Q3 2020 Washington Prime Group Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to Washington, Prime Group Q3, 2020 earnings call and webcast.

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After the speaker's presentation, there will be a question and answer session.

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I would now like to hand, the conference over to Lisa Indest Executive Vice President Chief Accounting Officer. Thank you. Please go ahead.

Good morning, and welcome to W.P.G. third quarter 2020 earnings call.

During today's call, we will make certain forward looking statements as defined by the federal Securities Law. These statements relate to expectations beliefs projections plans and other matters that are not historical and are subject to the risks and uncertainties that might affect future events or results for a detailed description of these risks please refer to our earn.

This release and various SEC filings management May also discuss certain non-GAAP financial measures reconciliations of each non-GAAP financial measure to the comparable GAAP measure are included in our press release supplemental information packet and SEC filings, which are available on the Investor Relations section of our website.

Members of management with US today are Luke and 40, CEO, Mark Yale CFO, Josh Linda Moore head of leasing and dead, Dan Scott SVP of development now I'll turn the call over to Lou.

Thanks, Lisa and.

Hello, everybody.

There can be no denying the COVID-19 pandemic has resulted in a new set of challenges for an already beleaguered retail sector now withstanding ever since joining W.P.G. My objective has been straightforward provide middle America, whether it be Oklahoma City, Allahu rail, but Turkey wouldn't relevant.

Goods and services via our dominant counseling center proposition.

I emphasize middle America and it as it is where our assets are primarily situated and it is this demographic constituency, which has been largely ignored.

It became crystal clear, we couldn't sit on our hands waiting for the usual suspects to occupy space no nor where are we going to regain our guests respect by superficial measures. It was going to require a fundamental shift as to how we regard our role as landlord and by this I mean, I proactive operator, which requires the.

First thing, Tennessee activated common area and delivering relevant adaptive reuse projects I can tell you that Josh and Dan.

And everybody else that our company has done just that and we can evidenced that VR metrics, but then COVID-19 rears its ugly head.

Well, it's certainly one heck of a blow it's not a knockout punch and it actually strengthened our company's conviction about our guests and our locations well.

Well, we've previously highlighted and as well as quantified and you can take a look at our web site for some of the.

White papers, we've done and things that just addressing mid faces cities.

In addressing the potential of midsize cities.

It appears a wider audience is beginning to recognize or attributes as well.

In fact, there appears to be increasing catalyst for those secondary trade areas, which possess robust commercial educational and cultural infrastructures.

While it's certainly going to require heavy lifting from all.

We believe.

And were adamant our re imagined town centers are an integral part of this equation.

As always we provide comprehensive detail with respect to operational and financial metrics things to Lisa and Mark and.

Everybody else the our supplemental reporting.

As well as our.

And just our Investor Relations website I just want to mention a follows a few of the more significant which took place during the quarter.

We successfully executed amendments to our credit facility.

Year to date leasing volume exhibited a 7% increase totaling 3.4 million square feet.

Which lifestyle tendency accounted for 47% of the new lease of new leases signed.

We've collected over 87%.

Of our third quarter rental income and associated charges.

Obviously as adjusted for the uplift clickable impact of COVID-19, eight again, 87%.

Of the current of our 18 current adaptive reuse projects all remain committed total committed to open I've admittedly seven are being delayed to the to this coming quarter as well as next week.

We executed a purchase and sale agreement for the mixed use redevelopment.

As we previously discussed regarding Westminster mall and.

Nation of which net cash proceeds should be in excess of $50 million.

We also just kind of study where were looking at the next round of additional mixed use projects and we've identified eight assets.

Which are estimated to result in multifamily densification at.

Totaling over.

4000 units or so.

We ended third quarter, Mark will speak more obviously with respect to our financial metrics with 112 million Bucks on hand, and we estimated year end cash will be between 125 and 35 million.

And we're actively working on measures, which will result in substantial leveraging its important to know.

This action and I was like everybody listen up in no way shape or form has anything to do with a bankruptcy or a corporate restructuring and if anything will serve as a testament to our operational abilities.

The task of transforming our assets into dominant town centers.

Which provides relevancy and excitement for our guests, which we are thinking about and quite frankly executing upon 24, seven I mean, it it Ain't easy and.

And it was certainly difficult even before a global pandemic emerge.

Notwithstanding the progress we have made to date, we are just adamant that it's going to continue and we are going to transform our assets accordingly, and with that Mark I'm going to hand, it over to you.

Thanks, Lou the significant news from a balance sheet perspective. This quarter involves the recent credit facilities modification, we successfully closed on in August.

Based upon the modification the company was in compliance with all applicable credit facilities and bond covenants as of the end of the most recently completed fiscal quarter that ended September Thirtyth 2020. Additionally.

Additionally, the company is actively working on measures with existing debt investors that would result in de leveraging more balance sheet execution as successful and once again just to emphasize these specific deleveraging measures do not involve the negotiation of restructuring support agreement or other arrangements in the context of a bankruptcy proceeding in any way whatsoever.

When considering the uncertainty associated with Covance significant risks exist any forecasting the current environment notwithstanding based upon our current projections and the positive impact from the potential deleveraging measures described above we believe the company should have the necessary flexibility that will allow us to navigate and maintain compliance with both or modify credit facilities and bond cover.

That's for the foreseeable future for covenant forecasting purposes. This assumes a slow recovery with continued pressure from the pandemic, but that our properties do remain open and are not significantly impacted by any future government mandated operating restrictions.

We should note that the company did exceed the thresholds for several of the leverage bond covenants as of the end of the third quarter. However, since these are in current space, they're only measured at the company actually incurs new incremental debt, which did not occur during the quarter. So they were not applicable and finally as you mentioned the company has no current plans to incur additional debt.

From a liquidity perspective as Lou mentioned, we did finished the quarter of.

This year with approximately $112 million of cash on hand based upon improved cash collection trends during the third quarter were assuming positive net cash flow generation for the fourth quarter, which should result in the company, finishing 2020 with 125 million to $135 million of liquidity.

The cash forecast does include approximately $25 million of redevelopment spend over the next three months. It also assumes that minimal common dividend payments are required or needed over the remainder of the year to address redistribution requirements.

We also expect that within the next six months to transfer back our remaining non core enclosed assets of Charlottesville fashion Square Muncie mall, resulting in additional debt reduction of over $75 million from our current balance sheet.

Finally, we'll we'll have all 2020 debt maturities address when we close in the next week or so on the Port Charlotte mortgages extension. The deal will provide for an additional year of term without any principal pay downs.

Now, let me turn to our quarterly financial results reported AFFO for the third quarter was seven cents per diluted share. These results were directly burden by an approximately $40 million or 18 cents per share decline in property NOI quarter over quarter from our entire portfolio, which is indicative of our cautious view of the future.

Collections of outstanding tenant receivables accordingly significant drivers of this decline as it relates to our tier one properties involved a recording of $13 million of reserves against credit risk tenants with material delinquent balances moving to the cash basis for our National Theatre tenancy, resulting in additional reserves of $8 million.

And then finally, the impact from the second and third quarter bankruptcies for another $6 million.

Well Ana why performance has certainly been challenged since the start of the pandemic. We've been encouraged by the improved actual cash collections nearly 20, nearly 90% during the third quarter of rental income and associated charges adjusted for the applicable impact of cobot related lease modifications as well as better than expected sales.

Performance with comp sales only down 8% for the most recent fiscal quarter. Accordingly, we do believe we will see continued sequential improvement in comparable and Hawaii forecasting a 10%, 20% decrease for the fourth quarter of 2020 as.

This projection assumes that the company's properties remain open throughout the fourth quarter and are not significantly impacted by any future government mandated operating restrictions.

With that we'll now open the call for any questions. Thank you.

Ladies and gentlemen in order to ask a question you will need to press Star and then one on your telephone keypad.

Good enough to Star Wars, please stand by while we compile acuity roster.

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And again, ladies and gentlemen in order to fuel yourself for your question you will need to press Star and then one on your telephone keypad.

Ladies and gentlemen. This concludes these unique period now turn the call back over to CEO, who can 40 for any closing remarks.

Thank you all.

Indeed.

Indeed in these trying times.

Our.

Mike our team is about.

Ability and you can look at it via our operational and our financial.

Measures that we've taken.

Our pretty astounding and I, thank all of them.

And.

We'll it's time to get back to work. So thank you all and have a great day bye.

Ladies and gentlemen, this concludes the Q and a session.

Today's conference call. Thank you for your participation and you may now disconnect.

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