Q1 2020 Earnings Call
[music].
Ladies and gentlemen, today's conference just gotten to begin shortly please continue to stand by and thank you for your patience again today's conference is scheduled to begin shortly please continue to stand by and thank you for your patience.
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And just paid for other comparable terms.
The companies actual financial condition. The result of operations may vary materially from those contemplated by set forward looking statements discussion of these factors that could cause results to different materially from these forward looking statements are contained in the company's S.C.C. filings, including the company's reports on form 10, K. and 10 Q.
Additionally, just call contain references to certain non gap measures, which we believe are useful and evaluating the company's performance I.
Reconciliation of these measures to the most directly comparable gap measures are included in today's earning to release and supplemental information furnished to the S.C.C. under form A.K.
If you wish to follow along today's with today's earnings released supplemental and earning to call presentation are all available on the Investor Center page of the company's website W.W.W.E.P.R.K.C. Dot com now altering the call over two company President and C.E.O., Greg Silvers.
Thank you Brian.
Good morning, and thank you for joining us on today's first quarter earnings call before we begin on behalf of myself. The E.P.R. board of directors and our entire team I want to express our wishes for everyone's health and safety.
Clearly, we have entered unprecedented times and our focus on experiential assets places is that the tip of disappear.
As the covert 19 pandemic escalated we recognized the need to proactively communicate and have provided several updates on the condition and status as a company.
Through these updates we have highlighted actions will <unk> into ensure strong liquidity and provided contacts around or long term viability illustrated by a liquidity analysis.
Beyond sharing our first quarter results today, we will discuss additional steps we are taking the poor to fire a balance sheet, including suspending our monthly cash dividend common shareholders. After the dividend payable may 15, and the suspension of our share repurchase program. Following the execution of our proposed covenant waiver.
Substantially all of our properties are currently closed due to state and local government action.
As a result, we reported that are tenets in borrowers paid approximately 15% of contractual base rent and mortgage payments in April and we do not expect any significant changes until after operations resume.
Additionally reported that the company has agreed to defer rent and mortgage payments on a month to month basis for substantially all of the customers that did not pay rent for April and today, we will provide further detail regarding future to burrows.
We are proactively working with our customers to evaluate their deferral request and the structure appropriate repayment plans as we gain more clarity into when they can open reopen for business.
In most cases, we believe deferral is appropriate.
No one anticipated revenues going to zero in a matter of three short weeks and continuing vermont's depending upon the business in the restrictions imposed by state and local authorities.
We currently expect that most of these deferrals are recoverable.
Are announcement regarding the Tipperary suspension of our monthly cash dividend to common shareholders and the plan suspension of our share repurchase program was made after careful consideration and a clear understanding of our cash collections relative to our monthly dividends.
While we believe we have ample liquidity due to the actions we have taken we are being prudent in our approach due to the uncertainty of the ultimate length and impact of the pandemic.
It's simply does not make sense to borrow from tomorrow given this the given the uncertainty of this recovery.
It is important to remember that these events however, our transitory.
We will be a strong company when we get to the other side and we remain committed to reasonable leverage leverage levels and a strong balance sheet.
Our tenants enjoyed broad consumer success for decades before this tragedy and they will return.
The question is one pace how quickly, we'll our tenants be able to regain momentum.
Our current expectations are for our properties to begin reopening beginning in may.
However, absent a therapeutic option or a vaccine we believe social distancing will remain the norm and capacities will be limited.
Against this backdrop of challenges I want to reiterate our strong belief in the long term macro trend of experiential properties.
People will come back to our properties with so many of US sheltering at home, we can anticipate incredible demand for us and once again come together with friends and colleagues to share an experience and we own the properties, where we will share those experiences.
Now, let me turn them over to Greg who provide more detail on the portfolio.
Thanks, Greg at the end of the first quarter. Our total investments were approximately 6.7 billion with 371 properties in service and 98, 4% occupied.
During the quarter, our investment spending was 41.9 million and our company level rent coverage was 1.92 times.
Experiential portfolio comprises 285 properties with 48 operators is 98.3% occupied and accounts for nearly 6 billion of our 6.7 billion and total investments we have two properties under development.
Our first quarter spending was entirely in our experiential portfolio completing the acquisition of too strong theaters and spending on experiential bill to suits.
Our education portfolio comprises 86 properties with 16 operators and at the end of the quarter was 100 per cent occupied.
I now want to turn to our view of the reopening and rent payment timelines.
We have ongoing discussions with our major exhibitor partners about their reopened.
At this time, we believe most theaters will reopen around July 1st their plans are naturally subject to the timing of lifting of stay at home orders by individuals the individual state and local authorities and completely dependent on the studio release schedule.
We anticipate social distancing requirements, we'll limited capacity and most theaters, but given typical seat utilization metrics, we anticipate theaters will have sufficient capacity to meet demand.
Exhibition partners have safety and comfort for their employees in gas top of mind, if they come back to the movies, they're diligently developing appropriate health and sanitation measures.
Based on our discussions we anticipate a gradual ramp up with films from the back catalogue likely a discount prices and reduced operating hours until the studios begin releasing new product.
This will allow the exhibitors time to work out their health and sanitation measures and educate guess what new normal practices as they ramped up first run product as life begins to return returned to normal seeing movies on the big screen in a theater will as it always has provide an exciting cost effective entertainment option.
The film slate lines up well for the remainder of 2020 tenant currently scheduled for July 17th will be the first major release, followed by New line on July 24th.
Title scheduled for the remainder of 2020 include Wonder woman 1984, Black widow top gun Maverick and no time to die.
We're bullish on the 2021 film slate, which includes a number of strong offerings avatar matrix for the fast and furious nine spiderman, three ghost Busters afterlife, jungle cruise and M.I. seven.
There's been much press regarding universals comments about shrinking the theatrical release window after <unk> World Tour.
Earlier this week Disney affirmed that they very much believe in the power the theatrical launch program for their big movies. We continue to believe that studios, including Universal will in large part honor the theatrical release window, because it's in their economic self interest to have multiple staggered distribution channels to maximize.
Profitability.
We don't believe the performance of Trolls World Tour represents a permanent shift and that consumers longstanding preference to enjoy movies on the big screen versus home viewing.
Rather in our view it was driven by unprecedented worldwide stay at home orders, which shuttered all theaters and led to families chasing limited entertainment options even at a premium.
We don't draw the conclusion that have families have the option to see <unk> World tour on the big screen, they would've chosen P.D.O.D. over the big screen at these levels.
As noted on our April 21st press release, Despite A.M.C. 500 million of private offering proceeds we determined that was prudent to begin recognizing revenue for M.C. on a cash basis.
As Greg noted in his remarks, we're proactively working with all of our customers, including A.M.C. to evaluate the referral requests and a structure appropriate repayment plans as we gain more clarity into when they can reopen for business and how quickly they can ramp up their operating cash flows.
I also want to spend a minute discussing anticipated reopening schedules for our other major customer groups again, it goes without saying these businesses are subject to ramp up driven by when state and local jurisdictions left restrictions the specifics of each operating platform and operator, including individual markets and.
Circumstances governmental capacity restrictions and most importantly, the time it takes the public to become more and more comfortable with health and sanitation measures.
These projections are based on what relevant jurisdictions are currently communicating and our ongoing discussions with customers as we all know this is a very fluid situation. These can certainly change and they will vary from state to state and city to city.
We expect Jim openings through May.
We expect phase openings and are eating play category through May and June.
We anticipate over 50 per cent of our attractions and cultural operators will be open by July a few attractions could miss all or part of the season due to governmental health and sanitation measures and the feasibility of operating for truncated season.
We anticipate openings and experience will lodging market by market with most if not all opening by July 1st.
We anticipate resorts World Catskills opening July as it's a ground lease we don't anticipate any impact on rent payment.
We don't anticipate any impact to the ski season opening into fourth quarter.
Turning to our education portfolio in many jurisdictions early childhood education schools were not mandated to close but didn't have sufficient enrollment to operate efficiently. We expect early childhood education operators to reopen and stay as stay at home orders are lifted and parents need childcare.
Number of our schools will open an early may and we anticipate a two to six month ramp up based on capacity limitations and typically softer summer months.
Many of our private schools are operating with distance learning, we expect them to reopen in August and September for the fall semester.
Finally, I want to take a moment's outlined what we believe our rent collections will look like at a very high level through the remainder of the year.
We're actively working with our customers to structure appropriate deferral and repayment agreements were in the early innings and learning daily as we go we're in constant communication to understand anticipated reopening and ramp up trajectory and they unique health and sanitation challenges present in each discrete line of business we have.
Strong relationships with our operators and make long term investments we're focused on their long term health.
In general, we anticipate a ramp up of rent and mortgage payments through Q3 to four with the repayment of different amounts commencing and 2021 and in some cases, depending on the differ amount extending beyond 2021.
We expect and our verifying that our customers will continue to pay third party expenses, including ground leases taxes and insurance.
Mark will provide additional color on the revenue recognition and cash collections implications of our perspective rent deferral and repayment agreements and I now turn it over to him for discussion of our financial.
Thank you Greg today, I will discuss our financial performance for the corridor provide a balance sheet and liquidity update and close with the discussion of some of the financial implications of the covert 19 disruption as we move forward.
That's that's always adjusted for the quarter was 97 cents per share versa dollar 36, and the prior year, an F.F.L. for the core there was $1.14 per share compared to $1.38 in the prior year.
Larger than usual difference between F.F. zero and F.F. for the quarter was due to the noncash write offs of straight line rent totaling 12.5 million.
Primarily related to M.C. theaters as previously disclosed.
Please note that the operating results for the first quarter of 2019 related to the public Charter school portfolio, which we sold last year are included in discontinued operations. Those prior peered results included a 5 million dollar termination fee.
[noise] total revenue from continuing operations for the quarter was point 5 million was up point 5 million from prior year due to the revenue associated with new net investments and experiential real estate in revenue related to the car resort that is operated under a traditional read lodging structure, which impacts other income included in total revenue.
As well as other expense.
These increases were offset by the straight line write offs, which were recognized as a reduction of rental revenue.
Note that the Cartwright resort and the Saint Pete, Florida hotels in which we own equity interests and that are also operated on or traditional route lodging structures were shut down as a result of covert 19 for the second half of March.
Additionally, tenant reimbursements included in rental revenue and property operating expense.
Expense each decreased by approximately 2.5 million verse prior year and this was the result of more tenets paying property taxes directly.
Well, you're not grows up the related revenue and expense in such cases.
Finally percentage rents for the quarter totaled 2.8 million.
First 1.4 million and the prior year and they increase was mostly related to our casino ground lease and to a lesser extent certain movie theaters.
Transaction costs were 1.1 million for the quarter compared to 5.1 million and the prior year. The prior year expense primarily related to the Preopening expenses in connection with the car right resort.
At January 1st 2020, we adopted the accounting standard update measurement of credit losses on financial instruments, commonly known as Cecil.
At adoption, we recognize 2.2 million of credit losses on our mortgage notes and notes receivable portfolio through retained earnings.
During the quarter, we recognize an additional 1.2 million of credit loss expense, mostly due to the impact of covert 19 on the model we use to calculate these losses.
No it's moved to our balance sheet in capital markets activities.
[noise], our net debt to gross assets was 38% on a book basis at March 31st on our net debt to adjusted either die ratio was 5.1 times at quarter and.
A quarter and we had total outstanding debt of 3.9 billion of which 3.1.
He and his either fixed rate that are debt that has been fixed or interest rate swaps with a blended coupon of approximately 4.3 million.
Additionally are weighted average debt maturity is approximately six years and we have no scheduled debt maturities until 2022, when only a revolving credit facility matures.
[noise] as we outline at our press release in April we believe we have ample liquidity to see us through the market disruption caused by Coven 19, with 1.1 point 2 billion of unrestricted cash on hand at quarter N.
And the temporary suspension of our monthly common dividend that Greg discussed we have multiple years of available cash on on hand, even if they april level of run an interest collections were to persist.
[noise] subsequent to the end of the first quarter, we purchase approximately 1 million shares for 20.4 million of 150 million common share repurchase program authorized.
But but as I will discuss later in my comments there can be no assurance that this program will be fully executed.
Because of the meeting meaningful impact the cover 19 pandemic has had on our customers I want to take a moment to discuss how are we intend to recognize revenue going forward as well as provide the level of cash collections, we anticipate over the remainder of 2020.
As we move into the second quarter for those tenants in which we provide rent deferrals related to coven 19 disruption we plan to elect not to to treat such deferrals as least modifications has allowed per recent guidance from the <unk>. Instead, we will treat such rent deferrals in one of two ways for for those tennessean in which full payment of differ.
Rent is deemed probable that 75 per cent of greater.
We will record rental revenue and accounts receivable.
For those tenants, where a collection of differed rents is not deem probable we will treat such differed rents is variable payments and only recognize such deferrals us rental revenue when the caches received.
As an example for tenants in the second quarter to quarter that receive a differ of all minimum rents for the second quarter no such minimum runs we recognize and rental rubbing on the second quarter and these differed rest will be recognized and future periods earnings only when and if collected.
Note that if a rent concession agreement related to cover 19 disruption period is consummated with a tenant during the quarter and we feel that such adjusted run it's probable of collection.
Will recognize rental revenue at the agreed upon right level.
Similarly, any <unk> contractual abatements of rent, we recognize in the period to which they relate.
For tenants were collection of rents over the at least term beyond the period impacted by the covert 19 disruption is not dean probable.
Cash accounting will be applied.
Finally in some limited cases, where at least changes are more significant in nature, we may treat such changes as least modifications.
For mortgages interest is expected to be fully recognized her in the coven 19 disruption period, and then deferrals reflected in interest receivable, whereas an increase of the mortgage balance do upon maturity.
This treatment is similar to the first category of Detroit World treatment I discussed for tenants were all differ rents are expected to be collected.
The slide you see illustrates the expected percentage of total pre coven contractual cash revenue that we expect to recognize and our financial statements for the last nine months of 2020 of 75% to 85% and full year 2020 of 80% to 90% respectively.
Using the revenue recognition methodology that I just described.
We have also provided the expected percentage, we expect to collect of such contractual cash revenue in the same periods of 35% to 45% and 50% to 60% respectively with the differences from the revenue recognition percentages related to receivables, we expect to have on our books that you're adding and collect thereafter.
Well each of these percentages are subject to changes new information becomes available and deferral agreements are finalized we thought it'd be helpful to show you. How we currently see this information over the remainder of the year.
Because the accounting I just walk through causes some pressure on near term quarterly results and the fact that certain financial covenants on our bank credit facilities and private placement notes are calculated based on the most recent quarterly net operating income we expect that we will not be in technical compliance, which will be non payment related.
With such covenants at the end of the second quarter. Accordingly, we are in discussions with our lenders and private placement node holders to obtain assist a temporary suspension or modification of these covenants.
Some of the <unk> suspended financial covenants expected to extend through the first quarter of 2021.
We also determined that we will temporarily suspend or monthly cash dividend to comment shareholders. After the common share dividend payable on may 15th.
Except as may be necessary to maintain reach status and to not a income tax.
And we will suspend the share repurchase program upon effective date of the covenant modification agreements agreements, which is expected to occur. The next 30 days.
Finally, as previously announced due to the uncertainties created by that covert 19 disruption, we're not providing any forward earnings guides.
Not what that I'll turn it back over to Greg for is closing remarks. Thank you Mark with that why don't we just open it up for questions.
Thank you.
Ladies and gentlemen easily have a question at this time, please crushed the star than the one key on your telephone.
Joel Your question. Please press the pound key.
Stamp all we can probably CUNY roster.
And the first question comes in a lot of Nick Joseph Let's see you manage now but.
Yeah.
Mm.
Yeah.
Yeah.
Okay.
We were not here near question.
[noise] Nick your line is now open.
Mhm.
Oh, let's move to Nick your line isn't the open.
<unk> you can you hear me.
Yeah, Yeah weekend.
Hmm, Okay, perfect I'm not sure what happened I wasn't on me and.
I was just saying I appreciate all the color on the disclosure that you guys are provided and then cherished what percentage of your 10 and a half received some sort of government support either through the P.P.P. or any other program.
<unk>, we have it's Greg we have had some but it's limited most of our tenants are are bigger r. and exceed the 500 employee limit and therefore are are not clickable to them given the the the size of their operations.
Okay.
I'm, just thinking about kind of <unk> recognize.
The idea is that many of these.
Ah properties and product types, well, well reopen and hopefully go back to somewhat normalcy over the over the coming months and years you know when you think about the opportunity to re purposes, either how do you think about that ability you know and any kind of historical examples would be helpful.
Sure and and again I think Nick.
As you said, we we we think these will go back I mean, we are.
We are the largest landlord to the three largest operators and so our properties are integral to their two there's to their ongoing success, but fundamentally these are big boxes. So <unk> again, they they're they're.
There are big boxes with a predominantly extra large size of acreage. So they they they are pretty easy to to transform into.
Who any matter of things, we've we've taken a weaned off and transform that to another operation is about a million dollars to to bifurcate that we we then had you know excess parking that we've sold for.
Somewhere the neighborhood afford $8 million of the access parking so.
Yeah. The actual the economics can work very well depending upon the the jurisdiction that you're in.
<unk>.
Thank you and our next question comes from the line of causing meetings with Raymond James Caroline is now.
Hey, good morning.
First question for me just on the Covenant discussions you seem to reference that you expected an agreement to be effective within the next 30 days and potentially template that leads to the first quarter of next year.
Lab raid on what terms are being modified where negotiation stand right now and and to clarify with the terms of the waiver maybe talk about your ability to pay dividends <unk> <unk> is that with the entire duration or just maybe elaborate a little bit more on again, just the way the covenant sketching Stan.
Yeah sure. This is mark I I think first to point out on the bank covenants a lot of those are quarterly driven so you can it can imagine the second quarter, where we're doing some of these deferrals and for example in the case of of A.M.C. not recognizing.
Cash income maybe other than ground leases and can it creates a problem with respect to those covenants that are calculated in that way and really what we're seeking is.
Waivers related to to to leverage covenants kind of total that the total asset value and again that <unk> that asset values are kind of a quarterly kept.
Calculation and also we have a a maximum of unsecured that unencumber asset values test. So both of those we will we will get waivers for it then there's cut to coverage test kind of six charge coverage and unsecured interest coverage, which will also seek waivers for <unk>. We'll go through 21 on a couple of these covenants we don't.
Don't anticipate needing that but kinda just planning for any downside. We we think will be covered so as far as discussions were in discussions with both groups and that's our bank credit facility that holds our line of credit in our term loan as well as our private placement holders and in both cases, we need a majority approval and I will say we have you know we have a term sheet with.
Our with our lead banks that we've out that we have they but they have approved we've held meetings with our top banks that take that that comprise more than 50 per cent of our credit facility. Those discussions are going very well. So we don't we don't anticipate any issues getting the the waiver done and as far as.
The other issues you mentioned, we agreed as part of that process to to suspend our dividend with our liquidity I think the bank might have been open to some form of dividend, but we thought it didn't make sense to borrow to pay the dividend it wouldn't want to come out on the other side of this with you know.
<unk>, you know low leverage and being a <unk> better position the stock buyback will continue through the covenant closing or the covenant modification closing like we said like a set of my comments and you just mentioned we expect that the next 30 days.
Okay I'll <unk> also.
Cure final questionnaire again, if things moderate faster better than than we projecting we have the ability to terminate this waiver or we will have the ability to terminated at any time, however, again.
You you you've heard listen I think there's a lot of discussion that's going on about how this is going to go forward and I I will tell you are crystal ball is is murky at best we're working with all our operators, but we had built a model that says we need to be prepared for we standing in this.
Social distancing environment until there's a therapeutic option or a vaccine.
Because I I think there's a general discussion out there that that people that the thing that is keeping people back his government restriction that as soon as they open up the doors people are gonna come.
Driving and we do not adhere to that we we think there's there is an aspect of this that these any businesses that is that our communal.
The actual determined enough that will be the customers. They will make the decisions whether they're willing to to be part of these activities and so we build a modeled it said hey, let's prepare for the worst if things get better we can always change that and and and react to that but.
But if we're prepared to handle the worse than we know we're going to come out the other side, we're going to have good businesses. We have good properties, we're going to be we're we're going to be fine, it's just getting across that desert.
Got it and then maybe in a in that same line of thinking they're recognizing you have agreed to differ on a month to month basis for now Greg you just maybe elaborate on how terrible though rent levels were that were established again <unk> pandemic and how they're all those will be going forward as well as just.
Ability of your tent ultimately <unk> that that differed rent implicit in some of your comments with the recognition that summary, possibly going to lower and our their cases, where it just makes sense now to go ahead and switched to some sort of percentage rent up or something it's just given that there is likely to be yeah. Rant here of a business is starting to open backup.
I I actually think calling your debt on I I think they're very much could be a ramp period, where it's percentage rent, but again that will be against the contractual rent. Yeah. You know that we'd be a credit against that I. I think is mark said in his comments, we think and our belief is that most of these people will or most of our.
Customers will be able to pay this fact, it's just a period of over what time and what security do we get for that a lot of variety of of looking looking through that and solutions will be different meaning that if if somebody's closed for two months and they're back up or three months, it's going to be different than if somebody's closed.
For eight months or limited for eight months. So I I think we'll take a a look at all of those kind of options, but clearly <unk> by by the information we're showing you we think most.
These are recoverable, we've we've made a decision with regard to H.M.C. and given they're they're leveraging the discussions that we're going on that it may it was prudent for us to be more conservative with them.
I think that doesn't mean that we don't think we'll recover those balances. It's just from an accounting standpoint, when we say, there's a 75% chance of a 90 per cent recovery when there's a lot of discussion out into market about them at least considering restructuring it's hard for us to make an argument to to the auditors that you don't have some level.
Risk and the most conservative thing to do to protect ourselves and our investors is to go to a cash basis. So I wouldn't interpret the fact that we put them on a cash basis that we think we're not going to recover any of this deferral. It's just a matter of us being prudent about it being conservative and giving us flexibility.
To deal with it once we know what levels were.
Thank you.
There next question comes from a lot of Brian Hawthorne with our V.C. capital markets or B.C. capital markets on is now.
Hi, Good morning does so.
If you were to trip on that you don't come to agreement is that just to make parents covenant or is there something else that it could be.
On the the bank facility in private placement those are not incurrence covering so those are those are coverage metrics. We don't anticipate a trip in any of the bond covenants, which three of the for those are incurrence related.
Yeah.
Okay.
Then.
That have.
<unk> you know like backed up on full social defaulted as close to the whole thing I guess, what do you you know tenants out there you go with a little smaller like that that is concerned about and I mean, I guess what are your you know what are your kind of expectations for personal smaller tenants that do.
Bankrupt or have some disruption significant disruptive.
I mean, clearly the numbers that were showing you today reflect our best belief in in these <unk>, even even when you look at US Cinemax filing you got to go back and say that was probably driven by their their wanting to get out of a transaction that they.
Had previously committed to we have to we only have two theaters with them. So we don't we again on all of these what we did is we went down through a tenant by tenant basis, probably through our <unk> 30 to 40 tenets, which are gonna get well down significantly below 1% and.
<unk> complete review of every one of these so the numbers that you that we're talking about today reflect our best believe as to what occurs it doesn't mean, there's not some of those with with potentially one of the names that you mentioned, where there could have disruption, but those numbers reflect that already.
Okay.
They get.
Thank you. Thank you.
Thank you.
I don't next question comes from a line of <unk> airline is now.
A good morning, guys, Greg I think the market had been expecting the common common dividends suspension, but given the lack of near term cash flow into prospect it could be a while before your back to anything approaching normal in terms of cash rent collections. What are you were in the boards thoughts on the payment or the prefer dividends and is there any debt covenants.
Either now or in the modifications that would cause you to need to put those dividends into a rears and any other reason if not while you wouldn't use your liquidity to continue to pay those.
We let's answer it first Rob we have no expectations that we will not pay our prefers we anticipate pain are prefers our interest the the only thing that if you go back to our liquidity analysis in the way that we broke it out there you saw that we had more even that at zero levels yeah.
<unk> of liquidity to pay those obligations. So we anticipate fully paying those obligations.
Okay, nothing in the competence either today or in the modifications that would that would interact that.
Okay.
And that.
Mark what's the difference in terms of A.M.C. versus Regal instead of Mark in terms of deciding to move to the the cash revenue recognition is adjusted A.M.C. you know at least for awhile, if not still today appear closer to what bankruptcy filing or was or something else that sort of.
How did you delineate between A.M.C. in Regal cinema, Mark in terms of revenue recognition.
So I think kind of heading into the this crisis or this covert period A.M.C. had higher leverage than those others and so they they came into it like with a higher leverage balance sheet and then what the disruption. They went out and did raise $500 million. So that provides them liquidity through what they're saying is through Thanksgiving.
But we thought just given the the whole credit profile was different than other tennis that merited, putting them on a cash basis and just was prudent to recognize that just when we get the cash.
Okay and then just last one for me early how it early childhood education mean, when you sit here today and and having looked at the financials of even having gone through some issues in the portfolio over the last year. So if some of these operators aren't able to come back and survive are there other tenants out there that.
Move in and take over the space or is it basically on you know more regional and multi location basis or is it really is then going to wind up being if you wind up have any hiccups there that it's really going to wind up being asked that by a set you know small operator by small operator to replace them I I I think.
<unk>, it's it's more the former than the latter part of a one of the benefits of what we did with migrating our portfolio. The C.L.A. portfolio to cram as we've had a great opportunity to be talking with a lot of different operators and there were many operators.
We're part of that process. So I I think are are playing to let them. If for some reason, which right now clearly we don't anticipate but for some reason there was something there there was demand for these facilities before we think there will be demand for them and we have the the short list of people who have expressed demand for those.
Okay.
Thanks, guys appreciate it.
Thanks.
Thank you.
There next question comes on the line Kim's stealing your.
Your line.
Yeah.
Dirty line is now open.
<unk>.
<unk>.
Yes, yes.
Oh, okay.
<unk>.
<unk> go back your hi, he goes back to your comments I I missed that actually about some of the conversation is that you and and maybe M.C. and the movie production studios are having.
It just seems like if there is one more production studio.
That follows universals mentality.
Dual releasing.
I'll take a good cars.
Some severe problems so what's the latest.
You have you can make this week.
Yeah, keeping it's a it's an interesting you got some feedback, but which which what we find is really interesting is you say if there's one more studio does it do you know is needs doing it with artemus file. So there are people who are doing is the better thing is to think at that nearly 80% or 90% of all move.
These are getting move to next year.
Even universal any movie that was not within two weeks of release and did not and has an expectation of over $40 million a box office got moved.
Universal even moved them everybody everybody moved them. So the idea that we're taking a trolls world tour movie for which the dollars, which again I think it's very interesting even when we look at that we're talking about a movie that made $100 million.
Digital which represents you know 5 million downloads at $20.
And comparing that to North America.
And the first three weeks when the reality is troll. The original movie made $350 million in its box office worldwide.
So I I think to a certain degree were comparing apples and oranges you had universal already backup from say, they're they're they were already started backing up and saying they're going to support the box office.
All the every studio that has a a film title that they think has.
[noise] box office potential already moved to later in the year or 2021, yet we use the.
10% to prove a point rather than the 90% that actually went to the other direction.
[noise]. Thank you.
Thank you went on next question comes from the line of crank Mailman Keybank.
Thanks, guys <unk> could you just give us the flavor of who actually did pay who's in the 15%.
Well again, Craig we were not naming individual tennis, but let me say in the big picture as as Greg Kinda mentioned I mean, there are certain of our tenets that are open and operating or have finished their season and so those are a likely group of people who are paying the people who are shut down.
The people who are not so again just in the Big picture. If you think of ski ski was done pretty much for the year and we <unk>, we collect generally the entire year during the operating season education is operating as some some capacity.
So that that just generally gives you a feel for fun.
Okay and do the water parks, just don't they pay into escrow after the season with those all say to you.
They do and and so you could have some those in there, but we've also tried to forecast going forward, they're about to go into their productive season. So the numbers that that mark put forth kind of.
Are evidence of our belief or our our understanding and what we think will occur for the rest of the year.
Okay.
You guys you know Flagday M.C. as an example, they raise 500 million bucks it clearly of the cash to pay it I mean as you guys are having these conversations how many of your tenants actually have the cash to pay it but are kind of hoarding it because of the uncertainty about reopening in the in the pace every opening and so they want to make sure they're viable versus you know paying near term extend.
<unk> and just how that would.
Impacts their ability to kinda repaying in for a quarter that time period or whatever the case may be.
I actually think that's 100% correct I think most are in that category and the in the sense that there is not a yet a great understanding of how long. This is going to take what levels that we're going to be able to operate in what the public response is going to.
Beat to this and so I I think there are a a lotta people who are just trying to figure out and say.
Oh is this really are we going to see some normalize levels in the fall or are we going to be as we said into 2021, when we hopefully have a vaccine for this and I and I think that it's what's driving and our and our discussions are on a lot of these.
With a with almost all of our tennis.
Okay and.
Just theaters in particular you know.
Just give us a flavor you know no one's just start calling for bankruptcy, but could you just give us. The since you guys are you know the largest landlord to a lot of these guys just the quality of the theaters that you guys zone and maybe the the coverages of those versus maybe others in their system and just there you know willingness to affirm those leases and bank.
See versus rejects I I know, it's a tough question, but just some kind of thoughts around the quality of of yours versus maybe others. They may have in the system.
Sure I and and like I said without any specific site as I said before I think it's important to remember where that we're the largest landlord for all three of those guys. So I I think our portfolio is very important to them and very <unk> to their success that doesn't mean that we haven't had theaters that we've I'd open for 20 years that may.
The Red So you have some level of exposure on those but we are predominantly like I said in major markets with these operators and they're they're very important kinda to them. So I I again, it I can't say that if you had a restructuring you wouldn't have some level of risk I think they.
Idea that this is you know as draconian as I've seen some estimates I think are way overstated I mean, you you know.
We will have to see but you know if you break things out into courthouse could we have tend to tend to 15, 20% in the lower cortiles, yes, but it's not nearly as draconian as.
What people think that Greg I don't know, what's going to say most of our theaters played a pretty substantial audiences. You know from 300 to 500000 people. So they aren't good trade areas.
And then just one last one for market the the the.
The the castle Das. This is very helpful. Could you just give us a sense of where leverage to go near term and some of these stress cases, and where you know it could trend back to assuming you know these are money. Good on the most of these the for agreements for him to 21.
Yeah, obviously, if you're if you're doing a debt to either dot calculation like we typically do on a quarterly basis and the but does a quarter times four and their stress in the quarter you get some odd metrics for a d., but in the short run.
I think the the <unk>, we have model this out and we position ourselves, particularly with the dividend suspension that we come out of this right in range, where where we blew historically been kinda in that for six to five six level as the way we see it sort of in our Bayes case, and that's kind of consistent with like I said, we've always been inconsistent with a investment grade metrics that leaving.
Enjoyed for a long time.
Okay. Thanks, guys.
<unk>.
Thank you.
And as a reminder, ladies and gentlemen task question to meet the press Star one on your telephone into removed. Your question. Please press the pound key.
And the next question comes from a lot of John <unk>, My soccer with Ladenberg tall.
[noise] [noise] in money.
Yes, that's a little bit about the ski ski tenants any.
<unk> basically throw up their cash reserves that they're kind of you know you guys are entitled to.
Yeah, I mean, what we said is generally speaking notes that's the way they work and what we're saying is without calling out any tenants specific get who's pay that is one of the areas. What I said was those areas where their season was effectively over we're a majority of our cash pain and then those that are.
Operating so that your assumptions not entirely inaccurate.
But maybe some to have a little more of kind of April March biased might have had a little bit of a struggle to kind of <unk> that's gross.
Not really but that that again like I said I don't want to talk about specific tenants, but that's that it's if there's anything is insignificant in there I can even add to that we received escrow payments even in the month of April yeah.
[laughter] very helpful and then.
The thing ever need any kind of amusements and what's in a positive case scenario, where where things maybe accelerated in terms of opening and in customer visits in what point <unk>.
Those property you need to open in Tennessee accelerated vegetation in order to kind of cover their ass grows on the back in the winter months <unk> a lot of variables.
Yeah, where would you can't even see openings to kind of maybe get more comfortable which then potentially being you know cash rent payers again.
And and I'll, let Greg Zimmerman at this but I I think it's gonna be geography dependent if you're operating a water park in taxes in Arizona in California, again, not as not as whether dependent we haven't water park in a while so again not as whether dependent so I I think it will.
Actually.
The other aspect that we'll throw into this that just say understand is probably when school starts and and if schools are starting and or their delayed or whatever so I I think <unk>. You know most of these are going to try to open his grades that in the main June time frame and try to see how those things go.
It will be jurisdiction by jurisdiction and we show we'll see.
And the only thing I would add is obviously those are less seasonality they have the heart or it'll be to make money. So as the seasons gets truncated that'll be the challenge. So the earlier they open the better.
[laughter] and then how're you kind of tracking your tenants compliance with their obligation to pay operating expenses, you, particularly real estate taxes.
Is there any case scenario, where you might poke a property tax acquittal charge before the tenant default just given the current environment.
Again, we have an attractive taxes are actually pretty easy because we can track yeah, you know the actual payments and modern to that insurance, depending upon the insurance certificate that you make the insurance is noncancelable without notice. So we'll get noticed a upon that we've contacted all of our ground less source and told them.
<unk> notify us if if they haven't been pain. So we've got a a pretty good system. We believe to kinda no. If there's anything going on or at the first hint of something and and right now we have good compliance with that.
Along the way the only thing dealing what else <unk>. We're in real time conversation with these tenants every single day and reminding them they need to do that and working through those issues. So one of the benefits we have of not having massive amount of tenants as we can be in communication with people yeah and the other thing John I'd say is this is the river.
Her side of the P.P.P., when we're dealing with bars or tennis their insurance programs are generally broad based across their entire portfolio. So it's not the little really little guys that we're dealing with it just to reiterate what Greg Zimmerman said in general even where we have deferral agreements being negotiated were generally require.
Bring them to keep paying those can cam payments and.
Real estate taxes and ground leases. So we think that'll continue we've <unk> and we're monitoring that as Greg said.
Very helpful. And then one last kind of quick detail one with regards to kinda cart right I guess, what kind of the the cash burn rate there well it shut down.
Oh, probably about a million and a half a quarter.
Okay. That's it for me. Thank you guys very much.
Yeah.
Thank you and as a reminder, ladies and gentlemen to ask a question. Please <unk> one on your telephone and withdraw your question. Please press the pound key please stand by we can <unk>.
[noise]. There next question comes from the line up <unk> no.
Thanks.
<unk> when you guys are negotiating with 10.
What type of about an actual.
Benefits are you trying to structure and and especially if things worse.
Are you considering warrants on other type of beneficial hi, financial things that you can kinda ask for.
It it's a great question I I think post most of ours right now are discussions. It's it's like you say things change depending upon how long someone's going to take the repaid so the easy things that we're talking about is additional security with the F.F. any of our <unk> properties, which was there.
Investment, which goes to the ability that if you ever have a problem you can port that entire property without any disruption. So I think all of those things go into to to play I I think it's.
For most of our for most of our tenets. We're having all of these discussions even to include you know if they have properties on their balance sheet do we take properties and payment or brand. So all of these discussions are alive in going on but what you said is correct. What it really is is a function of is how long.
Oh, how great is this what's the time payment for what's the security what's the what's the reasonableness of the the repayment period.
Okay. Thank you guys disclosed by just put them we understand it but in April what is your cash burn rate.
And <unk>, how that sorry to improve.
Overtime.
According to your schedule they put out there.
Yeah. It was 23 million a month and I think that's what it will be for awhile. We we we kind of projected each of those things that you know G.G.N.A. property expenses, we included losses that Cartwright and or Saint Petersburg property, while we're while they're shut down.
<unk> and just a a mendo thing I said earlier, the the 1.5 million dollar burn rate that I mentioned for cart right for the quarter.
1.5 million per month that includes Cartwright and Saint Petersburg, So I should amend when I said, there it's 1.5 million per month for both and we've just projected while they're shut down that's the run right for that so 23 million. We think is is is a run rate that that it's good for you know in the near term and really what we think are <unk>.
Burn rate is now we're starting to marks point on that keeping if those properties open up and start to do better that can be something that improves but I think most of the other things. We think are tenants are covering these were no. These pens are companies. The report expensive. So it really is interest kind of G.N.A. prefer yeah cause in that number even we have our us hanging around.
<unk> and so forth and as Greg said, we just set of are getting zero you know what could that be so that's the 23 million as Greg mentioned that if we expected to be better than that.
As we as we get paid for some some of those things.
Okay. Thank you bye.
Thanksgiving excuse me.
Thank you and I'm next question comes from Milan Anthony.
Loan with J.P. Morgan you're lodged open.
Okay. Thank you.
I joined the way it so apologies if if this was addressed but can you talk about.
The the distribution of either to our coverage, particularly in the theaters <unk> like how many <unk>, we're maybe out wind or below Pursat. The average were significantly apart just the general <unk>.
You know how that that distribution worked.
Yeah, and Tony we we don't talk about generally I I mean, I I think what is what's reasonable to think is that we we do have a bell curve operating <unk>. What we said was of of our theater, what is that that could potentially be below where ER coverages below where we'd like them could we.
You know tend to 20 per cent of our overall theater portfolio. Yeah. We think that's that's reasonable, but that's spreading it across a a lot of operators. So I think we feel.
A really good about our portfolio relative to that that these are the theaters that that these operators us being their largest landlord R.R.T.N.N. triple to their success.
And you do you have any just brought her stats on on where you're theaters. Your brain you know either percentile wise or otherwise you're just nationally in terms of pre covert box office take.
Yeah, I mean again are theaters are going to tend to be at the higher in on a revenue base is just because as I said, we're in major metropolitan areas.
Either on a on a revenue per screen or a total box office cells, they're going to be predominantly in the top 1000.
<unk> top 500 top 100.
With Greg I don't know that yeah again, it just goes <unk> most of our theaters played a 300 to 500000 customers and I think that's the real metric the number of bodies that are buying tickets.
Okay, and then you you put in your slide the expectation for like gap revenue recognition.
And I think you touched on a little bit about just.
You know how though the the the collection of branch May play out or in that there's a lot of uncertainty there but.
Does does in fact that you expect to recognize gap you know pretty consistent with what you already do it's just that you're just going away for the for rent to come in or do you anticipate you know percentage rent type situations for some period of time and then maybe make up those are the balance the lease or is there any early read or.
<unk>.
Yeah I think that's your your your questions right on Tony is first of all we probably will have these agreements may have some level of partial contractual or percentage rents as we ramp up and go through this and that's again that would be a credit against kind of what the contractual where it was and then it's.
Of figuring out okay, now that we know that that that the the full amount is x. what is like period of time.
To to get recovery of that what is the right period of incremental security to make sure that we're we're we're looking at that correct and and so I I think what we're what we're saying right now we were not a group who rushed out and said I'm going to sign up an agreement that says you get into for all you pay it back in three months, because we are not <unk>, we did not.
Leave at the time that this was a three month issue that we think we need to figure out.
End of where this is going we think it will come back once we get to the other side with a therapeutic or a vaccine, but we needed to be able to identify what is the sizes are for what's the best way to get that back quarter or various options and looking at at at monetizing that.
So you're a question is that.
Okay and then just.
Last question are there any parts of the portfolio that you think you're going to end up having to operate either you know on your own or for you know swap out operators.
I mean, clearly I think when we showed that we're we're treating kind of 80, 590% of our revenues as differing select we're we're not anticipating that there's.
Sections, our our whole groups of our our properties that we believe that.
Okay, great. Thank you.
Thank you.
Thank you.
[noise] or last question as well as a follow up question comes from a lot of common means with Raymond James <unk> now.
<unk>. Thank you just too quick ball for me just first bigger picture Oh, just as we go forward what are some adjustments you're working with your tend to make at your property make the maybe better aligned with social distancing requirements and kind of it that's the new standard and and how do you think about applying some of your capital on that front I just <unk>.
That would be helpful.
Yeah, <unk> I mean, clearly we're trying to we're trying to be a conduit for various groups to be understanding of best practices and what people in in one area of Konger get entertainment or do we were sharing that information. We don't look at this as a competitive advantage. We look at there's a way to make all customers they'll say aye aye.
Wouldn't see us deployed capital to do that again I I think.
At least now these are not capital intensive as much as they are figuring out health safety, you know mask or there are people going to wear a mask sanitation and <unk> hand, sanitizers. How many seats. Apart are you going to put people I think <unk>, you know plexiglass at the counters or things like.
It's not a lot of capital intensive, but it is trying to figure out.
Human nature side of this what is it where people feel safe what did they need to have and and what you had to have in place and the good thing about our properties is there's a lot of them that are that are <unk> and so we are generally grouping those into indoor congregate and things that are outdoor because outdoor has a different person.
Given people may feel safer given that the fact that they're outdoor than an indoor and see what Greg and his team in our asset management team or or trying to use that kind of best practices and share that information across the entire spectrum.
Got it Okay, and then Mark just on the negotiations just to clarify <unk>. Some specific progress on the bank or <unk>, but just how are the pilot, but no negotiation going on a comparative basis, just going to clarify that from my other question, Yeah, I I would say we've had discussions with.
Or private placement group, we've had discussions with the largest holder.
They they they travel a little bit of the timing of of the Bank group, but we expect a you know a similar outcome that we'll we'll get that done as well that that number is obviously a lot smaller number 340 million, whereas the obviously the bank group side is the you know there's a 750 million outstanding plus the 400 million dollar term loan so.
Our priority was really first on them and basically the private placement group feeds off.
Oh, well whatever the bank decides essentially and and then we'll we'll get that piece done as well, but we expect that all to be wrapped up in the next 30 days.
[noise] perfect thinking about.
Thank you thank you call.
Thank you.
And does does conclude today's question answer session.
It's on the conference back to Greg filters for further March.
Well. Thank you all for joining us today and the last comment I was maybe it was a stay safe and we look forward to talk into your next quarter. Thank you. Thank you. Thank you.
Thank you, ladies and gentlemen, <unk> today's conference call. Thank you for your participation and you may now disconnect.
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