Q1 2020 Earnings Call
Greetings welcome to reach a centres first quarter 2020 earnings call.
At this time, all participants will be English and only mode and brief question answer session will follow the fall presentation.
If anyone should a car I figured assistance during the conference. Please fresh start zero on your telephone keypad.
No there's conferences being recorded.
At this time altering the conference over to Laura Clark Senior Vice President capital markets Scar Q. may begin.
Good morning, and welcome to regions. He's first quarter 2020, Ernie <unk> journey needs today are based upon our president and Chief Executive Officer, My My Chief Financial Officer, Mac Chandler Cheap investment Officer, Jim Thompson, Chief operating officer, and Chris by the F.C.P. and Charger.
As a reminder, today's discussing contain forward looking statements about the company's feature business and financial performance.
These are based on management current expectations and are subject to risk and uncertainty factors in risk that could cause actualresults to defer materially from these statements are included in our presentation today and and our filing for the S.P.C.
But discussion today also contains nongaap financial measures they comparable gap financial matters are included in this quarter earnings materials Olive what's your opinion on our Investor Relations website.
I will now turn the call over to Lisa below draft Reconceive key priorities and why they call. The 19 pandemic a presentation, providing additional information regarding co. The 19 business upbeat an intact it could sit on our website Lisa.
Thank you are good morning, everyone.
The last couple of months, we've been an experience that.
None of us could ever imagine any.
No one that any of us will ever forget.
And hope you're all well.
I know several view them personally impacted during a challenging times.
And our thoughts are with you.
I thought that appreciation or also those on the front lines healthcare workers.
Safety officials first responders delivery drivers and did today many more the employees of the many retail businesses that continue to provide our country with a central goods and services.
All all are working so courageously to sir protect and provide for all of us.
During this pandemic reasons he has been dedicated to ensuring the wellbeing of our team member.
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And the people in the communities that are property so.
We are fortunate to have the resources in systems in place to allow it seems to work remotely.
At the same time my property, an asset management teams have continued to respond appropriately.
So any onsite tried it with us.
I am extraordinarily proud of how everyone at Regency has responded.
And I'm, especially proud of the tireless work performed by a property management team.
I think all of you.
As with any major disruption.
How well you are positions at the beginning of that disruption is so critical.
Most companies position to stray we'll have a significant advantage to emerged successfully.
Every just see we have worked diligently and thoughtfully to build a company that can withstand challenges at adversity.
Through the strength of our on equaled combination of strategic advantages.
Which have never been more relevant than they are today or people are portfolio or development program at our balance sheet.
Our portfolio.
Focus on necessity service convenience and value more than 80% of our national portfolio of neighborhood and community shopping centers are anchored by a grocery store.
With another 10% that if he didn't mass merchandise were like Walmart and target.
National drug store or a home improvement store assesses love or the home people.
Or local teams 22 offices throughout the country I've been working diligently tennis and benders, enabling all of our properties to remain open an operating allowing okay continue to provide the goods and services that the surrounding neighborhoods need.
Exactly April approximately 60% of our candidates were allowed to operate in some form including categories such as grocery draws banks restaurant pet at office supplies.
The remainder of our football portfolios occupied by many basketball.
Hi, credit quality retail or such as P.G.S. or Burlington as well as many other refill the service provider that are anxious to reopen.
We also benefit from a pipeline of high quality developments in redevelopment.
That are talented investments in such a structure to provide us the timing and financial flexibility.
Affording us the Optionalities Ida continue to move forward during this time.
To pause positioning these projects for future evaluation over the long term.
Lastly, but certainly not least.
Agencies greatest as Vanity is are extremely strong balance sheet featuring low leverage.
A low payout ratio the highest level free castle in the sector.
Quality to satisfy our commitments and thoughtfully managed to maturity.
This intentional positioning is a key element of our strategy and maintaining the financial strength is a critical important.
Considering the possibility that we may still be able to maintain the current dividend even beyond this quarter given the benefit of our solid financial position. Our board approved full payment of our give at at at the rate of 59, and a half as per share.
That said over the coming my management and the board will carefully monitor the extent and success at the opening of the country and economy consumer behavior retailer performance actual regency result.
Our view a future right selection and then alive.
And even though we recognize that there may still be on certain see when we have our earnings Paul with you in August.
We should have a much better view of the impacts from the pandemic intercession on our company.
I want to emphasize that the resulting future major decisions will be very deliberate. This this includes the decisions related to the level the quarterly dividend.
We must and we will weigh near term liquidity and balance sheet metrics with future expectations for regency football yet.
Including preserving our financial strength to best position.
For cheating or strategic objectives, I sustained out performance.
None of us could have imagined occurred challenges facing our country the economy retailers and the shopping center business.
But even in this environment I'm firmly convinced that regency will not only successfully whether that's priceless navigation bridge to the new normal, but also will thrive in the post pandemic world.
My beliefs goes back to the strategic advantage is that <unk>.
High quality necessity inconvenience focused portfolio.
Our value at asset management development capabilities.
The strength of our balance sheet liquidity position.
And our unparalleled team I've experienced professionals.
And this is my confidence is on library Jim.
Lisa.
Before I get into the details around cobot 19 impacts I think it is important to quickly touch on the solid first quarter momentum we were experience before the pandemic began.
First quarter leasing based rent growth exceeded our expectations.
While leasing activity is clearly been impacted by the Kobe situation.
Still been able to execute a number renewals over the last two months.
And our continued to negotiate good leases with numerous times.
Many anchor tenants such as publics target wegmans in P.G.X. as well as drugstores medical uses and banks continued to pursue new deals during this time.
We are already saying activity pick up in those markets were sheltered place guidelines are being relaxed.
And we are confident that leasing activity will increase once we have further clarity on reopenings across the country.
At least imagine the top priority for asset management teams continue to be maintaining the safety wellbeing of our team members tennis properties and customers in our communities.
All of our properties have been opened an operating from the entirety of the pandemic.
In addition to reaching out to each of our 8000, plus tenants and continuing to safely make regular on site visits properties.
Asset management group has also set up our tenet assistant website.
Bite includes resources that are candidates are able to leverage as well as direction on how they can access and apply for government or other assistance programs.
We recently hosted Webinars it hundreds of our agenda to tend to providing further information on regency's plans.
Successfully safely reopen their business.
As as the end of April approximately 40% of our tenants were closed although we anticipate within the next 30 days to see many of those retailers begin to implement plans to reopen as mandated closures are lifted.
We collected 62% of our pro rata patron for the month of April.
This includes a collection rate of over 90% from 10 is deemed to be essential.
Represents nearly half are pro rata it'd be are.
Collections for restaurants, which represent approximately 19 per cent of our totally B.R. was 41%.
And finally.
April collection rate for other retailing service categories, which represents a little over a third of around you'll be a B.R. was 37%.
Given the ongoing uncertainty in the marketplace and extent a future impacts we remain in the early stages of working with 10 at some potential rent a perl plan to help our retailers, especially those that have been totally closed for a period of time.
Allowing them to focus on reopening and start to rebuild their customer base.
We recognize it regency success is it always has been.
<unk>, so we need to work with a retailers understanding their needs well being mindful of our contractual rights long-term strategic objectives.
As mandates are lifted them, we began to Albert Genesis centres transition into it postcode environment. Our teams are prepared to make adjustments to the operation of our centers.
Such as facilitating more violent and pick up areas.
Adding hand sanitation areas, installing social distancing sonys reminders and prohibiting the use of certain common areas until they are deemed safe for all customers.
Just as regency team and portfolio unsuccessfully navigate through various cycles in disruptions over history.
Our teams are well equipped and doing everything we can.
Help our tenants and properties prepare to recover a successfully and quickly as possible.
Huh.
Thank Jim.
We continue to have confidence in our ability to create long term value through disciplined development it'd be development.
That said given the current environment is prudent to reassess the scope timing projected investment on each of burning process projects as well as or extensive pipeline.
We realize the importance of reevaluating our projects to determine if modifications maybe necessary as we think about the future needs to go retailers and their customers, including potential changes to design formats.
But the end of 2090, we'd approximately $350 million developments unbeatable much the process.
But nearly 225 million, we may need to be invested.
It's the onset of the pandemic diligently reevaluated future timing scope for each of these projects.
As a result of this process.
Did you finished construction on those projects that are nearly complete as well. So it was where we have the subsidy applications.
We will have best approximately $80 million to complete these projects.
You're also fortunate that out to select number of other projects construction was at a point, where we're able to pause without experiencing material impacts to a long term value creation.
This is allowed us to selectively dipper investment of approximately 145 million I've been process commitments.
For the projects could choose the reconstruction plan, including the village hunters like in Tampa and point 50 in Fairfax, Virginia.
Scoping costs are essentially unchanged.
Rather projects like Kerry town exchange of Richmond, Yeah, I bet in Harvard Square and market calmly Clinton in Arlington, we intend to face or investment in these projects radius flexibility as we determine the most appropriate future direction.
I Cope Republic market in Los Angeles, Fairmont, They said in the Bay area, where we have not yet started vertical construction, we get suspended activity.
To allow for more time to study and potentially phase. These projects that sounds like these require a more material reconsideration, Oh, Tennessee scope timing in return on investment given the impacted the ongoing response Toby 19 pandemic.
We will be a certain to update you revise planes as soon as they become more clear.
We are also thoroughly reviewing our near term investment pipeline will continue to position these opportunities to start while preserving optionality in order to me in order to best me the jar near term commitments until we have better visibility of or free cash flow.
We were fortunate to be in a position continue moving these projects forward will be assessed the timing and scope of our plans.
Projects, such as West part square in Bethesda, <unk> and the U.T.C. barks at San Diego, We remain excited to start these projects when the timing is right.
It's important to note that these projects are major we've elements of existing own shopping centres and he suffered timing up our incremental investment Medicaid at bar ability to maintain and away from the existing roster of tennis.
Continue to have conviction in the long term value creation opportunities afforded by these acceptable locations.
The same time I understand that these investments require patience and discipline to cornerstones of agencies proven investment strategy.
Mike.
Thanks, Mac and good morning, everyone.
I'll start with our first quarter results, where we were off to a good start for the year relative to our initial expectations.
Well not indicative of expected full your results I do think it's important to know that the operating environment was quite healthy.
However, after reserving for open receivables as a result of the pandemic.
<unk> for the quarter came in at negative 70 basis points.
As noted on a last earnings call. We did plan for a negative first quarter growth rate driven by bankruptcy related move out, but still or underline results were better than those expectations.
However, as many of you are aware gap requires that we reserved for any receivables we're collecting the entirety of the lease obligation is less than probable.
Given the current environment, we reviewed all receivables with emphasis on non essential tenets restaurants, local tenets tenants that did not paypal rent and I'll watch less time.
And he receivable that was less than probable was reserved and we will recognize income as those amounts of received.
This resulted in a bad debt charge the same property breath in the quarter of approximately $2 million above what we originally planned.
Related Leigh and as required by the standard the changing collectability expectations for certain tennis also resulted in a reversal of the related noncash straight line rent of approximately $3.5 million.
We will continue to evaluate our collectible are uncollectable leasing come reserves as the current situation evolves.
Now to the balance sheet liquidity position.
Over the years with committed to a rigorous set of principles in order to maintain balance sheets drinks and flexibility.
I did buy low levels of leverage maximizing free cash flow access to it but to liquidity to meet our needs and well ladder maturity profile to reduce risk.
As a result, we are very well position from a balance sheet and liquidity standpoint, as we pittard towards mitigating me impacts from the ongoing response to this health crisis.
During the quarter, we took several steps to for further solidify our position, including settling in our forward equity offering and drawing down on a revolving credit facility.
These actions when aggregated good property sale proceeds that closed during the quarter position regency, where the cash balance with $735 million, which when combined with on drawn capacity provides total liquidity at approximately 1.3 billion.
While protecting enhancing our liquidity position.
Also carefully managing all future capital requirements, including development spend property level expenditures as well G.N.A. and dividend payments as mentioned earlier by Lisa.
Importantly, and to amplify what Lisa said, we will closely monitored the ongoing impact of the pandemic response on our cash flows and future dividends will be subject to our ongoing comfort with our liquidity position or leverage ratios and our taxable income forecasts.
Lastly, as we previously announced we withdrew are 2020 guidance due to the extreme uncertainties be impacted the covered 19 situation.
We look forward to providing guidance again, when we have greater clarity around reopenings and the impacts to our business.
We understand the need for timely information in this rapidly changing environment and are committed to being a transparent as possible.
That n. as we did March we will provide material made quarter business updates if warranted.
That concludes our repaired remarks, and we now welcome your question.
Thank you at this time will now be conducting a question and answer session.
To ask a question. Please for a star one from your telephone keypad and a confirmation telling the indicate your line isn't the question cue.
You May press start to feel like to move your question from the queue.
<unk> consider using speaker equipment may be necessary to pick up your handset before pressing the star keys.
One moment, please while we pull for questions.
[laughter].
Thank you are first question is front line Christine Mcilroy what city. Please just use your question.
Thank you ask morning. My first question is for Mac I just following up on some of your opening remarks and thinking about just the construction pipeline and understanding your deferring 145 million of cutbacks.
Assuming for now that's just sort of pausing and crashing out that's stand in extending the pipeline.
Well, you revisit that potentially permanently reduce the scope of that was projects and reduce that plant spanned I know, it's projections and given that you've remove some of the yield productions.
Impacts should we expect these delays in interruptions will have on L.C.L. productions ultimately.
I think Christine good morning.
I'd say, we're going to revisit that pipeline continually it's it's still very early in the process.
And as visibility becomes more clear, we'll reassess these projects and as you mentioned that has to do a tendency and timing and scope you know R.Y. So it's a little bit too soon to say when these projects will come back on line and if so we elect not to pause, but but to stop but I I think at this point.
We were very much believe in these projects, we believe in the locations and the concept and we take long term, they're going to be terrific projects. So at this point, we just need to take a little more time to steady just projects. So I can't give you a home a lot more clarity at this point, but we're constantly revisiting those and and well no more.
As the quarters come by won't be sure to update everybody.
Okay question second question is from Mike We've started to become obviously I'm more conservative already in evaluating the collective L.D. if you're at least says what percentage of the of your A.B.R. did you convert to cash basis that have Q1, and maybe you could provide a little bit more color on how you will be.
Further approaching this process does he think about be accounting for a for to kill innocent firemen.
Hey, Hey, Chris had good morning. Thank you for the question I think it's a little too early to respond to that your first part of your question. How much did you convert to cash basis, well, we did at the end of the quarter was really about those receivables that we're on our books at that point in time and using it using April.
The April reaction to the health crisis to inform our our assessment of course it all day. So it was it was simply.
Our our our probability of collection says decrease for a certain segment of our town of has at March as we move into the second quarter I think that's where the relevance of your question will come into play.
There's still a lot to be determined there as we work through the progress of opening up as we work with our 10 minutes on least modifications to the extent, they're necessary and the context the context of all of those discussions and those agreements will inform us as we think about how the standard applies to revenue recognition.
And you hit the nail and ahead. Some of these modifications will continue to result in a cruel accounting some will be converted into cash basis, and it's on us and we'll do it the best job, we possibly can to inform you and all of our industries in stakeholders in that in fact going forward.
That'll be helpful. Thank you.
[laughter] Nick's questions from the line of Greg Mcguinness with Scotiabank pleased to see if your questions.
Yeah, everyone. Some signal you somewhat tire reports on the potential fall out of retailers due to the pandemic, primarily and apparel specialty retail restaurants I'm just curious what your exposure to Bankruptcy's have been best why this year or your watch list has evolved through the pandemic and what steps are taken.
To try and mitigate any actual haul out.
Hey, Greg.
Good morning, I'm, sorry, maybe a little bit of a broken record on too early to tell.
And in fact, it is I I think really.
From a high level nothing's really changed with respect to our watch list. Besides the end of our watchlist is about the same as it has banned it's it's been blessed and five per cent of variety are identified do we anticipate that there can be some acceleration and internet failures in bankruptcy pounds. Absolutely. This is this is an environment that will certainly result.
But but we haven't.
We have an added any and all that significance to our watchlist in some time and I and I don't think this situation has resulted in that occurring just yet.
And I I think I would add.
I think about the the the part of retail real estate.
We operate in.
I think it's it's best position whatever that both posts pandemic world looks like I like the fact that we are close to neighborhoods and that we have grocery anchored shopping centres and and the quality of our real estate, it's something that was true pre coded and it certainly going to be I think even more true posted as retailers continued.
To focus on having a physical presence, which I think they still need and if anything that perhaps this is highlighted some of the the difficulties and the cost of delivering enough picking up and that a physical presence really is going to be critical as part of their overall strategy and being close to the customer and having the best.
Patients is going to be of critical importance to them.
Right. That's there and then lease are you seeing much benefit from a paycheck protection plan. When you have your 10 minutes been successful in getting those funds them do they use them to pay rent third but more so just keeping folks employed men not you guys may need to step in and help on the rent side.
I I'm going to all a gym really dig into this this is discussed drive me the opportunity to give another shot at shout outs, our property management team, which Jen ultimately really has responsibility for saw allow him to get into the details but our team is done really has worked really tirelessly since the started this pandemic staying in.
Cats with all of our tenants in particularly those local tennis that don't have access to the capital markets to breads them through this and so I will I'll, let you in college and talk to that.
Yeah, Great. We've obviously spent a lot of time sharing information educating and in some instances really helping some of the local 10, it's physically fill out the application forms for assistance.
Posted webinars.
So we we I think we've done a pretty good job of helping.
Local folks get access to that.
It was programs and from a.
I can't tell you exactly what what the ratio folks who have had.
Benefit of that program, but I will say that there have been several tennis that.
Basically paid their rent in April due to the fact, they they were able to access though spot so.
There there there is indication that that has worked as we get deeper into the conversations with the tenants were certainly.
That that answer will come into play as as far as how we evaluate additional needs that but they may require to to reopen.
I think <unk>.
The next questions from the line of Craig Smith with Bank of America.
Questions.
Thank you.
Squandering <unk> mandates in some of your markets are lifted and non essential each other's can oakland.
What has been the consumer acceptance.
Of these 10, it's opening in terms more discretionary shopping.
Craig It's obviously very very very early Texas kind of led the charge where the may one opening.
I can give you some some limited what we're hearing from our folks in the field number one I think all the retailers that are returning.
To work if you will very very focused on ensuring our customers are.
Feel safe and and are trying to make sure. They have a very welcoming but safe environment for customer to return to so everybody's top of mind to make sure the customers feel feel good about coming back.
I would say from a restaurant perspective.
Full service folks right now there to 25% occupancy what we have seen in general is the full service guys are just sticking with the with the to go right now because I think that.
Are impression is they they are waiting for 50% occupancy were made make more sense to bring a folks back on line and and make in room dining more profitable for them.
That's not to say some of the Jersey Mikes and those kind of kind of folks are taking great advantage. We've seen it here in town that <unk> Burger fine where they have opened up they've got people inside you get good spacing and and the customer has embraced that so far.
Medical dental again cautious slow reopening.
And the one thing I would say in Atlanta, what we notice was when the salons opened up.
The lines as you can imagine we're out the door so literally out the door.
That's that is one categories, that's pop back pretty quickly obviously there.
Her instituting some waiting room protocols, some number of chairs but.
They're they're bouncing back pretty quickly the gyms in Atlanta were given a green line quite frankly right now what we see is you're taking a cautious.
Correct approach in.
Kind of waiting a little bit to make sure when they come out they've got a real good program they've got a.
Protocols in place again consumer confidence is going to be key really to all all of this.
For the consumer to come back.
And that's that's about all the color I got really from what I've seen so far.
That's great that's interesting to see where the priority fly just one of the thing I I was wondering if you know public somewhat more liberal rent relief program informed any of your rent deferral negotiations with your kind of.
[noise] short answer no.
As I, indicating the opening Rockford the early stages of negotiation, we're certainly not taking a blanket approach.
Oh, we're very <unk> read very thoughtful strategic and targeted each 10 it.
Will be.
We'll be handled individually.
Our goal is to negotiate a common ground to get a retailers open selling goods and services as soon as possible.
Fortunately.
We enjoy a high quality platform and the majority of our tennis perform well in our assets.
And want to be here.
So I think we're both very anxious to get this worked out and behind us and so right now I would say, there's there's a real nice balance and then negotiation.
They want to be there, we want them, there and we're trying to as quickly as expeditiously as possible.
Through <unk> document negotiation.
But conversations data will say have been productive positive and quite frankly right in line with our expectations.
Oh, thank you for that detail by.
Thank you great.
Next questions from the line of Shivani suit with straight your bank. Please just use your questions.
Good morning, So the region 16 has a history of working with a third party Capitol and and you guys certainly have a wide pool of capital available to you guys. So just curious how these conversations have trend in recent weeks, just particularly given utilization of course, we anchored centre distribution centres in recent weeks.
Incremental capital and demand there from somebody or apart.
Hey, Shivani. Good morning. Appreciate the question, we are I I'll start with just liquidity from a capital perspective.
Fortunate to be partnered with some of the largest pension funds in the country.
Cal PERS casters state of Oregon, and the in those longstanding relationships we have.
He said access to capital our partners as well have access to capital and the plan that Jim and his team is operating to work with our 10 minutes to minimize the disruption to encounter in cash flow to the best of our ability our partners are in agreement with our approach and that as Ben.
Not surprising to see I think that's a a product of a longstanding relationship.
Relationship between us so that's been comforting.
On the I think what you're asking is more forward looking product type question and I think are again, our alignment of interest is there a week.
Continues to be an interest in investing capital in the necessity based grocery anchored space.
In the private capital markets and our partners those that I've mentioned have consistently ask about continuing investment opportunity together with regency, given our historical performance. So I'd I'd say, our our vision of of the future of the space, which is positive.
And I think there's no there's been no better time to.
Prove out the concept than the relevancy of this product type them now.
Especially with it you know the essential retail requirement that this country knees and our partners <unk> agree with that and they believe in that as well and.
Going forward, though I I don't know necessarily that are capitalization strategy has changed in that I I don't know that reasons. These plans to add to our portfolio from a joint venture perspective has changed as a result of this environment. We we still feel like the portfolio. We currently on with our partners is.
Is about appropriately sized and we are actively looking to increase that sure.
But I do think it's also important and many of you have hurt us talk about this and prior in meetings one on one meetings as well as on calls that you know we've always we value those relationships with our partners and we always thought of them as long term and while we haven't needed.
Their capital for quite some time now, we believe that treating people right and and and doing yeah, well by your partners may it sometimes pay off in the future and who knows what the future holds and whether we might need to access third party capital and I. Thank the good thing is I believe that would be available to us.
If we such as.
That's great to hear and then in terms the mortgage debt on specific properties.
If the 62% <unk> that would potentially trigger any revaluation requirements are competence I guess is there anything we should be aware of their.
Thank you know nothing to be aware of that we've been in communication with all of our mortgage holders. In fact, we've actually closed on $225 million, a mortgages and the first quarter of this year and that many of those closings extended into the the shut down and the health crisis and I'd have to make it a point to.
Crushing congratulate our capital markets team, Andrew Mumford, who runs that that the mortgage business for us that regency has done a remarkable job maintaining those relationships closing on those projects are lenders. We appreciate them living up to their commitments when in fact, there wasn't opportunity knocks.
Do that again, I think that action speaks to.
Our relationships the value we've created over the past.
Unfortunately, the product I I think these lenders understand that they're getting into a durable asset class.
Highlighted by highly productive grocery stores.
The other day, we're happy and comforted to close those loans this quarter not at not this quarter close on this week this week.
Thanks for your time.
The next question comes from the line of Richard Hill was Morgan Stanley.
<unk>.
Hey, you got Ronald candidate on for a Richard Hill too quick ones for me. The first one is just going back to the dividend.
Just like a just a little bit more color on sort of the thought process. The bear because I think you know you know I think nobody really knows what's happening what's gonna happen over the next three 612 months, but are we supposed to read into that having seen need Perl data.
And things don't get worse, you know you felt comfortable that the dividend could be maintained.
You know at these levels, obviously, if things do get worse, you know everything's off the table, but just trying to get a sense of sort of what is the scenarios that were thought through about that decision. Thank you.
Of course, I'll, I'm really going to reiterate what I.
Set in their prepared remarks, and again, yeah I'll go back to something that is clearly part of our strategic objectives in that positioning or balance sheet to really be able to what Stan and oftentimes. We said the next recession, we never quite imagine that it would be like this but.
Intentionally strengthened and positioned ourselves so that we really could withstand some disruption and it's just it's early it is we're really early and this <unk>.
Situation tend to circumstances that we don't know.
What will happen over the next three 612 months, but was that said, we we came into this well really low pay out ratios right or I thought, though payout ratio is below 60% or add up okay out ratio and noticed 70% range and what that afforded us was a very high.
Absolute level of free cash flow.
Yeah, we worked to defer some of our capital spend on our developments that provides us even more financial flexibility and we do believe because we are there is uncertainty and so much that's on none, but there's still a possibility that we'll be able to maintain the parents live in it and so with that said, we were very confident and paying this second quarter to that.
But again as I said am I prepared remarks, we're going to monitor really close closely what happens over the next three nights the consumer Jimmy the mentioned it consumer confidence is such a big part of this and how the consumer behaves you can open the stores, but if they don't go is that's going to impact the success of our tenets.
And we will be we will stay really close to it and management and the board are gonna Maddox as closely as a critical balance because again I just said positioning ourselves to achieve our strategic objectives is is is critically important and we're gonna have to away.
Saying the dividend with that financial strength to ensure that we can achieve our objectives in the future as well and best be positioned to do that.
Helpful. My second questions, just dog going back sort of expenses.
Maybe keep provide some color on on how much of your expenses can actually be <unk> or in some ways that form right. I you know, we're assuming things like property taxes utilities, I, probably can't but just just how much and those can be deferred and the corollary to that question would be what level of land collect.
And it's sort of break even to cover those expensive. Thank you.
Sure <unk>.
<unk> perspective listen we believe we operate at best in Class shopping center at a best in class efficiency rate.
So when you really think of and then as we mentioned on the call all of our shopping centers are open and over you know a person's 60% of our our tenants are operating so when you think about that the flexibility within the light on ends of operating expenses, we feel like we're running the they're they're they're more fixed then variable although we're doing what we can.
And to to enhance and provide liquidity to ourselves where we can.
You can move the need a little more at the poverty level is on cat. That's that's certainly to the extent deletion environments slows down that'll that'll resulting from stadiums for my cash perspective to the extent, we have one time capital items that the property level parking lot repair repair to the extent, we can differ that capital.
Safe manner, we will and we're and we're we're doing that as we speak but beyond that.
You know from Illiquidity standpoint.
You know that there there isn't at the property level I think that were cheating our goals and the really the needle move it was with respect to our development pipeline and $145 million that we were able to in effect option to the future, which we felt like provided that helps with that confidence Lisa mentioned as we considered our dividend.
Oh, Oh, sorry, I'm, sorry break even second part question really good question. So from a it's about 50 per cent rent collection on the top one to break even before capitals and then after capitals, it's roughly around 55%.
Got it that's helpful. I just wanted thank you guys again for all the transparency disclosures and and everything you provided thank you.
Ears here, we appreciate it.
Well, yeah, Laura and Catherine do an exceptional job and we appreciate you recognize that.
Our next question comes from the line of Brian Hawthorne with RBC capital markets. Please Caesar questions.
Hi, just one for me how are you guys belting adjusting the kind of mix versus kind of trying to work with some of your current pilots or or replace some of you know that you feel it's a better long-term strategy.
No I think we yeah. The question was unclear sorry can you repeat it.
Oh, sorry, Yeah, I'm, just kinda could how're you balancing.
Maybe adjusting to tighten next where you kind of see some people that either.
You know where attractive <unk> now or maybe we're ones that you were just kind of wait to get the space back and replace them you know how how are you looking at that and.
Making about that and has that has that changed at all from your previous strategy pretty pandemic.
Yeah, right right I think.
We pride ourselves in in our proactive asset management.
Constantly as you per se constantly trying to upgrade the quality of our Tennessee or merchandising.
So I think I think.
It's our standard playbook I would say during this pandemic.
You may have more opportunity.
To recapture some space.
<unk>.
And potentially.
Remerchandise in the future where to calm but <unk>.
<unk>, we're always looking to do that.
Yeah.
Is there anything any tenets or any industries in particular, where you're.
What kind of more stood now and Remerchandising then maybe you were before.
No I think I I think it's it's it's kind of the known suspects from the watch listed that would be that that would be where we would expect in our planning opportunities to do arise and that's those those are the kind of spaces were talking to stronger bed.
To retailers.
Quite frankly pre <unk> said.
Have their eyes on that space so.
That's really all I could tell you that.
Being a little bit humble, we've I Ain't right. If you look at Regency's track record we've done.
I can say because I'm not one that's dealt Jim the team of down an exceptional job really as he said proactively managing our 10. It next in our merchandising next and ensuring that we were positioning are centres for the long term. It. If you you know retails always evolving this is going to accelerate some of that evolution no doubt.
But we've had uses common uses go and we are continually working to ensure that we have adoptable, an optimal merchandising et cetera et cetera, it's really important.
Okay. Thank you take my question.
Oh.
My next question. This from the line of Mike Miller with J.P. Morgan to see if they're question.
Hi, I guess, putting aside that you have some <unk> government exposure this time.
You talk a little bit about how your small shops compare today versus the T.F.C.
[laughter].
[laughter].
Jim topped the details, but generally just thinking about what's happening today versus what happened I guess was 11 years ago 10, 11, 12 years ago, It really is apples and oranges and.
Also.
<unk>, we regency have significantly and.
We made a lot of significant moves since that time in terms of the properties that we sold really refocusing and having a much more discipline development program in building properties that we would only want to hold rather than developing to sell and I think that if you look at regency today versus regency 12 years ago.
It's just we're we're different and the quality of our tenant based today is certainly.
Higher level than it was Ben and I think that <unk> and so with that when I do and I think I have the rough numbers in gym can talk a little bit more you know in back in the the G.S.C., we sell to about 92% overall occupancy 84% shot <unk> occupancy, which was one of the highest in sectors. Even then and then.
Layer on top of that that I think that we've improved the quality of our portfolio.
I feel really good about it but this is this is a different animal and they're still so much that unknown, it's too hard to predict what the what the end will be.
Right now we feel really good about the quality of our real estate, we feel really good about that though the sector that we operate in.
And we still really good about the quality of our <unk>, but but there's a lot more to come.
About it.
And then what triggers do you look forward to potentially repaid <unk> cooled off the line.
Hey, my.
We will I I think though dove tail with our assessment of really pulling down the line was it a little bit of a reaction in a play book out of the G.F.C., frankly, and I think sense that point in time, we've become very comfortable with the treasury's response to the to the potential economic crisis, we feel really good about our capital partners.
That that are lenders to us on a revolver. So I would say that those triggers are probably more about the the financial capital markets than than what we see occurring in the portfolio that being said, we're going to give it some time right now it is a rather inexpensive.
Insurance policy to carry on the balance sheet.
We had the same time, we are always looking at her that maturity profile I think our history. Our track record specifically recently would show that we built a very we live by a set of principles one of which is to limit our annual maturities to know more than 15% of our total debt capital and we're.
Always looking out two or three years to see if to be opportunistic and determine if we can stretch out our maturities interest maintain that safety from a capital perspective. So we're looking at 2022.
Obviously, and 20 and 21 very limited maturities, we've taken care of my neighbor mortgages already and 2022 is our next target.
We'll see what how the capital markets evolved from this point forward.
It is they feel quite nicely over the last several weeks, but it's at the same time.
<unk> you have to be aware of you have to be careful <unk> everyday is a new day in the capital markets as you know and well we're doing what we can to monitor that activity and we'll be opportunistic it to the extent something is presented.
Got it thank you that was it.
For next questions from Atlanta floors, and I come with Compass point.
Their questions.
Morning Gods.
Quick I Love My questions I had to have have been answer, but I just more I guess a broader question for you given that regency's got this great balance sheet, you're sitting on this tremendous liquidity.
A lot of your 10 minutes or.
Struggling.
Would you consider.
Investing in some of your your your retailers. The particular ones that you know pretty well or are you going to stick to your is your view that you're going to stick to your knitting.
Again, it's it's more really or or early in the discussion process with that retailers, we do appreciate and acknowledge.
That.
Many of our tenants are are an important part of the fabric of our center and some of them, specifically and and it's not a surprise right specifically in the in the restaurant area.
Either they can be almost a another anchor to to centres and depending upon how the consumer behaves and how we open up and again it so much they're still so much uncertainty.
It's too early to answer that definitively.
I would I would never say never.
But right now we are discussing and working with the tennis and focusing on getting them reopened and understanding what they need in order to succeed <unk>. That's what the team is focused on.
<unk>.
Thank you.
The next question is from the line of some decide which jeffrey's. Please just user crushed.
Hi, I think and passed industry on a past investor presentation. You cited the status of 40000 grocers in the industry going at 30000.
How are you thinking about the magnitude of that number now you know are there any disrupters that might shift that maybe you know potentially a proliferation of micro fulfillment centers.
Not sure that we ever put that in in print and an investor presentation, but I do recall half actually saying that on an investor called probably about a year ago and it's really just I mean, it was what we were hypothetically talking at the time, saying eat there are 40000 grocery.
Stores in the U.S., even if we were to lose 25% right. That's how we think about it and that number were to really reduce we still do you think about regency as well as all of our other you know publicly traded appears and other institutionally on shopping centres really on the best real estate and so when you think.
Regency 416 shopping centers, 80% of what's our grocery <unk> I do the math that gets you to somewhere and be a 300 plus grocery stores, So 300 plus out of.
Even if there are 30000, we still believe we're gonna have some of the best of the best in terms of the operators that are that that continued to operate and we also do believe that a physical presence is going to continue to be critically important and you know look at look at what Amazon is doing in terms of you know by whole foods and.
The the unverified rumors I guess actually though they've they've opened to store already right. They are they're continuing to open grocery stores even throughout this pandemic. So think that the fact that the quality of our real estate the quality of our anchors we haven't necessarily changed our.
Future outlooks for for grocery stores.
Thanks.
Our next question comes from the line of Chris Lucas was capital one securities fix was user questions.
Oh, good morning, everyone, Jim I'm, sorry, if I Miss this did you provide the percentage of A.B.R. them under which you already agreed to to curl requests.
Oh, Chris <unk> no I didn't we're like I said we're.
Earlier in the process and.
All I can tell you, there's there's more to calm and we'll be able to to share more down. The road is we if you're kind of did some of the speakers you should be honest.
I just want to make sure I didn't Miss it and then Mike I guess two questions for your one is on the on the loans that you recently closed on I guess curious as to whether an opera were any lender underwriting changes that you know sort of incorporated sort of the impact from code it.
2222 their process.
No Chris they as I said they.
You know, we applaud them for a living up to their commitments and there was no no covered related modification.
Okay. Thanks to the last question like just as it relates to some of these larger development projects that are on.
Review at this point, how should we be thinking about some of the D.V.C.
Numbers you had previously provided no particular caused the cost of already in the west barred.
I think it's project specific I'm actually going to hand that off to Mac, but I I think generally <unk>. It is projects do but west barred as an example is more likely to maintain its occupancy in N.Y., then maybe a fair amount day, which we had already negotiated a terminals and and in fact, there at least was.
Fire relatively soon it will JC Penney, so I'll I'll harm it off to the Mac and he can handle you know why disruption.
Good morning, Chris.
I think I think what's really important is worth continuing to position these projects to start.
In order to do that we need to make sure that we have the ability to get towards headed spaces. So we'll continue to extend these tenets other short term basis, so that when the timings right. We can start these projects, but we should be able to maintain income gets tougher as you go along that's not to be unexpected.
That's what we've revealed in the past so well hold income the best we can but but we think that's a worthwhile trade to position ourselves to start these projects when the timing is right.
Okay, great. Thank you appreciate it.
Annex questions from the line of Tammy fight with Wells Fargo pleased to see if they're questions.
Hi, Good morning, I'm, just wondering on I just go after Christmas question on that $225 million with mortgages I guess for those negotiations taking place Creek coded well I know they closed you know recently, but where those negotiations again taking place.
Okay, so that they.
Oh those those two amendments were made pretty coded, but importantly, we closed those into April I mean, we were we were deep into both institutions working from home.
And no no real re trades on pricing or or condition.
Okay, <unk>, but I guess, just as an indicator for changes and L.T.V.'s are underlying caproate assessments or anything else that lenders are making it's difficult to say at this point.
Yeah, Yeah at this point, yet I I think we know that credit spreads her from what we were able to secure for ourselves and underwriting there. It is likely changing as we speak we haven't tested yet on secure in a new mortgage these are bad interest.
Closing deals that had already been struck prior to the crisis.
Okay. Thanks, and then wondering if you can comment on what you were seen so far in a I'm sorry, if you touch on that's all right, maybe whatnot projection dark or may write collections relative to what you collected in April.
We won't.
We've seen in May is is is their collection through as we say here today through yesterday and in fact those rates of mirrored at what we experienced in April.
On that Tammy.
We we don't have any expectations coming into May we did anticipate that may have the potential to be less than April just kind of given the timing of when the closures started to a cool occur and how late they were in March we thought there was a reasonable chance in <unk>.
But maybe it would be worse than April, but we've seen those collection Reds mirror paper on a day to day basis to this point and and they still very may well settle lower level than April.
That wouldn't surprise US then I think Mike said, we're going to remain committed to being transparent and providing updates. So when we feel when feel good that we have good numbers to report, we'll make sure that we provide you with that.
Okay, Yeah definitely appreciate that and I'm just wondering the range of collections you're theme for April across her markets are you seen any particular pockets of weakness.
No <unk>.
There's no real geographic difference at this point I think is we started to open.
Markets, they're they're likely will be some data that we can interpret like right now, it's it's kind of across the board.
<unk>.
I think and then and then just one last question he could well impairment that you took in the quarter just wondering what that was related to.
Hey, Tammy.
The best or less there and I'm just joking.
So you have to go back in time and understand why goodwill is on our books and it goes back to the merger with equity one and if you think about the the way the purchase price is allocated from an accounting standpoint at the at the end the day goodwill reflects synergy value.
But then you get into how the accounting literature is is a bit awkward with respect to real estate companies like reason to once you determine the value of that goodwill than you are forced to allocate that to all of your assets and it's not the assets you acquired in the merger if it's your company's assets effectively spreading mass energy value.
Cross the platform.
And then not to get overly technical but now you're assessing that goodwill for impairment triggers from that 0.4.
That's a qualitative test that was triggered with the onset of the crisis really it was the the rapid reduction shareholder and share value that triggers that qualitative then you move into your quantitative impairment analysis, which is a discounted cash flow approach and <unk>.
<unk> and it resulted in about a 40% right down one of our original goodwill importantly, it's their first to reflects energy value of the <unk> of the merger with equity one that synergy value has been absorbed and it still exists and this is where I say the the literature for goodwill with respect to real say companies.
It's a bit awkward in that they force you to to allocate back to the individual assets.
Okay. Thank you that's helpful.
Sure.
Thank you. Thank you.
Remind you of saying to ask a question Sammy press start one on your telephone keypad.
Yeah.
Thank you at this time, we have no additional questions altering the call over to Lisa Palmer for closing remarks.
I'd Wanna, Thank everyone again for their time well, thank all of our frontline markers.
You'd have the Blue Angels fly through here today, but it was a little quiet outside my window. So when a thank them also first for saluting Jacksonville hospitals, and I'm happy mother's day weekend to all the mothers.
Thanks again.
Thank you. This will include today's conference me disconnect. Your life. This time, thank you for your participation.
Hey, remember Claire.