Q1 2020 Earnings Call
Greetings and welcome to RPT reality first quarter 2020 earnings conference call. At this time all participants are in listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference call is being recorded.
Now I'd like to turn the conference over to your host Vincent Chao. Thank you you may begin.
Good morning, and thank you for joining us for RP cheese first quarter 2020, <unk> conference call.
This time management would like me to inform you that certain statements made during this conference call, which are not historical maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Additionally statements made during the call are made as of the date of this call Mr. must I didn't replace you understand the passage of time by itself will diminish the quality of the statements made although we believe the expectations reflected in any forward looking statements are based on reasonable assumptions factors and risks could cause actual results to differ from expectations.
Certain of these factors are described these risk factors in our annual report on form 10-K quarterly report on form 10-Q for the first work 2020.
Sure one of these statements made on today's call also involve non-GAAP financial measures listeners are directed to our first quarter press release, which includes definitions of those non-GAAP measures reconciliation. The nearest GAAP measures and which is available on our website in the investor section.
I would now let's turn the call over the President and CEO, Brian Harbor, and CFO, Mike <unk> for their opening remarks, after which we will open the call for questions.
Good morning, and thank you for joining our first quarter 2020 conference call.
I'd like to start by thanking all the frontline workers, helping us all get through this unprecedented appeared in time.
Please hard working tyres tirelessly to ensure that our centers are safe operational and ready for the reopening of the economy. Our tenants were doing everything they can take contained a sports our customers despite wide spread store closures and to our investors lenders and vendors, we're taking a pragmatic.
View of the situation to ensure that we can all prosper coming out of this pandemic.
Ultimately our success through the pandemic lives an ample liquidity excellence in operations business continuity and a strategic outlook for the future. These four principles have driven what we have done and we'll continue to do a throughout this pandemic and in a post pandemic environment.
Led by an operationally hands on proactive motivated and crisis tested management team, we sit in a position of relative strength. Following a two year transformation of our organization.
Our predominantly grocery anchored and valued orientated portfolio and our flexible balance sheet.
Combined with recent actions, we believe that RPT, we'll be able to whether the current storm and thrive once a passive.
Regarding our financial liquidity, we took a number of quick and decisive steps when the severity of the pandemic became apparent which we described in our earnings release and our covert 19 update from late March in short the actions, we took increased our cash to over $320 million at the end of the first quarter, which should allow us to weather the downturn.
Got it by Cobot 19.
Looking for it to better align expenses, where the current revenue stream.
We made the difficult decision to reduce some of the development functions and temporarily reduce executive officer cash salaries as detailed in the earnings release.
As a management team, we see tremendous opportunity. They had that are in this for the long haul and we felt that the salary adjustments were a proactive step that created alignment with our employees and our shareholders.
Combined we expect to save about a million dollars in cash from these actions.
Lastly, the board recently made the decision to temporarily suspend the quarterly common dividend prison, preserving roughly $18 million per quarter.
No decisions regarding dividend payments beyond second quarter 2020 haven't made.
Future dividend decisions will be made based on liquidity needs and re taxable income distribution requirements.
Management in the board did not to take the decision to spend the dividend lightly we are committed to providing investors with a healthy and sustainable dividend cash flow visibility improves and the longer term impacts of covert 19 or more apparent.
Currently all 49 of our properties are open and operational.
As of May 7th.
83% of our tenants baby our open as of May Eightth, we collected 58% of April ramp and reimbursements largely from open tenants.
Our top 25 times based on maybe are over 86% have paid where I've agreed in principle to some form of short term deferment.
The majority of April uncollected rent was tied to the non essential and experience alternate categories with whom we are an active conversations with.
Not surprisingly these categories comprised the vast majority of our rent relief court <unk> requests that we have received to date.
In terms of make collections. It is too early to comment given the fluidity of tenant negotiations.
Well the segment of our portfolio has importance and provides transparency into our business.
The single bass predictor of collections remains whether or not the stores opened for business as such we are encouraged that some states have begun to lift locked down orders lie more tenants to reopen their doors.
That said.
Every tenant has different circumstances, each rent deferment negotiation has different considerations. There are still elements of uncertainty in all cases, given the rapidly changing health environment, we are experiencing today.
In order for us to clearly evaluate our cash flows by risk level, we have classified our tenants into four tears based on our assessment of their ability to pay rent near term.
And the sustainability of their rent payments long term.
In tier one our tenants who have both good long term business models have largely been able to remain open through the pandemic.
These include central businesses, as well as QSR and fast casual restaurants, who remain open.
Even if only a takeout drive through or delivery basis.
87.9% of this tier remains open an 83.9% paid April rent as of May.
In tier two our tenants with solid long term business models and good balance sheets pre coven, but that sell more discretionary items, the discount apparel retailers like TJ, Max and Ross fall into this category long with other investment grade quality tenants not included in tier one.
Our tier two tenants paid 78.7% of April rent.
But only 27.2% by Hbr were open in April.
Tier three tenants offer more commodity like private products like full line apparel and accessories and tier four tenants are more spiritual in nature, including full service restaurants and in many cases were key drivers traffic pre pandemic.
Collectively tier three and tier four tenants paid 36.1% of April rent and 35.6% Baby our remained open.
Turning now to tenant negotiations.
I would characterize our approach that's from but fair.
Our size is an advantage right now that's our top executives are directly involved in negotiations we understand that many of our tenants are in an extremely difficult position relative to their businesses and sales channels being turned off overnight.
We are working in good faith.
With them to get through the current turmoil in a way that both the tenant inland landlord can be successful beyond the crisis.
To assist our tenants we started the RPT tenant concierge service to support our small business partners and gaining access to various government assistance programs.
Hosting educational webinars, and providing and paying for direct access to legal resources.
The 275 tenants that we targeted nearly two thirds of told us they applied for the P.P. long.
Application for an S.P.A. loan for eligible tenants, it's a prerequisite for consideration of any form of deferral.
That's sad, let me be Claire.
Well, we are empathetic to our tenants current situations. We are actively pursuing collections and we'll pursue all remedies, where we believe tenants have the capacity to pay right.
Well, we're not doing sacrificing long term cash flow just for a short term April may rent gain.
April rent is still coming in and I said earlier, we will continue to pursue collections aggressively.
Getting through this will take the collective efforts of the entire ecosystem. There is no place for bad actors.
For our part we continue to service our debt to pay your real estate taxes and insurance.
And our maintaining the assets to operate safely during the mandated shutdowns, while preparing for the reopening of the economy.
As we negotiate any form of rent relief, we are using our tiering process to guide our decision making process.
Focus on deferrals to support tenants, indeed, well granting rent relief abatements judiciously.
At this point well only a 127 rent relief requests have been approved 121 have been in the form of deferrals totaling $3.8 million and only six abatements have been granted totaling less than $71000.
Typical deferral terms call for repayment by the end of 2020.
Ranged from one to three months.
Please know that neither deferrals, nor abatements are being granted for free and.
We are using them as currency to improve lease terms that adds significant value down the road.
Some examples include cleaning up co tenancy clauses, eliminating no builds and extending term to name a few.
We have proven to be exceptional on the operational side of the business and will navigate this storm do that exact same lands.
Although much of this focus has been on who is not paying rent I think it's important to keep in mind that the pandemic is also highlighting the importance of key tenda categories and specifically the grocery channel. We are seeing incredible demand at our non grocery anchored centers from grocers and are currently in negotiations with seven top tier grocers at.
Non grocery anchored centers in our portfolio that we improved the durability of cash flows out. These centers, if we if close and increase the number of our centers.
Rocher or grocery component by 14%.
Turning now to RP teacher spots the pandemic at the organizational and community levels, which I believe is a strong reflection of the caliber and quality of the company.
At the organizational level responded quickly and definitively in response to what was a rapidly escalating situation to ensure the safety and health of our employees and to provide uninterrupted service to our times, we shut down in New York Office in early March followed shortly by the closing of our Michigan office.
Our employees have now been working safely and efficiently.
From home for almost 10 weeks.
But a year ago, we establish an optional work from home day program, which made the transition to a full work from home environment quite smooth.
Our technology tools and processes allowed us to rapidly evolve.
The situation real time and with limited disruption.
Well, we're all looking forward to the day, we can return to the office, we are prepared and ready to continue to work remotely as long as it takes to ensure the health and safety of our people.
In addition to our work from home programs. We have also been working diligently to protect the ongoing health and wellbeing of our employees through weekly wellness emails covert related seminars and weekly companywide virtual happy hours.
At the tenant community level RPT has been actively engaging with supporting both our tenants and those on the front lines of the pandemic.
To date, we have donated over 20000 meals to support <unk> school lunch programs at risk populations central workers and nursing home employees and local communities.
We have also matched employee contributions to support hospital workers and volunteers.
In anticipation and preparation the reopening of many of our tenants coming weeks, we have developed plans for several key initiatives at our shopping centers to keep customers and tenants safe.
Some examples of how we have and are preparing for the reopening of the economy are summarized in our press release, but include things like adding nearly four miles worth of social distancing for markers curbside pickup distributing over 120000 mouse.
An increasing health and safety protocol signage at our centers.
Current health crisis has caused us to reshape our business plans quickly at a refocus our efforts in the near term.
Our response, the pandemic has been focused on the health and safety of our employees and their families. Our tenants in our shopping center customers.
Maintaining business continuity during and after that pandemic, an increasing liquidity to withstand the near term financial impact to the health crisis, while positioning the company for long term success after the crisis passive.
No. The pandemic is having a profound impact on how we think about the business. We remain confident that at its core value and service oriented as well as the grocery anchored shopping center model is one that will stand the test of time as we all seek out common ground.
Upon which to gather experienced life and yes.
Shop.
With that I will turn the call over to Mike.
Thanks, Brian and good morning, everyone over the last couple of weeks since a pandemic enforce many of our key decisions have been through the lens of liquidity.
Our goal is simple focused on what you can control repair what you can.
As we outlined in the earnings release last night detail since the pandemic started we have taken action that are expected to supplement our cash position in twice 20 by at least 380 million relative to our pre pandemic plant.
A significant contributor to this was our recent borrowings on our line of credit.
Out of abundance of caution.
And after analyze our potential cast needs.
We drew down 225 million from our line during the quarter.
Bringing our total cash position to over 320 million at the end of March.
Based on all the steps we've taken over the last two years, the solidify our balance sheet.
We're fortunate to not have any debt maturing in 2020.
Only 37 million maturing at 21.
And just 53 million at 22.
If our cash collection remained at the April level of 58%, we would be able to fund are ongoing operations without utilizing much more cash on hand.
Our breakeven cash collection rate is roughly 61%.
In short, we believe we have more than enough liquidity to withstand the impacts of overnight team.
The severity of the situation.
Well, we have no material use forecast today, we will continue to balance our future cash needs and debt covenant compliance requirements to ensure we have optimal liquidity and flexibility to operate our business.
It's also important to note that 46 of our 49 properties are unencumbered.
Biting us with the optimal operational flexibility to make decisions quickly without the Bergen servicers or lenders.
Quickly on our first quarter results operating up a bulk of the first quarter was 26 cents per share, which was inline with our internal projections.
During the quarter, you recognized about 800000 and costs related to the suspension of our acquisition and disposition program, which had been excluded from operating FFO is there a nonrecurring nature.
Same property NOI growth the first quarter points wanting was 2.3%, which included a 120 basis point drag from right not probable collection, reflecting the initial impact from coal with 19 attributable to a conservative approach, we took with an entertainment tenet that had a substantial open they are back.
That we deemed uncollectable.
Absent the same property NOI growth for the quarter was in line with our expectation.
We ended the quarter at an occupancy rate of 93.3% Dot 100 basis points sequentially, given typical seasonality and the recapture.
Expected anchor space, but up 150 basis points year over year on the leasing front volume halted in early March due to covert 19 impacting our new lease thought.
As a result with a much higher mix of renewal activity during the quarter.
In total we signed 46 leases comprised the 558000 square feet of which 60000 square feet or new leases and 490000 renewal leases, we experienced walid releasing spreads of 6.2%.
36, comparable leases, including a 6.2% renewal spread and a 5.2% new lease spread.
Turning now to our outlook for the remainder of the year in late March we pulled our clients want to guidance given the lack of visibility created by the car buyers.
While we are not reintroducing guidance today, we want that provide some additional points to think about you attempt to model the balance of the year relative to our previously provided guidance.
We ended the quarter with side not open they'd be article about 2.1 million. Despite the pandemic, we have been able to continue most of our construction activity associated with these leases.
Well, we have seen a life delay with rent commencement dates we expect a breath to come back over the next 12 months.
Regarding near term explorations, we only have re 0.4% of our it'd be are expiring over the balance of 2020 mitigating some near term tenant retention at risk.
The capital perspective, we have only $14 million remaining committed capital spend in 2020 of which $11 million related or a sign that opened backlog and residual capital to recently opened tenants with the balance largely related to essential maintenance capital.
Turning to the common dividend as Brian mentioned once the dust settles in the current disruption and longer term applications for the market become more clear subject to board approval you expect to me Institute a sustainable dividend that will again provide a stable income stream for our investors.
Translate into 18 million per quarter common dividend be we're paying what equates to 54 million perpetual capital preservation through the next three quarters.
Lastly, the spirit of transparently, it's worth noting that we provided additional detail on our fears that Brian discussed earlier. In addition to more information on our merchandising mix and performance as it pertains recollection, and our quarterly investor deck posted on our website.
With that I'll turn the call back to the operator open the lines for questions.
Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad a confirmation tollway indicate your line is in the question Q you May press Star too if you like to remove your question from the Q4 participants use and speaker equipment. It may be necessary to pick up your handset before.
Person this dark he's one moment, please why we poll for questions.
Our first question comes from Derek Johnston with Deutsche Bank. Please proceed with your question.
Hi, Good morning, everybody. Thank you can you give us an update on capital sources and uses especially as it relates to the G. I see changing I do think the original plan was to partner with them on acquisition. So we would chariots as to whether their appetite for retail real estate.
Change since the time dynamic.
Second part of this question is another 200 million capital commitment from Marin has that been funded or what was the timeline to that.
Thanks, Derek and good morning, a great to hear your voice.
Were greatly excited about the G. I see partnership by the timeline of that is we have three years from December 2019, when the JV close to deploy that capital.
Stayed at least we have strong relationship with them.
View, the grocery sector, the grocery channel through the through the seems lens as they do I.
I can tell you from an acquisitions perspective, it's it's it's much too early.
But we expect to see a lot of opportunities with dislocations in pricing.
And to say the lease this is a very unique relationship among our peer set which gives us a major strategic advantage when the timing is right yeah right now its its liquidity liquidity liquidity.
But you know that will serve us well near term and be a differentiator for opportunistic opportunities in the future.
Capital commitment.
As being funded acquisition by acquisition, so that there's no funding, but it's a funded that's an that's had an add on an acid needed basis prior to closing of each assets.
Okay got it. Thank you and then of course the dividends suspension you know, it's it's no secret I feel the screen, maybe you know viewed the coverage is stretched for a time. There. So you know given where the portfolio is that today 'cause the suspension, perhaps last for a few.
Orders longer as you guys, maybe work to shore up capital and further reduce leverage and then the second part you know the question would be how much more do you guys have to pay out after the first quarter distribution to satisfy reporting requirements.
Thanks, Let me take the first part and I can answer the second.
We believe you know first and foremost paying a sustainable dividend level is important and where we were well on our way to cover our dividend before the spend on the cat I mean, you look at last year and sector, leading with 4% plus same store NOI and take out Kobe. This would have been a north of a 3% on NOI this quarter.
And we're well on our way to coverage with that being said.
We're in this situation so once once the dust settles from the current disruption and longer term implications of the market become much more clear and obviously subject to board approval, we expect to reinstituted sustainable dividend that will again provide a stable income stream for our investors the timing of such remains to be seeing and again, it's subject to board approval.
Yeah, when we do reinstate a quarterly dividend it will be sized appropriately to meet our redistribution requirements and at a level that is sustainable can grow in conjunction with our earnings growth.
As far as any sort of catch up payment that will be a board decision at the time, we reinstate but unlike the preferred dividend there's no required catch up payment with that so Mike you want to touch upon leveraging the taxable.
Yeah sure as far as taxable income goes Derrick I didnt quite a bit too early to nowhere taxable income requirement will be for 2020, what I can tell you that our taxable income and Nineteena was approximately 34 million and we have paid out approximately 20 million and distribution thus far in 2020.
Based misinformation that gives you some sense of possibilities are taxable income in 2020 and potential remaining distributions to meet our taxable income requirements for a this year.
Thank you that's very helpful. Thanks, guys.
Thanks, Doug Best [laughter] [noise].
Our next question comes from Todd Thomas with Keybanc Capital markets. Please proceed with your question.
Hi, Thanks, good morning, good morning.
And.
Maybe my maybe for Mike also you mentioned, it's early in May of terms. They ran collections can you share any detail on Sunday, either directionally or how collections are tracking compared to April at this time and that and then there seems to be a fairly strong correlation between open.
And rent payment, which makes sense I know what the reopening timelines looked like across the portfolio, maybe how much KBR might be opened by like say June twond or or July one based on what are the plans retailers are discussing with yeah.
Yeah that's.
Let me take the first question from May if that's true fluid I was on.
On track.
From from April from accounts over a month right now.
But it's much too fluid and we're still getting April right. After that probably that's we speak right now [noise].
But that said we have a very very detailed approach to our collections habitat seem assigned and myself included talking with a number of C. <unk> C suite level on the retailer side and and and there. So I do think that's a that's an advantage that's a set in my prepared remarks.
That are sizes that advantage, where we get to myself and Tim and and others on the leasing team David Ross get to get to speak with these retailers face to face and work out something that is a win win for both.
As far as opening up I do feel bullish that more rent will become again just based on the geography or that we have you know where do you look at our concentration at Michigan. You know that's that's mostly my opening up May 15th, Georgia, just opened up Tennessee opened up Texas opened up Colorado.
Opened up you know Saint Louis opened up so it really with the outs.
Really with exception of Chicago.
We're on a run a pretty good geographic footprint, where no concentration in the northeast or California, or the Pacific Northwest, where it's going to be a little later.
Retailers are opening by what they feel comfortable you know much more of the nationals have been doing the curbside pick ups and are much more aggressive with opening a then the regionals and locals, but that being said and the Florida is and Georges other world, We're seeing a good a good.
Uptick with with with communication, we're seeing good uptake with people planning for opening.
Two we have a whole planned opening practice with best in our best case practices and procedures from from you know from C.D.C. and others from a local municipalities. So we're there to help them and our asset management team has done an unbelievable job and the success.
Okay, and then you talked about the you know sort of balance or the ability of tenants to pay rent you know both both near term, but but also long term Howard how are you thinking about you know future rents for for restaurants theaters may be fitness or ER.
Other tenants that that might operate at reduced levels going forward how are you approaching.
Those discussions.
Well I mean, we're we're being common study with that approach and that you know is isn't in the tier four category of what we described as being much more empathetic to their businesses, where those are pure government shutdowns. So in the restaurants. It's a case by case basis. I mean, we look at sales pre covidien and look at their occupancy costs.
Yes.
You know tried to get their occupancy costs going forward. So it it literally we're in the details of case by case for each restaurants thankfully. We have a lot of QSR is who are opened with drive through restaurants, and fast casuals as well.
And then our sit towns and fine dining a horrible aka you know probably be around 25% occupancy for the near term you know for the next 60 days and then get uplifted based on state orders or state mandates.
I'd say go on that's kind of set something that we're walking hand in hand with them theaters. The same same bucket and then the same thing with fitness you know at life and this is one of our top 20 tenant.
We're in great dialogue with them and they have a great plan in place with social distance and turning their gems into more of cardio rooms, you know to have more space. So.
That category, we're in constant dialogue with and that's a case by case basis based on based on the states, but based on the operator as well.
Okay, and then I'm just lastly, so so the seven grocer deals that you commented on that you're negotiating I'd imagine that there is an urgency for for grocers to open and expand their footprints.
During this time.
These lease discussions that might advance in the near term to lease signing and you know do you have space available to accommodate those those grocers today and water restrictions look like across the portfolio at centers, where you where you already have a primary grocer, there's still opportunities for you to expand.
You know grocers are specialty food stores at those centers as well yeah, I mean, we're in a grocery Renaissance.
It's it's unbelievable the amount of demand and I haven't seen this in my career.
And really early on we were the leasing team talked with grocers talked with our existing and talk with new and saw the SAP as an opportunity to get in front of this pretty quick and set saw that it's a channel four for growth for them, but off so that would mean for growth process internally as well. So you know the.
Hello, Wiser leases I I am optimistic that it could turn pretty quick you know a few were vacant vacant boxes.
There is one that would be a combination of spaces and relos an identified but Todd. These are these are top tier grocers household names a strong balance sheets.
And and and voids in markets that they want to be in and that's another reason that I'm I've I like I liked the portfolio, where we're at today, where we're in the top 40 top 50 markets.
And don't have any of the tertiary exposure. So I think that's another reason why I think some of these grocers have really been active with us is down to the real estate.
We have a plan for every asset that's not grocer you know in some some have leasehold encompasses two too that we can't get out of but if a.
Tenant falls in default or a tenant falls and you know bankruptcy and we see a way to get some of that real estate, where we know we had a b C. Gross your whole foods are trader Joe's and our back pocket.
Just more of a reason to to actively negotiate or remedies for that location.
Okay, great. Thank you thank Scott.
Our next question comes from Collin Mings with Raymond James. Please proceed with your question.
Thank you good morning, Oh I just wanted to go back to Eric's question as far as GEC and you mentioned the three year timeline, but can be just expand on what you'll look forward to shift the focus back towards growth versus clearly the focused right now on liquidity and then it you'd think about deploying capital either.
In conjunction with GEC are.
<unk> for RPT, how you think about the potential to look at more distressed opportunities that might emerge as opposed to bulk focusing on property would arguably more durable cash flows.
Yeah, Hey calendar. Good morning. Thanks for the question I think I mean really with GE I see the JV was structured for grocery and Alan and from that channel specifically and.
Nothing's really changed or it's going to be we're looking from the markets. The same markets. You know those same pro business pro growth markets, we'll continue to pursue a those markets as part of that strategy. You know Austin is thriving with our with our Lake Hills acquisition. It was actually number one and our April.
Collection out of the entire portfolio. So we feel really good about that market and and know that market well I haven't spent the last year of knocking on doors and meeting with private owners.
You know and the opportunistic side of it first durable cash flow I think well look at both we're looking at driving as we've always been we've been a bottom up I or our company period, and if we can get.
Strong IR ours and since its secure ire ours from from durable cash flows at a higher yield will take that if we look at opportunistic assets, where we know that real estate really well and I said earlier, we have very strong grocery relationships and we know a AML.
As on or a whole foods or a trader Joe's wants to be in that market at that intersection we could we could take down an opportunistic asset as well. So I think the jets. He relationship is something that I'm greatly excited about and and thankfully it happened at the time it it did and.
[music].
You know, it's I think that that's going to be a very very bright future for the company.
Okay. Thank you and then switching gears I, just want to talk a little but more about and recognizing.
Literally a year and a good position as far as flexibility going forward in terms of not having a major commitment on the on the redevelopment or development front, but just as you think about the physical.
Lay out of your property, you think about potential redevelopment opportunity going forward, just maybe touch on how you plan to maybe shift some things around or think about the differently in light of maybe social being your for longer.
Yeah. So I mean, we're really thankful were not didnt have I mean, we have zero dollars from a redevelopment perspective and I.
I started pulling that lever back as as you know eight months ago, just based on where we are in the cycle and really reallocating that capital for what would be called development into our re merchandising strategy, we're getting 18% yields.
So you know, we like that box programming and specifically like that you know mid to high teens yield obviously.
But we also are looking at you know what does the shopping center look like while it's too early.
Personally I see it asked.
Having to front doors today, you know one within the store and then one outside the store and that's curbside.
So we are putting.
Resources into a curbside program, we are putting resources into analytics, a with video and and to to know capacity within the stores capacity within you know outside patios capacity within.
Within our parking lots and we've done a huge implementation of social distancing measure is already a that are out our center today, with you know social distance yards and and and other things so.
You know, it's too early to say like what else Kolon, but I think one thing we've proven as we're very operational savvy and were proactive and so I think.
The liquidity that we have today is enormous and were very thankful for that and it's going to prove out to be again, another differentiator for amongst our peers, where we can play offense, but we can also play reactive on where this cove it responses is coming.
Okay. Thank you Brian Thank you.
Our next question comes from Craig Schmidt with Bank of America. Please proceed with your question.
Hey, good morning.
I was wondering if you knew.
To what extent the off price retailers, TJ Ross and Burlington.
Our open and then I mean, it seems like they have a real opportunity in terms of sourcing could be very opportunistic, but how do they balance that with the treasure hunt approach of shopping there, which seems to be at odds with the social distance.
Good question. So you know we think we think there's going be a grocery Renaissance. What we think there's give me an off price Renaissance as well and you look at it Department store channel.
And TJ and Ross Nordstrom rack, Burlington Saks off fifth.
Yes, they're gonna be able to be buying inventory for pennies on the dollar.
And we see that that's a huge strength holiday what they're gonna do within the four walls of the treasure Hunt remains to be seen.
That being said you know TJ in particular, we see them as one of the greatest retailers in the world and they've proven to provide growth.
The year after year. So you know what those smart minds, I think they'll figure it out.
When they're opening.
It all depends on June geographically, so we're in constant and it's changing you know weren't constant dialogue and I do expect some of them.
To be opening here in may and and in certain states and then you know for pretty much all the states hopefully in early June.
And Craig I think I would add there that 90% of our or just kind of apparel.
Did pay April rent and only 3% we're open a north of April.
Okay, and so I'm just curious are there any off price off operators opened in Texas.
I mean from out apparel, we don't have any apparel that center, we have dollar trees. The dollar trees open.
If you called out off price, but we don't have not done that one particular center, we have no off price.
Okay. Thank you.
Thank you.
Our next question comes from Floris Van Dyke them with Boenning and Scattergood. Please proceed with your question.
Hey, Brian actually Compass point, but wanted to a asked you guys about.
Your covenants your you're pretty tight on your unsecured covenants, obviously, because you drew down your your line as you think about deploying that capital does that make you once you <unk> or potentially payback that your line.
But if you think about deploying that capital.
Am I right to say to think that if you were to invest that into a JV assets for example, with it.
A joint venture.
That would count against you in terms of your leverage, whereas if you were to buy a wholly owned assets that are on secured.
That would actually improve your leverage ratios and then also how do you think about.
Potentially.
You know taking advantage of some of the price dislocation your preferred shares of sold awful lot would you consider buying back some preferred and reducing your your leverage even though that doesn't get counted in that in that covenant I don't believe.
Mike you want to start here for you I can start Brian you could talk about or the the acquisition environment long term, but Florida like I mentioned in her prepared remarks, we pulled the line down a 225 million a bunch of caution similar to what many of our peers did and based on the line rate of 2% that's Uh huh.
He inexpensive insurance policy until we gain more certainty, we're going up we're going to hold tight or just because of liquidity is number one and I would say acquisition is number two and in terms of Brent run insight on the unencumbered leverage ratio look we can send that's 225 million back and get down so what we were a at the end.
19, right around 45% and still have a 100 million of cash and based on the cash burn rate analysis that you know I shared my opening remarks, which is pretty negligible or we wouldn't even you eat into the 100 million if we need to do.
Enforce like I said earlier, we see huge potential dislocation I think personally in the private markets.
It's way too early but we are in concert constant dialogue with Servicers banks.
As well as private private owners that that could be having some issues or are having issues with some of their CMBS loans.
So it's a it's a scalloped common steady approach.
In my opinion.
Opinion, it's truly it for the dislocation today.
Brian if I were to ask you, presumably you've been looking out into them in the market you presumably had had some you know in particular for the G. I see a JV.
We're having discussions when you go good it what kind of.
Racing difference do you think will occur I.E., how much do you think that's properties you are looking I previously how much in terms of value will you be able to buy them you know a and I know, there's a little bit of Ah you know uncertainty here, but but how much of it.
In fact, a valued you'd expect to occur.
It's it's tough because everything so different and I mean, if you look at you know your Austin's in Nashville, Raleigh is or Charlotte's and you know if you had whole foods are trader Joe's with a few small shop tenants I think.
Those small shop tenants and the cash flows are stable and secure and our open you know I think.
Personally I think there's a there's a lot of capital is gonna be flocking to that if you look at more of you know more of your opportunistic you more regional grocers with much more small shop and call it 100000 square feet.
I think if I take it could talk tick up a turner to hire on cap rates.
But it's it's very early and it's all dependent on market and intersection and credit quality and more than ever so.
You know, we're sitting on the sidelines so to speak right now, but with with eyes on on on the future and in constant dialogue to see if something could break loose.
Okay floors in Florida, and one more thing clarity on your and your question about.
Our leverage ratio some by buying JV assets would not impact your unencumbered leverage ratio now if we chose should shows.
Well secured debt on those assets and pay and use those proceeds to pay down the unsecured debt than it would help it but.
Sure you know straight strictly by JV assets wouldn't impact or leverage ratio do earlier point.
Thanks, Mike I appreciate that maybe one last question in terms of for me and in terms of your exposure to your theaters I know you didnt take down any receivables yet in your and you're on your balance sheet.
For some you know questionable potential credit, but you do have a fair amount of exposure to two theaters. What do you think is how do you think that's going to play out and and do you expect you know as well.
Just curious to get your take on what do you think it's going to happen to your pure exposures to two to Regal and at some of your other theater attendance.
I mean, thankfully, we don't have AMC Cinemark has a great. Operator, we don't have any of them and written really goes a grid operator, and that's that's our largest concentration a theater world, obviously and great.
Conversations with them they seem a optimistic in the future and and are doing things internally within their four walls first for social distancing and and really plan to open up a call it.
In June.
From what they've been saying could change up or back, but what what they've been telling us internally.
And so for them, we're feeling fine and really we only have a flicks a in Indianapolis is one of their top performing theaters and they're comping in Alamo Drafthouse and in Minnesota. So.
You know Regals, our lions share and we if we have a very solid relationship with them and they're giving us a lot of commentary on what they're doing that's as soon as what they're doing now to prepare for when their doors open.
So I think you know it's it's it's really it's really concentrated in one for us with Regal and and and their tremendous of what they do and have a good balance sheet and especially with these new investors and they're up I'm optimistic in the future.
Thanks, Brian for sure thanks floors.
Our next question comes from Linda Tsai with Jefferies. Please proceed with your question.
Hi, I'm I didn't see leverage trending for the remainder of 2020 and its 2021.
Hi, guys I, Yeah Beecher Thanks, Brian.
The tough one I mean after the potential fall off from retailers as a result of the pandemic.
At this point, given our liquidity position with over 320 million in cash coupled with very limited or little commit committed capital. We don't see any any neither raised our debt levels near term as for the EBIT Aside I mean too much uncertainty in an environment come in right now Oh I'll tell you that where we are committed over the long term to leverage levels between.
Five it happens this exact times have we as we've discussed.
In earlier conversations.
Thanks, and then occupancy at 93% any sense of how that'll be by year end.
No no sense at this point is given the uncertainty and environment.
Yeah much too early.
One last one of the cheer for tenant.
No what percentage of applied for people who loan.
[noise] from the tier four theaters restaurants, and fitness, where they don't have a exact percentage of what PPP long.
I can tell you from.
You know the locals, which represent 13% of our hbr.
Half has and I really do.
Apply that to this comps here as program that we.
Implemented so that's it that's a really good percentage and.
And of our April rack collectibles, you know you had low fiftys from from local tenants that paid April that we think because of the PPP loans.
Great. Thanks.
Thanks on it.
As a reminder, if you like to ask a question. Please press star one on your telephone keypad one moment, please when we pull for questions.
Our next question comes from Mike Miller with JP Morgan. Please proceed with your question.
Yes, Hi, Greg you talked about wanting to get something in return for doing the deferrals. So for the 121 deferrals that you'd mentioned that you did.
What sort of adjustments to lease terms did you make on those <unk> what percentage of 121 had adjustments to the lease terms and what were some of the common once.
I don't have the exact percentage made the comment.
It would be co tenancy cleanup old co tenancy.
Extension of terms.
Oh exclusives opening exclusives to allow.
Or maybe some competitors to into the property.
Adding on maybe radiuses.
It was all over the board you know and and the teams you know any any deferral goes through a process in a committee.
So we have legal asset management leasing finance all eyes on it so it's not done in a vacuum so everybody is checking.
At least abstracts and.
Other leases, where we have operators operating and they in the in the assets to really make sure. We are extracting as much as we can as we're allowing them to for deferrals. So I've been very.
Out and pleased of of the team's efforts so far.
Got it okay. There was it thank you.
Excellent.
Yes.
We have reached the end of the question after session at this time I like to turn the call back over to Brian Harbor for closing comments.
They sit in my remote location separated from family friends and colleagues.
I'm sincerely grateful to be part of an organization that has risen to the current challenge in a way that goes beyond all expectations.
The caliber of talent at RPT the portfolio.
Our processes.
And our balance sheet improvements made over the past two years.
Well as our partnership with GE I see I've no doubt that RPT will emerge from this crisis ready and able to capitalize on opportunities that arise from this pandemic.
Thank you all for joining our call this morning and have a safe day.
This concludes todays conference you may disconnect your lines at this time and we thank you for your participation.