SITE Centers Corp. (SITC) Q1 2020 Earnings Call Transcript

SITE Centers Corp. (NYSE: SITC)
Q1 2020 Earnings Call
Apr 30, 2020, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the SITE Centers reports first-quarter 2020 operating results conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brandon Day, investor relations. Please go ahead.

Brandon Day -- Investor Relations

Good morning, and thank you for joining us. On today's call, you will hear from Chief Executive Officer David Lukes; Chief Operating Officer Michael Makinen; and Chief Financial Officer Conor Fennerty. Please be aware that certain of our statements today may constitute forward-looking statements within the meanings of the federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements.

Additional information about these risks and uncertainties may be found in our earnings press release issued this morning and in the documents that we file with the SEC, including our most recent reports on Form 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO and same-store net operating income. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's press release. This release, our quarterly financial supplement and earnings slide deck may be found on the Investor Relations page of our website at www.sitecenters.com.

At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

David Lukes -- Chief Executive Officer

Good morning, and thank you for joining our first-quarter earnings call. I'd like to first thank my dedicated colleagues at SITE Centers for their remarkable efforts during the past six weeks. Working remotely has been a learning experience for all of us and is certainly more difficult under the circumstances. I'm extremely grateful for everyone's flexibility and dedication to getting our 1Q books closed and our earnings released.

In fact, we did have a very good quarter. Our high-quality properties continue to show strong growth with year-over-year same-store NOI at 3.7%. We had almost 85,000 square feet of new leases signed during the quarter and an additional 479,000 square feet of renewals and options as discounters and service tenants remain attracted to our properties. The value proposition we offer to our tenants falls into three categories: First, low occupancy cost; second, convenient access to the last mile and the wealthiest ZIP Codes in the United States; and third, adjacency to other retailers, which results in higher customer traffic.

Over the course of my career, I've consistently found, even during recessions, that these three features continue to attract tenants because of the results retailers see in their sales and profitability. What's unique as we hold this call today is that all three aspects of our value proposition and are on a temporary hold, but I do believe they will remain true as the country reopens. I'd like to start with some facts this morning about our current operational status and provide some detail on the responses we've taken. We began to see stores closing on March 16, and the portfolio troughed on April 4 at 45% open as measured by base rent.

Since that low point, we've slowly trended higher, such that as of Tuesday, we're 49% open, including partially open, such as click and collect and drive-through with the expectation that we will see further increases over the next few weeks as states ease restrictions. Over this time period, all of our properties have remained open and operational, thanks to the wonderful efforts of our property management and leasing teams, who have worked to enact protocols in line with local and state guidelines. From a collection standpoint, we've currently received 50% of our pro rata rent for April. While not absolute, the rents collected are generally from open tenants, while those that withheld their contract rent are still largely closed.

Local noncredit tenants account for 12% of the outstanding and unpaid April rent. This means that the remaining 88% of unpaid April rent is from national tents or national franchise units. Our standard lease language is clear on payment obligations and specifically state that rent must be paid even if a tenant is not able to remain open. After all, we continue to pay our property taxes, pay for life safety and maintenance expenses and property insurance costs.

We are working with select tenants to defer rent where there's an economic return to SITE Centers. But we expect to enforce our legal contracts with respect to the obligations of the remaining tenants. We have noticed significant recent liquidity increase among our top retailers. In fact, 14 of our top 50 tenants, accounting for almost 24% of our base rent, have raised over $24 billion in debt and equity just this month.

It is a truly staggering amount of capital raised and it positions our tenants very well for reopenings. As is common during a recessionary period, local stores often seek financial assistance from property owners as they have limited access to short-term financing, and many times, landlords' assistance is needed, and it's a good solution to help them through a difficult time. When we receive a request from a local tenant, a detailed application is completed that shares historical tax returns, proof of required insurance and evidence of cash availability. To date, we have executed 98 payment plans as part of our SITE Centers COVID-19 Rental Assistance Program that, in aggregate, represent 1.9% of our second-quarter rent.

These payment plans do not modify any other terms of the lease, but instead simply defer the rent owed for a few months and are expected to be repaid before the end of the year. We will likely see more applications in the coming months, and we'll make decisions based on the tenant's financial position and our willingness to extend short-term credit. Remember that this assistance program is based on tenant need and our local shop exposure is only 7% of our total base rent. We are also well prepared to support our own obligations and have drawn $500 million on our line of credit, which remains in cash as of today.

The cash raise was a precautionary move, and we have no near-term uses with just $4 million of property level debt maturing through year-end, no planned acquisitions and minimal development obligations. We have worked tirelessly over the past three years to improve our balance sheet, and our liquidity and our maturity profile eliminates any near-term financing risk for the company. Our duration was significantly improved in February of this year as we repaid our 2022 bonds with proceeds from the sale of our joint venture portfolio to TIAA-CREF. The result is that we have no bond maturities until 2023.

In regards to the dividend, based on our estimates of taxable net income, we believe we have significant flexibility with respect to our dividend policy, recognizing that the dividend is a function of operating cash flow, the board of directors is suspending the second-quarter dividend in order to provide our company maximum flexibility. We remain extremely optimistic about our company, but believe a strong balance sheet is crucial to capitalize on strategic opportunities that will occur as a result of the pandemic. Before I hand the call over to Mike, I wanted to come back to my earlier comments about real estate and its appeal to tenants. Eventually, this crisis will subside.

I do believe that retailers and the consumer will make daily choices that are different from pre-COVID conditions. However, I also expect our value proposition will remain intact. Our focus group of 70 open-air properties are located in the wealthiest submarkets in the country, with average household incomes of over $100,000, which is in the 87th percentile nationally. We offer tremendous access to these customers in a convenient last mile format.

We offer synergies for tenants that have similar customers who will continue to have higher sales when they're grouped adjacent to each other. And lastly, our relatively low-cost compared to other forms of distribution will result in continued low occupancy costs for our tenants. In particular, we started to see, over the course of 2019 and into 2020, increased demand from mall-based tenants, and I expect this trend to accelerate. These three features will prove to be resilient even as we adapt to the changes that are accelerating in our sector.

Mike?

Michael Makinen -- Chief Operating Officer

Thank you, David. In terms of quarterly results, the lease rate for the portfolio was down 90 basis points from year-end largely due to Pier 1 closures and the sale of the teachers portfolio, which was 95.7% leased. Leasing activity partially mitigated these move-outs, though volume for the quarter was down measurably from our typical pace as tenants paused at quarter end given the pandemic and the move to work remotely. Post-quarter, activity from national tenants has resumed, albeit at a much lower pace.

That said, so far in April, we have two signed anchor leases and are also in active dialogue with a number of other national tenants in the discount, grocery, beauty and financial services sectors. Local tenants in contrast are largely paused, and I expect activity will be slow until tenants' specific submarkets reopen. Moving to construction activity and tenant deliveries. We opened three consolidated anchors in the first quarter, almost all of them earlier than expected and have another 10 consolidated anchors signed, but not yet open.

Construction activity outside of a few select states like California and New Jersey, has been largely uninterrupted, thanks to our construction team's efforts, and we feel confident in meeting our obligations to get stores open. We are working with tenants to make sure they can open at the right time with the right resources in place but within their lease timeline. As part of our steps taken to date, we reevaluated each of our planned and in progress construction and redevelopment projects, reducing our pipeline by 46%, with no material cost to the company. Removed from the pipeline was our planned project at Shoppers World, where we executed a ground lease with the Massachusetts Bay Transit Authority on a parcel of land that was in the entitlement phase for a multifamily building.

After an accelerated negotiation, the 10-year ground lease commenced in the first quarter with no capital outlay and materially better returns with lower risk versus ground up multifamily development. Adjusted for the removal of Shoppers World and speculative projects as of quarter end, we have just $30 million left to fund on the development pipeline. Conor?

Conor Fennerty -- Chief Financial Officer

Thanks, Mike. I'll comment first on quarterly earnings, the status of guidance and then discuss our balance sheet and liquidity. First-quarter results were ahead of budget, driven by better operations, including earlier rent commencements, higher recoveries and other income and lease termination fees related to the recapture of two ground leases. Included in the quarter, but excluded from OFFO, were $17 million of costs related to the redemption of our 2022 unsecured notes, which was funded in part with proceeds from the sale of our interest in the teachers joint venture, further extending our weighted average duration.

Turning to our balance sheet. The company remains well-positioned with pro rata net debt-to-EBITDA of 5.3 times, just $4 million of property level debt maturing in 2020, no unsecured maturities until 2023 and minimal future development commitments as outlined. The lack of material commitments is a point of differentiation with no significant cash outlays or impact to earnings in the current environment. Additionally, as part of our response to the pandemic that David outlined, we drew down $500 million on our line of credit, which remains in cash as of today and have another $325 million of availability on our lines of credit at quarter end.

We have no material uses for the cash at this time, as I just outlined, but felt the liquidity build was prudent in light of the macro environment. In terms of our covenants, just two of our 69 wholly owned properties are encumbered today providing future potential sources of additional capital and substantial capacity on each of our public bond and bank covenants. One item to note, our real estate assets and unencumbered assets covenants do not include cash in the calculation. As a result, in our earnings slide deck, we provided pro forma covenants to adjust for the $500 million line of credit draw.

Moving to our outlook. We withdrew 2020 guidance in March and are not providing an updated outlook at this time. There are a few modeling items to consider because of the changing operating environment, though. Embedded in our initial 2020 guidance were continued JV and RVI asset sales.

Given the dislocation in the transaction markets, it is likely that sales volume will be lower than initially expected, reducing downward pressure on fee revenue from 2019. Higher expected fees will help partially mitigate the revenue impact from tenant rent deferrals or reduced occupancy. There are a few moving pieces from the first to the second quarter of 2020 as well. First, ancillary and other income is expected to be lower by almost $1 million due to nonrecurring revenue received in the first quarter; and second, we do not expect to recognize revenue from Pier 1 and other previously announced bankruptcies totaling just over $1 million in the second quarter.

Lastly, as David mentioned, the board has suspended the second-quarter dividend as a result of the impact to our business from COVID-19. Based on our estimate of taxable net income today, no further dividends are required to be paid in 2020 to satisfy our REIT requirements, which would result in $78 million of additional retained free cash flow. That said, no decisions around future dividends have been made at this time. We have worked diligently to reposition our balance sheet over the last three-plus years and continue to believe our financial strength positions the company to create stakeholder value going forward.

With that, I'll turn it back to David.

David Lukes -- Chief Executive Officer

Thank you, Conor. Operator, we're now ready to take questions.

Questions & Answers:

Operator

[Operator instructions] The first question today comes from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi. Thanks. Good morning. David, just first question.

You mentioned in your prepared remarks a couple of times that your property service is important, last mile distribution hubs in good locations. And we've seen a sharp increase in online spending here during the last two months and then a rapid acceleration in online grocery spend. And I'm just wondering how you see retail evolving a little bit from here? What you're thinking about and talking to your tenants about in terms of retail in the coming months and maybe years as shifts in consumer preferences may have been accelerated here?

David Lukes -- Chief Executive Officer

Todd, I think it's the most important question, and we certainly have spent a lot of time thinking about it. If you look back on the spin that this company performed a couple of years ago, the properties that we selected to keep were ones that we felt would be durable, and over the long term, as tenants in the retail world changed because sales were strong and rents were low, we would likely see an increased demand for space and that the economics would be increasing over time, albeit with some capex to make some changes. I think retail has been changing to the online presence for the better part of a decade. I think, to date, some of the beneficiaries of that have been a movement of sales out of the department stores, some of them have gone online, but a lot of them have gone into the discounters.

And the discounters have been the most prolific acquirers of our space over time. And so I think we've seen a huge increase in demand in the last maybe two or three years for junior anchor space, which then prompted a lot of shop demand. What I think is interesting now, and you certainly are seeing a lot of increased demand from the Internet. But even recently, a few days ago, I believe Adobe Analytics has come out with a report that showed over a 200% increase in curbside pickup.

So one of the things that our property management team has been extremely active on lately is the desire for our tenants to make use of convenience, not just being proximate to your home, but convenience being, we have really flexible buildings. We have flexible site plans. We have flexible curb cuts. And so I think what's going to happen as we leave this crisis is that the consumer, I think, will have an increased desire for flexible, safe and adaptable transactions.

And I do think that that's going to inure to the strip centers. There's other trends as well that I'm sure you would agree, working from home is actually working. And even if a percentage of that, a small percentage becomes a long-term aspect of the American workforce, I do think suburban communities are going to benefit from that. And I think open-air strips will benefit even more.

So there's a couple of things that are happening, but those are a few of the things that we're focused on.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Do you think grocers need to rethink and reconsider their real estate footprints from all of this? Or do you think that the acceleration in click and collect and I guess really online grocery spend and delivery has -- what kind of impact do you think that that has on the brick-and-mortar side, the retail side in the grocery industry specifically, I guess?

David Lukes -- Chief Executive Officer

Well, I think the grocery industry was already dealing with the desire to change their footprint and their format. I mean the amount of test cases that have been done to try and figure out how to automate delivery mechanisms. We're already in full tilt. And I certainly think this helps make that become more common.

I mean, I think it's no surprise that most retailers, well more than half of our tenant roster, are thinking actively about what to do with their square footage. The interesting thing about any recession is that you end up seeing less construction take place for new projects. So let's assume that most of our tenants would like to reconsider their footprint, and at the same time, most of them don't have the opportunity to go across the street to new construction projects because we're in the older developed wealthier suburbs, and so the only solution is adapting their existing footprint. From the mall tenants, I think the malls continue to go to the strips.

But from the strip perspective, I do agree with you, and I think that the grocers and a lot of the mass merchants are going to really figure out how to make use of that last mile distribution. Mike, do you have anything to add to that?

Michael Makinen -- Chief Operating Officer

Yeah. I would say that one of the things that I think this pandemic has given us an opportunity to do collectively with our grocery retailers is to work together to really look at how curbside, pickup, how parking configuration can really benefit the click and collect aspect of their business. And I think that it has also forced an acceleration of the expertise on this side of the retailer to really drive this part of the business. And I think it works well together, and I think we've worked very well together with our grocery tenants in creating what was a secondary element of their business and pushing it into an area that is really benefiting both of us.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK. And just sticking with -- Mike, so leasing, I realize a lot of the 2020 lease expirations were either already signed or in motion, renewals were under way and so forth. But can you just speak about how you're handling expirations? Going forward here, what you're seeing in the market? And how those discussions with tenants are advancing?

Michael Makinen -- Chief Operating Officer

Well, right now, obviously, this is a completely unique time, and we're really dealing with it tenant by tenant. And in some tenants where there was a heavy growth momentum, we're continuing to have conversations that are relatively normal as it relates to renewals and options that are being exercised. With other tenants, it's a different conversation. But the fact of the matter is it's all over the board.

And there's a tremendous amount of variation in how the tenants are approaching it.

Conor Fennerty -- Chief Financial Officer

And, Todd, just from the financial side. So it's less than 2% of our rents expiring over the course of the year. And I think it's fair based on Mike's comments and David's comments around construction that you probably could see a modestly higher retention rate. So it's a long way of saying, I think we feel pretty good about our retention, and there's really not a lot of kind of rent rolling in the next, call it, six to 12 months.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK. Thank you.

David Lukes -- Chief Executive Officer

Thanks, Todd.

Operator

The next question comes from Christy McElroy of Citigroup. Please go ahead.

Christy McElroy -- Citigroup -- Analyst

Hey. Good morning, guys. Thank you.

David Lukes -- Chief Executive Officer

Hey, Christy.

Christy McElroy -- Citigroup -- Analyst

Just in terms of the 50% non payment of rent and a higher amount being anchor tenants, what are tenants saying to you about May, especially given what you mentioned in terms of the liquidity raises that they've been able to do and how the store closures have troughed? We've heard that some national tenants that may have paid April are saying they won't pay May. So what are you expecting it to be, worse or better?

David Lukes -- Chief Executive Officer

Well, Christy, I wish I had a factual answer for you. The reality is we just don't know. I guess we're going to find out next week. I suspect that some tenants that didn't pay in April are going to pay in May, and I would suspect that some that did not pay in April are going not pay.

So it's really on a case-by-case basis. We've heard lots of rumors and stories, and we've heard directly from retailers a lot of different strategies as to how they're dealing with this. So I think from our perspective, we're just going to be patient because we really don't know. The normal payment program for rent is out the window.

We were receiving April rent as recently as two days ago. And that's, obviously, 20 days beyond the final due date. So I honestly don't know. It's just going to be a little bit curious for the next week or two.

Christy McElroy -- Citigroup -- Analyst

And so, David, I mean, you did talk about how rents are due, obviously. What do you make of the tenant's view of the legality behind all of this? What do you feel is the strategy of many of these national retailers that aren't paying? Is it we'll pay you when we can or we'll pay you when we strike an agreement with you? Or are they taking a stance that they're not obligated to pay? Because I think there's a lot of confusion out there. Obviously, these are all long-term contracts and that many tenants are technically in default or will be on these contracts.

David Lukes -- Chief Executive Officer

Yeah. No, it is a very curious problem. And as I mentioned twice in my remarks, this company has paid every bill that we owe. We paid property taxes in lots of local communities.

We pay life safety costs. We pay insurance costs. We sweep the parking lots. We keep the power going.

We keep security open. So there's a lot of expenses we're paying that are part of our contract. And the rental payment is supposed to come from the tenant to not only cover those expenses but also other expenses we have. So it's a very curious situation.

Like I said, I think that our mindset is to be protective of our covenants and protective of our legal contracts. But also a little bit patient that in times like this when companies are drawing on their lines of credit, and no one really knows what the future looks like, I think we have to take a step back and be patient for a couple of weeks. The solution then, as you mentioned, is likely to be a variety of outcomes. Some tenants are simply being opportunistic.

Some tenants are being protective, and some tenants simply can't afford to pay, and other ones can and are simply choosing to sit on their capital. So we'll see what happens.

Christy McElroy -- Citigroup -- Analyst

OK. Thank you.

Operator

The next question comes from Shivani Sood of Deutsche Bank. Please go ahead.

Shivani Sood -- Deutsche Bank -- Analyst

Hey. Good morning. In terms of the lease, but not yet commenced rent, I think you guys had mentioned that those openings are progressing on the national tenant side. Just curious if there's anything different about how tenants are approaching store openings as we prepare for this sort of new normal situation going forward?

Michael Makinen -- Chief Operating Officer

OK. This is Mike. As I mentioned, we have 10 executed anchor leases in our consolidated portfolio yet to open. That ranges from tenants like PGA Superstore, Burlington, Lidl, Marshalls, HomeGoods, Dollar Tree.

And the good news is that in spite of the pandemic, we've basically been able to continue most of our construction activity on schedule in the majority of the states. I mentioned New Jersey and California are exceptions because these states have placed a moratorium on construction activity. So there's a handful of RCDs in those states that will see some delay. But as for the most part, we expect to see rent commencements occur, but in some cases, with slight delays.

Shivani Sood -- Deutsche Bank -- Analyst

And then you guys have a fair amount of exposure to states that are starting to open back up, Georgia, Florida, Texas. I recognize that it's very early still, but can you give us a sense for traffic? And that you've seen over the past few days that some of these alternate restrictions have lifted and since that April 4 trough that was mentioned.

David Lukes -- Chief Executive Officer

I'll let Mike provide some color, but it's so recent. I guess we could say that it's an infinitely higher percentage increase from when nobody came. But it's nice to have some stores open. Mike, I don't know if you have any anecdotes.

Michael Makinen -- Chief Operating Officer

Yeah. The only thing I would add to that is that we really are in a very early stage of this. And the tenants are being particularly cautious with regard to social distancing and meeting all the guidelines of running the business. And there's still a lot of customers who are just deciding whether they're ready to go get their nails done.

But at the same time, traffic is picking up, and Atlanta has really been our area where we focus.

Shivani Sood -- Deutsche Bank -- Analyst

Thanks so much.

Operator

The next question comes from Alexander Goldfarb of Piper Sandler. Please go ahead.

Alexander Goldfarb -- Piper Sandler -- Analyst

I just wanted to follow-up on Christy's question on the rents and rent collection and the point about these are contractual obligations. So how do you guys work to make sure that tenants realize that this can't be their permanent go to, that they just have this arbitrary right? And at the same time, if you're not getting paid, let's say, by half the tenants, why would you not pay half the property tax? I mean, it seems odd that as a landlord, you guys shoulder the whole burden, it seems to be a shared burden. So how do you make it clear to the tenants that they haven't just gained this arbitrary right. And how do you make it so it's not the company, and shareholders and your employees who are bearing all the burden that this is a shared cost, not only among the tenants, but also the community because that's ultimately where it is.

You guys can only do so much, which you are.

David Lukes -- Chief Executive Officer

Good morning, Alex. Yes. I agree. I'm not sure how to be more specific.

Look, our business, we are lenders, right? We borrow from the unsecured market, and we lend space to retailers for long-term contracts. And you ask of how do you make a tenant understand? I think that the legal contracts are pretty specific and they're not hard to decipher, even without a law degree. So I think everyone understands it. But look, like I said before, I think patience is warranted right here.

We have a highly unusual circumstance, and I think in that aspect, the best strategy is just to be patient for a few weeks until the smoke clears. Once the reopenings continue, we'll all have four corners around what was not paid. And at that point, I don't have any interest in waiving our contractual rights. I think our stakeholders deserve to have those contracts supported.

But I also recognize that in some cases, there are financial benefits to the landlord and the tenant, crafting a solution that gives both of them something they need.

Alexander Goldfarb -- Piper Sandler -- Analyst

OK. Yeah, It seems to be a tough situation with landlords...

David Lukes -- Chief Executive Officer

It's definitely a tough situation. It definitely is. I mean, it's -- in my career, I've never seen it before. It's very, very strange.

Alexander Goldfarb -- Piper Sandler -- Analyst

And what happens if you just withhold property tax? I mean, if people aren't paying you, why do you have to be obligated to pay others?

David Lukes -- Chief Executive Officer

Well, the two are tied theoretically. But, realistically, we have obligations to local communities. The communities, teachers and firefighters rely on our property taxes. And we have no intent on reducing our own obligations to those communities.

So I know that they're theoretically attached, but I don't think two wrongs make a right in this sense.

Alexander Goldfarb -- Piper Sandler -- Analyst

OK. OK. And then just going to the dividend suspension and your comments that you don't have to pay for this year, so is the sense that really it was the transactional income that was driving the taxable income that was driving the dividend for this year? Or is it the expectation that you're not going to get paid sufficient rent this year to even hit that threshold? Because it sounds pretty early in the year to say that you've already satisfied the full year. So I'm just trying to understand if it's more transactional income that would have driven taxable or if it's your expectation of the decline in the rental income that's driving the taxable reduction?

David Lukes -- Chief Executive Officer

Yeah. Conor can give you some detail behind that.

Conor Fennerty -- Chief Financial Officer

Yeah. Alex, remember, the fourth quarter, you have a little bit of flexibility -- not a little bit, you have flexibility on when you declare, when you pay and when you include that dividend in which particular year, meaning you can roll your fourth-quarter dividend from 2019 to 2020. And the second thing is, when you declare and when you pay a dividend, it also gives you flexibility. So when we declare the fourth-quarter dividend, even though it might not be paid in 2020, it could be included in our taxable net income payment.

The second thing, just to clarify, I would just say is taxable income is based off contractual rent. So just because a tenant doesn't pay us doesn't mean we will decline or have a decline in taxable income. But using those two items, meaning when we declare and pay for the fourth-quarter '19 and fourth-quarter '20 gives us that kind of clarity on our taxable income for the year. It's really not related to transactions.

Alexander Goldfarb -- Piper Sandler -- Analyst

OK. Thank you.

Conor Fennerty -- Chief Financial Officer

You're welcome.

Operator

Next question comes from Ki Bin Kim of SunTrust. Plese go ahead.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Thanks a lot. Good morning, guys. Just a couple of questions regarding the 50% rent paid and your comment about executed deferrals representing 2% of 2Q '20 rent. What is that implying about the remaining 48%? And from a very practical standpoint, I could imagine it's very difficult to go through all the requests in the short time frame, so where are we in terms of that? Like do you actually -- how much progress have we made in actually going through these deferral requests?

David Lukes -- Chief Executive Officer

Hey, Ki Bin. Good morning. It's a great question, and I could see how you would connect the dots by saying, OK, if you're at 1.9%, you haven't received 50%, how much longer of a program in this. The reality is any landlord is going to look differently on national credit when you have a large portfolio of the same brand versus a local shop in a local community.

For our portfolio of 69 assets, our local shop exposure is 7% of our total. The payment plans are part of that 7%. OK? So when a local shop just simply doesn't have the financial wherewithal to make it through two or three months of closures, then it is sometimes in our best interest to help them by deferring rent. And this is a pretty well-worn path, I think, in every recession that I've been involved with, this is the playbook that you pull out.

You're working with your local tenants. If there's somebody you want, they've done well over the last 10 years, they've always paid their rent on time, it's a very easy and elegant way to help them through a tough time, but then you get paid back usually within three to six months. That is not the same program that one would entertain for a large national tenant, simply because most of these national tenants have a higher degree of liquidity than we do. And they're the ones that I think are going to have a much easier time opening.

They have logistics and supply chains and furloughed employees, and they have a method for getting back and opening their stores. So I don't think the 2% works its way into the 50% category. I think the 2% is really part of that 7%.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

OK. So you kind of answered some of this, but what percent do you think of the 50% tenants that didn't pay, would you categorize as opportunistic in nature?

David Lukes -- Chief Executive Officer

I don't even know how to answer that. I know what you're asking, but half of the stores are closed. And while it's not a perfect overlap, about half of the stores are paid. So opportunistic, I think, probably depends more on their own financial position.

I mean there are some tenants, particularly some of the entertainment ones that I think have asked for some assistance, and there's some validity there because it's difficult to see some of these tenants surviving in a couple of months. On the other hand, we had a grocery store that does over $100 million in gross sales as for rent assistance. And they've been open, they haven't closed today. So I think there are a number of tenants that are being opportunistic, and I guess you can expect that.

It's unfortunate because, to Alex's point, we're paying property tax. So it is unfortunate, but it's part of the business.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Well, I'm sure those tenants are the same ones getting the forgivable loans from the government too. So...

David Lukes -- Chief Executive Officer

Probably.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Thank you.

David Lukes -- Chief Executive Officer

Yeah.

Operator

Next question comes from Brian Hawthorne of RBC Capital Markets. Please go ahead.

Brian Hawthorne -- RBC Capital Markets -- Analyst

Hi. Good morning. Just one for me. Do you guys know or have an estimate of how many of your tenants have access to the Paycheck Protection Program? And then can you talk about how successful they have been getting it?

David Lukes -- Chief Executive Officer

Brian, we don't have great data on that. And part of the reason is that our portfolio is heavily weighted toward national credit. So if you think about only 7% of our ABR is from small shop tenants, the only time we have visibility as to whether they applied for Paycheck Protection Program is if they apply with us for some rental assistance and then we require them to sign an affidavit stating that they have applied to the program with the federal government. So we have a few that we've been able to log, but we really don't have great data on that.

Conor Fennerty -- Chief Financial Officer

Brian, the more impactful program for us, just given our national exposure, to David's point, is the federal services involvement and the IG and the high-yield markets. Right? And so David referenced that 14 of our 50 tenants tapping the equity or debt markets, that is more impactful for us just given our national tenant exposure.

Brian Hawthorne -- RBC Capital Markets -- Analyst

OK. Thank you.

Operator

The next question comes from Rich Hill of Morgan Stanley. Please go ahead.

Rich Hill -- Morgan Stanley -- Analyst

Hey. Good morning, guys.

David Lukes -- Chief Executive Officer

Hey, Rich.

Rich Hill -- Morgan Stanley -- Analyst

Just wanted to maybe transition away from April, May, and June and think about the longer term. One of the things that you guys have highlighted in the past was the amount of, for a lack of better term, cash that you're going to be getting in from either RVI fees, the wind down of the Blackstone JV, and then some preferred payments as well. That can be rather substantial, certainly, as it relates to the value of your market cap right now. What are you thinking about with that cash right now? Do you see this environment as a really big opportunity to go buy distressed valuations? So are you going to do special dividends? Are you going to pay down debt? How are you thinking about it in this environment versus maybe six months ago?

David Lukes -- Chief Executive Officer

Hi. Good morning, Rich. Well, I think the three categories you mentioned, the RVI fees we were assuming would be reduced over the course of 2020 because our assumption was that companies are selling their assets as fast as they can. And our fees are based on the AUM.

And so eventually, our fees would decline. Since the transactions market are pretty much on hold right now, our assumption is that the RVIs will stay higher for a little bit longer. And so that's a little bit more cash into 2020 than we budgeted. With respect to the Blackstone pref and the RVIs pref, you're right, the 2 of them together add up to, what, $160 million or $170 million -- I'm sorry, 200, about $260 million to $270 million.

So we're not at the point that we're thinking about how to allocate the investment, if we get those proceeds back. We're more interested in receiving the proceeds. And again, those both are results of the transaction market, which is really slow. So we don't really have great visibility as to when we get the two preferreds back, but we do still feel confident that we eventually will.

Conor Fennerty -- Chief Financial Officer

And, Rich, just to add to that, as you know, when we've got a dollar in the door, historically, we look at all of our alternatives, which prior to this was a share repurchase, redevelopment, paying down debt, acquisitions. That calculus or that equation doesn't change with this, right? So if one of those came back in, we would go through the same exercise and same math. Probably today, liquidity and cash are probably of the highest value for us. But that will depend on where our share price is, where our bonds are trading and what opportunities we see in the market.

Rich Hill -- Morgan Stanley -- Analyst

True. True. I think that's helpful. Maybe not as much detail as I wanted, but I appreciate the response.

Going back to the portfolio that you actually own right now, you have a carefully curated portfolio post-RVI spin. One of the things that you talked about in the past was maybe having a portfolio that intentionally had some exposure to lower quality tenants because there was a mark-to-market opportunity. In a way, does that provide you maybe more growth to the upside now in this environment than maybe some of your peers? Or do you think it's tougher sledding than you were previously expecting?

David Lukes -- Chief Executive Officer

I think that the business plan of selecting the highest quality real estate with the best mark-to-market was a good strategy, and it remains kind of a firm benefit to us over the course of time. I mean, I guess the real question is, is the normal state of disruption in retail increasing? And I'd say the answer is probably yes. And so, yeah, I would expect that we would have more near-term gains, but there's a cost to that. Right? There's a capex cost to recycling tenants at a faster pace.

If you think about our five-year business plan, we had assumed a bankruptcy process that would continue at a fairly high rate. And this is probably going to even accelerate that. So I think it's pulling forward a couple of years of bankruptcies, I would assume, to the near term. So I look forward to recycling some real estate and being able to raise rents.

But I think it's going to come at a much bigger hill. And because of that, I think, to Conor's point, our liquidity and our ability to conserve cash right now is a pretty important feature.

Conor Fennerty -- Chief Financial Officer

Yeah. And, Rich, the value -- to David's initial comments and opening remarks, the value proposition of our real estate remains, we think, as we come out of this. So you take that and dovetail with Mike's comments around demand from the discounters, from grocery, from beauty, I think we feel really good about those backfill opportunities and still think that mark-to-market remains in place. To David's point, it might be quicker.

That being said, we're still excited about that opportunity to backfill with better tenants, test prepared for the future post-COVID, and to Todd's comments, maybe with a higher click and collect percentage, whatever it might be.

Rich Hill -- Morgan Stanley -- Analyst

Yeah. And, Conor, that's an important point. What I was driving at was, it sounds like the business plan remains firmly intact. It's just been pushed out a little bit?

David Lukes -- Chief Executive Officer

Yeah, I would agree.

Rich Hill -- Morgan Stanley -- Analyst

OK. Thanks, guys. I appreciate your time.

David Lukes -- Chief Executive Officer

Thank you.

Operator

Our next question today comes from Vince Tibone of Green Street Advisors. Please go ahead.

Vince Tibone -- Green Street Advisors -- Analyst

Hey. Good morning. Since there's a lot of negotiations taking place with tenants, Middle East, how are you thinking about trading off a period of maybe rent abatement in order to remove onerous restricted clauses in a lease that could potentially have a greater long-term value to site than that period of free rent?

David Lukes -- Chief Executive Officer

Hey. Good morning, Vince. It's a great question. Right now, all of our activity has been on assisting small shops because they're the ones that need it over the short term, which is why we've arrived at those 90 or 100 payment plans for some of the small shop tenants.

We have not done any national anchor portfolio resolutions where it's a horse trading. In my opinion, it's just too early in the process. Over the course of the next month, I do think there will be a lot of conversations about, hey, we need this, and we can help you with that. And to your point, there are things in leases that are somewhat restrictive on landlords, especially the older leases that had prohibited and restricted uses, options that could be triggered.

There's lots of ways that a retailer could make an offer to a landlord to trade a short-term gain for a long-term gain for the landlord, and we would be open to that. But at this point, we're not really engaged in those dialogues.

Vince Tibone -- Green Street Advisors -- Analyst

Interesting. Fair enough. And do you think there's a relationship aspect to working with some of your national tenants to where maybe the landlord to grant rent relief or provide some forced rating will get favorable treatment down the road in terms of the next leasing deal? Is that something that crosses your mind? And is it something you consider?

David Lukes -- Chief Executive Officer

Well, I think any time they're -- I mean, in any business, between the customer and the supplier, there's always a relationship. And in many cases, in this category, there are some long-standing personal relationships between dealmakers on both sides. But I don't think that those relationships obfuscate our commitment to our stakeholders. After all, our equity and our debt holders are the ones that have entrusted their capital with us, and they've done so based on contracts that we've negotiated.

So while the relationships make it sometimes more difficult to have hard conversations. Both sides, both tenant and landlord are both going to be protecting their own stakeholders at the same time. So we're not interested in forgiving rent simply for the sake of a relationship. What we are interested in doing is helping our tenants get back open.

And if that means that there are some things that they need and that they're willing to give in order to get them open as a team, then I think we're open to that.

Vince Tibone -- Green Street Advisors -- Analyst

It's helpful color. Interesting to see how it plays out. I have one more question, just maybe shifting gears a bit. If you could maybe just, without talking about any individual tenants, I'd be curious to hear your thoughts on how you think the retailer bankruptcies could play out this year in terms of Chapter 7 versus Chapter 11? Like do you think the lending environment is supportive in terms of giving some retailers a chance to reemerge? Or do you think that companies who maybe run out of liquidity could be forced to liquidate where maybe in, say, normal times, they would be given a chance to restructure their business and keep a lot of their stores open?

David Lukes -- Chief Executive Officer

Well, what's interesting is that for the last three years, I think we have been saying that retailer bankruptcies are simply a part of our business, right? Retail is changing. If you have great real estate, you're going to have to adapt and try and increase the profitability of our own properties as tenants liquidate. In this environment, what I find fascinating is that it is notably different than the great financial crisis. I mean, the great financial crisis was a time when bad things happened to tenants that had bad business plans.

You had too much debt and you had thin margins, then a financial crisis tipped you over. In this market, it's a little different. We're seeing bad things happen to really good tenants that have good business plans. They have good balance sheets.

They have good value propositions. They have great brands. And they have no sales. So in that aspect, I really do believe that we're going to see more reorganizations and fewer liquidations than we did 12 years ago because debt financing, private equity, I think they see the value in some of these chains in these brands, and I think that they're going to try and make sure that these change in these brands come out on a better footing financially.

Vince Tibone -- Green Street Advisors -- Analyst

That's interesting. Thank you. That's all I have.

Operator

The next question today comes from Mike Mueller of JP Morgan. Please go ahead.

Mike Mueller -- J.P. Morgan -- Analyst

Yeah. Hi. I have two questions. First, do you have a sense at this point about the percentage of that local ADR that just may not reopen? And then the second question is, what trigger are you looking for to pay back the money that was drawn down from the credit line that you're sitting on?

David Lukes -- Chief Executive Officer

Yeah. Good morning. We really do not have any more information on which ones can and cannot open. It's just too early in the process.

It's only been, frankly, a couple of weeks. So we'll see as it comes out. And with respect to the balance sheet, I think Conor probably has a pretty good answer to the line.

Conor Fennerty -- Chief Financial Officer

Yeah. Mike, I think it's too early today. We obviously are sitting on the cash. And there is a cost -- I'm sorry, we have the $500 million on the line.

There's a cost to that. At this point, I don't think we're in any hurry, just given the -- we think the benefit of keeping the excess liquidity outweighs the cost, but it's certainly something that's top of mind for us. I don't know. We'll update it as we go forward, but it just feels a little early right now.

Mike Mueller -- J.P. Morgan -- Analyst

Got it. OK. That was it. Thank you.

Operator

The next question comes from Samir Khanal of Evercore. Please go ahead.

Samir Khanal -- Evercore ISI -- Analyst

David or Mike, I guess, releases that are being negotiated today. I mean, what are the tenants sort of asking for in these bases that you didn't see a few months ago? The other questions that we've gotten is, is there COVID language being incorporated in leases? What if there's a possibility of a second wave coming in, in terms of virus? I guess what's different today than a few months ago in terms of the agreement?

Michael Makinen -- Chief Operating Officer

Hi, Samir. This is Mike. Right now, the leases that we're working on are leases that are in the relatively advanced stage and provisions and items related to COVID have not entered into those conversations. But we're waiting and seeing what's going to happen over the next several months as to how that's going to play out.

Samir Khanal -- Evercore ISI -- Analyst

OK. And I guess my second question is on bankruptcy. I guess for you, Mike. Do you get the sense that a lot of the restructurings and bankruptcies could get pushed out in the next year? Because I just get the sense that a lot of the retailers can't hold sort of going out of business sales at the current moment.

Just trying to get a picture of bankruptcies maybe later this year or even into next year?

Michael Makinen -- Chief Operating Officer

I'll let Conor speak to that one.

Conor Fennerty -- Chief Financial Officer

Yeah. Samir, it's a good question. I don't know. I mean I don't think bankruptcy is not something you can really push off.

Right? So I don't think there will be a pause. I think you could see, frankly, once you have a reopening, an increase ahead of the holidays as either some retailers who struggle to liquidate their inventory or buy inventory ahead of the holidays. So I don't think there'll be a pause, but it's just a guess. As you know, the bankruptcies that are in process, the Modell's, the Pier 1s, etc., are effectively on hold until you see some sense of reopening.

But our excitation to David's prior comments, is there'll be more bankruptcies and effectively a pull forward. So I don't see a pause, but just the best guess -- it's guess, at best, excuse me.

Samir Khanal -- Evercore ISI -- Analyst

OK. Thanks, guys.

Operator

The next question comes from Floris Van Dijkum of Compass Point. Please go ahead.

Floris Van Dijkum -- Compass Point -- Analyst

Hey. Good morning, guys. A couple of questions. Your bad debt reserve wasn't that much different from the first quarter of last year.

What are your expectations going forward? And in particular, also in terms of some of the straight-lining of rents of potential dubious tenants. So do you expect that those charges will probably, likely, increase in the second and third quarters?

Conor Fennerty -- Chief Financial Officer

Hey, Floris. It's Conor. How are you? I understand the genesis of your question on bad debt, and it's really hard to compare companies, and it's an apples and oranges comparison. What I would tell you is I feel really good about our receivable balance and our collection process.

We've got a great property accounting and property reporting team that's on top of their game. So I understand the genesis of your question. We did have an increase in bad debt versus our budget and took some reserves on some tenants that have receivables, excuse me, that we were worried about. On a go-forward basis, I think you're going to see less variability in bad debt over the course of the year, then you will just simply see tenants go on cash accounting or the cash basis of accounting.

So I'm not expecting a material increase in write offs. Our receivable balance on a year-over-year basis is down modestly from a year-end perspective or camera perspective, we're well ahead of where we were last year. We do a great job there, as I mentioned. So I don't expect to see a massive uptick in bad debt.

I think what you'll likely see is more a change on tenants moving to cash basis accounting. In terms of your straight-line rent question, we took some reserves this quarter, as we outlined in our deck. Our straight-line rent reserve or receivables is down modestly year-over-year. You're absolutely right.

Could you have further write-offs? It's TBD. We're very early at this pandemic, as we mentioned, and we'll see as we go from here. But we took a modest reserve this quarter, and we'll see as we approach next quarter.

Floris Van Dijkum -- Compass Point -- Analyst

Thanks, Conor. One more question, and this is maybe one for David as well. But in terms of your capital, I mean, suspending the dividend basically saves $150 million. You've got ample liquidity, you've got a very strong balance sheet, no maturities, strong cash position.

What would make you be more aggressive in terms of repurchasing shares given that they're trading at just above a third of the level that you issued equity at the end of '19?

David Lukes -- Chief Executive Officer

Well, first of all, remember that the Board has only suspended the second-quarter dividend. So I wouldn't take that necessarily as an annualized impact. But I hear your point that we do have a tremendous amount of liquidity right now. The balance sheet is in great shape.

And if we wanted to be aggressive on allocating that capital, there are a variety of things that I would find interesting. Certainly, our stock is interesting. But given the fact that we've drawn our line, and we're kind of in a little bit of a defensive posture right now, which I think is appropriate, I don't see that being a reasonable idea. And I'm more interested in what opportunities arrive as we come out of this COVID crisis, but most likely are in the middle of then of a recession because that's the point in time where sometimes really great real estate can dislodge from existing owners, and we can buy vacancies, and we can buy properties that we think we can work at.

And we can grow our company. So I think all options are on the table once we have paid back the line. And feel like we're in a position that we can be aggressive. But for right now, I think prudence is probably pretty reasonable given that the country is still closed.

Floris Van Dijkum -- Compass Point -- Analyst

Great. Thanks. Thanks, David.

David Lukes -- Chief Executive Officer

Thank you.

Operator

The next question comes from Linda Tsai of Jefferies. Please go ahead.

Linda Tsai -- Jefferies -- Analyst

Hi. Good morning. The 50% of the rest that were received, does that cover monthly fixed costs, like operating expenses, G&A, debt service, and capex?

Conor Fennerty -- Chief Financial Officer

Hey, Linda. It's Conor. So breakeven effectively is 50% pre-capex. And so you're correct, we cover interest expense, G&A, opex, etc.

Our capex for the first quarter was about $12 million in the leasing capex side. So if you extrapolate the April payment trends for the rest of the quarter, in a hypothetical scenario, we would have a cash burn of about $12 million if you assumed leasing capex was the same for the second quarter as well. For us, breakeven is probably about mid-60s. The point I would add to that is -- or two points I would add to that, excuse me.

One, that's including the $500 million of additional line balance. Right? So there's an interest expense component to that. And the second point, to David's remarks, we're still collecting rent on April, and we're in conversations with tenants on potential deferrals or whatever it might be to Vince's question. So in an absolute basis, yes, we're covering all of our fixed expenses ex-capex today.

But I would just say that it's still really early. As David mentioned, we're still early in negotiations or conversations with tenants, and we'll go from there.

Linda Tsai -- Jefferies -- Analyst

Thanks for that. And I just had one more. On your earlier comments that bankruptcies will start to accelerate, and there will be higher capex associated with recycling, would you expect capex spend per space to increase because there's more competition to attract the higher quality tenants? Or was that just more about aggregate spending in general due to higher turnover?

David Lukes -- Chief Executive Officer

Yeah. I really just meant the latter, Linda. If you look at the last three years for us, our capex spend has been elevated simply because we were doing a lot of anchor leasing. Our expectation was that we were going to conclude that anchor leasing and then the capex would start to decline, which means that we likely then would allocate capital to other activities like external acquisitions or stock buybacks.

And if what is accelerated is additional churn in the tenant base, then it means that we'll be reallocating capital again to leasing, which is a very profitable way to invest money, but I would have thought it was a little bit slower every year. And I do think that we're going to get a little bit more of a wave here in the next year.

Linda Tsai -- Jefferies -- Analyst

That's it for me. Thanks for taking my questions.

Operator

The next question is a follow-up from Christy McElroy of Citigroup.

Michael Bilerman -- Citi -- Analyst

It's Michael Bilerman with Christy. I was wondering if you can talk a little bit about any differences that you're seeing between your joint venture portfolio and the core wholly owned portfolio. And whether there's any differences in terms of rent collections between those two pools? And then also talk about the capitalization from a balance sheet perspective, you've moved SITE Centers, corporate balance sheet to largely be unsecured and have also reduced the level of preferred after the equity offering in December. but the joint venture portfolio is largely secured with a higher level of indebtedness relative to value.

And so I don't know if there's potential default issues on that side given what is likely a similar level of rent pay, but can you sort of walk through some of that for us?

Conor Fennerty -- Chief Financial Officer

Michael, it's Conor. You're absolutely right. So our secured debt effectively is entirely with the JVs. There's a couple of things I'd point out.

So, one, the JVs have enough cash on hand to cover interest expense for now. That could be a risk down the road if this continues or worsens from here. But as of today, we feel good about their capitalization. The second point I'd make, as you know, we've selected partners that are incredibly well capitalized.

So the largest insurance companies in the world, largest asset managers in the world, other investment managers with significant capital. So I feel really good about our capitalization there. And then the third point I would make is that debt is nonrecourse. There's no cross-default provisions.

So we'll do what's best for stakeholders. But the leverage and the attachment point really varies dramatically across the joint venture. So we do have some joint ventures with no leverage. We have others with 30% or 40% LTV and some with higher, specifically in the Blackstone portfolio.

But what I would tell you is that the JVs themselves remain well capitalized. They have cash on hand, and they've got enough to cover interest expense for now.

Michael Bilerman -- Citi -- Analyst

And the collectibility between the two pools of assets were similar or different?

Conor Fennerty -- Chief Financial Officer

It's all over the place. So what I would tell you is some of the joint ventures had higher collection rates, some had lower. It really depends on property type, Michael. So we're seeing marginally higher collection rates in the kind of community or smaller centers and then for lower collection rates on the lifestyle side, and that really just depends on which joint venture you're referring to.

But, for largely, if your power, you're generally in the collection rate that we've seen. If you're a community, you've seen marginally higher and then lifestyle just modestly lower. And the joint venture is kind of a smattering of each of those, depending on which one you're referring to.

Michael Bilerman -- Citi -- Analyst

And then if you think about the 50% nonpayment of April rent, you have about 7% of your income is in ground leases. Did 100% of the ground rent get paid? And then effectively, if that's the case, that would imply a much lower collection rate on the actual store front. So if you can just clarify, that would be great.

Conor Fennerty -- Chief Financial Officer

Michael, I don't know the collection rate on the ground leases. We have to come back to you on that.

Michael Bilerman -- Citi -- Analyst

OK. And then do you have on that 50% sort of the number of tenants that that comprises? So if you think about your tenant base, your top 10 tenants are making up almost 30%. Your top 50 tenants are 60% of your rent. What is the concentration of that 50% nonpayment? Were there some larger ones in that bucket? Or were they dispersed in conjunction with the way your rent role is?

Conor Fennerty -- Chief Financial Officer

Yeah. Just given, Michael, the size of our portfolio, just for context, our top 100 tenants are almost 75% of our rent. So not surprisingly, it's fairly concentrated. So you're absolutely right.

Michael Bilerman -- Citi -- Analyst

And then as you think about the sectors of that non 50% payment, I assume you've called out the restaurants, fitness and theaters, which is 11% of your base rent, which sounds like those are all doughnuts 0 payment. What else makes up the remaining 40 percentage points?

Conor Fennerty -- Chief Financial Officer

Yeah. So if you look on Slide 8 of our earnings deck, Michael, we've got in there the percentage of ABR open by category. As David mentioned in his remarks, it's not a perfect correlation. But, generally, the tenants that are open are paying rent and the tenants that are closed are not paying rent.

So you're spot on. The three that we called out, not surprising are lower payment kind of categories. But if you look on that slide, it's almost perfectly correlated with payment. And so to your exact point, it's restaurants, it's fitness, it's entertainment, i.e., theaters for us.

And at the other end spectrum, it's the warehouse, clubs, gas stations, grocers that are paying rent.

Michael Bilerman -- Citi -- Analyst

OK. Last question. Just, David, if I go back to your three core tenants of building the new SITE Centers portfolio, which you talked about the low occupancy cost, the convenient access last mile and also being in the wealthiest ZIP Codes in the U.S. and then the adjacency to which your other retailers provide resulting in the high consumer traffic.

Right? You feel like your portfolio is better positioned and of better quality. I guess with that mindset, why do you think you are suffering basically in line, if not, from at least an early read, a little bit less rent collection relative to industry if you fit those three qualities?

David Lukes -- Chief Executive Officer

Good morning, Michael. Well, it appears that a number of tenants have decided to simply not pay across their entire store fleet. And so I guess we haven't really felt like it's pointed at any particular portfolio. We feel like the chains that have decided not to pay rent have just decided nationally not to pay rent.

And it's not a surprise that our portfolio is filled with more national tenants, and we have a smaller shop exposure. The one thing to consider is a big question for us is when do these tenants pay rent, given their contracts? Why haven't they, those are all valid questions. On the other side is these tenants have raised a lot of capital. They have survivability.

They have cash in order to reopen. And what I would suspect is it's the undercapitalized small shop tenants over the next six months that will really struggle because that's what happened in 2008, '09. There was this four- to six-month lag with shop tenants where they kind of continue to pay the bills, and continue to try and stay open. But if they're in a recession, particularly if you're in lower income or moderate-income markets where the job loss is higher, it's very, very difficult for small shops to stay solvent.

Whereas I think the large national chains, albeit punishing landlords at this point. But I think in the long run, they're able to get open again. And so I think that trend might reverse.

Conor Fennerty -- Chief Financial Officer

The other thing, Michael, I'd just add to that is we have not, to David's point, entered any deals or transactions with any of the national retailers on deferred rent. And that could obviously have a material impact just given how concentrated we are on the April payment rates.

Michael Bilerman -- Citi -- Analyst

Right. Do you think -- and OK, I respect you and Mike and many within the SITE Centers organization have long tenured, deep relationships with these retailers. I can remember a time where DDR used to have, I don't know, it was like over 800 assets. It may have gone over 1,000 at one point, right? Where you as an entity were the tenant's largest landlords in many cases.

Do you think size, in terms of landlord size, when we come to the other side of this, will matter in terms of where rents ultimately get paid? How much rent gets paid? What stores, retailers will keep that? There will, maybe, a separation between sort of large versus smaller, more niche-oriented players?

David Lukes -- Chief Executive Officer

I think that the size of the landlord mattered a lot when the large landlords had big development programs that serviced a rollout of large national chains. That was a symbiotic relationship that seemed to mean that size mattered. A retailer that wanted to open 50 stores a year could go to their top landlords who are also developers and merchant builders. And you could fill your open to buy simply by a handful of really big national relationships.

And that was sometimes private and sometimes it was the REITs. But honestly, I don't really see the retail world as having a tremendous footprint growth. It's more about reallocating footprints in the higher density and higher income submarkets. And in that sense, I think the landlord matters less.

So I personally feel like shrinking as we did to concentrate on five dozen properties was the right move because we can really be very, very granular on every single lease decision, and it's not overshadowed by a relationship that we have with a tenant that has a big rollout program. And in that sense, I think we're always going to do what matters to our stakeholders, which is our debt and our equity holders.

Conor Fennerty -- Chief Financial Officer

Yeah. The only thing I'd add, Michael, you know this probably better than we do, is I think it's the strips. The public strip represents 10%, 15% of the shopping center in the United States. So it's a little different than the malls with how concentrated they are.

So it's not to say that we're not relevant, and the retailers don't know who we are, but it is definitely extremely fragmented and remains that way.

Michael Bilerman -- Citi -- Analyst

Great. Thanks for all the time.

Operator

The next question comes from Steve Sakwa of Evercore ISI. Please go ahead.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. I just had really one question maybe for David or for Mike. Just you made a comment about mall tenants. And I'm just curious if you could maybe expound on either the categories or the pace, if if there's any names or things that you could just give us a little bit more color on.

What you're seeing and how that might unfold over the next six to 12 months?

David Lukes -- Chief Executive Officer

Good morning, Steve. I mean, I guess I would refrain from giving you tenant names. But even in the last year, I think we've seen health and beauty, in particular, recognize that their customers are coming to strips. And Mike can give a little bit more detail.

But I really do think this was heavily influenced by the ability for tenants and landlords to access geolocation data. The cellphone data that you're able to aggregate now can give you such an incredible window into who's coming to your properties, a lot of the mall-based tenants, and that's why I bring up health and beauty, realize that their customers were not just going to a mall. Their customers were also going to strip centers. And because of the convenience for their customer in the strip versus the mall, that was a big draw.

And then they look at the occupancy cost ratio. I'm sure you saw the analysis between Gap and Old Navy when they started to show their profitability and you look at the occupancy cost ratio between those two different brands, it's remarkably less expensive to be in a strip format. And so I think what we were starting to see last year because of the geofencing data is only going to be exasperated now.

Michael Makinen -- Chief Operating Officer

I'll add to that, Steve. This is Mike. The one thing I'd point out is that when a retailer who operates in a mall with was extremely high cost, extremely high extra cost looks across the street and basically says, look, I can be there for a third of the price, at the same time generate similar sales, we're hearing that all the time from the mall tenants. And we've got two portfolio reviews scheduled for the next few weeks with almost what I would call exclusively mall-based tenants who are good credit, good operators.

And their main statement is, look, we want to be by T.J. Maxx, Target, Marshalls, Ross, Burlington, more than we want to be down the wing from a closing dillards. And that basically is what we see as an opportunity that we're really going to strike while the iron is hot.

Steve Sakwa -- Evercore ISI -- Analyst

And do you think that that manifests itself in deals this year? Or just given the situation, does this kind of get more pushed off into 2021 when you see the kind of fruits of that labor?

Michael Makinen -- Chief Operating Officer

No. I think it will definitely become some deals this year.

Steve Sakwa -- Evercore ISI -- Analyst

OK, guys. Thanks a lot.

Operator

The last question today comes from Chris Lucas of Capital One. Please go ahead.

Chris Lucas -- Capital One Securities -- Analyst

Conor, just a couple of follow-up questions, if I could. On the reserves you took in the first quarter, were any of them related to sort of the payment patterns you saw in April or were they all first quarter specifically related?

Conor Fennerty -- Chief Financial Officer

They were unrelated to any of the payment plans. I think from a collectibility perspective, I think it's all but one of our payment plans have been deep rent we would defer as opposed to put it on a cash-based accounting.

Chris Lucas -- Capital One Securities -- Analyst

OK. And then do you have a way to describe sort of the composition of the unpaid rent for April as it relates to sort of completely not paid versus partial payments?

Conor Fennerty -- Chief Financial Officer

The majority is completely unpaid, Chris. There's been a couple of national chains. I'm sure you've seen headlines, they've paid $20 or 50%, whatever it might be, but the vast majority has just been fully unpaid.

Chris Lucas -- Capital One Securities -- Analyst

OK. And then, Mike, on leases that were set to commence, say, second quarter or third quarter, what are you hearing from the tenants in terms of their interest in opening up and commencing around?

Michael Makinen -- Chief Operating Officer

There's some shop tenants that are a little more skeptical about it, but most of the nationals are committed.

Conor Fennerty -- Chief Financial Officer

And then remember, I would just say from a timeline perspective, Chris, we've always talked about third and the fourth quarter are the biggest openings. Clearly, that could still be impacted by the pandemic, but there typically is not a lot of tenants opening this time of year. It's really trying to get ahead of the holidays.

Chris Lucas -- Capital One Securities -- Analyst

Sure. And then the last question for me. Just as you guys -- and a lot of the conversation has been about the PPP program. I guess I'm just curious as to whether you've done any analysis at this point of what tenants might be able to qualify for the Main Street lending program, which really hasn't gotten off the ground yet?

David Lukes -- Chief Executive Officer

Yeah. We really don't have much visibility into that. Like I said, our local tenant exposure is so low that we really don't have access to what they're looking for, unless they ask for a rent assistance from us, and then we can require them to prove that they've applied for other forms of financing. But to date, honestly, we just haven't seen enough data to be thoughtful about it.

Chris Lucas -- Capital One Securities -- Analyst

OK. Thank you. Appreciate the time.

David Lukes -- Chief Executive Officer

Thanks, Chris.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to David Lukes for any closing remarks.

David Lukes -- Chief Executive Officer

Thank you all very much for dialing in, and we'll talk next quarter.

Duration: 73 minutes

Call participants:

Brandon Day -- Investor Relations

David Lukes -- Chief Executive Officer

Michael Makinen -- Chief Operating Officer

Conor Fennerty -- Chief Financial Officer

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Christy McElroy -- Citigroup -- Analyst

Shivani Sood -- Deutsche Bank -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Brian Hawthorne -- RBC Capital Markets -- Analyst

Rich Hill -- Morgan Stanley -- Analyst

Vince Tibone -- Green Street Advisors -- Analyst

Mike Mueller -- J.P. Morgan -- Analyst

Samir Khanal -- Evercore ISI -- Analyst

Floris Van Dijkum -- Compass Point -- Analyst

Linda Tsai -- Jefferies -- Analyst

Michael Bilerman -- Citi -- Analyst

Steve Sakwa -- Evercore ISI -- Analyst

Chris Lucas -- Capital One Securities -- Analyst

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