Phillips Edison & Co Inc

NASDAQ:PECO

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon. And welcome to the Phillips Edison & Company's First Quarter 2020 Earnings Presentation. My name is Chuck, and I will be your conference operator for today. Before we begin, I would like to remind our listeners that this conference call is being recorded and simultaneously webcast, and a replay of today's call will be available later on today's company's website. The webcast and slide presentation can be accessed by visiting the Events and Presentations page in the Investors section of the Phillips & Edison company website at www.phillipsedison.com or at www.phillipsedison.com\investors. If you are participating in the webcast, please note that the slides are user controlled.

I would now like to turn the conference over to Michael Koehler with Phillips and Edison & Company (sic) [ Phillips Edison & Company ]. Sir, please proceed.

[Michael Koehler, executive]

Thank you, operator. Good afternoon, everyone. And thank you for joining us. I'm Michael Koehler, Vice President of Investor Relations with Phillips Edison & Company. Joining me on today's call are our Chairman and CEO, Jeff Edison; our President, Devin Murphy; and our CFO, John Caulfield.

Please turn to Slide 2 for the agenda. During today's presentation, Jeff will provide a portfolio overview and speak to our first quarter 2020 highlights. John will then discuss our financial results for the quarter and our balance sheet. Finally, Jeff will provide a COVID-19 update, discuss our updated estimated value per share and provide an outlook for the remainder of 2020. On the conclusion of our prepared remarks, Jeff, Devin and John will address your questions.

Before we begin, I would like to remind our audience that statements made during today's call may be considered forward-looking and are subject to various risks and uncertainties. Please refer to Slide 3 for additional disclosure and direction on where you can find information regarding potential risks. In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in the appendix of the slide deck, which is available on our website.

I will now turn the call over to Jeff Edison, our Chief Executive Officer. Jeff?

[Jeffrey Edison, executive]

Thank you, Michael. Good afternoon, everyone. And thank you for joining us today. The health and safety of our neighbors, associates, investors, shoppers and communities are of great concern during this unprecedented time. Our thoughts are with those impacted by this difficult situation. To all our stockholders, financial advisers and other participants on this call, we hope you and your families are staying safe.

Before we get into the COVID-19 update and estimated value per share discussion, I'd like to provide a portfolio overview and briefly discuss our first quarter 2020 highlights. Slide 4 provides an overview of our national portfolio of grocery-anchored shopping centers. As of March 31, 2020, our portfolio consisted of 285 wholly-owned properties, 97% of which were grocery anchored, located in 31 states, totaling 31.9 million square feet of gross leasable area. This compares to 300 properties at March 31, 2019, located in 32 states totaling 34.1 million square feet.

Our disposition activity over the past year has improved the quality of our portfolio. It has also allowed us to reduce our debt and to invest in new growth opportunities. At quarter end, our leased occupancy was 95.6%. This is a new record high for PECO. Our in-line occupancy was over 90%. During the quarter, 76.8% of our annualized base rent came from grocers and national regional tenants, representing a strong creditworthy tenant base.

Our top 5 markets in terms of property count are Atlanta, Chicago, Tampa St. Pete, Dallas and Minneapolis, St. Paul. All 5 markets fall within the top 20 MSAs in the United States.

Slide 5 provides an overview of our diverse group of tenants whom we call our neighbors. Kroger and its brands are collectively our largest tenant, accounting for 6.9% of our ABR across 66 centers. We are Kroger's largest landlord. Publix is our second largest tenant, accounting for 5.6% of our ABR across 56 centers. We are Publix's second largest landlord. Ahold Delhaize, which owns GIANT, Stop & Shop and Food Lion, Albertsons/Safeway and Walmart round out our top 5 anchor neighbors. No grocer accounts for more than 6.9% of our total ABR. Subway, Anytime Fitness, T-Mobile, H&R Block, Great Clips, make up our top 5 in-line tenants. No single in-line tenant accounts for more than 1.6% of our in-line ABR. The average remaining lease term for our portfolio was 4.6 years.

Slide 6 outlines our occupancy metrics and in-place rents. As I mentioned, our lease portfolio occupancy for the quarter ended March 31, 2020 was a record high. Anchor occupancy increased to 98.3% and in-line occupancy was down slightly to 90.1%. Our overall ABR was $12.68 per square foot, which increased 4.4% from a year ago. Our in-line ABR was $20.12 per square foot, which increased 4.7% year-over-year.

Slide 7 illustrates our highlights for the quarter. As we noted, over time, our top strategic initiative is to deliver strong operating results and NOI growth. The first quarter of 2020 was no exception. Our best-in-class fully integrated management platform delivered same-center NOI growth of 2.6% compared to the first quarter of 2019. FFO and core FFO per diluted share increased 5.3% and 5.9%, respectively. That was compared to the first quarter of 2019. Our FFO and core FFO, both fully covered our gross distributions totaling 122% and 107.9% of total distributions made, respectively. And finally, we repaid a $30 million term loan early, which was due in 2021. As a result, we do not have any material loan maturities due until April of 2022. These first quarter results took place in a much different environment than the one we're in today. Our second quarter results will reveal the negative impact of COVID-19, but we believe that our portfolio is resilient and will bounce back once the pandemic has subsided. Our focus on well-located grocery-anchored neighborhood centers will allow us to successfully adapt the new normal.

With that, I will turn the call over to John Caulfield, our CFO. John?

[John Caulfield, executive]

Thank you, Jeff. And good afternoon, everyone. Slide 8 reviews our first quarter same-center NOI. During the 3 months ended March 31, 2020, same-center NOI increased 2.6% when compared to the first 3 months of 2019. Driving our NOI growth was a $2.9 million increase in rental income, which primarily resulted from a $0.23 or 1.9% increase in average base rent per square foot. In addition to a 1.7% increase in average same-center occupancy and higher recoveries when compared to the first quarter of 2019. These revenue increases were partially offset by higher real estate taxes.

Slide 9 outlines our net income, FFO and core FFO financial results for the 3 months ended March 31, 2020. Our net income was $11.2 million compared to a net loss of $5.8 million for the same period in 2019. The improvement is attributable to the property NOI growth just discussed, lower G&A expenses and fewer nonrecurring charges than we experienced a year ago. The company generated funds from operations, or FFO, of $68.2 million for the 3 months ended March 31, 2020. On a per share basis, FFO increased 5.3% to $0.20 per diluted share from $0.19 per diluted share for the comparable period. Further, during the first quarter, the company generated core FFO of $60.2 million. On a per share basis, core FFO increased 5.9% to $0.18 per diluted share from $0.17 per diluted share for the first quarter of 2019.

Slide 10 outlines our debt profile as of March 31, 2020, and our net debt to total enterprise value was 45% as of March 31, 2020. Our debt had a weighted average interest rate of 3.3% and a weighted average maturity of 4.7 years. Approximately 81.9% of our debt was fixed rate. This compares to a debt to total enterprise value of 39.5% at December 31, 2019, with a weighted average interest rate of 3.4%, a weighted average maturity of 5 years and approximately 89.4% fixed rate debt. Our leverage increased because of the decrease in our estimated value per share and as a result, despite our net debt decreasing by $19.5 million during the quarter, our leverage ratio increased.

We continue to maintain a strong cash and liquidity position bolstered by a recent $200 million draw on our $500 million credit facility, which currently has an additional $255 million of borrowing capacity available. As of April 1, we had $210 million of cash on our balance sheet. Our corporate revolving credit facility matures in October of 2021 and has options to extend its maturity to October 2022. As such, we do not have any material debt maturities until 2022. We've worked hard to appropriately ladder our debt maturity profile and believe the steps we have taken to increase our liquidity will allow us to weather the current environment for a sustained period.

I would now like to turn the call back to Jeff for an update on COVID-19 and a discussion on our new estimated value per share. Jeff?

[Jeffrey Edison, executive]

Thank you, John. Turning to Slide 11. During this unprecedented time, we are seeing tremendous uncertainty across the economy and specifically the retail real estate landscape. However, because of the necessity-based nature of our neighbors and especially our grocers, 100% of our centers have remained open and operational throughout the entire pandemic so far. As recently as April 20, 42 states had issued statewide stay-at-home orders and another 3 states had stay-at-home orders in certain regions. Although altogether, approximately 316 million Americans have been covered by these mandates.

Now 3 weeks later, we are beginning to see some of those stay-at-home mandates lift. As of Monday, 26 states have partially reopened. Another 4 states are expected to partially reopen soon. Across our portfolio, 59% of our properties are in states that have partially reopened; 9% are in states that are expected to reopen soon; and 1% are in states that have never had restrictions. That 1% represents our 3 shopping centers in Iowa. States with the most PECO properties are Florida, Georgia, Ohio, California and Texas. Only California is still under statewide stay-at-home orders. Ohio plans to reopen soon. Florida, Georgia and Texas have partially reopened.

The consistent dialogue and open lines of communication we have established with our neighbors since the pandemic ensued have been critical. Our team has been focused on informing our neighbors of government requirements so they can reopen safely and as quickly as possible.

Slide 12 provides a more detailed look into our neighbor type. This pandemic has made us think about our portfolio differently than we have in the past. Approximately 51% of our ABR comes from neighbors that we consider to be essential at this time. Grocery stores make up 36%. Dollar stores, pharmacies, medical facilities, pet supply stores, banks, hardware stores, auto supply stores and other essential businesses make up the remaining 15%. Restaurants comprise approximately 15% of our portfolio's rent; 9% comes from quick-serve restaurants; 6% comes from full service restaurants. Many of our restaurant neighbors still offer carryout and delivery. However, some have been temporarily closed as a result of government mandates. Other restaurants are seeing decreased sales due to the inability to serve patrons in their dining rooms.

Approximately 34% of our total ABR comes from other retail and services. This includes 17% from personal and professional services like barbershops, hair salons and nail spas. Another 13% comes from soft good retailers, 3% come from fitness and 1% from entertainment. We are pleased with the resilience of our neighbors, but the impact of the government mandates to PECO have been material for our business, as illustrated on Slide 13.

For the month of April, we collected approximately 77% of the rents and recoveries that were due from our neighbors. Through May 11, we have collected approximately 74% of rent and recoveries due to the month of May. As of May 11, approximately 1,640 or 30% of our neighbors were still temporarily closed. This represents 21% of our total ABR and 16% of our gross leasable area. We have received approximately 2,120 rent relief requests from our neighbors, which represents 38% of our approximately 5,550 total neighbors. On a positive note, approximately 460 of our neighbors have reopened, which represents 22% of the tenants that have been temporarily closed.

Slide 14 illustrates the conservative measures we have implemented to manage the negative financial and operational impact of COVID-19. Our Board of Directors recently approved a temporary 25% reduction of my base salary; a temporary 10% reduction to the remaining executive management teams' base salaries; and a 10% reduction to the Board members' compensation for the 2021 term. Monthly distributions have been temporarily suspended. We drew $200 million in April on our $500 million revolving line of credit. All capital projects are being delayed to the extent possible. Expense reductions are being implemented at the property and corporate levels, including a reduction in workforce. Repurchases for death, disability and incompetence have been temporarily suspended. And the standard share repurchase program remains suspended.

As we discussed last month during our update call, the decision to suspend distributions is one of the hardest decisions we've ever made as a company. We believe this is a prudent decision and will allow us to protect the long-term value of PECO. Based on discussions with our neighbors and our assessment and projections for our properties, we believe these measures are appropriate. It's important to understand that our neighbors have binding contractual obligations to pay rent. We're encouraging them to continue paying during this time. Our focus is to work with neighbors so they can reopen as quickly as possible. Once reopened, we can work with them on a longer-term basis and plan for any missed rent payments. We expect to reevaluate distributions and repurchases once the pandemic has stabilized, and we begin to see normalized, predictable cash flow from our properties. At this point, it is still too early to tell when that will be.

Now turning to Slide 15. Please note that during these unprecedented times, our management team and Board of Directors are always fully aligned with our stockholders. In addition to the salary reductions I just mentioned, PECO's executive team, including myself, expect to see further decreases in compensation. As a result of the pandemic's impact on our business, our compensation will be further impacted because our compensation plans are highly incentive-based. Approximately 83% of my compensation and 65% of our executive officers' compensation is based on company performance. In addition, we are negatively impacted by the suspension of monthly distributions. Collectively, our executive officers are the company's largest shareholder, owning approximately 8% of PECO.

Slide 16 outlines the steps we are taking to support and work with our neighbors as they seek to reopen their stores in the current environment. Our top priority at this time is to maintain open and consistent dialogue with our neighbors, to help inform them with government requirements so they can reopen as safely and as quickly as possible. Our in-house leasing team has contacted each of our closed neighbors, discussing their business and financial situation and informing them of the resources available to them at this time. We have added a resource website dedicated to keeping our neighbors up-to-date on resources available. This information includes state and local regulations on how and when to reopen safely, social media and marketing tips and creative ideas for reopening. We are also using our proprietary communications platform, DashComm, to push pertinent information to all of our neighbors. Despite our efforts, it remains to be seen how COVID-19 will ultimately affect the outlook for our neighbors and therefore, our business.

Slide 17. There's no question COVID-19 will have a meaningful negative impact on the U.S. economy. Our focus over the last 29 years has been owning and operating grocery-anchored shopping centers. Through our experience, these types of assets have proven to be recession resilient and e-commerce resistant, but our business is not immune to this pandemic. COVID-19 and the stay-at-home measures taken to keep us safe have increased the concern about the future of retail. They have created new uncertainty about the health and resiliency of our neighbors.

As they have done for the past 5 years, Duff & Phelps, an independent third-party valuation firm performed an annual valuation following the same methodology and processes used in years passed. The estimated value per share range provided by Duff & Phelps was $8.45 to $9.68. Our Board of Directors established our updated estimated value per share at $8.75, representing a decrease of approximately 21% from our previous estimated value per share of $11.10 and 12.5% below our offering price of $10 per share. This decline in value was driven by several factors. One was the disruption from the COVID-19 pandemic negatively impacting the expected future cash flows and occupancy rates assumed for our properties as the economy recovers. Second, the uncertainty around the long-term impact of COVID-19 drove an increase to discount rates and terminal capitalization rates used in their analysis. This uncertainty can be observed by the significant decrease in changes in valuation in the public equity markets. Our 21% decrease in share value compares to decreases in the stock market of our publicly traded peers, ranging from 38% to 61% over a similar time frame. And third, and lastly, the decline in interest rates, although helpful to our interest payments, negatively impacts our balance sheet. It created material interest rate swap liabilities as of March 31, 2020 due to the mark-to-market nature of our debt instruments.

It is unclear the lasting effect the current environment will have on retail real estate or the economy as a whole. Even though we are seeing businesses reopen, we do not know whether these businesses will regain traction. It is too early to know how difficult it will be to collect rent, drive rent increases and sign favorable leases with new and existing neighbors. We believe it is prudent to take a conservative position at this time. We will consider reassessing the estimated value per share in advance of next May, if conditions change materially. Despite the decline in our estimated share value, we are proud of the distributions we have made to investors, as illustrated on Slide 18 and 19. The first PECO common share purchased in our initial offering has received monthly distributions totaling $6.26 per share, and the last PECO common share purchased in our initial offering was -- received monthly distributions totaling $4.11 per share. Further, together with REIT II, we have made distributions of over $1.3 billion to our shareholders. Depending on the timing of your investment and treatment of your distributions, Phillips Edison & Company's common stock has returned between 29% and 64% of your original investment. This is inclusive of the adjustment to our estimated value per share that we talked about earlier. For our former REIT II shareholders, your investment has returned up to 10% on your original investment.

Now turning to Slide 20. In closing, the execution of our strategic plan during 2019 and the recent implementation of measures to maximize our financial flexibility and preserve cash, greatly improve our ability to handle the current economic uncertainty. As we look toward the remainder of 2020, our top priority is to help our neighbors reopen and watch for potential opportunities that may arise as the economy recovers. We will maintain regular dialogue with our neighbors and work with them to ensure they open for business safely and quickly so they can return to profitability as soon as possible.

Our second priority is to remain focused on execution by operating our portfolio at the highest level. Our best-in-class team will work diligently to maintain high occupancy rates at our centers. We will identify favorable re-leasing opportunities with existing neighbors and seek new leasing opportunities with high quality businesses. We will do this while preserving liquidity during a time of uncertainty. In fact, for the month of April, we executed 20 new leases, 31 renewals and 7 options for the managed portfolio. We continue to sign new leases in May.

Our third priority is to identify new investment and growth opportunities on the other side of the pandemic with our investment management business. Executing on these objectives will help maintain our NOI and will ultimately help position us to achieve longer-term goals of executing a successful liquidity event.

As you all have seen over the past 2 months, the financial markets are in turmoil, particularly for retailers and retail real estate owners. The share prices of our publicly traded peers have traded sharply downward during this volatile time. As of May 11, these stocks have declined an average of 47% in the past year. Their average discount to NAV has increased to 50%. Because of this, it is likely that listing is off the table for 2020. We will continue regular discussions with leading investment bankers, institutional investors and Wall Street analysts to stay abreast of the public market conditions so that we are able to act quickly when the opportunity presents itself. We continue to consider all avenues for a successful liquidity event.

In closing, we assure that we are working relentlessly to protect our business and the long-term value of our stockholders' investment. With that, I will turn the call over to Michael Koehler. Michael?

[Michael Koehler, executive]

Thank you, Jeff. This concludes our prepared remarks. Our webcast listeners are able to submit a question via the webcast portal. [Operator Instructions]

We've had a number of questions about the NAV. Can you provide some more color on why the NAV came down so much and why the Board went below the midpoint? And also, why would you reprice now in the middle of this pandemic when other NCRs are delaying their repricing? Jeff?

[Jeffrey Edison, executive]

Thanks, Michael. This was a decision that we made based upon basically following the normal protocol that we have for the last -- since the REIT has been -- has started. And once a year, we've done that, we didn't believe that we should get out of that cadence just because of the virus. We think that we took a relatively conservative approach to it to make sure that we took into account the dramatic things that are happening in the economy. I mean, we have one of the highest level of unemployment now that we've had really, since the great depression, and it doesn't seem to be getting a lot better. We're in a time when our retailers are in turmoil. So there is going to be noise in these numbers. If there is a dramatic change in the environment, the economy, the pace at which are neighbors reopen, we will reevaluate this at that time. But we do think it's the prudent thing to do at this point is to move ahead with what we had -- have done now since we started the REIT.

[Michael Koehler, executive]

Great. Our next question comes from Mark Levy. He asks what is the strategy and timing to increase the estimated value per share in the future? Jeff, do you want to take that?

[Jeffrey Edison, executive]

Well, I would say that anyone right now, who knows where -- or talks to know -- claims to know where the future's going is not in the business. Things are changing daily, and we are working on a variety of plans to address the issue. Our first and foremost issue is to get the over 2,000 tenants that have closed for -- primarily because they've been ordered by the government to close, we want to get those guys open. We want to get them open and get them to where they can start to become profitable as quickly as we can. We got to keep in mind that safety is what's going to drive the customer to our centers and we don't want to get out ahead of that, but we want them to be able to get open and as quickly as we can. And that's the #1 focus. It's the number 1, 2, 3, 4 and 5 parts of our plan is to get them open.

And then we move into phase 2, which is how do we get them profitable. And that will require some negotiating on lease terms. Our primary focus at this point is, with those who have reopened, is to take the rent that they have not been able to pay and to amortize that into the remaining part of their lease term. And hopefully, we -- a number of -- we've been able to get that in this year. But it will -- that will vary by tenant. And we're negotiating tenant by tenant on these spaces. And if you think about negotiating 2,000 -- with 2,000 tenants, this is a massive workload that we are trying to work through. We believe it's the right strategy. Each one of our neighbors has a different story and a -- different needs, and we're trying to adapt to that and get that taken care of -- and getting taken care of as quickly as we can.

One thing that we do are -- we've seen already, and we're very confident of is that people always underestimate the strength of the entrepreneur. And the majority of these 2,000 tenants are entrepreneurs, and they will -- we don't need to lead them. They will lead us to success. And we're lucky to have them as our neighbors, and we want to do what we can to make them successful as they reopen and to give our customers, the end customer, a safe and secure place to buy their necessity goods and to do the things that they want to do in their communities. And we are working really hard to get that done. And that is our strategy, and we are hopeful that it will be successful.

[Michael Koehler, executive]

Great. We had a question just come in, saying -- says the following. You said it's your goal now to help your tenants reopen as quickly as possible. What does that look like? And what are you going to do once they've reopened to help? Jeff?

[Jeffrey Edison, executive]

Great question. And one we're dealing with in real-time because, as I said earlier, each one of these neighbors has a different need, different needs, different requirements to get them back open and get -- to get them to be successful. And I would say the #1 thing we're trying to do is to communicate with them and to try and keep a constant flow of communication wherever we can. And initially, our plan with them was to get them as much government money as was available and to help guide them and work with them to get government assistance. We believe that around 90% of our neighbors applied for government assistance, and we are seeing that quite a few of them were able to secure that, which I think will be helpful as they work towards the reopening.

But it's a battle. It's the #1 focus of our leasing, our asset management team and our property management team. And as I said earlier, we're confident in the power and the strength of the entrepreneur. And we think that when we come out of this, it will be that strength that will allow us to get 1,800 or even the 2,000 that did close back reopened and operating.

[Michael Koehler, executive]

Great. The next question is, what type of leasing activity are you seeing in the current environment? Jeff?

[Jeffrey Edison, executive]

If you've -- Thanks, Michael. If you'd have asked me that question a month ago, I would have thought we would have had no new leases, no renewals and very few people extending their leases through the options that they have. But during April, we signed 20 new leases with -- primarily with national tenants, and it was with a very strong group that included Starbucks, Carls Jr., Burger King, Great Clips and Five Below. And we also had 30 of our in-line tenants renew, all of them with positive rent growth. So I wouldn't have thought that 30 days ago. I'm very proud of the leasing team and the incredible effort they're making to keep us operating in a time where it's really hard to do that. But I think that's really positive. And I think, knock on wood, but May seems to be moving along a similar lines. So I think we have over 70 leases out right now. And -- but our goal for May is to have 20 new leases.

[Michael Koehler, executive]

Jeff, we've received a lot of questions around the distributions. Why was it completely suspended instead of partially suspended? And are the collections that you're receiving, are they enough to pay out a partial distribution? Jeff, can you provide some additional commentary on the reasons behind the suspension of the distributions?

[Jeffrey Edison, executive]

Sure. As we discussed in the last call, this was a very difficult decision for the management team and for the Board. And it was -- we were -- as I think I said before, we're in this bog of war. We don't know where -- what it's going to look like on the other side. And we're very proud of the fact that we've paid 111 consecutive months of distributions. We paid $1.3 billion to our REIT I and REIT II shareholders. We've -- we consistently work hard to try and protect that. But our ultimate focus here is to make sure that we protect the value of the company and don't move into any kind of a difficult situation where we can't do that. And we felt that in looking at the environment with the level of unemployment, the level of closings we had that it was the prudent thing to do. And I do -- we have a variety of different types of shareholders with different objectives from this investment. And our ultimate goal here is, as it always has been, first and foremost, is to preserve the principle of the investment. And we think that this was the right thing to do at this time. And as I said in our last call, our -- we are very aligned to try and get the dividend back and up paid -- being paid as quickly as we can. And as soon as we see clarity in our cash flow, that will be a top priority for us to get the dividend back engaged.

[Michael Koehler, executive]

What about government stimulus programs? Won't they help your tenants pay rent? John, do you want to take that?

[John Caulfield, executive]

They will. As Jeff mentioned, a large number of our neighbors have applied for the stimulus program. We've worked with them. We've got a COVID-19 page that has resources referencing the government programs as well as the states that are helping out. And so as Jeff said, it's communicate, communicate, communicate. We're just trying to let them know of all the funds available. And we do know that some of them have been receiving those funds. I know it's the PPP program. Actually, only 25% is eligible to pay towards rent. But we've actually, in ways to get them open and things, one of the initiatives we're working on is kind of a rewards program. And one of the rewards that they can receive a small rent credit is show us that you applied. So just trying to encourage them to make use of that. So we do think it will be helpful. It's undetermined right now exactly how much it will help, but between that and where our collections are, I think we're very hopeful that we're going to get those 1,800 back open and even more.

[Michael Koehler, executive]

Great. We've had a number of questions related to share repurchases and liquidity and a time frame around either the next repurchase or a full cycle liquidity event. Jeff, would you like to provide some commentary on that?

[Jeffrey Edison, executive]

Sure. As we've talked about in a number of our quarterly update calls, one of our top priorities is to get liquidity for our shareholders. I would say that with the -- in the current environment, it's certain that -- that has certainly been pushed out. When your public peers are trading at a 50% discount to NAV, it is just an indicator of how difficult it is to be a public company today. We believe we're very lucky to be in the non-traded space today because it allows us more flexibility to make sure that we are focused on delivering as much cash flow as we can to the company. But it is -- I -- my assumptions are that we are looking for liquidity, but we are doing it in a time frame that meets all of our shareholders' needs.

And as I think I said on the last quarterly call, we sort of look at -- we have 3 different types of shareholders. We have shareholders who want liquidity now, we want -- we have a number of shareholders who want liquidity at NAV, and we have a number of shareholders who want long-term value and income from this investment. Our goal is to come up with a strategy that gets that -- get -- meets as much of the requirements of that -- those different groups as we can. And there's no option that's not on the table, whether it's selling the company, whether it's selling the company in pieces, whether it's selling them asset-by-asset or whether it's a listing in the public markets, each of those comes with its difficulties and its possibilities. And we're talking on a regular basis with the investment banks and as well as with various brokers. And we think that this environment, it is -- a liquidity event is going to be extremely difficult and probably not on the table for at least some period of time. And until we get more clarity, that's really the best information that we can give you.

[Michael Koehler, executive]

Our last question this afternoon is for John. It says, can you discuss the balance sheet and why your leverage ratio has increased so much? John?

[John Caulfield, executive]

Sure, Michael. Okay. So our -- we -- as Jeff mentioned, we were able to pay off a $30 million term loan, which knocked out our remaining term loan maturity in 2021. So we have no maturities for term loans. We do have some secured mortgages that are due in 2021, about $80 million, but our liquidity position, that doesn't concern us using cash or revolver to take care of that.

So our leverage ratio increased this quarter because the calculation is based on our total enterprise value. So when we multiply the share count by the reduction in our net asset value or estimated value per share, that caused the increase to the 45%. I mean, I think we're very grateful that over the last few years, our plan has been to delever to prepare for a liquidity event, as Jeff just spoke to or prepare for times like these. And so that way, then we're not in a position where we need to make more limited moves. We have all opportunities available to us at its leverage. And so that is something that we will continue to monitor. And I will add that we are in compliance with our debt covenants and anticipate being in compliance and we continue to have ongoing conversations with our lenders. So I think we're in a very stable place. And again, the laddering of our maturities out into the future have given us the options that we need to ensure we're in a solid position at this time of uncertainty.

[Michael Koehler, executive]

With that, this now concludes our question-and-answer session. I'd like to turn the call back over to Jeff for some closing comments. Jeff?

[Jeffrey Edison, executive]

Yes. Thanks, Michael. I just want to assure all of our shareholders that we are laser-focused on getting our neighbors reopened and paying rent. That is -- that's our top 10 priorities are all focused on how do we do that the best way we can. That will give us the clarity to make the other decisions that we've got to make but until we can get clarity there, it is going to be -- it's going to be a bumpy road. And fortunately, this is not our first, and we will address it the way we have in the past, which is to focus as hard as we can on getting our key priorities accomplished. And with that, giving us a lot more options to address the other issues that are also going to be important, including the dividend and other liquidity options for the company. We are -- but that will take time, but I can promise you that we are as focused as we can beyond that, and we're addressing it.

I think if you look at our peers, we're addressing it better than any of them because of our laser focus on operations and the team that we have that is able to perform even in these really, really difficult situations in difficult environments. So I want to thank all of you for being on. We will continue to give you updates as they are -- as things are changing. But again, thanks for being on the call today and have a great rest of your day. Thank you.

[Michael Koehler, executive]

Thank you for joining us today. You may now disconnect.