Ladies and gentlemen, thank you for standing by,and welcome to the Third Quarter 2020 Acadia Realty Trust Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Jennifer Han. Please go ahead.

Good morning, and thank you for joining us for the Third Quarter 2020 Acadia Realty Trust Earnings Conference Call. My name is Jennifer Han, and I am an Assistant Controller in our Accounting 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 and 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, November 4, 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]. 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.

Thanks, Jen. Good afternoon, everyone. I hope everyone is well. Today is certainly a day chock-full of distraction. So I appreciate you joining us. Perhaps it gives you some time to turn off CNN or FOX News or whatever election feed and talk with us. So before I hand the call over to John and Amy, let me discuss some of the trends that we're seeing throughout our portfolio and our platforms. First, as it relates to our core portfolio performance and our collections, we have seen continued improvement, continued restabilization after a very scary spring. As you may recall, back in April, half of our tenants were not paying us rent. Then by June, things began to improve, and we were collecting approximately 80% of our billed rents, with approximately half of the unpaid balance attributable to credit tenants that were either in deferral agreements or in dispute resolution. Thankfully, since then, our credit tenants have largely resumed, paying pursuant to their leases and accordingly, by the end of the third quarter, cash collections were in at 90% of our pre-COVID billings. And what we're seeing is that each month has been getting better than the prior month. And thus, we got to the 90% rate sooner than we forecasted. This improvement is also consistent with our stores reopening, which at quarter end, were at similar levels to our collection rate. So what does this mean for the remaining 10% of our portfolio that's not yet been collected? Well, this splits into 2 even buckets about half our tenants on our watch list where we are not expecting these tenants to survive post-COVID. We're rooting for them. We'll work with them, but we will continue to fully reserve against their rents for reporting purposes and are much more focused…

Thanks, Ken, and good morning, everyone. As Ken has already hit the key points on cash collections, I'm just going to add a few additional thoughts about how we actually think about those percentages as we monitor and manage our business, and it really falls into two buckets. First, what is the collection percentage telling us about our post-COVID NOI? As Ken mentioned, we are now collecting 90% of our monthly billings. So while a high and growing collection percentage is certainly our goal, it doesn't tell us the full story. Consistent with our past disclosures, we monitor and report our percentages based upon pre-COVID billings, which means that we don't modify the denominator for deferral agreements. Additionally, our billings for the third quarter are about 99% of what we were billing pre-COVID. So what this really tells us is that our increased collection percentages are continuing to support our current expectation of about a 10% adjustment to NOI. As this higher percentage is indicative of increased cash flows and not from reducing our denominator for deferral agreements or even worse, declining occupancy. Now moving on to the second bucket I mentioned. We also assess how the cash collections translate into our operating results. And ultimately, what I believe is the most relevant data point, our balance sheet. Through our increased cash collections of approximately 90% coupled with our ability to break even below 50%, we were able to retain in excess of $20 million in cash during the quarter. And in fact, this is what showed up as a reduction of our debt on the balance sheet. And secondly, I think about how much tenant exposure we are carrying on our balance sheet. Or said differently, what do we have remaining on our books at September 30, irrespective as…

Thanks, John. Today, I'll provide an update on our funds platform. First, with respect to our existing Fund V portfolio, since 2016, we've successfully aggregated an approximately $650 million portfolio of 14 open air suburban shopping centers. Given the state of the transactional markets, we were able to acquire these properties at a substantial discount to replacement cost and at an unleveraged yield of approximately 8%. And then we secured 2/3 leverage at a blended interest rate of 3.6%. In doing so, these properties have been delivering an attractive leveraged return and we expect that most of our total return will come from current cash flow. Over the past several years, we've carefully curated this portfolio, acquiring assets that we believed would have strong NOI stability. To that point, this year, the fund's collection rate has remained resilient despite the COVID pandemic, consistently coming in, in the mid- to high 80s on a cash basis since July. Accordingly, we continue to make monthly distributions from this fund to its investors. Post-outbreak, we've also been encouraged by the strong leasing activity within the Fund V portfolio with our leasing team delivering 95,000 square feet of executed leases with $1.5 million of annual base rent, and another 172,000 square feet of leases that are either at lease or at LOI with a combined $2.8 million of annual base rent. The pandemic has reduced our current leverage yields by approximately 100 basis points, but we are still clipping a coupon between 13% and 14% on our invested equity, and this feels pretty good, especially compared to alternative investments in the real estate sector. On the acquisitions front, while our transaction activity last quarter was quiet. As discussed, our existing Fund V investments are performing well and with approximately $200 million of discretionary capital…

[Operator Instructions]. Our first question comes from Craig Schmidt of Bank of America.

My question is regarding how long will it take the $1.3 million signed leases to open stores? I'm just curious to how long retailers are waiting before they actually open the stores? And then how long may it take tenants that are either at lease or under LOI to move to a possible signed lease?

Sure. Craig, I think it's -- you know what, I'll take on the signed leases, I would say for the majority of those, I think we're targeting second half of '21 before we would see an RCD on those. And Ken, if you want to talk just on the general trends, but I think for the most part, we should expect these in the back half of '21 to start showing up and into '22.

Yes. No, that sounds consistent. And Craig, the leasing timing feels more normal than not, but we do have to keep in mind that if things get delayed over the winter that those months could add on. But in general, we've been pleased with the fact that our retailers are getting out there, visiting properties. Certainly proceeding with the leasing, the legal process and the approval process on a business-as-usual fashion.

Okay. And then just a follow-up. Are you hearing anything from state or local agencies, given the rise in COVID that might result in -- for the mandated closings?

No, but keep in mind, most of the regions, most of the cities, states that the majority of our core assets at least are located in, have taken a very cautious view on the reopening. It doesn't need to be a reshutdown as much as a pause. I've been fairly impressed with the thoughtfulness at the very local levels, we are obviously in touch with the different municipal leaders and their agencies. And they're watching things closely. I think they're being careful, but I think we get through the next few months, hopefully, with everyone staying safe and without any massive step backs in terms of reopenings.

And our next question comes from Floris Van Dijkum of Compass Point.

I wanted to get a sense of -- by the way, thank you, John, for the -- trying to quantify the impact of lost or recurring rents. If I'm not mistaken, if you're billing 99% of your pre-COVID rents and you're collecting 90%, that would assume just over a 9% -- sorry, a 10% rental impact. Is that the right way to think about it?

Yes. No, absolutely, Floris. I think the -- and so the short answer is yes, that of what was our billings for the third quarter were 99% of what we were billing prior to that. And then the other thing to keep in mind, and as I talked about the occupancy movements that we had, those happened late in the quarter. So I think those were all reflected in our billings in the denominator but still they were billed, and that's what drove the 99%. So just to correlate those to the 2, I want to make sure you had that piece of it.

Great. And then I wanted to -- obviously, Century 21 has impacted earnings quite a bit, it looks like this quarter. Anything you can say about the re-leasing costs or the potential cost to retenant that space because it's a lot. And yes, there is some prime frontage space as well. But presumably, there's some other more difficult to lease space in that 100,000 square feet that Century 21 occupied as well. If you could give or maybe if Amy can give a little bit more background on that.

So first of all, keep in mind that the Century 21 leases in our City Point development, which is in one of our funds. So it is not a core asset. That the earnings impact that you're referring to was associated with the straight-line rent, which usually in our fund business, we buy, fix and sell these assets so quickly that the straight-line is just not a factor we think about. But that was the earnings impact was associated with straight line. As it relates to Century 21 specifically, we signed that lease in 2009/2010 during the darkest days of the global financial crisis. It was a very tenant-favored deal at the time, but we were highly motivated to get that going to get the development started. And I'm very disappointed to see Century 21 go away because I was a big fan of their company, their management team, an unfortunate casualty of COVID. And so don't get me wrong when I say the following, which is, given the vintage of that lease, given the demand and Amy walked through it with some of the office leases we signed, with New York University, with the BASIS School, with a variety of other users. I don't think you should anticipate -- it could happen, but I don't think you should anticipate that best and highest use is a simple retail re-tenanting. So I say that because under many of the different scenarios that we're discussing with a variety of retailers, the cost varies depending on how many different tenants we put in, but the NOI is quite compelling because best and highest use for the street level on Fulton Street will remain retail, period, and we will do that. Upstairs, we have the opportunity to be far more imaginative and cost will matter, but in general, and we've said this on other calls, thankfully, when you're talking about these high-quality areas, costs are an issue, but they are a fraction of the issue re-tenanting in high rent areas as opposed to in our more suburban areas. So we will certainly watch the costs. I promise you. We will do everything we can to keep our costs down, but there are a host of exciting uses, and that's what the team is focused on first and foremost right now.

Great. Maybe one follow-up for me is on the 1238 Washington -- sorry, Wisconsin Avenue asset in Washington, D.C., can you give us a little bit more color? What kind of -- I saw that was not expected to be stabilized for a couple of years, but what kind of yields -- what can you tell us about that? You only own 80% of that asset, right?

Yes. That's part of our M Street and Wisconsin collection. It's a long-term ground lease, it's still in the early days, Floris. So other than we wouldn't be doing it, if we weren't highly confident that it will be profitable and accretive. It's just not that big, and it's not far enough along for me to start bragging yet.

And our next question comes from Katy McConnell of Citi.

Great. So can you provide a little more color on the types of opportunities you're seeing for the fund platform today? And how much market dislocations impacted pricing? And then based on what you have in process, how should we think about the time frame for deploying the capital?

Sure. So let's start with the obvious, which is there has been a massive disruption to the retail industry overall. When you have a full shutdown the way that COVID hit much retail, at least for a few months last spring, it puts buyer, sellers, lenders into a state of shock. And I think you've seen it play out first and foremost and most extremely in the public markets, where they can adjust and have downward significantly. I'd argue they have overshot the mark. But then on the other side, the lenders, sellers, holders have been much more hesitant until there's better clarity around where rents are going to re stabilize. I think we're beginning to get there. And I think the general conclusion is that credit tenants are going to pay their obligations. Sales are going to be impacted. Rents in certain areas will be impacted, but there is better price discovery around rents. And that's critical because once we can set where NOIs are, we can then figure out and negotiate with sellers as to where value is. And the struggle is because in the public markets as opposed to the private markets, they tend to use a lot more debt. And until you have NOI price discovery that then comes up to value price discovery, you may be talking to a borrower who's totally wiped out. Then you go and jump and talk to the mezzanine lender. Well, you're seeing instances in that case where they're wiped out, and then there's the mortgage lender. And so what is occurring right now and part of the reason that I think things are slower is the decision-makers in the capital stack are finally recognizing where they stand. Now to the extent that the junior equity is in the money,…

Okay. Great. And then maybe as a follow-up to Craig's question on the new leasing pipeline. Can you provide some more color on the economics of the new street retail deals that you've been working on?

Sure. So what we have not seen as opposed to during other downturns, we have not seen many retailers reaching out for cheap rents forever. And that's always a little problematic because if you sign a 20-year lease with Burlington Coat Factory down 30% from a year ago in rents, while you have negatively impacted that asset accordingly. But what we are seeing, certainly, are retailers saying, "Hey, for the next year or 2, what if this happens? What if that happens? How are you going to protect us?" And so for 12 to 24 months, if it's the right retailer, for the right location, we can afford to be flexible, partially because of where our base is, was and partially because we are still working through a pandemic. What I am pleased to see is 9 out of 10 times those retailers say, "In the next 2 to 3 years, we will step up to real rents." Now whether those leases are 3-year, 5-year, 10-year leases, whether they're formulaic or just a simple set TBD. But in general, what we have found for the key streets is retailers, our pricing rents back under assumptions pre-COVID, we have always priced our deals, made our assumptions on a healthy rent-to-sales ratio. And so far, no one seems to be running away from that once we get past this next difficult 12 to 24 months.

And our next question comes from Todd Thomas of KeyBanc Capital Markets.

Ken, just following up, first on the conversation around rents a little bit, what you just discussed. And also, you talked about it taking time for rents to recover to pre-pandemic levels. First, [Technical Difficulty] rents or does that apply more broadly to urban and suburban rents as well? And then, I guess, as it relates to those comments, can you just provide a little bit more color around current market trends and whether you are seeing a stabilization in asking rents or if you would expect a little bit more near term pressure?

Yes. So I'd expect some more near-term pressure, Todd, meaning, boy, is this an uncertain time. Check in with me in a week from now, check in with me a month from now, and the range of outcomes could be significantly different based on a variety of different things. I am not going to ascribe to a dystopian future where you can't even imagine collecting rents, I do believe. And what our retailers are telling us is that they are planning for stores that get past this time period. But that being said, to get to your street versus suburban, first of all. What we all need to keep in mind is the way we think about things, the way the private market thinks about things, the way the public markets probably should think about things is net effective rent, meaning, what does it cost us to put in that tenant. In suburbia, I have been pleasantly surprised that face rents have more or less held up. Really depends on are you talking about anchor, junior anchor, satellite space and a whole variety of other issues regionally and otherwise. But generally, we're not seeing a lot of degradation in rent. But keep in mind, the cost to put those tenants in, especially for junior anchors has gone up. Same for satellites. And the cost is a much higher ratio and thus, the net effective rent impact is real because if you have a $15 rent, well, the good news is it's a $15 rent, not $150 rent, but it's still costing us close to, in many instances, $80, $100 a foot to put them in. And so its impact in that effective rent is more of what I'm seeing than on top line rent. In the cities, I'm seeing rental pressure. So top line rents are down, but then keep in mind, the cost of putting in those tenants is kind of the same as suburbia. So the net effective impact is not as great, although I don't want to pretend for a second. If we're trying to sign a lease, for the next 24 months in Midtown Manhattan to a sit-down restaurant. Well, first of all, I'm not sure why we would try, but even if we tried, I can't pretend for a second that, that tenant can or should be able to pay us the same rent that he paid 9 months ago, and that's where we're going to have to be patient until we get to the other side of this.

Okay. That's helpful. And looking at the structured finance book, I was just curious if there are any upcoming mortgage maturities or any repayments that we should consider in the months ahead as we think about the model for 2021? And then also, can you just talk about the performance of your mortgage and mezzanine investments?

Yes. So I'll take the first one. In terms of any meaningful repayments, I wouldn't expect anything repayment wise in the next 6 to 12 months. Then in terms of performance, the one -- big one we did at the beginning of the year was the Brooklyn loan. And that one is -- and I'll let Ken elaborate on it, but I think it's performing in line with our expectations. No concerns as they work through the pandemic, and we think that one still in good shape. I don't know if you want to add anything further?

Yes. I mean, my friend is probably not maybe listening to this earnings call, but we're clipping a 9% coupon on that mixed-use project in Brooklyn, and we'd be thrilled to take the keys, but I have no reason to think we will. So that investment, Todd, I think, will be a good one. We went through this during the GFC. You may recall, we made some very opportunistic loans, and people were concerned during the GFC. And then correctly, to your point, concerned when we got paid back because of the dilution, these all have another couple of years of duration in them. I expect the borrowers to utilize that. And then probably in the next 12 to 24 months, we'll let you know as that money starts coming back to us.

And our next question comes from Linda Tsai of Jefferies.

In addition to street retail doing a little better, we've heard from some industry experts that luxury is also doing better. Are you seeing this in your portfolio?

Yes, yes. So there's a few different phenomenon going on, and we need to differentiate between some short-term positive trends that we saw perhaps associated with stimulus or other events, which is still good, and I'm glad when any of our luxury retailers are comping positively and several did this summer. More interesting, though, is certain luxury segments notwithstanding the fact that international tourism and the shopping that comes along with it -- notwithstanding the fact that, that international tourism was shut down, the domestic consumer stepped up. Now that runs contrary to prior recessions, but this recession is contrary to prior recessions. Housing values have held up, stock market other than our stock has held up and the consumer has had what luxury retailers are somewhat viewing as forced savings. They didn't go on vacation, they couldn't go out to restaurants. And so we're seeing spots, luxury watches, for instance, without their usual shopper, luxury watches are still having strong sales, and there's a variety of others. So that's a positive sign. I do think it's encouraging, in general, just to remind us that the U.S. consumer does like to shop, does like to shop for unique items. And it doesn't just have to be luxury. It's true from what we're seeing from lululemon, it's true for what we're seeing from Allbirds and a variety of other retailers. Certainly, a bunch of the sneaker companies continue to do well. So yes, there is that trend. Let's hope it continues as we work our way through this.

And then just following up on the new leases being signed, are you requiring increased security deposits?

Yes, we should. Shouldn't we? I don't want to sound flat. And John, you may have a specific answer. But historically, the dialogue with credit tenants was, "Hey, you don't need a security deposit, we're always good for it," and then April happened. I am not aware, John, of any significant changes amongst our credit tenants.

No, I think that's right. And I think we look at, particularly, Linda, if we have a big capital outlay, we really drill into the credit, and then we'll look to other types of credit support. But I think it's largely, I think, pretty consistent with what we've done in the past.

But it is certainly worth a conversation if we were to ever revisit credit tenants not behaving. Now in their defense, the last spring was an unprecedented time period where everyone was hoarding cash for a period of time. It was an existential risk when I speak to retailers or board members of retailers. They say, "You think you were afraid, take a look at what we were facing." The great news is, for the most part, those who are climbing through the other end. And we pointed this out in our collections and otherwise. They're now on the other side of that, and we don't expect to see that again. But I wouldn't mind getting security deposits. Chris Conlon, you should keep that in mind.

And look, I think the one part that I would add that a step that we sort of always does, but now we always do is if it's a relo we understand how they treated the landlord during the pandemic. So that is one piece of that we look to as to how did they react during that. And did they fulfill their obligation during that period. So that is one thing we do, do differently.

And our next question comes from Ki Bin Kim of Truist.

It's Ki Bin. So you guys did a good job of explaining some of the changing nature of the leases that you're signing to reflect this kind of COVID environment, but when you commit capital, obviously, you can't do a short-term lease because you're committing capital and that's irrespective to the lease duration. So I was wondering if you can just talk a little bit more, provide some more details around the leasing that you're doing? And what kind of out tenants are having in their leases like reduced termination fees or maybe rents tied to sales, things like that?

Yes. So just to be clear, if we are investing in stores and this believe it or not, it's a bigger issue in the suburbs, because as I pointed out, the ratio of annual rent to cost to put the tenant in is 5 to 10x more difficult than in the streets just because of, again, the top line rent. But in every instance, and we have not seen retailers push back there is an expectation of full repayment of any cost, TI, LC, leasing commission, in the event that the tenant has some form of a kickout tied to some performance metric or otherwise.

Okay. So next question, I'm looking at your asset at 200 West 54th Street. It looks like Stagecoach Tavern is no longer a tenant. I think they were paying about $400 or higher a square foot rent. I'm just curious is the remaining tenancy -- is that the Dunkin' Donuts and the souvenir store? And how do you feel about that credit? And if that -- is that at all reserved for going forward?

So let me be first very clear about that asset in Midtown Manhattan that is dependent on both tourism and return to office work. That is one of the more challenging assets in our portfolio. When it comes back, we'll all be thrilled to own it. But we're going to have to be patient on the way through. Yes, there's -- you're right, Dunkin' Donuts is credit, et cetera. But I don't want to overpromise on that asset. And the only thing I'll mention is once upon a time, that with Stage Delicatessen. And once upon a time, again, it's going to be a great restaurant, but we have to imagine a post-pandemic life.

Okay. And just last quick one. John, when you mentioned $1 per share of FFO as like the run rate near term? Do you mean FFO or AFFO? Was a little confused by that.

AFFO, AFFO.

I warned, John.

I'm not looking -- yes, we had a big conversation on this, Ki Bin. And I'm going to look at the transcript, and I'm pretty sure I said AFFO.

AFFO.

But it is AFFO, yes.

And our next question comes from Vince Tibone of Green Street.

I have a follow-up on the leasing pipeline. All the commentary you provided was very helpful. But I think mostly related to renewal discussions. Could you elaborate a little bit more on tenant interest for new stores in your street retail portfolio? And just are there retailers looking to sign new leases and open urban locations in 2021?

Yes. I'm kind of being flipped. Yes. Yes, Vince, there you are. A big chunk of the leases we're working on. And John, maybe you can pull it up, are new tenants, new leases. And on one hand, you say, wow, that sounds a little crazy, unless you saw, well, it's obviously that fast, casual with a drive through or walk through, and they're crushing it in almost every store they have. And of course, they want to use this opportunity to or medical uses that are popping up in cities and in suburbs or the off-price folks who use these opportunities to gain co-holds into markets that otherwise they couldn't. So none of the new leases strike me as particularly surprising, especially if you overlay some of the other things I mentioned, which is we were always heading into this recession, a little concerned about our digitally native, like the Allbirds and Warby Parker, young brands, are they going to make it to the other side because they have the online connection, they made it to the other side. And as you know, Vince, almost without exception, every retailer who is good at opening stores and running stores, finds that to be the most profitable component. You should expect to see a continued rollout in an omnichannel world of those retailers who have the DTC piece of their business put together to use this opportunity to open stores as well. So it's a nice wide variety of new tenants, not just renewals that I think over the upcoming 12 and 24 months will make a lot of sense.

Yes. No, but what I'd add to that is I think that we were intending that disclosure to be on the new tenant. So what I would say is that on the street and urban side to elaborate a bit is we think of our street exposure and, call it, 40% of our ABR, half of it is similar to the conversation we just had, what we think is the more COVID exposed and more office dependent tourism markets. But then the other half of that is, think of the -- people where -- people live and work and what we think is lower density street. And I would say, for the most part, where we're seeing that growth is in some of those lower density street locations, and these are -- run the gamut, they're credit tenants. Some of them are digitally native that are looking to branch out into our locations. So I think that is where some of it is. And some of the things that are not in our -- in those numbers, we have people poking around in the high-density locations as well for the same reason, Ken, mentioned on stage is that these will be locations that will be essential to a retailer at some point in the future. So we haven't talked about those, but the ones are actionable are really falling into that 20% bucket of lower density street locations.

Very helpful. One more for me. Could you discuss the decision to extend the maturities on the fund mortgages versus refinancing. Is that at all an indication of very tight credit markets today? Or was that always part of the plan?

Both. So it is almost without exception, easier to extend than refinance at this point in the cycle. Borrowing costs for retail have gone up, spreads have widened notwithstanding base rates down. So to the extent that you have the ability to extend, of course, you will. Thankfully, we have great relationships with our lenders, and we deserve that, and then they extend and reciprocate by things like options to extend.

Yes. So what do you think needs a change? Just as at the NOI visibility to make the lending environment anything close to where it was for pre-pandemic? Is that still -- I mean, you kind of touched on that earlier.

Green Street has to stop writing about the retail Armageddon. So here's the thing. We will get past this horrendous last spring of collection that made every lender in the world nervous. We are going to have a sector that has relatively stable cash flow. Some will be flat for a long period of time, but predictable, and others will have asymmetrical growth like in our streets. And lenders are going to look at that and lenders who are willing to lend to other forms of real estate, like net lease, from the same tenants are going to say, "Gee, it's 3 net lease tenants glued together, of course, I'll lend on that." I would not expect proceeds to come back to where they were 1 or 2 years ago so fast, I would not predict that this happens overnight, but I do think we're going to start seeing stability. And once we climb out of this, the capital markets will do what they normally do, assuming we climb out of it and our credit tenants behave appropriately assuming that the economy is on stronger footing 12 months from now than it is today. And I would tell you, the consumer has been hanging in there. So I feel pretty bullish with the caveat that the next several months are going to be tough.

And our next question comes from Mike Mueller of JPMorgan.

John, I was wondering, can you generally run us through the rough math of how you get to the dollar of recurring AFFO? I mean if I'm just thinking about Q3, you get $0.20 of FFO, add back your straight-line write-off, that gets you a little over $1 on a run rate, and that's before CapEx coming out. So to get to that $1 of AFFO, are you implicitly assuming that the 50% of the reserve tied to the healthy tenants that were -- the pre-pandemic healthy tenants like gyms and stuff, that comes back and your money good on that?

Yes. So Mike, I think it's a lot of moving pieces and parts, but I think it's really where we see that right now, we're reserving about 10% of our NOI. Sorry, 10% of our ABR, and as Ken mentioned, that falls into the 2 buckets. So we think between a combination of half of that bucket, ultimately getting to the other side and rent paying as well at some of the lease-up that we have built in that is going to go in the normal course that we get to a sense of normalcy at that point. So a lot of moving pieces that get us there. But and again, we're not intending as a matter to provide guidance. We're just thinking about what we see this quarter, what our current expectation is and how we're going to think about it setting forward. But we're feeling pretty good about that.

And to be clear, Mike, we are not expecting a quick rebound in that 5% until there is better resolution on the health side.

Got it. Okay. And then I guess if we look at the 2021 rent rolls in Manhattan, in particular. Can you -- well, I guess, the overall lease expiration schedule, can you just walk us through, is there anything we should be cognizant of that's going to be particularly a headwind or a tailwind?

Yes, within Manhattan, Mike, so keep in mind that's less than 10% of our overall portfolio. Just keep that in perspective. But in terms of significant role, we do have a space in Soho that we think is possible that we get back or in conversations. And you can imagine conversations with all of these. And I would say the other one that's still in occupancy is in Union Square, the event space. I think that's one you should assume is also one that we are actively looking to work with and ultimately, re-tenant. So I think those would probably be the 2 I would point to.

[Operator Instructions]. And this does conclude our question and answer -- actually, we do have a follow-up question from Ki Bin Kim of Truist.

Sorry for elongated call, but I'm just curious, as a management team, what else do you want to see before you start to implement a sustainable dividend?

Well, sustainable dividend. So I think that's the first part, and maybe I'll have Ken talk about the second part of it. But I think, Ki Bin, we are going to have, and as we have this year, we have taxable income. So whether we want to or not, we will have to pay a dividend given the low leverage we're at. So I think what I would say that I would talk to our Board about is a sustainable dividend is once that we are very comfortable with our near term guidance, which we're getting there. I mean we update our budgets, I don't want to say daily, but pretty close to daily as to where we think the world shakes out. So I think it's really at the point that I would be disappointed if in February, we were not at a point where we had conviction around where our budgets, where our cash flows, where market has settled out. So I think it's really continuing to go through that process, seeing more leasing velocity in deals and where our pipeline is and you'll see more of that pipeline that we discussed turn into leases, et cetera, I think gives us the conviction around what it looks like and how resilient it is. And I think the last point before I turn it over to Ken is how sticky is this 90%? So I'd say we saw it in September, we saw it again in October, knock on wood. We're only the fourth day into November, but off to a solid start in November. But I think that's the thing we're going to watch closely as well is how resilient is that 90% because that gives us indications as the strength of our retailers and how important these spaces are to them.

Yes. Just to add to that, and I don't speak on behalf of the entire Board, but how we, as a Board, would think about this is our leverage is more or less where we'd want it. I'm not at all concerned about, assuming the world normalizes, paying a dividend within the range of -- I don't really want to go to the Board and say, "We need to lever up to do it." And I certainly, given where our stock price is, wouldn't want to go to the Board and say, "We need to issue stock for a dividend." And you can do the math, and John has laid it out, but there's a pretty nice, healthy, certain range of what a normalized dividend looks like in a very abnormal world. So I think that, that will become clearer over the upcoming months. And then we will have the luxury of talking about how much that dividend should and could grow as we lease our way out of this painful period.

And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Ken Bernstein for any closing remarks.

Great. Thank you all for joining us today. Hopefully, it was a pleasant distraction from watching your news feeds on the election. Look forward to seeing all of you in person in the not distant future, but until then, stay safe, stay well.

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