Q1 2020 Earnings Call
[music].
At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During this session you need to press star one on your telephone.
If you require any further assistance. Please press star Zero I would now at the end the conference over to your Speaker today Mr., Brian Mccarthy Senior Vice President of marketing and communications. Thank you. Please go ahead Sir.
Thank you and good morning, everyone.
Them to take Realty group's first quarter earnings call.
Some of today's comments contain forward looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties.
Actual results may differ materially from these statements.
For more information about the factors that can adversely affect the company's results. Please see our SEC filings, including our most recent 10-Q.
Today's remarks also includes certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for reconciliation of these non-GAAP performance measures to our GAAP financial results.
On the call with me today from Kite Realty Group, our chairman and Chief Executive Officer, John Correct.
President and Chief operating Officer, Tom Mcgough.
Executive Vice President and Chief Financial Officer, Keith Fear, Senior Vice President and Chief Accounting Officer, Dave fuel and senior Vice President capital markets and Investor Relations Jason Cool.
I will now turn the call over to Jeff.
Thanks, Brian and good morning to everyone.
Thanks for joining us today.
Care he family appreciates that this has been and continues to be very challenging time for everyone.
Including our investors tenets customers and vendors.
And I hope this call find you all doing very well.
We're truly grateful for the hard work and bravery.
Of those in the medical community, our first responders and the employees at our retailers who are working diligently to stay open and operating through this challenging period.
We fully expect and understand that the primary focus of this earnings call will be on coded 19 and its impact on KRG.
But before discussing that topic, we believe it would be to service to our team to ignore our solid first quarter results.
Prior to the onset of the pandemic care GE was poised to build on the momentum we established last year with the successful execution of project focus.
In the first quarter, we executed 41, new leases and renewals comprising over 256000 square feet.
The comparable leases generated spreads of 10% and 25% on a cash and GAAP basis, respectively.
Our same property NOI grew 90 basis points, which was above our internal budget and consistent with the growth trajectory. We had discussed on our last call.
However, it's important to note that but for a co vid related bad debt reserve, our same property NOI growth would have been 1.3%.
Finally, I'd like to point out the K Rgs Hbr is over $18, which is a testament to the hard work of our team and the results of project focus.
Turning to the impacts of the pandemic first and foremost we focused on the safety of our employees.
And I've been sold press with their level of engagement insincere desire to help the company and our customers.
We relied on our business continuity plan to swiftly transitioned to having most of our employees working remotely which was a credit to our investment in technology and risk management planning.
There's generally a sense of calm and confidence in our ability to navigate past the coded crisis.
Thankfully, we have one of the most experienced teams in the sector to handle this challenge at every level of the organization.
Many of our senior leaders were either here at KRG or a various other real estate firms during the great financial crisis.
We know how to handle the dislocation and we're used to rolling up our sleeves and digging into the details.
Details are critical at these moments and rest assured the entire team is making certain that nothing is overlooked and that we're doing everything we can and for all of our stakeholders.
That includes doing all we can for two of our most critical stakeholders, our tenants and their customers.
The good news is that 100% of our centers are open and operating and through April approximately 50% of our tenants.
I have been opened for business in at least some capacity.
On the ground were assisting our opened tenants in a multitude of common sense and creative ways to ensure they're able to meet the needs of their customers in a safe and efficient manner.
As for the tenants that have yet to reopen we're going to rely heavily on our playbook to assist them in every way in ramping back up as the world Reopens.
One of the silver lining as of the crisis is our unprecedented level of communication that we've been having with all of our tenants.
The vast majority of these conversations have been constructive for both sides valuing the relationships that we've built over the years and acknowledging the bridge to the other side of this crisis is built on cooperation.
By focusing on relationships, we have not abated any rents and we were able to collect 67% of our April rents and we expect this number to continue to grow.
A handful of the conversations have been understandably difficult due to the fundamental principle that the retail sector operates as a virtuous cycle.
Our ability to pay our obligations, including very important real estate taxes and help our most vulnerable tenants small mom and pop businesses for the most part is directly correlated to our well capitalized tenants abiding by the rental obligations.
If we can collectively helped mitigate the impact to the smaller tenants who are the backbone of our economy. They could stay open and operating.
This will in turn strengthened the us economy, and potentially help well capitalized tenants recover lost sales.
The recovery. Please lost sales will generate sales tax revenues.
We have to remember that the sales tax and real estate taxes.
Help fund our community services, including the critical funds frontline workers in this code crisis.
In the long run it's a win win situation for all parties involved.
For this virtuous cycle to work, we all need the smaller businesses to survive. It's why KRG created the KRG small business lending program.
On April Twentyth, we announced the ability for any small business tenant in our portfolio to apply for a low interest loans to help them manage this disruption.
A tenant response has been robust and we intend to make our first loans under this program as early as next week.
The KRG small business lending program is made possible by the current state of our balance sheet and liquidity profile.
When factoring in capital required to complete Redevelopments KRG has one of the best balance sheets in the sector.
We have no debt maturing until 2022, and only $3.5 million of remaining spend on our Eddy Street to development that will finish this summer.
As we completed project focus last year, we think it was the right time to begin a significant amount of redevelopment.
While we couldn't possibly predicted this crisis, we did think that 2020 was going to be a bit choppy.
This conservative approach has left us with ample liquidity.
As of March 30, Onest, we have 350 million of cash on hand, with only 300 million drawn on our 600 million dollar line of credit.
We believe we have enough capital to not only weathered the storm.
But to look for opportunities on the other side of this temporary dislocation.
I wanted to point out some of the things the company has been doing on the human side as well.
Not only are we ensuring the well being of safety of our employees, but we're doing what we can for those impacted in the communities in which we serve.
Our kind cares initiative has been engaged on multiple fronts.
We've delivered food to local hospitals may donations to various organizations supporting furloughed workers.
Supplied meals to the families of quarantine first responders entering the mix of a week long hunger drive to provide for individuals and families in needs.
Like our shopping centers the communities, we live in our and virtuous cycle.
Our country is facing incredibly dynamic uncertain crisis and care G., we are fond of saying it's around the world and with that in mind, we are committed to respecting valuing strengthening and supporting all of our existing relationships. Furthermore, we're confident that we will conduct ourselves in a way that we will cry.
Great new robust relationships that will last for years to comp.
Care GE is a tough but fair company made up of resilient people who've recreate who have created a strong portfolio of assets and a very durable balance sheet.
We will as a team persevere and look to flourish as we emerge from this crisis.
Thanks for everyone for joining the call today and given the current situation, we won't be discussing individual tenants any guidance related to May June or the rest of 2020.
And with that again, we thank you for joining and operator. This for this concludes our prepared remarks and ready for questions.
At this time, if you would like to ask a question press star one on your telephone keypad again that is star one for any questions.
And your first question is from Alexander Goldfarb with Piper Sandler.
Hey, good morning out there good morning.
Hey.
Two questions from US first is yes.
John Apart from your.
Your gentle persuasive voice you guys did manage to get ready collections from a number of tenants like movie theaters that were closed and other ones like soft goods in personal service et cetera, where the both were closed and yet your rent collections vastly exceeded.
Can you just walk us through what's going on presumably these are all tenants who are closed and probably we're thinking about huds bidding patch. So how do you think that.
It was was it just simply pay you didnt have any AMC or anything like that therefore these people had cash or is this something else going on that made your rent collections on these categories, where they were.
Sure. Thanks, Alex.
Well, it's a multitude of things obviously in terms of our conversations with our retailers and as I mentioned in the call.
That's one of the things that Weve always prided ourselves on is the deep relationships that we have and mutual respect that we have for each other.
I think that.
When you look at the quality of the portfolio and all the work that we've done on on the portfolio I think first and foremost it's reflective of that and it's reflective of the fact that these are very important locations to the great majority of our majority of our retailers.
In addition to that it is the.
Frankly, the intensity that this organization has.
To to work and grind through the things that we have to do.
And we've been fully focused on it from day one.
I could go on a long time with this Tom and his team and Greg poets in his team I mean the.
The company has been pretty focused on this but in the end. It really is mostly a reflection of the quality of the portfolio and how important these locations are to these retailers.
Okay. And then you also talked about upfront. The fact that you need to be paid by the rents because you have obligations to property tax utilities.
Insurance mortgage and all that funds stuff.
Obviously, you've had tenants and I know you're not going to comment on particular ones, but you have tenants who has chosen to not paid and probably we're in a position to eight so how do you make sure that you know this definitely become sort of the de facto every time.
Adam has trouble.
Outside of bankruptcy, they just start arbitrarily not and how do you make it pretty clear.
Two attendance that.
They need to abide by and they can't just arbitrarily not hey.
Well I mean, I think the reality is that we it's kind of a contract law question right. These are contracts they need to be abided by and.
Is it a concern that this would become.
Something that would happened often no I think this is a very very unique situation.
And frankly, there are some companies that have obviously been extremely disruptive. So when I said the word the vast majority of our conversations have been constructive and have been partnership conversation thats totally accurate. Unfortunately, there is a small number.
Of those that Havent been and.
The reality is that's disappointing.
And we just have to deal with it on a one by one situation and Thats part of why you've seen us collect all almost 70% of our rent is that those have been.
Not not a tremendous amount of that and frankly, the majority of our rental disruption is in the small shop space, which is much more understandable relative to the to the capital reserves, but for those larger well capitalize tenants it is quite disappointing.
That said this it's early we're still collecting rent today tomorrow the day after the day after that.
We don't stop so we fully intend on collecting that rent. It is obligated is an obligation.
And we'll be professionals, but we will doggedly pursuing.
Thank you.
Thank you.
And your next question comes from the line of Christy Mcelroy with Citi.
Hey, good morning, guys. Thanks.
To follow up on Alex's question I know, we're talking a lot about collection by heading category in your disclosure is very very helpful. In that regard how should we think about collection by geographic market. Like for example that Florida has better collection rates and other markets and in thinking about your sunbelt exposure in terms of.
Attention the shorter closure period, then thank coastal how do you think about their relationship as we move forward between rank collection and time period at the stores were closed.
Hi, Christy its interesting and and one thing that's true to all of all of the questions. All the answers. It's early in this process.
And true also that the state to state by state and also frankly, so in some cases city by city County by County, there are different opening procedures opening rules.
Im sure Youre like us that it's quite confusing and some of this isn't left to interpretation and there will be no perfect way to play this that said clearly geography matters.
And the way that this unfortunately has presented itself is very concentrated in in you know in particular urban geographies that is going to be more difficult than potentially.
The southeast as you mentioned, but I think every city is different and we're early so.
Our collections have been quite frankly pretty pretty evenly spread out it's really more about the type of shopping center itself at this point, but I do think long term theyre, they're likely is potential impact as it relates to.
The differences between.
Livability so to speak but it's way too early to really project anything and I think is probably way too early to try to.
Create run rates on anything or two to think that the way that shopping head is done is changed forever. We're not big believers that it's a one year kind of in the fog of war here. We just have to we just have to do what we have to do kind of inch by inch and then I think over time.
We'll see how this evolves, but we're very happy I should say with the composition of our portfolio and when we did you know the asset dispositions that we did over the last two years. There was a clear focus on where we wanted end up.
And then just recognizing that you haven't made a decision on the dividend yet can you discuss some of the factors that the board will be considering in regard to whether or not to spend or potentially cut the dividend and I recognize you don't want to talk about may recollections, yet, but how much of a factor will that be in sort of bad decision.
In process share, yes, we we do have an upcoming board meeting and obviously the dividend will be discussed at the meeting and as you noted as it is a board level kind of conversation and decision I think there will be a multitude of factors that will that with the board will look at obviously.
Again, we're in this we're in this timeframe that were very disrupted and trying to kind of figure out what the length of it is very difficult. So the factors will be obviously you know the liquidity position that were in the cash flow projections that we have.
The collections that we have and.
I think I think all those will be taken into consideration as it relates to what what to do.
This quarter and going forward I mean, but I do think time.
Is your friend right now in the sense of of seeing how this evolves I mean literally day by day. So we do have some time, we will take a look at it and we will present all that data in a decision will be made.
Thank you. Thank you.
Yes.
Your next question Mr., Floris van Dijkum with Compass point.
Great.
Hey, guys. Thanks for taking my question.
The the question I had.
Was.
Regarding the you obviously you have this loan Graham to augment yo or to help your some of your tenants can you provide an update on the.
The applications for PPP loans, and the response that your tenants have gotten in that and how you think youre program is that target to specific guidance or is it. Okay. That's in your in your portfolio were eligible.
Sure I mean as it relates to PPP overall floris.
Frankly, it's been very good for the tenants that we have that had been able to access it.
It's difficult to know exactly whose accessing I think what we can see is that those that have have have have a high correlation to having paid April rent. So we're a believer in the program one of the reasons that we ended up rolling.
Now our own program was I'm not sure that it was a a supplement or something to put into place.
That would bridge those that aren't able to access it I think it was more of a realization that it's going to be almost impossible for a single government program to really reach all of its intended recipients. So for US. It is thats why we made it.
That we made the ability for a tenant to borrow up to three months of total operating expenses with really no limitations on on what it be spent on so we believe it's a great addition to PPP and were big fans of the PPP.
Having been kind of reloaded in terms of the capital amounts, but one of the concerns also was that it only cover two and a half months. So perhaps our plan will help some of these smaller tenants.
It will be able to get to the other side of the bridges, we like to say that the otherwise wouldn't so overall the demand.
I think that was your other question, it's we see it as robust in both the PPP plan.
Lending program and our own.
Great. Thanks I.
I guess, maybe one follow up question for me is.
You guys took some reserves obviously on the bad debt and also on the Street straight line, maybe walk us through your thinking behind that and the reasoning.
And I and how you look at that going forward.
Keith you want to take that.
Sure I'll say that type floors.
On the straight line reserve really two things to think about first this reserve represents our continuing desire to be conservative.
Especially in this current environment and second this is really what I'll call accounting noise, it's a non cash write off.
It's a receivable that depends on our ability to realize on the rep rent escalators in the future. So we did it analysis, we looked at areas that we felt would be disproportionately impacted by coven.
And Thats the number $2.9 million numbers, a number that we came up with.
Again, it's conservative it's a noncash item and I'm fairly confident you'll see a bunch of our peers take similar charges.
In the next quarter, we decided to take this quarter.
As far as the bad debt.
Acceleration.
Listen.
We always do a tenant by tenant analysis, and we had some certain receivables in March that but for coded we probably would have not realize them as bad debt, but we believe we looked at data.
Yes. The landscape ahead of US this I didn't know what it will be conservative thing so we realize another.
So $200000 of bad debt that we again, we wouldn't otherwise buffer cobot.
That $200000 traveling the 40 basis points of same store NOI. So again, it's just as philosophy in trying to be conservative in this then new environment.
Thanks, that's it for me.
Thank you.
Your next question is from Todd Thomas with Keybanc capital markets.
Okay.
Hi, good morning.
First question John thinking about.
Leasing in sort of a post pandemic environment here, So fitness food entertainment and these were some of the categories that would that were active and taking space prior to.
The pandemic. So how are you thinking about leasing demand going forward I mean inevitably even in normal environments or percentage of tenants don't renew and look to move locations for various reasons and and space becomes available. So have you started the field calls from users or think about.
How you might backfill vacancies over the next few quarters, if you could shed some light on conversations that'd be helpful.
Sure I'll start and have come add to that I look I think overall as I said a minute ago. It's so early in the process for us to try to start to think through.
What is the world look like on the other side of this and how how damaging or non damaging will it be it's very difficult on almost impossible I would say to to rationally speak to that right. Now I will say that look every one of our retailers and I if I didn't say.
As I should have said this more emphasize way are battling and doing everything they can possibly do.
To get to the other side and we want to do everything we can possibly due to help them do that so as it relates to those guys like restaurants, and the service side that I guess, you're referring to I mean is.
I've seen I have been so impressed with the creativity that I see in our portfolio, particularly in the restaurant section our sector and I think theres going to be some great things to come out of this that well actually grow sales.
In the future, but as it relates to guys right now Tom maybe you could talk a little more about the guys that were talking to were actually who are pursuing us in pursuing space yeah, absolutely Todd.
First of all Oren nice opportunity right now talk into every national retail I mean, thats one of things as process as broad as were constant communication.
At high levels understanding their business understanding what's going to happen as they come out there are soft players that are very bullish for 21.
Selling the this plays into their hand, even further so we are having conversations productive conversations in that regard and then we're being very measured as it relates to our tenants that are under construction the ending in the process of openings, making sure that we get until an opening point.
That makes sense that may be pushing back 30 days et cetera, we're going to do that because it's in the best centers of kite as well so as John mentioned this will evolve, but we'll file is starting to see some some glimmers of interest coming out of the tenant base.
Okay and then.
As as retailers begin to to reopen and restriction. These.
Sales recover or are you, having conversations with tenants about.
Structuring leases and rent to be more and more variable in nature, I guess sales based or otherwise for a period of time or until certain hurdles are met is that part of the discussion thats ongoing now.
No I mean are our as I said on the on the in prepared remarks. The only thing is that we have done.
Yeah.
As deferrals for a period of time that get paid back in a very quick period of time. So we are we are currently and don't anticipate that we would look to fully restructure at all leases that I've seen I've seen some media stuff about that and Thats just.
Frankly, it doesn't really work that way, it's just not yet I don't see that in our portfolio.
Thats the one good thing about having a very strong open air portfolio is we continue to believe that will be demand for these spaces through the various cycles of this and if anything the format that we deliver the retail product. It is a very.
Favorable format in a new world, So long answer, but no we don't foresee that being a big part of the future.
Okay, and then just piece on the the 300 million dollar.
Draw on the line is there is there anything specific that you're looking for.
The gain confidence and paying that down I guess, how should we think about that there is a cost of that money. So in terms of the timing or or process to pay down the line balance over time, what should we what should we be expecting yeah, I think thats one of the world drilled more normalize and whether that's a pay down overtime as things start to adjust and 10 start.
Looking back on line or whether that at some point. We just so you don't will send the entire $301 back again too early to tell but just like our appears we just felt this was a and appropriate amount of money that would obviously be sufficient to allow us to continue for for the foreseeable future.
It's a level of drawdown that gives us very comfortable on our covenants. So again, we'll see obviously incurring additional interest expense.
This is something that we don't want to do but we are based on the fact that are the rate is so low.
Dick This is really cheap insurance and again, we'll we'll see how it goes.
Okay. Thank you if you.
Your next question is from Chris Lucas with capital one security.
Good morning, guys actually just keep a follow up question too to Todd's question about the line of credit.
How is the borrowing base for that determined and is that a quarterly or annual or trailing test.
It's a it's a quarterly test.
Chris in the borrowing base, we have at $600 million, which you'll see an or Q.
Our current maximum borrowing base right now something like.
$585 million, so again, it's a quarterly test.
Well, the several unencumbered assets and.
Yeah, right now, we're very very close to being able to take the maximum 600.
Okay. Thank you for that and then I guess.
I'm curious on the on your disappointing conversations with some of the retailers that are.
Turning to position to pay rent.
For any of those retailers surprising in terms of.
Who makes that list that you.
In the previous conversations wouldn't have expected that sort of hardball tracker.
That's a creative way to try to give me to say.
Who that was I like that Chris.
Yes, there were a couple there were a couple on there that we're quite surprising and.
Frankly opportunistic.
That said I don't want to make it sound like that is is a is a big part of the universe, but there is a small part of that universe that is definitely taking the tact.
It's a it's an aggressive tack that is something we're going to have to deal with and I don't think thats unique to us I frankly think we've based on our relationships had a lot less of those maybe than others.
But yes, there is that Theres a couple out there that are quite surprising.
Part of that part of that as we said pretty clear parameters of being able to negotiate with these curves and that doesn't mean, they're warren conversations they simply and meet the criteria that we felt was fanfare nickel.
Okay. Thank you guys.
Thank you.
And your next question is your Craig Smith with Bank of America.
Thank you.
I just wondered what percentage of the tenants are you in active discussions for rent deferrals.
What are you generally targeting for your payback period.
Well as you can see you know from what we've disclosed.
Obviously, having collected.
The majority of the rent, which it's not a huge number.
But so I don't think we're going to get into it I think I think we did disclosed in our in our investor presentation that we were pursuing 20, 25% approximately so you should assume that that's in that range Craig.
Okay in terms of the terms.
I think we're going to get into that either.
But suffice to say.
It will.
By the time, we report a quarter from now what.
It will be a little more clear.
But it's been very as Tom said, it's we have a very specific.
Basically offer that we're willing to do which is very short term.
Just tell you it's very short term in nature and frankly, the great majority of the tenants understand that because.
As we roll out these openings I mean quite frankly.
Where we are literally today from where we are aware when we started these negotiations is is radically different terms of the number of tenants that are going to be open.
Great.
Thanks for taking the but even the yes.
Hi, guys. If I just want to add on to the extent that we're doing these short term offer as I want to make it clear none of them are abatement any any kind of you know accommodation were discussed about tentative strictly in terms of deferment.
Okay. Thank you and then I just wondered you have given the the cobot crisis are you seeing an acceleration or an extension of your ability to offer a quick site services.
Yes.
Sure Tom you want to hit that Yeah, we will we will definitely address that and we're having very specific conversations with our national tenants about that.
Take a very cooperative approach.
Very balanced approach.
Mark and team working on to make sure that we have these clusters of place and to make them as efficient as possible for the retailer. So we want to make sure that doesn't just address nationals, but also address smaller test if that name exists.
Okay. Thank you.
Your next question comes on line of morning, Georges with RG, Yes.
Hey, good morning, Thanks for taking my question. So just looking at operation I guess Directionally, how should we be thinking about the operating expenses you have just in context of all these tenants that remain closer and our operating with reduced operations and then I guess, how much you know rent could you see falling off before some of those costs.
We're on might become an issue.
Keith you want to hit that.
Oh sure listen we're obviously we're reviewing.
Operating expenses of deals every part of the geography of the income statement I will tell you about you know there's opportunities for us to pull back some expenses.
60% of our leases, our AG chem, 40% of the or leases on fixed cam. So some of that will benefit our tenants some of it will benefit us, but one thing when we're thinking about expenses that you were not going to compromise the quality of our shopping centers were knocking at Warner shopping centers in a way that's going to be.
Anything less than first class. So yes, there are opportunities there being reviewed we're being prudent and mindful and pulling back where appropriate but again I'm not at the expense of that the quality of our centers.
Now and then looking at capital allocation, a little bit more broadly.
Clearly taken steps to enhance your liquidity position just given the uncertain environment.
Just circling back is recognizing it's ultimately important decision would you consider just for your dividend doing some kind of lump sum payment later in the year when there was better visibility.
What about share repurchases, what would you want to see before you start looking at redevelopment pipeline again.
Well sure as I said on as it relates the dividend its premature for me to.
Talk about it because we've got an upcoming board meeting and it will be discussed and it's a full board level conversation, but.
As I mentioned Theres, a multitude of factors that we will be looking at and we're obviously in an extremely unique period of time so.
I think every we would just say stay tuned in and we will be back around on that as it relates to capex and as it relates to stock buyback basically capital allocation.
Cash is king.
Capital Preservation is a factor life right now and we've done a great job very quickly.
Doing that and getting ourselves in a position and frankly everything we did last year put us into position to be very liquid today and when I look at the space and I look at the liquidity versus.
Fixed cost we're in a really really good place.
So I think we'll just have to see and take its going to take a little bit of time to see how this plays out over the next several months but.
We believe that were very good capital allocators and when the time is right. We will look at redevelopment and were that the idea. It's funny. You also mentioned stock buybacks in there and we had a lot of count we had a lot of questions about that several months ago about why it just it just kind of why we didnt and.
It shows that it's very difficult when you're when you're an operator to to be looking at deploying capital into stock buybacks and less it's.
A tremendous amount of free cash flow. So I think thats right now not high on our list, but as we evolve and come out of the other side of this we're going to be in a very good position.
As a company to take advantage of opportunities, let me to say that and each one of those things you mentioned our potential opportunities.
Awesome. Thanks, so much appreciate the color I'll turn it back.
Q.
Your next question comes on line of RJ Milligan with Baird.
Hey, Good morning, guys. John can you talk about how you think about blending to tenants that that obviously need to short term release versus lending to tenants through the the quite small business program that probably won't make it in the long term anyway, how are you having those discussions.
Sure well.
Let's just first say that you know every tenant in our portfolio, we have already fully underwritten. So when we're saying that we're going to rollout a small business lending program.
To the effected small businesses, we we know the credit of those companies very well and have already underwritten them. What we're looking at is the changes that have happened to them and whether or not we deem that that is temporary because of the kobin crisis and because of the mandatory shutdowns.
Other or whether we believe that business will have a very difficult time ever recovery. So we're our intention is it too just throw money out the window.
Like helicopter Ben I guess are our attention here is to make smart loans that we believe will help these businesses get to the other side and flourish and frankly, we believe that our relationships that we have you know will obviously be strengthened through that.
But of course, when you're in the process of lending money no different than when you're in the process of.
Lending Ti dollars.
Some of it doesn't get paid back in so you you do have a credit loss associated with things that we lend out, but we believe that will be very good at that and since we already know these guys RJ.
I feel pretty good that we will be being a good being good shape there.
Hi, John I'll, just add on listen our Jay This is really.
I would see preservation exercise right. So when we're underwriting these tenants.
One of the things were asking ourselves is.
How good it was a business before how good we think that business is going to be in the postcode environment. So I'll, let John said. This is just not throwing good money. After bad. This is really try to make a long term smart play that will leave tenants in place that we believe and.
Orders from having to return at the space Yeah, We did the math in our in our Investor presentation.
The breakevens fairly compelling so but that's the again the purpose of this program is occupancy preservation.
Got it and I guess to further on that point given the long term approach, which I think is appropriate in terms of you want to maintain occupancy and.
In the future, none or would you have returned in costs, but maybe a question of actual demand for space to even be able to re tenanted. So how do you think about and I know you haven't granted any rent forgiveness, but why isn't that why do you think that isn't on the table for Titan maybe some of your peers in terms of trying to preserve that longer term occupancy.
Well I think look I think there's a very different.
It's a very different.
Thing when you talk about forgiveness slash abatement versus deferral. The reason that we won't and aren't giving abatements is that we strongly believe that this is a situation that on that as a point in time and anyone that tries to come to us and take that.
Right in time out too far even with a deferral, let alone abatement, we strongly disagree with that because this this is changing by the minute by the hour by the day and you know were frankly.
As you know, we we are we're kind of down in it in the dirt very intensely and we understand what's going on and frankly. This is this is a battle of inches right now and we're trying to gain inches every day and eventually that will be feet yards miles. So when you start.
Getting put the position of trying to have tenants tell you that.
This is going to be.
A difficult situation from six months from now no one knows that so thats kind of why RJ. We were keeping this in a very short window because that window can change dramatically ended as we've all seen it does and were optimistic that it will change for the better in the future.
Okay helpful. Thanks, guys. Thank you.
And your next question comes from the line of Tammi Fique with Wells Fargo Securities.
Thanks, Good morning, guys.
Wondering are you seeing differences and when collection between power centers and you're more traditional grocery anchored centers within your portfolio.
Of course, we're seeing differences in different types of centers Tammy I think.
When you look at it we're really looking at it more from you know the tenants themselves.
Categories themselves.
Then we are the different centers and because of the fact that we've gone.
Frankly, the fore sight, we had in the in the asset sales last year. The 550 million of UBS of properties that we sold we've significantly changed the dynamic of our portfolio and it's obviously reflected in our in our collections. So it's really more about that there.
And I've always said this is there the definitions are a slippery slope.
It could be something that someone defined as a power center that you could get a 100% wreck rent collection Ana and there could be a grocery anchored center that you know you only get the grocer. So in that these are these are extreme examples, but I would tell you that it's really balanced it's really more about the categories and really about the quality and.
I think thats why Weve, we've done well is the quality and the people that we have in the relationships that we have.
Gotcha, and then I was wondering there have been historical discussion about small tenants moving into strip shopping center I guess Im just curious what your thoughts are on that at this point and I guess you have a sense for with the occupancy cost differences are for tenants that have made that now.
Sure I mean look it's again, it's early to try to try to look at things in a way that are that are changing forever, but no doubt that are as we've always said our are kind of product is a very effective delivery system for retailers and and so important today.
Dave.
And obviously if this is if theres anything sustained from this event from this crisis.
It will help our product because of its accessibility to ease to pull up get something leave the east to walk from ones shop to another and be outside while you're doing that there's lots of things, but really the one of the biggest factors that you hit upon is the cost associated with it for the retail.
That's not to say that now that this this is by and area I don't believe it is I think that.
All types of retail will ultimately.
Be a player it just comes down to the real estate and it comes down to the to the dirt. If you have good dirt, which we do you are going to do fine and there's plenty of models that have good dirt, it's really more about that.
Yes, we do think it's a continuing trend where we'll see people.
Want to try out our centers that happens in the past Tom you want to yet I would say the only other big differences. The sheer number of trips. So mall you may have a far limited number of trips per week, but in a.
Open Air type scenario Pac kit.
That could increase two times, just because of these but I guess, a big part of it.
Got it thanks, and then I guess.
With the new leases that you have signed since the end of the quarter I guess, what do you guys thing in terms of spread and I understand it might not be necessarily indicative of what what holds true for the remainder of the quarter, but just curious you guys are.
Seeing any bond.
Okay.
Yes, I don't think maybe I don't think Theres anything happening right now that's indicative of a significant change.
Relative.
Leases spreads its early.
We obviously haven't disclosed anything yet on that but I mean, the reality is.
This quarter that we're currently in is going to be different.
So who knows out who knows what is that I'm trying to emphasize that I would not look to extrapolate anything or try to run rate anything that happens this quarter. Other than you know the data that we're trying to give use as best we can relative to the collectability of agree.
Since based on the strength of our real estate.
Okay. Thanks, and just one last question I'm curious when you think you will be in a position to be able to provide on that.
Again don't know [laughter].
I think we're just going have to see how it how is this evolves and and.
We'll be will be as transparent as we possibly can but right now.
As I said at day by day, and inspired show a kit I can't tell you that yet either.
Okay fair enough. Thank you. Thank you.
Again, if you like to ask a question press star one on your telephone keypad again that a star one for any questions.
Thank you and there are no further questions at this time Mr. Mccarthy I'll go ahead turn the call back over to you for closing remarks.
We just want to again, thank everyone for joining us we appreciate.
And value all of our relationships as we said very much and we hope that you all stay healthy and safe and we look forward to getting to the other side as soon as possible.
Thank you.
Ladies and gentlemen, this does conclude today's conference call. Thank you for participating you may now disconnect.
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