Q4 2020 Weingarten Realty Investors Earnings Call
Good morning, and welcome to the Weingarten Realty, Inc. Fourth quarter 2020 earnings call. My name is spread and I'll be your operator for today at this time all participants are in a listen only mode. Later, we will conduct a question and answer session during which you may dial star. One if you have a question. Please note. This conference is being recorded and.
And I will now turn it over to Michelle Wiggs, Michelle you may begin.
Good morning, and welcome to our fourth quarter 'twenty and 'twenty Conference call. Joining me today is drew Alexander Johnny Hendrix, Steve Richter, Joe Shafer as a reminder, certain statements made during the course of this call are forward looking statements within the meaning of the private Securities Litigation Reform Act. These statements are based on management's current expectations and are sub.
Due to uncertainty and changes in circumstances actual results could differ materially from those projected in such forward looking statements due to a variety of factors more information about these factors is contained and the Companys SEC filings also during this conference call management may make reference to certain non-GAAP financial measures such as funds from operations or <unk>.
<unk>, both coronary and which we believe help analysts and investors to better understand Weingarten operating results reconciliation to these non-GAAP financial measures is available and our supplemental information package located under the Investor Relations tab of our website and on the.
And I'll turn the call over to drew Alexander Thank you Michelle and thanks to all of you for joining us. Thank you all for your patients with rescheduling our call from last week, we felt that moving the call was for the best as power and Internet was inconsistent and our team was working and some difficult conditions.
I want to reiterate that our first priority continues to be the safety and wellbeing of our associates tenants stakeholders and the broader community as we begin to hopefully put COVID-19 and behind us.
We are pleased with our operating results for the quarter, our cash collections continue to trend favorably, which clearly reflects the strength of our transformed portfolio of primarily grocery anchored centers located in the southern and Western United States as most know weingarten embarked upon a multiyear transformation several years ago, we <unk>.
Just on centers with stronger demographics, and selling centers with watch list tenants our transformed portfolio today is much better positioned for growth, we've always believed and the Sun belt and the growing popularity of the states and which we operate will further enhance the value of our strong portfolio.
We continue to strategically home and our portfolio exiting Charlotte North Carolina, and Dallas Fort Worth, Texas during the quarter, both good markets, but we didn't see getting a real presence and either so strategically it made sense to exit.
For the full year, we sold property totaling $248 million purchased $167 million of assets and invested $75 million and our three new development projects.
Subsequent to year, and we sold two properties one in Tucson, and one and Raleigh, we were especially pleased with our purchase of the remainder of village Plaza at Bunker Hill here in Houston, certainly one of the best properties and our portfolio Johnny will discuss this further and a little bit.
While there are challenges were especially impressed with the production of our leasing team and this unprecedented economic environment as they've already gain commitments from quality retailers for several of the recently vacated junior box anchor spaces.
And we still have a lot of hard work ahead of us as we seek to return to full occupancy, but the multiyear transformation of our portfolio has certainly made the road ahead easier and.
<unk> transformation resulted in a higher percentage of grocery anchored centers and much improved tenant base and most importantly, a much stronger balance sheet with little near term debt maturities.
With respect to our dividend, we declared an increase to <unk> 30 per share from <unk> 18 per share or cash collections remained strong we have approximately $10 million of annualized revenue from leases that are signed but not yet paying rent and.
And and additional robust pipeline of over 60, new leases that are under letter of intent and and our legal department with annualized rents greater than $7 million that makes us very optimistic as we look to the future non.
Not only does this make us comfortable with our 2021 dividend. We're also bullish about 2022 NOI grew up with no material debt maturities this year and reduced Capex requirement. We are also very comfortable with our liquidity and we'll certainly monitor conditions and our cash flow, but as mentioned we are optimistic.
<unk> that the worst is behind us.
Finally, all three of our large and new development projects are progressing nicely. There is minimal additional investment for completion and leasing is going well.
Central was nearing stabilization with retail at 98% leased and residential at 89% leased at West Alex and residential is currently 46% leased retail 82% leased and we're very excited that Harris teeter is under construction with their opening scheduled for this summer.
At the Driscoll and Houston the residential construction is nearly complete and were 47% leased these are great projects, which will begin to contribute meaningful cash flow. This year and they are creating good long term shareholder value Steve. Thanks.
Thanks, Greg and core at that though for the quarter ended December 31, 2020 was 43 per share compared to 53 per share for the same quarter of the prior year. The decrease from the prior year as a result of the ongoing impact of the pandemic on our operating results, which included abatements of rent tenant fallout.
And reserve recorded for bad debt expense and uncollectible revenue during the quarter, which together totaled about eight cents per share.
Also contributing to the year over year decrease was our disposition program, which cost us and additional <unk> <unk> per share compared to the same quarter of last year.
A reconciliation of net income to core <unk> is included in our press release.
With respect to our balance sheet, our $500 million revolving credit facility is totally available during the quarter, we repurchased 832000 shares of our common stock at an average price of $16.66 per share with proceeds from the disposition program.
With no material maturities until late 2022, we have adequate liquidity after the payment of dividends to comfortably sustain operations and pursue select growth opportunities.
Finally, I'd like to address 2021 guidance.
Well there is a great deal of uncertainty remaining regarding the impact of the pandemic. We've run many possible scenarios to find the middle of the road with how our transformed portfolio will perform this year.
This guidance is based on a gradual improvement and the economy and retail environment as the country moves to the vaccination process during the remainder of the year.
Occupancy is expected to bottom out midyear and build from there.
Guidance for 'twenty and 'twenty, one core F. F. O is a range of $1 65 to $1 75 per share.
The range of guidance for both net income and that's F O R predictably wider than normal due to the significant uncertainties let.
Let me highlight a few components to provide color around some major drivers using numbers at the midpoint of our guidance for simplicity.
First this guidance anticipates that bad debt uncollectible revenue will decrease from 2020 levels, but this benefit will be largely offset by tenant fallout and terminations. Both fallout that has occurred as a day and additional fallout anticipated.
The guidance does not anticipate taking any new leases to cash basis. This along with our normal process. The budget straight line rent will result, and a benefit and straight line rent at <unk> 12 per share due to the projected absence of any straight line rent write offs in 'twenty and 'twenty one.
Third our development program will contribute a penny per share in 'twenty and 'twenty one and this includes NOI coming on line of eight offset by a reduction in capitalized interest of five cents and a reduction in capitalized overhead of <unk> <unk> per share.
Finally, we have our transactions activity, our 'twenty and 'twenty dispositions will reduce 2021 F. F O by seven cents, which is partially offset by 2020 acquisitions totaling four cents per share.
This guidance also includes the impact of 100 million to 150 million of dispositions, which is front and loaded given we've already sold about 54.002 million and 21.
We forecast acquisitions of between $50 million to $100 million, which is projected to be backend loaded.
The net impact of these projected transactions will reduce F. F O five cents per share and 2021.
There are certainly a lot of assumptions, but we hope this helps build the bridge between 'twenty and 'twenty actual results in 'twenty and 'twenty one guidance same.
Property NOI guidance will not be provided initially, but maybe added during the year. Our guidance specifics are included on page 10 of the supplemental Johnny.
Thanks, Steve our transformed highly diversified portfolio continues to produce results at the top of our peer group.
As of February 12, the fourth quarter collections were 94% of the rent billed or social tenants, including restaurants, we're 96% and non essential was 91%.
Large format gyms and theaters continue to lag behind all other categories.
Only two 7% of our ABR comes from these two categories.
Regionally collections have been consistent across our portfolio with the exception of California properties.
Where we collected 87% of the rent billed in Q4.
California's recently lifted some restrictions so we believe Goldman collections will improve there.
For the company as a whole January collections trajectory is similar to the last several months.
As of February the 12th we've collected 93% of the rent build most of the portfolio has benefited from our geographic positioning and high growth CRO business low tax states not only containing the first areas to reopen but also enjoying significant inward migration.
Occupancy for the portfolio fell to 92, 9% from 93% last quarter, that's not nearly as severe as we had feared.
Keep in mind, we still have 3% of our tenants who have not signed any sort of agreement and who have not paid rent.
The company is committed to working with those tenants, we can help but some will not be able to make the transition post COVID-19.
It is important to note there are many of our tenants who are thriving supermarkets medical services general merchandise home improvements and sporting goods wine and liquor electronics discount clothing home furnishings pets financial services and craft make up 50% of wine Garden's ABR.
Collections for the categories, where 98% and the fourth quarter. These tenants are healthy and many of the categories are expanding.
We're experiencing strong demand for available space during the fourth quarter, we executed 81, new leases and 91 renewals new leases represented $6 $7 million and base minimum rent. This is the highest fourth quarter production volume we've generated since 2015 the pie.
<unk> for new leases as strong over the last several quarters, we've been adding human resources to our production chain and we're poised to take advantage of the demand for great space.
During the quarter, we executed leases with several medical clinics and urgent care facilities, Kelsey Seybold clinic packs urgent care, Virginia Hospital and quick care. We're also excited to have signed leases with sprouts supermarket and Ross along with several home furnishing retailers.
Rent growth for the fourth quarter was five 8% rent for new leases increased almost 10% while renewals grew just under 4% for the year rent for new leases grew 11, 2% with renewals at six 6%.
Management anticipates modest rent growth through 2021, as we focus on improving overall occupancy.
Rent growth will likely vary considerably from quarter to quarter.
Excluding river Oaks, we are completing the redevelopment of eight properties. This year, we spent $41 million on these assets today and we'll spend another $11 million over the next 12 months. Most of these projects are out parcel buildings and we believe they provide the company with returns around 10%.
Net.
The company is very excited to have executed a transaction to obtain our partners and 42% interest and village Plaza Bunker Hill here in Houston.
We now own 100% of the project, which is one of the finest supermarket anchored shopping centers and Houston is.
Is anchored by a very high volume HEB Academy, Ross, Burlington, Petsmart, and Nordstrom rack and the three mile demographics are very strong population of 140000 College educations over 51% and average household incomes over $141000 a year.
This improves our very strong Houston based assets today.
Today, almost 80% of our Houston ABR comes from shopping centers within five miles of the Galleria.
Our three mile average population is 155000 with household incomes of 136000.
Collections at our properties and Houston are 95%.
Houston economy is strong and very diversified Houston has regained and about half the jobs lost at the beginning of the pandemic and we expect to continue to grow our employment base through 2021.
It's too early to determine the exact effect of recent migration, but we know it has a positive impact on new household formations and 2021, we will continue to provide challenges for the company and I am confident our portfolio and our associates will continue to perform at the top of the peer group drew.
Thanks, Johnny.
Our heartfelt thanks goes out to all our associates, who are working so very hard right now and to our board of trust managers, who provided constant quality feedback throughout these difficult times there are still issues to deal with but we feel things are positioned to improve through 2021.
Great people, great properties, and a great platform equals great results.
And thank all of you for joining the call today and for your continued interest and Weingarten operator, we'd now be happy to take questions.
Thanks drew and we will now begin the question and answer session. If you have a question. Please press star one and your phone keypad and you could.
I'd like to be removed from the queue. Please press the pilot side with the hash key issue and a speaker phone. Please pick up your handset first before dialing once again if you have a question. Please press star one on your phone keypad.
And from Citi, We have Katy Mcconnell. Please go ahead.
Great Thanks, and the line of everyone.
To start can you provide some color and high yield debt pricing trend and bought the acquisitions and dispositions for this year.
<unk>.
Share of Katie and good morning. This is drew.
As we said and in the guidance we have a few.
You know dispositions that we want to continue to.
Hone the map and take advantage of things and and that's where we're looking at that being $100 million to $150 million, we've already sold.
You know two properties one in Tucson, and that was more of a power center with some tenants that would be on most People's watch list.
And one in.
Raleigh, where the supermarket wasn't as strong as our average so a few other holdings, but we don't see a tremendous amount of disposition activity last year was a little stronger than we would have forecast or we did forecast largely as a result of the COVID-19 crisis, the opportunity to buy stock back.
And then the opportunity to basically do what could be considered a swap.
To sell our last asset and Fort worth for the remainder of Bunker Hill. So a lot less activity on the dispositions from an acquisitions. You know we're very focused as you know on about 24 markets coast to coast, we see everything that trades, we will continue to be selective.
We do hear some brokers talking about more property coming to market and we will certainly look at it but.
No.
Good quality properties like like we're looking for are still trading at pretty aggressive cap rates call. It.
You know, 5% little little less and coastal markets. So so it has to have some good growth to it identifiable growth to make sense. So we do see some transaction activity, but not not big in 2021.
Okay got it thanks and then.
And could you update us on what percentage of ABR coming from cash basis tenants today, and how those collection levels have been trending so far.
Good morning.
This is Steve a total cash basis tenants today are about $17 $5 million, which is about 14% of our ABR and interestingly enough between Q3, and Q4 that collections for cash basis has been and the 79 and 80% range for both quarters.
Okay, great. Thanks, Kevin.
From Scotiabank, we have Greg Mcginniss. Please go ahead.
Hey, good morning, and glad to hear that the team is doing all right. After the winter storm and totally understand moving to call.
And I'd like to talk about the dividend.
We were surprised at the level of the reestablished dividend.
Non appear to give much breathing room after capex needs.
Is it currently set to be matching taxable income for 2021 are there some 2020 gains.
And that are being distributed are.
What was the reasoning for setting kind of at this high level of dividend, which is one of the reps.
It represents one of the highest yields within the shopping center group now.
Good morning, Greg It's drew thank you for the kind wishes and it was a tumultuous week across the state, but everybody's safe and that's the main thing so as to your question on the dividend we are comfortable with the 30 cents, it's about 70%.
You know with <unk> at the midpoint of our guidance, it's you know middle nineties.
And <unk>, depending upon how you score at and it is a function of several things that you mentioned in terms of our our estimated taxable income this year as well as.
Obligations from past years, but the main thing that I would say is what we tried to get into and the in the script is when we look at.
The.
You know, what's going on and the portfolio. We look at the huge amount of leases that are signed but not commenced we look at a very strong robust growing pipeline.
We also don't have that much.
Capital left on the new developments that will continue to produce more revenues.
And so as we look to the end of 'twenty, one and into 'twenty. Two you know we feel very comfortable with it were and are.
Great financial position.
So looking at the taxable income and the cash flows that the trends you know we felt comfortable with the 30.
Is there a.
Kind of a payout ratio that you're targeting at this point on the air flow basis. So if.
And if I'm thinking about kind of outsized growth from kind of re.
Repopulate and the portfolio with tenants and growing <unk> back up from what was lost in 2020.
Should we expect kind of a dividend and match that so we maintain this kind of higher payout ratio or.
So do we expect to get to maybe a more kind of an 80% ish.
Store call average within the shopping center and payout so.
So I gave you my thoughts and then Steve can elaborate but but I would say what what drives it is our guess and non taxable income and thats, where taxable income is.
Really really really hard to forecast you know doing F. O projections is challenging and a COVID-19 world, but taxable income gets into not only how much dispositions, we do but what you know dispositions we did we.
We have great joint venture relationships, but some of those had been around for a while and there could be some changes.
And our joint ventures.
Debt that again are very hard to forecast even get into issues about when your tenants pay your rent in terms of the calendar year. So it's very complicated so I would say what drives it for US you know ideally would be to be at 100.1% of taxable income.
But it's a it's a very imprecise thing so I think Steve's telling me I covered it and anything else to add Steve No I was just going to reinforce that our long term strategy.
It has been to pay out kind of if you will the minimum required in order to maintain rates status, but as <unk> articulated.
And have to be careful with that 101% or whatever because the calculation of net income is anything but precise and we're having to do that in advance so.
Debt.
Longer term the strategy as the dividend is a minimum payout to maintain REIT status.
Right, Okay, No that's fair and then.
Just a quick question on the development pipeline leasing seems to be going well and general just curious if you could comment on the central Arlington residential leasing decline and I'm also curious if you guys have any any updated thoughts on the <unk>.
And final stabilized yield of the developments.
Sure.
Yeah as we've talked in a couple of different formats. We you know as part of the whole unprecedented year, we encountered.
At Centro a lot of pushback in the fall as we tried to wean the tenants from free rent. Some of this was due to some localized conditions.
With with some competition.
But a lot of it was the whole work from home environment and we've heard this from investors at different conferences that we've seen across the country that.
And not only where people willing to move.
And in this environment apartment folks they were they were quite happy to move to have some new walls to stare at so.
We got up into the nineties, we ratcheted back a little bit on the free rent and we dropped down.
And as you heard in the prepared remarks, you know, we're now up to about 89% leased which is up from the end of the year that's in there.
And.
The supplemental that we posted so you know things are going well the projects are.
Four miles from Amazon HQ, two more people are going back to the office the barriers to entry are quite high.
So we feel good about things.
You know as we move forward through the rest of the year as far as the yields.
A bit challenging to say, but we're still looking at it broadly speaking around a 6% you know five and a half 6%.
Stabilized yield we are and the world as we've said before where we are no longer capitalizing so our investment and it's not going up due to the capitalized expenses. So the.
And the expenses are somewhat said and each dollar of revenue is additive.
And so again, we feel very good about the long term nature exit cap rates for this kind of product will be.
And the middle and maybe even low force so good value creation and and you know we've worked on all the projects for many many years, it's great to see them leasing up and.
We can't overstate, how important it is to get the Harris Teeter.
And Kroger supermarket opened at West, Alex, which should happen and the early part of the summer.
Okay and from Bank of America, we have Craig Schmidt. Please go ahead.
Yeah.
Just wanted to dig a little deeper.
You mentioned and in your earnings release that.
Are you still seeing some of the smaller shop struggle and you would think might continue to struggle for some time I noticed that the the January rent collection.
And to 87% from 90.
Wondering.
And maybe you could talk about what what degree I realize it's you know.
Smaller part of your portfolio, but what's what's happening with the small shops.
Sure Craig Good morning. This is drew I'll take a shot at it and then turn it over to Johnny.
Yeah, I think one of the main things that we all need to keep in mind is how generally good things are debt as you know Craig being and astute follower retail you know this.
This quarter is typically bankruptcy season, one of the things that we feel very good about as we look at our top 25 of our top.
Our top.
50, our top 60 tenants is we really don't see appreciable exposure.
No two bankruptcies.
Above and beyond what we're already dealing with so we feel real good about that but when it does come to the mom and Pops, especially in California. It's.
It's challenging.
It's hard for us to know.
You don't have the sophistication level, there's been a lot of the use restrictions.
We are getting better.
There's more government programs that it looks like we'll be coming to the rescue so it's very difficult.
For us to forecast you know Johnny what else would you have to add hey, good morning, Craig.
Some of it is timing Craig you know January.
As many days to collect.
But overall, we've been we've been very happy.
I think some of it is some amount of fatigue and we have a lot of the service tenants, who still are struggling a little bit and could certainly use some help from Washington, if if that is forthcoming soon.
Great and then just maybe a little on the acceleration of leasing activity are you seeing tenants willing to sign leases, but want to open later in the year or are they agnostic in terms of when theyre opening.
And you think 2021 could have.
Greater ABR and trends.
Leasing debt transactions in 2020 overall.
Hey, Craig I will say that given governmental.
Policy it seems to take about a year for somebody to get opened so anybody who signs a lease now it's not going to be open for probably a year.
And in some municipalities that could be even even longer.
And I think people are anxious to get back open and they see and opportunity that could be once in a lifetime to get space and shopping centers like River Oaks and other great properties, where they haven't been able to be over the last five or six years. So I think people want to take advantage of that and I think that.
Really a lot of what is driving leases.
At least as we are not seeing any delays and new leases now we are seeing some leases, where we're doing some amendments or some more deferrals gyms theaters, where there is some amount of delay in and that taking place, but those are really the two specific areas, where we are.
Seeing any kind of delayed transactions, we did a lease and in Texas on a new GM and.
And there is a contingency relative to.
Uh huh.
And when they come how what their occupancy could be.
Thank you.
Thanks Scott.
From <unk>, we have keep it Kim please go ahead.
Thanks.
So you guys talked about the leasing pipeline growing about $15 million of signed deals this quarter and another $10 million that you've talked about signing and thus far in 'twenty, one and another $7 million under LOI or in negotiation.
Just curious how much of this is just replacing.
Tenants that are paying today that might fall out or expiring leases and ultimately I'm, just trying to get to and answer of like how much of those will be additive to your bottom line versus replacing other tenants.
<unk> and I would say this is Johnny good morning, I would say that the vast majority of the spaces that we are leasing are currently vacant.
No.
When did they go vacant probably they went vacant over the last 12 months show.
Theres not very many tenants that I'm, replacing while they are still in place.
And again I think I referred to this idea that we're trying to work with as many tenants as we can to get them to the other side of the pandemic and.
And it is the economics for us are significantly better if we can renew a tenant even if it's for a little less rent even if.
We had to abate a little bit of rent.
So we're trying to do that where we can most of the leasing we are doing right. Now is replacement of the bills of the Stein Mart and replacement of shop tenants, who left during the pandemic.
Got it.
And Steve So your same store NOI declined 12% this quarter.
Worse than last quarter, it's minus 8%.
But when you look at the high level metrics like occupancy year over year. It didn't change all that much.
And <unk>.
If you look at the rent collections and.
Still pretty good.
And obviously bad debt went up a little bit and so I'm just trying to put all those things together to come up with and mental bridge of why same store NOI went from negative eight to negative <unk> 12, and how we should think about this going forward.
Good morning keep at it.
Thank you.
And Theres a lot of pieces that go into that obviously, but again bad debt and fall out is probably the most significant I mean, one thing I can point to for example is that we added some cash basis tenants and Q4 are quite frankly about 114 tenants.
And that was you know do you have to write off the any receivable there so that caused a little bit more bad debt and Q4, but it's really all about that bad debt and then as noted we still are seeing some fallout and we expect to have a little more in 'twenty, one and then middle part of the year well will begin to build.
It's again, it's all around that bad debt for all of that number.
Was there a <unk>.
Owning element to the negative 12% and same store NOI, which will be first course.
Just by a matter of fact next quarter.
I'm, sorry, I missed the first part of your.
It had to do with the economy.
Is there any accounting aspect.
And a negative 12% same store NOI that will reverse.
Yeah, the cash basis taken and tennis to cash basis, and having to write off the <unk>.
And thats sitting on the balance sheet is certainly and more of accounting and then just Q4 numbers. So I mean, I think some of it is accounting.
Yeah.
Okay. Thank you.
From Jpmorgan, we have Michael Mueller. Please go ahead.
Yeah, Hi.
The press release, you mentioned, you expect a full recovery to pre pandemic operating results and its going to take many months I guess when I think of months I think of less than a year and.
And I just want to make sure that that's not what you are saying and.
And if he can give us any more color on that comment or timeframe would be great and where do you think occupancy could trough and mid year compared to the 91% level, where it is now.
Good morning, Mike It's drew.
So yes.
In terms of months 24 months 30 months or still you know and a number of mine and so it's it's very challenging to say.
And when things get back and it will be more of an evolution, but as we've commented.
And we're extremely pleased with the amount of activity that we saw.
In the fourth quarter, and this year and and a lot of it has to do with what Johnny was saying earlier debt.
Really when the vaccine announcements came out it was it was sort of game on because in the barrier to entry markets, where we operate it is as Johnny said about a year. So.
Tenants that we've been talking to for several months had been looking at opening even and.
And to 'twenty, one into 'twenty, two and from this point forward basically 22, so there they're really actively looking at space. So.
When all of that translates and how we get those things commenced is many months and yes, it could definitely be more than than 12.
And I'm sorry, there's another part of your question.
Yeah.
Yeah, when you think about Aki crossing at mid year.
Great Great questions that we don't know the answer to and we have some sort of internal.
Discussions because our occupancy has never dropped below signed occupancy has never dropped below 90% and.
And the history of the company you know didn't.
In Texas, and the Middle and late Eighty's didn't and the global financial crisis and according to the business plan.
Isn't isn't supposed to this year, but it'll be really close.
And right around that level and it's totally a function of you.
As Johnny said, we're working with a lot of tenants, we don't have that many tenants and they're really at high risk categories, but we do have some and then on the other hand, we have a tremendous amount of.
New leases and leases being signed and so we do as Steve said and the prepared remarks see it.
Continuing to soften a little bit.
And then gets stronger for the rest of the year, so whether or not it does drop below the 90 will be a.
Very close play at the plate as they say.
Got it and I've heard and I personally and I'm taking fee.
I personally I'm, taking that it won't drop, but we will see I'm.
And I'm, sorry go ahead and I got it yes.
It's just going to say and just to clarify are you talking about the leased rate as opposed to the occupancy rate is that correct correct. That's the straight line yes.
The.
And the commenced occupancy will definitely and we.
We think as we've said historic spreads between <unk>.
Signed and commenced will widen as we do.
Try to get all these tenants back filled and and the barrier to entry markets, where where we generally operate that that takes a long time. It takes about a year as Johnny said.
Got it okay and that was it thank you.
Thank you.
From Compass point, we have Floris van <unk>. Please go ahead.
Good morning, guys, sorry, I had you on mute.
Thanks for taking my question and I Hope you guys are statements day and safe there.
Capital allocation and wanted to ask you some questions on that drew but some interesting developments you exited two non core markets.
And you and you bought presumably very low cap rate asset and your core market and Houston, maybe if you can talk about I know the demographics of bunker Hill are great, but whats the upside potential.
Of having.
Full control of that asset and.
And your view if you can maybe give a little bit more details on that.
Sure good.
Good morning, and thank you and and Yeah, It's 70 degrees and beautiful here today. So I had dinner outside last night and my wife and are joking about what a difference a week make so thank you for your concern, but but we're through it.
Bunker Hill is as one of the strongest assets in our portfolio and.
And honestly the demographics understate it in terms of the growth and the <unk>.
Tension that it has because the area south of it and is it.
Super ZIP with Super high incomes the area north of it not so much but it is improving.
Dramatically, we are shooting some drone videos with the tremendous densification, that's going on right across the freeway with high rise apartments office, new hotels et cetera.
It is just such an incredible location that <unk>.
Economically the ability to lease it increase rents is great for US. This also was the opportunity to take over management and leasing of it because it is also something of a flagship asset along with River Oaks, Our centre at post Oak.
It further cements that any tenant who thinks about coming to Houston is going to want to talk to us. So it is.
Not only does it have strong economics and the growth. It also increases our platform and our leverage you know and the Dallas Fort worth market and the Charlotte market are both great markets and and if a good portfolio of properties came up and either we would certainly take a take a good look at it.
But.
We've just had trouble getting any sort of presence in and either one.
And so strategically.
And I heard somebody say the other day, you either want to be a or in a debt.
If we can't be a significant.
Factor and the market and we should focus our resources, where we can so so good markets but.
It made sense to focus and bunker is just in.
And incredible asset with a great lineup of tenants and the ability to continue to push rents and if we did ever get any big space back and we could look at densify, but economically probably makes sense just to lease it to great Great Center.
Thanks, Joe.
And at the inside the other thing, which I think was actually a testament to our to your balance sheet and I think you are.
The only strip company that I can recall that has actually repurchase share since last quarter.
Significantly below where the stock prices today.
How do you think about.
Allocated obviously, you're trading closer presumably to Youtube.
Census, and a V now or.
How do you think about allocating capital, presumably the fact that you're talking about acquisitions going forward.
It means that you know.
Will you look to resell those shares and <unk>.
And back and the markets or.
How do you think about.
Future capital allocation.
And where do you see the greatest opportunity I guess is it in Europe in your core markets is it and the troubled markets on the west coast or.
Where do you feel you are going to create the greatest value for your shareholders.
Good question, there are lots and lots to unpack so yeah.
We have tried to keep a lot of dry powder really less and you know coming out of the global financial crisis and.
Timing lined up that we were able to buy the stock at a price that we were very comfortable with it was a very very good discount.
Two our underlying net.
Net asset value and as you May remember, we sold a couple of pretty decent assets and the.
Midst of the pandemic one and.
Orlando and won and Durham that.
Reconfirm to us the underlying and.
So a lot of why our dispositions were higher in 'twenty than we expected them to day was a direct result of creating that dry powder because of the COVID-19 crisis, and and we were able to take advantage of it.
Buy some stock back the other reason dispositions were higher was the opportunity to swap out of out of bunker that we talk about so we certainly want to have some dry powder and I certainly hope, we don't see those kind of availability and the and the stock price.
But if that if that opportunity does present itself, we'll take advantage. So.
We will certainly look at.
Acquisitions across the two dozen markets, where we're focused and.
Whatever presents itself you know happy to buy other things and Houston, or Florida, or Washington, D C or Seattle, or San Francisco area or Southern California.
All.
About the individual underwriting and the assets to meet the quality test and have growth. So we don't sort of pre allocate we're just opportunistic to where the.
And the opportunities present themselves.
Thanks, Joe that's it from me thank you.
And once again, if you do have a question. Please star one on your phone keypad.
And on the line from Jefferies. We have Linda Tsai. Please go ahead.
Hello, and good morning, your earlier comment on cash basis tenants to 79% being collected and <unk> and <unk> just anything to highlight on why it was the same and how does this trend and the upcoming quarters.
Good morning than debt.
The population changes changed a little bit.
<unk> and.
And Q3, we had like $20 million and Q4 that number was 17 and a half million dollars. So I mean as we go through time and tenants are added our and our fall out it changes the 79% to 80% for both quarters.
You know I don't have a good indication as to why other than and we continue to do the team does a great job of collecting that rent and terms of going forward.
And again I think if you think about our overall.
And that we think things are stay a little weak for the first half of 'twenty, one and then build from that so.
You know I don't think youre going to see dramatic shift one way or another but could it dropped down a little bit it could it increase yes.
Hi, Linda this is Johnny just think about this you know a large part of that or the theaters and the gms and.
And.
There is still pretty stagnant a lot of our theaters and Gms are in California, and there just hasnt been a lot of movement there.
Thanks for that color I guess related to that the 3% that's not signed.
Would that kind of fall and the gym category are those more like local tenants.
Yeah, I would say and theaters.
And as kind of the big one and.
There are a few gms, it's the large gyms that are really mostly the concern. We've had very good luck with the small gyms paying or coming to some sort of agreement to defer later on and as a matter of fact, where we've had small gyms.
And Paul out we've had someone else ready to jump right. In you know you have orange theory, and stretch and Theres a lot of folks who are interested in that category and who believe that category will recover quickly.
And when full restrictions are released and the vaccination becomes effective.
The capital requirements for those concepts that don't have big equipment is just a good good business model for them.
Got it and then just finally on the rent collections at 94%.
Does this stay pretty steady in 'twenty and 'twenty, one or does it tick up.
Hey, Linda.
This is Johnny I personally believe it ticks up.
California.
And we would be around 98% for the rest of the country.
And California's at 87, so that is really the area, we need to target and a lot of the restrictions where collections are being relaxed and I think we will see movement there.
And as California's probably four months behind the rest of the country as it as you think about leasing activity and getting the resolution to some of the issues, we've had and their problems or a lot worse a lot worse because they have they have been closed a lot longer.
Let me just add one other thing this is Steve on that you know you never get to 100% historically.
At the end of 30 days, we were 90, 697%.
Historically, the actual bad debt is somewhere between a half and three quarters of a percent and.
But you always have some laggards now the pandemic has certainly.
Caused collection of rents to be a little different than historical but at the end of the day.
You know you still don't get to 100%. So the 90 94, you know we think it's pretty good.
We're at 93 and January already a little over that probably so.
And.
I think it has a little room to grow but you have to put it and perspective of youre not going to get to 100 either.
Great. Thanks for all that.
And from capital one Securities we have Chris Lucas. Please go ahead.
Hey, good morning, everybody.
Just going back to the capital allocation conversation.
And the timing mismatch between the disposition one the reinvestment.
Net.
And that we should see sort of catch up at some point and 22 or is that something that is where some of that sort of excess proceeds from dispositions.
But we're going to be held for sort of future investment and redevelopment projects, how should we be thinking about the timing and sort of replacement net NOI.
Chris drew good morning, and you're talking about in terms of the guidance that would suggest that the guidance yeah, yeah yeah.
And I appreciate you just wanted to make sure it's totally around the opportunities Chris debt that we can't.
Totally fine tune it as.
As I think I said you know we are not at this exact second.
Seeing a lot of acquisition opportunities that make sense, we think we will.
And we're well positioned for that over time, we will have more development opportunities as you know.
We have a pipeline that we've talked about and a road show that could total up to $2 billion over.
Multiple period of years with another.
Another.
$600 million just at River Oaks now again in terms of 'twenty two.
Yeah.
We spent a lot of money on some construction drawings and <unk>.
'twenty two that would be sort of quick timing. So so it is something that we want to be positioned for the long term, but I want it and want to underlying the long term so.
If we can sell the dispositions and continue to hone the map and deal with watch list tenants will do that I don't think it'll be.
That much money this year and will be.
Responsive to good acquisitions, but but you know we're going to be long term, we're not going to let.
And the money burn a hole in our pocket is it where we're going to be focused on good assets that meet our investment criteria from a from a quality perspective and have some identifiable growth.
So I'm happy and hopefully that gets.
And the essence of your question.
Yeah. So I guess just wanted to.
A follow up and the past when you guys were going through the portfolio repositioning process.
Amount of assets on the market for sale was usually significantly more than you sort of anticipate and solid.
Is this more of a rifle shot approach in terms of the dispositions or is it similar process on a scale basis, just that a smaller number.
I would sort of say, it's a little bit and the middle East.
We do have more working then we think we would sell but it's nowhere near the same magnitude. So it is more of a rifle because we just don't.
We have one center in Kentucky that we've been working on some title issues that we think will get resolved.
But but it's a good center so if we hold it a little longer we hold it a little longer if we can exit Kentucky.
It probably makes sense to exit Kentucky, So I would say it probably leans to rifle that debt.
There's just not that much in terms of how we've honed and and.
And what's left to do.
Okay, and then just jumping over to leasing for a second.
Is there more.
Was there any difference right now in terms of.
Anchor tenants.
Hmm.
It's Robert here.
Hustle and we're looking to close on leases versus shop spaces. There is there any difference in terms of the pace of their interest and getting something done.
Chris John and good morning.
Yeah, I think there's there seems to always have been.
Entrepreneurs to shop guys have.
A lot more desire to move quickly.
And when you're looking at the boxes. They are working through a process debt remains the same as it has been probably a little more difficult with the work from home.
And so it does seem to take a little longer to get some of the.
Individual the box has done and I will complement our friends at sprouts, they have been incredible and moving very quickly on.
The deal that we did with them and looking at some other stuff.
<unk>.
But I would say generally the shops are our little faster. It is interesting and I meant to say a little bit earlier that one of the great benefits. We've had from this pandemic.
And is while we were providing flexibility for some of our partners.
And a box tenants, we did get some <unk>.
<unk> of restrictions and exclusives that have been very valuable for us and a lot of what we're leasing now has the ability to lease.
Uses that we never had the ability to you to lease and certain areas of the shopping centers.
And.
And so these tenants are eager to get these spaces that they've really never been able to get before.
Okay. Thank you appreciate it that's the only and this one.
Thank you and we'll now turn it back to drew for closing remarks.
Thank you Brandon I really appreciate everybody's interest and Weingarten, where available later if there's other questions. There are some conferences coming up shortly and.
And then the next few weeks, we'll be talking to investors. So again. Thank you all very much for your interest and Weingarten have a great day all the best.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.