Q1 2020 Earnings Call
The documents that we file with the SEC including our most recent reports on form.
10-K and 10-q in addition we will be discussing non-gaap Financial measures on today's call including FFL operating SFO in same-store net operating income reconciliation of these non-gaap Financial measures to the most directly comparable gaap measures can be found in today's press release this release our quarterly Financial supplement and earning slide deck may be found on the same page of our website at ww.w at this time. Does my pleasure to introduce our chief executive officer David looks good morning, and thank you for joining our first quarter earnings call. I'd like to first thank my dedicated colleagues at site centers for the remarkable efforts during the past six weeks working remotely has been a learning experience for all of us and is certainly more difficult under the circumstances. I'm extremely grateful for everyone's flexibility and dedication to getting our one Q books closed and our earnings released in fact
Did have a very good quarter are high-quality properties continues show strong growth with year-over-year same store noi at 3.7% We had almost eighty five thousand square feet of new leases South in the quarter and an additional four hundred seventy-nine thousand square feet of renewals and options as Discounters and service tenants remain attracted to our properties the value proposition. We offer to our tenant falls into three categories first, low occupancy cost second convenient access to the Last Mile in the wealthiest ZIP codes in the United States wage and Thurs adjacency to other retailers which results in higher customer traffic.
Over the course of my career. I've consistently found even during recessions that these three features continue to attract tenants because of the results retailer see in their sales and profitability. What's unique as we hold this call today. Is it all three aspects of our value proposition on our on a temporary hold but I do believe they will remain true as the country reopens wage. I'd like to start with some facts this morning about our current operational status and provide some detail on the responses. We've taken we began to see stores closing on March 16th and 4th on April 4th at 45% open as measured by base rent since that low Point. We've slowly trended higher such that as of Tuesday. We're 49% open a clued-in partially open such as click-and-collect and drive through with the expectation that we will see further increases over the next few weeks as States. He's restrictions.
Over this time. All of our properties have remained open and operational thanks to the wonderful efforts efforts of our property management and leasing teams who have worked to enact protocols in line with local state guidelines from a collection standpoint. We've currently received 50% of our pro-rata rent for April while not absolute the rents collected are generally from South tenants while those that withheld their contract rent are still largely closed local non credit tenants account for 12% of the outstanding and unpaid April rent off. This means that the remaining 88% of unpaid April rent is from National tents or national franchise units.
our standard
Language is clear on payment obligations and specifically state that rent must be paid. Even if a tenant is not able to remain open after all we continue to pay our property taxes pay for Life Safety and maintenance expenses and property insurance costs. We are working with select tenants to defer rent where there's an economic return to site centers, but expect to enforce our legal contracts with respect to the obligations of the remaining tenants. We have noticed significant recent liquidity increase among our top retailers. In fact fifteen of our top 50 tenants accounting for almost 24% of our base rent have raised over $24 billion dollars in debt and Equity just this month. It is a truly staggering amount of capital raised and a positions are tenants very well for re-openings as as common during a recessionary period local stores often seek financial assistance from Property Owners Club.
Have limited access to short-term financing and many times landlords assistance is needed and a good solution to help them through a difficult time. When we receive a request from a local a detailed application is completed that shares historical tax returns proof of required insurance and evidence of cash availability to date we have executed 98 payment plans as part of our site centers covid-19 rental assistance program that in aggregate represent 1.9% of our second quarter rent these payment plans. Do not modify any terms of the lease, but instead simply defer the rent owed for a few months and are expected to be repaid before the end of the year.
We will likely see more applications in the coming months and we'll make decisions based on the tenants financial position in our willingness to extend short-term credit. Remember that this assistance program is based on tenant need and our local shop exposure is only 7% of our total base rent. We are also well prepared to support our own obligations and up drawn $5,000 on our line of credit which remains in cash as of today. The cash raised was a precautionary move and we have no near-term uses with just four million dollars of property level maturing through year-end. No planned Acquisitions and minimal development obligations. We have worked tirelessly over the past three years to improve our balance sheet in our liquidity and our maturity profile eliminates any near-term financing risk for the company are duration was significantly improved in February of this year as we repaid our 2020 wage.
Bonds with proceeds from the sale of our joint venture portfolio to TIAA-CREF. The result is that we have no bond maturities until 2020 3 a.m. To the dividend based on our estimates of taxable. Net income. We believe we have significant flexibility with respect to our dividend policy recognizing that the dividend is a function of operation cash flow. The board of directors is suspending the 2nd quarter dividend in order to provide our company maximum flexibility. We remain extremely optimistic about our company offers a strong balance sheet is crucial to capitalize on strategic opportunities that will occur as a result of the pandemic.
before
And the call over to Mike. I wanted to come back to my earlier comments about real estate and its appeal to tenants. Eventually. This crisis will subside. I do believe that retailers and the consumer will make daily choices that are different from preco but conditions. However, I also expect our value proposition will remain intact our focus group of seventy open-air properties are located in the wealthiest submarkets in the country with average household incomes of over one hundred thousand dollars, which is in the 87th percentile. Nationally, we offer tremendous access to these customers in a convenient last month format. We offer synergies for tenants that have similar customers who will continue to have higher sales when they're grouped adjacent to each other.
And the lastly are relatively low cost compared to other forms of distribution will result in continued low occupancy costs for our tenants in particular. We started to walk over the course of 2019 and into 2020 increased demand from all base tenants and I expect this trend to accelerate these three features will prove to be resilient even as we adapt to the changes that are accelerating in our sector Mike. Thank you David in terms of quarterly results. The lease rate for the portfolio was down 90 basis points from your end off largely due to Pure 1 closures and the sale of the teachers portfolio, which was 95.7% least leasing activity partially mitigated these move-outs the volume for the quarter was down measurably from our typical Pace as tenants paused at quarter-end given the pandemic and the move to work remotely.
Post quarter activity from National tenants has resumed albeit at a much slower Pace that said so far in April. We have to sign danker leases and are also enacted dialogue with a number of other National tenants in the discount grocery Beauty and financial services sectors local tenants in contrast are largely paused and I expect activity will be slowing down until tenants specific submarkets reopen moving to construction activity and tenant deliveries. We open 3 Consolidated anchors in the first quarter almost all of them earlier than expected and have them are 10:00 Consolidated anchors signed but not yet open construction activity outside of a few select States like California and New Jersey has been largely uninterrupted thanks to our construction team and we feel confident on meeting our obligations to get stores open. We are working with tenants to make sure they can open at the right time with the right resources in place. But within the release timeline dead.
As part of our steps taken to date, we re-evaluated each of our plans and in progress construction and Redevelopment projects reducing our pipeline by 46% with no material cost the company removed from the pipeline was our planned project at Shoppers World where we executed a ground lease with the Massachusetts bay transit authority on a parcel of land that was in the entitlement phase for a multi-family building after an accelerated negotiation the tenured ground lease commenced in the first quarter with no capital outlay and materially better returns with lower risk versus ground up in a family development adjusted for the removal of Shoppers World and speculative projects as a quarter end. We have just Thirty million left to fund on the development pipeline Connor. Thanks Mike, comment. First on quarterly earnings the status of guidance and then discuss our balance sheet and liquidity first quarter results were ahead of budget driven by better operations, including earlier rent commencements higher wage.
reason other income and Lease terms
Fees related to the recapture of to ground leases included in the quarter but excluded from or Seventeen dollars of costs related to the Redemption of our 2022 unsecured notes, which was funded in part with proceeds from the sale of our interest in the teachers joint venture further extending are weighted average duration turning to our balance sheet. The company remains well positioned with pro-rated and bought a 5.3 times just four million dollars of property level debt maturing a 2020 no unsecured maturities until 2023 and middle future development commitment has outlined with the lack of material commitments is a point of differentiation with no significant cash outlays or impact or earnings in the current environment additionally as part of our response depend demek that David outlined month. We drew down $500 on our line of credit which remains in cash as of today and have another $325 of availability on our lines of credit at quarter-end.
We have no material uses for the cash at this time as it just outlined but felt liquidity bills is prudent in light of the macro environment in terms of our covenants. Just two of our 69 wholly-owned properties are off today providing future potential sources of additional capital and substantial capacity on each of our public Bond and Bank covenants one item to note our real estate assets and unencumbered assets coverage do not include cash in the calculation as a result in our earnings slide deck. We provided pro forma covenants to adjust for the $500 line of credit draw moving to our Outlook off. We went through 2020 guidance in March and are not providing an updated Outlook at this time. There are a few modeling items to consider because of the changing operating environment though embedded in our initial twenty twenty guidance working with you JV an RBI asset sales given the dislocation of the transaction markets. It is likely that sales volume will be lower than initially expected reducing downward pressure on fee revenue from 2019 dead.
Higher expected fees will help partially mitigate the revenue impact from 10 to 4 or reduced. Can see there are a few moving pieces from the 1st to the second quarter of a 2020 as well first answer and other income is expected to be lowered by almost $1 due to non recurring Revenue received in the first quarter and second. We do not expect to recognize revenue from Pure one and other previously announced bankruptcies took just over 1 million dollars in the second quarter.
Lastly as David mentioned the board suspended the second quarter dividend as a result of the impact or business from covid-19 based on our estimate of taxable. Net income today. No further Dividends are required to be paid in full 20 to satisfy our read Requirements which would result in $78 million dollars of additional retained free cash flow that said no decisions around future dividends have been made this time. We have worked diligently to reposition our balance sheet over the last three-plus years and continue to believe our financial strength positions the company to create stakeholder value going forward with that. I'll turn it back to David.
Thank you, Connor operator.
ready to take questions
the question and answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We will pause momentarily to assemble the roster.
The first question today comes from Todd Thomas of keybanc capital markets, please. Go ahead. Hi. Thanks. Good morning, David. Just first question, you know, you mentioned in your prepared remarks a couple of times that your property serve is important, last-mile distribution hubs and in good locations, and we've seen a sharp increase in online spending here during the last two agents and and in the rapid acceleration and online grocery spend and I'm just wondering how you see retail evolving a little bit from here what you're thinking about and talking to your tenants about in terms of retail is coming months and and maybe years as as shifts in consumer preferences may have been accelerated here. It's I think it's the most important question and we certainly spent a lot of time thinking about it may be if you look back on the spin that this company performed a couple of years ago the properties that we selected to keep were ones that we felt would be durable dog.
And over the long term as tenants in the retail World changed because sales were strong and rents were low. We would likely see an increased demand for space and that the economic choice would be increasing over time albeit with some some capex to make some changes. I think retail has been changing to the online presence for the better part of a decade off. I think, you know to date some of the beneficiaries of that have been a movement of sales out of the department store some of them gone online but a lot of them have gone into the Discounters and the Discounters have been the most prolific wage, um, uh acquirers of our space over time. And so I think we've seen a huge increase in demand in the blast, maybe two or three years for junior anchor space which then promotes a lot of shop demand. What I think is is interesting now and you know, you you certainly are seeing a lot of increase demand from the internet, but, you know even recently as a few days ago, I believe Adobe analog
Come out with a report that showed over a 200% increase in curbside pickup. So, you know, one of the things that are property management team has been extremely active on lately is the desire for our tenants to make use of convenience. Not just being proximate to your home but convenience being we have really flexible buildings. We flexible site plans. We've flexible curb cuts and jobs, I think what's going to happen is we leave this this crisis is that the consumer I think we'll have an increased desire for flexible safe and adaptable transaction page and I do think that that's going to inure to the benefit of the strip centers. There's other Trends as well that I'm sure you would agree, you know working from home is is actually working and even if a percentage of that a small package becomes a long-term, you know aspect of the American Workforce. I do think Suburban communities are going to benefit from that and I think open air strips will benefit even more
so there's a couple of
Things that are happening but those are those are a few of the things that we're focused on.
Do you think do you think Grocers need to to rethink and reconsider their their their real estate Footprints from all of this or do you think that the the the acceleration in in Click and collect and and and I guess really online grocery spend and delivery, you know has you know, what kind of impact do you think that thoughts as on the the brick-and-mortar side the retail side in in the grocery industry specifically, I guess. Well, the grocery industry was already dealing with the desire to change their footprint and their format. I mean, you know, the amount of test cases that have been done to try and figure out how to automate, you know, delivery mechanisms. We're already in in Full Tilt and I certainly think this this this helps make that become more common wage. I mean, I I think it's no surprise that most retailers, you know, well more than half of our tenant roster are thinking actively about what to do with their square footage, you know, the interesting thing about any
Question is that you end up seeing less construction take place for new projects. So let's assume that most of our tenants would like to reconsider their footprint and at the same time most of them don't have the opportunity to go across the street to a new construction project because we're in the older, you know developed wealthier suburbs. And so the only solution is is adapting their existing footprint from the mall tenants. I think the mall contains go to the strips, but from the strip perspective, I I do agree with you and I I think that the Grocer's and a lot of the the mass Merchants are going to really figure out how to make use of that last Last Mile distribution Mikey everything. But yeah, I would say that one of the things that I think this pandemic is given us an opportunity to do collectively with our grocery retailers is to work together to really look at how curbside pickup how parking configuration can really benefit the click and collect aspect of their business. And I think that it is also forced an acceleration of the expertise wage.
On this side of the retailer to really drive this part of the business and I think it works well together and I think we've worked very well together with our grocery tenants in creating what was a secondary element of their business and pushing it into an area that is really benefiting both of us.
Okay, and and this just sticking with Mike so leasing I realized a lot of the 2020 lease expirations were you know, either already signed or or in motion renewals, you know, we're underway and off but can you just speak about how you're how you're handling expirations, you know going forward here what you're seeing in in the market and how those discussions with with tenants are are advancing. Well, right right. Now obviously this is a completely unique time and we're really dealing with the tenant by tenant moved and in some tenants where there was a you know, a heavy growth momentum. We're continuing to have conversations that are relatively normal as it relates to renewals an options that are being exercised with other tenants. It's a different conversation, but the fact of the matter is it's all over the board and there's a tremendous amount of variation in how to tenants are approaching it taught just from out of the financial size.
so it's less than 2% of our rent expire over the course of the
And I think it's fair based off Mike's comments and David's comments around construction that you you probably could see a modestly higher retention rate. So it's a long way of saying I think we feel pretty good about our attention and there's really not a lot of birth of kind of rent rolling in the next call, you know, six to twelve months.
Okay. Thank you. Thanks.
Next question comes from Christine McElroy of Citigroup, please go ahead. Hey, good morning guys. I appreciate you just in terms of the 50% non-payment of rent and a higher amount being anchor tenants what our tenants saying to you about May especially given, you know, what you mentioned in terms of the the liquidity raises that they've been able to do and how close you know, the store closures of trust. We've heard that some national tenants that may have paid April are saying they won't pay May. So what are you expecting it to be worse or better?
Well Christy, I wish I had a factual answer for you. Is it reality is we just don't know I guess we're going to find out next week. I I suspect that some tenants that didn't pay in a are going to pay in May and I would suspect to some the paid in uh-huh did not pay in April or going to are going to not pay so it it's really it's really on a case-by-case basis. We've heard lots of rumors and stories and we've heard directly from retailers a lot of different strategies as to how they're dealing with this. So I think from our perspective we're just going to be patient because we really don't know, you know, the the normal payment program for rent is out the window. We were receiving April rent as recently as two days ago. So and that's obviously, you know, twenty twenty days beyond the final due date so long. I I honestly don't know it's just going to be a little bit curious for the next week or two.
And and so leave it. I mean you did talk about how you know rents or do obviously what do you make of the tenants view of the legality behind all of this? What do you feel is the strategy of money these National retailers that aren't paying is it will will tell you when we can or will pay you when we strike an agreement with you or are they taking a stance that they're not obligated to pay because I think you know, there's a lot of confusion out there wage. Obviously, these are long-term contracts and that many tenants are technically in default or will be on these contracts. Yeah. Yeah. No, it is a very curious problem. And as I mentioned twice in my you know remark this company has paid every bill that we oh, we pay property taxes in lots of local communities. We pay Life Safety costs. We pay insurance costs. We sweep the parking lots. We keep the power going off security open. So there's a lot of expenses. We're paying that are part of our contract and you know, the the rental payment is supposed to come from the tenant to not only cover those expenses, but also other expenses we have wage.
It's a very curious situation. Like I said, I I think that our our mindset is to be protective of our covenants and protective of our legal contracts, but also a bit patient that you know, in in times like this when companies are drawing on their lines of credit and no one really knows what the future looks like. I think we have to take a step back and and be patient for a couple of weeks the solution then wage, you know, as you mention is likely to be a variety of outcomes some tenants are simply being opportunistic. Um, some tenants are are being protective and and some tenants simply can't afford to pay off. The ones can and are entered simply choosing to sit on their capitals. So we'll see what happens.
Okay.
Thank you.
The next question comes from Shivani stood of Deutsche Bank, please go ahead. Hey, good morning. In terms of the lease the not yet convinced. I think you guys had mentioned wage is opening at are progressing on the national ten minutes. I'd just curious if there's anything different about how tenants are approaching store openings as we as we prepare for this sort of new normal situation going forward wage. Like as I mentioned, we have ten executed anchor leases in our Consolidated portfolio's yet to open that ranges from tenants like PGA Superstore Burlington Lidl Marshall Home Goods Dollar Tree and the good news is that in spite of the pandemic. We basically been able to continue most of our construction activity on schedule in the majority of the States. You know, I mention a New Jersey in California are exceptions because the states have placed a moratorium on construction activity. So there's a handful of our CDs and those states that will see some delay but as for the most part we expect to see rep
incidents occur, but in some cases with slight delays
And then you guys have a fair amount of exposure to see if that are starting to open back up, Georgia, Florida Texas. I recognize that it's very early. So but can you give us a sense for traffic and that you've seen in the past few days if some of these shelter-in-place restrictions have lifted and since that April 4th trough that was mentioned. You know, it's I'll let I'll let Mike provide some color but it's so recent. I guess we could say that it's an infinitely higher percentage increase from when nobody came but it's nice to have some stores open. Mic don't know if you have any anecdotes. The only thing I would add to that is that we really are in a VIN number early stage of this and the tenants are being particularly cautious with regard to social distancing and meeting all the guidelines of running the business and there's still a lot of customers who are just deciding whether they're ready to go, you know, get get their nails done. But at the same time traffic is picking up and Atlanta is really been our area where we focused
The next question comes from Alexander Goldfarb of Piper Sandler, please. Go ahead. Hey, good morning. It's just wanted to follow up on Christy's question on the Reynolds and rent collection and and the point about these are contractual obligations. So how do you guys work to make sure the pendants realize that this can't be, you know, they're they're permanent go to that. They may have this arbitrary right and at the same time, you know, if you're not getting paid, let's say by half the tenants why would you know, maybe you know, why would you not pay half the property taxes? I mean it seems odd that as a landlord you guys shoulder the whole burden. It seems to be a shared burden. So you know, how do you how do you make it clear to the tenants that they don't they haven't just gain the same very right and how do you make it so it's not the company and shareholders that are you know, and your employees who are burdening for bearing all the burden that this is a shared cost not only among the tenants but also dead.
Community cuz that
That's ultimately where it is. You guys can only do so much which you are.
Good morning, Alex. Yes, I agree.
I'm not sure how to be more specific. I you know, look our business. We are we are lenders right? We borrow from the unsecured market and we lend space to retail is for long-term contracts. And you know, you're you're you're asked of how do you make a tenant understand? I think that the legal contracts are pretty specific and on there. They're not hard to decipher even without a degree. So I think everyone understands that but you know look, like I said before I think patience is warranted right here. We have a highly unusual circumstance and I think in that aspect the best strategy is just to be patient for a few weeks until the Smoke Clears, you know, once the re-openings continue we'll all have four corners around what was not paid and at that point. I don't have any interest in waiving our contractual rights. I think our stakeholders deserve to have those contracts supported but also recognize. Yep.
In some cases there are Financial benefits to the landlord and the Tenant crafting a solution that gives both of them something they need.
Okay. Yeah just seems to be a tough tough situation with definitely a tough situation. It definitely is I mean, it's it's you know in my career. I've never seen it before it's it's very very strange and what happens if you you know, just withhold part property tax. I mean if you're if people aren't paying you why do you have to be obligated to pay others?
Well, the two are tied theoretically but realistically we have obligations to local communities the communities, you know teachers and and firefighters rely on our property taxes a.m. And we have no intent on reducing our own obligations to those communities. I so I I know that they're theoretically attached but I don't think I don't think two wrongs make a right in a sense.
Okay, okay, and then just go into the dividend suspension and your comments that you don't have to pay for this year. So is the is the sense that really it was the transactional income that was driving the the taxable income that was driving the dividends for this year or is it the expectation that you're not going to get paid sufficient rent this year to even hit that threshold, sounds pretty early in the year to to say that you've already satisfied the full year. So I'm just trying to understand if it's more transactional income that would have driven taxable or if it's your expectation of the decline in a rental income. That's driving the taxable reduction. Yeah. Connor can give you some detail behind that. Yeah. Remember the fourth quarter. You have a little bit of flexibility not a little bit you have flexibility on on when you declared dead when you pay and when you include that dividend in which particular year meaning you can roll your fourth quarter dividend from 2019 to 2020 and the second thing is when you declare and when you pay a month.
When we declare the fourth quarter dividend, even though it might not be paid in 2020. It would it could be included in our tax on income payment the second thing just to clarify which is say is tax on income is based off contractual rent. So just because a tenant doesn't pay us does it mean we will decline or have a decline in taxes income but using those two items meaning when we declare and pay for the fourth quarter 1920 gives us that kind of clarity on our tax on income for the year. It's really not related transactions. Okay. Thank you. You're welcome.
Next question comes from Kevin Kim, please. Go ahead.
Thanks a lot. Good morning guys, just a couple of questions regarding the 50% rent paid and your comment about executed deferrals representing 2% of 2 Cube 26. What is that implying about the remaining 48% and from my very practical standpoint I could imagine it's very difficult to go through all the requests and the short time frame. So where are we in terms of that? Like did you actually how much progress have you made and actually going through Tuesday for all requests?
Hey keeping good morning. It's a great question and I can see how you would connect the dots by saying. Okay, if you're at 1.9% you haven't received fifty how much longer of a program in this the reality just any landlord is going to look differently on national credit. When you have a large portfolio of the same brand vs. A local shop and a local community wage for our portfolio of 69 assets. Our local shop exposure is 7% of our total the payment plans are part of that 7%
And also gives you flexibility. So
Okay, so when I when a local shop just simply doesn't have the financial wherewithal to make it through, you know, two or three months of closures then it is sometimes in our best interest to help them by deferring rent and this is a pretty well Worn Path. I think in every recession that I've been involved with. This is the Playbook that you pull out. You know, you're you're working with your local tenants if there's somebody you want. They've done well over the last ten years. They've always pay their rent on time. It's a VIN number easy and elegant way to help them through a tough time, but then you get paid back, you know, usually within 3 to 6 months that is not the same program that one would entertain for a large National tenant wage because most of these National tenants have a higher degree of liquidity than we do and and they're the ones that I think are going to have a much easier time opening they have Logistics and Supply chains and birth employees and you know, they have a method for getting back and opening their store. So I I don't think the 2% Works its way into the 50 category. I think the 2% is really part of that seven.
Okay, so you kind of answer some of this but what percent do you think of the fifty percent of that didn't pay would you categorize as opportunistic in nature?
I do.
Don't even know how to answer that.
No, I know what you're asking. But you know the half of the stores are closed and it while it's not a perfect overlap about half. This is a paid. So opportunistic. I think probably depends more on their own financial position. I mean, there are some tenants, you know, particularly some of the entertainment ones that I think have asked for some assistance and you know, there's some validity there because it's difficult to see some of these tenants surviving a couple of months on the other hand. We had a grocery store that does over a hundred million dollars gross sales ask for rent assistance and they've been open to have a close today. So I think there are a number of tenants that are being opportunistic and I guess you can expect that.
Don't wait, sorry fortunate because you know to Alice's point, we're paying property tax, so it is unfortunate, but it is it's part of the business. I'm sure it'll pass are the same ones getting the forgivable own government to so probably thank you. Yep.
The next question comes from Brian Hawthorne of RBC Capital markets, please. Go ahead. Hi. Good morning. Just one for me. Do you guys know or have an estimate of how may your tenants have access to the paycheck Protection Program? And then can you talk about how successful they they have been getting it Brian. We don't have great data on Thursday. And part of the reason is that our our portfolio is heavily weighted towards National Credit. So if you think about only 7% of RAV4s from a small shop tenants, the only time we have visibility as to whether they applied for a paycheck Protection Program is if they apply with us for some rental assistance, and then we require them to sign an affidavit stating that they have applied to the program the federal government. So we have a we have a few that we may be able to log but we really don't have great data on that right the more impactful program for us. Just giving our national exposure to David point is is there's the federal reserve's of birth.
And the IG and the high-yield market, right and so David reference that 14 of our 50 tenants tapping the the the equity or debt markets that is more impactful for us. Just giving our national ten exposure.
Okay. Thank you.
Next question comes from Rich Hill of Morgan Stanley, please. Go ahead. Hey, good morning guys Irish want to maybe transition away from April May and June and and think about the longer-term one of the things that you guys have highlighted in the past was the amount of the lack of a better term cash that you're going to be getting in from either rvi fees off, you know, the wind down of uh of the Blackstone JV and then some preferred payments as well. You know, that that can be rather substantial certainly as it relates to the value of your market cap right. Now. What do you thinking about what that cash right now? Do you see this, you know environment, you know as a really big opportunity to go by distress valuations. So you you know, are you going to do special Dividends? Are you okay down death? How are you thinking about it in this environment versus maybe, you know six months ago.
Good morning, Rich. Well, I think you know the three categories you mentioned the rvi fees. We
We're assuming would be reduced over the course of 2020 because our assumption was that company is is selling their assets as fast as they can and our fees are based on the month and So eventually are fees would decline since the transactions Market are are are pretty much on hold right now. Our our assumption is that the rbi's will stay higher for a little bit longer. And so that's a little bit more cash in the 2020 than we budgeted with respect to the Blackstone, press and the RV iprep. You're right the two of them together add up to what a hundred and sixty or seventy thousand. I'm I'm sorry two hundred two hundred sixty to seventy million. So, you know, we were we're not at the point that we're thinking about how to allocate off the investment if we get those proceeds back, we're more interested in in receiving the proceeds and again those both our results of the transaction Market, which is really slow. So we don't Reserve
Have great visibility as to when we get the two preferreds back, but we do still feel confident that we eventually will and resources to add to that as you know, when we've got a dollar in the door historic. Oh like we look at all of our Alternatives which you know, you know prior to this was a share repurchase Redevelopment paying down debt Acquisitions that calculus or that equation doesn't change with this, right? So if one of those came back, then we would go through the same exercise and say math, you know, probably today liquidity and cash or probably the highest value for us, but that will depend on where share prices were bombs or trading and what opportunities we see in the office. Sure. Sure. I think that's that's helpful. Maybe not as much detail as I want it but I appreciate the response. Hey going back to the portfolio that you actually own right now, you know, you you have a carefully curated portfolio post rvi spin, one of the things that you talked about in the past was was maybe having you know a portfolio wage.
That intentionally had some exposure to a lower quality tenants because there was a mark-to-market opportunity, you know in a way does that provide you may be more gross at the UPS office now in this environment then then maybe some of your peers or do you think it's it's, you know tougher sliding than you were previously expecting.
I think that the business plan of selecting the highest quality real estate with the best mark-to-market was a good strategy and it remains a a kind of a firm benefit to us over the course of time. I mean guess the real question is is that normal state of disruption in retail increasing and I'd say the answer is probably yes. And so yeah, I would expect that we would have more near term gains, but that's a cost of that right? There's a capex cost to recycling tenants at a faster Pace, you know, if you think about our five-year business plan, we had assumed a bankruptcy process. I continue to fairly High rate and and this is probably going to even accelerate that so I think it's it's pulling forward a couple of years of bankruptcies. I would assume to the near-term. So I look forward to recycle some real estate and being able to raise rents, but I think it's going to come at a at a much bigger Hill and and because of that I think you know the Congress Point our liquidity in our our ability to conserve. Yep.
right now is a is a pretty important feature and remember it's the value today was initial comments and and opening remarks the value of
Opposition of our real estate remains we think as we come out of this so, you know, you take that and dovetail with Mike's comments around demand from the Discounters from grocery from beauty. I think we feel really good about this back to Opportunities and still think that money market remains in place to David's point. It might be quicker that being said we're still excited about that opportunity to backfill with with better tenants ten prepared for the future, you know, post covid-19.
Yeah, I would agree. Okay. Thanks guys. I appreciate your time. Thank you.
Next question today comes from Vince too bony of Green Street advisors, please go ahead.
Hey, good morning, since there's a lot of negotiations taking place with tenants Middle East. How are you thinking about trading off a period of maybe rent abatement in order to remove or restricted Clauses in a lease that could potentially have a greater long-term value to site than that. Of free rent a good morning Vince. It's a great question, you know, right now all of our activity has been on assisting small shops because they're the ones that need it over the short-term which is why we've arrived at those, you know, ninety or a hundred down payment plans for some of the small shop tenants. We have not done any national anchor portfolio resolutions where it's a horse trading in my opinion. It's just way too early in the process over the course of the next month. I do think there will be a lot of conversations about hey, we need this and can and we can help you with that and to your point there are things in in leasing a
That are somewhat restrictive on landlords, especially the older leases that had prohibited and restricted uses, you know options that could be triggered. There's lots of ways that our retailer could make an offer to a landlord to you know, trade a short-term gain for for a long-term gain for the landlord and we would be open to that. But at this point we're not really engaged in in in those dialogues.
Oh interesting fair enough, and I'm just kidding. You think there's a relationship aspect to working with some of your National tenants to where maybe the landlord to you know, Grant relief or provide some dead horse trading will get favorable, you know treatment down the road in terms of the next leasing deal. Is that something that crosses your mind? And is it something you consider?
Well, like any time there, I mean in any business between you know, the customer and the supplier, there's always a relationship and in many cases in in this in this category. There's some long-standing personal relationships between dealmakers on both sides, but I don't think that those relationships obvious Kate our commitment to our stakeholders after all our equity in our debt holders are the ones that have entrusted their Capital with us and they've done so based on contracts that we've negotiated. So while the relationships makes me sometimes more difficult to have hard conversations both sides. Both tenant-landlord are both going to be protecting their own stakeholders at the same time. So, you know, we're not interested in forgiving rent simply for the sake of a relationship where we are interested in doing is helping our tenants get back open and if that means that there are some things that they need and that they're willing to give in order to get them open Thurs.
As a as a team then I think we're open to that.
No, that's helpful color of interesting to see how it plays out. I have one more question just maybe shifting gears a bit. If you could maybe just without talking, you know without talking about any individual tenant. I'd be curious to hear, you know, your thoughts on how you know, you think the retailer bankruptcies could play out this year in terms of chapter 7 versus chapter eleven. Like do you think the lending environment is supportive in terms of giving you know some retailers a chance to re-emerge or do you think that you know companies who maybe run out of liquidity could be forced to liquidate where maybe in a way it's a normal times. They would be given a chance to to restructure the business and keep a lot of their stores open. Well, it's interesting is that you know, for the last three years. I think we have been saying that retailer bankruptcies simply a part of our business right retail is changing. If you have great real estate, you're going to have to adapt and and try and increase the profitability of our own properties as tenants liquidate. Yep.
This environment what I find fascinating is that it has it is notably different than the great financial crisis. I mean the great financial crisis was a time when bad things happened to tenants that had been a business plans you had too much debt and you had thin margins then a financial crisis tipped you over in this market. It's a little different we're seeing bad things happen to really good tenants that have good business plans. They have good balance sheets. They don't value propositions. They have great Brands and they have no sales. So in that aspect, I really do believe that we're going to see more re organizations and fewer liquidations than we thought it twelve years ago.
Because every financing private Equity, I think they see the value in some of these these Brands and I think that they're going to try and make sure that these these change in these Brands came out on a better footing financially.
No, that's interesting. Thank you. That's all I have.
The next question today comes from Mike Mueller of JPMorgan, please. Go ahead. Yeah. Hi. I have two questions first. Do you have a sense at this point about the percentage of that local APR that you know just may not reopen and then the second question is what would trigger are you looking for to pay back the the money that was drawn down from the cross that you're sitting on?
Yeah, good morning. We we really do not have any more information on you know, which ones can and cannot open. You know, it's just it's just too early in the process. It's only been you know, frankly a couple weeks. So we'll see as it comes out and with respect to the balance sheet. I think Connor it probably has a pretty good answer to to the line. Yeah, like I I think it's it's too early today. We obviously are sitting on the cash and and there was a club I'm sorry. We have the the 500 on the line. There's a cost of that at this point. I don't think we're in any hurry. Just given that we think the benefit of keeping the excess liquidity outweighs the cost but it's it's certainly something that. Of mine for us, you know, I don't know what what they they just go forward, but it just feels a little early right now.
Got it, okay.
Thank you.
Next question comes from American all of evercore, please. Go ahead.
David or Mike, I guess releases that are being negotiated today. I mean, what are what are the tenants or two asking for these bases that you didn't see a few months or they're you know, one of the questions we've gotten is wage. They're coded language being Incorporated releases. You know, what if there's a possibility of a second wave coming in in terms of virus? I guess what's different today than a few months ago in in in terms of the agreement with Heights mayor? This is Mike right now the leases that were working on our leases that are in the relatively Advanced stage and Provisions and items related to covid-19 not entered into those conversations, but we're waiting and seeing what's going to happen over the next over months as to how that's going to going to play out.
Okay, and and I guess my second question is bankruptcy, I guess for you might do you get the sense that a lot of the restructurings and bankruptcies could get pushed out in the next year because it's May I just get the sense that you know, a lot of the retailers can't hold sort of going out of business sales at the current moment. Just trying to get a picture of bankruptcies maybe later this year or even into next year I speak to that one. Yeah, it's a it's a good question. I I don't know. I mean, I don't think banksy's not something you can really push off right so so I don't think there'll be a pause. I think you could see frankly. Once you have a reopening of an increase ahead of the holidays is as either some some retailers for struggle to liquidate their inventory or by inventory have the holidays. So I don't think there'll be a pause but it's just a guess as you age the bank C's that are in process. Um, the Modell's the pro12 cetera are effectively on hold until you see some sense of reopening but you know are cetaceans to Davis prior comments and they'll be more bankruptcies in in effect wage.
Forward so I don't see a pause, but just the best guess at uh, two guests at Bass. Excuse me.
Okay. Thanks guys.
The next question comes from Flores then comes this point, please go ahead.
Hey, good morning, guys.
Couple of questions your bad debt Reserve wasn't as you know that much different from the first quarter of last year, or your expectations going forward and and in particular also in terms of some of the streamlining of rents of of of potential dubious tenants. Do you expect that? Those charges will probably likely increase in the second and third quarters as far as it's kind of aerial, you know, I understand the Genesis of your question on bad that it's really hard to compare companies and it's it's an apples and oranges comparison. What I would tell you is, I feel really good about receivable balance and in our collection process, we've got a great property accounting and property reporting team. That's that's you know on top of a game. So I I understand the tenets that your question we did have increase in bad debt versus our budget and took some reserves on some tenants that have we receivables. Excuse me that we were worried about
On a go-forward basis. I think you're going to see less variability and bad debt over the course of the year. Then you will just simply see tennis go on cash accounting or cash basis accounting. So I am not expecting a material increase in and and write-offs, um are receivable balance.
I mean your your basis is down modestly, you know from a year-end perspective or a Camry perspective or well ahead of where we were last year. We do a great job there as I mentioned so I don't expect to see a massive uptick in in Baghdad. I think what you'll likely see is more change on non-cash tenants moving to cash basis accounting in terms of your straight-line rent question. We took some reserves as quarters. We outlined in Our Deck, you know, straight-line rent Reserve or or receivable is is down modestly year-over-year. You're absolutely right. Could you have further right off? It's we're very early at this pandemic as we mentioned and we'll see who's we go from here, but you know, we we took a modest Reserve this quarter and we'll see as we we approached the next quarter.
Thanks for calling one more question. And this is you know, maybe one for for David as well. But in terms of your capital, I mean suspending the dividend basically saves $150,000. You've got ample liquidity. You've got a very strong balance sheet no maturities, you know strong cash position. What would what would make you be more aggressive in terms of repurchasing shares given that they're trading at, you know, just above a third of the level that you bought you issued Equity at, you know, at the end of end of nineteen. Well, first of all remember that the the board has only suspended the second quarter dividend, so I wouldn't need that necessarily as an annualized uh impact, but I hear your point that we do have a tremendous amount of liquid right now that the balance sheets in great shape and if we wanted to be aggressive on allocating that cap off
There are a variety of things that I would find interesting, you know, certainly our stock is interesting but given the fact that we've drawn our line and we're kind of in a in a little bit of a defensive posture right now, which I think is appropriate. I don't see that being a reasonable idea and I'm more interested in what opportunities arrive Thursday come out of this, you know, covid-19 says but most likely are in the middle of the end of a recession because that's the point in time where you know, sometimes really great real estate can dislodge from existing owners and we can bring these and we can buy properties that we think we can work out and we can grow our our company. So I think all options are on the table once we have paid back the line and and feel like we're in a position that we can be aggressive. But for right now I think Prudence is is probably pretty reasonable given that the country is still closed.
Great. Thanks. Thank David. Thank you.
Next question comes from Linda's a Jefferies, please. Go ahead. Hi good morning. The fifty percent of the rents that were received is that covered monthly fixed costs like operating a genie that service and capex. It's Connor. So so Break Even effectively is 50% free capex. And so you're correct. We cover interest expense g n a f x etcetera our capex to the first quarter was about twelve million dollars in the leasing capex side. So if you extrapolate the April payment trench the rest of the quarter and a hypothetical scenario that we would have a cash burn of about twelve million dollars if you assumed leasing capex was the same for the second quarter as well. You know for us Break Even is probably about mid sixties. This point I would add to that is is there two points I would have to excuse me one that's including the $500 of additional line balance, right? So there's an interest expense component to that and the second point to David's room off.
We're still collecting rent on April and we're in.
Conversations with tenants on on uh, potential deferrals or whatever. It might be defenses questions. So in a in an absolute basis, yes, we're covering all of our fixed expenses X cap off today, but I would just say that, you know, it's still really early the is David mentioned. We're still really negotiations our conversations with tenants and we'll go from there.
Thanks for that and I just had one more on your earlier comment that your bankruptcy to start to accelerate and they'll be higher capex associated with recycling would you expect capex to increase because there's more competition to attract the higher quality tennis or was that just more about aggregate, you know spending in general due to higher turnover. Yeah. I really just meant the ladder the you know, if you look at the last three years us our capex spend has been elevated simply because we were doing a lot of anchor leasing our expectation was that we were going to conclude that anchor Leasing and then the capex would start to decline which means that we likely May allocate Capital to other activities like external Acquisitions or stock BuyBacks and if if what is accelerated is additional turn in the tenant-based then it means that we'll be getting Capital again to leasing which is a very profitable way to invest money, but I would have thought it was a little bit slower every year and I do think that we're going to get a little bit more of a wave here in the next year.
That's it for me. Thanks for taking my question. You're welcome.
The next question comes is a follow-up from Christy McElroy of Citigroup, please go ahead. Hey, it's Michael bellermann with Christy. I was wondering if you can talk a little about any difference is that you're seeing between your joint venture portfolio and the core wholly-owned portfolio and whether there's any differences in terms of rent collections between those two pools and Thursday. So talk about the capitalization from a balance sheet perspective, you know, you've moved site centers corporate balance-sheet to largely be unsecured and have also reduced the level of preferred after the 8th offering December, but the joint venture portfolio is is largely secured with a higher level of indebtedness relative to value. And so I don't know if there's potential default issues on that side given what is likely a similar level of rent pay but can you sort of walk through some of that for us a Michael? It's Connor. You're absolutely right. It's or secured debt affect birth.
Is entirely with the jv's there's a couple of things I point out. So so one the jv's have enough cash on hand to cover interest expense for now, that could be a risk down the road if this continues or worsens from home, but as of today we feel about good about their capitalisation. The second point I'd make is you know, we've we've selected partners that are incredibly well capitalized. So the largest insurance companies in the world or Jake manager is in the world other investment managers with significant Capital. So I feel really good about our our capitalization there and the third point I would make is that debt is non-recourse no cross-default provision. So we'll do what's best for stakeholders, but the leverage and he's hatching Point really varies dramatically across the joint ventures. So we do have some joint ventures with no leverage. We have others with Thirty or forty years and and some with hires but it's specifically the Blackstone portfolio. But what I would tell you is that the the jv's themselves remain well capitalized they have cash on hand and and they've got enough to cover interest wage.
In the collectability between the two pools of assets or similar or different all over the place. So what I would tell you is some of the joint ventures Home Collection rates somehow lower. It really depends on property type Michael. So we're seeing marginally higher collection rates in the kind of community or smaller centres and then for lower,
Watching Ray's on the lifestyle side. And that really just depends on which joint venture referring to but for the for largely if your power you're generally, you know, the collection rate that we've seen if your community you've seen marginal home and lifestyle just modestly lower and and the joint ventures kind of a smattering of each of those depending on which one you're referring to and then if you think about the 50% non-payment of a proration you have about 7% of your income as in ground leases at 100% of the ground rent get paid and then effectively if that's the case that would imply much lower collection of light on the actual storefront. So if you can just clarify that would be great. I don't know the collection rate on the ground leases. We've had to come back to you on that.
Okay, and then do you have on that 50% sort of the number of tenants that that comprises so, you know if you think about your tenant-based, you know, you're Top Dog tenants are making up almost 30% your top 50 tenants are 60% of your rent. What is a concentration of that fifty percent non payment, you know where there are some larger ones in that bucket or were they dispersed in conjunction with the way your rent roll is? Yeah, just giving Michael the size of our portfolio just for contacts are top a hundred tennis or almost 75% of our life. So not surprisingly it's fairly concentrated to you're absolutely right.
And then as you think about the sectors of that non 50% payment, I assume you've called out the restaurants Fitness in theaters, which is 11% of your base rent which wage sounds like those are all Donuts zero payment what else makes up the remaining forty percentage points? Yeah. So if you look on slide eight of our earnings that Michael we've got in there the percentage of wage are open by category as David mentioned his remarks there. It's not a perfect correlation, but generally the tennis that are open or paying rent in his hands that are closed or not paying rent. So you're spot on the three that we called that's not surprising or lower payment kind of categories. But if you look on that slide, it's it's almost perfectly correlated with payment. And so to your exact point restaurants, it's Fitness. It's It's Entertainment. I am theaters for us and at the other end Spectrum, it's the warehouse Club gas stations groceries that are paying rent.
Okay last question just you know, David if I go back to your you know, your Three core tenets of building the new site Center portfolio, which you talked about the lock and take off convenient access Last Mile and also being in the wealthiest ZIP codes in the US and then the adjacency to which your other retailers provide resulting in the high consumer traffic. If you feel like your portfolio is better position than a better quality, I guess with that mindset. Why do you think you are suffering basically in line? If not from at least an early read a little bit less rent collection relative to Industry if you fit those three qualities
Well, it appears in good morning, Michael.
It appears that a number of tenants have decided to simply not pay across their entire store flea. And so I I guess we haven't really felt like it's off to add any particular portfolio. We feel like the chains that have decided not to pay rent have just decided nationally not to pay rent. And you know, it it's it's not a surprise that our portfolio is filled with more National tenants than we have a smaller shop exposure. You know. The one thing to consider is a big question for us is when do these tenants pay rent given their contracts? Why haven't they it was were all valid questions on the other side is you know, these these tenants have raised a lot of capital they have survivability. They have cash in order to reopen and what I would suspect is it's the undercapitalized small shop tenants over the next six months that were really struggled because that's what happened in 2008-9. You know, there was this for 2 6 months laugh.
With shop tenants where they kind of continue to pay the bills like you to try and stay open, but if they're in a recession particularly, if you're in lower income or moderate-income markets where the job losses higher it's very very difficult for them to stay solvent. Whereas I think the the large National chains, I'll be at punishing, uh landlords at this point, but I think in the long run they're able to get open again. And so I think that Trend my Traverse the bulb is out to that as we have not to David's Point entered any any deals or transactions with any of the national retailers on rent and that could obviously have a material impact just given how concentrated we are on the April payment rates, right? Do you think in like, I respect you and Mike and many within the site centered organization have long-tenured deep relationships with these retailers, you know, I can remember a time where DDR used to have it was like over 800 assets. It may have gone over a thousand at one point right where you as an entity were the tenants largest landlord in any case law.
Do you think size in terms of landlord size is when we're when we come to the other side of this will matter in terms of where rents ultimately get paid how much rent gets paid what stores retailers will keep that they'll will maybe a separation between birth of large versus more smaller more Niche oriented players.
I think that the size of the landlord mattered a lot when the large landlords had big development programs that serviced a roll out of large National chains off that was a symbiotic relationship that seemed to mean that size mattered a retailer that wanted to open 50 stores a year could go to their top landlords who were also developers and Merchants Builders and I could fill your open to buy simply by a handful of really big National relationships. And that was sometimes private that sometimes it was the wreath, but honestly, I I don't really see the retail world has had a tremendous footprint growth. It's more about reallocating Footprints in in the higher density and higher-income submarkets. And in that sense, I think the landlord matters less money. So I I personally feel like shrinking as we did to concentrate on, you know, five dozen properties was the right move because we can really be very very granule.
on every single lease decisions and
It's not overshadowed by a relationship that we have with the tenant that has a big roll out program. And you know in that sense. I think we're we're always going to do what matters to our stakeholders which is our our debt and our Equity holders off. The only thing I had Michael, you know, it's probably better we do is is I think it's the strips the public strips represent ten fifteen percent of the of the shopping center the United States. So it's it's it's a little different than the malls with concentrated they are so it's not to say that we're not relevant and then the Retailer's don't know who we are but it is definitely extremely fragmented and remains that way
Great. Thanks for all the time.
The next question comes from Steve of evercore is I please go ahead thanks. I just had really one question maybe for David or for Mike just you made a comment about you know moss and I'm just curious if you could maybe expound on either the categories or the pace. If you you know, there's any names and things that you could just give us a little bit more color on you know what you're seeing and how that might unfold over the next six to twelve months. Good morning Steve. I mean, I I guess I would refrain from giving you a tenant names, but even the last year, I think we've seen uh, you know Health and Beauty in particular, um, recognize that their customers are are coming to strips and you know might can give a little bit more detail, but I really do think this was heavily influenced by the ability for tenants and landlords to access geo-location data, you know, the the cellphone data that you're able to aggregate now can give you such an incredible window into who's coming.
Your properties a lot of them all based tenant and that's why I bring up Health and Beauty realize that their customers were not just going to a mall their customers were also going to strip centers and home of the convenience for their customer in in the strip versus the mall. That was a big draw and then they look at the occupancy cost ratio. I'm sure you saw the analysis between Gap Old Navy when they started to show their profitability and you look at the occupancy cost ratio between those two different brands. It's remarkably less expensive to be in a strip format. And and so I I think what we were starting to see last year because of the geo-fencing data is only going to be exasperated now, I'll add to that Steve. This is my the one thing I point out is that wage when a retailer who operates in a mall with extremely high, uh costs extremely high extra costs looks across the street and basically says look I can be there for a third dog.
Of the price at the same time generate similar sales, we're hearing that all the time from the mall tenants and we've got to portfolio review scheduled for the next two weeks with almost what I would call a supreme all based tenants who are good credit good operators and their main statement is look we want to be by TJ Maxx Target Marshalls Ross Burlington more than we want to be down Wing from a closing Dillard's and that basically is a you know is is a what we see is an opportunity that we're really going to strike while the iron is hot bath.
And do you think that that manifests itself in in deals this year or just given the situation is just kind of get more pushed off into twenty Twenty-One when you see the kind of fruits of that labor know, I think it'll definitely be become some deals this year.
Okay, guys. Thanks a lot.
The last question today comes from Chris Lucas of Capital One, please. Go ahead.
Hey, good morning guys, Just a couple of follow-up questions. If I could on the reserve she took in the first quarter or any of them related to sort of the payment patterns. We saw in April or they all first quarter specifically related. They were unrelated to any of the payment plans. I think from a collect ability perspective. I think it's it's all but one of our payment plans have been deep rent. We've defer as opposed to put it on a cash basis account.
Okay, and then do you have a way to describe sort of the composition of the unpaid rent for April as it relates to you know, sort of completely not paid versus partial payments. The majority issue is completely unpaid Chris. There's been a couple National chains. I'm sure you've seen headlines that paid twenty or fifty whatever it might be but the vast majority is just been fully unpaid. Okay, and then Mike off on leases that were set to commence a second quarter or third quarter, which what are you hearing from the tenants in terms of their interests in open opening up and and commencing around there's some shop tenants that are a little more skeptical about it. But most of the Nationals are committed and I remember just I would say from about it from a timeline perspective Chris. We've always talked about third in the fourth quarter of the biggest openings clearly may still be impacted by the pandemic, but they're they're typically not a lot of tenants opening this time of year. It's really trying to get ahead of the holidays.
Sure. And then last question for me just is it you guys in a lot of the conversations been about the TV program? I guess I'm just curious whether you've done any analysis at this point of what tenants should be able to qualify for the Main Street MonDay program, which really hasn't gotten off the ground yet.
Yeah, we don't we really don't have much visibility into that. Like I said our our our local tenant exposure is so low that we really don't have access to what they're what they're looking for. Unless they ask for a rent money assistance from us and then we can require them to prove that they've applied for you know other forms of financing, but to date honestly, we just haven't seen enough data to be to be thoughtful about it off. Thank you appreciate the time.
This concludes our question-and-answer session. I would like to turn the conference back over to David's for any closing remarks. Thank you all very much for dialing in and we'll talk next.
Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.