Kite Realty Group Trust

NYSE:KRG

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. And welcome to the Q1 2020 Kite Realty Group Trust Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. Bryan McCarthy, Senior Vice President of Marketing and communications. Thank you. Please go ahead, sir.

[Bryan McCarthy, executive]

Thank you. And good morning, everyone. Welcome to Kite Realty Group's first quarter earnings call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties. Actual results may differ materially from these statements. For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent 10-Q.

Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for a reconciliation of these non-GAAP performance measures to our GAAP financial results.

On the call with me today from Kite Realty Group, our Chairman and Chief Executive Officer, John Kite; President and Chief Operating Officer, Tom McGowan; Executive Vice President and Chief Financial Officer, Heath Fear; Senior Vice President and Chief Accounting Officer, Dave Buell; and Senior Vice President, Capital Markets and Investor Relations, Jason Colton.

I will now turn the call over to John.

[John Kite, executive]

Thanks, Bryan, and good morning to everyone. And thanks for joining us today. The KRG family appreciates that this has been and continues to be a very challenging time for everyone, including our investors, tenants, customers and vendors. And I hope this call finds you all doing very well. We're truly grateful for the hard work and bravery of those in the medical community, our first responders and the employees at our retailers who are working diligently to stay open and operating through this challenging period.

We fully expect and understand that the primary focus of this earnings call will be on COVID-19 and its impact on KRG. But before discussing that topic, we believe it would be a disservice to our team to ignore our solid first quarter results. Prior to the onset of the pandemic, KRG was poised to build on the momentum we established last year with the successful execution of Project Focus.

In the first quarter, we executed 41 new leases and renewals, comprising over 256,000 square feet. The comparable leases generated spreads of 10% and 25% on a cash and GAAP basis, respectively. Our same-property NOI grew 90 basis points, which was above our internal budget and consistent with the growth trajectory we had discussed on our last call.

However, it's important to note that if not for a COVID-related bad debt reserve, our same-property NOI growth would have been 1.3%. Finally, I'd like to point out that KRG's ABR is over $18, which is a testament to the hard work of our team and the results of Project Focus.

Turning to the impacts of the pandemic. First and foremost, we've focused on the safety of our employees, and I've been so impressed with their level of engagement and sincere desire to help the company and our customers. We relied on our business continuity plan to swiftly transition to having most of our employees working remotely, which was a credit to our investments in technology and risk management planning.

There's generally a sense of calm and confidence in our ability to navigate past the COVID crisis. Thankfully, we have one of the most experienced teams in the sector to handle this challenge at every level of the organization. Many of our senior leaders were either here at KRG or at various other real estate firms during the great financial crisis. We know how to handle the dislocation, and we're used to rolling up our sleeves and digging into the details. Details are critical at these moments, and rest assured, the entire team is making certain that nothing is overlooked and that we are doing everything we can for all of our stakeholders.

That includes doing all we can for 2 of our most critical stakeholders, our tenants and their customers. The good news is that 100% of our centers are open and operating. And through April, approximately 50% of our tenants have been open for business in at least some capacity.

On the ground, we're assisting our open tenants in a multitude of common sense and creative ways to ensure they're able to meet the needs of their customers in a safe and efficient manner. As for the tenants that have yet to reopen, we're going to rely heavily on our playbook to assist them in every way in ramping back up as the world reopens.

One of the silver linings of the crisis is our unprecedented level of communication that we've been having with all of our tenants. The vast majority of these conversations have been constructive, with both sides valuing the relationships that we've built over the years and acknowledging the bridge to the other side of this crisis is built on cooperation. By focusing on relationships, we have not abated any rents and we were able to collect 67% of our April rents, and we expect this number to continue to grow.

A handful of the conversations have been understandably difficult due to the fundamental principle that the retail sector operates as a virtuous cycle. Our ability to pay our obligations, including very important real estate taxes, and help our most vulnerable tenants, small mom-and-pop businesses for the most part, is directly correlated to our well capitalized tenants abiding by their rental obligations. If we can collectively help mitigate the impact to the smaller tenants, who are the backbone of our economy, they can stay open and operating. This will, in turn, strengthen the U.S. economy and potentially help well-capitalized tenants recover lost sales.

The recovery of these lost sales will generate sales tax revenues. We have to remember that the sales tax and real estate taxes help fund our community services, including the critical frontline workers in this COVID crisis. In the long run, it's a win-win situation for all parties involved.

For this virtuous cycle to work, we all need the smaller businesses to survive. It's why KRG created the KRG Small Business Lending (sic) [ Loan ] Program. On April 20, we announced the ability for any small business tenant in our portfolio to apply for a low-interest loan to help them manage this disruption. The tenant response has been robust, and we intend to make our first loans under this program as early as next week. The KRG small business lending program is made possible by the current state of our balance sheet and liquidity profile. With factoring in capital required to complete redevelopments, KRG has one of the best balance sheets in the sector. We have no debt maturing until 2022 and only $3.5 million of remaining spend on our Eddy Street 2 development that will finish this summer.

As we completed Project Focus last year, we didn't think it was the right time to begin a significant amount of redevelopment. While we couldn't have possibly predicted this crisis, we did think that 2020 was going to be a bit choppy. This conservative approach has left us with ample liquidity. As of March 31, we have $350 million of cash on hand, with only $300 million drawn on our $600 million line of credit. We believe we have enough capital to not only weather the storm, but to look for opportunities on the other side of this temporary dislocation.

I wanted to point out some of the things the company has been doing on the human side as well. Not only are we ensuring the well-being and safety of our employees, but we are doing what we can for those impacted in the communities in which we serve. Our Kite Cares initiative has been engaged on multiple fronts. We've delivered food to local hospitals, made donations to various organizations supporting furloughed workers, supplied meals to the families of quarantined first responders and are in the midst of a week-long hunger drive to provide for individuals and families and needs. Like our shopping centers, the communities we live in are a virtuous cycle.

Our country is facing incredibly dynamic uncertain crisis. At KRG, we are fond of saying, it's a round the world. And with that in mind, we are committed to respecting, valuing strengthening and supporting all of our existing relationships. Furthermore, we're confident that we'll conduct ourselves in a way that we will create new robust relationships that will last for years to come. KRG is a tough but fair company, made up of resilient people who have created a strong portfolio of assets and a very durable balance sheet. We will, as a team, persevere and look to flourish as we emerge from this crisis.

Thanks for everyone for joining the call today. And given the current situation, we won't be discussing individual tenants, any guidance related to May, June or the rest of 2020. And with that, again, we thank you for joining. And operator, this concludes our prepared remarks and ready for questions.

[Operator]

[Operator Instructions] And your first question is from Alexander Goldfarb with Piper Sandler.

[Alexander Goldfarb, analyst]

Just 2 questions from us. First is, John, apart from your gentle persuasive voice, you guys did manage to get rent collections from a number of tenants like movie theaters that were closed and other ones like soft goods and personal service, et cetera, where the bulk were closed and yet your rent collections vastly exceeded. Can you just walk us through what's going on? Presumably, these are all tenants who were closed and probably were thinking about husbanding cash. So how do you think that it was -- was it just simply, hey, you didn't have any AMCs or anything like that, and therefore, these people had cash? Or is there something else going on that made your rent collections in these categories where they were?

[John Kite, executive]

Sure. Thanks, Alex. Well, it's a multitude of things, obviously, in terms of our conversations with our retailers. And as I mentioned in the call, that's one of the things that we've always prided ourselves on is the deep relationships that we have and the mutual respect that we have for each other. I think that when you look at the quality of the portfolio and all the work that we've done on the portfolio, I think, first and foremost, it's reflective of that and it's reflective of the fact that these are very important locations to the great majority of our retailers. In addition to that, it is the -- frankly, the intensity that this organization has to work and grind through the things that we have to do. And we've been fully focused on it from day 1. I could go on a long time with this. Tom and his team and Gregg Poetz and his team, I mean, the company has been pretty focused on this. But in the end, it really is mostly a reflection of the quality of the portfolio and how important these locations are to these retailers.

[Alexander Goldfarb, analyst]

Okay. And then you also talked about upfront the fact that you need to be paid by the rents because you have obligations to your property tax, utilities, insurance, mortgage and all that fun stuff. Obviously, you've had tenants, and I know you're not going to comment on particular ones, but you have tenants who have chosen to not pay who probably were in a position to pay. So how do you make sure that this doesn't become sort of the de facto every time a tenant has trouble outside of bankruptcy, they just start arbitrarily not paying. How do you make it pretty clear to a tenant that they need to abide by and they can't just arbitrarily not pay?

[John Kite, executive]

Well, I mean I think the reality is that we -- it's a kind of a contract law question, right? These are contracts they need to be abided by. And is it a concern that this would become something that would happen often? No. I think this is a very, very unique situation. And frankly, there are some companies that have obviously been extremely disrupted. So when I said the word the vast majority of our conversations have been constructive and have been partnership conversations, that's totally accurate. Unfortunately, there is a small number of those that haven't been. And the reality is that's disappointing and we just have to deal with it on a 1 by 1 situation. And that's part why you've seen us collect almost 70% of our rent is that those have been not a tremendous amount of that. And frankly, the majority of our rental disruption is in the small shop space, which is much more understandable relative to the capital reserves. But for those larger well-capitalized tenant, it is quite disappointing. That said, this is -- it's early. We're still collecting rent today, tomorrow, the day after, the day after that. We don't stop. So we fully intend on collecting that rent. It is an obligation and we'll be professionals, but we will doggedly pursue it.

[Operator]

And our next question comes from the line of Christine McElroy with Citi.

[Christine McElroy Tulloch, analyst]

To just follow up on Alex's question. I know we're talking a lot about collection by tenant category and your disclosure is very, very helpful in that regard. How should we think about collection by geographic market? Like, for example, did Florida have better collection rates than other markets? And in thinking about your Sun Belt exposure, in terms of potentially shorter closure periods than coastal, how do you think about the relationship as we move forward between rent collection and time period that the stores were closed?

[John Kite, executive]

Christy, it's interesting. And one thing that's true to all of the questions, all of the answers. It's early in this process. And true also that the state-by-state and also, frankly, in some cases, city by city, county by county, there are different opening procedures, opening rules. I'm sure you're like us that it's quite confusing, and some of this is left to interpretation, and there will be no perfect way to play this. That said, clearly, geography matters. And the way that this unfortunately has presented itself is very concentrated, in particular, urban geographies that is going to be more difficult than potentially the southeast, as you mentioned. But I think every city is different, and we're early. So our collections have been, quite frankly, pretty evenly spread out. It's really more about the type of shopping center itself at this point. But I do think long term, there likely is potential impact as it relates to the differences between livability, so to speak. But it's way too early to really project anything. And I think it's probably way too early to try to create run rates on anything or to think that the way that shopping is done has changed forever. We're not big believers that it's -- when you're kind of in the fog of war here, we just have to do what we have to do kind of inch by inch. And then I think over time, we'll see how this evolves. But we're very happy, I should say, with the composition of our portfolio. And when we did the asset dispositions that we did over the last 2 years, there was a clear focus on where we wanted to end up.

[Christine McElroy Tulloch, analyst]

And then just recognizing that you haven't made a decision on the dividend yet. Can you discuss some of the factors that the Board will be considering in regard to whether or not to suspend or potentially cut the dividend? And I recognize you don't want to talk about May rent collections yet, but how much of a factor will that be in sort of that decision-making process?

[John Kite, executive]

Sure. Yes. We do have an upcoming Board meeting. And obviously, the dividend will be discussed at the meeting. And as you know, it is a Board-level kind of conversation and decision. I think there'll be a multitude of factors that the Board will look at. Obviously, again, we're in this time frame that we're very disrupted and trying to kind of figure out what the length of it is, is very difficult. So the factors will be, obviously, the liquidity position that we're in, the cash flow projections that we have, the collections that we have. And I think all those will be taken into consideration as it relates to what to do this quarter and going forward. I mean -- but I do think time is your friend right now in the sense of seeing how this evolves. I mean, literally, day by day. So we do have some time. We will take a look at it, and we will present all that data, and a decision will be made.

[Operator]

Your next question is from Floris Van Dijkum with Compass Point.

[Floris Gerbrand van Dijkum, analyst]

The question I had was regarding the -- obviously, you have this loan program to augment or to help your -- some of your tenants. Can you provide an update on the applications for PPP loans and the response that your tenants have gotten in that? And how you think your program, is it targeted to specific tenants? Or is it all tenants in your portfolio are eligible?

[John Kite, executive]

Sure. I mean as it relates to PPP, overall, Floris, frankly, it's been very good for the tenants that we have that had been able to access it. It's difficult to know exactly who's accessing. I think what we can see is that those that have, have a high correlation to having paid April rent. So we're a believer in the program. One of the reasons that we ended up rolling out our own program was -- I'm not sure that it was a supplement or something to put into place that would bridge those that aren't able to access it, I think it was more of a realization that it's going to be almost impossible for a single government program to really reach all of its intended recipients. So for us, it is -- that's why that we made it -- that we made the ability for a tenant to borrow up to 3 months of total operating expenses with really no limitations on what it'd be spent on. So we believe it's a great addition to PPP, and we're big fans of the PPP having been kind of reloaded in terms of the capital amount. But one of the concerns also was that it only covered 2.5 months. So perhaps our plan will help some of the smaller tenants be able to get to the other side of the bridge, as we like to say, that they otherwise wouldn't. So overall, the demand -- I think that was your other question. We see it as robust in both the PPP plan -- lending program and our own.

[Floris Gerbrand van Dijkum, analyst]

Great. I guess maybe one follow-up question for me is you guys took some reserves, obviously, on the bad debt and also on the straight line. Maybe walk us through your thinking behind that and the reasoning and how you look at that going forward?

[John Kite, executive]

Heath, do you want to take that one?

[Heath Fear, executive]

Yes. Yes. Yes, sure, I'll take that. I mean on the straight-line reserve, really 2 things to think about. First, this reserve represents our continuing desire to be conservative, especially in this current environment. And second, this is really what I'll call accounting noise. It's a noncash write off. It's a receivable that depends on our ability to realize on rent escalators in the future. So we did an analysis. We looked at areas that we felt would be disproportionately impacted by COVID, and that's the number -- the $2.9 million number is a number that we came up with. Again, it's conservative. It's a noncash item, and I'm fairly confident you'll see a bunch of our peers take similar charges in the next quarter. We decided to take them this quarter. As far as the bad debt acceleration, listen, we always do a tenant-by-tenant analysis. And we had some certain receivables in March that -- but for COVID, we probably would have not realized them as bad debt. But when we looked at the landscape ahead of us, I said, you know what, it will be a conservative thing. So we realized another sort of $200,000 of bad debt that, again, we wouldn't otherwise but for COVID, and that $200,000 translated into 40 basis points of same-store NOI. So again, it's just this philosophy of trying to be conservative in this new environment.

[Operator]

Your next question is from Todd Thomas with KeyBanc Capital Markets.

[Todd Thomas, analyst]

First question, John, thinking about leasing and sort of a post pandemic environment here. So fitness, food, entertainment, these were some of the categories that were active in taking space prior to the pandemic. So how are you thinking about leasing demand going forward? I mean, inevitably, even in a normal environment, a percentage of tenants don't renew and look to move locations for various reasons and space becomes available. So have you started to field calls from users or think about how you might backfill vacancies over the next few quarters? If you could shed some light on conversations, that would be helpful.

[John Kite, executive]

Sure. I'll start and have Tom add to that. Look, I think overall, as I said a minute ago, it's so early in the process for us to try to start to think through what does the world look like on the other side of this and how damaging or non-damaging will it be. It's very difficult, almost impossible, I would say, to rationally speak to that right now. I will say that, look, every one of our retailers, and if I didn't say this, I should have said this more in an emphasized way, are battling and doing everything they can possibly do to get to the other side. And we want to do everything we can possibly do to help them do that. So as it relates to those guys like restaurants and the service side that I guess you're referring to, I mean, I have seen -- I have been so impressed with the creativity that I see in our portfolio, particularly in the restaurant section -- or sector. And I think there's going to be some great things that come out of this that will actually grow sales in the future. But as it relates to guys right now, Tom, maybe you can talk a little more about the guys that we're talking to are actually who are pursuing us in pursuing space.

[Thomas McGowan, executive]

Absolutely, Todd. First of all, we're in a nice opportunity right now talking to every national retailer. I mean that's one of the things this process has brought is we're in constant communication with them at high levels, understanding their business, understanding what's going to happen as they come out. There are soft players that are very bullish for '21, feeling that this plays into their hands even further. So we are having conversations, productive conversations in that regard. And then we're being very measured as it relates to our tenants that are under construction and in the process of opening, making sure that we get them to an opening point that makes sense. And if that may be pushing back 30 days, et cetera, we're going to do that because it's in the best interest of Kite as well as the tenant. So as John mentioned, this will evolve, but we're finally starting to see some glimmers of interest coming out of the tenant base.

[Todd Thomas, analyst]

Okay. And then as retailers begin to reopen and restrictions ease and sales recover, are you having conversations with tenants about structuring leases and rent to be more variable in nature, I guess, sales-based or otherwise for a period of time or until certain hurdles are met? Is that part of the discussion that's ongoing now?

[John Kite, executive]

No. I mean our -- as I said on the prepared remarks, the only thing that we have done is deferrals for a period of time that get paid back in a very quick period of time. So we aren't currently and don't anticipate that we would look to fully restructure at all leases. I've seen some media stuff about that, and that's just, frankly, it doesn't really work that way. It's just not -- I don't see that in our portfolio. That's the one good thing about having a very strong open-air portfolio is we continue to believe there will be demand for these spaces through the various cycles of this. And if anything, the format that we deliver the retail product in is a very favorable format in a new world. So long answer, but no, we don't foresee that being a big part of the future.

[Todd Thomas, analyst]

Okay. And then just, Heath, on the $300 million draw on the line. Is there anything specific that you're looking for to gain confidence in paying that down? I guess, how should we think about that? There is a cost to that money. So in terms of the timing or process to pay down the line balance over time, what should we be expecting?

[Heath Fear, executive]

Yes, I think just when the world feels more normalized. And whether that's a pay down over time as things start to adjust and tenants start to come back online or whether that at some point, we just say we'll send the entire $300 million back, again, too early to tell. But just like our peers, we just felt this was an appropriate amount of money that would obviously be sufficient to allow us to continue for the foreseeable future. It's a level of drawdown that gets us very comfortable in our covenants. So again, we'll see. Obviously, incurring the additional interest expense is something that we don't want to do. But we -- based on the fact that the rate is so low, we think this is really cheap insurance. And again, we'll see how it goes.

[Operator]

Your next question is from Chris Lucas with Capital One Security.

[Christopher Lucas, analyst]

Actually, just, Heath, a follow-up question to Todd's question about the line of credit. How is the borrowing base for that determined? And is that a quarterly or annual or trailing test?

[Heath Fear, executive]

It's a quarterly test, Chris. And the borrowing base, it's $600 million, which you'll see in our Q. Our current maximum borrowing base right now is something like, I don't know, call it, $585 million. So again, it's a quarterly test. It looks at our unencumbered assets. And right now, we're very, very close to being able to take the maximum $600 million.

[Christopher Lucas, analyst]

Okay. And then I guess, John, just curious on your disappointing conversations with some of the retailers that are in a position to pay rent. Were any of those retailers surprising in terms of who makes that list that you -- in previous conversations, wouldn't have expected that sort of hardball tactic?

[John Kite, executive]

That's a creative way to try to get me to say who that was. I like that, Chris. Yes, there were a couple on there that were quite surprising, and frankly, opportunistic. That said, I don't want to make it sound like that is a big part of the universe, but there is a small part of that universe that is definitely taking the tact. It's an aggressive tact that is something we're going to have to deal with, and I don't think that's unique to us. I frankly think we, based on our relationships, had a lot less of those maybe than others. But yes, there's a couple out there that are quite surprising.

[Thomas McGowan, executive]

And part of that is we set pretty clear parameters of being able to negotiate with these groups. And that doesn't mean there weren't conversations. They simply didn't meet the criteria that we felt was being fair and equitable.

[Operator]

And your next question is from Craig Schmidt with Bank of America.

[Craig Schmidt, analyst]

I just wondered, what percentage of the tenants are you in active discussion for rent deferrals? And what are you generally targeting for your payback period?

[John Kite, executive]

Well, as you can see from what we've disclosed, obviously, having collected the majority of the rent, it's not a huge number. But -- so I don't think we're going to get into it. I think we did disclose in our investor presentation that we were pursuing 25% approximately. So you should assume that that's in that range, Craig.

In terms of the terms, I don't think we're going to get into that either. But suffice to say, it will -- by the time we report a quarter from now, it'll be a little more clear. But it's been very, as Tom said, it's -- we have a very specific, basically, offer that we're willing to do, which is very short term. I would just tell you, it's very short term in nature. And frankly, the great majority of the tenants understand that because as we roll out these openings, I mean, quite frankly, where we are literally today from where we were when we started these negotiations is radically different in terms of the number of tenants that are going to be open.

[Heath Fear, executive]

And Craig, I just want to add on, to the extent that we're doing these short-term offers, I want to make it clear, none of them are abatement. Any kind of accommodation that we've discussed with our tenants, it's strictly in terms of deferment.

[Craig Schmidt, analyst]

Okay. And then I just wondered, given the COVID crisis, are you seeing an acceleration or an extension of your ability to offer curb side services to your consumers?

[John Kite, executive]

Sure. Tom, you want to hit that?

[Thomas McGowan, executive]

Yes. We will definitely address that, and we're having very specific conversations with our national tenants about that. And we're going to take a very cooperative approach, a very balanced approach that our marketing teams are working on to make sure that we have these clusters in place and to make them as efficient as possible for the retailer. So we want to make sure that it doesn't just address nationals, but also address smaller tenants, if that need exists.

[Operator]

Next question comes from the line of Marni Georges with RGS (sic) [ RJF ].

[Marnie Georges, analyst]

So just looking at operations, I guess, directionally, how should we be thinking about the operating expenses you have just in context of all these tenants that remain closed or that are operating with reduced operations? And then, I guess, how much rent could you see falling off before some of those costs on your end might become an issue?

[John Kite, executive]

Heath, do you want to hit that?

[Heath Fear, executive]

Sure. Listen, we're obviously -- we're reviewing operating expenses in every part of the geography of the income statement. I will tell you that there is opportunity for us to pull back some expenses, 60% of our leases are on CAM, 40% of our leases are on fixed CAM. So some of it will benefit our tenants, some of it will benefit us. But one thing when we're thinking about expenses is that we're not going to compromise the quality of our shopping centers. We're not going to run our shopping centers in a way that's going to be anything less than first class. So yes, there are opportunities. They're being reviewed. We're being prudent and mindful and pulling back where appropriate. But again, not at the expense of the quality of our centers.

[Marnie Georges, analyst]

Fair enough. And then looking at capital allocation a little bit more broadly. Clearly, you've taken steps to enhance your liquidity position just given the uncertain environment. And circling back just recognizing it's ultimately a Board decision, would you consider deferring the dividend, doing some kind of lump sum payment later in the year when there's better visibility? What about share repurchases? What would you want to see before you start looking at the redevelopment pipeline again?

[John Kite, executive]

Well, sure. As I said on -- as it relates to the dividend, it's premature for me to talk about it because we've got an upcoming Board meeting and it will be discussed, and it's a full Board-level conversation. But as I mentioned, there's a multitude of factors that we'll be looking at. And we're obviously in an extremely unique period of time. So I think we would just say stay tuned, and we will be back around on that. As it relates to CapEx and as it relates to stock buybacks, basically capital allocation, cash is king. Capital preservation is a fact of life right now. And we've done a great job very quickly doing that and getting ourselves in a position. And frankly, everything we did last year put us in the position to be very liquid today. And when I look at the space and I look at the liquidity versus fixed cost, we're in a really, really good place. So I think we'll just have to see and take -- it's going to take a little bit of time to see how this plays out over the next several months. But we believe that we're very good capital allocators. And when the time is right, we will look at redevelopment. And the idea -- it's funny, you also mentioned stock buybacks in there and we had a lot of questions about that several months ago about why. And it's just kind of why we didn't. And it shows that it's very difficult when you're an operator to be looking at deploying capital into stock buybacks unless it's a tremendous amount of free cash flow. So I think that's, right now, not high on our list. But as we evolve and come out of the other side of this, we're going to be in a very good position as a company to take advantage of opportunities. Let me just say that. And each one of those things you mentioned are potential opportunities.

[Operator]

Your next question comes from the line of R.J. Milligan with Baird.

[Richard Milligan, analyst]

John, can you talk about how you think about lending to tenants that obviously need the short-term relief versus lending to tenants through the Kite Small Business Program that probably won't make it in the long term anyway. How are you having those discussions?

[John Kite, executive]

Sure. Well, let's just first say that every tenant in our portfolio, we have already fully underwritten. So when we're saying that we're going to roll out a Small Business Lending Program to the affected small businesses, we know the credit of those companies very well and have already underwritten them. What we're looking at is the changes that have happened to them and whether or not we deem that that is temporary because of the COVID crisis and because of the mandatory shutdowns, other -- or whether we believe that the business will have a very difficult time ever recovering. So our intention isn't to just throw money out the window like Helicopter Ben, I guess. Our intention here is to make smart loans that we believe will help these businesses get to the other side and flourish. And frankly, we believe that our relationships that we have will obviously be strengthened through that.

But of course, when you're in the process of lending money, no different than when you're in the process of lending TI dollars, some of it doesn't get paid back. And so you do have a credit loss associated with things that we lend out. But we believe that we'll be very good at that. And since we already know these guys, R.J., I feel pretty good that we will be in good shape there.

[Heath Fear, executive]

John, I'll just add on -- listen, R.J., this is really an occupancy preservation exercise, right? So when we're underwriting these tenants, one of the things we're asking ourselves is how good was the business before? How good do we think that business is going to be in a post-COVID environment? So like John said, this is just not throwing good money after bad. This is really trying to make a long-term smart play that will leave tenants in place that we believe in and avoid us from having to retenant the space. We did the math in our investor presentation, the breakeven is fairly compelling. So that's the -- again, the purpose of this program is occupancy preservation.

[Richard Milligan, analyst]

Got it. And I guess further on that point, given the long-term approach, which I think is appropriate in terms of you want to maintain occupancy and in the future, not only do you have retenanting costs, but maybe a question of actual demand for space to even be able to retenant it. So how do you think about -- and I know you haven't granted any rent forgiveness, but why isn't that? Why do you think that isn't on the table for Kite and maybe some of your peers in terms of trying to preserve that longer-term occupancy?

[John Kite, executive]

Well, I think, look, I think it's a very different thing when you talk about forgiveness/abatement versus deferral. The reason that we won't and aren't giving abatements is that we strongly believe that this is a situation that is a point in time. And anyone that tries to come to us and take that point in time out too far, even with a deferral, let alone abatement, we strongly disagree with that. Because this is changing by the minute, by the hour, by the day. And we're, frankly, as you know, we are kind of down in the dirt very intensely, and we understand what's going on. And frankly, this is a battle of inches right now, and we're trying to gain inches every day. And eventually, that will be feet and yards, miles. So when you start getting put in the position of trying to have tenants tell you that this is going to be a difficult situation from 6 months from now, no one knows that. So that's kind of why, R.J., we're keeping this in a very short window because that window can change dramatically. And as we've all seen, it does. And we're optimistic that it will change for the better in the future.

[Operator]

And your next question comes from the line of Tammi Fique with Wells Fargo Securities.

[Tamara Fique, analyst]

Just wondering, are you seeing differences in rent collections between power centers and your more traditional grocery anchor centers within your portfolio?

[John Kite, executive]

Of course, we're seeing differences in different types of centers, Tammi. I think when you look at it, we're really looking at it more from the tenants themselves, the categories themselves, than we are at the different centers. And because of the fact that we've gone -- frankly, the foresight we had in the asset sales last year, the $550 million of properties that we sold, we've significantly changed the dynamic of our portfolio and it's obviously reflected in our collections. So it's really more about that. And I've always said this, the definitions are a slippery slope. There could be something that someone defines as a power center that you could get 100% rent collection on it, and there could be a grocery-anchored center that you only get the grocer. So -- and that -- these are extreme examples. But I would tell you that it's really balanced. It's really more about the categories and really about the quality. And I think that's why we've done well is the quality, and the people that we have and the relationships that we have.

[Tamara Fique, analyst]

Got you. And then I was wondering, there has been historical discussion about mall tenants moving into strip shopping centers. I guess I'm just curious what your thoughts are on that at this point? And I guess, do you have a sense for what the occupancy cost differences are for tenants that have made that move?

[John Kite, executive]

Sure. I mean, look, again, it's early to try to look at things in a way that are changing forever. But no doubt that our -- as we've always said, our kind of product is a very effective delivery system for retailers and it's so important today. And obviously, if this is -- if there's anything sustained from this event, from this crisis, it will help our product because of its accessibility, the ease to pull up, get something, leave, the ease to walk from one shop to another and be outside while you're doing that. There's lots of things but really, one of the biggest factors that you hit upon is the cost associated with it for the retailer. That's not to say that this is binary. I don't believe it is. I think that all types of retail will ultimately be a player. It just comes down to the real estate, and it comes down to the dirt. If you have good dirt, which we do, you're going to do fine. And there's plenty of malls that have good dirt. It's really more about that. But yes, we do think it's a continuing trend where we'll see people want to try out our centers that haven't in the past. Tom, you want to?

[Thomas McGowan, executive]

Yes. I would say the only other big difference is just the sheer number of trips. So a mall, you may have a far limited number of trips per week. But in an open air-type scenario, that could increase 2x just because of ease, so I think that's a big part of it.

[Tamara Fique, analyst]

Got it. And then I guess with the new leases that you have signed since the end of the quarter, I guess, what are you guys seeing in terms of spreads? And I understand it might not be necessarily indicative of what holds true for the remainder of the quarter. But just curious if you guys are seeing anything there that we can pursue?

[John Kite, executive]

I don't -- Tammi, I don't think there's anything happening right now that's indicative of a significant change relative to leases, spreads. It's early. We obviously haven't disclosed anything yet on that. But I mean, the reality is this quarter that we're currently in is going to be different. So who knows how -- who knows what it is. I'm trying to emphasize that I would not look to extrapolate anything or try to run rate anything that happens this quarter other than the data that we're trying to give you as best we can relative to the collectibility of rents based on the strength of our real estate.

[Tamara Fique, analyst]

Okay. And then just one last question. I'm curious when you think you will be in a position to be able to provide earnings guidance again?

[John Kite, executive]

Again, don't know. I think we're just going to have to see how this evolves, and we'll be as transparent as we possibly can, but right now, as I said, it's day-by-day and inch by inch. So I can't tell you that yet either.

[Operator]

[Operator Instructions] And there are no further questions at this time. Mr. McCarthy, I'll go ahead and turn the call back over to you for closing remarks.

[John Kite, executive]

Okay. We just want to again thank everyone for joining us. We appreciate and value all of our relationships, as we said, very much, and we hope that you all stay healthy and safe. And we look forward to getting to the other side as soon as possible. Thank you.

[Operator]

Ladies and gentlemen, this does conclude today's conference call. Thank you for participating, you may now disconnect.