Earnings Call Transcript - EPR Q2 2020

Operator, Operator

Good day ladies and gentlemen and welcome to the Second Quarter 2020 EPR Properties Earnings Conference Call. As a reminder this conference call is being recorded. I would now like to hand the conference over to your host Mr. Brian Moriarty, Vice President of Corporate Communications.

Brian Moriarty, Vice President of Corporate Communications

Thank you. Hi everybody and welcome. Thanks for joining us today for our second quarter 2020 earnings call. I'll start the call today by informing you this call may include forward-looking statements as identified in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate, or other comparable terms. The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of these factors that could cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along today's earning release, supplemental and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com. Now I'll turn the call over to the company's President and CEO, Greg Silvers.

Greg Silvers, President and CEO

Thank you, Brian. Good morning everyone and thank you for joining us on today's second quarter call. I'd like to start by extending our best wishes for the health and safety of everyone and by voicing my appreciation to the entire EPR team that has been diligently working to advance the goals of EPR while working remotely and facing the challenges of the ongoing pandemic. Joining me on the call today are Company CIO Greg Zimmerman; and Company CFO Mark Peterson. I will start the call with an opening statement and then turn the call over to Greg and Mark who will provide more detail. As we discussed on our last call, during this unprecedented time, we've taken the necessary steps in terms of our balance sheet and tenant agreements to help ensure EPR's long-term success. To this end we have maintained an essential focus on fortifying our balance sheet with sufficient liquidity to sustain us. We have more than $1 billion of cash on hand which puts us in a very strong position to navigate the current challenges. Furthermore, with increasing progress in our rent collections as we move through the quarter and for July, we are cautiously optimistic that we will continue to see sustained improvement during the coming quarters. We are also pleased to see that our tenants have made significant progress in safely reopening our properties within the confines of jurisdictional mandates and our theater tenants are currently targeting the late summer to reopen. Separately, we've reached resolution with the vast majority of our customers where deferrals were warranted. Our team has worked extremely hard over the past few months to execute agreements which are reasonable for both EPR and our tenants as we ramp back up throughout the year. Greg will have more detail on this. Additionally, we executed important new lease restructuring agreements with AMC theaters. The leases contain several features which we believe will significantly enhance our long-term position with respect to AMC which we received in return for providing a reduction in annual fixed minimum rents. Specifically, we believe the new Master Lease structure will reduce our risk should AMC seek the protections of a reorganization process. As Greg will elaborate, we also meaningfully extended our lease term and gained the optionality to reduce AMC concentration through the bundling of transitional properties. Lastly, with regard to the recent studio announcements regarding the release of titles. I think it's important to remember that all of us are trying to navigate a pandemic that has disrupted our normal activities. We understand that some will want to mark this time as a permanent change. However, we believe such leaps are not supported by the underlying economics. All of the studios understand that to maximize the economics for a film they need a robust theater exhibition platform. Notwithstanding, the excitement generated by Trolls World Tour, the reality is that Universal did not make nearly the revenues or profit of the original title that was released theatrically. And in reality after taking into account significant margin expenditures, they may have lost money. The uncertainty of the times has led studios to pursue various avenues including premium video-on-demand, streaming-on-demand and delaying titles. It's important to note that the delaying of releases has been by far the most frequent choice for the studios even those that are experimenting with PVOD and SVOD. Both Universal and Disney reaffirmed their commitment to theater exhibition. Disney indicated that the release of Mulan was driven by the pandemic and not a change in their operating model. Universal moved Fast & Furious 9 to a 2021 theatrical release. We understand that these experiments may result in changes to the model, but these changes will be driven by economics and theatrical release continues to be an important part of that equation. As with any experiment many questions remain including what's the economic model? Does film rent reduction or exhibitor participation in PVOD revenues offset revenue losses from shortening the window? And how much revenue will be lost if in fact studios like Universal only intend to move films that were not going to generate significant box office anyway? What price point will consumers support for at-home viewing? And is this data skewed to reflect current pandemic conditions? To date most non-theatrical releases have been family product with a younger target demographic. Separately over the last five years PVOD has shown significant decline while monthly subscription streaming platforms have seen significant growth. How will this be implemented internationally? Remember worldwide box office was approximately $42 billion and this hybrid approach is a difficult proposition for most of the remaining markets given the fear of privacy. Any long-term systematic change requires a viable economic model and the underlying economics at this point simply do not support radical shifts to the strategy. Could we see revisions through the theatrical window? Definitely, especially for low-budget films or films with low-to-moderate box office expectations. Likewise we could also see new content providers like Netflix move into theatrical release as a means to increase revenues. The long-term effects of the pandemic on our everyday lives have yet to be defined, but we are confident that theatrical exhibition will remain an important part of film distribution simply because of these economics. Now I'll turn the call over to Greg Zimmerman.

Greg Zimmerman, CIO

Thanks, Greg. At the end of the first quarter, our total investments were approximately $6.7 billion with 369 properties in service and 97.3% occupied. During the quarter, our investment spending was $11.7 million and was entirely in our experiential portfolio, comprising build-to-suit development and redevelopment projects that were committed prior to the COVID-19 pandemic. Our experiential portfolio comprises 284 properties with 44 operators is 97% occupied and accounts for nearly $6 billion of our $6.7 billion in total investments. We have three properties under development. Our education portfolio comprises 85 properties with 15 operators and at the end of the quarter was 100% occupied. I now want to turn to our customers' reopening schedules and to update you on our deferral agreements and rent payment timelines. We have ongoing discussions with our major exhibitor partners about their reopening plans. There have been several stops and starts owing to the pandemic. But as of today, the major exhibitors have announced their intent to reopen in mid to late August to prepare for the release of Tenet on September 3rd for the Labor Day weekend. Openings will be state by state, city by city. Given the varying impact of COVID-19 throughout the country, we do not anticipate that AMC, Regal or Cinemark will be able to open 100% of their theaters in their first reopening phase. As the past several months have demonstrated, reopening plans are entirely dependent on the studio's release schedule, which has been pushed back based on governmental restrictions. As we mentioned on our Q1 call, while ongoing social distancing requirements will limit capacity in most theaters given typical seat utilization metrics theaters should have sufficient capacity to meet demand. Our exhibitor partners have developed comprehensive COVID-19 safety plans, the safety and comfort of their employees and guests is top of mind as they come back to the movies. As life begins to return to normal, seeing movies on the big screen in a theater will as it has always been an exciting cost-effective out-of-house entertainment option. We expect the remainder of 2020 will be a slow ramp-up as customers grow more comfortable coming back to the movies with social distancing protocols and studios better understand the exhibitor's ability to deliver box office results. The current 2020 film slate, which is subject to change, includes Tenet, Death on the Nile with Kenneth Branagh, The Empty Man, Honest Thief with Liam Neeson, Wonder Woman 1984, Black Widow, No Time to Die, Coming to America and Dune. The 2021 film slate was strong before the pandemic because a number of films have pushed to 2021 were bullish. The 2021 film slate includes strong offerings A Quiet Place Part 2, Top Gun: Maverick, The Fast and The Furious 9, Spider-Man 3, Ghostbusters After Life, Jungle Cruise, Jurassic World Dominion and MI7. We believe the studios pushing these releases to 2021 is strong evidence of their commitment to the exhibition industry and the big screen as the best format for major releases. I want to spend a minute updating you on our other major customer groups as of August 4. Approximately 88% of our non-theater operators are open. These businesses continue to implement social distancing guidelines to comply with state and local requirements. Performance remains fluid, depending on the impact of COVID-19 in each locale. At a high level, performance has generally exceeded our operators' expectations in the face of an ever-changing and hugely challenging environment. We believe this performance has clearly demonstrated that our drive-to value-oriented destinations are resilient. We have not seen any meaningful impact to our portfolio from reduced airline travel. 35 of our 36 top wealth locations, all four of our Andretti Karting locations and the majority of our family entertainment centers are open. All but one of our U.S. gyms are open. About 56% of our attractions are open. Attractions have been negatively impacted by the increased spread of COVID-19 in California, Arizona and Texas. As we indicated on our Q1 call, a few attractions may miss all or part of the season due to governmental health and sanitation measures and the financial feasibility of operating with a reduced occupancy and a truncated season. Except for the Kartrite hotel and indoor Water Park, all of our experiential lodging assets are open. Kartrite remains subject to New York State's phased reopening plans. Given we will miss the entire summer season, we are planning for a Kartrite reopening in spring of 2021. Resorts World Catskills remains closed because of New York reopening orders. We continue to believe the ski season opening will not be impacted. Turning to our education portfolio. All of our early childhood education centers have reopened. They continue to ramp up operations consistent with applicable state and local requirements. Their ramp-up is impacted by hotspots throughout the country and the timetable for parents to return to work. Most of our private schools were forced to close in Q2, but quickly pivoted to online learning. As we head to the fall they're evaluating state and local requirements to determine if they can go back to in-person learning, need to develop a hybrid of in-person and online learning or can only provide online learning. We anticipate all of our private schools will be open for in-person hybrid or online learning in the fall. We'll have more clarity over the next 30 days as public schools determine their reopening plans and tuition payments for the fall come due. I want to take a moment to update you on the status of our cash collections and deferral agreements. Tenants and borrowers have paid approximately 21% and 28% of second quarter and July 2020 pre-COVID contractual cash rent and interest payments respectively. We anticipate that our permanent rent reductions will total approximately 5% to 7% of annualized pre-COVID contractual cash rents and interest payments, the bulk of which relates to the AMC rent reduction I'll discuss in a few moments. We've diligently worked with our customers to structure appropriate deferral and repayment agreements to facilitate their ability to reopen efficiently and to help ensure their long-term health, while also protecting our position and rights as landlord. Our goal has been to help them through a period, where they have significantly reduced or no cash flow, ramping back to a more stabilized cash flow. We've individually tailored each deal, taking into account the variables impacting each business and improved our position through various arrangements. With regard to 18 of our top 20 customers, we have executed agreements or, in several cases, no deferral agreement is required. Between executed agreements and those customers for whom no agreement has been required, we have addressed 85% of our annualized pre-COVID contractual cash rent and interest payments. We are actively negotiating documents with the remainder of our customers and are very close to finalizing and executing agreements with all customers, comprising the lion's share of our lease space and cash revenue. Our agreements are generally structured to ramp up rent and mortgage payments through the end of 2020 and, in some cases, beyond 2020. Repayment of deferred amounts typically commences in 2021. Depending on the deferred amount and to allow our customers some breathing room, the deferral repayment period generally extends beyond 2021. The vast majority of our arrangements provide repayment of all deferred rent. In a few cases, we have provided rent concessions, but in each case we've received equal or greater value through additional lease term, additional collateral or other benefits. In virtually every case, our customers have paid and continue to pay third-party expenses, including ground rent, taxes and insurance. Finally, I want to provide an update on AMC. We executed a comprehensive agreement with AMC to meaningfully reduce our risk, improve our collateral and enhance our position in the event of a reorganization proceeding. We also provided AMC with appropriate deferrals and rent relief to weather the COVID-19 pandemic. To summarize, through this agreement, we created a Master Lease structure which reduces our risk in the event of restructuring, extended our average lease term by nine years and we've given ourselves the option to reduce our concentration to AMC, by transitioning seven theaters. We entered into a Master Lease for 46 of our 53 AMC theaters, where we extended our average lease term by nine years to 15.5 years in four staggered individual tranches and included fixed escalators of 7.5% every five years on fixed rent. For the remaining seven AMC theaters, we have the right, but not the obligation, to recapture any or all of these to either sell for another use, or to lease to another exhibitor. In return, we reduced AMC's annual fixed cash rent by approximately $26 million, or 21%, to approximately $96 million. We also deferred rent for April through June 2020. That deferred rent is included in the $96 million of fixed cash rent in the Master Lease and in the rent under the seven individual leases. Repayment will be made in equal monthly installments over the 14-year term of the first tranche of the Master Lease, or the term of each of the seven individual leases. Additionally, to allow AMC to ramp up, in lieu of fixed contract rent and repayment of past deferrals, from July through December 2020, AMC will pay percentage rent equal to 15% of gross sales, with the difference to be added to the deferred rent payments. For the month of July, the company expects no percentage rent, because AMC theaters did not reopen. For additional details on the agreement, please see our 10-Q to be filed after this call. Mark will provide additional color on the revenue recognition and cash collection implications of our prospective rent deferral and repayment agreements. I now turn it over to him for a discussion of the financials.

Mark Peterson, CFO

Thank you, Greg. Today I will discuss our financial performance for the quarter, which was greatly affected by the temporary disruption caused by COVID-19. I will cover payment deferrals, give an update on our balance sheet and strong liquidity position, and finish with some forward-looking estimates. Before diving into the quarterly results, I want to review the charts in the press release that outline how we classify tenants and borrowers for accounting purposes along with certain deferral information. On the left side of the slide, we have categorized our tenants and borrowers into five groups based on how we accounted for them relative to our annualized pre-COVID contractual revenue level of $624 million, which includes cash rent, tenant reimbursements, and interest payments. This annualized cash revenue does not include properties operated under a TRS structure. Customers without payment deferrals make up 18% of that revenue. Customers who had some or all payments deferred, with those deferrals recognized as revenue in our financial statements, constitute 50%. In this category, we had $64 million of accounts receivable related to payment deferrals as of June 30, which we believe is fully collectible, and we expect to recognize another $67 million in future periods, totaling $131 million. Customers who deferred payments but whose deferrals were not recognized as revenue due to uncertainties about collection represent 4%. Customers that operate on a cash basis and/or are anticipated to be restructured, including AMC, account for 27% of that revenue. Some payments were deferred in the second quarter for customers in these two categories, totaling $41 million; this deferred revenue was not recorded in our financial statements. Finally, new vacancies due to the pandemic represent about 1% of that revenue. The last column of the chart illustrates our projected total payment deferrals of $142 million, which does not include deferrals for customers that operate on a cash basis and/or those expected to be restructured. AMC is the largest tenant in this group and exemplifies why their deferrals are not included here, as the rent has been restructured under a new agreement as Greg described. The next chart displays statistics for the projected $142 million in total deferrals and the status of all agreements based on annualized pre-COVID contractual revenue. The average deferral period is 11 months, with an average of five months deferred and an average collection period of 32 months, which starts after the deferral period. The bottom of the chart indicates that customers representing 85% of annualized pre-COVID contractual revenue have either signed a deferral agreement or do not require one. Now, with that context, let's review the quarter's financial results. Adjusted FFO for the quarter was $0.41 per share compared to $1.36 in the previous year. Adjusted AFFO for the quarter was $0.44 per share, down from $1.37 in the prior year. It's important to note that the operating results for the second quarter of 2019 included the public charter school portfolio, which was sold last year and is now in discontinued operations. The previous period also included a $6.5 million termination fee. Total revenue from continuing operations for the quarter declined by $55.3 million from the prior year, primarily due to the impact of COVID-19, such as less revenue recognized for customers on a cash basis or that have been restructured, deferred rent not recognized due to low likelihood of collection, and to a lesser extent, contractual rent abatements and concessions. Furthermore, since the Kartrite Resort indoor Water Park remains closed because of COVID-19 restrictions, we saw lower other income and a decrease in other expenses of $5.3 million. The adverse effects from COVID-19 were somewhat offset by revenue increases related to property acquisitions and developments over the past year. Additionally, percentage rents for the quarter totaled $1.5 million compared to $4.1 million in the previous year, with a $1.8 million decrease due to property closures because of COVID-19 restrictions. The remaining decrease was mainly from early education facilities previously operated by CLA, which only paid percentage rent in 2019. These properties are now leased to Crème de la Crème. General and administrative costs fell by $1.8 million from the prior year to $10.4 million, primarily due to lower payroll and benefits, as well as reduced travel and professional fees. In the quarter, we recognized $54.5 million in impairment charges on six properties and four joint venture investments in China. These impairments were a result of shortening our hold periods for several properties given the COVID-19 pandemic and our belief that theaters in China will continue to underperform. These impairment charges were excluded from adjusted FFO. Transaction costs for the quarter were $771,000, down from $6.9 million the previous year, as the prior year's expense mainly related to preopening costs for the Kartrite Resort indoor waterpark. We also recognized an additional $3.5 million in credit loss expense during the quarter, primarily due to COVID-19, based on a third-party model we employ to calculate these losses. Now let's transition to our balance sheet and capital markets activities. Our debt to gross assets was 41% on a book basis at June 30. We have not included net debt to adjusted EBITDA or any coverage ratios in our reporting, as we do not consider those ratios meaningful during this period of temporary disruption caused by COVID-19. At the end of the quarter, we had total outstanding debt of $3.9 billion, with $3.1 billion being fixed rate debt or fixed through interest rate swaps, yielding a blended coupon of approximately 4.5%. Our average debt maturity is about five years, with no scheduled maturities until 2022 when only our revolving credit facility matures. As previously stated, due to the strain on near-term quarterly results from the accounting related to COVID-19, we amended our credit agreement and note purchase agreements on June 29 to obtain temporary changes to certain covenants, some of which extend through the first quarter of 2021. In connection with the amendment, we incurred $3.4 million in related fees, with $820,000 expensed and the remainder capitalized as financing fees; we also suspended our common share repurchase plan. We believe we have sufficient liquidity to navigate through the market disruption caused by COVID-19. Our cash outflows from operations, which include interest payments less preferred dividends, were about $38 million during the second quarter. We expect a lower cash burn rate going forward as collections are anticipated to improve. However, even at the elevated second quarter level, accounting for our committed investment spending and projected maintenance CapEx in 2020 and 2021, we estimate about six years of liquidity based on over $1 billion in unrestricted cash on hand at the end of the quarter. During the quarter, we purchased 4.1 million common shares for $106 million of the $150 million authorized for repurchases by our Board, executed at an average price of $26.06, which we believe offers significant value to existing shareholders. Finally, as previously mentioned, due to the uncertainties arising from the COVID-19 disruption, we are not providing any forward earnings guidance. However, similar to last quarter, this slide presents the expected percentage of pre-COVID contractual cash revenue we plan to recognize in our financial statements for the last six months of 2020 and the full year 2020, which we estimate to be 65% to 75% and 70% to 80% respectively. We expect to collect 50% to 60% and 55% to 65% of such pre-COVID contractual cash revenue in the same timeframes. Note that the full year 2020 revenue recognition range has been lowered from prior estimates primarily due to reduced expectations for theaters and some cautiousness, while the cash collection range has increased based on our collection performance to date and projected collections for the remainder of the year, mainly based on executed deferral agreements.

Greg Silvers, President and CEO

Thank you, Mark. As we discussed today we are cautiously optimistic about the re-openings to date and the planned reopening for theaters. While optimistic there remains several hurdles that we must cross until we can resume normal operations including the payment of a dividend. I can assure you that the resumption of a dividend is a priority for our Board, but only after we have clarity on some of the challenges we face. As we discussed today, we're hopeful that that process is well underway. With that why don't I open it up for questions.

Operator, Operator

You have your first question from Ki Bin Kim from Truist. Your line is now open.

Ki Bin Kim, Analyst

Thanks. Good morning, guys. So you guys made a pretty bold forecast that you expect permanent rent reductions of 5% to 7%. Just to clarify for everyone you're talking about your entire pre-COVID revenue base right? Not just the 85% of tenants that you reached an agreement with?

Greg Silvers, President and CEO

That's correct. It's off the entire.

Ki Bin Kim, Analyst

Okay. And can you just help me understand, how much of that is contractually known? And how much of that is unknown because obviously you only have agreements for 85% of your tenant base.

Greg Silvers, President and CEO

I'll let Greg speak next. However, I believe that the 85% we counted represents signed agreements. The rest of that portion is nearly complete. Therefore, we feel very confident about our current numbers.

Greg Zimmerman, CIO

Yes, Ki Bin, it's Greg. Yes, we feel very confident. And as you would expect we focused on the majority of our large tenants and big revenue first and then we're knocking out the remainder. But we're fairly confident on the rest of the agreements.

Ki Bin Kim, Analyst

Okay. And obviously, it's going to be hard to forecast earnings or cash collection for your company. But how are you thinking about the cadence from here on out? And I'm not sure what the right metric is, but if you could provide any kind of color to The Street on what we should expect going forward in terms of like collections or revenue recognition.

Greg Silvers, President and CEO

Again, I think, you can imply kind of what it will be for the balance of the year based upon the numbers that Mark just supplied because we gave kind of what revenue recognition would be our estimates if you go to the midpoint of that. I'll let Mark jump in. But, I think, if you look at the midpoints of those that would give the best indication of what our balance of the year cash collections would be.

Mark Peterson, CFO

Yes. Just a little bit about timing. I think collections will continue to get better as we come off of these deferral agreements in Q3 and Q4 certainly. And with respect to revenue recognition, we'll see a marginally better revenue recognition in Q3. And then as we move into Q4, I think, you'll see even greater revenue recognition as some of tenants that are in that category three that we weren't recognizing during the deferral period start to get recognized. And furthermore we get a little more percentage rents and other income recognized on properties that are either cash basis or they're in restructuring. So I think cash ramps up nicely and revenue recognition does as well but it's more fourth quarter oriented.

Ki Bin Kim, Analyst

Okay. And for my last question, was the 21% rent reduction for all 53 locations or just 46? What impact does this have on AMC? How much financial flexibility does it provide them? Additionally, could you share what AMC's coverage ratio was before COVID, and how a 20% rent reduction would affect that coverage ratio relative to pre-COVID levels?

Greg Silvers, President and CEO

The first question involves all 53 assets, not just the 46. I believe it will provide some relief. However, AMC has nearly 700 theaters, so there are many issues they need to address. We aimed to position ourselves in case they struggle to navigate this and potentially pursue some form of restructuring. We're not suggesting they will, but we've taken steps to manage our own challenges and are ready to move forward. We typically don't provide coverage specifics on individual tenants, but it's important to note that the situation has meaningfully improved for the assets overall.

Ki Bin Kim, Analyst

Okay. Thank you, guys.

Operator, Operator

Thank you. Your next question comes from the line of Brian Hawthorne from RBC Capital Markets. Your line is now open.

Brian Hawthorne, Analyst

Hi. Good morning. My first question in a bankruptcy scenario, how comfortable are you that the AMC Master Lease will stand up in court?

Greg Silvers, President and CEO

You know, I don't think anybody can give you great assurances. But I can tell you that when we structured it, we used bankruptcy council, the latest court decisions that were out there to structure a transaction that we believe is the most formidable available.

Brian Hawthorne, Analyst

Okay. And then on the 15% of gross receipts for the AMC, monthly payments for the rest of this year. I guess how much – how should we think about that in terms of – I mean assuming theater is open as planned out. I guess kind of how much potential rent could AMC pay this year?

Greg Silvers, President and CEO

Again, I don't think we're giving that number. I can assure you that it's probably conservative in how we've approached this just because of there were a lot of unknowns as to how various jurisdictions would allow reopening, what product would be available. I don't think we're prepared to give a specific number but I'm comfortable that it's a conservative approach that we took.

Brian Hawthorne, Analyst

Is that percentage rent that's not included in the cash collections number you guys gave right? Not in that range.

Mark Peterson, CFO

Correct the percentage rent is not.

Brian Hawthorne, Analyst

All right. Thank you.

Operator, Operator

Thank you. Your next question comes from the line of Nick Joseph from Citi.

Nick Joseph, Analyst

Thanks. Just following up on the AMC restructuring. And Greg, you obviously gave a lot of kind of comments on the theater industry more broadly and kind of the uncertainty of what kind of the shortening of the exclusive window could be. So when you think about kind of medium and longer term, how you set rent, how did that factor in? And I recognized you walked through a lot of the push and pulls. But just in general how did you think about creating a buffer for any kind of structural changes to that business?

Greg Silvers, President and CEO

Again it's primarily you're kind of looking at overall coverage. So you have to have some degree of forecast as to – and we spend a lot of time on it looking on where we think impacts of various things will be. And then it rolls through to where – what you think your coverage buffer needs to be. And you're also looking at again against where other theater companies are operating. And if you got into a situation where could you re-lease those theaters at given very similar economics. So all of those I can assure you that all of those things went into consideration.

Nick Joseph, Analyst

And then for the 88% of the properties that are now reopened. How is performance kind of four-wall performance for those properties relative to pre-COVID levels I don't know on an EBITDA basis. And I recognize it's still very early but can you give us a sense of how social distancing...

Greg Silvers, President and CEO

I would say – and this yes. And this is a general and I'll let Greg kind of weigh in. I would say the tenancy that we've seen is probably 65% to 70% of pre-COVID revenues. Now again, we have some properties that are operating at 100% of 2019 revenues and some that are not. But generally that kind of 65% to 70% in this – the reason that that's kind of really solid is those are generally breakeven numbers for operators. So again, they're – at those levels they're not burning cash. They are at least breaking even and generally tending to grow. Now as Greg mentioned, if you have hotspots or flare-ups or things like that it can tamp back down but those numbers have been kind of at that level and building.

Greg Zimmerman, CIO

Nick the only other thing I would add is that almost across the board everybody is doing better than they projected they would do which is comforting to us.

Nick Joseph, Analyst

Thank you.

Operator, Operator

I am showing no further questions at this time. I would now like to turn the conference back to Mr. Greg Silvers.

Greg Silvers, President and CEO

Thank you all for being with us today. We look forward to speaking with you next quarter. Stay safe. As I mentioned, we are optimistic. Things are getting better out there. Thanks a lot, everyone, and we will talk soon.

Brian Moriarty, Vice President of Corporate Communications

Thanks.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. You may all disconnect.