Ladies and gentlemen, thank you for standing by. Welcome to the Q1 2020 Federal Realty Investment Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Ms. Leah Brady. Please go ahead.
Good morning. Thank you for joining us today for Federal Realty's first quarter 2020 earnings conference call. Joining me on the call are Don Wood, Dan Gee, Jeff Berkes, Wendy Seher, Dawn Becker, and Melissa Solis. They'll be available to take your questions at the conclusion of our prepared remarks. A reminder that certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information, as well as statements referring to expected or anticipated events or results. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be attained.
The earnings release and supplemental reporting package that we issued yesterday, our annual report filed on Form 10-K, and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and results of operation. We've also posted on the website a slide deck that has more detailed information on the impact of the COVID-19 pandemic on our business to date and various actions we've taken in response to COVID-19. These documents are available on our website. Given the number of participants on the call, we kindly ask that you limit your questions to one or two per person during the Q&A portion, and you should feel free to jump back in the queue if you have any additional questions. With that, I will turn the call over to Don Wood to begin our discussion of our first quarter results. Don?
Thank you, Leah, and good morning, everyone. There's a certain comfort in the familiarity of the well-worn quarterly routine of the earnings call with each of you that's oddly reassuring to me as we battle through this mess each day in preparation for advantageous positioning coming out the other side. First, my heartfelt thoughts and prayers for good health to each of you and your families and friends in this crazy time, particularly those of you holed up in small spaces in my favorite city, home to the 27-time world champion New York Yankees.
A shout-out of immense respect and appreciation for the unity and the work ethic of the Federal Realty team on the front lines over these past six to eight weeks, including our property management team, who've taken care of our assets so that essential businesses could provide those services to the community, and also to those team members whose jobs weren't full-time anymore, and who volunteered for the numerous new areas where their help was needed. Top to bottom, everything in between, thank you. This is one dedicated and talented team. Let me start with a few comments about the first quarter, and then move on to today's situation and where we are headed from here. As you saw in our press release last night, we reported FFO of $1.50 a share in the first quarter compared with $1.56 in last year's first quarter.
Even before the COVID-19 crisis, we're going to have a tough year-over-year comp because of the $5.4 million in lease termination fees in last year's quarter compared with $2.7 million this quarter, or a difference of roughly $0.03 a share. We were having a great start of the year up until the last two weeks in March, and were on track to grow FFO per share, ex termination fees, by 2%- 3%. That changed in a blink with mandated shutdowns and fear of the uncertain future. The states that we do business in were among the first to close, and by the second half of March, we were really feeling the heavy drop-off in activity. Rent payment deficiencies and increased bad debt provisions, among other items directly attributed to COVID-19, totaled $4 million, or $0.06 per share in the first quarter.
Still, a pretty solid quarter, which also included over 80 leases executed for nearly half a million sq ft. We went into this whole mess in a strong position from both an operational and most certainly a balance sheet perspective. I guess the real question is: Will we make it through, and what will we look like on the other side? First things first. Yes, we will make it through. Dan will spend considerable time going through our current cash position, cash flow projections, our development spending flexibility, and plans for additional financing. One comment from me in that regard. History and track record really matters at a time like this. A reminder that in 2009, in the depths of the recession, when markets were closed to many borrowers, we accessed the unsecured market. We secured bank debt from a consortium of lenders.
We upsized our line of credit. We even issued a small amount of common equity. The point is that all of those markets were open to us then, and our balance sheet and competitive position is even stronger today. Again, Dan Gee on our plans in a bit. Our development spend, which approximated $35 million a month coming into April, has been pared to about $10 million a month, with the Massachusetts and California shutdowns at Assembly Row and Santana West and a few other smaller projects saving cash currently. Construction at CocoWalk in Florida and 909 Rose at Pike & Rose in Maryland continue as both are nearly complete, and in fact, will be over the next few months. We have every intention to complete all of our development projects that are partially constructed.
The start of construction on all new development projects are, however, on hold until we have some better visibility on the length of the pandemic's effects. Okay, rent collection. It's obviously impossible for a simple tell-all statistic or metric to try to explain such a multifaceted and complicated phenomena as the virtual shutdown of the entire U.S. economy by pandemic. April rent collections certainly are not that metric, but they're a relevant piece of data. They're easy to understand. They fit neatly on a matrix of comparative companies. Like same-store NOI, it's just not that simple, and it's such a small part of a company's post-COVID viability and growth prospects. More on that in a minute.
For the record, we collected 53% of our contractual rent in April, which we expect to be better than the mall sector and a little bit less than the grocery-anchored shopping centers, who have a tenant base more highly geared to essentials. Our portfolio is far more diversified, which we see as a major strength, not a weakness, for any period in history and any economy in history, other than in the quarter or two that a global pandemic literally shuts down the world. All 104 of our shopping centers are open and operating with about 47% of the tenants open and trying to do some level of business. About a quarter of our rent comes from essential services, grocery, drug, banks, et cetera, and that was largely paid in April. Another 20% comes from our residential and office tenants, largely at our mixed-use communities.
95% of our resi rent for April was collected, as was 87% of office rent. Restaurants make up 15% of our rental base, about half full service and half QSRs and fast food. About a quarter of that rent was paid in April. Fitness and experiential tenants like theaters and bowling concepts comprise another 6%, and very little April rent was collected in that category. Payment was sporadic on the balance of the portfolio. Our first response for non-payers was, of course, to communicate with clarity that we expect existing contracts to be honored, and in many cases they were. Others did not pay, have been put in default, and no active conversations are underway between the parties for a whole host of reasons. These are largely small tenants who were struggling pre-COVID-19 and will have a hard time reemerging on the other side.
Vacancy will clearly be higher on the other side of this crisis. No good prediction on how much higher at this point. The remainder are those tenants who have the wherewithal to pay, but who are looking for deferrals for the periods that they're closed, and some for a couple of months after. These negotiations are complex and consider many factors, including the easing of lease restrictions that may impair our ability to redevelop down the road. We don't have a blanket policy for handling these negotiations. This is a really important point. One of the many advantages of our platform is that we're small enough to have senior-level experienced executives handle each of these conversations on a one-off individual basis. We believe that individualized approach will lead to the best result for Federal as a whole as we look to the coming years and not just months.
I think all of that is a pretty good summary of what's happening right now. You can find additional information in a presentation available on our investor website. Check it out, it's thorough, if you haven't already. Let me move on to give you a few thoughts about where we see ourselves on the other side of this. As you would expect from me, let me start with the short-term negatives. First, geography. No surprise here. The states we do business in will largely be the last to reopen and likely with the most stringent conditions, California, Massachusetts, Pennsylvania, Maryland, et cetera. You know the list. Clearly a negative relative to the middle of the country in terms of the second quarter and probably third quarter activity. Second, our tenant makeup.
More lifestyle and entertainment-oriented restaurants and retailers that are not essential for consumers during a pandemic, as I laid out in the percentages above. Those two things, geography and tenant mix, are not conducive to outperformance or accurately predicting performance at all in the second or third quarters of 2020, perhaps longer. Accordingly, we're in no position to offer earnings guidance for any period at this point. What we can do, however, is share our thoughts as to a pretty compelling plan and vision for our properties enhanced growth on the other side of this. First, from the demand side. We see the geography negative in the short term as a huge positive on the other side of this. At the end of the day, real estate needs to be near high-paying job centers to be able to grow in value. Ours are.
They're in densely populated and affluent first-tier suburbs to major coastal cities, but not in the central business districts of those cities. They're open air. Think Bethesda and North Bethesda, Maryland, relative to downtown D.C. Coconut Grove to downtown Miami. Hoboken to Manhattan. San Jose to San Francisco. El Segundo to downtown Los Angeles. Somerville, Massachusetts, to downtown Boston. Bala Cynwyd, Pennsylvania, to downtown Philly. You get the idea. Open air places, not enclosed buildings, that are easily accessible by car with convenient parking, close enough to high-wage job centers that are able to attract the latest tenants and this is really important, provide a full array of services. The luxuries and conveniences that both city and suburban people have grown accustomed to, and in fact, demand, aren't likely to be given up on easily. It's kind of a Goldilocks scenario here.
Not too close, not too far, just right in terms of those locations. Might what we've always believed to be the sweet spot, those close-in first-tier suburbs, be even sweeter in a post-COVID-19 world? We think so. Second, landlord organized and integrated curbside delivery programs. That's landlord organized and integrated curbside delivery programs at shopping centers and mixed-use communities in densely populated first-tier suburbs need to be, in our view, a permanent component of a property's toolkit for attracting customers, and not just for food. Face it, delivering goods and services to the end user profitably has not been broadly solved. Customer pickup in an attractive, convenient, safe environment is the most important piece to economically delivering goods that last mile. We'll be a leader in landlord-integrated curbside delivery on the other side of this.
Third, it's not hard to see how the steady drumbeat of enclosed mall tenants who have been moving, at least partly, to open-air shopping centers over the past several years doesn't accelerate meaningfully in the wake of COVID-19. When you think about which open-air properties are most likely to garner a disproportionate share of that movement, Federal formats, tenant mix, and locations are pretty darn well positioned. We think this is one of the most important sources of where new tenant demand comes from that's necessary to replace the COVID-19 retail failures.
There's also a fourth and a fifth and a sixth set of initiatives that we're working on that are too premature to talk about at this point, but they all relate directly to why all of us at Federal are, while patiently working through this awful pandemic today, extremely excited about what awaits as we work into the other side later this year and next, and for many years after that. As you sit back and take a break from compiling April rent collection stats and think about the future of the 25 or so publicly traded, retail-oriented real estate companies in business today, I think you'd agree with me that our locations, our formats, our diversity and innovative team should put us at the top of that list. Let me now turn it over to Dan before addressing your questions. Dan?
Thank you, Don. Good morning, everyone. FFO of $1.50 per share represented a largely intact first quarter. As Don mentioned, prior to the March impact of COVID-19 on our numbers, we were on pace to outperform our internal forecast by about $0.03 or $0.04 per share, with COVID-19 impacts representing roughly $0.06 of negative drag. Overall, the numbers in the first quarter were driven primarily by Splunk taking possession on time at 700 Santana Row on February 1st, lower property level expenses and lower G&A, offset by the aforementioned COVID-19 related impacts in the last three weeks of March, which included higher bad debt expense than we had forecast, lower contribution from our hotel JVs than forecast, lower parking revenue, and higher interest expense, given the cash position we built. Our comparable POI metric came in at a -2.5% for the first quarter. Don't be alarmed.
Excluding term fee headwinds, which were expected of a -1.8%, and COVID-19 related POI impacts in the same store pool of a -1.7%, comparable POI would've been a positive 1%, a result which would have also exceeded our internal expectations. Through March 15th, we were also having a solid first quarter on the leasing front with almost 500,000 square feet of activity. Leases of note where merchandising was meaningfully enhanced and or rents increased include TJ Maxx replacing Staples at Andorra & Philly, Burlington taking the Bon-Ton box at Brick in New Jersey, Old Navy at the Old Pier 1 in Mount Vernon, Virginia, a renowned South Miami restaurant group signing on with a new concept at the former Gap ground floor space at CocoWalk, and converting retail space to creative office space for a cutting-edge cosmetic line at The Collection at Plaza El Segundo in L.A.
All examples of our ability to drive demand from best-in-class tenants across property types due to the strength of our real estate locations. This has continued into the second quarter with deals signed over the last 30 days with two top grocers as well as a major office tenant. Plus, we have seen real estate committees at these retailers open up in recent weeks with site approvals coming in at several additional locations. Add in a bidding war for our Fairway grocer location and our recently acquired Brooklyn asset, and you see demand for our real estate from top tenant continues, albeit at lower volume, even in the midst of a global pandemic. Let me take a step back and take a few moments to comment on the overall profitability of Federal from a fundamental perspective.
We have a high- margin business at the property level with PO margins just under 70%. Breakeven cash collection for POI at the property level is right around 30%. Breakeven cash collection after G&A, after interest expense, after maintenance and leasing capital, is roughly 60%. While our second quarter and the balance of 2020 will be challenging, no doubt, our cash burn rate from operations, even in the second quarter, should be minimal. Let me take a moment to highlight our updated disclosure. Both Lee and Don highlighted our COVID-19 business update and its availability on the front page of our investor section of our website. Additionally, in our 8-K supplement, you may have noticed an office tenant, Splunk, is now our top tenant, albeit at a very manageable exposure of 3.4% of revenues. For those unfamiliar, Splunk is a leader in data software analytics, security, and operations.
A public company since 2012, Splunk has a market capitalization in excess of $20 billion, roughly $2.4 billion of revenue last year, and has a leading industry position in all things data. In March, we posted on our newly designed Federal 1962 branded website our inaugural ESG-focused corporate responsibility report entitled "A Sustainable Mindset." It is a comprehensive overview of our longstanding commitment to ESG throughout all aspects of our business. On to the balance sheet and liquidity. In mid-March, we drew down close to our entire $1 billion credit facility given concerns over the stability of the financial markets. At quarter end, we continued to have that $1 billion of cash on hand. Since that time, we have raised an additional $400 million in an unsecured term loan.
The term loan has a one-year maturity with a one-year extension option and an interest rate set at LIBOR plus 135, given our A- rating. These moves provide us with substantial pro forma liquidity of $1.4 billion in cash on hand and available credit capacity as we navigate through these uncertain times. Our credit metrics remain strong with net debt to EBITDA at 5.7 times, fixed charge coverage at 4 times, and a weighted average debt maturity of 10 years. We remain well positioned to manage through the challenging environment we currently face like we have done time and time again over our 58-year history and our 52-year track record of cash flow stability and increasing dividends. Our A-, A3 ratings from S&P and Moody's respectively, should provide us with continued access to the unsecured bond market at attractive interest rate levels.
We expect to refinance our manageable debt maturities, $340 million through the year-end 2021, primarily in this market. Our diversity of other attractively priced funding sources continues to be a differentiating factor for Federal. The quality of our real estate still commands premium pricing in the institutional sales market, as evident by our most recent asset sale last week in Pasadena at a four-and-a-half cap rate. The ability to partner with attractively priced passive joint venture capital remains high. Let me provide you with a more fulsome update on our development pipeline. At 331, roughly $675 million is remaining to be spent on our in-process pipeline. That pipeline is disclosed in our 8-K on pages 16 and 17 and outlines our redevelopment and development respectively.
Updated timing, given the government-mandated shutdowns at our two largest projects, Assembly Row and at Santana Row, push out the timeline somewhat. $250 million-$275 million is estimated to be spent for the balance of 2020, with most of our projected second quarter spend being pushed out at least a month or two on average. $250 million is now projected to be spent in 2021, with the balance, $150 million-$175 million, in 2022 and into 2023. Over 80% of that pipeline is non-retail, with 55%+ amenitized office and 25%+ residential, all of which are located in first-tier suburbs. Note that 50% of the commercial, office, and retail is pre-leased.
Note that we have the ability to hit the pause button on roughly $280 million of this existing pipeline, which would reduce the in-process pipeline's remaining spend to less than $400 million. To clarify, at the current time, hitting the pause button is not our objective, nor our current plan. As is our hallmark, we will maintain discipline in those capital allocation decisions as we move forward. As you saw yesterday, we declared a regular cash dividend of $1.05 per share payable in July. Given the strength of our balance sheet and liquidity position, our goal is to maintain a cash dividend and push our 52-year record of increasing dividends to 53. Again, the management team and our board of directors will be extremely disciplined in setting our dividend policy as we navigate moving forward. Lastly, FFO guidance for 2020 was withdrawn back in March.
We hope to reintroduce guidance when we have a better visibility on the impact of COVID-19 on our business over the coming quarters. With that, operator, please open up the line for questions.
Thank you. Ladies and gentlemen, as a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question is from the line of Craig Schmidt with Bank of America.
Good morning.
Good morning, Craig.
Yeah. In talking about the expanding and enhancement of the curbside service and delivery, is any of that going to require any zoning differences that you might need to have to accommodate that? Or are you well within the bounds of staying within your current zoning?
As you know, Craig, we've got a lot of different property types in a lot of different places. We don't expect zoning to be an issue. There are clearly certain things that need to be done. For example, at Pike & Rose, we needed to get the county to give up some parking spaces that they get paid on, that they were able to do, which I just loved. At most of our shopping centers, that's not a problem, but we do have fire lanes and other reasons, things that we need to work through.
What the most important thing, I think, to understand about this is that the evolution of curbside pickup and the integration of it from the landlord's perspective with multiple tenants, I really think is something that we are just starting, but over the next quarters and years, will become such an integral part to what we do that will solve the inherent issues that are bound to come up with 100 properties and implementing this along the way. Zoning should not be the primary concern.
Okay. Then just real quick, are you having any discussions with retailers who are looking to move to an all percentage rent as opposed to fixed minimum rents?
Sure. Let me put it to you this way. Every tenant is trying to somehow renegotiate their contract, and all kinds of ideas are coming through what it is that they would like to do. I cannot state this enough. The beauty of this place is that we do not have a policy on how we're going to handle certain types of tenants. Because of our size, which is relatively small and manageable, we can take a senior executive, whether it's me or Wendy Seher or Jeff Berkes or Jan Sweetnam or Lance Billingsley, there are 10 of us at a senior level that can have each of these conversations with each different business, each different retailer, specifically to come up with the best solution. All kinds of things are being asked, as you can imagine.
At the other side of this, retailers need to be in productive shopping centers. They need to be in places where they're going to be able to make money. We're at the top of those lists. Our negotiating ability, while certainly not perfect, and our contracts, while certainly not perfect, are pretty darn advantageous to be able to allow us to get to an economic solution on the other side of this. Do I expect some percentage rent deals? Of course, I expect some percentage rent deals. I also expect different conditions under which you operate, including some easing of restrictions that were hard for us to redevelop, for example, along the way. There's a long way to play this stuff all out yet over the next six months or so. We're not rushing. We're going to have one-by-one conversations to get them right.
Okay. Thank you.
Your next question is from the line of Nick Yulico with Scotiabank.
Hey, good morning. This is Greg McGinniss. I'm with Nick. Don, I know it's early, how have rent collections trended so far in May? Do you have any rough estimates or expectations for final collections relative to April? I'm sure you're spending a lot of time thinking about the financial solvency of your tenants, and we're just curious what percent you think might not be recoverable in terms of rents. Maybe another way to think about that is, what percent of leases do you expect to switch to cash accounting?
Gosh, Greg, you had so much in there. I'm going to go to the first part and see if Melissa and Dan want to add anything to it. I suspect the answer's going to be no. Look, I could tell you that May has started out, we're ahead of April. I don't even know why we're ahead of April, but where we were in terms of at this point in April, and that's an important point to make, for the first few days, that we've collected more than we did in April at that point. Whether that's sustainable or not, I don't know. Obviously, we'll have to see what happens all the way through. I'll make one point on cash versus accrual and the accounting part of this. Where my focus is really not so much on where yours is in terms of those focuses.
Mine's all about how, on the other side of this, we've got a growth plan with new tenants, different places to get those new tenants, as I laid that out. Those tenants that really have a business plan going forward, I'm not really all that about taking tenants that had a hard time coming in here and doing whatever we can to keep them in the shopping center. I don't think that's necessarily the best way to move forward. All the focus here, while there's the day-to-day of negotiation, is on 2021, 2022, where effectively we'll not only maintain but expand our leadership position. I don't know, you guys, if you want to add anything to that at all, I guess.
Yeah, no. Hey, look, it's a moving target with regards to kind of what we see as collectibility from our tenants, and we'll make assessments as we move forward. There's not much we can add there except to concur with what Don highlighted.
All right, thanks. That's fair. Could you just dig into the restaurant rent collections a little bit more? What were the collections like on quick service versus full service? What gives you confidence that full- service tenants can survive this or be able to pay back deferred rent, given what's likely to be a diminished business for a while?
Yeah. look, there was a differentiation between what was collected with regards to, w e had quick service. We have essentially 27%. Don mentioned a quarter, about 27% total in restaurants. Roughly 37% with the QSRs and the fast food, and then less than 20% from full service.
Greg, let me jump on the point about what makes you think we can move forward with respect to that, because that's a real important one. We have circled about 35 tenants, restaurant tenants, that were incredibly strong, that we want to make sure open back up quickly. When they do, they're such an important part of the shopping center. We've circled, we've actually authorized a $10 million fund that is available for tenants to effectively reopen. Only select restaurant tenants that we've designated to effectively go there. We are in the early stages of that, because that's not PPP money that we're talking about. It's not specifically tied to the employees of those restaurants. It's about getting them back open and the working capital necessary to get them back open. We're not going to do that with failing restaurants.
We're only doing that with our strong restaurants who've come in but are challenged today financially to be able to get that initial start going back. It's an important part of what we do in terms of our merchandising of a shopping center and mixed-use property, but it's one that we're highly focused on to make sure we're investing in the best ones.
All right. Thank you.
Your next question is from the line of Christy McElroy with Citigroup.
Hi, good morning. Thank you. Don, I just wanted to follow up on some of the comments you made in the opening remarks about your markets and demographics. On one hand, you're in coastal markets that it seems like things are shut down longer, but you also have higher income demographics that may not be as impacted in terms of job losses. You also have a longer-term trend here of potentially greater work from home trends that could result in more people moving to lower cost of living markets that could impact that historical high wage job centers that you discussed. How are you thinking about all these factors today, not just from a retail perspective, but office and resi as well?
Christy, first of all, who knows, right? It's really hard to predict where we're going to go other than to say, Think about yourself and your team, and how comfortable you've gotten with services, the level of services that you've had over the past five or six or seven years. I don't believe that those urban, and you're not as urban as some of the folks in your spot, but those urban folks are going to move out to second and third-tier suburbs. It's too much of a drop-off in what was available to them. I do believe in those 1st-tier suburbs, where we are, the ability to have it all. I do think this is going to be a resurgence for cars and your own personal transportation device as opposed to mass transit for a while and maybe longer than a while, I don't know.
We'll see how that plays out. I think that's critical. The other thing, I don't know if you know, whether we disclosed this or not, I find this interesting. In our big three, the Assembly Row, Pike & Rose, and Santana Row, all of whom are in that first-tier suburban area, right? While we absolutely did not collect a lot of the lifestyle rent on the retail side, overall, we collected two-thirds of the rent due in those properties because of the residential, because of the office component to it. The notion of those places as kind of centers of jobs, those places as centers of living and the new style for doing that, I think we're right in the middle of it, right where we belong. The specifics to your question, we'll have to see. Let's see how it plays out.
At the end of the day, the real estate is sure conducive to where the jobs are, whether they're at home or in the existing place that they're at, and certainly for the retailers to be able to create sales and value there. I'm feeling pretty good about the position.
Okay. Thanks for that. I agree. I'm probably an anomaly in terms of where I live. I understand your dividend payment track record and the importance of that. The dividend can be an annual payment. Just, you're doing a lot to shore up liquidity in terms of including the new term loan. Can you discuss the board's decision not to just sort of suspend the payment for now, given the current environment, and take more of a wait-and-see approach?
Very much so. Listen, a lot of people would say, and I've seen it in some of the notes, "Well, Federal's very proud of their long-term dividend record, and that's why they keep making their payments, or that's why they made their payment." That's not true. It is true that we're proud. The biggest single reason to continue our dividend payment to the extent we can, and as Dan said, we'll evaluate it every three months, and I'll get to your annual question in a minute, is because on the other side of this, down the road, there's going to have to be equity issues. The ability to effectively look back at 2020 and say the company was able effectively to maintain that very important part of total return for a shareholder is really important in our view.
Today, as we understand where our ability to access capital is, how that is going, and I think as Dan alluded to, we'll have more to say about that in the next couple of weeks or whatever, with additional financing. We think it's important to, at this point, declare July. We'll absolutely reassess that come August with respect to the next payment. The difference between simply annual and quarterly in the whole scheme of what is now today $1.4 billion worth of capacity made sense for us to make an $80 million dividend declaration.
Great. Thanks, Don.
Your next question is from the line of Alexander Goldfarb with Piper Sandler.
Morning, Don and Dan. Hopefully Lebanese Taverna is one of your restaurants that you're looking that's on that 25 to 35 list. Two questions from us. The first one, Don, is when you're working with tenants, how do you make them realize that rents are contractual, that this is not some new era where suddenly tenants, we've even seen some big tenants like a Ross, where they suddenly can arbitrarily get this right to not pay? How do you enforce and make clear that tenants have to absolutely honor these contractual obligations and that this is not some new right that they now can use whenever they get into a distressed situation?
Boy, Alex, first of all, I don't know how to answer that question. They understand that. It is a negotiation. There are businesses trying to take advantage of a situation to effectively void a contract. I don't know why anybody would be surprised at that in a time like this. You take your legal rights, your contractual rights, you put them up against the viability of the company that you're talking about, your alternatives, and where you think you can go and where you're going to be on the other side of this, and you see what you get, what you can get or what you need. Because, by the way, we want some stuff out of that contract too. The negotiation starts. It's not about explaining to them their legal obligations.
They understand their legal obligations, and the default notices that we're sending make that very clear behind it. Yeah, I don't really know how much more to add to that. That I could.
Okay. Don, that's helpful. The second question is, you mentioned the value and the benefit of the office and the residential for your mixed-use as far as powering through the overall center's rent collection. As you look at your portfolio across your lifestyle projects, your row projects, and your traditional shopping center projects, are you noticing better trends with the mixed-use because of that commercial element? Or is it really coming down to the particular tenant mix and that one center just by nature of the tenant mix they had was really the overall driver of why that center did better?
I'm sort of curious if basically if having the office and the residential provides more stability or if it really comes down to the tenant mix, in which case a shopping center with a lot of essential will maybe do better, and therefore, as you guys think about how you're going to tenant projects, tenant mix, as you've always said, tenant mix becomes even more important.
Let's put it this way. First of all, we do believe that the residents, in particular in our mixed-use projects, because of the rents are generally, and where we are, more affluent and at least so far, have maintained their jobs more so than rental tenants in kind of a traditional use for an apartment, where you're in an apartment because you can't afford a house. We don't generally have those type of tenants in the mixed-use places we have. Generally, I'm not surprised that we're collecting as well as we're collecting throughout those uses. They're there for a reason. They're there because of that amenitized base.
If most of them have the wherewithal to pay and they've got the amenitized base down below, even though the amenitized base is less essential, if you will, as defined by grocer and drug in April and May, believe me, the stuff that's down there on the retail side of those mixed-use projects is essential on a longer- term basis because that's their life. That includes the right food, that includes the right shopping. All of those pieces are critical to why they chose to live there in the first place. We're in the first two months of a global shutdown. Making long-term predictions about the collectibility overall, whether it's those particular tenants or future tenants, you can't take April rents to make that decision about going forward there.
I feel the mix that we have moving toward urban mixed use and even our grocery anchored infill locations, the trends that were there before will only be solidified on the other side of this pandemic. That's how I view it.
Don, that's helpful. Thank you.
Your next question is from the line of Shivani Sood with Deutsche Bank.
Shivani?
Operator, let's move to the next question.
The next question is from the line of Jeremy Metz with BMO Capital Markets.
I'm just following up, Don, on that last question and going back to your comments in the opening about the curbside and being a leader there. I guess just given all the projects underway in planning, the big developments, the redevelopments, the box repositioning, you're looking at some of these industries being impacted, some potentially worse off or just even with just different future expansion plans. Is there any additional color here on just how you and the team are maybe shifting your plans around it at all as you envision curating some of these or any additional on the design or redesign at this point beyond just the curbside pieces? Is it just on the margin or is there any wholesale rethinking in some cases here?
Yeah, that's a good question, Jeremy. There's been no wholesale rethinking. Effectively, it does go back to what I was saying before. If you think about physically where our places are and what advantages we have coming out of the recession based on those locations, we want to exploit as best we can the advantages we see. Those advantages include, obviously, an enhanced level of service. Curbside is a big piece of it'll be the way we do curbside going forward that's the real differentiator. Think about how comfortable it is if you live in a community to use your shopping center, if you could, for all purposes, for all services that you use. Sometimes you feel like strolling, sometimes you got 20 minutes and you got to pick something up and move along, everything in between.
We want to take advantage of our positions that way. Certainly, open air versus enclosed, hard to imagine that's not an advantage. We want to take advantage of the formats that we have. Coming out on the other side, to the extent we're looking at new projects, to your point, we will look at it with the best information we have at the time. As I sit here on May 7th or whatever day it is today in the middle of the crisis, I kind of like where we are and how we've set this up, despite what will clearly be a much tougher environment to produce results for the next quarter or two.
Yeah, I think that's fair. A second one from me, just a quick one here on Hoboken. I think you and your partner there had some additional assets under contract. Just wondering what the latest status is of those and possibly timing. If that's part of the capital plan Dan Gee laid out building up some liquidity for. Maybe on top of that, how should we think about executing some of the additional assets that you had originally planned as the transaction markets open back up here? Thanks.
Sure. First of all, with respect to Hoboken, everything we thought going into Hoboken, we continue to think today. As you would expect, the deals that were not done yet, we continue to look with our partner for other deals and have made some pretty good progress in moving some deals along. We're not going to close them right now. We're going to sit back, we're going to see how this all plays out. I believe on the other side, we'll wind up picking that stuff back up, but let's see where we are at that point. That's the Hoboken piece to it. What's the second part of your question? I hate to do it again.
Property sales.
With what?
Property sales that were in the pipeline.
Yeah, property sales in the pipeline. Again, it's.
Do you know when we'll call it?
I got you. Look, we're just going to take a pause on that right now. Hard to tell where those markets would be. You did see that we did close on Pasadena in the quarter, by the way, and at a sub-5 cap, which says something, but obviously, that deal was negotiated before.
They had the ability, with full visibility of COVID, to back out of the deal, and they didn't. Priced that at a four and a half cap, I think says a lot about real estate quality, even in this environment.
In terms of future asset sales, they're on hold right now. We'll reevaluate later in the year.
Thank you.
Your next question is from the line of Mike Mueller with JPMorgan.
In fallout, in run rate, NOI erosion, do you think this is better, worse, or the same as the GFC?
Oh, gosh, Mike. Different. Different. I don't know the answer to your question. I really don't know. It's not the same as the big recession, obviously. The globe has been closed down economically. There's, I don't think anything that's been like that. As things start loosening up, I do think, as I said, we'll be one of the last to effectively have people, have those jurisdictions restrictions come off. I also think it's less about having the restrictions come off and more about the populace getting comfortable and feeling safe in coming back out into the community, and that's going to happen. That's already happening in the markets we're in today.
I come to work every day, and I know that I've seen traffic in the states I'm in, Virginia and Maryland, that has continued to build as I'm sure most of you have seen, and nothing's changed with respect to the restrictions, specifically, where we are. As that builds back, the question is, how can we get these businesses back up? Effectively, how soon will the market accept them? I'm optimistic, but I do think we're talking about 2021, where we see any kind of level of normalcy and activity.
Got it. Okay. The press release, you talked about slower construction pace because of safety protocols. I guess, do you see that as something that's just a temporary phenomenon or something along the lines of more of a new norm? What are some examples of what's changed on the ground for the projects?
Like everything else, I think you'll see a slow comeback to "normalcy." What those safety protocols are right now are specific distancing, specific rules with respect to cleanliness and masks, and how many people can be working in a particular area. For the projects that are closed down as they come back up, I do believe those protocols will be in place. Whether they're in place forever or not remains to be seen. It's stuff like that, which is frankly, the same protocols that you see in a grocery store or anywhere else during the crisis. A lot of consistency.
Got it. Okay. That was it. Thank you.
Your next question is from the line of Vince Tibone with Green Street Advisors
Hey, good morning.
Good morning.
Given your ability to access debt capital, would you consider levering up to go on offense on the acquisitions front over the next year or so if you think there are unique distressed investment opportunities out there?
We're going to talk about that, Vince, later in the year. It's a good question. Look, remember, everybody's levering up, whether they like it or not. Every retailer, every real estate company, et cetera. From our perspective, I love that we came in here so well-capitalized, so that incremental levering up is not a strain on the business. We will be able to talk about that and think about that. There may be distressed opportunities going forward, but as with everything, looking at those carefully and really deciding that that's where you're going to allocate your capital rather to kind of what you got. As you know, we got a lot of stuff in the works and opportunities within the portfolio.
Personally, that's going to take precedent because we know what it is that we're getting, and you never know what you're getting when you go after a distressed asset that way. Too early to say, but certainly something that'll be on the radar later in the year.
Yeah. I think the way to think about that, and the way we think about that, is balance, and clearly maintaining balance through that. Look, while we're not raising equity at the stock level, we have the ability to tap our assets and raise equity at the asset level very cost effectively, particularly even in this environment. I think there's going to be balance from that perspective. Hey, look, we do hope to be able to play a little offense, but we'll see and we'll know more as things unfold.
Thank you, Ed. That's helpful color. One more, just switching gears a bit. I'm curious, how do you see second- quarter rent payment disputes between tenants and landlords being resolved if you don't reach an agreement on rent deferral or rent abatement? If a tenant just says, "I don't feel like I need to pay," but you have a legal contract, how does this get settled?
Hey, Mark. How are you? Not much. I'm on this Federal call. Something quick?
Alex, can you mute please? I'm not sure if he's still in there. Vince, go ahead.
I'm sorry, Vince. I did hear your question.
Sorry. Did you guys hear my question?
We did hear it. Somehow Goldfarb got on. I don't know how he does this stuff. It's amazing.
Sorry about that, Don.
It's okay, Alex. Help me again, Vince. Where are we going?
Disputes with tenants who don't pay and we don't reach a deal with.
Look, at the end of the day, there has not been a non-payment of rent so far, and we don't expect there to be, for which we have given up our rights. This is not unilateral. We've preserved our rights either through default or effectively through the contract itself. It has to be resolved. The likelihood is that individual negotiations will resolve the vast majority of those contracts. For those companies that frankly can't pay because they'll wind up filing. We've seen a bunch already. We'll continue to see that, and the courts will effectively vet that out. Those are the two ways that effectively it happens. You should continue to see that through May and June, frankly.
Okay. Fair enough. If I could just sneak one more quick one in. Do you have any exposure to co-working operators in your office portfolio?
We do. We've got a Regus deal that is signed down at CocoWalk for 40,000 ft or so. Every indication is that that deal continues to go through. We have a small deal with them also, I think, at Pike & Rose on a floor and they're under contract there. It's limited, but that's what we got.
Just to clarify, the one at Pike & Rose that's already in place, or that's a new deal?
That's been in place for years. No, that's been in place for years.
Got it.
It's a small lease. The big one is down in CocoWalk. That's still under construction, being built out. That's all we got.
Perfect. Thank you. Thank you for the time.
Thanks.
Your next question is from the line of Chris Lucas with Capital One Securities.
Hey, good morning, guys. Hey, Dan, on the credit facility balance, I guess the question for me would be, is there any plans to think about maybe locking that in longer term with some long-term debt? If you did, what sort of pricing would you get right now in the marketplace?
Interesting. Our credit facility has a 2024 maturity. We have the right to extend it to 2025. It's actually pretty well out there, and it's actually very attractively priced. We have maximum flexibility there. We are going to avail ourselves as an A-, A3-rated company. You've seen a lot of peer companies in that credit rating access the market on a relative basis very attractively. We'll monitor the market and look to be opportunistic and nimble, in I think the same range that you've seen Realty Income, Boston Properties, some of the other blue-chip, A-rated companies access the market, and do it in an opportunistic way. That's something that I think you've seen some data points out there, and we would expect to be in and around that range.
Okay, thanks. My other question. Don, this may be a dumb question, but I'm going to ask it anyways, which is, when you put a tenant into default, what are the consequences of that to the tenant, and how does that help or hurt your ability to sort of get them to where you want them to from.
That's a great question, Chris. That's not a dumb question at all. The answer is it varies. The single biggest thing you got to think about is most companies, retailers and other companies, have in their credit agreements, in their financing somewhere, the covenant that they got to be up and fully paid on their rental obligations. What we saw in early April was when we would threaten or go to default, we'd get paid. Now, those same companies are trying to negotiate with their lenders to effectively get relief from that. That particular provision, to the extent they are successful, the ability to default will be less impactful. The bigger thing, especially for Federal, is on the other side of this, they need us in a lot of these productive locations. The big R word, the relationship word, can't go one way.
The notion of being able to work something through to be able to get paid and work has been extremely successful, frankly, in a number of the negotiations that we've got. Defaulting on an obligation, even under this big, giant catchall thing called COVID-19, which generally you think, "Well, I can do anything I want because the whole world's shut down." There's coming out the other side of this. Coming out the other side of this, there's got to be business happening. That stuff is you're not paying a rental obligation and defaulting somebody and not having that be honored without negotiating it through is a pretty big black eye in terms of a negotiation.
Go for it. All right.
It's one of the things that. It's Wendy. I just wanted to jump in and stress is that while there are certain outliers, certainly in the negotiations that we're having day to day, which are numerous, as Don mentioned, the retailers want productive locations. They need them. They want to work themselves out of this. We want to work out of this. What I've found, again, there are outliers, there is a balance in the approach that we're seeing in the negotiations. Again, everybody's trying to work out of this and gain production, and I'm seeing that in our day-to-day conversations. The other thing that I want to point out, one more thing, is what we're learning about the retailers has been beneficial to us because we're all in a time that we haven't been in before. We're learning things about the retailer.
They're sharing more than they would share before, and it's helping us as we think about how we want to move forward with our business plans.
Thank you for that.
Your next question is from Linda Tsai with Jefferies.
Hi. Good morning. When you look at the low collection categories, which are about a third of your ABR, what's the breakdown between national chains versus more local operators, and then maybe investment grade versus non-investment grade?
Oof. Just looking through reams of data to see if we carved that up with respect to some of that specificity.
Maybe, Kenny, can take it offline there.
Yeah, we could probably take it offline, Linda. I don't think we've got that sliced and diced in that way with regards to just the lower quality, the lower collection tiers. If you look at page three on portfolio composition in our COVID business update, that gives you the overall portfolio, but we don't have it necessarily carved up. Let's follow up offline.
Okay. As the states are concentrated and start to open up, it seems like restaurants would see their businesses recover faster since a lot of them are already open. Any sense of how the pace of the top line would recover for the other low collectors or what these tenants are saying in your conversations with them?
Yeah. I just think it's different by jurisdiction. It's just too early to tell how that top line is going to come out of it. We'll see.
Yeah. It's ultimately based on how the consumer feels about coming out and reengaging. That's why it's so important from an operational standpoint, that we're taking all the steps with the curbside pickup and all the operational initiatives that we're taking so that that customer can feel comfortable and safe and reengage as soon as possible.
Thanks. Just one final one.
Sure.
What's your longer-term perspective on fitness tenants? I know it's only 4% of ABR, and you have a mix of traditional and boutique fitness chains, but what's the right mix in your view as it relates to customer demand, and then also the creditworthiness of these tenants?
Linda, it depends. Life Time is a good example of a company that paid their obligations. We don't have any Life Time, but they paid their obligations in April. They're very optimistic about where they're going to come out on the other side. When I look at fitness, I think it's a critically important category in the type of shopping centers and mixed-use properties that we have. Do I think that people are getting used to exercising at home? Will that stay there? I'm a big social guy, so I very much believe in the resocialization, if you will, and the importance of health clubs. Now, when they open up, obviously, they're going to open up with restrictions in terms of the capacities and the number of people that can be in there and the space between them. How that plays out over time, I don't know.
Is there a place for fitness? In the long-term future? Absolutely, from my perspective.
Thanks.
Our next question is from the line of Floris van Dijkum with Compass Point.
Hey, good morning, guys. Thanks for taking my question. A question I had on the PPP funds, and particularly regarding your restaurant business. The fact that you're setting up your own $10 million funds, presumably those are loans or grants that you're going to give to your restaurant tenants. What percentage of your restaurants have applied for PPP loans? Do you have any insight into that and what they've been granted as well? Is this to replace or to augment the PPP funds, potentially?
Yeah. No, I understand your question. These are completely separate. I don't have an answer to the applications. I don't think we do, of how many of our restaurants have applied or received.
Most all have applied.
Received?
We don't know.
We don't know, right?
At least half.
Really?
Yes.
I just got some good news here. Half of our restaurants have received PPP loans. What we're doing, it's a different purpose. First of all, they are loans, not grants, under our program. What they're about, the PPP money, in order for it to be forgiven, has to be used largely for retaining employees. In our jurisdictions, they're not open yet. One of the things we saw as a problem with the way PPP was working was a timing issue. The difference between when that money would be available, what it could be used for, versus what we're trying to do is pick our best players. It's not available to everybody, just our best players, and effectively make sure that we can shorten the time by loaning them those proceeds for equipment startup, restocking inventories, things like that, so that they can get open sooner.
It's a very different purpose, and obviously, it's very limited relative, obviously, to the PPP program.
Got it. One other question maybe from me. I note that J. Crew has crept into your top 25. Can you maybe comment generally on what you deem to be your at-risk tenants, whether on average they have rents that are above or below market, and what kind of potential impact it would be to re-tenant some of those? How many of the J. Crew locations do you expect to retain following the bankruptcy?
Still early to tell, but we've got about 11. We've got five J.Crews and six Madewells. When I look down the list, they are all productive places. I would expect, I don't know for sure yet, but I would expect J.Crew to want to restructure those deals and not reject those deals, which really makes them just like everybody else out there who's entering the negotiation phase. I don't know, but when you look at where ours are, we've got both a Madewell and a J.Crew at The Grove in Shrewsbury, at Barracks Road in Charlottesville, at Third Street Promenade. Another at Santana, another at The Point. They're at really good locations. In terms of being able to either cut a deal with them or backfill them, I feel pretty darn good. They're in our best places.
Great. In terms of your other at-risk, do you feel as comfortable about those?
No.
Obviously.
I don't feel comfortable about anything. We're in the middle of a pandemic here, for Pete's sake. We've got tenants that haven't paid, and we're working through the negotiations. No. Look, I can't on the call go through the top 25, one through 25 with you, Dan. I can do that with you separately. At the end of the day, I got to look at the real estate, and I feel pretty darn good about the real estate. I hope that helps.
That's great. Thanks, Don.
There are no further questions at this time. I would like to turn the call back over to Leah Brady.
Thanks everyone for your time today. Hope everyone stays safe.
Thank you, ladies and gentlemen. This concludes today's conference call. We thank you for your participation and ask that you now disconnect your lines.