Kite Realty Group Trust

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2020 Kite Realty Group Trust Earnings Conference Call. At this time, our participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star 0. I will now have to hand the conference over to your speaker today, Mr. Brian McCarthy, Senior Vice President of Marketing and Communications. Thank you. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to Kite Realty Group's first quarter earnings call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties. Actual results may differ materially from these statements. For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent 10Q. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release, available on our website, for reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group, our Chairman and Chief Executive Officer, John Kite. President and Chief Operating Officer, Tom McGowan. Executive Vice President and Chief Financial Officer, Keith Feer. Senior Vice President and Chief Accounting Officer, Dave Buell. And Senior Vice President, Capital Markets and Investor Relations, Jason Colton. I will now turn the call over to John.

Thanks, Brian, and good morning to everyone. Thanks for joining us today. The KRG family appreciates that this has been and continues to be a very challenging time for everyone, including our investors, tenants, customers, and vendors. And I hope this call finds you all doing very well. We're truly grateful for the hard work and bravery of those in the medical community, our first responders, and the employees at our retailers who are working diligently to stay open and operating through this challenging period. We fully expect and understand that the primary focus of this earnings call will be on COVID-19 and its impact on KRG. But before discussing that topic, we believe it would be a disservice to our team to ignore our solid first quarter results. Prior to the onset of the pandemic, KRG was poised to build on the momentum we established last year with a successful execution of Project Focus. In the first quarter, we executed 41 new leases and renewals comprising over 256,000 square feet. The comparable leases generated spreads of 10% and 25% on a cash and GAAP basis respectively. Our same property NOI grew 90 basis points, which was above our internal budget and consistent with the growth trajectory we had discussed on our last call. However, it's important to note But for a COVID-related bad debt reserve, our same property NOI growth would have been 1.3%. Finally, I'd like to point out that KRG's ABR is over $18, which is a testament to the hard work of our team and the results of Project Focus. Turning to the impacts of the pandemic, first and foremost, we focused on the safety of our employees. And I've been so impressed with their level of engagement and sincere desire to help the company and our customers. We relied on our business continuity plan to swiftly transition to having most of our employees working remotely, which was a credit to our investment in technology and risk management planning. There's generally a sense of calm and confidence in our ability to navigate past the COVID crisis. Thankfully, we have one of the most experienced teams in the sector, to handle this challenge at every level of the organization. Many of our senior leaders were either here at KRG or at various other real estate firms during the great financial crisis. We know how to handle the dislocation, and we're used to rolling up our sleeves and digging into the details. Details are critical at these moments, and rest assured the entire team is making certain that nothing is overlooked and that we are doing everything we can for all of our stakeholders. That includes doing all we can for two of our most critical stakeholders, our tenants and their customers. The good news is that 100% of our centers are open and operating, and through April, approximately 50% of our tenants have been open for business in at least some capacity. On the ground, we're assisting our open tenants in a multitude of common sense and creative ways to ensure they're able to meet the needs of their customers in a safe and efficient manner. As for the tenants that have yet to reopen, we're going to rely heavily on our playbook to assist them in every way in ramping back up as the world reopens. One of the silver linings of the crisis is our unprecedented level of communication that we've been having with all of our tenants. The vast majority of these conversations have been constructive, with both sides valuing the relationships that we've built over the years and acknowledging the bridge to the other side of this crisis is built on cooperation. By focusing on relationships, we have not abated any rents, and we were able to collect 67% of our April rents, and we expect this number to continue to grow. A handful of the conversations have been understandably difficult due to the fundamental principle that the retail sector operates as a virtuous cycle. Our ability to pay our obligations, including very important real estate taxes, and help our most vulnerable tenants, small mom-and-pop businesses for the most part, is directly correlated to our well-capitalized tenants abiding by their rental obligations. If we can collectively help mitigate the impacts of the smaller tenants, who are the backbone of our economy, they can stay open and operating. This will in turn strengthen the U.S. economy and potentially help well-capitalized tenants recover lost sales. The recovery of these lost sales will generate sales tax revenues. We have to remember that the sales tax and real estate taxes help fund our community services. including the critical frontline workers in this COVID crisis. In the long run, it's a win-win situation for all parties involved. For this virtuous cycle to work, we all need the smaller businesses to survive. It's why KRG created the KRG Small Business Lending Program. On April 20th, we announced the ability for any small business tenant in our portfolio to apply for a low-interest loan to help them manage this disruption. The tenant response has been robust, and we intend to make our first loans under this program as early as next week. The KRG Small Business Lending Program is made possible by the current state of our balance sheet and liquidity profile. With factoring in capital required to complete redevelopments, KRG has one of the best balance sheets in the sector. We have no debt maturing until 2022, and only $3.5 million of remaining spend on our Eddy Street 2 development that we'll finish this summer. As we completed Project Focus last year, we didn't think it was the right time to begin a significant amount of redevelopment. While we couldn't have possibly predicted this crisis, we did think that 2020 was going to be a bit choppy. This conservative approach has left us with ample liquidity. As of March 31st, we have $350 million of cash on hand with only $300 million drawn on our $600 million line of credit. We believe we have enough capital to not only weather the storm, but to look for opportunities on the other side of this temporary dislocation. I wanted to point out some of the things the company has been doing on the human side as well. Not only are we ensuring the well-being and safety of our employees, but we are doing what we can for those impacted in the communities in which we serve. Our Kite Cares initiative has been engaged on multiple fronts. We've delivered food to local hospitals, made donations to various organizations supporting furloughed workers, supplied meals to the families of quarantined first responders, and are in the midst of a week-long hunger drive to provide for individuals and families in need. Like our shopping centers, the communities we live in are a virtuous cycle. Our country is facing an incredibly dynamic, uncertain crisis. At KRG, we are fond of saying it's a round world. And with that in mind, we are committed to respecting, valuing, strengthening, and supporting all of our existing relationships. Furthermore, we're confident that we'll conduct ourselves in a way that we will create new, robust relationships that will last for years to come. KRG is a tough but fair company made up of resilient people who have created a strong portfolio of assets and a very durable balance sheet. We will, as a team, persevere and look to flourish as we emerge from this crisis. Thanks for everyone for joining the call today. And given the current situation, we won't be discussing individual tenants, any guidance related to May, June, or the rest of 2020. And with that, again, we thank you for joining, and operator, This concludes our prepared remarks and ready for questions.

At this time, if you would like to ask a question, press star 1 on your telephone keypad. Again, that is star 1 for any questions. And your first question is from Alexander Goldfarb with Piper Sandler.

Hey, good morning out there. Morning. Hey, two questions from us. First is, you know, John, apart from your, you know, your gentle persuasive voice, you know, you guys did manage to get rent collections from a number of tenants like movie theaters that were closed and other ones like soft goods and personal service, et cetera, where the both were closed and yet your rent collections vastly exceeded. Can you just walk us through what's going on? Presumably these are all tenants who were closed and probably were thinking about, you know, husbanding cash. So how do you think that, you know, it was, you know, was it just simply, hey, you didn't have any AMCs or anything like that, therefore these people had cash? Or is there something else going on that made your rent collections in these categories where they were?

Sure. Thanks, Alex. Well, It's a multitude of things, obviously, in terms of our conversations with our retailers. And as I mentioned in the call, that's one of the things that we've always prided ourselves on is the deep relationships that we have and the mutual respect that we have for each other. I think that when you look at the quality of the portfolio and all the work that we've done on the portfolio, I think first and foremost, it's reflective of that, and it's reflective of the fact that these are very important locations to the great majority of our retailers. You know, in addition to that, it is, frankly, the intensity that this organization has to work and grind through the things that we have to do. And we've been fully focused on it from day one. You know, I could go on a long time with this, Tom and his team and Greg Poets and his team. I mean, the company has been pretty focused on this. But in the end, it really is mostly a reflection of the quality of the portfolio and how important these locations are to these retailers.

Okay. And then you also talked about up front the fact that, you know, you need to be paid. by the rents because you have obligations to property tax, utilities, insurance, mortgage, and all that fun stuff. Obviously, you've had tenants, and I know you're not going to comment on particular ones, but you have tenants who have chosen to not pay who probably were in a position to pay. So how do you make sure that this doesn't become sort of the de facto every time a tenant has trouble outside of bankruptcy, they just start arbitrarily not paying the How do you make it pretty clear to a tenant that they need to abide by and they can't just arbitrarily not pay?

Well, I mean, I think the reality is that we, you know, it's kind of a contract law question, right? These are contracts they need to be abided by. And, you know, is it a concern that this would become, you know, something that would happen often? No. I think this is a very... very unique situation. And frankly, there are some companies that have obviously been extremely disrupted. So when I said the word, the vast majority of our conversations have been constructive and have been partnership conversations, that's totally accurate. Unfortunately, there is a small number of those that haven't been. And the reality is that's disappointing and and we just have to deal with it on a one-by-one situation. And that's part of why, you know, you've seen us collect almost 70% of our rent is that those have been, you know, not a tremendous amount of that. And, frankly, the majority of our rental disruption is in the small shop space, which is much more understandable relative to the capital reserves. But for those larger, well-capitalized tenants, it is quite disappointing because That said, it's early. We're still collecting rent today, tomorrow, the day after, the day after that. We don't stop. So we fully intend on collecting that rent. It is an obligation. And we'll be professionals, but we will doggedly pursue it.

Thank you.

Thank you.

Next question comes from the line of Christy McElroy with Citi.

Hey, good morning, guys. Thanks. Just to follow up on Alex's question, I know we're talking a lot about collection by tenant category, and your disclosure is very, very helpful in that regard. How should we think about collection by geographic market? Like, for example, did Florida have better collection rates than other markets? And in thinking about your Sunbelt exposure in terms of potentially shorter closure periods than coastal areas, How do you think about the relationship as we move forward between rent collection and time period that the stores were closed?

Hi, Christy. It's interesting, and one thing that's true to all of the questions, all of the answers, it's early in this process, and true also that states by state and also, frankly, in some cases, city by city, county by county, there are different opening procedures, opening rules, I'm sure you're like us, that it's quite confusing and some of this is left to interpretation and there will be no perfect way to play this. That said, clearly geography matters and the way that this unfortunately has presented itself is very concentrated in, you know, in particular urban geographies that is going to be more difficult than potentially the southeast, as you mentioned. But, you know, I think every city is different, and we're early. So our collections have been, quite frankly, pretty evenly spread out. It's really more about the type of shopping center itself at this point. But I do think long-term there likely is, you know, potential impact as it relates to, The differences between livability, so to speak, but it's way too early to really project anything. I think it's probably way too early to try to create run rates on anything or to think that the way that shopping is done has changed forever. We're not big believers that when you're kind of in the fog of war here, You know, we just have to do what we have to do kind of inch by inch, and then I think over time we'll see how this evolves. But we're very happy, I should say, with the composition of our portfolio. And when we did, you know, the asset dispositions that we did over the last two years, there was a clear focus on where we wanted to end up.

And then just recognizing that you haven't made a decision on the dividend yet, can you discuss some of the factors that the board will be considering in regard to whether or not to suspend or potentially cut the dividend? And I recognize you don't want to talk about May rent collections yet, but how much of a factor will that be in sort of that decision-making process?

Sure. Yeah, we do have an upcoming board meeting, and obviously the dividend will be discussed at the meeting. And as you know, it is a board-level decision. kind of conversation and decision. I think there will be a multitude of factors that the board will look at. Obviously, you know, again, we're in this time frame that we're very disrupted and trying to kind of figure out what the length of it is is very difficult. So the factors will be, obviously, you know, the liquidity position that we're in, the cash flow projections that we have, the collections that we have, And, you know, I think all those will be taken into consideration as it relates to what to do this quarter and going forward. I mean, but I do think time, you know, is your friend right now in the sense of seeing how this evolves. I mean, literally day by day. So we do have some time. We will take a look at it, and we will present all that data, and a decision will be made. Thank you. Thank you.

Your next question is from Flores Vandencombe with Confidence Point.

Great. Morning, guys. Thanks for taking my question. You know, the question I had was regarding the, you know, obviously you have this loan program to augment, you know, or to help some of your tenants. Can you provide an update on the the applications for PPP loans and the response that your tenants have gotten in that and how you think your program, is it targeted to specific tenants or is it all tenants in your portfolio are eligible?

Sure. I mean, as it relates to PPP overall, Floris, frankly, it's been very good for the tenants that we have that have been able to access it. it's difficult to know exactly who's accessing. I think what we can see is that those that have, have a high correlation to having paid April rent. So we're a believer in the program. One of the reasons that we ended up rolling out our own program was, I'm not sure that it was a supplement or something to put into place that would bridge those that aren't able to access it. I think it was more of a realization that it's going to be almost impossible for a single government program to really reach all of its intended recipients. So, you know, for us, that's why we made the ability for a tenant to borrow up to three months of total operating expenses with really no limitations on what it'd be spent on So we believe it's a great, you know, addition to PPP, and we're big fans of the PPP having been kind of reloaded in terms of the capital amounts. But one of the concerns also was that it only covered two and a half months. So perhaps our plan will help some of these smaller tenants, you know, be able to get to the other side of the bridge, as we like to say, that they otherwise wouldn't. So, overall, the demand, I think that was your other question, you know, we see it as robust in both the PPP plan lending program and our own.

Great. Thanks. I guess maybe one follow-up question for me is – You guys took some reserves, obviously, on the bad debt and also on the straight line. Maybe you can walk us through your thinking behind that and the reasoning and how you look at that going forward.

Keith, do you want to take that one?

Yeah, you're sure I'll take that. Hi, Floris. I mean, on the straight line reserve, really two things to think about. First, this reserve represents our continuing desire to be conservative, especially in this current environment. And second, you know, this is really what I'll call accounting noise. It's a non-cash write-off. It's a receivable that depends on our ability to realize on rent escalators in the future. So, you know, we did an analysis. We looked at areas that we felt would be disproportionately impacted by COVID. And that's the number, you know, the $2.9 million number is the number that we came up with. Again, it's conservative. It's a non-cash item. And I'm fairly confident you'll see a bunch of our peers take similar charges today. In the next quarter, we decided to take them this quarter. As far as the bad debt acceleration, listen, you know, we always do a tenant-by-tenant analysis, and we had some certain, you know, receivables in March that, but for COVID, we probably would have not realized them as bad debt, but when we looked at, you know, the landscape ahead of us, decided, you know what, it would be a conservative thing, so we realized another sort of $200,000 of bad debt that, again, we wouldn't otherwise, but for COVID. And, you know, that $200,000, you know, translated into 40 basis points of our same store. So, again, it's just this philosophy of trying to be conservative in this new environment.

Thank you. That's it for me.

Thank you.

Your next question is from Todd Thomas with KeyBank Capital Markets.

Hi, good morning. First question, John, you know, thinking about, you know, leasing in sort of a post-pandemic environment here, so fitness, food, entertainment, you know, these were some of the categories that were active and taking space prior to the pandemic. So how are you thinking about leasing demand going forward? I mean, inevitably, you know, even in normal environments, a percentage of tenants don't renew and look to move locations for various reasons. And and space becomes available. So have you started to field calls from users or think about how you might backfill vacancies over the next few quarters? If you could shed some light on conversations, that would be helpful.

Sure, I'll start and have Tom add to that. Look, I think overall, as I said a minute ago, it's so early in the process for us to try to start to think through What does the world look like on the other side of this, and how damaging or non-damaging will it be? It's very difficult, almost impossible, I would say, to rationally speak to that right now. I will say that, look, every one of our retailers... and if I didn't say this, I should have said this more in an emphasized way, are battling and doing everything they can possibly do to get to the other side. And we want to do everything we can possibly do to help them do that. So as it relates to the guys like restaurants and the service side that I guess you're referring to, I have been so impressed with the creativity that I see in our portfolio, particularly in the restaurant sector, And I think there's going to be some great things that come out of this that will, you know, actually grow sales in the future. But as it relates to guys right now, Tom, maybe you could talk a little more about the guys that we're talking to are actually who are pursuing us and pursuing space.

Yeah, absolutely, Todd. First of all, we're in a There are soft players that are very bullish for 21, feeling that this plays into their hand even further. So we are having conversations, productive conversations in that regard. And then we're being very measured as it relates to our tenants. interest coming out of the tenant base.

Okay. And then as retailers begin to reopen and restrictions ease and sales recover, are you having conversations with tenants about structuring leases and rent to be more variable in nature, I guess, sales-based or otherwise for a period of time or until certain hurdles are met? Is that part of the discussion that's ongoing now?

No. I mean, as I said on the prepared remarks, the only thing that we have done is deferrals for a period of time that get paid back in a very quick period of time. So we aren't currently and don't anticipate that we would look to fully restructure at all leases. I've seen some media stuff about that, and that's just Frankly, it doesn't really work that way. I don't see that in our portfolio. You know, that's the one good thing about having a very strong open-air portfolio is we continue to believe that there will be demand for these spaces through the various cycles of this. And if anything, you know, the format that we deliver the retail product in is a very favorable format in a new world. So long answer, but no, we don't foresee that being a big part of the future.

Okay. And then just Heath, on the $300 million draw on the line, is there anything specific that you're looking for to gain confidence in paying that down? I guess, how should we think about that? There is a cost to that money. So in terms of the timing or or process to pay down the line balance over time, what should we be expecting?

Yeah, I think just when the world feels more normalized and whether that's a pay down over time as things start to adjust and tenants start to come back online or whether at some point we just say, you know, we'll send the entire $300 million back. Again, too early to tell, but just like our peers, we just felt this was an appropriate amount of money that would obviously be sufficient to allow us to continue for the foreseeable future. It's a level of drawdown that is very comfortable in our covenants. So, again, we'll see. Obviously, incurring the additional interest expense is something that we don't want to do, but based on the fact that the rate is so low, we think this is really cheap insurance. And, again, we'll see how it goes.

Okay. Thank you.

Your next question is from Chris Lucas with Capital One Security.

Good morning, guys. Actually, just a follow-up question to Todd's question about the line of credit. How is the borrowing base for that determined, and is that a quarterly or annual or trailing test?

It's a quarterly test, Chris, and the borrowing base, you know, it's $600 million, which you'll see in our queue. Our current maximum borrowing base right now is something like, I don't know, call it $585 million. So, again, it's a quarterly test. It looks at our unencumbered assets. And, you know, right now we're very, very close to being able to take the maximum 600. Okay.

Thank you for that. And then I guess, John, just curious on your disappointing conversations with some of the retailers that, you know, are in a position to pay rent. Were any of those retailers surprising in terms of who makes that list that you, in previous conversations, wouldn't have expected that sort of hardball tactic?

That's a creative way to try to get me to say who that was. I like that, Chris. Yeah, there were a couple. There were a couple on there that were quite surprising and, frankly, opportunistic. That said... I don't want to make it sound like that is a big part of the universe, but there is a small part of that universe that is definitely taking the tact. It's an aggressive tact that is something we're going to have to deal with, and I don't think that's unique to us. I frankly think we, based on our relationships, had a lot less of those maybe than others. But yeah, there's a couple out there that are quite surprising.

And part of that, being able to negotiate with these groups, and that doesn't mean there weren't conversations. They simply didn't meet the criteria that we felt was being fair and equitable.

Okay. Thank you, guys. Appreciate it.

Thank you.

And your next question is from Craig Smith with Bank of America.

Thank you. I just wondered, what percentage of the tenants are you in active discussion for rent deferrals, and what are you generally targeting for your payback period?

Well, as you can see, you know, from what we've disclosed, obviously, you know, having collected the majority of the rent, you know, it's not a huge number. But, you know, so... I don't think we're going to get into it. I think we did disclose in our investor presentation that we were pursuing 25% approximately, so you should assume that that's in that range, Craig. Okay. In terms of the terms, I don't think we're going to get into that either, but suffice to say, by the time we report a quarter from now, it'll be a little more clear. But it's been very, as Tom said, we have a very specific basically offer that we're willing to do, which is very short-term. I'm just telling you it's very short-term in nature. And, frankly, the great majority of the tenants understand that because, you know, as we roll out these openings, I mean, quite frankly, you know, where we are literally today from where we started these negotiations is is radically different in terms of the number of tenants that are going to be open.

Great.

I just want to add on to the extent that we're doing these short-term offers. I want to make it clear, none of them are abatement. Any kind of, you know, accommodation we've discussed with our tenants is strictly in terms of deferment.

Okay. Thank you. And then I just wondered, you know, given the COVID crisis, are you seeing an acceleration or an extension of your ability to offer curbside services to your consumers?

Sure.

Tom, you want to hit that? Yeah, we will definitely address that, and we're having a very good time.

Okay, thank you.

Thank you.

And that question comes from the line of Marnie Georges with RGES.

Hey, good morning. Thanks for taking my question. So just looking at operations, I guess directionally, how should we be thinking about the operating expenses you have just in context of all these tenants that remain closed or that are operating with reduced operations? And then I guess how much rent could you see falling off before some of those costs on your end might become an issue?

Keith, do you want to hit that?

Sure. Listen, obviously we're reviewing operating expenses and every part of the geography of the income statement. I will tell you that there is opportunity for us to pull back some expenses. 60% of our leases are on CAM, 40% of our leases are on fixed CAM, so Some of it will benefit our tenants. Some of it will benefit us. But one thing when we're thinking about expense is that we're not going to compromise the quality of our shopping centers. We're not going to run our shopping centers in a way that's going to be, you know, anything less than first class. So, yes, there are opportunities. They're being reviewed. We're being prudent and mindful and pulling back where appropriate. But, again, not at the expense of the quality of our centers.

Fair enough. And then looking at capital allocation a little bit more broadly, Clearly, you've taken steps to enhance your liquidity position, just given the uncertain environment. Circling back, just recognizing it's ultimately a board decision, would you consider deferring the dividend, doing some kind of lump sum payment later in the year when there's better visibility? What about share purchases? What would you want to see before you start looking at the redevelopment pipeline again?

Well, sure. As I said, as it relates to the dividend, it's premature for me to talk about it because we've got an upcoming board meeting and it will be discussed and it's a full board level conversation. But as I mentioned, there's a multitude of factors that we'll be looking at and we're obviously in an extremely unique period of time. So I think we would just say stay tuned and we will be back around on that. As it relates to CapEx and as it relates to stock buyback, basically capital allocation, you know, Cash is king. Capital preservation is a fact of life right now. And we've done a great job very quickly doing that and getting ourselves in a position. And, frankly, everything we did last year put us in the position to be very liquid today. And when I look at the space and I look at the liquidity versus, you know, fixed costs, we're in a really, really good place. So, you know, I think we'll just have to see and take – It's going to take a little bit of time to see how this plays out over the next several months, but, you know, we believe that we're very good capital allocators, and when the time is right, we will look at, you know, redevelopment and, you know, the idea. It's funny, you also mentioned stock buybacks in there, and we had a lot of questions about that, you know, several months ago about why, you know, and it's just kind of why we didn't. And it shows that it's very difficult when you're an operator to be looking at deploying capital into stock buybacks unless it's a tremendous amount of free cash flow. So I think that's right now not high on our list, but as we evolve and come out of the other side of this, we're going to be in a very good position as a company to take advantage of opportunities. Let me just say that. And each one of those things you mentioned are potential opportunities.

Awesome. Thanks so much. Appreciate the caller. I'll turn it back.

Thank you.

Your next question comes from the line of R.J. Milligan with Bayers.

Hey, good morning, guys. John, can you talk about how you think about lending to tenants that obviously need the short-term relief versus lending to tenants through the Kite small business program that probably won't make it in the long term anyway? How are you having those discussions?

Sure. Well, let's just first say that, you know, every tenant in our portfolio we have already fully underwritten. So when we're saying that we're going to roll out a small business lending program to the affected small businesses, we know the credit of those companies very well and have already underwritten them. What we're looking at is the changes that have happened to them and whether or not we deem that that is temporary or because of the COVID crisis and because of the mandatory shutdowns, or whether we believe that the business will, you know, have a very difficult time ever recovering. So our intention isn't to just throw money out the window, you know, like helicopter Ben, I guess. Our intention here is to make smart loans that we believe will help these businesses get to the other side and flourish. And frankly, we believe that our relationships that we have you know, we'll obviously be strengthened through that. But, of course, when you're in the process of lending money, no different than when you're in the process of lending TI dollars, some of it doesn't get paid back. And so you do have a credit loss associated with things that we lend out. But we believe that we'll be very good at that. And since we already know these guys, RJ, I feel pretty good that we will be in good shape there.

John, I'll just add on. Listen, RJ, this is really an occupancy preservation exercise, right? So when we're underwriting these tenants, you know, one of the things we're asking ourselves is, you know, how good was the business before? How good do we think that business is going to be in a post-COVID environment? So like John said, this is just not throwing good money after bad. This is really trying to make a long-term smart play that will, you know, leave tenants in place that we believe in and avoid us from having to re-tenant the space. You know, we did the math in our in our investor presentation, the break-even is fairly compelling. So that's the, you know, again, the purpose of this program is occupancy preservation.

Got it. And I guess further on that point, you know, given the long-term approach, which I think is appropriate in terms of you want to maintain occupancy and, you know, in the future, not only do you have retenanting costs, but maybe a question of actual demand for space to even be able to retenant it. So, you know, how do you think about, and I know you haven't granted any rent forgiveness, but, you know, why isn't that, why do you think that isn't on the table for Kite and maybe some of your peers in terms of trying to preserve that longer-term occupancy?

Well, I think, look, I think there's a very different, it's a very different thing when you talk about forgiveness slash abatement versus deferral. The reason that we won't and aren't giving abatements is that we strongly believe that this is a situation that is a point in time. And anyone that tries to come to us and take that point in time out too far, even with a deferral, let alone abatement, we strongly disagree with that because this is changing by the minute, by the hour, by the day. And we're frankly... As you know, we are kind of down in the dirt very intensely, and we understand what's going on. And frankly, this is a battle of inches right now, and we're trying to gain inches every day, and eventually that will be feet and yards, miles. So when you start getting put in the position of trying to have tenants tell you that, You know, this is going to be a difficult situation from six months from now. No one knows that. So that's kind of why, RJ, we're keeping this in a very short window because that window can change dramatically. And as we've all seen, it does. And we're optimistic that, you know, it will change for the better in the future. Okay. Helpful. Thanks, guys. Thank you.

And your next question comes from the line of Tammy Seek with Wells Fargo Securities.

Thanks. Good morning, guys. I'm just wondering, are you seeing differences in rent collections between power centers and your more traditional grocery anchor centers within your portfolio?

Of course, we're seeing differences in different types of centers, Tammy. I think, you know, when you look at it, we're really looking at it more from, you know, the tenants themselves. the categories themselves than we are at the different centers. And because of the fact that we've gone, you know, frankly, you know, the foresight we had in the asset sales last year, the $550 million of properties that we sold, you know, we've significantly changed the dynamic of our portfolio, and it's obviously reflected in our collections. So it's really more about that. And I've always said this. The definitions are a slippery slope. There could be something that someone defines as a power center that you could get 100% rent collection on, and there could be a grocery anchored center that you only get the grocer. These are extreme examples. But I would tell you that it's really balanced. It's really more about the categories and really about the quality of And I think that's why we've done well is the quality and the people that we have and the relationships that we have.

Gotcha. And then I was wondering, there has been historical discussion about mall tenants moving into strip shopping centers. I guess I'm just curious what your thoughts are on that at this point. And I guess do you have a sense for what the occupancy cost differences are for tenants that have made that move?

Sure. I mean, you know, look, again, it's early to try to – look at things in a way that are changing forever. But no doubt that our, as we've always said, our kind of product is a very effective delivery system for retailers. And so important today, you know, and obviously if there's anything sustained from this event, from this crisis, it will help our product because of its accessibility, the ease to pull up, get something, leave, the ease to walk from one shop to another and be outside while you're doing that. There's lots of things, but really one of the biggest factors that you hit upon is the cost associated with it for the retailer. That's not to say that this is binary. I don't believe it is. I think that all types of retail will ultimately, you know, be a player. It just comes down to the real estate, and it comes down to the dirt. You know, if you have good dirt, which we do, you're going to do fine, and there's plenty of malls that have good dirt. It's really more about that. But, yeah, we do think it's a continuing trend where we'll see people, you know, want to try out our centers that haven't in the past. Tom, you want to?

Yeah, go ahead. I would say the only other big difference is just the sheer number of trips. So a mall, you may have a far limited number of trips per week, but in an open-air type scenario, that could increase two times just because of these. So I think that's a big part of it.

Got it. Thanks. And then a guest? With the new leases that you have signed since the end of the quarter, I guess, what are you guys seeing in terms of spreads? And I understand it might not be necessarily indicative of what holds true for the remainder of the quarter, but just curious if you guys are seeing anything there that we can... I don't think there's anything happening right now that's indicative of a significant change relative to leases, spreads.

It's early. Okay. We obviously haven't disclosed anything yet on that. But, I mean, the reality is this quarter that we're currently in is going to be different. So who knows how, who knows what. I'm trying to emphasize that I would not look to extrapolate anything or try to run rate anything that happens this quarter other than, you know, the data that we're trying to give you as best we can relative to the collectability of rents based on the strength of our real estate.

Okay, thanks. And then just one last question. I'm curious when you think you will be in a position to be able to provide earnings guidance again?

Again, don't know. I think we're just going to have to see how this evolves and And, you know, we'll be as transparent as we possibly can. But right now, you know, as I said, it's day by day and inch by inch. So I can't tell you that yet either.

Okay. Fair enough. Thank you.

Thank you.

Again, if you would like to ask a question, press star 1 on your telephone keypad. Again, that is star 1 for any questions. And there are no further questions at this time. Mr. McCarthy, I'll go ahead and turn the call back over to you for closing remarks.

Okay. We just want to, again, thank everyone for joining us. We appreciate and value all of our relationships, as we said, very much. And we hope that you all stay healthy and safe. And we look forward to getting to the other side as soon as possible. Thank you.

ladies and gentlemen this does conclude today's conference call thank you for participating you may now disconnect