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EPR Properties (EPR 0.92%)
Q1Â 2020 Earnings Call
May 7, 2020, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the EPR First Quarter Earnings Conference Call. [Operator Instructions]. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions].
I would now like to hand the conference over to your speaker today, Brian Moriarty, Vice President, Corporate Communications. Thank you and please go ahead, sir.
Brian Moriarty -- Vice President, EPR Properties
Okay. Thanks for joining us today for our first quarter 2020 earnings call. I'll start the call today by informing you this call may include forward-looking statements as identified in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate or other comparable terms.
The Company's actual financial condition, the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of these factors that could cause results to differ materially from these forward-looking statements are contained in the Company's SEC filings, including the Company's reports on Form 10-K and 10-Q.
Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the Company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release, and supplemental information furnished to the SEC under Form 8-K.
If you wish to follow along today's -- with today's earnings release, supplemental and earnings call presentation are all available on the Investor Center page of the Company's website www.eprkc.com.
Now, I'll turn the call over to Company President and CEO, Greg Silvers.
Greg Silvers -- President and Chief Executive Officer
Thank you, Brian. Good morning, and thank you for joining us on today's first quarter earnings call. Before we begin, on behalf of myself, the EPR Board of Directors, and our entire team, I want to express our wishes for everyone's health and safety.
Clearly, we have entered unprecedented times and our focus on experiential assets places us at the tip of the spear. As the COVID-19 pandemic escalated, we recognize the need to proactively communicate and have provided several updates on the condition and status of the Company. Through these updates, we have highlighted actions we've taken to ensure strong liquidity and provided context around our long-term viability illustrated by a liquidity analysis.
Beyond sharing our first quarter results, today we will discuss additional steps we are taking to fortify our balance sheet, including suspending our monthly cash dividend to common shareholders after the dividend payable May 15th and the suspension of our share repurchase program following the execution of our proposed covenant waiver. Substantially, all of our properties are currently closed due to state and local government action.
As a result, we reported that our tenants and borrowers paid approximately 15% of contractual base rent and mortgage payments in April and we do not expect any significant changes until after operations resume. Additionally, we reported that the Company has agreed to defer rent and mortgage payments on a month-to-month basis for substantially all of the customers that did not pay rent for April. And today, we will provide further detail regarding future deferrals.
We are proactively working with our customers to evaluate their deferral request and to structure appropriate repayment plans as we gain more clarity into when they can reopen for business. In most cases, we believe deferral is appropriate. No one anticipated revenues going to zero in a matter of three short weeks and continuing for months, depending upon the business and the restrictions imposed by state and local authorities. We currently expect that most of these deferrals are recoverable.
Our announcement regarding the temporary suspension of our monthly cash dividend to common shareholders and the planned suspension of our share repurchase program was made after careful consideration and a clear understanding of our cash collections relative to our monthly dividend. While we believe we have ample liquidity due to the actions we have taken, we are being prudent in our approach due to the uncertainty of the ultimate length and impact of the pandemic. It simply does not make sense to borrowing from tomorrow given the uncertainty of this recovery.
It is important to remember that these events, however, are transitory. We will be a strong Company when we get to the other side and we remain committed to reasonable leverage levels and a strong balance sheet. Our tenants enjoyed broad consumer success for decades before this tragedy and they will return. The question is one of pace. How quickly will our tenants be able to regain momentum? Our current expectations are for our properties to begin reopening beginning in May.
However, absent a therapeutic option or a vaccine, we believe social distancing will remain the norm and capacities will be limited. Against this backdrop of challenges, I want to reiterate our strong belief in the long-term macro trend of experiential properties. People will come back to our properties. With so many of us sheltering at home, we can anticipate incredible demand for us to once again come together with friends and colleagues to share and experience. And we own the properties where we will share those experiences.
Now, let me turn over to Greg, who will provide more detail on the portfolio.
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
Thanks, Greg. At the end of the first quarter, our total investments were approximately $6.7 billion, with 371 properties and services and 98.4% occupied. During the quarter, our investment spending was $41.9 million and our Company level rent coverage was 1.92 times. Our experiential portfolio comprises 285 properties with 48 operators is 98.3% occupied and accounts for nearly $6 billion of our $6.7 billion in total investments. We have two properties under development. Our first quarter spending was entirely in our experiential portfolio comprising the acquisition of two strong theaters and spending on experiential build-to-suits.
Our education portfolio comprises 86 properties with 16 operators and at the end of the quarter was 100% occupied. I now want to turn to our view of the reopening and rent payment timelines. We have ongoing discussions with our major exhibitor partners about their reopen [Technical Issues].
At this time, we believe most theaters will reopen around July 1st. Their plans are naturally subject to the timing of lifting of stay-at-home orders by individual state and local authorities and completely dependent on the studio release schedule.
We anticipate social distancing requirements will limit capacity in most theaters, but given typical seat utilization metrics we anticipate theaters will have sufficient capacity to meet demand. Our exhibition partners have safety and comfort for their employees and guests top of mind as they come back to the movies. They are diligently developing appropriate health and sanitation measures.
Based on our discussions, we anticipate a gradual ramp up with films from the back catalog likely at discount prices and reduced operating hours until the studios begin releasing new product. This will allow the exhibitors time to work out their health and sanitation measures and educate guests with new normal practices as they ramp to first run product.
As life begins to return to normal, seeing movies on the big screen and a theater will, as it always has, provide an exciting cost effective entertainment option. The film slate lines up well for the remainder of 2020. Tenet, currently scheduled for July 17th, will be the first major release, followed by Mulan on July 24th. Title scheduled for the remainder of 2020 include Wonder Woman 1984, Black Widow, Top Gun: Maverick, and No Time to Die.
We're bullish on the 2021 film slate, which includes a number of strong offerings Avatar, Matrix 4, the Fast & Furious 9, Spider-Man 3, Ghostbusters: Afterlife, Jungle Cruise, and MI 7. There has been much press regarding Universal's comments about shrinking the theatrical release window after Trolls World Tour.
Earlier this week, Disney affirmed that they very much believe in the power of the theatrical launch program for their big movies. We continue to believe that studios, including Universal, will in large part honor the theatrical release window, because it's in their economic self-interest to have multiple staggered distribution channels to maximize profitability.
We don't believe the performance of Trolls World Tour represents the permanent shift in the consumers long-standing preference to enjoy movies on the big screen versus home viewing. Rather, in our view, it was driven by unprecedented worldwide stay at home orders, which shuttered all theaters and led the families chasing limited entertainment options even at a premium. We don't draw the conclusion that if families have the option to see Trolls World Tour on the big screen, they would have chosen PVOD over the big screen at these levels.
As noted in our April 21st press release, despite AMC's $500 million of private offering proceeds, we determined it was prudent to begin recognizing revenue for AMC on a cash basis. As Greg noted in his remarks, we are proactively working with all of our customers, including AMC, to evaluate their deferral requests and to structure appropriate repayment plans as we gain more clarity into when they can reopen for business and how quickly they can ramp up their operating cash flows.
I also want to spend a minute discussing anticipated reopening schedules for our other major customer groups. Again, it goes without saying these businesses are subject to ramp up, driven by when state and local jurisdictions lift restrictions, the specifics of each operating platform and operator, including individual markets and circumstances, governmental capacity restrictions and, most importantly, the time it takes the public to become more and more comfortable with health and sanitation measures.
These projections are based on what relevant jurisdictions are currently communicating and our ongoing discussions with customers. As we all know, this is a very fluid situation. These can certainly change and they will vary from state to state and city to city.
We expect gym openings through May. We expect phased openings in our eat and play category through May and June. We anticipate over 50% of our attractions and cultural operators will be opened by July. A few attractions could miss all or part of this season due to governmental health and sanitation measures and the feasibility of operating for a truncated season. We anticipate openings in experiential lodging market by market with most, if not all, opening by July 1st.
We anticipate Resorts World Catskills opening in July. As it's a ground lease, we don't anticipate any impact on rent payment. We don't anticipate any impact to the ski season opening in the fourth quarter. Turning to our education portfolio, in many jurisdictions, early childhood education schools were not mandated to close, but didn't have sufficient enrollment to operate efficiently.
We expect early childhood education operators to reopen and stay -- as stay at home orders are lifted and parents need child care. A number of our schools will open in early May and we anticipate a two to six-month ramp up based on capacity limitations and typically softer summer months. Many of our private schools are operating with distance learning. We expect them to reopen in August and September for the fall semester.
Finally, I want to take a moment to outline what we believe our rent collections will look like at a very high level through the remainder of the year. We're actively working with our customers to structure appropriate deferral and repayment agreements. We're in the early innings and learning daily as we go. We're in constant communication to understand anticipated reopening and ramp up trajectory and the unique health and sanitation challenges presented in each discrete line of business. We have strong relationships with our operators and make long-term investments. We are focused on their long-term health.
In general, we anticipate a ramp up of rent and mortgage payments through Q3 and Q4 with the repayment of deferred amounts commencing in 2021 and in some cases, depending on the deferred amount, extending beyond 2021. We expect and are verifying that our customers will continue to pay third-party expenses including ground leases, taxes and insurance.
Mark will provide additional color on the revenue recognition and cash collections' implications of our prospective rent deferral and repayment agreements, and I'll now turn it over to him for a discussion of our financials.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Thank you, Greg. Today, I will discuss our financial performance for the quarter, provide a balance sheet and liquidity update and close with a discussion of some of the financial implications of the COVID-19 disruption as we move forward.
FFO as adjusted for the quarter was $0.97 per share versus $1.36 in the prior year and AFFO for the quarter was $1.14 per share compared to $1.38 in the prior year. The larger than usual difference between FFO and AFFO for the quarter was due to the non-cash write-offs of straight-line rent totaling $12.5 million, primarily related to AMC theaters as previously disclosed.
Please note that the operating results for the first quarter of 2019 related to the public charter school portfolio, which we sold last year are included in discontinued operations. Those prior period results included a $5 million termination fee.
Total revenue from continuing operations for the quarter was $0.5 million -- was up $0.5 million from prior year due to the revenue associated with new net investments and experiential real estate and revenue related to the Kartrite Resort that is operated under a traditional lodging structure, which impacts other income included in total revenue as well as other expense. These increases were offset by the straight-line write-offs, which were recognized as a reduction of rental revenue.
Note that the Kartrite Resort and the St. Pete, Florida, hotels in which we own equity interests and that are also operated under traditional lodging structures were shutdown as a result of COVID-19 for the second half of March. Additionally, tenant reimbursements included in rental revenue and property operating expense each decreased by approximately $2.5 million versus prior year. And this was the result of more tenants paying property taxes directly. We do not gross up the related revenue and expense in such cases.
Finally, percentage rents for the quarter totaled $2.8 million versus $1.4 million in the prior year and the increase was mostly related to our casino ground lease and to a lesser extent certain movie theaters. Transaction costs were $1.1 million for the quarter compared to $5.1 million in the prior year. The prior year expense primarily related to the pre-opening expenses in connection with the Kartrite Resort.
At January 1st, 2020, we adopted the accounting standard update measurement of credit losses on financial instruments, commonly known as CECL. At adoption, we recognized $2.2 million of credit losses on our mortgage notes and notes receivable portfolio through retained earnings. During the quarter, we recognized an additional $1.2 million of credit loss expense mostly due to the impact of COVID-19 on the model we used to calculate these losses.
Now, let's move to our balance sheet and capital markets activities. Our net debt to gross assets was 38% on a book basis at March 31st and our net debt to adjusted EBITDA ratio was 5.1 times at quarter end.
At quarter end, we had total outstanding debt of $3.9 billion, of which $3.1 billion is either fixed rate debt or debt that has been fixed through interest rate swaps with a blended coupon of approximately $4.3 million. Additionally, our weighted average debt maturity is approximately six years and we have no scheduled debt maturities until 2022 when only our revolving credit facility matures.
As we outlined in our press release in April, we believe we have ample liquidity to see us through the market disruption caused by COVID-19 with $1.2 billion of the unrestricted cash on hand at quarter end and the temporary suspension of our monthly common dividend that Greg discussed, we have multiple years of available cash on hand, even if the April level of rent and interest collections were to persist.
Subsequent to the end of the first quarter, we purchased approximately 1 million shares for $20.4 million of $150 million common share repurchase program authorized, but, as I will discuss later in my comments, there can be no assurance that this program will be fully executed.
Because of the meaningful impact the COVID-19 pandemic has had on our customers, I want to take a moment to discuss how we intend to recognize revenue going forward as well as provide the level of cash collections we anticipate over the remainder of 2020.
As we move into the second quarter, for those tenants in which we provide rent deferrals related to COVID-19 disruption, we plan to elect not to treat such deferrals as lease modifications as allowed per recent guidance from the FASB, instead we will treat such rent deferrals in one of two ways.
For those tenants in which full payment of deferred rent is deemed probable at 75% or greater, we will record rental revenue and accounts receivable. For those tenants where collection of deferred rent is not deemed probable, we will treat such deferred rent as variable payments and only recognize such deferrals as rental revenue when the cash is received.
As an example, for tenants in the second quarter that receive a deferral of all minimum rents for the second quarter, no such minimum rents will be recognized in rental revenue in the second quarter and these deferred rents will be recognized in future periods earnings only when and if collected.
Note that if a rent concession agreement related to COVID-19 disruption period is consummated with the tenant during the quarter and we feel that such adjusted rent is probable of collection, we will recognize rental revenue at the agreed upon rent level. Similarly, any contractual abatements of rent will be recognized in the period to which they relate.
For tenants, where collection of rents over the lease term beyond the period impacted by the COVID-19 disruption is not deemed probable, cash accounting will be applied. Finally, in some limited cases where lease changes are more significant in nature, we may treat such changes as lease modifications.
For mortgages, interest is expected to be fully recognized during the COVID-19 disruption period and any deferrals will be reflected in interest receivable, whereas an increase of the mortgage balance due upon maturity. This treatment is similar to the first category of deferral treatment I discussed for tenants, where all deferred rents are expected to be collected. The slide you see illustrates the expected percentage of total pre-COVID contractual cash revenue that we expect to recognize in our financial statements for the last nine months of 2020 of 75% to 85% and full year 2020 of 80% to 90%, respectively using the revenue recognition methodology that I just described.
We have also provided the expected percentage we expect to collect of such contractual cash revenue in the same periods of 35% to 45% and 50% to 60%, respectively. With the differences from the revenue recognition percentages related to receivables, we expect to have on our books at year-end and collect thereafter.
While each of these percentages are subject to change as new information becomes available and deferral agreements are finalized, we thought it'd be helpful to show you how we currently see this information over the remainder of the year. Because the accounting I just walked through causes some pressure on near-term quarterly results and the fact that certain financial covenants under our bank credit facilities and private placement notes are calculated based on the most recent quarterly net operating income, we expect that we will not be in technical compliance which will be non-payment related with such covenants at the end of the second quarter.
Accordingly, we are in discussions with our lenders and private placement note holders to obtain a temporary suspension or modification of these covenants with some of the suspended financial covenants expected to extend through the first quarter of 2021. We also determine that we will temporarily suspend our monthly cash dividend to common shareholders after the common share dividend payable on May 15th, except as may be necessary to maintain REIT status and to not owe income tax.
And we will suspend the share repurchase program upon the effective date of the covenant modification agreements, which is expected to occur in the next 30 days. Finally, as previously announced, due to the uncertainties created by the COVID-19 disruption, we are not providing any forward earnings guidance.
Now, with that, I'll turn it back over to Greg for his closing remarks.
Greg Silvers -- President and Chief Executive Officer
Thank you, Mark. With that, why don't we just open it up for questions?
Questions and Answers:
Operator
Thank you. [Operator Instructions] And our first question comes from the line of Nick Joseph with Citi. Your line is now open.
Nick, your line is now open. Nick, questions? Nick, your line is now open.
Greg Silvers -- President and Chief Executive Officer
Let's move to...[Speech Overlap]
Operator
Nick, your line is now open.
Nick Joseph -- Citi -- Analyst
Can you hear me?
Greg Silvers -- President and Chief Executive Officer
Yes, now we can.
Nick Joseph -- Citi -- Analyst
Okay. Perfect. Not sure what happened. I wasn't on mute. I was just saying that I appreciate all the color and the disclosure that you guys have provided and then curious what percentage of your tenants have received some sort of government support? Is it through the PPP or any other program?
Greg Silvers -- President and Chief Executive Officer
Nick, we have -- it's Greg. We have had some, but it's limited. Most of our tenants are bigger and exceed the 500 employee limit and therefore are not applicable to them given the size of their operations.
Nick Joseph -- Citi -- Analyst
Okay. And then just thinking about kind of repurposing. I recognize kind of the ideas that many of these properties and product types will reopen and hopefully go back to somewhat normalcy over the coming months and years, but when you think about the opportunity to repurpose the theater, how do you think about that ability, and any kind of historical examples would be helpful?
Greg Silvers -- President and Chief Executive Officer
Sure. And again, I think, Nick, as you said, we think these will go back. I mean, we are the largest landlord to the three largest operators and so our properties are integral to their ongoing success. But, fundamentally, these are big boxes. So, again, they are big boxes with a predominantly extra large size of acreage. So they are pretty easy to transform into any manner of things. We've taken a wing off and transformed that to another operation, it was about $1 million to bifurcate that wing. We then had excess parking that we sold for, I think, somewhere in the neighborhood of $4 million to $8 million of the excess parking. So the actual -- the economics can work very well depending upon the jurisdiction that you are in.
Nick Joseph -- Citi -- Analyst
Thanks.
Operator
Thank you. And our next question comes from the line of Collin Mings with Raymond James. Your line is now.
Collin Mings -- Raymond James -- Analyst
Hey, good morning. First question for me, just on the covenant discussion. You seem to reference that you expect an agreement to be effective within the next 30 days and potentially in place at least through the first quarter of next year. Can you maybe just elaborate on what terms are being modified? Where negotiations stand right now? And to clarify with the terms of the waiver, just maybe talk about your ability to pay dividends and repurchase shares? Is that for the entire duration or just maybe elaborate a little bit more on, again, just where the covenant discussions stand?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah, sure. This is Mark. I think, first, to point out on the bank covenants, a lot of those are quarterly driven. So you can imagine in the second quarter where we're doing some of these deferrals and, for example, in the case of AMC and not recognizing much cash income, maybe other than ground leases and CAM. It creates a problem with respect to those covenants that are calculated in that way. And really what we're seeking is the waivers related to two leverage covenants, kind of total debt to total asset value. And again that asset values are kind of a quarterly capped calculation. And also we have a maximum unsecured debt unencumbered asset value test, so both of those, we will get waivers for. And then there's two coverage task, kind of fixed charge coverage and unsecured interest coverage, which will also seek waivers for.
We will go through '21 on a couple of these covenants. We don't anticipate needing that, but kind of just planning for any downside we think will be covered. So as far as discussions, we are in discussions with both groups and that's our bank credit facility that holds our line of credit and our term loan, as well as our private placement holders. And in both cases, we need a majority approval and I will say we have a term sheet with our lead banks that we have -- that we have -- they have approved. We've held meetings with our top banks that take -- that comprise more than 50% of our credit facility. Those discussions are going very well. So we don't anticipate any issues getting the waiver done.
And as far as the other issues you mentioned, we agreed as part of that process to suspend our dividend. With our liquidity, I think, the bank might have been opened to some form of dividend, but we thought it didn't make sense to borrow to pay the dividend and we want to come out on the other side of this with strong -- low leverage and be in a better position.
The stock buyback will continue through the covenant closing or the covenant modification closing, like we said -- like I said in my comments and you just mentioned, we expect that in the next 30 days.
Collin Mings -- Raymond James -- Analyst
Okay. And then... [Speech Overlap]
Greg Silvers -- President and Chief Executive Officer
Also to your final question there, again if things moderate faster, better than we projecting, we have the ability to terminate this waiver. We will have the ability to terminate it at anytime. However, again, you've heard -- listen, I think there is a lot of discussion that's going on about how this is going to go forward and I will tell you, our crystal ball is murky at best. We're working with all of our operators, but we have built a model that says we need to be prepared for withstanding in this social distancing environment until there is a therapeutic option or a vaccine, because I think there is a general discussion out there that people -- that the thing that is keeping people back is government restriction. And as soon as they open up the doors, people are going to come driving in.
We do not adhere to that. We think there is, there is an aspect of this that these any businesses that is -- that are communal. The actual determinant of that will be the customers. They will make the decisions of whether they're willing to be part of these activities. And so, we build a model that said, hey, let's prepare for the worst. If things get better, we can always change that and react to that. But if we're prepared to handle the worse, then we know we're going to come out the other side. We're going to have good businesses, we have good properties, we're going to be fine. It's just getting across that desert.
Collin Mings -- Raymond James -- Analyst
Got it. And then, maybe, in that same line of thinking there. Recognizing you have agreed to defer on a month-to-month basis for now. Greg, can you just maybe elaborate on how durable the rent levels were that were established again prior to the pandemic and how durable those will be going forward? As well as just the ability of your tenants to ultimately repay that deferred rent? Implicit in some of your comments was a recognition that some rents are possibly going lower and are there cases where it just makes sense now to go ahead and switch to some sort of percentage rent for some tenants, just given that there is likely to be a ramp period here of businesses starting to open back up.
Greg Silvers -- President and Chief Executive Officer
I actually think, Collin, you're dead on. I think there very much could be a ramp period where it's percentage rent -- but, again, that will be against the contractual rent. That would be a credit against that. I think, as Mark said in his comments, we think, and our belief is that most of these people will -- or most of our customers will be able to pay this back. It's just a period of over what time and what security do we get for that.
A lot of variety of looking through that and solutions will be different, meaning that if somebody is closed for two months and they are back up for three months, it's going to be different than if somebody is closed for eight months or limited for eight months. So I think we'll take a look at all of those kind of options, but clearly by the information we're showing you, we think most of these are recoverable.
We've made a decision with regard to AMC and given their leverage and the discussions that were going on that it may -- it was prudent for us to be more conservative with them. I think that doesn't mean that we don't think we'll recover those balances. It's just from an accounting standpoint when we say there is a 75% chance of a 90% recovery. When there is a lot of discussion out in the market about them at least considering restructuring, it's hard for us to make an argument to the auditors that you don't have some level of risk and the most conservative thing to do to protect ourselves and our investors is to go to a cash basis.
So I wouldn't interpret the fact that we've put them on a cash basis that we think we're not going to recover any of this deferral. It's just a matter of us being prudent about it being conservative and giving us flexibility to deal with it once we know what levels we're at.
Operator
Thank you. And our next question comes from the line of Brian Hawthorne with RBC Capital Markets. Your line is now open.
Brian Hawthorne -- RBC Capital Markets -- Analyst
Hi. Good morning, guys. So the covenants -- if you were to triple, I mean, and you don't come to an agreement, is that just an incurrence covenant or is there something else that it could be?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
On the bank facility and private placement, those are not incurrence covenant, those are coverage metrics. We don't anticipate tripping any of the bond covenants, which three out of four of those are incurrence related.
Brian Hawthorne -- RBC Capital Markets -- Analyst
Okay. And then there has been a couple of your tenants that have had some issues on like Cinemax went bankrupt and Punch Bowl Social defaulted or close to defaulting. I guess what -- do you have any of the new tenants out there even if they are all small like that you're concerned about? And I mean I guess what are your kind of expectations for some of the smaller tenants that do go bankrupt or have some disruption, significant disruption, to their business?
Greg Silvers -- President and Chief Executive Officer
I mean clearly the numbers that we're showing you today reflect our best belief in these. Even when you look at a Cinemax filing, you've got to go back and say that was probably driven by their wanting to get out of a transaction that they had previously committed to. We have two -- we only have two theaters with them.
So we don't -- we again, on all of these, what we did is, we went down through a tenant by tenant basis, probably through our top 30 to 40 tenants, which are going to get well down significantly below 1%, and did a complete review of every one of these. So the numbers that you -- that we're talking about today reflect our best belief as to what occurs. It doesn't mean there is not some of those with potentially one of the names that you mentioned, where there could have disruption, but those numbers reflect that already.
Brian Hawthorne -- RBC Capital Markets -- Analyst
Okay. Thank you for taking my questions, guys.
Greg Silvers -- President and Chief Executive Officer
Thank you.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Thank you.
Operator
Thank you. And our next question comes from the line of Rob Stevenson with Janney. Your line is now open.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Hi. Good morning, guys. Greg, I think the market had been expecting the common dividend suspension, but given the lack of near-term cash flow and the prospect it could be a while before you're back to anything approaching normal in terms of cash rent collections. What are your and the Board's thoughts on the payment of the preferred dividends? And is there any debt covenants either now or in the modifications that would cause you to need to put those dividends into arrears? And any other reason if not why you wouldn't use your liquidity to continue to pay those?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
We -- let's answer it first, Rob. We have no expectation that we will not pay our preferreds. We anticipate paying our preferreds are -- the only thing that if you go back to our liquidity analysis and the way that we broke it out there, you saw that we had more -- even at zero levels, years of liquidity to pay those obligations. So we anticipate fully paying those obligations.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Okay. And nothing in the debt covenants either today or in the modifications that would impact that?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
No.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Okay. And then, Mark, what's the difference in terms of AMC versus Regal and Cinemark in terms of deciding to move to the cash revenue recognition is adjusted, AMC, at least for a while, if not still today, appear closer to a bankruptcy filing or was there something else that sort of -- how would you delineate between AMC and Regal and Cinemark in terms of revenue recognition?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
I think kind of heading into the this crisis or this COVID period, AMC had higher leverage than those others, and so they came into it like -- with a higher leverage balance sheet. And then with the disruption, they went out and did raise $500 million, so that provides some liquidity through what they're saying is through Thanksgiving. But we thought just given the whole credit profile was different than other tenants that it merited, putting them on a cash basis and just was prudent to recognize it just when we get the cash.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Okay. And then just last one from me. Early childhood education mean when you sit here today and having looked at the financials of these and having gone through some issues in the portfolio over the last year or so, if some of these operators aren't able to come back and survive, are there other tenants out there that could move in and take over the space or is it basically on a more regional and multi-location basis or is it really then going to wind up being if you wind up having any hiccups there that is really going to wind up being asset by asset, small operator by small operator to replace them.
Greg Silvers -- President and Chief Executive Officer
I think, Rob, it's more the former than the latter. Part of -- one of the benefits of what we did with migrating our portfolio, the CLA portfolio to Creme is, we've had the great opportunity to be talking with a lot of different operators and there were many operators who were part of that process. So I think our playbook, if for some reason, which right now clearly we don't anticipate, but for some reason there was something there, there was demand for these facilities before, we think there will be demand for them, and we have the shortlist of people who have expressed demand for those.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Okay. Thanks, guys. Appreciate it.
Greg Silvers -- President and Chief Executive Officer
Thanks.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Thanks.
Operator
Thank you. And our next question comes from the line of Kim Stevens. Your line the line is now open. Kim Stevens, your line is now open.
Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst
Can you guys hear me?
Greg Silvers -- President and Chief Executive Officer
Yes.
Operator
Yes.
Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst
Okay. Yeah. This is Ki Bin.
Greg Silvers -- President and Chief Executive Officer
Hey, Ki Bin.
Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst
Can you go back to your -- hi, can you go back to your comments, I missed it actually, about some of the conversations that you and maybe AMC and the movie production studios are having. It just seems like if there is one more production studio that follows Universal's mentality of dual releasing, I think it could cause some severe problems. So what's the latest you have [Speech Overlap] Thanks.
Greg Silvers -- President and Chief Executive Officer
Yeah. Ki Bin, it's an interesting you got some feedback, but what we find is really interesting is, you say if there is one more studio does it, do you know, Disney is doing it with Artemis Fowl. So there are people who are doing this. The better thing is to think at -- that nearly 80% or 90% of all movies are getting moved to next year, even Universal, any movie that was not within two weeks of release and did not -- and has an expectation of over $40 million of box office got moved. And Universal even moved them, everybody, everybody moved them.
So the idea that we're taking a Trolls World Tour movie, for which the dollars -- which again, I think, it's very interesting even when we look at that. We're talking about a movie that made a $100 million in digital, which represents 5 million downloads at $20. And comparing that to North America and the first three weeks, when the reality is Trolls, the original movie, made $350 million in its box office worldwide.
So I think to a certain degree we're comparing apples and oranges. You've had Universal already back up from saying -- they were already started backing up and saying they're going to support the box office. You've had all the -- every studio that has a film title that they think has box office potential already moved to later in the year or 2021, yet we use the 10% to prove the point rather than the 90% that actually went the other direction.
Operator
Thank you. And our next question comes from the line of Craig Mailman with KeyBanc.
Craig Mailman -- KeyBanc Capital Markets Inc. -- Analyst
Thanks, guys. Apologies if I missed this, but could you just give us a flavor of who actually did pay, who is in the 15%?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Well, again, Craig, we're not naming individual tenants. But let me say in the big picture, as Greg kind of mentioned, I mean, there are certain of our tenants that are open and operating or have finished their season. And so, those are a likely group of people who are paying. The people who are shutdown are the people who are not. So again just in the big picture, if you think of ski, ski was done pretty much for the year and we -- remember, we collect generally the entire year during the operating season. Education is operating at some capacity. So that generally gives you a feel for it, Craig.
Craig Mailman -- KeyBanc Capital Markets Inc. -- Analyst
Okay. And does water parks, don't they pay into escrow after the season with those -- [Speech Overlap]
Greg Silvers -- President and Chief Executive Officer
They do. And so you could have some of those in there, but we've also tried to forecast going forward there, about the go into their productive season. So the numbers that Mark put forth kind of are evidence of our belief, our understanding in what we think will occur for the rest of the year.
Craig Mailman -- KeyBanc Capital Markets Inc. -- Analyst
Okay. And you guys flagged AMC as an example, they raised $500 million, they clearly have the cash to pay it. I mean as you guys are having these conversations, how many of your tenants actually have the cash to pay it, but are kind of holding it, because of the uncertainty about reopening and the pace of reopening? And so they want to make sure they're viable versus paying near term expenses? And just how that would impact their ability to kind of repay in a four-quarter time period or whatever the case may be?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
I actually think that's a 100% correct. I think most are in that category, in the sense that there is not yet a great understanding of how long this is going to take, what levels of that we're going to be able to operate in, what's the public response is going to be to this. And so I think there are a lot of people who are just trying to figure out and say is this really -- are we going to see some normalized levels in the fall or are we going to be, as we said, end of 2021 when we have -- hopefully have a vaccine for this. And I think that is what's driving, and our discussions are on a lot of these with almost all of our tenants.
Craig Mailman -- KeyBanc Capital Markets Inc. -- Analyst
Okay. And just theaters in particular, just give us a flavor, no one's necessary calling for bankruptcies, but could you just give us a sense you guys are the largest landlord to a lot of these guys, just a quality of the theaters that you guys own, and maybe the coverages of those versus maybe others in their system and just their willingness to affirm those leases and bankruptcy versus reject them. I know it's a tough question, but just some kind of thoughts around the quality of yours versus maybe others they may have in the system?
Greg Silvers -- President and Chief Executive Officer
Sure. And like I said, without being specific, as I said before, I think it's important to remember that we are the largest landlord for all three of those guys. So I think our portfolio is very important to them and very integral to their success. That doesn't mean that we haven't had theaters that we've had opened for twenty years that maybe the rent. So you have some level of exposure on those, but we are predominantly, like I said, in major markets with these operators and they are very important kind of to them.
So, again, I can't say that if you had a restructure and you wouldn't have some level of risk. I think the idea that this is as draconian as I've seen some estimates, I think are way overstated. I mean, we will have to see, but if you break things out into the courthouse, could we have 10% to 15%, 20% in the lower quartile? Yes, but it's not nearly as draconian as what people think, but Greg I don't know --
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
Well, I was going to say most of our theaters played a pretty substantial audiences from 300,000 to 500,000 people, so they're in good trade areas.
Craig Mailman -- KeyBanc Capital Markets Inc. -- Analyst
Okay. And then just one last one for Mark. The cash flow analysis is very helpful. Could you just give us a sense of where leverage could go near-term in some of these stress cases and where it could trend back to, assuming these are money good on most of these deferral agreements as we head into '21?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah. Obviously, if you're doing a debt to EBITDA calculation, like we typically do on a quarterly basis and the EBITDAs are quarter times four and there is stress in the quarter, you get some odd metrics for debt to EBITDA in the short run. But I think the -- we have modeled this out and we've positioned ourselves particularly with the dividend suspension that we come out of this right in range where we've historically been, kind of, in that 4.6 to 5.6 level as the way we see it sort of in our base case and that's kind of consistent with, like I said, we've always been and consistent with the investment grade metrics that we've enjoyed for a long time.
Craig Mailman -- KeyBanc Capital Markets Inc. -- Analyst
Great. Thanks, guys.
Greg Silvers -- President and Chief Executive Officer
Thank you, Craig.
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
Thanks, Craig.
Operator
Thank you. [Operator Instructions]. And our next question comes from the line of John Massocca with Ladenburg Thalmann. Your line is now open.
John Massocca -- Ladenburg Thalmann -- Analyst
Good morning.
Greg Silvers -- President and Chief Executive Officer
Good morning, John.
John Massocca -- Ladenburg Thalmann -- Analyst
Can you guys talk a little bit about the ski tenants? They basically filled up their cash reserves that you guys are entitled to?
Greg Silvers -- President and Chief Executive Officer
Yeah, I mean, what we said is generally speaking though, that's the way they work and what we're seeing is without calling out any tenants specific at who's paid, that is one of the areas what I said was those areas where their season was effectively over were a majority of our cash paying and then those that are operating. So your assumption is not entirely inaccurate.
John Massocca -- Ladenburg Thalmann -- Analyst
But maybe some that have a little bit more of kind of an April, March bias might have had a little bit of a struggle to kind of fill up those escrows?
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
Again, not really but -- again, like I said, I don't want to talk about specific tenants, but if there's anything it's insignificant.
Greg Silvers -- President and Chief Executive Officer
Yeah, I can even add to that. We received escrow payments even in the month of April.
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
Yeah.
John Massocca -- Ladenburg Thalmann -- Analyst
Very helpful. And then switching over to maybe kind of amusements, let's say in a positive case scenario where things maybe accelerated in terms of opening and customer visits. In what point would those properties need to open and kind of see accelerated visitation in order to kind of cover their escrows on the backend through the winter months? I know it's a little tough, because there's going to be a lot of variables, but where would you kind of need to see openings to kind of maybe get more comfortable with them potentially being cash rent payers again?
Greg Silvers -- President and Chief Executive Officer
And I'll let Greg Zimmerman add to this, but I think it's going to be geography dependent. If you're operating a water park in Texas and Arizona and California, again not as weather dependent, we have a water park in Hawaii. So again, not as weather dependent. So I think it will actually -- the other aspect I will throw into this that just so you understand is probably when school starts. And if schools are starting and/or if they are delayed or whatever, so I think most of these are going to try to open, as Greg said, in the May-June timeframe to try to see how those things go. It will be jurisdiction-by-jurisdiction and we shall -- we'll see, but Greg?
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
Well, and the only thing I would add is obviously the less seasonality they have, the harder it will be to make money. So as the season gets truncated, that will be the challenge. So the earlier they open, the better.
John Massocca -- Ladenburg Thalmann -- Analyst
Okay. And then how are you kind of tracking your tenants' compliance with their obligation to pay operating expenses, particularly real estate taxes? And is there any case scenario where you might book a property tax accrual charge before the tenant default just given the current environment?
Greg Silvers -- President and Chief Executive Officer
Again, we have a -- taxes are actually pretty easy, because we can track the actual payments and monitor that. Insurance -- depending upon the insurance certificate that you make, the insurance is non-tangible without notice, so we'll get notice upon that. We've contacted all of our ground lessors and told them to notify us if they haven't been paying. So we've got a pretty good system we believe to kind of know if there's anything going on or at the first hint of something. And right now we've had good compliance with that along the way.
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
The only thing I would also add Greg is, we're in real-time conversation with these tenants every single day and reminding them they need to do that and working through those issues. So one of the benefits we have of not having a massive amount of tenants is we can be in communication with people.
Greg Silvers -- President and Chief Executive Officer
Yeah. And the other thing, John, I'd say is this is the reverse side of the PPP. When we're dealing with larger tenants, their insurance programs are generally broad-based across their entire portfolio. So it's not the little -- really little guys that we're dealing with.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
And just to reiterate what Greg Zimmerman said, in general, even where we have deferral agreements being negotiated, we're generally requiring them to keep paying those CAM payments and real estate taxes and ground leases. So we think that will continue and we're monitoring that, as Greg said.
John Massocca -- Ladenburg Thalmann -- Analyst
Very helpful. And then one last kind of quick detailed one with regards to kind of Kartrite, I guess what's maybe kind of the cash burn rate there while it's shut down?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Probably about $1.5 million a quarter.
John Massocca -- Ladenburg Thalmann -- Analyst
Okay. That's it from me. Thank you guys very much.
Greg Silvers -- President and Chief Executive Officer
Thanks, John.
Operator
Thank you. [Operator Instructions]. And our next question comes from the line of Kim Stevens [Phonetic] with SunTrust. Your line is now open.
Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst
Thanks, again. When you guys are negotiating with tenants, what type of a financial benefits are you trying to structure in, and especially if things get worse, are you considering warrants and other type of beneficial financial things that you can kind of ask for?
Greg Silvers -- President and Chief Executive Officer
Ki Bin, that's a great question. I think most of ours right now are in discussions. It's like you say. Things change depending upon how long someone is going to take to repay. So the easy things that we're talking about is additional security with the FF&E of our properties, which was their investment, which goes to the ability that if you ever have a problem you can port that entire property without any disruption. So I think all of those things go into play. I think it's for most of our tenants, we're having all of these discussions even to include, yeah, if they have properties on their balance sheet, do we take properties and payment of rent. So all of these discussions are live and going on, but what you said is correct, what it really is -- is a function of is, how long -- how great is this, what's the time payment for what's the security, what's the reasonableness of the repayment period.
Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst
Okay. And I think you guys disclosed this, but I just didn't really understand it, but in April what is your cash burn rate? And can you talk about how started to improve over time according to your schedule that you put out there?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah. It was $23 million a month and I think that's what it will be for a while. We kind of projected each of those things that G&A, property expenses, we included losses at current rate and our St. Petersburg property, while they were shutdown. And just to amend a thing I said earlier. The $1.5 million burn rate that I mentioned for Kartrite for the quarter is $1.5 million per month that includes Kartrite and St. Petersburg. So I should amend what I said there. It's $1.5 million per month for both. And we've just projected, while they're shut down, that's the run rate for that. So $23 million we think is a run rate that is good in the near-term and really what we think our burn rate is.
Greg Silvers -- President and Chief Executive Officer
Now to Mark's point on that, Ki Bin, if those properties open up and they start to do better, that could be something that improves. But I think most of the other things we think our tenants are covering these -- we know these payments [Phonetic] on companies third-party expenses, so it really is interest kind of G&A preferred.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah, because in that number even we have our -- us paying ground leases and so forth and, as Greg said, we just said, if we're getting zero, what could that be, so that's the $23 million. As Greg mentioned, we expect it to be better than that as we get paid for some of those things.
Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst
Okay. Thank you, guys.
Greg Silvers -- President and Chief Executive Officer
Thanks, Ki Bin.
Operator
Thank you. And our next question comes from the line Anthony Paolone with J.P. Morgan. Your line is now open.
Anthony Paolone -- J.P. Morgan -- Analyst
Okay. Thank you. I joined late, so apologies if this was addressed. But can you talk about just the distribution of EBITDAre coverage, particularly in the theaters, pre-COVID? Like how many were maybe at one or below versus at the average versus significantly above just the general how that distribution worked?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah. And Tony, we don't talk about -- generally, I mean, I think what's reasonable to think is that we do have a bell curve operating. What we said was of our theater is that, that could potentially be below where our coverage is, below where we'd like them. Could we have 10% to 20% of our overall theater portfolio? Yeah. We think that's reasonable. But that's spreading it across a lot of operators. So I think we feel really good about our portfolio relative to that. But these are the theaters that these operators us being their largest landlord are key and integral to their success.
Anthony Paolone -- J.P. Morgan -- Analyst
And do you have any just broader stats on where your theaters bring the percentile wise or otherwise just nationally in terms of pre-COVID box office take?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah. I mean, again, our theaters are going to tend to be at the higher end on a revenue basis, just because, as I said, we're in major metropolitan areas. So either on a revenue per screen or a total box office sales, they're going to be predominantly in the top 1,000, if not top 500, top 100. But Greg, I don't know if you could --
Greg Silvers -- President and Chief Executive Officer
Yeah, again, it just goes -- most of our theaters played a 300,000 to 500,000 customers. And I think that's the real metric, the number of bodies that are buying tickets.
Anthony Paolone -- J.P. Morgan -- Analyst
Okay. And then you put in your slide the expectation for the GAAP revenue recognition. And I think you touched on a little bit about just how the collection of brands may play out or in that there's a lot of uncertainty there, but does the fact that you expect to recognize gap, pretty consistent with what it is just that you're just going to wait for the deferred rent to come in or do you anticipate percentage rent type situations for some period of time? And then maybe a make-up over the balance of what you said [Phonetic] -- is there any early read on that?
Greg Silvers -- President and Chief Executive Officer
Yeah. I think that's -- your question is right on, Tony, is, first of all, we probably will have these agreements may have some level of partial contractual or percentage rents as we ramp up and go through this. And that's again -- that would be a credit against kind of what the contractual rent was, and then it's kind of figuring out, OK, now that we know that the deferral amount is X, what is the right period of time to get recovery of that? What is the right period of incremental security to make sure that we're looking at that correct?
And so, I think what we're saying, right now, we were not a group who rushed out and said, I'm going to sign up an agreement that says you get a deferral and you pay it back in three months, because we are not -- we did not believe at the time that this was a three-month issue, that we think we need to figure out kind of where this is going. We think it will come back once we get to the other side with the therapeutic or a vaccine, but we needed to be able to identify what is the size of the deferral, what's the best way to get that that back and what are various options and looking at monetizing that. So your question is dead on.
Anthony Paolone -- J.P. Morgan -- Analyst
Okay. I mean just -- last question. Are there any parts of the portfolio that you think you're going to end up having to operate either on your own or swap out operators?
Greg Silvers -- President and Chief Executive Officer
I mean clearly, I think, when we show that we're treating kind of 85% to 90% of our revenues as defer and collect, we're not anticipating that there's sections or whole groups of our properties that we believe that.
Anthony Paolone -- J.P. Morgan -- Analyst
Okay, great. Thank you.
Greg Silvers -- President and Chief Executive Officer
Thank you.
Operator
Thank you. And our last question as well as a follow-up question comes from the line of Collin Mings with Raymond James. Your line is now open.
Collin Mings -- Raymond James -- Analyst
Thank you. Just two quick follow-ups for me. Just first, just bigger picture. Just as we go forward, what are some adjustments you're working with your tenants to make that your property can make them maybe better align with social distancing requirements and kind of if that's the new standard? And how do you think about deploying some of your capital on that front? Just any thoughts there would be helpful.
Greg Silvers -- President and Chief Executive Officer
Yeah. Collin, I mean, clearly we're trying to be a conduit for various groups to be understanding of best practices in what people in one area of congregate entertainment are doing, we're sharing that information. We don't look at this as a competitive advantage. We look at it as a way to make our customers feel safe. I wouldn't see us deploying capital to do that. Again, I think at least now these are not capital intensive as much as they are figuring out health, safety mask, are people going to wear masks, sanitation and hand sanitizers, how many seats apart are you going to put people.
I think Flexiglass at the counters or things like that, it's not a lot of capital intensive, but it is trying to figure out the human nature side of this. What is it where people feel safe? What did they need to have? And what do you have in place? And the good thing about our properties is, there's a lot of them that are congregate and so we are generally grouping those into indoor congregate and things that are outdoor.
Because outdoor has a different perspective and people may feel safer given that the fact that they are outdoor than in indoor. And so what Greg and his team and our Asset Management team are trying to use that kind of best practices and share that information across the entire spectrum.
Collin Mings -- Raymond James -- Analyst
Got it. Okay. And then, Mark, just on the covenant negotiations, just to clarify. You detailed some specific progress on the bank group front, but just how are the private placement note negotiations going on a comparative basis? Just wanted to clarify that from my earlier question.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah, I would say we've had discussions with a private placement group. We've had discussions with the largest holder. They trail a little bit of the timing of the bank group, but we expect a similar outcome that will get that done as well. That number is obviously a lot smaller number, it's $340 million whereas obviously the bank group side is -- there's $750 million outstanding plus the $400 million term loan. So our priority was really first on them. And basically the private placement group feeds off whatever the bank decides essentially and then we'll get that piece done as well. But we expect that all to be wrapped up in the next 30 days.
Collin Mings -- Raymond James -- Analyst
Perfect. Thank you, both.
Greg Silvers -- President and Chief Executive Officer
Thank you.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Thank you, Collin.
Operator
Thank you. And this does conclude today's question-and-answer session. I would now like to turn the conference back to Greg Silvers for further remarks.
Greg Silvers -- President and Chief Executive Officer
Thank you all for joining us today. And the last comment I will leave you is stay safe and we look forward to talking to you next quarter. Thank you.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Thank you.
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
Thank you.
Operator
[Operator Closing Remarks].
Duration: 65 minutes
Call participants:
Brian Moriarty -- Vice President, EPR Properties
Greg Silvers -- President and Chief Executive Officer
Greg Zimmerman -- Executive Vice President and Chief Investment Officer
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Nick Joseph -- Citi -- Analyst
Collin Mings -- Raymond James -- Analyst
Brian Hawthorne -- RBC Capital Markets -- Analyst
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst
Craig Mailman -- KeyBanc Capital Markets Inc. -- Analyst
John Massocca -- Ladenburg Thalmann -- Analyst
Anthony Paolone -- J.P. Morgan -- Analyst
