Good day, and welcome to The Macerich Company Q3 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-19, 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-K with the SEC, which are posted in the investor section of the company's website at macerich.com. Joining us today are Tom O'Hern, Chief Executive Officer. Scott Kingsmore, Senior Executive Vice President and Chief Financial Officer, and Doug Healey, Senior Executive Vice President, Leasing. With that, I would like to turn the call over to Tom.
Thank you, Jean, 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 Q3 was a challenging quarter, albeit better than the Q2 in most respects. We had releases spreads of 5% and occupancy at nearly 91%. At the end of the Q3 , most of our town centers were open with only our three 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 our tenants 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.
Our number one priority during the quarter was to safely reopen all of our centers, get our tenants open, and get the employees rehired and back to work, and to welcome back our shoppers. I am very appreciative of the entire Macerich team that did a tremendous job of getting our centers reopened safely, in some cases, for a second time. Some of the health and safety measures we took went way beyond CDC recommendations and included significantly upgrading our air filtration systems to include hospital-quality air filtration with HEPA filters. We engaged the clinical head of infectious disease at UCLA 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. There are increased cleaning and sanitizing protocols, CDC guidelines, and approved products that are baseline 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 had 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 for 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 million 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 eight weeks, sales were up to 90% of pre-COVID-19 levels. The consumer is shopping with a purpose, and there has been pent-up demand. Our Q2 was more about getting centers open and getting our tenants open safely and less about leasing. The focus in the Q3 is collecting past due 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 is a 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, most stores will be closed on Thanksgiving Day. With consumers not spending money on vacations and entertainment during COVID-19, most of our consumers in our markets have 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, with lots of social distancing. We got 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've increased property taxes on commercial property. It's known as Proposition 15. That proposition would've 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 vote shows Prop 15 passing. As of today, it is trailing. The yes votes stand at 48.7%. The no are at 51.3%. 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 third quarter. You'll hear some of the specifics from Doug. Although we are still in the midst of COVID, our centers are operating at 90% capacity, sales levels of 90% pre-COVID.
Even if you look at one of the more challenging categories, restaurants, in our portfolio, we have 247 restaurants, and 94% of those are open today. The Q2 was an extremely unique quarter, and some of the second quarter challenges carried into the third quarter and may even carry partially into the fourth quarter. 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 doubtful accounts was less than Q2 of 2020, but still much higher than normal. We expect to gradually improve to 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 Q2 and Q3 of 2020.
Now I'll turn it over to Scott.
Thank you, Tom. Disruption from COVID-19 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 is down 17%. Changes between the Q3 of 2020 versus the Q3 of 2019 were driven primarily by the following factors, and the numbers I'm going to quote are at share for the company. One, $21 million in bad debt allowance in the form of $14 million of increased bad debt expense versus the Q3 of 2019, coupled with $7 million of lease revenue reversed for tenants that are accounted for on a cash basis per GAAP within the Q3 . Two, over $29 million in short-term non-recurring rental assistance.
Three, a $9 million decline in common area and ancillary revenue as well as percentage rent. Four, a $4 million decline in parking income driven by protracted property closures and reduced parking utilization at our urban centers in New York City and Chicago primarily. Five, interest expense increased $4 million due to a decline in capitalized interest. Six, net operating income declined from the Hyatt Regency Hotel at Tysons Corner. It was about a $2 million decline. Seven, a negative $0.03 per share diluted impact from shares issued in the Q2 relating to our stock dividend issued in the Q2. These factors were all offset by increased lease termination income of $7 million and land sale gains totaling $11 million net impact. Revenue declines from occupancy loss also contributed to declines in both net operating income and FFO for this 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 of numerous retail tenants, 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 rejections, approximately half of which is already embedded within the 90.8% reported occupancy during the third quarter, and the balance of these stores will close within the Q4 .
Year to date, we have reported $57 million in additional bad debt reserves versus 2019, including $50 million of bad debt expenses and $7 million of lease revenue reversals for tenants accounted for on a cash basis. Similar levels of reserves are certainly not being anticipated going forward. We've recorded well over $20 million in non-recurring short-term rental assistance year to date. We expect those to continue into the Q4 of 2020. Lastly, we anticipate increases to transit revenue line items 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 Q3 and over 80% in October, liquidity continues to improve.
Cash on hand has increased from $573 million at June 30th to $630 million at September 30. 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 Herculean 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 improvements to operating cash flow throughout the year. We are closing on a 10-year, $95 million financing on Tysons Vita, the residential tower at Tysons Corner. The loan will have a fixed rate of 3.3% and will include interest-only payments during the entire loan term. This will provide approximately $47 million in liquidity to the company.
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 remain unchanged following that extension. We have agreed to terms with the loan servicer for a three-year extension on Fashion Outlets of Niagara Falls, which will extend the loan maturity through October of 2023. We expect the loan amount and interest rate also to remain unchanged following that extension. 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 Q2 , the 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 open pre-COVID is now open today. As I discussed on our last call, and has been the case in the third quarter, 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, as we look at our top 200 rent-paying retailers, we've either received full rent payment or secured executed documents with 147 and are in LOI with another 23. All of which totals approximately 93% of the total rent these top 200 pay.
Consequently, collections continue to improve. Third quarter saw an average collection rate of 80%. That's compared with 61% in the second quarter. As of today, as Tom mentioned, our collection rate for October stands at about 81%. The third quarter 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. Most importantly, the retailers began committing to new deals again, a true sign that for the first time in months, they're 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 Q3 metrics.
Pro-rated sales for the third quarter were $718 per square foot, that's computed to exclude the period of COVID closures for each tenant. The $718 is down from $800 per square foot at the end of the Q3 2019. For centers open 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 Q3 was 90.8%. That's down 50 basis points from last quarter and down 3% from a year ago. 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%. 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 one year ago. As I mentioned earlier, the leasing environment continues to improve. In the Q3 , we signed 120 leases for 342,000 square feet. This is over three 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 Outlet of Chicago, Jacadi Paris at Scottsdale Fashion Square, Kids Empire and State 48 Brewery at SanTan, Margaree's Grill at Danbury Fair, Starbucks at Fashion District Philadelphia, Madison Reed at 29th Street, Polestar 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 expirations and finalizing deals in order to secure as much expiring sq ft 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 sq ft, with another 67% in LOI stage. This brings our total leasing activity on 2021 expiring sq ft to just over 90%. Turning to openings in the Q3. We opened 44 new tenants in 276,000 sq ft, resulting in total annual rent of $11.3 million.
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 Outlets of Niagara Falls, Aerie at Vintage Faire, West Elm at La Encantada, and Golden Goose, Capital One Café, 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 at Wilton Mall, also in a former Sears store, the new and spectacular-looking Restoration Hardware Gallery at The Village at Corte Madera. All this was in the Q3 .
In October, we finished the repurposing of Sears at Deptford with the opening of Round1. Also in October, we remained active with Dick's Sporting Goods, opening them at Vintage Faire in a portion of Sears and at Danbury Fair in the former Forever 21 box. The digitally native and emerging brands continue to expand their omni-channel presence by opening stores. The third quarter was no exception. We opened Amazon 4-Star and Indochino at Scottsdale, two Warby Parker stores at Scottsdale and 29th Street, along with Amazon Books and Tempur-Pedic at Flatiron Crossing. 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 1.7 million sq ft for a total annual rent of $63 million.
Since the pandemic, only nine of these retailers with signed commitments have informed us that they won't be opening. Total impact of this is only 60,000 sq ft of the 1.7 million sq ft, and only $3 million of the $63 million 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. 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 aren't we talking more about conversion or sales or 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 Primark at Danbury, being the number one store in its region since reopening. Like Bath & Body Works at Freehold, beating last year's sales three months in a row with capacity limited to 50%. Like HomeGoods at Atlas Park, outperforming last year by 15%, while also at 50% capacity. Like Burlington reopening at Kings Plaza and selling through inventory it took a month to replace. Like Sephora at Broadway Plaza, which currently ranks as one of the top stores in the company by virtue of conversion rates that are 20%-30% higher than last year. Round1 at Deptford and Valley River, operating at full capacity with hour-long waits at night and on weekends. For our luxury retailers at Scottsdale Fashion Square, such as Gucci, Louis Vuitton, and Golden Goose, all exceeding plan by 25%-40%.
North Italia, a restaurant at La Encantada, back to pre-COVID sales, even at 50% occupancy. Tilly's at Arrowhead, who reported double-digit sales increases since reopening in May and is expecting their best holiday season ever at this location. 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 so one-dimensionally and focus on other metrics in addition to simply traffic. When we do, I think we'll all find that we are in a much better place than many think. With that, I'll turn it over to the operator to open up the call for Q&A.
Thank you. Please note we will be limiting the call to one hour today. We ask that you limit yourself to one question with one follow-up question. If you have more questions, please queue up again so that everyone has an opportunity to ask a question. If you're using speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, star one to ask a question. I'll pause a moment so that everyone has an opportunity to signal for questions. We will go to that first question from Craig Smith 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 2020, or has this limited their ability to restock?
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. 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 were in pretty good position both in terms of inventory and employees, because most of the employees had been furloughed. Given the generous unemployment benefits, a lot of them found difficulty in getting their employees back. They did, and most of them are fully staffed and ready for the holiday season.
Great. My follow-up, is Macerich fully liable for all the debt and guarantees at Fashion District Philadelphia?
No, Craig, that's a loan that is a several loan, so it's 10 REIT, half the obligation is Macerich.
Okay. Thank you.
Thanks. We'll move to our next question from Mike Mueller of JP Morgan.
Yeah, hi. 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?
Doug, why don't you take that one?
I'm sorry. Could you repeat the question, please?
Yeah. For the leasing activity for 2021 that you walked through, what are the rent spreads on that?
Scott, feel free to jump in.
The spreads are included in the spreads we report.
Right.
Yeah. Mike, good morning. It's the hazards of a call when we're all separated here. Time's got a bug, so apologies.
No problem.
We haven't completed the spreads. I would say this, though. We're using this as an opportunity to get in front of our 2021 expiries. Our largest focus right now is occupancy. Occupancy is critical. Certainly more critical than the final dollar of rate. As a result of some of the declines in occupancy, I would expect perhaps our spreads to paper a bit. 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 of rate, very similar to what we did about 10 years ago coming out of the recession, proved actually to be a very good strategy.
These renewals, I would say, are going to err on the side of being shorter rather than longer to give us an opportunity to reprice when the environment is better a couple years from now.
Got it.
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 spread. I think last quarter we were 7%, third quarter we were 5%. 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 the spreads that we reported in the Q2 and Q3 .
Got it. A follow-up. Can you talk about how strong the tenant interest is in that activity when you look at your top quartile of the portfolio compared to the bottom three quarters of it?
I can take that, Mike. When the pandemic shut down the malls, our business really came to a screeching halt. 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. 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. It's interesting, our top, I think you mentioned our top quartile. Our top 20 properties have normally been from 16 or 17, 95%, 96% leased, and now we've seen them 92%, 93% leased. 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.
That's really piqued the interest of some of these retailers that want to be opportunistic. Those that went into the pandemic with strong balance sheets, 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.
We'll go to our next question with Floris van Dijkum of Compass Point.
Hi. Hey, guys. Thanks for taking my question. I wanted to get a sense of how your Q3 billable rents compared to your Q1 billable rents, so the market could get a sense of what is the run rate in NOI and how much has it declined. Presumably with the leasing activity that you guys are talking about. You're setting yourself up for some increase off that base. If you can give some more color on that would be great.
Floris. Hi, good morning. I don't have that figure handy. We can perhaps follow up offline, but I will say that the billing rate in the Q3 is down a bit relative to the Q1 , as one can imagine. You've got some short-term rental concessions that expire at the end of the Q3 , primarily with locals and some challenged categories. You've had some closures as a result of the bankruptcy. Certainly that has reduced the billable rate in the Q3 relative to the Q1 pre-pandemic. I do not have that factor in front of me.
Okay, maybe we can follow up offline. My follow-up question may be, has your pitch to tenants changed as a result of the pandemic in terms of getting them signing up to your assets, or how have you changed the positioning of your assets as a result of this?
Hey, Floris, 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's 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. Our philosophy of town centers and creating such hasn't changed a bit.
Great.
We'll move to our next question, which comes from Michael Bilerman of Citi.
Hey, it's Michael Bilerman here with Keith and Connell. Tom, I was wondering if you can spend some time talking about leverage levels. 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 Tysons on the resident complex. It sounds like you're doing the same for Flatiron and Green Acres. The overall leverage level of the company remains quite high. How are you thinking about addressing that element in terms of raising some additional equity capital, either through sales, maybe taking back keys of assets that may be over-leveraged? 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. Now isn't a particularly good time to be raising capital to de-lever. That'll change. We saw it change in 2009 and 2010, and that'll happen again. The same will happen with appetite for assets. As you recall, we sold 25 malls coming out of the financial crisis, starting in 2011, generated about a billion and a half of liquidity. 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 forecast at the beginning of the year, it's significantly in excess of the current dividend level.
That ought to allow us a fair amount of cash flow from operations to use in the near term for de-levering, and that would be the play.
If you could give an update on the line of credit which you extended this past July. You used your one-year extension to push it out 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 $1.5 billion of proceeds as you look to refinance that? 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 the last part of that, and then you can elaborate, Scott. As you indicated, 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. This will be the seventh time we've recast that line of credit. Those discussions are early on. It's too early to tell you what the terms would look like and the overall amounts. 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.
That's early 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.
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 watchlist with occupancy down 300 basis points as of 3Q, but then you talked about leasing progress combined with the watchlist. What does that mean for your future occupancy expectations?
Hi, Caitlin. Well, as Scott mentioned, I think in his remarks, we had an acceleration of our watchlist into bankruptcy as a result of COVID. Bankruptcies, tenants that failures or reorgs that would have happened over the course of the next two or three years happened in the course of the last eight months. Frankly, our watchlist is pretty short. Obviously, the tenants that are in reorg right now, we keep an eye on them. Most of them, as Scott indicated, were not liquidations, but reorgs. 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. The watchlist is actually fairly short today as a result of COVID. Doug, do you want to elaborate further on that?
I'm sorry?
Doug, you care to elaborate further on the watchlist?
I think Tom, you were 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 six or seven weren't on our watchlist, which means two things. We keep a pretty good watchlist, the fact that so many of them weren't on it means our watchlist has decreased significantly, similar to what Tom said.
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 covered the full $800 million that we talked about on the last quarter. There was also another 19 malls that were discussed last quarter that were in forbearance. Can you just give us an update on the forbearance process, and if it's still 19 malls, has that shrunk, has that increased?
Yeah, sure, Alex. Scott here. As I mentioned in my opening remarks, we have either closed or secured terms on two of our five near-term secured maturities. Still working on Flatiron, Green Acres Mall, Green Acres Commons. 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 Green Acres Commons, are high quality, institutional-quality assets. I think we'll be successful on those as well. The 19 assets that you mentioned, simply we agreed on end-of-deferral arrangements. They're not in forbearance. It was a very amicable process with the loan servicers or with the balance sheet lenders to agree to defer debt service payments.
We do have extensive disclosures in the Q, which cover how long those lasted and what the repayment periods are. Now that we're in November, I believe we have about two or three months worth of remaining, I'll call it catch-up debt service deferral payments to make through the Q1 of 2021. Very amicable process.
Okay. Scott, just so I make sure I understand you. those 19 assets that went forbearance, basically you got, and we'll see when Q 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. All of those deferrals were during the summer months, and we're now repaying that debt service. Those repayments, Alex, will extend into the Q1 of 2025.
Okay.
Generally, they were two-month agreements where we were able to defer debt service payments for two months, and then generally they repaid either late in the fourth quarter or in the Q1 of 2021.
Okay. Just Tom, going back to the dividend. The amount that you're paying right now, is that taxable income driven? Right now you don't need to pay a dividend for tax purposes?
Well, you always need a 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.
Okay. That's based on the $0.15 is where your taxable income is currently.
No, it's an annual number, Alex. You'll recall we had higher dividends in the H1 of the year, so it's not quite that simple. Yeah, we consider taxable income when we make our dividend payments.
Got it. 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. Yeah. You've got to pay out 90% of your taxable income. That's a fundamental premise of that all REITs have to follow.
Okay. Thank you, Tom.
We'll go to our next question from Todd Thomas with KeyBanc Capital Markets.
Hi there. This is Ravi Vaidya 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?
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, Bed Bath & Beyond boxes. We also did a deal with a hospital at one of our Sears boxes we replaced with a hospital at Wilton Mall in New York. There's a lot of uses. In some cases, we'll be knocking down the empty department store and building multifamily. That's going to be the case in Los Cerritos. In Washington Square, we'll also knock down the Sears box and replace that with a hotel and entertainment complex. There's a lot of demand in the big format. It also will go non-retail. It'll go non-traditional retail, could go multifamily.
We've done a lot of hotel deals, and it's just repurposing the square footage and eliminating a certain amount of retail.
Yeah. Thank you.
We'll move to our next question from Greg McGinniss of Scotiabank.
Hello, good morning. I think that minimum rents in the consolidated portfolio were down 9% from last quarter. Can you just help us understand the drivers of that change and what the expectation might be on any additional adjustments we anticipate heading into Q4?
Yeah, 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 had been reversed for tenants on a cash basis. That is a component. We did grant some short-term, non-recurring rental assistance, primarily to local, and I'd say challenged categories. That was a factor. Then, of course, we reported occupancy down roughly 3% from a year ago, and certainly that was a factor quarter-over-quarter. All of that factors 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 accrual basis accounting. 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 open, or excuse me, closed, either for a second time or closed for a very protracted period of time through the third quarter. We may deal with a little bit of that there. Certainly, the occupancy impacts that we're reporting on will carry into the fourth quarter. Like I said, I think the operating results in the Q4 will continue to feel the impacts of COVID.
Okay. Just trying to think about these recurring revenues a bit more, just for clarity on two other items. First is on the term fees. Curious if that was associated with any large tenant in particular or just across the portfolio, and then kind of what to expect from that number heading into Q4. Second, on the land sale, was that flowing through the income statement or just on FFO?
Sure. On the terminate, I don't want to get specific with certain tenants. I would expect in a heightened kind of volatility that the term fees will continue to remain elevated. You think in prior moments in history where we've had heightened volatility, sometimes tenants want to buy out of their lease obligation. It's an opportunity effectively for us to secure a nice termination fee and then be able to backfill and effectively profit off that backfill. 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 flow through the P&L in terms of FFO. As I mentioned, it was roughly $11 million after accruing for the tax provision.
Okay. It wasn't flowing through other income or gains on the income statement for net income?
That's correct. Yes. It was below the line. Mm-hmm.
Great. Thanks.
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 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-19. I'm also wondering if you could speak to maybe conversion rates at the overall mall itself and some of the inline tenants and trends that you might be seeing there.
Hey, Tom, I can take that. 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. 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. That's what we're seeing, whether it's in traditional retail, luxury or otherwise, we'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. Hey, Scott, one question for you. I think a lot of us would applaud a guide in the next quarter. I'm curious, what do you think is going to happen over the next several months that would give you the confidence to guide for the full -year 2021, but maybe be a little bit reluctant to guide for Q4? Look, I'm not questioning why you're not guiding for Q4. I'm more curious, what's going to change over the next three months that 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. 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, the 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.
Well, I think where we're at today, of our top 200 retailers, we've come to terms with 90%-plus of those. The balance of them, that's going to happen in the fourth quarter. That's creating some of the uncertainty in the Q4 that we don't think is going to carry over to 2021. With each passing month, I think the retailers get more comfortable as they move through COVID, looking forward to the post-COVID era. I think we'll be in a much better position 90 days from today to give guidance than we are today. In the COVID world, 90 days seems like an eternity, and we learn more, we know a lot more than we did even when we did our last earnings call. I think that's going to put us in position by January to be able to do it.
That's really helpful, Tom, I echo your comment that three months feels like an eternity. Sometimes a week feels like an eternity. Thank you. The comments on the cadence was really helpful. Thanks, guys.
You bet, Rich.
We'll go to Linda Tsai of Jefferies.
Hi. I just wanted to turn to leasing. What tenant categories are looking to expand?
Hey, Linda, it's Doug. We're seeing it across the board. There's a lot going on in the traditional retailer environment. Just some examples. American Eagle has 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, three test stores this year. 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.Crew's Madewell also. That list goes on.
Thanks. Then I was wondering if you share any of the same lenders with two of your lower quality counterparts who recently filed, and if 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. I was just asking if you possibly shared any of the same lenders with two of your lower quality counterparts who recently filed, and if you maybe had a sense of what might have driven the decision to default those companies?
Is that shared lenders? Was that your question?
Yeah.
Yeah. We do. It's a relatively small group of REIT unsecured lenders. I don't really want to speak for either of them. Obviously, we're partnering with PREIT, and we're very well informed as they went through the process. I think if you read the public filings, they had support of 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 said they expect to be in and out of bankruptcy very, very quickly. I'll defer to them. Yeah, we know a lot of the lenders they have, and we know a lot of them, and I think they're the ones that were supportive of PREIT.
Thanks for that. Just one follow-up. The denominator for collections in 2Q, 3Q, and October, did that change at all?
The definition?
Yeah.
Linda, we treated the collections consistently as we moved forward. The way we treated 2Q collections is no different today than it was 90 days ago.
Okay, thanks.
At this time, I would like to turn the call back over to Tom O'Hern for any additional or closing comments. Please go ahead, Mr. O'Hern.
I'm sorry. Thanks, everyone, for joining us today. We hope to see many of you virtually at NAREIT in a few weeks. Until then, take care.
This concludes today's call. Thank you for your participation, and you may now disconnect.