Q1 2020 Earnings Call
Good morning. Good afternoon. My name is Simon and I will be your conference operator today.
At this time I would like to welcome everyone to the Realty income first quarter 2020 operating results conference call.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question answer session.
She would like to ask a question. During this time simply press Star then another one on your telephone keypad.
If he would like to withdraw your question. Please press the pound Keith Thank you.
Mr., Andrew Crum Associate Director Realty income you May begin your conference.
Thank you all for joining us today for real.
First quarter 2020 operating results conference call, it's gotten ourselves will be Sumit, Roy President and Chief Executive Officer, Jonathan Pong Senior Vice President.
Capital markets and finance.
During the conference call will make certain statements that maybe considered forward looking statements under federal Securities law. The company's actual future results may differ significantly from the matters discussed in any forward looking statements, we will disclose in greater detail. The factors that may cause such differences and the company's form 10-Q.
Well be observing a two questions one it during the Q and a portion of the call in order to give everyone. The opportunity to participate if you'd like draft. Additional question you may reenter the queue I will now turn the call over to our CEO generally.
Thank you Andrew.
Welcome everyone.
Discuss in detail the economic impact to the cobot 19 pandemic, but first I would highlight several first quarter results, which positioned us very favorably to stop the.
During the first quarter regenerated, if AFFO per share up 88 cents and completed approximately 486 billion in high quality property acquisitions.
Additionally, we raised approximately 752 million in well priced equity at a price of $77.37 per share.
We ended the quarter with a net debt to adjusted EBITDA, our ratio of five times and our fixed charge coverage ratio of 5.5 times, it's the highest in our company's history.
The impact to the could 19 pandemic has been and continues to be felt across geographies economy. The industries and I thought to remain with all who have been impacted.
We continue to manage the business with a focus and all stakeholders.
Shareholders clients colleagues and community.
Accordingly, we have leveraged technology to ensure a seamless business continuity with our employees working CP from their homes and I want to thank my colleagues for their hard work and dedication to ensuring the strength of our business operations.
Our real estate portfolio its deliberately designed to generate predictable cash flow through a variety of economic environment, but I put 40 was not immune to the economic shutdown that has resulted from called at 19.
Attendance operate across 51 different industries.
We have always maintain stringent investment parameters targeting high quality tenants, who are leaders in their respective industries.
Approximately half our rental revenue is generated from investment grade rated tenants.
Certain tenants have requested rent relief and these requests have primarily been for wrench deferral rather than rent abatement.
We are reviewing rent deferral requests on a case by case basis.
We view our tenants it's partners and clients are not relationship it's in biotech.
However, the approach we have taken its two independent please review the individual financial and business positions I thought tenants and we have not and will not except rent deferral requests that we believe our solely opportunistic in nature.
For April we have collected approximately 83% of contractual rent.
We received essentially all of expected ran from investment grade rated tenants.
Why do we have not historically pursued properties leased to investment grade rated tenants as the primary objective.
During periods of economic uncertainty high grade credit tenants do tend to provide more reliable streams of income all else equal.
We disclosed in our financial supplement the percentage of contractual rent collected by industry.
On top four industries convenient stores drug stores dollar stores in grocery stores, each cell essential goods and represent approximately 37% of our rental revenue.
We have received almost all of the contractual rent due to us from tenants in these industries.
Other industries, such as theaters health and fitness restaurants in child care have been challenged due to store closures and social distancing requirement.
Up to 17% of rent not collected in April.
86% is from operators in these select industries.
We believe this trend about corporate partnerships will be important as we seek mutually beneficial resolutions.
We're pleased to partner with leading operators in each of these industries.
Additionally, we remain constructive on the long term viability of each of these industries.
The success of the theater industry has largely been tied to the quality of films produced by Hollywood and the U.S. box office reached an all time high as recent as 2018.
Additionally, the economic business model for studios continues to suggest in our view that appeared a distribution channels will remain attractive going forward.
We also expect the non discretionary and low price point propositions that the quick service restaurant health and fitness and childcare industries to support resiliency up their rents being capabilities once that businesses are fully opened.
As we continue to manage our portfolio to support long term value creation, we believe the breadth and depth of our asset management and real estate operations Department, which is our company's largest department is a key competitive advantage vis-a-vis our competitors.
Moving onto investment activity during the first quarter.
In the first quarter of 2020 reinvested approximately 486 million in 65 properties located in 22 states on the United Kingdom at a weighted average initial cash cap rate of 6% and with a weighted average lease term of 14.1 years.
On a total revenue basis, approximately 36% of total acquisitions during the quarter will from investment grade rated tenants.
95% or the revenues were generated from retail tenants on 5% with generated from industrial tenants.
These assets at least to 25 different tenants in 17 industries.
Cost of 486 million invested during the quarter 320 million was invested domestically and 61 properties at a weighted average initial cash cap rate of 6.5% and with a weighted average lease term a 14.8 years.
And $166 million was invested internationally in full properties located in the UK I had a weighted average initial cash cap rate of 5.1% and with a weighted average lease term of 12.5 years, including our first industrial acquisition in the UK up two properties leased to an investment grade operator.
During the quarter, we sourced approximately $18.1 billion off the 18.1 billion source during the quarter 10.4 billion, what domestic opportunities and 7.7 billion what international opportunities.
After 486 million in total acquisitions closed into first quarter, 55% will one off transactions.
Our investment spreads relative to a weighted average cost of capital were healthy during the quarter, averaging approximately 247 basis points for domestic investments and 272 basis points for international investments, which were well above our historical average spreads.
We defined investment spreads as initial cash yield less a nominal first year weighted average cost of capital.
Our disposition program remained active during the quarter, we sold 17 properties for net proceeds of $126 million at a net cash cap rate of 6.2% and we realized an unlevered iron ore up 11.1%.
Our portfolio is well diversified by tenant industry, geography, and property type, which contributes to the stability of our cash flow at quarter end, our properties will lead to approximately 630 tenants at 51 different industries located in 49 States, Puerto Rico in the UK.
84% apart rental revenues from our traditional retail properties.
The largest component outside of retail is industrial properties at approximately 11% of rental revenue.
Walgreens remain remains our largest tenant at 6% of rental revenue.
Convenience stores remains our largest industry at 11.9% of rental revenue.
Within our overall retail portfolio approximately 95% far rent comes from tenants with a service nondiscretionary and or low price point component to that business.
We continue to believe these characteristics allow attendance to operate in a variety of economic environments and to compete more effectively with E commerce.
These factors have been particularly relevant in today's retail climate, where the vast majority of recent U.S. retailer bankruptcies have been in industries that do not possess these characteristics.
We continue to feel good about the credit quality in the portfolio with approximately half of our annualized rental revenue generated from investment grade rated tenants.
The weighted average rent coverage ratio for our retail properties is 2.8 times on a four wall basis, while the median is 2.5 times.
Occupancy based on the number of properties was 98.5% a decrease of 10 basis points versus the prior quarter.
During the quarter, we released 93 properties recapturing, 99% of the expiring rent.
Since our listing in 1994, we have re leased or sold over 3200 properties with leases expiring recapturing over 100% of rent on those properties that will release.
Our same store rental revenue increased 8.2% during the quarter.
The lower same store rent growth is partially driven by a change in methodology. As we are now recognizing percentage rent during the period. It is accrued rather than during the period. It is paid which also resulted in higher same store rent growth in the fourth quarter of 2019.
Moving on I'll provide additional detail on our financial results for the quarter, starting with the income statement.
Our genie expense as a percentage of revenue, excluding approximately $3.5 million of severance related to the departure of a former CFO was 4.4% for the quarter and our cash DNA margin, excluding severance was 3.5%.
We continue to have the lowest generation the net lease REIT sector.
Our non reimbursable property expenses as a percentage of revenue was 1.3%.
As a result different early redemption of our 250 million dollar 2021 notes, we recognize approximately $9.8 million loss on extinguishment of debt during the quarter.
Briefly turning to the balance sheet, we have continued to maintain our conservative capital structure.
And remain one of only a handful of freed with at least two eight ratings.
In April we drew $1.2 billion on our revolving credit facility to increase our caf cash position as a conservative measured at due to uncertainties related to call that 19.
Under the revolving credit facility to eight credit ratings provide for a borrowing rate of LIBOR plus 77.5 basis points.
We currently have approximately 1.2 billion enough cash on hand, and an additional 1.1 billion available under our revolving credit facility.
Which provides significant financial flexibility.
Looking forward, our overall debt maturity schedule remains in excellent shape.
The weighted average maturity of our bonds is 8.3 years.
Additionally, we have approximately 400 million of total debt coming due throughout the remainder of 2020 and 2021.
In summary, our balance sheet is in great shape, and we continue to have low leverage strong coverage metrics and ample liquidity.
In March we increased the dividend for the hundred six time in our company's history.
We've increased our dividend every year since the company's listing in 1990 for growing the dividends at a compound average annual rate of approximately 4.5%.
We are proud to be one of only three recent the S&P 500 dividend aristocrats index for having increased the dividend every year for the last 26 consecutive years.
Moving on.
As we navigate through the current state of economic volatility and uncertainty we believe a strong financial position is paramount.
The timeline for economic uncertainty remains unclear, but we believe we are well positioned with significant financial flexibility.
Further we believe we are well positioned to capitalize on opportunities going forward. Once we receive additional clarity regarding the carbon crisis.
To wrap it up we've completed a very strong quarter and on and we're well positioned from both the balance sheet on portfolio standpoint heading into this period of uncertainty.
The Cobot 19 pandemic has resulted in an economic environment, largely unprecedented but I'm confident in the resiliency of our tenant credit profile the quality of our real estate and the talent if our team members to continue generating favorable shareholder value over the long term.
At this time I'd like to open it up for questions.
Operator.
Thank you, ladies and gentlemen at this time I'd like to remind everyone that in order to ask your question. Please press Star then the number one on your telephone keypad, if you'd like to withdraw your question. Please press the pound key please limit yourself to two questions if you'd like to ask additional questions any reenter the queue.
We'll pause for just a moment to in politics, you've been a roster.
And your first question comes from the line of Haendel St. Joost with Mizuho. Your line is open.
Hey, I guess, a good morning to you all out there.
Good so.
Thanks for taking my question Sumit first a high level question I'd be curious how coated and your portfolio operations.
Since I have impacted your view on portfolio allocation or on sub category exposures.
Certainly curious on how that's impacting your forward thinking on portfolio strategy and it sounds like you're still a fan of movie theaters casual dining childcare. So curious if perhaps you can sprinkle into more commentary on both sectors and perhaps when do you expect to be made hold on those rents and your plans for the Subsectors.
Exposures on the longer term basis. Thank you.
Sure. Thank you for your question handle or there's a lot that you've asked so I'll try to take it one at a time starting with.
You know a high level view as to the covered 19 situation and whether we would have done things differently entering into this crisis.
And the onset remains that look none of us at least I wasn't smart enough to anticipate a scenario for a downturn where businesses with goal from you know X revenues to zero literally overnight.
The downturn in enough itself is not something that we hadnt anticipated we were you know.
In the longest recovery since theater in the last 60 70 years.
And so.
A lot of all our thinking had been centered around there is a downturn coming how is the portfolio currently constituted how is it going to.
Would stand and we will sort of using the lost great recession as a filter to run through our our portfolio allocation our industry concentration et cetera.
And under any of those scenarios.
We felt we work very well positioned.
What we didn't anticipate was the social distancing phenomena.
Because I would argue that had this downturn taken on a color not necessarily the drivers of the downturn being similar to the loss to recession 2008 through 2010, but.
If the social distancing norm wasn't part of the equation the industries that we find most impacted by this pandemic theaters.
And fitness those would have continued to thrive.
As they did in the last downturn.
And so you know the which is why we hesitate to say that.
Unless our view of what's going to cause downturns in the future has dramatically altered which it might and and you know I E pandemics are going to be.
Situations that are going to occur more often in the future where businesses can be shutdown overnight for long periods of time, if that becomes the norm going forward and I'm not smart enough to say, whether it will it won't.
Then, yes, I do think that it will change our our philosophy around the allocation that we currently have.
But what we also think whats happen having gone through this pandemic.
Is that we are going to be better prepared.
There will be more allocation of resources and infrastructure put in place to anticipate about possible pandemic into future and so in situations like that where businesses are not essentially shut down for you know bass periods of time.
The businesses that we are exposed to that are most impacted editors help health and fitness casual dining et cetera won't be quite as impacted.
And especially theaters and health and fitness will continue to do well just like they did in the last downturn.
So you know this is a bit of a wait and see and.
See how we learned from this particular situation and what are the provisions put in place by the government to anticipate and be better prepared to handle situations like this going forward, but you know had this being a downturn that was triggered by any other factors outside of social distancing. These two industry.
This would have just done just fine.
And so it's a little too early to say as to whether we need to make wholesale changes to our portfolio allocation going forward.
Without getting some answers to some of the you know the questions that remain.
Set of unclear to me I'm going forward.
Going through the list of you know the the industries that have been most impacted it's the ones that I've. Just mentioned you know if you think about the theater industry.
It represents approximately 6% of far off our revenue stream.
They are more impacted with essentially all their locations being close and they are generating zero revenues at this point.
You know, although we think it will take longer for patrons to get comfortable attending theaters force shutdown.
Our fundamental pieces on the industry remains constructive IP size off right now.
We believe that it is unlikely that studios with bypass the theatrical releases and go direct to consumer, especially for major releases since the margins up the theatrical releases of so much higher.
Yes people points to what's happened with troll and the fact that they were able to.
You know get $19, a 99 cents for the releases to PD odie, but it is largely being driven by the stay at home and having new alternatives is it's our view.
And I do think that theaters will continue to be the primary avenue for four releases, especially the blockbuster movies.
Just given the unit just given the economics.
This industry will take longer to recover though.
I think people are going to be very hesitant to go back to theaters, but.
But if you look at the types of formats that we have on the theater side. We do believe that those that are less crowded that have recliner seats fewer patrons, but theater those are going to pop probably see more if it come quicker come back in the the more traditional theaters.
The other industry that I mentioned was our health and fitness industry.
Those businesses went from.
No.
Being very healthy too too.
Generating fractions of revenues like in the single digits.
And you know, but we do believe that that business has a potential to bounce back much more quicker quickly than the theater business and.
We believe that within a three to four month timeframe the businesses should normalize for for the theater business.
Casual dining thankfully, it's a very small portion of our business. It's it's approximately 3% of our rent and that too has been impacted and that business will take longer and.
I think the fact that if you're not aligned with.
Operators that have the balance sheet and the liquidity to withstand a long duration shutdown or partial shutdown.
You know you all going to see a few operators calendar in that particular business, but thankfully. We are we're aligned with in most cases in that particular area with.
Operators that are either publicly traded have the liquidities and laboratories to continue to manage through this crisis.
Another industry that we are keeping a close eye on this child care, which represents about two and 100% 2.4% about Rand.
And there thankfully again, we are exposed to you know.
Two of the larger national operators in kinda can lot Petite, but there are they do tend to be a lot of mom and pop players and they probably will be forced into bankruptcy.
Within this particular industry, just because they don't have the liquidity or the balance sheet strength to withstand a a longer term shutdown.
So [noise].
Those are the four industries that we feel like we have to keep a closer eye on.
And.
And we are doing that we're in constant conversations with our with our operators and we are trying to work out solutions that that you know is mutually beneficial.
That's great color. Thank you so.
One more if I may or more of a question on on rents you're looking for a bit more color.
On April.
How much of the equal rent was paid on time and maybe some color on how that compared to perhaps one year ago.
And then there's investor concern that money is going to be enough proceeds are enough landlords and so our investors we'd like to be concerned that may or June Leds proved more challenging elected that aprils. Thank you.
Sure.
So as you know you know we ended up collecting 83% almost 83% of the rent due to us in April.
But if you were too fast forward to end of March beginning of April.
The numbers that we were looking at where were much higher in terms of the requests that were coming in.
Part of the reason that you know is so.
Interesting about this particular situation is.
Thats.
The tenants liquidity profile is changing almost on a on a daily basis.
In the initial discussions that we were entering into with some of our tenants through those discussions Oh. They were waiting on banks. They were looking at structures like types et cetera to have access to additional forms of liquidity.
And.
You know over.
Over the 30 day period.
People that we talk may have liquidity for six to eight months period ended up being able to raise private capital either through a bank loan or through you know pipes et cetera and were able to.
Created liquidity position that was very different from where they looked at the beginning of the month and so our discussions therefore evolved.
During this time to help accommodate.
You know our own needs and thankfully given the type of relationships that we have given the type of operators that we have that tend to be larger better capitalized operators have more access to capital.
We were able to collect a lot more rent than what we had originally thought we were going to collect at the beginning of April.
And and we suspect that the situation is going to be similar for the month of Maine.
And one of the other variables that has changed is there are most states that are now opening up.
You know this friday supposed to be.
The threshold date for for a few more states to start opening up their own businesses that will start to open up yes things will take a while to sort of recover but the fact that these businesses are going to open up that changes. There. There you know liquidity profile to the assumptions that we were originally running bad businesses.
We'll be shut down for a period of time certainly more than just a month.
So because the data continues to change in evolve.
No.
It is very difficult for us to share with you the precise amount of.
Renteria going to collect for the month of thing.
We do believe that the month of May will certainly be worse than the month of April from a rent collection perspective, because there was some.
Tenants that told us that they're paying us for the month of April, but they would like for us to consider.
Deferring their main event and so we recognize that that's going to be the case, but we have only resolve 6% off the.
Tenants that have come to us and asked us for for a department and partly because you know the remaining 94% has not been resolved partly because their liquidity position continues to evolve and change.
So.
You know April was great may we believe will be will be slightly worse.
On June it's just too far away to two to forecast out as to what's going to happen.
Thank you for the prospectus.
Welcome.
Thank you are handled.
Your next question comes on the line of Christine Mcelroy with Citigroup. Your line is open.
Hey, cement thank you.
Do you made a comment at the end of year marks and work hard to capital allocation that you might be opportunistic and they're only once universities additional clarity regarding the current crisis I just wanted to get a sense for you're obviously in a great immediate liquidity position, but you're also balancing that liquidity with finding potentially market.
Charles and then nonpayment of expenses.
Is it reasonable to him that use meaning meaningfully pulled back on sort of allocating capital toward acquisitions at this point for now I, regardless of what the pipeline looks like maybe just give us a little bit more color on your desire to allocate tap into patients in this environment.
Sure.
It's a it's a it's a bit if a balancing that creates due to be very honest. We are in a very good liquidity position.
We have certainly a bit more visibility today than we did in April.
Which gives us a bit more confidence today than it did price in the beginning of April.
Having said that.
We haven't been able to handicap unit the duration of this downturn.
We know what the tenants are asking for.
You know the range of what they're asking for and the question that we are struggling with internally is is that accurate reflection of what will truly transpire and that is whats.
You know keeping us a bit hesitant in being able to to go out there and and you know invest a lot of capital.
So if there was a reason why we came out with a very healthy.
Acquisition number at the beginning of the it's because our pipeline was very strong and a lot of what you saw that we ended up.
Taking over the finish line was a reflection of the pipeline that we had in place and some of which you will see we will also transact in the second quarter.
But having said that you know.
I think about the acquisitions market and you know.
In Threeq compartments, if you will one day. So there's a there's a core product that is still out there that is continuing to do really well and in fact, I would say, they're a tailwinds.
You know given discovered 19th situation and they are the usual suspects you know the grocery business.
The convenience store business.
The the drug store business as well as the dollar store businesses those businesses have continued to thrive.
And and we don't see much of a change in cap rates et cetera, there, but that's a product that if we can opportunistically expand on we will but we are going to be hyper selective and part of this this hyper selectivity comes from you know not being able to handicap the duration of this.
Downturn and therefore, what is our true liquidity needs going to look like going forward.
But what we what we are very you know what we are trying to do and every department is trying to do it stayed very close to all contacts to continue to look for for the opportunistic transactions and if and when there is a bit more clarity in terms of the duration of this this pandemic we want to be first in line.
To to be very aggressive on the on the acquisitions front, but we are going to tread carefully.
And then just on the debt capital Fine you have a.
Chairman and sorry, if you already addressed that that Jan June term loan coming down what's your intention in regard to that and do you have any desire to access the unsecured bond market today, what do you have a sense for where you get price that price a bond deal today.
So the term loan you're absolutely right, there's a $250 million cloud that's coming due in June.
Determined on market remains open.
We you know we've been told by the banks that we've spoken with that they'll be happy to to re Fi that 250 million dollar term loan.
What is going to be different however is the actual term associated with that term loans. So we this was a five year term loan that we had entered into.
Today, the best I think we'll be able to do is a one plus one.
And you know for me.
If I had to compare you know just keeping it outstanding on my line versus doing a term loan with banks.
I think I have a better cost associated with my line being outstanding then then refining refinancing it with with the banks, but that is an avenue available to us.
With regards to the unsecured bond market I think they're being only two transactions that are being done recently won I believe was.
Well if at least similarly rated companies.
One was Camden and then the other one was Boston more Boston.
Office.
I think one was done at a 2.8% the other one was done at a three in the quarter percent. We are similarly rated we believe will be in that similar Zip code.
And you know the advantage that we have today is.
We don't have to do anything in the unsecured market, we believe given our ratings and given these two two examples of that market remains open to us and we will opportunistically take advantage of that market. If it presents itself, but we don't have to do that.
Okay. Thank you.
Thanks.
Your next question comes from the line of Nick Yulico with Scotiabank. Your line is open.
Hi, this is growing again.
So just curious what visibility is affluent beacon assets in this market.
Our holdings, essentially more vacant assets plus tenants not paying rent or insurance impact a property costly leakage expectation.
Yeah.
Look I do think that the transaction market has.
Has slowed a bit.
We were able to sell 13 vacant assets through the first quarter.
And you know Opportunistically people are still continuing to look.
For assets.
We in fact had vacant assets that we were able to close.
Subsequent to the first quarter. So there continues to remain a market. It's just much more selective is how I would phrase it.
And.
You know and thankfully if you look at our our portfolio today, there isn't a lot of new resolutions that we have to go through.
For the remainder of the so we feel like we are in a pretty good position, but it is certainly a slower today than it was in the midst at the first quarter.
Okay, and then I appreciate the mission given so far on timing expectations remain how still evolving.
But is there any.
Are you still expecting the nearly 100% from investment grade tenant, but you did in April and May as well.
It's too early to tell you know, we do expect should could collect a very high percentage I don't know if it is going to be a 100% just like we did in April.
And that's where you know some people have come in and Opportunistically tried to take advantage of the situation.
And this is where you know I I think.
The spirit of the conversations have been compromise and we've we've drawn a pretty hard line.
When we have negotiated or engage with some of these these folks.
But at the same time, if they had businesses and they can point to a short term deferral request, which is legitimate we are engaging in those it's just the the the threshold for accepting.
Proposals that are being put forth by investment grade tenants, it's very very high and so our expectation will be that you know if it's not similar to April it should be pretty similar to April in terms of what we are able to do in may, but but again I just caveat that by saying it is still too early to tell.
Thank you.
[noise] [noise]. Your next question comes from the line of Shivani suit with Deutsche Bank. Your line is open.
Sure Yeah. It was done Yep Yep.
Thanks for taking my question just what's the guide to the theater attendance at unit pay rent in the UK in April and can you just remind us of how the prospects there versus the U.S.
Just in terms of your rights and obligations in the sort of a scenario and how it might be different.
Hi, Shivani. It's a good question you know as far as we're concerned it's the same tenants that we have here and it's in the world that that that is our tenant in the UK and we are not isolating our discussions based on geography. It is a holistic discussion that we're having with them the right.
Recognize you know their liquidity situation, we do our own independent liquidity situation to get a field for you know where they are what does there you know local jurisdiction allow in terms of reopenings, how restrictive that is and and based on that you know.
We we continue to evolve our thinking in terms of wherever you ultimately end up.
With regards to resolutions with with that particular tenant.
But you know it's largely the same in fact in the UK. We we have the ability to lock out a tenant which we don't in the U.S. and so that is a bit more landlord friendly than than what we have in the in the U.S., but like I've said.
You know.
We view our tenants as our clients and there's a single biotic relationship and that is not our intent you know we want to work with them, especially with businesses that have been impacted I mean, these guys have gone from having a pretty good Ron to essentially zero revenues and so.
Trying to work with them, we are trying to understand what the situation is and come up with a solution that is mutually beneficial.
Thanks for that and then can you shed some color on the industrial acquisitions that were made in the UK and and in terms of how the structure of these leases and the underlying assets from Paris, Q, what you back down in the last.
Yes. So we were very proud that was our first industrial transaction that we did it is with a investment grade pharmaceutical company and.
We're very comfortable with the location.
It's it's in industrial hub, you know very good location and we like the industry like the land.
True Triple net lease very similar to what we find here in the U.S.
And so on all fronts. This was a good transaction for us.
Your next question comes on the line of Rob Stevenson with Janney. Your line is open.
Good day guys.
Are you buying assets, where the tenants either deferring or not paying rents and what percentage of the first quarter acquisitions have deferred or not paid.
April rent.
We will not be buying assets were going into that acquisition. There is an expectation for deferral of friend that is just not part of our business model. It's not how you know net lease companies are structured draw. That's you know.
But you know if a particular transaction.
Was in the works and.
We you know where we had essentially done our diligence we didn't have any outs and.
You know it was a question of closing or not closing, we will absolutely close those transactions.
And.
You know and in fact, I can think of one situation, where a portion of the rent has been deferred for the month of of April but those were largely transactions that was already in the pipeline. We had we had you know there was a handshake agreement and we felt.
Like we need it to honor our transaction and we have and this is this is a situation that we feel pretty good about the tenant longer term and you know.
Feel like they're going to be able to bounce back as soon as some of the social distancing is is sort of lifted.
Okay and can you talk about how April red collections went within the industrial and office portfolios compared to the retail portfolio.
Yeah.
I I would say and I don't have the numbers right other top of my head, but by and large we collected 100% on the industrial and office side of equation.
And you know most the vast majority I almost want to say, 100% that I don't have the numbers in front of me Rob.
I would have had my whole team surrounding me and she giving the numbers right [laughter] point out that situation, but I think the vast majority if not 100%. If it is on the retail side of equation Mr. Guy Okay.
Alright, Thanks appreciate it.
Sure.
Your next question comes from the line of Vikram Malhotra with Morgan Stanley. Your line is open.
Thanks for taking the question somewhat not to beat a dead horse, but just so that we understand kind of hypothetically what could happen sell hypothetical given its early but.
Given the the deferred percentage you had an upper than talking about some of the they've put that it's Mike needing a deferral.
Is it a bad assumption to see if we just sort of add up health fitness tier to sort of the areas, where you've seen the issues, which is 24, 25% of the rent is it fair to say that the deferrals in me could sort of trend up to that region and we shouldn't see anything different.
Yeah without boxing myself in Vikram, because like I said, you know if the only data we have to rely upon.
Is what makes me hesitate to give you numbers because I look at April and I look at where we were towards the end of March and what our expectation was for the month of April and May be actually ended up.
I would say was very different.
But if you're trying to isolate the four biggest industries that have impacted unites a vast preponderance of this is 17% a deferral.
You're absolutely right those four industries represent 86, eight and almost 90% off off the deferred amount.
So could that be a the ZIP code of where it all ends up the answer is yes, and and keep in mind, even within those four boxes, you know outside of the theater business.
That was partial collection.
So you know, but then that can be more than offset by some of these other businesses that that haven't been as impacted as these full businesses under a portions of that that that sort of have all the also falls into this deferred bucket. So as a starting point I would say that that would be you know.
How you think about you know the problem industries, and where the the deferment should.
You know dominate in terms of unit a quantum of the deferment. Those are the four industries that would make up the vast majority.
Of the fan out is Brent.
And then maybe just how does this make you think about.
The AG mix, while it may not have been there like a totally intentional strategy of like specifically every quarter every year, having a certain I'd mix, but certainly experience has been the idea is headed up a lot more so I'm just wondering.
Near term and medium term is this how does how do you think about the AG acquisitions relative to the others.
Look what we have always said is we want to invest in businesses that have the.
You know operational trends to withstand.
Various economic cycles.
And though having an investment grade wasnt necessarily something that we were chasing most of what how we define the box that we were chasing tended to be investment grade and clearly if you have to look at our April numbers, you know the investment grade sided equation.
One has held up very well.
And so you know it's not by accident that that that that is the case they tend to have more access to liquidity that they have more capital sources than than some of the more regional and smaller operators do and and therefore, they are able to even in situations where their businesses that completely shut down.
They're able to at least pay partial rent and or in some cases full rent because they have the liquidity strengths to do so so you know if all else being equal having an investment grade rating certainly it's something that that you know has shown really well in this particular situation.
Okay, Great and then just last one I know in this situation it's sort of.
Maybe just difficult or unfair to go the tenants and kind of give them deferrals.
In exchange for something in that and then we've had this conversation on multiple calls, but I'm just sort of wondering you know thinking about the power of the leave the rights you have similar things might have happened in a regular recession or some other recession as well. So is there a group of tenants where for example.
Will you felt they do not need it and you know yet you want to sort of accommodate what could you get in return or what are you trying to enforce its that situation arises in terms of getting something in exchange for for an extended before.
Yeah.
Look I mean.
We feel like there are enough.
Tenants today.
Genuinely need help and they genuinely need to borrow our liquidity.
Okay, and we would much rather be there to help then get over this home specially if we believe that the mid year medium to long term prospects for those businesses in those particular operators continues to be strong we would like to lend them our liquidity, okay and that doesn't mean, you know give then capital.
It just means give them deferments.
Right.
If there are situations, where you have a healthy tenant who is asking to opportunistically take advantage of our balance sheet et cetera, that's where we do run into a little bit of an issue that's not to say, we're not going to engage.
But it's a much higher hotel for them to convince us that they need to borrow our capital or are you know ability to defer rent and therefore create liquidity for them.
If they cannot clearly show a path to you know hey. This is this is this is existential or even if it's not existentially mix then much much stronger and allows them to be much more active but that's a very difficult argument for some of our tenants who are very strong to make and buying large stores that may have.
Engaging those types of discussions in the earlier stages of Big you know have had done the right thing and have ended up paying the rents that they owed to us.
And so you know it is a tale of two cities in or there are those that clearly need our help and we are working diligently with them to to make that happen.
And there is a much much smaller group that wanted to be opportunistic with too you know thankfully the right resolutions are occurring.
Great. Thank you.
Thanks Vikram.
Your next question comes from the line of Todd Stender with Wells Fargo. Your line is open.
Sumit I hope you're will.
I am Todd Hope you are well too.
Sure and thank you.
So under normal circumstances, that's the landlord triple net lease you have negotiating power you're the landlord.
But now with coal that you've lost some of that I would imagine.
No viable tenant to really backfill the space can you just comment on how you're going into these.
Rent deferral discussions.
Knowing that we could be in this for a while tenants revenues are certainly down and maybe down for a while how do you look at your positioning right now.
As far as negotiating power.
Yeah, and look we've never thought of the despite the fact that we tend to be the largest landlord for so many of these tenants.
We have never thought of that as leverage you know, we recognize that situation that our tenants find themselves in and we are genuinely interested.
For some of the reasons like you just enumerated we are genuinely interested in making sure that they survive and they come out healthy and they're able to live to fight another day.
However, we wouldn't be doing our job if we weren't thinking off what are some of the more creative ways to create options for ourselves.
With regards to some of these asset types.
And yes, if you go down the traditional path of looking for an alternative operator within the same industry.
Yes that set Pat you know, perhaps a stronger operator, who has a higher probability of surviving you know engaging in those types of conversations sooner. Yes. That's that's certainly a path, but we also have to get creative about you know where are these assets located who could potentially benefit from these.
Locations truly think about asset management from a very different perspective than a pure real estate perspective to try to start creating alternatives unexplored of those alternatives, which is precisely what we are doing.
But that's not to say, we're going to use this as a leverage in our negotiations. It's just you know us doing our job.
But look.
I understand what the situation what covert 19 has done to some of our tenants and we are trying to do the right thing and the most efficient resolution for us.
Will always be that the incumbent survives.
And tries as a going concern coming out of this and so is there a path for us to take these tenants from the current situation that they find themselves in to that point, where they can become a a going concern. That's what we are exploring as a priority one.
And at the second priority, it's it's what I just shared with you.
That's helpful last question.
Just on its a general rent deferral it could be I would imagine arranging a one lots to three months I think just for starters, if that's fair and how long or are you, giving tenants the opportunity to repay that it's just going to bleed into Q1.
Obviously it was just April were talking about that.
In many right now we're going to be in June shortly.
To these deferral payments spread well into next year, how you kind of frame that.
So.
And none of our discussions.
Has the deferral period gone past and and the ask has always been exactly like you said 30 days to 90 days.
What we have structured.
His 30 days to five months, so one months to five months and part of the reason why we did that was just to stay pay us something.
It helps us on our cash flow side and the total quantum of your deferral is still going to be the same.
Okay, but we will spread it out over a larger peers. So it's not that you're going to get zero percent deferral, you'll get a portion of your rent deferred and we will collect some rent rental income during this period and it'll give you. The time you know you need to to get healthier.
That's those are the ones that we have resolved in and it has that flavor to it and the payback of that deferred rent is approximately that nine to 10 month timeframe.
It's for us to be made whole.
But didn't know situation that I'm aware off today.
Has anybody asked us for a deferral.
Asked us for a deferral past three months.
That's helpful. Thank you.
Thank you.
Yes.
Your next question comes from the line of John Misaka with Ladenburg Thalmann. Your line is open.
Good afternoon.
Hey, John.
So if and when we get back to an environment, where you I'm kind of feeling go on the offsets from an acquisition perspective in an understanding or other factors that go into this decision, but let me what kind of spreads would you want to see your cost of capital to to make Reaccelerating the acquisition platform attractive.
He is that even a gating factor today at all or is it mostly just.
Concerns about kind of the macro volatility.
No. It's I mean anytime you're looking at the acquisitions market, John you want to make sure that you.
You know continue to capture some level of spread day, one and then you had growth in the leases, which allows you to continue to capture them, you know more and more spread.
So so that is absolutely something that we're going to take into consideration.
If and when we decide to you know selectively put our capital to work, but like I said our priority today.
Not having the visibility into the duration of this this particular pandemic.
It's going to make us very very selective in terms of where.
We put our capital to work on the acquisition from.
So.
It's just I would say, it's a little too early to tell a what we are trying to do however, his position ourselves from a liquidity perspective from a capital perspective from a discussions perspective to be ready to go if and when the market allows us and we have more visibility into you know a bad.
As pandemic is going and what is the true impact I'm going to look like as soon as that becomes a bit here to us than it is today I think we want to be in a position to be.
Now, let's start at the gate, if you will to take advantage of the acquisitions market.
I mean, you kind of over the last couple of quarters, you guys have achieved kind of above historical average spreads means that necessary to get back in the aftermarket or if it came back more towards you guys long term historical spreads would that be kind of fine.
Long term historical spreads would absolutely be fine you know we will we were in that hundred 50 basis points spread that's the average that we have accomplished through the history of our company and that is certainly an area that would that would you know that would be attractive enough, but again.
It is going to be a function of the product.
If it is you know riskier assets.
We are going to be a lot more hesitant to pursue those types of transactions even at outsize spreads. If these are right down. The fairway you know like I said, weve compartmentalised or the acquisition markets into into three buckets and the first bucket that we go to is the.
One where you know markets really haven't changed.
But we hope it does and if it does you know those are products that will continue to have tailwinds.
In this environment and we continue to thrive in this environment and so.
We will judiciously.
Grow you know that that particular element, but not today you know I'm. This is all predicated on having more clarity as to how long. This pandemic is going to last.
I greatly appreciate the color that's it for me. Thank you very much.
Thanks, John.
Your next question comes on the line Linda Sia with Jefferies. Your line is open.
Hi, I'm, recognizing you have a great track record with your dividend and liquidity needs Apple for our own understanding how machine revenues have to go do have to go down or decline before you're at 100%.
Payout.
Yeah. So you know I think the easiest way to answer that Linda is you know our payout ratio at the end of 2019.
Oh, perhaps at the end of the first quarter was right around 80%.
So you know if we lose 20% of our AFFO.
Than then you're going to be at a 100% a payout ratio.
Thanks, and then.
How do you expect occupancy look at the end of Q2 versus where you ended in one Q.
It's a it's a very interesting question I've read we just don't now you know deferment does not mean these assets are coming back to us and.
And like I said, Linda the vast majority of what we have.
Being engaged in is a different people.
Want to continue to operate. These these are these locations so I'd be surprised if if you know.
Will it be lower than the first quarter I see it will.
Because some of these are some of these smaller operators. Unfortunately, despite us trying to work with them may not survive, but thankfully that's a very small percentage of our overall portfolio and and and so those will be coming back and Ah, but I I don't.
Expected to be dramatically different or will it be lower than the 98 five.
I think I think yes, the answer is.
[noise]. Thanks, sorry, you mentioned this earlier, but any sense of what percentage of your tenant base. This open right now.
We would say about 80% of our retail tenants are open today and by that we mean, there either fully open or partially open and I would say 20%.
Of our tenants or are you know fully closed.
Thanks, that's it.
Your next question comes from the line as Chris Lucas with capital One Securities. Your line is open.
Good afternoon, everybody, Hey, I assume it's a couple quick questions for you when did you guys.
Women, who ask transaction completed in the first quarter.
When it was a loss to transaction, we completed in the first quarter, how far into the quarter result.
Oh, I I wouldn't be surprised if they weren't assets. We are closing in the last couple of days for the quarter.
Okay, and then have you closed anything so for this quarter.
Yes, we believe behalf.
Okay and my last question.
And are working on it.
I go back to that one.
And quantity that you want to sphere.
No it's too early.
And you know.
What's already happened in the first month.
You know, it's probably not going to be reflective of what's going to happen remaining two months.
Okay and then last question for me is Tom you talked a lot of that line of business exposure on the deferral any geographic listeners that you're running into California has been particularly just providing leniency her tenants I'm just curious whether that's had an impact on your deferral requests.
That's a great question, Chris we have not seen that when we have been doing our analysis, even with respect to given tenant obviously, they shared with us what their liquidity analysis looks like we have been doing it independently off our tenants to try to get a sense for what their liquidity position looks like.
And part of what we are trying to overlay with regard to your liquidity analysis is to look at the geographies and then you know take into consideration what some of the state specific rulings have been like a I would say that Georgia, and Ohio, and Tennessee, there being a bit more aggressive.
In terms of opening up or alarming stores to open up what does that mean, which other states that are going to be potentially slow or in terms of a store openings et cetera, and so what does that mean for those the stores that we have in our portfolio and their ability to pay and we sort of it you.
At that level, we try to capture what the what the liquidity position of each of these tenants will look like when we engage in a conversation with the tenant and they either help you know support our thought process or challenge our thought process.
To continue to refine the you know the analysis, but you know this was based on forecasting when some of these states are going to open.
[music].
Last Friday was the first day that some of the state's decided to open up and so what is actually going to end up playing out or could be a little different from what weve underwritten.
And back to wouldn't be then overlaid on top of our analysis due to reflect what is truly happening.
In some cases states have pushed out.
The the reopening day than in others, they've they've stayed true and.
They have a different staging too you know what is considered phase one opening with its baseball or opening up for instance in New York. It is very different from from what it is here in a in California. So.
We do take that into account, but it is you know.
It is in anticipation of what we see happening.
And units again too too early to tell what the true impacted but most of our operators are.
National operators and so the conversation is more holistic, but we do overlay that into our liquidity analysis.
Great. Thank you for sure.
Okay.
Your next question comes on the line of Collin Mings with Raymond James Your line is open.
Thanks. Good afternoon, just one quick one for me just recognizing there wasn't a lot of overlap in terms of timing, but just as you read leased properties toward the end of one Q was there any shift in what tenants would agree to as relates to term or other lease language and how do you expect this to evolve just given the pandemic.
You know most of our discussion Colin has been around making sure that we are collecting the deferred rent.
As soon as possible I mean that is key to us from a cash flow perspective, and and restate that is one of the objectives that we have while entering into any of these negotiations and so but but I think I've mentioned this in one of the previous answers most of the.
I ask that that we receive from our tenant base has has been a 30 to 90 days or deferment, what we have structured as a slightly longer deferment and there was up for the ones that we have structured slightly longer deferment period, but collecting partial rent.
During that Pasha no longer.
Deferment period.
And then making sure that we are getting back our unit deferred rent within a period of 10 call. It 10 mountains from the time that the department and that's that's the structure that we've we've engaged and.
But the vast majority of the discussions.
Haven't been resolved yet and part of it is because the liquidity situation continues to evolve for some of these these tenants and so you know.
Our our goal is to to try to collected in the initial you know whatever was the initial lease term period and not start to engage and let's extend out lease terms if that is economically a far better outcome for us we will absolutely do that.
But for US the goal is yes, we will.
Engage in a conversation, but we want to get paid back as quickly as possible and if that means not having to necessary revised lease terms, that's okay with us.
I apologize commit actually minute in terms of leases that were up for natural expiration or renewal that kind of dynamic had changed or just how about I know it could change not specifically related to any sort of.
Rent deferment negotiation.
Oh, sorry about that call and no look we had a pretty good pretty good the first quarter in terms of recapture rate we were at 99%, which is right on top of our historical historical average and this is across the spectrum, you know renewals and new tenants.
And so.
You know do we expect that to change.
Perhaps but it is again going to be a sub sector by Subsector phenomena. You know these are renewals in the grocery business or in drug store business or dollar store businesses those.
Those will continue to get renewed with the existing rent options and the rent bumps that's associated with those options in place if they tend to be in industries that have been more impacted I eat casual dining etcetera, I think those are going to suffer you know.
But nevertheless, if you know those locations are inherently valuable to the operators and even though they're shop today, but they recognize that these are all.
Locations that have historically been very well on should do well once.
You know social distancing is alleviated then I think they will they will still want to enter into discussions with us, but it's too early calling to tell you precisely how it's going to play out you know this is.
Yeah, the speed with which all of this happened was pretty dramatic but the first quarter. If that's the data that you want to lean on.
It was a pretty good quarter four for renewals.
Okay. Thank you.
Thanks.
Your next question comes from the line of Joshua Dennerlein with Bank of America. Your line is open.
Hey, good afternoon. Thanks for question.
You mentioned earlier that you expect some tenants who paid in April or cresting may rent deferrals are those tenants concentration for industries that drove most of the non collection role or some of that and like another industry category.
No look the vast majority I would say falls into that into that well into the four categories that we have.
Highlighted but then there are other businesses as well you know automotive services is another area that that we have tenants that.
Have paid.
April rents, but they might.
And they have discussed with us and we have actually.
We are working with them to help alleviate or defer some of the rents for the month of me, but the the before industries that you know for sure continues to be the industries that are most impacted other ones that we've talked about Joshua.
Hi.
Thanks, and then just like we talked about it yet on the call or just an update on the CFO search where that is in the process.
Or maybe expectations on when you think.
At a new CFO in place.
Sure.
Look.
It's obviously a bit difficult right now given that so many of the existing cfos are so in trench right now in trying to resolve their own companies issue.
Et cetera. So.
Yes, we do find ourselves in very interesting times, having said that look we have engaged an external search firm to help us through the CFO search process.
They're continuing to be very active we've gone through first round up interviews with a select few candidates that that's sort of where stepped up a we're continuing to to you know go through first round interviews so.
My My hope was that we would be able to wrap this thing up by June.
But given you know this covert 19 situation and the inherent slow down.
That this has imposed.
It'll probably be much later by the time be we get somebody to fill that seat.
And and truth be told you know we have such a good team between Jonathan and Sean.
I I don't feel like we are really lacking in any area of the business with regards to the CFO, that's not to say it wouldn't you know.
That is wouldn't help to have somebody else here, you know, helping take the load off of Jonathan and Sean but.
We want to find the right person and not to losses of Paramount importance and so if it takes us a bit longer that's okay and you know given the current situation I do think you'll take up a bit longer.
Okay. Thank you appreciate that.
Thank you.
Your next question comes from the line of Barry Raskin with two Jay investment Group. Your line is open.
Hello greetings.
Hi, very high is it sumit or summit.
It's summit.
Yeah.
It's a little bit in the in the middle there.
Yeah.
So I have a couple of quick questions. One is in many of the other questioners asked of out of my question sorry.
That was really good but I guess I'm thinking of just from a more long term perspective as it relates to your dividend, which is kind of your brand.
In terms of the read from the retail perspective.
I guess fundamentally how safe is is this dividend and how much pressure is there on you and your organization to continue to.
Meet the criteria to be in a dividend aristocrats I'm I'm thinking because I'm. The reason I'm asking is because when I look at these.
What percentage or you know over 11% of your top 20 tenants by revenue being restaurants, or you know casual dining gyms and theaters my perspective is that.
These things aren't going to come back for a long time like you said and even when the restrictions are lifted.
From a government perspective, it there's very.
I see more bankruptcy is coming from these theaters in restaurants, and as you said, maybe not as much from gyms, but the overhead and capital structure of these.
Institutions seemed very weak.
If you if you have to go for three or four or six months without any revenue or anyway. So that's sort of a fundamental question would you guys.
Borrow money or would you need to borrow money.
Can you to pay that dividends, that's that's sort of my first question.
Yeah look I mean that really is what goes to the I think it was I'm.
Giovanni who asked the question you know how much room do you have and it goes back to our payout ratio we have 20%.
Of.
Off of a room within our business model.
To help support the the dividends that we haven't plays.
You know.
Yes. It is our brand we are the monthly dividend company. It is you know very much part and parcel of how we operate our business. It is our mission and so this is one of those tools that we certainly have available to us to manage liquidity, but one that we feel.
At least given the nature of the non today and despite all of the things that you've laid out Oh, we do not need to put on and part of that goes back to you know the liquidity strength that we have to be able to withstand disruptions.
Even medium term disruptions.
And and and still be able to maintain it profile of the business that continues to be very strong and continues to support the dividend.
As you know Barry we were added to the dividend aristocrats earlier. This year. It took US 25 years to get there and then and you don't want to list.
Well, you don't and and for for a variety of reasons that I just laid out but at the same time you know if this is a two year phenomena rather than a six month phenomena or nine months phenomena than that too is a lever that one might need to lean on but it is certainly not one that we feel like we need to lead.
Do it and it is a testament to the portfolio that we have created as a testament to the ratings that we have in the access to liquidity that we have and our ability to be a lot more patient and potentially some of our peers and the fact that our portfolio has performed a piece for the month of April the way did you know continues to provide some level.
Have you know tailwinds to that to that pieces, but look these things are evolving situations and things can change.
But we remain hopeful.
Well, Yeah, I I think that is a testament to a which is wyman investor in your company for a long time.
Because I think you have very strong team.
The pressure on on the company to continue to perform in this way must be enormous I could just see what would happen to the share price.
If that dynamic changed.
I really like you said you guys seem to have the additional liquidity and I like what you said that that in essence your tenants in some cases can lean on youve to use your liquidity.
In essence to.
The your their bank for a while I know that violence real estate outside of owning Oh.
And we've had to give deferrals and in some cases full forbearance some of our tenants.
Most most cases, they will pay us back well they say, they're gonna [laughter], we'll see.
I think I'm sure you guys are doing scenario planning for the worst case scenario.
And I'm, assuming you have contingencies in place.
And I appreciate that my only other question has to do with how you're communicating with all of your tenants, particularly used to be more vulnerable tenants and if they get relief from P.P.P. loans or insurance relief of course, that's a big that's a big Harry Monster, the whole insurance industry, and what's going to happen with force majeure.
Her and.
Business interruption and there's a lot of cases moving through the course already on that but if any of your tenants. These particularly these that get relief have you put them on noted notice that if they do get this relief that you're going to expect.
Some.
Relief back to you guys or is that just kind of you're going to see wait and see how that happens I'm I'm wondering if they're already on notice that if they do get this release it that you'd like to have some.
Legal means.
By which to share in that.
Yeah, and look very I mean, you said, how often do we communicate with attendants constantly as the word that comes to mind, even with those that we have resolved.
You know a deferred structure for for their rents and I will tell you that because our communication so constant.
And it's not just because we wanted to be made whole it's to make sure that these guys are doing well and continuing to.
To withstand this pandemic situation as best as they can and there's a relationship here that we want to continue to build on that in situations, where you know some of our tenants who were.
Able to get the PPP loan.
They came back and they paid us the rent even though in the beginning their request for was for a deferral. So nice this goes back to the Testament of you know.
Being constantly in touch with your with your tenants and making sure that you use remain engaged and the liquidity situation I think I've referenced this multiple times. During this call continues to evolve I'm not just for the better capitalized tenants, who have access to multiple sources of capital but.
Even for some of these smaller tenants who tends to be a very small portion of our overall tenant portfolio I mean largely dominated by <unk>.
National and regional players.
But you know it's about staying in touch it's about making sure that they're doing well.
They're continuing to remain healthy and through those where liquidity situations change. We can we can you know engage in those conversations and more often than not they they will pay if they feel like they're in a better place. So so you got has been the situation for us.
So thank you. So if you haven't had you haven't put people on notice specifically if they get relief that you you're just keeping in touch with them and if they do.
If they don't pay you back then you asked them.
Well you know it goes back to if there is a resolution in place then there are provisions that if your liquidity situation. What could change you know you should consider paying us back.
But remember that we've only resolve 6% of.
Tenants, who are common asked us for you know some sort of a department.
And.
The Big reason for that is because the situation continues to evolve and so rather than striking a transaction which could become.
You know obsolete, we we'd much rather stay engaged and you know get real time information on how things are evolving for each one of our tenants and therefore, you know a the situation with whether or not they can pay their friends changes.
That's the reason why we have you know just chosen to stay engaged rather than necessarily get it over the finish line.
That's great. Thank you very much.
Thank you.
[noise] any other.
[noise] thinks we don't have in just a question my apologies. This concludes the question and answer portion of Realty incomes Conference call I will now turn the call over to yourself Sumit Roy for your concluding remarks.
Okay. Thank you all for joining us today, and we look forward to connecting with everyone virtually at the upcoming conferences. Thanks Bye bye.
Yeah, let's.
I'm in this concludes today's conference call you may now disconnect.
[laughter].
[music].