Good day, and welcome to the Macerich Company Third Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.
Thank you, and good morning. Thank you all for joining us on our Q3 2020 earnings call. During the course of this call, we will be making certain statements that may be deemed forward looking within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, including statements regarding projections, plans or future expectations. Actual results may differ materially due to a variety of risks and uncertainties set forth in today's press release and our SEC filings, including the adverse impact of the novel coronavirus COVID-nineteen on the U. S.
Regional and global economy and the financial condition and results of operations of the company and its tenants. Reconciliations of non GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8 ks with the SEC, which are posted in the Investors section of the company's website atbafrich.com. Joining us today are Tom O'Hearn, Chief Executive Officer Scott Kingsmore, Senior Executive Vice President and Chief Financial Officer and Deb Healey, Senior Executive Vice President, Lacy. With that, I would like to turn
the call over to Tom.
Thank you, Gene. And thank all of you for joining us today as we continue to navigate through these unprecedented times. As you read in our earnings release, the 3rd quarter was a challenging quarter, albeit better than the 2nd quarter in most respects. We had re leasing spreads of 5% and occupancy at year end 91%. At the end of the Q3, most of our town centers were open with only our 3 enclosed centers in Los Angeles remaining closed by government mandate.
Those centers reopened in early October. So as of today, all of our centers are open and attendants are eagerly planning for a busy holiday season. Most of the results were better than the second quarter, but we were obviously adversely impacted in the quarter due to COVID in general and specifically due to the protracted California and New York City closures. The number one priority during the quarter was to safely reopen all of our centers, get our tenants open and get their employees rehired and back to work and to welcome back our shoppers. I'm very appreciative of the entire Macerich team that did a tremendous job of getting our service reopened safely in some cases for a second time.
Some of the self health and safety measures we took went way beyond CDC recommendations that included significantly upgrading our air filtration systems to include hospital quality air filtration with more infusion filters. We've raised the clinical head of infectious disease and use of our medical center to review and advise us on our protocols and policies. We hired a nationally renowned engineering firm to advise us on advanced HVAC systems and protocols. We implemented modified hours, increased cleaning and sanitizing protocols, CDC guidelines and approved products that are based on for our services. In terms of rent collections, we are much better off in the Q3 compared to the Q2.
During the Q3, our average rent collections were 80%. October is trending above 80%. For most of the tenants not paying rent during the closure period, we have generally come to terms with them. In general, we agreed to rent relief usually in the form of deferred rent for the closure months with repayment in 2021. In many cases in exchange for landlord favorable amendments to leases.
There were some large reserves from uncollectible rents in the quarter, which Scott will comment on. Cash flow continues to improve by the month as we move into the Q4 and I expect that to continue. As of today, we have significant liquidity and currently have approximately $675,000,000 of cash on the balance sheet. The tenant reaction to reopening has been good. The tenants almost without exception were eager to get reopened.
By October for centers open at least 8 weeks sales were up to 90% of pre COVID levels. The consumer shopping with a purpose and there has been pent up demand. Our second quarter was more about getting centers open and getting our tenants open safely and less about leasing. The focus in the Q3 was collecting cost to rents and started to shift back to leasing. Looking at traffic in general, it's running about 80% compared to a year ago.
Some of that has to do with capacity limits, particularly for restaurants and also for having no seating in the food court. Sales on the other hand are running on average 90% of a year ago, which means there I'd say higher capture rate. This year will be a different holiday season. We believe it's going to start earlier. Operating hours will be shorter.
There'll be capacity limits and most stores will be closed on Thanksgiving Day. With consumers not spending money on vacations and entertainment during COVID, most of our consumers in our markets had money to spend this holiday season. Top categories are expected to be fitness and wellness, home furnishings, electronics and athletic leisure. There will be Santa kiosks for photos, but with lots of social distancing. We've had a number of questions about potential for property tax increases in California.
Although small in the political scheme of things, there was a proposition in California that would have increased property taxes on commercial property. It's known as Proposition 15. That proposition would have removed the protection of Prop 13 from commercial properties in California. For us, generally, we structure our leases to pass through taxes to the tenant as a recoverable expense with a significant bottom line impact if the final vote shows Prop 15 passing. As of today, it is trailing.
The yes votes stand at 48.7% in the middle are at 51.3%. So hopefully that means no increase for commercial taxes in California. Looking at the balance of 2020, the pandemic has shown that good retail is not going away, especially in A quality centers. Digitally native brands appreciate more than ever the profitability of their physical stores. Big format retailers got active again in the Q3 and you'll hear some of the specifics from that.
Although we are still in the midst of COVID, our centers are operating at 90% capacity, sales levels of 90% pre COVID. And even if you look at one of the more challenging categories, restaurants, in our portfolio, we have 2 47 restaurants and 94% of those are open today. The Q2 was an extremely unique quarter and some of the 2nd quarter challenges carried into the 3rd quarter and may even carry partially into the 4th quarter. But many metrics got better in the Q3, specifically collections and the number of tenants open and the progress we're making on leasing activity. The impact on reserves for deductible accounts was less than Q2 of 2020, but still much higher than normal.
We expect to gradually improve a more normal level in the Q1 of 2021. Although there are still too many uncertainties to give guidance, we expect the Q4 of 2020 and the year 2021 to be much better than the 2nd and third quarters of 2020. And now I'll turn it over to Scott.
Thank you, Tom. Disruption from COVID-nineteen continued to severely impact 2020 results in the Q3. Funds from operations for the Q3 was $0.52 per share, down from the Q3 of 2019 at $0.88 per share. Same center net operating income for the quarter was down 29% and year to date it was down 17%. Changes between the Q3 of 2020 versus the Q3 of 2019 were driven primarily by the following factors and the numbers on Unicorn Red's share for the company.
1, dollars 20,000,000 $21,000,000 in bad debt allowance in the form of $14,000,000 of increased bad debt expense versus the Q3 of 2019, coupled with $7,000,000 of lease revenue reversed for tenants that are accounted for on a cash basis per GAAP within the Q3 2, over $20,000,000 of short term non recurring rental assistance 3, a $9,000,000 decline in common area and employer revenue as well as percentage rent 4, a $4,000,000 decline in parking income driven by protracted property closures and reduced parking utilization at our urban centers in New York City and Chicago primarily. 5, interest expense increased $4,000,000 due to a decline in capitalized interest. 6, net operating income decline from the Hyatt Regency Hotel at quarter was about a $2,000,000 decline 7, a negative $0.03 per share diluted impact from shares issued in the 2nd quarter relating to our stock dividend issued in the 2nd quarter. These factors were all offset by increased lease termination income of $7,000,000 and land sale gains totaling $11,000,000 net impact. Revenue declines from occupancy loss also contributed to declines in both net operating income and FXR over the quarter.
As Tom mentioned, we are not providing updated 2020 earnings guidance given the continued uncertainties. We do anticipate continued volatility operating results in the Q4. While we're not providing guidance for 2021, as we mentioned last quarter, we still believe that 2020 will be a trough in the company's operating results, including primarily to the following factors. The pandemic has effectively accelerated the financial troubles with numerous repo banks, resulting in a wave of bankruptcy filings that were funneled into 2020. We do not anticipate this volume to recur in 2021.
The majority of the filings have resulted in reorgs and not full fleet liquidations. We do expect approximately a 3% cumulative drop in occupancy from lease rejection, approximately half of which is already embedded within the 90.8% reported occupancy during the 3rd quarter and the balance of these stores will close within the 4th quarter. Year to date, we have reported $57,000,000 in additional bad debt reserves versus 2019, including $50,000,000 of bad debt expenses and $7,000,000 of lease revenue reversals the tenants accounted for on a cash basis. Similar levels of reserves are certainly not anticipated going forward. We've recorded well over $20,000,000 in non recurring short term rental systems year to date and we expect those to continue into the Q4 of 2020.
And then lastly, we anticipate increases to transit revenue line ons going forward into 2021, namely the percentage rent, advertising, sponsorship, vending and other ancillary property driven revenue. We look forward to providing 2021 guidance on our typical cadence this time next quarter. Given the continued improvement in rent collections of 80% in the 3rd quarter and over 80% in October, liquidity continues to improve. Cash on hand has increased from $573,000,000 at June 30th to $630,000,000 at September 30th. And as Tom noted, liquidity continues to improve to this day.
This improved liquidity is solely due to improved operating cash flow and is a testament to the hurtful unit efforts by our people to both secure the right to open all of our properties and to negotiate thousands of agreements with our retailers. With continued progress in these negotiations, which Doug will soon elaborate upon, we anticipate further improvement to operating cash flow throughout the year. We are closing on a 10 year $95,000,000 financing on Tyson's theater, the residential tower of Tyson's Corner. The loan will have a fixed rate of 3.3% and will include interest only payments during the entire long term. This will provide approximately $47,000,000 of liquidity to the company and we expect the loan closing to occur within the next several weeks.
We secured a short term extension on Danbury Fair through April 1, 2021. The loan amount and interest rate remained unchanged following that extension. We have agreed to terms with the loan servicer for a 3 year extension on Fashionality with Niagra, which will extend the loan maturity through October of 20 23. We expect the loan amount and interest rate also to be unchanged following that extension. And then lastly, we continue to work with our lenders to secure loan extensions for the non recourse mortgages on
each of
Flatiron Crossing, Green Acres Mall and the power center adjacent to that Green Acres Commons, and we anticipate securing extended term within the coming weeks. Now I will turn it over to Doug to discuss the leasing and operating environment. Thanks, Scott. Like the second quarter, majority of our efforts in the Q3 involved getting our retail partners open as quickly and as safely as possible once our centers were allowed to reopen. To date, all of our properties are open and I'm happy to report that 93% of the square footage that was opened pre COVID is now open today.
As I discussed on our last call and has been the case in the Q3, much of our time and energy was spent working with those retailers that did not have the ability to pay rent while closed. And we've made great progress. In fact, if we look at our top 200 rent paying retailers, we've either received full rent payment or secured executed documents with 147 and they're in LOI with another 23, all of which totals approximately 93% of the total rent these top 200 pay. Consequently, collections continue to improve. 3rd quarter saw an average collection rate of 80% that's compared with 61% in the 2nd quarter.
And as of today, as Tom mentioned, our collection rate for October stands at about 81%. But the Q3 wasn't all about collection. As our centers continue to open and as our retailers opened and were able to trade with some consistency, the leasing climate began to improve. Retailers began executing leases that have been out since before COVID. But most importantly, the retailers began committing to new deals again, a true sign that for the first time in months, we are now looking forward rather than solely focusing on the past.
I'll expand on this in a moment, but first let's take a look at some of the 3rd quarter metrics. Frolated sales for the Q3 were $7.18 per square foot, and that's computed to exclude the period of COVID closures for each tenant. The seven eighteen is down from $800 per square foot at the end of the Q3 2019. For centers opened the entire month, sales in September were actually 92% of what they were a year ago, once we exclude Apple and Tesla. Occupancy at the end of the 3rd quarter was 90.8%.
That's down 50 basis points from last quarter and down 3% from a year ago. And this is primarily due to store closures from bankruptcies and from our local tenants that couldn't survive the pandemic. Temporary occupancy was 5.7 percent, that's down 70 basis points from this time last year. Trailing 12 month leasing spreads were 4.9%, that's down from 5.1% last quarter and down from 8.3% in Q3 2019. Average rent for the portfolio was $62.29 down from $62.48 last quarter, but up 1.8% from $61.16 1 year ago.
As I mentioned earlier, the leasing environment continues to improve. In the Q3, we signed 120 leases to 342,000 square feet. This is over 3 times the number of deals and square footage that was signed in the Q2. And these stats do not include any COVID workouts. Some leases signed in the Q3 of note include Gucci, Fashion Outlets of Chicago, Chicago, Chicago Paris, the Costeau Fashion Square, Kids Empire and State 48 Brewery at Santan, Barbary's Grill at Danbury Fair, Starbucks at Fashion District Philadelphia, Madison Reed at 29th Street, Full Star at Village of Corte Madera, and finally, Lucid Motors at Scottsdale Fashion Square and Tysons Corner.
Both Lucid and Polestar are new additions to the electronic car category and first to the Macerich portfolio. As we head toward the end of the year, much of our focus is on our 2021 lease expiration and finalizing deals in order to secure as much expiring square footage in 2021 as possible. At this point in time, by virtue of COVID workouts and through the normal course of leasing, we have commitments on 26% of our 2021 expiring square footage with another 67% in the LOI stage. This brings our total leasing activity on 2021 expiring square footage to just over 90%. Turning to openings in the Q3.
We opened 44 new tenants in 276,000 square feet, resulting in total annual rent of $11,300,000 This represents 65% of the openings we had at the same quarter last year, but with 15% more square footage and virtually the same total annual rent. Given the conditions our industry has faced over the last several months, I think this speaks volumes to the strength of the leasing pipeline we had pre pandemic. Notable openings include Adidas and Tory Burch at Fashion Outlet of Niagara Falls, Perry at Vintage Fair, West Elm at La Quintata and Golden Goose, Capital 1 Cafe and a new Levi's store at Scottsdale Fashion Square. In the large format category, we opened Dick's Sporting Goods at Deptford Mall in a portion of a former Sears store, Saratoga Hospital of Wilton Mall also in a former Sears store, the new and spectacular looking Restoration Hardware Gallery at Village at Fort Madera. And all this was in the Q3.
In October, we finished the repurposing of Spears at Deptford with the opening of round 1. And also in October, we remained active with Dick's Sporting Goods, opening them at Vintage Fair in a portion of Spears and at Danbury Fair in the former Forever 21 box. The digitally native and emerging brands continue to expand their omnichannel presence by opening stores. The Q3 was no exception. We opened Amazon 4 Star and Indochannel at Scottsdale, 2 Warby Parker stores at Scottsdale and 29th Street, along with Amazon Books and Tempur Pedic at Flatiron Crossing.
And our pipeline remains strong. At this point, we have signed leases with 190 retailers scheduled to open throughout the remainder of 2020 and into 2021. This totals 1,700,000 square feet for a total annual rent of $63,000,000 And since the pandemic, only 9 of these retailers with signed commitments have informed us that they won't be reopening they won't be opening. Total impact of this is only 60,000 square feet of the 1,700,000 square feet and only 3,000,000 dollars of the $63,000,000 in total rent. Lastly, I want to address the issue of traffic.
There's been a ton of focus on traffic and the fact traffic is down compared with last year. And it is, there's no arguing that. However, I struggle with the notion that traffic seems to be perceived as the sole means to a retailer's success. Why are we talking more about conversion or sales for the combination of both? Despite less traffic, the Macerich portfolio has seen tremendous success in the reopening of stores that were forced to close due to COVID.
Like Prime Market Danbury being the number one store in its region since reopening. Like Bath and Body Works at Freehold, beating last year sales 3 months in a row with capacity limited to 50%. For HomeGoods at Atlas Park, outperforming last year by 15%, while also at 50% capacity. For Burlington, reopening at Kings Plaza and selling through inventory, it took a month to replace. For Sephora, Broadway Plaza is currently ranked as one of the top stores in the company by virtue of conversion rates that are 20% to 30% higher than last year.
In round 1 at Deptford and Valley River, operating at full capacity with hour long rates at night and on weekends. For how its luxury retailers at Scottsdale Fashion Square such as Gucci, Louis Vuitton and Golden Goose, all exceeding plan by 25% to 40%. Our North Italia, a restaurant at Long Catada, back to pre COVID sales even at 50% occupancy. Antilles at Arrowhead, we reported double digit sales increase since reopening in May and is expecting their best holiday season ever at this location. And the list goes on and on.
Unfortunately, these success stories are too often overshadowed by the overwhelming focus on the effect this pandemic has had on traffic in the short term and pre vaccine. Make no mistake, traffic is important. There's no denying that. However, I do think it's time we stop thinking still 1 dimensionally and focus on other metrics in addition to simply traffic. And when we do, I think we'll all find that we are in a much better place than many think.
And with that, I'll turn it over to the operator to open up the call for Q and A.
Thank you. And we will go to that first question from Craig Schmidt of Bank of America.
Thank you. I was just wondering, given the late openings of some of the enclosed malls, are they able to get fully stocked in inventory for holiday 'twenty or has this limited their ability to deploy stock?
Hi, Craig. How are you? Actually, as a result of having closed once and reopened, most of the retailers had a little bit of experience in managing their inventory and being ready to go. So in California, even though we didn't know exactly when the enclosed malls were going to open, the retailers had a decent expectation, had their inventory lined up and we're in pretty good position both in terms of inventory and employees, because most of the employees have been furloughed. And given the generous unemployment benefits, a lot of them had difficulty in getting their employees back.
But they did and most of them are poised and ready for the holiday season.
Great. And then a follow-up. Is Matrix fully liable for all the debt and guarantees that Fashion District Philadelphia?
No, Craig. That's a loan that is a several loan to half the obligations, it's PennReach, half the obligations, Macerich.
And we'll move to our next question from Mike Mueller of JPMorgan.
Hi. For the 91% of 2021 leasing activity that was referenced, can you talk
a little bit about how the spreads are on that pool
of leases compared to what you just reported for this quarter?
I'm
sorry, could you repeat the question, please? Yes. For the leasing activity for 2021 that you walked through, what are the rent spreads on that? Scott, feel free to jump in. Yes.
So, Mike, good morning. The hazard of our call is overall separated here. Time is going to work,
so apologies.
We haven't considered the script, I would say this though. We're using this as an opportunity to get in front of our 21 X3s. Our largest focus right now is occupancy. Occupancy is critical, certainly more critical than the final dollar rate as a result of some of the declines in occupancy. I would expect for capital spreads to pay for a bit, but we don't have that metric computed at this point.
Bear in mind that the strategy we're taking right now, focusing on occupancy rather than every dollar is right, very similar to what we did about 10 years ago from now the recession. We've actually been a very good strategy. And so these renewals, I would say, are going to on the side of being shorter rather than older to give us an opportunity in the price when the environment is better a couple of years from that. Got it.
The actual the spreads that we reported though, to the extent a lease has been signed, even if it's a 2021 start, it's included in the leasing spreads. So I think last quarter we were 7%, 3rd quarter we were 5%. So to the extent any of those leases Doug referenced for 2021 openings are actually signed deals rather than letter of intent, they will be in our kind of spreads that we reported in the second and third quarter.
Got it. And then a follow-up, can you just tell us how strong the tenant interest is in
the equity when you look at
your top quartile portfolio and compare it to
the bottom three quarters of it?
Yes, I can take that, Mike. When the pandemic shut down the malls, our business really came to a screeching halt. I mean, nobody was really focused on real estate or leasing. The retailers were focused on their corporate offices, their employees and getting their stores back open. But since the retailers have opened and as I mentioned been trading for 60, 90 days and understanding that they can get back to 90% of where they were last year, the interest has really started to peak.
And it's interesting, our top I think you mentioned our top quartile, our top 20 properties have normally been from 2016 or 2017, 95%, 96% leased. And now we see them 93% 92%, 93% leased. So what that says really is the first time in years, we have some real good space opening up in some of our top tier centers. And that hasn't happened in a while. And that's really peaked the interest of some of these retailers that are going to be they want to be opportunistic.
Those that went into the pandemic with strong balance sheet, great product and have come out on the other side in good shape are going to take advantage of that. Got it. Okay. Thank you.
And we'll go to our next question from Forrest Fandigham of Compass Point.
Hey, guys. Thanks for taking my question. I wanted to get a sense of how your 3rd quarter billable rent compared to your 1st quarter billable rent. So I could so the your markets could get a sense of what is the sort of the run rate in NOI and how much has it declined? And presumably with the leasing activity that you guys are talking about, you're setting yourself up for some increase off that date, but if you can give
some more color on that, that would be great.
Yes, Lars, hi, good morning. I don't have that figure handy. We can perhaps follow-up offline. But I will say that the Q3 is certainly the billing rate in the Q3 is down a bit relative to the Q1 as one can imagine. We've got some short term rental concessions that have factored into the Q3, primarily with locals and some challenged categories.
And then you had some closures as a result of the bankruptcy. So certainly that has reduced the billable rate in the Q3 relative to the Q1 pre pandemic. But I do
not have that factor in front of me.
Okay. Maybe we can follow-up offline. My follow-up question maybe has your pitch to tenants changed as a result of the pandemic in terms of giving them signing up to your assets or how you change your the positioning of your assets as a result of this? Hey, Laura, it's Doug. I don't think our position has changed really at all.
Our focus has been and continues to be morphing our malls into what we call town centers, where there's something for everybody. And that hasn't changed. I think it slowed down the process in some of the categories, where we look to bring entertainment, theaters, experiential concepts to the properties that slowed a little bit, but it's not going away. It's going to come back and it's going to come back in a different form. And that category does still remain active.
But our philosophy of town centers and creating such hasn't changed a bit. Great.
And so we'll move to our next question, which comes from Michael Bilerman of Citi.
Hey, it's Michael Bilerman here at Citi McConnell. Tom, I was wondering if you can spend some time talking about sort of leverage levels. And I understand from a liquidity standpoint, the company has a fair amount of liquidity and you certainly shored that up by having the extensions on Danbury and Fashion Outlets and getting a new loan on Tyson's on the resi complex. It sounds like you're doing the same for Flatiron and Green Acres. But the overall leverage level of the company remains quite high.
And so how are you thinking about addressing that element in terms of raising some additional equity capital either through sales, maybe it's handing back keys of assets that may be over leveraged or are you planning on just waiting it out?
Well, Michael, much as we saw with the great financial crisis, capital markets have basically shut down. So now isn't a particularly good time to be raising capital to delever. That change, we saw change in 2,009 and 2010, and that will happen again. And the same will happen with appetite for assets. As you recall, we sold 25 balls coming out of the financial crisis starting in 2011, generated about $1,500,000,000 of liquidity.
So we expect post pandemic, post vaccine things will return to a more normal level and we'll have the opportunity to dispose of non core assets and use that capital for reducing leverage levels. One thing I would point out is given the current cash flow, even though it's less than had been forecasted at the beginning of the year, it's significantly in excess of the current dividend level and that ought to allow us a fair amount of cash flow from operations to use in the near term for delevering and that would be the play.
And can you give an update on the line of credit which you extended this past July, you used your 1 year extension to push to next July, it's obviously predominantly all drawn. Can you just help us sort of understand whether you'll be able to get the full 1 point $1,000,000,000 of proceeds as you look to refinance that? And if there's any sort of capital commitments that your joint venture partners, because you do have a lot of joint venture assets, are not willing to fund in any way?
I'll take the first part of that and then the last part of that and then you can elaborate, Scott. As you've said, Michael, we extended our line of credit and we're currently in conversations with our line lenders to do a new line of credit. We've got some time and we've also got a 22 year relationship in that bank group. So this will be the 7th time we recast that line of credit. So those discussions are early on.
It's too early to tell you what the terms would look like in the overall amounts. But obviously, we
have a fair amount of cash on the
balance sheet as well. And at some point, that would be used to reduce the line of credit balance. But that's really in the discussions. And so far, I think all of our joint venture partners have been similar to us in terms of being cautious about capital spending during the pandemic. Very similar to what we saw in the financial crisis and then as things start to improve, capital spending increases and I would expect to see that post COVID as well.
And so we will move on to our next question from Caitlin Burrows with Goldman Sachs.
Hi, good morning. I was wondering if you could talk about your current watch list with occupancy down 300 basis points as of 3Q, but then you talked about leasing progress combined with the watch list. What does that mean for your future occupancy expectations?
Hi, Caitlin. Well, as Scott mentioned, I think in his remarks, we've had an acceleration of our watch list into bankruptcy as a result of COVID. So bankruptcies, tenants said failures or reawards that would have happened over the course of the next 2 or 3 years happening in the course of the last 8 months. And so frankly, our watch list is pretty short. Obviously, the tenants that are in New York right now, we keep an eye on them.
Most of them, as Scott indicated, they're not liquidations, but reorgs. And in our case, we typically keep roughly 65% of the stores open post bankruptcy, about a third are rejected and that's similar to what we're seeing here. So the watch list is actually fairly short today as a result of COVID. Doug, you want to elaborate further on that?
I'm sorry?
Doug, you could elaborate through it on the watch list?
No, I think, Tommy, we're spot on. The only thing I would say of all of the bankruptcies that we saw this year, I think there were probably 38 or 39, I think only 6 or 7 weren't on our watch list, which means 2 things. We keep a pretty good watch list and the fact that so many of them weren't on it means our watch list has decreased significantly similar with Onset.
And thank you. We'll move then to our next question from Alexander Goldfarb of Piper Sandler.
Hey, good morning out there.
Just two questions. First, just following
up on the balance sheet. You guys have extended a few of the maturities right now. I don't know if that covers the full $800,000,000 that we talked about on the last quarter. But then there was also another 19 malls that were discussed last quarter that were in forbearance. So can you just give us an update on the forbearance process?
And if it's still 19 malls, has that shrunk, has that increased?
Yes, sure, Alex. It's Scott here. We as I mentioned in my opening remarks, we maybe closed our secured terms on 2 of our 5 near term secured maturities, still working on Flatiron and Greenacres Mall, Greenacres Commons. So that's what comprises the 800. Again, so far, pretty successful efforts, terms ranging from short term extensions to longer term extensions.
Thus far, no change in principal or interest rate. The remaining assets, those being Flatiron and Greenacre Common, they're high quality, institutional quality assets. So I think we'll be successful on those as well. The 2019 assets that you mentioned, we agreed on typically we agreed on end of the bill arrangement for another coherence. It was a very amicable process with the loan servicers or with the balance sheet vendors to agree to defer debt service payments.
We do have extensive disclosures in the Q, which cover how long those lasted and what are the payment periods are. Now that we're in November, I believe they have about 2 or 3 months worth of remaining, I'll call it, catch up debt service deferral payments to make through the Q1 of 2021. So very amicable for us.
Okay. So Scott, just to make sure I understand you. So those 19 assets that went for Barron, basically you got and we'll see when the 2 comes out. You guys got deferred debt service through the end of Q1 2021, is that correct?
We got deferred debt service, which is now being repaid. To all of those deferrals during the summer months. And we're now repaying that debt service and those repayments, Alex, will extend into the Q1 of 2020. Okay.
Generally, there are 2 months agreements when we were able to defer debt service payments for 2 months and generally the rebating related in the Q4 or Q1 of 2021.
Okay. And then just Tom going back to
the dividend, the amount that you're paying right now, is that actual income driven or right now you don't need to pay a dividend for tax purposes?
We always need dividend for tax purposes if you have any taxable income. We cut last quarter, we maintained the same dividend. The one that's coming up here based on estimation of taxable income for the balance of the year.
So okay. But that's based on so the $0.15 is where your taxable income is currently?
No, it's an annual number, Alex. And you'll recall we had higher dividends in the first half of the year, so it's not quite that simple. But yes, we consider taxable income when we make our dividend payments.
Got it. So next year, it would likely then go up, just to get it back to what your taxable income would be. Is that how I should interpret that?
Sure. It depends on what taxable income is. You've got to pay out 90% of your taxable income. So that's a fundamental premise that I'll reach out to follow.
Okay. Thank you, Tom.
And we'll go to our next question from Todd Thomas with KeyBanc Capital Markets.
Hi there. This is Ravi Zaidya on the line for Todd Thomas. Just looking forward here, given the stresses in large format fitness and theaters, how is the company going to look to backfill department store boxes? What's the appetite to use these spaces for non retail purposes, perhaps distribution centers or otherwise?
Well, I think Doug commented on that to some extent in his comments. We've done a handful of deals just in the past quarter with Dick's Sporting Goods. A lot of that was in empty boxes, Sears boxes for the 21 boxes. We also did a deal with a hospital at one of our Sears boxes we replaced with a hospital and that was in New York. And there's a lot of uses.
In some cases, we'll be knocking down the empty store and building multifamily that's going to be the case in those Cerritos. The Washington Square will also knock down the Sears box and the plays out with a hotel and the entertainment complex. So there's a lot of demand in the big format, but it also will go non retail. It will go nontraditional retail because they're multifamily, we do a lot of hotel deals and just repurposing the square footage and eliminating a certain amount of retail.
Yes. Thank you.
And we'll move to our next question from Greg McGinnis of Scotiabank.
Good morning. I think the minimum rent in the consolidated portfolio was down 9% from last quarter. You just help us understand the drivers of that change and what the expectation might be on any additional adjustments you anticipate heading into Q4? Yes, sure. This is Scott.
I covered some of that in my opening remarks. I certainly mentioned the bad debt allowance, which included a component of leasing revenue that have been reversed for tenants on a cash basis. So that is a component. We did grant some short term non recurring rental assistance, primarily the locals and I'd say challenged categories. That was a factor.
And then of course, we reported occupancy down roughly 3% from a year ago and certainly that was a factor quarter over quarter. So all of that factors in. In. I do think that some of that will certainly carry forward. As these bankruptcies taper off, those tenants will start to now convert to a pool basis accounting, but we may have a little bit of that cash basis with revenue reversal noise in the Q4.
I certainly think we'll deal with a little bit more of rental concessions, especially when you think of some of our properties in New York City and California that were opened excuse me, closed either for a second time or closed for a very protracted period of time through the Q3. So we may deal a little bit look a little bit of that there. And certainly the occupancy impacts that we're reporting on will carry into the Q4. So like I said, I think the operating results in the Q4 will continue to appeal the impacts of COVID. Okay.
And then just trying to think about these recurring revenues a bit more, just as for clarity on 2 other items. First is on the currency. Curious that was associated with any large spend
in particular or just across
the portfolio? And then kind of what you expect from that number heading into Q4? And then second, on the land sale, was that flowing through the income statement or just on FFO? Yes, sure. On the Terminate, I don't want to get specific with certain tenants, but I would expect in a tightened time of volatility that the term fees will remain elevated.
You think in prior moments in history where we've got heightened volatility, Sometimes tenants want to buy out of their lease obligation, an opportunity effectively for us to secure a nice termination fee and then be able to backfill and effectively profit off that backfill. But I'm certainly not going to get into specific names. I would expect the termination fee to continue to be elevated relative to last year. Land sales did go through the P and L in terms of FFO. As I mentioned, it was roughly $11,000,000 after accruing for tax provision.
Okay. But it wasn't flowing through other income or gains on the income statement, current net income? That's correct. Yes, it was below the line. Great.
Thanks.
And moving on, we'll go to a question from Rich Hill with Morgan Stanley.
Hey, good morning, guys. I wanted to come back to the early comments on the conversion rate, which I thought was pretty interesting. I recognize that that is a really important driver of sales and why there's some retailers that are actually seeing really high conversion rates on the other side of COVID-nineteen. But I'm also wondering if you could speak to maybe conversion rates at the overall mall itself and some of the in line tenants and trends that you might be seeing there? I can take that and Tom feel free to jump in.
I don't think we have specific conversion rates for each mall. A lot of what we talk about is anecdotal. But what we are hearing across the board is that while traffic is down and we know that our sales are up, it does relate to the fact that our shoppers are converting more. They're not necessarily going to the mall as much, but when they're there, they're buying. And that's what we're seeing, whether it's in traditional retail, luxury or otherwise, you're seeing it across the board.
I think a lot of their dwelling and a lot of their research is being done online, so that when they get to the mall, they know what they're there for and they buy it. Got it. That's helpful. And Scott, one question for you. I think a lot of us would applaud a guide in the next quarter.
But I'm curious, what do you think is going to happen over the next several months that will give you the confidence to guide for the full year 2021, but maybe be a little bit reluctant to guide for 4Q. Look, I'm not questioning why you're not guiding for 4Q, I'm more questioning or more curious like what's going to change over the next 3 months to give you a lot of confidence on 2021? Well, Rich, I would say fundamentally, just the fact that our centers are open and trading gives you an underpinning of confidence That combined with, as Doug mentioned, we've made tremendous progress with our national retailers, which number just a touch over 200 in number. So we're gaining visibility on that front. Collections continue to improve.
I think all of those factors are what gives you some comfort that you could give guidance for the following year. That's again fundamentally centers are open and your tenants are trading. That gives you a lot of confidence. Tom, I don't know if you want to add anything to that. Yes.
Well, I think where we're at today, we've come
to terms of our top 200 retailers, we've come to terms with 90% plus of those. And so the balance of them that's going to happen in the Q4, that's creating some of the uncertainty in the Q4 that we don't think is going to carry over to 2021. And with each passing month, I think the retailers get more comfortable as they move through COVID, looking forward to the post COVID era. And I think we'd be in a much better position 90 days from today to give guidance than we are today. I mean, in the COVID world, 90 days seems like an eternity and we learn more, we know a lot more than we did even we did our last earnings call.
So I think that's going to put
us in position by January to be able to do it.
That's really helpful, Tom. And after your comment, pretty much feels like an eternity, sometimes a week feels like an eternity. So thank you. That was comments on the cadence was really helpful. Thanks guys.
You bet, Rich.
And we'll go to Linda Tsai of Jefferies.
Hi. At your thought in terms
of leasing, what tenant categories are looking to expand?
Hey, Linda, it's Doug. We're seeing it across the board. The lot going on in the traditional retailer environment. Just some examples, Aerie I'm sorry, American Eagle come out with a new concept called offline, which is a branch of their Aerie store, Women's at Leisure. And they're doing I think, 3 test stores this year.
We have one of them. And should everything work out, that's going to be a real rollout vehicle for them. Aritzia out of Canada is expanding. Levi's went public last year. They're opening another 100 stores between this year and next year.
Lululemon is always expanding, whether they're expanding their fleet or they're trying to expand their store size. J. Crews, Madewell also and that list goes on.
I mean, I was wondering if you share any
of the same lenders with 2 of your lower quality counterparts who recently filed and you had a sense of what ultimately drove the decision to default those companies?
I'm sorry Linda, could you repeat that? You broke up a little
bit. Sure. No, I was just asking if you possibly shared any
of the same lenders with 2 of your lower quality counterparts who recently filed and if you maybe have a sense of what might have driven the decision to default those companies?
Was that shared lenders? Was that your question? Yes. Yes. We do.
It's a relatively small group of REIT unsecured lenders. So I don't really want to speak for either of them. Obviously, we're partnering with P REIT and they're very well informed as they went through the process. And I think if you read the public filings, they had supportive 95% of their lender group. There was a 5% holdout and under their documents that was relevant and we think that's why they went that route.
I think they put out press releases themselves that they expect to be in and out of bankruptcy very, very quickly. So I'll defer to them. But yes, we know a lot of them. The lenders they have is that we know a lot of them and I think they are the ones that are supportive of PD.
Thanks for that. And then just one follow-up. The denominator for collections in 2Q, 3Q in October, did that change at all?
The definition? Yes.
Linda, we've treated the collections consistently as we move forward. So the 2Q, the way we treated 2Q collections is no different today than it was a 100 days ago.
Okay. Thanks. And at this time, I would like to turn the call back over to Tom O'Hern for any additional or closing comments.
Thanks, everyone, for joining us today. We hope to see many of you virtually at NAREIT in a few weeks. Until then, take care.
And so this concludes today's call. Thank you for your participation and you may now disconnect.