Pennsylvania Real Estate Investment Trust
Q4 2019 Earnings Call Transcript

Published: 26 Feb 2020

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the PREIT Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]I would now like to hand the conference over to your speaker today, Ms. Heather Crowell. Thank you. Please go ahead, ma'am.

[Heather Crowell:]

Good morning, and thank you all for joining us for PREIT's fourth quarter 2019 earnings call. During this call, we will make certain forward-looking statements within the meaning of federal securities laws. These statements relate to expectations, beliefs, projections, trends, and other matters that are not historical facts and are subject to risks and uncertainties that might affect future events or results.Descriptions of these risks are set forth in the Company's SEC filings. Statements that PREIT makes today might be accurate only as of today, February 26, 2020, and PREIT makes no undertaking to update any such statements. Also, certain non-GAAP measures will be discussed. PREIT has included reconciliations of such measures to the comparable GAAP measures in its earnings release and other documents filed with the SEC.Members of management on the call today are Joe Coradino, PREIT's Chairman and CEO and Mario Ventresca, our Incoming CFO.I'd now like to turn the call over to Joe Coradino.

[Joe Coradino:]

Thanks, Heather, and Good morning everyone. We're nearly two months into 2020 and as we look back where we were a year ago, it feels a little different. We're beginning to believe that the headwinds are slowly subsiding, and the work we've done positions us to capitalize on an improved operating environment.With last night earnings release, we announced completion of transactions confirming that we were on our way to shoring up our balance sheet. The effort includes selling over $300 million in assets in the form of non-income producing land for multifamily and hotel densification, operating out parcels and a sale leaseback of five mid-tier properties.We entered into this sale leaseback transaction for 5 properties that will deliver $153.6 million in proceeds netting approximately $57 million in liquidity. The transaction is structured as a 99-year lease with an option to repurchase. The agreement also provides for release of parcels related to multifamily development is subject to ongoing lease payments at 7% with annual escalations.The land sales represent phase one of the multifamily densification plan. We've signed purchase and sale agreements with four buyers on seven properties for $125 million. This phase will include 3,450 of the 5,000 to 7,000 units buildable. Upon receipt of entitlements, we will close on these lands sales, which will allow us to reduce our leverage levels.Note that, this represents only half of our land available for densification and we expect to monetize the balance as part of phase two. Additionally, the Company has 2 hotels and 12 additional out parcels under agreements shale, which are expected to net an additional $12 million in liquidity.These transactions demonstrate our ability to efficiently access internally generated capital and together with potential modifications to our credit facilities covenants create a runway needed in order to complete execution of our business plan.The Company has had productive discussions with its lenders with a goal of modifying its debt covenants in the short-term through September 30, 2020. To avoid covenant violations and ensure compliance with its obligations, the Company is also in discussions to modify the terms of agreements on a long-term basis.In the near-term, we expect to experience stress against our leverage ratio, fixed charge coverage and our unencumbered debt yield covenants. And in abundance of caution, we notified you of potentially exceeding our covenant limits. However, while our ratios are tight right now, we're currently in compliance with our loan covenants and expect to modify then by the end of March.The bank group has acknowledged the work we have done to shed non-core assets including 18 underperforming malls through which we raised nearly $900 million. This capital was redeployed into our value-creating redevelopment program, wherein we took action to aggressively reduce our exposure to department store consolidation.We have unquestionably differentiated our portfolio and are at the early stages of recognizing the benefit of our efforts. We've created a company that can internally raise over $300 million and we expect this to aid our discussion with the Bank Group bringing about near-term resolution.We're in a business that has in the past few years experienced volatility from a disruptive business model. There are and will always be retail bankruptcies, liquidations and closings, but we've taken proactive steps to manage the disruption. We sold underperforming properties and those 18 malls that we disposed of, we've seen over 40 department stores closed. It would not have improved and allocate capital to assets when we pay it to obsolescence.Conversely, of Macy's 125 announced store closings, we will have only one in our portfolio, a testimony to the quality of the portfolio we've created. Another step we took was diversifying our tenant base. In fact, today 47% of our non-anchor space is leased to non-mall uses, including dining and entertainment, health and wellness and off-price merchants which are traditionally found in open-air centers.These uses motivate the modern consumer and allow us to serve more customers. As stewards of stakeholder capitol, we firmly believe that serving the customer more enhance the value of our properties, benefiting all of our constituencies over the long-term. We executed on this aspect of our plan by being the first to proactively take back department store space.We've replaced 13 department stores in three years, contrast to our peers who are looking at well over two dozen vacant boxes. We've executed on this action plan definitely and have dramatically improved the credit of our underlying cash flow stream, having doubled our commitment from TJX, Burlington, Dave & Busters, Darden & Regal since 2012.Given today's announcement of over $300 million in capital raising initiatives, our balance sheet is sailed in the right direction. As we look towards 2020, we believe we're a better position to deliver on expectations than in 2019. We recognize this is an optimistic view and at the same time don't think you'd want someone else sitting on this call that doesn't believe in the business.We're on a mission to prove mall to have a bright future, with a sole operator of mass appeal, economically accessible retail and entertainment properties, with admirable underlying demographics and high barrier to entry markets, and we are confident in our position as an innovator at the forefront of shaping consumer experience positions as well as we move towards solid ground in retail.Fashion District, Philadelphia, Mall at Prince George's and Woodman Mall are three high-touch redevelopments continue to generate interest from consumers and tenants at are rapid pace. Both The Mall at Prince George's and Woodman will be beneficiaries are of our densification program.At Fashion District traffic is robust with over $4.8 million shoppers since September, 2019, as exciting tenants continue to open and build momentum with 47,000 square foot industrious co-working facility next inline. The project is over 80% leased and 90% committed. Notable, recent additions to the property include outlet tenants, Armani Exchange and Eddie Bauer; full price retailers Sephora and Torrid; and experiential destinations, AMC Theaters, Round One, Wonderspaces and REC Philly.In the next few months, we will welcome more new to Philadelphia tenants including Kate Spade, DSW, Windsor, YOYOSO and Clair de Lune. These exciting retail brands will be joined by international fashion of retailers, Prime Mark. At Woodman Mall, we continue to see traffic growth in the double-digits. And so, our comp stores has pop up over 10% to over $600 per square foot following the opening of the expansion wing in October.With the entire property benefiting from the short after additions, we expect the excitement will continue as we welcome Sephora and White House Black Market this spring. There continues to be a tremendous opportunity for this property to continue to exceed expectations as we deliver more aspirational brands solidifying it as the winner of the consumer dollar in Grand Rapids.We have a number of anchor replacements so to come online this year with two Michael's stores opening at Plymouth Meeting and Moorestown malls, where they round out former Macy stores. Deck's Sporting Goods will replace a former Sears at Valley mall. Sales at the property are up 5.9% in 2019.This March, Burlington will replace Sears at Dartmouth Mall, another market dominant asset that has come out the Victor as two competing and closed malls have closed in this market. We're underway with releasing stores closed as a result of bankruptcy.We've executed our lease to replace 93% of the space, approximately half of the backfills are temporary, allowing us to capture upside as the environment improves. We are clear that non-anchor leasing is how we will earnings growth gets back on track, and we're up for the task of introducing new tenants and diverse users throughout our portfolio.And now, I'll turn the call over to Mario who will discuss the quarter and our guidance in more detail. Mario?

[Mario Ventresca:]

Thanks, Joe. From an operating perspective, the key themes that define this year's performance continued to define our operating results for the fourth quarter. The rationalization of tenants store count through bankruptcies and store closings completing our anchor replacement program and backfilling the in line space; as a result of our anchor repositioning efforts, we've benefited from the incremental revenues from tenants that have opened in 618,000 square feet since January 1, 2018.In the fourth quarter of 2019, these new tenants contributed a total of $1.5 million dollars of new revenues to the portfolio and $3.4 million for the year. These tenants will contribute $7.5 million dollars on an annualized basis. Our core mall portfolio, which contributes to nearly 90% of our NOI, continues to deliver metrics that indicate stability and highlight the quality of our portfolio that we've created. From an occupancy perspective, we ended the year at 95.5% total including anchors and 92.9% for non-anchor space.Average gross rents were just under $60 per square foot and occupancy costs are reasonable with room for improvement at 12.3%. Our comp sales are up 5.7% for the year at an all-time high of $539 per square foot. Off note, we now have 8 assets performing at over $500 per square foot and two assets at over $700 per square foot. We outperformed the National Retail Federation holiday sales estimate, with sales growth of 4.2% over 2018 November and December.This absolutely speaks to the positive consumer reception to our asset repositioning and anchor box replacement initiative. We have 425,000 square feet of executed leases in our pipeline for future openings in our same store portfolio, which will contribute $13.1 million of annualized revenues. This revenue will come online and hit P&L towards the back half of the year and annualized into 2021.Renewal spreads have been driven by our wholly-owned asset performance. Our consolidated portfolio significantly outperformed our joint ventures, registering positive annual renewal spreads of 6.7% non-anchor under 10,000 square feet, and 5.5% non-anchor over 10,000 square feet as compared to negative 10.5% and flat respectively for the joint venture portfolio.We secured 8 anchor renewals during the year, comprising 807,000 square feet, bringing our total renewal activity to just under $1.6 million square feet of transactions. Our renewal leasing pipeline and activity is another indicator of significant positive momentum in and retailer commitment to our enclosed mall portfolio.Same-store NOI, excluding termination fees fell outside of our previous guidance for 2019, due to the acceleration of rent relief for a large format, bankrupt tenants over what was previously projected. For the month of December, NOI excluding termination fees for our wholly-owned assets increased by three-tenths of a percent for the month. This positive inflection point supports the guidance I will discuss later on the call.We reported FFO as adjusted of $0.34 per share, compared to $0.51 in the prior period after accounting for the dilution from asset sales. Last year's fourth quarter included the incremental impact of land sale gains of approximately $0.10 per share. During the quarter, we closed on the sale of three outparcels to FCPT and the Woodland REI parcel was closed in January.In the fourth quarter, we also sold our last remaining undeveloped land parcel in our portfolio. During the quarter, we recorded the previously announced $2.7 million gain on sale of the three recently developed outparcels. We have not committed at this point to monetize any outparcels other than the 12 we have under contract to be sold, but we believe these to be an attractive source of capital going forward.Let me now review our capital plan and provide some additional details on our earnings guidance. During the quarter, we spent $49.3 million on redevelopments and department store replacements, bringing the total spend to $183 million for the year. In 2020, we expect to spend approximately $100 million on our announced pipeline projects. We ended the year with $48 million of available liquidity.Based on completed initiatives and those underway, we expect to generate an additional $113 million of liquidity during the year. Last night, we issued guidance and our underlying assumptions for 2020. We expect FFO as adjusted per share to be between $1.04 and $1.28. Our guidance includes a reserve of $2 million at the midpoint and $3 million at the low end for bankruptcies and store closings.We've assumed lease termination fees of between $1 million and $2 million with $1.5 million at the midpoint. In our 2020 guidance, we have assumed land sale gains of $14.4 million to $28.8 million as a result of our densification initiatives. Excluding these gains, FFO is expected to be $0.89 per share at the midpoint.The key drivers of the variants to 2019 FFO are higher interest expense as a result of increased borrowing and redevelopments being placed into service, which equates to $0.13 cents per share, the sale of outparcels which removed from same store NOI in the amount of $0.015 per share. These were partially offset by lower G&A of $0.04 per share and same store NOI growth of $0.01 per share.We expect to realize $3.6 million of incremental revenues from our anchor replacement program in 2020. 2020 store openings coupled with the animalization of rents from major tenants that opened last year are driving our performance. From a balance sheet perspective, we expect to invest approximately $100 million to complete our redevelopment pipeline.This consists mainly of the balance of spending at Fashion District and tenant-specific costs to complete our replacement projects at Woodland, Cap City, Dartmouth and Valley Malls. Our three ongoing Macy's replacement projects at Valley, Plymouth Meeting and Morris Town malls and the cost to complete construction of the Studio Movie Grill, at Willow Grove park.As we work toward the completion of our 10-K, our auditors are reviewing our liquidity position and debt covenant compliance. The current status of ongoing discussions with the Bank Group may impact the auditor's opinion. As we said earlier, we are engaged in productive discussions with our Bank Group and fully expect that this will be resolved before the end of the first quarter.We are a company on the move with a positive trajectory. We have unquestionably improved our portfolio and this progress is manifesting itself in our operating metrics. The progress announced on the capital raising front, provides us with ample liquidity and will serve to increase balance sheet stability. This will provide the runway for the Company to benefit from the valuable platform we have created.And with that, we'll open it up for questions.

[Operator:]

Thank you. [Operator Instructions] And your first question comes from the line of Christy McElroy with Citi.

[Michael Bilerman:]

Yes, it's Michael Bilerman. And if I do an accent, can I do like two questions and pretend to be a two people?

[Joe Coradino:]

It depends what your first question is.

[Michael Bilerman:]

Right, I want to back -- I wanted to start on the liquidity situation and really try to understand the board and management's perspective regarding the dividend, which is, and I respect that you have all these capital transactions that are working. But, you're in a position right now where even though you fully expect to get clearance on your covenants, you're in a tight position. And I'm struggling to understand, why you would maintain 130%, 140% payout ratio this year based on the guidance and not try to pay that dividend and stock, just to retain that capital to be able to execute what you need to execute? And that's, I'm just struggling really hard, why you've maintained this dividend for the last 3, 4 years when you've been so tight, and now are going to be spending money for the dividend rather than retaining any free cash flow?

[Joe Coradino:]

One of the motivation in paying a dividend, and by the way, we haven't -- we thought long and hard about it, difficult decision, has been attempting to balance our share price in light of the disconnect in the public market pricing of the Company. We recognized 20% unusual and we'll continue to take that into consideration as we look at future dividend periods. But with 13 million in leases coming online and FDB stabilizing, our FFO payout ratio net of land sales is about 90%. On AFFO basis, we're about 85%. But Michael, I mean, I don't want to -- I don't want to do anything other than appreciate the question and understand the point.

[Michael Bilerman:]

I mean land sales are not core income, right. Dividend is generated from core operations. Land sales are helping you gain some liquidity from a debt perspective. I guess I'm still struggling to understand, why maintain a $0.21 quarterly dividend when you're free cash flow before land sales is less than that, right. You are increasing your leverage even though I recognized 80 million shares and so the dividend is not massive, but you're putting yourself more in a box for doing that, that's why I struggle to really understand why even maintain in the first quarter, the most recent dividend when it was going to be above a 100% excluding the land sales?

[Joe Coradino:]

I appreciate the point. I think I've given you the answer that, the board and management has reached a decision based on.

[Operator:]

Your next question comes from online of Ki Bin Kim with SunTrust.

[Ki Bin Kim:]

If you pursue the sales leaseback, I would think lenders would probably treat that as that that would certainly push you over those limits. So, it sounded like you're pretty confident that you'll get lender modifications by the end of the first quarter, which is only a month away. So, what are common practical...

[Joe Coradino:]

Yes, let me give you -- let me sort of take a step back here. First, we're in compliance with all of our covenants today, that's first and foremost. We want it to be transparent and we wanted to just lay it out there. It probably will have a negative effect, but it's something that we see a solution in the near-term by the end of the month. We've been in ongoing discussions with our lenders. So, it's a very positive discussion.We were in Charlotte on Monday and the meeting ended with the bankers congratulating us on the work we've done in our portfolio. We expect to bring it to resolution. I don't really see the, I mean, obviously the transaction you're speaking about will impact one of our covenants. But I think the converse of that will bring a significant capital to the Company. I know in one of your own your report you mentioned that it was expensive capital. At 7%, we view that capital as not dissimilar to a 5% loan with 20 year amortization.

[Ki Bin Kim:]

Yes. So, before I get to that point, would the lenders require a higher interest rate? Is that the likely outcome? Is that in your guidance as well?

[Joe Coradino:]

Well, at this point we're not prepared to discuss the terms of our agreement with the lenders.

[Ki Bin Kim:]

Okay.

[Joe Coradino:]

We only expect to bring it to resolution.

[Ki Bin Kim:]

Okay. And when we wrote that it was expensive cost of capital, we're comparing it to the relative other options you have available, like cutting the dividend, which brings me to my second question. I'm just really trying to understand the rationale for keeping that dividend. Is it because at this point given what everybody markets are and how they're treating malls and REIT stock? From a real practical standpoint, the possibility of a shareholder return without the cash in hand dividend deal fairly limited. Is that the primary reason to keep that dividend, because at some point, there's got be a tipping point, where it's less about shareholders and dividends and more about company going concern and employees and things like that? I'm just curious about when you reached that tipping point?

[Joe Coradino:]

Well, no to your question, is that the reason behind it? And I think I answered this question for Michael. I mean essentially, we saw a disconnect between our share price and the value we created and we kept the dividend in place. As we move forward, we understand it is a pretty high coupon and it's a pretty high coupon and it's something we'll take into consideration with our board, certainly prior to the next dividend payment.

[Operator:]

Your next question comes from the line of Michael Mueller with JPMorgan.

[Michael Mueller:]

I guess first of all you talked about CapEx spend of 125 to 150 million this year, some type of redevelopment, I guess what's the split between recurring and redevelopment and then I guess if we look at Page eight or the supp with the detailed guidance break down, how do you have ongoing redevelopment activities but your CapEx goes to 0 on Jan 1 or your capitalized interest goes to 0 on Jan 1?

[Mario Ventresca:]

Mike, hi, it's Mario. We split between the two capital numbers. We proactively managed our capital expenditure program, looking forward into 2020. When we prepare the 2019 budget, recurring 10 allowances are roughly $20 million plus or minus, recurring CapEx was somewhere in the $6 million to $8 million range.

[Michael Mueller:]

Okay, so if you have 130 million of recurring 100 to 125 of redevelopment development. What is your capitalized interest go away completely in 2019 or 2020?

[Mario Ventresca:]

We're essentially, we've been capitalizing the interest on the redevelopment spend. You'll see it in the 2019 representation on the guidance it was roughly $13 million. We expect to bring all of the projects that are currently under redevelopment into, placed into service during the year with darkness in the beginning of the year with partnered with the Burlington open and through mid year with Studio Movie Grill which is expected to open late in the first half of this year.

[Michael Mueller:]

Okay, so literally beginning in the first quarter it goes to zero then is the way to think it.

[Mario Ventresca:]

Yes.

[Michael Mueller:]

Okay. And then I think on the under sale leas back transactions, can you give us a sense as to what sort of investor did that transaction with. I think you said, it was 5 mid-tier malls. Any color on what those malls were?

[Mario Ventresca:]

I mean, it's essential.

[Joe Coradino:]

Mike, this is Joe. I mean it's essentially a well capitalized fund that has done this sort of thing before and someone we believe is, we've had this feel in hand for months and really sat on it and thought about it and sat down and thought about it and signed the day before yesterday. We think it'll be a relatively, 60, 90 days, maybe 120 is the outside the closing.

[Operator:]

And your last question comes from the line of Christy McElroy with Citi.

[Christy McElroy:]

So, I want to just sort of come back to sort of a dealing with your covenants your lease, the land, a modification, at least from the release, it sounds like that's only a short-term modification up until September. And obviously, you have these liquidity transactions that are still subject to due diligence, customary closing conditions, securing entitlements, so that capital that I would say is at risk, right? Those deals are not closed yet. You get to September 20th, things may not be better, you have massive amount of maturities coming in '21 and '22, as a percentage of your total. I guess, how should we think about everything that's going on?

[Joe Coradino:]

You should think about it as, we have already begun discussing the long-term transaction and anticipate having that in place well before that exploration.

[Christy McElroy:]

And how should we think about the security or the cost of getting to these transactions?

[Joe Coradino:]

You mean the fact that we're in the midst of a negotiation right now, I'd rather not discuss the terms of the transaction.

[Operator:]

And your next question comes from Vince Tibone with Green Street Advisor.

[Vince Tibone:]

Hi. Good morning. Just one more on the covenant point here, I'm just curious if you see it as part of the long-term solution, a potential equity raise being required either by the lenders? Or is that something you would consider to get under compliance on a longer-term basis?

[Joe Coradino:]

It's not under consideration at this point. Remember, there's a couple of things I think first off, $300 million plus is a significant amount of capital. Our foreseeable capital expenditures are closer to 100 million. But also, the residential piece is Phase 1. So, there is a second comparably-sized transaction out there, that we have the ability to call on and also we've sold off about $30 million in outparcels.We sold off 10 -- we're about to close on an additional 20 with a FCPT. As we have taken back these anchors, one of the advantages of doing that is when you take back the anchors, you no longer need anchor approval to put in outparcels. So, we've created a significant inventory at this point of outparcels.So, we have significant levers at our disposal through the multifamily and the outparcels to bring in sort of organically created additional capital and don't really see an equity raise in the our future at this point. I mean maybe all of the analysts in the call give us a buy rating as a result of the capital we've raised and we'll be able to see a significant increase in the share price. But short of that, I think right now we're going to focus on raising capital organically.

[Vince Tibone:]

Got it. Thanks. And then one on the sale leaseback transaction, so the initial payment, looks like just shy of $11 million. What's the coverage on that in terms of what those properties are generating from an NOI perspective? And just in terms of maybe let's say a downside scenario potentially, if these malls are to deteriorate and let's say the NOI declines below the ground lease payment. Is there any put option on this type of transaction as there would be with a secured mortgage debt? Or how would that work, let's say, if the NOI the property sell below the payment? Are you still obligated at the corporate level to pay that rent payment? Is there any ability to almost just put back the mall to them? If you can just maybe talk about both those factors a little bit, that'll be helpful.

[Joe Coradino:]

Yes, Vince, I don't want to get into too many of the details. The buyer is in due diligence at this point, although they've visited all the properties and they're very comfortable with the real estate. I mean, we talked about the quality of the assets that the decel will apply to. These are solid, middle market and actually one asset located outside of Philadelphia in Morristown.New Jersey, we have Valley Mall where we just invested significant capital. The payments, as you said, are about $11 million 10 in three quarters on the 7%. We have an option to repurchase the lane underlying the properties. There is no put at this point in time are included in the transaction. But they're really the details that were prepared and discussed at this point.

[Operator:]

Your next question comes from the line of Ki Bin Kim with SunTrust.

[Ki Bin Kim:]

Can you just provide some more details around the sale leaseback transaction, multifamily land sales? Just curious about the language, obviously, all deals are subject to due diligence and other conditions. But I'm just curious, if this is something you or if this is the same thing that we've been expecting from Penn REI for the past couple of quarters. So, I guess. I'm just asking about the certainty for both transactions?

[Joe Coradino:]

Let me take a step back. We have been talking about it for some quarters. We decided to create a very competitive process with respect to the multifamily. And so, we went out to a number of bidders, I think at one point we had as many as 30 CAs signed for the seven properties, went through a very exhaustive process to reach a conclusion. And our expectation is that, this will about half of them will close this year about half next year just generally speaking.As you think about entitlements, both Springfield Town Center and Mall at Prince Georges are entitled, and several of the other properties, we started the entitlement process in some cases ovary over a year ago, maybe two years and we're fairly well long on one of them. We received the first vote this week are expecting approval in two weeks. So, we're well around on the multifamily transactions and continue to sort of create that have that be a priority.And as it results, as it relates to the sale leaseback, and this customary due diligence that anyone, who is making $153 million investment would want to do on the assets and without giving the list of assets, we have a pretty high degree of comfort to that will come to closing. I just want to go back for one minute. On the multifamily, two of the properties is a repeat buyer that we've done business with in the past. And again, we have a pretty high degree of certainty that we'll bring to these transactions to closure. Does that help?

[Ki Bin Kim:]

It does. But just to clarify one more thing, you said half will close -- you expect half to close this year, half to close next year. The $25.3 million, is that for both this year and next year? Or is that just reflecting?

[Joe Coradino:]

Yes, you split that in half.

[Ki Bin Kim:]

The gains in guidance -- and the gains in the guidance for this year reflects path forward that reflects. I'm just curious about because it sounds like you're spreading it over two years, but the gains in the guidance, is that half the games or is that for both in total?

[Mario Ventresca:]

Yes. So, we have -- as Joe said, we have half the parcels closing in the latter half of this year, Ki Bin. So, there would be three closing this year and three closing next year in 2021.

[Ki Bin Kim:]

Okay. And just going back to the sales leaseback, what quality or grouping of malls are the five assets behind the ground lease? Would have you're a Tier 1 group other Tier 2 or 3?

[Joe Coradino:]

Ki Bin, I think we've made the point that is -- it's a group of middle of the portfolio assets. I don't want to give a list at this point.

[Ki Bin Kim:]

Okay. And just the last question from me, why is your share count a little bit of higher in your 2020 guidance versus where you ended the year in '19?

[Mario Ventresca:]

It's a function of two things. It's the dividend reinvestment plan and the employee incentive compensation rolling into the next year or into this year actually.

[Operator:]

And there are no further questions. I would like to turn the call back over to presenters for any closing comments.

[Joe Coradino:]

Well, thank you all for being on the call today. We'll continue to keep you updated on our progress toward our balance sheets stability. From an operating perspective, we're proud of the portfolio we've created and we believe we've taken the right steps to get here.Thank you all again for being on the call and have a good day.

[Operator:]

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