Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2020 Acadia Realty Trust Earnings Conference Call. Operator instructions were provided. I would now like to hand the conference over to your speaker today, Joy Liu. Thank you. Please go ahead, madam.

Good morning, and thank you for joining us for the second quarter 2020 Acadia Realty Trust Earnings Conference Call. My name is Joy Liu, and I am an intern in our Finance and Capital Markets Department. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC. Forward-looking statements speak only as of the date of this call, August 6, 2020, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Operator instructions were provided. Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Thank you, Joy. Well done, and thank you to all of our summer interns this summer. Welcome, everybody. While we have plenty of details that we're going to drill into today, I think it's worth beginning with an overview of the progress that we have made since our last earnings call. As you may recall, back in April, we announced we were at a 50% collection rate. And of the 50% of tenants not paying, about half of them were national credit tenants seeking rent to maintain. By June, we saw many of the nonpaying credit tenants back off their initial positions of force majeure, and recommenced paying such that by the end of the second quarter, we were collecting in excess of 70% cash. And then inclusive of short-term strategic deferrals with national credit tenants we are at above 80%. Also, we're seeing continued improvement in collections such that June was better than May, July better than June, and August is showing positive trends as well. So the first question is how solid is that 80%? Well, we have longer-term leases with average lease roll of less than 10% a year over the next three years. We have a nice blend of credit, essential retailers, high quality locations and strong demand. But we need to take into account the fact that there still is credit loss, rollover and supply-demand pricing pressures. And additionally, we're still in the very early days of understanding which segments of the consumer will be most impacted and most sidelined as government support abates and as the new normal for unemployment and the economy emerges. Nevertheless, given the demographic quality of our portfolio, given the quality of our locations and the credit quality for our portfolio, this 80% portion of our revenues feels solid. So then what about the remaining 20%? Well, just about half our leases with credit tenants that are not yet resolved. For that portion, we'll likely get there both with respect to back rents as well as rents going forward. Then the other half of the 20% is split into two buckets roughly equally. About half consists of both local tenants not yet fully reopened or tenants highly dependent on post-COVID conditions, whether they be gyms or theaters or sit-down restaurants. And here, the repayment of back rent, frankly, is less of an issue than when can these tenants get fully reopened. Then the other bucket: our tenants on our watch list. Here, we're not expecting many of these tenants to survive much less thrive. We're rooting for all of them, and we'll work with them. But we are far more focused on the quality of these locations, which is very strong, and we feel good about our ability to retenant them. As John will discuss, we have taken reserves for those tenants that either entered into the crisis on weak footing and whose likely demise has been accelerated, as well as those that have been impacted, at least in the short-term, by COVID. So when we take into account the headwinds facing retailers, both from the pandemic and prior headwinds, and then based on the percentages that I just walked through, we expect the impact to blend to roughly 10% of our NOI over the next year or so before it starts to bounce back. This 10% hit is certainly a significant decline. And there remains an unusually broad range of outcomes in terms of this. But this 10% is not nearly as much as the public market seems to be pricing in. Then as we think past the pandemic and try to evaluate the impact of longer-term consumer trends impacting our portfolio, it's worth contrasting the different components of our portfolio. Now as we've discussed in the past, our portfolio is highly differentiated, but it is also highly diversified. As you know, our core portfolio represents approximately 90% of our earnings. Our fund platform represents approximately 10%. Within our core portfolio, roughly 40% of our NOI comes from street retail, 20% from urban and 40% from suburban. In terms of the urban component: these urban shopping centers are dominated by tenants like Target, which also happens to be the largest tenant throughout our portfolio, as well as Whole Foods and others. And this segment has less satellite space and thus has had the strongest collection rate of our three components. Then with respect to our suburban portfolio, that is split fairly evenly between supermarket-anchored and community centers. And here, we're seeing similar short-term outcomes in collections and performance from the half of our portfolio that is supermarket-anchored versus community. The good news on the supermarket-anchored side is that the properties are anchored by essential retailers that stayed open throughout the lockdown. Now counterbalancing this is the fact that often, our satellite space represents as much as 50% of the NOI in those properties. And the outcome for our satellites is much more dependent on the economy reopening and recovery. And then on the other hand, with the community centers, they're generally populated with a higher percentage of credit tenants. But as we have seen, these credit tenants also have sharper elbows than our satellite tenants. Finally, with respect to our street retail. Again, it's worth thinking about it in two components: Roughly half are lower density or more neighborhood-focused street retail that's meeting the more local needs of the community with tenants ranging from Trader Joe's and Walgreens, but also properties in affluent suburbs like Greenwich or Westport, Connecticut. Given the essential and lower density suburban characteristics for this half of our street retail portfolio, these properties are reopening faster and might also benefit from some shifts that we're seeing in spending patterns in suburbia. Then the other half of our street retail portfolio is based on mission-critical streets in the key gateway markets in the United States. This portion is much more dependent on the reopening of our gateway cities as they serve both local residents but also shoppers from all around the world. These properties include Soho in New York, North Michigan Avenue in Chicago and throughout our portfolio in the country, and it is unrealistic for us to expect an immediate rebound during the pandemic. In this somewhat upside-down world that COVID has created, the most sought after, dense locations have paused during this crisis. Now that being said, these great locations will likely provide the most asymmetrical upside when we get to the other side. In most markets that have reopened, we have seen pent-up demand. We have seen enthusiasm by the consumer in excess of expectations, perhaps in some cases, too much enthusiasm. And I can't imagine once these major corridors reopen, that we won't see that same pent-up demand and enthusiasm as well. As we have discussed, rents on some of these great streets have been correcting for the past several years. We were very careful and disciplined in what we acquired during the 2010 to 2015 period. And thus, we're relatively well insulated. In New York City, for instance, Manhattan represents approximately 10% of our NOI. Our rents in our portfolio there average out to about $250 a foot, well below where market rents were last year and certainly much less than prior peaks. Thus, while we have some impactful lease-up of mission-critical locations to do, we should be well positioned not only to maintain an important portion of that NOI, but then also capitalize on it as conditions improve. Now we can debate how much rents might further drop during the pandemic or what properties in Soho might be worth today, but they are certainly not worth less than zero. And in prior cycles, when these corridors rebounded, they usually retested prior peaks. Now needless to say, we don't need and we don't expect rents at prior peaks anytime soon. Even half that amount would provide significant growth in excess of expectations. There's an ongoing and worthwhile debate as to the future of our great cities. During the initial phase of the COVID crisis, density has certainly been an obstacle. Prior to COVID, there was a growing premium placed on the type of knowledge that is best produced by people in close proximity to other people. Now today, many wonder whether this pandemic will lead to a longer-term movement away from cities, whether it's work from home or work from a ski slope; in the short term both ideas sound compelling. But longer term, post-health crisis, historically the de-densification trend has just not played out. Most recently, we saw this in Shanghai and Hong Kong after the SARS outbreak, where once the pandemic was under control, we saw further densification and further demand. Now the shift for some families to suburbia or other up-and-coming cities, well, that always makes sense. But keep in mind, as we saw in New York City after 9/11, many families departed: some temporarily, others permanently. But ultimately more moved in than moved out. Now we understand that this segment of our business is not for the faint of heart. But the diversification that comes from the other components of our business should add the stability we need to weather the storm and the rebound could be compelling. So as we look at our core portfolio in the short term, our focus is going to be getting our stores reopened, and our collection rate to a more normalized level. Then as we look further down the road, our team is focused on executing on our leasing pipeline, which is very encouraging. We have leases under negotiation for approximately $6 million of NOI, which for us equates to approximately 5% of our overall NOI or roughly half of the 10% disruption I just discussed. This pipeline is a good first step. And as retailers begin to look beyond the shutdown, they're telling us that they expect our kind of locations to benefit from the ongoing trends of retailers doing more with less, the shift in retailing channels, as well as the continued rise of omnichannel. Turning to our fund platform. As you know, this provides further diversification of cash flow for us, and it also gives us the ability to play offense irrespective of our stock price. Amy will update you as to the status of our funds. But in terms of new investments, given the amount of disruption to the retail sector, it's still a bit early. However, if the public markets are any indication, there's going to be outsized opportunities. And it will be interesting to see where most of these opportunities arrive. Historically, we have focused on real estate embedded in retailers such as our Albertsons transaction. Last few years, we have been focused on buying out of favor higher-yielding assets that populate our Fund V. But also opportunistically acquiring on key streets, like our success on Lincoln Road in Miami and then throughout the country. And if we can find sellers who do not have the staying power or the patience to wait for recovery, or sellers who buy into the narrative that the sellers — excuse me — that the cities are never rebounding and that rents are going to be dialed back by decades and forever, well, we could find pricing that will be cheaper than in a generation. So to conclude, as we work through a health crisis and work through an economic crisis, we recognize that a full recovery will require patience, will require perseverance and discipline. And I assure you, our team is up to this challenge, given the diversification of our portfolio, the opportunities via our fund platform and then the embedded growth when we get to the other side of this pandemic. We are well positioned not only to survive but thrive. And with that, I would like to thank our team for their work over the last quarter, and I will turn the call over to John.

Thank you, Ken, and good morning, everyone. I will start off with a discussion of our second quarter results, focusing on how COVID has impacted our portfolio, along with a few observations as to what we're beginning to see in a post-pandemic environment, and then closing with a discussion on our balance sheet. Starting with FFO: FFO as adjusted was $0.29 a share. And within our adjusted FFO, we generated approximately $6.5 million or $0.07 a share related to our realized gains this quarter from our investment in Albertsons. Amy is going to provide some further color on the investment specifics, but I did want to spend a moment on how we are treating Albertsons within our adjusted FFO. Consistent with our past practice, our adjusted FFO will only reflect realized gains. Thus, any unrealized mark-to-market adjustments will be excluded until the underlying shares are sold. As a reminder, at our 28% pro rata interest, we have approximately one million shares remaining that we expect will be sold over the course of the next two years. In terms of the $0.10 of cohort-related credit losses this quarter, this translates to $9.4 million and is comprised of $2.7 million of reserves on straight-line rent and $6.7 million on current period billings. First, starting with the $2.7 million of straight-line rent reserve. While the current period reserve is somewhat irrelevant, given that it represents an amount that is built up over multiple years, I think the more relevant data point is what remains on our books at June 30. At quarter end, our pro rata core straight-line rent balance was approximately $35 million. And to date, we have reserved approximately 30% or $10 million against this amount. Now moving on to the $6.7 million reserves that we took against billings and recoveries. Of this amount, $6 million relates to our core portfolio, which means that we reserved approximately 40% against our uncollected balances. And this reserve was spread relatively proportionally among our street, urban and suburban portfolios. With our street and suburban portfolio, each recognizing approximately 45% of the reserve as compared to the 40% that each of these generate in ABR, with the remaining 10% of the reserve coming from our urban portfolio, which comprises 20% of our ABR. While our quarterly results certainly highlight that we aren't immune from the pandemic, as Ken mentioned, our exposure to those tenants that could see extended impacts on their business feels relatively manageable. Specifically, we think about those categories as gyms and theaters, which represent less than 5% of our ABR and under 2% coming from full-service restaurant venues. So now moving into how we translated the cash we received to the revenue that we recognized during the second quarter. Our core rents and recoveries for the second quarter were just under $50 million prior to establishing a $6 million reserve. And of this amount, as Ken mentioned, we collected over 80% of it in cash, along with money-good deferral agreements. In terms of the deferral agreements, the vast majority we view as strategic deferrals with predominantly national credit tenants and repayment periods under a year. And should these tenants live up to these agreements, which we anticipate, we are back to full pre-COVID rents by the fourth quarter of this year. Thus, all else being equal, we expect our cash collection rate to trend towards 80% in the near term. So after receiving cash and money-good deferral agreements for over 80%, I now want to walk through how we approach the remaining 20% or roughly $10 million, and it falls into two relatively equal buckets, so call it 10% or roughly $5 million each. The first bucket represents those credit tenants that have both chosen not to pay or enter into deferral agreements with us. However, given their credit, coupled with the importance of our locations to their operations, we feel strongly these amounts will be collected, and thus, did not apply a reserve against their uncollected balance. And in fact, we are continuing to see these amounts showing up in our recent cash collections. The second bucket, actually slightly in excess of 10% reflecting the $6 million reserve, we have written off, meaning that we don't expect to collect it. Now it's worthwhile to further separate this bucket into two distinct components. First, about half of the write-off was from our watch list. And the most likely outcome for this group is that we get the space back, and our leasing team is already in the process of identifying replacement tenants. Our watch list includes those that have declared bankruptcy or we believe are on the verge of doing so, the largest of which is Ascena. As a reminder, we have four locations in our core portfolio with annual base rent and recoveries of approximately $3 million or about 1.8% of our ABR. We have fully reserved all of our Ascena exposure, including both billed rents along with any straight-line balances. Additionally, while the process is still fluid, our expectation is that we take back all four of these spaces within the next few months. And our leasing team is already working on profitably re-leasing each of these locations, with over 90% of the ABR coming from some of our most dynamic locations on North Michigan Avenue and Lincoln Park in Chicago. The second scenario of write-offs involves those that we think will need our short-term assistance to get to the other side. These are the tenants that had profitable businesses prior to the pandemic, with our locations being vital to their continued success. The open questions are how much of our support will they need and for how long will they need it. Now it's this last bucket of write-offs that we believe forms our current thinking about the projected drop of 10% in our NOI that Ken mentioned. While it's too early to provide any front guidance, we are starting to see similar results of this roughly 10% drop playing out in our preliminary projections as we work through a detailed update of our internal models. Now moving on to same-store NOI. Our same-store NOI declined by nearly 19% during the quarter, driven by the credit reserves I just discussed. While the reserves were by far the single largest driver, two other factors weighed into the quarterly decline: First, given the current environment and preservation of capital, we have not moved any properties into redevelopment, notwithstanding our belief that some of these may ultimately be redeveloped. And secondly, as you may expect, we are seeing some short-term delays on achieving rent commencement dates on a few of our key street leases. The good news is that these tenants are excited about opening, but the bad news is that the pandemic pushed the day forward a few months, including key street locations in Chicago and Greenwich, Connecticut. So notwithstanding the unfortunate and very significant implications that COVID had on our portfolio during the quarter, our same-store NOI results would have otherwise been tracking in the 2% range. Lastly, I want to highlight a few items on our balance sheet. At our current cash collection levels in excess of 70%, we are retaining cash. And as a reminder, we are able to break even with core tax collections of under 50% after factoring in the fees and distributions that we are actually receiving from our profitable fund business, as well as the interest income on our structured finance book. Additionally, we have sufficient liquidity in excess of $100 million, comprised of pro rata cash on hand, along with remaining capacity on our core and fund facilities. In terms of our dividend, as I just mentioned, we are retaining capital at current collection rates, and we have the tax cover to continue doing so for the balance of the year, while at the same time, maintaining compliance with our REIT requirements. In summary, and I think I speak for many of us, this has certainly been one of the most challenging periods of my professional career. We have a lot of hard work in front of us, along with some great opportunities. Given the strength of our portfolio, our balance sheet and the laser focus of our incredibly passionate and experienced team, we look forward to accretively getting to the other side of this extraordinary challenge that we are facing. I am now going to turn the call over to Amy to discuss our fund business.

Thanks, John. Today, I'll provide an update on our fund platform. First, with respect to our capital allocation strategy, our funds are a mix of street, urban and suburban retail. Over the last few years, we knew we were late cycle. Accordingly, we shifted our fund acquisition focus away from value-add development to more stable but out-of-favor shopping centers. Since 2016, we've successfully aggregated an approximately $650 million portfolio of 14 open-air suburban shopping centers on behalf of Fund V. The portfolio has strong geographic and tenant diversity. We acquired these properties at a substantial discount to replacement cost at an unleveraged yield of approximately 8%, and we secured 2/3 leverage at a blended interest rate of 3.7%. Pre-COVID, we were clipping a current leveraged yield of approximately 17%. Over the past several months, the fund's collection rate has generally remained consistent with that of our core. Given the overall durability of Fund V's cash flow, in May we reinstated our monthly operating cash flow distribution to our fund investors after a two-month pause. Looking ahead, if we assume that Fund V's NOI returns to a baseline of 90% of its pre-COVID level by next year, consistent with Ken's earlier remarks, then the fund will still be delivering a mid-teens current return on a leveraged basis. And that feels pretty good, especially compared to alternative investments in the real estate sector. On the acquisitions front, the transaction markets remain quiet. We have approximately $200 million of dry powder or approximately $600 million on a leveraged basis, and we have at least a year to invest it. Given increased headwinds in the near-term due to COVID-19, we will remain appropriately disciplined. Since launching our fund platform more than 20 years ago, we have invested under four key strategies: Opportunistic, which includes Fund V's suburban high-yield strategy; street retail; urban retail; and distressed retailers. This last category includes Fund II's investments in Mervyns Department Stores and Albertsons Supermarkets. Fund II still owns an approximate 1% interest in Albertsons. Since inception, the fund has received $112 million of distributions on its $24 million investment, including $23 million of cash received during the second quarter. This has resulted in a realized 4.8x multiple on invested equity and an internal rate of return in excess of 250%. Additionally, the fund still owns approximately four million shares. At yesterday's closing share price, this equates to another $64 million of expected cash, which would increase the projected equity multiple to nearly 7.5x. As previously discussed, Acadia's pro rata share of this fund and the Albertsons investment is 28%. On the dispositions front, as previously discussed, during the second quarter, Fund IV completed the sale of Colony Plaza, one of originally eight properties in our Northeast grocery portfolio investment, to a 1031 buyer. More generally, the capital markets remain on pause, especially for opportunistic sellers like us. That said, we continue to evaluate our existing portfolio for disposition candidates in the near- to medium-term, particularly some of our supermarket-anchored centers that are especially buyer-friendly in a COVID world. Turning briefly to City Point, the property continues to serve the needs of Downtown Brooklyn. With respect to our anchors, Trader Joe's and Target remain open and operating as they have throughout the pandemic. And Century 21 has now reopened. Several of our smaller shops with street-facing entrances are also open, including Casper, Camp and Sello Barber. Several of our market hall vendors are also operating stalls in our pop-up outdoor markets. It's been great to see pent-up consumer demand manifest into foot traffic at our property, with Brooklyn noticeably busier than Manhattan. In fact, at times, our retailers have had to manage lines outside their stores to prevent overcrowding, including, to no one's surprise, Trader Joe's. We are prepared to fully reopen the property with the appropriate air filters and other safety measures in place when government restrictions are lifted. Our new lululemon store is also poised to open. Finally, with respect to fund-level debt, we have ample liquidity on our subscription lines, and we are actively working to address any 2020 and 2021 maturities. Our lenders remain highly cooperative and supportive. In conclusion, our fund platform remains well positioned to successfully weather this period of unprecedented disruption with a successful capital allocation strategy and ample dry powder to continue to execute on it. Now we will open the call to your questions.

Operator instructions were provided. Your first question comes from Craig Schmidt with Bank of America.

Thank you. You guys said you executed 25 new and renewal leases in the core and fund portfolio. And basically, you said that the rents on those were pretty near what you thought pre-COVID expectations. Could you provide a little more detail on that? As well as maybe leases that are coming up, what kind of rent spreads are you seeing?

Yes, absolutely, Craig. So two things. I think on the first point on where we're seeing rents in line with our pre-COVID expectations: That's on the pipeline. So on the pipeline, and Ken mentioned it in his remarks, we have over $6 million of leases sprinkled throughout each of our portfolios that are well along in the process, whether at lease or under LOI, and we are seeing those being signed right in line with where we would have expected it before the pandemic hit. On the other point that we put in the press release on new and renewal leases: of those, there were no new conforming leases in the core, we just had renewals. And those were spread throughout the portfolio.

And then just in terms of color and feedback that we're getting from those retailers ready to go back on offense: Many of them think back to the last recession, and every recession is different, but those that feel that they are well positioned, and there will be many, to go back on offense and that their business models are well situated for what they see over the next several years, what they're telling us is they don't want to wait and miss the opportunities. And so we do see them stepping up. Some of them are the off-price retailers who are not really thinking about omnichannel, who are really executing and just want the best locations, and we're very encouraged by their interest throughout our portfolio, including in our urban assets. And then there are a variety of retailers who are recognizing the benefits of omnichannel, whether it is some of the digitally native that we've been talking about for a while, but then also look at what Target has been doing and the new leases that they have signed post-COVID in New York City alone, and that also is giving a positive indication. So those retailers that recognize they're going to weather the storm and recognize that they're going to be in a strong position, they're starting to step up.

Great. And then just for a follow-up, how long do you think it might be before Fund V starts to see some opportunities? And what type of assets would you be targeting in terms of acquisitions?

And it's impossible to predict precisely, Craig, because as you know, our capital is fully discretionary and on call. So for the right deal, the answer could be tomorrow. I doubt it will be tomorrow because I would know about that today. But there's so much disruption in the system that we are seeing real estate embedded into retailers that's quite intriguing. We are seeing, especially from the private market, a variety of ownerships that use too much debt. And now there is going to be restructuring, whether it results in foreclosure and the purchase of debt, or preferred equity taking over and looking for a new operating partner, still too early to tell. And then there's all of the other areas that are in our core competencies. So what I say in the very short term: we saw that everyone stood still for a bit to just figure this out. And now we're starting to have those kinds of conversations. They could hit quickly. But if they don't, and we have to be patient, our capital is very patient, and we'll wait until we see the right time.

Your next question comes from Christy McElroy with Citi.

Hi, good morning. Thanks. I'm just, Ken, in regard to your comments about the potential for a 10% NOI impairment, and I appreciate your willingness to put that number out there. How do you think about the impact from occupancy loss versus an adjustment to your in-place rent? So just trying to think about it from the perspective of occupancy, which can be backfilled, versus lower in-place rents that could be locked in for longer.

And Christy, as you know with us, it even gets more complicated, because we have some very valuable spaces that are low square footage versus a Kmart box somewhere in suburbia, which is a lot of square footage. So it will be hard to track on a square footage basis what our occupancy will decline to. That being said, if we think about it from an economic occupancy, if you will, I do think that the majority will be from tenants that go away and then get refilled. So that falls more into the vacancy than from just melting ice cubes and a significant amount of rent declines. And that just has to do with where our basis is in terms of rent per square foot, as I said, in Manhattan. Thankfully, we were careful that we didn't have top-of-market rents. We tried, but the leases were long term, so we didn't get to those peaks. So we don't have that problem of significant rent declines. There'll be some in some spots, but overall, we feel pretty well insulated on that side. We feel very well insulated as it relates to our long-term leases with Target, for instance, where it's measured in decades, not years. So I do think it will be losing tenants or tenants pausing until they can fully reopen and then climbing back to the new normal rents.

And then I wanted to go back to a comment that you made in answer to Craig's question about looking in the context of the funds about the real estate embedded in retailers that could be intriguing. How would you think about taking advantage of some of those opportunities? Could you maybe expand more on that comment, given your willingness in the past to do those sorts of retailer-driven investments, and as we just saw with Albertsons that can be profitable?

Sure. And the same thing with Mervyns way back when, where there was a department store chain that needed a turnaround at the opco level, but equally important was a turnaround at the propco level, and that's where we were involved, taking closed stores and converting them into other retail uses or other mixed uses. Without getting into the specifics of which retailers today have real estate that best and highest use probably goes beyond their current use, those are the conversations that our acquisition teams have with bankers and brokers and owners all the time, and there certainly are some of them today. Because one of the many things that COVID has done has certainly accelerated the reinvention of a wide variety of real estate, and we have the capital and the skill set to execute on that. Again, it requires the stars aligning. It needs to make sense. I can gladly talk about Mervyns and Albertsons, the deals we did do. I could talk a lot about the deals we did not do. So we'll see if the right real estate shows up, but if it does, we'll be there.

Your next question comes from Todd Thomas from KeyBanc Capital Markets.

Good morning, Ken. Just following up on your comments around the 10% NOI reduction that you discussed over the next year or so. As you think about the portfolio, how do you think that NOI losses spread out across the suburban, street and urban segments of the portfolio?

Sure. And John, feel free to chime in as well. As we said, the urban piece — so these are major cities, but these are shopping centers anchored by Target or Whole Foods or Trader Joe's — the collection rate feels or has been the strongest of all three components. And my guess is that that will continue to be the case, and the NOI will be the most stable. Now the flip side of that is, as you can imagine, the contractual growth of a Target-anchored property with limited satellite space is also the least. So the growth of that 20% of our portfolio comes from densification, and you see us executing on that where we're redeveloping in San Francisco, our city center, and there will be others over an extended period of time, but none of them happen quickly and nor do we need them to. So that will be the strongest. And so far, I think if you think about the 40% that we say is our street portfolio, half of that, the 20% that is in the major markets, I think that's where we're going to see, at least in the short run, the biggest short-term challenges. But the good news here is we're in touch with all of those retailers. And almost without exception, all of them look forward to reopening once it's safe for their employees, once they can get their businesses back on track. And none of them are saying, 'these are markets we don't want to be in.' So what I can't answer right now, Todd, is how long is that dip and how quick is that rebound. But that would be the area conversely that we're probably most focused on in the short run. John, I don't know if there's additional color you want to add.

No, Ken, I think that summarizes it well.

All right. And then just digging in on that leasing pipeline. So you talked about $6 million of NOI. Can you talk about the timing that you might expect to see that materialize? And is that largely for sort of new noncomparable space in the portfolio? Or is that demand waiting to re-tenant some existing space? I guess you framed it up as backfilling more than 50% of that 10% NOI loss. Is it targeted to replace tenants? Or just — that's sort of how you're framing it up. I was just curious if you could comment on that.

Yes. So the vast, vast majority falls into that 10%. You're correct, Todd, meaning some of those spaces, if you think about the 10%, some of them are tenants on our watch list, we don't have control of that space yet. But we do anticipate — and some of the space has been in high demand for years. I don't want to say much more than that. But retailers, it's been on their radar screen for a while. And now they're saying, you know what, we think you might have the opportunity to get this back sooner rather than later. And so we are trading paper on that. It is dependent on us getting those spaces back. The good news if we don't get the space back is it's NOI right now; the bad news is I am much more excited about the new tenants coming in than the existing ones there. So that's a decent chunk of the $6 million is scattered throughout our core portfolio on that side. And then others are just vacancies that you and I have discussed over the last year or two, high-quality locations where tenants were gearing up. With COVID, everything paused for a couple of months. And now thankfully, what our retailers are saying is they're ready to come back. The challenge as to timing, Todd, is I don't expect, nor do we really encourage retailers to open and start paying rent before a given community center or street is reopened. And so this summer will be challenging. And I think that it would be imprudent for us to expect a lot happening during this quarter. But then what we're hearing from our retailers is as soon as they can safely reopen, they want to be open. They're doing site visits now. They are actively negotiating. This is not just people staying busy. And so I am encouraged, as we get past the health crisis, that we will see these over the next several quarters.

All right. That's helpful. And just a quick one for John. You mentioned the 1.8% exposure to Ascena that was reserved against this quarter. How much ABR exposure do you have to bankrupt tenants in the portfolio overall?

So in terms of bankrupt tenants overall, Todd, it's probably in the 3% to 4% inclusive of Ascena. So maybe another 1% or 2% on top of that. Overall watch list that we took reserves on was around 5%. So I'd put it probably another 1.5% on top.

Your next question comes from Mike Mueller with JPMorgan.

Just curious how good of a handle do you think people have on what street rents are today, whether it's in SoHo or Georgetown or Chicago? What's that visibility look like?

The visibility has probably never been worse, Mike. On one hand, we all think that this is just something that landlords and tenants agree on in a vacuum. But the reality is it's sales-based, and retailers are thinking about what revenue they can produce out of those four walls and then what other halo effect or other incremental benefits might exist in omnichannel or otherwise. But in a market that's shut down, the best they can do is look back to what were comparable sales pre-COVID, what does the recession look like once we get past this initial phase, and so there's not a lot of clarity. The flip side is, they know where their customers are ordering from. They have very good data for those that have online, for instance. Additionally, as opposed to the last recession, this one has not hit the housing market, has not hit the white-collar market, has not hit the affluent market, and those shoppers are still shopping. They're just shopping in other ways. So many of our retailers say, we know if we can open a store here once we are post-pandemic, we can see based on where we're shipping to that that's where the shopper is. So there are ways that people are feeling their way through, but it's still very early days.

Got it. And then thinking about the core portfolio, thinking about how your capital deployment looked over the past three years, whenever you start putting money to work again on a go-forward basis. How do you think it will be — do you think it will be similar to the types of investments you made in recent years or different in some way, whether it's geographically or the type of property buy?

Way too early to know. Because of, first of all, all of the realities of working through this crisis and everything I touched on, but also just the reality of where the REIT market and our stock price has gone. I don't think we're alone in this. I think there's very few retail REITs that are trading at or at a premium to their NAV such that they could use their currency. And we have always been very clear that we need to be able to match-fund in order to accretively acquire. So step one is we need to see a recovery or a reconciliation between the private markets and the public markets before we can think about using our currency for just about anything. And then once we get to that point, and I hope we do, and I'm confident we will, then where will the best opportunities to grow our core portfolio be? And so much of that depends on what this looks like when we get to the other side. We have always worked very hard to listen to our retailers and hear from them where they see their strongest growth opportunities. And we're still in the early days of that. We'll get a better sense as we see how the lease-up plays out. But then also a whole host of other shifts that are occurring in our economy, in the consumer and then how the consumer is shopping. So that's a long way of saying, we have a pretty broad set of core competencies. We have biases and we're certainly going to be guided based on where the retailers come. But first and foremost, we just need to focus on leasing up some really valuable space, getting that NOI and FFO to the bottom line, and then we'll figure out the other stuff.

Your next question comes from Linda Tsai with Jefferies.

In terms of the 10% hit to NOI, and it not being a snap back, how are you thinking about the pace of recovery returning to 2019 levels, acknowledging there's some obvious differences? Do you think the financial crisis holds any clues?

I don't know. So here's what I'm puzzling with. We're all looking at similar data. I probably spend more time talking to retailers, but we're all seeing a bunch of things that are playing out similar and then many that are different to the financial crisis. As I pointed out earlier, during the GFC, the housing bubble burst, and you saw housing prices and the stock market drop dramatically. Now if you look at the S&P 500 or many housing markets, perhaps outside of New York City and others, you see a lot of stability. So what I can't predict, because some of this is in the government's hands, some of this is dependent on when the health crisis is resolved, as to what shape or how long it takes. And I'm hesitant to guess other than to say, we're going to watch all of these trends carefully. We are not going to be presumptuous as to predicting when we see the resolution of the health crisis. And then we're going to see in the next few weeks what the government support looks like. And that may give us some sense of which portions of the consumer are going to be in tougher shape than others. And that then also will guide which portions of our portfolio recover faster. But if you just think about what I've said, we may see, and it wouldn't surprise me to see, that recoveries follow that portion of the consumer that is better insulated from this crisis than others.

And then one for John: what's the level of collections you're getting from restaurants and gyms?

Hi Linda. So starting with the gyms: they are less than 3% of our ABR. And on collection percentage, those fall into the category of not yet open, given the locations where our gyms are, and we're seeing around 20% collections on those and have reserved appropriately. On the restaurant side, it's a bit more nuanced. Overall, as you'll see in our supplement, we list restaurant exposure at 8% of ABR. But we think about it in different categories as it relates to collection. What I highlighted in my remarks was what I think is most challenged at the moment is the full-service category, which is under 2% of our ABR. That category is struggling, and we're seeing collections right around 29% on our full-service restaurants. When we look at the other categories of restaurant, whether it's coffee or fast food, those are trending almost at full collections. And then we have some quick-service concepts where we're seeing about 45% collections. So on a blended basis, Linda, we're about 45% collections on our restaurant exposure overall.

Your next question comes from Floris van Dijkum with Compass Point.

Hey, guys. Question on your closed space. What percentage of these stores and ABR that's closed is mandated closed versus closed by choice?

John, do you have that data?

I do. Yes, Floris: I would say the vast, vast majority of what is closed is mandated to be closed. The others that are not open are largely for the health and safety of employees. So I think it's a relatively small bucket that are actually not open for reasons they could be open, such as a retailer choosing to protect employees. We don't have examples of that in our portfolio where a major retailer like Apple is choosing to remain closed; it's a small bucket.

Great. And maybe can you also talk — some of the other — some of your peers have talked about initial August collection trends. Can you comment maybe on that and give some more insight?

Yes. And I think, Floris, what I could almost echo back what Ken said is that when we first started looking at cash collections as being such an important metric, the first time we did this we were at 50% when we talked about April. We then moved to 56%, then moved to 71% and now we're at about 74% in July. The point being that as the world is starting to reopen and the relevancy of the physical space to the retailers became very apparent, we saw collections rise as part of that. So what I would say in August, and we're still early into the month, just following up on what Ken said in his remarks, is we are seeing similar upward trends in our cash collections. I don't want to give a final percentage yet because there's still several days left to go. But we're seeing the same positive news as stores continue to reopen, as the deferral agreements flip to full rent, and we see ourselves trending towards the 80% range in the hopefully very near term.

Your next question comes from Vince Tibone from Green Street Advisors.

Hi, guys. For tenants that are open in your street portfolio, how are sales trending relative to last year? And are there big differences based on geography?

There are big differences based on geography. There are big differences based on whether those retailers had, going into the crisis, a strong digital omnichannel presence, and thus were able to execute through the crisis and use the stores for all of the benefits there. For those, we have seen a strong rebound in street retail sales. The essential retailers like Trader Joe's and Target have seen sales growth that is hard to wrap your head around because of the obvious shift. Where I think it has been the toughest has been those retailers without strong digital presence in cities that are just reopening. There, it's quiet. I would expect it to be quiet in places like SoHo until New York has really come back. I think that's a post-Labor Day phenomenon, and that's what we'll be watching for.

That's helpful. So anything you mean to quantify a little bit more on average street retail sales for what's open? Or is it still even too early to have that?

It's still a little too early. And the other thing I'd remind you is we don't get official monthly sales reports. So the dialogue we're having with these retailers: certainly they're discussing their sales. If sales are good, you tend to hear about those. And the rent collection's high; the others are a little less so. So it's still a little early. I think that's a worthwhile conversation for us to have post-Labor Day.

Makes sense. One more for me. Could you discuss the background on the town center transaction and the conversion there?

John, you want to cover that?

Yes, absolutely. Vince, the conversion you're referring to in the supplement is where we converted a note into an equity ownership in the town center. That was part of a tax-driven transaction we did several years ago in several steps to the conversion, where we converted a note that was tied to an equity interest in the partnership and in a noncash exchange exchanged the note for a full ownership in the property. That occurred over the past several years.

Was the price prenegotiated? I'm trying to get a sense: is this at all a comp of what a negotiated transaction could be? Because the way I'm looking at it is you acquired about 27% of additional interest for $39 million. So I'm just trying to get a sense of this new pricing: was it prenegotiated?

Prenegotiated several years ago. So it's not an indication of post-COVID pricing.

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Kenneth Bernstein for closing remarks.

Great. Thank you all for joining us. Look forward to catching up with all of you on our next call. And until then, stay safe and well.

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