Chief Executive Officer.
Thank you.
Here with me today, it's Michael Haines, our Chief Financial Officer, and Rich Schoebel, our Chief operating officer.
We would like to start by expressing our gratitude to all of you for taking the time to join us today.
We know that conducting business is not easy during the stressful and difficult time.
We hope that you and your families are doing well and have remained safe and healthy.
Turning to our business. Our objective today is to provide a candid open assessment of the state of our company and the important prudent steps that we are taking to protect our business. During this crisis as well is what we're doing to protect the company as it relates to the potential long term impact.
First though in terms of our first quarter results, our business performed largely inline with expectations, if not a touch above in some areas.
[laughter] fall was 29 cents a share for the first quarter, our portfolio lease rate was well above 97% again close to another record high.
Same center NOI increased by 3.3% in the first quarter and weekend posted strong releasing spreads.
22.5% on new leases and 8% on renewals.
Well, we posted a strong first quarter, what's not apparent in our results is that up until the pandemic kit.
We were on track to have a record breaking first quarter driven by the strong demand for space as well as the strong underlying fundamentals of our portfolio and the markets we operate in.
Well these fundamentals were suddenly froze the six weeks ago, our business has held up remarkably well and we're confident that it can bounce back once this passes in large part because of our longstanding core strategy focusing on a daily necessity sector.
In fact, 79% of our tenants based on C.L.A. had been designated as essential business as per stage guidelines of which over 89% are currently open and operating as of April 17th.
Additionally, 98% of our portfolios grocery and or drug anchored would travel all been extremely busy during this crisis serving their communities.
While our shopping centers are performing believe remarkably well given the unprecedented circumstances were not immune to the extraordinary challenges that retail landlords are facing across the country today.
As of April 17, 70.4% of our tenants based on C.L.A. were opened in operating meaning 29.6% of our tenants are temporarily close.
In terms of revenue today, we have received approximately 68% of our April build receipts on a cash spaces, which includes base rent in Canada.
Fortunately that 68% is sufficient to cover our normal monthly average fixed costs, including property operating expenses Gnh debt service and cap yes.
Additionally, as many of you may have seen in the news back on April 1st the Governor of Oregon issued an order that effectively allows all commercial tenants the right to not pay any rent from April through Jim.
Notwithstanding that order to date over 70% of our Portland tenants have paid their rental cam as usual, which we believe speaks volumes as to the benefits of our daily necessity focus.
[laughter] with respect to those tenants that are temporarily closed never question, how we're approaching each tenants situation carefully and thoughtfully doing our best to arrive at reasonable solutions as the stay at home order continues.
Fortunately today no tenant that is temporarily closed has told us that they're going to close for good in fact, the feedback has been quite the opposite thus far.
Additionally, in terms of our anchor tenants, we have limited exposure to traditional big box retailers in the Softgoods theater in traditional fitness sectors. So in terms of the potential long term impact to our portfolio. If there were to be some tenant fallout in these sectors the impact to our business should be manageable.
With respect to the near term impact the where we are experiencing given that the stay at home orders are still in effect.
We don't know yet what the impact could be in may or June.
On the positive side tenants that are currently closed her all poised and ready to reopen.
In terms of the government's phased approach to reopening the economy when the west coast enters phase one that 19, 99.7% of our tenant base should be allowed to be open.
Following social distancing and other guidelines.
The remaining tenants, which are only five tenants that operate daycare center should be allowed to reopen in phase two.
As we sit here today, the West Coast States have not yet said when said when they will lift or stay at home orders and begin phase. One. Additionally, once they do we expect it could be it could take a bit more time in certain sectors for customers to return to their normal shopping recreational in dining patterns.
With this in mine, we have taken important steps to enhance our financial position with the goal of having the wherewithal and flexibility to continue running our business in portfolio effectively and efficiently.
One of the steps we've taken is to temporarily suspend the company's quarterly dividend.
Before the pandemic hit in mid March we had previously declared are normal quarterly dividend, which the company paid on March Thirtyth as previously committed again, given the unprecedented circumstances and given that the stay at home owners are still in effect. It remains to be seen how main Jim could unfold. Therefore, we believe.
Leave that not declaring a second quarter dividend is the prudent course of action at this time.
Going forward, we intend to carefully evaluate future dividend declaration seats, each quarter now I'll turn the call over to Michael Haines, our CFO to discuss where things stand from a financial perspective, Mike.
Thank you mr. over the past six weeks since the pandemic should we had been carefully analyzing the company's potential liquidity needs in terms of this year as well as in 2021, taking into account debt maturities potential revenue versus fixed expenses and potential retenanting costs.
In terms of debt maturities. Fortunately, we have zero debt maturing for the next two years in fact in terms of unsecured debt. We don't have any unsecured debt maturing for approximately the next four years until late 2023.
Terms of secured debt, we only have a couple of small mortgages totaling 23 million maturing two years from now in mid 2022, and then no secured debt maturing again until 2024. Furthermore, we only have for mortgages and total across our portfolio.
Thankfully, we're not being burdened with mortgage servicer issues like so many shopping center landlords currently our we've always steered away from using mortgage debt and then said utilize low leveraged long term unsecured debt to build our business.
Terms of revenue versus fixed expenses as Stuart indicated for the month of April we've received to date sufficient cash revenue to cover our normal monthly average fixed costs, but it's Stuart also noted that we don't yet know what may and June will be leg as well as how long it might take for cash receipts to build back up to their prior level as such our liquidity analysis is based on a range of conservative.
Of assumptions and also includes factoring in meaningful retenanting costs in the event there's tenant fallout.
No. These factors into consideration we have drawn a total of 130 million on our credit facility again, the goal being to have the wherewithal to meet our potential cash needs through this year end 2021.
What was being able to continue staying in compliance with our debt covenants.
With 130 million drawdown. We currently have approximately 233 million outstanding on our 600 million credit line, which you may recall were just re up the few months ago back in December where we lowered the borrowing spread airline down to 90 basis points over LIBOR and extended the maturity for another four years to February 2024.
Lastly in light of the current circumstances, we withdrawn or previously stated AFFO guidance for 2020, we hope that when the stay at home orders are lifted and all tenants can reopen we will have greater clarity as the impact on our business and be in a position to provide new guidance now I'll turn the call ordered Schoebel our COO rich. Thank you Mike as Stuart noted in the phase.
Some extra ordinary challenging circumstances, our portfolio has continued to perform remarkably well all 88 of our shopping centers continue to be open and operating following local state and federal guidelines in mandate and as Stuart highlighted 86 of our 80 and shopping centers are grocery and our drug anchor all of which are open.
And our discussions over the past several weeks with our grocery tenants, we have consistently heard that they're experiencing record sales growth across the board in some case by as much as 50% to 80% incredible numbers.
Additionally, one of our grocers that is one of the strongest national grocers in the country, who had previously indicated to US a few months back that they were considering relocating their store, but now they're eager to put in place a new very long term lease and they now under invest significant capital to enhance their space.
In terms of our overall tenant base as of April 17, 70.4% of our tenants based on Geo labor open and operating breaking that down between anchor and non anchor as of April 17, 70% over anchor tenants are open and 60% over non anchor tenants are open.
Furthermore, as of April 17, 75% of our National tenants were open 84% of original tenants are open and 55% of our local tenants Roe.
And our supplemental we provide a breakdown by tenant type in terms of what percent is open.
The two tenant types that have been affected the most in our portfolio in terms of temporary closings are the tenants in the entertainment and fitness sector.
All of our entertainment tenants are currently close Fortunately as Stuart noted our exposure is limited.
I don't have a roughly 2000 tenants in total across our portfolio. We only have 10 entertainment 10, which together only account for 1.6% of our total Geo way.
And of the Tam only four movie theater.
And our discussions thus far movie theater tenants are working hard at developing new strategies to address social distancing concerns and they're making plans for big Reopenings.
While may take time for their patronage to fully return is cleared off that they're all gearing up for the challenge.
In terms of fitness tenants only 3% of our fitness tenant based on Jill Air currently open similar to the entertainment sector Weve been careful over the years to manage the type of fitness tenants that we have in our portfolio.
Today, the vast majority of our fitness tenants are the smaller boutique type concept and the two to 3000 square foot range, many of which focus on small group classes and one on one training.
Once these boutique tenants reopen its anticipated there will be able to function for the most part as before given that their prior normal operations were largely consistent with new social distancing practices.
As to where traditional fitness, Jim operator, similar to movie Theater Theyre, all planning new strategies aimed at getting their members back into their Jim's quickly.
The one retail segment that everyone is focused on is the restaurants sector.
In terms of our portfolio our restaurant tenants generally fall into three categories versus those that have drive through capabilities and tenants like Starbucks Chick Fil a burger King just to name a few all of which are currently open and continue to generate solid sales actually better than what we they had expected.
The second category includes those tenants, whose businesses have always been takeout and delivery focused. These tenants are also all open and actually experiencing stronger than expected sales. In fact, just as an example, one of our pizza takeout tenants told us last week that they're experiencing record sales like never before and that they are doing everything they possibly can to keep up.
With the demand as they view it as an opportunity to grow their loyal customer base.
The third category, which accounts for about one third of our restaurant tenants are their traditional casual dining restaurants not surprising most of these are currently close that said many of these restaurants are using the downtime to develop new menu items and a variety of other things, including some that are actually doing interior upgrades, so that when they reopen their best as.
Mission to bring back their loyal customers.
While there is a lot of speculation currently as to whether or not seeding capacities will need to be reduced given that our portfolio situated in suburban communities. Our casual dining tenants are typically mid price restaurants that only reach capacity a couple of nights a week and then only for peak hours or so.
In other words going for social distancing should not be insurmountable issue for these tenants.
So while it may take time to know whether or not there will be long term impact to the overall restaurant sector. We are hopeful that with some adjustment the sector can bounce back.
Additionally, given that only about one third of a restaurant tenants are traditional casual dining restaurant, we should be able to manage any follow up if there were to be some.
Turning now to how we're working with tenants that are temporarily closed.
Stuart noted as of April 17% to 29.6% of our 10 based on July are temporarily closed we have been in contact with all of these expecting that many could need some kind of rent deferment.
With respect to anchor tenants that are temporarily closed there currently focused on dealing with the immediate challenges have been close things like employee and inventory issues. So lot of them haven't yet come to us with a specific requests.
Thus far we've agreed with one anchor tenant of fitness center differs 75% other base rent for April and May aggregating about $45000 in total rent deferment for the two months.
In terms of non anchor tenants that are temporary close a number of have been proactive with us and requesting rent deferment ranging from deferring a portion of their monthly rent to deferring the full amount.
Today, we have agreed to defer a total of $205000 Brent in aggregate for April through June.
As part of agreeing to the rent deferment. The tenants are required to stay current on Tam and in most cases are required to pay the deferred rent starting in July in the form of monthly installments amortized over six months July through December.
Additionally, if any of these tend to receive financial assistance from the government they're required to pay us the deferred rent in full at that time.
In fact, we were just notified by several tenants that there will no longer need their rent differ because they have received the loan grant from the government and will now be paying rent in full.
Generally speaking the process of working with tenants on rent deferment is very fluid and difficult to predict where it could end up as we sit here today as an example, there are some tenants where we have agreed in principle to the terms of the rent deferral and we've sent the paperwork only to have the tenant contact us that they have changed her mind, there will be paying the rent as normal.
Additionally, as Stuart as Mike noted given that there is no set date, yet by the states as to when the stay at home orders will be lifted we do not know yet what may and June could bring in terms of where this rent deferment process will ultimately end up.
With respect to ongoing leasing activity since the Pandemics hit six weeks ago, while the number of deals being signed has slowed dramatically. There are still lot of retailers, including national regional and local tenants actively looking at sites online virtually that is in fact, there are a number of opportunistic retailers in the marketplace today that are bullish.
Seeking keysight that they've had their eyes on for years and couldn't get into.
These sites where to become available they're ready to seize the opportunity.
We view all of this activity in interest as a possible positive indicator of how things might back bounced back once this passes.
In terms of actual executed deals during the pandemic or activity has mostly been on the renewal front. Thus far although we have also been signing some new leases too.
In terms of renewals tenants that we had expected three new before the pandemic hit have done so, including just recently renewing a national off price apparel anchor retailer who stores are temporarily closed.
And we're also in the midst of negotiating with the same retailer renewing another anchor lease of theirs early as part of signing a new long term anchor lease for one of their other brands.
In terms of new leasing activity most of it is with smaller tenants, thus far primarily in the service sector, but we also recently signed a 53000 square foot new lease with a strong grocer.
Looking ahead are scheduled anchor lease expirations for the remainder of the year. When we have one anchor lease scheduled to expire which is with one of the largest national grocers. We're currently in discussions with the tenant about a long term renewal like the other grocer that I mentioned. This grocer is also very eager to renew their lease.
Additionally, looking at our anchor lease expirations for next year 2021, we have 13 anchor leases expiring until the bulk of these tenants that are with grocery and drug stores. The other three leases are with tenants historically have been very strong performers at our properties and we expect that their business will pick up back once.
This passes so just as we don't have any debt maturity concerns as Mike pilot. We also don't have any concerns as it relates to the scheduled anchor lease expirations for the next two years.
Lastly in.
In light of roughly one third of our Julie being temporarily closed weve appropriately scaled back a variety of property services to be imbalance with the current needs of those tenants that are open which will help reduce property operating expenses until all tenants are back up and running.
Additionally, we have postponed for the time being all non essential building improvements and landscaping projects now I'll turn the call back over to Stewart. Thank you rich.
With respect to acquisitions in light of the uncertainty as to both the near term potential long term impact from the pandemic, we have suspended all acquisition activity, including the pending transaction that we discussed on our last call in February.
In terms of market activity, there has been essentially nothing traded in the grocery anchored center on the sector on the West coast for the past month that said once this passes and the market opens back up we do believe that the grocery anchored sector will continue to be a sought after property type and the retail industry.
Perhaps even more so going forward.
In terms of dispositions, we have one pending sale that has stalled for the time being as the buyers financing has been put on hold the buyer continues to be in contact with us and they hope to move forward with buying the property. Once this fully passes.
In terms of our Densification program, we're continuing to work with Citi planners and continuing to make progress with the entitlement process on the three densification projects that we have been pursuing.
Lastly, I would like to summarize what distinguishes ROI C and it's important to remember during this crisis.
All of our 88 shopping centers are opened in operating.
98% of our portfolio was grocery and or drug anchored.
Our tenant base is diverse focused on daily necessities and they are resilient.
95% of our portfolio is unencumbered.
Our balance sheet, a solid with essentially no debt maturing for approximately the next four years and.
And perhaps most important.
It's our west coast and grocery anchored shopping centers at shopping center expertise.
For over 25 years, we've been focusing exclusively on the west coast and in the grocery anchor sector.
During that time, we have successfully operated and build value through a number of different in challenging circumstances.
While this current crisis is truly nothing anyone has seen before and will undoubtedly have a lasting impact on us all we remain confident in our ability to forge ahead and continue building long term value.
Now, we'll open up the call for your questions.
Operator.
Thank you Sir as a reminder to ask a question you would need to press star one on your telephone.
To withdraw your question press the pound key.
Please standby, while we compiled acuity roster.
I show our first question comes from Collin Mings from Raymond James. Please go ahead.
Good morning, calling.
Hey, good morning out there Stewart.
First for me just on the dividend can you give me just expand on the decision to fully suspend the distribution for now as opposed to just reducing it and then more broadly along these lines can you just walk us through how you intend to balanced capital allocation alternatives moving forward the company bought back stock for a while there during the quarter early now let's move more towards preserving liquidity once you.
Distribution requirements are met just how do you plan on deploying that remaining cash.
Well I'll deal with the dividend first.
In terms of reducing the dividends. So when we received and not enough cash revenue in April while we received enough cash revenue unable to cover the monthly average fixed cost. There was still there was still up not a lot of class a free cash flow beyond that Additionally, given that the stay at home motor is still in place on the West Coast. We just.
Don't know yet what main June might look like in terms of cash flow.
So we could end up with a lot of cash flow for the second quarter.
But of course, no one we suspended it temporarily for the quarter, but assuming tenants can open back up at some point here in the next month or two and cash revenue returns to normal lab levels as we head towards the third quarter, we could be back paying a dividend by the third quarter, Mike do you want to talk about.
The capital allocation.
Sure.
We disclose who did a drawdown for liquidity purposes is really going to be dependent upon.
The duration of this a of the stay at home orders wants to tens or back up and running we can assess our cash flows. We can we can manage around the first distribution requirements. We fully intend to stay re complaint in that respect we're not sure. It's really too early to tell what 2020 is taxable incomes are going to look like so as we if we don't feel a need to have that cash sitting in the balance.
She does move through the year them with simply de lever with that.
The decline bounce back down.
Yeah, I guess, that's going to second part of my question. Just as you think about now kind of having the opportunity to reset the dividend. If you will going forward with the intention be maybe a more conservative payout ratio moving forward and keeping some of that excess cash flow to maybe accelerate delevering or again potentially buy back stock given where the stock trades presuming it.
Below your in Avi just you trying to dig through kind of how you're balancing those different alternatives on a go forward basis.
Well dividend policy, obviously is conducted and at the board level, but certainly if things do open up quicker than we think and things to normalize quicker than we think then we certainly would look at the payout ratios at that point and then determine.
At that point, what's right in terms of the dividends. So it's tough to answer the question right at this moment, but it's something of course will be looking at going forward.
Understood.
Switching topic, the or just recognize there's a lot of uncertainty here and again, that's clear in the prepared remarks Stewart, but just based on your conversations with tenants in some of the moving pieces you discussed on the permit process and as well some of the government stimulus measures that have come into place here would you expect a sharp falloff in may relative to what you call.
In April.
It's kind of your expectation right now that you'd probably be a similar level.
You know it's again, it's tough to predict you know the April I think has been better than what we anticipated a but at this point is tough to tell you that a you know where may and June are going to end up.
So it's just you know I'd love to be able to answer the question, but you know again.
It just depends on how quick things open and you know how fast the the current tenant base that arent open gets stabilized and open for business.
Okay. Thanks, I'll turn it over.
Thank you.
Next question comes from Todd Thomas from Keybanc. Please go ahead.
Good morning, Todd.
Hi, Thanks, good morning.
Well.
First question for Mike well, I guess, I guess store, maybe too you mentioned that 60% of April build receipts on a cash basis is sufficient to cover your normal monthly fixed costs, I guess, GNS capex and debt service.
Have you stressed the model and looked at variable expenses, a little bit harder to see how much further that 68% can go before you are cash flow negative.
I mean, we've done a lot of sensitivity analysis.
And a you know again it will just vary depending on depending on.
How is that receipts look in terms of main June.
You know I would think that wouldn't it would have to go down you know a pretty big them out for us to really get into what I would call a very stressful situation.
Okay or are you are you looking at other ways to cut costs you suspended the dividend are there other.
Cost saving initiatives that you're.
That you're contemplating today.
The answer is yes, we're always looking that cost saving initiatives day in day out.
You know, it's it's we run a pretty lean and mean organization here as you probably know.
In fact, even from a GNS perspective, we have the lowest gn Ada revenue ratio among our peers.
And at the property level rich and his team have done a great job in terms of on the you know looking at expenses. So that we continue to look at wherever we can squeeze dollarss, whether that is reducing capex.
You know stop building pass out things like that but.
We're constantly look at that day in day out so that continues to be also a moving target, but we continue to make progress on that front.
Okay, and then and then Mike I just to be clear I wasn't I wasn't sure.
Just on your comments, but is the $130 million that you drew down on the line is that your your current assumption for.
The cash that you expect to need potentially through 2021 to kind of bridge from where we're at today to sort of the reopening and and.
Normalization here is what kind of assumptions or are you talking about and is that what you are.
You know trying to communicate in your remarks around that the drawdown.
Yes, that's exactly what I was referring to we did we didnt Nat analyzer liquidity needs. Although it through the end of next year, hopefully everything will reopen well before that maybe hopefully this year, but we wanted to be conservative and look at or near its although through 2021, which includes in our operating fixed costs.
Some retenanting cost and such so that takes us through the balance of next year.
Okay and included in that or you know what sort of assumptions are you making.
In terms of.
The normalization of tent in sales and or potential fallout.
We look we took a pretty conservative approach as far as a reductions in revenue.
Kind of ran with that run rate and then looked at what would you need to operate beyond that so it's kind of takes all that into consideration.
Okay.
Alright, thank you.
Thank you.
Thank you next question comes from Christy.
Macau ROI from Citigroup. Please go ahead.
Good morning, Christie Christy good morning, good morning, guys. Thanks.
Just in regard to the 767.5% of April base rent and campaign.
Can you provide the rent only numbers given that Cam collection can sometimes be paid in advance and.
Our our the deferred rent that you talked about the deferred agreements included in the calculation in terms of what was build.
The second part, yes, what was build was was 100% of everything.
Yes.
The direct collection was actually a touch better.
In terms of a percentage.
We included added there to give you that color as well.
Okay, great. Thank you and then.
Just in regards to restaurant understanding that it's about 13% of GRA.
But what is restaurants as a percentage of FBR and what was the rent collection.
For that category any problem.
I.
I think we have the hbr at our fingertips, we can certainly follow up with you on that and what was the second part Christie.
Just to what was the rent collection for restaurants in April for that category.
For Brent collections for restaurants looks like was a little over 50% closing in on 52.
Okay, yes that percentage of FBR information would be would be really helpful.
At CIT to have and then just a follow up on on you talked about tenants like movie theaters in restaurant.
Preparing for social distancing.
With that results in more limited revenue opportunity for those types of tenants and not that reduces the rent that they can pay for potentially a significant period of time. How are you thinking about working with some of those tenants on our longer term rent reductions is that something that you're considering.
I mean, I think you know I think the challenge there is understanding what the volumes are going to be and obviously there may also be some reduction in cost as it relates to to the the new operations. So we're trying to take a cautious approach to this because I don't think theres any uncertainty we've have had tenants come.
To us and say you know I can only pay act, but where we need to understand how they have arrived at that number because there's certainly no one who can today predict what volumes are going to be so we're trying to be looking short term in terms of these deferrals and but understanding that you know depending on the volumes.
But.
End up being more normalized we may have to revisit some of these.
Right. Okay. Thank you.
Thank you Christine.
Thank you I'm next question comes from RJ Milligan from Baird. Please go ahead.
Good morning RJ.
Good morning, good afternoon on the East coast.
I was curious are you guys gave some stats on.
The amount of tenants that are designated essential that are open and operating on a jelly basis.
Those numbers based on an AB arm.
No we don't.
Would it be fair to assume that because of most of your anchors are open and operating in tick up a larger percentage of the square footage that if it were to be on a BR basis that it would be actually lower in terms of whats open.
No I think it's it's actually going to be fairly close to the geo laid percentage.
Okay.
Mike I believe some of the bank covenants on the unsecured line are calculated using current quarter EBITDA annualized is there any risk to the covenants into Q on are you currently working with any of your unsecured lenders to modify those covenants.
Not currently work with the lenders, we've looked at that and stress tested it to see what kind of.
Ours is it's a GAAP base so.
Because of the rent deferment agreements are not going to be subject to lease modification language Russell billing the revenue in accordance with leases on a GAAP basis. So a GAAP EBITDA is only going to be impacted if I take a large bad debt reserve in the quarter and that's going to be largely dependent on the tenants ability to pay whether that they've been able to access governor.
It really programs is it's a very fluid situation, but from a.
Second quarter GAAP perspective like EBITDA.
The only and that's really going to largely affected as the bad debt expense estimate that we'll have come up with by June.
Got it and finally, the obviously, there's there's been a lot of retailers in the news who have the ability to pay rent, but have been opting not to pay rent and I'm just curious, especially given your exposure in California with I think there is a moratorium on evictions I think for 12 months following the end of the show.
Down and I'm, just curious what what sort of recourse do you have with some of these tenants.
The decides not pay rent that actually campaign.
Well it has been frustrating I.
I think you hit it on the button in terms of what we received in April because there's been a series of tenants that we know that can pay rent and haven't.
So we have been as aggressive as we can be but given the current mandates. She is there's only so much you can do.
So that's been a bit frustrating as im sure it will be for the peer group as well, but I think as we move through the balance of the month and into Mace I think and lot of that will be somewhat resolved in terms of working with these tenants. It's one big partnership I mean, we're all in this together that's the.
Bottom line.
So we all have to help each other and we'll find a way we'll get through this and more importantly, I think at the end of the day. A you know will I think we'll come out in pretty good shape.
Okay. Thanks, guys.
Thank you.
Next question comes from Jeremy Metz from BMO capital markets. Please go ahead.
Good morning, Jeremy.
Hey, guys right.
Stuart I just wanted to get.
Well, it's here on the stock buyback you did if we go back.
We've been talking at times by bringing leverage down.
You had some acquisitions that were in the works you add the one.
Sounds like under contract, which is all just adds of our last February. So just wondering on the decision to lever ops buyback stock just with what you had going on at the time.
Yeah, I mean look a I would tell you, we're probably more lucky than smart in terms of walking away from that deal because we walked away well in advance of the.
Pandemic hitting.
That was because after underwriting the assets, we just felt that it didn't stand up to the our current criteria were standards in terms of our buybacks I mean, we started that right as the pandemic was beginning and realized very quickly that it wasn't a good use of our capital. So we stop that immediately and I don't see us buying back.
Stock going forward, given the issues with liquidity across the sector. So that's where things sit right now Jeremy on both fronts.
And in terms of the acquisition.
Good walk away from did you have any hard money down there you had renewed or where do not yet at that stage.
Well I know, we had the ability to back out of the contract without a penalty we actually did it before we went heart.
All right.
Thank you.
I show next question comes from Barry, Oxford from D.A. Davidson. Please go ahead.
Great. Thanks, guys.
Stuart.
And back to rent receipts, just real quick the 68% in April was all of that kind of cash received from the tenants or did some of the come from the security deposit.
Bucket.
No all already all cash rents and camp.
Alright, perfect perfect and then.
My next question, just kind of switching gears, a little bit to valuation.
For it.
A question, we anchored shopping centers is it too too soon for you to make a comment as far as what's changed and also in the credit or debt markets can somebody get.
Dead or mortgage.
Hi, a community center right now or is that for Thats whats or is that the source of causing a very low or no transactions.
Yeah, I mean, I think the bigger issue out there obviously is just understanding the NOI going forward and where that on why might settle in as it relates to.
The current environment.
I do think coming out of this the one thing that will continue to separate itself in terms of the sector is that the grocery anchored shopping center will become much more of valuable.
In terms of looking at the sector I think the basic necessities.
Which is something we've been focused on for the many decades I think as we've always said is going to continue to be the most sought after.
Segment of the sector.
In terms of financing from what I've read and I get old hundreds of reports today in terms of what's going on out there as I'm sure you do.
The financing markets are preliminary closed although well what we're hearing on the ground is if it's a very strong grocery anchored center. There is still some financing available, but that's the only segment of retail right now where you can even get or have a conversation as it relates to debt financing.
Then also just along kind of those same lines. So as we come out of that and the markets kind of open back up do you see the spread between eight properties and B properties whitening widening out.
Oh, yes, or yep. So yes, you probably give you got to perceive a flight to quality.
Correct.
Okay perfect I appreciate the time guys.
Thank you.
Thank you next question comes from Craig Smith from B O. A please go ahead.
Good morning, Craig.
Good morning.
No given.
Your comments on rent relief.
Are you doing any wavering, where you can get a change of control or a lease term extension.
Yeah, I think Greg this thats really depends on the situation there outside as you know I think Stuart mentioned in his prepared remarks on we're treating each one of these on an individual basis we are.
Trying to get a good understanding of the current business operations in the future plans for the tenant, but if theres a near term expiration to deal with or an onerous provision in the lease that.
It has been holding our leasing team back or something like that we are addressing it all at the same time, yeah. I mean, remember, we're not giving rent relief forgiving rent deferment and we are looking at co tenancy exclusives, I mean, everything within a lease in dealing with our tenant base. So that if we do end up giving rent deferment, we know.
Yet hopefully more than just the deferment as it relates to the way, we're negotiating with our tenant base.
So this actually in my view could open up a bit of opportunity longer term in terms of.
I'm addressing both co tenancy and exclusives.
Okay, Great and then when when did you draw the 130 million on your facility.
Hey, Craig it's like we drew some of it as the very end of March and then an additional amount in mid April.
Okay.
When I look at the cash and equivalents at the end of March It's 63 million and now it's a 133 is that the two tranches there.
Yes.
Okay great.
And then I. Thank you for the status of tenant base.
Tables, the end of your supplemental.
I just wondered what tenants are included in the off price category I would've thought TJX and Ross in Burlington, Obviously, that's not the case.
Yeah, those tenants are in the apparel category.
Prices things like big lots.
And that sort of thing.
Okay.
Great. Thank you.
Thank you bye.
Thank you. Our next question comes from Wes Golladay from RBC capital markets. Please go ahead.
Good morning, when I got us no.
Hi, Good morning, guys. So looking at that 30% of the to Miss that aren't paying going back to our Jays question. How big is the group or they can pay but not paying and is there any co tenancy in there.
And I think it's a touch hard to quantify as a percentage.
No.
Everybody, who hasn't paid has been contacted by us in the conversations have been started does some of those are contacts have been in the form of a demand notice and some of them of in the form a phone call.
The the ones. We think can pay are getting the demand notices and that is generating.
Very quick phone call back.
And.
So we are all over those tenants, we believe have the ability to pay where were we are as we said earlier looking at every case individually and we need to understand you know there.
Access to capital from other fronts versus coming coming to just the landlord I mean, we were very early in the encouraging our tenant base to get in front of the SP a programs and as we touched on in the prepared remark that seems to be paying off as people are.
Contacting us almost on a daily basis to say tear up the paperwork I'm going to pay Moran.
I mean I wish it was every tenant but it's enough that its.
Meaningful.
And if there is no we've had no while co tenancy issues, where west as it relates to collecting our rats.
Okay, and then maybe sticking with the PPP program do you have an idea what percentage of your tenants are eligible for that program and of those that have applied are they getting a very good success rate actually getting funds from the program.
I mean, there isn't there are some subset that for one reason another do not qualify and that's certainly in our criteria. We take into consideration we're doing the deferral requests I don't have a.
Statistic on that a lot of time to someone who is ours has too many employees or someone who.
As an open yet or.
In the open don't have enough time on the out there but.
It's hard to put a person.
Okay, but do you think the general feedback has been positive from your tenets perspective, there may just be waiting for the funds or do you think they think the program needs to be worked at all or just maybe a qualitative view on it.
I think there's been some frustration with the ability to get into the web sites and you know things like that but it but we have seen is that the tenants that are proactive are being successful and.
So it really does pay off as they get on the web sites and get their application and obviously, there's been some funding issues and we're sure that the more we know more bundled been provided and we'll continue to be provided to support. This program has its desperately needed.
Thank you that's all for me.
Thanks, Great. Thank you.
Thank you I'm next question comes from Vincent Bones from Green Street Advisors. Please go ahead.
Good morning, good morning.
Morning.
Im just curious which would small shop tenants categories concerning the most from a liquidity insolvency perspective. It's this last for a few more months.
I think some of the challenging ones are the ones that are very hands on the salons and you know the single thinking more here of the.
The 123 person shops, where they're very hands on and social distancing can be a bit of a challenge for them.
A lot of.
Tenants in that space, you know the nail salons in the rest are.
Typically be recent immigrants and not necessarily you know with a strong balance sheet.
Yeah that makes sense are those generally the tenants.
Already worked with on the rent deferment side or I'm. Just curious like is that kind of ones, where you think maybe Brett relief is going to be required more from it.
I mean, I think what's been.
Interesting leased to me and maybe Stuart I know the Pos is that.
A partner when we say deferment. It has typically not been the full rent has typically been a percentage of the rent whether it's 25 50, maybe 75% of the the base rent for the month.
And then full triple net charges to be paid.
They are very grateful for any any kind of assistance, we can can offer.
And so someone who has received a 50% deferment for two months April and May.
They don't seem to any issue with paying the what we're asking to pay and they're just flat for that breathing room were providing.
Yeah, and a number of cases, Vince we you know these tenants have only ask for 50% or 25%, it's not like Dave said, we need 100%. So every situation is different and as rich has articulated you know a it's all over the place.
So every situation is different.
That makes sense.
One more for me I mean do any of the operating expense saving you mentioned benefit ROI sees bottom line or do they path to the tenant through lower Cam.
It really ultimately were passed through to the tenants through lower cap.
We ended the Dan and I guess, there is a slight impact on our administrative fee but.
Nothing material.
Got it okay. So from a kind of operating leverage perspective, you. There's not really many operating expense savings that would change the margin for ROI seed second quarter. For example, just to clarify yes, because the majority I mean Unum 19, you know that making this percentage up at 95% of our leases are triple net leases.
Right. So it's going to be reconciled at the end of the year very few of our leases or a gross component where potentially we could pick up a little bit of upside, but there are few.
Okay. That's helpful. Thank you so I have.
Yes. Thank you.
Thank you I'm next question comes from Michael Gorman from BTI Ji. Please go ahead.
Yes, Thanks, good morning, Mike.
I just wanted to follow up on I think it was christys question about kind of social dispensing and capacity have you had any conversations with some of your larger anchor tenants grocers that have started to limit.
Density in their stores as a result of the situation have has that impacted sales trends at all in recent weeks since they've started to implement those.
No not at all in fact, the click and collect has been.
When speaking with our goes as we do often has been so the increase has been so dramatic.
Both in terms of click and collect and in terms of in store on the amount of customers coming in store I think the grocers have done an amazing job.
As it relates to a both you know how they've dealt with the social.
Spacing inside the store at this point and the cleansing this up their stores. It's just been amazing what in terms of what we've heard and what we've seen on the ground.
So our grocery stores and drug stores have just on that done an amazing job in terms of.
Handling this crisis, and we don't see any impact to them going forward as it relates to the social distancing.
Got it Thats, great and can you share maybe anything anecdotally or any of the numbers that you've seen in terms of kind of what the breakdown for your grocer volume has been in terms of click and collect versus in store traffic over the over the past four to six weeks during the crisis has as most of the sales gain come through the omni channel side of the.
Business.
I think it's been a as good on the click and collect as has been inside the store from our discussions I mean, it's just been amazing looking at how dynamic and how large these increases have been I mean.
You know, it's it's as we've gotten some sales then I think as rich mentioned during his dialogue.
It's just been us stay I mean astounding as to the numbers and we haven't accounted for any percentage rent from that perspective. So.
Rich I don't know if you want to add to that no I mean, I think the theme. We keep hearing is you know how thankful. The grosses are that they were proactive on the click and collect front you know leading up to this because they were able to than you know leverage. It I mean, there really is one of our growth top growth through some you know is now rolling out click and collect at 130 locations that Didnt previously.
Some of it.
So I think that we don't have any anecdotal evidence our data as to where where the sales and but for better than in store, but they certainly are grateful for the click and collect and coming up with new ways of doing click and collect where it doesn't involve the capital investment that they were initially putting in wood modifying the parking lot and everything else signage and the rest.
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Great and then just one last one from me stretching out the time horizon a bit here through it I know I know, it's a tough as you guys are dealing with us on the day to day basis, but.
I see is a company that was kind of built out of the last crisis. What are you seeing in the market that is similar to the o. eight or nine timeframe and recognizing your cost of equity is kind of prohibitive here are there any other alternative conversations you're having with maybe alternate capital sources that would allow you to be opportunistic.
Rick if you do see some less sophisticated operators experience some some fall out here.
It's a great question. The answer is yes, we had been approached by some outside capital a we're looking at it a we do see that there could be some incredible opportunities out there for us, but again, that's still going to be subject to making sure it doesn't impact our liquidity.
And our capital structure going forward.
But it is on our mind, Oh, I am starting to see if it a stress out there from an opportunity perspective.
And it's something you know that we're going to sort of where I'm going to turns my time to over the next couple of weeks in terms of looking at that type of opportunity.
It is beginning to feel like what we saw a in the early days of ROI sake.
Great. Thanks, guys.
Thanks, Michael.
Thank you.
Next question comes from Michael Mueller from JP Morgan. Please go ahead.
Good morning, Mike.
Hi. This is song on for Mike I'm, just wondering I guess deeper sensors. Your tenant base. That's currently closed you have a rough sense of how many of them are eligible for government funds and how many have flat.
I don't have a percentage on who would be eligible I mean, I think what we are seeing here is that the.
The tenants that are of a close that or is actually going down.
I think just last night, our property manager up in Portland reported 10 tenants that have opened up for some level of business saw yesterday.
So seems I mean, I don't want to get too far ahead of ourselves, but it seems that people are starting to figure out ways to open under the government mandates.
Practice, the social distancing and start generating some sales.
Got it and sorry. This is touched on earlier, but just before you with your guidance I think you're expecting in June and it should kick up this year, but it came in lower and once you should we think of that and it's time to run rate for the year.
For core.
Probably too early at this point in terms of looking at a run rate from a gene a perspective, just because we you know it's still too early to look at what's going on out there.
But Mike in terms of our DNA for the quarter.
It's too difficult to say, a whether that's going to move and if it moves how far down or up it may go I hung I would just use the first quarters as a run rate for now we'll revisit the Jim.
Got it thank you stay safe.
Thank you thank you too.
Thank you. Our next question comes from Chris Lucas from capital One. Please go ahead.
Hi, Chris Good morning, Hi, guys.
Well good afternoon.
Hey.
Couple of quick questions for you.
As it relates to sort of the.
Rent collections was there any geographic differences that you notice you just mentioned the Portland that some stores opening up just curious as to whether or not when your major markets, whether whether you're so anything that was geographic or was it was all really line of business driven.
Yeah. It's it's an interesting question, we were I actually just looking at that the other day, but it actually came in pretty consistent across the regions, which we thought was interesting given that they're all in very different stages and different you know mandates, but yes, it was actually pretty consistent.
Okay and then.
I missed some of the cost a lot takedowns that you guys talked about earlier, but just as it relates to sort of though the commencement of leases.
And the pace.
Is there how should we be thinking about that if it relates to sort of how what the tenants are telling you in terms of their ability to open and their willingness scope and that's there should we thinking about that sort of more really back end loaded or is there anything that is getting done now.
Yeah, we are moving forward I mean, we have obviously been in touch with every single tenant that has not commence Jeff and.
Two confirmed or willingness to continue to move forward. Most everybody. We've spoken to is our prepared to to move forward I think things are slower because the cities are slower, but almost every municipality, where we have about projects going or open in some fashion. We are getting inspections, we are.
Completing work.
But I think you know, it's a little bit early to tell whether there is going to be an impact on the delay in the commencements because of this or tenant who was ready to open tomorrow, but would be prevented open.
And Chris we are being very proactive obviously from a marketing standpoint in working with the tenant base as it relates to you know.
What we can do together to once things open up to really make the atmosphere is as as as clean as possible in and more importantly, what we can do from a marketing standpoint to make sure. The public is very comfortable coming back to our centers.
And going to the stores that have been closed I mean, that's been on my four front for the last week, we cannot anticipate that things could open up hopefully pretty soon.
Thank you for that and then.
Question on on prepayment trends and what I'm really looking at is like you've got a lot of small tenants I don't know if they all paid by yes.
But have you seen in things that relates to see credit card payment for those really small tenants.
February March April.
You know there are so we have offered recently just started offering credit card payments that tenants in some of the tenants are taking advantage of that.
Many still pay by paper check believe it or not handwritten.
And what we have seen though is that we obviously monitor every single day in terms of checks and coming in and they're coming in from all types of tenants in the mom and Pops, all the way up and.
You know a lot of that is driven through you know the fact that we're in constant communication with them and we're working through the deferral process and.
So I think the trends are probably touch later.
This month and then previous months, but you know the the payment type is consistent with their historic practice, a few more priority mail packages and Fedex is I think when the default notices went out but other than that.
Okay. Appreciate that thanks, and then Mike I appreciate the disclosures in there, but I would really occurred you guys to think about providing the our exposure you have done it in the.
Investor presentations in the past and the graph, but it's kind of difficult to sort of currently I'm sort of that data without having real numbers. If you always helpful. But you know your your shop spaces to X Clark.
The rent for the anchor so so actually have NBR risk is more useful for us.
Kind of model the company.
Well certainly we'd appreciate your feedback Chris.
Thank you that's all I have guys. Thank you.
Thanks, Chris Great. Thank you.
Thank you I show no further questions in the queue or at this time I'd like to turn the call back to Mr. Stuart Tanz CEO for closing remarks.
Thank you and closing again, thank you everyone for taking your time out today and if anyone has any additional questions. Please contact Mike richer me directly. Thank you and have a great Dane stay healthy in safe. Thank you very much.
Thank you. Thank you ladies and gentlemen, this concludes todays conference call. Thank you for participate and you may now disconnect.
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