Q4 2020 Retail Properties of America Inc Earnings Call
Greetings and welcome to the retail properties of America fourth quarter 2020 earnings Conference call.
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A question and answer session will follow the formal presentation.
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It is now my pleasure to introduce your host Mr. Mike <unk>, Vice President of Investor Relations and capital markets. Thank you. Sir Please go ahead.
Thank you operator, and welcome to the retail properties of America fourth quarter 2020 earnings Conference call.
In addition to the press release distributed last evening, we have posted the quarterly supplemental information package with additional details on our results in the invest section on our website at Www Dot <unk> Dot com.
On today's call management's prepared remarks and answers to your questions may include statements that constitute forward looking statements under federal Securities laws. These statements are usually identified by the use of words, such as anticipates believes expects and variations of such words or similar expressions.
Actual results may differ materially from those described and any forward looking statements and will be affected by a variety of risks and factors that are beyond our control, including without limitation those set forth and our earnings release issued last night and the risk factors set forth and our most recent form 10-K, 10-Q and other SEC filings.
As a reminder, forward looking statements represent managements estimates as of today February 17th 2021, and we assume no obligation to update publicly any forward looking statements, whether as a result of new information future events or otherwise.
Additionally, on this conference call, we may refer to certain non-GAAP financial measures you can find the reconciliation of these non-GAAP financial measures.
The most directly comparable GAAP numbers and definitions of these non-GAAP financial measures in our quarterly supplemental information package and our previous 'twenty and 'twenty earnings releases, all of which are available in the invest section of our website at www Dot RPI Dot com.
On today's call our speakers will be Steve Grimes, Chief Executive Officer, Julie Swinehart, Executive Vice President and Chief Financial Officer, and Treasurer, and Shane garrison, President and Chief operating Officer.
After their prepared remarks, we will open up the call to your questions with that I will now turn the call over to Steve Grimes.
Thank you, Mike and good morning, everyone. I appreciate you joining the call today and.
And I reflect on 'twenty and 'twenty I'm reminded of the unprecedented challenges we faced in the spring and summer that tested nearly every aspect of our platform at the same time I've been overwhelmingly impressed by the responsiveness of our people to these trials.
I wanted to take a moment to thank our employees for answering the call from both our tenants and our communities during the past year and solidifying of major rebound towards normalcy across our business, including 94% cash collections in Q4, which are being adversely impacted by our two multi tenant assets and California.
Notably cash collections for our small shop space and Q4 were $94, 3% placement and slightly ahead of the portfolio average. Furthermore, cue for national and local tenant collections were at 95, 1% and 91, 4%, respectively. Despite our mix of essential versus nonessential tenants.
Our cash collections speak volumes about the relevancy and strength of our assets and our team.
And equally as important I believe our Q4 performance showcases our ability to rebound from this pandemic should all things remain on the positive from the macroeconomic front and vaccine distribution and should allow us to emerge even stronger as we and our tenants have adopted strategies that support and enhance the viability of our centers and I am proud of.
And deeply appreciative of this effort on all fronts.
We built upon our improved third quarter performance and the fourth quarter as leasing volumes remained strong and we increased cash collections and total addressed rent and turn driving our total available liquidity higher.
And that's further uptick and our fundamental performance enabled us to increase our quarterly dividends of six cents per share as declared in December from the five cents per share declared in September when we reinstated our dividend the board.
And we'll continue to meet quarterly to deliberate our dividend payout balancing our capital structure need REIT tax requirements and desire for healthy dividend coverage that will permit headroom for sustained reinvestment and growing our business and reinforcing our balance sheet.
We are keenly focused on delivering continued improvement and our results to enable our dividend to move higher as warranted and time.
Jean will review, our operational progress and the quarter and provide an update on our expansion at one Loudoun, which should add incrementally to our growth outlook. Later this year before becoming a more meaningful driver of our run rate cash flow sometime in 'twenty and 'twenty two.
We remain focused on the broader corporate stewardship goals, while working to drive our business forward to that and we recently executed power purchase agreement and certified renewable energy certificates to deliver energy from renewable resources to another 19 of our properties.
And with similar actions, we took in early 'twenty and 'twenty for our Texas portfolio, our largest concentration of assets. We now hold contracts for clean energy for properties that accounts for 45 per cent of our total operating portfolio and we look to advance debt and similar efforts as 'twenty 'twenty one unfolds.
Well, Julie will detail key aspects of our 'twenty 'twenty, one financial guidance and just a few minutes I want to relay some higher level perspective from my vantage point.
I have shared with many of you over the past several months that I do not envy your position when it comes to underwriting the sector for 'twenty and 'twenty, one as Julie will articulate there are many factors to consider when understanding guidance for us and for that matter the sector before beginning to understand the playing field earnings calls to date have proven that but also.
So as I have mentioned, we will be transparent and provide you with the framework for understanding the components that can drive our performance and the positive or the negative from a guidance level.
We remain committed to supporting you and understanding our guidance and its components given these uncertain times.
The immediate macroeconomic backdrop continues to present challenges for our business, though conditions are currently headed and the right direction. The U S unemployment rate while elevated by historical standards at six 3% has declined and eight of the last nine months after peaking at 14, 8% in April.
Similarly, consumer confidence the well below the level seen and typical economic expansions and still subject to isolation of laid based on COVID-19 case counts and other factors has improved in the month of January and also sit above April cyclical low.
We hold many valid reasons to expect conditions to improve and the at the year progresses, including the rollout of the vaccine to more and more tears of the population and pending material stimulus from Washington D C.
And a timeframe when outdoor temperatures governance, so much of our ability to connect with people responsibly. We also expect the spring to provide a boost to both the sentiment and consumer activity.
We see many other reasons much more specific to our business for well founded optimism the changing consumer behavior and brought about by the onset of COVID-19 caused many retailers to dramatically accelerate business plans and they become more relevant and accessible.
And we have begun to see the fruits of this effort and recent retail earnings reports we.
We supported this effort by many of our tenants through enhancing our curbside pickup capabilities and other amenities aligned with and increasingly ubiquitous approach to omni channel retailing that validates the brick and mortar presence for.
The other national retailers have steadily access large amounts of capital at attractive pricing and the last several quarters and adding to their ability to reinvest and their business and to pay owed rents.
Housing remains perhaps the brightest spot and the consumer sector jointly propelled by low interest rates and migration to the suburbs as well as your Sun belt States, our portfolio generally positioned and first ring suburbs outside of major U S cities, it's poised to benefit from this population shifts while retailers connected to all things home continuing.
Right.
With that being said in the near term, we expect more shakeout amongst certain subsets of retail and our tenant base will not be immune. However, after our multi year effort to reinforce the quality of our rent roll through Derisking and diversification, we expect to navigate the challenges ahead of us the definitely and.
And amid this turbulence, we see demand for retail space and class a assets, increasing our quality portfolio should benefit from the narrowing focus of prospective and existing tenants to the sites that matter most for my brand accessibility and merchandising standpoint.
While our near term results will continue to reflect current challenges with occupancy likely to worsen and incrementally as Shane will articulate and rent commencements to take longer than during pre Covid times, our intermediate to long term financial performance will reflect the more enduring element of our changing consumer and retailer preferences for which we believe we are.
Very well positioned as I stated earlier our results from the last few quarters have only served to secure my confidence and our out your prospects and with that I will now turn the call over to Julie.
Thank you Steve This morning, I will review, our fourth quarter and full year financial results of rent collection trends and our capital structure positioning and will also share of initial thoughts around our 'twenty and 'twenty one guidance.
During the fourth quarter, we generated operating <unk> per diluted share of <unk> 20 cents.
And seven cents year over year the <unk>.
Fact of the pandemic remains evident and our fourth quarter year over year lease income decline of $13 $6 million or six cents per diluted share, which explains the vast majority of our year over year operating S. F O change and is driven by the combination of the occupancy declines.
But improving collection levels and collectability assumptions pertaining to uncollected of Mt.
In addition of $2 8 million dollar decrease and straight line rental income equating to one cent per diluted share largely driven by the Q for movement of certain additional tenants to the cash basis of accounting contributed to this overall decline and lease income.
We continue to evaluate ultimate collectability of amounts due from tenants are cash basis tenant population grew to nearly 12% of ABR as of December 31, 'twenty and 'twenty up from 10% at the end of Q3.
Operating <unk> per diluted share decreased one sense sequentially driven by an increase in G&A expense and the fourth quarter as determinations for of discretionary incentive compensation were made and therefore of crude.
Prior to Q4, we did not have the basis upon which to record these amounts.
For the full year, we generated operating and that's all of 84 cents per diluted share, which measures of 24 cents below the dollars eight per diluted share we delivered for calendar 2019.
The full year decline in operating and <unk> can be explained by the declines and lease income in Q2, Q3 and Q4.
Same store NOI and the fourth quarter decreased 11, 4% or $9 $3 million compared to Q4 of 2019, continuing to narrow from the 12 per cent decline in Q3, and the 22% decline in Q2.
Full year same store NOI decreased 11, 2% of $36 $3 million as declines and the last nine months of the year more than offset our Q1 same store NOI growth and our base rent expansion from contractual rent increases.
And in occupancy decline lower collection level, and collectability assumptions pertaining to uncollected amounts were all drivers and.
I'm pleased to report that and the fourth quarter, we continued to accelerate collection trends reporting last night that as of February 8th 'twenty 'twenty. One we have collected $94 one per cent of fourth quarter base rent of <unk>.
650 basis point improvement over our updated Q3 rate and a 600 basis point improvement over our updated and 78% rate for Q2, the low point for 'twenty and 'twenty.
Importantly, non essential categories and restaurants drove this fourth quarter collection of improvement.
Also encouraging some of the categories hardest hit by the pandemic climbed to the mid 90 per cent collection level in Q4, including apparel and services, while the soft goods and discount category improved dramatically to nearly 100% collected in Q4.
In addition, health clubs and full service restaurant rent collections climbed to the low to mid eighties level during the fourth quarter, our office tenants, which sit adjacent to our retail footprint and are overwhelmingly located in suburban settings continued to demonstrate collection patterns above our portfolio average and correlate strongly with our essential tenant receipts.
Again this quarter previously reported collection levels continued to improve as our teams worked with tenants to collect these past due balances contributing significantly to the sequential decrease and net accounts receivable of $12 $6 million.
For further context collection rates for tenant recoveries and Q4 continued to measure of approximately in line with our base rent collection levels. As we also experienced in Q2 and Q3.
While most tenant concessions did not require repayment of any deferred amounts during 'twenty and 'twenty. There were some debt did and I'm happy to report that we have received 98% of those miles. It's still early in the year, but we have already received the majority of deferrals that were due in January 'twenty and 'twenty one although currently not at the rate, we realized for 'twenty and 'twenty amounts due.
True.
Our teams will continue to actively pursue collection and these deferred and other amounts and per the terms of the agreements, we expect that more than 90% of amounts of deferred from 'twenty and 'twenty will be repaid by the close of 2021.
Also during the fourth quarter, we continued to sign previously agreed upon tenant concessions the majority of which pertain to Q3 and prior amount of adding further clarity to amounts billed but not yet collected Shane will provide additional detail on this and other operational progress and just a few minutes.
Turning to the balance sheet following a very productive third quarter of capital markets activity, we did not engage in any capital markets transactions in the fourth quarter valid.
Validating the reopening of our bonds due 2025, which reestablished their index eligibility those bonds and are subsequently issued bonds. Due 2030 have experienced significant spread improvements of 200, and 180 basis points, respectively. Thanks to our proactive approach to managing cash flow since the onset of the pandemic.
And our successful $500 million aggregate public bond fund raising during July and August our total available liquidity improved by $50 million year over year to 892 million as of December 31, with no scheduled maturities until April 'twenty and 'twenty, two and no currently outstanding unsecured principal obligations due.
And until November 2023, combined with our robust liquidity position and wide headroom under our covenant and commitments, we are evaluating our capital structure options for 'twenty and 'twenty, one from a position of strength.
Turning to guidance, we expect to generate operating <unk> of 76 to 84 cents per diluted share in 'twenty and 'twenty one.
As outlined in last night's release, we of base to the forecast on the current outlook for the macro economy and public health among other factors.
Further this range contemplates several assumptions, including among others opportunistic exploration and execution of acquisitions dispositions and capital markets activities and higher G&A expense and the amount recognized in 'twenty and 'twenty.
In addition, there are a handful of consideration points that are fairly unique to 'twenty and 'twenty one that are worth mentioning.
First our cash basis tenant population represented 12% of our ABR as of December 31.
Which leaves our ability to recognize revenue from these tenants in 'twenty and 'twenty, one completely dependent on the timely receipt of funds from them within any given reporting period.
Additionally, the cash base of tenant population of subject to evaluation and adjustment each quarter, which could also impact straight line rent.
Second and our supplemental on page four we disclosed that we recognized $9 $9 million and revenue during 2020 pertaining to tenant deferral agreement, which is a component of accounts receivable at year and the majority of which is due during 2021.
Third we have roughly $4 million and deferrals for which income was not yet recognized during 2020 due to lease concession structure, but for which payment is due in 'twenty and 'twenty one.
Stepping back and evaluating our 2021 operating <unk> guidance range of 76 to 84 cents and how it compares to 'twenty and 'twenty operating <unk> of 84 sent the.
The following key drivers should be considered.
First the interest expense has not typically been significantly volatile for us and we expect the same to hold true for 'twenty and 'twenty one.
Keep in mind, we will continue to advance our efforts at our announced expansions and redevelopments during the year, whereby we capitalized interest and certain payroll costs.
Second the net earnings impact from opportunistic transaction activity, if any combined with the expected 'twenty 'twenty one impact from our expansions and Redevelopments should be minimal are modest at best as those projects do not stabilize until 'twenty and 'twenty two.
Third our G&A expense assumption for 2021 as disclosed in last night's release accounts for one to two cents of impact compared to 2020.
This essentially lead same store NOI, which is impacted by your occupancy assumptions and noncash items, including straight line rent. These two components contained more inherent volatility than others, especially as we are still navigating through the pandemic primarily due to some of the same judgments and estimates we've been talking about for the last three core.
<unk>, including Collectability estimates and cash basis tenants determinations.
From where we sit today, we believe this initial guidance range is appropriate and we commit as always to clear transparent disclosure as the year progresses.
We accept that we continue to operate in an environment that poses a wider range of dispersion and outcomes. However, the sustained acceleration of our cash collection and the high quality of our assets as demonstrated by our positive aggregate leasing spreads for the fourth quarter as well as the full year and our balance sheet strength reinforce my confidence and our forward progress.
<unk> to come in 'twenty and 'twenty, one and.
And now I will turn the call over to Shane.
Thank you Julie our fourth quarter results reflect the ongoing improvement and our operational metrics as well as provide for a framework as we outline of our limited, but improving 'twenty 'twenty, one outlook and fundamentals and this unique operating environment.
And as Julie detailed and Q4, we achieved the second straight quarter of accelerating collections with 19 of our 'twenty for tenant use categories now above the 90% collections level, including 17 categories at 95 per cent or better.
And we continue to convert tenant negotiations into signed deals with in process of amendments falling to just 40 basis points of build base rent and Q4.
These efforts also brought our total address rent statistics to the 96% to 97% range for each of the last three quarters and in turn and also helps fuel our sequentially higher volume of lease signings.
While leasing volume in Q3 was our highest on a trailing 12 month basis, we increased our total number of lease signings by 12% and Q4, demonstrating continued interest and our high quality portfolio and solid execution within the platform.
And aggregate, our ongoing dialogue with existing and potential tenants helped us drive fourth quarter and execute of GLA to within 3% of year ago levels.
Notably we accomplished this velocity, while continuing to sustain and aggregate positive spreads, which also accelerated for the second consecutive quarter heading incrementally closer to stabilized patterns before the onset of the pandemic.
Looking deeper new leasing spreads, which measured three 3% and Q4 continue to show a heightened quarter to quarter volatility given and incrementally modest sample size and reflect our effort to balanced duration occupancy and economics and the current environment.
Our renewal spreads of three 8% sustained the positive comps during and throughout the pandemic.
More importantly, we continued to focus on forward growth with annual bumps of approximately 200 basis points on comparable new leases executed in the quarter.
Notably our lifestyle mixed use assets drove the average higher at 230 basis points for the segment and our fourth quarter leasing effort also help reduce our total ABR expiring in 2021 by 22% and our anchor ABR expiring in 'twenty and 'twenty, one by 37 per.
Non.
While our leasing velocity continues to improve we anticipate occupancy to continue a downward trend for the next few quarters and Q4 retail portfolio occupancy declined by 50 basis points to 91, 7%.
Celebrating from Q Threes 140 basis point sequential decline.
Helped by moderating impacts of COVID-19, and favorable seasonality.
Our anchor occupancy of 94, 7% and leased rate of 96, 2% continue to serve as an indicative foundation for our overall portfolio that will provide for cash flow and help us drive small shop signings and 2021.
While we faced and outsized year in 2020 on the bankruptcy front, we are left with a fundamentally stronger rent roll and we will look to build on that solidified base over the next few years of.
Of note bankrupt tenants accounted for just one 3% of our ABR at December 31.
Down from two 6% as of September 30th.
And announced bankruptcies, thus far in 'twenty and 'twenty one of accounted for just for locations and our portfolio.
During Q for bankruptcy backfill accounted for eight deals or 7% of leases executed with demand driven by medical and other uses.
While the focus on optimizing the fundamentals of our existing operating portfolio. We continued to advance our redevelopment and expansion projects in the quarter at one loudoun with conviction and the broader non cyclical strength of Loudoun County, and Northern Virginia, driven heavily by the technology sector. We elected to continue can.
Struction and as a result avoided a surge and lumber and other structural costs and delays and 2020 and are now poised to begin leasing this month driving incremental cash flow that will aid and our return to historical earnings levels as we track toward our existing stabilization target and 2022.
Specifically at our largest expansion project to date, we continue to advance toward our goal of and opening this spring at pad Ge's multifamily residential branded volume. These 99 units will serve to further expand and diversify our cash flows into the multifamily as we continue to execute on our meaningful error rate entitlements created.
Over the past few years.
Turning to the commercial portion of loud and we continue to complete interior finishes for pad Gs 33000 square feet of office space, which is now and lease for negotiation for approximately 90% of the GLA.
Across the street of pad H, we are installing drywall and other finishes for the remaining 279 multifamily units scheduled to deliver later this year.
At Circle East Ethan Allen opened in January and Shake Shack, our other anchor looks set for opening this month.
The lease rate continues to improve at a cadence of one to two deals per quarter and our pipeline represents over 50% of the GLA at the project, we remain patient and this difficult environment, but are encouraged by increasing fundamentals and interest as tenants start to open and the macro appears more favorable.
Pivoting to our 2021 transaction outlook.
We will remain vigilant for opportunities balancing asset specific valuation factors against the broader portfolio positioning and.
And capital allocation opportunities.
While the Julie outlined many of the financial specifics embedded within our guidance assumptions.
I want to emphasize a few points underlying our guidance and assumptions for 2021.
First we like most anticipate some form of recovery in the back half of the year largely driven by vaccine distribution.
With that we also believe the leasing volumes will be volatile, but continue to generally trend positively as the year goes on however.
However, with some level of uncertainty and structural overhang. We continue to believe the economic occupancy will be delayed while overall lease volumes increase.
In summary, we will see the majority of the economic benefit from the fundamental progress we will make this year specific to leasing volume and lease rate.
After 2021, we remain confident and the relevancy of our assets and our platform, which our results and the last two quarters have only reinforce however, our climb back to normalized levels of occupancy will take a straightforward combination of time hard work and pragmatism and while I am confident.
And this broader path forward the exact timing of these developments will only crystallized in the coming quarters as we remain focused on our goals of rent roll durability, and improving our foundation for sustained growth and our cash flows for the intermediate and long term.
With that I will turn the call back to Steve.
Thanks, Jane and Julie for your reports loads of information to Digest and we appreciate your time today I think at best we turn the call over to questions at this time operator.
Ladies and gentlemen, the floor is now open for questions and if he would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is and the question queue you.
And you May press Star two if he would like turbo for your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys and once again that is star one to register of questions at this time.
Our first question today is coming from Derek Johnston of Deutsche Bank. Please go ahead.
Got it thank you and.
Good morning.
Just wanted to dig in on the occupancy a little more of that Shane mentioned.
Where do you envision the occupancy crossing.
And what level of occupancy saddle, especially for shop tenants. So when I look at the model and kind of work.
When I look at the opportunity set is the trough likely and three Q 21 or for Q2, 'twenty, one and then thus setting the table for resumed growth, albeit from a lower base.
Hi, Derek Good morning. This is Shane I'll I'll start us off here.
I think one of the one of the reasons, we have such a wide range of its tough to say when and where we trough I would tell you that.
Consistent with my prepared remarks, we certainly see continue of dumped continued downward pressure on occupancy at least through Q2, if not through Q3, we do have some rent commencements coming online you know that 130 bps spread.
The most of that comes on and the second half of its about $5 million annualized so it'll take some pressure as far as the accretion up and occupancy but it's of.
Little speculative right now as to how far each segment goes and where we actually trough, but it does look like from.
From the Ark perspective, Q2 to Q3 is the time period.
Okay. Thank you that's helpful and and I guess kind of staying on this trend is what can you share of about your watch list as it stands now I mean do you guys did take back a lot of and.
And a lot of space and for Q and it was largely due to expected bankruptcies.
As the watch list basically washed out at this point.
As bed Bath and beyond now like firmly off the west of the rest of your centers and any.
The color on the updated watch list would be would be very helpful. Thank you.
Yeah, It's a great question and.
And we have obviously had some issues around our watch list of exposure historically I think one of the upsides from what has gone on and the last year of specific to our portfolio is exactly what what you touch on and that our rent roll continues to dramatically change and and certainly be more tangible and <unk>.
And a lot of respect so.
He knows obviously out of our top 25 at this point.
Dick's has moved into our top 20 Altra has moved up total wine has moved up so you can see sort of the hardening of our our top 25 from a credit perspective, and you're very point, our watch list exposure has diminished greatly, albeit painfully and the short term.
As far as what's remaining on the watch list.
I would tell you it's more categorically than it is any one named tenants at this point, you know movie theaters, which I'm sure will be.
And you know a broad based topic on this call and certainly through the rest of the year is is paramount to us it's diminished the 260 basis points at this point, we elected to offensively take one of our theater boxes back and South Lake and the quarter. So.
It's diminished, but as a category certainly high on our list and certainly you know restaurants and certain gyms.
And those are the three buckets, so much less of named tenant and and as you would expect more categorically focused at this point.
And Derek this is Julie good morning, I would just add to that the disclosure that we've included in the supplemental around our cash basis tenants. So that figure has migrated up again in Q4 to 12%.
And it's up from about 10% at the end of Q3 and 8% at the end of Q2.
And that subset of tenants and you know, even though we collected over 94 per cent for the portfolio in aggregate the cash basis tenants. We only collected about 65 per cent from them during the fourth quarter and I think you know when you said when I think about that element and certainly great question on occupancy as it relates to how we're thinking.
And about O F a flow for 'twenty 'twenty, one and I think of occupancy is certainly of a variable and of factor, but things like cash basis tenants with 12 per cent of our ABR on the cash basis, knowing that I can only record revenue to the extent, they pay and the quarter or and the in the year for that example for that for that matter also leads to some of that variability so and you know Jay.
<unk> is I can share off to a strong start we've got 93 per cent collected from our tenants and January but again that cash basis tenant population and we only have about 65, and the and that 93 I'm, referring to kind of new 2021 rent. There's also.
And you know this layer if you will of deferrals. So we didn't we didn't really have much of any deferred amounts due in 'twenty and 'twenty and I mentioned and my prepared remarks that we did collect out of 98 per cent of those much of what is due from those deferrals starts in January so we haven't yet collected that 93% from that subset of.
It's just another element of variability that we've contemplated in that 8% wide range.
Thank you very much.
Q.
Thank you. Our next question is coming from Chris Lucas of capital One Securities. Please go ahead.
Hey, good morning, everybody, Hey, Julie if I could can we go back the fourth quarter G&A I don't know if you touched on this but could you maybe give us some hum from color.
For around the <unk>.
And it will spike.
Sure Chris Good morning.
As I mentioned and in our and my prepared remarks.
The company elected to award discretionary incentive compensation now historically, our incentive compensation is based on a kind of standard metrics and it's not of a discretionary nature and zinc.
And and many others were and the boat in 2020, where he was the very different year and that historic practice, whereby we would've been accruing quarterly.
It was not something that was that we had support to accrue and frankly until fourth quarter. So you see the effects of the results of the evaluations made for incentive compensation for the executives as well as employees reflected all in the fourth quarter. So it is much much outside of <unk> compared to the build up for the year and that was one of the reason.
And so that we chose to guide in 2021 because of the the Lumpiness. If you will of the quarter to quarter G&A in 'twenty and 'twenty.
Chris and then.
And I'm gonna add onto that one thank you.
I had mentioned at the onset of the pandemic that we're gonna be sharpening our pencils from a G&A perspective, and and we did do that if you'll see year on year decline and G&A from 2019, obviously the guide at the midpoint is a bit higher than what we experienced not only in 'twenty, but also in 19 and I would just yeah and Julia had mentioned.
In terms of the Lumpiness I would caution people from taking the Q4 and annualize Inc. From our perspective, where we're trying to get back to some level of pre COVID-19 levels in terms of G&A, which include things like travel and conferences, which we're hopeful we can get to and the back half of the year as well as you know bonuses not on a discretionary.
The basis, but at a target level basis, so should those things.
So I would say adversely if you will meaning we're not traveling you could see that number of com to the lower end of the range to the extent that you get to the higher end of the range means that we're just having a bang up year and and all the things are great. So just wanted to get some perspective on the range vis vis the fourth quarter print.
Thanks, Steve for that I guess I, just wanted to make sure though that for for 'twenty, One and then.
Should we be thinking about volatility and that number as it were sort of be a smoother number through the course of the year.
Good question, Chris and I would say it would be a smoother number as of as.
We've seen in the past I would point out that Q1 tends to be a slightly elevated for G&A for some other compensation related reasons and then you know as we get frankly as we get towards call. It Q3, and certainly in Q4, we are truing up for Truing down and you sort of expected payout off of target and those.
Quarter, So I.
I would I would expect less lumpiness than what you saw Q4 versus the previous quarters. This year.
Okay. Thanks for that and then Shane just wanted to talk specifically about the <unk>.
And I guess going.
Going into the bankruptcies of roughly 28 units.
And where does that where does that stand now and how does the.
I guess the protests that the landlords of posted against the settlement impact either positively or negatively the potential outcome for for whatever remaining units there are.
Yeah, our C&I exposure Chris is as.
Fairly diminished and want to say, we're 50 basis 60 basis points something like that now.
And so well.
You know the the protest around the the the final bankruptcy resolution I think remains to be seen.
But I think for us.
All things considered much less impactful than it was pre bankruptcy that's really the only color I could have on on the tenant as it relates to us.
And then numerically were down to 18 spaces at year end.
Off the off the page of the top 25 tenants and the supplemental for sure.
Sure. Okay. Thank you for that and then the change of sticking with you for a second when you think about how your breakdown.
We're sort of from various box sizes. If you will where is the most strength that youre seeing in terms of leasing activity and where is the most challenging.
The size right now.
It's a great question and I don't.
The appeal of a few layers here, but let me give you the setup from a pipeline standpoint.
So our pipeline is significant we we're pushing about 400 basis points of the ABR on the pipeline right now and.
And there's a lot of the sprouts as you know Chris and the economy that are just waiting for kind of that last sparked too and in the form of really of.
Path forward on vaccine distribution and hopefully resolution later in the year. So.
You know the foundation of set there and we see outside of the pipeline. There's the other indicative as I was reading over the weekend looking at and kind of new business applications.
The U S January was up $70 73 per cent year over year with retail far and away by a factor of two to one and first place with a little over 100000 application. So and that's what we see you know the of the.
Anchor space, we're still over 96% leased.
And and you know, it's a little more stable than the headline would tell you and and real class a space I would say is much tighter than the broader denominator would would kind of indicate.
But the inline space is interesting I would say.
One and four of our tenants and and the shop space pipeline as restaurant.
And it's it's counterintuitive until you really think about the availability of broad based cheap debt and the entrepreneur and entrepreneurial spirit is still alive and well and it's you know the restaurant category has always been very resilient and so in some ways of surprising sums ways of isn't when you kind of do the math and put the pieces together.
That is the one piece of our industry that is really kind of at the.
At the middle of the creative destruction of process. So we see a lot of lessons learned quickly and.
And on the on the back of that space today that has relatively new black iron and relatively new build out.
There is considerable demand for those and and we anticipate turning around a lot of that space pretty quickly this year.
And again, what sort of with and increasingly indicative macro healing and so the toughest space. Conversely, I would say it continues to be kind of that five to 10000 feet, there's less and less use of users that will take a clean 10000 feet and that's been you know.
Increasing over the last couple of years.
But at the top and bottom smaller shop and in the larger space continues to be a.
Demonstrate considerable demand.
Okay. Thanks for that and then just on the restaurant demand that you're talking about is that coming from and <unk>.
National or multi regional chains versus sort of the.
And sort of.
We're localized for entrepreneur or is it pretty broad based.
And I would say it leans more towards the individual or smaller regional players than it does nationals.
Okay interesting. Thank you that's all I had this morning.
Thank you thanks, Chris.
Thank you. Our next question is coming from Todd Thomas of Keybanc Capital markets. Please go ahead.
Hi, good morning.
Shane first question I guess, just following up on on that commentary, perhaps around food and restaurants, and and maybe merchandising your centers and in general is that likely to change at all going forward. Your your lifestyle and mixed use segment skews more towards.
Food and experiential maybe local shops as well how should we think about.
Leasing and the.
The merchandising of the center is going forward.
Hi, good morning.
No.
And I'm hesitant to commoditize, the commentary I think that it depends on it's less about the configuration of the centre mixed use or neighborhood in this case and more about what makes the corridor of the center is in tick and what drive sales. So.
And those assets and corridors, where we see.
Historically had been driven by daytime population and ordinate office attendance in this case versus those that are driven more of kind of and 18 hour and have a broader nightlife as the contrast, we have been hit harder by those assets that have have historically.
Historically relied on daytime population than the broader 18 hour type assets that have a much more lively night component and so.
It depends I think that we still very much view restaurant regardless of format.
As a significant driver of traffic, we just need to understand longer term, what the stickiness is of behavior, especially as it relates to office attendance and how that impacts us and and we won't understand that even by the end of the next year, but again I think looking at the pipeline and.
The indicative momentum buildup and and specifically that category, we still feel great about them getting a lot of those deals executed them hopefully here in short order.
Yeah.
Okay.
And then Julie I guess of couple of questions around the 'twenty one guidance so.
So the 20 cents of O F F O in the quarter or 80 cents annualized that's the midpoint of the 'twenty one guidance what are the what are the key drivers and the model that would result in the sequential decrease in the O F. F. O. It seems it seems like G&A and maybe straight line rent were a bit outsized in the quarter.
Relative to where they may be on balance during during 'twenty one just.
Just curious if you could talk about that and what the the.
And the downside impact might be coming from.
Sure Todd Thanks for the question, you know and we tried to share.
Sure a lot about our framework around guidance and and both the release and then also in our prepared remarks, and and you're right. We G&A as we put out there is certainly an element when I think about same store NOI and the and again, we're not we're not issuing the same store NOI guidance today.
But some of the variables within there are of course of your occupancy assumptions, which I think Shane alluded to and we've had a question on already.
And then really for for the balance of lot of it is around collections and it's keeping in mind that we have you know $9 $9 million that we recognized last year and 2020, that's kind of a fair way down the fairway deferrals that we need to collect on in 'twenty and 'twenty, one and on top of that I mentioned and additional $4 million and deferrals that didn't qualify.
For.
For that preferential revenue recognition treatment, so it's not and revenue yet, but it's due in 'twenty and 'twenty one so its collections on the existing 2021 amounts, but also these deferrals and it's also heavily dependent on collections from our cash basis tenants and and again cash basis is what it what it sounds like literally I cannot recall.
The revenue if it comes in you know of day after the quarter and after record it and the next quarter and with 12% of our ABR on the cash basis, you know, it's something that I can and we can influence and and we will certainly continue to try to collect from tenants.
Finally, but it's a little bit of them out of our control as well with that timing factor and I think those are some of the same store NOI components that have the most variability outside of same store, though I and and you mentioned this noncash and specifically with the noncash straight line rent.
On the.
That is a is a figure that you know what I'd say is it's probably one of the more significant variables and our guidance that is hard to.
And of kind of see I guess, and it's hard to call out of runway of run rate.
Look back a few years and think about straight line rent and we had a mountain and the 4 million and $5 million range and those were doing some of our record leasing year. So historically for us I'd say the single driver largest driver for positive straight line rent has been new tenants, taking occupancy and the impact of those tenants that have rent bumps, especially.
And if they're offered a couple of months of free rent those can be material contributors to straight line rent. So you know Shane commented on our expectations around the leased to occupied spread.
Widening and you know the straight line rent balances for those 12 per cent of tenants on the cash basis are essentially frozen and so they will not grow so if if off.
If I were to point you to one element outside of you know some of our assumptions within the same store NOI. It's it's the straight line component and I can tell you that you know several points within our guidance range contemplates a negative straight line amounts for 'twenty and 'twenty. One so hopefully that's helpful to understand some of the components.
Okay.
And with with regard to the cash basis tenants.
I guess, Steve you touched on the capital of that that that's been raised by many of your tenants, which has enabled companies to a.
Reinvest and their business reduce leverage and some of your tenants have raised significant capital even in some of the categories like theaters that I suspect, we're not paying rent over the last few months.
Does that change the conversation at all around rent payments are you able to engage and more constructive conversations with some of these tenants that publicly disclose the their capital raising activity and and and I guess, Julie you know relative to the 65% cash basis collections that you reported in the fourth quarter and I think you said, where you know <unk>.
Consistent in January the does that does that lead to other protections going forward.
Well I'll start Todd. Thanks for the question Yeah, I did say in my opening remarks that there were a number of tenants retailer specific that were accessing the debt markets, which obviously implies that there's some level of comfort and lending to those folks and I also said that and you know while debt doesn't necessarily mean payment of rent it and I think our debt issuance.
And there's a little bit of help for that business, where we should fully expect for rent and you know that.
That being said on the theater side of Shane and pointed out theatres are still a watch list for us as well as well as health clubs and then Theres just the number of other retailers that have been out there that are pretty much at the top of our list that are just you know, giving us even more certainty around our anchor occupancy and ability to pay but with that I'll turn it over to Julian and the <unk>.
Second part of the question sure and you know.
The the collection levels from our cash basis tenants of certainly improved during 'twenty and 'twenty and if I look back at Q2, we were collecting about 30% and in the thirties low thirties and in Q3 from the cash basis tenant population at that time, we collected of in the low 50%. So it's improving when and when I get to the mid sixty's and and and I.
I can share with you within that 65 per cent collection level. We do have you know all of our theaters on the cash basis. For example, and we collected 38 per cent from them during the quarter, a little bit more came and after year and does he see and our supplemental disclosure, so and setting theaters aside the the balance of non theater of cash basis tenants.
We collected about 80 per cent from them and Q4, so and certainly improving and and again, it's it's one of the more significant components that we flexed.
And and and provide some different scenarios as we went went ahead and and went to set guidance, but again. It's a it's early I think you know what I can commit to is being transparent as we reported first quarter results and going forward to be very clear on how the subset of our tenant population fared and and I think you know just if I haven't.
Mentioned, yet there is certainly the possibility that some of these tenants come off the cash basis, but I can tell you that that is of much higher hurdle and you know we typically need to see some demonstrated a several quarters of paying and full and paying on time from these folks to move them off and it's much easier to move on and I know you know we have increased that populate.
And from where we sit today, we're very confident that 12% today is the right amount, but that number could grow I've seen it grow each of the last two quarters and you know it's early and the year, but it's something that again, we will continue to report on each quarter going forward.
Okay, Alright, great. Thank you.
Thanks, Tom for you.
Thank you. Our next question is coming from Paulino of real harsh Smith of Green Street. Please go ahead.
Well the morning.
And I was wondering Hudson Neil on the long term growth.
And for.
And the open markets and your Inc changed and the recent 12 months and.
And I saw and what are the markets doesn't Inc.
True worsen any major and any comment on the main major trends for me and very helpful.
Sure I'll start that.
You know and I think it's a it's a and evolving picture and certainly in a pandemic struck and environment, it's hard to.
Have any broad based takeaways that extend.
And with permanent so you. So I can tell you from a collection standpoint kind of Reis.
Recent indications.
Our collections of stabilized, but for California really there is no other disparity I mean, even in New York, we're almost out of 100 per cent collections.
And what California, though which only has two remaining multi tenant assets you know we've been pretty vocal and since just after IPO. That's at the state itself is not a market, we're going to be and long term, but our collective for our collections experience there and the quarter and was probably a blended and the <unk>.
<unk> somewhere and including the theater so.
And that remains a very tough environment on surprisingly from a collection standpoint long term growth I think you know that that story continues to be written we have about 30% of our portfolio and Texas, Texas continues to have an order net population growth.
Phoenix continues to do well, which is one of our top 10 markets Seattle, Atlanta still does very well for us as well as the mid Atlantic So.
Its early I think there is some structural change going on and we'll see what kind of permanent and see the.
This has as it relates to you know remote office and and and other things that would kind of shape. Some of this long term, but what we can look at right now is as population growth and and collections experience and.
And for our current portfolio and the top 10 markets. The lion's share of where we are and where we want to be long term.
Thank you.
And then and another question some of your peers having day.
The percentage rent arrangements and with some with some of other tenants.
And so for them to provide them some flexibility on helping them get to the other side of this crisis.
The done something similar at all and.
Any color around the topic with the.
Yeah, we absolutely have but the.
And I would say that the hurdle to that as debt to the extent we've agreed on some interim percentage rent as a bridge back to normalcy.
Those tenants have to be tenants that we believe.
It's prudent to continue to invest and because that's what it is it's not only time. It's also capital that we are theoretically for going so we've done it on surprisingly we've done them with some of our restaurant category of the larger format restaurants that we have.
We certainly engaged and the other categories.
I think we've got we've done it with the one theater as an example of one off operator, and and certainly a few Jim so the the categories that continued below our 94 plus percent and the corner or are the ones that we have certainly done.
The percentage rent interim deals to get them kind of the other side and generally we try to do that at a quarter to no longer than two quarters forward.
So most of that if not all of that should burn off you know March or at the latest June this year as we look at again and at a forward kind of of ramp on the macro so.
We will see what happens, but we're positioned for a bridge for the other side without encumbering that space long term with below market structure.
Yes.
Thank you very helpful.
Thank you.
Thank you. Our next question is coming from Katie Mcconnell of Citi. Please go ahead.
Great. Thanks. Good morning, everyone can you talk about your outlook for the Mark to market upside on the bankruptcy exposure that you have lots of proof point and to what extent of the bankruptcy backfill top drives me and Chris and you like.
The things that didn't quite yeah.
And Katie I'll I'll start with just a quick mention of our bankruptcy exposure. It's it's lower than it has the last two quarters at about 1.3 per cent of our ABR as of the end of the year.
And I'm sorry, the question was specific to our remaining exposure.
Yeah, and the especially you haven't addressed yet our debt standpoint.
Although we haven't addressed yet.
And what do you have a point and the half life.
Yeah, the one country.
Yeah, So about one 3% currently.
It's still very fluid I think the good news is that.
When we look at our occupancy which has winnowed, obviously down to you know the nine.
The 91, plus pushing 92 at this point and again, the the remaining tenants and the tangible increase and credit.
And in conjunction with we were over 500 basis points of bankruptcy last year, and now where you don't want and and 40 150 basis points. So it's a fluid process, albeit much smaller and it's hard to say kind of where this ends up and <unk>.
'twenty 'twenty one you know it's hard to it's hard to believe that.
Looking at the current environment that you know was 16000 plus stores closing last year, we would be anywhere near that number but again that assumes like we have and our broad based modeling that there is some macro improvement mid year, so still fluid, but markedly diminished bankruptcy activity and our outlook is that it should be.
Again, and with some improvement and and the macro economy and mid year.
Okay.
Okay got it. Thanks, and then can you just go kind of thinking about the timeline for starting some of the projects you've already entitled and your Shadow pipeline and has that changed at all of the last few months as you've gotten more clarity around share, ladies and capex needs and the Dr. Kim.
Sure let me.
I guess, it's worth just starting kind of where we're at right. Now so development continues to be a bigger piece for us as as the company and our brand and obviously, that's something we spent years positioning for and regards to monetizing noncore assets and creating debt that are right and entitlement value.
So we've got the for projects on the page right now that's six cents on a stabilized basis and I think that's one of the more unique stories and our space.
And it should be stabilized at the end of 'twenty two.
Hum.
South lakes of 100% leased will deliver that shortly on track on budget just the single tenant pad deal the shops of quarter field, we delivered all of the in the quarter of the remaining national fitness user we have pushed the rents start out and that was part of a broader portfolio of negotiation.
Well, it's still of 100% leased a bit more carry so the the.
And overall return and bandwidth has come down, but it's still double digits and really related to just more carry as we pushed out run start which turns to our two biggest projects circle East. We continue to add one to two leases of quarter were 17% now and.
And you know that's.
That's an asset the continues to garner more interest and I think that prospectively with the two colleges coming back directly adjacent to US and in addition to the multifamily taking off across the street and just the corridor of continuing to mature.
We expect great things from that asset this year and we are certainly on track for a Q3 Q4 of 22 stabilization there.
And then turning to go out and far and away our largest project very important to our shareholders and certainly to our brand I'm happy to report that we delivered pads early and as I said in my prepared remarks I'm. We've actually released our first department before we even went live with leasing.
And you know looking at the office and the commercial portion of that our office has you know where and leased or LOI for about 90 per cent of the space already largely tech driven and that corridor.
And the the other retail 35000 feet or so we have about 30% of that enacted some form of vacuum negotiation. So again, all and six tenths of accretion.
But it's taken a lot to get there and to your point, we want to stay and the accretion as far as delivery cycle goes. So we have naperville teed up and we'll talk through that as the year progresses and that was entitled last year. We also still have about 4 million square feet of of commercial and general. So we continue to look.
Loudoun Uptown, we continue to look at merrifield as far as our ability to go vertical there and finished the entitlement.
So.
And I'm hesitant to give you a date as to when we will tie into the next generation of projects.
I'd tell you were looking at it and we're trying to balance staying in the accretive delivery cycle with risk and and the macro developing so stay tuned, but we're certainly contemplating our next project as we speak.
Okay.
That's really helpful. Thank you.
Thank you.
Thank you. Our next question is coming from Linda Tsai of Jefferies. Please go ahead.
Hi, good afternoon, and I apologize if I missed this when you say leasing will be volatile are you, implying a little bit of a pullback for <unk> and generally would you expect to sustain the run rate of the last two quarters in 'twenty and 'twenty one.
Hi, Linda good warning, it's hard to say I think that.
When we say leasing is volatile I think it's all things leasing and and including occupancy and lease rate I think from a from just a and overall topline trend as we talked about earlier.
What we see all things considered is a continued momentum at the topline and hard to say what the volume of this quarter to quarter, but just generally throughout the year, we should we should increase our leased rate.
By year and from where we're at but we think occupancy will be lumpy right and if we if we think we won't trough until Q2 of Q3, but and tend to kind of GAAP out on the lease rate. That's some of the volatility we talk about them and we think of it.
And I think more importantly, when you think about the arc and bandwidth over our earnings. This year, that's certainly a component of that and when we.
Obviously, you put a lot of thought into the bandwidth and and some of the scenarios. We contemplated where you know just how deep is the structural overhang around labor or permitting process, especially of kind of everybody comes to the table at once.
And that's that's certainly part of our consideration there so it will be lumpy, but again as a trend and we certainly see momentum at the top with occupancy and playing catch up throughout the year.
Thanks for that color and then the bankruptcy backfill as you said there were eight of them and what kind of tenants where they.
Kind of all over the board really you know, we've we've done believe it or not little health and beauty, we actually had the fitness and there.
A little bit of a restaurant and I think we had one of them for the larger.
Like a total wind type concept. So you know depending on the size kind of all over but.
Space is still and demands and like we talked about earlier I think the class a space its truly hard to appreciate just how constricted that supply is but I think it will.
It will continue to demonstrate throughout the year.
Thank you.
Thank you.
Thank you. Our next question is coming from Floris Van <unk> of Compass point. Please go ahead.
Oh, Thanks for taking my question guys.
Wanted to talk a little bit about the.
Capital allocation, if you will I mean, you have a $170 million pipeline, which you are making some good progress on $100 million has basically been spent already so you got incremental $70 million to go.
You're probably going to retain and call. It 30 of 40 million of of cash after dividends this year.
And as Youre thinking about building up share and you sort of alluded to the the shadow pipeline by the way you haven't mentioned carillon, yes curious to see where that stands as well because that's obviously significantly more spend.
As youre thinking about doing the future projects as well, which appear to be decent returns on invested capital.
And you thought about.
More non core sales and maybe if you can comment also.
And potentially on the opportunity on the any ground rent monetization and your portfolio.
Sure Floris good morning.
Look I think obviously first and foremost our best capital allocation is to get this portfolio back to stabilization through through leasing capital and.
And I think you agree.
After that though Oh, we're going and we mentioned we would be opportunistic on the transaction side, we will talk about development and a minute.
And to that point.
And we would anything we do on the transaction side. There was a couple of things to think about one to the extent, we acquire anything it would be more of the same that we've done historically, which would be phenomenal dirt that's kind of and a short to medium term covered land play that we think we can densify the longer term.
We would certainly more likely acquire first and then later and that's simply because the market is tight and that product is very tough to find.
But also of the capital we would use to fund that as is.
Very much from the pool, you're touching on and so we've got 500 basis points or so of ABR and ground leases.
And we view that as a very liquid pool with the very sticky pricing.
And those two things combined and addition to the dynamics on the acquisition side.
Kind of mandate that we wouldn't buy before we saw assuming we transact.
As it relates to development.
Again, we think these returns are very compelling, especially with the larger mixed use projects.
These projects that have scale and mass and you can the basket and better we very much of the U S. As more of a rarity than they were historically.
Which gives us in order to pricing power, especially through the vertical so love to keep building that pipeline and.
And we will certainly keep that in mind as and allocation goes, but we certainly need to stabilize the leasing first carillon, specifically I didn't mention it.
It is very much still and our thoughts it is still entitled obviously with considerable commercial and multifamily. The hospital will open in late spring and we continue to have conversations around medical office have not gotten anything off the ground.
And to where we would feel comfortable going alright would have to be highly leased on the medical office building to go at this point, we haven't gotten there, although we still have very fluid conversations around that.
And we still have conversations around the multifamily and I think we could go with any number of partners that would still like to go on the multifamily what has changed and surprisingly has been the retail REIT retail has changed dramatically. Since we started that project. The good news is the wet and dry infrastructure and the ground is still at a point.
Works very malleable, we can kind of go wherever we want and.
So there's not a lot of of lost investment and the and the infrastructure. So I'm not saying, we will or wont I think it depends on how the year shapes up I also think that to the extent and we do go on the multifamily as an example, and we've talked about this before you would expect us to contribute the land to a joint venture.
And we would own up to 50% of that with no further capital all the obligation, which would obviously continue to demonstrate the value and and certainly be accretive and short order. So we have optionality florists and and that's really what we're structured for right now we have options and we will take them into consideration.
As the year develops.
That's great color, just just to make sure that I. So.
You are looking at a couple of <unk>.
Acquisition potentials, and those would primarily be funded through things like ground lease.
The dispositions is that is that the way to think about it.
Yeah, that's correct for us.
Great.
Thanks, that's it for me.
Thank you.
Thank you our last question today is coming from Mike Mueller of J P. Morgan. Please go ahead.
Yeah, Hi, just wanted to go back to the guidance again, so if the quarter was 21 when you add back the straight line write off that annualized and still about 84, and <unk> talked about losing occupancy, but I'd imagine that's reserved against already for not paying anything in terms of cash so what's the implicit assumption that.
Yes.
There is no improvement and reserves or collections or maybe they take a step back is that part of the scenario.
Oh good afternoon, Mike Thanks for the for the question.
I can't stress.
And I can't stress enough the variability in our expectations around really two main concepts and within the same store NOI.
The collections right. So you know we modeled various scenarios and we're being aware that we've got a significant portion of our our tenant based on the cash basis of accounting and that we are collecting.
And at levels far below the portfolio average there and I think for some at least some point into 'twenty and 'twenty, one and those trends could continue again, where all of I think talking about our back half of the year improvement.
Again, we could move additional tenants to the cash basis, which can be quite noisy on the straight line rent front. So none of them outside of the same store NOI, but on earnings and we've afforded for some possibility. There are again, our 12 per cent is certainly far below many of the peers and it's not to say that our 12 of our 12 per cent is right for our biz.
And this today, but that is the figure that could change. So you know I think as I was trying to connote and AR and AR and AR and the answer previously today.
Great line rent has been strongly benefited by in the last couple of years. So call. It 2019 2018 by the strong leasing years that we had moving tenants and tenants with rent steps tenants with some element of free rent significantly boosted those figures and then the negative what are we and negative $2 million or so and straight line for 2002.
<unk>.
And was impacted of course by moving more tenants to the cash basis, but again. These tenants now can't grow the straight line can't grow. So if they were elements of growth. Prior we're not seeing that and 'twenty 'twenty. One. So again just trying to point you to the.
Variability and potentially you know.
And I don't want to say illogical, but and non linear nature of straight line rent and what that can do again committed to transparent disclosure every quarter and and I'm I'll be sure to speak to this point on calls going forward as well.
Got it and maybe lastly, so does it feel like 'twenty. One is the trough year or I know, Sean you talked about the stabilization of 'twenty, two and should we think of 'twenty. Two is the trough year, where you begin to inflect.
Oh, she and stabilization comments I think were related to our developments for us as opposed to the okay.
Yeah, we can tell when you think we still feel 'twenty one some point of 'twenty, one is trough occupancy and building leasing momentum should push us well into 'twenty two on on the stabilization benefit.
Got it okay that was it thank you.
Thanks, Mike.
Okay.
Thank you at this time I would like to turn the floor back over to Mr. Grimes for closing comments.
Well. Thank you everybody for your time today, we know that there's a lot of information and here to digest and pretty much say this every quarter, but this quarter for sure there's quite a bit to digest.
And offer up to any of you that need further clarification as you start to digest. This information more and we're always available to help you and this process and we're encouraged by everything that we put out today in terms of.
What I think we have in terms of disclosure and that will only be solidified as quarter on quarters are the quarters past Q1, I think can be incredibly telling and it for the most part is right around the corner and so.
And so we will be talking with you all very soon and hopefully with continued progress. So thanks again for your time today.
Ladies and gentlemen, thank you for your participation and interest.
You may now disconnect your lines or log off of the webcast and enjoy the rest of your day.
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