Rithm Property Trust Inc (RPT) 2020 Q1 法說會逐字稿

Greetings, and welcome to RPT Realty First Quarter 2020 Earnings Conference Call.

(Operator Instructions) Please note, this conference call is being recorded.

I would now like to turn the conference over to your host, Vincent Chao.

Thank you.

You may begin.

Good morning, and thank you for joining us for RPT's First Quarter 2020 Earnings Conference Call.

At this time, management would like me to inform you that certain statements made during this conference call which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Additionally, statements made during the call are made as of the date of this call.

Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made.

Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, factors and risks could cause actual results to differ from expectations.

Certain of these factors are described as risk factors in our annual report on Form 10-K and quarterly report on Form 10-Q for the first quarter 2020.

Certain of these statements made on today's call also involve non-GAAP financial measures.

Listeners are directed to our first quarter press release, which includes definitions of those non-GAAP measures and reconciliations to the nearest GAAP measures and which is available on our website in the Investors section.

I would now like to turn the call over to President and CEO, Brian Harper; and CFO, Mike Fitzmaurice, for their opening remarks, after which we will open the call for questions.

Good morning and thank you for joining our first quarter 2020 conference call.

I'd like to start by thanking all the frontline workers helping us all get through this unprecedented period in time: our employees, who are working tirelessly to ensure that our centers are safe, operational and ready for the reopening of the economy; our tenants, who are doing everything they can to continue to support their customers despite widespread store closures; and to our investors, lenders and vendors, who are taking a pragmatic view of the situation to ensure that we can all prosper coming out of this pandemic.

Ultimately, our success through the pandemic lies in ample liquidity, excellence in operations, business continuity and a strategic outlook for the future.

These 4 principles have driven what we have done and will continue to do throughout this pandemic and in the post-pandemic environment.

Led by an operationally hands-on, proactive, motivated and crisis-tested management team, we sit in a position of relative strength following a 2-year transformation of our organization, our predominantly grocery-anchored and value-orientated portfolio and our flexible balance sheet.

Combined with recent actions, we believe that RPT will be able to weather the current storm and thrive once it passes.

Regarding our financial liquidity, we took a number of quick and decisive steps when the severity of the pandemic became apparent, which we described in our earnings release and our COVID-19 update from late March.

In short, the actions we took increased our cash to over $320 million at the end of the first quarter, which should allow us to weather the downturn created by COVID-19.

Looking forward to better align expenses with the current revenue stream, we made the difficult decision to reduce some of the development functions and temporarily reduce executive officer cash salaries as detailed in the earnings release.

As a management team, we see tremendous opportunity ahead and are in this for the long haul, and we felt that the salary adjustments were a proactive step that created alignment with our employees and our shareholders.

Combined, we expect to save about $1 million in cash from these actions.

Lastly, the Board recently made the decision to temporarily suspend the quarterly common dividend, preserving roughly $18 million per quarter.

No decisions regarding dividend payments beyond second quarter 2020 have been made.

Future dividend decisions will be made based on liquidity needs and REIT taxable income distribution requirements.

Management and the Board did not take the decision to suspend the dividend lightly, and we are committed to providing investors with a healthy and sustainable dividend as cash flow visibility improves and the longer-term impacts of COVID-19 are more apparent.

Currently, all 49 of our properties are open and operational.

As of May 7, 53% of our tenants by ABR are open.

As of May 8, we collected 58% of April rent and reimbursements largely from open tenants.

Of our top 25 tenants based on ABR, over 86% have paid or have agreed in principle to some form of short-term deferment.

The majority of April uncollected rent was tied to the nonessential and experiential tenant categories, with whom we are in active conversations with.

Not surprisingly, these categories comprise the vast majority of our rent relief requests that we have received to date.

In terms of May collections, it is too early to comment given the fluidity of tenant negotiations.

While the segmenting of our portfolio has importance and provides transparency into our business, the single best predictor of collections remains whether or not the store is open for business.

As such, we are encouraged that some states have begun to lift lockdown orders, allowing more tenants to reopen their doors.

That said, every tenant has different circumstances.

Each rent deferment negotiation has different considerations, and there are still elements of uncertainty in all cases given the rapidly changing health environment we are experiencing today.

In order for us to clearly evaluate our cash flows by risk level, we have classified our tenants into 4 tiers based on our assessment of their ability to pay rent near term and the sustainability of their rent payments long term.

In tier 1 are tenants who have both good long-term business models and have largely been able to remain open through the pandemic.

These include essential businesses as well as QSR and fast casual restaurants who remain open, even if only a takeout, drive-through or delivery basis.

87.9% of this tier remains open and 83.9% paid April rent as of May 8.

In tier 2 are tenants with solid long-term business models and good balance sheets pre-COVID but that sell more discretionary items.

The discount apparel retailers like T.J. Maxx and Ross fall into this category, along with other investment-grade quality tenants not included in tier 1. Our tier 2 tenants paid 78.7% of April rent, but only 27.2% by ABR were open in April.

Tier 3 tenants offer more commodity-like products like full-line apparel and accessories.

And tier 4 tenants are more experiential in nature, including full-service restaurants and in many cases were key drivers of traffic pre-pandemic.

Collectively, tier 3 and tier 4 tenants paid 36.1% of April rent, and 35.6% by ABR remained open.

Turning now to tenant negotiations.

I would characterize our approach as firm but fair.

Our size is an advantage right now as our top executives are directly involved in negotiations.

We understand that many of our tenants are in an extremely difficult position relative to their businesses and sales channels being turned off overnight.

We are working in good faith with them to get through the current turmoil in a way that both the tenant and landlord can be successful beyond the crisis.

To assist our tenants, we started the RPT Tenant Concierge Service to support our small business partners in gaining access to various government assistance programs by hosting educational webinars and providing and paying for direct access to legal resources.

Of the 275 tenants that we targeted, nearly 2/3 have told us they applied for the PPP loan.

Application for an SBA loan for eligible tenants is a prerequisite for consideration of any form of deferral.

That said, let me be clear.

While we are empathetic to our tenants' current situations, we are actively pursuing collections and we'll pursue all remedies where we believe tenants have the capacity to pay rent.

What we are not doing is sacrificing long-term cash flow just for short-term April-May rent gain.

April rent is still coming in, and as I said earlier, we will continue to pursue collections aggressively.

Getting through this will take the collective efforts of the entire ecosystem.

There is no place for bad actors.

For our part, we continue to service our debt, to pay our real estate taxes and insurance and are maintaining the assets to operate safely during the mandated shutdowns while preparing for the reopening of the economy.

As we negotiate any form of rent relief, we are using our tiering process to guide our decision-making process and focus on deferrals to support tenants in need while granting rent relief abatements judiciously.

To this point, while only 127 rent relief requests have been approved, 121 have been in the form of deferrals, totaling $3.8 million, and only 6 abatements have been granted, totaling less than $71,000.

Typical deferral terms call for repayment by the end of 2020 and range from 1 to 3 months.

Please know that neither deferrals nor abatements are being granted for free, and we are using them as currency to improve lease terms that will add significant value down the road.

Some examples include cleaning up co-tenancy clauses, eliminating no builds and extending term to name a few.

We have proven to be exceptional on the operational side of the business, and we'll navigate this storm through that exact same lens.

Although much of this focus has been on who is not paying rent, I think it's important to keep in mind that the pandemic is also highlighting the importance of key tenant categories and specifically the grocery channel.

We are seeing incredible demand at our nongrocery-anchored centers from grocers and are currently in negotiations with 7 top tier grocers at nongrocery-anchored centers in our portfolio.

And we'll improve the durability of cash flows at these centers if closed and increase the number of our centers with a grocer or grocery component by 14%.

Turning now to RPT's response to the pandemic at the organizational and community levels, which I believe is a strong reflection of the caliber and quality of the company.

At the organizational level, we responded quickly and definitively in response to what was a rapidly escalating situation.

To ensure the safety and health of our employees and to provide uninterrupted service to our tenants, we shut down our New York office in early March, followed shortly by the closing of our Michigan office.

Our employees have now been working safely and efficiently from home for almost 10 weeks.

About a year ago, we established an optional work-from-home day program, which made the transition to a full work-from-home environment quite smooth.

Our technology, tools and processes allowed us to rapidly evolve with the situation real-time and with limited disruption.

While we are all looking forward to the day we can return to the office, we are prepared and ready to continue to work remotely as long as it takes to ensure the health and safety of our people.

In addition to our work-from-home programs, we have also been working diligently to protect the ongoing health and well-being of our employees through weekly wellness e-mails, COVID-related seminars and weekly company-wide virtual happy hours.

At the tenant and community level, RPT has been actively engaging with and supporting both our tenants and those on the frontlines of the pandemic.

To date, we have donated over 20,000 meals to support school lunch programs, at-risk populations, essential workers and nursing home employees and local communities.

We have also matched employee contributions to support hospital workers and volunteers.

In anticipation and preparation of the reopening of many of our tenants in the coming weeks, we have developed plans for several key initiatives at our shopping centers to keep customers and tenants safe.

Some examples of how we have and are preparing for the reopening of the economy are summarized in our press release but include things like adding nearly 4 miles worth of social distancing floor markers, curbside pickup, distributing over 120,000 masks and increasing health and safety protocol signage at our centers.

The current health crisis has caused us to reshape our business plans quickly and to refocus our efforts in the near term.

Our response to the pandemic has been focused on the health and safety of our employees and their families, our tenants and our shopping center customers, maintaining business continuity during and after the pandemic and increasing liquidity to withstand the near-term financial impact of the health crisis while positioning the company for long-term success after the crisis passes.

Though the pandemic is having a profound impact on how we think about the business, we remain confident that at its core, the value and service-orientated as well as the grocery-anchored shopping center model is one that will stand the test of time as we all seek out common ground upon which to gather, experience life and, yes, shop.

With that, I will turn the call over to Mike.

Thanks, Brian, and good morning, everyone.

Over the last several weeks since the pandemic gained force, many of our key decisions have been through the land of liquidity.

Our goal is simple: focus on what you can control and prepare for what you can act.

As we outlined in our earnings release last night in detail, since the pandemic started, we have taken actions that are expected to supplement our cash position in 2020 by at least $380 million relative to our pre-pandemic plan.

A significant contributor to this was our recent borrowings on our line of credit.

Out of abundance of caution and after analyzing our potential cash needs, we drew down $225 million from our line during the quarter, bringing our total cash position to over $320 million at the end of March.

Based on all the steps we have taken over the last 2 years to solidify our balance sheet, we are fortunate to not have any debt maturing in 2020, only $37 million maturing in '21 and just $53 million in '22.

If our cash collections remained at the April level of 58%, we would be able to fund our ongoing operations without utilizing much of our cash on hand.

Our breakeven cash collection rate is roughly 61%.

In short, we believe we have more than enough liquidity to withstand the impacts of COVID-19 despite the severity of the situation.

While we have no material use for cash today, we will continue to balance our future cash needs and debt covenant compliance requirements to ensure we have optimal liquidity and flexibility to operate our business.

It is also important to note that 46 of our 49 properties are unencumbered, providing us with the optimal operational flexibility to make decisions quickly without the burden of servicers or lenders.

Quickly on our first quarter results.

Operating FFO for the first quarter was $0.26 per share, which was in line with our internal projections.

During the quarter, we recognized about $800,000 in costs related to the suspension of our acquisition and disposition program, which have been excluded from operating FFO as they are nonrecurring in nature.

Same-property NOI growth for the first quarter 2020 was 2.3%, which included 120 basis point drag from rent not probable of collection, reflecting the initial impact from COVID-19 attributable to a conservative approach we took with an entertainment tenant that had a substantial open AR balance that we deemed uncollectible.

Absent this, same-property NOI growth for the quarter was in line with our expectations.

We ended the quarter at an occupancy rate of 93.3%, down 100 basis points sequentially given typical seasonality and the recapture of an expected anchor space but up 150 basis points year-over-year.

On the leasing front, volume faltered in early March due to COVID-19, impacting our new lease volume.

As a result, we had a much higher mix of renewal activity during the quarter.

In total, we signed 46 leases comprised of 558,000 square feet, of which 60,000 square feet were new leases and 498,000 were renewal leases.

We experienced blended re-leasing spreads of 6.2% on 36 comparable leases, including a 6.2% renewal spread and a 5.2% new lease spread.

Turning now to our outlook for the remainder of the year.

In late March, we pulled our 2020 guidance given the lack of visibility created by the coronavirus.

While we are not reintroducing guidance today, we wanted to provide some additional points to think about as you attempt to model the balance of the year relative to our previously provided guidance.

We ended the quarter with signed not open ABR of about $2.1 million.

Despite the pandemic, we have been able to continue most of our construction activities associated with these leases.

While we have seen a slight delay with rent commencement dates, we expect the rents to commence over the next 12 months.

Regarding near-term rent expirations, we only have 3.4% of our ABR expiring over the balance of 2020, mitigating some near-term tenant retention risk.

From a capital perspective, we have only $14 million of remaining committed capital spend in 2020, of which $11 million is related to our signed not open backlog and residual capital to recently opened tenants, with the balance largely related to essential maintenance capital.

Turning to the common dividend.

As Brian mentioned, once the dust settles from the current disruption and longer-term implications for the market become more clear, subject to Board approval, we expect to reinstitute a sustainable dividend that will again provide a stable income stream for our investors.

Extrapolating the $18 million per quarter common dividend we were paying would equate to $54 million in potential capital preservation through the next 3 quarters.

Lastly, in the spirit of transparency, it's worth noting that we provided additional details on our tiers that Brian discussed earlier, in addition to more information on our merchandising mix and performance as it pertains to rent collections in our quarterly investor deck posted on our website.

And with that, I'll turn the call back to the operator and open the line for questions.

(Operator Instructions) Our first question comes from Derek Johnston with Deutsche Bank.

Can you give us an update on capital sources and uses, especially as it relates to the GIC JV?

I do think the original plan was to partner with them on acquisitions.

So we were curious as to whether their appetite for retail real estate has changed since the pandemic.

And then second part of this question is the $200 million capital commitment from their end, has that been funded?

Or what was the time line for that?

Thanks, Derek.

Great to hear your voice.

We're greatly excited about the GIC partnership.

The time line of that is we have 3 years from December 2019 when the JV closed to deploy that capital.

To say the least, we have a strong relationship with them and view the grocery sector, the grocery channel through the same lens as they do.

I can tell you from an acquisitions perspective, it's much too early, but we expect to see a lot of opportunities with dislocations and pricing.

And to say the least, this is a very unique relationship among our peer set, which gives us a major strategic advantage when the timing is right.

Right now, it's liquidity, liquidity, liquidity, but that will serve us well near term and be a differentiator for opportunistic opportunities in the future.

Capital commitment, it was being funded acquisition by acquisition, so there’s no funding, but it's funded as an -- on an as-needed basis prior to closing of each assets.

Okay.

Got it.

And then, of course, the dividend suspension, it's no secret.

I feel The Street maybe viewed the coverage as stretched for a time there.

So given where the portfolio is at today, could the suspension perhaps last for a few quarters longer as you guys maybe work to shore up capital and further reduce leverage?

And then the second part of the question would be, how much more do you guys have to pay out after the first quarter distribution to satisfy REIT reporting requirements?

Thanks.

Let me take the first part and Mike can answer the second.

We believe, first and foremost, that paying a sustainable dividend level is important.

And we are -- we were well on our way to covering our dividend before this pandemic hit.

I mean you look at last year and sector leading with 4%-plus same-store NOI.

And take out COVID, this would have been north of a 3% NOI quarter, and we're well on our way to coverage.

With that being said, we're in this situation.

So once the dust settles from the current disruption and longer-term implications of the market become much more clear, and obviously, subject to Board approval, we expect to reinstitute a sustainable dividend that will again provide a stable income stream for our investors.

The timing of such remains to be seen and again is subject to Board approval.

When we do reinstate a quarterly dividend, it will be sized appropriately to meet our REIT distribution requirements and at a level that is sustainable and can grow in conjunctions with our earnings growth.

As far as any sort of catch-up payment, that will be a Board decision at the time we reinstate.

But unlike the preferred dividend, there is no required catch-up payment with that.

So Mike, you want to touch upon leverage and the taxable?

Yes.

Sure.

As far as taxable income goes, Derek, at this point, it's a bit too early to know what our taxable income requirement will be for 2020.

What I can tell you is that our taxable income in '19 was approximately $34 million, and we have paid out approximately $20 million in distributions thus far in 2020.

And based on this information, it gives you some sense of possibilities for taxable income in 2020 and potential remaining distributions to meet our taxable income requirements for this year.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

Brian, maybe for Mike also, you mentioned it's early in May in terms of rent collections.

Can you just share any detail on May, either directionally or how collections are tracked when compared to April at this time?

And then there seems to be a fairly strong correlation between open and rent payment, which makes sense.

Do you know what the reopening time lines look like across the portfolio?

Maybe how much ABR might be opened by, say, June 1 or July 1 based on the plans retailers are discussing with you?

Let me take the first question from May.

It's too fluid.

It's about on track from April, from a month-over-month right now.

But it's much too fluid.

And we're still getting April rent.

That's probably as we speak right now.

But with that said, we have a very, very detailed approach to our collections and have a task team assigned, and myself even included talking with a number of C-suite level executives on the retailer side.

So I do think that's an advantage.

As I said in my prepared remarks, that our size is an advantage where we get to -- myself and Tim and others on the leasing team, David Roth, get to speak with these retailers face-to-face and work out something that is a win-win for both.

As far as opening up, I do feel bullish that more rent will be coming in just based on the geography that we have, where you look at our concentration in Michigan, that's mostly opening up May 15.

Georgia just opened up.

Tennessee opened up.

Texas opened up.

Colorado opened up.

St.

Louis opened up.

So really, with the exception of Chicago, we're on a pretty good geographic footprint with no concentration of the Northeast or California or the Pacific Northwest, where opening is going to be a little later.

Retailers are opening by what they feel comfortable.

Much more of the nationals have been doing the curbside pickups and are much more aggressive with opening than the regionals and locals.

But that being said, the Floridas and Georgias of the world, we're seeing a good uptick with communication and we're seeing good uptick with people planning for opening.

Two, we have a whole planned opening practice with best case practices and procedures from CDC and others from a local municipality.

So we're there to help them, and our asset management team has done an unbelievable job in this assist.

Okay.

And then you talked about the sort of balance or the ability of tenants to pay rent, both near term but also long term.

How are you thinking about future rents for restaurants, theaters, maybe fitness or other tenants that might operate at reduced levels going forward?

How are you approaching those discussions?

Well, I mean, we're being calm and steady with that approach.

And that is in the tier 4 category of what we described as being much more empathetic to their businesses where those were pure government shutdowns.

So in the restaurants, it's a case-by-case basis.

I mean we look at sales pre-COVID and look at their occupancy costs, try to guess their occupancy costs going forward.

So it -- literally, we're in the details of case-by-case for each restaurant.

Thankfully, we have a lot of QSRs who are open with drive-through restaurants and fast casuals as well.

And then our sitdowns and fine dining who will probably be around 25% occupancy for the near term for the next 60 days and then get uplifted based on state orders or state mandates, let's say, go on.

That's something that we're walking hand-in-hand with them.

Theater is the same bucket.

And then the same thing with fitness.

LA Fitness is one of our top 20 tenant.

We're in great dialogue with them, and they have a great plan in place with social distancing, turning their gyms into more of cardio rooms to have more space.

So that category, we're in constant dialogue with, and it's a case-by-case basis based on the states but based on the operator as well.

Okay.

And then just lastly, so the 7 grocers deals that you commented on that you're negotiating, I'd imagine that there is an urgency for grocers to open and expand their footprints during this time.

Are these lease discussions that might advance in the near term to lease signing?

And do you have space available to accommodate those grocers today?

And what do restrictions look like across the portfolio at centers where you already have a primary grocer?

Are there still opportunities for you to expand grocers or specialty food stores at those centers as well?

Yes.

I mean we're in a grocery renaissance.

It's unbelievable, the amount of demand, and I haven't seen this in my career.

And really early on, we, with the leasing team, talked with grocers, talked with our existing and talked with new and saw this as an opportunity to get in front of this pretty quick and saw that as a channel for growth for them but for growth for us internally as well.

So the LOIs or leases, I am optimistic that it could turn pretty quick.

A few were vacant boxes.

There's one that would be a combination of spaces and relos identified.

But Todd, these are top-tier grocers, household names, strong balance sheets and voids in markets that they want to be in.

And that's another reason that I like the portfolio where we're at today.

We're in the top 40, top 50 markets and don't have any of the tertiary exposure.

So I think that's another reason why I think some of these grocers have really been active with us is down to the real estate.

And we have a plan for every asset that's not grocer.

And some have leasehold encumbrances to -- that we can't get out of.

But if a tenant falls in default or a tenant falls in bankruptcy and we see a way to get some of that real estate where we know we have a ABC Grocer, Whole Foods or Trader Joe's, in our back pocket, that's just more of a reason to actively negotiate or remedies for that location.

Our next question comes from Collin Mings with Raymond James.

I just wanted to go back to Derek's question and -- as far as GIC, and you mentioned the 3-year time line.

But can you maybe just expand on what you'll look for to shift the focus back towards growth versus clearly the focus right now on liquidity?

And then as you think about deploying capital, either in conjunction with GIC or for RPT, how do you think about the potential to look at more distressed opportunities that might emerge as opposed to focusing on properties with arguably more durable cash flows?

Yes.

Thanks for the question.

I mean really with GIC, the JV was structured for grocery and from that channel specifically.

And nothing has really changed.

We're looking from the same markets, the same pro business, pro growth markets.

We'll continue to pursue those markets as part of the strategy.

Austin is thriving with our Lakehills acquisition.

It was actually #1 in our April rent collection out of the entire portfolio.

So we feel really good about that market and know that market well, having spent the last year of knocking on doors and meeting with private owners.

And the opportunistic side of it versus durable cash flow, I think we'll look at both.

We're looking at driving, as we've always been, we've been a bottom-up IRR company, period.

And if we can get strong IRRs and secured IRRs from durable cash flows at a higher yield, we'll take that.

If we look at opportunistic assets where we know that real estate really well, and as I said earlier, we have very strong grocery relationships and we know a Amazon or a Whole Foods or a Trader Joe's wants to be in that market at that intersection, we could take down an opportunistic asset as well.

So I think the GIC relationship is something that I'm greatly excited about.

And thankfully, it happened at the time it did.

And I think that that's going to be a very, very bright future for the company.

Okay.

And then switching gears, I just wanted to talk a little bit more about in recognizing, clearly, you're in a good position as far as flexibility going forward in terms of not having any major commitments on the redevelopment or development front.

But just as you think about the physical layout of your properties and as you think about potential redevelopment opportunities going forward, just maybe touch on how you plan to maybe shift some things around or think about things differently in light of maybe social distancing being here for longer.

Yes.

So I mean we're really thankful we have $0 from a redevelopment perspective.

And I started pulling that lever back, as you know, 8 months ago just based on where we were in the cycle and really reallocating that capital for what would be called development into our remerchandising strategy where we're getting 18% yields.

So we like that box program and specifically like that mid- to high-teens yield, obviously, but we also are looking at what does the shopping center look like.

While it's too early, personally, I see it as having 2 front doors today, one within the store and then one outside the store, and that's curbside.

So we are putting resources into our curbside program.

We are putting resources into analytics with video and to know capacity within the stores, capacity within outside patios, capacity within their parking lots.

And we've done a huge implementation of social distancing measures already that are at our centers today with social distance yards and other things.

So it's too early to say what else, Collin, but I think one thing we've proven is we're very operational savvy and we're proactive.

And so I think the liquidity that we have today is enormous, and we're very thankful for that.

And it's going to prove out to be another differentiator amongst our peers, where we can play offense but we can also play reactive on where this COVID response is coming.

Our next question comes from Craig Schmidt with Bank of America.

I was wondering if you knew to what extent the off-price retailers, T.J., Ross and Burlington, are open.

And then, I mean, it seems like they have a real opportunity in terms of sourcing, could be very opportunistic.

But how do they balance that with the treasure hunt approach of shopping there, which seems to be at odds with the social distancing?

It's a good question.

So we think we think there's going to be a grocery renaissance and we think there's going to be an off-price renaissance as well.

And you look at the department store channel and T.J., Ross, Nordstrom Rack, Burlington, Saks OFF 5TH, they're going to be able to be buying inventory for pennies on the dollar, and we see that as a huge strength.

What they're going to do within the 4 walls of the treasure hunt remains to be seen.

That being said, T.J., in particular, we see them as one of the greatest retailers in the world, and they've proven to provide growth year-after-year.

So with those smart minds, I think they'll figure it out.

When they're opening, it all depends on geography.

So we're in constant dialogue, and I do expect some of them to be opening here in May and in certain states.

And then for pretty much all the states, hopefully, in early June.

And Craig, the only thing I would add there that 90% of our discount apparel did pay April rent and only 3% were open in the month of April.

Okay.

And so I'm just curious, are there any off-price operators open in Texas?

I mean from an apparel, we don't have any apparel at that center.

We have Dollar Trees.

So Dollar Tree is open, if you call that off-price.

But we don't have -- in that one particular center, we have no off-price.

Our next question comes from Floris Van Dijkum with Boenning & Scattergood.

Brian, actually, it's Compass Point.

But wanted to ask you guys about your covenants.

You're pretty tight on your unsecured covenants, obviously, because you drew down your line.

As you think about deploying that capital, does that make you want to -- or potentially pay back that -- your line, obviously, but if you think about deploying that capital, am I right to say -- to think that if you were to invest that into JV assets, for example, with the GIC joint venture, that would count against you in terms of your leverage, whereas if you were to buy fully owned assets that are unsecured, that would actually improve your leverage ratios.

And then also, how do you think about potentially taking advantage of some of the price dislocation?

Your preferred shares have sold off a lot.

Would you consider buying back some preferred and reducing your leverage even though that doesn't get counted in that covenant, I don't believe?

Mike, do you want to start?

Yes, I can start, Brian, and you can talk about more of the acquisition environment long term.

But Floris, like I mentioned in my prepared remarks, we pulled the line down the $225 million out of a bunch of cautions, similar to what many of our peers did.

And based on the line rate of 2%, it's pretty inexpensive insurance policy.

Until we gain more certainty, we're going to hold tight just because liquidity is #1, and I would say, acquisitions is #2.

And in terms of running tight on the unencumbered leverage ratio, look, we can send that $225 million back and get down to what we were at the end of '19, right around 45%, and still have $100 million of cash.

And based on the cash burn rate analysis that I shared in my opening remarks, which is pretty negligible, we won't even eat into the $100 million if we needed to.

And Floris, like I said earlier, we see huge potential dislocation.

I think, personally, in the private markets, it's way too early.

But we are in constant dialogue with servicers, banks as well as private owners that could be having some issues or are having issues with some of their CMBS loans.

So it's a calm and steady approach, but in my opinion, it's too early for the dislocation today.

Brian, if I were to ask you, presumably, you've been looking out into the market.

You presumably had some -- in particular, for the GIC JV, were having discussions when COVID hit.

What kind of pricing difference do you think will occur, i.e., how much do you think that properties you were looking at previously, how much in terms of value will you be able to buy them?

And I know there's a little bit of uncertainty here, but how much of an impact to value do you expect to occur?

It's tough because everything is so different.

I mean if you look at your Austins and Nashvilles or Raleighs or Charlottes, and if you had Whole Foods or Trader Joe's with a few small shop tenants, I think those small shop tenants and the cash flows are stable and secure and are open.

I think -- personally, I think there's a lot of capital going to be flocking to that.

If you look at more of your opportunistic and more regional grocers with much more small shop and, call it, 100,000 square feet, I think it could tick up a turn or 2 higher on cap rates.

But it's very early and it's all dependent on market and intersection and credit quality more than ever.

So we're sitting on the sidelines so to speak right now but with eyes on the future and in constant dialogues to see if something could break loose.

And Floris, one more thing of clarity on your question about our leverage ratio.

So buying JV assets would not impact our unencumbered leverage ratio.

Now if we chose to put secured debt on those assets and use those proceeds to pay down unsecured debt, then it would help it, but strictly buying JV assets wouldn't impact our leverage ratio, to my earlier point.

I appreciate that.

Maybe one last question for me, in terms of your exposure to your theaters.

I know that you didn't take down any receivables yet on your balance sheet for some questionable potential credit.

But you do have fair amount of exposure to theaters.

What do you think is -- how do you think that's going to play out?

And do you expect -- well, I'm just curious to get your take on what you think is going to happen to your exposures to Regal and some of your other theater tenants.

I mean, thankfully, we don't have AMC.

Cinemark is a great operator.

We don't have any of them.

And Regal is a great operator, and that's our largest concentration in the theater world.

We're obviously in great conversations with them.

They seem optimistic in the future and are doing things internally within their 4 walls for social distancing and really plan to open up, call it, in June from what they've been saying, could change up or back, but that is what they've been telling us internally.

And so for them, we're feeling fine.

And really, we only have a Flix in Indianapolis, which is one of their top-performing theaters in their company, and then Alamo Drafthouse in Minnesota.

So Regal is our lion's share, and we have a very solid relationship with them, and they are giving us a lot of commentary on what they're doing now to prepare for when their doors open.

So I think it's really concentrated in one, Floris, with Regal, and they're tremendous at what they do and have a good balance sheet and especially with these new investors, and they're optimistic for the future.

Our next question comes from Linda Tsai with Jefferies.

How do you see leverage trending for the remainder of 2020 and into 2021?

Mike, do you want to take that?

Yes.

Sure.

Thanks, Brian.

Linda, that's a tough one.

I mean absent the potential fallout from retailers as a result of the pandemic, at this point, given our liquidity position with over $320 million in cash, coupled with very limited or little committed capital, we don't see any need to raise our debt levels near term.

As for the EBITDA side, I mean, too much uncertainty in the environment to comment right now.

I'll tell you that we are committed over the long term to leverage levels between 5.5 to 6.5x as we've discussed in earlier conversations.

And then occupancy at 93%, any sense of how that will be by year-end?

No sense at this point, just given the uncertainty in the environment.

Yes, much too early.

One last one.

On the tier 4 tenants, do you know what percentage has applied for PPP loan?

From the tier 4, the theaters, restaurants and fitness, we don't have an exact percentage of what PPP loan.

I can tell you from the locals, which represent 13% of our ABR, half has, and I really do apply that to this concierge program that we implemented.

So that's a really good percentage.

And of our April rent collectibles, you had low 50s from local tenants that paid April that we think because of the PPP loans.

(Operator Instructions) Our next question comes from Mike Mueller with JPMorgan.

Brian, you talked about wanting to get something in return for doing the deferrals.

So for the 121 deferrals that you mentioned that you did, what sort of adjustments to the lease terms did you make on those?

What percentage of the 121 had adjustments to the lease terms?

And what were some of the common ones?

I don't have the exact percentage, Mike, but common would be co-tenancy cleanup, old co-tenancy, extension of terms, exclusives -- opening exclusives to allow maybe some competitors into the property, adding on maybe radiuses.

It was all over the board.

Any deferral goes through a process and a committee.

So we have legal, asset management, leasing, finance, all eyes on these.

So it's not done in a vacuum.

So everybody is checking lease abstracts and other leases where we have operators operating in the assets to really make sure we are extracting as much as we can as we're allowing them rent deferrals.

So I've been very proud and pleased of the team's efforts so far.

We have reached the end of the question-and-answer session.

At this time, I'd like to turn the call back over to Brian Harper for closing comments.

As I sit in my remote location separated from family, friends and colleagues, I am sincerely grateful to be part of an organization that has risen to the current challenge in a way that goes beyond all expectations.

The caliber of talent at RPT, the portfolio, our processes and our balance sheet improvements made over the past 2 years as well as our partnership with GIC, I have no doubt that RPT will emerge from this crisis ready and able to capitalize on opportunities that arise from this pandemic.

Thank you all for joining our call this morning, and have a safe day.

This concludes today's conference.

You may disconnect your lines at this time, and we thank you for your participation.