Phillips Edison & Co Inc

NASDAQ:PECO

Earnings Call Transcript 2020-Q2

[Operator]

Good afternoon, and welcome to Phillips Edison & Company's Second Quarter 2020 Earnings Presentation. My name is Carrie, and I will be your conference operator today.

Before we begin, I would like to remind our listeners that this conference call is being recorded and simultaneously webcast. A replay of today's call will be available later today on the company's website. The website and slide presentation can be accessed by visiting the Events & 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 call over to Michael Koehler with 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 Chief Executive Officer, Jeff Edison; our President, Devin Murphy; and our Chief Financial Officer, John Caulfield.

Please turn to Slide 2 for the agenda. During today's presentation, Jeff will begin with a portfolio overview and touch on our highlights for the quarter. John will then speak to our financial results as well as our balance sheet and debt profile. Jeff will then provide an update on the impact COVID-19 is having on our portfolio and provide an outlook for the remainder of 2020. Upon 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 detailed in the appendix of the slide deck, which is available on our website.

I will now turn the call over to Jeff Edison, our CEO. Jeff?

[Jeffrey Edison, executive]

Thank you, Michael. Good afternoon, everyone, and thank you for being on the call today. Our core philosophy of owning and operating grocery-anchored real estate is currently showing its resilience in the midst of the ongoing pandemic. We have always known the importance of the grocery-anchor and other necessity-based businesses to local communities.

These retailers provide essential products and services and act as a lifeblood of our communities, especially in times like this. During our 29-year operating history, we have successfully not navigated multiple market cycles, uncertainties and challenges. That said, the second quarter of 2020 presented many difficult challenges and was unlike anything we had seen before.

Prior to COVID-19 pandemic, we enjoyed record occupancy and healthy demand for our well-located retail real estate, the economy was strong, unemployment was low and we were seeing robust operations at our centers. We have made 111 consecutive monthly distributions, totaling $1.3 billion to our stockholders. However, beginning in March, operating and retail real estate portfolio in this environment became very challenging. I am proud to say that our talented team of hard-working associates rose to the occasion. Considering the unprecedented situation we find ourselves in, I'm pleased with our results.

Before we get into more detail on our results, I will provide a portfolio overview and briefly discuss our diversified portfolio of tenants whom we call our neighbors.

Now turning to Slide 4. As of June 30, 2020, our portfolio consisted of 284 wholly-owned properties, 97% were grocery anchored. Our centers are located in 31 states, totaling 31.8 million square feet of gross leasable area. This is down from 298 properties a year ago. Our disposition activity over the past year has improved the quality of our portfolio as we have invested disposition proceeds into better growth opportunities through 1031 exchanges and we've reduced our debt.

At quarter end, our lease portfolio occupancy was 95.6%, and our in-line occupancy was 90.3%. During the quarter, 76.6% of our totalized annual base rent came from grocers and other national and regional neighbors. 77% of our total ABR came from service and necessity-based neighbors, representing businesses that are more likely to be considered essential and could have remained open during the pandemic. Our top 5 markets by property count are Atlanta, Chicago, Tampa, St. Petersburg, 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 neighbors. Kroger's and its brands are collectively our largest neighbor, accounting for 6.8% of our ABR across 66 centers, we are Kroger's largest landlord.

Publix is our second largest neighbor, 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 neighbor accounts for more than 6.8% of our total ABR. Subway, Anytime Fitness, T-Mobile, H&R Block and Starbucks make up our top 5 in-line neighbors. No single in-line neighbor accounts for more than 1.5% of our in-line ABR.

Our ABR by neighbor industry consists of 35.5% from grocery anchors, 26.2% from service providers, 23% from traditional retailers and 15.3% from restaurants. Our ABR by neighbor type consists of 35.5% from our grocery anchors, 41.1% from other national and regional neighbors and 23.4% from our local neighbors.

Slide 6 illustrates our highlights for the quarter, which were meaningfully impacted by the ongoing COVID-19 pandemic. As of August 10, 97% of our neighbor spaces were opened for business, and we collected 86% of our monthly billings for the second quarter, with collections improving each month during this quarter. Monthly collections for July totaled 90%.

Our same-store NOI decreased by 5.2% and core FFO decreased 6.1%. These decreases were partially mitigated by expense reductions that were implemented in response to the pandemic, coupled with lower interest rate expense from the decline in rates. During the quarter, we fully repaid the $200 million we drew on our $500 million revolving credit facility on April 1 to ensure liquidity. We are now comfortable with the stability of our lenders, given the liquidity the Federal Reserve has created and our lenders' better financial position today relative to the great financial crisis.

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

[John Caulfield, executive]

Thank you, Jeff, and good afternoon, everyone. Turning to Slide 7. Same-center NOI decreased 1.3% when compared to the first 6 months of 2019. The decline in our year-to-date same-center NOI performance was the result of the impact the COVID-19 pandemic had on our portfolio. The shelter-in-place restrictions across the country caused temporary closures throughout our portfolio and at one point 37% of our neighbors were temporarily closed, which resulted in lower rent and recovery collections. While our neighbors are contractually obligated to fulfill the terms of their leases, we have increased our collectability reserves related to unpaid billings.

Despite these reserves, our portfolio recognized an increase in recovery revenue resulting from the 100-basis point increase in occupancy over the past 12 months, combined with a favorable resolution and collection of CAM reconciliations. Our leasing push and occupancy gains in 2019 put us in a favorable position heading into this crisis.

Slide 8 outlines our year-to-date net income and core FFO results. Core FFO increased 1.2% to $111.9 million compared to $110.7 million in the same year ago period. And on a diluted share basis, core FFO was unchanged at $0.34 compared to the same year ago period.

We understood at the onset of the pandemic that it was going to have a material impact on our portfolio and we immediately began to analyze areas where we could lower expenses. After a thorough review across all departments within the organization, we implemented intentional expense reductions which resulted in a 28% decrease in general and administrative expenses compared to the second quarter of 2019. This reduction coupled with lower interest expense partially offset the negative impact of COVID-19.

Our 6-month performance was the result of 2 very different quarters, however, as illustrated on Slide 9. Our same-center NOI growth and core FFO growth for the first quarter of 2020 were relatively strong at 2.7% and 8.4%, respectively. However, the pandemic and severe economic disruption in the second quarter drove year-over-year declines as our same-center NOI and core FFO for the second quarter decreased 5.2% and 6.1%, respectively.

The third quarter of 2020 is showing some signs of improvement as our neighbors are open again, and the consumer can resume getting their haircut, going to the nail salon and getting take out. That said, we expect our results will continue to be negatively impacted for the foreseeable future. Given the current level of uncertainty, we will continue to manage our cash and properties conservatively.

Slide 10 outlines our debt profile and maturity ladder as of June 30, 2020. Our net debt to total enterprise value was 44.4% at June 30, 2020, which includes the impact of our reduced estimated value per share on our total enterprise value. This compares to 39.5% at December 31, 2019, despite our net debt decreasing by $73.5 million during 2020.

At June 30, our debt had a weighted average interest rate of 3.1% and a weighted average maturity of 4.5 years. Approximately 75% of our debt was fixed rate. This quarter, we introduced a new metric called net debt to adjusted earnings before interest, taxes, depreciation and amortization for real estate also known as adjusted EBITDAR. This metric is widely used by publicly traded REITs, including our shopping center REIT peers. In effect, net debt to adjusted EBITDAR expresses a REIT's total debt as a multiple of its annualized adjusted earnings and is not impacted by valuation, which can be subjective.

Our net debt to adjusted EBITDAR on an annualized basis was 7.1x at June 30, 2020, slightly improved from 7.2x at December 31, 2019. Our publicly traded peers have comparable ratios between approximately 5x and 7x, with an average of approximately 6.3x net debt to adjusted EBITDAR. While we would like a lower net debt to adjusted EBITDAR ratio in the long term, we are comfortable with our leverage in the current environment.

Looking at our debt maturities, we believe we have appropriately laddered our debt maturity profile as we do not have any material maturities until April of 2022. We continue to maintain ample liquidity with access to $490 million of our $500 million credit facility and $53.3 million in cash, which we believe is critical as we manage through this uncertain environment for a sustained period of time.

I would now like to turn the call back to Jeff for an update on COVID-19 and a discussion on our remaining outlook for 2020. Jeff?

[Jeffrey Edison, executive]

Thank you, John. Now turning to Slide 11. The pandemic has been a harsh reality for all of us in the United States. We continue to see increases in new cases with a few new signs of easing. The recent spike in COVID-19 cases in the U.S. is alarming. We've seen multiple states reenact closure mandates and occupancy restrictions that are affecting our bars, gyms and restaurants.

States like California, Texas, Florida and Georgia have all seen increases in positive test results since the stay-at-home mandate began to lift. It is difficult to predict when the virus will be under control. But it is unlikely to occur before 2021.

As we look at the economic impact of COVID-19, the fallout has been dramatic. In the U.S., second quarter GDP saw the largest quarterly drop in history. Unemployment for July 2020 was 10.2%, and we've seen over 1 million new unemployment claims for 20 weeks in a row. The retail sector has been greatly impacted by this economic fallout. We have seen over 20 major retailers filed for bankruptcy protection this year, including J. Crew, Neiman Marcus, Brooks Brothers, GNC and Stein Mart. While many of these retail bankruptcies will have more meaningful effect on mall landlords than us, the shadow cast on the overall retail landscape is undeniable. This environment has influenced us to be cautious and conservative.

As we look at our shopping centers, the majority of our neighbors provide essential products and services, as illustrated on Slide 12, but they are still impacted when consumers stay at home. Here, we show a more detailed breakdown of 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 have generally been considered to be essential during the pandemic; grocery stores make up 36%; banks, dollar stores, medical facility, hardware stores and other essential businesses make up the remaining 15%.

Restaurants comprise approximately 15% of our portfolio's ABR, 9% comes from quick service restaurants, 6% comes from full service restaurants. Most of our restaurant neighbors are offering carryout and delivering during the pandemic. We have worked with many to add outdoor seating, while their indoor dining rooms have been impacted by social distancing.

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% comes from fitness, and 1% from entertainment.

Now turning to Slide 13. Because of the necessity-based nature of many of our neighbors and especially our grocers, 100% of our centers have remained open and operational throughout the entirety of the pandemic. At our peak in April, approximately 27% of our neighbor spaces as a percent of ABR were temporarily closed.

During this period, only 73% of our ABR was open for business. We have seen our ABR open for business improve to 98% today. In terms of neighbor spaces open for business, we've seen improvement from 63% at our lowest point in April to 97%, where it remains today. The consistent dialogue and open lines of communication we have established with our neighbors since the pandemic ensued have been critical to these improving statistics as well as improvements to our rent and recovery collections.

For April, May and June, we collected approximately 84%, 86% and 89%, respectively, of our rent and recoveries that were due from our neighbors. For July 2020, collections increased to 90%. While we are pleased with these improvements, these are some of the lowest numbers we've seen in our operating history. We will continue to maintain a physically conservative approach to our business, while the outlook is unclear.

Slide 14 highlights the measures we have taken to manage the negative financial and operational impacts of COVID-19. I have taken a 25% reduction in my base salary. Our remaining executive management has taken a 10% reduction in their salaries, and our Board has agreed to a 10% reduction of their base compensation for the 2020 to 2021 term.

Monthly distributions have been temporarily suspended following the April 2020 payment. Capital investments are being prioritized to support the reopening of our neighbors and new leasing activity or they've been delayed where that is possible. Expense reductions have been implemented at both the property level and the corporate level. And repurchases for death, disability and incompetence have been suspended and the standard share repurchase program remains suspended.

As we've discussed on past calls, the decision to suspend distributions was an extremely difficult decision. However, considering the current operating environment and future uncertainty, we believe that it was a prudent decision and will allow us to protect the long-term value of PECO and your investment. Making distributions in an environment with the current level of uncertainty has the potential to erode long-term value of our shareholders' principal investment and also limit our growth.

Before we can make distributions again, we must have a higher level of confidence that our future cash flows will be uninterrupted. The recent surge in COVID-19 cases has tempered our expectations as states are reimplementing measures that are impacting our neighbors and the economy. Our Board of Directors cannot commit to making distributions and our share repurchases until the pandemic has stabilized and we began to see normalized predictable cash flow from our properties. Both distributions and repurchases are expected to be reevaluated at our next Board meeting in November.

Turning to Slide 15. Please note that during these unprecedented times, our management team is aligned with our stockholders. In addition to the salary reductions I just mentioned, PECO's executive team, including myself, will likely see further decreases in compensation because of our compensation plans, which 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 also negatively impacted by the suspension of our monthly distributions. Collectively, our executive officers are the company's largest stockholder, owning approximately 8% of PECO. Further, when we merged with our external adviser, Phillips Edison Limited Partnership, in 2017, we became a fully internally-managed REIT. As a result, no asset management fees or any other management fees are being paid to a third party.

Now turning to Slide 16. Despite the reduction in our estimated value per share that was announced in May, we are pleased with our track record of creating and protecting stockholder value. The first PECO common share purchased in our initial offering has received monthly distributions totaling $6.32 per share. And the last PECO common share purchased in our initial offering has received monthly distributions totaling $4.17 per share. Further, we have made distributions of over $1.3 billion to our stockholders. Depending on the timing of your investment and treatment of your distributions, Phillips Edison & Company's common stock has returned between 29% and 65% of your original investment. This is inclusive of the adjustment for our estimated value per share. For our REIT II shareholders, your investment has returned up to 10% on your original investment.

Now turning to Slide 17. As we look to the remainder of 2020, we must continue to remain focused and committed to executing our goals. First, preservation of capital and protecting the principal of your investment is our top priority. There remains a tremendous amount of uncertainty around the short- and long-term effects of COVID-19 on the economy, the consumer spending and the retail real estate overall. At a time when our revenues have been greatly impacted, cash conservation is paramount. And our unsecured capital structure has proven to be beneficial as others pay for expensive waivers or loan modifications, which we have not had to do. Protecting the value of PECO inherently means supporting and working with our neighbors. When the pandemic hit, we began dialogue with them to better understand how the new environment and government mandates impacted their business.

When the shelter-in-place mandates were lifted, we worked with our neighbors to ensure they were aware of all the local safety rules and all the regulations so they could reopen and run their business safely. Now that most of our neighbors are back open, we have begun to work with them on a longer term basis to plan for missed rent payments. As John said, our neighbors have binding contractual obligations to pay rent. We are carefully navigating this process with each neighbor on a one-on-one basis.

Our second focus for the remainder of the year is to position the company to capitalize on strategic opportunities that may present themselves in the near future. We continue to patiently analyze the real estate landscape for attractive acquisition, growth and liquidity opportunities. The decisions and investments we are analyzing today will be made with the best interest of long-term stockholder in mind. Additionally, we continue to seek new investment and growth opportunities with our investment management business. Executing our objectives will help preserve our net asset value and in the future, help position us to achieve our longer term goals.

That said, the lasting effect the current environment will have on retail real estate or the economy as a whole is unclear. 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 missed rent, drive rent increases and sign favorable leases with new and existing neighbors over the long term.

As you all have seen over the past quarter, the financial markets remain volatile, 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 the beginning of August, these stocks have declined on average 47%, and their NAVs have decreased an average of approximately 21% in the past year. This reduction in NAV mirrors the performance of our estimated value per share. Further, the average discount to NAV of our public peers is now 39%.

We continue regular discussions with 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 to have a successful liquidity event. However, it is unlikely that a liquidity event will happen in the foreseeable future. We continue to consider all avenues for a successful liquidity event as well as options for partial liquidity.

In closing, we assure that our entire organization is working to protect our business and the long-term value of our stockholders' investment.

With that, I'll turn it back to Michael Koehler. Michael?

[Michael Koehler, executive]

Thank you, Jeff. This concludes our prepared remarks.

[Michael Koehler, executive]

Our webcast listeners are able to submit a question via the webcast portal. [Operator Instructions]

We've received a number of questions related to our distributions. When do you expect to make distributions again? Why haven't you begun making a partial distribution and what do you see -- what do you need to see in order to make distributions in the future. Jeff, would you like to comment on that?

[Jeffrey Edison, executive]

Sure. Thanks, Michael. Distributions are one of our top priorities right now and something that we're very focused on. The -- as we said -- has said through multiple conversations with all of our stakeholders in these meetings, the driver on that was really the lack of clarity in the market. And what we're doing is, we're trying to get more clarity. And we continue to work to get that. I think that the clarity today versus March is significantly better. But we continue to get surprises and we continue to have things happening that we are concerned about. And my -- what we're fighting at every day is to figure out at what point do we have enough confidence in our ongoing cash flow that we can set a dividend that we are confident will be sustainable. It's important to note that if we don't pay any more dividend this year, we'll have paid a 2% dividend. So we are -- we have -- we did pay a full dividend through April. And you can be assured that this is a priority for us. We'll continue to -- we believe it's like -- it's important to be the next major step that we take as an organization to get that back and running. And as soon as we believe that there's enough clarity in the market that we will put that back into place.

[Michael Koehler, executive]

Thanks, Jeff. You mentioned back in May that you would consider repricing the estimated value per share if things improved greatly. Do you have any update on that sentiment?

[Jeffrey Edison, executive]

We have the exact same sentiment today we had then. It's too early. We don't have enough information that would say that there is a significant change to it. The markets can -- as you know, the markets continue to be difficult for retail and retail real estate. And until we see improvement in that, we don't think there's an impetus for a repricing of the NAV.

[Michael Koehler, executive]

Great. Thanks, Jeff. Got a number of questions come in related to where do we go from here as stockholders? We've seen the Dow and the S&P recover and now close -- being close to all-time highs, where the value of PECO's common stock went down by 21% from May and no longer makes a distribution. Jeff, can you provide some color on kind of what we're seeing from a macro and micro perspective?

[Jeffrey Edison, executive]

Yes. The market is bifurcated right now. I mean, there are parts of the market that, as we all know, are at all-time highs. Unfortunately, we are not in that segment. Our segment today is trading at over a 35% discount to its net asset value. Those net asset values have come down about 21% since then -- since February. So you -- there's been a double hit on the pricing of both a discount to NAV and a decrease in the NAV for the peers in our markets. So i.e., the -- I think that those are over -- my feeling is that those are overstated today and that retail is being crushed with the over -- I mean our segment of retail is being brushed with the same brush that malls are and power centers. And our actions and our responses have been very different.

If you look at where we were in March, we had 2,000 of our neighbors closed. That was almost 40% of our overall portfolio was closed through force mandates. We've reopened the vast majority of those. And as we've said, we're over 97% open today. Our occupancy is over 95%. We think there'll be some deterioration in that as the recession continues to have its effect. And obviously, the pandemic and how that fluctuates. But 95% is still strong. And we're going to see how that reacts over time.

On the -- some bright spots, if you look at our leasing activity, from a historic perspective, you would have anticipated a really very, very small amount of leasing going on. And in July, we had -- we did, I think, close to 20% more than we've done in the 2019 in that month. So we are -- we signed 45 leases in July. And we're continuing to see positive momentum on the leasing side. That is something that would not normally happen in this kind of a recession and sort of an abnormality. And a lot of those are with really strong national tenants. So we are cautiously optimistic that, that's going to be really positive.

And then to get to over 90% collections is a great relative mark. We're better than any of our peers in terms of those collection amounts. It's still 10% of our income that is not being paid, which -- that translates to somewhere around $4 million, a little over $4 million a month of cash that we're not receiving that we're contractually obligated to receive. So those are not insignificant numbers. But the momentum is good there. And I mean, I think our biggest concern there is what's going to happen in -- over the next 3 to 4 months as we sort of manage what -- there's an awful lot going on. We're managing an election, we're managing a recession, we're managing a fed that has been very accommodative and we're obviously facing a pandemic that is very unpredictable. And so we're looking at all those things. And I think our feeling is that the market is going to be -- market for retail real estate is going to segment. Malls are going to be treated differently than power centers and power centers are going to be treated differently than grocery-anchored shopping centers. And if that happens, it will be a very -- we believe we will look very good on a relative basis. And we will see those gaps in valuation between where the market is and where their net asset values are decreased. But it surprised me that they haven't -- that hasn't happened so far. But there -- as we all know, there've been continuously bad news drumming on retail. I mean if you look at it, I think there are over 20 bankruptcies that have already been filed. I mean, when companies like Neiman Marcus, Jos. A. Bank, Ann Taylor, Lord and Taylor and J.C. Penney get -- they've declared bankruptcy, everyone thinks, wow, that's got to be horrible for PECO. And there is some effect on us, but we don't have a single one of those tenants in our centers. But when Stein Mart and GNC and Chuck E. Cheese and 24 Hour Fitness, we do have some exposure to those specific bankruptcies.

So we're very lucky that we're not in the mall business. Their valuations are extreme -- are worse than ours. But I think we're also getting pulled down by their -- how they're reacting. So that -- I mean, I think that's where it is. Where do we go from here? We work really hard to get stabilize our income. We then reinstate our dividend when we feel that we're at that point. And I don't want to under emphasize. This is a yield stock. Management believes that strongly. And the dividend is critical to that, obviously. But our -- we do also believe that at the moment at least make sure we preserve the principal of the company and do not put us into that kind of financial problem. So yes, a lot of uncertainty out there still, some more clarity than we had just a few months ago. But still going to be -- it's going to be choppy waters for a period of time.

[Michael Koehler, executive]

Thank you, Jeff. The next question comes from [ Steven Hillard ]. He asked has the civil unrest in any of our top 5 markets affected any of PECO's properties. Jeff, would you like to provide some color on that?

[Jeffrey Edison, executive]

The answer is we've had nothing dramatically happened. We have had a number of our centers that were focal points for specific marches that went on specific protests and when you got a big parking lot and it's identifiable as a public -- as the public's parking lot near your house, it's very often on social media a place where it's an easy mark. Our team has done a remarkable job of keeping those as nonviolent as possible and that has happened. I mean we have had broken windows. We have had police cars that have been burned in our parking lots. So yes, we have seen that and it's been there. But it has on an overall basis, it's been relatively minimal impact. I think total across the board, it's less than 20 protests at our centers. So it's -- we continue to monitor it. And obviously, it is a concern. And -- but knock on wood, we have been relatively away from it so far.

[Michael Koehler, executive]

Great. Thanks, Jeff. Next question is, can you provide an update on your distributions as it relates to maintain your REIT status. John, do you want to take that?

[John Caulfield, executive]

Sure. Thank you, Michael. So we diligently review our REIT compliance quarterly. I think the specific REIT test that this question relates to is there's a requirement that REITs pay out at least 90% of their taxable income. Taxable income is quite different than book or GAAP income. And so based on our projection for taxable income for the year, when we consider the distributions that we've paid year-to-date, we believe we will remain in compliance, that we will have covered our taxable income. As our projections change, we'll reevaluate that. But I think it does come down to the point that Jeff made with regards to resuming distribution then REIT compliance will not be an issue.

[Michael Koehler, executive]

Great. Thank you, John. Next question from [ Gary Hess ] is, how does the second quarter 2020 rent collection of 86% compared to 2019's second quarter as well as the first quarter of 2020. John?

[John Caulfield, executive]

Sure. I'll take that one as well. So historically, when we look at collections, I typically think of it in terms of bad debt expense or collectability reserves and it's less than 1%. We have disclosure in our 10-Q that we will file with the SEC later today that will show some comparative information. But historically and I believe this is true for most businesses, you're looking at collecting 99% or closer to 100% of your collection. So as we look at these distributions, it is a meaningful drop in those collections. But as I look to Q1, it will be less than 1%, and 2019 was also less than 1%. I'm sorry, the answer is we would have collected 99% of our revenue.

[Michael Koehler, executive]

Thanks, John. One more question here for you. Who would you consider to be your top 3 publicly-traded grocery-centered REIT competitors?

[John Caulfield, executive]

So we -- when we talk about our peers, we specifically are looking at 8 peers that are shopping center REITs, that are publicly traded shopping center REITs. But as we've also talked about, we do have a very unique position in the grocery-anchored concentration that we have over 97% of our anchors or of our centers have a grocery anchor. So the closest in terms of this concentration would be that we have 2, which is ROIC, the Retail Opportunity Investments Corp. They're concentrated on the West Coast and then Regency Centers. The others -- the other cities have some grocery, but they're not nearly as concentrated and then start getting to other differentiations. But as you're looking -- comparing our performance, I would recommend ROIC and Regency.

[Michael Koehler, executive]

Thanks, John. Our final question today is for Jeff. As we've had a number of questions related to repurchases and liquidity and a time frame around the full cycle liquidity event. Jeff, can you provide some commentary on that, please?

[Jeffrey Edison, executive]

Sure. I think as I said on the last quarterly meeting, the -- our focus right now is getting clarity, getting our dividend reinstate as quickly as we can. And that will be our priority until we have it done. And then our long-term priority of liquidity will kick in. We don't think there's a strong chance of liquidity until we are able to at least get the dividend back up and paying on a consistent basis. So that's a priority. But liquidity is something that we are always looking at. We looked at and are looking at everything from stacks and reverse mergers and asset sales and portfolio sales. And we look at that on a pretty much a constant basis. It's a reasonably difficult market right now. And as we have stated before, we -- our goal is to please as many of our shareholders we can. And we look at the market as having 3 buckets of shareholders. We have a bucket of shareholders who want immediate liquidity at any price. We have a group that would like to receive the dividend and have liquidity at a NAV-type number. And then we have some long-term investors who want the -- getting the dividend and getting the yield and holding that for a long-term basis. And our -- Phillips management is to find the solution that helps all 3 of those is on long-term value [Technical Difficulty] shareholders. So we are clearly aligned in that long-term value creation and we'll continue to do that. I don't want to give any like prognosis of liquidity only because if I did, you'd look at me like I didn't know what I was talking about because anybody who can give you an idea of when this market will come back and that retail will be priced at a reasonable discount to NAV, I just don't think that there's -- that person exists or that knowledge exists with the amount of uncertainty that we're all facing every day. But I can assure you that it is a priority for us. It is not as high a priority today in terms of -- as the dividend. We want to get the dividend back and running. We think that, that will be key to getting value on a long-term basis. And so that is our [Technical Difficulty] but as you said I think that we do [Technical Difficulty] regular basis giving us ideas of how we get liquidity. And we track them down, we run them down, and we try to find what can create the right solution for the 3 different buckets of investors that we have.

[Michael Koehler, executive]

Great. Thank you, Jeff. So this concludes our question-and-answer session. I'll turn the call back to Jeff for some closing comments today.

[Jeffrey Edison, executive]

Well, thanks, everybody, for being on the call today. We appreciate your questions. We appreciate your investment with us. We are -- as we all know, we're in a difficult time. And we're -- this team is -- I'm [Technical Difficulty] how hard they're working to try and get through the blizzard of things that are going on a daily basis and the amount of variety of things that we're having to deal with that we've never dealt with before. And we're -- you have a great team that's working really hard to preserve value and create value in this portfolio. We are obviously very disappointed in the dividend being cut and we are working hard to get that reinstated. And then to move on to a liquidity event on a long-term basis. So thank you again for your -- all of your support and we will keep cracking through this environment. And let's all hope that we can get a vaccine, and we can start to see some normality return to the consumer, so that we're in a different environment. And that can happen as quickly as we can. So I hope you all stay safe and thank you again for being on the call and your support in our stock. Thanks.

[Michael Koehler, executive]

Thank you.

[Operator]

The conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines. Have a great day.