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Kimco Realty Corp
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Good morning and welcome to Kimco's Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. Please note this event is being recorded.
I would now like to turn the conference over to David Bujnicki. Please go ahead.
Good morning, and thank you for joining Kimco's second quarter 2020 earnings call. We’ll jump right into it while most of us in the Northeast still have power and Wi-Fi service. The Kimco management team participating on the call today include Conor Flynn, Kimco's CEO; Ross Cooper, President and Chief Investment Officer; Glenn Cohen, our CFO; Dave Jamieson, Kimco’s Chief Operating Officer; as well as other members of our executive team that are available to answer questions during this call.
As a reminder, statements made during the course of this call may be deemed forward-looking, and it is important to note that the company's actual results could differ materially from those projected in such forward-looking statements due to a variety of risks, uncertainties and other factors. Please refer to the company's SEC filings that address such factors.
During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco's operating results. Reconciliations of these non-GAAP financial measures can be found in the Investor Relations area of our website.
And with that, I’m going to turn the call over to Conor.
Good morning and thanks for joining us. Today I will give you an update on how we have confronting the challenges posed by COVID-19 and how we plan to move forward as parts of the country continue to struggle with the virus, while other parts slowly come back. Ross will give an update on the transaction market, and Glenn will follow with a recap of the numbers for Q2 and our enhanced liquidity position.
The COVID virus is a challenge to our entire industry, and one that we're addressing head on. At Kimco, our great team, high quality assets, and strong balance sheets are helping us weather the pandemic and prepare for the future. We have an effective strategy for dealing with COVID-19 and have made significant progress since our last call.
First, I would like to applaud the entire Kimco team for their tireless efforts in ensuring that our centers remain open and operating. Our people are smart, passionate, dedicated, and determined. Simply put, they're the best at what they do, and together we continue to provide our shoppers, our tenants, our employees, our extended Kimco family, and our local communities with a safe experience.
It is also worth noting that as a result of our national footprint, our best practices and lessons learned from the challenges faced early-on in the Northeast are now being employed to help those areas in the Southeast and West in their time of need. Our portfolio continues to withstand the pandemic impact. We have reached deferral modification agreements with the vast majority of our top 100 retailers so we deem non-essential and are forced to close in some capacity.
We believe our retailer partnerships are differentiators for Kimco, and in these challenging times tenant relations matter more than ever. While working with our tenants to help them get to the other side, they've worked with us to remove certain lease restrictions that will enhance redevelopment opportunities and create long-term value for our shareholders. Ironically, many of our tenant relationships have actually strengthened during the pandemic, which bodes well for our future success, including the potential for opportunistic investments similar to the successful investment we made in Albertsons.
The operating metrics reported today for our reposition portfolio reflects its quality and resiliency, and in times of stress quality is critical. We continue to lease space even in these uncertain times. In Q2, we executed 52 new leases totaling 256,000 square feet at a positive 22.9% spread and renewed 180 leases covering 959,000 square feet at a positive 10.7% spread. Combined our spreads were a strong plus 12%.
New leasing and tenant retention efforts helped occupancy finish at 95.6 for the quarter, anchor occupancy was even stronger at 98.2%, and small shop occupancy was 88%. Year-over-year, our anchor occupancy was flat, which again represents a strong result in the current environment, and a further testament to our team and portfolio. We continue to extend assistance to our small shop tenants who need help in these challenging times.
Our tenant assistance program or TAP is a multi-pronged approach to provide valuable resources free of charge. This program provides our small shop retailers with a free legal advisor to help navigate the numerous state and federal programs available for small businesses, which by our count has potentially resulted in over 20 million of PPP funding for our small shop tenants.
Our TAP program is also helping tenants activate outdoor areas to continue operations. The National Kimco curbside pickup initiative has been well received and customers are utilizing their service more and more. Retailers have told us that our curbside program stands as the best they’ve encountered, and has had a positive impact on their operation. We have also helped our restaurant tenants activate sidewalk cafes, and green spaces to help with capacity constraints.
All of our efforts and initiatives to help our tenants are paying off. For the month of April, we collected cash based rent totaling 68%, in May 66%, June 76%, and July is currently an 82%. We are currently trending above our internal forecast for rent collection. While this is encouraging, we remain mindful of the rollbacks occurring in certain hotspots. And the simple reality is that the impact of the virus inhibits our industry's ability to forecast for the sense of confidence.
During the second quarter, we granted rent deferrals, totaling 18.5% of base rent. We fielded rent deferral requests for July that amounted to only 8% of scheduled rent, and have worked out deferral plans for 4 basis points of total rent. This is a significant improvement from the start of the pandemic, when in April we feel the deferral requests that amounted to 39% of AVR.
At the end of July, our weighted average repayment period for deferrals is approximately 9 months. Currently, 94% of our tenants are open with only 3% of AVR subject to mandated closures. Our development and redevelopment pipeline activity is currently focused on achieving multiple entitlement master plan approvals across the country. Our goal is to entitle an additional 5,000 multifamily units in the next five years that will provide us with a total of 10,000 units by 2025.
While we are closely controlling our project expenses, our goal is to be ready to move forward with several projects when market conditions are right. As per our signature series projects, we just received a temporary certificate of occupancy for the new Shop Rite grocery anchor at The Boulevard Project on Staten Island. We anticipate opening this fall with the majority of other retailers opening in the spring of 2021.
At Dania Pointe, we recently completed construction and now have 15 tenant fit outs underway, including Urban Outfitters and Anthropologie. The first multi-family building, the [indiscernible] Dania Pointe, which is on a ground lease has begun moving in the first residence. Our portfolio strategy is focused on having our grocery, home improvement, and mixed use anchored assets clustered in strong economic MSAs that serve the last mile.
These dense areas create significant barriers to entry and a favorable balance of supply and demand. Our sophisticated retailers are utilizing these last mile stores as indispensable fulfillment and distribution centers. This is a differentiator for Walmart, Costco, Target, Home Depot, Lowe's, and all of our grocery anchors, who continue to serve their customers in multiple ways, in-store shopping, buy online pick up in store, curbside pickup, and home delivery.
These services and conveniences are all part of what the consumer is now demanding. And those with stores close to dense populations are outperforming pure e-commerce players on delivery times and cost efficiency. We are witnessing a blurring of lines between the distribution, fulfillment, and last mile stores. We've also seen an uptick in demand from our essential retailers who are also looking for more last mile location. Clearly, we are experiencing retail Darwinism play out in an expedited manner, and we believe we are well-positioned to take advantage of the future of retail.
Finally, in addition to our team and portfolio, we continue to prioritize liquidity. Glenn will give the detail on how we bolstered our balance sheet by issuing our first green bond at an attractive rate, paid back our term-loan, and continue to push out a maturity profile. We have our entire untapped $2 billion line of credit at our disposal, limited maturities on the horizon, and received a further cash infusion from our Albertsons Investment.
We believe our ongoing efforts to enhance our balance sheet and cash position will enable us to prosper and be opportunistic at a time of tremendous dislocation and well into the future. While the current unpredictability of the virus in government action is making forecasting a challenge, we continue to monitor the environment daily. We meet regularly with our board members to keep them up to date, review our cash projections and determine how and when to reinstate our dividends.
To be clear, it is our intention to pay an additional cash dividend in 2020, which at a minimum will cover our taxable income. As I said at the outset, the companies that stand-out in this environment are those with superior talent, superior asset quality, and a superior balance sheet. In these unsettled times, we believe we have the right combination to weather the storm and will be among the best positions to preserve and succeed over the long-term. Ross?
Thank you, Conor and good morning everyone. I would first like to echo Conor’s sentiments on the Kimco team and the incredible efforts put forth during these challenging times. It has been nothing short of inspirational. On the business side, our strategy has been fairly straightforward; ensure the maximum amount of liquidity and balance sheet strength to enable us to be opportunistic at the appropriate time. We are confident that we have successfully accomplished the first part of the equation, and now we remain patient and ready for the latter.
Thus far, the transaction market has been fairly limited, with most owners and lenders biding as much time as possible before deciding on the path forward with their assets. Multi-tenant strip center transactions were down by 80% to 90% from April through July. This is coming off a vibrant and active January and February, which was up 30% and 16% year-over-year. The majority of the deals that did close from April to June were pre-COVID deals that were pushed over the finish line with both sides of the deal willing to compromise to get it done.
Post COVID deals hitting the market have been sparse, with a few exceptions being smaller essential retailer anchored centers that have a very specific reason to consider a sale. There has been very little capitulation between buyers and sellers in the bid ask at this point. We anticipate that come the fourth quarter and into the early parts of 2021, there may be some private owners and operators that ultimately make the decision to be market sellers.
That being said, we're starting to see investment opportunities loosening up in two distinct categories. First, with our existing retailers, liquidity is more important than ever, regardless of what category they operate within, and all are looking to bolster cash and strengthen their balance sheets. We have a proven history of unlocking value, and working with retailers to weather a crisis and have started having multiple discussions around mutually beneficial ways to work with those companies that are real estate rich. Between owned stores and distribution centers, there is substantial value in their holdings that can be used to enhance value for their business, while providing a solid growing income stream for us.
The second category is with existing owners in need of offensive growth capital. In many cases, the traditional sources of financing have dried up for retail property owners. With the exception of down the fairway, neighborhood grocery anchored or very strong credit junior lineups, lenders have become extremely cautious during this pandemic. For those like Kimco with liquidity already raised, it presents the option to invest rescue capital to those in need.
And this is not specific to distressed or struggling properties. This includes major market centers with growth opportunities that need capital to execute on the vision. Whether coming in as a joint venture partner or a lender, there are excellent real estate locations that require investment capital, which we can assist with and we're having those conversations regularly.
As for an update on our exploration of an investment vehicle, we have had productive conversations with multiple outside capital sources that are interested in partnering with Kimco on unique opportunities. Because the set of opportunities are wide and varied, we continue to evaluate different structures that best reward Kimco’s shareholders. We will have more updates as the plus business pipeline unfolds.
While we will be thoughtful and opportunistic with where we place that capital, we are starting to build a potential pipeline for these initiatives. We believe it will take time and patience, but given our knowledge of the sector and broad relationships, we anticipate being able to unlock value for our shareholders in the coming years with this investment approach.
Now, let me pass the call off to Glenn for the financial details of the quarter.
Thanks, Ross and good morning. I’m going to focus my comments on second quarter results including accounts receivable reserves, capital market activities, and our strong liquidity positions. For the second quarter 2020, NAREIT FFO was 103.5 million or $0.24 per diluted share, as compared to 151.2 million or $0.36 per diluted share for the second quarter last year. The reduction was mainly due to an increase in credit loss reserves of 51.4 million as compared to the second quarter last year, resulting from the ongoing COVID-19 pandemic.
On a positive note, we delivered incremental NOI of 1.9 million from our recently completed development projects at Lincoln Square, Grand Parkway, Mill Station, and Dania Pointe. We also reduced our financing costs by 3.5 million, achieved with 8.2 million of savings from the previous redemptions of 575 million of preferred stock offset by higher interest expense of 4.7 million due to increased debt levels.
It is worth noting, although not included in NAREIT FFO, but included in net income, we recognized realized gains totaling over 1o0 million or $0.44 per diluted share from the partial monetization of our Albertsons Investment, and in unrealized gains of 524.7 million on our remaining ownership stake in Albertsons. We received over 228 million in cash from these transactions and used the proceeds to reduce debt.
As expected, our second quarter results were negatively impacted by the forced and voluntary closures of many of our tenants during the second quarter due to the ongoing COVID-19 pandemic. Those most affected were tenancy non-essential and included many of our small shop tenants. We have been working diligently to help as many tenants as possible with deferrals, but collectability for many is questionable and requires us to place those tenants on a cash basis. To those tenants now on a cash basis, we reserved 100% of their outstanding accounts receivable. We're continuing to monitor the situation closely.
Now, let me provide some additional detail regarding the credit loss reserve for the second quarter of 2020. We recorded a $40.1 million credit loss reserve against accrued revenues during the quarter, and an additional $11.6 million reserve against non-cash straight line rent receivables.
As of June 30, 2020, our total uncollectible reserve stands at 56.1 million or 32% of our pro rata share of accounts receivable. Of the total credit loss reserve, 22.5 million is attributable to tenants on a cash basis. At the end of 2Q, 2020, approximately 6.4% of our annual base rents are from cash basis tenants. Any collections of the reserve amounts will be included in revenues in the period received. In addition, we have a reserve of 21.6 million or 12.5% against straight line rent receivables.
Turning to the balance sheet, our liquidity position remains strong with over 200 million of cash and 2 billion available on our recently closed revolving credit facility with a final maturity in 2025. During the second quarter 2020, we obtained a fully funded $590 million term loan, further enhancing our liquidity position. We subsequently repay 265 million of this term loan with proceeds from the partial Albertsons monetization during the second quarter.
We finished the second quarter 2020 with consolidated net debt-to-EBITDA of 8.6 times and 9.4 times on a look through basis, which includes our preferred stock outstanding and pro rata JV debt. The increase is attributable to the credit loss reserve, which reduced EBITDA. However, if we include the realized gains from the partial monetization of the Albertsons Investment, the consolidated net debt-to-EBITDA would be 6.5 times and the look through metric would be 7.3 times level similar to the first quarter 2020 results.
Our weighted average debt maturity profile as of June 30, 2020, was 10.6 years, one of the longest in the REIT industry. Subsequent to quarter-end, we issued a 2.7% $500 million green bond. Pending investment in eligible green projects, the proceeds were used to repay info to remaining 325 million outstanding on the April 2020 term-loan and the early redemption of 200 million of the $484.9 million of bonds due in May of 2021. We will incur an early redemption charge of approximately 3.3 million during Q3 2020.
Our consolidated debt maturity for 2021 of 425 million and our joint venture debt maturities of 195 million are quite manageable given our liquidity position and availability on our $2 billion revolver and availability on the $150 million revolver in our peer joint venture. In addition, we continually monitor the bond market for opportunistic entry points. As a result of the ongoing impact from the COVID-19 pandemic, we are not comfortable providing FFO or same site NOI guidance at this point.
Regarding our common dividend, during 2020 we have so far paid dividends of $0.56 per common share. It remains our intention during 2020 to take cash dividends at least equal to our taxable income. We continue to evaluate the business and economic landscape and have monthly dialogue with our board regarding the timing and the level of the common dividend. Although these are challenging times, with our abundant liquidity position, highly experienced and motivated team along with our well-positioned portfolio, we are built to withstand the impact of the pandemic and thrive when we get to the other side of this unprecedented situation.
And with that, we would be happy to take your questions.
[Operator Instructions] The first question comes from Rich Hill from Morgan Stanley. Please go ahead.
Good morning, guys. I want to maybe just start with a higher level question about rent deferrals and bad debt, and I'm not asking you to give a guide by any means, but I'm wondering if you can give us some historical views into how much of bad debt you ultimately end up collecting, and then how much of deferrals you might be might not collect?
It's Glenn. I mean, it certainly varies. I mean, up until the pandemic, if you look at what we've done in the past, right, credit loss reserves has ranged somewhere in that 75 basis point range. And for the most part, that is what you really have [one round of writing-off] over time. Look, the pandemic is a lot different. You have really retailers that are closed not because they want to be closed, and not because they were in financial trouble because of the situation they've been forced to close.
So, trying to estimate what the uncollectible amount is going to be is just really, really challenging. What we are doing is spending a lot of time with the tenants trying to help them since can’t stay open and give them the opportunity to get the other side to help, you know manage it as best as we can. But really, I can't actually give you a number of what we would expect here.
Got it? That's helpful. I didn't want to spend a little bit of time on the COVID-19 business update in your supplemental. First of all, thank you for the detailed disclosure. It's really helpful. So, if I'm looking at your total rent collected versus deferrals, in 2Q it was 70% rent collected, almost 19% deferrals, and then in July it was 82% rent collected, and 5% deferrals. So, two questions, number one, are you converting, you know, deferrals into actual rent collections as properties and stores open up? And do you think that sort of cadence will continue for the next couple months whereby, you know, you'll have an increase in rent collections and then still some bad debt.
Well, again, the deferrals – depending on where the deferral is, if it's a deferral that was done on a on a cash basis tenants, that's fully reserved. So, as I mentioned in my opening remarks, to the extent we collect those, those are going to wind up as revenue in the period that they're collected, but, you know, again, converting deferrals to rent collection. Again, I think as Conor mentioned, the weighted average term is about nine months for all the deferrals. And a lot of the deferrals that are going to be paid really, mostly in 2021 will really come from a lot of the major tenants that we provided, you know, those rents referrals to. So, I think you'll see a fair amount of this referral get collected.
Okay, fair enough. I was really trying to understand was, it looks like you have some pretty strong cadence in rent collections while deferrals are going down. And it seems like based upon the prepared remarks and what Connor was saying we would expect the rent collections to continue to rise in October, that's really what I was trying to get at.
No, that's exactly right, Rich. I think when you saw early in the pandemic, we all, you know, banded together to work with the large tenants to make sure that they have the deferrals nailed down so that we can now take the time to really help the small shop tenants, because they're going to need a longer bridge, in my opinion.
So the lion's share of the big tenants have been have been taken care of in terms of deferrals and now we're crafting, you know, unique deferral programs for our small shop tenants, because in my opinion, they don't have the balance sheet, they don't have the cash on hand, and we need to do a bit more for those folks.
Got it. That's really helpful, guys. I really appreciate the transparency. It's extremely helpful. Thanks, guys.
Next question comes from [Craig McGinnis] from Deutsche Bank. Please go ahead.
Hey, good morning. I was just hoping to dig into, maybe bankruptcies a bit. I'm curious what your exposure has been to what your exposure is to those tenants so far this year, and maybe the expected impact to occupancy. Also have all those kind of been taken to a cash accounting basis? Thanks.
Yeah, I’ll start with the second part of your question. Anyone that's in bankruptcy – anyone in bankruptcy is on a cash basis, and any AR that we have from them is fully reserved. Ray, maybe you want to add about the tenants themselves.
Hi, Glenn. Yeah, sure. Hi, this is Ray Edwards. You know, last week, Taylor Brands filed for bankruptcy. And in all honesty, I think from the list from Kimco of tenants that we felt were at risk and that would be filing during COVID other than, you know, maybe AMC which restructured their debt, we think that, you know, we've kind of hit the top of the top major tenants of ours that we're concerned about. And I think the exposure, Glenn, you can correct me, for the tenants that filed was about like 2.5% of ABR, something like that.
That's 2.3.
Modest.
So the only other point I would add Ray, and I think you've made this point before is that the majority of tenants that have filed due to the pandemic have been more of a reorganization. They've been a debt for equity type of exchange, and you know, there have been some store closures that come along with that, but they've been focusing on keeping their best performing stores. And luckily, thanks for our transformed portfolio, you know, we haven't been impacted as significantly from those store closures.
That's correct. And for example, with [GMC], which is actually a small tenant for us, but we had about 50 odd locations with them. They filed their motion and the motion to assume lease and includes about 44 of our 50 odd leases with them. So, we have – number of leases we think will be assumed by the tenants and operating on the other side of their bankruptcy.
Okay, thanks. And then just a follow up on leasing, spreads are obviously quite healthy this quarter. I'm just wondering how much of that was due to discussions that were, kind of already in place ahead of COVID-19 issues, and then kind of expectations on leasing volumes and spreads into the back half the year?
Yeah, great question.
Sure. Yeah. This is Dave Jamieson. So, in terms of our spreads this quarter, the majority of those leases were pre-COVID negotiated leases that were in process at the time prior to the pandemic hitting. So, obviously it should quite well. As related to a go forward basis, you know, I've said consistently in the past, it's always dependent on the population on a quarter-by-quarter basis. So, it can vary fairly dramatically. One by the number of deals you do; and two, by those deals that qualify as a comp spread. That said, our below market portfolio, you know enables us to absorb a bit of a cushion, if there is a slight decline and still get that positivity out of a new lease that is executed. So, we do feel good and comfortable going for that we still should have some momentum.
I'd also note that on the leasing side, you know, the essential retailers, primarily grocers off price, etcetera are really looking to expand during this opportunity where they see new vacancy that might come to market with great real estate. They want to make sure that they capture those opportunities to extend their market share. So, the demand side will be there. We've seen it already with our anchor, anchor occupancy obviously holding flat year-over-year, which is quite positive.
And on the small shop side, you know you referenced the bankruptcy and – as bankruptcies and as those spaces do become available, it does give us that chance to upgrade into a more well-capitalized retail tenant. So that is – could be another positive on a go forward.
Thanks Dave.
Next question comes from Christine McElroy from Citi. Please go ahead.
Thanks, guys. Good morning. Conor, you've been pretty vocal about national credit tenants needing to pay. I'm sure your approach to your tenants has evolved as the pandemic has evolved. What's your approach today in regard to that, you know, national tenant base that hasn't paid, how successful has it been? Are you in litigation with any tenants today or do you expect to need to go that route at some point?
Yeah. Hi, Christy. Yeah, we have been, I would say firm, but fair with our national credit tenants. You know, we continue to think that, since the beginning of this, it's really their responsibility to pay, so that we can use our balance sheets to go and help those small shops that are most in need. And I'm very pleased, you know, with the team performance of having all of our tenants that were deemed non-essential that we're in our top 100 have been put on deferral plans to help them in time of need.
So, you know, it showcases a lot in terms of the partnership that we have with our retailers. We're not in any litigation. We don't plan to be. We've worked through it, you know, it's been very challenging times, very stressful times for all those involved, but we look at each tenant individually, each lease individually, and we try and come up with a mutually beneficial agreement that gives us the ability to potentially loosen up some lease restrictions, some potential for some redevelopment in the future.
And, you know, in terms of the deferral plans, I've been very pleased with what we've been able to achieve. And the lion's share of our big tenants have actually performed and have done quite well in this and have been paying their rent. And so, you know, it allows us now to really focus and help those small shop tenants in times of need.
Okay, thanks. And then just in terms of the [sub-dividend] that you expect to pay later this year to satisfy taxable income, when you ultimately announced it, should we look at it as just that a true-up or do you expect to reset it at a point where you believe it will be at a sustainable level into 2021?
Christy it’s a really good question and it's one that we have constant dialogue with our board about and so when we're ready to reinstate it, we'll make sure that, you know the board has communicated clearly of how we believe the dividend should be looked at. Obviously, we know the dividend is important to our investor base. We want to reinstate it at the appropriate time when we feel like we have visibility into the future cash flow projections and it better will be well covered so that it can be in a position to grow in the future.
Okay, thank you.
The next question comes from Derek Johnson from Deutsche Bank. Please go ahead.
Hi, everyone. Good morning and thank you. So, as I looked at the [SOP] SOP on Page 33, you know, I was wondering, you know, if you can give some color on the 20 million delta between the 56 million bills and potentially uncollected – and the 35 million potentially uncollectable.
Let's see. The 56 million of uncollectable that is the full reserve; both consolidated and pro rata share. And it includes both, you know, it includes both the amounts for anyone that's a cash basis tenants. I think, I mentioned in my opening remarks. About 22.5 million of that reserve relates to tenants that are a cash basis. And then the balance of it is, the other tenants where we've done our full analysis on the reserves themselves. And we could give you some insight as to how we calculated that reserve, if that would help you a little bit. And I'm going to actually let Kathleen Thayer, kind of give you a little bit of insight into that.
Good morning. So, as Glenn mentioned, we assess all of our tenants from a cash basis perspective, but in-light of the pandemic, we obviously needed to look further into our tenants. So, we rent actually on a lease by lease level, and assessed each of our tenants from a risk perspective. And this was done at various levels throughout, you know, the company all the way through their regional Presidents as well as Dave Jamieson.
And the assessment entails looking at the industry the tenant was in, the location that the tenant was in, past performance in terms of payments, the operating status overall the tenant and then just in general, you know, conversations we've been having with the tenant through the pandemic or perhaps even the lack thereof, if they've been, you know, radio silent on us. And so, with those risk assessments, that allowed us to determine what an overall general reserve would be on our AR, as well as our deferred receivable and our straight line receivable. And so those general reserves represented about 50% on the AR on deferred side of what we took for Q2, and about 67% on the straight line side, for what we took in Q2.
Thank you for color on the process. Switching to development and has continued development at Boulevard and you did mention Dania Pointe Phase 2 and 3 in the opening comments, have completion dates been pushed back here, is the first part? And then secondly, you know, given the pandemic and how our net effective rent discussions, you know, and development yields kind of being impacted versus pre-COVID underwriting?
Sure, this is Dave Jamieson. So, in terms of The Boulevard as Conor mentioned in his prepared remarks, we did get the temporary CEO for the Shop Rite grocer, and we anticipate them opening in the back half in the fall of this year. So, that's going to be a real positive with the balance of the retail tenants really scheduled in 2021. On an IRR basis, if you have some delays and tenant openings, obviously that additional time will have some nominal impact, but when we look at the quality and the strength of these two projects, The Boulevard Dania Pointe, long-term value is exceptional. And that's really how we look at it.
You know, these are projects that we will hold indefinitely and so there's no short-term exit plan there. In terms of the Dania, you know, the activity there is going quite well with 15 active projects, tenant project fit outs, underway right now, and even for the few tenants that we've actually gotten back where we hadn't actually done or started to fit out work for them, there's been a number of retailers and other uses interested in backfilling that space, and we're at least with several of those locations already.
So, again, long-term when you have a project of that size and scale sitting along II-95 with 240,000 cars a day driving past it, you have to think beyond the short-term disruption here and really think about the quality of that real estate and the project into the future and it's going to be quite exceptional. So, we feel very good about it.
Yeah, just to add on to that. The completion dates are both have not been pushed, because we haven't able to actually get waivers for The Boulevard to continue to construct during the pandemic and Dania continued to construct during the pandemic. It's the rent commencement dates that Dave was referencing that will be pushed a little bit there and we anticipate it being a, you know, major contributor to 2021.
Thanks so much, everyone.
The next question comes from Craig Schmidt from Bank of America. Please go ahead.
Well, thank you. I mean, it sounds going forward that, you know, we might have a little more challenge from occupancy and the small shops than the anchors or the total portfolio. I'm wondering if you think that the small shop decline that you experienced this quarter will be replicated in the second half of the year, or do you think that your efforts may help shorten up?
Great question, Craig. You know, our hope is that, you know, it won't continue to decline as it has. 135 basis points of the decline over this current year has been related to those bankruptcies that have occurred, but also past bankruptcies that have already previously filed like peer 1, Charming Charlies via the vacating of Dress Barn cetera. So that was a really big contributor in the first half that we started to see that slide, but you know, our efforts have been extensive and far reaching in terms of retention in the small shops and we want to absolutely do everything we can possibly can to retain those tenants and really help them bridge to the other side because it really is unfortunate that, you know, this short-term disruptions had such an impact on them, but net-net in the long-term, if we can retain those tenants and help them thrive on the back end of this, you know, we're all better off.
I think a big thing to note as well is just the big difference between the Great Recession and now is the quality of our real estate. You know, we had a much larger portfolio at the time spread across a much larger part of the country. And now, with our really refined portfolio of high-quality assets about 400 in the Top 20 markets, I think some of the resiliency that we're starting to see from those positions is a real positive, again, with the anchor side holding flat year-over-year. So, you know, as we do get the vacancy back, the demand, we feel confident we’ll be there, and you know, we’ll push the other side.
Craig, we are encouraged by the small shops adoption of curbside pickup. I think that's, you know, one of the trends that we've seen really accelerate through the pandemic. And the nice part is, is we've rolled it out now nation-wide; we've seen customers really gravitate towards it. And now that the small shops are in that program, I think that bodes well for them evolving their business model to give them a fighting chance to sort of make it through and hopefully come out the other side of this.
Great. And then, just, you know, looking – obviously the tenants have done the best are essential and value retailers versus sort of the full price discretionary retailers. As you work to fill those vacancies, are you going to continue to focus on the essentials? Or will you open yourself up to more discretionary retailers?
Yes. Our focus has always been grocery anchored centers and our internal target goal has always been to get a grocery store into every location that doesn't currently have on. So, we'll continue to make that a priority. We have long extensive conversations with them about the opportunities for them to expand. And for a lot of the essentials, you know, the change in format is active. It was happening pre-COVID; it's happening during COVID; and will continue post-COVID.
So, you know, where you saw – where an opportunity you thought may not have existed in the past, it's now become a real opportunity because, to Conor’s point, they're adapting their business models or they are finding new ways in which to attract customers which has different needs than there were in the past, so that will always be a big focus of ours.
Great, thank you.
Next question comes from Alexander Goldberg from Piper Sandler. Please go ahead.
Hey, good morning and I hope everyone has power, at least generator. So, two questions, first, Glenn, on the dividend, going back to Christy's question, how much your taxable income this year is driven by actual cash versus it's driven by, you know, rent deferrals where you didn't restructure the leases, so they don't – so effectively the leases still count as taxable even though you're not necessarily getting the cash currently. Just sort of curious what the delta is on that and how that drives your dividend decisions?
Yes, I mean, the bulk of what we have is the cash that is collected. I mean, you see the amount of reserves. The reserves themselves are the portion that has not been collected thus far. And those reserves are not taxable deductions until you would actually write them off, but the bulk of what we had is cash collection.
Okay. So basically, you're not – essentially your dividend decision is one based on cash. It's not like you're forced to pay something for rent that you haven't received, but are deferred?
No, no. We – again, we also – you have to keep in mind we also have a fair amount of tax strategies. I mean that the bigger question is, we have the gains from Albertsons and we need to be able to shelter those gains, which we – we have a variety of tax strategies that we are going to employ to actually be able to shelter those gains in addition to the gains that come from the rest of the business.
Okay. And then, the second question is going back to the curbside and dine-out or takeaway service that the restaurants have employed, do you guys have a sense of how much your tenants were able to offset, you know, their traditional shopping or traditional restaurant business by implementing curbside and dine-out? Just sort of curious, you know – I mean, we've seen stats, you know, [indiscernible] put out a PowerPoint with a number of, you know, stats from various retailers and how much business, you know, the stores are picking up by online orders, people picking up in store. But on an economic basis, do you guys have any sense for the impact and how much the tenants have been able to recover through these two, you know, curbside and takeaway service?
Sorry, I just lost power on you, my bad. Just kidding. No, it's a great question and it is – it really does vary tenant-by-tenant. So, there's a lot of anecdotal information, you know, that we've been getting that curbside and outdoor seating has been extremely helpful in trying to generate sales when they've had to keep their indoor dining closed. So, we do know that it's been having – it's been beneficial there and we have gotten calls from retail tenants asking specifically to expand curbside stalls in certain locations for them and/or they would sponsor and contribute to adding new locations on the curbside.
So, we know from that information that it actually has been, you know, quite helpful to them and helping bridge to the other side, but it's – you know, at this point, we don't have any hard data to suggest, you know, how much it's offset, you know, loss from sales indoor inside a restaurant. I'd also say actually in speaking to some restaurants, they've identified, you know, the best selling items on their menu or other ways in which they could actually improve profitability and how they can run their restaurant into the future versus how they historically had been doing it.
And some have been seeing a real net benefit there because, you know, the staff required to say, run a new model is a fraction of what it was to do a full fit out service. So, some of them are actually taking this as the opportunity to sit back and say, hey, we can actually do a little bit better here if we adjust XYZ and that might be their new format going forward. And so, you know, we want to stay very close to them, but that's what we've been hearing.
Okay. Thank you.
Next question comes from Ki Bin Kim from Truist. Please go ahead.
Thanks. Good morning. Just wanted to go back to your comments about possibly investing or lending into your tenants using some third-party capital, can you just provide some more details behind it? I wasn't sure if you're referring to, you know, select cases within your portfolio that tenants that might need it? Or were you thinking kind of bigger picture things like what authentic brands has done actually investing into a brand or a chain?
Sure, Ki Bin. I'm happy to jump into that one. So, there's obviously two different programs and what I was referring to is, on the investment side of looking to help secure real estate solutions for these retailers. That's obviously different than the TAP program and other ways that we've helped to, you know, bridge the gap for these retailers through the pandemic, but what we've done for – you know, the history of our plus business for several decades is invest in retailers that are real estate rich and there's obviously a variety of ways to do that. The Albertsons investment being the most notable, but over the years, we've done a variety of investments whether it be sale leaseback opportunities, other forms of financing with the real estate as collateral and that's really what we're looking for in terms of future investment categories.
With the authentic brands, the Simon, you know, Brookfield, I think they're probably looking at it a little bit of a different way. I don't know exactly the way that they structure their deals, but we're going to make sure that the investments that we make are very much on the offensive where we are doing it in a way that we are able to control a significant amount of retail or real estate, I should say, and not necessarily doing it in a way to preserve, you know, cash flow for those retailers. But that obviously, would be an added bonus to that situation. But we have a variety of conversations, if you'd imagine, with our 3,500 plus retailers in our portfolio, many of which own real estate that they're looking at ways to explore enhancing their liquidity through utilization of that real estate.
Okay, thanks. And do you have any sense for your small shop tenants? What the occupancy cost ratios look like and for the rent they're paying? I'm just trying to get a sense of when they don't pay rent, like how much does that actually help them in terms of their overall cost structure?
So, again, it's different on use type of operation, how they've set themselves up, you know, where their primary drivers of revenues are? But, you know, rent and labor, labor is actually a very big cost component to the restaurants that they have to be mindful of. So, when they've had to close and then they've had to look to re-staff, there's a big startup costs that you have to be mindful of. And in certain areas as well, like California where there's been the openings and the re-closings, you've had to revamp your supply chain to get it fully staffed and then had to shut down again, put pressures on them as well in the short term from a cash flow standpoint. So, those are the biggest components for the restaurant side.
Okay, thank you.
Next question comes from Wes Golladay from RBC Capital Markets. Please go ahead.
Hey, good morning, everyone. Just wondering with COVID here for another quarter, I know [it’s not going] away anytime soon, are you looking to change the scope of additional phases of your mixed use projects? And could COVID actually accelerate some of your projects? I remember you had a few that have some [townhome] capabilities.
It's a great question. I hope it's only a quarter that we have left with COVID. I think that would be a good end result, but we’re anticipating it might be a little bit longer than that. But in terms of our phasing, yes, from the very beginning of our Signature Series, we always wanted to ensure we have [indiscernible] opportunities and where we can phase the projects dependent on demand, depending on market cycles and conditions so we can accelerate and/or decelerate as needed.
No different now on a go forward basis. Right now, at our Pentagon, where we have the Witmer, which is a fully stabilized multi-family project, we're currently doing underground utility work to prep the opportunity for the second tower at that project, which is where the National Landing Amazon headquarters is, that’s directly across the street. There we see, you know, great opportunities into the future with Amazon, I think, having over 1,000 hires already and the demand drivers being there. But that said, you know, we're just doing the underground utility work in preparation to move forward. But that's still a decision that we have to make into the future and we'll continue to evaluate as the markets evolve and that's how we'll always continue these large scale projects.
And Wes, this is Ross. I mean, the only thing I would add to that is where you might see an acceleration and we have seen an acceleration is our efforts on the entitlement side. So, while we're not necessarily going to activate or green light additional projects in the midst of the pandemic, we have seen historically during times of disruption where the cooperation with the municipalities and the local jurisdictions is actually enhanced during these challenging times. So, we're at full speed ahead on continuing to hit, you know, our goals of continuing to increase the amount of residential units and other uses for these projects going forward.
Okay, got it. And then turn into the existing tenant base, do you have a timeframe where you think you’ll resolve all these tenants that you're [indiscernible] for on a cash basis? Is there a bit moratoriums against you’re kicking some of them out? Are you in active conversations with most of them? And/or I guess when you look at these tenets, are most of them open or are they in that still not open bucket?
So we're always talking to our tenants, you know, our 7,900 plus tenants in our portfolio. Our operating teams are on their phones on a daily basis talking to as many as they possibly can and our real focus right now is getting to the table those that have been somewhat quiet, the small shops that have not yet responded to some form of deferment plan. So, we'll continue our efforts there. That said, in terms of them being open, you know, there are some that are open and probably some limited capacity and how they're operating or running their business and they're focused on getting their business up and running. But it's something that we'll continue to hammer on and really, you know, that's, I’d say, our priority one, two, and three right now is to get that done.
Okay, got it. Thank you.
Next question comes from Caitlin Burrows from Goldman Sachs. Please go ahead.
Hi, good morning. I was wondering if you could just maybe talk a little bit on leasing. The earnings release mentioned that in the second quarter, there were 52 new leases and 180 renewals and options. So, I was just wondering if you could talk a little bit of the cadence of that leasing and how are the conversations now or comparing versus a year ago in terms of either of them getting closer to normal.
Sure. Yes, so, yes, 52 new leases kind of which were anchor deals. Again, the majority of those were in negotiation prior to COVID, and so, is bringing those to the finish line and getting them resolved. Again, on the renewal and the option side, I think it's a good testament to the quality of the real estate and obviously the spreads that were associated with that. I mean, those are opportunities where tenants had the chance to punch out or look for some other concession or consideration on rent, but clearly, you know, it was the appropriate rent and the right center for them to stay in and we worked, you know, hard with each of those tenants to ensure that we retain them.
So, right now, I’d mentioned earlier that, you know, there is a big demand and a big push on the essential retailers looking to expand into space and they're constantly changing their format. So, that's – that has continued, you know, throughout the pandemic and we've also seen other operators even in some distress categories, such as fitness, now, the lower price providers, the cost sensitive operators actually look at space too because they see an opportunity to grab market share post-pandemic.
So, you know, some of the mid-priced guys have had pressures, you know, 24-hour filed bankruptcy, so some of these other retail categories are seeing that opportunity that, you know, coming out of this, they could really expand their market share within any given trade area. So, we expect, you know, this conversation to continue and we want to stay very, very close to those and even if they aren't expanding today, but they're well capitalized and we'll have a real plan into the future. We want to make sure we're close to them as well.
I guess also as you were saying that some of those leases that were completed in the second quarter were already in conversation like pre-COVID that, I guess, would suggest that then there with a dip in conversation after that, have you – to what extent have you seen those conversations increase again? I know you kind of just talked about it, but I guess with that angle, anything else to add?
No, I wouldn't say there's been a dip necessarily, it's just the timing of getting the deals executed, and the negotiation, you know, [indiscernible] with any given tenant. We hosted a virtual deal making call in June with – you know, as a full day of, you know, 30 plus retailers and having conversations across the country, all are looking for opportunities to expand, so it's just been ongoing.
Maybe one another thing I would add is…
Okay, and then – yes.
At a time like this, we’re really focused on retention. We adopt the phrase, love the one you're with, and you're going to see us continue to work on retention as much as possible. And then, as Dave said, it's pretty exciting to see, you know, the essential retailers and we've seen this before in past dislocations where retailers that are thriving in a time of disruption, they look to upgrade their real estate; they look to upgrade their own store locations. And so, it's nice to be in a position where the portfolio has been transformed and we're seeing increased demand because retailers are trying to upgrade their locations.
Got it. And then just maybe quickly for the Q2 that was 70% collected on the rent side and 18% deferral, any other update you can give for that remaining 12%, if there's been like the pace of progress or the outlook there?
Yes. We were – I think I mentioned it a little bit on the previous question from the last caller is that that's our focus to get them all to the table, to get them resolved on those discussions. So, that's going to be an ongoing effort. That's related to some of the smaller shop retailers that have been silent through this process and wanting to make sure that we work out a plan, you know, collectively that works both for them and for us so that we provide that bridge to get them to the other side. So, well – that's a top priority in terms of our efforts on the operating side.
Okay, thanks.
[Operator Instructions] Next question comes from Mike Mueller from JP Morgan. Please go ahead.
Thanks. Hey, Glenn, how did the green bond pricing compared to what you could have done with a traditional bond?
It’s a great question. You know, I would say a couple of things about the bond itself. You know, spreads have widened out so much and part of the objective of issuing this bond was to try and help reset our entire bond complex, which is what happened. I would tell you that being one of the first green bonds to be done in months was actually very helpful and what we saw was a lot of demand. So at peak on a $300 million announced deal, we had $1.8 billion of [orders] and that gave us a chance to – you know, again, the more volume and the larger size book you have, gives you the chance to really reduce your pricing, which is what we did.
It's very hard to pinpoint how many basis points it's saved relative to what a regular bond would have done, but I would tell you that there were least a dozen funds that had green initiatives that were in this deal. So I would say it definitely had some benefit too, it’s for sure, but, you know, it's very hard to pinpoint an exact number, but it definitely helped. And the bonds – the nice part is the bonds have really traded very well and the whole bond – our whole bond complex has really come back to, you know, not quite as low as it was, but to much better levels. I mean, the bonds we issued four weeks ago were at [210] over. They are trading today in the 170s. So, the objective really was to kind of reset the curve and that's been accomplished, so we feel good about that.
Got it. Okay. And then on the go forward dividend, not the 2020 true-up, how's the Board thinking about that? Is the goal going to be to, you know, set it as low as possible just to maximize as much retained cash flow? Is that going to be the [bias work]?
Yes, I mean, I think what we've talked about is to have a dividend that would be really no more than 80% of [FAB] and, you know, if it's – if it can be lower, fine, but that's kind of the target and that's what we've talked about for a long time. So, I think as we reset it, that's probably the level that we'll look towards.
Got it. Okay, thank you.
Next question comes from Floris van Dijkum from Compass Point. Please go ahead.
Thanks. Good morning, guys. I thought, Conor, in the comment you mentioned you had about the 20 million of PPP estimated funds for your small shop tenants was really interesting. That shows you, also, I think that you're probably perhaps closer to your tenants or have been working more closely with them than some others. Remind me again – most of your small shop tenants had security deposits. I don't believe your national tenants tend to have security deposits. Have you applied any deposits for any of the cash rent collection? And how do you think about that as the PPP funds, you know, are used up? How would you look at that relative to the deposits that you have on for your small shop tenants? And how do you have them replenish their deposits with you going forward?
It's Glenn. I mean I’d say, we have not really applied a lot of those security deposits against their rent yet. We're trying to still work through, you know, what we've done with deferrals. So, we have left that there. You know we will use them if they go to bankruptcy or if they just leave altogether, we’ll offset it, but in most cases, the security deposits are not, you know the preponderance of [indiscernible] right here. In many cases, you're looking at, you know, one to three months of security deposits, so it's not a significant amount that you would really be applying into the entire lease.
Fair enough. And Conor, maybe – I mean, the other thing you mentioned you want to, you know, focus more of your time going forward on your small shop tenants. Presumably, this is where you're going to see some level of abatements going forward as well. How do you – how flexible will you be with your tenants? And is that really dependent on how you view them, how important you view them for each center? Or do you have any sort of, you know, big picture thinking beyond that?
Yes. No, it's a good question, Floris. And we work as a team to go through each tenant individually lease-by-lease because, you know, it really depends on the local spots that they're in, the rent versus market, the business that they had pre-COVID, the type of use to make sure that we have the best merchandising mix to drive as much traffic at all points a day to the shopping center. And there's no question that small shops are always impacted the most in these types of dislocations, and so we're going to have to do more, there's no question about it. And that's why we've been repeatedly saying that that's where our focus is now.
Now that we've got the Top 100 really nailed down, we feel like we can really take our effort, talk to them on a daily basis, making sure we understand what they're facing and give them the best opportunity to make it to the other side. So, it's been an effort that the whole team has combined to really push. Obviously, our TAP program goes a long way with tenant tracking to understand what they're facing and how do we navigate the government programs that are available and then what can we do as a landlord to also help them. So, it's not like sort of a silver bullet out there. We just sort of take all the efforts that we have and try and do everything we can to retain as much as possible and help them to the other side.
Great. And last question for me, I guess in terms of this – the fund opportunity, would you consider maybe doing some sale leasebacks for some of the tenant-owned real estate that potentially gets more credit risk on your book as well? Or would you look at specific assets where you really love the real estate and you're willing to own that real estate even with a credit quality that might not be as pristine as maybe it was a couple years ago?
Yes. No, it's certainly a combination of factors that we evaluate when making those investment decisions. At the end of the day, we've always been all about the value and the basis of the real estate and [the dirt]. So, we're obviously looking at credit quality; we're looking at location; we're looking at the pricing; we're looking at the yield. And when you factor all those together, we're trying to make investment decisions that have long-term value creation opportunities. So, there may be some opportunities with credits that were once a bit more pristine than they are today in this environment, but that doesn't mean that some of the real estate that they control is not, you know, A plus stuff. So, we're very much looking at all those factors and we think that we'll have some things to talk about in the coming months and quarters.
Thanks, Ross.
Next question comes from Linda Tsai from Jefferies. Please go ahead.
Hi, thanks. On Page 11 of your NOI disclosure, it shows reimbursement income increasing in the quarter and then also on year-to-date basis, what's driving that? Hello?
Hi, can you repeat that, Linda?
Oh! Okay, sorry. So, on Page 11 of your NOI disclosure, reimbursement income increased in the quarter and then also on a year-to-date basis, what's driving that?
Tough to get into the detail a little bit. But again, it really is just – it's the recovery amounts that we have collected relative to – you know, just relative to the billings that we put out during the quarter. I don't think there's anything – there's nothing major in it, nothing really significant that I would point you to. I think it's more normal timing than anything else.
Got it. And then, one of your peers talked about occupancy hitting the high 80s in the first half of 2021, any color you could provide on this metric headed into next year?
You know, I think for us, it will – right now it did, so let's observe and see how the balance of this year plays out, you know, with the pandemic and the disruption that it could have on the retailers. So I would say it's a little too early to tell. I mean, obviously, our goal is to maximize retention and increase occupancy as best as we can. So we continue to put forth, you know, all of our efforts to do that. But I'd say right now, you know, we're trying to stay focused on the present and while looking towards the future.
Thanks. Just a last one, are there certain retail categories you see is generally having a wider swath of better capitalized tenants? Or does it just boil down to having winners and losers in any given category?
Yes, I mean, there are – there's always winners and losers. You know, there is – and those change over time. You know, do they have, you know, the right format and the right supply chain and the right vision for the future? Are they led by good merchants to understand exactly how the retailer can adapt to the changing needs of the customer? But then it all is driven by the balance sheet, right? How well capital are they? How are they determined to deploy that capital for growth mode? How are they using omni-channel?
So there's numerous factors and I think you can probably go through every category and see the winners and losers and it's really – it's broken down between those that are well-capitalized with a strong vision versus those that are undercapitalized or overextended with that and haven't made the necessary investments to evolve with the future and the change.
And Linda, just to add on your earlier question on the recovery, CapEx recoveries is what's driving that.
Thanks.
Next question comes from Vince Tibone from Green Street Advisors. Please go ahead.
Hi, good morning. You mentioned potentially providing rescue capital to [illiquid] private real estate owners either on the equity or debt side, how are you thinking about the required returns on any new investments given where your stock is trading today? And also how much capital could you see allocating as a lender?
Yes, I mean, the hurdles are definitely higher, there's no question about it, but we are seeing opportunities that are starting to hit those hurdles. So by a way of example, you know, there are owners out there that have signed leases on redevelopment opportunities pre-COVID at very attractive yields that traditionally would have provided, you know, regular – you know, traditional lenders would have provided the capital there just not there.
So, when you look at the opportunity whether it be in a preferred equity position or a [indiscernible] position at double digit, you know, yields on very high quality real estate, we would have never imagined that we would be able to participate in that even six months ago. And you couple on top of that what we're really focused on is, in many cases, you know, having the opportunity to get a [right of first refusal] on those assets in the event that the asset is sold.
So, we do think that there is some very good short-term opportunities to get yield that is attractive, but also longer-term, when things normalize, the ability to potentially control that real estate down the road. I would tell you that the capital plan and how much we would be willing to invest in that is very dependent on a variety of factors. So, we watch our balance sheet very closely.
Obviously, the Albertsons investment is one that provides us some flexibility with capital coming down the road that could be utilized, as well as dependent upon the ultimate structure that we put forth to invest in these types of opportunities would provide us some additional powder with outside investors. So, I can't pinpoint an exact amount, but I can tell you that the pipeline is starting to form and we want to make sure that we're there with the capital available to do so at the appropriate time.
Thanks, that's helpful color. Switch gears just for a second, how long do you think operating expenses can stay at these lower levels? I mean, when are you expecting them to kind of rebound and come to, you know, what they've been historically?
Yes, it’s an interesting question. I think when we look at the belt tightening that we've done across the portfolio and what we've been able to do in terms of the efficiencies, you know, it's our job to continue to look long and hard about how do we do more with less, how do we belt tighten for the long term. And so, you know, I think the operating expenses is one that we continue to monitor to see how we become more efficient.
We've invested heavily in technology; we've invested heavily to make sure that the efficiencies gained are things that we can continue on past the pandemic, so it's not just a short-term [pop]. So, it's one that we've been monitoring closely and I think as a large national owner, we get benefits of scale there because the investments we make we can deploy and really see significant efficiencies across the whole portfolio.
Thank you.
Next question comes from Chris Lucas from Capital One Securities. Please go ahead.
Hey, good morning, everybody. I'm sorry, the call is so long, but I did have a couple of quick questions for you. You guys provided great detail in terms of the number of various categories as it relates to rent collection. I guess the one category breakdown I was surprised [I didn’t see was] was sort of national versus regional versus local tenants. Is there much variation in that or was it fairly consistent?
It really is dependent, Chris, on the category within that national, regional or local. Obviously, there's essential retailers in each of those, there's non-essentials in each of those categories. Clearly, the essentials have been gaining market share, have been dominant in this period of time where like they have a lack of a competitive set. And so, it's interesting because never before have we been in an environment where, you know, a government picks winners and losers.
Somebody said the COVID-19 pandemic is extremely smart. They can tell the difference between a Target and a TJ Maxx because, you know, essential versus non-essential has been varied widely between what municipalities deem essential. So, we're trying to work with everyone as best as we can recognizing that some have been put at a disadvantage and we're doing our best to make sure those make it to the other side.
Okay, great, thank you. And then as it relates to, you know, sort of the shop space recovery, the great financial crisis really, you know, the recovery from that was driven by national kind of primarily on the shop space and the mom and pops I think were very late to the sort of recovery process. Do you see that same sort of scenario playing out as we get to the other side here? Or do you think that there's, you know, a much more balanced outcome coming from the different types of size tenants?
I can solve with that a little bit. You know, it is interesting. There is a major difference between this pandemic and what happened in the great financial crisis and the difference is how the consumer is being handled by the government. You know, the consumers in – you know, although unemployment is still at very high levels, the consumer is being bridged here. You had unemployment insurance plus $600; you had all those PPP loans, which are really going to be grants.
So the consumer is actually being bridged, where in the great financial recession, you know, it was all about saving banks and other financial system and the consumer was really left to fend for themselves. So, I think you have a better shot of, you know, those – again, a lot of these tenants, even the small shops had good solid businesses until they were forced to close. So, I think that as re-openings happen and if you get to a vaccine and things come back to normal, you do have a consumer that has a fair amount of money in their pocket. You know, there's trillions of dollars that are sitting as additional, you know, deposits today. So, I think you have a better shot at it.
Yes, the other thing, Chris is, it will really depend on the path of virus. You know, as you've seen, certain hotspots pop-up and closures [have being to], you know, come back again, the smaller shops are the ones that are most impacted by, you know, a rollback of openings. And so, you know, depending on the path of the virus going forward, clearly it will depend – you know, we'll see how those small shops are able to be viable.
Okay, great. Thank you. That's all I had this morning.
Next question comes from Tammi Fique from Wells Fargo. Please go ahead.
Thank you and good morning. Thanks for taking my question. You mentioned that 6.4% of tenants are now being accounted for on a cash basis. I guess do you have a sense for what percent of those tenants paid Q2 rents, and what percent of those tenants have paid July rents? And then, do you expect to add additional tenants to that bucket as we go through third quarter? Or do you think that 6.4% is fairly assessing the risk at the tenant base? Thank you.
Hey, Tammi. 20% of our tenants paid on our Q2 that were cash basis. That number has jumped up to 50% for July.
Great, thanks. And do you think that additional tenants will get added to the cash basis bucket as we go through the third quarter? Or do you think that 6.4% is really assessing the risk of the tenant base at this point?
You know, again, Tammi, it's going to really depend on what happens. So, if any further tenants go into bankruptcy, they're going to wind up on a cash basis. So, we're going to have to watch it pretty closely for what's happening. It really is, it's really just going to depend on how we assess collectability at each tenant that we go through each period.
It also depends on the course of the virus. I mean, that's obviously, outside of our control. And we've been mindful that as soon as we feel like we have a good handle on our projections, then we can disclose those, but as things continue to change daily, we've just been taking it a day at a time.
Okay, great. Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to David Bujnicki for any closing remarks.
We want to thank everybody that participated on our call today. If you have any additional follow up question, please do reach out to me or my IR department. Otherwise, please continue to be safe, social distance, and enjoy the weekend. Thank you so much.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.