Good morning, and welcome to Kimco's First Quarter 2020 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask Please note this event is being recorded. I would now like to turn the conference over to David Budznicki, Senior Vice President, Investor Relations and Strategy. Please go ahead.
Good morning, and thank you for joining Kimco's Q1 2020 earnings call from wherever you find yourselves following social distancing guidelines. Obviously, hosting this call remotely from our homes is a new dynamic and we hope to make the best of it, even with the occasional dog barking and kids yelling in the background. The Kimco management team participating on the call today include Conor Flynn, Kimco's CEO Ross Cooper, President and Chief Investment Officer Glenn Cohen, our CFO Dave Jamieson, Kimco's Chief Operating Officer as well as other members of our executive team that are available to answer questions during this call. As a reminder, statements made during the course of this call may be deemed forward looking. It is important to note that the company's actual results could differ materially from those projected in such forward looking statements due to a variety of risks, uncertainties and other factors.
Please refer to the company's SEC filings that address such factors. During this presentation, management may make reference to certain non GAAP financial measures that we believe help investors better understand Kimco's operating results. Reconciliations of these non GAAP financial measures can be found in the Investor Relations area of our website. And with that, I'll turn the call over to Conor.
Good morning, and thanks for joining us. Today, we will take a bit of a modified approach to our quarterly call. I'll give you an overview of how we have confronted the challenges posed by COVID-nineteen and how we plan to move forward as the country begins to reemerge. Glenn will follow with a recap of the numbers for Q1 and our desirable liquidity position. 1st, on behalf of the entire Kimco team, I want to thank all the first responders, medical professionals, volunteers, grocery store workers and essential retailers that have risked their own personal safety to serve and help all of us.
They are the true heroes and their efforts should not be forgotten. And on a personal note, I also want to thank all of you for your support in my personal bout with the virus. Your emails, texts and thoughts were as powerful as any vaccination and were a big part of my recovery. I would also like to recognize the entire Kimco team for their tireless efforts to ensure our centers continue to provide essential goods and services to our local communities. All of our centers are open and operating, and we will continue to provide our shoppers, our vendors, our employees and our extended Kimco family with a safe experience.
Our best health and safety practices have been shared with companies both small and large, so that we can help those with less resources and more critical needs. As an organization, we are battle tested, having successfully weathered both industry specific cycles and macroeconomic downturn. That said, this current situation is unprecedented and poses new challenges. We have been working seamlessly and remotely since mid March, focusing all our efforts, as Milton reminds us, to survive so we can thrive. Our strategy is focused on exactly that, managing through the current environment with an eye to positioning ourselves to thrive when the economy opens back up.
Our strategy for dealing with COVID-nineteen was one we implemented quickly to try and help those most in need. Time was of the essence on all fronts and a wait and see approach was never considered. First, we prioritized liquidity. Glenn will give the details on how we bolstered our balance sheet, which included securing a well timed term loan at very advantageous rates with extension rights. With a well heeled balance sheet and cash position, Kimco will not only survive, but is in a strong position to prosper.
Moreover, we wanted to have available resources not only for our own use, but to help our retailers, many of whom don't have the same access to capital. Next, we refocused our operations by shifting more resources to the front line. Our team has worked tirelessly to develop new approaches and launch new programs that address the numerous tenant requests. Our significant investment in cloud hosted technologies from companies like Salesforce, MRI, Microsoft and Zoom have streamlined our operations and created efficiencies across the organization. These investments have allowed us to roll out programs of size and scale rapidly across the country.
In addition, we deployed custom developed tools to help us manage and quickly address tenant communications related to COVID-nineteen concerns. All this has provided us tremendous real time data that allows us to react quickly and be proactive. We have led by example as a number of our peers are following our lead in technology, website architecture and tenant assistance programs. Our tenant assistance program or TAP is a multi pronged approach to give our tenants the valuable resources in a time of need, free of charge. At the end of March, we encouraged our small shop mom and pops to embrace TAP, which provides them with a free legal advisor navigate the numerous state and federal programs available for small businesses to help them weather this storm.
We also engaged quickly to give these small businesses the opportunity to know that the rent for April was not hanging over their head, so they could focus on the government assistance programs and try and keep as many employees as possible. In addition to legal advisors, we have helped identify lenders to work with our small shop tenants applying for the PPP loans. By our last count, just under 600 tenants have participated in the program. For the month of April, we have collected cash rent totaling 60% of our build rent. We fielded rent deferral requests for 35% of scheduled rent from tenants and have worked out deferral plans that equal approximately 14% of the April rents.
For the month of May, we are still in the grace period for a number of leases that allow our retailers to pay over the 1st few weeks of the month. To date, May rent collections are tracking near the same level as April through the 1st week of the month. Each of our deferral programs is confidential and catered directly to the needs of the tenant. We are in a very fluid environment and we plan to proactively address the challenges ahead by quickly implementing any required changes while keeping an eye on the long term. As such, we don't want to speculate and instead focus on the facts and provide accurate information as the situation continues to unfold.
We are working to maintain occupancy and bridge our tenants to the other side of the pandemic. We are also on the alert for dislocation opportunities. We have not seen any assets of quality trade in this environment yet, but we are ready if and when they present themselves. At the same time, until we get a clearer picture of the landscape, we have hit the pause button on assets we were considering adding to the portfolio before the COVID-nineteen crisis hit. Our development and redevelopment pipeline fortuitous position of having limited projects in the active phase.
Our 2 main projects, Dania in Florida and Highland in Staten Island are very close to completion and will be tremendous assets for Kimco long term. After a temporary delay, we received approvals to continue construction at the Boulevard at the former Highland Shopping Center as it was determined to be essential due to the ShopRite grocery anchor. We are hopeful that this Signature Series asset will open later this year. At Dania Point, construction has been ongoing Urban Outfitters and Anthropologie beginning to build out their newly leased spaces. While we recognize that the pandemic may pose challenges surrounding the schedule of inspections and achieving final sign off, we remain optimistic that we're able to complete these 2 projects on schedule.
As previously noted, we have postponed nearly $100,000,000 of capital expenditures originally planned for this year as a way to further our already strong liquidity position. Our strategy of focusing on grocery anchored centers and mixed use assets continues to validate our approach as these assets are outperforming, especially in this current environment. Our first two Class A multifamily projects, Lincoln Square in the heart of Philadelphia and the Whitmer in Washington DC are both operational and despite the recent shelter in place orders, we've been able to continue leasing activity at both with virtual tours. Based on the success of both the Lincoln Square and the Whitmer, we are continuing to expand upon our existing 4,500 multifamily units that are currently entitled and our new goal over the next 5 years is to have over 10,000 units entitled. Perhaps never before has pharmacy and essential physical brick and mortar retail been more important.
And while I anticipate e commerce will continue to accelerate in this stay at home period of the pandemic, it is important to note that the lion's share of e commerce deliveries are originating at the store base. We anticipate curbside pickup combined with click and collect to be another trend that will accelerate both during the current pandemic and on the other side. We have launched the Kimco curbside pickup program and we are already working with our tenants to implement a proprietary system to provide for curbside pickup in our parking lot. We want to help our retailers embrace the new normal of retail and help them ramp back up sales upon reopening with a full suite of services that are now expected by our shoppers. We know the road ahead is not going to be easy, but with persistence and a laser focus on what we can control, we will be positioned to thrive over time.
Glenn?
Thanks, Conor, and good morning. Clearly, we are all experiencing an unprecedented health crisis that is causing a global financial recession or what some may view as a global depression. It is times like these that bring out the best in all of us. I echo Conor's sentiments in that we salute all the workers on the front lines who are caring for the sick and ensuring that we have the most vital essentials such as groceries, medicine and medical office and pet supplies. And I cannot be prouder of how the entire Kingco organization is handling this crisis.
We are fortunate to have significantly invested in our technology infrastructure, which has enabled us to quickly convert from a multi office setting to a work at home environment for 500 associates within 24 hours. What is truly amazing is we have never skipped a beat. As a matter of fact, communication and productivity across the entire organization is at the highest level. We've positioned the company to withstand the severity of the current situation and come out stronger on the other side of which I will elaborate on shortly. 2020 was off to a solid start as the Q1 results will demonstrate.
Let me provide some color on the Q1 and spend some time on our balance sheet strength and significant liquidity position. As a reminder, beginning in 2020, we are reporting only on NAREIT defined FFO. If we recognize a unique transactional gain or charge, we'll definitely be sure to point it out. NAREIT FFO came in at $160,500,000 or $0.37 per diluted share for the Q1 2020. This compares to $158,400,000 or $0.38 per diluted share for the Q1 of 2019.
Our Q1 results include a decrease in NOI of $7,500,000 This decrease was driven by net disposition activity during 2019, lowering NOI by $11,400,000 and higher credit loss of $2,800,000 due in part from the bankruptcy filings of Pier 1, Modell's and Fairway. NOI benefited from $3,100,000 of incremental development NOI from our Lincoln Square, Dania Point, Mill Station and Grant Parkway projects and organic rental growth of $6,100,000 dollars FFO for the Q1 2020 also benefited from lower G and A expense of $4,800,000 and reduced financing costs of $5,800,000 with the latter resulting from the redemption of $575,000,000 of perpetual preferred stock last year. We issued a $350,000,000 3.7 percent 30 year bond and 9,500,000 shares of common stock at $21.03 per share to fund the preferred redemptions during The successful transformation of our operating portfolio has put us in a strong position to weather the COVID-nineteen impact, but we realized there remain challenges ahead. Pro rata occupancy stands at 96%, down 40 basis points from a year ago, but flat to threethirty onenineteen results. Anchor occupancy is at an impressive 98.6%, down 30 basis points from year end, but up 80 basis points from a year ago.
Small shop occupancy is at 88.8%, down 50 basis points from year end, primarily due to the vacates from Dressbarn and Pier 1. Pro rata leasing spreads remained strong during the quarter at 7.3%, comprised of new leasing spreads of positive 13.3% and renewals and options of a positive 6.8%. Same site NOI growth was positive 1.5% for the Q1 2020 versus a comp of 3.7% in the same quarter last year, primarily driven by minimum rent increases, which contributed 2 30 basis points and increased percentage rent, which added 30 basis points. Offsetting these increases in same site NOI is higher credit loss from the bankruptcies previously mentioned. All in all, a solid Q1.
Now let's spend some time on our balance sheet and sizable liquidity position. During the 1st 4 months of 2020, we have significantly fortified our liquidity position with the execution of 4 key transactions. In January, we completed the $225,000,000 refinancing for our Keyer joint venture comprised of a $75,000,000 5 year unsecured term loan used to pay off maturing mortgage debt and a new $150,000,000 4 year plus 1 year option unsecured revolving credit facility with 0 drawn on it. The pricing for the term loan is at LIBOR plus 135 with the revolver pricing at LIBOR plus 120 basis points. In February, we completed a new $2,000,000,000 revolving credit facility priced at LIBOR plus 77.5 basis points.
It's due in 2025 including options and replaced our previous $2,250,000,000 revolver which was scheduled to mature in March of 2021. We ended the first quarter with $675,000,000 drawn, including $300,000,000 drawn in mid March as a precautionary measure as the COVID-nineteen crisis was unfolding. Earlier this month, we subsequently repaid this $300,000,000 In April, we closed on a new $75,000,000 mortgage on a joint venture property, replacing a $66,000,000 secured loan that was the largest individual joint venture debt that was scheduled to mature in 2020. The new 7 year loan has fixed rate coupon of 3.13%. And then lastly, in April, we completed a new $590,000,000 term loan priced at LIBOR plus 140 basis points with 15 banks participating.
This loan has a final maturity date in April of 2020 2. As of today, we have nearly $600,000,000 of cash on the balance sheet, 1.6 $1,000,000,000 of availability on our revolving credit facility and over 3 20 unencumbered assets which represents approximately 80% of our total NOI. Combined, we have the most liquidity by far of any REIT in the Open Air sector and it puts us in excellent shape to withstand the crisis, assist our tenants who need the most help and provide maximum flexibility to be opportunistic should suitable transactions arise. Our weighted average debt maturity profile is 10.1 years, one of the longest in the entire REIT industry, and we only have $114,000,000 of pro rata debt maturing for the remainder of 2020. In addition, we have significant cushion with respect to our bank and bond covenants and are confident that we could access the unsecured bond market if we deemed it desirable.
As previously announced, as a result of the uncertainty and lack of visibility regarding the extent of the COVID-nineteen impact, we have withdrawn guidance for 2020. In addition, out of abundance of caution, the Board has decided to temporarily suspend the common dividend. The Board will monitor our performance and economic outlook on a monthly basis and intend at a later date to reinstate the common dividend during 2020 to an amount at least equal to our REIT taxable income. Certainly, there are many unknowns, including the timing of the country reopening, the pace of getting back to some semblance of a new normal, and the financial health of specific companies. But we remain confident that with our abundant liquidity position, long debt maturity profile, superior portfolio and incredible team, we will, as Milton says, not only survive but thrive.
And with that, we'd be happy to take your questions.
Our first question will come from Christine McElroy with Citigroup. Please go ahead.
Hi, good morning and thank you. So Connor, I guess this is for you. We've seen April collection rates from you and all of your peers. The variance among the group is not that wide, but it's there. How should the investment community be looking at April collections in the context of what the most important thing is, which is ultimately the entire collectability of these rents.
So some national tenants are playing hardball, but should ultimately be in a position to pay, while local and maybe regionals are getting a little bit more support from the government and landlords? What are sort of the most important factors we should be considering ultimately?
Yes. Hi, Christy. It's a good question. I think it's so early on in the pandemic that the 1st month of collections that everybody is tracking should be taken with a grain of salt, I think, because the real question, Mark, was how long this will last and how deep it will go. So we are still sort of in the early innings of it.
And you are spot on in terms of the lion's share of what we did early on was to help our small shop tenants, because we felt we've been pretty clear from the get go that we think our large national retailers who have the balance sheets and the cash on hand position to pay their rent should pay their rent. So we can use our balance sheet to go and help the small shops, the ones that don't have the balance sheet or the cash positions to weather the storm. And so the 1st month that you're seeing being reported, I would say that the lion's share of the numbers that are reported probably capture something similar where the bigger players are paying a portion or all of their rents and then the smaller mom and pops are probably working through this to try and make sure that they survive and get to the other side of it. So as it progresses, I think obviously May will be important in June and the re openings will be critical, right? So you've started to see now a few states start to reopen.
And anecdotally, we've heard a few of our retailers from store managers say that so far so good. They've been pleasantly surprised. So we continue to monitor the situation. But again, take it with a grain of salt that it is extremely early. Okay.
And then, about half of your projected CapEx reduction is in leasing CapEx. How much of this is a function of just you expect lower leasing volume in this environment versus a concerted effort to pull back on leasing incentives? And in that context, how much is the current environment where many tenants are not respecting that long term lease contract? How does that change your view on the economics and the risk associated with some of these upfront leasing costs and how much you're willing to invest?
Hey Christy, it's Dave. So it's a bit of a layered question. So let me just try to break it down a little bit to make sure I address everything that you did ask. Not necessarily we won't be doing, but will probably be pushed into 2021. We are RCD commencements and or the leasing volume itself maybe accelerated in the back half of this year as we start to get better visibility into the situation with COVID and the reopening of markets and then targeting those retailers that are actively looking to expand because there are a number of them that are looking at this as a real opportunity to continue to strengthen their own brick and mortar portfolios.
So that's where we'll typically see it. As it relates to sourcing of deals and how we evaluate new deals going forward, we've always taken a very hard look at the quality of the tenant and their balance sheet and that will continue. Throughout this, it's always been a historic focus and it will remain a focus because it's really at these times is where that matters most. And those with the strong balance sheet and great operating fundamentals will be the ones that continue to thrive during this time and then on the back end of it as well. Thank
you.
Our next question will come from Greg McGinnis with Scotia. Please go ahead.
Hey, good morning. Glenn, Kimco has done a really good job in making sure that it has liquidity survived. And this is not necessarily a unique position for Kimco operating in this difficult environment, but how are you thinking about managing leverage throughout the shutdown and once we get onto the other side of this pandemic? And then Ross, if you wouldn't mind commenting on the transaction environment, your ability to help fund any expenses with dispositions, that'd be appreciated as well. Thanks.
Hi, Greg. I mean, look, leverage has always continued to be a focus for us. The liquidity that we have right now has not had an impact on leverage because you have it's really net debt, right? You have cash that we've put on the balance sheet or debt that we've repaid with some of that liquidity. So we really haven't moved leverage really hasn't moved and you see that both in the numbers at the end of the Q1 and where I would expect it to be even at the end of the second quarter.
Again, leverage is an important thing. We will keep a very close eye on it. We are a strong BBB plus Baa1 rated company, which is important to us. We still have desires to get us to a positive outlook. And I think we're doing really all the right things around that, where the rating agents will see a difference.
I mean, they're tapping the bank market and having 15 banks participate in this environment is fairly unique. I do feel, as I mentioned in my prepared remarks, that we have clear access to the bond market if we wanted to do it. So and again, we feel like we're in pretty good shape on that standpoint and leverage will continue to be a focus of trying to reduce it further. Yes.
As it relates to the second part of the question, I would just say that the current market is really taking a bit of a wait and see approach to really better determine the longer term impacts to cash flow, to tenancy. We have seen a few smaller deals trying to structure around the situation with master leases, escrows or holdbacks, but it's really a pretty de minimis component of the overall transaction market. In terms of our own portfolio and utilizing dispositions, I mean, we are extremely confident in the portfolio transformation that we've undertaken over the last 5 to 7 years. As you know, our intent coming into this year pre COVID was to have a very modest level of dispositions and really that hasn't changed even in the midst of this. You'll see a very light second and third quarter from a disposition and transaction overall standpoint for Kimco.
As we get into the 4th quarter, we may evaluate a couple of deals if the market defrosts to a certain extent, but we do not anticipate utilizing dispositions as a major funding mechanism in any meaningful way.
Great, thanks. And Connor, you've shown a clear focus on helping out the smaller shop tenants. And I'm just curious how successful your tenants have been at obtaining the PPP funds with guidance from the tenant assistance program. Do you have any stats on maybe how many tenants have applied for and received funds?
Yes, it's obviously something we focus on. And I'll tell you that the first round was uninspiring because typically as you've seen some of those stats come out, it sort of reflected exactly what we saw in our small shop tenants, that around 5% of them were only successful in the 1st round. But the good news is we've seen quite a few be very successful in the rounds following it. And we think that since they've made tweaks to the program and it's been more focused on the small shop and the small restaurant and the mom and pop, we think that they have the tools now to get through the window and be successful on obtaining those funds. So we're cautiously optimistic that obviously they did it extremely fast and had to get it out there and there were some loopholes in there that people took advantage of.
But now we think that the small shops that we have, have the right tools in place and are ready to go and hopefully get the PPP loans so that they can make it to the other side of this. So we're cautiously optimistic that they've made the changes needed.
All right. Thanks for the color, guys.
Our next question will come from Alexander Goldberg with Piper Sandler. Please go ahead.
Hey, good morning and thank you. First, just on the dividend, you guys suspended the common dividend, but it sounds like you're still going to pay the preferred. So based on where you've paid the common so far and presumably you're going to pay preferreds the
rest of the year. Do you guys need to pay a common dividend the balance of
the year to satisfy tax compliance with REIT status?
Hi, Alex, it's Glenn. Based on where we are currently and based on our own internal forecast, the answer is yes. We would still need to pay a further dividend to cover taxable income.
Can you share how much is it are you close to the line or you're still are still on the T box and you still got Yes,
we can't share that, Alex.
I would say it's honestly, Alex. It's just again, it's too early. There's a lot of moving parts that go into it. But we as I mentioned, we would still need based on the current forecast, there would be a need for further dividend to make our distributions equal 100% of our taxable income.
Okay, great. And then the second question is just in speaking to REITs other REITs out there, sounds like tenants have credit as part of their bank lending. They have to be current on all of their leases, etcetera. But some of the tenants have been seeking waivers from their creditors so that if they don't pay their leases, they're not in default of their credit. Do you know how many of your tenants have sought those waivers out from their banks?
Alex, yes, it's Dave. We don't. We haven't really had that
Our
Our next question will come from Rich Hill with Morgan Stanley. Please go ahead.
Hey, good morning. And Connor, I'm glad to hear you're feeling better. I want to come back to start off coming back to a question Christy asked about maybe ability to defer expenses. I'm thinking back to how much CapEx you were able to reduce during the GFC. But maybe Connor, if you're thinking about fully loaded CapEx, both reoccurring and then development and redevelopment CapEx, how much do you think you could reduce that from your run rate in 2019?
Thanks for that. It's nice to be back in the saddle, that's for sure. Look, we look at our CapEx and our OpEx really on a site by site basis, and we have multiyear CapEx and OpEx plans. And so what we do is we go through that in detail to figure out what is required to be sure that the operating plan keeps the shopping center as safe as possible, making sure that the required upgrades are done, and that the more the needs and the wants, I guess, are separated. So we obviously prioritize the needs and then we push out the wants.
And that's just on the capital plan for each and every asset. On the offensive CapEx where we look at our development and redevelopment plan, we continue to think that our asset base is ripe for redevelopment. And as I mentioned in my comments, we think we're really only in the early innings of the entitlement plans that we've played these last few years. We've been successful with gaining traction on the multifamily entitlement plan. We think that we're again probably going to double the amount of entitlements in the next few years, mainly because we see the path ahead.
Now the question is, is how much of that can we activate and how much would we put in that in the active pipeline? In this environment, we're probably going to hit the pause button on taking on projects ourselves, but we may look at ground leasing or doing some other projects that way that limit the amount of capital that we would have to implement to the project. But look at the value creation over the long term. And again, it's all about the long term here. We know that we're in an unprecedented situation.
But typically, what we've seen in the past, at least when I was out west when we went through the last crisis, we were very, very successful on the entitlement plans during the downturn. Many times, cities and states are in desperate need of raising taxes and capital and they loosen up their grip a little bit on the entitlement plan. So we might be actually even more successful on our entitlements in a situation like this than we even expected. And so the key for us is securing the entitlements. And then as we've talked about before, it's that decision tree of where our cost of capital is and do we elect to sell the entitlement rights, do we elect to ground lease the entitlement rights, do we elect to joint venture the entitlement rights Or do we elect to self develop?
And I think in this current situation, the likelihood of doing self development is very slim. But we do think that long term value creation on entitlements is critical to our success and critical to our shareholders.
Got it. I think that's pretty helpful color. I wanted to talk about your negotiations with tenants, maybe not just what you're hearing currently, but I think what a lot of what I'm certainly trying to understand and what I think a lot of us are trying to understand is, does the structural dynamic change over the medium to long term? So I'm curious, are you hearing about any tenants wanting to stay in your properties, but maybe go to more of a percentage rent structure or any tenants asking for lower rents. I would think that there was a fair amount of tenants that still are very viable and to be involved, but are maybe needing a little bit more cushion than they did previously.
So I'm curious, are you engaging any of those discussions yet or is it still too early days?
Yes, this is Dave. It's a great question. It is very much still the early days. I mean, when despite it feeling like almost a decade that we've been through this, it's really only been about 6 weeks. So keeping that in context, the way we've approached this is really wanting to take a very methodical and measured approach 1 month at a time, have those discussions as needed as they arise.
And then we continue to get more visibility through the course of the summer and then into the fall to better understand exactly what the outcome in the long term implications will be. From the retailer side, they a lot of our retailers, again, as I mentioned earlier, see this long term as an opportunity to continue to strengthen their portfolio and we'll be wanting to expand and they are starting to reopen their locations as markets start to open as well. So for us, it's going to be a very measured approach. And as we get further along, we'll have better visibility into the longer term outcome.
Okay. One point just to add to that. I think it's important to know and retailers are prioritizing this, is they look at their opportunity set and they see their boxes. And the differentiator for Kimco is that we have 3rd parties validate that our market rents on our anchor boxes are 55% below market. And so when they look at their fleet of stores, they recognize which stores they need to protect because they're not going to be able to replace that type of economic deal.
And so I think one thing you're probably going to see is there's going to be a limited amount of landlords through this as well as on the other side of this that have the capital to invest in some of the larger and the junior box type of deals that are out there. So I would anticipate that you're going to see those anchor tenants, those junior anchors that are successful prioritize the spaces that they have that are either on ground leases or significantly below market rents. And we think that's a differentiator for Kimco.
Got it. Very helpful, guys. Thanks again.
Our next question will come from Craig Schmidt with Bank of America. Please go ahead. Thank you. On the deferred rental agreements, when are you generally targeting for the payback of the deferred rent? And are you getting any other control rights as you enter into these deferral agreements?
Yes, this is Dave. Hey, Craig. It really is a case by case analysis. We treat each retailer on its own in those discussions. And so they will vary based on needs and wants on both sides.
And again, we wanted to take a very measured approach here, just addressing it 1 month at a time.
Okay.
And then I think Craig,
there are we have seen opportunities Craig to recapture control areas and things like that that would open up some redevelopment entitlement opportunities. But as Dave says, it really is every individual tenant, every site, every lease is a little bit different. So you have to go 1 by 1.
Okay, great. And then just turning to the Kimco's curbside pickup program. I wondered how you're monitoring it And does the national rollout seem to be imminent?
Yes. So this is so we first launched it in Texas. Now in Texas is going to be one of the first markets to open and require curbside. So Grand Parkway is actually fully deployed at this point with stalls in play. And as those retailers have started to open, we've seen both local and nationals utilize it.
We anticipated curbside to be a trend into the future at some point. It's been an ongoing dialogue for years now at various events in our conversations with our retail partners. COVID, what that did was really just accelerate this trend that was imminent. And so for us, we're able to get out in front of it very, very quickly because we were already working on plans to deploy. And our system being centralized, we're able to offer those retailers specific zones in which they can utilize for their curbside pickup and then they communicate directly with their tenant or their shoppers on what zones to go to and then those shoppers call the retailer to identify exactly what stall they're in.
So thus far it's early, right? We're about a week or 2 into our initial deployment in Texas, but the response right now has been very favorable. And as it relates to the balance of the national program, we've been already in process with that and we'll have again a very measured approach on that rollout. But the way the trend is going is that curbside will just be one of those other tools that retailers and landlords will be working collectively to ensure that we service the customer in the best way possible?
Yes. Craig, you think it's a way to get customers more comfortable coming back to the shopping center as well. So one of the key challenges that we focused on is helping our small shop tenants as well as getting the customer to a level of comfort so that they can go back to their daily needs and services when the states are allowed to open back up. And we feel that because most of our grocery stores, our big box tenants and our home improvement centers have been open through this, that the customer is actually comfortable with that program that they've been very successful. Our retailers have reported a 200% plus growth in curbside pickup.
So we figured why not take the best practices of our largest national tenants and share that with our small shop tenants so that they can hopefully rebound quickly and that we also invite the customer back to the shopping center in a way that gives them the comfort level that I think is going to be required to make sure that we rebound as quickly as possible.
Yes, it does seem like a good way to facilitate towards the reopening. Thank you for your comments.
Our next question will come from Samir Khanal with Evercore ISI. Please go ahead.
Yes. Good morning, guys. So Connor, I guess the question I had was on co tenancy risks. I mean, how should we think about that, I guess, in the portfolio, especially as it relates to some of the bigger, the Boxier Centers or the newer developments that you had? I assume there are leases that are tied to some of these non essentials, right?
The gyms, the theaters, I mean, if they were to potentially restructure or even close doors, I mean, how does that trickle through, I guess, the rents of the other tenants there?
Yes. Co tenancy risk for us is pretty minimal. When you think about the way that co tenancy has been drafted in a lot of these leases, it does vary case by case. But predominantly across our portfolio, a co tenancy clause has a number of tenants having to go dark in order for it to be triggered. And so if you think about that typically a shopping center has maybe 3 to 5 anchors, typically a co tenancy clause in our portfolio needs at least 2 to 3 of those anchors to be dark in order for it to be triggered.
And we do come into this from a position of strength. If You think about the multi year repositioning that we've gone through, if you think about the balance sheet and how we position it to go long, and if you think about our occupancy from an anchor perspective at over 98%, in a lot of ways, we've been preparing for this. Now we knew that the cycle was going to end. We never would have guessed it was going to end this way. But in a lot of ways, we've been preparing for this.
And a lot of the deferral programs that we've been talking to tenants as well are allowing us to sort of water down those co tenancy clauses or give us even a little bit more strength on the other side of it. So hopefully that helps.
Thanks for that. And I guess my second one is on the grosses, right? I mean, can you provide an update on maybe even Albertsons here? What's the potential to even monetize that investment at this point? I mean, clearly, the grocery sector has been pretty solid here during the pandemic.
And then, you know, Albertsons has certainly reduced their debt position here. So how should we think about that?
Hi, good morning. It's Ray Edwards. How are you? I hope you and your family are safe and healthy. For Albertsons, I think you might have seen on Tuesday night, they refiled and updated their S-one based on the fiscal year end for them, which was in February.
And they really have performed extremely well. Their comp store sales were up in March like 47%, and I think over the 1st 2 months over 30%. And they've done a great job, as you've mentioned, on the balance sheet in improving their debt profile. So, they feel very they feel they're in a great position on potentially on an IPO, but the markets are the market. So, we have to work with the underwriters, see what the right thing is to do on that front and we will execute at the right time.
But they're really focused right now on running the business and it's much more complicated today for them than it was 2 months ago. So we want to, as owners, make sure they execute correctly and make the company as strong as it can be.
Thanks guys. Appreciate the color.
Our next question will come from Mike Mueller with JPMorgan. Please go ahead. Yes, hi. I know the game plans for deferrals, but how are you thinking about the risk that with so many people out of work that this could turn into cuts and permanent closures if sales are slow to come back?
Yes. Hi. It's Dave again. So again, it's so early in the cycle to really make any real forecast on what the longer term outcome will be. So for us, with the deferment program, we've been wanting to take it 1 month at a time, gain better visibility into the program, into how COVID is going to have these impacts on the retailers and employment, etcetera, longer term.
And then in which case, we'll be able to address that. But our focus has always been on the tenant retention out of the gate as COVID started and we're exhausting all of our resources to ensure that they have the appropriate support to survive and thrive through this long term.
Got it. Are you operating with the view though that this is worse than the GFC or better or just similar?
It's unprecedented in a lot of ways and it's a very different outcome. This was a I think the Great Recession was a financial crisis. This was a social crisis initially and now we're starting to see how it evolves and how it plays, but it's still early days. So I'd hate to forecast exactly what the expectation would be longer term here until we start to see a little bit more into the future.
Hey, it's Glenn. I'll just go for a little bit more. To his point, again, this is a health crisis that it's turning into a financial crisis. A lot of these companies, like the really the strong retailers that many of them that are closed today, they're not closed because their business was bad or they had bad inventory. They're closed because of the pandemic that we're in.
So it's very difficult to compare it to the great financial crisis. I mean, look at unemployment. Unemployment is at 14.7%. You have 30,000,000 people that are out of work temporarily or on furlough. But different than the crisis, the great financial crisis, the government has been incredibly positive about pumping liquidity, helping the consumer, giving them $600 checks on top of the unemployment.
So it is very different. Again, and the end though is it's too early to really tell where we're going to come out. So we just take it a day at a time, a week at a time and a month at a time.
Our next question will come from Derek Johnston with Deutsche Bank. Please go ahead.
Hi, good morning, everybody. I wanted to go back to the tenant assistant program real quickly. How can it become more substance versus PR? And I say that respectfully, right? So how have you invested in tweaking the approach to filing for the program so that more tenants actually see relief in round 2?
And or is it a buy in issue with local tenants? So bottom line, what can you do to generate a higher success rate going forward?
Yes. Hi, this is Dave. Go ahead. Sorry. And so, yes, so with the program to start, the we had, as Conor mentioned in his prepared remarks, we have over 600 tenants already through the program itself or participating currently in the program.
To ensure that we bolster the effectiveness of it too, we also aligned ourselves with local banks that seem to have the greatest success early on in terms of getting the loans to the end customer, which was our retailer. When we look at the program to date, I think it has been very effective. We have over $20,000,000 either approved and or submitted for loans. So when you think about substance, I think that's very substantive. And we continue to work through this.
And if the program as it relates to the government in terms of government assistance continues to expand, we have the infrastructure in place to continue to support that and to provide further assistance to those retailers as they navigate the PPP process and the other submittal processes for systems.
Okay, great. And then just secondly, with respect to Albertsons, if an IPO is successful, could you just remind us how your stake would be treated and or taxed?
Yes. Hi, it's Glenn. So if it gets if something was to get done, you have to step back and look at where we are. We have a basis of about $140,000,000 A portion of the investment was previously held in the REIT. And then there's another portion that was in our TRS, which has now been merged back into the REIT.
We know that based on the studies that we've done and where we stand that the max tax is roughly $50,000,000 in total on everything, irrespective of how big, how much capital you would get from a transaction. So what's going to happen is, if it was to go public, the investment that we have today, which is on the cost method, would then turn into a marketable security and you would mark to market the unsold shares on your balance sheet and then the cash you're getting is basically like a free equity offering. You get all this cash with no impact to NOI because we're not generating any NOI from the investment.
Our next question comes from Jeremy Metz with BMO Capital Markets. Please go ahead.
Hey, good morning. Hey, Connor, I was just hoping to get a little more color on the dividend here and the decision to suspend it versus possibly cut it. You still have a decent amount of CapEx need even with the slight reduction you outlined. AFFO coverage was pretty tight before this. So was there a thought at all to use this opportunity to just better right size it now?
And is
that something maybe we should be looking at in the coming quarters? And therefore, is suspending was just the right first step? Or how should we think about that?
Hey, Jeremy. It's a good question. Look, I think we're all very much in the early innings of this pandemic and we want to get more color on how May plays out, how June plays out, and really see the amount of rent we're collecting before we can really get an understanding of hopefully how the economy opens back up and how our retailers respond. And so it's all about clarity. And I think the Board has discussed a number of different scenarios of what may or may not happen.
And the tricky part is, is nobody has a perfect crystal ball of what we're dealing with today. And so the suspension is exactly that. And we did comment that it will be reviewed monthly, because we do want to keep the Board in constant communication to understand all the ins and outs that we are seeing and the different scenarios that may play out and the taxable income piece that's going to be critically important as well. So there's a lot of different scenarios that may play out. We think suspending it was the right move today.
We think reviewing it monthly is the right move going forward. In that way, we can move quickly if and when we need to and we know we need to reinstate it. We made that comment before. We made it in the press release. We made it in our remarks.
And so it will be reinstated in 2020, and we just have to understand what that level at the right point is going to be as things clear up a little bit more.
Yes, that's helpful. And second one for me, in terms of the deferrals that were granted the 14% that was mentioned, does this cover some tenants that were in the paying camp for April? And if so, how much is from that group that actually paid in April versus coming from that bucket that didn't?
Could you just, I guess, clarify the question? Just wanting to better understand what was asked.
Yes. I think these deferrals get thought of as being granted towards the 40% that didn't pay you April, where in reality, I think some of the tenants that have paid did so to gain more favorable standing. And so I guess I'm trying to figure out is of the deferrals that were granted, is some of those come from that tenant base that paid in April versus the bucket that didn't?
Got it. Yes, it varies. It's really case by case. Those sometimes in the early discussions as all this started to unfold, some retailers try to take a very hard acknowledging that they had financial obligations to meet and so they paid April rent with nothing tied to that. But it really is always a case by case.
So it's hard to, I'd say, contextualize exactly it being one thing or another.
So just I guess just so can we assume that there possibly were some tenants that paid April that might get rent deferred for May or June. Is that I guess that's where I was going with it is, are there potential future expectations we need to be thinking about from tenants that pay it? Is it not just so clean as this is a group that didn't pay and those are the only ones getting the flows?
Yes. I mean that can very much be part of the discussion and providing more favorable terms to ourselves and the landlord. And providing more favorable terms to ourselves and the landlord that will enable us to do other things in the future. So it's all of those points are discussions and negotiating points on the table.
Okay. Thanks, guys.
Our next question will come from Vince Tibone with Green Street Advisors. Please go ahead.
Hey, good morning. Ross, could you provide a little more color on the conversations taking place in the transactions market today? How are people thinking about stabilized NOI and cap rates in this environment? Sure. Good morning.
I know it's early for you. That really is the challenge today is that the lack of clarity that the retailers have in terms of the opening, it's very difficult for an acquisition to take place when the NOI is so uncertain. So as I mentioned previously, there are opportunities or attempts to try and box in what that risk may be. So you have seen some conversations related to trying to understand which tenants are paying, which tenants are not paying, who you may want to try to box in an escrow agreement for or to cover some rent for a period of time. But I would say right now, the vast majority of investors or owners that have capital are really a bit on the sidelines right now, just waiting to see how it unfolds.
If there becomes a period of more distress or dislocation, I think we and some others are ready to take advantage of it. But right now, it's really been a situation where I heard a quote that I like that in the Q1, the planes that were in the air landed and not a lot of planes have taken off since. So we're waiting to see when there's clearance to fly again.
Makes sense. I mean, in
your mind, what needs to change maybe to unfreeze the transaction market?
I mean, is it just
more country reopening, rent payment rent collection levels getting back to normal ish levels? Or is it what's the biggest criteria in your mind to kind of get things moving again?
Yes. 1st and foremost, there needs to be a comfort level in the country that it's safe to reemerge and to start shopping again and for these retailers to open. Even in some of the states and the counties where reopening plans have started to exist, not all the retailers have opened yet even if they're capable or allowed to legally. So we're still a little bit early in people getting comfortable, whether it be a testing capacity or ultimately a vaccine. So as soon as I think there's a return to normalcy and there's a better understanding of which retailers and which categories of retail will open it and what that looks like.
Are there capacity issues? Are F and B, theaters, fitness going to be able to return back to 100% capacity? As soon as we have more clarity in that scenario, I think both investors and lenders will become a little bit more comfortable in loosening the purse strings and starting to invest again.
That makes sense. That's helpful color. One more just quick one for me if I could. What is the pre leasing level at The Boulevard? Has that impacted at all in recent months due to the pandemic?
Yes. Right now, we were in we're close to 90% on the pre leasing with the Boulevard and nothing's changed at this point. So we continue to do our fit out work with all the retail tenants, as Conor mentioned earlier. The it was deemed essential. We got the waiver.
ShopRite is underway. We're going through the inspections. And then for the balance of the shopping center, we continue to do work for that work.
Yes. Thank you. Thank you. Huge kudos to our team that went above and beyond to get those waivers because it was not easy and to get it expeditiously and get it back to having the construction workers on-site was not easy. So I thank all the team that's been working on that because it's been pretty incredible to see how a site that was closed down in essence from the shutdown to quickly ramp back up was pretty impressive.
Thanks Vince. So we can take the next question.
Our next question will come from florist Van Ginkel with Compass Point. Please go ahead.
Hey, thanks guys. Thanks for taking my question. A quick can you remind us again what your breakeven rent collection is to cover your ongoing expenses?
Yes. Hi, Florence. It's Glenn. If you look at like run rate, total expenses, G and A, operating expenses at property level, interest expense, all that kind of stuff, it runs about $150,000,000 a quarter. So somewhere roughly in around $50,000,000 a month.
And what percentage of the cash rents would you need to collect to get to that level?
Well, we're above that with our 60%. So we're more than Right. Where we are.
Is that in the okay. But is that in the mid-50s?
It's probably around the 50% level. I have to do the math specifically, but it's around that.
Okay. Another question maybe for you, Glenn, as well. Your straight line receivables, it doesn't appear like you've taken any write downs on any of that. Could you walk us through how you think about some of your riskier tenancies and also maybe talk about that in terms of the bad debt, which was 4,000,000 dollars relative to the $1,700,000 last year. How much of has the COVID impacted your thinking about your tenants?
Well, let me just talk generally about this AR reserves as it relates to us. We as a practice have always had reserves against straight line. So the number that appears in our supplemental, that is net of reserves. So we have reserves up already and pretty robust policies and procedures and how we analyze tenants as we go forward. Now the pandemic makes us review those have always had and we may be a little different than others.
We've always had reserves against straight line, good times and bad. So you don't see a whole lot of movement there because that actually is a netted number. So there is a sizable reserve against straight line today. On the AR, the billed AR and what we call unbilled AR, which is our the CAM, the tax that you're accruing as you go along, we have very significant reserves there as well. And again, very again, what we believe are extremely very robust policies about how we look at it and we go tenant by tenant, lease by lease in making determinations about the appropriate level of reserves.
Now, do I think the reserves will go up in the Q2? I do. But I think as of threethirty 1, the reserves are very adequate and clear about where things are. So I don't you'll see movement, but I'm not expecting drastic movement as it relates to RAR. The $4,000,000 that you saw for the quarter, which is it's roughly 138 basis points.
As you know, we carry in our forecasts and our budget around 100 basis points for a year. So that at 138 basis points is roughly 35 basis points for the quarter. So even relative to our original plan, we still have 65 basis points available to us. And I would also tell you that a portion of the reserve taken was really related to one tenant that's still operating. So and that was really the Fairway Grocer in Plainview for us.
That was about $1,000,000 of the reserve. They're still operating. So then they come back to us too.
Our next question will come from Haendel St. Juste with Mizuho. Please go ahead.
Yes. Good morning. I'm glad to hear everyone doing well, especially you, Conor. So my first question is on the non essential rent on your COVID update slide. That bucket comprises just under half of your rent, 43%, it looks like.
And it looks like you collected 42% from that group in April and received deferral request for another 21%. So I'm trying to get a sense of how we should understand that. What do you expect from the 37% who have not requested deferrals? And then maybe you could share some thoughts on how you see the probability collection for this group overall versus say the essential and if we could see a narrowing of the gap between that and the 86% you collected in the essential bucket? Thanks.
Sure. So I'll try to break this down a little bit and make sure I address all parts of your question. So for those that have not requested any deferrals at this time, it could be for a variety of reasons. One, they're continuing to operate or they're still paying, they could be closed in paying. It also means that they just have been going through the loan process and wanting to wait to see gain more visibility into what type of assistance they could secure to meet their financial obligations with us in our lease.
Now we have seen that actually happen a couple of times for those that had requested deferrals, had since called us back and said that they're willing to pay rent because they just got the PPP loan. So they're able to meet that obligation. So it really does vary. In terms of collectibility on the back end, again, it is still too early to tell. We're only 6, 7 weeks into this.
So you're going to have to play that out a little bit further to understand exactly as markets start to reopen and these retailers start to get back in the swing, what that looks like. And I do apologize, but I think you have one last part to your question.
I was just looking for some perspective on the 2 buckets, if we could see some narrowing, somewhat addressed it. But the crux of my question was, there's a big chunk here that hasn't either paid or requested deferrals. I was really trying to get some clarity on what the nature of conversations and what you understood to be the current situation there.
Okay. Yes, I think what I just mentioned probably answers that
best. That's helpful. Thank you. And then maybe a question for you, Glenn. I just want to clarify on the collection numbers we're seeing here.
It looks like it's based on ABR. In other words, total occupied total potential of rent, not necessarily based on an occupancy based numbers in a sense that if you had lower occupancy, you would benefit because you have less rent to collect? Just wanted to make sure because there's a lot of numbers being thrown out there in the industry right now. Some are based on total potential ABR assuming 100 percent occupancy, some are based on current occupied ABR, some are putting in that figure.
So it's important. I just want
to make sure we understand what's being reflected here.
It's strictly based on build AR. Okay. It's simple. It's not complicated. It's the build AR for the month of April.
And I think you're talking about what would it be if you included the CAM and the other recoveries, it's comparable to what we collected.
Our next question will come from Chris Lucas with Capital One. Please go ahead.
By ABR that you could provide just in terms of how long the deferrals are across your 14%?
No. Right now, I mean, similar to how I think I addressed this earlier, it really is a case by case situation. And as I also stated earlier, some of these deferments that were issued to some of these retailers have started to get paid back just because they've secured the loan. So it is still very fluid. We'll have better visibility as we progress through this over the next couple of months.
Okay. And then, Glenn, earlier in your comments, you mentioned something about a mortgage, I think
you did. It looks like there was a
JV mortgage that you pushed out 90 days. I guess I'm just curious as to what you're seeing in the direct lending market in terms of how people are underwriting or if they're not, if they pull back, just maybe some commentary about what's going on in the mortgage market would be really helpful.
Yes. So we have a property in the Bronx, Concourse Plaza, right near the Yankee Stadium that was really a development project over time with our partner. We're fifty-fifty partners. So we had a loan that was maturing in 2020 and we sourced a new loan for higher proceeds actually at $75,000,000 and closed on it in early April. So it's a new 7 year loan at a 3.13%.
So actually the cost savings for the partnership and extended the term out much longer. Look, the mortgage market is very, very specific as to the property that you're looking to finance. For a while, the CMBS market froze for a bit. Bank lending has its level of challenges, I would say, more at the big money center banks than it is at the regional banks. I think the regional banks are still very active.
The other thing I could give you some just some visibility on is, again, on the residential side, the Fannie and Freddie market is completely operating and functioning. And for the right assets, you can still clearly get mortgages and financing for term at incredibly low rates.
On the multifamily side, construction financing, have you looked at that in terms of what's available and how that's being underpriced?
We really haven't. We don't have actually any construction financing. As a matter of fact, the one construction loan that we did have, which was on Dania, which was $67,000,000 we paid off during the Q1. So we actually have no construction financing. We haven't been outsourcing it.
I believe if we wanted to, quite candidly, if we wanted to get construction financing, I think with the banking relationships that we have, we could obtain it. But it's not something that we are doing at the moment.
Our next question will come from Collin Mings with Raymond James. Please go ahead.
Thanks and good morning. I just wanted to go back to the transaction market and you touched on Albertsons specifically a bit, but if we would just reflect on Kimco's history and the Plus business, can you maybe just expand on your potential appetite for any similar opportunistic investments as this cycle plays out? And how would you balance these type of investments versus, obviously, the near term focus on liquidity or potentially ramping back up some redevelopment opportunities you've discussed?
Sure. I think when you look at the strategy of Kimco, we've always had the opportunity bucket where we look at retailers that are real estate rich and that's how close to 10 years ago, we wound up with the Albertsons investment of owning close to 10% of that grocery chain. They still own and control, close to 50% of their real estate. And the original thesis there was that the real estate alone was so valuable that it would make sense long term. And clearly, the operations now have been a shining star in the grocery sector.
We still believe that there's going to be opportunities for the what we call the plus business going forward. We have been focused on making sure that we try and harvest our existing Plus business investments before we go and start to make new investments, just again so we can build on the wonderful track record that we've had over the decades of investing in those types of opportunities. That being said, we think it's a differentiator for Kimco. We think there's going to be opportunities ahead of us where the Plus business will be utilized and come in handy to really create opportunities, because we do think there's going to be a significant amount of dislocation. And if we're one of the few that have the capability to underwrite, the capability to invest, we think it will reward our shareholders.
Okay. So it sounds like that does remain, again, more of an intermediate to longer term priority?
We always have it as part of our differentiated strategy. We obviously have a very solid Tier 1 portfolio where we are laser focused on executing our 2020 vision strategy. If you think about it over the past few years, how we've transformed the asset base, how we've gone long on the balance sheet, A lot of the effort that we've made has really positioned ourselves to be ready for this type of environment so that the mothership can continue to hopefully outperform. But the bucket that we have for the Plus business is always unique and opportunistic when those opportunities present themselves. And so we're ready.
We think it's a differentiator for us and we think it will really reward our shareholders in the long term.
Okay. And then Dave, you spent some time discussing the curbside program, but to the extent social distancing becomes more of a focus going forward, Are there any other longer term changes you've already started to work on with tenants in terms of expanding outdoor seating for restaurants or anything else along that line as you just think about the actual physical location or the physical layout of your properties?
Yes, great question. I mean, you absolutely nailed it with your example. The outdoor seating is something that we already talked to our restaurant operators with. And we've actually been surveying each of them to analyze those that already have outdoor seating, those that want to expand capacity, areas in the shopping center that we can support that capacity. How do we do we manage it in a centralized fashion with the appropriate social distancing measures?
Do we support the individual restaurants and the outdoor seating that they need? So all of that is very much on the table and under consideration. Between our development team, property management team, construction team and leasing folks, everyone is really directly engaged and best understanding how we can serve our tenant base and the needs going forward. Obviously, the situation will evolve. Different municipalities and counties have different restrictions and that's what we've seen through the outset is you really have to take this case by case, but we take all 400 of our assets and have been doing very much a deep dive on how do we reformat both for the short term and then what are more longer term solutions that will be more permanent.
Our next question will come from Ki Bin Kim with SunTrust. Please go ahead.
Thanks. Good morning. Hope you're all doing well. So you have about 3.5% of rent expiring this year and you have about another 1% that's month to month. What is the kind of current game plan to address those?
And how would those negotiations go in this type of environment?
Sure. Yes, this is Dave. So in terms of the current renewals and the discussions pre COVID, those have been ongoing. They're happening pre COVID and even as we're going through the 1st 6 weeks here, those discussions continue. Again, the quality of our real estate has vastly improved over the years.
And so our 400 locations really service the community well and service the retailers extremely well. I think what this has proven is that being close to your customer in these markets is really essential and we've been able to service that and the brick and mortar strategy will be critical long term to service all these different options to the customer, whether it be curbside, BOPIS, which has been an evolving trend that looks to will be in play for the long term here and has really been growing over the last couple of years. So we feel good about that. And then in terms of those that are month to month and how we address those, we are really looking at in a very measured way. We don't want to get too far out in front of it.
Similar to what we did with the Great Recession is we can do shorter term renewals for the time being. Let's get more visibility to how this looks long term and then we can address a longer term renewal on the back
end there. Yes. So I guess what I
was asking for about the Similar to what we've done in the past sorry Ki Bin, Similar to what we've done in the past recession, in the past great recession is we adopted the phrase love the one you're with and we recognize that the existing tenant base is your best friend right about now. And so we're working with making sure that we love the one you're with and bridge them to the other side of this. Okay. Does that translate into perhaps shorter term leases for now for the longer term leases that are expiring?
Not necessarily. Again, it's case by case. It's hard to paint a broad brush on it, because these situations different. And when you look at the majority of our retail shopping centers have essential components to it with grocery, over 77% of our ABR is associated with shopping centers that have a grocery component to it. Those are the areas that people want to be in.
I mean it's been proven that through this pandemic that having component is really key. And for those other retailers that can co tenant across that are alongside it, they really do want to stay in those centers longer term. But it's really hard to paint a broad brush over questions like that.
Yes. I appreciate that. And
Glenn, did you was there
a change in the lease spread definition? If I look at the supplemental, is there some language that suggested that?
No. No, at least spread definition hasn't changed.
Okay. Yes, we just changed the format the way in the presentation the way it looks.
Okay. I just noticed that the 4Q number changed versus what you reported for 4Q last quarter?
No, the definition didn't change. It's just a presentation change.
All right. Thank you, guys.
Our next question comes from Tamy Fricke with Wells Fargo. Please go ahead.
Good morning. I'm glad you are feeling well, Connor. Just following up on the commentary you made about loving the one you're with. Certainly, there are a number of tenants that you may not love quite as much as others. I guess, is this also an opportunity to address lower credit tenancy where you may want to remerchandise longer term or is occupancy preservation at such a critical level that maybe that's not a consideration at this point?
No, that's a good question. And I think you look at each and every situation and each and every site individually that make the best business plan for the long term. And so we're always looking to upgrade tenancy. We're always looking to improve the credit quality as well as the potentially I personally think there's going to be a lot of opportunity to add a lot of grocers to our sites that don't currently have a grocery anchor and we're working on that right now. We're already close to 80% grocery anchored.
I think we're going to be up over 80%. That's a challenge that we've laid out for ourselves. But that being said, we recognize that a lot of retailers are going to have their expansion plans put on pause, except for those that maybe have been operating through this pandemic. And so we do want to take it case by case. And the small shops to me are critically important because I think they're the secret sauce in terms of connecting with the community.
Every shopping center has sort of the major national credit tenants that people are used to shopping and love. But I think the real important part of the shopping center is that secret sauce, the local mom and pop, because it's typically a generational owner or someone from the community someone that they really connect with. And I think that's where we really want to shine in this type of environment is helping those folks get to the other side of it.
Okay, got it. Thanks. And then I guess some of your peers are looking to extend loans to their small shop tenants. I'm curious if you've given any thoughts to doing that?
Yes. It's actually something we've talked about when we were rolling out the TAP program, and looked at doing ourselves. But then we realized we should probably prioritize the government programs that are in place because in essence they're there for a reason and we figured let's make sure the tenants that we have access those programs first, and take advantage of those programs. And then as we watch the PPP program closely and see how it's playing out, if we need to, we have the ability obviously with our balance sheet to step in and help those in need. But right now, the priority is to focus on the PPP.
Okay, great. Thanks. And then if I could sneak one more in, I'm curious if you are seeing any differences in collectibility based upon geography?
We really haven't seen much difference. It's a right now, it's pretty consistent across the board.
Okay. Thank you.
Our next question will come from Linda Tang with Jefferies. Please go ahead.
Hi. Thanks for taking my question. Any sense of the breakdown in April rent collection for anchors versus the small shops?
It's in the supplemental. You'll find that in the supplemental in our COVID business update, Linda.
Okay. I think by and large, the anchors were paid and then it just varied a lot across the small shops, right?
Yes. 73 percent of our anchors paid and 44% of our non anchors paid for April.
Thanks for that. And then when you look at the pipeline of retailers announcing restructurings, are there any strategies to best mitigate the impact of upcoming increases? Maybe anything you can do to maintain occupancy on a short or medium term basis? And then then do you think your scale helps you in this context?
Our scale and our diversity definitely helps. Mean, when you look at the diversity of tenant base across the portfolio, it's pretty incredible how diverse we are, especially when you take into the geographic diversity on top of the tenant diversity. Clearly, we're watching the credit markets closely. Our tenants are some of the our top 50 has we have the highest investment grade credits of our peer group, but we're watching closely how that plays out. Clearly, there's been a lot of reorganizations, lot of debt for equity swaps that we've been watching in other sectors.
But we're going to monitor that closely and continue to evaluate the opportunities.
Our last question today comes from Christy McElroy with Citigroup. Please go ahead.
Hey, it's Michael Bilerman with Christy. Conor, it's great to hear that you're doing better. I wanted to sort of ask you and I think obviously you're doing a lot of stuff on the deferral and working with your tenants. I assume you're paying a royalty fee to Stephen Stills for the one you're with as well. But how do you think about providing equity and stepping into retailers?
It's obviously been a hallmark of Kimco for a long time. Ray has been leading those initiatives. Do you view that as an opportunity today to invest into retails, put aside the deferrals and the loans, but try to make commitments and roll out a much more significant program on that end?
Hey, Michael. Thanks for those comments. Yes. No, we look at it the same way we've always looked at it. We want to be opportunistic when those events create dislocation where retailers that are real estate rich need a partner to come in and unlock the value of that real estate.
So we're very careful on who we invest in and why. You can sort of look at our track record back to decades of all the investments we've made and it's pretty consistent theme across the board. We like retailers that are real estate rich. We typically think we have the capacity to underwrite it. We have the We want to see the current Plus investments pay off.
We anticipate them to continue to perform. And hopefully, there'll be some more dislocation in the near term that will create opportunities for us so that we believe as a differentiator can really shine and create a lot of value for our shareholders.
I guess is that an initiative right now? You obviously have had relationships with private equity firms. I'm just trying to get a sense of, obviously,
a lot of these retailers are
struggling. Chatere eleven filings are rising pretty dramatically. So I just don't know whether that's an active dialogue and I
respect it.
It is.
It is. It is. It's part of our strategy. It's always been a Kimco differentiator. It always will be.
And we've been looking at that. It's lumpy, as you know. It's not the easiest thing to model, which I know sometimes cause you a lot of angst, but we do think it's an opportunity for us at the right time. And we haven't seen it happen yet, but we think the window is going to be opening here shortly for us to take advantage of it.
And then on the dividend, and so it's a suspension and you're going to review it monthly. What happens when you do reinstate? Do you view that as a that you'll want to catch up and pay the whatever dividends didn't get paid in the quarter? Is it just then when you reinstate it, it's just going to be on a go forward basis at whatever new rate you will feel comfortable with from a payout ratio perspective, how should the market think about the suspension?
Yes, it's a good question, Michael. It is very, very early. We're going to take it month by month. We use that monthly review specifically because we do think we're going to have to have these updated calls monthly with our Board to give them where we sit from May, from June, from July, and then reinstate it where we think we'll have confidence obviously in covering it and that it'd be sustainable for the long term. We know that the dividend is critically important to the investment thesis of Kimco shareholders and we want it to be tied to taxable income and to our cash flow.
And as we get more information, as the Board digests the information that's coming in daily, weekly, monthly, we'll be in a position to reinstate it where we believe that for the long term, it'll be in a good spot, not only for the existing, but to grow over time.
Right. So in this case, you may have a top up dividend to meet taxable income and then a new run rate quarterly dividend that you'll feel comfortable going into the future?
It will really depend obviously on the situation that's transpiring in front of us. A lot of options are available to us, a lot of levers that we can use, But that is part of the that is one of the optionality that we have that we can look at when we get a little deeper into it.
And you feel from paying it in stock, with having the ability to go 90% in stock, that the idea of just spending was a better outcome than giving script to your shareholders?
We felt like suspension was the right approach at this point just because there's such a lack of clarity. Obviously, with the change from 80% to 90% of the stock issuance of the dividend, that's an interesting option as well. And again, it's a Board discussion that we've been having regularly. We'll continue to monitor the situation. And I believe that as this gets a little bit deeper and we get the ability to see a little bit more clarity, then we'll have more information at our hands to put it back in place at the right level.
Okay. And the last thing, with some of the states and municipalities that have reopened, do you have any tenant sales from the stores, the restaurants that have opened in your portfolio? Is there any anecdotes that you can share about the pent up demand that's going on in the economy when things do reopen?
We don't have any specific sales yet, obviously, since it's only been a couple of days. But we have seen we do have conversations with store managers that we have relationships with. And obviously, the curbside pickup program that we've launched, we have a lot of dialogue surrounding that. They've been very pleasantly surprised with the curbside pickup and the accessibility and the use of it. They've been happy so far.
So we're continuing to monitor that closely, but we don't have any sales data yet.
Yes. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to David Budjnicki for any closing remarks.
Thank you for participating on our call today. I'm available to answer any follow-up questions you may have. I hope you and your families are staying safe and healthy during this crisis. And hopefully, by next call, we can do this in a more normalized setting. Thank you, everybody.
Bye bye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.