Q4 2020 Macerich Co Earnings Call
Okay.
Good day on welcome to them May switch company fourth quarter 'twenty to 'twenty earnings Conference call. Today's conference is being recorded on at this time I'd like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.
Okay.
Thank you for joining us on our fourth quarter 2020 earnings during.
During the course this call we will be making certain statements that may be deemed forward looking within the meaning of the safe Harbor in the private Securities Litigation Reform Act on.
1995, including statements regarding projections plans or future.
Patients.
Actual results may differ materially due to a variety of risks and uncertainties set forth in today's press release and our SEC filings.
Including the adverse impact on.
The novel Coronavirus, COVID-19 on the.
U S regional and global economies and the financial condition and results from operations of the company and tenant.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on form 8-K, with the SEC, which are posted in the investor section of the company's website at <unk> Dot com.
Joining us today are Tom O'hern, Chief Executive Officer, Scott <unk>, Senior Executive Vice President and Chief Financial Officer.
Thank you Lee senior executive Vice President of leasing and with that I would like to turn the call over to Tom.
Thank you Jamie and thanks to all of you for joining US today as we continue to navigate through these challenging times.
Yes.
2020 was an extraordinarily tough year in so many ways for all of us.
Once Covid storm U S in mid March.
All of our centers closed.
So thats a quick thing.
We quickly adopted significant measures to conserve liquidity much as we had done during the great financial crisis.
We persevered through those dark days for the second quarter, we got most of our centers opened by mid summer.
And all of our centers open by early October no further closures.
Okay.
It was a herculean effort.
Search team and I'm very proud of their efforts.
There were not a lot of good days, but we battled through it.
Rent collections for example, during April and May were 35%.
That grew to 80% in the third quarter and as of today, the fourth quarter rent collections were at 92% and rising by the week.
2020 was Europe prices, but we made it through the year and things are improving by the week.
Covid daily infection cases are down significantly throughout our markets.
Positivity rate is dropping and on.
Hospitalizations are down significantly compared to a month ago.
We now have two vaccines in distribution with a third on the way.
Currently 10 per cent of the U S population has had at least one dose of the vaccine and distribution is accelerating.
Now that the Covid battle is over.
Much much better than it was even three months ago.
Some level of normalcy returning include.
Including restaurant dining from going to the mall.
Our shoppers have returned.
December sales were approaching 85% of pre COVID-19 levels, even in the midst of a surge in COVID-19 cases.
Gradually restrictions on capacity and indoor dining are being lifted and that will help both our traffic and our sales.
Covid among many other things had the impact of accelerating bankruptcies dozens of retailers that otherwise likely would have gone into bankruptcy over the next several years, but.
But instead were accelerated into 2020.
The result is our occupancy level is at 90%, which is the lowest since the great financial crisis. However.
Within two years post GST, we were back to full occupancy.
We expect a similar recovery post COVID-19.
We have worked through most of the bankruptcies from 2020.
Unfortunately, the vast majority of those have been reorganizations not liquidations.
The biggest bankruptcy on the year with Jcpenney.
Of our 2007 J C Penney locations.
Only two locations closed.
Green acres on Kings Plaza, both on New York.
I'm happy to report that we have leases out for signature on both of those locations and should be able to make announcements in the very near future.
As you say goodbye to 2020 and gladly watch it in the rearview mirror, we are very optimistic about 2021 and the recovery of our business.
Although 'twenty one is going to be a transitional year it will be much better than 2020 in almost every respect.
Most of the tenant Covid work out agreements will have some impact on us from 'twenty one.
In terms of rent relief as well as.
Higher than normal vacancy rates.
That being said, we expect to see occupancy gains in the second half of the year and are gradually improving leasing environment.
Rent collections have improved significantly up from our September collection rate of 77% and.
And are now above 90% in the fourth quarter.
January is also trending above 90%.
We have come to agreement on Covid workouts with over 93% of our top 200 tenants.
Yeah.
Leasing activity picked up significantly in the fourth quarter.
Volumes in fact, where 90% of pre COVID-19 levels of the fourth quarter of 2019.
We even have a variety of gated attractions that are planning to open this year, including Candy Topeka model and in the museum of ice cream.
Many of our replacement tenants in the former Sears locations will also open in 2021.
Our 2021 lease expirations are 60% leased today.
But the majority of the balance in the letter of intent stage.
Looking at the balance sheet most of our 2021 low maturities have been successfully extended.
Negotiations are well underway to renew our line of credit, which matures in the third quarter.
Retailer traffic and sales continue to pick up with traffic at 80% of pre COVID-19 traffic.
And sales on average <unk> 85 per cent of pre COVID-19 levels.
We expect improvements in both traffic and sales as we progress through 2021.
The cost reductions and cost containment measures, we adopted when COVID-19 hit will be continued into 2021.
On a final point for me once again, we have been recognized as a leader in sustainability and have achieved the number one global real estate sustainability benchmark ranking in the North America retail sector.
That makes six straight years for that honor.
And with that I'll turn it over to Scott.
Thank you Tom highly.
Highlights of the financial results for the quarter are as follows funds from operations for the fourth quarter was 45.
That's down from the fourth quarter of 2019 at 98 per share.
Same center net operating income for the quarter was down 33% and year to date is down 22%.
You will see these results are unchanged relative to what was filed last week.
On February one.
Changes between the fourth quarter of 2020 versus the fourth quarter of 2019 were driven primarily by the continuing impact of COVID-19 and are as follows in the figures on siding or at the company's pro rata share.
One.
$38 million decline from Covid related rent abatements across permanent and temporary leasing revenue line items.
Fourth quarter abatements were elevated relative to the third quarter on payments of $28 million and this was largely due to the protracted summer closures of several large properties in New York and in California. This resulted in delayed negotiations with tenants at those properties.
Cumulatively for the year in 2020, we granted $56 million of abatements.
Number two nine.
$19 million of Covid related decline in common area, and ancillary revenues, including specialty leasing and temporary tenant revenue percentage rent revenue business development revenue and parking revenue.
These declines were generally a continuation of what we experienced in the second and third quarters, what were exacerbated in the fourth quarter given the seasonal nature of these types of income.
However, looking forward into 'twenty, one we do anticipate growth in each of these more transient income line items, assuming conditions at our properties improve as we do expect.
In total for all of 2020. These line items were down $43 million.
Number three.
General top line revenue decreases totaling approximately $12 million driven primarily by COVID-19 related occupancy decreases and.
And before <unk>.
$6 million of bad debt expense in the form of reversals of lease revenue for tenants on a cash basis pursuant to GAAP.
That was about $5 million, and then bad debt expenses of about $1 million.
As a result of the Covid related disruption to our business. The bad debt expense line item was significantly elevated in 2020 at $62 million.
This was a $52 million increase versus $10 million of bad debt expense in 2019.
For five there was an $8 million decrease from loss or gain on underappreciated asset sales or write downs on consolidated assets.
This included a $5 million impairment charge in the fourth quarter of 2020 for undeveloped land that is currently under contract for sale and is expected to close in 2021.
And lastly, offsetting these items straight line of rent increased $19 million in the fourth quarter. This was driven by applying straight line rent averaging two all rental assistance lease amendments executed during the fourth quarter.
So to summarize some of the major impacts from Covid that impacted real estate NOI in 2020 and again all of these figures are at the company share we highlight the following.
$156 million of one time retroactive abatements of rent.
These concessions were granted the local business owners and entrepreneurs to restaurants and other food uses and in selected cases to national tenant snowed or to secure near term lease expirations and to achieve other landlord favorable concessions.
Two.
$43 million of decline and commentary on the ancillary revenues percentage rent and temporary or excuse me and parking revenues again. These are transient line items and we would expect those to bounce back.
And number three we wrote off an extra $52 million of bad debt expense relative to 2019.
Plus in addition, we had another $11 million of rent that was reversed for tenants that are accounted for on a cash basis.
So when you add all that up collectively that's roughly $162 million of pandemic driven NOI declined.
Just among those three categories.
This morning, we provided 2021 earnings guidance and we do direct you to the company's form 8-K supplemental financial information for more details of the company's guidance assumptions.
2021, SSO is estimated in the range of $2.05 per share to 225 per share.
While certain guidance assumptions are provided with on our supplemental filing I'd like to provide some further details.
This guidance range assumes no further government government mandated shutdowns of our retail properties.
We are not providing same center NOI guidance at this time given continued.
Expected impacts of COVID-19 in early 2021.
But we do anticipate growth in the same center NOI starting in the third quarter of 'twenty, one and in fact at this time, we expect strong double digit growth in the second half of 2021.
Anticipated progress on vaccination efforts continued fiscal stimulus from the federal government significant pent up demand from our market consumers and softer comparables in the last half of the year inform this thinking per ramped up growth later in 2021.
In terms of SSL by quarter, we estimate the following cadence 21% in the first quarter, 24% in two Q, 25% in <unk> and the balance 30% in the last quarter.
We view 2021 is a transitional year as we pivot away from the disruption and widespread closures caused by Covid during 2020.
We do expect that the first quarter 'twenty. One will include lingering effects of COVID-19, including from retroactive rent adjustments relating to 2020.
While we are certainly not giving forward looking guidance into 2022 in future years.
We are however, optimistic about the financial tailwind that may ensue, as our country Hill's from the pandemic.
Trough occupancy appears to have been contained to roughly 88%, which we estimate to be at the end of the first quarter and we do believe there's an opportunity to grow occupancy later part of the year and certainly over the coming years.
It should fuel future operating growth.
Again more details of the guidance assumptions are included in the company's form 8-K supplemental financial information.
Now onto the balance sheet.
As addressed in detail within our recent filings over the last few months, we have successfully extended for secured mortgage loans totaling over $660 million per extension terms ranging up to three years.
Those loans included mortgages on Danbury fair fashion outlets of Niagara Flatiron crossing and Green acres mall.
We do anticipate securing similar extensions on remaining mortgages that mature in 2021, including from Green acres Commons for which we are currently working on a two year extension.
In November the company financed the previously unencumbered Tysons Vita. This is a residential tower at Tysons corner.
Phone is a $95 million mortgage the mortgage loan bearing fixed interest at three 3% for 10 years at closing this generated $45 million of incremental liquidity to the company and there is some incremental funding capacity remaining under this low.
As mentioned in our recent filings we continue to make progress on the renewal of our line of credit.
Cash on hand at year end.
It was 50 $555 million as Tom previously noted collection efforts are now over 90%.
This improved collection environment is a direct byproduct of the extensive efforts by a vast many within the company to negotiate thousands of agreements with our retailers I can tell you. We are extremely proud of those efforts as Tom has already noted.
As a result, we do anticipate further improvement in collections into 'twenty 'twenty, one and in addition, we.
We estimate.
The collections of both contractually deferred and delayed rent collections in 2021 that relate to 2020 build brands in the approximate range of $60 million to $75 million.
During 2021, we expect to generate over $200 million of cash flow from operations and this is after recurring operating and leasing capital expenditures and after dividend.
This assumption does not include any potential capital generated from dispositions refinancings or issuances of common equity.
This operating cash flow surplus will be used to delever the balance sheet as well as to fund our development pipeline.
And as for development, we expect to spend less than $100 million in 2021, excluding further development expenditures on Onewest side, which recall is independently funded by a construction loan facility.
With that I will now turn it over to Doug to discuss the leasing environment.
Sure.
Thanks, Scott in the fourth quarter much of our focus again was working with retailers to secure rental payments and improve our collection rates.
Looking at our top 200 rent paying national retailers, we now have commitments with 176, which is up considerably from last quarter.
But more importantly, we now have received payments or if we've worked out deals totaling 93 per cent of the total rent. These top 200 pay.
And as a result, our collections continue to improve.
As of today collection rates increased to 89% in the third quarter and 92% in the fourth quarter of 2020.
Occupancy at the end of the third quarter was 89, 7% that's down 110 basis points from last quarter and down four 3% from a year ago.
This is primarily due to store closures from the unprecedented amount of bankruptcies and early abandonments that occurred throughout 2020.
Temporary occupancy was five 9%.
It's down 50 basis points from this time last year.
Trailing 12 month leasing spreads were negative three 6% and that's down from four 9% last quarter and down from four 7% in.
In 2019.
Average rent for the portfolio was $61 87.
At December 31, 2020.
This represents a one 3% increase compared to $61 six.
As of December 31, 2019.
A <unk>, 7% decrease compared to $62 29.
At September 32020.
2021 lease expirations continue to be an important focal point.
And to date, we have commitments on 60% of our expiring square footage with another 40% or the balance and the letter of intent stage just regarding tenants who are closed.
They've indicated they intend to close.
In the fourth quarter, we signed 217 leases for 900000 square feet.
This represents 80% more leases and one five times the square footage when compared to the third quarter of 2020.
This also represents 90% of the square footage that we signed in the fourth quarter of 'twenty.
2019.
Noteworthy leases signed in the fourth quarter include Athleta at Danbury Fair.
Louis Vuitton at Scottsdale fashion square.
<unk> got lot Qatada, mostly re dose.
Madison Reed at Santana.
For renewals with Sephora at Eastland, Flatiron crossing vintage faire on Pacific view as.
As well as five store package with charming charlies at Green acres, Flatiron, Fresno long Qatada and Pacific view.
Turning to openings in the fourth quarter, we opened 59 new tenants.
236000 square feet, resulting in a total annual rent of over $10 million.
Notable openings in the fourth quarter include Bulgaria enrolled exit Scottsdale free.
Free people at La Qatada lush.
Russ it looks to re dose.
The COVID-19 secure <unk> comments.
J, a henkels at fashion outlets of Chicago.
In the International Arena, we opened another three stores with low visa at Deptford Mall Queen Center in Kings Plaza, along with quite Australia at low Cerritos.
And the large format category, we opened Dick's sporting goods, a vintage and round one at Deptford mall, both in former Sears locations.
The digitally native and emerging brands continue to open bricks and mortar stores in the fourth quarter, We opened Amazon four star and Madison Reed at 29th Street.
Amazon books at low Cerritos.
And purple at Tysons corner.
Now, let's move to 2021 and our pipeline.
Our pipeline remains strong vibrant and exciting.
We already have signed leases totaling approximately 494000 square feet.
All scheduled to open in 2021, and this list continues to grow.
Later this year, we look forward to opening an amazing two level 11000 square foot flagship store at Scottsdale fashion square, the first and only you are in all of Arizona.
Joining Dr will be moving at the time that.
Further marketing Scottsdale fashion square is the one and only true luxury destination in the market and the state for that matter.
Prime Mark is well under construction and will open its highly anticipated 50000 square foot store at fashion District, Philadelphia in September of this year.
Other impactful openings to look forward to this year include Dave <unk> Buster's at vintage Faire Kids Empire, and Madison Reed at Santana.
Tyra banks model land at Santa Monica place X laser Fresno fashion Fair Sam.
San Bernardino County offices at Inland Center.
Bourbon and bones at Santana village.
Cooper's Hawk winery at Boulevard shops.
Shake Shack at 29th Street.
On core Julio's, South Plains charity at village of Corte Madera.
Lucid motors at Tysons corner in Scottsdale fashion square.
And marine layer at Broadway Plaza.
And that's just to name a few.
And when we look at deals still in lease negotiation.
Have you got another 435000 square feet to open in 2021, and this number gross daily.
Okay.
Lastly, I'm often asked during this unprecedented.
Time of bankruptcies and store closures who's left to fill this space.
What we need to remember is this pandemic only accelerated the demise of those retailers who are already struggling pre pandemic.
It's not talked about are those retailers, who was strong going into the pandemic and actually came out stronger on the other end.
Perhaps it's because they have great product and offer great value.
Perhaps just because they had strong omni channel business and use their online strategy to actually increased customer awareness and acquisition.
I think we are 11, Dick's sporting goods target peloton and Blue Nile and there are so many others.
Or how about the strong traditional retailers with significant open to buys looking to capitalize on some great new available space and some of the best centers in the country I'm talking about retailers such as Aerie made.
Madewell three people Levi's Sephora, our house Auryxia old Navy Athleta just to name a few.
For brand extension, such as offline by American Eagle.
Hicks Abercrombie <unk> Fitch.
Dick's Sporting goods do experiential concept.
Our new and emerging brands like L Yoga, Ferity Psycho Bunny turn out.
Our new electric car manufacturers, such as lucid Pollstar and Vin fast.
And we are deep in discussions all of these retailers and many many more.
However.
We know our shoppers want more than just traditional retail.
And that's why we continue to focus on bringing alternative uses to our campuses and not just retail.
Uses like office residential hospitality medical wellness education, fitness grocery service and even storage.
And that's why we continue to refer to our properties as town centers.
Because that's what they are becoming.
Transformational and there'll be something for everyone.
And they have to be.
Because that's what our modern day shopper wants.
And now I'll turn it over to the operator to open up the call for Q&A.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure you're on mute function is turned off to allow the signatory chocolate line.
We all are limited to one hour conference today. So we do ask that you limit your questions to one question on one follow up question. Please.
We will now take the first question from Samir Khanal from Evercore. Please go ahead.
Good morning, everybody.
Scott. Thank you for the color on on when occupancy will trough. Thank you mentioned, 88%.
But I guess, how should we think about the pickup or the ramp up in occupancy maybe into 'twenty two from a modeling perspective with all the leasing you're doing.
Good morning Samir.
Well.
Again, we're not giving guidance into 2022, but just you know I think Doug provided a pretty good sense for.
The return of leasing demand, we have almost 500000 square feet that is already executed due to open in 'twenty. One we have well over 400000 square feet that I'll say is in our shadow pipeline.
Deals in documentation deals in negotiation.
That's going to spill into 'twenty, one as well as 22 and.
And I think we've been pretty clear on this in the past we've got some pretty high quality space that has not been on the market for quite some time given the decline in occupancy and I think.
Of these brands that are.
Both the legacy as well as new and emerging are very interested in taking high quality space on high quality market. So I think we'll see some decent pickup sameer.
Zamir to give it give you a frame of reference the last time, we had an occupancy level. This low was.
The end of 2019 going into 2010 after the great financial crisis and it was about two years before we bounce back to the 90 495 per cent occupancy level and to me. It just seems very similar.
Let me take a couple of years to get fully recovered and have that space absorbed we've got good demand. There is a lot of new retail categories less apparel more experiential, but it's going to take it's going to take a few quarters for sure.
Got it and then I guess as a follow up and Scott when I when I look at your receivables now it's about 240 million on the balance sheet and look I understand the bill.
That's been built up over the last few quarters.
And there's always sort of a normal state of receivables you carry on the balance sheet, even before COVID-19, but.
Bad debt expense Youre guiding theres only about 10 million so.
I'm just wondering what are you seeing in terms of the health of the retail that gives you confidence that.
Net numbers of the appropriate amount for the year, just trying to make sure I'm not missing anything here.
Sure.
Well you know we do have a view into the economy is recovering in our centers are opening if anything over the last two months, we have not seen any further restrictions and in fact, we've seen a loosening of the mandated closures and mandated occupancy restrictions, including by use like with restaurants.
So we do see a healthier environment, which is going to certainly pick up traffic and ultimately pick up sales. So within our guidance not only is our bad debt, but we're also carrying a fair amount of reserves for uncertainty and I'll, just I'm not going to specify the number but I will certainly say that we're carrying more.
Then what we typically would carry for instance, what we carried into 2020 without a view into COVID-19.
So we're carrying some provisions in addition to bad debt expense as we should be given.
The environment today.
Got it okay. Thank you that's helpful.
Is it gave on that your question has been on since you may remove yourself from the key by pressing star two.
We will now take the next question from Floris Van <unk> come at Compass point. Please.
Please go ahead.
Great. Thank.
Thank you guys.
Taking my question.
I thought it might I know that Simon.
Simon was a little bit more explicit in terms of.
Talking about its NOI in 'twenty, one growing is there any color you can give us Scott or Tom in terms of what your expectations are for NOI, how much of a bounce back should should people expect.
In in 'twenty, one given given some of the headwinds you're talking about.
Oh, Hi, Flores, yes, it's really going to be two halves of the year that look fairly significantly different yeah first quarter of 'twenty, one we're still having the impact of some COVID-19 concessions.
Statements et cetera, and that compares with a pretty healthy first quarter of 2020.
So we expect the first half of the year to be to be down in terms of same center.
But as Scott said, the second half of the year, we think will be very strong and we'll probably be putting up close to double digit same set of growth.
In terms of rather than looking at it on a on a same center I go I guess everything is the same center in some ways, but so are we talking about.
3% to 4% at overall NOI growth for the year or what sort of range or are you looking at.
Yes, Floris, we're not giving specificity for the entire year.
I certainly hope to be in a position to do that as the year progresses, but we don't think at this point in time that we.
It's the right thing to do it's Tom mentioned, the first quarter is going to have a fair amount of volatility on it as we lap a COVID-19 over the coming weeks you know the first quarter is going to be a difficult comp to the first COVID-19.
Once we get clear of that.
We should hopefully be in a position to provide more concrete same center guidance, our NOI guidance.
For the balance of the year.
Great and maybe if you could also.
Walk us through you mentioned your discussions on the the refinancing of the line.
We obviously, we've talked a little bit about that offline as well, but if you can maybe talk about what people should expect U. How how that is going to look in and you know what.
Whether that's going to require you pledging some additional unencumbered assets or are you or how much flexibility do you have in <unk>.
In those discussions and how much of a cost impact potentially could that happen, presumably that's already in your guidance as well as the fact that you might be paying a higher interest cost for the second half on that amount.
For US we were in deep negotiations with our lending group. These are lenders that we've done business with for the last 25 years. So.
We're in negotiations with them and Thats.
At cross purposes to share with you the specifics of those it's premature to do that but we're making great progress with them.
You saw from the 8-K filing we put out.
A week and a half ago that we may end up securing the line previously or currently its unsecured but we do have quite a few unencumbered assets. So that's a possibility going forward, but other than that we're not going to give any more color than that because we're in the midst of negotiations I'm sure you can understand that.
We will now take the next question from Mike Mueller from J P. Morgan. Please go ahead.
Yeah, Hi, two quick ones here first can you give us a sense of what the rent spreads are on your 'twenty, one leasing activity and how they compare to last year.
Down 4%.
And second question is on a straight line rental income with some more normalized go forward run rate.
Doug you want to take the first part of that.
Yeah sure sure Tom.
With regard to the lease executions I talked about on my prepared remarks.
I don't believe that the spreads have been commuted.
I would suggest that in the short term, there's going to continue to be pressure on spreads as we focus on on occupancy we've talked about that.
Last quarter and this quarter occupancy is paramount.
Once we take the supply off the table and demand comes back I think we'll start to see the.
The spreads increase but for the short term there there will be some compression.
And Mike on a straight line of rent question.
You know, it's going to be elevated in the first part of the year consistent with the rental concession agreements that we continue to.
To execute with our tenants.
We cannot recognize those rental concessions until we actually book the arrangement or excuse me until you actually sign the deal when we signed that deal then that has a.
An inverse impact on straight line of rent. So we're gonna see straight line of rent continue to be elevated for the first part of the year, where again similar to what not providing same center guidance, we're not providing straight line guidance just given the uncertainties about the flow of those deals, but we will see at elevated in the first part of the year and then we'll see a return to normal.
Yeah, I would say in 'twenty, two will be on the $10 million to $15 million range, which would be in a relatively normal run rate for us, but it will be elevated in 'twenty one.
Got it okay. That's helpful. Thank you.
Well now take the next question from Todd Thomas of Keybanc Capital markets. Please go ahead.
Hi, Good morning. This is Ravi day, the underlying for Todd Thomas Hope you guys are doing well.
That's been a bit volatile over the last couple of weeks with regards to the ATM program Day recently filed a how should we think about your desire to issue equity at current stock levels.
Well, yes, we did we did file for an ATM and if we use the ATM will report on that quarterly in our 10 Qs and that's just a periodic decision that the company on the board will make its just a tool to have available should we be in position to.
So your stock price that we like we would consider it but again, it's just a shelf.
Does we're putting it out there doesn't necessarily mean, we're going to use it and will report quarterly if we use it and how much.
Okay. Thank you and just one more here how do you think about dispositions as a source of capital is there interest in selling one of your larger assets to raise capital to Delever.
The market for that like today, we haven't seen a lot of trades for individual assets yet.
You're right there haven't been a lot of trades.
That being said Theres always theres, a fair amount of capital out there and Theres a fair amount of interest.
So I wouldn't be surprised to see us transact a little bit. This year, we don't have any of that in our guidance and you can't count on it until the checks in the from the bank, but it's certainly a possibility this year.
Thank you I appreciate the color.
Thank you.
We will now take the next question from Caitlin Burrows from Goldman Sachs. Please go ahead.
Hi, there.
Following up on some of that previous question Kelly like 19, you disclosed earlier in the month debt negotiations are ongoing for a recasting our credit facility and it could include on a lower lending commitment and require securities I guess to the extent that you need to reduce your borrowing to recast. It. How do you think you find that day that given where the line of credit as of today.
Well Caitlin, we've got about $550 million of cash on the balance sheet. So I don't think.
Do you see that line a bid is going to be an issue at all we've got plenty of liquidity for that.
Okay.
And then just thinking about.
Maybe just touch on that from the previous question, but thinking about where leverage is on today and glad the EBITDA growth outlook.
Outlook.
2021, I guess, what is your kind of your interest in urgency and reducing leverage in 2021.
Go back.
Well I don't think you can really look at debt to EBITDA at a day, given what's happened with EBITDA.
You've got to look forward, a little bit to say, where do you think that's going to go what's it going to grow too.
And we're going to generate a significant amount of cash.
After our debt.
Debt service on the dividend and my expectation is we'd probably use most of that excess cash to reduce our leverage.
Okay. Thanks.
Thanks.
We will now take the next question from Alexander Goldfarb with Piper Sandler. Please go ahead.
Sure.
Hey, good morning, pointing out there on dialysis.
Hey, Hey, Tom how are you on.
So you are on.
Great.
Uh huh.
So two quick things from me first off on the mortgages that you guys are.
And again and renegotiating are there any cash.
Cash restriction whereby the lender.
The youngest the mortgages are thing that any excess cash above the capex needs to go to debt pay down before it can do anything else or was there any cash flow restrictions on maybe it was mortgage extensions or refinancings.
It would be pretty atypical for us on.
In some cases, there are very minor restrictions, but we've generally been able to execute these these extensions Alex from one to three years with no change to rates and with very little to no re margin at closing, but it would be it would be pretty atypical to have those situations.
Okay and on the second question is.
It sounds from your comments on the ATM that you haven't used it at your sounds like Youre pretty guarded on issuing equity. So if that's the case.
If we use last year, you had last few quarters of dividend taxable requirements.
It seems like the dividend again is a big source of cash flow you guys are assuming that that you know the same third and fourth quarter holds true. So what are you hearing the dividend to the bare minimum and they maybe 90 million 80 value whatever the math is would that also be an additional source to help you guys right.
Mechanically not sort of planting equity in the near term debt. It would seem like that's a good source of capital to help the company.
You guys refinance maturities.
Yeah, Alex I'm not sure you've got a clearer view on the tax side there. It's a good point and we cut the basically the tax requirement this year.
Our expectation that it would be similar it's a board decision. So we're not giving guidance on the dividend your per se, but from a tax standpoint.
Don't expect a big change.
And we cut this year to the minimum in the second half of the year and.
That's probably something we'll consider in 2021 as well.
I mean, I was just going off of the debt.
Declaration that you guys had worked at Etame with tactical on the other 14 times with not.
Yeah, that's what I was basically get on.
Yeah, but you guys you've got to look at the full year, you can't just look a whole quarter.
Right right I was looking at the full year and I was looking at each of those columns. So okay cool. Thank you.
Well, we'll have a tax session offline about that.
Next season.
We will now take the next question from Michael Bilerman of Citi. Please go ahead.
Hey, good morning out there.
Tom or Scott what is the current unencumbered asset pool, either buy underappreciated book value or.
Maybe just on annualized NOI, just from us to get a sense of.
What that boring on the unencumbered borrowing base could be.
I think we've got about 25 assets various sizes, Michael that are unencumbered.
Well I don't have the NOI of that specifically and we probably wouldn't disclose it anyway, but theres a significant number of unencumbered assets and you can look at our debt schedule on that set up against the property scheduling.
At least as it relates to the malls or some other assets that are.
Single assets.
Building share there that it may not show up on the property list, but there's about 25 assets or so in total it's a fair it's a fair.
Big number.
Yeah, I'm, just trying to get a sense of athletes on for all sides and tight from quality I'm, just trying to get a rough ballpark just to try to better understand a boring day sort of whether it's $1 billion 2 billion. The burden on a half 500, just some way of guiding us in terms of.
Yeah.
Mortgage value for those assets.
Well, it's hard to say mortgage value I would tell you that debt unencumbered pool is significant enough to support our existing line of credit of $1 5 billion.
Okay.
And then just relates to the ATM just walk through a little bit it's not a tool that you had put in place previously I guess, what had held you back before from having an ATM in your tool kit.
I would assume debt Wednesday, when your stock had doubled probably would've been something that you had on your tool kit at that point they have been.
The decision you may have pulled out I'm not sure but can you just talk about the decision of not having it before and now putting it in place.
Well, we've had them before Michael.
The last time, when the ATM expired, we didnt like where our share price was.
As a result, didnt renew it at that point in time.
Fairly quick process, you can get one put in place within 45 days.
Certainly I don't I don't think we anticipated the spike related to Gamestop, maybe perhaps you did but we did not.
And if it wasn't in place did not I did not participate on that unfortunately.
Okay and <unk>.
Keep in mind that in any given day, you can only do about 10% on the volume.
On your ATM. So it was about a two day spike there.
It got us thinking about it and said hey, it's a good tool we might as well have it back on the shelf and so that's why we related.
Okay. Thank you.
Thanks.
We will now take the next question from Greg Mcginniss from Scotia Bank. Please go ahead.
Hey, everyone. Thanks for taking the question.
Well Scott I appreciate the clarity on the Q4 rent abatements in line they were higher than Q3, but I was just hoping.
Could you tell us how much actually applied to Q4, as we try to create them.
You know like a go forward doable.
Run rate to model off.
I would say probably less than three years to 5% on.
It's really relates to retroactive periods, primarily the second quarter and some cases again for those California, and New York properties. The abatement extended for a longer period, because in all candor, our retailers were unable to trade for six months.
But very very little of that pertains to the fourth quarter.
Okay. Thanks for the second question.
On the leasing volumes I appreciate the potential for the 800000 square feet plus of it.
This point, just hoping to get a little more context to help us understand the financial benefit from.
From those leases so could you potentially provide them kind of the total knee switched on GLA and then how much debt demanded in the consolidated versus unconsolidated centers.
Yeah, we don't have a breakdown of that between consolidated and unconsolidated I think you know what are our GLA is it's roughly on small shop basis. Its about 21 $22 million or so you know so that 800000, if all of it were to come to fruition, it's 350 to 400 basis.
Points of occupancy.
Doug quoted a couple of numbers. He quoted just under 500000 square feet that we expect to come on line at its new deals coming online in 'twenty one.
And then the rest of it a little over 400000 square feet was we'll call. It shadow would be things that pop online later this year and into 2022.
Great. Thank you.
Sure.
As a reminder, ask a question. Please press star one we'll now take the next question from Floris Van <unk> from Compass point. Please go ahead.
Hey, guys. Thanks, a follow up question, but.
Yes, I think one of the.
On the fears I guess some investors now that you have an ATM in place.
Its debt.
<unk> will be tapping the market at the current share price and I I I believe I don't believe that's what you've done certainly I know it doesn't appear like you used it so far.
And can you give.
Maybe I was trying to get a sense of at what level will you think to to use debt ATM and if it's not at the current share price and and where so in other words, where do you think your NAV is or what the ranges and how far off is contracted from that in your view.
And maybe also talk about your the discussion you had.
Any with Ontario teachers, when they stepped out at over 20 $20 a share.
So, Florida look we're not going to comment on the ATM activity if any.
If we use the ATM will report on it at the end of the quarter just like all the other companies that use their Atms do but it's not in our best interest to comment on it along the way. So we're not planning on doing that and we do not publish an NAV.
So that's not available either.
Yeah.
So it's just another tool in the tool kit and we will periodically decide if and when to use it.
Right, but presumably.
You must have an idea of because you presumably share that with your board. What's your NAV is.
Or what's the range of any day.
If you can.
I think yes, I guess the debt the thing what I'm trying to get at is is the current share price is something where you would consider doing that well before.
On the fears that investors have as debt you cap it at such low share price that you dilute the value of the company.
<unk> proven in the past that you're willing to wait until the share price recovers to a more appropriate level. Obviously, we saw the squeeze that happens.
You know similar to what happened at Gamestop unfortunate you didn't have the ATM in place, but now that you do have that.
No.
Hopefully you will be more reticent to use it at the current levels, but if it gets above a certain level, presumably you will be much more willing to use that is there any sort of.
Indications you can give to the market or at least to pacify investors that you're not going to issue debt 13, or $14, but you might consider doing it at 16 or $18.
No for us as I said, we're not going to tip, our hand as to if and when we're going to use it as to what price level. It depends on the facts and circumstances at the time market conditions liquidity et cetera again.
We have had a equity shelf available for years now and it's there and we use it when it's appropriate we haven't used it for a while.
Just supplementing that with an ATM shelf as well, it's as simple as that.
And is there any any light you can shed on any conversations you've had with with Ontario teachers prior.
Prior to them.
That being out.
Florida, So our conversations with our shareholders are confidential.
As I'm sure you can imagine.
Thank you.
Right. Thanks, a lot.
Okay.
We will now take the next question from Michael Bilerman of Citi.
Please go on.
Okay.
Hey, Paul.
Follow up as we think about the recovery of occupancy and that was really helpful. For you to go through all the categories of retailers that were expanding before COVID-19 hit.
How should investors think about regaining back towards that.
Higher occupancy of 94%, 95% in <unk>.
<unk> of the total NOI potential how much it will cost you in capex.
And we're just really thinking not not as much on the <unk>.
And so on it because it's going to take some time to build up but really the return on that capital on how it compares to where.
It would've been I E. How are we going to get to 80% of the NOI level and Sweden back to that 600 basis, 0.6, and 700 basis from occupancy in terms of what it was before and how much money would you have to spend to induce a tenant.
Come in just thinking about the return on that NOI stream over the next few years.
And your expectations of going back to you.
Gross peak occupancy level.
Yeah, Michael I'll jump in and then Doug you can give some color Scott as well so we're talking about roughly 5% to pick up from where we are today.
We dropped at 88% occupancy as Scott said to get back to full occupancy you are talking about roughly.
You know one point too.
They had square feet or so.
Doug you kind of gave the cadence for this year and in terms of Capex.
To choose whether we want to pay a big tenant allowance or go for a deal that's got a lower tenant allowance for low tenant allowance at all I mean, we were fairly stingy with the.
But the tenant allowances coming out of the financial crisis. So we have been through this before and I would imagine that we will be very sensitive to the creditworthiness of the tenants that we do deals with.
And who we give tenant allowances too so it's really hard to say at this point how much capital will be involved with that just to give you. An example that we converted.
One series box too.
Medical facility.
I think we're getting roughly.
$1 million a year in rent and I think the total landlord work was only.
500000, so there are deals like that to be done on other deals and more expensive. It's just going to take some time to.
G sort those deals out with you know we've taken a very critical look at who we give curt allowance dollars Tuesdays.
Okay.
That concludes today's question and answer session. Mr. Tom ahead, I'd like to turn the conference back to you Sir.
Catherine. Thank you. Thank you all for joining us today.
Be well stay positive test negative.
Hope to see you soon.
Yeah.
Okay.
That concludes today's call. Thank you for your participation you may now disconnect.