Quarterly report pursuant to Section 13 or 15(d)

COVID-19 Pandemic

COVID-19 Pandemic
6 Months Ended
Jun. 30, 2020
Risks and Uncertainties [Abstract]  
COVID-19 Pandemic COVID-19 Pandemic

The current novel COVID-19 pandemic has had, and will continue to have, repercussions across local, national and global economies and financial markets. COVID-19 has impacted all states where our tenants operate their businesses or where our properties are located and measures taken to prevent or remediate COVID-19, including “shelter-in place” or “stay-at-home” orders or other quarantine mandates issued by local, state or federal authorities, have had an adverse effect on our business and the businesses of our tenants. The full extent of the adverse impact on, among other things, our results of operations, liquidity (including our ability to access capital markets), the possibility of future impairments of long-lived assets or our investments in unconsolidated joint ventures, our compliance with debt covenants, our ability to renew and re-lease our leased space, the outlook for the retail environment, bankruptcies and potential further bankruptcies or other store closings and our ability to develop, acquire, dispose or lease properties for our portfolio, is unknown and will depend on future developments, which are highly uncertain and cannot be predicted. Our results of operations, liquidity and cash flows have been and may continue to be in the future materially affected.

Our outlet centers have not closed throughout the pandemic, but have been operating under reduced hours since late April when the first stores began to reopen. Our outlet centers may experience additional short-term store closures as retailers implement additional safety protocols at specific locations impacted by increased exposure to COVID-19.

While our outlet centers remained open, retailers began closing their stores in our outlet centers in mid-March and by April 6, 2020, substantially all of the stores in our portfolio were closed as a result of mandates by order of local and state authorities. By June 15, 2020, in store shopping for non essential retail was allowed in every market in which our centers are located.

A number of our tenants have requested rent deferrals, rent abatements or other types of rent relief during this pandemic. As a response, in late March 2020, we offered all tenants in our consolidated portfolio the option to defer 100% of April and May rents interest free, payable in equal installments due in January and February of 2021.

The following table sets forth information regarding the status of rents billed during the second quarter as of June 30, 2020 (In thousands):
Second Quarter Rents Billed: (1)
As of June 30, 2020
% of Rents
Rents collected

Unmodified rents expected to be collected(2)

Rents deferred (3)

Under negotiation

One-time rent concessions in exchange for amendments to lease structure

Bankruptcy related, primarily pre-petition rents

At risk due to tenant financial weakness

Total rents billed

Excludes variable revenue which is derived from tenant sales and lease termination fees.
In July 2020, we collected $9.7 million of these rents.
Includes rents deferred with substantially all payments due in 2021, for which the majority is due in January/February of 2021.

During the three months ended June 30. 2020, we wrote off approximately 25% of second quarter rents, of which 9% is related to bankruptcies 2% related to other uncollectible accounts due to financial weakness and 14% related to one-time concessions in exchange for landlord-favorable amendments to lease structure. In addition, for both the three and six months ended June 30,2020, we recorded a $9.7 million reserve for a portion of deferred and under negotiation billings that are expected to become uncollectible in future periods. Further, we recognized a write-off of revenue of approximately $3.7 million of straight-line rents associated with the tenant bankruptcies and uncollectible accounts. We are closely monitoring changes in the collectability assessment of our tenant receivables as a result of certain tenants suffering adverse financial consequences due to COVID-19 and should our estimates change, there could be material modifications to our revenues in future periods.

Given the economic environment as a result of COVID-19, a select number of our tenants underwent liquidity hardships and filed for Chapter 11 bankruptcy protection in the second and third quarter to date of 2020. Although some of these tenants intend to exit the Chapter 11 bankruptcy process and resume operations, the outcomes of such proceedings are unknown and we are currently exploring leasing alternatives for stores we expect to close. Recent Chapter 11 bankruptcy filings include, but not limited to, J. Crew Group, Inc. (filed in May 2020) and Brooks Brothers, Lucky Brand Jeans, New York and Company and Ascena Retail Group, Inc. (all filed in July, 2020). Substantially all of the rents billed to these tenants during the second quarter (which were approximately 93% of the rents included in the table above under the caption “Bankruptcy related, primarily pre-petition rents”) were written off as uncollectible rent as of June 30, 2020.

In March 2020, to increase liquidity, preserve financial flexibility and help meet our obligations for a sustained period of time, we drew down substantially all of the available capacity under our $600.0 million unsecured lines of credit. In June 2020, we repaid $200.0 million of the outstanding balances bringing the outstanding balance to $399.8 million. Additionally, subsequent to June 30, 2020 through July 31, 2020, we repaid an additional $320.0 million.

We also took steps to reduce cash outflows, including the reduction or deferral of certain operating costs, temporary base salary reductions for our named executive officers and other employees, and the reduction of certain other general and administrative expenses. During the second quarter, these reductions reduced cash outflows by approximately $11.0 million, including $1.0 million of general and administrative and $10.0 million of property operating expenses. In July 2020, we restored the above mentioned salary reductions.

We also deferred our Nashville pre-development-stage project and certain other planned capital expenditures. We paid the dividend that was declared in January 2020 as scheduled on May 15, 2020. Given the uncertainty related to the pandemic’s near and potential long-term impact, the Company’s Board of Directors temporarily suspended dividend distributions to conserve approximately $35.0 million in cash per quarter and preserve our balance sheet strength and flexibility. The Board continues to evaluate the potential for future dividend distributions on a quarterly basis. We expect to remain in compliance with REIT taxable income distribution requirements for the 2020 tax year.