Site Centers Corp (SITC) Q4 2020 Earnings Call Transcript

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Site Centers Corp (NYSE: SITC)
Q4 2020 Earnings Call
Feb 18, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the SITE Centers Fourth Quarter and Year End 2020 Earnings Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Brandon Day with Investor Relations. Please, go ahead.

Brandon Day -- Investor Relations

Good morning and thank you for joining us. On today's call, you will hear from Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty. Please be aware that certain of our statements today may constitute forward-looking statements within the meaning of the federal security laws. These forward-looking statements are subject to risk and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information about these risks and uncertainties may be found in our earnings press release issued today and in the documents that we filed with the SEC, including our most recent reports on 10-K and 10-Q.

In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO and same-store net operating income. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's press release. This release, our quarterly financial supplement and accompanying slides may be found on the Investor Relations section of our website at sitecenters.com.

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

David R. Lukes -- President & Chief Executive Officer

Good morning and thank you for joining our fourth quarter earnings call. We had a strong finish to the year with record leasing activity and continued improvement on the collection front. These results are a product of the work of everyone at SITE Centers and I want to thank all of my colleagues for their continued dedication. 2020 was a challenging year on many fronts and because of our tireless efforts the company is in a fantastic position for the future. I'll start this morning with a summary of fourth quarter events and then discuss some emerging macro tailwinds which are providing support and growth to our portfolio of assets in wealthy suburban communities.

Consistent with the last quarter 100% of our properties and 98% of our tenants remain open and operating as we continue to provide the necessary support for our communities. Collections continue to move higher and as of Friday we've collected 94% of fourth quarter and 94% of January rent. Unresolved monthly rent is now running around 3% with the remaining tenants in various forms of settlement negotiations. We continue to take a methodical approach to resolving any unpaid rent, which along with the deferral repayments is driving continued progress on prior period collections. We've now collected 88% of rent from the April 2020 through January 2021 period and after including deferrals for approval tenants we are expecting to collect 94% of base rent.

To put that in context at the time of our first quarter 2020 earnings call on April 30, only 49% of our tenants were open and we had collected just 50% of April rent. We've come a long way since then and it's worth stepping back and recognizing two important outcomes that developed throughout 2020. First, around 90% of our tenants are national with a deep understanding of their contractual obligations and proven access to capital. Notwithstanding those contracts many national tenants reacted to the early COVID fears by withholding rents, while we continue to pay operating expenses and property taxes to our local communities. Over the next few months, most of these tenants realized that protecting their rights to occupy their space within our properties was extremely important.

And they began to repay the rent that was owed. Some of our tenants offered other financial benefits to us such as outparcel approvals or a relaxation of exclusivity terms in return for a deferral program, which had helped us with leasing as we have more site control and flexibility to accommodate tenant demand. These negotiations are the primary reason why our collections continue to improve even for prior quarters throughout the year. One store opening occurred late in the summer, the second trend emerged, strong sales performance. With the increased movement to the suburbs, continued strong household income and wealthy communities and a growing work-from-home culture, our tenants are seeing and forecasting an improvement and profitability, which is increasing their interest in signing leases at our properties.

It's notable that our leasing volume in the third and the fourth quarters as well as our pipeline of new leases being negotiated now is running ahead of pre-pandemic levels with the fourth quarter representing the highest level of activity since the third quarter of 2018. And based on the volume of deals in our pipeline there's still more to come. To add some perspective on the scale of the pipeline, for the comparable site portfolio, we completed 30 anchor deals in 2019 and another 18 anchors in 2020. As of yearend we had 22 anchors in various stages of lease negotiation with three already done as of Friday and the rest are expected to be executed by mid-year 2021. The biggest driver of the uptick in leasing in our view relates to pandemic induced societal shifts that I previously mentioned.

The population increases in our suburban communities and attractive growth due to work-from-home flexibility at our properties are leading retailers to increase their store footprints in the last mile of the wealthiest suburbs and it may take to launch new concepts, which is broadening the universe of tenants seeking space. Restaurants, discounters' banks, warehouse clubs, medical care, delivery services sporting goods, all of these users desire convenient access to these communities with ample parking, space for curbside pickup and lower operating costs compared to other formats. We believe we are in the beginning of a multi-year trend and that the value of our offering centered around convenience will drive sustainable activity and cash flow growth for a number of years.

Our current leasing investments will provide our initial portfolio growth. And I would expect our future capital allocation to capture these societal changes happening today they're feeling rent growth in many open-air properties. These trends are simply too apparent to ignore and there will be investment themes that develop as a result. Turning to the dividend, the company declared the first quarter dividend of $0.11 per share, which is up from $0.05 per share in the fourth quarter. This dividend is based on the current collection rate and our board of directors will continue to monitor our dividend policy throughout this year should operations and cash flows improve. Importantly, this dividend rate provides significant cash flow to fund our 2021 business plan.

And with that, I'll turn it over to Conor.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Thanks, David. I'll comment first on fourth quarter earnings and operating metrics; discuss 2021 guidance and conclude with our balance sheet and dividend. Fourth quarter results were primarily impacted by uncollectible revenue related to the pandemic. Total uncollectible revenue at SITE share was $4.5 million or a $0.02 per share hit to OFFO. Included in this amount is $2.2 million of payments and net reserve reversals related to prior periods. Other than the write-off of $1.6 million of pro-rata straight line rents, which is an additional $0.01 per share headwind, the only other material one-time item that impacted fourth quarter OFFO was $1.2 million of lease termination fees, which is higher than our normal run rate. In terms of operating metrics, the lease rate for the portfolio was down 30 basis points sequentially largely due to Steinmart store closures.

Based on minimal bankruptcy activity we are tracking today and the recent pipeline that David outlined we expect the lease rates to stabilize at this level. Trailing 12 months leasing spreads decelerated in the fourth quarter with renewals impacted by one anchor deal executed to maintain occupancy. New lease spreads were impacted in part by deals to Five Below space formerly occupied by Pier 1, which generally pay above market rents. Based on our pipeline today we expect blended leasing spreads in 2021 to be consistent with the first three quarters of 2020. Their renewal spreads may remain under pressure in the first quarter due to short-term COVID related deals. Moving forward we are introducing 2021 OFFO guidance of $0.90 per share to $1 per share.

The bottom end of the range assumes no improvement in collections with continued occupancy headwinds and the top half of the range assumes a steady improvement in collections and a return to a more normalized pre-COVID operating backdrop. Additional 2021 guidance fees include JV fees of $11 million to $15 million and RVI fees which exclude disposition and refinancing fees of $13 million to $17 million. Other 2021 factors to consider include G&A which we expect to be around $54 million, interest income which we expect to be immaterial in 2021 with the closing of the Blackstone transaction in the fourth quarter and the repayment of our preferred investment and interest expense, which we expect to be around $23 million in the first quarter at our share and relatively consistent over the course of the year.

Lastly, we provided a schedule on the expected ramp of our $13 million signed but not open pipeline on page 10 of our earnings presentation. This pipeline alone for context represents just under 4% of our share in fourth quarter annualized base rent. If you were to also include the 22 anchors that David referenced, the pipeline increases to approximately 5% of our base baseline with a majority of our commencements expected in 2021 and 2022. Turning to our balance sheet, included in the receivables line items at year-end is approximately $14 million of net COVID-related deferrals we expect to collect in future. Details of timing and composition of the balance [Indecipherable] pages 8 and 9 of our earnings slide deck.

As I mentioned last quarter, the vast majority of this revenue is attributable to public tenants with half the balance from tenants operating in discount sector. In terms of liquidity the company remains well positioned with minimal 2021 maturities. No unsecured maturities until 2023 and minimal future development commitments. Additionally we have $835 million of availability on our lines of credit and $74 million of consolidated cash on hand at year-end. We have no material uses at this time. Lastly, David mentioned the company declared the first quarter dividend of $0.11 per share, which is based on current collection trends. This dividend level provides significant free cash flow to fund our growing lasing and tactical redevelopment pipeline with excess cash to be retained. We continue to believe our financial strength will allow us to take advantage of future opportunities to create stakeholder value.

And with that, I'll turn it back to David.

David R. Lukes -- President & Chief Executive Officer

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

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question comes from Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi, good morning. David, you talked about some investible themes materializing as a result of population shifts and work-from-home trends. What does that mean for SITE's investment efforts here? The company was starting to invest ahead of the pandemic. I think the acquisition of The Blocks in Portland was one of the more recent acquisitions and commentary was shifting toward becoming more offensive. How are you thinking about investments today and how should we think about the timeline to act on some of these themes?

David R. Lukes -- President & Chief Executive Officer

Good morning, Todd. How are you? I think right now our investment as you can see from the leasing pipeline is primarily in leasing capex. We've just got a ton of activity and our capital allocation right now is squarely in the leasing front. Having said that, it's just very interesting to note that even before the pandemic, we were making investments in properties that I would say were heavily tilted toward convenience, a little bit more format agnostic. In other words, less focus on a specific type of anchor or a format and more focused on where the tenants want to be. The Blocks portfolio is a bit more urban. It is also heavily convenience-oriented. If you look at a tenant roster, it's just got a lot of service tenants and banks and so forth.

And there were other investments we made one in Austin and one in Tampa that were also heavily based on convenience -- kind of a local -- two to three mile community. And those properties performed better than most over the course of the pandemic. So I think for me it's just reinforcing the fact that the customer traffic tends to be heavily focused toward convenience. All of these trends that are coming out of COVID are making me a lot more bullish on the convenience aspect in wealthier suburbs. And so, as we start to make property acquisitions, which I do expect to happen this year, we're going to continue that focus on where the tenants want to be because frankly that's where the rent growth is. The rent growth is in convenience-oriented properties.

And so, I think we're going to be buying into a rent growth theme as opposed to buying into a vacancy theme. And those are different, right? When you get into an early part of a recession, a lot of investors have a choice to make. They're either going to kind of go for distressed assets that have some vacancy and you can provide some near-term growth. For this particular recession that we're seeing, it's a bit of a split. You can make an investment theme based on occupancy, but boy, I'll tell you that the leasing volume and the number of calls that we're getting from tenants makes me feel like the rent growth theme is a much more powerful long-term investment strategy.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. And then Conor, in terms of investments is there -- are there any investments embedded in the guidance at all at either the high- or low-end of the range?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

No, there's not, Todd.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. And then David, you also talked about retailers launching new concepts and it sounds like the leasing pipeline is pretty healthy here. How much of that pipeline is comprised of new concepts today and how meaningful of an opportunity might that be? Maybe you can just shed some light on what you're seeing there in terms of where the demand is in terms of the space sizes and maybe give some examples of some of those expansion or new concepts?

David R. Lukes -- President & Chief Executive Officer

Okay. Sure Todd. I mean at this point if you look at the supplemental and you look on page 14, which kind of shows the total new leasing and a comp leasing the fourth quarter was pretty dramatic. I would say that the percentage of those total deals is still the same kind of strong suspects that have been heavily in leasing for the last couple of years. So I don't think the newness of concepts is contributing heavily today but it is providing competition and a number of the new concepts have us under NDA so I can't really be open about new concepts we're seeing because a lot of retailers are looking at creating another banner or another flag within their empire.

And I do think over the next couple of years we are going to see some new concepts roll out. What surprised me most Todd is that the two categories that were most difficult to fill in the last five years have been backspaces, number one which I would say 20,000 to 50,000 square foot of category. And then secondly as -- when we lost Pier 1 that kind of 8,000 to 10,000 square foot space was the most difficult. The new concepts that are emerging now seem to be half in the 8,000 to 10,000 and half in have 25,000 to 50,000 range. And that was surprising. I mean it's surprising to see new concepts they focus on larger suites. And I do think that that is driving some of our square footage gains in the fourth quarter. And I do think that's going to continue for the next year or two.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay, great. All right. Thank you.

Operator

The next question is from Rich Hill with Morgan Stanley. Please go ahead.

Richard Hill -- Morgan Stanley & Co. LLC -- Analyst

Hey, good morning guys. First of all, let me thank you for the earnings presentation. I thought it was very good, particularly page 14. I wanted to talk through just a little bit about the guidance in 2021 and maybe push you a little bit because we're thinking about 94% of rents collected. And presumably you're going to get a healthy percentage. My words, not yours of deferrals back in 2021. Why isn't there a realistic scenario where total NOI, consolidated NOI could be closer to 2019 levels versus still looks to be relatively still behind versus -- given what's implied by the guide? Walk me through that? Why shouldn't we be more bullish?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah, I mean it depends Todd, excuse me, Rich on those classifications of the deferrals, right? So these are -- there's always deferrals, there's no necessarily NOI impact, right? And you're not going to see it in earnings. If they're cash basis, you're right. It could be a decent tailwind. I would just say I mean if you think back to my prepared remarks and we're at $0.25 and let's just use deferral as proxy for NOI, including the quarter we're at $2.2 million of reserve reversals from prior periods, right? We also had the lease termination of a $1.2 million and then RVI fees will step down by $1 million. So those three pieces are about $4.5 million and $0.02 a share, so start at $0.23 many are watching there.

But to your point, I'm not going to say we support that logic, but I think from a cash flow perspective maybe on an NOI perspective, you could see some pretty big deal and zero deferrals come through and you're seeing acceleration in collection. I would just say it's really early Rich. I mean, we're encouraged by activity. We're encouraged by collections. David mentioned a number of times our national exposure and how important that is to us. 41 of our top 50 are public companies that helps with our visibility, but just given where we are with the pandemic we don't have perfect visibility. So I think you [Indecipherable] see us really commit to anything until we get a little more clarity over the course of the year.

Richard Hill -- Morgan Stanley & Co. LLC -- Analyst

Yeah, that's completely fair and I appreciate and I would expect nothing less. Why don't you come back a little bit to the leasing volume in 4Q? It was really nice to see leasing volumes accelerate. One of the things that we've always thought as attractive about SITE Centers is even tenuously selected properties with below market leases for a number of different reasons, which provides an interesting growth story over the medium term. So if that narrative is still true why did the leasing spreads at least on a quarterly basis not trailing 12-month basis, but on a quarterly basis. Why did they turn negative? And I'm not saying it's a bad thing because obviously there's two components. There's occupancy and there's leasing spreads, but can you maybe walk through if there's anything specific that happened in the quarter that maybe would have led to a temporary decline in leasing spreads that we shouldn't project going forward?

David R. Lukes -- President & Chief Executive Officer

Sure. Let me back up one second. Just in terms of asset selection -- if you have a chance as an investor to build a portfolio one at a time, you can do so on investable themes that you think are going to work long-term. When we did the RVI spin-off, it was a chance to almost do that. You're not building a property-by-property but you're selecting the keepers from the sellers. And doing so you have to make a decision as to how you're selecting those properties. It is true that we had a number of properties and do that have below market rents and Steinmart going away is an example where we're going to capture a lot of those below market rents.

But really if you look at the statistics of what was selected for SITE Centers to keep and be an ongoing growing entity, it was number one, household income. I mean, there's just no question that that's the biggest difference between RVI and SITE Centers is household income. It's not necessarily tenant roster. It's not grocery anchored versus power. It wasn't necessarily mark-to-market on in-place rents. It really had everything to do with household income because historically that's where I've seen the more stability in bad times and the most rent growth in good times. I do think that it was a reasonably good idea and I think that the pandemic is kind of doubling down on that thesis simply because of the interest by retailers in those markets.

I would agree with you Rich that over the long-term rent spreads are important because they tell a story about rent growth. The problem is with a company of our size, it's a pretty bumpy path. And we have some quarters that have had really strong spreads and then we had this last quarter which was negative. In this quarter in particular, it had almost everything to do with releasing Pier 1 boxes. And if you remember from what I had mentioned a minute ago, the lease up of 8,000 to 10,000 square foot boxes has been pretty weak for a couple of years. It's starting to get strong and there's a couple of new concepts, particularly medical uses and other types of convenience stores that really want that square footage. And so we're happy to add those to our properties.

But the leasing spreads were impacted negatively by kind those recent Pier 1 spaces getting eaten up. That could continue if we continue to lease spaces that had a higher rent and if the inventory is more Pier 1s or it could reverse substantially if we start leasing up the Steinmart locations or other ones like that that have lower rents. So it's going to be bumpy. But I will say if you look on page 14 of the stuff and you kind of see the rent spreads over the trailing 12 months around 8%, a couple of years ago at Investor Day, I believe we showed that -- we felt that portfolio could deliver 5% to 10% positive rent spreads kind of in the long-term. And so, I'm still supportive of that original thesis that we're going to be in the long-term in that 5% to 10% range. But it's not that we won't end up with a quarter or two here and there that are negative.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. Just to echo David's point, the vintage of the bankruptcy is incredibly impactful given [Indecipherable]. Steinmart is probably 300% to 500% mark-to-market. The pipeline that David mentioned is kind of a [Indecipherable] kind of low-20s. So once we sign those and [Indecipherable] etc could have a material impact on what we reported.

Richard Hill -- Morgan Stanley & Co. LLC -- Analyst

That's really helpful guys. And one more quick question for me. Transaction activity and the market feels a lot better than it did gosh, six or eight months ago. But we haven't seen a tremendous amount of transaction activity. We've seen some but not a lot. We haven't seen maybe as much as some would have hoped in RVI. Is it -- are we in a weird time period where there's a bid ask spread that is living to that transaction volume? So said another way, there's no distress coming out but there's still enough uncertainty in the world where people don't want to come in with both feet in. How are we supposed to think about the transaction market?

David R. Lukes -- President & Chief Executive Officer

It's really interesting because you would think that the bid ask spread is the reason why the industry hasn't seen a lot of transactions. There's been a couple in RVI but it hasn't been dramatic. We've sold a few properties here and there. I think it's less the bid ask spread as much as the equity out there seems to be following the credit markets. And I just think that that was less available last year. That seems to be changing pretty -- I mean in the last month I think we've started to see a lot more positive momentum on the credit side. So my feeling is with the strong performance in the open-air sector from most portfolios I do think the credit markets are going to be more constructive on lending to open-air. And you better believe that there's equity waiting to be invested. But I think that equity have to follow the credit markets. It feels like this year is going to start to ramp-up.

Richard Hill -- Morgan Stanley & Co. LLC -- Analyst

Thank you, guys. That's it for me.

Operator

The next question is from Michael Bilerman of Citi. Please go ahead.

Michael Bilerman -- Citi -- Analyst

Good morning. David, you talked a lot about sort of the anchor renewals and you threw out some numbers on the call about the pipeline 22 deals in negotiation, following 18 you did in 2020. I wasn't sure if that was just the wholly owned 17 assets or whether that was the whole portfolio. So if you can just clarify sort of what basis it's on? And then talk a little bit about how much of that activity represents the rollover that you have? I think over 10,000 square feet, there's about eight at least in the wholly owned portfolio and a few more in the unconsolidated that don't have options. So I don't know how much of it is those types -- those tenants that are rolling and how much is existing vacant space.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah Michael, its Conor. So it's the comparable portfolio. So the JV is wholly owned and that's why I gave some color on kind of NOI impact. What it means for SITE Centers is call it an additional 2% boost to our signed not open pipeline. If you look at that pipeline today of the $13 million signed not open plus the 22 anchors all but maybe one or two anchors are effectively vacant today. So that's all -- if you're taking kind of fourth quarter 2020 NOI as a starting point that's all NOI to come. The other point I would just add to that is remember we're talking just base rents, right? The recoveries on these anchors of these deals are pretty impactful. And then the last point I'd make is the pipeline David mentioned is just anchors. We've got a number of pads, grounds, etc, in the hopper as well, which David mentioned the rent growth we're seeing for convenience-oriented real estate, some of those rents are bigger and larger than some of the anchors we're signing. So I would just say again just to answer your original question it's a mixture of wholly owned and JVs both on walls we're qualifying if I just give you base rent.

Michael Bilerman -- Citi -- Analyst

Right. And then at what point do you sort of feel the small shop occupancy will start to reverse and start to move up with all this demand and the data that you're seeing on the traffic levels. I would have thought you would have seen more maybe some small business openings to take advantage of those stores, which don't require as much capital investment relative to an anchor. And so you're sitting there at 83%. At what point does that start to march the other way consistent with the anchor deals you're doing?

David R. Lukes -- President & Chief Executive Officer

It's a really good question. I wish that I had a crystal ball Michael. I mean normally I would say that we're getting a lot of shop activity -- maybe a lot is too aggressive, we're getting reasonably strong shop activity but the back door is still open meaning it's more difficult for shop tenants during the recession that it has been anchors. I'll echo again what Conor said, you look at our top 50 tenants, they represent 60% of our base rate and of on those top 50, 41 of them are public companies and that same group raised over $50 billion of fresh capital in 2020.

So I think the kind of immediate leasing momentum is coming from the anchors. If they start opening and generating sales and the vaccine gets out I do think the shops will follow that but to-date I wouldn't say that the shops are as aggressive as the anchors are. I do agree with you if you're saying that the shops should follow. What we need to see happen and we need to see the shops not going out of the back door in other words not closing or staying close. And on that front I do think we have a pretty small exposures in most of our shops you look at our restaurant list they tend to be national tenants but they're being a little more careful than the anchors are right now.

Michael Bilerman -- Citi -- Analyst

Okay. And just one last quick one just on the Canadian the land sale up in Toronto for $22 million, was your basis cost $3 million or had that been written down? And looking at the stuff that looks like it was a 10% ownership and you sold it for $88 million so I wasn't sure if there is a promoted interest that got you to $22 million just -- and can you just go through the math there?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah, Michael -- it was $83 million that's on page 18 I'm sure -- very -- at the bottom of the page there. I actually don't recall if that was in that basis. We took a writedown previously. I think it's a land -- a piece of land that we owned for some time so it had to come back to on the promoter of the structure on that front.

Michael Bilerman -- Citi -- Analyst

Okay. Thanks.

David R. Lukes -- President & Chief Executive Officer

Thanks Michael.

Operator

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

Alexander Goldfarb -- Piper Sandler & Co. -- Analyst

Hey, good morning. Good morning. So just a few questions here. First just David going to RVI, I understand from the U.S. perspective that -- open air coming back and -- that should jog lose some more sales there. But how would you rate things on the island as far as the same trends and preferences for open air are also on Puerto Rico and also the credit is the same or is it a different dynamic there that's still lingering from pre-pandemic when sales on the island were a lot slower than they were on the mainland?

David R. Lukes -- President & Chief Executive Officer

Hey, Alex, good morning. It's a very reasonable question. I think it's important because -- as you all know we would be very happy to receive back our $190 million prep that is ex-RVI and that's dependent on asset sales. So I do think that even though it's a separate company it is relevant for sure. My personal feeling like you're saying is that the durability of open air in the U.S. even in the secondary markets, if there's a town and property, they performed pretty well during the pandemic. And I would say that's true of the RVI assets in aggregate, the U.S. performance was pretty good. The tenant rosters look somewhat similar to SITE Centers. And so if the credit markets continue what they've been doing in the past month and being more constructive on lending, my hope and my expectation is we start to see more U.S. RVI transactions this year.

For Puerto Rico it's really hard to tell. I mean as you know, we closed on one asset sale on Christmas Eve. We have had a number of conversations recently with people that are kicking tires in Puerto Rico and are trying to understand the dynamics there. I personally think that the equity is a little bit ahead of debt in Puerto Rico. And the reason is that there's some interesting macro issues. Puerto Rico has much less square footage per capita than the U.S. Puerto Rico has much less online sales penetration. And if you look at the traffic going to the properties, the sales of grocery stores and Walmart and so forth is really strong on the island. And I think there's a lot of interest politically as to how the country is doing. What their own credit profile and economic future looks like -- a lot of people are interested. But I will say that I don't have any visibility as to when transactions will pick up in Puerto Rico. I wish I did but I just don't.

Alexander Goldfarb -- Piper Sandler & Co. -- Analyst

Well, maybe just to that point the rent mark-to-market, if leasing trends here in the U.S. you expect to be sort of modestly positive rent spreads. Is that the same there or are you guys still looking at heavy rent roll downs which is perhaps more of the issue from a lender perspective on the island?

David R. Lukes -- President & Chief Executive Officer

The Puerto Rican portfolio it just like we said in the U.S. when we see rents rise it has everything to do with a vintage bankruptcy in Puerto Rico. You're right. It had everything to do with the vintage of the leases being signed. And it just so happens when a lot of big box and kind of national chains move into Puerto Rico. They're now passing their primary term there and their options. And so when you get to the end of their term a number of them have been above market. And so, I would say we're still dealing with some roll down. I think the last two years or so we've probably dealt with the bulk of them. So there's a little bit of room on that. But I don't think that the spreads are as strong as they are in the U.S. on a trailing 12 month.

Alexander Goldfarb -- Piper Sandler & Co. -- Analyst

Okay. And then just looking here David, one is looking at slide 12 of the PowerPoint you guys are still heavy anchor and small shop is pretty small as a percent of ABR. So when we think about rent spreads and your ability to drive rents which is clearly something you well-articulated. My question is that the big anchors, the rent bumps are pretty modest, pretty tepid. And that's the real juice comes from the smaller tenants. But for you guys the smaller tenants are a small part of the portfolio. So is it really that that small part -- the small shops really are driving the outsized or is there more juice as these anchors roll that we may not typically be thinking of?

David R. Lukes -- President & Chief Executive Officer

I think I'm trying to unpack that question. I mean if you look at the near-term growth of this company a lot of is occupancy related. The number of anchors being signed on existing vacant spaces is so large that we're going to see a lot of good solid growth from brand new 10-year leases with credit and filling space. And like Conor said, it's not just the ABR. It's also the leverage on the Triple Nets which the landlord is paying at that point. Once that stabilizes I mean the fact of the matter is any portfolio that's heavily weighted toward national credit whether they're anchors or shops the national credit tenants they get something for being a credit worthy tenant. And in general its rent bumps every five years not rent bumps every year. So this product type is open product type is geared toward national geared toward national tenants.

Once you fill up the space and get to have at a high stabilized occupancy the growth is not that high because the tenant rent growth can be 10% every five years. And so you kind of have a cap on your growth. I think that's what you're asking. Now where that would change is something we haven't seen in a while, which is rent growth in anchors. And that's an interesting subject. I mean I don't think you generally see rent grow until you have a lack of supply. And as you can tell by our leasing volume we still have supply. But it sure feels like that supply is winnowing down pretty fast. And so my hope is once we get through this big wave of box leasing the opportunities that we have left let's say an Office Depot leaves or runs out of term and we want to replace that. My hope is with a small inventory that's left we are going to be able to push anchor rents. And that hasn't happened in a while.

Alexander Goldfarb -- Piper Sandler & Co. -- Analyst

Okay. So that's really the point where you're talking about the rent growth which is some of that is just coming from getting back under water space Pier 1 aside and the other part is just as you rapidly lease-up the anchors that the scarcity then allows you to get leverage there. So it sounds like that's the two-step part of it which is good?

David R. Lukes -- President & Chief Executive Officer

Yeah. I mean, yeah, it's exactly right. I feel like in the near-term this is all about occupancy and mark-to-market on whoever lease. Step two would be market rents go up. And I have not seen the market rents and anchors going up. I just haven't -- and I don't think they've gone up in years. Having said that, your average household income is over $100,000 there's no new supply and you end up leasing -- this will be the amount of space will be 3,000 or 3,500 square feet when compared throughout last year. At some point we're going to have pretty low inventory which means that's the point where we can start selecting tenants so that we can start pushing rents.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

And the only thing I'd add which is we have been largely manufacturing rent growth with the tactical projects that we've talked about the last six months. So if you look at page 17 of our stuff it's actually everyone on those projects is a reconfiguration of space i.e., going from anchors to shops. And so on its honestly it's a small relative to rental rise but it really does start that up if we kind of continue this path for a couple of years.

Alexander Goldfarb -- Piper Sandler & Co. -- Analyst

Okay. And just finally the 6% sort of outstanding you collected 94% whether in cash or deferral the 6% outstanding do we think about that being 6% pending vacancy for -- sort of split the difference 3% vacancy 3% that you'll collect how should we think about that remaining stats?

David R. Lukes -- President & Chief Executive Officer

Yeah, and Alex and in a normal recession if you look at tenants that don't pay rent there's always a question mark of when is that tenant going to go away. And I think that's the basis of your question right how much of the unpaid is simply not going to open back up and pay rent again. But if I look back in my experience in previous recessions I would say there's two reasons why a tenant is not paying goes away. Reason number one is they're a bad operator and they run out of money and reason number two is they're a good operator but they don't really see a future in your property or in their business and so they throw in the towel before things get worse. I mean those generally are the two reasons why a non-paying tenant goes away.

With respect to the first like I said before if our top 50 tenants is 60% of our AVR, 41 of those are public companies and they raised $50 billion this year, I'm not concerned about access to capital so I don't think in our tenant roster running out of money from the tenant perspective is an issue. The second would be they don't see a bright future. At this point good operators that have a negative view of the future don't sign new 10-year leases. And so it just it feels like the risk of our non-paying tenants going away in this part of this particular recession seems pretty low. My caveat would be if there are sectors like full service sit down restaurants which is pretty small, but it's there and the theaters those experiential types of retailers if they're just not able to hang on because the pandemic causes a much longer tail than other types of businesses then that's a risk, but for the most part I feel pretty good about those tenants that are paying not -- not eventually leaving.

Alexander Goldfarb -- Piper Sandler & Co. -- Analyst

Okay. Thank you very much.

David R. Lukes -- President & Chief Executive Officer

Thanks Alex.

Operator

Next question comes from Hong Zhang with J.P. Morgan. Please go ahead.

Hongliang Zhang -- J.P. Morgan -- Analyst

Yeah, hi. It sounds like you put a couple more tenants on a cash basis in the fourth quarter. Is that just cleaning up the roster at year end or are there any other troubled tenants that you could potentially put on a cash basis this year?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Hey, Hong its Conor. We did put some more cash basis tenants on the -- our tenant list in the fourth quarter. I think as a percent of AVR we're just over 13%. I mean over the course of the year it's likely we could add some more. If you come back to my comments though there's not much we're tracking on the bankruptcy front that could change, right? But there isn't much we're tracking, so as of today it's not a long list that we're worried about this on the cash basis, but things change with of course here, so it certainly could change our view on some tenants.

Hongliang Zhang -- J.P. Morgan -- Analyst

Got it. And are you expecting any additional, I guess reserve reversals or have you received any income that you've previously written-off in the first quarter so far?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

We have -- we haven't quantified that and we'll do so with first quarter results but the absolute we have.

Hongliang Zhang -- J.P. Morgan -- Analyst

Got it. And just to clarify is there assumption for that sort of income in your 2021 guidance or is your 2020 guidance excluding that sort of stuff?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

It excludes any reserve reversals.

Hongliang Zhang -- J.P. Morgan -- Analyst

Got it. Thank you.

Operator

The next question is from Paulina Rojas-Schmidt with Green Street. Please go ahead.

Paulina Rojas-Schmidt -- Green Street Advisors -- Analyst

Good morning. Could you please elaborate on the increased demand that you are seeing for your former Pier 1 boxes and between 8,000 and 10,000? It would be ideal if you could please cite some specific examples? And also you mentioned that you're seeing some new concepts emerge. I'm not sure if it's for this type of box size but is different if you could also elaborate on this it will appreciated? Thank you.

David R. Lukes -- President & Chief Executive Officer

Yeah. Good morning. I would say that the demand increased for the 8,000 to 10,000 square foot range is off of a pretty low base. So I wouldn't take that as being an indicator that there's sudden an outsized demand. There are a couple of tenants that recently started to grow. They are a couple of new categories as I mentioned before were under NDA from a couple of new concepts so I unfortunately can't really go into great detail about the specific types of tenants. But there's been a couple of tenants that are wanting to get into properties particularly ones that are in wealthy suburbs and so the first few that they're trying are in the 8,000 to 10,000 square foot range. I think what's been more impactful honestly is the demand for larger boxes and kind of the 25,000 to 50,000 square foot range, that's been more surprising to me.

And I think there's a little bit more on the new concept front for those larger spaces than there is the 8,000 to 10,000 square foot. But it really runs the gamut. I mean you've got some grocery concepts. You've got sporting goods concepts. You've got delivery services. You've got kind of logistics style tenants. They're taken 8,000 to 10,000 square foot space that are less retail and more logistics. There's tenants that are medically oriented. A lot of people in the suburbs appear to be moving their doctors and dentists and opticians from the cities to the suburbs long-term. And that's propelling a lot more kind of health and wellness. A lot of the health and wellness categories seemed to be kind of moving away from individual 500 square foot suite and office buildings and moving into kind of a collective health and wellness suite in the suburbs and so that's kind of one of those categories to fill that 8,000 to 10,000 square foot void.

Paulina Rojas-Schmidt -- Green Street Advisors -- Analyst

Got it. Thank you.

Operator

Next question comes from Ki Bin Kim with Truist Securities. Please go ahead.

Ki Bin Kim -- Truist Securities -- Analyst

Thank you. Good morning. Can you just talk about high level the sales activity that you're seeing? And I know you're on track every tenant obviously, but whatever information that you do have the sales activity that you're seeing in 4Q this year versus last year and maybe foot traffic?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Hey Ki Bin, it's Conor. I mean, to David's point I wanted to -- the downside of national tenants. One of those is sales and sales collections and we get very little information on that front. I think it's just about a third of our tenants report sale. I would kind of point you back to our public tenants, right, that's where we get the most information and that our anecdotes with our internal portfolio review. So I don't have great information for you there. What I would just say though is if you start taking down our top 50 you'll see fairly dramatic sales increases for the home improvements, home furnishing, groceries, the discounters are starting to ramp up a little bit. There's the pipeline laggard. But everyone else has put up their specific crafts business. I mean they've been putting up 20%, 30% comp. So we have some data on that from a couple of weeks ago, a couple of months ago, you can see the presentation we did. But I would point you to our public tenants on that front.

Ki Bin Kim -- Truist Securities -- Analyst

Okay. And moving to your retention ratio is one of those simple facts that a lot of folks don't report. And I was curious if what you expect going forward in 2021?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

You're correct. We do not report our retention ratio. I would say for anchors it's historically been in the 90% to a 100% range in the quarter. And there's nothing in our pipeline that makes me think you'd deviate from that. Our shops to David's point it's much lower. Historically, I think it's been in the 70s. My guess is now it's even lower just given fallout of the recession. So our blend is probably down marginally in the kind of 80s. But for anchors it's extremely high.

Ki Bin Kim -- Truist Securities -- Analyst

And implicit in your guidance, you're assuming that doesn't change much or improvement. How are you thinking about that?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah, no, most of our anchor leases will in the first quarter. So our visibility on that front is extremely high.

Ki Bin Kim -- Truist Securities -- Analyst

Okay. Thank you, guys.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

You're welcome.

Operator

The next question is from Linda Tsai with Jefferies. Please go ahead.

Linda Tsai -- Jefferies LLC -- Analyst

Hi. What's the best way to think about dividend growth going forward?

David R. Lukes -- President & Chief Executive Officer

The best way to think about dividend growth is that I think the Board of Directors is kind of thoughtfully and carefully considering what the growth rate of the dividend is. And I think all of us management and the board are looking very carefully at the durability of collections. I don't think anybody wants to get over our skis until we really see more of a conclusive end to the COVID environment. So we're really basing it on the current collections for this quarter. And I think the board will simply reconsider every quarter and look at where collections are. From a long-term basis, I think there's a payout ratio that we think is appropriate. Conserving capital for us is great because it allows us to fund a lot of leasing capex and hopefully some acquisitions coming up. So I think we're going to be pretty careful with the high watermark -- once the collections get back to normalized. We'll be pretty careful about the high watermark for the dividend over time.

Linda Tsai -- Jefferies LLC -- Analyst

Thanks for that color. And then to clarify you said that the leased rates should stay stable from 4Q levels. Does that also mean that the 290 basis point signed but not occupied spread starts to compress?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

I don't think so. If you look at our slides Linda, page 10 or 11, we've got the sign -- page 10, we've got the signed but not open kind of cadence of commencement. So from a commence rate, we're really not going to see a big uptick until the back half of the year. Leased rate is always really difficult to forecast. Against my comments, we're not tracking zero bankruptcies at this time. To David's point, we could have some additional [Indecipherable] it's not material for us, but it could be a little bit of pressure. But I do think based on our leasing pipeline, it's stabilized and we're hopeful it'll start to accelerate over the course of the year, but we're not willing to commit to that just yet. For the leased occupied gaps, I mean look based on our activity -- like I mentioned to Michael the pipeline David mentioned are just the anchors, right? So if we have additional pads and convenience stores to retailers in addition to that you could see an acceleration or an expansion of our lease occupied gap even with the signed not open pipeline commencing in the back half. But we should, right, we're also 90% leased. I mean, we've got a lot of river on that front.

Linda Tsai -- Jefferies LLC -- Analyst

Got it. Thank you.

Operator

The next question is from Chris Lucas with Capital One Securities. Please go ahead.

Christopher Lucas -- Capital One Securities, Inc. -- Analyst

Good morning everybody. Hey David, just going back on the anchor sort of retention rate number as it relates to the leases that you have -- that have no options left with them. Is there a similar expectation or how should we be thinking about those 11 leases? I know it's a pretty small number but just kind of.

David R. Lukes -- President & Chief Executive Officer

A similar expectation on -- I'm sorry just give me a little more so what you're saying is if an anchor tenant in our portfolio runs out of term and options and they're naked.

Christopher Lucas -- Capital One Securities, Inc. -- Analyst

Right.

David R. Lukes -- President & Chief Executive Officer

What's our expectation on retaining them versus replacing them, is that what you mean?

Christopher Lucas -- Capital One Securities, Inc. -- Analyst

Correct. Yes, exactly. Thank you.

David R. Lukes -- President & Chief Executive Officer

Yeah. I think in the recent past because there's been so much kind of anchor churn in the past three or four years you were more -- we were more likely to retain on existing tenant that ran out of a term because the capex is low, they have at least a proven business in that property and we can probably get a reasonable rent increase. And by reasonable, I mean kind of a traditional 10% bump. What's going to be very interesting is throughout this year it looks like our inventory of available boxes in wealthy suburbs is going to go down pretty dramatically, which means we're going to have some tough choices to make when tenants that are maybe not top tier run out of term. And it sure feels like we might be in an environment where we start purposefully replacing tenants with better ones.

And that's a pretty good spot to be in. We've done a little better in the last quarter where we decided to not renew an existing tenant. Go ahead and take the vacancy because we want to replace them. And so maybe there's a year-and-a-half of downtime but you end up with a much stronger long-term property. That's a good position to be in. And it feels like we're kind of at the beginning of that right now. So the retention from the tenant side might be stronger in this environment. The question is whether the landlord wants to keep that retention or would rather replace the tenant. So there's an example in Shoppers World in Boston. There have been a number of tenants that we've decided we would like to replace them and upgrade the tenant roster because when you get these windows where anchors are active it's best to take advantage of them because it doesn't last forever.

Christopher Lucas -- Capital One Securities, Inc. -- Analyst

Okay. Thank you for that. And I guess that sort of leads me to the other part of this which is I think pre-COVID a lot of the conversation among the national tenants was about rightsizing their footprint. Is that conversation sort of put on hold right now as they sort of reevaluate how they want to work with consumers in terms of how they want to build their distribution?

David R. Lukes -- President & Chief Executive Officer

Yeah, that's one of the most fascinating subjects that I personally haven't developed a conclusive opinion on it. But it is really interesting. I mean as you know, you and I have talked for years about anchors wanting to downsize their space and get more efficient. It almost feels like there have been a number of examples where that's reversed during COVID. And the reason I say that is demand for space that's 30,000, 40,000, 50,000 square feet has increased. So we're doing less box splits. And in this last year we're doing more full box leasing. I'm not exactly sure what the reason is. I mean we have pulled some of their building permit drawings just to kind of look at what the new footprint looks like. And it does appear that the tenants are making sure they have enough square footage to be flexible on delivery from store. And if you look at some of the new building permits you can see the involvement of a different type of loading and delivery dock, a different type of customer pick up lane, and those things take square footage. It's hard to shrink your store down to just in time inventory and at the same time want the inventory in the store, and so it feels to me like that trend of shrinking footprint might be reversing a little bit.

Christopher Lucas -- Capital One Securities, Inc. -- Analyst

Okay. Thank you for that. The last question for me is now that you guys have sort of concluded there's sort of the joint venture deconstruction between you and Blackstone and you've got a handful of assets on a wholly owned basis. How should we be thinking about that group of assets that you picked up on a wholly owned basis in terms of the long-term viability of them in your portfolio versus -- future disposition proceeds potentially?

David R. Lukes -- President & Chief Executive Officer

Yeah. I think you should assume the same thing with our existing core portfolio. There's going to be a handful that we sell fairly soon, because we want to recycle that capital into higher growth assets. And there's a couple that have really strong tenant sales. They've got contractual rent bumps coming up or there's outparcels that we can build. Of the nine that we bought I would say -- a third of them will probably sell fairly soon. A third of them are stable and growing at the same rate as the rest of portfolio. And a third of them have some tactical redevelopment where we can add an outparcel or subdivide the box or lease some vacancy and so that's kind of -- to me it's a proxy of our overall portfolio. We're always going to be selling the bottom couple of assets not because they're necessarily bad or risky but they just run out of growth. And in this industry I think once you run out of growth there are other ways to make money. And I'd rather see us continue to recycle.

Christopher Lucas -- Capital One Securities, Inc. -- Analyst

Great. Thank you for that. That's all I have this morning.

David R. Lukes -- President & Chief Executive Officer

Thanks Chris.

Operator

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

David R. Lukes -- President & Chief Executive Officer

Thank you all very much. And we will speak to you next quarter.

Operator

[Operator Closing Remarks]

Duration: 55 minutes

Call participants:

Brandon Day -- Investor Relations

David R. Lukes -- President & Chief Executive Officer

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer & Treasurer

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Richard Hill -- Morgan Stanley & Co. LLC -- Analyst

Michael Bilerman -- Citi -- Analyst

Alexander Goldfarb -- Piper Sandler & Co. -- Analyst

Hongliang Zhang -- J.P. Morgan -- Analyst

Paulina Rojas-Schmidt -- Green Street Advisors -- Analyst

Ki Bin Kim -- Truist Securities -- Analyst

Linda Tsai -- Jefferies LLC -- Analyst

Christopher Lucas -- Capital One Securities, Inc. -- Analyst

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