Q1 2020 Earnings Call
Welcome to the first quarter 2020, Cedar Realty Trust earnings Conference call. As a reminder, this conference call is being recorded at the top all audience lines have been placed some you will conduct a question and that just following the formal presentation I.
I would now turn the call over to Nicholas potential. Thank you. You May proceed. Good evening. Thank you for joining us for the first quarter 2020, Cedar Realty Trust earnings Conference call.
Dissipating in today's call will be Bruce Schanzer, Chief Executive Officer, Robin Ziegler, Chief operating officer.
<unk> Chief Financial Officer.
Before we begin please be aware that statements made during the call that are not historical maybe deemed forward looking statements and actual results may differ materially from those indicated by such forward looking statements.
These statements are subject to numerous risks and uncertainties, including those disclosing the company's most recent form 10-K for the year ended 2019.
Updated fire subsequently filed quarterly reports on form 10-Q.
Other periodic filings with the FCC.
As a reminder, forward looking statements speak only as of the date of this call May 14, 2020, and the company undertakes no duty to update them.
During this call management may refer to certain non-GAAP financial measures.
Including funds from operation and net operating income.
<unk> earnings press release, and supplemental financial information posted on its website for reconciliations of these non-GAAP financial measures what that most directly comparable GAAP financial measures with that I'll now turn the call that are Bruce Schanzer.
Thanks, Nick Good evening and welcome to theaters first quarter 2020, <unk> earnings conference call. This.
This call is taking place during an unprecedented period.
The cobot 19 pandemic that swept through the U.S. and the globe, resulting in a shutdown at much of the national and World economy.
Although this is technically our first quarter Twentytwenty earnings call, which was largely unaffected by the crisis.
We will focus our comments on the crisis.
Before jumping into the substance of the call I wanted to take a moment to thank the members of teams theater with their professionalism and dedication during this period.
It's it's been an incredibly difficult time for everyone both at Cedar and beyond.
This time has highlighted the majority of life and are interconnected.
We're all staying home to protect our parents grandparents friends neighbors and people, we don't even know from a virus that it's proven to be brightening, we contagious and badly.
We are reminded three this experience that what is most important.
Namely that we look out for one another and that we value life and health above all else.
What we are experiencing does put the relative operating success, we will be discussing on this call in an appropriate contest.
Nonetheless, we are pleased with the relative outperformance of our portfolio wall humbly acknowledging that it's been overeat fairly short period of time.
And it was achieved while we are right we focus on the much more important issues of life and death.
Furthermore.
Although our portfolio has performed well on a relative.
Our business like those of our retail REIT peers is stressed the say beliefs.
With approximately 40% Barrick tenants close at this time in our share price at an all time low.
As you have seen immediately after being confronted with the pandemic. We took measures similar to our peers in order to preserve cash and guard against especially adverse scenarios.
Specifically, we grew $75 million on our revolver reduced our dividend.
Meaningfully scaled back that's scheduled capital spend are out our mixed used redevelopment, which we continue to monitor.
Yeah suspended our earnings guidance.
In addition, we subsequently announced that due to the decline in our share price triggered by the pad data.
We will potentially need to take a measure before the end of the year to increase our price per share about one dollar per share which could be through a reverse stock split.
In thinking about our recent results relative to other retailed meets I'm reminded of the thing to say attributed to Warren Buffett that you only discover Gui swimming naked when the tide goes out.
With over 70% of our people revenue collected versus an average of 58% for shopping center REIT, there's a whole and dramatically less for the mall Reits, you're starting to see a real proportionate separation I retail so tight.
The secular decline in bricks and mortar retail you didn't begin the arrival of cobot Nike.
No the low tidy that provoked underscores many of the differentiating characteristics, we have spoken about often.
There are two specific fees to highlight in this regard.
First theaters assets are almost entirely grocery anchored shopping centers with predominantly necessity based retailers.
These services are more internet resistant and our centers are therefore simply more resilient that other retail real estate assets to many of the trend negatively impacting retailers.
Second there is a fundamental difference between retail real estate, such as malls lifestyle centers Street retail big box Big box assets.
Levered to swap good discretionary good retailers.
And the smaller format neighborhood centers, such as those owned and operated by theater.
Hi, Peter we have read for years about the types of assets that other landlords own whether mall or shopping center, which will be the long term survivors when the dust settles on the secular evolution bricks and mortar retail.
I'd be lying if I did acknowledge it over the years, we would've been thrilled to own such assets.
Remarkably the pandemic, we're now experiencing and the long term societal and commercial impact it hasn't got dirt could very well capitalize a fundamental change.
After sent them into one that most high reprising the characteristics embodied by teeters portfolio.
This could be the black Swan that causes SEDAR and got that seagate favor in the capital markets.
Over the years, we've been very vocal in pursuing it slightly different strategy in which we are focused on population and trade area to the exclusion of income or education and grocery anchored assets almost exclusively.
This is Ben probabilistic approach to an uncertain environment and future.
And that was before the Corona buyers pandemic Andrews introduced even greater uncertainty into the future bricks and mortar retail.
And refining our portfolio over the years, we simply have said to ourselves that retail lead people above all else.
The trade areas and traffic patterns oftentimes matter more than high income or education.
The lower income aren't necessarily a bad thing.
They are less likely to migrate to shopping online.
And that necessity based retail while they slower growing category is more defensive and reliable.
To be fair. We have also focused on assets that made sense for us considering our relatively high cost of capital.
Nonetheless, we are now starting to see the positive differences between our real estate and others highlighted prices accelerate evolution in bricks and mortar retail.
In a matter that appears to be cover our appetite.
I, often say the comparing grocery anchored shopping centers to malls lifestyle centers and street retail Big box centers is like comparing apartment so hotels.
Somehow when capital markets professionals to speak of retail real estate. They will often they will often lumped in with more lifestyle Street retail big box and non grocery anchored centers because offer people a place to shop.
However, you will not see apartment reads lumped in with hotel and senior housing, we even though the all provide people with a place to sleep.
Hopefully one positive consequently, this pandemic for purposes of our business and stock price performance.
Well be greater appreciation.
What we see as they start and fundamental difference.
Within different categories, a bricks and mortar retail.
Our supplemental financial filing provides helpful detail on the different categories of tenant for purposes of understanding where payment is coming from as a general matter.
However, one thing to highlight is that it is not simply a function of the assets and our tenant composition.
Our team has done an exemplary job of attacking this challenge.
We have contacted just about all of our tenants not only to discuss collection or forbearance, but that that we check it.
The depth and quality of these interactions and the human touch it in body has driven a marginal rent collection, which has in turn led to a much better than average overall collections and the second quarter to date.
Doug I'm proud to say that the relative outperformance, we have seen not just a function of our assets, but it's very much a credit the team theater.
I could not be prouder of this group and the way they have collaborated during this time.
Although I'm reluctant to make any bold prediction in the face of this uncertainty may collections are coming in solidly thus far and the team is continuing to work with tremendous focus and dedication. So out so I think our relative for portfolio outperformance should continue.
I'm not note.
Thinking a bold predictions I'm struck by work from my home the sheer volume of commentators telling us what the post cobot 19 world is going to look like.
I note and digesting all of these pronouncement that none of these people ever preface their comments by acknowledging they didn't anticipate the very pandemic that is the foundation for their predictions.
That's I think it is critical to acknowledge that as we think about what tactics and strategies to employ we do so in the face a great uncertainty.
For those who actually have to put their capital to work in the face. This uncertainty decisions must be made with considerable humility and within ever greater analytical mindset.
As we endeavor to navigate through this challenging environment.
However, one prediction I will make is that while many consumers will not be shopping malls lifestyle centers and street retail anytime soon.
Our leasing team will be enthusiastically shopping at these retail outlets for new tenants to bring to our more stable and better performing grocery anchored centers.
In finding ourselves at this juncture, where despite extreme stress our assets have held up relatively well.
We acknowledge our good fortune, but also realize that we're harvesting the fruit of the treat you had been planting for many years.
Our approach of filtering through a lot of noise.
Focus on certain types of assets has helped our company find itself on relatively solid footing. During this perfect storm.
I am only sorry that our shareholders have not yet seen this reflected in our share price.
However, like the cycles of the Moon.
There will be a high tide once again.
And I hope that this outperformance we have seen from a particular assets and operating platform will be more appreciated in the capital markets in the month in years ahead.
That said this crisis and the relative outperformance of our portfolio.
The only made us more optimistic that our assets could very well being the long term survivors as the secular decline in bricks and mortar retail accelerates.
Before concluding I would like to return to the topic I was discussing at the outset.
Namely the fact that in the face of the life and death issues. We are all grappling with during this time.
Our operating results, whether strong or weak.
Must be digested in the context of what really matters.
At theater, we have focused on grocery and in many instances grocery within shouts communities were food and security is a real issue.
Unfortunately, the economic consequences of the Corona virus pandemic have severely hit many of these communities.
We often talk at theater about doing well for our shareholders well do a good for our communities.
Today that I do you need to be more than a nice saying.
Rather we need to take unprecedented action during this unprecedented times.
I would encourage everyone on this call to consider supporting their local food Patrick.
Google who pantry near me.
You will be amazed at how close you probably live to a place where people who are struggling with food and security are compelled to go in order to feed themselves and their families.
When you're out the supermarket, despite an extra $20 of canned goods bread or other staples and drop it off at your local pantry Ware.
Or you could bring them a chuck.
This is a crisis facing our communities and it behooves us to step up if we can.
With that I will give you robin to discuss our results and provide greater detail around how we have navigated the corona virus crisis, thus far.
Thanks, Chris Good evening to Echo Bruce a sentiments I could not be more proud of how our team at theater has faced and work through the challenges of these unprecedented times.
Well Mark on our quarterly results in a moment, but I'd be remiss, if I did not speak to the process and the results of this team's efforts thus far as we work through the Corona virus pandemic.
During the month of April we collected 70.4% of our rent as previously mentioned this is a relatively strong rent collection performance. Further in May we have currently collect at 65% if I read and expect that May collection rate to continue to increase some as we finished the month.
Our top five tena categories based on annualized base rent are comprised of grocery stores fast casual at full service restaurants fitness and dollar stores.
These five categories, the make up 50% of our total annualized base rent with grocery stores alone comprising 28% of our total annualized base rent.
Our relative success at rent collection in April can be attributed impart to our grocery anchors as well as a substantial composition of our tenant base falling into the essential retail category.
However, these are not the only factor we have a robust collections rent for Barents and tenant communication process, which we designed and implemented an immediate response to the crisis to meet the dual aim of ensure optimal rent collection, while supporting the viability of our tenants.
As part of this process, we reviewed every lease in our portfolio to ascertain if there were any lease provisions that we would want to modify as part of any rent for parents agreement.
We have verbally contacted every local and regional small shop tenants that did not initially pay April to ensure ultimate rent payment or to set up a rent deferral plan with pay back into 2020 or 2021.
We are handling the national anchors and small shops with a twofold approach in some instances we are relying on express provisions in our tenant leases that support no relief for payment financial obligations under present circumstances, and requiring that tenants pay their rents in fall and on time.
And other instances, where other business objectives have been identified with respect to certain national tenants. We are entertaining modification discussions on a one on one basis in exchange for a specific lease provisions.
Currently 60% of our stores are open 89% of which are considered essential retail.
Essential retail makes up 61% of our overall base rent composition.
In order to ensure we are best managing through our operations. During this time of store closures, we have reassessed the property maintenance needs to keep the standards that our customers have come to expect well conserving scope and expenses where possible to managed to the bottom line as a result, we have reduced recurring.
Roughly operational expenses by almost $80000 and postponed approximately $5 million a property level capital expenditures.
Additionally, we significantly and strategically reduced our capital spend in 2024 are mixed use urban redevelopment and value out renovations.
And have complied with government mandated construction shutdowns, where applicable for both tenant construction and development projects.
Now onto the first quarter 2020 performance.
From a leasing perspective, we signed 30 deals totaling 309500 square feet.
An average base rent of $16, an 18 cents per square foot.
17 renewals were executed totaling 270302 square feet at a positive spread of 0.9%. This includes three flat growth freed renewal options totaling 180659 square feet at the point, Jordan Lane and Newport.
Excluding these three grocery deals that renewal spread increases to 2.7%.
Five comparable new leases vacant less than one here were executed at a positive spread of 24.3% and seven comparable leases that were vacant longer than one year were executed at a negative spread up 32%, resulting in an overall that comparable new lease spread of negative 7.5%.
[music].
And overall comparable lease spread of negative 0.4%.
First quarter 2020 same property leased occupancy is 130 basis points higher than the same period in 2019, and 20 basis points higher than the prior quarter.
During this time of Coven 19 in order to effectuate, all that I have discussed and the aspects that I have not it literally has involved every department in the company. It required members of team theater to stop and take on assignments that in some cases are not part of their regular job responsibilities.
The cohesiveness and dedication demonstrated by team theater has been exemplary to behold and truly inspiring as a member of senior management.
That I will give you Phil.
Thanks Robin on this call I will briefly comment on our Q1 operating results and then discuss additional information we have added to our financial supplemental along with some other financial and accounting impacts of code.
Starting with operating results.
For the quarter operating FFO was $16.7 million or 18 cents per share.
As discussed on our previous call. This quarter included elevated lease termination income.
Around to eight cents per share related to shoppers food warehouse at Metro square.
Same property in Allied countries, 0.8% over the comparable period in 2019, excluding redevelopment properties and increase 0.1% redevelopment are included.
Always our redevelopment or in various stages.
Some cases this includes creating intentional vacancy over the past year, that's causing.
Lower NOI growth when they are included.
With regard to financial supplement filed today.
We've made several different than modifications, including.
Adding a page that provides the L.A. annual base rent category.
A realistic summary highlights our grocery anchors and provides an expanded a key tenets by property.
Decreased our measure for large shop, that's from 15000 square feet of 10000 square feet.
And extended our list of top tenants to now include 25 tenants.
It may these additions and modifications to provide more insight into our portfolio.
In particular, I think the jelly and avionics and a category provides very detailed information about our diverse tenant base and the various retail categories. So much we derive a revenue.
I believe you will find it very informative.
Moving to covert anyway.
In addition to the operational measures Robin to stuff.
Taking various actions to increase liquidity and financial flexibility or spot the coated including.
$75 million on our revolving credit facility.
Reducing the common dividend to one step for share.
Reducing near term construction spend and evaluating other non essential expenditures.
It's important to note due to timing of the mandatory closures at Q1 earnings were not significantly impacted.
However, our earnings beginning in Q2 will certainly be negatively affected by code.
In particular for tenants for whats Collectability of lease income determined to be left them probable.
That requires related lease income to be prospectively counterpoint to cash basis, and all previously recognized lease income not collected.
Going straight line receivable could be reversed.
It's always thought and both decrease in revenue and elevate it bad debt.
Therefore, while at record anchor portfolio had resulted in relatively strong collections for April that may given the uncertainty of economic impact caused by cobot withdrawn full year 2020 back.
With that I'll open the call for questions.
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First question comes a lot of Todd Thomas with Keybanc capital. Please proceed with your question.
Hi, Thanks, good afternoon.
Thanks for the the additional detail in the supplement for the retail categories. So that's really helpful.
First question Bruce maybe maybe Robin you know you have you have some vacancy in the portfolio and there are a number of centers without a grocer anchor and Bruce you spoke about the potential benefits that you see materializing for a your product type, but aside from rank collections in April and May or you see.
Turning to see any signs of budding demand from some grocers are other essential retailers to take additional space in the portfolio or is it a little too soon to tell.
Yeah, I would tell you tied that it's too soon to tell at this point, what we are seeing of course is strong performance.
At the bricks and mortar level for our supermarket and other grocer anchors. So certainly the case for the bricks and mortar grocer, if anything has gotten stronger a true this pandemic.
And so certainly the idea.
All right.
Yeah.
Warner choose centers that we had a where there's a vacant anchor and there's an opportunity for grocery potentially move in certainly I whatever the odds were of leasing it to a grocery before those odds of probably improve.
You know since but again I think we're going to need to see clear and this isn't just theater I think they were all going to need to see clear of this pandemic and associated shutdown before we'll be able to confidently say.
Oh, we're gonna be releasing some of these anchor boxes.
Course.
[music].
Right now people arent actively.
Doing anchor deals.
So it's really just a matter of us.
Kind of maintaining a contact with them and hoping when the world reopened I'd say.
Some of what we have seen.
In terms of strong performance by grocers.
Extend to.
They're actually there is having an interest in some of our vacant space that might be suitable for them.
Okay, and and what do you what does this mean for you know sort of property values and and I guess, you know potentially dispositions.
For some grocery anchored or drugstore anchored centers, you know, there's quite a bit of capital markets volatility today as well, but you know what's the market like for these assets and have you explored.
You know the disposition of monetization of any assets in order to two do you ever and maybe you can sort of tie that into the mixed use intensification development projects that you were advancing you know how does this potentially change the strategy and the company's ability to to forge ahead.
Oh, that's out there there are a lot of pieces to that question cuts I'll try to.
Maybe I'll answer a few different question is do you ever a few different ideas in there. So one was a you know what is our view of.
The.
Value and potentially you Bob's value for our centers. The second question was.
You know, whether we're seeing any kind of transaction activity or we are exploring any transactions for our centers and then the third question and there was what are our thoughts around our mixed use redevelopment projects in light of both.
You know how values are evolving for grocer and then just more generally I you know capital availability Osama after each of those questions and then.
Oh, that's robyn or Philips actually to expand I'm on the third one.
So in terms of the first question, how we have seen values evolve.
I would imagine over the last two months or with the conduit markets and CMBS markets shot.
There aren't there aren't any new deals that are getting papered.
With this current kind of capital markets freeze.
So certainly we don't have read visibility or the way, we typically do into a transaction activity for our asset types in our geographic footprint.
My comment.
For my comments during the during my prepared remarks.
Our really.
Prediction right. The prediction is that whereas before this happened before we had this market shocks day, you're potentially will will affect consumer behavior that there was the view.
What type of retail real estate was going to be the long term survivor type of real estate that was going to right.
As a.
The secular decline in bricks and mortar retail continued.
And I think that between what we have seen in terms of the style outperformance of our assets and our asset type.
Hold with just some of the potentially changing sensibilities.
Consumers, it's very possible that in fact, what we see is we just see a fundamental change in the types of retail real estate that.
Endure and do well when we're through this pandemic and the types.
Real estate assets retail real estate assets that decline or that our child. So I think that that is the answer to your first and second questions.
In terms of eight we're not seeing a lot of activity ourselves and be right. You know the thoughts around value is you know if anything we're probably a little bit more optimistic.
About or assets on a relative basis compared with how we thought about them before because again they appear to be doing better than other types of bricks and mortar retail assets through this pandemic.
In terms of your last question the mixed use assets. It's a fairly complicated question certainly saw our announcement that at least for 2020 that we're scaling back the extent of our capital spend.
We're continuing to monitor and so we might.
Potentially even scale that back further.
Yeah. There was a question analytically, that's one that we haven't yet resolved, but there were starting to think about which is to the extent that.
The market.
For just a simple up the fairway grocery anchored centers somehow evolved in a way.
Hey, I'm.
Relates to how we think about capital allocation, we might have to think further about the capital we're putting into our mixed use assets, but that's really cheap too early for us to make any calls around that but of course, we realize that this situation calls that.
Into question. So certainly it's something that we're going to think about as the world's.
Evolves.
Okay Alright, great.
Thank you.
Thanks.
Our next question comes on line of Collin Mings with Raymond James Please state your question.
Thank you and good evening, everyone. Just wanted to go back to I pod question first here again, you referenced a couple of times between the prepared remarks in the press release that capital spending plant down to $20 million and it could be reduced even further can you maybe just elaborate what have you spent a spent year to date.
I'm going to let Phil.
Started attacking that question and then obviously Robyn.
And I might potentially chime in as well, but so why do you take that.
Hey, Carlin year to date for the development and redevelopment or the I should say the value add renovations.
Is.
Less than 10 million or the exact name and number in front of me, but it's not 10 million, it's a little less than that.
Okay.
And then again kind of sticking with the theme here and beyond just the kinda potential capital commitment that Oh you just.
As it relates to Todd's question as it relates to the mixed use a assets, but just how has the shift in the economic outlook and then again just potentially the long term impact of social distancing measures, maybe just cause you to reimagine. Some of the projects just things around in vacation and kind of cabot potential tenants that might be attracted to somebody.
Projects, just bigger picture about beyond again, just kind of the capital side of things how are you thinking about that right numbers.
Well, let me, let me take a little bit of that and then.
I'll hand, it off to Robyn.
So the first thing to recognize at least when it comes to the northeast Tights project and the South corridor crossing project is that they are still very much oriented around grocers and of course.
As we talked about the grocers have done a pretty well.
In terms of the merchandising again anchor elements at South corridor crossing or just about dawn I northeast tights, while we have made quite a bit of progress.
And actually are pretty far along we haven't disclosed it publicly in a manner that allows me to operate too much further on that but again certainly I.
The anchor pieces are starting to coalescing crystallize.
But it's premature for us to.
To really talking about too much more publicly in terms of the social dispensing and some of the sensibility that people are going to bring a as we enter into this post co bid world. We are starting to work on it now one of the.
Interesting things that we grappled with as we you know we have task force task forces excuse me internally that I spend time on this is that we have to be pretty flexible in our mindset could we really don't know exactly.
What people are gonna be looking for a once we are cleared this we're right in the middle of it and so.
In certain respects, it's a little too soon to say, but I'll, let robin.
Expand on that a little bit if you'd like Rob.
Sorry about that I'm sure just piggybacking off of what breathless sharing.
You know from a from a merchandising standpoint.
On the on the retail side I think it's a little bit too too early as we really learn how customer pattern shafts kind of coming out.
Oh, good but it is something that we are monitoring very very closely as Bruce said the two other projects are intended to be grocer anchored.
And so you know I don't think that that aspect of it but it will change, but but some of the other somebody other pieces of it merchandising perspective, you know we are we are looking at it.
The other large part of these mixed use projects are obviously the residential piece and so you know we are looking at how do the mid eighties faces change as as part of the new social distancing dynamic how to some of the some of the features such as touched outlets.
Touchless phosphorus and touchless hand that and some of those fastest thought that the common area planning we're looking at that so there are you know there.
Sex of the new social different seen dynamic that we find ourselves and that's getting incorporated into how we think about the site planning the residential.
The residential pieces of it all is certainly getting worked in and I think the merchandising.
Something that we are very keenly focused on as we look at how traffic patterns and customer patterns shift as we come out of that.
Okay. That's helpful color there [laughter] [laughter] Robin just maybe sticking with you for a second can you maybe elaborate and quantify off while just where deferral or potential abatement negotiations bandwidth with tenants.
Obviously, you provided by the recollection data for for April and May, but just any other color on kinda steps going forward I know that you referenced them. Some payback periods that could extend extend into 2021, but just any additional color, though you can provide.
Sure. So generally speaking when we are talking to tenants we are.
Generally getting.
Two months of abate, Matt that either get paid over.
Six months and 2020 or 12 months in 2021, and that's generally split between whether it's a local or regional center for national tenants and we're talking strictly deferral here related to what we've been negotiating with tenants we have.
Executed 16 deal thus far.
And those are largely with the small shop and so that's where we are.
Thus far in the process there Ben about 84 of them out of that proves that our outlet tenants that are under review.
But about 16 of them up and our 16 of them up and execute about sorry.
Okay. Appreciate all the all the detailed there and then.
Phil just you referenced in the press release, a as of March the company with a compliant with all financial covenants and maybe can you just update us on bad in context of where rent collection, Stan and just the outlook there moving forward just in context of the company's leverage.
Yeah, Let me circle back before I do that just to the question you asked about renovation or they're worried about capital to date when I've given you close to 2 million I was talking as of today column. So as we sit here and make it was about five and a half million for the first quarters I just want to be clear. So you can get a decent run rate there.
Yeah, I think you did you see in our press release, we were at 70% cash collection first quarter. We're already at 65% you know in May expect that to grow.
I don't you know I'm not going to speculate as to how long you know.
Closures.
Last you know and so whether it's in that quarter and or a six month event. You know so it's a little hard right now to know.
Yeah for most of our ratios we do.
But cushion to absorb that type of.
He asked collections, we see today and at the Bank Covenant don't really worked on can they work on gap there kind of a hybrid in between.
So you know if we're running 70% cash collection for the bank.
Yes, we're getting credit a little higher than that you know something closer to.
Not full GAAP, but closer to it for most of the financial ratios Rich kids.
We have adequate cushion to absorb it currently set.
Also maintained an unencumbered in Hawaii.
Amount to support our line of credit no no. One you know Kim is calculated quarterly annualized so that when can be really tough, but you know we've had conversations with the bank you know they're fully aware this they notice the quarter with the mandate it closures.
As Bruce kind of a label that early the black Swan event.
And in the general context, the conversations or whatever we need there will be.
Easy compare to what they just had to do for all the hotels, but they they they're aware of you know the fact that that's an quarter covenant or not really a covenant requirement to maintain a certain amount of unencumbered NOI. It's a quarter number annualized me understand what's going on this quarter and if they're going to work with us on that but as far as all the ratios fixed.
Charge coverage leveraged.
The kinda back cash flow their main now well done the higher end of those covenants, but we have adequate cushion to cover them.
Okay I appreciate all the detail there I'll turn it over.
Once again, if you like test question. Please press star one on your telephone keypad. Once again, if you like touched a question. Please press star 100 telephone keypad.
Yes.
Our next question comes on line of tours Bendeka, What's Compass point. Please see what's your question.
Hey, great good afternoon guys.
One or two.
Uh huh.
Get a sense what is your.
Breakeven or cash rent collection.
Level and and it does that include also can you include on Capex and there were leasing costs.
Hey, Floris this is Phil.
Walk through that I'll use round numbers and I tried to keep it straight for us in a normalized year after maintenance capital after dividends common and preferred where they were running we generate about 10 million a free cash flow after all that and it's about the little more than 10% of our into why but.
Lets around it and keep it easy at 10% over in a lot with the some of the actions taken to mitigate effective coded to put in the press release discussed on our call such as reducing the common dividend.
You know also reducing maintenance capital and other things.
That gets us to almost an additional $12 billion or 20, an additional 20% in Hawaii. When you combine those together that would get you 30% of in Hawaii.
So we could absorb about 30% reduction in O y and be in breakeven and that that again it after all the maintenance capital leasing capital and dividends at the current run rate or reducing the common to one cents, we could absorb about 30% reduction.
But to be clear that it'd be for any development capital.
Right. So so it it's 70% collection ratio would get you to break even including your dividend of a penny.
So if you exclude the dividends in the high 60.
No I'm, including the dividend.
Yeah.
After the dividend after we paid a dividend we can absorb about 30% reduction in a lot and be clear I'm, giving you annual enough right. So, let's just say you know getting I'm not going to speculate on whether this last quarter or six months, but just be clear here to stay at lack the core. So we would have a 30% reduction for a quarter that would obviously be seven or.
5% for the year, we're saying, we can or we'd be break even.
30% read that reduction for the year.
Okay.
I ask a question about the 7.4 million impairment.
Can you give more color on that.
Yeah, so that that relates to metro squared if you'll see in the quarter. We also booked about a $7.1 million lease term fee, which is almost the same as the impairment amount. So mattress wherever the largely just the dark anchor that was continuing to pay.
Shoppers warehouse and and just a few small shop. So you know the the value from that really was primarily driven by that anchor which we terminated early [laughter].
And when we.
Permanent come now the property has devalued with that zero or income of zero and you know wherever that would lease up you know left the capital and all so the term fee.
Kind of he quoted impairment we took.
That's the way the math works on that the way it works for gas.
Okay. Thanks.
Maybe one more question maybe this is for Bruce as well.
Addressing your your higher leverage leverage went up this past quarter net leverage.
But you alluded to the fact that you know you're probably going to have some more bad debt in some write offs of some receivables going forward as the pandemic starts to bite.
What.
Obviously, you curtailed your development plan, which as you know a sensible thing to do.
What additional steps can you do or what other strategic moves are you thinking about ER to reduce your you know you're above average leverage and that's and that's even before we account for the preferred as well.
If you can walk away from some of your thinking that would be great.
Well first I have to tell you that.
We're very mindful of our above average leverage is always.
But I can tell you that with the other priorities we have right now.
Reducing leverage while it's something that certainly we would love to achieve is not.
First order focus right now.
So with.
The biggest focus our company being making sure that we maximize rent and cash coming in.
Maximizing tenant retention and misery and minimizing capital outflows are you know that takes a tremendous amount of focus considering the overall.
Corruption in our business. So your observation is spot on.
Our leverage is above average.
And it certainly is something that we're mindful oh.
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But right now there's nothing.
Well doing right now.
So lower our leverage obviously, they're loads of things.
In our tool kit I am certainly as we.
Come out of this period, where Ah.
The pandemic.
Oh, the stay at home part of good pandemic experience will largely be resolved aren't in the capital markets reopen Oh, we have some ideas that we could potentially pursue I bet again, I think it would be premature for me to start laying them out right now, but right now again, our biggest folks is.
Really the three things that I outlined one making sure that we maximize cash coming in to making sure that we maximize tenant retention and three making sure that we minimize cash going out the door and those are really the three biggest focuses that we have as an organization right now.
Hi, This is a crisis as a country or as a company.
Fighter skewing, a little bit better than others, you know, we're dealing with a challenge all right and so we're really focused on those three priorities and luxury.
Thinking about how to improve our balance sheet is something that we're going to defer to a point when a again your capital markets have reopened and the world just starting to return back to normal.
Thanks, Bruce maybe one last one from me your you mentioned the stock price decline in and you might do something is that the are you thinking about something like a 10 for one or you know one for 10, I should say a stock split reverse stock split or something to get your stock price backup.
Above a dollar and what is the timing of that.
So floors. This is exclusively triggered by.
I didn't notice we received from the New York stock exchange relating to one of their requirements were listed security being that maintain a share price for 30 day carried over a dollar.
Reminded I quoted Warren Buffett.
During my prepared remarks, and I know Warren Buffett, as often said that ive stock splits don't create value and so certainly we're mindful of that as we think about broadly speaking I know the idea of the stock split so again.
We have until the end of year I think we had put that out an 8-K filing at a week or two ago laying out having your stock exchange recognizes that the downdraft in our stock like another stocks is there is largely almost exclusively a function of.
The pandemic.
So they tend to the period.
By which needs to be resolved until the ended the year.
And we're going to continue to monitor our share price and to the extent that after he start coming out of this period, our share price hasn't recovered I will will start exploring the idea of reverse stock split and I couldn't say, what the ratio would be a better we'd be intended to get our.
Share price up to a level.
That would allow us to satisfy the requirements of the New York stock exchange.
Great. Thanks papers.
Sure no problem.
[noise] Star No further questions left in the queue I would like to turn the floor back over to Mr., Bruce Schanzer for any closing remarks.
Thank you all for dialing into this even call.
I would conclude I once again thanking the members it seems theater for their efforts.
Im humbled at their resilience and can do attitude during this time.
I would alter urge you to he'd my comments regarding supporting your local food pantries, we each have an opportunity to help our neighbors and do something good. During this unprecedented time with that I wish you a good evening and a healthy tomorrow.
This concludes todays teleconference. You may now disconnect your lines at this time. Thank you for your participation have a wonderful day.
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