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Retail Opportunity Investments Corp (NASDAQ:ROIC)
Q1 2020 Earnings Call
Apr 23, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Retail Opportunity Investments 2020 First Quarter Conference Call.

[Operator Instructions]

Please note that certain matters discussed in today constitutes forward-looking statements within the meaning of federal securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the company can give no assurance that these expectations will be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results to differ materially from future results expressed or implied by such forward-looking statements and expectations. Information regarding such risks and factors is described in the company's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K. Participants are encouraged to refer to the company's filings with the SEC regarding such risks and factors as well as for more information regarding the company's financial and operational results. The company's filings can be found on its website.

Now I would like to introduce Stuart Tanz, the company's Chief Executive Officer.

Stuart A. Tanz -- Chief Executive Officer

Thank you. Here with me today is Mike Haines, our Chief Financial Officer; and Rich Schoebel, our Chief Operating Officer. We'd like to start by expressing our gratitude to all of you for taking the time to join us today. We know that conducting business is not easy during this stressful and difficult time. We hope that you and your families are doing well and have remained safe and healthy. Turning to our business. Our objective today is to provide a candid, open assessment of the state of our company and the important prudent steps that we are taking to protect our business during this crisis as well as what we are doing to protect the company as it relates to the potential long-term impact. First, though, in terms of our first quarter results, our business performed largely in line with expectations, if not a touch above in some areas. FFO was $0.29 a share for the first quarter. Our portfolio lease rate was well above 97%, again, close to another record high. Same-center NOI increased by 3.3% in the first quarter, and we again posted strong releasing spreads to 22.5% on new leases and 8% on renewals.

While we posted in a strong first quarter, what's not apparent in our results is that up until the pandemic hit, we were on track to have a record-breaking first quarter driven by the strong demand for space as well as the strong underlying fundamentals of our portfolio and the markets we operate in. While these fundamentals were suddenly frozen six weeks ago, our business has held up remarkably well, and we are confident that it can bounce pat once this passes, in large part because of our long-standing core strategy, of focusing on the daily necessity sector. In fact, 79% of our tenants based on GLA have been designated as the central businesses per state guidelines, of which over 89% are currently open and operating as of April 17. Additionally, 98% of our portfolio is grocery and/or drug-anchored, which have all been extremely busy during this crisis serving their communities. While our shopping centers are performing remarkably well, given the unprecedented circumstances, we are not immune to the extraordinary challenges that retail landlords are facing across the country today. As of April 17, 70.4% of our tenants based on GLA were open and operating, meaning 29.6% of our tenants are temporarily closed.

In terms of revenue, today, we have received approximately 68% of our April billed receipts on a cash basis, which includes base rent and CAM. Fortunately, that 68% is sufficient to cover our normal monthly average fixed costs, including property operating expenses, G&A, debt service and cap adds. Additionally, as many of you may have seen in the news, back on April 1, the governor of Oregon issued an order that effectively allows all commercial tenants the right to not pay any rent from April through June. Notwithstanding that order, to date, over 70% of our Portland tenants have paid their rent and CAM as usual, which we believe speaks volumes as to the benefits of our daily necessity focus. With respect to those tenants that are temporarily closed and have requested help, we are approaching each tenant's situation carefully and thoughtfully, doing our best to arrive at reasonable solutions as the stay at home order continues. Fortunately, to date, no tenant that is temporarily closed has told us that they are going to close for good. In fact, the feedback has been quite the opposite thus far.

Additionally, in terms of our anchor tenants, we have limited exposure to traditional big-box retailers in the soft goods, theater and traditional fitness sectors. So in terms of the potential long-term impact to our portfolio, if there were to be some tenant fallout in these sectors, the impact to our business should be manageable.

With respect to the near-term impact that we are experiencing, given that the stay at home order is still in effect, we don't know yet what the impact be in May or June. On the positive side, tenants that are currently closed are all poised and ready to reopen. In terms of the government's phased approach to reopening the economy, when the West Coast enters Phase 1, then 99.7% of our tenant base should be allowed to be open following social distancing and other guidelines. The remaining tenants, which are only five tenants that operate day care centers, should be allowed to reopen in Phase 2. As we sit here today, the West Coast states have not yet said when they will lift their stay at home orders and begin Phase 1. Additionally, once they do, we expect it could take a bit more time in certain sectors for customers to return to their normal shopping, recreational and dining patterns. With this in mind, we have taken important steps to enhance our financial position with the goal of having the wherewithal and flexibility to continue running our business and portfolio effectively and efficiently.

One of the steps we have taken is to temporarily suspend the company's quarterly dividend. Before the pandemic hit in mid-March, we had previously declared our normal quarterly dividend, which the company paid on March 30 as previously committed. Again, given the unprecedented circumstances and given that the stay at home orders are still in effect, it remains to be seen how May and June could unfold. Therefore, we believe that not declaring a second quarter dividend is the prudent course of action at this time. Going forward, we intend to carefully evaluate future dividend declarations each quarter.

Now I'll turn the call over to Michael Haines, our CFO, to discuss where things stem from a financial perspective. Mike?

Michael B. Haines -- Chief Financial Officer.and Vice President

Thank you, Stuart. Over the past six weeks since the pandemic hit, we have been carefully analyzing the company's potential liquidity needs in terms of this year as well as in 2021, taking into account debt maturities, potential revenue versus fixed expenses and potential retenanting costs. In terms of debt maturities, fortunately, we have 0 debt maturing for the next two years. In fact, in terms of unsecured debt, we don't have any unsecured debt maturing for approximately the next four years until late 2023. In terms of secured debt, we only have a couple of small mortgages totaling $23 million, maturing two years from now in mid-2022 and the notes secured debt maturing again until 2024. Furthermore, we only have four mortgages in total across our portfolio.

Thankfully, we are not being burdened with mortgage servicer issues like so many shopping center landlords currently are. We've always steered away from using mortgage debt and instead utilize low-leverage, long-term unsecured debt to build our business.

In terms of revenue versus fixed expenses, as Stuart indicated, for the month of April, we've received to date sufficient cash revenue to cover our normal monthly average fixed costs. But as Stuart also noted, we don't yet know what May and June will be like as well as how long it might take for cash receipts to build back up to their prior level. As such, our liquidity analysis is based on a range of conservative assumptions and also includes factoring in meaningful retenanting costs in the event there's tenant fallout. Taking all of these factors into consideration, we have drawn a total of $130 million on our credit facility. Again, the goal being to have the wherewithal to meet our potential cash needs through this year and 2021 as well as being able to continue staying in compliance with our debt covenants.

With $130 million drawdown, we currently have approximately $233 million outstanding on our $600 million credit line which you may recall, we just reupped a few months ago, back in December, where we lowered the borrowing spread on our line down to 90 basis points over LIBOR and extended the maturity for another four years to February 2024. Lastly, in light of the current circumstances, we have withdrawn our previously stated FFO guidance for 2020. We hope that when the stay at home order are lifted and all tenants can reopen, we will have greater clarity as to the impact in our business and be in a position to provide new guidance.

Now I'll turn the call over to Rich Schoebel, our COO. Rich?

Richard K. Schoebel -- Chief Operating Officer

Thank you, Mike. As Stuart noted, in the face of extraordinary challenging circumstances, our portfolio has continued to perform remarkably well. All 88 of our shopping centers continue to be open and operating following local, state and federal guidelines and mandates. And as Stuart highlighted, 86 of our 88 shopping centers are grocery and/or drug-anchored, all of which are open.

In our discussions over the past several weeks with our grocery tenants, we have consistently heard that they're experiencing record sales growth across the board, in some case, by as much as 50% to 80%, incredible numbers. Additionally, one of our grocers, that is one of the strongest national grocers in the country who had previously indicated to us a few months back that they were considering relocating their store, but now they're eager to put in place a new, very long-term lease and they now plan to invest significant capital to enhance their space.

In terms of our overall tenant base, as of April 17, 70.4% of our tenants based on GLA were open and operating. Breaking that down between anchor and nonanchor. As of April 17, 78% of our anchor tenants are open and 60% of our nonanchor tenants were open. Furthermore, as of April 17, 75% of our national tenants were open, 84% of our regional tenants were open and 55% of our local tenants were open. In our supplemental, we provide a breakdown by tenant type in terms of what percent is open.

The two tenant types that have been affected the most in our portfolio in terms of temporary closings are the tenants in the entertainment and fitness sector. All of our entertainment tenants are currently closed. Fortunately, as Stuart noted, our exposure is limited. Out of our roughly 2,000 tenants in total across our portfolio, we only have 10 entertainment tenants, which together only account for 1.6% of our total GLA and of the 10 only four movie theaters. In our discussions thus far, movie theater tenants are working hard at developing new strategies to address social distancing concerns, and they are making plans for big reopenings. While it may take time for their patronage to return, it is clear to us that they are all gearing up for the challenge.

In terms of fitness tenants, only 3% of our fitness tenants based on GLA are currently open. Similar to the entertainment sector, we have been careful over the years to manage the type of fitness tenants that we have in our portfolio. Today, the vast majority of our fitness tenants are smaller boutique-type concepts, in the 2,000 to 3,000 square foot range, many of which focus on small group classes and one-on-one training. Once these boutique tenants reopen, it's anticipated they will be able to function for the most part as before, given that their prior normal operations were largely consistent with new social distancing practices. As for the traditional fitness gym operator, similar to movie theaters, they're all planning new strategies aimed at getting their members back into their gyms quickly.

The one retail segment that everyone is focused on is the restaurant sector. In terms of our portfolio, our restaurant tenants generally fall into three categories: first are those that have drive-through capabilities, tenants like Starbucks, Chick-fil-a, Burger King, just to name a few, all of which are currently open and continue to generate solid sales, actually better than what we they had expected. The second category includes those tenants whose businesses have always been take out and delivery focused. These tenants are also all open and actually experiencing stronger-than-expected sales. In fact, just as an example, one of our pizza take out tenants told us last week said they're experiencing record sales like never before and that they are doing everything they possibly can to keep up with the demand as they view it as an opportunity to grow their loyal customer base.

The third category, which accounts for about 1/3 of our restaurant tenants, are the traditional casual dining restaurants. Not surprising, most of these are currently closed. That said, many of these restaurants are using the downtime to develop new menu items and a variety of other things including some that are actually doing interior upgrades so that when they reopen, they're best positioned to bring back their loyal customers. While there's a lot of speculation currently as to whether or not seating capacities will need to be reduced, given that our portfolio is situated in suburban communities, our casual dining tenants are typically mid-priced restaurants that only reach capacity a couple of nights a week and then only for a peak hour or so. In other words, going forward, social distancing should not be an insurmountable issue for these tenants.

So while it may take time to know whether or not there will be long-term impact to the overall restaurant sector, we are hopeful that some adjustment the sector can bounce back. Additionally, given that only about 1/3 of our restaurant tenants are traditional casual dining restaurant, we should be able to manage any fallout if there were to be some. Turning now to how we are working with tenants that are temporarily closed. As Stuart noted, as of April 17, 29.6% of our tenants based on GLA are temporarily closed. We have been in contact with all of these tenants, expecting that many could need some kind of rent deferment. With respect to anchor tenants that are temporarily closed, they're currently focused on dealing with the immediate challenges of being closed, things like employee and inventory issues. So a lot of them haven't yet come to us with a specific request. Thus far, we have agreed with one anchor tenant, a fitness center to defer 75% of their base rent for April and May, aggregating about $45,000 in total rent deferment for the two months.

In terms of nonanchor tenants that are temporary closed, a number of them have been proactive with us in requesting rent deferment, ranging from deferring a portion of their monthly rent to deferring the full amount. Today, we have agreed to defer a total of $205,000 of rent in aggregate for April through June. As part of agreeing to the rent deferment, the tenants are required to stay current on CAM, and in most cases, are required to pay the deferred rent starting in July in the form of monthly installments amortized over six months, July through December. Additionally, if any of these tenants received financial assistance from the government, they are required to pay us the deferred rent in full at that time. In fact, we were just notified by several tenants that they will no longer need to rent defer because they have received a loan grant from the government and will now be paying the rent in full. Generally speaking, the process of working with tenants on rent deferment is very fluid and difficult to predict where it could end up as we sit here today. As an example, there are some tenants where we have agreed in principle to the terms of the rent deferral, and we have sent the paperwork, only to have the tenant contact us that they have changed their minds and will be paying the rent as normal. Additionally, as Stuart and Mike noted, given that there's no set date yet by the states as to when the stay at home orders will be lifted, we do not know yet what May and June could bring in terms of where this rent deferment process will ultimately end up.

With respect to ongoing leasing activity, since the pandemic hit six weeks ago, while the number of deals being signed has slowed dramatically, there are still a lot of retailers, including national, regional and local tenants actively looking at sites, online virtually that is. In fact, there are a number of opportunistic retailers in the marketplace today that are bullish on seeking key sites that they've had their eyes on for years and couldn't get into. If these sites were to become available, they are ready to seize the opportunity. We view all of this activity and interest as a possible positive indicator of how things might bounce back once this passes. In terms of actual execute deals during the pandemic, our activity has mostly been on the renewal front thus far, although we also been signing some new leases, too. In terms of renewals, tenants that we had expected to renew before the pandemic hit have done so, including just recently renewing a national off-price apparel anchor retailer whose stores are temporarily closed. And we are also in the midst of negotiating with the same retailer renewing another anchor lease of theirs early as part of signing a new long-term anchor lease for one of their other brands.

In terms of new leasing activity, most of it is with smaller tenants thus far, primarily in the service sector, but we also recently signed a 53,000-square foot new lease with a strong grocer. Looking ahead at our scheduled anchor lease expirations for the remainder of the year, when we have one anchor lease scheduled to expire, which is with one of the largest national grocers. We are currently in discussions with the tenant about a long term renewal. Like the other grocery that I mentioned, this grocer is also very eager to renew their lease.

Additionally, looking at our anchor lease expirations for next year, 2021, we have 13 anchor leases expiring in total. The bulk of these 10, in fact, are with grocery and drug stores. The other three leases are with tenants that historically have been very strong performers at our properties, and we expect that their business will pick up back once this passes. So just as we don't have any debt maturity concerns, as Mike highlighted, we also don't have any concerns as it relates to the scheduled anchor lease expirations for the next two years. Lastly, we in light of roughly 1/3 of our GLA being temporarily closed, we have appropriately scaled back a variety of property services to be in balance with the current needs of those tenants that are open, which will help reduce property operating expenses until all tenants are back up and running. Additionally, we have postponed for the time being, all nonessential building improvements and landscaping projects.

Now I'll turn the call back over to Stuart.

Stuart A. Tanz -- Chief Executive Officer

Thank you, Rich. With respect to acquisitions, in light of the uncertainty as to both the near and potential long-term impact from the pandemic, we have suspended all acquisition activity including the pending transaction that we discussed on our last call in February. In terms of market activity, there has been essentially nothing traded in the grocery-anchored center sector on the West Coast for the past month. That said, once this passes and the market opens back up, we do believe that the grocery-anchored sector will continue to be a sought-after property type in the retail industry, perhaps even more so going forward. In terms of dispositions, we have one pending sale that is stalled for the time being as the virus financing has been put on hold. The buyer continues to be in contact with us, and they hope to move forward with buying the property once this fully passes.

In terms of our densification program, we are continuing to work with city planners and continue to make progress with the entitlement process on the three densification projects that we have been pursuing.

Lastly, I would like to summarize what distinguishes ROIC and is important to remember during this crisis: all of our 88 shopping centers are open and operating; 98% of our portfolio is grocery and/or drug-anchored; our tenant base is diverse, focused on daily necessities, and they are resilient; 95% of our portfolio is unencumbered; our balance sheet is solid with essentially no debt maturing for approximately the next four years; and perhaps most important, is our West Coast and grocery-anchored shopping center expertise. For over 25 years, we've been focusing exclusively on the West Coast and in the grocery-anchored sector. During that time, we have successfully operated and built value through a number of different and challenging circumstances. While this current crisis is truly nothing anyone has seen before and will undoubtedly have a lasting impact on us all, we remain confident in our ability to forge ahead and continue building long-term value.

Now we'll open up the call for your questions. Operator?

Questions and Answers:

Operator

[Operator Instructions]I show our first question comes from Collin Mings from Raymond James. please go ahead.

Collin Mings -- Raymond James -- Analyst

Good morning calling a good morning out there, Stuart. First, from me, just on the dividend. Can you maybe just expand on the decision to fully suspend the distribution for now as opposed to just reducing it. And then more broadly, along these lines, can you just walk us through how you intend to balance capital allocation alternatives moving forward. The company bought back some stock for a while there during the quarter and clearly now has moved more to toward preserving liquidity. Just once your REIT distribution requirements are met, just how do you plan on deploying that remaining cash.

Stuart A. Tanz -- Chief Executive Officer

Well, I'll deal with the dividend first in terms of reducing the dividend. So when we received enough cash revenue in April while we received enough cash revenue in April to cover the monthly average fixed costs, there was still not a lot of free cash flow beyond that. Additionally, given that the stay at home order is still in place on the West Coast, we just don't know yet what May and June might look like in terms of cash flow. So we could end up with a lot of cash flow for the second quarter. But of course, no one we suspended it temporarily for the quarter. But assuming tenants can open back up at some point here in the next month or two, and cash revenue returns to normal levels as we head toward the third quarter, we could be back paying a dividend by the third quarter. Mike, do you want to talk about the capital allocation?

Michael B. Haines -- Chief Financial Officer.and Vice President

Sure. As you know, we disclosed, we did the drawdown for liquidity purposes. It's really going to be dependent upon the duration of this of the stay at home orders. And once the tenants are back up and running, we can assess our cash flows, we can manage around that. As far as distribution requirements, we fully intend to stay REIT compliant in that respect. We're not sure it's really too early to tell what the 2020 taxable income is going to look like. So as we if we don't feel the need to have that cash sitting on the balance sheet as we move through the year, then we'd would simply delever with it, take the line balance back down.

Collin Mings -- Raymond James -- Analyst

Yes. I guess that's why I was going to the second part of my question. Just as you think about now, kind of having the opportunity to reset the dividend, if you will, going forward, would the intention be maybe a more conservative payout ratio moving forward? And keeping some of that excess cash flow to maybe accelerate delevering? Or again, potentially buy back stock, given where the stock trades, presuming it's still below your NAV. Just trying to think through kind of how you're balancing those different alternatives on a go-forward basis.

Stuart A. Tanz -- Chief Executive Officer

Well, dividend policy, obviously, is conducted in at the Board level. But certainly, if things do open up quicker than we think, and things do normalize quicker than we think, then we certainly would look at the payout ratios at that point and then determine at that point, what's right in terms of the dividend. So it's just tough to answer the question right at this moment, but it's something, of course, we'll be looking at going forward.

Collin Mings -- Raymond James -- Analyst

Understood. Switching topics here, just recognize there's a lot of uncertainty here. And again, that's clear in the prepared remarks, Stuart. But just based on your conversations with tenants, in some of the moving pieces you discussed on the permit process and as well as some of the government stimulus measures that have come into place here. Would you expect a sharp fall off in May relative to what you collected in April? Or is kind of your expectation right now that you'd probably be a similar level?

Stuart A. Tanz -- Chief Executive Officer

Again, it's tough to predict. The April, I think, has been better than what we anticipated. But at this point, it's just tough to tell you that where May and June are going to end up. So it's just I'd love to be able to answer the question. But again, it just depends on how quick things open and how fast the current tenant base that aren't

Open gets stabilized and open for business.

Collin Mings -- Raymond James -- Analyst

Okay, thanks. I'll turn it over.

Operator

Thank you. Our next question comes from Todd Thomas from KeyBanc. please go ahead.

Stuart A. Tanz -- Chief Executive Officer

Good morning.

Todd Thomas -- KeyBanc -- Analyst

Hi, thanks. Good morning. hope everyone's well. First question for Mike well, I guess, Stuart, maybe, too. You mentioned that 68% of April billed receipts on a cash basis is sufficient to cover your normal monthly fixed cost, I guess, G&A, capex and debt service. Have you stressed the model and looked at variable expenses a little bit harder to see how much further that 68% can go before you are cash flow negative?

Stuart A. Tanz -- Chief Executive Officer

I mean, we've done a lot of sensitivity analysis. And again, it will just vary depending on how the receipts look in terms of May and June. I would think that it would have to go down a pretty big amount for us to really get into what I would call a very stressful situation.

Todd Thomas -- KeyBanc -- Analyst

Okay. Are you looking at other ways to cut costs? You suspended the dividend. Are there other cost-saving initiatives that you're contemplating today?

Stuart A. Tanz -- Chief Executive Officer

The answer is yes, we're always looking at cost-saving initiatives, day in and day out. It's we run a pretty lean and mean organization here, as you probably know. In fact, even from a G&A perspective, we have the lowest G&A to revenue ratio among our peers. And at the property level, Rich and his team have done a great job in terms of the looking at expenses. So we continue to look at wherever we can squeeze dollars whether that is reducing capex, stop building paths out, things like that. But we're constantly looking at that day in, day out. So that continues to be also a moving target, but we continue to make progress on that front.

Todd Thomas -- KeyBanc -- Analyst

Okay. And then, Mike, just to be clear, I wasn't sure based on your comments, but is the $130 million that you drew down online, is that your current assumption for the cash that you expect to need potentially through 2021 to kind of bridge from where we're at today to sort of the reopening and normalization here. Is what kind of assumptions are you talking about? Is that what you were trying to communicate in your works around the drawdown?

Michael B. Haines -- Chief Financial Officer.and Vice President

Yes, that's exactly what I was referring to. We did we analyzed our liquidity needs all the way through the end of next year. Hopefully, everything will reopen well before that, maybe hopefully this year. But we want to be conservative and look at our needs all the way through 2021, which includes our operating fixed costs, some retenanting costs and such. So that takes us through the balance of next year.

Todd Thomas -- KeyBanc -- Analyst

Okay. And included in that or what sort of assumptions are you making in terms of the normalization of tenant sales and/or potential fallout?

Michael B. Haines -- Chief Financial Officer.and Vice President

We took a pretty conservative approach as far as reductions in revenue and kind of ran with that run rate and then looked at what we would need to operate beyond that. So it kind of takes all that into consideration.

Todd Thomas -- KeyBanc -- Analyst

Okay. All right.

Michael B. Haines -- Chief Financial Officer.and Vice President

Thank you.

Operator

Thank you.Our next question comes from Christy McElroy from Citigroup. please go ahead.

Richard K. Schoebel -- Chief Operating Officer

Good morning.

Christy McElroy -- Citigroup -- Analyst

Good morning. Good morning, guys. Thanks. So, Just in regard to the 67.5% of April base rent and campaign, could you provide the rent only number given that CAM collection can sometimes be paid in advance. And are the deferred rents that you talked about, the deferred agreements, included in the calculation in terms of what was billed?

Richard K. Schoebel -- Chief Operating Officer

To the second part, yes, what was billed was 100% of everything. So yes to that. And

The rent collection was actually a touch better in terms of a percentage. We included and I can give you that color as well.

Christy McElroy -- Citigroup -- Analyst

Okay, great. And then in regards to restaurants, understanding that it's about 13% of GLA. But what is restaurants as a percentage of ABR? And what was the rent collection for that category in April?

Richard K. Schoebel -- Chief Operating Officer

I think we have the ABR at our fingertips. We can certainly follow-up with you on that. And what was the second part, Christy?

Christy McElroy -- Citigroup -- Analyst

Just what was the rent collection for restaurants in April for that category?

Richard K. Schoebel -- Chief Operating Officer

For rent collections for restaurants, looked like it was a little over 50%, closing in on 52%.

Christy McElroy -- Citigroup -- Analyst

Okay. Yes, that percentage of ABR information would be really helpful. To have? And then just a follow-up on you talked about tenants like movie theaters and restaurants. Preparing for social distancing. But if that results in more limited revenue opportunity for those types of tenants and that reduces the rent that it can pay for potentially a significant period of time. How are you thinking about working with some of those tenants on longer-term rent reductions? Is that something that you're considering?

Stuart A. Tanz -- Chief Executive Officer

I mean, I think the challenge there is understanding what the volumes are going to be. And obviously, there may also be some reduction in cost as it relates the new operations. So we're trying to take a cautious approach to this because I don't think there's any uncertainty. We've have had tenants come to us and say, I can only pay x, but we need to understand how they've arrived at that number because there's certainly no one who can today predict what volumes are going to be. So we're trying to be looking short-term in terms of these deferrals, and but understanding that depending on the volumes that end up being more normalized, we may have to revisit some of these.

Christy McElroy -- Citigroup -- Analyst

Right. Okay. Thank you.

Stuart A. Tanz -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from R.J. Milligan from Baird. please go ahead.

Stuart A. Tanz -- Chief Executive Officer

Good morning, RJ.

R.J. Milligan -- Baird -- Aanlyst

Good morning. Good afternoon on the east coast. I was curious, you guys gave some stats on the amount of tenants that are designated essential that are open and operating on a GLA basis. Do you have those numbers based on an ABR?

Stuart A. Tanz -- Chief Executive Officer

No, we don't.

R.J. Milligan -- Baird -- Aanlyst

Would it be fair to assume that because of most of your anchors are open and operating and take up a larger percentage of the square footage that if it were to be on an ABR basis that it would be actually lower in terms of what's open?

Stuart A. Tanz -- Chief Executive Officer

No. I think it's actually going to be fairly close to the GLA's percentage.

Richard K. Schoebel -- Chief Operating Officer

Kay. Mike, I believe some of the bank covenants on the unsecured line are calculated using current quarter EBITDA annualized. Is there any risk to the covenants in 2Q? And are you currently working with any of your unsecured lenders to modify those covenants?

Michael B. Haines -- Chief Financial Officer.and Vice President

Not currently working with the lenders. We've looked at that and stress tested it to see what kind of ours is it's a GAAP base. So because the rent deferment agreements are not going to be subject to lease modification language, we're still billing the revenue in accordance with the leases on a GAAP basis. So GAAP EBITDA is only going to be impacted if I take a large bad debt reserve in the quarter. And that's going to be largely dependent on the tenant's ability to pay, whether or not they've been able to access government relief programs. And it's a very fluid situation. But from a second quarter GAAP perspective, EBITDA, the line that's really going to largely affected is the bad debt expense estimate that we'll have to come up with by June.

Richard K. Schoebel -- Chief Operating Officer

Got it. And finally, the obviously, there's been a lot of retailers in the news who have the ability to pay rent but have been opting not to pay rent. I'm just curious, especially given your exposure in California, with I think there is a moratorium on evictions, I think, for 12 months following the end of the shutdown. I'm just curious, what sort of recourse do you have with some of these tenants that decide to not pay rent that they actually can't pay rent?

Stuart A. Tanz -- Chief Executive Officer

Well, it has been frustrating. I think you hit it on the butt in terms of what we received in April because there's been a series of tenants that we know that can pay rent and haven't. So we have been as aggressive as we can be, but given the current mandates, there's only so much you can do. So that's been a bit frustrating as I'm sure it will be for the peer group as well. But I think as we move through the balance of the month and into May, I think a lot of that will be somewhat resolved in terms of working with these tenants. It's one big partnership. I mean, we're all in this together, that's the bottom line. So we all have to help each other, and we'll find a way. We'll get through this. And more importantly, I think at the end of the day, I think we'll come out in pretty good shape.

Richard K. Schoebel -- Chief Operating Officer

Okay.

Operator

Thank you. Our next question comes from Jeremy Metz from BMO Capital Markets. please go ahead.

Stuart A. Tanz -- Chief Executive Officer

Good morning, Jeremy.

Jeremy Metz -- BMO Capital Markets -- Analyst

Hey, guys.Stuart, I just wanted to get your thoughts here on the stock buyback you did. If we go back, you've been talking at times about bringing leverage down. You had some acquisitions that were in the works. You had the one, it sounds like under contract, this is all just as of our last month, February. So just wondering on the decision to lever up some and buy back stock, just with what you had going on at the time.

Stuart A. Tanz -- Chief Executive Officer

Yes. I mean, look, I would tell you we're probably more lucky than smart in terms of walking away from that deal because we walked away well in advance of the pandemic hitting. And that was because after underwriting the assets, we just felt that it didn't stand up to the our current criteria or standards. In terms of our buyback, I mean, we started that right as the pandemic was beginning and realized very quickly that it wasn't a good use of our capital. So we stopped that immediately. And I don't see us buying back stock going forward given the issues with liquidity across the sector. So that's where things sit right now, Jeremy, on both fronts.

Jeremy Metz -- BMO Capital Markets -- Analyst

And in terms of the acquisition that you did walk away from, did you have any hard money down that you had to leave? Or were you not yet at that stage?

Stuart A. Tanz -- Chief Executive Officer

No. We had the ability to back out of the contract without a penalty. We actually did it before we went hard.

Jeremy Metz -- BMO Capital Markets -- Analyst

Thank you.

Operator

I show our next question comes from Barry Oxford from D.A. Davidson. please go ahead.

Barry Oxford -- D.A. Davidson -- Analyst

Great. Thanks, guys. Stuart, going back to rent receipts, just real quick, the 68% in April, was all of that kind of cash received from the tenants? Or did some of it come from the security deposit bucket?

Stuart A. Tanz -- Chief Executive Officer

No. All rents. All cash rents and CAM.

Barry Oxford -- D.A. Davidson -- Analyst

Great. Perfect. Perfect. And then my next question, just kind of switching gears a little bit to valuation for grocery-anchored shopping centers. Is it too soon for you to make a comment as far as what's changed? And also in the credit or debt markets, can somebody get debt or mortgage to buy a community center right now? Or is that the of causing very low or no transactions?

Stuart A. Tanz -- Chief Executive Officer

Yes. I mean, I think the bigger issue out there, obviously, is just understanding the NOI going forward and where that NOI might settle in as it relates to the current environment. I do think coming out of this, the one thing that will continue to separate itself in terms of the sector is that the grocery-anchored shopping center will become much more valuable. In terms of looking at the sector. I think the basic necessities, which is something we've been focused on for the many decades, I think as we've always said, is going to continue to be the most sought-after segment of the sector. In terms of financing, from what I've read, and I get hundreds of reports a day in terms of what's going on out there, as I'm sure you do, the financing markets are preliminary closed. Although what we're hearing on the ground is if it's a very strong grocery-anchored center, there is still some financing available. But that's the only segment of retail right now where you can even get or have a conversation as it relates to debt financing.

Barry Oxford -- D.A. Davidson -- Analyst

Then also just along kind of the same lines. So as we come out of that and the markets kind of open back up, do you see the spread between A properties and B properties widening out going forward or?

Stuart A. Tanz -- Chief Executive Officer

Yes.

Barry Oxford -- D.A. Davidson -- Analyst

Yes. So you perceive you're going to perceive a flight to quality?

Stuart A. Tanz -- Chief Executive Officer

Correct.

Barry Oxford -- D.A. Davidson -- Analyst

Okay, perfect. I appreciate the time, guys.

Stuart A. Tanz -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Craig Schmidt from BOA. please go ahead.

Richard K. Schoebel -- Chief Operating Officer

Good morning, Greg.

Craig Schmidt -- BOA -- Analyst

Good morning. Um, you know, Given your comments on rent relief, are you doing any wavering where you can get a change of control or a lease term extension?

Richard K. Schoebel -- Chief Operating Officer

Yes. I mean, Craig, that's it really depends on the situation. There has as I think Stuart mentioned in his prepared remarks, we're treating each one of these on an individual basis. We are trying to get a good understanding of the current business operations and the future plans for the tenant. But if there's a near-term expiration to deal with or an onerous provision in the lease that has been holding our leasing team back or something like that, we are addressing it all at the same time.

Stuart A. Tanz -- Chief Executive Officer

Yes. I mean, remember, we're not giving rent relief or giving rent deferment, and we are looking at cotenancy, exclusives. I mean everything within a lease and dealing with our tenant base, so that we do end up giving rent deferment, we get, hopefully, more than just the deferment as it relates to the way we're negotiating with our tenant base. So this actually, in my view, could open up a bit of opportunity longer term in terms of addressing both cotenancy and exclusives.

Craig Schmidt -- BOA -- Analyst

Okay. Great. And then when did you draw the $130 million on your facility?

Michael B. Haines -- Chief Financial Officer.and Vice President

Craig, it's Mike. We drew some of it at the very end of March and then an additional amount in mid-April.

Craig Schmidt -- BOA -- Analyst

Okay. I guess when I look at the cash and equivalents at the end of March, it's $63 million, and now it's $133 million. Is that the two tranches there?

Michael B. Haines -- Chief Financial Officer.and Vice President

Yes.

Craig Schmidt -- BOA -- Analyst

Okay. Great. And then thank you for the status of tenant base at the table at the end of your supplemental. I just wondered what tenants are included in the off-price category. I would have thought TJX, and Ross and Burlington but obviously, that's not the case.

Stuart A. Tanz -- Chief Executive Officer

Yes. Those tenants are in the apparel category. Off-price is things like Big Lots and that sort of thing.

Craig Schmidt -- BOA -- Analyst

Okay, great. Thank you.

Stuart A. Tanz -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Wes Golladay from RBC Capital Markets. please go ahead.

Richard K. Schoebel -- Chief Operating Officer

Good Mooring.

Wes Golladay -- RBC Capital Markets -- Analyst

A morning guys.Looking at that 30% of the tenants that aren't paying, going back to R.J.'s question, how big is the group for the can pay but not paying? And is there any cotenancy in there?

Richard K. Schoebel -- Chief Operating Officer

And I think it's a touch hard to quantify as a percentage. Everybody who hasn't paid has been contacted by us, and the conversations have been started. Some of those contacts have been in the form of a demand notice, and some of them are in the form of a phone call. The ones we think can pay are getting the demand notices. And that is generating a very quick phone call back. And so we are all over those tenants, we believe, have the ability to pay, we are, as we said earlier, looking at every case individually, we need to understand their access to capital from other fronts versus coming to just the landlord. I mean we were very early in encouraging our tenant base to get in front of the SBA programs. And as we touched on in the prepared remarks, that seems to be paying off as people are contacting us almost on a daily basis to say, "tear up the paperwork, I'm going to pay my rent." I mean wish it with every tenant, but it's enough that it's meaningful.

Stuart A. Tanz -- Chief Executive Officer

And there is no we've had no cotenancy issues, Wes, as it relates to collecting our rents.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay. And then maybe sticking with the PPP program. Do you have an idea of what percentage of your tenants are eligible with that program? And of those that have applied, are they getting a very good success rate actually getting funds from the program?

Richard K. Schoebel -- Chief Operating Officer

There are some subsets that for one reason or another do not qualify, and that's certainly a criteria we take into consideration, and we're doing the deferral requests. I don't have a statistic on that. A lot of times, it's someone who is too large, has too many employees or someone who hasn't opened yet or was recently opened and don't have enough time on out there. But it's hard to put a percentage on it.

Wes Golladay -- RBC Capital Markets -- Analyst

But do you think the general feedback has been positive from your tenant's perspective, they may just be waiting for the funds? Or do you think they think the program needs to be reworked at all? Or just maybe a qualitative view on it?

Stuart A. Tanz -- Chief Executive Officer

I mean I think there's been some frustration with the ability to get into the website and things like that. But what we have seen is that the tenants that are proactive are being successful. And so it really does pay off if they get on the websites and get their application in. Obviously, there's been some funding issues and we're sure that the more we know more funds have been provided and will continue to be provided to support this program because it's desperately needed.

Wes Golladay -- RBC Capital Markets -- Analyst

Thank you. That's all for me.

Stuart A. Tanz -- Chief Executive Officer

Thanks. That's great. Thank you.

Operator

Thank you. Our next question comes from Vince Tibone from Green Street Advisors. please go ahead.

Richard K. Schoebel -- Chief Operating Officer

Good morning.

Vince Tibone -- Green Street Advisors -- Analyst

He Good morning. Morning. I'm just curious, which small shop tenant categories concerning the most from a liquidity and solvency perspective, if this lasts for a few more months.

Richard K. Schoebel -- Chief Operating Officer

I think some of the challenging ones are the ones that are very hands on, the salons and the single I'm thinking more here of the 1-, 2-, 3-person shops where they're very hands-on and social distancing can be a bit of a challenge for them. A lot of tenants in that space, the nail salons and the rest are can typically be recent immigrants and not necessarily with a strong balance sheet.

Vince Tibone -- Green Street Advisors -- Analyst

Yes. I mean, that makes sense. Are those generally tenants that you've already worked with on the rent deferment side? Or I mean just curious, like, is that kind of ones where you think maybe rent relief is going to be required more than deferment.

Richard K. Schoebel -- Chief Operating Officer

I mean, I think what's been interesting, at least to me and maybe Stuart has other thoughts is that when we say deferment, it has typically not been the full rent, it's typically been a percentage of the rent, whether it's 25%, 50%, maybe 75% of the base rent for the month. And then full triple net charges to be paid. They are very grateful for any kind of assistance we can offer. And so someone who's received a 50% deferment for two months of April and May, they don't seem to have any issue with paying what we're asking them to pay, and they're just glad for that breathing room we're providing.

Stuart A. Tanz -- Chief Executive Officer

Yes. In a number of cases, Vince, these tenants have only asked for 50% or 25%. It's not like they've said, we need 100%. So every situation's different. And as Rich has articulated, it's all over the place. So every situation's different.

Vince Tibone, Green Street Advisors, Inc.-Analyst of Retail 74

No, that makes sense. One more for me. I mean, do any of the operating expense savings, you mentioned benefit ROIC's bottom line? Or do they pass through to the tenants through lower CAM?

Richard K. Schoebel -- Chief Operating Officer

It really ultimately will pass-through to the tenants through lower CAM. At the end of the day. I mean, I guess there is a slight impact on our administrative fee, but nothing material.

Vince Tibone -- Green Street Advisors -- Analyst

Got it. Okay. So from a kind of operating leverage perspective, there's not real any operating expense savings that would change the margin for ROIC in the second quarter, for example, just to clarify.

Richard K. Schoebel -- Chief Operating Officer

Yes. I mean because the majority, I mean, 90 I'm making this percentage up, but 95% of our leases are triple net leases, right? So it's going to be reconciled at the end of the year. Very few of our leases are of a gross component where potentially we could pick up a little bit of upside. But there are a few.

Vince Tibone -- Green Street Advisors -- Analyst

Okay, that that's helpful. Thank you.

Richard K. Schoebel -- Chief Operating Officer

So I have and I thank you.

Operator

Thank you. Our next question comes from Michael Gorman from BTIG. please go ahead.

Stuart A. Tanz -- Chief Executive Officer

Thanks. Good morning, mike

Michael Gorman -- BTIG -- Analyst

I just wanted to follow-up on I think it was Christy's question about kind of social distancing and capacity. Have you had any conversations with some of your larger anchor tenants grocers that have started to limit density in their stores as a result of the situation. Has that impacted sales trends at all in recent weeks as they've started to implement those?

Stuart A. Tanz -- Chief Executive Officer

No. Not at all. In fact, the click and collect has been when speaking with our grocers, as we do often, has been so the increase has been so dramatic both in terms of click and collect and in terms of in-store the amount of customers coming in store. I think the grocers have done an amazing job as it relates to both how they've dealt with the social spacing inside the store at this point and the cleanliness of their stores. It's just been amazing in terms of what we've heard and what we've seen on the ground. So our grocery stores and drug stores have just done an amazing job in terms of handling this crisis, and we don't see any impact to them going forward as it relates to the social distancing.

Michael Gorman -- BTIG -- Analyst

Got it. That's great. And can you share maybe anything anecdotally or any of the numbers that you've seen in terms of kind of what the breakdown for your grocery volume has been in terms of click and collect versus in-store traffic over the past four to six weeks during the crisis. Has most of the sales gain come through the omni-channel side of the business?

Stuart A. Tanz -- Chief Executive Officer

I think it's been as good on the click and collect as it's been inside the store from our discussions. I mean, it's just been amazing looking at how dynamic and how large these increases have been. I mean, it's as we've gotten some sales in I think as Rich mentioned during his dialogue, it's just been a I mean, astounding as to the numbers. And we haven't accounted for any percentage rent from that perspective. So Rich, I don't know if you want to add to that?

Richard K. Schoebel -- Chief Operating Officer

Yes. No. I mean, I think the theme we keep hearing is how thankful the grocers are that they were proactive on the click and collect front leading up to this because they were able to then leverage it. I mean, there was one of our top grocers is now rolling out click and collect at 130 locations that didn't previously have it. So I think that we don't have any anecdotal evidence or data as to where the sales of click and collect are better than in store, but they certainly are grateful for the click and collect. And coming up with new ways of doing click and collect, where it doesn't involve the capital investment that they were initially putting in with modifying the parking lot and everything else, signing and the rest.

Michael Gorman -- BTIG -- Analyst

Great. And then just one last one for me, stretching out the time horizon a bit here, Stuart. I know it's tough as you guys are dealing with us on a day-to-day basis. But ROIC is a company that was kind of built out of the last crisis. What are you seeing in the market that is similar to the '08, '09 time frame? And recognizing your cost of equity is kind of prohibitive here, are there any other alternative conversations that you're having with maybe alternate capital sources that would allow you to be opportunistic if you do see some less sophisticated operators experience some fallout here?

Stuart A. Tanz -- Chief Executive Officer

It's a great question. The answer is yes. We have been approached by some outside capital. We're looking at it. We do see that there could be some incredible opportunities out there for us. But again, that's still going to be subject to making sure it doesn't impact our liquidity in our capital structure going forward. But it is on our mind. I am starting to see a bit of stress out there from an opportunity perspective. And it's something that we're going to sort of well, I'm going to turn my time to over the next couple of weeks in terms of looking at that type of opportunity. It is beginning to feel like what we saw in the early days of ROIC.

Michael Gorman -- BTIG -- Analyst

Great, thanks, guys.

Operator

Thank you. Our next question comes from Michael Mueller from JPMorgan. please go ahead.

Richard K. Schoebel -- Chief Operating Officer

Good morning, Mike.

Michael Mueller -- JPMorgan -- Analyst

This is on for Mike. I was just wondering, I guess, of the percentage of your tenant base that's currently closed, do you have a rough sense of how many of them are eligible for government funds and how they have applied?

Richard K. Schoebel -- Chief Operating Officer

Don't have a percentage of who would be eligible. And I think what we are seeing here is that the tenants that have closed that is actually going down. I think just last night, our property manager up in Portland reported 10 tenants that have opened up for some level of business yesterday. So it seems I mean, I don't want to get too far ahead of ourselves, but it seems that people are starting to figure out ways to open under the government mandates, practice the social distancing and start generating some sales.

Michael Mueller -- JPMorgan -- Analyst

Got it. And sorry if this was touched on earlier but I guess before you withdrew guidance, I think you're expecting G&A to tick up this year but it came in lower in 1Q. Should we think of that as kind of the run rate for the year?

Stuart A. Tanz -- Chief Executive Officer

It's probably too early at this point in terms of looking at a run rate from a G&A perspective, just because we still too early to look at what's going on out there. But Mike, in terms of our G&A for the quarter, it's just too difficult to say whether that's going to move. And if it moves, how far down or up it may go.

Michael B. Haines -- Chief Financial Officer.and Vice President

Yes. Hang, I would just use the first quarter as a run rate for now. We'll revisit it at June.

Stuart A. Tanz -- Chief Executive Officer

God, thank you.

Michael B. Haines -- Chief Financial Officer.and Vice President

Thanks.

Richard K. Schoebel -- Chief Operating Officer

Thank you. You too.

Operator

Thank you. Our next question comes from Chris Lucas from Capital One. Thanks. please go ahead.

Richard K. Schoebel -- Chief Operating Officer

Good morning.

Chris Lucas -- Capital One -- Analyst

Hey, guys. Good afternoon. Hey, couple of quick questions for you. As it relates to sort of the rent collections was there any geographic differences that you noticed? You just mentioned that Portland had some stores opening up. I was curious as to whether or not in your major markets, whether you saw anything that was geographic or whether it was all really line of business driven?

Richard K. Schoebel -- Chief Operating Officer

Yes. It's an interesting question. We were actually just looking at that the other day, but it actually came in pretty consistent across the regions, which we thought was interesting, given that they're all in very different stages. And different mandates. But yes, it was actually pretty consistent.

Chris Lucas -- Capital One -- Analyst

Okay. And then I missed some of the call, so I apologize if you guys talked about this earlier, but just as it relates to sort of the commencement of leases and the pace. Is there how should we be thinking about that as it relates to sort of how what the tenants are telling you in terms of their ability to open and their willingness to open. Is there should we be thinking about that just sort of more really back-end loaded? Or is there anything is getting done now?

Richard K. Schoebel -- Chief Operating Officer

Yes. We are moving forward. I mean, we have obviously been in touch with every single tenant that has not commenced yet. And to confirm their willingness to continue to move forward. Most of everybody we have spoken to is prepared to move forward. I think things are slower because the cities are slower. But almost every municipality where we have projects going are open in some fashion. We are getting inspections. We are completing work. But I think it's a little bit early to tell whether there's going to be an impact on the delay in the commencements because of this or a tenant who is ready to open tomorrow, but would be prevented to open.

Stuart A. Tanz -- Chief Executive Officer

And Chris, we are being very proactive, obviously, from a marketing standpoint, working with the tenant base as it relates to what we can do together to once things open up to really make the atmosphere as clean as possible and more importantly, what we can do from a marketing standpoint to make sure the public is very comfortable coming back to our centers and going to the stores that have been closed. I mean, that's been on my forefront for the last week. We can anticipating that things could open up hopefully pretty soon.

Chris Lucas -- Capital One -- Analyst

And then just a question on sort of payment trends, and what I'm really looking at is you've got a lot of small tenants. I don't know if they all pay by ACH. But have you seen anything as it relates to, say, credit card payments for those really small tenants, February, March, April?

Richard K. Schoebel -- Chief Operating Officer

There are some we have offered recently just started offering credit card payments to the tenants, and some of the tenants are taking advantage of that. Many still pay by paper check, believe it or not, handwritten. And what we have seen though is that we obviously monitor every single day in terms of checks that are coming in, and they're coming in from all types of tenants from the mom-and-pops all the way up. And a lot of that is driven through the fact that we're in constant communication with them, and we're working through the deferral process. And so I think the trends are it's probably a touch later this month than previous months. But the payment type is consistent with their historic practice. A few more priority mail packages and FedEx is, I think when the default notices went out. But other than that...

Chris Lucas -- Capital One -- Analyst

Okay. I appreciate that. And then, Mike, just I appreciate the disclosures in there, but I would really encourage you guys to think about providing the ABR exposures. You've done it in the investor presentations in the past and the graph, but it's kind of difficult to sort of interpolate sort of that data without having real numbers. And the GLA's helpful, but it's your shop space is 2 times plus the rents of the anchor. So actually having ABR risk is more useful for us trying to model the company.

Stuart A. Tanz -- Chief Executive Officer

So we certainly appreciate your feedback, Chris.

Chris Lucas -- Capital One -- Analyst

Thank you. That's all I have, guys.

Richard K. Schoebel -- Chief Operating Officer

Thanks, Chris. Great, thank you.

Operator

Thank you.I show no further questions in the queue, sir. At this time, I'd like to turn the call back to Mr. Stuart Tanz, CEO, for closing remarks.

Stuart A. Tanz -- Chief Executive Officer

Thank you. In closing, again, thank you, everyone, for taking your time out today. And if anyone has any additional questions, please contact Mike, Rich or me directly. Thank you, and have a great day. Stay healthy and safe. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Stuart A. Tanz -- Chief Executive Officer

Michael B. Haines -- Chief Financial Officer.and Vice President

Richard K. Schoebel -- Chief Operating Officer

Collin Mings -- Raymond James -- Analyst

Todd Thomas -- KeyBanc -- Analyst

Christy McElroy -- Citigroup -- Analyst

R.J. Milligan -- Baird -- Aanlyst

Jeremy Metz -- BMO Capital Markets -- Analyst

Barry Oxford -- D.A. Davidson -- Analyst

Craig Schmidt -- BOA -- Analyst

Wes Golladay -- RBC Capital Markets -- Analyst

Vince Tibone -- Green Street Advisors -- Analyst

Michael Gorman -- BTIG -- Analyst

Michael Mueller -- JPMorgan -- Analyst

Chris Lucas -- Capital One -- Analyst

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