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Cedar Realty Trust Inc (NYSE:CDR)
Q1 2020 Earnings Call
May 14, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the First Quarter 2020 Cedar Realty Trust Earnings Conference Call. As a reminder, this conference call is being recorded. At this time, all audience lines have been placed on mute. We will conduct a question-and-answer session following the formal presentation. I would now turn the call over to Nicholas Partenza. Thank you, you may proceed.

Nicholas Partenza -- Director of Financial Reporting

Good evening and thank you for joining us for the first quarter 2020 Cedar Realty Trust Earnings Conference Call. Participating in today's call will be Bruce Schanzer, Chief Executive Officer; Robin Zeigler, Chief Operating Officer; and Philip Mays, Chief Financial Officer. Before we begin, please be aware that statements made during the call that are not historical maybe deemed forward-looking statements and actual results may differ materially from those indicated by such forward-looking statements. These statements are subject to numerous risks and uncertainties, including those disclosed in the company's most recent Form 10-K for the year ended 2019 as updated by our subsequently filed quarterly reports on Form 10-Q and other periodic filings with the SEC.

As a reminder, the forward-looking statements speak only as of the date of this call, May 14th, 2020 and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures including funds from operations and net operating income. Please see Cedar's earnings press release and supplemental financial information posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will now turn the call over to Bruce Schanzer.

Bruce J. Schanzer -- President and Chief Executive Officer

Thanks, Nick. Good evening and welcome to Cedar's first quarter 2020 earnings conference call. This call is taking place during an unprecedented period. The COVID-19 pandemic has swept through the U.S. and the globe resulting in a shutdown of much of the national and world economy. Thus, although this is technically our first quarter 2020 earnings call, which was largely unaffected by the crisis, we will focus our comments on the crisis.

Before jumping into the substance of the call, I wanted to take a moment to thank the members of team Cedar for their professionalism and dedication during this period. This has been an incredibly difficult time for everyone both at Cedar and beyond. This time has highlighted the fragility of life and our interconnectedness. We are all staying home to protect our parents, grandparents, friends, neighbors, and people we don't even know from a virus that has proven to be frighteningly contagious and deadly. We are reminded through this experience that what is most important namely that we look out for one another and that we value life and health above all else.

What we are experiencing does put the relative operating success we will be discussing on this call in an appropriate context. Nonetheless, we are pleased with the relative outperformance of our portfolio while humbly acknowledging that it has been over a fairly short period of time and it was achieved when we are rightfully focused on the much more important issues of life and death. Furthermore, although our portfolio has performed well on a relative basis, our business, like those of our retail REIT peers, is stressed, to say the least with approximately 40% of our tenants closed at this time and our share price at an all-time low.

As you have seen, immediately after being confronted with the pandemic, we took measures similar to our peers in order to preserve cash and guard against especially adverse scenarios. Specifically, we drew $75 million on our revolver, reduced our dividend, meaningfully scaled back the scheduled capital spend at our mixed-use redevelopments, which we continue to monitor, and suspended our earnings guidance. In addition, we subsequently announced that due to the decline in our share price triggered by the pandemic, we will potentially need to take a measure before the end of the year to increase our price per share above $1 per share, which could be through a reverse stock split.

In thinking about our recent results relative to other retail REITs, I am reminded of a famous saying attributed to Warren Buffett that you only discover who is swimming naked when the tide goes out. With over 70% of our April revenue collected versus an average of 58% for shopping center REITs as a whole and dramatically less for the mall REITs, we are starting to see a real performance separation by retail asset type. The secular decline in bricks and mortar retail didn't begin with the arrival of COVID-19, though the low tide it has provoked underscores many of the differentiating characteristics we have spoken about often.

There are two specific themes to highlight in this regard. First Cedar's assets are almost entirely grocery anchored shopping centers with predominantly necessity-based retailers. These services are more Internet resistant and our centers are therefore simply more resilient than other retail real estate assets to many of the trends negatively impacting retailers. Second, there is a fundamental difference between retail real estate such as malls, lifestyle centers, street retail, and big box assets levered to soft good and discretionary good retailers and the smaller format neighborhood centers such as those owned and operated by Cedar.

At Cedar, we have read for years about the types of assets that other landlords own whether mall or shopping center, which will be the long-term survivors when the dust settles on the secular evolution in bricks and mortar retail. I'd be lying if I didn't acknowledge that over the years, we would have been thrilled to own such assets. Remarkably, the pandemic we are now experiencing and the long-term societal and commercial impact it has engendered could very well catalyze a fundamental change in investor sentiment to one that most highly prizes the characteristics embodied by Cedar's portfolio. This could be the black swan that causes Cedar and its assets to gain favor in the capital markets.

Over the years, we have been very vocal in pursuing a slightly different strategy in which we have focused on population and trade area to the exclusion of income or education and grocery anchored assets almost exclusively. This has been a probabilistic approach to an uncertain environment and future and that was before the coronavirus pandemic introduced even greater uncertainty into the future of bricks and mortar retail. In refining our portfolio over the years, we simply have said to ourselves that retail needs people above all else, the trade areas and traffic patterns oftentimes matter more than high income or education. The lower incomes aren't necessarily a bad thing since they are less likely to migrate to shopping online and that necessity-based retail while a slower growing category is more defensive and reliable.

To be fair, we have also focused on assets that made sense for us considering our relatively high cost of capital. Nonetheless, we are now starting to see the positive differences between our real estate and others highlighted as this crisis accelerates the evolution in bricks and mortar retail in a manner that appears to favor our asset type. I often say that comparing grocery anchored shopping centers to malls, lifestyle centers, street retail, and big box centers is like comparing apartments to hotels. Somehow when capital markets professionals speak of retail real estate, they will often lump us in with malls, lifestyle street retail, big box and non-grocery anchored centers because all offer people a place to shop. However, you will not see apartment REITs lumped in with hotel and senior housing REITs even though they all provide people with a place to sleep. Hopefully, one positive consequence of this pandemic for purposes of our business and stock price performance will be greater appreciation of what we see as a stark and fundamental difference within different categories of bricks and mortar retail.

Our supplemental financial filing provides helpful detail on the different categories of tenants for purposes of understanding where payment is coming from as a general matter. However, one thing to highlight is that it is not simply a function of the asset and our tenant composition. Our team has done an exemplary job of attacking this challenge. We have contacted just about all of our tenants, not only to discuss rent collection or forbearance, but to simply check in. The depth and quality of these interactions and the human touch it embodies has driven our marginal rent collection, which has in turn led to a much better than average overall collections in the second quarter to date. Thus, I am proud to say that the relative outperformance we have seen is not just a function of our assets, but is very much a credit to team Cedar. I could not be prouder of this group and the way they have collaborated during this time. Although I'm reluctant to make any bold predictions in the face of this uncertainty, May collections are coming in solidly thus far and the team is continuing to work with tremendous focus and dedication. So I think our relative portfolio outperformance should continue.

On that note, in thinking of bold predictions, I am struck as I work from my home the sheer volume of commentators telling us what the post COVID-19 world is going to look like. I note in digesting all of these pronouncements that none of these people ever preface their comments by acknowledging they didn't anticipate the very pandemic that is the foundation for their predictions. Thus I think it is critical to acknowledge that as we think about what tactics and strategies to employ, we do so in the face of great uncertainty. For those who actually have to put their capital to work in the face of this uncertainty, decisions must be made with considerable humility and with an ever greater analytical mindset as we endeavor to navigate through this challenging environment.

However, one prediction I will make is that while many consumers will not be shopping at malls, lifestyle centers, and street retail anytime soon, our leasing team will be enthusiastically shopping at these retail outlets for new tenants to bring to our more stable and better performing grocery anchored centers. In finding ourselves at this juncture where despite extreme stress, our assets have held up relatively well, we acknowledge our good fortune but also realize that we are harvesting the fruit of the trees we have been planting for many years.

Our approach of filtering through a lot of noise to focus on certain types of assets has helped our company find itself on relatively solid footing during this perfect storm. I'm only sorry that our shareholders have not yet seen this reflected in our share price. However, like the cycles of the moon, there will be a high tide once again and I hope that this outperformance we have seen from our particular assets and operating platform will be more appreciated in the capital markets in the months and years ahead. That said, this crisis and the relative outperformance of our portfolio has only made us more optimistic that our assets could very well be the long-term survivors as the secular decline in bricks and mortar retail accelerate.

Before concluding, I would like to return to the topic I was discussing at the outset, namely, the fact that in the face of the life and death issues we are all grappling with during this time, our operating results, whether strong or weak must be digested in the context of what really matters. At Cedar, we have focused on grocery and in many instances grocery within challenged communities where food and security is a real issue. Unfortunately, the economic consequences of the coronavirus pandemic have severely hit many of these communities. We often talk at Cedar about doing well for our shareholders while doing good for our communities. Today, that idea needs to be more than a nice saying. Rather, we need to take unprecedented action during this unprecedented time.

Thus, I would encourage everyone on this call to consider supporting their local food pantry. Google food pantry near me and you'll be amazed at how close you probably live to a place where people who are struggling with food and security are compelled to go in order to feed themselves and their families. When you're at the supermarket just buy an extra $20 of canned goods, bread or other staples and drop it off at your local pantry or you could bring them a check. This is a crisis facing our communities and it behooves us to step up if we can. With that, I will give you Robin to discuss our results and provide greater detail around how we have navigated the coronavirus crisis thus far.

Robin McBride Zeigler -- Executive Vice President and Chief Operating Officer

Thanks, Bruce. Good evening. To echo Bruce's sentiments, I could not be more proud of how our team at Cedar has faced and worked through the challenges of these unprecedented times. I will remark on our quarterly results in a moment, but I would be remiss if I did not speak to the process and the results of this team's efforts thus far as we work through the coronavirus pandemic. During the month of April, we collected 70.4% of our rent. As previously mentioned, this is a relatively strong rent collection performance. Further in May, we have currently collected 65% of our rent and expect the May collection rate to continue to increase some as we finish the month.

Our top 5 tenant categories based on annualized base rent are comprised of grocery stores, fast casual, and full service restaurants, fitness, and dollar stores. These five categories make up 50% of our total annualized base rent with grocery stores alone comprising 28% of our total annualized base rent. Our relative success at rent collection in April can be attributed in part to our grocer anchors as well as a substantial composition of our tenant base falling into the essential retail category. However, these are not the only factors. We have a robust collections, rent forbearance, and tenant communication process which we designed and implemented in immediate response to the crisis to meet the dual aims of ensuring optimal rent collection while supporting the viability of our tenants.

As part of this process, we reviewed every lease in our portfolio to ascertain if there were any lease provisions we would want to modify as part of any rent forbearance agreement. We have verbally contacted every local and regional small shop tenant that did not initially pay April rent to ensure ultimate rent payment or to set up a rent deferral plan with pay back in 2020 or 2021. We are handling the national anchors and small shops with a two-fold approach. In some instances, we are relying on express provisions in our tenant leases that support no relief for payment of financial obligations under present circumstances and requiring that tenants pay their rent in full and on time.

In other instances, where other business objectives have been identified with respect to certain national tenants, we are entertaining modification discussions on a one-on-one basis in exchange for specific lease provisions. Currently, 60% of our stores are open, 89% of which are considered essential retail. Essential retail makes up 61% of our overall base rent composition. In order to ensure we are best managing through our operations during this time of store closures, we have reassessed the property maintenance needs to keep the standards that our customers have come to expect while conserving scope and expenses where possible to manage to the bottom line.

As a result, we have reduced recurring monthly operational expenses by almost $80,000 and postponed approximately $5 million of property level capital expenditures. Additionally, we significantly and strategically reduced our capital spend in 2020 for our mixed-use urban redevelopments and value-add renovations and have complied with governments mandated construction shutdowns where applicable for both tenant construction and development projects.

Now on to first quarter 2020 performance. From a leasing perspective, we signed 30 deals totaling 309,500 square feet at an average base rent of $16.18 per square foot. 17 renewals were executed totaling 270,302 square feet at a positive spread of 0.9%. This includes three flat grocery renewal or option totaling 180,659 square feet at The Point, Jordan Lane, and Newport. Excluding these three grocer deals, the renewal spread increases to 2.7%. Five comparable new leases vacant less than one year were executed at a positive spread of 24.3% and seven comparable leases that were vacant longer than one year were executed at a negative spread of 32% resulting in an overall net comparable new lease spread of negative 7.5% and overall comparable lease spread of negative 0.4%. First quarter 2020 same-property leased occupancy is 130 basis points higher than the same period in 2019 and 20 basis points higher than the prior quarter.

During this time of COVID-19, in order to effectuate all that I have discussed and the aspects that I have not, it literally has involved every department in the company. It required members of team Cedar to step in and take on assignments that in some cases are not part of their regular job responsibilities. The cohesiveness and dedication demonstrated by team Cedar has been exemplary to behold and truly inspiring as a member of senior management. With that, I will give you, Phil.

Philip Mays -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, Robin. On this call, I will briefly comment on our Q1 operating results and then discuss additional information we have added to our financial supplemental along with some other financial and accounting impacts of COVID. Starting with operating results, for the quarter, operating FFO was $16.7 million dollars or $0.18 per share. As discussed on our previous call, this quarter included elevated lease termination income that rounds to $0.08 per share related to Shoppers Food Warehouse at Metro Square. Same-property NOI increased 0.8% over the comparable period in 2019, excluding redevelopment properties and increased 0.1% when redevelopments are included. As always, our redevelopments are in various stages, in some cases, this includes creating intentional vacancy over the past year, thus causing lower NOI growth when they are included.

With regards to our financial supplement filed today, we've made several additions and modifications including: adding a page that provides GLA and annual base rent by tenant category, a real estate summary now highlights our grocer anchors and provides an expanded list of key tenants by property, decreased our measure for large shop tenants from 15,000 square fee to 10,000 square feet, and expanded our list of top tenants to now include 25 tenants. We made these additions and modifications to provide more insight into our portfolio. In particular, I think that GLA and ABR by tenant category provides very detailed information about our diverse tenant base and the various retail categories from which we derive our revenue. I believe you will find it very informative.

Now moving to related matters. In addition to the operational measures Robin discussed, we've taken various actions to increase liquidity and financial flexibility in response to COVID including drawing $75 million on our revolving credit facility, reducing the common dividend to $0.01 per share, reducing near-term construction spend, and evaluating other non-essential expenditures. It's important to note that due to the timing of the mandatory closures, our Q1 earnings were not significantly impacted by COVID. However, our earnings beginning in Q2 will certainly be negatively impacted by COVID. In particular for tenants for which collectability of lease income is determined to be less than probable, GAAP requires the related lease income to be prospectively accounted for on a cash basis and all our previously recognized lease income not collected including straight line receivables to be reversed which will result in both a decrease in revenue and elevated bad debt expense. Therefore, while our grocery anchored portfolio has resulted in relatively strong collections for April and May, given the uncertainty of the economic impact caused by COVID, we've withdrawn our full-year 2020 guidance. With that, I'll open the call to questions.

Questions and Answers:

Operator

At this time, we willl be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Todd Thomas with KeyBanc Capital. Please proceed with your question.

Todd Thomas -- KeyBanc Capital -- Analyst

Hi, thanks, good afternoon. Thanks for the additional detail in the supplement for the retail categories. That's really helpful. First question, Bruce, maybe Robin, you have some vacancy in the portfolio and there are a number of centers without a grocer anchor and Bruce, you spoke about the potential benefits that you see materializing for your product type, but aside from rent collections in April and May, are you starting to see any signs of budding demand from grocers or other essential retailers to take additional space in the portfolio or is it a little too soon to tell?

Bruce J. Schanzer -- President and Chief Executive Officer

Yeah, I would tell you, Todd that it's too soon to tell at this point. What we are seeing, of course, is strong performance at the bricks and mortar level for our supermarket and other grocer anchors. So certainly the case for the bricks and mortar grocer, if anything, has gotten stronger through this pandemic and so, certainly the idea of one or two centers that we have where there is a vacant anchor and there is an opportunity for a grocer to potentially move in, certainly whatever the odds were of leasing it to a grocer before, those odds have probably improved since, but again, I think we're going to need to see clear and this isn't just Cedar, I think that we're all going to need to see clear of this pandemic and associated shutdown before we'll be able to confidently say how we're going to be releasing some of these anchor boxes which is, of course, right now, people aren't actively doing anchor deals. So it's really just a matter of us kind of maintaining contact with them and hoping when the world reopens that some of what we have seen in terms of strong performance by grocers extends to their -- potentially they are having an interest in some of our vacant space that might be suitable for them.

Todd Thomas -- KeyBanc Capital -- Analyst

Okay and what does this mean for sort of property values and I guess potentially dispositions for some grocery anchored or drugstore anchored centers. There's quite a bit of capital markets volatility today as well, but what's the market like for these assets and have you explored the disposition and monetization of any assets in order to delever and maybe you can sort of tie that into the mixed-use and densification development projects that you were advancing. How does this potentially change the strategy and the company's ability to forge ahead?

Bruce J. Schanzer -- President and Chief Executive Officer

There are a lot of pieces to that question, Todd. So I'll try to -- maybe I'll answer a few different ideas in there. So one was, you know, what is our view of the value and potentially evolved value for our centers. The second question was whether we're seeing any kind of transaction activity or are we exploring any transactions for our centers and then the third question in there was what are our thoughts around our mixed-use redevelopment projects in light of both how values are evolving for grocer and then just more generally capital availability. So I'm going to answer each of those questions and then I'll ask Robin or Phil potentially to expand on the third one.

So in terms of the first question, how we have seen values evolve? Well, as you can imagine over the last two months, with the conduit markets and CMBS markets shut, there aren't any new deals that are getting papered with this current kind of capital markets freeze. So certainly we don't have great visibility the way we typically do into transaction activity for our asset types in our geographic footprint. My comment or my comments during my prepared remarks are really a prediction, right?

The prediction is that whereas before this happened before we had this market shock that potentially will affect consumer behavior that there was a view of what type of retail real estate was going to be the long-term survivor and type of real estate that was going to thrive as the secular decline in bricks and mortar retail continued and I think that between what we have seen in terms of the stout [Phonetic] performance of our asset and our asset type coupled with just some of the potentially changing sensibilities of consumers, it's very possible that in fact what we see is we just see a fundamental change in the types of retail real estate that endure and do well when we are through this pandemic and the types of retail real estate assets that decline or that are challenged.

So I think that that is the answer to your first and second questions in terms of A) we're not seeing a lot of activity ourselves and B) the thoughts around value is, if anything, we're probably a little bit more optimistic about our assets on a relative basis compared with how we thought about them before because again they appear to be doing better than other types of bricks and mortar retail assets through this pandemic.

In terms of your last question. The mixed-use assets, it's a fairly complicated question. Certainly you saw our announcement that at least for 2020 that we're scaling back the extent of our capital spend. We're continuing to monitor and so we might potentially even scale that back further. There is a question analytically that's one that we haven't yet resolved but that we're starting to think about, which is to the extent that the market for just this simple up the fairway grocery anchored centers somehow evolves in a way that relates to how we think about capital allocation, we might have to think further about the capital we're putting into our mixed-use assets, but it's really too early for us to make any calls around that, but of course we realize that this situation calls that into question. So certainly, it's something that we're going to think about as the world evolves.

Todd Thomas -- KeyBanc Capital -- Analyst

Okay, all right, great. Thank you.

Bruce J. Schanzer -- President and Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Collin Mings with Raymond James. Please proceed with your question.

Collin Mings -- Raymond James -- Analyst

Thank you and good evening everyone. Just wanted to go back to Todd's question first here, again, you referenced a couple of times between the prepared remarks and the press release that capital spending plan is down to $20 million and it could be reduced even further. Can you maybe just elaborate what have you spent year-to-date?

Bruce J. Schanzer -- President and Chief Executive Officer

I'm going to let Phil start attacking that question and then obviously Robin and I might potentially chime in as well, but Phil, why don't you take that?

Philip Mays -- Executive Vice President, Chief Financial Officer and Treasurer

Hey, Colin. Year-to-date for the development and the redevelopment or I should say the value add renovations is less than $10 million. I don't have the exact name and number in front of me, but it's not $10 million, it's a little less than that.

Collin Mings -- Raymond James -- Analyst

Okay and then again kind of sticking with this theme here and beyond just the kind of potential capital commitment that you just -- as it relates to Todd's question as it relates to the mixed-use asset, but just how has the shift in the economic outlook and then again just potentially the long-term impact of social distancing measures maybe just cause you to reimagine some of the projects just things around densification and kind of the potential tenants that might be attracted to some of these projects, just bigger picture about beyond again just kind of the capital side of things, how are you thinking about that right now, Bruce?

Bruce J. Schanzer -- President and Chief Executive Officer

Well, let me take a little bit of that and then I'll hand it off to Robin. So the first thing to recognize at least when it comes to the Northeast Heights project and the South Quarter Crossing project is that they are still very much oriented around grocers and, of course, as we talked about, the grocers have done pretty well. In terms of the merchandising, again the anchor elements at South Quarter Crossing are just about done. Northeast Heights while we have made quite a bit of progress and actually are pretty far along, we haven't disclosed it publicly in a manner that allows me to elaborate too much further on that, but again, certainly the anchor pieces are starting to coalesce and crystallize, but it's premature for us to really talk about too much more publicly.

In terms of the social distancing and some of the sensibilities that people are going to bring as we enter into this post COVID world, we are starting to work on it. One of the interesting things that we grapple with as we have task forces, excuse me internally that spend time on this is that we have to be pretty flexible in our mindset because we really don't know exactly what people are going to be looking for once we are clear of this, we're right in the middle of it and so in certain respects, it's a little too soon to say, but I'll let Robin expand on that a little bit if you'd like Robin.

Robin McBride Zeigler -- Executive Vice President and Chief Operating Officer

Sorry about that. Sure, just piggybacking off of what Bruce was sharing, from a merchandising standpoint on the retail side, I think it is a little bit too early as we really learn how customer patterns shift kind of coming out of COVID, but it is something that we are monitoring very, very closely. As Bruce said, two of the projects are intended to be grocer anchored and so I don't think that aspect of it will change, but some of the other pieces of it from a merchandising perspective, we are looking at it. So the other large part of these mixed-use projects are obviously the residential piece.

And so we are looking at how do the amenity spaces change as part of the new social distancing dynamic, how do some of the features such as touchless faucets and touchless hand knobs and some of those facets of it. The common area planning, we're looking at that. So there are aspects of the new social distancing dynamic that we find ourselves in, that's getting incorporated into how we think about the site planning, the residential pieces of it that's certainly getting worked in and I think the merchandising is something that we are keenly focused on as we look at how traffic patterns and customer patterns shift as we come out of this.

Collin Mings -- Raymond James -- Analyst

Okay, that's helpful color there. And Robin just maybe sticking with you for a second, can you maybe just elaborate and quantify if possible just where deferral or potential abatement negotiations stand with tenants. Obviously, you provided the rent collection data for April and May, but just any other color on kind of steps going forward. I know that you referenced some payback periods that could extend into 2021, but just any additional color there that you can provide?

Robin McBride Zeigler -- Executive Vice President and Chief Operating Officer

Sure. So generally speaking when we are talking to tenants, we are generally giving two months of abatement that either gets paid over six months in 2020 or 12 months in 2021 and that's generally split between whether it's a local or regional tenant or a national tenant and we're talking strictly deferral here related to what we've been negotiating with tenants. We have executed 16 deals thus far and those are largely with the small shops and so that's where we are thus far in the process. There have been about 84 of them that have been approved that are out with tenants that are under review, but about 16 of them have been -- or 16 of them have been executed thus far.

Collin Mings -- Raymond James -- Analyst

Okay, I appreciate all the detail there and then Phil, just, you referenced in the press release as of March, the company was in compliance with all financial covenants, but maybe can you just update us on that in context of where rent collection stand and just the outlook there moving forward just in context of the company's leverage?

Philip Mays -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, let me circle back before I do that, just to the question you asked about the renovation or the redevelopment capital to date. When I was giving you close to $10 million, I was talking as of the today, Collin. So as we sit here in May, it was about $5.5 million for the first quarter. So I just want to be clear, so you can get a decent run rate there. I think you see in our press release, we were at 70% cash collection first quarter. We're already at 65% in May, expect that to grow. I don't -- I'm not going to speculate as to how long the mandated closures last and so whether this a quarter event or a six month event, it's a little hard right now to know.

For most of our ratios, we do have adequate cushion to absorb the type of frequent cash collections we see today and the bank covenants don't really work on [Technical Issues] they work on GAAP, theya are kind of a hybrid in between. So if we're running 70% cash collection for the bank covenants, we are getting the credit a little higher than that something closer to not full GAAP but closer to it. For most of the financial ratios [Technical Issues] we have adequate cushion to absorb where we currently sit. We have to also maintain an unencumbered NOI amount to support our line of credit. That one is calculated quarterly annualized.

So that one can be really tough, but we've had conversations with the bank, they are fully aware of this. They know this quarter with the mandated closures as Bruce kind of labeled it earlier, the black swan event and in the general context of those conversations are whatever we need there will be easy compared to what they just had to do for all the hotels, but they are aware of the fact that [Technical Issues] quarter covenant or it's not really a covenant requirement to maintain a certain amount of unencumbered NOI and it's a quarter number annualized and they understand what's going on this quarter and they're going to work with us on that, but as far as all the ratios, fixed charge, coverage, leverage, the kind of cash flow we're maintaining now, we'll be on the higher-end of those covenants, but we have adequate cushion to cover them.

Collin Mings -- Raymond James -- Analyst

Okay. I appreciate all the detail there. I'll turn it over.

Operator

[Operator Instructions] Our next question comes from the line of Floris van Dijkum with Compass Point. Please proceed with your question.

Floris van Dijkum -- Compass Point -- Analyst

Hey, great. Good afternoon, guys. Wanted to get a sense, what is your breakeven cash rent collection level and does that include -- also can you include capex in there or leasing costs.

Philip Mays -- Executive Vice President, Chief Financial Officer and Treasurer

Hey Floris, this is Phil. I'll try to walk through this. I'll use round numbers and try to keep it straightforward. In a normalized year after maintenance capital after dividends, common and preferred, where they were running, we generate about $10 million of free cash flow after all that and it's about -- it's a little more than 10% of our NOI, but let's round it and keep it easy at 10% of our NOI. With some of the actions we've taken to mitigate the effect of COVID, which we put in the press release and discussed on our call such as reducing the common dividend and also reducing maintenance capital and other things, that gets us to almost an additional $20 [Phonetic] million or an additional 20% of NOI. When you combine those together, that would get you 30% of NOI, so we could absorb about a 30% reduction in NOI and breakeven and that again is after all the maintenance capital, leasing capital, and dividend at the current run rate, reducing the common to $0.01, we could absorb about a 30% reduction, but to be clear that is before any development capital.

Floris van Dijkum -- Compass Point -- Analyst

Right. So it's 70% collection ratio would get you to breakeven including your dividend of a $0.01. So if you don't include the dividend, is it in the high 60s?

Philip Mays -- Executive Vice President, Chief Financial Officer and Treasurer

I'm including the dividend. So after the dividend, so after we pay the dividend, we can absorb about a 30% reduction in NOI and be clear, I'm giving you annual numbers, right. So let's just say again I'm not going to speculate on whether this lasts a quarter or six months, but just to be clear here I'm going to say [Phonetic] it lasts a quarter. So if we were to have a 30% reduction for a quarter that would obviously be 7.5% for the year and we're saying we can we'd be breakeven at a 30% reduction for the year.

Floris van Dijkum -- Compass Point -- Analyst

Okay, can I ask you a question about the $7.4 million impairments? Can you give a little bit more color on that?

Philip Mays -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. That relates to Metro Square. You'll see in the quarter, we also booked about $7.1 million lease term fee, which is almost the same as the impairment amount. So Metro Square was largely just a dark anchor that was continuing to pay Shoppers Food Warehouse and just a few small shops. So the value from that really was primarily driven by that anchor which we terminated [Technical Issues] the property has to be valued with that at zero or income of zero and wherever that would lease up, less the capital and all. So the term fee is kind of equal to the impairment we took -- just the way the math works on that and the way it works for GAAP [Phonetic].

Floris van Dijkum -- Compass Point -- Analyst

Okay, thanks. Maybe one more question, maybe this is for Bruce as well. Addressing your higher leverage. Leverage went up this past quarter, net leverage, but you alluded to the fact that you're probably going to have some more bad debt and some write-offs of some receivables going forward as the pandemic starts to bite. What -- obviously you've curtailed your development plan, which is a sensible thing to do, but what additional steps can you do or what other strategic moves are you thinking about to reduce your your above average leverage and that's even before we account for the preferreds as well. If you can walk through some of your thinking, that would be great.

Bruce J. Schanzer -- President and Chief Executive Officer

Well, Floris I have to tell you that we're very mindful of our above average leverage as always, but I can tell you that with the other priorities we have right now, reducing leverage while its something that certainly we would love to achieve is not a first order focus right now. So with the biggest focus of our company being making sure that we maximize rent and cash coming in, maximizing tenant retention, and minimizing capital outflows, that takes a tremendous amount of focus considering the overall disruption in our business. So your observation is spot on. Our leverage is above average and it certainly is something that we're mindful of, but right now, there is nothing that we're doing right now to lower our leverage, obviously, there are loads of things in our tool kit and certainly as we come out of this period where the pandemic, the stay at home part of the pandemic experience will largely be resolved and the capital markets reopen, we have some ideas that we could potentially pursue, but again, I think it would be premature for me to start laying them out right now, but right now, again, our biggest focuses are really the three things that I outlined.

One, making sure that we maximize cash coming in. Two, making sure that we maximize tenant retention, and three, making sure that we minimize cash going out the door and those are really the three biggest focuses that we have as an organization right now. This is a crisis as a country, as a company despite us doing a little bit better than others. We're dealing with a challenge and so we're really focused on those three priorities and the luxury of thinking about how to improve our balance sheet is something that we're going to defer to a point when again the capital markets have reopened and the world is starting to return back to normal.

Floris van Dijkum -- Compass Point -- Analyst

Thanks, Bruce. Maybe one last one for me. You mentioned the stock price decline and you might do something, is that, are you thinking about something like a 10 for 1 or 1 for 10 I should say stock split -- reverse stock split or something to get your stock price back up above $1 and what is the timing of that?

Bruce J. Schanzer -- President and Chief Executive Officer

So Floris, this is exclusively triggered by the notice we received from the New York Stock Exchange relating to one of their requirements for a listed security being that it maintained a share price for a 30-day period over $1. I'm reminded I quoted Warren Buffett during my prepared remarks and I know Warren Buffett has often said that stock splits don't create value and so certainly, we're mindful of that as we think about broadly speaking, the idea of a stock split. So again, we have until the end of the year. I think we had put that out in an 8-K filing a week or two ago laying out how the New York Stock Exchange recognizes that the downdraft in our stock like in other stocks is largely almost exclusively a function of the pandemic.

So they have extended the period by which it needs to be resolved until the end of the year and we're going to continue to monitor our share price and to the extent that after we start coming out of this period, our share price hasn't recovered, we'll start exploring the idea of a reverse stock split and I couldn't say what the ratio would be, but it would be intended to get our share price up to a level that would allow us to satisfy the requirements of the New York Stock Exchange.

Floris van Dijkum -- Compass Point -- Analyst

Great, thanks, Bruce.

Bruce J. Schanzer -- President and Chief Executive Officer

Sure, no problem.

Operator

Since there are no further questions left in the queue, I would like to turn the floor back over to Mr. Bruce Schanzer for any closing remarks.

Bruce J. Schanzer -- President and Chief Executive Officer

Thank you all for dialing into this evening's call. I would conclude by once again thanking the members of team Cedar for their efforts. I am humbled at their resilience and can-do attitudes during this time. I would also urge you to heed my comments regarding supporting your local food pantries. We each have an opportunity to help our neighbors and do something good during this unprecedented time. With that, I wish you a good evening and a healthy tomorrow.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Nicholas Partenza -- Director of Financial Reporting

Bruce J. Schanzer -- President and Chief Executive Officer

Robin McBride Zeigler -- Executive Vice President and Chief Operating Officer

Philip Mays -- Executive Vice President, Chief Financial Officer and Treasurer

Todd Thomas -- KeyBanc Capital -- Analyst

Collin Mings -- Raymond James -- Analyst

Floris van Dijkum -- Compass Point -- Analyst

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