Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2020 Kite Realty Group Trust Earnings Conference Call. At this time, all participant lines are in listen-only mode. So if you require operator assistance, please press star then zero. After the presentation, there will be a question and answer session. I'd now like to hand the conference over to your host today, Mr. Bryan McCarthy, Senior Vice President, Marketing and Communications. Please go ahead. Thank you, and good morning, everyone. Welcome to Kite Realty Group's fourth quarter earnings call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties. Actual results may differ materially from these statements. For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release, available on our website, for reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group, our Chairman and Chief Executive Officer, John Kite; President and Chief Operating Officer, Tom McGowan; Executive Vice President and Chief Financial Officer, Heath Fear; Senior Vice President and Chief Accounting Officer, Dave Buell; and Senior Vice President, Capital Markets and Investor Relations, Jason Colton. I will now turn the call over to John. Thanks, Bryan, and good morning, everyone, and thanks for joining us today. Well, we appreciate that this continues to be a challenging time for all of us, including our investors, tenants, customers, vendors, and employees. We obviously hope this call finds you doing very well. Last quarter, we discussed how we seem to be closer to the end of the pandemic than the beginning. As we pass the one-year mark of the first reported case in the U.S., we're more confident in that statement today. Currently, new cases are falling while the vaccination rate is growing quickly. There's a sense of hope in the country that we didn't have nine, six, or even a few months ago. The sense of hope makes us believe that we're on the cusp of the country returning to a more normal life. We continue to have very strong industry-leading collections. Fourth quarter collections are 95% of gross rent. As we discussed last quarter, this is a testament to our properties, our people, and our processes. Even our third quarter collections continue to clip higher and now sit at 93% of gross rent billed. While we will never stop pursuing the owed rent, we believe the stabilization in rent collection quarter-over-quarter shows the worst is behind us. With that perspective, let's discuss our strategy going forward in a more normal environment. The first part of our strategy is to continue to focus on warmer and cheaper parts of the country. The pandemic accelerated a migration to these cities and states that had already been underway. Technology improved the ability to more effectively work from home. Companies then realized they didn't need to be in major expensive hubs to attract talent. This accelerated large company moves to cities such as Dallas, Orlando, and Nashville, to name a few. The growth will be dramatic, and KRG will continue to position itself to benefit from that growth. This migration's far from over, and the advantage it presents is becoming more evident. The shift to warmer, cheaper locales is a key reason we purchased Eastgate Crossing in Chapel Hill, North Carolina. It's a premier asset anchored by Trader Joe's, located in a KRG target market. Please note that we executed a nondisclosure agreement on the transaction, therefore, we'll be unable to discuss details. What I can say is the transaction was a win-win for both sides, and we are very happy to be the new owners with plans to quickly increase the property's value. The second part of our go-forward strategy is leasing and filling the vacancy caused by the pandemic. We are already well underway. The momentum of last quarter has continued. KRG executed 60 leases for over half a million square feet in the fourth quarter. Additionally, we are in the process of addressing over 80% of the 5.9% of ABR from bankrupt tenants. As a reminder, this is up from 65% last quarter, despite additional bankruptcies in the fourth quarter, raising the impacted ABR from 5.4% - 5.9%. We currently have 19 vacant anchor spaces, and during our big box surge a few years ago, KRG successfully backfilled 22 vacant anchors at accretive returns. We're hopeful to do the same with these vacancies. Our new project, Anchor Acceleration, is already well underway, and we've laid out the potential economics on page 19 of our investor presentation. You'll see that assuming the current ABR for our in-place anchors, there's a potential mark to market of nearly 30%. To provide a specific example, we had seven Stein Mart locations become vacant this quarter, and over half of our year-over-year 490 basis point lease rate decline is from Stein Mart, whose average ABR at those locations was only $8.16. If we had to pick an anchor to lose, this was definitely the one. This temporary dislocation provides a great opportunity to backfill with a tenant who will not only pay market rent, but will drive significantly more customer traffic. As we examine new lease opportunities, please keep in mind that we're very cognizant of total return. We're not going to spend unnecessary capital simply to inflate our lease spreads. We are going to do what makes the most financial sense for the company and our shareholders. Sometimes this means a negative spread deal in exchange for limited or zero tenant allowance. The situation occurred this quarter, we had two fitness anchor tenants that declared bankruptcy in 2020. We executed deals to backfill those two spaces with minimal tenant allowances, resulting in negative spreads, a significant return on cost. Excluding these two leases of over 100,000 sq ft, our blended lease spreads would have been 13.4% on a GAAP basis and 6.8% on a cash basis. Moving to shop vacancy, we have approximately 182,000 sq ft of shop space to lease in order to get back to our industry-leading shop lease rate of 92.5% from the end of 2019. Since we've been there before, we are confident in our ability to once again reach these levels. As with the anchors, we've laid out the potential economics in our investor presentation. The final part of our go-forward plan is to maintain a strong balance sheet in order to take advantage of new opportunities. One opportunity was the purchase of Eastgate. Another opportunity has been the redevelopment of the Macy's store at Glendale Town Center, that began this quarter. In addition to the multifamily development we announced last quarter at Glendale, we are bringing Ross Dress for Less, Five Below, and Old Navy into the shopping center to replace part of the Macy's box. The highlight of the project is that due to a partnership with the city of Indianapolis in the form of a TIF bond, the net cost to us is only $3.9 million, resulting in a very compelling yield. This is another example of the KRG team adding value at great risk-adjusted returns. We'll continue to take advantage of the opportunities that present themselves while always maintaining the strength of our balance sheet and our liquidity profile. Before I turn it over to Heath, I want to again thank the entire KRG team. I really cannot express enough of my gratitude to the men and women of our team. The strength of our operations is just not possible without them. We all look forward to shifting from surviving the pandemic to thriving in the future. I'll now turn the call to Heath to discuss the balance sheet and 2021 guidance. Thank you, John, and good morning, everyone. As we kick off 2021, our posture of cautious optimism has developed into one of prudent opportunism. As we speak, COVID positivity rates are rapidly declining. The vaccine rollout is accelerating, and children are returning to the classroom. While we're not out of the woods, the clearing is in sight. When the pandemic first hit, we collectively made a promise to conduct ourselves in a way that would make us proud when looking back. Suffice to say, I'm proud of how well our people, properties, and processes handled and continue to handle the pandemic. Our current focus is on the path forward, filling the COVID-related vacancies and leveraging our strong balance sheet and operating prowess to prudently unearth future opportunities. Before delving into the future, let's take a minute to discuss our fourth quarter results. We generated $0.29 of NAREIT FFO in the fourth quarter. Excluding the one-time impact of severance charges related to some management changes, FFO as adjusted is $0.33 per share. This includes $3.4 million of bad debt, $2.6 million of which is related to fourth quarter billings. As we did last quarter, we've disclosed the bad debt breakdown on page 18 of our supplemental. On that same page, you will see that our billings dropped 1.3% as compared to the third quarter, primarily related to Stein Mart. Our balance sheet and liquidity profile remained strong in the fourth quarter. Our net debt to EBITDA, pro forma for the Eastgate transaction, was 6.8 x, down from 6.9 x last quarter. Just as important, our liquidity position remains strong. No debt maturing until 2022. Only $12 million of outstanding capital commitments and ample liquidity of over $560 million to address the current vacancies. John discussed the potential mark-to-market for the vacant boxes. I'd like to add some color on the potential capital outlay with re-leasing not only the anchor spaces, but also the shops. As broken out on page 19 of our investor presentation, we conservatively estimated that our re-leasing efforts will cost $100 per sq ft for anchors and $55 per sq ft for in-line tenants, making the total required capital around $67 million. As a reminder, we completed the big box surge spending approximately $64 per sq ft, and our average cost per small shop leases in 2020 was $51 per sq ft. In all cases, our potential re-leasing costs are well inside our current availability, even before taking into account cash flow from operations net of dividend payments. Turning to our guidance for 2021, we are projecting FFO as adjusted to be between $1.24 and $1.34 per share. We are guiding to FFO as adjusted for one key reason, to reduce the noise from 2020 and provide a clean 2021 FFO run rate. Accordingly, our guidance excludes any impact from 2020 accounts receivable or 2020 related bad debt. By way of example, to the extent we are unable to collect any of the 2020 accounts receivable, it will become a bad debt expense in 2021, but it will be excluded from our FFO as adjusted. The same holds true in reverse. If we're able to collect on some of the 2020 bad debt, which we continue to aggressively pursue, we will recognize that as revenue, but it will also be excluded from our FFO as adjusted. In both scenarios, these potential changes in earnings are one-time items and would skew the 2021 FFO run rate. We will, of course, highlight the impact of these items throughout the year, and we will continue to report NAREIT FFO. The midpoint of our guidance assumes approximately $8.2 million of bad debt. The bad debt number is an addition to incremental vacancy included in our forecast for tenants that have or may stop operating. The $8.2 million was primarily sized based on the annualized amount of bad debt associated with fourth quarter billings, less the budgeted vacancies. Basically, the midpoint of our guidance assumes that the 4% of revenues that we didn't collect in the fourth quarter is not collected in 2021, either by way of additional vacancy or uncollected rents. Another slide we added to the investor presentation we think will be of interest is slide 15. This slide expands on our detailed disclosure on page 18 of the supplemental to incorporate how our 2021 guidance compares to 2020. The supplemental shows that fourth quarter recurring revenues have decreased approximately 7% as compared to the first quarter. This new slide shows that 2021 guidance is only 3% below the first quarter of 2020 annualized. Said another way, this shows that we believe the recovery is already underway. Finally, this guidance assumes we will sell an additional asset or assets to match fund the Eastgate acquisition. This is consistent with our message about match funding any acquisitions in order to keep leverage in check. While we are positive about what the future holds, we will always ensure not to take any step that will undo the progress we've made to date. We have a strong balance sheet, a best-in-class leasing and operating platform, a portfolio of assets that has consistently outperformed the peer group over the course of 2020, a winning strategy that continues to pay dividends, and most important, a deep desire to meet and then exceed our pre-COVID levels across every single metric. Thank you to everyone for joining the call today. Operator, this concludes our prepared remarks. Please open the line for questions. Ladies and gentlemen, if you'd like to ask a question at this time, please press the star then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, you may do so by pressing the pound key. Again, that is star then one to ask a question. Our first question comes from the line of Floris van Dijkum with Compass Point. Thanks. Good morning, guys. Thanks for taking my call. Morning. Morning, Floris. Morning. Before I get on, nice disclosure, particularly pages 15 and 19 of the deck you guys put out. Hopefully some of your peers might follow suit and provide that kind of clear information. Can I ask you guys a little bit about You talk about match funding or your Eastgate acquisition. What additional non-core do you have, or should we think about your ground rent income, for example, your $16 million of ground lease income that you could presumably sell at very compelling cap rates, which actually could boost your earnings as opposed to selling another non-core asset? Can you walk through your thought process on that and give a little bit of insight? Sure. Yeah, look, I think all the above in terms of things that you mentioned are potentials for us, and we've talked about in the past, Floris, with you and others, just in terms of on both fronts. We still have some assets that are attractive assets but are potentially in markets that we don't view as where we want to be long term. We also have, and we pointed out, in fact, if you look on the last page of our sup, we kind of break out the components of NAV and then leave it to you for cap rates. Obviously, we have a significant amount of ground lease NOI as well. Bottom line, I'd stay tuned. We're actively working on what we talked about relative to the match funding. We look forward to telling you what it is when we get it done. As you know, we're not the kind of people to talk about stuff before it's done. That said, we're very confident that we will be doing that soon, and that when we do, that this can be a very accretive transaction for us. From the match funding as the property that we acquired, as you know, was 73% leased. A lot of upside, and we're already actively engaged in creating value with that upside. John, maybe if I can follow up on that. Obviously, you talked, or I think it was Heath who laid out some of the upside, or maybe it was you, I can't remember now, on the Stein Mart. How advanced are discussions on that space, and how confident are you guys that you're going to make good progress this year on that space? Obviously, you're very forthright in terms of the upside potential in terms of rent spreads and returns on invested capital. How about the timing of that? I'll give you just a macro and then I'd like Tom to address it a little more in detail. Bottom line is, as I've said, it was me talking about Stein Mart, and I guess I'm a little hurt that you don't know my voice by now, Floris, but I can get over it. I can get over it. We'll cover it in the spring on number seven. Honestly, look, and I mean it was absolutely if you're going to have a tenant have that big of an impact on your lease percentage, that I know a lot of people look at, the reality is we were psyched. Okay. This is the tenant to lose. We've talked about it over the years. They're paying $8 a foot. Look, I don't talk about it flippantly that unfortunately, that this business went out of business because there was a lot of great people there. What I do say is, for a long time, we were in the position where we knew that this just wasn't a tenant that was going to survive, but based on lease contracts, we can't just say, "Hey, it's time for you to leave." What I think is that people should focus on here, and the reason we laid it out in the investor presentation is two things. One, we're really good at this. We just did it a couple of years ago. We like it. This is what we do. We've always been the leasing efforts are the tip of the spear. I've said it many times. Two, yes, we have a lot of deals active on it. I'm going to turn that to Tom. Yeah. If you look at Stein Mart, let's say we had seven active spaces, we're very confident that we're moving through at least half of those. The real benefit to the company, the real benefit to the shopping centers is you have a company that, let's say, was doing $5 million of revenue out of the store, very unproductive. A scenario would be if you could replace that with someone like Total Wine that is doing, or could do $25 million out of that same store. You're generating a heck of a lot more traffic into your center. You're creating visibility. We're excited, not in terms of just our ability to get these leased, but to generate a better experience for our customers with better tenants, better rents, better spreads, et cetera. Bottom line, we're going to get them all leased. It's just a matter of time. I think what Tom's referring to is that we have these active deals right now on half of them, but we'll get them all leased, Floris. Yeah. I'll just add one. When I first came to Kite, I asked Tom McGowan, "How do we get rid of these Stein Mart guys?" Tom said, "Heath, they just keep renewing." Like John said, we're pretty happy that if you had to pick an anchor, this is the one. One thing also important to point out, we did mention this in our prepared comments, though. Look what happened to our ABR. We were at 18 last quarter. We're at 18.42. That's nearly a $0.50 pickup in ABR quarter-over-quarter. A lot of that is because we've gotten rid of this $8 tenant. A little bit of addition by subtraction. Okay. Thanks. One last question, I guess from me. Maybe, Heath, if you could put the $8 of bad debt reserve for this year into context and compare it to, not last year, obviously, because it was such a screwy year, but compared to 2019, what you guys had, and just to put it in context? Yeah. It's $8.2 million, Floris. Typically, we have about $3 million on a normal year of a bad debt reserve. The way we sized it, and I said it in my comments, was we really took the intra-fourth quarter bad debt number. We annualized it. We took account for those tenants that had bad debt but were then being modeled as vacant. Then we looked at a couple of other tenant categories that we were still a little concerned on and added a little bit of a buffer on top of that. That's where the $8.2 million came from. Again, it's not quite three times, but almost three times as much as the bad debt in a normal year. Yeah, said another way, it's $0.06 a share of impact above a normal year. It's significant. Great. Thanks, guys. That's it for me. Thank you. Our next question comes from Katy McConnell with Citi. Hi, great. Thanks. Wondering if you could update us on how January rent collections are trending so far and your outlook for the rest of 1Q based on any new restrictions that you're aware of that's impacting your portfolio today? Yeah, the collections in January are on track with our fourth quarter collections. All right. What was the second question, Katy? I was just asking about your outlook for the rest of 1Q and whether you have any restrictions impacting certain assets or markets that you're aware of that could change. No. If we haven't proved that we're good at collecting rent, I don't know. Okay? We'll continue to collect rent. We're good at it. Our tenants, we're fortunate that we have a great relationship with our retailers, and we're in the markets that we're in that have, as I said on the last call, there's a clear correlation between the markets that we're in and businesses being open. I don't foresee any downturn. We'll see how this thing goes. Clearly, we're not all the way out of the woods. We've been conservative in our projections, but it feels at this point that we will continue on that path. All right. Makes sense. Regarding the Eastgate acquisition, can you talk about the extent to which you have been looking at other marketed opportunities? Just give some color on what the transaction environment for a strip looks like today, and also what your plans are for adjusting the vacancy or adding value to that property going forward. Sure. Look, this was a unique situation, where this came along at the right time, and so we were very happy to have been able to get that done. Look, at this point in the cycle, these are few and far between right now. There's a limited amount of buyers, who can actually move quickly and close all cash. That was obviously one of the reasons this was able to happen. It's not opened up like, it was before, Katy. It's going to take a little more time probably, due to bid-ask spreads. I think it's firming up, and I think it sounds corny, but as we get into the spring, it's just going to feel better for people, and I think then you'll probably start to see more activity. Look, the thing about it is there's very low supply out there, so people generally, they want to hold assets unless it's a strategic change for someone. That created this opportunity. All right. Great. Thank you. Thank you. Our next question comes from Todd Thomas with KeyBanc Capital Markets. Hi, thanks. Good morning. John, you talked about warmer and cheaper markets, and that's been the company's strategy in general. You've also taken some opportunities to move into the New York MSA, for example, a few assets in New York, Connecticut, New Jersey. Is there any interest in taking advantage of what may be better pricing in those markets? If not, are those asset sale candidates? Yeah, good question, Todd. Look, I think one of the things we do talk about the strategy, warmer, cheaper. I think what we've tried to always say is, look, that's where the majority of our rent is going to come from. As an example, Florida, Texas, North Carolina, those three states alone are over 50% of our revenue. That said, there's always going to be opportunities in markets that maybe don't fit that technical profile. We'll look at them, and we will study them, and good real estate is good real estate. It isn't going to be our primary focus. Our primary focus is going to continue to be invested, the majority of our capital invested in what we call those warmer, cheaper markets. To the second part of that question, sure. There's possibilities that we could recycle assets in the Northeast as your specific question. We're not going to do it at below the value of the asset, right? Particularly, it would be nice if those markets opened in a major way. I think that they're beginning to see that they need to, and that there's no real data to support being closed. I think as that evolves, Todd, we'll take a closer look at that. Okay. Got it. On the asset sale that you're contemplating, how far down the road are you on match funding Eastgate? Sort of following up on, I guess Floris' question, realizing that there's some leasing upside at Eastgate, can you characterize the pricing maybe in terms of the spread that you anticipate achieving vis-a-vis the capital recycling, John? I think you characterized it as being accretive. Is that 2021 or longer term? Well, I wasn't specific on timing for a reason. I think, Todd, what we're trying to say is that, in the two-part question, I guess, number one, I said stay tuned earlier, and I think that's the right thing because we're actively working on a couple opportunities to match fund. We're confident it will happen. I'm just not ready to say exactly the date or anything like that. The great thing is, as Heath kind of ended with in his prepared remarks, our balance sheet was strong enough that we could do this, and it really did not impact our balance sheet, as you can see. That's a real positive. The match funding is just something we think is smart in this particular transaction, particularly because it is 73% leased, and it creates this upside potential. That's what I mean by it being accretive transaction, because obviously, we don't think it's going to stay 70% leased, and we are actively engaged in opportunities right now that would significantly increase the occupancy. Long story short, I can't give the exact details of that, Todd, but suffice to say, it was a great transaction for us. It's just what we love to do. We love to find these opportunities where there's embedded value that we can go out and just fight to get. That really motivates us, frankly. Okay. Heath, on the guidance, so the bad debt assumption of $8.2 million for the year, which you talked about being roughly the 4Q 2020 run rate. Is that a conservative assumption, or do you not see that improving as we move throughout the year and as conditions continue improving and normalizing? I think it's an appropriate assumption at the midpoint of our range. Listen, obviously still a lot of variables out there, and we hope that we can outperform it. At this point in time where we're sitting, that was a number we felt comfortable with. All right. Just lastly then, also on the guidance. I understand the assumption around not including any contribution, either positive or negative to the guidance range from the 2020 reserves. This quarter included a net $700,000 negative impact. Do you anticipate that the net impact from prior period adjustments could be negative for a period of time, or would that potentially should we expect that to inflect to the extent that we continue moving toward a more favorable reopening environment? Yes, I think, Todd, the reason we actually are excluding them from our FFO is just for that very reason, because I don't know. In the third quarter, it was $1 million on each side, it basically canceled each other out. In this quarter, it was $700,000 more of deemed uncollectible AR. What happens this quarter? I honestly don't know. Really, the reason we're doing this is because, listen, there's so much volatility in a lot of things we're doing. To remove one more piece of volatility, we thought was the best way of showing you a 2021 run rate. Just by way of an example, we have $13 million of bad debt. We are chasing that bad debt. We have got collection teams. We have collection attorneys. We're going to do all we can to make sure we get that money. If I collect half of that bad debt, that's $0.07 to the upside. I'll tell you what, if I'm beating FFO estimates with that $0.07, that's not a quality beat, right? Just in the reverse, if all of a sudden during the quarter, we deem some tenant to have their AR be uncollectible and it's an expense and I miss guidance or I miss earnings because of that expense, that's a non-quality miss, right? For us, it's really just about giving you a very pure, smooth number. If I was one of the analysts, I would think to the extent people aren't breaking out that 2020 number in their guidance, I would ask them, "What is your assumption around what's happening?" Is it a positive or a negative swing? For us, it's like, you know what? We're going to let it be what it is. We're going to remove one more variable. We're going to give you the cleanest 2020 number possible. All right, great. Thank you. Thank you. Our next question comes from Alexander Goldfarb with Piper Sandler. Hey, good morning. Just echoing the prior link on the guidance comment. I appreciate, Heath, what you guys are doing. At the same time, it is preferable when everyone sort of dines on the same NAREIT definition. I understand that you want to exclude things that either throw the number one way or the other. Still, just for comparison, I think it is good to adhere to the NAREIT definition, even though it has its flaws. I appreciate what you're trying to do. Two questions. First, whoever came up with slide 27 in the deck, it's a bit of salt in our New York wounds. Maybe you want to remove that slide going forward. It's a little painful to see how much we're losing out by living up here. On the remaining 5% of rents that you haven't collected, I saw 4% was bad debt. Of those tenants, should we think about that there's another 4% of vacancy to come, or how should we think about that 4% number of bad debt as we think about you guys going forward? Yeah, listen, of that 4% of it, we handicapped it that about 50%-60% of it is still money good. I wouldn't take that 4% and just say, "Well, we're going to throw that out the window, or we're going to give up on it." Again, I think I'd harken you back to that slide that showed you our annualized first quarter revenues to our guidance for 2021, which shows a 3% decline. Again, it's 4%, but like I said, we're not going to give up on it. Okay. Heath, what you're saying is of that 4%, a little bit more than half you think is money good? Put it this way. We have $4.4 million of uncollected rent, and $2.6 million of it we wrote off, right? That $2.6 million of it, obviously, we think that's the 4%, right? We think that's not money good. Okay, that's vacancy. In other words, we're going to see vacancy rise by that amount, or I'm just trying to just understand. I understand that slide that shows the 3% down, which is awesome, I'm just trying to understand how that relates to this 4% and if we should expect the occupancy to go down by that amount. Alex, we don't guide to occupancy. What I will tell you is that you'll continue to see the spread between leased and occupied widen. Right. In the height of the big box surge, we had a spread of, I think it was as high as 320 basis points. As the year goes across, as we start signing up leases, you're going to see that spread widen out tremendously. I could easily see it hitting 300 or beyond that, based on the velocity of box deals that we get done over the next two years. Alex, Okay, thanks. Yeah, just take into account that we're. That's a point in time, right? You're looking at a point in time, and we're actively leasing. This is all in that guidance that we gave you. The other thing I want to tell you is, we are guiding to the as-adjusted number, but we will report the NAREIT number every quarter. It's out there. You're going to see it. All right? We're not reporting it. We have to report it. I got to lean into that a little bit, because the bottom line is, when 2022 comes around and we're comparing things to 2021, I think you're going to say, "Hey, that was smart you guys did that, because now we can't figure out what the hell is going on with these other guys." We'll see. It is far from us trying to not be transparent. It is the opposite, right? We're going to clearly- No. Yeah, go ahead, bud. Yeah, no. Look, I totally hear you, and I totally understand what you guys are trying to do, and I appreciate it. Right. the point. I know. I want everybody to understand that we'll certainly be showing both numbers, and that in terms of the impact of the bad debt that Heath was talking about and how that relates to the leasing percentages, I think the point of the guidance was we were being reasonable in all these assumptions and probably leaning towards conservative. It is because we're talking about being out of the pandemic, but we're not. We're still utilizing that caution as it relates to really everything, in terms of the projections. Okay. The second question is, you guys obviously are standout on your non-essentials for the number of tenants paying rent, open, and all that fun stuff. Would you say it's just purely the difference in the COVID regulations in the municipalities, whereby most of your properties are located in states that didn't shut down and let their tenants open? Or are there other specifics, meaning maybe just the way the business models worked or the layout or something else that's also driving it, that it's not just purely, hey, the portfolio is weighted towards the Sun Belt, but there are other dynamics that are in there that allow these businesses to stay afloat, and to reopen? Obviously, early on, a bunch were closed, which is negative cash drain. It seems like almost all of them have rebounded pretty healthily. I didn't know if there's something else specific that's driving that. Sure. Great question. Look, I think when we lay out that little acronym that we've talked about, the 3 Ps, people, properties, processes, that's real. To the extent that, yes, we are, as I said, Florida, Texas, North Carolina is, like, 52% of our rent. We obviously have lots of properties in other markets. Frankly, we have peers that own similar exposures that we've significantly out collected. In the end of the day, it's never one thing. It's just not. I think it's this combination of who we are as people, where these properties are located, and what our relationships are with the retailers. I said it a couple of quarters ago. Sometimes you would say, "Well, why, geez, you collected more theater rent than almost anybody?" "Seems like your fitness guys are paying a little more. The restaurants look pretty good." We have only three, what you would call white tablecloth restaurants, okay. That's a factor there. In the end, it's all those things, and these tenants ultimately decide, "I want to work with Kite, and they're a good landlord, and they have been supportive of us in the past, and we need to support them. Damn, I need this location. I don't want to lose this location." I always said to everybody underestimates how little supply there is in Class A open air real estate, man. Everybody. You got to think about that. It's all those things combined, Alex. As you know, we are the kind of people that we just never stop going, and we're always on this. Ultimately, it's going to be a great thing for both us and our customers. Thanks. Thanks, John. Thanks. Thank you. Our next question comes from Chris Lucas with Capital One Securities. Hey, good morning, guys. Just a couple of quick ones for me. I guess, just on the transaction that you guys completed, I guess thinking about it sort of in reverse. You bought it, and now you're going to go look to finance it or essentially fund the acquisitions with the dispositions. Is that really a function of how you want to do things, or is that a function of the market for finding things is just too difficult, and so trying to preload the dispose is just not warranted? Look, Chris, I think it's probably everything right now. The reality is we don't have to do anything and we'll feel very good that this was a great transaction. When it gets to stabilization, it will be, from an EBITDA standpoint, significantly higher than where it is right now. We could just literally be, say, "Hey, this is a great deal. We don't need to do anything, and our balance sheet will remain intact." I think what we're saying is, we're looking at options within the portfolio that don't have growth profiles that this has or maybe are a little more dispersed geographically that we take advantage of it. I think we can do that, and that creates a lot of accretion when we do that. I don't want you to think that we have to do it, Chris, because we absolutely do not. It's something that we want to do. I think we'll see what happens, and that's why we said stay tuned. We're very confident in our ability to get things done, and when we do it, then we can talk about a little more in terms of the logic behind it. That's the big picture. Okay. Thanks, John, for that. Just on the dividend, you guys bumped it from the sort of what was the established $0.15 run rate to now $0.17. Just trying to understand sort of what is the sort of fundamental thought process behind your dividend distribution at this point. Sure. I think the dividend is, in terms of the business practice behind it, is kind of in lockstep what we said earlier, is that we're still subject to the pandemic, and we're still being conservative with where we think we are and the timing of full recovery. I think that's a big part of it. Essentially, we look at the dividend less from these ratios that people throw out and more from cash flow. Where's our cash flow today? How do we see it growing? Where does this fit in light of the CapEx requirements that we also laid out, that are more significant in the next couple of years than they have been historically. We've been to this movie before, and we think it's smart to put ourselves in a position to not have the dividend drag on the cash flow, right? I think that's not ubiquitous across our universe in terms of peers, but that's our decision right now. Keep in mind, I think when the pandemic was in its throes, the dividend was $0.05, but we were paying it, right? We've come a long way, Chris, but I think we have a long way to go, and I think as we evolve, we're going to look at this every quarter. We're going to look at our cash flow, we're going to look at the leasing patterns and adjust accordingly. Let me just say that, obviously, we feel much better today than we did when we were paying a $0.05 dividend. Okay. Thank you for that, John. That's all I have. Okay. Thank you. As a reminder, ladies and gentlemen, that is star, then one, if you'd like to ask a question at this time. Our next question comes from Craig Schmidt with Bank of America. Thank you. Given the increased leasing volume in fourth quarter and looking at your leasing pipeline, I'm wondering, do you think you can lease more square footage in 2021 than you did in 2019? Interesting question. I would think so, just based on the fact that we have more available space to lease. To be candid, Craig, we don't really set the goals by lease square footage. We're really looking at so many other things. Merchandising is very important to us. I think, look, we'll see. It's early. We're just starting. When you lease half a million in the previous quarter, you look at the growth that we've had, I would hope so. Look, I'm not putting that out there. It's just not something that we're really focused on. We're really more focused on what we said, which is we're going to backfill the bankrupt tenants. We're going to backfill the boxes. We've done it before, literally a couple of years ago, and we're excited to do it again. Great. Given that backfilling, are you seeing a merchandise or tenant mix shift in your portfolio as you fill some of these previous vacancies, like the health club or Stein Mart and others? Yeah. I'll start, and I'll give Tom the floor. I think we're seeing a really interesting opportunity to improve the merchandise and improve the tenancy. Tom gave one example with Stein Mart, in terms of Total Wine, for example. There is a myriad of tenants out there, and I'll give that to Tom. Yeah, I would say just general diversity seems to be improving. You look at the grocery side, and you have all these extremely active. Trader Joe's is out there, Whole Foods, Amazon, different names pop up. You may see Sprouts refire soon. You could see Fresh Market. You're really put in a position as a landlord to have more and more options, and fitness may not seem like something that will come back, but we're seeing activity on the spirit side, the Spec's and the Total Wine. Then the value guys, we met with a couple of them last week, and we're getting ready on a deal with buybuy BABY, Old Navy, Five Below, TJ, Burlington. We feel as good about our inventory today as we did in 2019. That's for sure, in terms of our ability to find replacement tenants. I'll say it another way, Craig. I think there's more tenants doing deals right now than there was in 2019. I believe so. I'll tell you that. That is unequivocal. I believe so. That shows the power that I mentioned earlier of well-located, open-air real estate that hasn't been built new since 2007. Okay. Unfortunately, I'm starting to feel like that was a hell of a long time ago. I was pretty young in 2007. I'll tell you, Craig, people are focusing on the negative of this. It is a positive, and it is a positive for our industry, and we're going to be sector leading in how quickly we move on this. I think that also falls into our small shops, that convenience play as people become busier and busier and want quick transactions and more shops. We see that falling not only on the box side, but on the shop side as well. That's encouraging. Just finally from me, the past year, Kite spent about $1.7 million on maintenance CapEx, in 2019 you spent $4.3 million. I can see it being prudent that you might be pushing some of the CapEx down the road, do you think there'll be an increase in CapEx spending in 2021 versus 2020? Yeah. I can tell you right now, our budget in 2021 is higher than our budget in 2020 for CapEx spend. That was heavily impacted by the second and third quarter, in the depths of the pandemic, pulling back where we needed to. Some of it became a run through in the sense that we were able to more efficiently manage these. Remember, we're heavily fixed CAM. There's obviously a benefit to that. We're never going to, what's the word? We're never going to put ourselves in a situation where we're deferring maintenance. We're not going to do that. We've never done that. If you visit, and I hope you do, our shopping centers, very quickly, I think you'll see that these things are well taken care of. I did one of my surprise visits last week, and I'll call out the team down in Delray Beach, and I pulled into the shopping center. They don't know I'm coming, of course. It looked damn good. Look, I think we're really good at that, Craig, and we're operators. I think Heath ended on that. We've always said we're operators. There's a lot of guys out there who are financial guys and all this other stuff, but we pride ourselves on being really efficient, high-quality operators, and that's what you need when you're in this kind of environment right now. You've got to have really good operators, and I think it's why we've, as Heath said, we've outperformed in the metrics during the pandemic because when the tide goes out, you see who's running it, right? We've done well there. Craig, I would add, in addition to sort of belt-tightening during COVID, remember that the 2019 number included a bunch of assets that we sold. That CapEx number had dollars associated with the 24 assets we sold. Our run rate on a go-forward basis is likely going to be less than what you're seeing in the 2019 numbers. Great. Thanks for the thoughts. Thank you. I'm showing no further questions in queue at this time. I'd like to turn the call back to John Kite for closing remarks. Well, just want to thank everyone for joining us. Onward and upward. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.