Q1 2020 Earnings Call
[music].
Welcome to the Q1 2020 Federal Realty Investment Trust earnings Conference call. At this time, all participants are in listen only mode.
So to speak your presentation, there will be a question answer session to ask a question doing to fishing you will need to pay star one of your telephone. Please be advised that today's conference is being recorded.
You acquire any other assistance. Please press star Zero I would now like to have a conference over to your speaker today basically your Prady. Please go ahead.
Good morning, Thank you for joining us today for Federal Realty's first quarter 2020 earnings Conference call joining me on the call or Don Wood, Dan GE, Jeff FERC asked when DCR Dawn Becker and more because all that there will be available to take your questions. The conclusion of our prepared remarks.
A reminder, that certain matters discussed on this call may be deemed to be forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements include any annualize our projected information as well as statements, referring to expected or anticipated events or results. Although federal Realty believes the expectations reflected in such forward looking statements are based on reasonable assumptions that are realty's future operations and its actual performance may differ materially from the information in our forward looking statements and we.
Can give no assurance that these expectations can be obtained the earnings release and supplemental reporting package that we issued yesterday. Our annual report filed on form 10-K, and our other financial disclosure documents provide a more in depth discussion of risk factors that may affect our financial condition results of operation. We've also posted on the website a slide deck that has more detailed in for me.
As shown on the impact of the Cobot 19 pandemic on our business to date and various actions we've taken in response to covert 19.
These documents are available on our website given the number of participants on the call. We kindly ask the limit your questions to one or two per person during the Q and a portion and you should feel free to jump back in the queue. If you have any additional questions and with that I will turn the call over to Don Wood to begin our discussion of our first quarter results.
Don.
Thank you Leah and good morning, everyone.
No there's a certain comfort in the familiarity of the well worn quarterly routine to the earnings call with each of you. That's oddly reassuring to me as we battled through this mess each day in preparation for advantageous positioning coming out the other side.
First my heartfelt thoughts and prayers for good healthy each of you and your families and friends and that's Crazy time, particularly those of you hold up in small spaces in my favorite city.
So the 20 signed seven time World Champion New York Yankees.
That's a shout out of the men's respect an appreciation for the unity and the work ethic of the federal Realty team on the front lines over these past six to eight weeks, including our property management team.
We've taken care of our assets, so that essential businesses could provide those services to the community.
And also to those team members, whose jobs weren't full time anymore, and who volunteered for the numerous new areas, where their help was needed top to bottom everything in between thank you. So is one dedicated and talented team.
Let me start with a few comments about the first quarter and then move on to today's situation, where we are headed from here.
Just on our press release last night, we reported FFO of $1.50 a share in the first quarter compared with the dollar 56 in last year's first quarter.
Even before the cobot 19 crisis, we're going to have a tough year over year comp because of the $5.4 million and lease termination fees and last year's quarter compared with 2.7 million this quarter or a difference of roughly three cents share.
Well, we were having a great started the year up until the last two weeks in March and we're on track to grow AFFO per share X termination fees by 2% to 3%.
That changed in a blank with mandated shutdowns in fear of the uncertain future.
The states that we do business and were among the first to close and by the second half of March we were really feeling the heavy drop off in activity.
Rent payment deficiencies and increased bad debt provisions among other items directly attributed to covert 19 totaled $4 million or six cents per share in the first quarter.
Still a pretty solid quarter, which also included over 80 leases executed for nearly half a million square feet.
So we went into this whole mess in a strong position from both an operational and most certainly a balance sheet perspective. So I guess the real question is what we make it through what we look like on the other side.
First things first yes, we will make it through the channel spent considerable time going through our current cash position cash flow projections, our development spending flexibility and plans for additional financing.
One comment from me in that regard.
History and track record really matters at a time like this a reminder that in 2009 in the depth of the recession when markets were close to many many borrowers we access the unsecured market.
We accessed the bank, we secured bank debt from a consortium of lenders, we upsized our line of credit we haven't issued a small amount of common equity.
The point is that all of those markets. We're open to US then and our balance sheet and competitive position is even stronger today again, the LNG on our plans in a bit.
Our development spend.
Which approximated 35 million a month coming into April has been paired to about 10 million a month with the Massachusetts, and California shutdowns at Assembly row, and Santana West and a few other smaller projects saving cash currently.
Construction at Cocowalk in Florida, and 99 rose.
At Pike <unk> Rose in Maryland continue as both are nearly complete and in fact will be over the next few months.
We have every intention to complete all of our.
Element projects that are partially constructed.
The started construction on all new development projects are however on hold until we have some better visibility on the length of the pandemics effects.
Okay rent collection.
It's obviously impossible for a simple tell all statistic our metric to try to explain such a multifaceted and complicated phenomena as the virtual shutdown of the entire us economy by pandemic.
And April went collections certainly are not that metric.
There are relevant piece data are easy to understand they fit neatly on a matrix of comparative companies like same store NOI, it's just not that simple and as such a small part of the company's postcode viability and growth prospects more on that in a minute.
For the record we collected 53% of our contractual rent in April, which we expect to be better than the mall sector and a little bit less than the grocery anchored shopping centers, who have attended base more highly geared to essentials.
Our portfolio is far more diversified, which we see as a major strength not a weakness for any period and history and any economy in history other than in the quarter or two that a global pandemic literally shuts down the world.
All 104 of our shopping centers are open and operating with about 47% of the tenants open and trying to do some level of business.
About a quarter of our rent comes from essential services grocery drug banks et cetera, and that was largely paid in April.
Another 20% comes from our residential and office tenants largely at our mixed use communities, 95% of our resi rent for April was collected as was 87% of office rent.
Restaurants make up 15% of our rental base about half full service and half QSR isn't fast food about a quarter of that rent was paid in April.
Fitness and experience will tenants like theaters in bowling concepts comprise another 6% and very little Ed April rent was collected in that category.
Payment with sporadic on the balance of the portfolio.
So our first response for non payers was of course to communicate with clarity that we expect existing contracts to be honored.
And in many cases they work.
Others did not pay have important default and no active conversations are underway between the parties for a whole host of reasons is are largely small tenants who are struggling pre cobot 19, and we'll have a hard time reemerging on the other side.
They can see will clearly be higher on the other side of this crisis no. Good prediction on how much higher at this point.
For the remainder are those tenants, who had the wherewithal to pay but who are looking for deferrals for the periods that they are closed some for a couple of months after.
These negotiations are complex and consider many factors, including the easing of lease restrictions that may impair our ability to redevelop down the road.
We don't have a blanket policy for handling. These negotiations this is a really important point.
One of the many advantages of our platform is that were small enough to have senior level experienced executives handle each of these conversations on a one off individual basis.
But we believe that that end up visualized approach will lead to the best result for federal as a whole as we look to coming to the coming years and not just months.
So I think all of that is a pretty good summary of what's happening right. Now you can find additional information in a presentation available on our investor website check it out its therell if you haven't had already.
Let me move on to give you a few thoughts about where we see ourselves on the other side of this.
And as you would expect for me, let me start with the short term negatives.
First geography.
No surprise here the states, we do business in will largely be the last to reopen and likely with the most stringent conditions, California, Massachusetts, Pennsylvania, Maryland et cetera, you know the list.
Clearly a negative relative to the middle of the country in terms of the second quarter and probably third quarter activity.
Second our tenant makeup more lifestyle and entertainment oriented restaurants, and retailers that are not essential for consumers during a pandemic as I laid out in the percentages above.
So those two things geography tenant mix are not conducive to outperformance or accurately predicting performance at all in the second or third quarters of 2020, perhaps longer.
Accordingly, we are no position offer earnings guidance for any period at this point.
Well, we can do however, its share our thoughts as to a pretty compelling plan and vision for our properties enhance growth on the other side of this.
First from the demand side.
We see the geography negative in the short term as a huge positive on the other side of this.
At the end of the day real estate needs to be near high paying jobs centers to be able to grow in value ours are.
They are in densely populated an affluent first tier suburbs the major coastal cities, but not in the central business districts of those cities plus there are open air.
Think bethesda, and North Bethesda, Maryland relative to downtown DC.
Coconut grove to downtown Miami.
Hoboken to Manhattan.
San Jose to San Francisco.
Also gun, though to downtown Los Angeles.
Somerville, Massachusetts to downtown Boston.
Valid Kenwood, Pennsylvania, the downtown Philly you get the idea.
Open Air places not in close buildings.
That are easily accessible by car with convenient parking close enough to high wage job centers.
That are able to take it to attract the latest tenants and and this is really important provide a full array of services.
The luxuries and conveniences that both city in suburban people have grown accustomed to and in fact demand aren't likely to be given up on easily.
It's kind of Goldie lacks lock scenario here not to close not too far just right in terms of those locations.
What we've always believed to be the sweet spot that was close in first year suburbs, we even suite or in a post cobot 19 World We think so.
Second.
Landlord organized and integrated.
Curbside delivery programs that landlord organized and integrated curbside delivery programs at shopping centers and mixed use communities in densely populated first tier suburbs needs to be and our view a permanent.
Component of a properties tool kits for attracting customers and not just for food.
Facing delivering goods and services to the end user profitably has not been broadly solved.
Customer pickup in attractive convenient safe environment is the most important piece to economically delivering goods that last mile.
We will be a leader in landlord integrated curbside delivery on the other side of this.
And third it's not hard to see how the steady drumbeat of enclosed mall tenants, who have been moving at least partly to open air shopping centers over the past several years doesn't accelerate meaningfully.
In the wake of Cobot 19.
When you think about which opened their properties are most likely to garner a disproportionate share of that movement federal formats tenant mix and locations are pretty darn well position.
We think this is one of the most important sources of where new tenant demand comes from that's necessary to replace the covert 19 retail failures.
There's also a fourth and fifth and a six set of initiatives. We're working on that are too premature to talk about at this point, but they all relate directly to why all of us at federal our while patiently working through this awful pandemic today extremely excited about what awaits as we work into the other side later this year.
And next and for many years after that.
So as you sit back and take a break from compiling April rent collection staff.
Think about the future of the 25 or so publicly traded retail oriented real estate companies and business today.
Thank you agree with me that our locations are format, our diversity and innovative team should put us at top of that list.
Let me now turn it over to Dan before addressing your questions then.
Thank you Don and good morning, everyone.
FFO of $1.50 cents per share represented a largely intact first quarter.
As Don mentioned prior to the March impact of Cobot 19 on our numbers, we were on pace to outperform our internal forecast.
By about three or four cents per share.
With Covance 19 impacts representing roughly six cents of negative drag.
Overall the numbers in the first quarter were driven primarily by Splunk, taking position possession Ontime at 700 Santana row on February Onest.
Lower property level expenses, lower DNA offset by the aforementioned cobot 19 related impacts in the last three weeks of March which included higher bad debt expense than we had forecast lower contribution from our hotel jvs and forecast lower parking revenue and higher interest expense given the cash position we.
Built.
Our comparable POI metric came in at negative 2.5% for the first quarter.
But don't be alarm, excluding term fee headwinds, which were expected of a negative 1.8% and cobot 19 related Pos impacts in the same store pool of a negative 1.7% comparable POI would have been a positive 1% results, which would have also exceeded our internal expectations.
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Through March 15th we were also having a solid first quarter on the leasing front with almost 500000 square feet of activity leases of note, where merchandising was meaningfully enhanced and door rents increased include TJ maxx, replacing staples at indoor and Philly Burlington, taking the Bon ton box at bricks in brick and.
Jersey.
Old Navy at the old Pier, one in Melbourne, and Virginia, a renowned south Miami restaurant group signing on with a new concept of the former GAAP ground floor space to Cocowalk and converting retail space to creative office space for a cutting edge cosmetic line at the collection at Plaza El Segundo in La.
All examples of our ability to drive demand from best in class tenants across property types due to the strength of our real estate locations.
This has continued into the second quarter would deal signed over the last 30 days with two top grocers as well as a major office tenant.
Yes, we have seen real estate committees at these retailers opened up in recent weeks with side approvals coming in at several additional locations.
And in a bidding war for our fairway grocer location on our recently acquired Brooklyn asset and you see demand for our real estate from top tenant continues, albeit at lower volume.
Even in the midst of a global pandemic.
Let me take a step back and take a few moments to comment on the overall profitability of federal from a fundamental perspective.
We have a high margin business at the property level with fuel margins just under 70%.
Breakeven cash collection for POI at the property level is right around 30% breakeven cash collection. After DNA after interest expense after maintenance and leasing capital is roughly 60%.
While our second quarter and the balance of 2020 will be challenging no doubt.
Our cash burn rate from operations, even in the second quarter should be minimal.
Let me take a moment to to highlight our updated disclosure boldly and Dom highlighted our cobot 19 business update and its availability on the front page of our Investor section of our at our website.
Additionally, in our 8-K supplement you may have noticed an office tenant Splunk is now our top tenant.
Albeit at a very manageable exposure of 3.4% of revenues for those unfamiliar Splunk is a leader in data software analytics security and operations a public company since 2012.
Because of market capitalization in excess of 20 billion roughly $2.4 billion of revenue last year and has a leading industry position and all things data.
Lastly in March we posted on our newly designed federal 1962 branded website, our inaugural SG focused corporate responsibility report entitled a sustainable mindset.
It is a comprehensive overview of our longstanding commitment to SG throughout all aspects of our business.
Now onto the balance sheet and liquidity in mid March we drew down close to our entire $1 billion credit facility given turns over the concerns over the stability of the financial markets.
At quarter end, we continued to have that $1 billion of cash on hand.
Since that time, we've raised an additional $400 million and an unsecured term loan. The term loan has a one year maturity with a one year extension option and an interest rate said at LIBOR plus 135, given our a minus rating.
These moves to provide us with substantial pro forma liquidity of $1.4 billion in cash on hand, and available credit capacity as we navigate through these uncertain times.
Our credit metrics remained strong with net debt to EBITDA of 5.7 times fixed charge coverage at four times on a weighted average debt maturity of 10 years we.
We remain well positioned to manage through the challenging environment. We currently face like we have done time and time again over our 58 year history.
And our 52 year track record of cash flow stability and increasing dividends.
Our aim minus athree ratings from S&P, and Moody's respectively should provide us with continued access to the unsecured bond market at attractive interest rate levels.
We expect to refinance our manageable debt maturities through.
340 million through the year end 2021, primarily in this market.
Our diversity of other attractively priced funding sources continues to be a differentiating factor for federal.
The quality of our real estate still commands a premium pricing in the institutional sales market as evidenced by our most recent asset sale last week in Pasadena at a four and a half cap rate.
And the ability to partner with attractively priced passive joint venture capital remains high.
Now let me provide you with a more fulsome update on our development pipeline at 331.
Roughly $675 million is remaining to be spent on are in process pipeline.
That pipeline is disclosed in our 8-K on pages, 17, 16, and 17 and outlines our redevelopment and development respectively.
Updated timing given the government mandated shutdowns at our two largest projects assembly row and at Santana row push out the timeline somewhat.
250 to 275 million is estimated to be spent for the balance of 2020.
With most of our projected second quarter spend being pushed out at least a month or two on average.
250 million is now projected to be spent in 2021.
With the balance 150 to 175 million in 2022 and into 2023.
Over 80% of that pipeline is non retail.
With 55 plus percent Amenitized office, and 25 plus percent residential all of which are located in first tier suburbs.
And note that 50% of the commercial office and retail is pre leased.
Also note that we have the ability to hit the pause button on roughly 280 million of this existing pipeline.
Which would reduce the in process pipelines remaining spend to less than 400 million.
To clarify at the current time hitting the pause button is not our objective nor our current plan, but as our hall, our hallmark, we will maintain discipline and those capital allocation decisions as we move forward.
As you saw yesterday, we declared a regular cash dividend of one dollar five per share payable in July.
Given the strength of our balance sheet and liquidity position. Our goal is to maintain a cash dividend and push our 52 year record of increasing dividends to 53.
However, again.
The management team and our board of directors will be extremely disciplined and setting our dividend policy.
As we knew as we navigate moving forward.
Lastly, AFFO guidance for 2020 was was withdrawn back in March we hope to reintroduce guidance when we have a better visibility on the impact of coven 19 on our business over the coming quarters.
And with that operator, please open up the line for questions.
Thank you, ladies and gentlemen, as remind you can ask your question you need to pay Stein wanting your telephone to with Jive question based upon key please standby lobby capacity kuni roster.
Your first question is from the line of Craig Smith with Bank of America.
Good morning.
Good morning, Craig.
Yeah.
And in talking about the expanding enhancement of the curbside service and delivery is any of that going to require any zoning differences that you might need to have to accommodate that or are you well within the bounds of staying within your current zoning. So as you know.
Craig Craig we've got a lot of different property types and a lot of different places in we don't expect zoning to be an issue. There are clearly certain things that need to be done for example at Pike inroads we needed to.
Get the county to.
Give up some parking spaces that they get paid on.
That they were able to do which I just love at most of our shopping centers, that's not a problem, but we do have fire lanes and other reasons things that we need to work through so what's the most important thing I think to understand about this is that the evolution of.
Curbside pickup and the integration of it from the landlords perspective with multiple tenants I really think is something that we are just starting but over the next quarters and years will become such an integral part of what we do that will solve the inherent issues.
That are bound to come up with 100 properties.
And implementing this along the way, but zoning should not be the primary concern.
Okay, and then just real quick are you, having any discussions with retailers who are looking to move to an all percentage rent as opposed to six minimum rents.
Sure, Let me put APEA this way.
Every tenant is trying to somehow renegotiate the contract and all kinds of ideas are coming through.
What they would what it is that they would like to do.
And this cannot be I cannot state this enough.
The beauty of this place is that we do not have a policy on how we're going to.
Handle.
Certain types of tenants.
Because of our size, which is relatively small and manageable we can take a senior executive whether it's me or when do you see or Jeff berkowitz or beyond sweetener more lands billings leave there there are.
Kind of us at a senior level that can have each of these conversations with each different business each different retailer specifically to come up with the best solution. All kinds of things are being asked as good as you can imagine but at the other side of this retailers need to be.
In productive shopping centers, they need to be in places, where they're going to be able to make money where at the top of those lists so our negotiating ability, while certainly not perfect and our contract well certainly not perfect are pretty darn advantageous to be able to allow us.
To get too.
Hey, economic solution on the other side of this do I expect some percentage rent field of course, I expect some percentage rents deals, but I also expect different conditions under which operate including some easing of restrictions that were hard for us to.
Redevelop for example.
Along the way so there's a lot leaves a long way to play the stuff all out yet over the next six months or so.
We're not rushing.
We're going to have one by one conversations to get them.
To get them right.
Okay. Thank you.
Your next question is from the line Nick.
Alico with Scotiabank.
Hey, Good morning, this is Greg Mcgarry Nick.
Don I know, it's early but how have great collections trended so far.
You have any rough estimates or expectations for final collections relative April and then I'm sure you're spending a lot of time thinking about financial solvency of your tenants. We were just curious what percent you think might not be recoverable in terms of rents maybe another way to think about that is what percent of leases do you expect to switch to cash accounting.
Gosh, Greg that yet so much in there I'm going to go to the first part C of Melissa and Dan add anything to it I suspect as is going to be no.
But it could look I could tell you that may has started out more ahead April I don't even know why we're ahead April.
But where we were in terms of at this point in April and that's an important point to make for the first few days that that we've collected more than we did in April at that point, whether thats sustainable or not I don't know Bull, obviously, we'll see what happens all the way through and in terms of of the.
I'll make one quest one point on cash first accrual in the accounting part of this where my focus is.
Is it really not so much on where yours is in terms of those those focuses mines all about how on the other side of this we've got a growth plan with wit.
With new tenants.
And different places to get those new tenants as I laid lay that out and those places that those tenants is that really have a business plan going going forward and that really.
All that about taking.
Yes.
Things that are mixed use property, but it's one that were highly focused on to make sure. We're investing in the best ones.
[noise] married thank you.
Yeah next question, it's been a line of Christie Mic law that Citigroup.
Hi, Good morning. Thank you Don I just wanted to follow up on some of the comments you made any opening remarks about your markets and demographics and so on one hand, you're in coastal market that it seems like things are shut down longer but you also have higher income demographic that may not be as impacted in terms of job losses, but you also have a longer term.
From trend here of potentially greater work from home trends that could result in more people moving to lower cost of living markets that could impact that historical highway high wage job centres that you discussed how are you thinking about all these factors today, not just from a retail perspective, but office and ready as well.
You know Chrissy first of all who knows right is <unk>. This is really is really hard to predict where we're going to go well other than to say I believe I think about yourself and go Oh.
Oh and your team in how comfortable you'd gone with services the level of services that you bad over the past five or six or seven years I don't believe that that those urban and you're not you're not as urban some some of the folks in your spot, but those urban folks are going to move out to you.
Second third year.
Suburbs, it's it's just too it's too much of a drop off in in what was available to them, but I do believe in those first year server suburbs with <unk>, where we are.
<unk> to have it all I do think there's this is going to be a resurgent for cars and your own personal transportation device as opposed to mass transit for awhile and maybe longer in awhile I don't know, we'll see how that plays out but I think that's critical the other thing and I don't know if this if you know.
Whether we disclose this or not but I find that interesting in our big three the assembly row, Piken Rose and Santana row, all of whom are in those that first year suburban area right.
While we absolutely did not collect a lot of the lifestyle rent on the retail side overall, we collected two thirds of the rent do in those properties.
The residential because of the office component to it so the notion of of those places as kind of centres of job.
Oh, those places that standards of living and and the new.
Style for doing that I think we're running in the middle of it right, where we belong. So you know the specifics your question right, we'll have to see let's see how it plays out but at the end of the day. The real estate is short conducive to where the jobs are whether there.
Oh, my or in the existing place a threat or and certainly for the retailers to be able to create.
Sales and value there, so I'm feeling pretty good about the position.
Okay. Thanks for that.
I agree I'd, probably an anomaly [laughter] before I left you know I I understand your dividend payment track record in the import.
That's a bad but the dividend can be an annual a payment just you know you're doing a lot to swap liquidity in terms of you know, including the new term loan can you discuss the board decision not to just start to suspend the payment for now given the current environment and and try to take more of a wait and see it folks.
Very very very much so <unk> listen.
A lot of people or would say and I've seen in some of the notes well federals very proud of their long term dividend record and that's why they keep making their payments are that's why they made their payments that's not true well. It is true that we're proud what's the reason that they get sick.
People reason to continue or a dividend payment to the extent weekend is Dan said, we'll evaluate it ever three months now gets you you're you're in.
<unk>, it's because on the other side of this down the road just going to have to be equity issues.
And the ability to effectively look back.
At 2000, and it's one day and say the company was able effectively to maintain that very important part of total return.
For a for a shareholder is really important in our view.
So today as we've.
Understood as we understand where our ability to access capital is.
Oh that is going and and you know I think.
Alluded to we'll have more to say about that that <unk> <unk>.
You know a couple of weeks or whatever.
<unk>.
With additional financing then then.
We think it's important to to at this point declared July.
Well absolutely.
<unk>.
Reassess that come August with respect to to the next payments, but the difference between simply annual and quarterly in the whole scheme of what is now today, you know $1.4 billion worth of Ah capacity is made says for us to make.
80 million dollar dividends declaration.
Okay. Thanks, Thanks Huh.
Unix question, it's been a line and ask San Diego to talk with I personally.
Mourning mourning Don.
And and Dan and hopefully Lebanese to burn it was one of your restaurants that you're looking that's on that 25 to 35 left.
So two questions from the.
The first one Don is how do you when you're working with 10 minutes How'd you make them realize that rents are contractual that this is not some new era, where sadly tended.
I mean, we've even seen some big time, it's like a loss where they suddenly can arbitrarily get you know this right to not hey, how do you enforce it makes clear that tenets half the absolutely oddities contractual obligation and that that this is not something new right that they've now can can use whenever they get into a.
Distressed situation.
Well I at first of all I don't know how to answer that question I mean.
They understand that.
It is a is a negotiation there is.
There is business is trying to take advantage of us situation to effectively board a contract that on on.
<unk>.
I don't know why anybody would be surprised.
At a time like this and so you you take your your legal rights. Your contractual rights you you put them up against the viability of the company that you're talking about your alternatives and where do you think there you can go and where are you going to be on the other side of this and you see what you get what you can get what you need.
Because by the way, we want some stuff out of that <unk> that contract and so the negotiation. So it's not about explaining to them. They're lately you know, they're legal obligations they understand illegal out obligations and the default rates. The bolt notice is that we're sending make that very clear behind it. So yeah, I I don't really know how much more.
To add to that that I could.
Okay, that's dot net.
Oh, that's helpful. And then the second question is you mentioned the value in the benefit of the office and the residential for your mixed use as far as powering through the overall centres rent collection as you look at your portfolio across your lifestyle, you know projects your wrote projects and your traditional shopping.
Projects are you noticed seems better trends with the mixed use because of that commercial element or is it really coming down to that particular 10 didn't mix and that you know one center just by nature dependent mix. They hide was really the overall driver why that Senator did bedroom sort of curious if it basically a hobby the office and the residential.
Provides more stability, where if it really comes down to dependent mixed in which case a shopping center with a lot of essential well, yeah, maybe do better.
Affords you guys think about how you're gonna, how you're going to kind of projects you know it <unk>, yeah kind of mix, if you've always that kind of mixed becomes even more important.
Let's put it this way.
First of all we do believe that the residents in particular in arm excuse product projects because of the Reds are generally.
<unk> and where we are more apple and and at least so far have maintain their jobs more so than you know rental tenants in God of a traditional use for an apartment you know where you're in an apartment because you can't afford a house.
We don't generally have those type of tenants in the mixed use can places we have so generally you know I'm not surprised that we're collecting as well as we're collecting.
Throughout those uses there are there for a reason there are there because of that Amenitized base and so it most of them have the wherewithal to pay and they've got the Amenitized base down below even though the Amenitized base is is less essential if you will as defined by grosser and.
Drugs in April and May well leave me the stuff that's down there is on the retail side of those those mixed use project is essential on a longer term basis, because that's their life.
That includes the right food then inclusive write shopping that all of those pieces are critical to why they chose to live there in the first place. We're in the first two months of a global shutdown.
Making long term predictions about about the collectability overall, whether it's the those particular tenets or future tennis is it you can't take April rents to make that decision.
How about you know going forward there I feel.
The mix that we have moving toward urban mixed use and even our grocery anchored in you know infill locations are all the trends that where they are both for we'll only be solidified on the on the other side.
This pandemic, so that's how I view it.
Down that's helpful. Thank you.
Your next question <unk>.
<unk> still shaped tank.
So Bonnie.
Hmm operator, let's move to the next question.
<unk> female capital markets.
Yeah.
Just following up on on my last question and go back [noise].
I'm actually opening the curbside and being a leader there yeah, she's getting all the projects you know on your way I'm planning to big developments to read developments the boss repositioning.
Looking at somebody industry being impacted or something.
And she'll be worse off or.
Future expansion plan there any additional color here on just Oh, you and your team or maybe shift your plans around or care at all during basic training.
Or any additional I'm dying or redesign it gets going beyond just the curbs Sars cases, there you're signing them, arguing or your d. wholesale rethinking <unk> in some cases here.
Yeah. That's a that's a good question Jeremy it. It is it's no there's been no wholesale rethinking I mean effectively.
And it does go back to what I was saying, saying before.
We.
If you think about physically where are places are.
And what advantages we have coming out of the recession based on those locations. Then then.
We want to exploit as best we can see advantages we see.
Those advantages.
Include.
Obviously.
<unk> enhance level of service curbside, the big piece of it but it's it'll be the way we do curbside going forward. That's the real differentiator think about how comfortable it is if you live in a community to use your shopping center for all if you code for all purposes for all.
Services that that's you use sometimes you feel like scrolling.
Punch you got 20 minutes and you got to pick something up and move along and everything in between so so we want to take advantage of <unk>.
Position that way certainly open air versus in clothes are to imagine that's not an advantage and so we want to take advantage of the formats that we have now coming out on the other side to the extent, we're looking at new projects to your point you know we will look.
<unk> with the best information, we have at the time, but as I sit here on may 7th or whatever day. It is today in the middle in the middle of the crisis I Kinda like where we are and how we've we've.
Despite what will clearly big you know much tougher environment to to produce results for the next quarter to.
Oh, Yeah sure and then a second one for me just a quick one year in Hoboken, I think you're in your partner that's an additional aspects I'm.
Just wondering what the later static nodes and possibly timing and then you know it's got some part of the capital plan, Dan G. laid out.
Quit 84, and then maybe on top of that how should we think about executing.
<unk> you had originally planned.
A good transaction market Oh come back up here.
Thanks.
Yeah sure. The first of all with respect to Hoboken, everything we thought going into Hoboken, We continue to think today, but as you would expect the deals that we're not.
We're not done yet we continue to look with our partner for other deals and have.
Made some pretty good progress in moving some deals a long. We're we're we're not going to call within right now we're going to sit back we're going to you know see how this all plays out I believe on the other side, we'll wind up taking that step back up let's see where we are at that point. So that's the that's the Hoboken.
He used to it just.
The second part of your question I had to do it again.
With what properties house that were in the yeah property sales in the in the pipeline that again. It then you only want to college.
Yeah, I gotcha, well, we're just going to take a pause.
On that right now marred to tell where those markets would be you did see that we did clothes on pasadena in the quarter by the way and at <unk>.
Which you know says something but obviously that deal was was negotiated before but they but they had the ability with full visibility of <unk>.
To back out of the deal and they didn't.
And you are priced at at a four and a half cap.
I think says a lot about you know real estate quality even in this environment.
Terms of future asset sales are on hold right now where we evaluate later in the year.
Yeah.
Yeah. Next question is for nine of make me and I'm like J.P. Morgan.
[noise] tended pull out and run rate in a way resolution do you think this is better or worse for the scene is the G.F.C.
Oh gosh my so different.
So so so different.
You know I don't I don't know the answer your question I I really don't know whether whether it's it's you know it's not the same as a as a big recession, obviously it is a.
I mean <unk>.
The globe has been closed down economically.
There's there's I don't think anything.
It's been like that and and so.
No as things start loosening up I do think as I said will be one of the last effectively.
<unk> you don't have those jurisdictions restrictions come off but I can also I also think it's less about having the restrictions come off and more about the the populace getting comfortable and feeling safe in coming back down to the community and that's going to happen.
Yeah, that's already happening in the markets. We're in today I know I I come to work every day.
And I know that that I've seen traffic in the states I'm in Virginia, and Maryland that does continue to to build I'm sure. Most of you have seen and nothing's changed with respect to the restrictions specifically, where we are so ads that builds back the question is how.
Oh can we get these businesses back up and effectively how soon will the market except them I'm optimistic, but I do think we're talking about 2021, where we see some <unk> any kind of level of of of normalcy an activity.
Okay.
And the press release, you talked about or construction pace because of safety protocols.
S. D.C. that is something that's just a temporary phenomenon or something along the lines more of a new Norman what <unk>. What are some examples of what's changed on the grounds for for the project.
Like everything else I think you'll see a slow come back to quote unquote normalcy, but I do but what what the safety protocols are right now are specific distancing specific roles with respect to cleanliness and masks and how many people can be working in a particular area I do.
I think that will that will for for the proper products that are close down as they come back up I do believe those protocols will be in place whether they're in place forever or not remains to be seen acquitted stuff. It's stuff like that which is you know frankly, the same protocols that you see.
Grocery store or anywhere else during the crisis.
A lot of consistency.
Okay. Thank you.
Yeah next question is going to Atlanta, <unk> Green Street it by anything.
[noise] Hey, good morning.
Given your ability to access that capital would you consider levering up to no one off sense on the acquisitions front over the next it's a year or so if you think there you know unique distressing investment opportunities out there.
Going to talk about that Vince late.
It really here. It's a good question now now look remember everybody's clever enough.
[laughter], whether they like it or not every retail or every you know ever real estate company. It it cetera from our perspective I love that we came in here so well capitalized so that you know incremental that rang up is not a ah.
You know is not a strain on the business. So we will be able to talk about then think about that I. You know there may be distressed opportunities going forward, but but as with as with everything.
You know looking at those carefully and really deciding that that's where you're going to allocate your capital rather to kind of what's it got and as you know we got a lot of stuff in in you know in the works and opportunities within the portfolio personally.
That's going to take precedence because we know what is that we're getting and you'll never know what you're getting when you go after discussed.
<unk>.
That way so.
To say, but certainly something that'll be on the radar later in the year.
Yeah, I I think the the way to think about that in the way, we think about that as balance and you know and clearly kind of maintaining balance through that.
That and and well while yeah. We're we're not the you know raising equity.
Talk level, we have the ability to kind of task bar.
Assets and raised equity at the asset level very cost effectively, particularly even in this environment. So I think there's gonna be balance from that perspective, and hey look we do hope to be able to play a little offense, but you know, we'll see we'll know more as a as things unfold.
Thank you that's helpful color <unk>. This switching gears a bit I'm curious how do you see second quarter rent payment disputes between 10, and some landlords being resolved. If you don't reach an agreement on rental Perl or rent a basement for 10. It just says I don't feel like I need to pay but you have a legal contract.
How is this good settled.
Well game.
Not much some on the federal call something quick you know you. Please.
Sure.
Then go ahead I'm sorry.
You guys here My question, we did hear it and some don't go far but.
I don't know how he does this stuff it's amazing.
Sorry about that.
Okay Alex.
Help me again, Vince where we go is pizza tendency to okay. We don't look at the end of the day.
There has not been a rent.
Non payment of rent so far.
And we don't expect there to be for which we have given up our right.
This is not unilateral and so we've you know we preserved our rights I just threw default are effectively through the contract self and so it has to be resolved it'll it'll either be resolved I mean.
The likelihood is that.
Individual negotiations will resolve the vast majority of of those contracts for those companies that frankly can't pay because you know they'll wind up filing we'd seen a bunch already will continue to see that and the courts will effectively.
You know vet that out those are the two ways that that that effectively it happens and so you should continue to see that through May Andrew frankly.
Okay fair enough if I could just sneak one more quick one and do you have any exposure to co working operators in your office portfolio.
We do we've got we've got a reduced deal that is signed doubted cocowalk.
For 40000 feet or so every indication is that that.
That deal continues to go through.
And then we have a small deal.
With them also I think get biking rose on a floor and and you know they're under contract. There. So that's it's limited, but that's that's what we got.
So are just to clarify the one that I can roads, that's already in place or that the new on that one minute plan for years.
That's been a place for years, it's a small lease and then the big one is down and Cocowalk that has not you know that's still under construction being built out and that's all we got.
Perfect. Thank you huh.
Your next question, it's been a line of Christmas capital Y. security.
Good morning, guys Huh.
Band on the year credit facility a balance I guess the question for me would be.
Is there any plans to pick it up maybe walking right in longer term with some long term.
If you did what what sort of price you would you get right now in the marketplace.
Interesting yeah.
Well our credit facility has a 2024 maturity we had the right to extend it to 2025, so it's actually pretty well.
L. out there and it's actually very very attractively.
The price. So we have maximum flexibility there clearly we are going to avail ourselves as an e. minus 83 rated company you've seen a lot of access a lot of peer companies in that credit rating access the market on a relative base is very very attractively will monitor other market and looked to be opportunists.
<unk>.
<unk>.
And then I think the same range that you've seen ill.
Realty income Boston property some of the other blue chip a rated companies access the market.
Yeah, and do it at the yeah, and an opportunistic way. So clearly that's something that I I think you've seen some data points out there and we would expect going to be in that in and around that range.
Okay. Thanks in in my other questions honest, maybe you're dumb question, but an African anyway, which is when you put a tenant into fall.
What are the <unk> what are the consequences of that to the tenants and how does that help work hurt your ability to sort of get them to where you want them to from from no. That's a great question <unk>, that's kind of dumb question at all and and the answer is embarrass the that the single biggest thing you got to think about is low.
Companies retailers and and other companies have in their credit agreements and there were financing somewhere the the covenant that they got to be up and fully paid on their their rail obligations and so you know what we saw in in.
Early April was you know when we would threaten or go to the fall we'd get hate.
Yeah. Those same companies are trying to negotiate with their lenders so effectively get relief from that so that particular provision to the extent, they're successful will become you know the ability to full will be lessened there'll be less impactful, but the bigger thing, especially for federal is on the other side of it.
<unk>.
They need us.
In in in a lot of these productive locations and you know the big our word the relationship word can't go one way and so the notion of being able to work something through to be able to get paid and work has been extremely successful frankly in a number of of.
Negotiations that that that we'd got but but you know the fall thing on an obligation even hundreds as big giant catch all thing called <unk> 19, which you know.
Generally you think well I can do anything I want because the whole world shut down.
There's another that's coming out the other side business and coming out the other scientists there's gotta be business, you know happening and that stuff is.
You're not paying a rental obligation and defaulting somebody and not having that be be be honored without negotiating it through is a pretty pretty big black on in terms of a negotiation.
One other thing Badger, Wendy I, just want to jump in and strap is that while there are certain outliers certainly in the negotiations that we're having data gain like on numerous I've gone mentioned, you know retailers wine productive locations. They need then they want to work and sounds.
And then we want to work out of that so there is there anything what I found it again <unk>, there's a balance in the approach that we're seeing in the negotiation so again.
Anybody trying to work out of this and gain production and and I'm seeing that and I gave me that conversation. The other thing I want to point out one more thing and.
But let and learning about the retailers he's been beneficial to laugh because there are in a time that we haven't been in before so we're learning things and not to retire they're sharing more than they were channel four and it's helping us as we think about how we want to move falling with our business plan.
Thank you for that.
Yeah next question is from Linda time chant free.
Hi, Hi, Good morning, you look at a low collection categories, which are about a third if you're any B.R.. That's the breakdown between national chains versus more local operators and then maybe investment grade versus front investment grade.
Ooh.
Just looking through reams of data to see if we carved that up.
With respect to some of that specificity.
You can you just saying animals lines, yeah, we could probably take it off line Linda I don't think we've got that sliced and diced in that way with regards to adjust our <unk>.
<unk>, the lower quality I mean, the kind of the lower collection.
Tears I mean, if you look at page.
Three on our portfolio composition, and our of and portfolio composition are coded business update that gives you kind of the overall portfolio, but we don't habit necessarily carved up.
So let's call up off line.
Okay, and then you know.
As the states are concentrated and start to open up it seems like restaurants would see their businesses recover faster since you know a lot of them already open but any sense of the patience top line, how the pace. The top line would it be cover for the other though collectors or you know what these tenants are saying in your conversations with them.
Yeah, I I just think it's it's it's different by jurisdiction by jurisdiction. It's just too early to tell kind of how that top line is.
Come out of it you know I think it's two we'll we'll see.
Yeah definitely based on like a consumer how the consumer feels about coming out and Reengaging. So that's why it's selling point in time, an operational standpoint that would change and all this stuff like that curbside pick up and and all the operational initiatives that we're taking so that that customer can feel comfortable and face.
<unk>.
Thanks to just one sign of one what's your longer term perspective on fitness tennis I know, it's only 4% of A.B.R.
Next says traditional and boutique fitness chains now what's the right next in your view as it relates to customer command and then also the credit worthiness. These tenants.
Let it depends you know.
In a.
Lifetime fitness is a good example of a of a company that.
Pay their obligations, we don't have any lifetime tennis, but they pay their obligations in April are very optimistic about where their where they're going to come out on the other side.
When I look at fitness I think it's a critically important category in the type of type of shopping centres and mixed use properties that we have do I do I think that you know people are getting used to.
Exercising at home well that stay there I'm, a big social guys. So I very much believe in the re socialization of the will and and the importance of of Health club now when they open up obviously, they're going to open up with restrictions in terms of the capacities and number of people that can be in there in the space between them.
How that plays out overtime I don't know is there a place for fitness in the in the long term future absolutely from my perspective.
Thanks.
Your next question his friend align the floor Sandy Compass point.
Hey, good morning, guys. Thanks for taking my question a question I had to on.
P funds and particularly regarding your restaurant business.
The fact that you're setting up your own 10 million dollar funds, presumably those are loans and grants that you're going to give to the to your restaurant tenets.
<unk> does that.
How what percentage of your restaurants have applied to for P.P.P. loans. It do you have any insight into that and then what they've been granted as well and it's it's to replace the or or to augment the P.P.P. funds potentially.
Yeah, No I understand your question and and he's are completely separate so I don't have an answer to the to the applications. I don't think we do have how many bar restaurants have have applied to receive okay, almost all install golf applied.
Oh, we feed them I mean, we don't know right at least half really now yeah.
Good news here have a bar have bar restaurants, I've ever see below.
But it but what we see in our <unk>, we're doing it it's a different.
It's a different purpose first of all they are loans not grass under our under a program and what they're about the P.P.P. money. You know is is in order for it to be forgiven has to be used largely for retaining employees in our jurisdictions, they're not open yet.
And so one of the things we saw as a problem with the way P.B.P. was working with a timing issue the difference between when that money would be available when it what it could be used for versus what what what we're trying to do was pick our best players not it's not available to everybody.
S players in affectively make sure that we can shorten the time.
By giving them loaning them those proceeds for.
Equipment start up restocking inventories things like that so that they can get open sooner. So it's a very different purpose and obviously, it's very limited relative obviously to the T.V. program.
One other question maybe for me I know that a j. crew was crept into your top 25.
Can you maybe comment <unk> generally on on.
You were were what you deem to be you're at risk tenants, whether on how much they have rents there are above or below mortgage and what kind of.
Potential impact it would be to to return at some of those that and maybe and how many of the J. group is locations you expect to retain falling into bankruptcy.
Early to tell but it but you know we've got about 11, we've got five j. crew's and six made wells when I looked down the list. They are all productive places and so I would expect I don't know for sure yet, but I would expect j. crew to want to restructure those deals and not regret reject those deals.
Which really makes them just like everybody else.
Out there who's who's the you know Ah entering the negotiation phase so yeah, I don't know, but when you look at where ours are.
You know, we've got both made well in a j. crew at.
The Grove in Shrewsbury at Barracks road in in Charlottesville, Third Street prominent and then another it Santana another at the point. These are there there are really good location.
And so in terms of being able to to either cut a deal with them or backfill then I feel pretty darn good they're in their in our best places.
Great.
And and and in terms of your other at risk.
As as comfortable about those or or no no I might be more it's I don't feel comfortable about anything or in the middle of a pandemic here for basic and so you know we've got tenets that haven't paid and we're working through the negotiation. So no I I look I can't on the call go through the top 25, 113 25 with your dad can do that with you separately, but at the end of the day.
<unk>.
I got to look at a real estate.
And I feel pretty darn good about the real estate I hope that helps.
That's great. Thanks done.
Yeah, No further questions at this time I would like that <unk>.
Thanks, everyone for your time today hope everyone say safe.
Thank you <unk>. Thank you put your participation and accepts you now disconnected lines.
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