Image source: The Motley Fool.
CBL & Associates Properties Inc (CBLQ)
Q4Â 2019 Earnings Call
Feb 7, 2020, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and welcome to the CBL Properties Fourth Quarter Earnings Conference Call. [Operator Instructions]
I would now like to turn the conference over to Katie Reinsmidt from -- CBL Chief Investment Officer. Please go ahead.
Katie A. Reinsmidt -- Executive Vice President-Chief Investment Officer
Thank you, and good morning. Joining me today are Stephen Lebovitz, CEO and Farzana Khaleel, Executive Vice President and CFO.
This conference call contains forward-looking statements within the meaning of the Federal Securities Laws. Such statements are inherently subject to risks and uncertainties. Future events and actual results, financial and otherwise, may differ materially. We direct you to the Company's various filings with the SEC for a detailed discussion of these risks.
A reconciliation of supplemental non-GAAP financial measures to the comparable GAAP financial measure was included in yesterday's earnings release and supplemental that will be furnished on Form 8-K and is available in the invest section of the website at cblproperties.com.
This call is being limited to one hour. In order to provide time for everyone to ask questions, we ask that each speaker limit their questions to two and then return to the queue to ask additional questions. If you have questions that were not answered during today's call, please reach out to me following the conclusion.
I will now turn it over to Stephen.
Stephen D. Lebovitz -- Chief Executive Officer
Thank you, Katie, and good morning, everyone. The mall business is in transition, and we are responding by making the changes necessary to our portfolio. While we wish progress could be reflected more immediately in our results, we are confident in our strategy.
This time last year, we had over 40 anchor closures. Today we have more than two-thirds of that space replaced with dynamic new traffic driving users. Most of these users are not traditional retail names. They include educational uses, fitness centers, casinos, new-to-market entertainment, fast casual and sit-down restaurants and in-demand value retail. Many of these projects include mixed uses, such as hotels, multifamily, medical, office and storage. The creativity of the CBL team is impressive, and while the job is far from done, we have made tremendous progress over the last year. I expected 2020 will be just as productive and will move us further toward accomplishing our goals.
As our results for 2019 and guidance for 2020 indicate, we are facing ongoing challenges as retailers struggled to succeed in an increasingly competitive and fast changing industry. Despite these challenges, we entered 2019 with financial results at the high end of our guidance range, including same-center NOI declining 6.5% and adjusted FFO of $1.36 per share. Revenues and occupancy were significantly impacted by retailer bankruptcies and store closings, including the liquidation or reorganization of several major retailers. Our 2020 guidance range incorporates the carryover from 2019, as well as our expectation of additional retailer fallout in 2020.
In January, Macy's announced one closure in our portfolio at our property at Hanes Mall in Winston-Salem, North Carolina. We have been working on plans and expect to be able to make an announcement for a replacement in the coming months. Earlier this week, Macy's announced its new strategic three-year plan, including a targeted store closure program. Our understanding is that the definitive closure list will be finalized over time. Within the CBL portfolio, we expect an additional six to seven store closures to occur over the next three years. We do not anticipate any of these closures to occur in 2020. While this announcement is certainly a setback, the extended timetable provides us with runway to line-up replacements.
As a result of our redevelopment efforts, we are diversifying our revenue stream and working to stabilize income. Since the BonTon and Sears bankruptcies in 2018, we have opened 15 new tenants in former anchor locations, adding more productive uses. And we have another dozen committed replacements either under construction or planning under way. We are proactively reducing our exposure to apparel retailers with more than 76% of 2019 new mall leasing completed with non-apparel tenants. We are currently under construction, have agreements executed or are in active negotiation on two multi-family projects, 14 entertainment operations, including two casinos, nine hotels, 28 restaurants, eight fitness centers, nine medical uses, three self-storage facilities and several other non-retail uses.
We are minimizing required capital investment, while effecting transformative redevelopments. We're utilizing ground leases, joint ventures and other creative structures. These structures have allowed us to add mixed-uses like the hotel and convention center at Brookfield Square in Milwaukee; multi-family housing to our open-air center, The Pavilion at Port Orange in Daytona Beach; storage facilities at three properties on outparcel land; and a hotel at Hamilton Place in Chattanooga. And we have a pipeline of additional projects that are in various stages of commitment and permitting.
We have also taken difficult yet important steps to maintain portfolio cash flow by suspending our common and preferred dividends. Our portfolio provides us with sufficient cash flow to fund capex, principal amortization, as well as our redevelopment and leasing programs. We also supplement our cash flow with select dispositions. In 2019, we completed the sale of a partial interest in two of our outlet centers to our existing partner, with the second closing during the fourth quarter. This transaction generated $18 million in equity and reduced our share of debt by $30 million, all while maintaining a 50% ownership interest in strong assets.
Our next major project opening is the redevelopment of the former Sears at Hamilton Place here in Chattanooga. Dave & Buster's and Dick's Sporting Goods, are opening this March, joining Cheesecake Factory, which opened in December 2018. The Aloft hotel and self-storage project are under construction as well. We recently announced that Malone's Steak & Seafood will join the project on an outparcel pad and additional uses will be announced in the near future. This project is a prime example of the strategy that we are implementing at our centers. Retail is changing, and a result -- and as a result, our shopping centers are evolving into what we call suburban town centers. Traditional apparel is being rightsized and enhanced by the new users I mentioned earlier. Even with these changes, 85% of retail sales still occur in stores and on-line retailers recognize the value of bricks and mortar facilities.
The strategy we are following at our properties positions them for ongoing success in their markets. We are confident that these steps and others we are taking now will yield positive results in the future.
I will now turn the call over to Katie to discuss our operating results and investment activity.
Katie A. Reinsmidt -- Executive Vice President-Chief Investment Officer
Thank you, Stephen. During 2019, the CBL leasing team, in spite of the difficult environment, completed nearly 3.9 million square feet of total leasing activity, including 1.4 million square feet of new leases and 2.5 million square feet of renewals. On a comparable same-space basis for the year, we signed approximately 2.1 million square feet of new and renewal leases at an average gross rent decline of 8%. Spreads on new leases for stabilized malls increased 9% and renewal leases were signed at an average of 11.5% lower than the expiring rent.
Same-center mall occupancy improved 110 basis points sequentially to 89.8%, however occupancy continues to be impacted by bankruptcy-related closures, which is evident in the 210-bps decline compared to the prior-year period. Portfolio occupancy declined a 190 basis points year-over-year to 91.2%. Bankruptcy-related store closures reduced year-end mall occupancy by approximately 400 basis points or 700,000 square feet, including closures from Payless, Gymboree, Charming Charlie, Charlotte Russe and Destination Maternity. In January, the majority of Regis and Mastercuts stores that were controlled by The Beautiful Group closed. In the CBL portfolio 25 locations, representing approximately 35,000-square feet and $1.5 million in gross rent, were impacted.
For the fourth quarter, mall sales increased 3%, bringing the trailing 12-month sales to $387 per square foot compared with $379 for the prior year. Categories that performed well during the holiday season included fast casual dining, electronics, children's and family shoes and sporting goods. Sales growth resulted in several positive shifts for the tiering of the malls in our portfolio. Parkway Place, St. Clair Square, Old Hickory and Imperial Valley all moved into Tier 1 due to their strong sales growth. Laurel Park and Northgate moved to Tier 3. At Laurel Park, which is a two-anchor mall, we just opened Dunham's Sports in the former Carson's box, which will drive new traffic to the center.
We are making great progress on our anchor replacement program. You can find a complete schedule of projects under way in the supplemental, but I'll touch on a few recent updates. At Mall del Norte in Laredo, Texas, we downsized Forever 21, and are opening entertainment user, Main Event, this month. Stephen described the status of our largest redevelopment of the year, the Sears redevelopment at Hamilton Place here in Chattanooga. The project includes Dave & Busters, Aloft Hotel and Dick's Sporting Goods, plus the recently announced Malone's Steak & Seafood.
We are also developing a joint venture self-storage facility on a parcel outside the ring road at Hamilton Place. This project is a similar structure to our previous storage projects and that we're contributing the land as our equity. The opening is expected later this year. Tilt is under construction, and will open soon at CherryVale Mall in Rockford, Illinois in the former Sears location. We started construction on an office building at our open-air center, Pearland Town Center, in Houston, Texas. The 48,000 square foot building will be fully leased to HCA Healthcare and will provide additional daytime traffic to the center.
At Coastal Grand in Myrtle Beach, a 50-50 joint venture, we started construction on an expanded Dick's Sporting Goods/Golf Galaxy combo store.
Entertainment operator, Flip N' Fly, will locate in the space that Dick's currently occupies. At Cross Creek Mall in Fayetteville, North Carolina, we are under construction on the former Sears location to add Dave & Buster's. We'll also announce additional restaurants and other users joining the redevelopment as details are finalized.
We have recently opened several anchor replacement projects. At our 50-50 joint venture property, Kentucky Oaks in Paducah, Kentucky, Burlington and Ross opened in the Seritage-owned Sears. HomeGoods also opened in mid-October to replace a portion of the Elder-Beerman store. Additional value retailers are under negotiation. As I mentioned earlier at Laurel Park Place in Livonia, Michigan, Dunham's Sports opened in the Carson's box in November. Ross Dress for Less replaced Herberger's at Dakota Square in Minot, North Dakota. And we are under -- we are currently under negotiations with another value retailer to take the remaining space.
At Frontier Mall in Cheyenne, Wyoming, Jax Outdoor Gear purchased and opened in the former Sears location. At Stroud Mall, the new Shoprite supermarket, which opened in October, replaced the former Bon Ton, and is exceeding sales projections. We opened a Furniture Outlet store in the former Sears in January as well.
We have strong demand for our remaining vacant anchor locations with several others under negotiation, out for signature or with active interest. We will make additional announcements as plans progress.
I will turn the call over to Farzana now to discuss our financial results.
Farzana Khaleel -- Executive Vice President-Chief Financial Officer
Thank you, Katie. We are executing on our key financial goals of maximizing free cash flow, supplementing our liquidity with other sources, such as dispositions, extending our maturity schedule and reducing leverage. Our pro rata share -- total pro rata share of debt at the end of 2019 was $4.25 billion. We have reduced our debt levels by $40 million sequentially and $409 million from December 2018. The year-over-year reduction was primarily due to dispositions and amortization. At the end of the year, we had $374 million available to draw on our lines of credit.
During the fourth quarter, we retired $12 million loan secured by The Terrace, an associated center in Chattanooga. Yesterday, we retired the loans secured by Parkway Place in Huntsville, Alabama, and by Valley View in Roanoke, Virginia, which had an aggregate loan balance of $84 million. All three properties have stable income with debt yields above 25% at payoff and were scheduled to mature in 2020. These three properties were added to the unencumbered pool.
Greenbrier Mall and Hickory Point both matured in December 2019 and are currently in default. For Greenbrier, we are pursuing an additional restructure and will announce the terms once complete. We anticipate completing a foreclosure or deed-in-lieu for the loan secured by Hickory Point mall this year. We closed on a new $4.7 million, a four- year loan secured by the second phase of our Atlanta outlet center, replacing the $4.5 million loan maturing -- maturing loan.
We have three property maturing in 2020, including a $65 million non-recourse loan secured by Burnsville Center. We are in the process of working with the existing lender on a potential extension and restructure. We expect to refinance the remaining two loans aggregating $19.5 million. We have several secured mortgages that mature in 2021 as well and have already begun working on refinancing opportunities.
We ended the year with financial results at the higher end of our guidance range. Fourth quarter adjusted FFO per share was $0.37, representing a decline of $0.08 per share compared with $0.45 per share for the fourth quarter 2018. Factors that contributed to the variance included lower-property level NOI of $0.06 per share and $0.02 per share of dilution from asset sales.
Full-year adjusted FFO was $1.36 per share compared with $1.73 for 2018. FFO for the year was impacted by $0.20 per share lower property-level NOI, $0.04 per share lower gain on sale of outparcels and $0.06 per share in dilution from asset sales. Fourth quarter same-center NOI decreased 9.1% due to the full impact of bankruptcies and store closures and same-center NOI for the year declined 6.5%.
During the quarter we recognized a $37.4 million impairment on Park Plaza Mall in Little Rock, Arkansas. The mall is encumbered by a $78 million loan due in April 2021. The mall has been impacted by a number of factors, including several tenant bankruptcies, and as a result the net operating income declined. We have been in discussions with the lender and anticipate restructuring the loan to allow for cash flow to fund future leasing efforts and improve revenue. However, the current NOI decline coupled with the near-term loan maturity resulted in a required impairment.
Based on our expectations for the rest of the year, we are providing adjusted FFO guidance for full-year 2020 in the range of $1.03 to $1.13 per share, which assumes a same-center NOI decline in the range of negative 9.5% to negative 8%. We have incorporated into our budgets all known activity, including the recent Regis and Mastercuts closing -- closures. Our guidance range incorporates a reserve to account for unbudgeted revenue decline related to unanticipated additional store closures or retailer bankruptcies. The reserve for 2020 is a range of $8 million to $18 million.
I'll now turn the call over to Stephen for concluding remarks.
Stephen D. Lebovitz -- Chief Executive Officer
Thank you, Farzana. We are fully focused on our major goals of stabilizing revenue, redeveloping our properties and improving our balance sheet. We are actively transforming our centers, generating new revenue streams and seeking out partnerships that supplement our capital sources and broaden our asset base. We are confident in our strategy and our properties, and while we wish results were more immediate, we expect to see our leasing, operational and redevelopment efforts benefit our portfolio in the near-term future.
Thank you for your time today. We will now open the call to questions.
Questions and Answers:
Operator
[Operator Instructions] The first question comes from Craig Schmidt from Bank of America. Please go ahead.
Craig Schmidt -- Bank of America -- Analyst
Thank you. As you guys move away from apparel tenants in your releasing efforts, are you going to able to get a corresponding volume increase from those new tenants, sales volume that is?
Stephen D. Lebovitz -- Chief Executive Officer
Hi, Craig. Good morning. So we definitely get more sales and more traffic from the new users. And just an example we're replacing Sears here in Chattanooga with the Dave and Busters and Dick's, and the restaurants and the sales and the traffic volume will be 3 times to 4 times at least what we had before. The Sears that we replaced at Brookfield Square in Milwaukee, similar where we have Marcus Theatres and Whirlyball Entertainment, the Hotel Convention Center, the Orangetheory Fitness, we've got a medical office building that will start construction soon. So all that activity is a huge multiple of what we're getting from it before. And that's really the essence of the strategy.
And the challenge is that near-term there is a lag from when Sears closed, and we lost the traffic that was being generated before until we can bring these new users online, and we're just starting to see these new users open up. And so we should continue to benefit this year if that occurs.
Craig Schmidt -- Bank of America -- Analyst
Okay, and then are you seeing any changes in the leasing environment in 2020 versus 2019? Or do you think it's pretty much similar?
Stephen D. Lebovitz -- Chief Executive Officer
Yeah, so it's obviously a little early. The sales trends are positive. We said -- we had positive sales of 2% on rolling 12-months and 30% for the quarter. And the holiday was good. So that's a positive. On the other hand, there are still plenty of retailers out there that are having their own unique challenges for different reasons. So it feels pretty similar at this point, but it's early in the year.
Craig Schmidt -- Bank of America -- Analyst
Okay. Thank you.
Stephen D. Lebovitz -- Chief Executive Officer
Thanks, Craig.
Operator
The next question comes from Rich Hill from Stanley Morgan [Phonetic]. Please go ahead.
Rich Hill -- Morgan Stanley -- Analyst
That's pretty great -- Stanley Morgan. I haven't heard that one in a while. Good morning, guys.
Stephen D. Lebovitz -- Chief Executive Officer
Congrats, Rich.
Farzana Khaleel -- Executive Vice President-Chief Financial Officer
New company.
Rich Hill -- Morgan Stanley -- Analyst
We changed our name. Hey guys. First of all, I want to thank you for your bridge on the same-store NOI guide, that's really, really helpful and I wish some of your peers would take your lead on that. So look I want to go back to capital allocation and maybe you can just update us on how you're looking about that as it relates to the right side of the balance sheet. And you obviously have a lot of options with refinancing loans, maybe negotiating modifications, buying back senior unsecured. Can you just walk through how you're thinking about that right now?
Stephen D. Lebovitz -- Chief Executive Officer
Sure. Well, congratulations, I guess or maybe not for the new firm. But I mean that's a -- like I said, the balance sheet and looking for ways to improve it is priority one and definitely something we're really focused on, and we have our new directors that joined us for their first meeting in November. We set up our Capital Allocation Committee. Before then, we were focused on it. We're still focused on it. And our new directors, Michael Ashner, Carolyn Tiffany, had been great and very constructive and helpful with ideas. And we also have a really good Board overall, just in terms of financial expertise.
So we've got a lot of support, which is -- we view as a positive. And there's lots of things like you say, across our capital structure that we're looking at, that are worth looking at. Our immediate focus is the secure debt that Farzana talked about, and it's a combination of -- and we made the decision to pay off the two loans with the 25% debt yields, which we think was a smart move for various reasons. And we just made those payoffs yesterday, and that -- and plus the open-air center, so that was roughly $85 million of addition to the unencumbered pool that we did through that move. So that -- that's an important capital decision that we made.
We're also looking at all the secured maturities closely for 2020 and 2021 and we had discussions with lenders for maturities that are coming due, because lenders are -- want to be proactive and want to get kind of ahead of the maturities, and we've had some success that we're working through or on those, and that's a big priority for us from a capital point of view, because that's our most immediate maturity.
We're looking at our investments, obviously every dollar counts. The decision to suspend the dividends, preferred and common was not something at all we took lightly. It was very difficult, but we feel it was the right move, because it does preserve the cash flow that we can use for redevelopments. And for capex and tenant allowances and leasing and what we need to do to stabilize our revenues, because that's our other priority, so that's a big focus.
And then we're looking at our other maturities -- we don't need [Phonetic] unsecured maturities until December 2023. So that's 3.5 years out. So that's not something that we're -- we have an immediate concern with, but we're talking and thinking about that. So, that's a long answer, but hopefully it just gives you a sense of how focused we are on this.
Rich Hill -- Morgan Stanley -- Analyst
Got it. That's very helpful, and I think that's all for me. Thanks, guys.
Stephen D. Lebovitz -- Chief Executive Officer
Thanks, Rich.
Operator
The next question comes from Christy McElroy from Citigroup. Please go ahead.
Christy McElroy -- Citigroup -- Analyst
Hey, thanks. Good morning, guys. I just wanted to follow-up on Richard's question. Just with all these restructuring talks happening, how much in total could we be -- should we be thinking about in terms of those efforts that adding up to in terms of debt forgiveness? And just beyond those individual mortgage loans that you're working on, is there an even bigger effort maybe to make out then in your debt? Just to follow-up on your comments, whether it's buyback bonds or just a larger restructuring effort on your -- on the secured debt that you just completed last year?
Stephen D. Lebovitz -- Chief Executive Officer
Yeah. Hi, Christy. So like I said, we're really focused primarily on the secured maturities that are happening in this year and next year and even into 2022. The unsecured is out there, 3.5 years. So I can't give any numbers as far as what -- when would anything would mean. But we're trying to figure out ways to improve our balance sheet and reduce leverage. That's been part of our strategy, and we're going to continue to do that. And that's kind of where it stands right now.
Christy McElroy -- Citigroup -- Analyst
And then in regard to your debt covenants, how are you thinking about compliance threshold specifically in regards to the consolidated income to debt service charge coverage ratio just in light of continued pressure on NOI and overall income levels? Where do you expect to be on that ratio this year?
Farzana Khaleel -- Executive Vice President-Chief Financial Officer
Hi, Christy. I think we did -- it went down just a little bit from last quarter due to these -- the EBITDA declining, but we still have a lot of room. We will continue to improve by reducing our debt levels, that's one way for us to improve the coverage ratio, and that's what we're trying to do. Also, when we pay off these high rate interest loans just recently as we did yesterday, that gives us a -- and then borrowing on our lines at a lower cost of capital that helps. So those are the things we're doing. I mean, yeah, the interest expense is one thing and then income is on the other side. So we're trying to work both the numerator and the denominator.
Michael Bilerman -- Citigroup -- Analyst
It's Michael Bilerman. Stephen, it sounds like it was on the secured side. You're trying to work these payoffs. Can you talk a little bit about the unsecured and whether you've approached to try to have some sort of workout on that debt? Because arguably, if you're able to reduce debt at a discount, it would provide a little bit more equity cushion, given where your stock is at?
Stephen D. Lebovitz -- Chief Executive Officer
Hey, Michael, thanks. First of all, thanks for the question. I think you know it's not something we can answer or would answer. It's really not something that -- like I said, we're looking at everything in our capital structure, but the immediate focus is the secured. And we follow what's out there. But it's not something that really there is anything to comment on. And as soon as we have something to say, we -- I think, you know that, when we're ready, we're out there, we're fully transparent about our plans. But on the other hand, when there's nothing to say, we just don't say it.
Michael Bilerman -- Citigroup -- Analyst
Does your equity market cap have -- from a net worth perspective, have any implications for any of your secured or unsecured borrowings, right -- I mean, and which is out of your control, right? I mean, you can't control your stock price, but arguably, given how depressed it is, is there a minimum work tests that you potentially could breach should the shares continue to fall?
Stephen D. Lebovitz -- Chief Executive Officer
No, there's nothing -- none of our loan covenants and none of our loans have any minimum net worth tests on the equity or they're not tied to the trading price of the equity. So that's not something that's going to trip us up.
Michael Bilerman -- Citigroup -- Analyst
Okay. Thank you.
Stephen D. Lebovitz -- Chief Executive Officer
Thanks, Michael.
Operator
The next question comes from Vince Tibone from Green Street Advisors. Please go ahead.
Vince Tibone -- Green Street Advisors -- Analyst
Hey, good morning. I just have a few more questions on the balance sheet. I'm just trying to get a sense of, just given where your bonds are trading, why wouldn't you use this more than opportunity to de-lever, whether it's putting -- even just using a line of credit to buy back some bonds in the outlet market or putting some debt on your community and associated centers, which are still readily financeable? It seems like you have this unique arbitrage here when you can use $1 of secured debt or a different type of debt to pay down $2 of debt from the unsecured maturities. I'm just -- will you walk me through your thought process on that and how you think about where the bonds are trading? Is this an opportunity for you to de-lever in a creative way?
Stephen D. Lebovitz -- Chief Executive Officer
Hey, Vince. Yeah, you're right. And you bring up really good points, and there is a lot of different places in our capital structure where there is opportunity, where there is arbitrage, and we think about and we talk about it. We want to make sure that we got the capital available for our properties, because we have to stabilize the revenues. That's really a priority for us in terms of accessing the capital markets going forward.
So having the capital to make sure that we're getting our leasing deals done that make sure we can do these redevelopments has been our top use. But you're right there is a lot of ways we can de-lever and we talked about all that, and we think about it and the points you raised are very valid.
Vince Tibone -- Green Street Advisors -- Analyst
Okay. That makes sense. And just maybe on that like, what is your forecast for free cash flow this year after all cutbacks and redevelopment? Obviously, there is no dividend. So is this -- are you at a self-funding point here or you still need to raise capital to pay for some of the box redevelopments?
Stephen D. Lebovitz -- Chief Executive Officer
Yeah, so we are self-funding. That was a big factor in the decision to suspend both the preferred and the common. So we got the capital without having to do dispositions or be forced to access the capital markets in another way.
Vince Tibone -- Green Street Advisors -- Analyst
Okay. Got it. And one last quick one for me, just -- I'm just curious why you didn't sell maybe more of the outlet shops -- at Atlanta. I mean, clearly that's a horizon. This horizon I want to take the full things. It seems like that could be another $70 million of proceeds or proceeds/debt reduction that you could have raised there? Any color there will be helpful.
Stephen D. Lebovitz -- Chief Executive Officer
So it's a -- we wanted to maintain the 50% ownership. It had very strong growth in both sales and NOI. And we need to preserve, and our portfolio is strong property. So we thought it was a win-win transaction for us, because we are -- we are able to raise capital, reduce -- take some debt off our balance sheet, but then keep a property that's going to be stable long-term and growing in the portfolio. So that was really our thought process.
Vince Tibone -- Green Street Advisors -- Analyst
Got it. Thank you. That's all I have.
Stephen D. Lebovitz -- Chief Executive Officer
Thanks.
Operator
The next question comes from Michael Mueller from JPMorgan. Please go ahead.
Michael Mueller -- JPMorgan -- Analyst
Yeah, hi. I was wondering -- excuse me, sorry about that. I was wondering, can you talk a little bit about the, I guess the disconnect. When we look at sales growth over the past couple of years, it's positive and NOI growth is obviously upon in the other direction. But can you just talk about how bridge those two dynamics a little more?
Stephen D. Lebovitz -- Chief Executive Officer
Yeah. So I mean, it's -- you got these two different categories of retailers, and we're seeing growth from the ones that have made the adjustments into the world -- the way the retail world operates now, and they've figured out how to appeal to shoppers that want to buy digitally or pick up in stores. And they're doing well and prospering, and we have plenty of those in our portfolio. And you've got stores like Bath & Body Works that are doing really well in Vance and H&M has had great sales growth, and they've made adjustments.
So we're seeing that, but we're also seeing retailers that -- we had the bankruptcies last year and the store closings. I mean, we had over 200 stores closed in our portfolio, 900,000 square feet. So those are the ones that we talked about previously Gymboree and Payless and things you remembered in Charlotte Russe and Charming Charlie and they were a drag on sales, now they're out and hopefully the ones who replaced them with are going to do better and have better sales results.
Michael Mueller -- JPMorgan -- Analyst
But when you typically give a rank card or an abatement, are the sales there, if we would dig into that three, whatever, does -- sales per square foot number, are those typically weighing on that number? And it's just you have other tenants that are far greater positive? It's just a very just different dynamic in terms of the magnitude.
Stephen D. Lebovitz -- Chief Executive Officer
It's -- I mean, every rent negotiation is unique. It depends on the retail or it depends on the way they look at their occupancy cost. But if their sales decreases, yeah, it's definitely going to weight on our results.
Michael Mueller -- JPMorgan -- Analyst
Got it. And one quick question. The 89.8% year-end occupancy level, where do you think that could go to by the end of 2020?
Stephen D. Lebovitz -- Chief Executive Officer
So, yeah, we intentionally don't make occupancy guidance or our part of our guidance. It just depends on what happens with certain retailers that the jury is still out. So for now, we'll hold off. Obviously, hopefully, we'll make progress. And if we continue to do the leasing volume that we're doing, and we don't have the same range of bankruptcies, we'll definitely make progress.
Michael Mueller -- JPMorgan -- Analyst
Okay. That was it. Thank you.
Stephen D. Lebovitz -- Chief Executive Officer
Thanks, Michael.
Operator
The next question comes from Jim Sullivan from BTIG. Please go ahead.
Jim Sullivan -- BTIG -- Analyst
Thank you. Stephen you've been very clear about the focus in terms of the debt balances and looking for some kind of flexibility there or concessions there. I wonder if you would talk about what flexibility if any, or what options if any, the Company might have with respect to the preferreds, given that they're selling at such a discount to par?
Stephen D. Lebovitz -- Chief Executive Officer
I mean, there, like I said, we look at everything across the capital structure and you're right that preferreds are trading at seed discount or low level, depending how you look at it. It's really -- in terms of our capital, it's preferred. So it's probably not the most immediate focus. But we're looking at everything.
Jim Sullivan -- BTIG -- Analyst
And in terms of the guidance, just to be clear, the guidance, I know you suspended the dividend on the preferred. The guidance provides for the dividend on preferred, because it's cumulative?
Farzana Khaleel -- Executive Vice President-Chief Financial Officer
Yes, it is undeclared. So we do include it in our guidance.
Jim Sullivan -- BTIG -- Analyst
Okay. Very good. Thank you.
Stephen D. Lebovitz -- Chief Executive Officer
Thanks, Jim.
Operator
There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Stephen Lebovitz for any closing remarks.
Stephen D. Lebovitz -- Chief Executive Officer
Thank you again for your time this morning. And if you have any further questions, feel free to reach out after. Have a good day.
Duration: 37 minutes
Call participants:
Katie A. Reinsmidt -- Executive Vice President-Chief Investment Officer
Stephen D. Lebovitz -- Chief Executive Officer
Farzana Khaleel -- Executive Vice President-Chief Financial Officer
Craig Schmidt -- Bank of America -- Analyst
Rich Hill -- Morgan Stanley -- Analyst
Christy McElroy -- Citigroup -- Analyst
Michael Bilerman -- Citigroup -- Analyst
Vince Tibone -- Green Street Advisors -- Analyst
Michael Mueller -- JPMorgan -- Analyst
Jim Sullivan -- BTIG -- Analyst
