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Washington Prime Group Inc (WPG)
Q3 2020 Earnings Call
Nov 6, 2020, 11:00 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 Washington Prime Group Q3 2020 Earnings Call and Webcast. [Operator Instructions]
I would now like to hand the conference over to Lisa Indest, Executive Vice President, Chief Accounting Officer. Thank you. Please go ahead.
Melissa A. Indest -- Executive Vice President, Finance and Chief Accounting Officer
Good morning and welcome to WPG's third quarter 2020 earnings call. During today's call, we will make certain forward-looking statements as defined by the federal security laws. These statements relate to expectations, beliefs, projections, plans, and other matters that are not historical and are subject to the risks and uncertainties that might affect future events or results. For a detailed description of these risks, please refer to our earnings release and various SEC filings.
Management may also discuss certain non-GAAP financial measures. Reconciliations of each non-GAAP financial measure to the comparable GAAP measure are included in our press release, supplemental information packet and SEC filings, which are available on the Investor Relations section of our website.
Members of management with us today are Lou Conforti, CEO; Mark Yale, CFO; Josh Lindimore, Head of Leasing; and Dan Scott, SVP of Development.
Now, I'll turn the call over to Lou.
Louis Conforti -- Chief Executive Officer and Director
Thanks, Lisa and hello, everybody. There can be no denying that COVID-19 pandemic has resulted in a new set of challenges for an already beleaguered retail sector. Notwithstanding, ever since joining WPG, my objective has been straightforward; provide Middle America, whether it be Oklahoma City, Oahu or Albuquerque, with relevant goods and services via our dominant town center proposition. I emphasize Middle America and as it is where our assets are primarily situated and it is this demographic constituency, which has been largely ignored.
It became crystal clear we couldn't sit on our hands waiting for the usual suspects to occupy space, nor were we going to regain our guests' respect by superficial measures. It was going to require a fundamental shift as to how we regard our role as landlord. And by this, I mean, a proactive operator which requires diversifying tenancy, activating common area and delivering relevant adaptive reuse projects.
I can tell you that Josh and Dan and everybody else that our company has done just that, and we can evidence that via our metrics, but then COVID-19 rears its ugly head. While it's certainly one heck of a blow, it's not a knockout punch and it actually strengthened our company's conviction about our guests and our locations. While we have previously highlighted and as well as quantified and you can take a look in our website for some of the white papers we've done and things that just addressing midsize cities and addressing the potential of midsize cities, it appears a wider audience is beginning to recognize our attributes as well. In fact, there appears to be increasing catalysts for those secondary trade areas which possess robust commercial, educational and cultural infrastructures. While it's certainly going to require heavy lifting from [Technical Issues], we believe we're adamant our reimagined town centers are an integral part of this equation.
As always, we provide comprehensive detail with respect to operational and financial metrics. Thanks to Lisa and Mark and everybody else. We are supplemental reporting, as well as our -- in just our Investor Relations website. I just want to mention a few of the more significant, which took place during the quarter. We successfully executed amendments to our credit facility. Year-to-date, leasing volume exhibited a 7% increase, totaling $3.4 million square feet, of which lifestyle tenancy accounted for 47% of the new leases signed. We've collected over 87% of our third-quarter rental income and associated charges, obviously, as adjusted for the applicable impact of COVID-19, again, 87%. Of the current -- of our 18 current adaptive reuse projects, all remain committed to open. Admittedly, seven are being delayed to this coming quarter, as well as next. We executed a purchase and sale agreement for the mixed-use redevelopment as we previously discussed regarding Westminster Mall and the monetization duration of which net cash proceeds should be in excess of $50 million.
We also took on [phonetic] a study. We're looking at the next round of additional mixed-use projects and we've identified eight assets, which are estimated to result in multifamily densification totaling over 4,000 units or so. We ended third quarter, and Mark will speak more obviously with respect to our financial metrics with $112 million on hand and we estimate year-end cash will be between $125 million and $135 million, and we're actively working on measures which result in substantial leveraging. It's important to note that this action, and I was like, everybody listen up, in no way shape or form has anything to do with the bankruptcy or a corporate restructuring and if anything, will serve as a testament to our operational abilities.
The task of transforming our assets into dominant town centers, which provides relevancy and excitement for our guests, which we are thinking about and quite frankly, executing upon 24/7, I mean, it ain't easy, and it was certainly difficult even before a global pandemic emerged. Notwithstanding, the progress we have made to date, we are just adamant that it's going to continue, and we are going to transform our assets accordingly.
And with that, Mark. I'm going to hand it over to you.
Mark E. Yale -- Executive Vice President and Chief Financial Officer
Well, thanks, Lou. The significant news from a balance sheet perspective this quarter involves the recent credit facilities modifications that we successfully closed on in August. Based upon the modification, the Company was in compliance with all applicable credit facilities and bond covenants as of the end of the most recently completed fiscal quarter that ended September 30, 2020. Additionally, the Company is actively working on measures with existing debt investors that would result in deleveraging of our balance sheet if execution is successful. And once again just to emphasize, these specific deleveraging measures do not involve the negotiation restructuring support agreement or other arrangements in the context of a bankruptcy proceeding in any way whatsoever.
Now, when considering the uncertainty associated with COVID, significant risks exist to any forecasting in the current environment. Notwithstanding, based upon our current projections and the positive impact from the potential deleveraging measures described above, we believe the Company should have the necessary flexibility that will allow us to navigate and maintain compliance with both our modified credit facilities and bond covenants for the foreseeable future. For covenant forecasting purposes, this assumes a slow recovery with continued pressure from the pandemic, but that our properties do remain open and are not significantly impacted by any future government mandated operating restrictions. We should note that the Company did exceed the thresholds for several of the leverage bond covenants as at the end of the third quarter. However, since these are in current space, they are only measured if the Company actually incurs new incremental debt, which did not occur during the quarter, so they were not applicable. And finally, I should mention, the Company has no current plans to incur additional debt.
From a liquidity perspective, as Lou mentioned, we did finish the quarter of this year with approximately $112 million of cash on hand. Based upon improved cash collection trends during the third quarter, we're assuming positive net cash flow generation for the fourth quarter, which should result in the Company finishing 2020 with $125 million to $135 million of liquidity. The cash forecast does include approximately $25 million of redevelopment spend over the next three months. It also assumes that minimal common dividend payments are require -- are needed over the remainder of the year to address redistribution requirements.
We also expect that within the next six months to transfer back our remaining non-core enclosed assets of Charlottesville Fashion Square and Muncie Mall, resulting in additional debt reduction of over $75 million from our current balance sheet. Finally, we will have all 2020 debt maturities address when we close in the next week or so on the Port Charlotte mortgage extension. The deal will provide for an additional year of term without any principal pay down.
Now, let me turn to our quarterly financial results. Reported FFO for the third quarter was $0.07 per diluted share. These results were directly burdened by an approximately $40 million or $0.18 per share decline in property NOI quarter-over-quarter from our entire portfolio, which is indicative of our cautious view of the future collections of outstanding tenant receivables. Accordingly, significant drivers of this decline, as it relates to our Tier 1 properties, involve the recording of $13 million of reserves against credit risk tenants with material delinquent balances, moving to the cash basis for our national theater tenancy resulting in additional reserves of $8 million, and then finally, the impact from the second and third quarter bankruptcies for another $6 million.
While NOI performance has certainly been challenged since the start of the pandemic, we've been encouraged by the improved cash collections nearly 90% during the third quarter of rental income and associated charges adjusted for the applicable impact of COVID-related lease modifications as well as better-than-expected sales performance with comp sales only down 8% for the most recent fiscal quarter. Accordingly, we do believe we'll see continued sequential improvement in comparable NOI forecasting a 10% to 20% decrease for the fourth quarter of 2020. This projection assumes that the Company's properties remain open throughout the fourth quarter and are not significantly impacted by any future government-mandated operating restriction.
With that, we'll now open the call for any questions. Thank you.
Questions and Answers:
Operator
[Operator Instruction] Ladies and gentlemen, this concludes the Q&A period. I'll now turn the call back over to CEO, Lou Conforti, for any closing remarks.
Louis Conforti -- Chief Executive Officer and Director
Thank you, all. Indeed, in these trying times our team's ability, and you can look at it via our operational and our financial measures that we've taken, are pretty astounding. And I thank all of them and we will -- it's time to get back to work, so thank you all and have a great day. Bye.
Operator
[Operator Closing Remarks]
Duration: 13 minutes
Call participants:
Melissa A. Indest -- Executive Vice President, Finance and Chief Accounting Officer
Louis Conforti -- Chief Executive Officer and Director
Mark E. Yale -- Executive Vice President and Chief Financial Officer
