Q3 2020 Weingarten Realty Investors Earnings Call

All parties. Please standby your capex will be good momentarily once again, please stand by the Weingarten Realty Inc. third quarter 2020 earnings call will begin momentarily. Thank you.

[music].

Good morning, and welcome to the Weingarten Realty Inc. third quarter 2020 earnings call for October 29, 2020, but it's Brandon and I'll be your operator for today at this time all participants are in a listen only mode. Later, we will conduct a question and answer session during which you could delve star one if you ask a question. Please note this call.

Which is being recorded.

I'll turn it over to Michelle Wiggs, Michelle you may begin.

Good morning, and welcome to our third quarter 2020 Conference call. Joining me today is drew Alexander Jitendra, Steve Richter, Joe Shafer as a reminder, certain statements made during the course of this call are forward looking statements within the meaning of the private Securities Litigation Reform Act.

Eight months are based on managements current expectations and are subject to uncertainty and changes in circumstances Act.

Actual results could differ materially from those projected in such forward looking statements due to a variety of factors more information about these factors is contained in the company's SEC filings.

Also during this conference call management May make reference to certain non-GAAP financial measures such as funds from operations or at that though that's for ne rate, which we believe help analysts and investors to better understand weingartens operating results.

Conciliation to these non-GAAP financial measures is available in our supplemental information package located under the Investor Relations tab of our website I will now turn the call over to draw it Sander.

Thank you Michelle and thanks to all of you for joining us I want to stress that our first priority continues to be the safety well being of our associates and stakeholders in the broader community.

Uh huh.

Like we said in our operating results continue to improve.

Cash collections continue to trend favorably impressed with the production of our leasing team.

Precedent economic environment.

Well there are certainly many challenges the multiyear transformation of our portfolio has made the road ahead easier.

Transformation resulted in a higher percentage of grocery anchored centers and much improved 10 basis. Most importantly, a much stronger balance sheet little near term debt.

We closed $64 million of dispositions in the quarter, including or less property in the state of Utah further focusing our portfolio.

Well the timing of the recovery is uncertain over 152 million 2020 dispositions year to date further strengthens our liquidity position. In addition to further improving the overall quality of our portfolio.

In an earlier press release, we announced a dividend of 18 cents per share for the third quarter. Additionally, given or dispositions. It is very likely that we will also pay a special dividend.

Yes.

We continue to carefully monitor our cash flow liquidity and adjusted dividend as appropriate.

Finally, all three of our large new development projects are progressing nicely.

Minimal additional investment for completion.

It's going well.

[laughter] retail is 93% leased and residential was 92%.

With Salix residential is currently 37%.

Retail 80 recently very.

We're very excited that Harris teeter.

Okay.

With an opening up their upscale supermarkets expected next.

That's the Driscoll in Houston the residential construction is nearly complete recently opened or onsite office already 25% we see.

Great project, which will create good long term shareholder value.

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Thanks, Great core FFO for the quarter ended September 30, 2020 was 44 cents per share compared to 34 cents per share for the second quarter.

53 cents per share for the same quarter of the prior year.

The increase over the prior quarter as a result of a significant reduction in bad debt expense from $19.3 million or 15 cents a share in the second quarter to 1.4 million or a penny a share in the current quarter.

In the first and second quarters at 2020, we designated the majority of the receivables from our watch list tenants uncollectible, and therefore establish reserves against them and moved them to the cash basis accounting.

So we don't have as much bad debt for GAAP purposes, given it was never a crew.

We have also provided additional bad debt disclosure on page 41, and 42 of our supplemental.

Further a reconciliation of net income to core at that though is included in our press release.

With respect to our balance sheet, we have full availability under our $500 million revolving credit facility and about 13 million of excess cash on hand.

With no material maturities until 2020, twos and limited new development funding obligations. We have we will have adequate liquidity after the payment of dividends to comfortably sustain and grow operations Johnny.

Thanks, Steve Good morning to everyone on the call.

We're pleased with the results we posted this quarter.

We have a motivated team of associates and a strong diversified transport portfolio.

Were 60% of our portfolio consist of essential tenet.

Today, 80% of our annual base rent comes from shopping centers with a supermarket component.

Pre pandemic those supermarkets average very strong sales of $712 per square foot significantly above the national average that's.

That translates to an average of over 100000 customers a month visiting our properties.

So many supermarkets have reported since March.

We expect current sales have increased nicely.

Well, we still have a lot of work to do cash collections have improved significantly as our tenants have reopened.

Today, the vast majority about 99% of our retailers are open.

And for the third quarter, we collected 90% cash rent that was due.

This is substantial improvement over the 82% we collected in the second quarter.

October is trending slightly ahead of the last couple of months.

This quarter, we did adjust the denominator to exclude termination.

That adjustment accounted for about 2%.

For the third quarter, we have accounted for 95% of the build rents do.

Last quarter, we talked about strategic deferrals.

Which part with major tenants, where we've been able to support their cash flow, while negotiating beneficial amendments that will help weingarten in the future.

This includes the spending co tenancy loosening exclusives or restrictions were allowing future redevelopment.

Almost 40% of our deferrals this quarter or strategic deferrals we've.

We feel strongly these will be repaid.

It's also worth noting deferrals are down from 14% in the second quarter to only 4% in the third quarter.

During the third quarter Stein Mart filed for liquidation we.

We have six Stein Mart and expect all to close in the fourth quarter.

Those leases represent $1.3 million in annual base rent.

Your average rent is $7.70 per square foot. So that's replaceable.

We're also working on letters of intent for three of those locations.

Tailored brands in a Siena also filed for bankruptcy in the quarter.

We started the quarter with Tennessee into stores and two of those were rejected yet.

We had seven tailored brands stores and three of those have been terminated.

Each of these tenants were designated as uncollectible last quarter. So they were fully reserved.

We also remain particularly concerned about large health clubs theaters and large high in restaurants.

Fortunately our exposure to these tenets is small.

Combined these three categories for about 4% of our annual base rent.

Now, let's move to some current quarter operating metrics that are more positive.

We're very encouraged to see leasing production improving.

During the quarter, we executed 59, new leases for almost $4 million in base minimum rent.

Still below historical production, but more than double the production for last quarter.

September production was about the same as a year ago.

In the quarter, we signed leases with medical tenants restaurants home furnishings and services.

We've got a good pipeline.

Executing leases that have been on hold for months and I think production will continue to improve.

Rent growth for the quarter was a positive 5.5%.

An 11% increase for new leases and 4% for renewals.

It's likely future periods could be more challenging as we compete with other properties, but the quality of our properties will give us an advantage.

Same property NOI was down 8.1% for the quarter.

Much of the negative impact is related to the bad debts, Steve discussed earlier.

Base minimum rent, which is the most significant component of same property NOI was down slightly less than 4%.

The company has contractual commitments for additional base minimum rent for leases signed and not to Miss the $8.7 million annually.

We expect to come in at $7.7 million annually over the next four quarters.

The last seven months have been challenged and we have a lot of work to do to repair the damage this pandemic as trigger.

Nevertheless operations are improving we have a great team that is up for the challenge drew.

Thanks, Johnny.

Heartfelt. Thanks goes out to all of our associates, who are working so very hard into our border trust managers, who provide constant quality feedback great.

Great people, great properties, and a great platform equals great results I. Thank all of you today for joining the call and for your continued interest in Weingarten, operator, we'd now be happy to take lessons.

Fixture.

The question and answer session. If you have a question. Please press star one on your telephone keypad, if youd like to be removed from the queue. Please press the pound sign of the hash key.

If you go to speakerphone. Please pick up your handset first before daily once you get if you have a question. Please press star one on your telephone keypad.

Before we take the first question I would like to offer our apologies for the delay in getting our release out last night, we had some last minute issues, we needed to work through that impacted our communications and unfortunately working through our processes in the wire services took much longer than we anticipated. Thank you again for your patience and I understand.

Brandon well take the first question.

And first question from Citi, We have Katy Mcconnell. Please go ahead.

Great. Thanks, and good morning, everyone.

So I'm wondering if you could provide some more color on what's happening in the transaction market for sure today as far as the opportunities you're seeing come to market.

Got it and then it looks like the cap rates on your three kids sales came down and that's putting pressure on and where do you think capex.

Okay.

Good morning case drew I'll try and address a lot of that and then maybe turn it over to Johnny for a little extra color seasonal closer to it on the acquisition side. So yeah.

Yeah broad picture on cap rates, what I think you're seeing is an acceleration of what we've talked about in the past that cap rates are very good quality assets remain at their pre coated levels and maybe even in some cases have come down.

Yes.

And when it moves out the risk spectrum, we see a continued widening.

Cap rates and pricing deterioration so.

You know as far as future in terms of modeling what were likely to sell I think most quarters, we will be in.

The middle to high Sevens cap rates and in some quarters. If we're successful you know de risking might even be a little above that as you accurately observed.

In this quarter, we will we were comfortably below that that's a function of the quality of the assets that we sold for some some reasons that it made strategic sense.

Huh.

Financing is available for good quality stuff with end of life certainty, but again gets it gets harder and harder to.

To the point of almost impossible. If there is a lot of risk.

On the acquisition front.

We are hearing about some things.

You know, we haven't seen a lot of the good quality property that.

We want to buy a little we've seen has been pretty aggressive.

Anything else.

Yes.

Morning, K. Reed.

You said the underwriting standards.

Lender.

Buyer.

Harsh.

Yeah.

So thats.

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Our.

Hi.

Okay. Thank you.

Go ahead sorry.

Okay.

And then just for a second question can you provide some background on the decline you're seeing in small shop collections over the last few months.

Yeah, It will change at all in the guidance.

For modifications that might be necessary.

Okay.

Yes, I think what we are looking at it.

Hi.

Understand when sales are.

The situation.

Yeah.

That said Adam.

Yes.

Lastly paid.

Well.

Sort of.

Right.

Hello.

We're having.

Not at all.

Let's go into the office.

Are not doing as well.

Got involved.

And there is going to be.

Got it.

Okay.

Okay.

From Bank of America with Craig Schmidt. Please go ahead.

Great. Thank you.

Jonny your comments about leasing spreads, possibly coming under a little more pressure and in forward quarters are you seeing.

A willingness of tenants to.

Chase lower rents to go to other properties or is that some other issue.

Craig I think the biggest issue that we had more available retail space than it was six months ago.

You were qualified.

I think we have an advantage as we continue to try these days over other jobs.

What we'll see for.

Our life and annuity.

Another pay there is a choice that may.

Right.

Right.

Okay.

Hello.

Okay.

Yes, we can hear you, yes, I can hear you now.

I guess im just.

Given the recent spike up in a covert cases.

What are your conversations like with with your tenants in terms of you know.

Ill they see the next couple of months and are you any lending, but concerned that you might see further like downs of those cases the elevated.

Yeah, that's a good question Greg.

It's a hard one to answer.

I'm not a doctor.

You know read a lot of things you know I I personally.

Yes that is the vast majority of the geography that we are in we will not see significant lockdowns you know.

We are constantly monitoring it and.

You know obviously subject to change.

We have we did see the other day and Denver, where we had a few centers a little bit of a restaurant.

Restriction on.

But.

Generally speaking.

We think most of our markets more locked down, but but there is a lot of.

Forward looking statement in that I know I know our centers are good.

I know our markets are good long term I know, we have some around 63% essential.

As you say there there have been some increase in cases recently.

No.

Okay. Thank you.

Yes.

[noise] from Scotiabank, we have Craig Nicholas Please go ahead.

Hey, good morning.

I'm not sure if other people are having the same issue I'm, having some trouble hearing the weingarten team excluding drew.

So if you can get your phone I'd appreciate it.

On a microphone and he has to move now.

Can you hear me, Greg, Yes, right now I can't thank you okay.

Okay, sorry about that.

No worries. Thank you okay.

Yes.

[laughter].

Well figure it out so for the first on his question I got off to Steve the language around the special dividends as kind of the past couple quarters has always been in the context of the disposition program. While the dividend currently being paid this year is based on last year's dispositions.

There are no regular rental revenue based taxable income that needs to be distributed as well this year.

Hi, Good morning, Greg There is taxable income generated this year, but the way the actual work you have you can borrow from the.

Future year in order to calculate exactly what is required to be distributed under the tax rules. So that it's a it's.

It's not a simple calculation.

But you can borrow from the the next year's distributions in order to meet the requirements. So that's effectively what we're winding up doing but we as we've noted the last couple of quarters in the communications, we do think that we'll have a fourth quarter.

Special dividend that would be paid in December in and you know it it's a catch up so to speak so it it may not be 100% just they they.

This budget from the gains from the disposition program, but.

That that's where.

It's the calculations that we we look at taxable income and we declare what we have to pay in 2019 excuse me 2020 in order to maintain REIT status and.

I can I can go through it more offline, but it's at the involve calculation.

Okay. No I appreciate that so there is some some piece of the special dividend that may be just an irregular taxable income this quarter. This year and some of that may be pushed into 2021 as well.

I understand it correctly.

Yeah. The one the one follow up I would make is when we rolled into.

The special dividend from Knight team that we had to roll into 20 that even further compound it that the complexity of the calculation. So it's it's it's again not a.

Very easy straightforward calculation then the other point I guess I should make is that there are tremendous differences between GAAP income and taxable income that we also have to work through so.

It is involved.

Okay, all right, Steve will have to spend some time on offline on that one.

Then just one more follow up here so.

For the 6% of link that not collected this quarter non preferred.

What's your level of confidence that those rents may come back one day I realized there on a cash basis and now you're not going to be accounting them until you actually collect it but we're just trying to get a sense for kind of permanent right impairment going forward here.

Yeah, it's difficult to to say a lot depends on what happens with the Lockdowns and and.

Sales of our tenants going forward.

Obviously, you know some of the deferrals are going to convert to abate Benson.

We're watching the tenant sales the best that we can and in the strength.

You know at some point, we're going to probably make a decision that in order for a tenant to get to the other side.

That we're going to go ahead and abate that red it's just difficult to say right now Greg.

Okay, That's fair and John just to follow up on your comment on the 2% change in denominator.

In the opening remarks does that mean that Q2 collections have been restated based on that change or no.

No.

Thanks for thanks for clearing that up.

Okay. Thank you.

From Green Street, we have its people. Please go ahead.

Hi, good morning.

Good morning, I have Uh huh.

Follow up on the asset sales could you discuss how forward and why was determined to arrive at the mid six stated cap rate given all the operating uncertainty I'm curious if there was a large gap between 2019 and Hawaiian pro forma NOI using the underwriting.

And also can you just talk a little bit about the availability of mortgage debt broadly for strip centers today and what are the buyers of your centers were able to get financing.

Sure good morning.

So good questions, but but really hard to answer, especially the first one precisely so.

On the debt financing you know I think they generally were.

Most of the cases, not all but in the cases, where they wouldn't that where they did they didnt need to.

Yes, and as I said it is available, but the underwriting standards with the lenders are really challenging.

To your to your first question, which is an excellent one that Johnny touched on is it it's really in my view. These days you know all about being a y.

It's not nearly the arguments about the cap rate and that's where you know each situation is different.

Properties that we sold were generally speaking you know nice.

Good stable assets. The one exception is the Westside Center.

No.

Les which has a guitar center, but that was seen as a great future redevelopment opportunities of the buyer that private buyer.

You know, we're very comfortable with the long term asset we were comfortable making the sale, even though we sort of redevelopment soon because we felt we were getting a fair price for it. So it was a unique.

Unique sale of a very high cap rate.

Asset for us, but non supermarket and something that we thought we were getting good value.

Very high percentage.

Probably even at or above our pre covidien A.D. So.

You know its each one is very different we look at it but it's a it's a great question. It's just hard to answer but as Johnny said it is really all about the in a y. yeah.

You know if you have a watch list.

Whose leases.

In 12 months there is a.

A lot more art than science on how you count that in a one.

And that's totally fair I appreciate the color we.

We will work on selling a lot, but we will also be very selective.

The team it's about de risking it's not about monetizing your worst case scenarios. So.

It comes down to the individual.

The individual assets.

Yeah that makes sense and then switching gears for a second just could you could you share what percentage of your total contractual rent is currently on cash basis accounting and then what would the third quarter collection rate from tenants that were on a cash basis.

Yeah. Good morning, this is Steve.

The third quarter, we recognized around $16 million of being more on triple net rents from tenants that had been moved to cash basis, you know that's roughly around 14% of total revenue.

During the quarter, we collected 73% of that amount. So the call. It 4 million ish left is what we've done with uncollected.

That obviously doesn't show up in our financial statements given that their cash basis, that's the whole issue.

You know under full disclosure that those numbers are have some adjustments that im going back and forth, but generally that's what we experience and just to give you a comparison in the same cash based basis tenants in Q2, we only collected 34% at the end of the second quarter.

Compared to where we were at 73% today for the third quarter, but again, we did collect some additional the 34% moved up as we moved into Q3, so I, but it does give you some insight into the positive collection efforts and momentum that we saw and during the third quarter.

Thank you for that and then maybe just one accounting follow up on that if a tenant.

Hey didn't pay their second quarter rent on time, there on cash based accounting and let's say they paid five months of rents in August do you recognize all that rent that they all past due rent included all of that is a crew or shows up in your financial statements for the third quarter and it's like.

Cash basis is that correct understanding that.

That is correct that quote on quote that is cash based as we receive the cash that we booked the revenue.

Got it I just wanted to clarify that so yes.

Yeah, I mean, there's so many moving pieces of the cash basis, it's hard to sometimes hard to follow where kind of recurring contractual revenue is trending.

Stripping out all the accounting noise, so just trying to get a handle on that.

Understood.

Okay from JP Morgan, we have Mike Mueller. Please go ahead.

Yes, Hi, Steve So you basically wiped out the entire reserve this quarter pretty much and I'm wondering can you tie that to Johnny's comments about.

You know if you are at risk from movies dining.

Tenants that are bankruptcy, because basically it seems like you're implying on a go forward basis that your your money good from those tenants on a go forward basis.

Well.

Mike I would tell you that you have to also think about we took those tenants to cash basis, and so that revenue is not showing up and nor is the reserve showing up so it looks like it all went away, but it's again it goes back to the cash basis accounting that is not showing up in the financial statements.

And I guess, what was the level of cash dependence on cash in Q3 versus Q2 then.

Well that those are the numbers I just gave we had about 60 million of cash basis rent generated in Q3.

And we collected 73% of that so again about $4 million went uncollectible.

So my question on it.

Steve This is right we can't reserve for the future.

For something that is a cool.

We don't think we're going to get Rednecks December from a tenant we.

Reserve that now that we've moved them to cash basis, because we're concerned but but.

Yeah, just to follow up on Drews comments, we actually had receivables outstanding for those tenants that we took to.

Cash basis, and that was the last quarter, we took like $10 million of that too bad debt because that was they are sitting out there. So in the cash basis scenario, you're not generating any IR, because you're never recording the rent to start with.

Sure sure what was the bucket of tenants who were on cash accounting dramatically different in Q3 than Q2.

Not dramatically it actually went down a little bit primarily for bankruptcies and and Ford.

Tenets that that flushed through the system.

Got it okay.

Okay. That's helpful. Thank you.

And one other thing that it went down because of a couple of dispositions that we had also took out.

Made that number slightly lower.

Bankruptcies and dispositions apologize for that.

Got it okay. Thanks.

[noise] from Truest, we have Ki bin Kim. Please go ahead.

Thanks, Good morning out there so just to follow up on it the.

The past couple of questions. The 1.6 million of bad debt versus the 14.5, excluding the straight line rent receivable from Twoq.

Is there any sense that maybe are you over earning on the bad debt and the kind of odd way to say it what.

What I'm asking is that those kind of from a cash basis on a cash basis, if they didnt catch up and paid for kind of partial twoq, you're right and Threeq you win in Threeq you I mean, there there could be a scenario, where maybe you're over earning on that I'm. Just curious if there if that's the case or not.

Oh, good morning, too bad I don't think that's the case I don't know that obviously, if we receive the cash it gets booked into earnings, but I'm not aware that that that was a significant.

Number in Q3.

Okay.

And just equal or looking at the reserves that you've taken to the tenancy moved to a cash basis to account for kind of a risk Tennessee.

When you did that.

Great you also thinking about any potential fallout come around one Q2 thousand one after we get past this holiday season, and inevitably there will be some other fall out do you think have we taken count all of those things already or is that for me we have to tap the leader.

I would say the answer to that is definitely yes. When you take it you know the accounting rules when you take it to cash basis, you're supposed to be looking at a greater than 75% probability that you.

They're going to pay their rent over the term of the lease. So you have to look forward at least according to the accounting literature. The way I understand it you have to look forward and say is this to that going to be viable in the future. So the answer to I think if I understood. Your question is very much so thats taken into consideration.

Yeah, that's the rule, but you know there is a a bit of my discretion that people can take us out of that and that was all.

All right. Thank you.

From Jefferies, We have Linda Tsai. Please go ahead.

Hi.

Given the recovering EBITDA persons to your debt to EBITDA, sorry showed healthy decline stabilization is there a level that you'd like to target by year end 2021, and what would you see is the main drivers.

Hi, Good morning, No I'd say the main driver the N O I piece of that calculation.

You know it clearly being your as you noted that the improvement that we recognize between Q2 and Q3.

As a result of the improvement in the NOI and a big piece of that obviously is the is the reduction in bad debt, So where it goes in the future is obviously going to be very much driven by the by were in Hawaii goes and as we've talked before it's this is a challenging.

Time to be predicting what operations look like you know between now and the end of the year, but clearly into 21 as well.

Thanks, and then the 87% collections in October you know, it's just it's slightly lower than the 90% in Twoq you an individual months, sorry, slightly more than 90% collected in threeq and the individual months, making a threeq is there anything to call out there.

Hi, Linda good morning, no Theres really not it's more of a timing issue.

Obviously have add a lot longer to collect Q3 than I have October you know, we're constantly collecting money and I looked at it. This morning, I think we're at about 88% now. So we will continue to improve that and I'm sure I I hope by the time, we get to the next call will be greatly improved.

Thanks, and then just finally can you talk a little bit about the lease up progress.

In both retail and residential at your three mixed use developments how is this trending versus expectations and what you see is appropriate given conditions in the local markets.

Good morning, Linda It's drew you know as I went through the numbers in there in the supplement also so I need to repeat does I would say that.

Since we are very pleased with it.

Thanks, Adam.

Well the resi.

Very pleased with the occupancy or working through some renewals dealing with all the names that you deal with in terms of the concessions and you don't have to.

We're through that.

C is challenged market not not great not horrible either.

And with a lot of people working from home, they're very focused on it.

Do have few of the retail.

We are working to get commence.

That's an issue there.

At West Dallas, which has taken longer than we would have liked.

Due to some timing issues some issues between Harris teeter.

And the city as we talked about you know it has taken longer.

And as we've also talked about.

Resi has taken longer due to the pandemic in the fact that the supermarkets not you don't have that exciting.

For two study so we're extremely pleased that the supermarket is under construction there.

We will open next summer, we also opened up silver diner very popular restaurant.

And with the which is doing very well in serving us well.

Well, so we're making great progress there.

It was on.

Our properties are about three and a half miles.

Amazon.

In Q2, but those jobs are not on the ground yet.

And generally speaking Amazon is working from home anyway, even if they were so the.

The pandemic Hasnt helped things. So we are pleased with the progress in light of the pandemic and Dan River Oaks Bristol to be.

You already 25%, having just opened the leasing office.

For a luxury high rise again.

In the pandemic, we're very pleased.

As always with apartments, some amount of concessions.

That's pretty normal so.

You know as as was observed in many of the analysts support leasing in the pandemic is challenging and for a while when they were locked down and we couldn't be more so.

But we are pleased very good long term locations.

Thanks.

And once again, if you have a question. Please press star one on your phone keypad.

From Compass point your Floris Van Dijkum. Please go ahead.

Morning, guys I'm just.

I think one of the key things you know everybody's trying to figure out is what is what is 21 go look like obviously nobody's, giving any guidance but.

It looks like you know same property revenues are down 5.9% is that is that a good.

A good number.

You think going forward.

Laura I'll start out and let's see and then maybe John if they want.

Time.

As you say it is so hard to say you know, we we don't know.

So many different things you know there are there are lots of variables out there.

Vaccines therapeutics virus economy et cetera.

Hi personally im optimistic that whatever happens with the election, there will be another round of stimulus.

That's another.

Saying that is I think enormously important.

To many of our guidance, especially the mom and Pops, which we have talked about earlier in the call.

Well of course in people.

Who are unemployed to two.

A bit of a two.

Supermarkets et cetera. So.

Lots of variables lots of unknown as we tried to give folks parts that.

He said in his prepared remarks, we are very concerned about the theaters.

The other you since you mentioned that.

Only about 4% so.

We know we have good properties and good balance sheet.

But theres a lot of uncertainty in the world So Steve any other thoughts.

Not really I mean, if you look at it.

It's tough to put numbers out of the financial statements even on the same store it from the standpoint of the noise that we discussed started around cash basis and not recording any bad debt for those tenants et cetera. So I. Appreciate we're all trying to figure out where this is all.

You want to go and how quickly and so forth, but as drew mentioned, it's there's just too many variables at this point to really.

Get any kind of confidence level in projections going forward.

Okay fair enough the other the other.

Question I have is so I'd love to just verify one one of the points. So there was a 2% change in your billable rent amounts right from the third quarter to the second quarter is that am I did I catch that correctly.

Correct.

Okay.

The other that question I mean, sorry go on.

No its not I was just going to say you know we talked about the quote unquote denominator effect last quarter and that's effectively the result of what we have historically talked about it in terms of the denominator effect, where it gets adjusted for bankruptcies et cetera.

Okay.

The other question I have you know al I wanted to get your you know your your thoughts on this obviously, you're you've you you prepared well for this for this pandemic in someone's with all the work you've done prior in terms of cleaning up the portfolio and getting your balance sheet in the shape that it said.

As you think about going on offense, what are the things that you will be looking at it.

If you think there's going to be opportunities on the distressed side do you or are you.

You think it's mostly families that want to get out private private owners that they are looking to sell over levered assets or or where do you see the potential opportunities as we head into into next year.

Good morning drew great question.

Also.

Quite challenging to answer you know I know that we are.

Very focus we have kept our team intact.

We've actually added people.

During the pandemic principally in leasing, but our growth people are are still very out there is one of the unique things about this company is our geography.

It's fairly focused in about two dozen markets that we want to grow basically from.

Seattle, Washington in the Washington, DC, So we we see everything.

And we're very focused on those opportunities. So yes, I think there will be some and some of the things that you identified are certainly sources over levered assets private owners, who are who are tired of bye.

There's obviously a lot could happen.

Depending how the elections ago in tax policy goes to 10 30 ones in capital gains that.

Could influence things a lot.

Spend a whole consent.

So these higher time on the conference call is talking about that even though it's not going to be known for some time. So yes, we.

We are positioned to take advantage of opportunities. We will certainly look at it we'll keep our quality standards high we like our geography.

Our sunbelt.

We're pleased with things and I think John what that's nothing so yes. The one thing I would add is we are going to be very focused on the existing assets. We have a lot of leasing to do.

I think we can take this opportunity to improve the tenant makeup that we have and also the densification that we've been talking about is going to be moved forward not sure exactly how far but it will be move forward with the ability that we've gained from some of the deferrals, we've done with some of the larger 10.

So, it's primarily going to be focused on our existing properties.

Great. Thanks, guys.

From Wells Fargo, we have heavy seek please go ahead.

Hi, Good morning, I'm, just wondering I wonder pure commented that there.

We're seeing weaker demand for.

Thousand square foot boxes, I'm wondering are you experiencing the same thing or where do you see the greatest tenant demand challenges today.

Good morning, Johnny.

You know that I wouldn't say that eight to 10000 square foot is kind of our our issue you know we we've got a lot a lot of dollar stores that does seem to be in that range.

There's a lot of demand there they've really done well through the pandemic.

I would say you know, it's probably going to be the smaller shop space that you're going to see it a little more turnover in yeah, we're going to lease it and but I think it will have some pressure in terms of the turnover and you know I'm going to say these personal services again.

You know theres still are the the discount clothing supermarkets or some of the boxes and I think we'll be fine and in those areas, but I think that the smaller spaces smaller than 8000 square feet is really where we're going to have some some some things to do.

Okay, Great and then and then just thinking about deferrals I guess Im wondering are you kind of cycle through on the second round of deferrals with the phone.

And I guess, so I know the first time with more of a negotiation, but I guess the tenants in theory have little lepton cores. So just curious what kind of second round discussions are like having us today.

Yes.

Most of the people that we're talking to in the second round are not national tenants and these are going to be smaller mom and pop tenants.

We did have about a million $1.4 million of deferrals that came due.

In the last quarter at about 90% of those did pay we.

We are pushing some of the deferrals and again you know we're very focused on how do we think we can shave who we can get to the other side.

There will be more deferral in some of those deferrals will turn into abatements.

But it will be mostly going forward with the with the smaller mom and pop tenants.

Okay, great. Thanks, and then just one last question, maybe just going back to the guidance I know, there's still a lot of uncertainty, but I guess I'm wondering.

When do you think you'll be able to have the comfort to provide guidance to the street.

More experienced drew all I'll start my colleagues wants to add I don't.

I think it would be.

Premature.

Lastly, guest we hope.

Sometime next year, but I see.

I think there needs to be some better understanding.

No pandemic conditions and locked down.

All those things.

I can tell you not anytime soon but exactly when hope.

Hope sometime next year earlier in the year than later, but I don't really know.

Okay. That's fair. Thank you so much.

And we have a follow up from Ki bin Kim. Please go ahead.

Thanks.

Did you do any lease modification in this quarter.

Did that manifest itself and.

Some of your operating stats or bad that stat.

Good good morning, Ki Ben Yeah. The short answer that is we had a couple very few immaterial amount in Q3 from modifications. It did not really moved the needle at all.

Okay on the the 2%.

Of these terminations that were removed from the denominator.

You said I think pretty clearly that that did not impact that all that 70% collection rate.

I'm curious whether that what does that 2% actually end up showing up in your financial statements.

I'm guessing, it's nothing sort of had a life either.

Yes, most that's it basically falls out it doesn't show up.

Yes.

Yeah.

Okay. So.

So I get rid of return to that 2%. When you mentioned that you collected 95% of build less than 95% Rebased.

Yeah, I think if I understand your question. Your question I think that's correct.

Just want to.

Chris I think our Franois stuff happen alright. Thank you.

We have no further questions at this time I drew will turn it back to you for closing remarks.

Thank you Brad. Thank you everybody I really appreciate your interest in Weingarten.

Religious again for the delay in the press release, but thanks again for your interest we are around available if there's other questions.

And we will be the virtual Navy.

Shortly so say sector, everyone have a great day. Thanks again.

Okay.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.