Phillips Edison & Company, Inc. (PECO) Earnings Call Transcript & Summary

Good afternoon, and welcome to Phillips Edison & Company Business Update Call. My name is Kate, and I'll be your conference operator today. Before we begin, I would like to remind our listeners that this is a live conference call and is being recorded in simultaneous webcast, as a replay for today's call will be available later today on the company's website. If you're participating in the webcast, please note that the slides are user controlled. The webcast and the slide presentation can be accessed by visiting events and presentation page on the Investors section of the Phillips Edison & Company website at www.phillipsedison.com or at www.phillipsedison.com/investors. I would like to turn the call over to Michael Koehler with Phillips Edison & Company. Sir, please proceed.

Thank you, operator. Good afternoon, everyone, and thank you for joining us. I'm Michael Koehler, Vice President of Investor Relations with Phillips Edison & Company. Joining me on today's call are our Chairman and Chief Executive Officer, Jeff Edison; our President, Devin Murphy; and our Chief Financial Officer, John Caulfield. During today's presentations, we will provide a quick overview of our portfolio and tenant base, discuss the impact COVID-19 is having on our portfolio and talk about our plan to mitigate that impact. Upon the conclusion of our prepared remarks, you will have the opportunity to submit questions. If you are logged into the webcast and have a question, you can submit it via the webcast interface. We encourage you to submit your questions as soon as possible. Before we begin, I'd like to remind our audience that statements made during today's call may be considered forward-looking, which are subject to various risks and uncertainties. Please refer to Slide 2 for additional disclosure and direction on where you can find information regarding potential risks. In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in the appendix of the slide deck, which is available on our website. I will now turn the call over to Jeff Edison, our Chief Executive Officer. Jeff?

Thanks, Michael. Good afternoon, everyone, and thank you for being on the call today. During this unprecedented time, the health and safety of our neighbors, associates, investors, shoppers and communities are of great concern. Our thoughts are with those most deeply impacted by the situation. And to all our stockholders, financial advisers and other participants on this call, we wish you and your families good health and wellness. Before we get into COVID-19 discussion, I'd like to provide a brief overview of our portfolio and track record. As of March 31, 2020, we managed 312 shopping centers across 31 states. 97% of our portfolio was anchored by leading grocers and our leased occupancy was at an all-time high of over 95%, as outlined on Slide 3. 77% of our annualized base rent comes from service-oriented or necessity-based tenants, which includes 36% from our grocery anchors. 64% of our total rents come from in-line and nongrocery anchors who rely on foot traffic generated by our grocery stores. These businesses include restaurants, fitness centers, nail salons, hair salons and soft good retailers, among others. These stores have been severely impacted by the stay-at-home and social distancing mandates resulting from the COVID-19 pandemic. Over 36% of our tenants, whom we call our neighbors, have temporarily closed as of Monday, April 13, 2020. Slide 4 provides a more detailed look into our neighbor type. Approximately 51% of our portfolio is considered essential at this time. Grocery stores make up 36% of our ABR or average base rent. Dollar stores, pharmacies, pet supply stores, banks, hardware stores, auto supply stores and other essential businesses make up another 15% of our ABR. Restaurants comprise approximately 15% of our portfolio's ABR, 9% comes from quick-service restaurants, 6% comes from full-service restaurants. Many of our restaurant neighbors still offer carryout and delivery, although some have been temporarily closed due to government mandates and decreased sales resulting from reduced foot traffic. Approximately 34% of our total ABR comes from other retailers and services. This includes 17% from personal and professional services like barbershops, hair salons and nail spas. Another 13% comes from soft good retailers. 3% comes from fitness and 1% comes from entertainment. Our neighbors are the lifeblood of our business. And we have taken significant action to help those who are being impacted by this pandemic. Before we go into this further, I would like to provide a quick recap of our track record of creating shareholder value over time, as illustrated on Slide 5. . From PECO's initial public offering price of $10, we have increased our estimated value per share 4x, including last year when we increased the estimated value per share to $11.10. PECO common shares, purchased at the beginning of our initial offering, have received monthly distributions totaling $6.26 per share. Shares purchased at the end of our initial public offering have received monthly distributions totaling $4.11 per share. Our most recent estimated value per share, plus accumulated distributions, totals between $15.21 per share and $17.36 per share, depending upon when you became a Phillips Edison REIT I stockholder. In total, together with REIT II, we have made distributions of over $1.3 billion to our stockholders. Our distribution on April 1 marked 111 months of consecutive distributions. Over our 29-year operating history, our fully integrated operating platform has driven strong financial performance, as illustrated on Slide 6. Our 100% in-house operating team has executed well, outperforming our peers over the past 3 years in several important metrics. We averaged 3.9% same-center NOI growth, outperforming our peers by 90 basis points. We averaged 4.9% core FFO growth, outperforming our peers by 690 basis points. And we averaged comparable renewal leasing spreads of 9.5%, outperforming our peers by 260 basis points. Our strategy of owning and operating grocery-anchored real estate in well-located markets has created strong financial results on an absolute and a relative basis. That said, please turn to Slide 7. During this unprecedented time, we are seeing tremendous uncertainty across the financial markets and specifically the retail landscape. Our grocery anchors are experiencing strong foot traffic and record sales. As Kroger announced, their identical store sales for March were up 30% over last year, and Walmart's March sales were up 20% over last year. Despite this, COVID-19 is negatively impacting our in-line neighbors. As of April 13, 42 states have issued statewide stay-at-home orders and another 3 states have issued stay-at-home orders in certain parts of the state. Altogether, approximately 316 million Americans have been told to stay at home. Slide 8 outlines the impact COVID-19 is having on our portfolio. As of April 13, 2020, approximately 36% of the neighbors are temporarily closed. This represents 25% of our total average base rent and 20% of our total gross leasable area. We have received a total of 1,850 rent relief requests from our neighbors, which represents approximately 33% of our 5,550 total neighbors. Additionally, we have collected approximately 70% of the rent from our neighbors that was due April 1, 2020. We have begun our regular process of updating PECO's estimated value per share as of March 31, 2020 financials. We expect the Board to establish our updated value in May. As you've all seen over the past few weeks, the financial markets are in turmoil, particularly for retailers and retail real estate owners. The share prices of our publicly traded peers have traded sharply downward during this volatile time. As of April 13, these stocks have declined on average 49% this year. And the average discount to NAV has increased to 52%. We expect the current environment will have a very negative effect on our valuation. Slide 9 outlines the steps we are taking to support and work with our neighbors. Our top priorities at this time are to maintain open and consistent dialogue with our neighbors and to help them reopen their stores as quickly as possible. We have created an internal task force dedicated to researching and understanding how the Cares Act and other programs can benefit our neighbors. We are alerting our neighbors of these programs. Our in-house leasing team is contacting each of our neighbors, discussing their business and financial situation and ensuring that they're aware of and understand all the resources that are available to them at this time. We've added reference resources to our website and are also using our proprietary communication platform, DashComm, to push pertinent information to our neighbors on a timely basis. And recently, we launched a business webinar series aimed at connecting our neighbor communities with resources and support during this time. We have partnered with experts to help our small business neighbors understand and navigate what stimulus program might be best for them. We have also put together step-by-step tutorials on how to apply for this aid. Despite our efforts, uncertainty remains. And it remains to be seen how COVID-19 will ultimately affect the outlook of our neighbors and therefore, our business. Slide 10 provides details on how we have adapted and are supporting our associates so they can continue to provide excellent customer service to our neighbors, while operating under stay-at-home orders. We have approximately 300 associates across the country, covering our nationwide portfolio of shopping centers. Our associates that work in our 4 main offices: Cincinnati, Park City, New York City and Atlanta have been working from home for a few weeks now. Our IT department has established an infrastructure that has enabled us to fully deploy our workforce remotely. Our cloud-based software systems and Microsoft video conference technology allows us to collaborate and execute at critical times like this. Communicating and maintaining connections throughout our organization has remained a top priority. We are working diligently to keep our associates engaged and up to speed on what we are doing. This includes weekly town hall video conferences and regular company-wide internal e-mails. Our HR department is keeping all our associates aware of the resources they have available to them via our internal COVID-19 page on our intranet. Additionally, we have applied for a payroll protection program loan available through the CARES Act. We ensure our associates are safe and engaged so they can be as effective, if not more effective, in this time of need. Efforts like these are why we have been named one of Cincinnati's Best Places to Work for 3 consecutive years. Slide 11 illustrates the conservative measures we have implemented to mitigate and prepare for the negative financial and operational impact of COVID-19. First, we have implemented expense reductions at the property and corporate levels. Second, capital projects are being delayed to the extent possible. In short, every dollar spent is receiving significant scrutiny. Third, we drew $200 million on our $500 million revolving credit facility to prepare for cash shortfalls should they arise. After this draw, we still have significant liquidity, with over $250 million available on this credit line as of April 1, 2020. Fourth, monthly distributions have been temporarily suspended. Fifth, repurchases of death and disability have been temporarily suspended. And last, a standard repurchase program remains suspended. The decision to suspend distributions was very difficult. In fact, it was one of the hardest decisions we've ever made, but we believe that it is prudent and will allow us to protect the long-term value of PECO. Based on feedback we are getting at our properties and from in-line neighbors, we believe these measures are appropriate. This communication is essential as we learn who will continue to pay rent. It's important to understand that our neighbors have binding contractual obligations to pay rent. We're encouraging them to continue paying rent during this time. Our focus is to work with neighbors so they can quickly reopen. Then we can work with them on a longer-term basis in how they repay missed rent. We expect we will reevaluate distributions and repurchases once the pandemic has stabilized and we begin to see normalized, predictable cash flow from our properties. However, at this point, it is still too early to tell what that might be. Turning to Slide 12. Please know that PECO's executive team, including myself, expect to see a meaningful decrease in compensation as a result of this pandemic's impact on our business. By design, our compensation plans are highly incentive based. 83% of my compensation and 65% of our other executive officers' compensation is based on company performance. As such, we believe this event will have a material negative impact on executive compensation. In addition, changes to our monthly distributions impact all of us. Collectively, our executive officers are the company's largest shareholder, owning approximately 8% of PECO. We are negatively impacted by the distribution suspension as well. Importantly, there's still some misunderstanding among our investors about management fees. In 2017, we merged with our external adviser to become an internally managed REIT. This means that neither PECO nor our investors pay asset management fees or any management fees to a third party. In fact, we collect fees by managing properties owned by our joint ventures in a private fund. I would now like to turn the call over to John Caulfield, our CFO, to discuss our balance sheet and capital position. John?

Thank you, Jeff. Turning to Slide 13. Our determination to reduce our debt over the past few years has given us flexibility and optionality during this current period of uncertainty. Last year, we generated $223 million in proceeds from the sale of 21 properties. After acquisitions and investing in our existing properties, we used these proceeds to repay $90 million of debt. These disposition proceeds, coupled with our delevering in 2018 and refinancing activity at the end of 2019, allowed us to repay term loans that would have matured over the next 2 years. As Jeff mentioned, we drew $200 million on our credit facility on April 1 to increase our cash on hand and to protect our liquidity. This facility matures in October of 2021 and we have the option to extend the maturity to October 2022. As such, we do not have any material debt maturities due until 2022. We maintain regular dialogue with our lenders and remain in compliance with our debt covenants. We have worked hard to appropriately ladder our debt maturity profile and believe the steps we have taken to increase our liquidity will allow us to weather this storm for a sustained period. I would now like to turn the call back to Jeff for some closing comments. Jeff?

Thanks, John. Turning to Slide 14. In closing, the execution of this strategic plan during 2019 and the implementation of these recent measures improve our ability to handle this uncertainty and position us for future growth once this crisis subsides. We have been in the grocery-anchored real estate business for 29 years, and our strategy has proven to be resilient through multiple market cycles, uncertainties and challenges. We believe that PECO will fight through this unprecedented time and come out the other side as even better operator. Our immediate focus at this time is to preserve cash as the duration and impact of COVID-19 remains uncertain. We also believe that accretive growth opportunities may arise coming out of this pandemic. We want to be positioned to capitalize on them in order to drive long-term growth. Be assured that we are working relentlessly to protect our business and the long-term value of our stockholders' investment. With that, I would now like to turn the call back to Michael Koehler, our Vice President of Investor Relations. Michael?

Thank you, Jeff. Before we begin our question-and-answer session, I would like to review how these changes will immediately impact our stockholders on Slide 15. Our April 1, 2020 monthly distribution was made at the same rate as past distributions, which was $0.67 per share annualized. This brings our total year-to-date distributions to $0.223 per share or a 2.0% yield on our current estimated value per share of $11.10. 100% of this April 1 distribution was made in cash. If stockholders were participating in our dividend reinvestment plan, or DRIP, those distributions were paid in cash. If the account was held with a custodian, the payment went to the custodian. If the account was held directly, a check was mailed to the address on record unless electronic deposit information was on file. The temporary suspension of distributions begins with what would have been the May 1 distribution. Please note that distributions do not have a catch-up feature and our Board of Directors determines the appropriate level of distributions on a periodic basis. We are planning to update our estimated value per share as of our March 31, 2020 financials, which we expect to announce in May. With that, we will now begin our question-and-answer session. You can submit a question via the webcast portal, simply type the question into the chat box and click submit question as illustrated on Slide 16.

We have received many questions on the distribution. For example, why couldn't the distribution just be lowered versus completely suspended. And would you consider a partial distribution when the economy and your business starts to improve? Jeff, would you like to take that?

Sure. Thanks, Michael. Before we -- I answer it directly, I want to step back and talk a little bit about historically what we've done. I mean, we paid 111 consecutive months of distributions and have distributed to our shareholders over $1.3 billion in distributions. It has always been something that we have focused on and has been an important part of this investment. We -- touching the distribution was obviously a very difficult decision for us, and probably one of the most difficult decisions we have had to make so far during this crisis. And we did it really for the reason of protecting the equity value of PECO and making sure that we had the long-term liquidity to come out of this crisis in a strong position. We have been doing this for 29 years in the grocery-anchored shopping center business. And I will tell you, this is the most uncertain environment that we've been in over that time frame. It is, as they say, we're kind of walking into the fog of war, and we don't know what's on the other side. We are -- believe that touching the dividend was really done in an abundance of caution. And when we sat down with the Board to talk to them about it, we did look at a wide variety of options, from doing something smaller, a partial dividend reduction, to what we ended up doing, which was the full reduction -- or temporary stopping of the dividend. And our thoughts there were really an abundance of caution. And we felt that if we had any clarity, I think we could have considered other options. But I mean, for 29 years, we've never had in 1 month, only 70% of our rents or obligations of our tenants come in. And we anticipate that will probably be even more difficult in May and June. So with that kind of uncertainty, I think we believe it was the prudent thing to do. I do want to note that we did pay full dividend for the first 4 months. That will be -- if this -- if we did not reinstate the dividend this year, that would be a 2% distribution for the year. My feeling is in 3 to 6 months, we'll have a lot more clarity in terms of what the impact on our neighbors is. Certainly, we'll have a lot more data in terms of who's paid the rent and who we anticipate not reopening once the pandemic is under control. So our feeling is that we've made a conservative, but I think, important decision to protect the long-term equity value of the company. And although a very difficult decision -- and I do want to point out that as the largest shareholder in the company, I'm taking the hit with you. I -- obviously not something that anybody wants to do, and we will have a keen eye on putting -- on making sure that we can get the dividend back going as quickly as we can. This is a important part of this investment, we understand that. And we will -- at the point in time where we can get some clarity into the cash flow of the company, our intentions are to reinstate the dividend at the size that's appropriate for the cash flow that we believe will be generated by the company on a longer-term basis.

Thanks, Jeff. A follow-on question came from Dennis Gagnon about the REIT qualifications and doesn't a certain amount of income have to be paid out to stockholders. John, would you like to take that?

Sure. Thanks, Michael. Yes, as a REIT, we are required to distribute at least 90% of our taxable income to shareholders. We regularly review these REIT requirements to ensure we stay in compliance. Some are income related, some are asset related. For reference, we distributed $0.67 per share in 2019. And to meet our distribution requirements, we would have needed to pay out only about $0.25. So for 2022, we've already paid out about $0.22 per share, which is inclusive of our April 1 distribution. So as Jeff indicated, we will be monitoring the -- resuming the dividend on an economic basis. We think that's the lead. But we are watching this to ensure we remain in compliance.

Thanks, John. The next question is as follows: We've had a number of questions related to share repurchases, liquidity and a realistic time frame for a liquidity event. Jeff, would you like to provide some commentary on that?

Sure. As we've discussed regularly on our quarterly update calls over the last several years, this is a focus of the company, to get liquidity for our shareholders. As all of you know, it has been a difficult time in the retail business, and the public markets have been difficult to access. One thing I do want to point out is that we do -- we don't just represent one segment of our shareholders, we represent them all. And we sort of -- our feedback from our shareholders is that there are really 3 buckets that people fall into: one who wants immediate liquidity; one who wants liquidity, but at a reasonable net asset value; and a third, which is looking for long-term value and income. And our job is to create a scenario where we can meet the needs of not just one set of investors, but of as many as we can. We'll never get -- make it perfect, but that is what our goal is. In this environment, to give any kind of view with -- our peers right now are trading at over a 50% discount to their net asset value. We're going to need significant clarity on that before I think it would become a realistic view to have a liquidity event. But we're focused on it. We're watching it, and we hope that the markets will improve, and it will give us the option at the soonest possible date to get liquidity for ourselves and our shareholders.

Thanks, Jeff. The next question is, why was the dividend reinvestment program temporarily discontinued and distributions sent in cash directly to stockholders? John, would you like to take that?

Sure, Michael. As we've discussed and as we talked with our Board, there's been a lot that's just changed over the past few months. We're in the process of updating our estimated value per share with Duff & Phelps as we've done the last several years as of our March 31, 2020 financials. And since we were doing it with shares as of the 31st of March and with the uncertainty in the marketplace. After consulting with our legal counsel and that it was out of an abundance of caution, we felt the best to make the distribution in cash. And we will evaluate resuming this dividend reinvestment program once we resume distributions.

Thanks, John. The next question comes from Jim Hanford. He asks, has Phillips Edison management considered selling individual properties versus listing the entire company on a stock exchange? Jeff, do you want that?

Yes. It's a great question. I mean, one thing that we have at our quarterly updates talked about is we are we're not just looking at listing as the only option. We've always had 3 options that we believe are the ones that will get us liquidity. One is, as you say, is a liquidation. The second is a private sale or sale to -- of the company to one group, whether that be public or private, but one source of capital. And then the third is a listing with or without an initial public offering. We're on -- we monitor that regularly, have for the last 2 years. As I said earlier, it's been a difficult environment. And so we -- and we will continue to do that going forward. One thing I did want to mention is we have been liquidating assets over the last 3 years. In 2018, we sold 25 properties for $441 million, including the largest portfolio sale, our Northwestern Mutual joint venture that was done in 2018. In 2019, we sold 22 properties for $223 million. Our plan for 2020 was to continue an active disposition plan. Obviously, that has been forestalled. The transaction volume today is almost 0. There are a few triple net deals being done in the market, but beyond that, there's really very little price recognition. We will continue to do that. Initially, the focus of that capital is to deleverage us. But we will always be looking at that as a way -- as another way of getting long-term value to the shareholders. The issue there is it's just a very lengthy process. And we don't think that today, on a risk/reward basis, is the right thing to do, certainly not in today's environment. But even going forward, it's a very long time frame to liquidate over 300 assets. And I'm not sure that would get the kind of liquidity that most of our investors are looking for.

Thanks, Jeff. We've had a number of questions about debt maturities and upcoming debt due. John, would you be able to provide some color on our debt structure?

Sure, Michael. So one thing that has been a focus for Phillips Edison for the many years now is appropriately laddering our debt. And this -- it's for exact instances like this. So we've actually used the disposition proceeds that Jeff just mentioned to repay the loans that were due in 2020 and 2021. So our next major maturity is in October of 2022. Our revolving credit facility does come due in next year, but we have 2 6-month extension options that allow us also to push that to October 2022. We're in regular dialogue with our lenders, and we're looking at maintaining those relationships with them and the positive reputation we have with them so that we have maximum flexibility under our debt. A few secured mortgages are going to come due, but -- in 2021, but we have capacity to refinance those with our revolver and the cash proceeds we have. One thing we are doing is looking opportunistically to say, is there an opportunity to refinance. Those are a number of the conversations that I'm having right now. And at least right now, there just isn't a lot of price clarity. So there isn't going to be much that we're seeing at this moment. But I think over time, you will see us take advantage of the market and low interest rates to the best that we can.

Great. Thanks, John. We've got a number of questions again related to the various government stimulus programs that are available. Won't that help your tenants pay rent? John, would you like to comment on that?

Sure, Michael. So we're doing a lot in terms of talking with our neighbors about their ongoing operations, their ability to pay rent, what their perspective is on reopening. And one thing that we've done is we've established a COVID-19 resource page on our website to help our neighbors understand what can be available to them at the state and federal level. There were 2 programs, primarily the Payroll (sic) [ Paycheck ] Protection Program as well as the Economic Injury Disaster Loans, trying to find ways for them to get available funding from us before -- or excuse me, not from us, to help pay us, to help them through this time. We're very focused on ways that we can get them back open and paying rent as well. One thing that was noted is that we did apply for the Paycheck Protection Program as well for PECO, and we're also continuing to evaluate other programs to see if we can benefit from those as well. So we're focused on this, understanding this to understand how best we can make use of the resources the government is offering to help our neighbors and help PECO.

Great. Thanks, John. We've got a question from an individual shareholder, Mary McDowell. She would like us to discuss the 3 greatest challenges to grocery stores bottom line today and post-COVID in the future as these stay-at-home orders begin to loosen. Jeff, would you like to provide some commentary around that?

Sure, Mary. It's a great question and one that we are looking at on a regular basis because the grocery business is, pre-virus, had a lot of change going on. And I would say that probably today, the biggest issue that the grocers are facing is what is the customer, over a long-term basis, going to decide? And coming out of the virus, what is their preferred way of shopping? Are they going to eat at home more? Are they going to eat out? Are they going to go back to eating out the way they were? As we said in the presentation, obviously people are not eating out and our grocers are getting a very big benefit from that. Initial weeks, they were 40% above their sales -- their historic sales numbers. They're kind of bouncing out at about 20% today. So that's 20% improvement in what they're selling. That is going to be a big -- what the consumer wants and believes is the best eating environment for them is what is going to be probably the top of mind for all of our grocers over the next 12 to 18 months. So I think that's one piece. The other piece, which has been an ongoing issue for the grocers is just the pressure on margins. And that has -- the stuff you buy in the center of the store is a very low-margin part of the business. There -- a lot of the -- a number of our grocers have come out saying that, although their sales are way up, the profitability is not going to be as much up as their sales because the people are stocking up on the low-margin items. And so they're looking at that. There's obviously things going on in the industry in terms of big box, the big-box retailers driving prices and the number of low-priced grocers entering the market. They continue to put pressure on the margins for our grocers. I think that's something that will be an ongoing issue for them that they will continue to work through. And then the third is what the consumer believes is the most convenient way for them to get groceries and what they're willing to pay for that. Obviously, there's a battle going on right now between buying in the store or buying online, and there's a battle going on on the online side between delivery to your house and pick -- ordering it online and picking it up at the store. Our leading grocers have -- are betting pretty heavily that what they call BOPIS, which is buy online and pick up in the store, is going to be -- how the consumer is going to define convenience the best and will also be at a cost that they're willing to pay for. Online delivery of groceries is very expensive. The economics do not work on a long-term basis unless the customer is willing to pay approximately $15 for each delivery. It's hard to see that penetrating deep into the American market. It could, but we're questioning that. The customer is very price sensitive, and $15 is -- for a bag of groceries is going to be really pretty difficult thing for them to swallow. And then -- so those are, I think, the 3 biggest issues that are facing our grocers. One thing I think is important to note is that historically, the grocers have been very slow to adapt. And this time around, it's a really very different playing field. I mean, when you look at the leaders in innovation today, everyone would say, well, it's got to be Amazon. Well, there is -- Amazon is obviously a great competitor and is innovating continuously. But if you look at the changes at Walmart and Kroger, those are 2 companies that have not been on the edge of change, have embraced this and are going after it in a big way. It would not surprise me that if on the grocery side, the 2 of them are able to provide a better customer experience than what Amazon can. We'll see. Amazon is a great competitor. You never want to underestimate them. But our feeling is that, this time around, the grocers are not sitting still while this happens. They're actively participating in it, and you see it in what they're investing in and in how they're performing at their stores.

Great. Thanks, Jeff. Another question just came in. What are our plans with the cash on the balance sheet, including the $200 million draw we just made on the revolver? John?

Thanks, Michael. At this point, the $200 million draw is cash preservation. It's really to maintain total flexibility and to support our operations as we look forward. We have to get a better understanding of our financial situation and the duration over which COVID-19 will have an impact. We've run a number of different financial models, including upside cases, base cases, downside cases, really evaluating what the different outcomes can be. And that's why we've taken the measures that we've discussed here and drew the $200 million just to make sure that we have the ability to preserve the capital that we have. And that cash could ultimately be used to pay down the debt. We could use it to opportunistically acquire assets. Our investment management business is something that we're looking at to say what opportunities are we looking at as we come out of this. As I mentioned, we continue to have dialogue with our lenders. So at this time, what we're doing is is we're learning, and we're watching, and we're taking those measures that we believe are necessary to preserve that different flexibility and the options that will best benefit our shareholders and help us get to a place where we're resuming distribution and maximizing value.

Great. Thanks, John. Our final question for this afternoon is as follows: How do you think the current environment will impact the NAV or estimated value per share? And why are you going forward with the reevaluation during this environment? Jeff?

We are in the process of doing what is our standard value -- annual valuation. It will be as of the end of March where we have prepared the information, given it to a third-party to do the work on it. We will provide that information to the Board to come up with the NAV, consistent with what we have done historically. It's a difficult time for valuations. Obviously, as I said earlier, our peers are trading at over 50% discount to their NAVs. And there's a lot of conversation about whether those NAV valuations will come down as well. I would anticipate in this environment that it will have a negative effect on our valuation. And we are going through that process. I would assume that in May, we will be able to give you what information we have at that time on where the valuation is moving. But that's our plan at this point. And as I said, it is the Board's decision and their discretion on that -- on the NAV valuation, but it is a difficult time to be doing valuations. There is very little transaction volume. It's been a very short time since the virus has taken -- has had its impact, and we will -- but we anticipate doing that in May.

Thanks, Jeff. This now concludes our question-and-answer session. Before I turn the call back over to Jeff for some closing comments, I'd like to remind our audience that these slides are available for download at our website at www.phillipsedison.com/investors, and a replay can be accessed on the same website as well. Jeff?

Thanks, Michael, and thank you all for being on the call. We hope we've given you some valuable information. As I said, we're in the fog of war. We are addressing all of the issues that the company is facing. And the biggest one, obviously, that we hope to get more clarity on, is whether our tenants are going to honor the contracts that they have on the rents. We're pushing hard on that. We're pushing very hard to get as many of the 2,000 neighbors who are closed open. We will continue to have that as our primary focus for the foreseeable future. We're doing whatever we can to help them through this very difficult time. I am hoping that as we move through the virus and its impact, we can start to get some clarity. I will tell you that it is very -- this is as difficult of a time as we've operated in. We thank you for your support as we go through this. We hope that you and your families can stay healthy and well. And we're going to be here working hard to try and: one, get the things stabilize, get clarity; and that it is a focus of ours to get the dividend reinstated at a point in time that we have clarity in terms of the cash flow from the company. So thank you again for being on the call. And if you have any additional questions, obviously call us and we will get you the answers as we go to the best of our ability.

Thank you, Jeff, and thank you, everyone, for joining us today. You may now disconnect.