Q3 2020 RPT Realty Earnings Call
Third quarter same property NOI and operating FFO were both up since last quarter fueled by a smaller impact from right not probable of collection, a direct result of improving collections as we move past the depth of the pandemic.
Our redknapp probable collection and abatements were roughly $4.5 million in the quarter, which included about 9000 related prior quarter billing.
Primarily our theaters.
The clean right not probable of collection for the quarter was $3.6 million as detailed on page 33 of our supplemental our third quarter rent. Excluding prior period amounts is down 7% or $3.7 million versus the pretty cold first quarter level.
While this is a point in time number and not a run rate moving forward. It is a stark contrast to the decrease implied in our share price.
As we look forward there are puts and takes to the trajectory of NOI puts our items such as a sign that open hbr backlog of $3 million.
The $1.5 million of sign that open hbr associated with leases in negotiation and embedded annual contractual rent growth. The takes are any reductions in rent or tenant fallout, which is tough to speculate on given the state of the pandemic.
Regarding third quarter uncollected rent is totaled about 6.4 million for the quarter.
Which $3.6 million was reserved as I noted earlier and $2.6 million was deferred net of reserves, leaving about 200000 on addressed.
For reference this is detailed in our supplemental on page 33 touch.
Touching on our operating fundamentals during the third quarter, we signed 44 leases covering 279000 square feet blended.
Blended rent spreads were 10.7% driven by our 43% new lease spreads our highest since mid 2018.
We ended the quarter with a leased rate of 93.3% down 30 basis points sequentially as the effects of COVID-19 begin to impact our occupancy statistics.
Given our solid leasing activity during the quarter, our anchor lease rate was actually up 10 basis points from last quarter fueled by our Nike in Burlington deals at front range village in Fort Collins, Colorado, where we were where we are seeing excellent leasing and.
As Brian noted our small shop lease rate was impacted this quarter as we recaptured eight sina spaces.
Which unfavorably impacted our leased rate by 30 basis points.
Bolstered by our rising recollections of nearly 90% and as a result of liquidity measures. We took earlier in the year. We ended the quarter with a healthy cash balance of 220 million, including 125 million of solve or borrowings and 95 million of cash our cash balance before debt repayments increased by about.
20.
With our strong third quarter cash flow generation and incremental confidence in our business paid off another 50 million of our revolver during the quarter.
We expect to repay additional outstanding amounts on our revolver is its ability and cash flow continues to improve and the economy overall returns more steady state.
We will also can keep tight control over liquidity Capex and expenses. This approach gives us the flexibility to strategically invest at the right time for the long term rig.
Regarding the dividend we understand this is a very important piece of our total return shareholders. However, as I noted last quarter.
Not need to pay a common dividend balance of 2020 meet our re taxable income payout requirement based on our current that's.
The timing of reinstatement remains a quarterly board decision.
As previously noted when we reinstate the common dividend, we will do so at a sustainable level that would grow in conjunction with earnings.
We ended the third quarter with trailing 12 month debt to pro forma adjusted EBITDA of 7.2 times up slightly from 7.0 times last quarter as another covance impact the quarter entered the calculation we.
We remain committed to bringing leverage into our long term target range of five and a half to six and a half times as the impacts of the pandemic flu behind us.
As I alluded to earlier and as part of our continued effort to improve transparency into our business. We have provided a granular breakdown of our first and third quarter bearing revenue bridge between reported base rent and recoveries to build and uninterested rent on page 33 of our stuff Battle. We hope you find this.
Full as you evaluate the trajectory of an NOI from COVID-19.
With respect to guidance, we will not be providing an update at this time given the high degree of uncertainty surrounding the scale and are fishing of several macro factors, including the pandemic economic stimulus and the results of the election to name a few.
We will continue to reassess the practicality of resuming guidance in future quarters with that I will turn the call back to the operator to open the line for questions operator.
Thank you at this time, we will conduct a question and answer thanks.
I would like to ask a question. Please press star one on your telephone keypad.
Information told anything here late Q.
Queue, you May press Star two if you will like we moved the questions from the queue for.
But participant to speak we quit me it may be necessary to pick up your handset before pressing just darkie one moment my first question.
Our first question from Todd Thomas with Keybanc Capital. Please proceed with your question.
Hi, Thanks, good morning.
First question just regarding.
Some of the deferrals that you know have been now rolling off what percent of the deferral rent was collected in the in the third quarter and maybe in October as scheduled and have you had to re cut any new deals where you had agreements in place.
Yes, sure Todd good morning, and good to hear from yeah.
I'll start with the deferral question and Bryan can talk about.
Negotiations so let me walk you back to Q2.
At point in time last time reported which was in early August we had about 12 million or so deferred since then Todd.
Five of that 12, Aspen paid and if you noticed that our questions. After reported last night, our second quarter's collection rate went up from.
65% to 76% so.
So after pay off that 5 million at least what about 7 million or so and then when you layer on the differ associated with Q3, you're about at 10 million and the trajectory from there Todd is about 30% of that 10 million will be paid in the fourth quarter of this year, 50% in 21, and then remaining thereafter.
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Yeah, and as far as any other ongoing engage negotiations on top of the.
Made deferral agreement there has been done so far.
Thats from our anchor Nash.
National small shop, as well as local mom and pop so.
As of yet there hasn't been any deferrals on top of deferrals.
So that's where we're at.
All right great. Thanks.
Yeah I appreciate the comments on on the theaters on theater exposure.
A few questions I guess, the the three Standalone boxes, you know it sounds like you're working on potential plans I guess to redevelop or re imagine those boxes, what rights do you have to recapture that fade from.
From the theaters that aren't paying right and if an opportunity were to surface or would you be constrained and unable to get at that space.
Yes, that's a good question and obviously that's from a competency perspective with the leases Tom some of your train from kind of the right. So what we have said, we're playing offense on those there's three freestanding boxes front end.
Yes, and Bill at our River City tremendous outdoor open Air Center I want to Nashville did.
Yes, no one in Deerfield Towne center across the street from a very high performing.
Super Walmart and its true freestanding separate parcels. So we're looking at wholesale clubs, we're looking at things like I said in my script.
Last mile Logistics, and then there's even demands where some junior box tenants.
So.
And there is some a lot of openings are a lot of interest from certain junior boxes, where we can split up sandbox into to two different spaces.
Okay and the <unk>.
The rent that Regal pays its almost $23 a foot seems seems pretty full but what's the rent for the three golds.
If you sort of stripped out the Webster place location can you can you share how much that skews that figure.
Yeah, we got that number in front of us Carlos let us get back to you offline on that one.
Okay and just one last question then on the local small shop. So the trend. There was was positive from from Twoq to Threeq you in terms of.
Collections, but it ticked down 1% in October the other segments, the anchors mid tier and the national small shops. All increase is there anything to read into that are you seeing any weakness.
I'll be no let me start this within the local small shops.
David I mean October it's a statement at time and I think you know October.
October today is more advanced than where we were same time over September so I wouldn't read into that 1% at all we're seeing good movement, you know even daily on that number so.
It's just a point of time.
Okay Alright.
Alright, thank you.
Thanks for that.
Our next question comes from Jeremy every account we told shipping. Please proceed with your question.
Hi. Thank you. This is kind of piece on for Derik Johnston Congrats on the positive lease.
Lease operating metrics, but looking into that how sustainable are these rent spreads going forward sort of airport.
[noise] Hey, Connor.
I think.
That's a good question and thanks for that so I think sustainability is there and since we've got some new management.
I've been in place I mean, we've been averaging 30% average spreads in second quarter 2019. So this is and as I said continuously undermanaged and hence under market rents.
Where we think we can continually over the long term.
Term drive trends, obviously, there will be ebbs and flows on the quarter, just especially given our size, but we continue we see massive upside.
Across the board and that's within the junior box category and the small shops.
I was really pleased.
With the SNL and the spreads and the quality of deals and then when you're talking for when you're talking Burlington, when you're talking Nike and Bank of America just to name a few really the average rent from an hbr perspective about 21 49.
Which was pretty impressive.
So these these deals at that 43% spread there were certainly a couple of junior boxes that drove it but we were.
Averaging.
Good for Scott double digits still with some small shop spreads.
Got it. Thank you and then looking over to be the acquisition front you guys said that there was a bit of an increase in.
Potential transactions on kind of just looking into that but what kind of phase are you starting to see from that area.
Any color along those lines. Thanks, yes.
And we were doing this pre kogut as well in the private sector as well.
Some families that's family office or private individuals have CMBS loan debt coming due.
These could be one offs portfolios, we're seeing increased activity from from some of the banks.
Well I think this could be a huge opportunity really the key for.
For all of this is finding deep value I'm good.
Great real estate, where.
Where we can come in and drive outsized alright, Arabs in a meaningful way.
So its we are you know we havent found anything today from a you know based on our underwriting and based on our.
Our star our strategy.
But deal flow has picked up considerably and as I said in my prepared remarks, I'm personally getting calls from some of these operators as well that are operators across the country that you have some debt coming up and we'd like to sell.
Thank you.
Thanks, Don.
Our next question comes from Linda Tsai with Jefferies. Please proceed with your question.
Hi, good morning.
Spine, but not open DDR, how do you see the leading that come on line in the coming quarters.
Yeah, the sign that opened up $3 million, all that will come online over the next five quarters, so a little bit this.
This year, and then Youre ratably over 21.
Thanks, and then can you discuss what you're seeing in the leasing pipeline for for Q and 11% of your Hbr is dealing 2021, how much of that has been addressed.
Yes, so from an upcoming leasing pipeline the visibility is pretty strong said in my prepared remarks about $3 million SNL, we have a million and a half behind and lease and then another few million behind that in in advance on the widest negotiations.
If you will.
So Linda its.
Few weeks ago I had at least committees on every Monday morning, and and.
Even without Rocher deals included in this quarter and in that committee or just committee of new deals that had.
Being here so the pipeline.
It's pretty robust.
And I'm very quite pleased with it with.
With the team's results on that.
And then as far as the renewal plan for next year right now or.
About 45% complete on that.
Thanks, and then over the next several quarters, you have a sense of where occupancy might trough.
Oh yeah.
I wish I could tell you I think there's just too many dark competing variables out there I talked a little summer fared remarks, the we're obviously still waiting on the election results both.
Primarily it's related the duration of the of the pandemic.
So too early to simply be seen on.
See I think the good news is I kind of talked about in his prepared remarks, you talked about that again hearing today is we have a $3 million of backlog from US now another million half from leases in negotiation.
Plus and contractual rent growth. So there is some books.
Positives.
Going into this quarter into next year, but the biggest the biggest unknown is the kind of fall off or any restoration.
No cross portfolio so to be seen.
Thanks for that just one last one in terms of waiting full priced apparel tenants the Baltic welcoming banks and medically says that your centers or how do you evaluate the long term demand for these lines of businesses.
Its asset by asset, it's a macro and its a micro and obviously, there's oversupply in certain segments of certain geographies and there's undersupply.
And.
From a from a perspective of.
Banks, obviously, the visibility and access is key.
From medical you know, we have a team really assign to really harvest institutional hospitals in these municipalities where they are looking to have.
Ill.
Really a branch.
Yeah, they're there they're hospital.
At these open Air shopping center, So 50000 square feet 20000 square feet of outpatient facilities, where we just good solid credit on that lease so it really depends on.
Really all macro you know from intersections intersections.
Thank you.
Thank you.
Our next question comes from Floris Van Dijkum <unk>.
Please proceed with your question.
Thanks morning, guys.
Strategically.
Brian can you maybe comment on your your GE Si joint venture.
Well discussions are moving along also particularly given the fact, the lending markets still appear to be a a very hot spot and gummed up and also how you reconcile that with <unk>.
With the stock price seems to be staying in terms of allocating capital.
Yes, so obviously, we're in conversation with GE I see a lot.
They see a lot of deal flow that we don't see we see deal flow that they don't see.
Yes, as I said.
On an earlier Q and a.
You know I or R&D and in yield if you will is everything so we're matching that compared to other strategic areas, where that could be leasing capital were asked.
Let me start first started we had 20 vacant boxes.
An average mid teen yields right on.
We're managing that worse.
The DAT you know, we're managing our number one responsibility is capital allocation and that all goes into.
A pot if you will and that's really what comes out of its got to be a special acquisition for us to job.
I do believe that there are out there I do believe that there are.
Enormous opportunities, where we can achieve high IR ours just based on.
Assets going back to receivers are assets being mismanaged over several years.
So where we can find those unicorns.
We were likely pounds, but it will be a delicate balance compared to balance sheet compared to leasing capital and our liquidity, which is I.
I think in a very good point, yeah, and just to just a reminder, floor listening and good morning.
Good to hear from you as well, we do have $100 million.
Of our cash unrestricted on the balance sheet to be able to al Qaeda Accordingly, as Brian just described.
And how does the.
Your discussion with lenders how is that.
<unk> has that is that one of the biggest stumbling blocks right now on the on the.
Acquisition side in particular on the in the M&A market potentially.
Yes, no I think for the right assets.
As Dan obviously.
Obviously size and geography and credit is it.
That is very is extremely important.
So for yes for large M&A deals, we're not talking about that were talking more on one offs and smaller portfolios and where there's.
Good credit a good story good narratives.
Most likely grocery or off price.
We're seeing some of that the market's open for that.
Thanks, guys.
Thank you.
Once again, if you have a question. Please press star one on your telephone keypad. Our next question comes from Mike Mueller with JP Morgan. Please proceed with your question.
Yes, Hi, Michelle.
First I'm not sure if I missed this but did you comment on was there anything abnormal driving new lease spread this quarter and the second question.
In terms of thinking about future acquisitions, we thinking differently about your.
We anchored.
Central mix and just kind of those those factors in terms of what you're waiting by.
Yes, Hi, Mike. Thanks, So let me hit the spreads first.
When you.
There wasn't really anything abnormal we had we had two junior boxes on that.
Matt.
Were extremely.
Good spreads, but then we had a number of.
Small shop deals that were double digit spreads as well.
So that's that.
Two on on the acquisitions perspective.
No essential business and grocery I think I think whats intriguing is.
You know that those are driving low cap rate today.
Where we might have a grocer or two or three in our back pocket.
On a power center on a center.
Community Center, where we can have a deal in hand.
In Didi before even execute that matched that's creating value and that's that's obviously driving cap rate compression.
So we're really looking at just solid real estate and again, we are in bottoms up I or our company and you know if we achieve the highest IR ours on on the property level the stock will eventually.
Showing that right and we've proven time and time again.
Since we started you know outsize and a lot of growth in occupancy increases and and taking 20 boxes and filling up every single one of them that double digit yields that we can do that and we have tremendous relationships across the country with a lot of these tenants. So I have the eye on strategy.
Where we can go in and maybe do cap rate arbitrage hands.
Buying at a high yield, but having a tenant locked in sealed before even close.
Got it okay thats helpful. Thank you.
Thanks, Mike.
Thank you at this time I would like to turn the call back over to Mr. Humberto for closing comments.
Thank you.
Years from now there will be three things that plays that stakeholders remember from this crisis.
Was there a humanity.
City and innovation.
Humanity is how we treated our employees retailers inner vendors.
Liquidity and how we prepared.
We were in the pandemic and what measures we took after the pandemic kit.
And innovation and how we found new ways to create value for our stakeholders.
These three pillars have guided our decision making every day.
Throughout the standout.
I'm extremely confident that if we continue to hold humanity liquidity and innovation in high regard.
We will look back and be extremely proud of the decisions we made today.
That will lead to a better tomorrow.
Thank you all for joining our call this morning I.
I'm looking forward to seeing many of you at the virtual Knavery conference in a couple of weeks.
Have a wonderful day.
Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and thank you for your participation and have a great day.
Okay.