May 7, 2017
Executives
Pierre Revol - Vice President of Investor Relations Thomas Nolan - Chairman and Chief Executive Officer Jackson Hsieh - President and Chief Operating Officer Phillip Joseph - Executive Vice President, Chief Financial Officer and Treasurer
Analysts
Anthony Paolone - JPMorgan David Corak - FBR Capital Markets Daniel Donlan - Ladenburg Thalmann Alexander Goldfarb - Sandler O'Neill Michael Knott - Green Street Advisors Vincent Chao - Deutsche Bank Vikram Malhotra - Morgan Stanley Ki Bin Kim - SunTrust Haendel St. Juste - Mizuho Chris Lucas - Capital One Securities Rob Stevenson - Janney
Operator
Good day, and welcome to the Spirit Realty Capital 2017 First Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Mr. Pierre Revol, Vice President of Investor Relations.
Please go ahead.
Pierre Revol
Thank you, operator. Good afternoon, and thank you, everyone, for joining us today.
Presented today's call is Tom Nolan, Chairman and Chief Executive Officer; Jackson Hsieh, President and Chief Operating Officer; and Phil Joseph, Chief Financial Officer. Before we get started, I would like to remind everyone that this presentation contains forward-looking statements.
Although we believe these forward-looking statements are-based upon reasonable assumptions, there are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to a number of factors. I refer you to the safe harbor statement in today's earnings release and supplemental information as well as our most recent filing with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements.
This presentation also contains certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures to most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished with the SEC under Form 8-K.
Before - Both today's earnings release and supplemental information are also available on the Investor Relations page of our website. For our prepared remarks, I'm pleased to introduce Tom Nolan.
Thomas Nolan
Good afternoon, and thanks for joining our first quarter 2017 earnings call. We appreciate your adjusting your schedules to join us today.
This afternoon, I will start with an update of our business, our quarterly activity and update you on guidance. Jackson will then provide more detail on our portfolio and strategy.
And finally, Phil will discuss our financial results. We will then take your questions.
The dramatic and swift moving changes to the retail landscape in reaction to changing consumer behavior has been well documented. I won't dwell in the statistics.
However, I will say the impacts are profound, and they do impact Spirit Realty. This affects not only our existing portfolio, but our ongoing investment strategy.
An unusually high number of our retail and restaurant tenants, ceased paying rent from the beginning of the year through today and this had a negative impact of $4 million on our first quarter result. However, as disruptive with these tenant challenges are, they will allow us to reposition the underlying assets with concepts better suited to today's consumer preferences.
A case in point is the default by the Lone Star restaurant operator. We own 15 units.
The annual rent was approximately $1.5 million. It is excellent real estate and importantly, existing rents were below market.
We have significant buyer interest in the portfolio at purchase prices that we expect will be accretive to the company. Let me move to retail.
Given the recent high-profile brick and mortar bankruptcies, including Gander Mountain of which Spirit had 6 stores, hhgregg of which we had 3 and Gordmans of which we had 1. We believe this restructuring and our liquidation trends are starting to increase conservatism amongst asset backed lenders who provide inventory financing for retailers.
Shopko, a general merchandise retailer and one of our most important tenants, is reliant on such asset documenting. And as such, we are monitoring them very closely, and we are working with them to help them remain competitive in these changing times.
Specifically, we continue to closely monitor their performance at the corporate and store levels. While we are encouraged by the same-store results and that the coverage within our stores remains relatively constant at 2.5x unit coverage.
We need to be pragmatic as to how their short and long-term fortunes affects their realty. And as such, we have concluded we need to be extremely conservative with our balance sheet and liquidity position to protect the long-term values of our franchise.
We recognize one of the virtues of the triple-net sectors are consistently and predictably, however, changing times call for evolving strategies. Business as usual is not the prudent approach for this company at this time.
So let me discuss what that means to us. First, as you have seen we have adjusted our earnings guidance.
There were 2 drivers to this change. And as I noted, we had higher credit losses and associated property cost expenses that flow through this quarter and through the rest of the year.
These are temporary disruptions. Our invested capital largely represents good underlying real estate.
We expect that these assets will be re-let or sold and the revenue will be replaced, but the capital will be redeployed. But it takes time and its positive impact will be seen in future's periods.
Second, we disclosed as part of our original guidance, we would be a net acquirer of $250 million of investments. We are withdrawing that element of guidance.
At the time of our original guidance released last November, we had a very robust acquisition pipeline. Since the last quarter, we have been more selective.
We did buy some assets that were in sectors we liked and in prices we thought were appropriate, but our judgment on a few of the larger portfolio opportunities was that the risk/return calculus was not favorable. Let me conclude my opening remarks by setting out the priorities of the company.
We understand our objective is to both protect and create shareholder value. Today, we believe the best course of action in that regard is to have a fortress balance sheet with ample flexibility and liquidity.
In our previous earnings call, we discussed that our leverage ratios would increase modestly throughout the year, as we financed our acquisitions. We now intend to take those leverage ratios lower.
We were a net seller in the first quarter. And we expect to further slowdown our acquisition volume for the second quarter.
We recognize that this capital allocation decision will have an impact on our 2017 AFFO per share. We may look back and conclude we were overly conservative, but as we sit here today, we believe prudence is the right approach.
With that, let me turn the call over to Jackson.
Jackson Hsieh
Good afternoon. As Tom mentioned, given the disruptive changes impacting the retail industry by e-commerce and regulatory change, we have become more selective in owning the industries that are resistant to those factors.
During the first quarter, we acquired 26 properties for $148 million. We bought 2 Home Depots, which is now a top 15 tenant as well as Cinemark, BJ's Wholesale, Dave & Buster's, Studio Movie Grill and a Dairy Queen portfolio, which have high-quality underlying real estate.
On the dispositions front, we completed a sale of $173 million of noncore assets. This was comprised of $93 million of the income-producing properties and $80 million of vacant properties.
Furthermore, we proactively reduced exposure to properties located in undesirable markets and to tenants that are more vulnerable to e-commerce disruption. We also sold 3 Shopkos during the quarter and 5 post-quarter for total proceeds of $47 million.
On our previous calls, we discussed a large 34 unit C-store operator that was in default and which we were in the process of restructuring, including bringing in an interim operator into the situation. At the end of the quarter, we were able to vacate the operator through the judicial process and then sell the vacant portfolio for $70 million.
We also generated a positive net present value due to the strength of the master lease. The underlying quality of the real estate, which was located in highly desirable West Coast markets and our outstanding and seasoned asset management team and legal teams who manage the process resulted in a favorable outcome for Spirit.
As of March 31, our portfolio, which is comprised primarily of single-tenant operationally essential real estate assets in 49 states, was 97.7% occupied and had an average remaining lease term of 10.6 years. 44% of our normalized rental revenues were derived from master leases and 89% of our leases have built-in rent increases.
Our unit level rent coverage remains healthy at 3x on reporting tenants. In addition, of the 15 leases that renewed this quarter, our revenue capture rate was 103%.
An unusually high number of tenants on our watch list became delinquent this quarter. This resulted in $4 million in lost rent during the first quarter.
And usually large - larger percentage of delinquent tenants may cause concern. However, we believe this is an isolated group of tenants relative to the large and diverse group of operators in our portfolio.
Similar to the resolution of the C-store portfolio, we are working through each of these situations to find a profitable solution for Spirit. We are focused on all of our tenants, especially, those in a more exposed for the dynamic e-commerce and regulatory changes afoot.
To that point, we remain in active dialogue with all our tenant management teams, monitoring their financial performance and discussing ways to support them in navigating this challenging retail environment. Recently, our largest external concern has been the tightening credit markets for retail and consumer-facing companies exacerbated by the large number of recent industry bankruptcies.
Our discussions with Shopko, in particular, have left us supportive of the business. Spirit owned Shopko same-store sales were down approximately 2.7% in the fourth quarter, as coverage remained at approximately 2.5x despite the 2% annual rent bump in January.
It is our understanding that the first quarter same-store results are trending more positively than the previous quarters on both sales and margin. As Shopkos largest landlord, we are actively working with Shopko's management team to help support them during a difficult time for the industry.
One of the opportunities identified last fall that we believe would help us become more efficient and anticipatory of potential negative changes to our operators was to bring in-house servicing for over 1,400 properties that were previously managed by a third party. Starting in April, this change was implemented.
We believe this will improve our tenant surveillance and monitoring process, which will lead to increased line of sight across our portfolio, better accountability and stronger relationships with our tenants. Our asset managers and lease administration teams are fully aligned and staffed to monitor all of these recent third-party service properties.
With these challenges that we have identified and addressing, we can look ahead knowing that our balance sheet, liquidity and in-house operational processes should enable us to overcome any additional headwinds that may arise. With that, I'll pass it to Phil.
Phillip Joseph
Thanks, Jackson. As Tom mentioned, we reported AFFO of $0.20 per diluted share for the first quarter of 2017.
This performance represents a decrease of $0.02 per share compared to the prior first quarter. There are 3 primary drivers related to this year-over-year performance: first, realized credit loss; second, well-planned balance sheet management; and third, disciplined capital allocation.
As it relates to credit loss, we did not recognize revenue in a higher percentage of our credit watch list tenancy and will face some earning's headwinds until we redeploy this investment. On the balance sheet front, we are targeting lower run-rate leverage.
We have corporate liquidity and minimal near-term debt maturities. Lastly, as for capital allocation, we have been a modest net acquirer over the last 4 quarters.
We have shown discipline relative to our cost of capital in this regard. As for the $0.02 reduction in AFFO over the prior first quarter, let me frame the specific contributors.
To calibrate, Q1 2016 had a moderate level of other income for the quarter. First, equity capital raises during 2016 added approximately $0.02 of dilution.
Second, interest expense savings from deleveraging added approximately $0.015 of accretion. Third, moderate net acquisition activity during 2016, which was back half year weighted, added approximately $0.005 of accretion.
Fourth, the 84 Lumber sale added approximately $0.01 of dilution. Lastly, credit loss experience during the quarter added approximately $0.01 of dilution.
As we said last quarter vigilant balance sheet management, disciplined capital allocation and prudent earnings growth continued to be key strategic objectives for the company. We also recognized the need to address the near-term tenant credit issues before we can address the earnings growth.
Total revenues for the first quarter of 2017 were $165.4 million compared to $168.4 million in the first quarter of 2016. Primary drivers were moderate net acquisition activity during the year-over-year period and lost rent related to lease restructurings and tenant credit loss.
Same-store rent growth for the quarter when compared to the prior year first quarter was down 0.5% as a result. Rent growth was negatively impacted by investments in the movie theater and casual dining industries.
These investments each represent less of 1% of our annual in-place rents, and we are encouraged by the level of operator interest in these assets, including existing customers. On the expense front, excluding corporate relocation and restructuring charges and expenses incurred during the first quarter of 2016.
Total expenses in the first quarter of 2017 increased to $168.6 million from $148.5 million in the same period of 2016. Primarily driving this result was higher property cost, G&A and noncash impairments.
Offsetting this was a decrease in cash interest expense, which notably decreased by approximately 18% or $8.9 million during the year-over-year period. With respect to run-rate G&A, it represented 8% of total revenues for the quarter.
The increase in G&A was largely due to straight line rent receivable write-offs of $1.2 million and moderately higher cash compensation as we transition to our full-time employee base in Dallas. We expect G&A to approximate 7.5% of total revenues for the year, which will benefit from cost-savings initiatives related to the internalization of servicing properties which Jackson spoke to earlier.
Our higher property costs are directly related to our current tenant credit issues. As we redeploy invested capital related to these tenancies, either via lease restructurings, tenant re-lets or assets sales, we expect these costs to moderate over the year.
In addition, relative to our focus on minimizing AFFO leakage on underperforming investments, we have realized impairments this quarter, as we are aggressively focused on redeploying invested capital. Our well-planned balance sheet management has enabled us to significantly lower our debt cost of capital.
Our weighted average cash interest rate improved by approximately 34 basis points from the prior first quarter and now stands at 4.27%. More importantly, our unencumbered asset base currently stands at $4.9 billion, has increased by approximately $1.6 billion year-over-year and represent 60% of our total real estate investments.
As of today, excluding non-recourse debt, transitioning to debt forbearance, we only have $270 million of debt coming due through the end of 2018, excluding our $420 million unsecured term loan, which is pursuant to two 1-year extension options. Our corporate liquidity remains strong and currently stands at $741 million, including $8 million in unrestricted cash and $41 million of liquidity available in our 1031 Exchange and Master Trust Notes for lease accounts.
In terms of our financial standing, our cash flow and leverage metrics continue to trend favorably and as expected. Fixed charge coverage, notably, improved at 3.5x versus 3.0x in the prior first quarter.
In addition, our first quarter reported leverage at 6.5x is reflective of lower EBITDA this quarter, driven by lower top line revenue. We expect to continue to end the year at or below 6.3 turns and we'll achieve this via asset sales and moderate organic EBITDA growth throughout the year.
Q1 of this year was going to be the low watermark from an AFFO perspective given the timing of the full deployment of the $205.7 million in proceeds that we received from our strategic 84 Lumber portfolio sale. In addition, we communicated that we are positioning to be a net acquirer at 2017 and that our leverage was likely to trend higher for a portion of the year and that accretive capital recycling as in prior periods would bring our leverage down to our stated target of at or below 6.3 turns.
We have recalibrated our capital allocation strategy for 2017 due to the tightening retailer and consumer-facing credit environment, concern around some of our larger tenants and our focus on e-commerce resistant industries. As a result, we have made the conscious decision to reduce our planned acquisitions for the year and ensure that we have a corporate liquidity to manage through the current portfolio headwinds that are impacting certain tenants.
As a result, we are lowering our 2017 AFFO guidance range from $0.89 to $0.91 per common share to $0.80 to $0.84 per common share. Key drivers related to lowering our prior 2017 AFFO guidance range are forecasted loss rent and higher property cost related to tenant credit issues and the removal of our prior $250 million net acquisition target for 2017.
To put this into perspective, the forecasted property cash NOI loss related to tenant credit issues could approximate a $0.06 AFFO per share reduction and our revised capital allocation plan, specifically, reducing acquisition activity, other income and reducing leverage via asset sales could approximate a $0.03 AFFO per share reduction. The timing of our capital allocation activities, most notably capital redeployment, combined with reduce proper cost leakage and interest expense savings will directionally drive our earnings throughout the year.
With that, we will be happy to take your questions.
Operator
[Operator Instructions] Our first question comes from Anthony Paolone of JPMorgan.
Anthony Paolone
So the first question is with regards to the credit considerations you made in your guidance and the hits in the first quarter, how much of that is stuff that just actually happened versus perspective things that you think might happen either related Shopko or other tenants?
Jackson Hsieh
Anthony, this is Jackson. Look, we had of confluence a number of different tenants actually hit us in the first quarter.
And I think Shopko, for instance, is not in that number. But hhgregg, Gordmans, and Gander filed bankruptcy in March.
So in the filing, they didn't pay March rent. So we got - take on the tail end of that issue.
As Tom mentioned, we had this movie theater situation that had been on the watch list for some time now since the fall as well as 2 large casual dining operations basically ceased paying rent during the quarter. And we basically had bad luck with some of the bigger bankruptcies coming in, hitting us on the rent.
And so the forecast really is making adjustments to what we believe will be restructurings that occur with things that we think are coming up in our watch list throughout the rest of the year. Just a kind of follow up on that.
A lot other things that affected us this first quarter had been on our watch list for several months now. And on a watch list like this, lot of times, they all don't sort of happen at one time.
And we sort of - well, I'll just tell you, we had a perfect storm hit us. And unfortunately, they sort of - they really had a big impact on us in this quarter.
But like I said, our guidance in terms of the adjustment reflects what we believe are conservative, restructurings that occur with the balance of the issues - the tenant issues that we have.
Anthony Paolone
But no Shopko change?
Jackson Hsieh
No, no. No, it doesn't include that.
Anthony Paolone
Okay. And then, the other question is over the last year or 2, you revamped the organization.
And it seemed like you were pivoting to a return to growth and now that plan has changed. And how do you think about the strategic alternatives for the company having to work through this versus at the extreme an outright sale of the organization?
Or just given what your stocks done even in the last week buying it back?
Thomas Nolan
Anthony, it's Tom Nolan. I'm happy to take that.
We have revamped the organization. And I think, as we sit here today and the senior management team sits here, first of all, obviously, we're disappointed with this message.
But I - the senior team, as I think, never been more engaged in the organization that we put together here to confront the challenges that we have. As for your second question, yes, from my perspective our job is to create shareholder value, however, you can create it.
And I've had that perspective since the day that I got here. I look at this company, we're a public company.
You can buy a share of the company. You can buy 10 shares.
You can buy all of the shares. I - we will look at every alternative to create shareholder value.
That's our job. And I know everybody in this room is committed to that.
Jackson Hsieh
And Anthony, I'll just follow up one last thing. In terms of, like the changes - look, the organization, it doesn't feel that way right now, but it is better.
I've made a number of changes reporting-wise, bringing the third-party service properties back into the system. We got a better tenant surveillance system, we've ranked every asset.
Asset managers are required to talk to tenants more frequently. I think we've got a better web surveillance system.
We just hired a new head of asset management. We've got a very specific investment strategy that we're focused on.
But the bottom line is, we are very cognizant of some of the pressure that is being put on some of these retailers right now. And we don't have to tell you how many had gone bankrupt this year, year-to-date, but we have exposure to a couple large ones, so we just feel at this point that we need to be completely liquid and ready to assist in any possible way.
Thomas Nolan
And on your last point, Anthony, as to the share repurchase possibility, the company has a share repurchase plan on file. We have $200 million authorization.
And as this the case when that was originally put out, I think that will be something that the company will address from time-to-time. There will be facts and circumstances driven.
And that seems to be in the best interest of the shareholders, I'm sure that's a program that we would consider.
Jackson Hsieh
And one last thing Anthony, and you related to alternatives. So look, you know my background, right.
I spent my entire year - my career basically advising companies and doing this sort of thing, advisory work. We have been trying to basically remove all the structural impediments that affect value in this company.
84 Lumber was one in terms of concentration. We've been very clear about Shopko reducing that concentration.
Not that Shopko is bad, it's just too much for a company of our size. Just working through the secured nature of our balance sheet, working through the bottom what I'll call portions of the things that we're selling.
We're, obviously, selling a lot of assets. So we are determined to kind of create a very, very fortress company and portfolio.
And if the market - and look, to get back to your point on growth, we don't have the cost of capital to do it. And so, I think, what I can tell you is we're committed to protecting the value of the franchise.
And when we get some of these areas - where we have some conservatism around, determined, I think, hopefully, we'll have a chance to be able to grow the business again.
Anthony Paolone
Okay. Thank you.
Operator
Our next question comes from David Corak of FBR Capital Markets.
David Corak
Just want a look at Shopko for a minute here. Can you tell us the unit level coverage of the Shopkos you sold this quarter versus the ones you sold in 2016?
And then Tom, I think you said the remaining Shopko portfolio is 2.5x. Last quarter, it was a little bit over 2.5x, I think, you said.
I realize, I'm certainly splitting hairs there, but did that go down given the Shopko kind of financials? Or was that because of the assets sold in the quarter?
Thomas Nolan
The Shopkos that we sold were pretty close to the ones that we still own.
Jackson Hsieh
Yes, let me - so the Shopko's that we sold generally had lower sales than the ones that we still own and has lower, actually, coverage in some cases. We've been trying to actually hold on to - we have ranking system.
So we have a criteria that we screen against these. And generally, we've been trying to work through the ones that are a little bit lower on our scale.
Thomas Nolan
And the point that I was making, which we have made before. The bell curve of performance of those Shopkos that we own is relatively bunched.
Jackson Hsieh
Yes. And don't forget, we had a rent bump in January too.
So just - you have to keep in mind, the average Shopko that we still own is north of $14 million in sales. And we don't disclose what we sell, but the sales from Shopko stores on average that we sold are lower than that number.
David Corak
Okay. Fair enough.
And then, with the theater portfolio, could you just give some more color on exactly what happened there? And what was in the watch list?
What is in the watch list and any detail you could share with us, that will be great?
Jackson Hsieh
At the time that the C-store, the famous C-store operator was running into issue that we just resolved, the theater was also on that watch list at the same time. Look, they're very good theaters.
They're actually 3 of them. They happened to be in Southern California.
The trade areas around these theaters are 5-mile population of 400,000, average income of $66,000. They're very good theaters.
The operator in this case, unfortunately, is not performing to the standard that we believe the theaters can compete. We basically can remove the theater operator at this point, but I think what you'll see us do is put a new theater operator in, one which we think has a better concept, that's a dining concept.
We actually think that we will have a better value at the end. But in the short-term, we're going to put more investment in these properties with a better operator.
And I believe that will have a positive outcome on the investment, not dissimilar to the C-store operator in terms of value recovery.
Operator
Our next question comes from Daniel Donlan of Ladenburg Thalmann.
Daniel Donlan
So I guess, Tom, just wanted to talk about what's going on with the tenant base and your cost of capital. Since 2015, the stocks have been a dramatic underperformer relative to the peers.
And as you're talking about moving operators in and out of properties, this is not what net lease REITs are basically experts at doing. So I'm just kind of curious, why not just let somebody else do this and potentially look to bring somebody else, whether it's through strategic alternatives or through selling the company?
Why is that bright decision to stay where you are now and revamp these properties as net lease REITs that's where your cost of capital is so crucially important to growing?
Thomas Nolan
Well, Dan, I think, our job is to try to create shareholder value every day that you can do it. And if that means investing and selling and portfolio management and re-tenanting properties that need to position themselves, that's what you do.
And we're going to do that every day that we're here. And we're going to try to improve this portfolio.
And there have been - there are certain credit issues that we've addressed. We're going to work through those.
Jackson has referred to a couple. I referred to one in my opening statement.
We have the ability to re-tenant them, reposition them and to bring revenues back in AFFO. As to, again, your comment on someone else doing it, again, refer back, I guess, to my previous comments, the company - this company is open-minded to any opportunity to create shareholder value.
You heard on my last conference call, last quarter that to alleviate any concern that that they may have been in the investor community, we opted out of MUTA to alleviate any concern about whether we would be receptive to the extent that there was an opportunity for appropriate shareholder value. That was true then, it's true today.
But in the meantime, we're going to work hard every single day on portfolio management, looking at investment opportunities and positioning these assets. Some of these assets are - the vintage on these, some of these go back a long way, some of these come from the cold portfolio.
Some of these have been once that we've done a few years ago. We've been, I think, through that.
And we're going to work through them to restore the value just like we did with that C-store portfolio.
Jackson Hsieh
But, Dan, one thing it is actually as a percentage of the asset base. Unfortunately, it's noisy right now, but it's not a significant portion.
I mean, a large majority of the assets in this company are actually really good. And so the frustrating part I know on your side is as an earnings company, we're not doing a good job.
And I would also say - just one other comment. If you look back at the cap rates that this company has bought property on average, they tended to be higher cap rates.
And as you know, to get higher cap rates, there are sort of 4 things you do. You either buy really good credit tenants with short lease duration.
You buy rural properties. You buy operators that maybe aren't seasoned, but we have good real estate, or even have properties that are over-rented.
Those are kind of 4 ways you end up at very high yield. And in this case, I would say we've got good real estate.
And if I would characterize one thing about the nature of our list of problems that are coming right now, there's not one really consistent theme. They're not all retail.
And it's not one part of the country. It's - it is not one vintage.
It's unfortunately like a - some of them are external bankruptcies like the 3 I mentioned, but there are few that were kind of operator driven. And so good real estate, but sort of a more speculative operator.
So our job is kind of just work through those right now. And it's, as you see for what we're buying, we're actually not trying to buy those.
So we - I think we've got a better handle on the issues that we've got to contend with the new systems we put in place, but I get it. At first time, I'm frustrated too, equally.
Daniel Donlan
Okay. And then just on Shopko.
You talked about supporting Shopko. I think you - and so just curious, what does that mean?
You talked about asset backed financing. Are they having issues obtaining asset backed financing?
Just trying to understand what the intentions are there.
Jackson Hsieh
Okay. I mean, I don't want - we obviously - I don't want to be go into great detail about Shopko, because there are a tenant.
And we have, obviously, things that are confidentiality relates to our lease agreements that we signed with them. But look, they are a private company.
They're owned by a private equity sponsor. The company was taken private almost 10 years ago.
It's a very nice retailer. And the thing we like about Shopko is unlike your traditional apparel large box retailer, they generate a lot of sales in margin through pharmacy and optical in their stores.
So they're very differentiated in that regard. They don't have any debt maturities.
They have availability on their line of credit, which is more inventory-based. But I'll just tell you right now that there are a lot retailers like that, that - look, as you know, I was in the finance business.
When lenders see guys starting go bankrupt left and right, what do they do. They tighten up, they get more conservative, and they ask for more things.
And so that's not really a Shopko thing. That's like a general thing, right?
And so I think, our position is we want to be prepared to have options to the extent required. They are very large investment in our part, as you can see.
And hey, look, this could be like an easy button. By the way, they paid rent.
They - just so you know. They're just kind of cruised through and we will yield back - look back at us and get probably pissed off.
But if something does happen, we would be prepared to assist. What does mean?
Could mean cutting rent, could mean potentially give a little bit of money, I don't know. But that's the case with all our tenants.
All of these tenants that are going through our watch list right now are in the process of being - there's discussions about rent restructures.
Daniel Donlan
Right. I guess, it was a little confusing given that the company, the coverage is 2.5x and same-store sales aren't really nearly as bad as some of these other retailers, I was just kind of looking for a little more clarity, so I appreciate...
Thomas Nolan
I was kind of just say that, Dan, on that, that we agree with that, that the coverage is good in our portfolio. But we have to look beyond that and we have to understand, I think, from my perspective, kind of asymmetric, they still pay us $48 million of rent a year.
And so - And they're in a very, very difficult industry. And so we look at our company and our - and say, given that we've got a tenant in a very tough industry who is doing pretty well on a relative basis, but they do pay us a lot of rent and so you just need to be prepared for any eventuality.
And from my standpoint, the best way to be prepared for any eventuality is that to have the best balance sheet that you can possibly have and have the most liquidity that you can have. And then worry about the acquisitions and the accretive earnings growth at a time you feel more confident about where some of those major tenants are going there.
Phillip Joseph
And Dan, just to be clear, the concern is external financing for retailers right now, not refinancing of loan maturities, but external inventory debt financing by factors. That's what gave us more concern.
Operator
Our next question comes from Alexander Goldfarb of Sandler O'Neill.
Alexander Goldfarb
Two questions. First, you guys mentioned $4 million in loss rent, which was just for the month.
So that would work out to $48 million annualized...
Jackson Hsieh
No, no. That's the loss for this quarter.
Alexander Goldfarb
Quarter. Okay.
Jackson, you said that the 3 tenants, Gander, and Bofard or whatever - Goodford, stop paying in March and then you guys loss $4 million.
Jackson Hsieh
No, no, what I said there was - there were one of a number of tenants that were impacting us through the quarter. And so when they file bankruptcy, basically, they don't pay that month.
And Gordmans, hhgregg and Gander filed bankruptcy in March. They didn't pay rent to anybody that month.
Now, they've come up with plans to move forward and they stop paying rent again in April, actually. In Gander's case, it's liquidation as you know, same with gregg.
Gordmans has already wants us to take our stores so - moving forward. So - but there are more tenants - just to be cleared, there are more tenants than what I just mentioned in that $4 million.
Alexander Goldfarb
Okay. So the $0.06 in the guidance, where you guys said guidance is impacted $0.06 by credit and $0.03 by further deleveraging/no capital, no acquisition?
Jackson Hsieh
Stop buying, basically.
Phillip Joseph
Yes. Basically, stopping the buying...
Alexander Goldfarb
Right. So in that $0.06, what is in there as far as impact from first quarter prospectively the next 3 quarters that's contributing to - So basically, the $0.06 breaks down how much?
How much from the first quarter? And how much do we think about in the subsequent quarters is driving that $0.06?
Phillip Joseph
I would say from a - kind of hard to break that down, but for the entire year, the estimated property cost leakage, property NOI leakage is estimated to be approximately $0.06 per share for the entire year. In terms of the credit loss that we experienced - what I tried to do is give you a bridge from Q1 2016 to Q1 2017 in my prepared remarks.
And for the quarter-over-quarter period, credit loss experienced about $0.01 of dilution. So Alex, that's giving you the walk from that perspective, it's almost - for the entire year, the estimate is $0.06 of property NOI leakage for the year.
Alexander Goldfarb
Okay. So let me ask another question.
You guys have done a lot since you've been there from the get-go and certainly, over the past year of improving the portfolio, the balance sheet, everything. You guys presented in the conference, you put out a presentation in April, which basically showed how good the company has gotten credit and how well everything is going.
But you guys experienced bankruptcies in March. There was the Gander thing that came out, but you guys were clear that it was like 1% or whatever, it wasn't sort of material.
I'm just wondering why didn't you guys disclose these issues if they were known in March? Why weren't they part of that investor presentation?
Or why is it now versus - I mean, clearly, the market knew, because for the past 10 days or something, the stocks been getting hit, but why won't you guys have indicated this back in earlier if it was known rather than waiting till now? What's changed in the past like four weeks that it wasn't disclosed earlier on than right now?
Thomas Nolan
Well, I think, Alex, just a couple of things. I mean, first of all, within this credit loss, our issues that we have discussed, we have told you about the C-store portfolio.
That's in this number. We have discussed that and its magnitude.
The theater operators, we have discussed from time-to-time. That's in this number.
When Gander filed for bankruptcy, we immediately posted on our webpage that fact that - and the implications of that. So I think we have indicated that we were having higher credit exposure.
I would also say just one point of, again, clarification just on the $0.06, because I want to just make sure we do the math on that correctly. The way that we're showing the $0.06 is for any of these, we're really showing what is the revenue that's been removed from guidance and we're not speculating whether we recover any of that during the course of this guidance period even if we've actually already done it.
For the example, the C-store portfolio that Jackson referred to, of the $0.06, that's considered - that's a component of that. And yet we've sold it in - we sold it March 31st, yet we are showing the entire years' worth of revenue even though we sold it on March 31st as coming out of our guidance, because that revenue was in our original guidance and because we are not reinvesting capital.
We're being so conservative about reinvesting capital and putting in liquidity, so one point of just clarification on that. But the bottom line, Alex, is we do think we've been very clear on particularly, the ones I've just talked about with the material components of what's happened to us this quarter, and I think it would have been premature to share anything else prior to this earnings call.
Alexander Goldfarb
All right, so let me just - the $0.06, just so I'm clear, you guys obviously sat around, everyone put everything up and down the hall but okay, anyone have any credit issues, put it in the hat. I assume that, that $0.06 is a pretty sort of all-in number, right?
So it includes even things that people aren't sure about or is that kind of what that means?
Jackson Hsieh
Yes, that's all. Yes.
Phillip Joseph
Right, and we set realistic time lines for capital redeployment related to these tendencies.
Alexander Goldfarb
Okay, listen - thank you.
Operator
Our next question comes from Michael Knott of Green Street Advisors. Please go ahead.
Michael Knott
Hi guys. Just a touch again on Shopko.
Can we be very specific on a couple of things? When is that coverage as of that you mentioned on the call and did it in fact per an earlier question come down since your comment about the coverage on the last call?
And then also on that topic is, Jackson, I think you mentioned the possibility of a rent cut to Shopko. Is that on the table, or did you decide to...
Jackson Hsieh
No, no. That's not it at all.
It's actually not at all. There is no rent cut being discussed with them at this point.
And the 2.5x coverage was fourth quarter.
Michael Knott
So that's a trailing 12-month as of….
Jackson Hsieh
It's a trailing - that's a trailing 12-month, yes.
Michael Knott
And last quarter, you guys said it was in excess of 2.5x, so presume that it did come down?
Jackson Hsieh
Yes. We - they ticked down slightly in the fourth quarter or so.
And you have the rent bump too. They're a fiscal - they're a January - end of January fiscal year-end, so just to keep in mind.
So there was a rent bump in January there.
Michael Knott
Okay. And then my second question, if I could.
Can you talk about the watch list and has that greatly expanded? Just curious what percent of your current rents is on the watch list?
And maybe you talk about what it takes to get on your watch list?
Jackson Hsieh
Look, we don't really - we've never really talked about watch lists or present watch lists. What I would tell you is that the number of tenants that are impacting us, the majority of them have been on that watch list for some period of time.
Unfortunately, it just kind of came together in this first quarter. What I can tell you is like on the watch list, basically, our asset management team, they're - so to what gets on a watch list, when you're talking to a tenant and tenants will ask for a rent cut, if you just say okay, we're going to be broke, right, because they just do that.
But there are legitimate issues some tenants have. They could be a top line issue.
It could be a financing issue. It could be some disruption in that business it depending on if the tenant is in a master lease.
I mean, there's just a variety of different things to go in as to whether it comes on that watch list. And we - basically, the bottom line is if we think we're going to lose money on the investment, there's discussion first as to what the issue is.
And then we'll make a determination if that goes into that watch list. If it goes on the watch list, we have a - weekly meeting basically, a meeting every week - every other week with accounting and the rest of the team internally to kind of discuss who is on that watch list, what are the issues, are there improvements.
And by the way, tenants come off that watch list. Sometimes they're on, sometimes they're off.
So it's just a heightened list of tenants that go on. Like I said, numerically, that number did not change in the last few months, but we had a number of them actually pop in this first quarter, unfortunately.
And so we're in the process of sort of restructuring a couple of these. Some actually will come back and get current.
So without getting into great detail about it, it's not been a cascade of new tenants coming in. It's been generally the same number that always been in that sort of bucket.
Michael Knott
Thanks.
Operator
Our next question comes from Vincent Chao of Deutsche Bank. Please go ahead.
Vincent Chao
Good afternoon everyone. I just want to follow up here on the watch list question.
So I mean, at a recent conference, Tom, I think you had mentioned that less than 5% of your ABR is on the watch list. If I look at the numbers on the rental revenues quarter-over-quarter, they're down about 3%, so more than half of that 5% or less than 5%.
So can you maybe just talk about that how those two things tie together and also what percentage again of your ABR is now currently on the watch list that hasn't already filed for bankruptcy?
Thomas Nolan
Well, I don't think we want to get into percentages, again, on the watch list. However, I think I'll reiterate, I guess, the point that Jackson's made, which is of the tenants that were on our watch list, a number of them hit this particular quarter.
They went from being on the watch list to being in a restructuring or nonpaying situation, which we have had tenants on the watch list, since the day that I got here, they come, they go, as Jackson said. And some hit any given quarter.
This particular quarter, they hit all, not all of them, but many of them. And so I think the message that we're trying to deliver is yes, we have a watch list.
Yes, some of them hit this time, but it is not because our watch list has grossly expanded. It hasn't.
Vincent Chao
Yeah, I mean, the order of magnitude is just I mean if it was less than 5% and 3% came out of the run-rate, I mean, that just seems like an astronomical amount. But, I guess, maybe just thinking about just a lot of the things that have been said over the course of this call in terms of the loss rent and some of the $0.06 credit loss that has been embedded in the guidance, I guess the $4 million that we've been talking about in the quarter, if I heard correctly, was largely tied to the three larger bankruptcy filers in March.
Jackson Hsieh
No, no. Actually, the three larger ones were actually the gas operator, the ones we've talked about, the California gas operator.
It was the 3-unit Southern California movie theater company. It was the two casual dining portfolios.
We had another couple of C-store operators in there as well that were smaller. That was the majority of them, actually.
And then - but we also had in the month of March, three of them were high - public bankruptcies where we have a couple assets in each of those three tenants. They blew in there as well.
But they're going to get current. The Gander, Gregg and Gordmans will start paying rent again in April, but they're going to wind down ultimately.
But that's all factored into the $0.06 number throughout the year. Can I give you just one other point, just so you know, like, when a tenant comes on the watch list, obviously you're trying to get them off the watch list, get them current, right?
So a lot of times, you will see a tenant, they just stop paying rent. They've got problems and you're trying to restructure it.
If we have recourse against them we're exercising our avenues that way. Many times they'll get current again, or we'll do a rent deferral to try to get them back on track, but they rarely do they sort of all just actually just stop paying rent.
And we had like, to give you a number, it's less than 10 that were sort of major contributors kind of impact us at one time. That being said, just - as you think about that $4 million, just do the math and just - we will get either of those tenants current or there is value in those assets, not unlike - not dissimilar to the C-store operator.
So for instance, one of the dining portfolios that Tom mentioned, it's good real estate; it's really low rent. We've already got proposals to sell that portfolio and it will be in excess of what we paid now.
That's not great for our earnings and is really noisy, but there's a lot of asset recovery in this bucket. It's not a zero.
It's also frustrating, I know, just because you're trying to model.
Vincent Chao
No, no, it's not even the modeling. I think, going back to Alex's point earlier, okay, so if the three that filed in March weren't the largest contributors to the $4 million, then why are we finding out about this $0.06 cut and 9% cut to AFFO guidance now?
Phillip Joseph
I guess the way I look at this is that, as we - as Tom mentioned on in his remarks, I mean, we were facing real-time credit issues with certain of our tenancies as we spoke to you.
Jackson Hsieh
I mean, just one other thing, just before you jump in, and I have to tell you, like I'd be - look, you can buy your way through this. This is how the math works, right.
If you're sort of getting into trouble, we could have easily just bought a lot of different things, things that are outside our criteria. And you would have seen some of the stuff come in the same-store.
We probably would have picked up another $0.015. We didn't think that was the right thing, because we don't want to buy things that don't make sense, so you've seen what we bought in the first quarter.
We had a very robust second quarter group of deals that were either in negotiation or negotiating purchase contracts and we walked them. And you'll ask me, like, when did we get this sort of point of view, last week.
So when I say it's real time, we shut down that acquisition pipeline last week. And I would say it was sort of the latter end of last week.
So the guidance change has some credit noise in it, but it also has virtually us not really buying very much and we think that, that's probably a prudent thing to do given some of the areas that we're focused on right now.
Phillip Joseph
Right. And it's a matter of making sure that we have the appropriate liquidity and the sound financial profile to manage through these temporary credit headwinds.
I mean - so that's one thing that I highlighted in my comments in that we have a very sound financial profile right now. We have over $740 million of corporate liquidity right now.
We have minimal debt maturities, full debt maturities through the end of 2018, we have over $4.9 billion of unencumbered real estate assets. We are in a good financial position.
Vincent Chao
Okay I'll jump back in queue [ph].
Operator
Our next question comes from Vikram Malhotra of Morgan Stanley. Please go ahead.
Vikram Malhotra
Thank you. So just first question is on Shopko and Shopko dates to guidance.
The coverages that you're quoting, just to be clear, are there 4-wall coverages? And can you give us what, if you've looked at your store set, what the range is if you done any math around like what percent of stores are really good versus stores that may need some help?
Jackson Hsieh
Vikram, first of all, that is 4-wall coverage. And in terms of stores, look we think we have good stores.
I mean, we have - the stores that we still own, and we own over 62 of the big-box stores, they are large department stores, account for a good portion of the rent. And as you know, we've talked about this in the past.
We have been in a very close dialogue with Shopko, looking at excess lands around stores that could be potential outparcels. We've looked at trying to take additional space that they may not necessarily need in some of their larger boxes to bring adjacent tenants in.
These are all things that will make them, candidly, more efficient, more profitable and bring more traffic into their locations. Also, the majority of the Shopko's stores that we own are freestanding, so they're not part of the regional malls.
So the stores are good, but the sales are good, the coverage is good, but all retail, it's not just Shopko, all kind of apparel merchandise retailers, fundamentally they rely on factors and they rely on inventory financing. And if that stops, it's usually not good.
So you're seeing a lot of retailers recently go upside down. And I think a lot of it is they don't have the ability to get inventory into their stores.
Now like I said in the case of Shopko, they're fortunate. They don't really have long-term debt on their balance sheet.
We don't really talk about what they do. But nor do they have any bullet maturities.
But we know that this is kind of an issue out there that certain retailers are being impacted by it. So...
Vikram Malhotra
Okay. And then, just to clarify on that, the $0.06 has no - you don't assume any problems from Shopko.
You assume rent current for the full year. So if there is something, then there would be an additional impact over and above this?
Jackson Hsieh
Yes.
Vikram Malhotra
Okay. So second question, just more generally corporate-wise.
You mentioned a couple of times now on the call that you're open to all options. And I'm not saying the only option is to sell the company, but does it make sense just given all the changes going on with the portfolio, with the move, to maybe have, whether it's a consultant or advisor to sort of help you out and maybe just look at things from a different perspective?
Jackson Hsieh
I did this for 30 years, Vikram, I'm pretty much done. I've turn the company upside down, honestly.
Thomas Nolan
No that was - I mean, obviously, Vikram, we're interested in putting forward with the best company that we can and the best management team that we can. The reason we - the President and Chief Operating position was open for longer than I would have probably liked, but it was open because we couldn't find somebody that I thought could come in and make the changes and the improvements here that we were looking for.
And when we were able to orchestrate the move and put the company here in Dallas to a place where we could attract that talent, that's what we've been doing. And the reason - there are a lot of reasons that we brought - that I brought Jackson in as the Chief Operating Officer is obviously his transaction experience and the like, but it was also because Jackson has the reputation of building world-class management teams.
I know, I worked with him at the companies that he has been at before he has been here. And I asked him to come in and to assess our processes, our peoples, and to put a first-class - and help me put a first-class operation together.
And he has been here for nine and half months, 10 months, and he has worked every day to do that. And that is an ongoing process that we are all committed to.
Vikram Malhotra
Okay. And then, just again on the corporate side, your low end of the guidance, you're assuming $0.20 run-rate.
Is there a point where during the year, you look at the dividend; the dividend is $0.19. I'm just sort of wondering how comfortable are you kind of maintaining the current run rate?
Phillip Joseph
On the dividend, we're comfortable with the current run rate right now. We're very focused on –$0.18 on a quarterly basis.
Yeah, we're comfortable with the dividend right now. We are very focused on maintaining moderate leverage throughout the year and, again it's - our dividend at this point in time, we don't anticipate any change.
Vikram Malhotra
Okay, great. Thank you.
Operator
Our next question comes from Ki Bin Kim of SunTrust. Please go ahead.
Ki Bin Kim
Thank you. So if I look at the adjusted EBITDA disclosure, it looks like it went down from $151 million to $143 million, so $8 million difference in one quarter even though you guys were effectively a net acquirer, because some of the stuff you sold was vacant.
So I just want to try to triangulate where the discrepancy is because I know you mentioned $4 million loss, but where is the other $4 million coming from?
Phillip Joseph
Well, the - it's a confluence of things. Part of that loss is that we had some bad debt expense going through G&A related to straight line receivable, rent write-offs.
And then the other items related to that were, obviously, some higher property cost as well.
Ki Bin Kim
Okay. And is there actually a risk that even though, let's say, a tenant vacates or stops paying rent, whatever it is.
Does inherent taxes or operating cost of that box...
Jackson Hsieh
We have to cover that.
Ki Bin Kim
Yeah, as far…
Phillip Joseph
Okay, go ahead.
Ki Bin Kim
No, go ahead please.
Phillip Joseph
No, you go ahead.
Ki Bin Kim
Let us all say the losses seem - the potential losses seems leveraged than just simply removing some portion of rental revenue, right?
Phillip Joseph
Oh, no. The $0.06 that we're talking about related to the credit issue, that's on a property NOI basis.
I mean, that would take into consideration potential property cost leakage as well.
Thomas Nolan
Yes, you're correct. Not only do you lose the revenue, you've got to start writing checks.
And that's why the actual impact is more than just these rents. And it's why it is in our best interest to - we're a triple-net company.
We want to put those expenses back on someone else. And so it's why we work very - why we work hard to solve these issues as quickly as we can.
And, again, that's using the two examples we've been talking about. The C-store portfolio, we were - we've got that done by March 31st.
And we're no longer writing checks to - for expenses and taxes in California on very, very good real estate, the dining concept that I talked about, again, good. It's very good real estate, but until we get it sold, we're writing checks for taxes and operating cost.
So it is really incumbent upon us to do those as quickly and as efficiently as we can.
Ki Bin Kim
Right. So if I just think about the quarter overall, and I'm just putting FFO earnings aside for a second.
Just overall, it feels like there is maybe a lack of obsession in knowing your tenants and how well they're doing. And not just putting them on the watch list, but actually acting on it before things get bad, right, whether it be asset sales maybe at a little bit of loss, but just maybe more proactive capital recycling, and like I said, like an obsession about knowing your tenants.
And I know, Jackson, you've only been there less than a year, but what you think about that?
Thomas Nolan
Well, I'll answer part of that question, and I think Jackson can talk about the steps we have taken, including bringing - we had a loan - we had a servicer that was providing services to us and interacting with the tenants and we've taken that in-house, because we feel it allows us to get closer to the tenant. But the one point, I'd like to talk about is, as far as our portfolio management activities here, I guess I would disagree.
I think we've been very active on the portfolio management side. We have been one of the largest sellers of property in the triple-net sector.
We have been aggressive. We have said over the years that to us, one of the reasons we've historically not given acquisition guidance is, again we think building the portfolio and having the best assets are the right criteria.
And if that means selling more assets than you bought, then that's what we're going to do. And we have had that a number of quarters.
And we could continue to have that. We have been a very aggressive seller.
Now some of these assets that we're talking about, unfortunately, they've been in our portfolio for a while, some of the legacy ones that go back many, many years. And we made - we would have liked to have monetized them.
They were on our watch list. It wasn't like we weren't watching them.
But at some point, not every asset is monetizable.
Jackson Hsieh
And just one anecdotal thing because when I've started here, actually sat - first of all, we removed the other asset - the guy who ran asset management before, so I sat in his seat. The most continuity in this firm besides Tom is actually the team in asset management, at least administration.
One of the employees here that's a senior asset manager, he has got over 10 years tenure in the company. That is actually, believe or not, you may not think this, but that's one of the best assets, that group, that we have right now.
It's just unfortunate that when these tenants go out, and like the gas guy's a great example, the C-store operator, we have to go through the judicial system through the unlawful detainer process to kick them out and same thing with the theater operator. And so I think things will get better.
To me, like the Midland - there I go I just spilled the beans, the servicer, one of the things when I came in here, I said, hey, why do we have the servicer doing this stuff? It's like you're doing duplicate work.
You don't have any kind of accountability. Things fall through the cracks.
Okay, let's bring it in, so well good, we'll save some money. But more importantly, you just take control of your tenants.
And so look, we have a lot of tenants, 430-plus at this point. And we just secured that acquisition on-boarding this month.
Was the team still working through on projects that related to that servicer? Yes, absolutely.
But one thing I would tell you and it's just a fact, the majority of issues that we're dealing with these problem, I'll call tenants, at this moment in time, were serviced by this particular servicer. And not that they were doing a bad job, but it's just inefficient when you have someone else kind of in between you trying to figure out if rent got collected or taxes got paid, and you don't want to have two people calling at same time.
So look, it's - for whatever reason, the company was set up that way; we brought it all in-house.
Ki Bin Kim
Okay. I appreciate that.
Thank you.
Operator
Our next question comes from Haendel St. Juste of Mizuho.
Please go ahead.
Haendel St. Juste
Hey, good evening I guess. So Tom or maybe Jackson, you guys have mentioned earlier that business as usual is not the prudent approach any longer.
So can you talk a bit more about how specifically this quarter's experience will impact your investment process and corporate profile going forward? Does this suggest maybe a greater focus on higher credit tenants and perhaps lower cap rate assets if and when you regain access to equity capital?
And does this suggest a rethink of your prior stated disposition strategy of selling your lower cap rate assets like your drug stores? And as part of that, I know it's a multipart question, but are you going to push for more unit level coverage from your tenants and perhaps increase those thresholds and revamp your underwriting in any way beyond just avoiding what you called weak and e-commerce threatened tenants going forward?
Jackson Hsieh
Well, the way we do it now and this is new, right. So every asset, as you know, is ranked here across 10 criteria, anything that comes into Spirit or goes out kind of goes through that same screen.
That screen is covered by our asset managers, not by the acquisition teams. As it relates to things that we want to buy, just go back to the deck that we put out, you can see it.
We have industries that we like, industries we don't. Some are - some have different cap rate profiles.
If we can't afford to pay for them, we won't buy them. And the things that we're selling, we're selling for a particular reason based on either concern over industry or concern over particular real estate fundamentals that might impact it.
Thomas Nolan
Yes, I would reiterate. I don't think our sales strategy was purely on trying to get the lowest cap rate.
Jackson Hsieh
No, not at all.
Thomas Nolan
Our sales strategy was a combination of - yes, is somebody willing to pay more for this asset than we believe it should get in the value it has to us in our portfolio, and does it line up with where we want to build this fortress portfolio from a type of asset point of view.
Jackson Hsieh
Yes, and as it relates to unit coverage, like we bought Home Depot's last quarter. You don't get your commission from Home Depot.
You don't even get sales from those guys. But we still do a number of deals with private operators with existing tenants where you do get that visibility.
So it's a balance. I mean, if I would say one thing about maybe the older Spirit, I think they had an obsession about yield.
I wouldn't say they were as obsessed about the industries necessarily or the geographies, but more of an obsession of yield and lease structure, and potentially some of it being coverage. But look, I don't have to tell you, when you get more yield, you take more risk, so - or maybe as I described earlier.
So I think we've got a portfolio strategy and investment strategy that we're pursuing. And right now, I'd say we're going to be a little bit more quiet until we get a little more visibility on like some of the headwinds impacting one of our larger tenants.
Haendel St. Juste
And one more on Shopko, can you share what the fixed charge coverage for them was, not unit-level coverage but fixed charge coverage?
Jackson Hsieh
We can't disclose that. But it was - the numbers have been consistent with historical coverages, fixed charged coverages, based on the - okay.
Haendel St. Juste
Fair enough. All right, thank you.
Operator
Our next question comes from Chris Lucas of Capital One Securities. Please go ahead.
Chris Lucas
Hi, good evening everyone. Jackson, just wanted to go back to sort of the comment you finished within the last question.
You talked about shutting down the acquisition pipeline for now. What does need to change for you to sort of rethink opening that back up and growing again?
Is it getting down to a certain leverage level? Or is it simply dependent upon sort of where you guys end up with Shopko, so is that a less than 5% or some lower level of exposure?
What are the characteristics we should be looking for there?
Jackson Hsieh
I'll tell you where we didn't want to be, but we didn't want to be deep into our revolver with a whole pot load of acquisitions, and if one of our bigger tenants really got into an issue, be sort of dealing with that. And I would say that I think we're a little bit more comfortable with some of the headwinds that are impacting Shopko.
I think you'll see us get back in. Like I said, it could be very quickly, but I also may not be.
I hate to be like that flippant, but I'm really not, it's not flippant.
Thomas Nolan
Well, I'm going to say….
Jackson Hsieh
It's really…
Thomas Nolan
It's really not that more complicated than, from the standpoint of looking at our portfolio, realizing we have exposure to one particular large tenant, but other tenants. And looking at the kind of, for my perspective, from a risk standpoint, kind of asymmetric risk.
If we're being overly conservative and everything works out fine, well what's the end result of us? Well, we gave up some growth and we've got a bunch of money sitting in cash sitting in the bank.
And we've got a pretty good portfolio. But if we were overly aggressive, then we tried to buy through this credit losses and move forward with a bunch of these acquisitions that we were looking at and were actively looking at, and then something untoward happen to us, and again, we're not suggesting it's going to, but you need to prepare for the potential eventuality and all of a sudden we have this big revenue disruption and we are way - not way, but we're out over our skis on our line of credits and we've got commitments going forward, that just didn't - from a risk return standpoint, that just seemed asymmetric.
We would rather be conservative and have everything work out right and have people look back at us and say, well, you gave up a bunch of growth. I mean, that's - we'll take that if that's the way it ends up.
Chris Lucas
Okay. And then, I got - I wanted to scroll back into the $4 million number, if I could.
That is rent, not NOI, correct?
Phillip Joseph
That's rent. That's rent.
Chris Lucas
Okay. So what was the NOI impact from that $4 million loss?
So what's the unrecovered expenses you had to get to?
Phillip Joseph
No. Approximately like $1 million.
Chris Lucas
Okay. So on the Gander, hhgregg, Gordmans, you didn't get rent for just March...
Jackson Hsieh
Just March, yeah.
Chris Lucas
Right. So what's their - what's your exposure to that - to those two tenants on an ABR perspective, dollars percent something that give me a sense us to what your...
Jackson Hsieh
We have like six Ganders, we got 3 Greggs, we got one Gordmans.
Phillip Joseph
They're both under 1% of...
Chris Lucas
Understood, yes, understood. I just wanted to know what the aggregate is, so I can at least sort of figure out what that risk is and then I want to hit the sort of the bigger issues in a second, but I want to understand what the ABR is here?
Jackson Hsieh
But I'll come back to you with it. I don't want to give you a number off the cuff.
I don't have it in front of me, to be honest, but it's less than 1%.
Chris Lucas
Okay. So did you guys get any rent from the movie theater, the casual dining concepts or the C-stores you talked about for the quarter in the first quarter?
Jackson Hsieh
Zero.
Chris Lucas
Zero. So I mean it kind of comes back to an issue that was discussed earlier, whether it was the conference or even the February 23rd call, I know you raised it, but how was - how were you thinking about how that was all going to resolve itself?
Thomas Nolan
Well, I think the...
Chris Lucas
It's two months missed rent at that point, or 1 missed rent and then 1 very late rent.
Jackson Hsieh
On the theater, there was one potential situation where the theater operator was going to stay in and resume paying rent again on a restructure basis. And we decided more recently that we were just going to change out the operator and we were considering a deal track.
On the restaurant guy, one of the restaurants was going to stop paying rent. And there was - we're negotiating a rent, reduction for a portion - to haircut the rent to get through the rest of the year.
One of the other portfolios will just get sold. So this is kind of like an ongoing discussion with these tenants as they weren't paying rent through that first quarter.
But I think there's more resolution. And they really stopped pretty much at the end in that January period paying rent.
Thomas Nolan
And, again, the C-store operator, which is the largest contributor out of all of the ones that we've spoken about, that one has now subsequently been sold and for a good recovery for us.
Chris Lucas
Okay. Appreciated, thank you.
Operator
Our next question comes from [indiscernible] of UBS. Please go ahead.
Unidentified Analyst
Going back to the $0.06 that's the impact this year, which is about $28 million, $29 million, what is the expectation for the recapture of that lost NOI, lost $0.06. I mean, how long does it take to get that back and how much do you get back?
Phillip Joseph
Well, again, the $0.06 related to property NOI diminution, what we're trying to do is kind of walk you from the low end of prior guidance, $0.89 to $0.80. And $0.06 of that reduction was related to potential forecasted property NOI leakage related to certain of these tenancies.
And so look, everything related to our guidance range this year, especially as it relates to these tenancies, is going to be dependent upon aggressive capital redeployment. And from a capital redeployment perspective, as we're looking at it for a company, I mean, as of right now just with respect to our cash position, we have approximately $50 million in cash that's in our 1031 and Master Trust Notes release accounts.
We're going to be investing that into acquisitions to get a return on that capital. Also, when you're looking at these - this invested capital that we have right now, we're very focused on getting revenue from that as well with respect to property investment.
And so we're going be focused on getting revenue from restructured leases and re-lets. We're going to focus on getting capital back from reduced property cost once we get these properties re-let or restructure the leases.
We're going to be selling assets and taking that capital to deleverage and reduce interest expense savings. There's going to be a lot of activity related to seeing this capital redeployed.
And that's what comprises our revised range.
Jackson Hsieh
Yeah. And just to answer that question more specifically, so SB gas, the gas guy, basically, let's leave it at that, basically, we got the money back.
So that income is gone. Those proceeds went to pay down the line of credit.
There are a number of other tenants that are on our list...
Thomas Nolan
But again, I'll jump in, and just to be clear, because I know he is trying to do the math here. Within the $0.06, that assumed that the C-store operator that was the entire full year's rent.
That's was in the $0.06 that we've calculated. We've actually sold it in March 31, but we didn't adjust - we didn't assume a reinvestment of that money.
We just simply took the money in. And so it's in the $0.06, but it's actually already been dealt with.
And at some point, it will be redeployed. But we consider it, because that was in our original revenue structure, we show it for the whole year.
It's in the $0.06, but we've already dealt with it. And the next one, which is the cinema, that's the next biggest contributor to the $0.06, and that one, Jackson, you've also discussed in terms of that we've already got an operator lined up.
Unidentified Analyst
Okay. So let me ask you a different way maybe.
So $0.06 is the impact for this year that you're talking about, okay. Some of these assets will get sold, some of them will get re-leased, okay...
Jackson Hsieh
Some of them will be - the rent will be restructured.
Unidentified Analyst
Okay. So what we're trying to figure out here is how do you get - how much do you get back?
If you lose $0.06 this year, you talked about selling some stuff, paying off a line of credit. That doesn't sound like you're - that sounds pretty dilutive relative to the revenue you lost.
Phillip Joseph
Well, you're redeploying that capital. We have assets right now that are not paying revenue.
We're going to re-let those assets to new tenants. We're going to potentially restructure those leases with a lower rent.
They're going to become revenue-producing throughout the year. We're going to be redeploying that capital.
That's very accretive.
Unidentified Analyst
Fair enough. But for the part that's re-leased, what should we assume on that?
I mean, should we assume - you're now giving a recapture rate in your supplemental, it was 63% on leases where you...
Jackson Hsieh
Yes, it's hard to generalize, because some are being sold, some are being re-leased, some are being restructured. And I hate to be - I know what you're looking for.
You can't over generalize about it, but what I would tell you is the decision that we are making on these restructurings are basically, first and foremost, how do we protect our investment? What's the best way to get net present value proceeds back?
And if think a tenant's no good, then kick them out, okay, and put a new one in or sell it. If we think the tenant can survive, perform, we'll adjust accordingly, but basically, we're going to look at a net present value of that particular situation trying to figure out what the best outcome for us.
If the operator is not doing a good job like you said and he won't leave, kick him out and replace him. So...
Unidentified Analyst
Is it fair to assume, I guess, just to be really simplistic here, is it fair to assume that the $0.06, you don't get that back, right? So you lose $0.06 and then maybe you get something back, but you don't get the $0.06, is that the right way?
It seems like that might be the right way.
Phillip Joseph
The $0.06 gets you to the low end of the guidance range.
Jackson Hsieh
When I think of the $0.06, let's just say, just pick a hypothetical number. It's $200 million of assets that are being impacted by this lost rent.
That's not the exact number, but just a hypothetical. If we got back $180 million, that $0.06 is gone, but we got the capital recovery back.
So on the way I look at it, and we should think about it is, look, there is an opportunity cost; we lose this income. I don't like it either, right, because it disappears, but the value destruction is very minimal to the enterprise.
We'll cover those proceeds back. So some - the ways you can mitigate that are obviously you buy more earlier in the year or earlier in the quarter because the dollars are all fungible, right?
Thomas Nolan
And that fungible point is that we're addressing the two issues of guidance that we talked about. The first was the revenue loss and the credit loss.
And the second was, you heard us, we have determined that we believe that the company's most important strategy at this time given the market that we're in is balance sheet stability and liquidity and so both of those impact this number. The convenience store operator, as you said, well, you pay down the line and so that's not terribly accretive.
Well, that relates to the second part of the strategy change that you heard us talk about here which is, until we have better visibility on our major tenants, we're going to get very, very liquid. And because that's where we think the best position for the...
Jackson Hsieh
And just to be clear, so on that point, if you ask me about timing - I'm just looking at my head of acquisitions right now. He's pissed off at me.
Called him over the weekend, I said one, two, three, four, five, six, seven deals? They're dead.
Take them off the list; walk away from them; we're not doing them. That's the effect of, in effect, the timing of our earnings.
The $70 million came back to that C-store at the end of March, cash, came into the company, paid down the revolver. You're supposed to keep your acquisition pipeline rolling to match its earnings.
But we're really not going to buying that robustly, quite honestly, until we get a little more visibility on this issue that came up very recently.
Unidentified Analyst
Okay. Yes, I'm just - I'm still a little confused.
If you're losing $28 million, $29 million of NOI this year and you're assuming you can reinvest at a 7% cap rate, that's $400 million of acquisitions or proceeds back at a 7% return that you'd have to do to make that back.
Phillip Joseph
It's redeploying - I mean it's reletting these properties and/or selling them. The $0.06 was just what calibrates you to the property NOI leakage that we have which gets us to the low end of the forecast of the range.
So it's incumbent upon as a management team as relates to these property investments that are not generating revenue right now to redeploy that capital, redeploy it by property sales, redeploy it by reletting it to new tenants, redeploying it by restructuring the leases and generating revenue on these assets. It's as simple as that.
Unidentified Analyst
Right, I get that. But it will be helpful to get a little bit more clarity on particularly how long the timing, if you're going to be, when you're reletting, how long that takes and what is the recapture rate, because, again, you reported a 63% recapture rate on reletting to a new tenant after a period of vacancy this quarter.
And if you use that rule of thumb on the NOI going away this year, then you're not getting back the $0.06 is my point. I think it would be helpful to get some more math on this.
I guess my last question is, if I think - if look at this year, your AFFO now is back to 2013, 2014 levels. Your G&A has gone up a lot since then.
Do you start to think about whether you need to shrink the personnel of the company? I mean, does the board start to think about resetting some comp issues here to deal with, again, the fact that you've kind of going backwards with your earnings?
Thomas Nolan
I think relative to the earnings, we have deleveraged substantially since the date that you referenced. And that said, one of the biggest components of the AFFO per share, the balance sheet, is substantially different balance sheet today.
And it is difficult to grow AFFO per share at the rates that we would like to while achieving our balance sheet objectives. And as to the compensation, just, I guess, I would say that our compensation is aligned.
Our short-term compensation is based on AFFO performance. And as you can imagine, the changes here have implications to that.
And our long-term compensation, 50% of our stock is - for the executive leadership team is based on total shareholder return comparisons, which is - this has also had implications, too. So I'm sure our compensation committee will take all this into consideration and put forward a good plan, but I think at this point, the alignment is in place and the implications of what's happened here appropriately affect us.
Unidentified Analyst
Thanks, appreciated.
Operator
Given the extended length of this call our last question will be from Rob Stevenson of Janney.
Rob Stevenson
Good evening guys. Can I get your thoughts on why no stock buybacks in the first quarter versus the acquisitions you did?
And then Tom, given your comments about building balance sheet strength and liquidity, how aggressive can we expect you guys to be in selling assets and using the proceeds to buy back stock over the remainder of 2017?
Thomas Nolan
Again, I think we already touched on the stock buyback. I mean, we have a plan that's been authorized to $200 million plan.
And we will assess that as to whether that's the best utilization for proceeds for the company, just like we would have done in the first quarter. Obviously, in the first quarter, we did not determine that, that was the best utilization for proceeds.
But the decision on a stock buyback, it's the opposite of this decision on an ATM. It's facts and circumstances driven, is that the best use of capital.
And I'm sure that this is something we will be studying and continuing to focus on. And if we do think that it's in the shareholder's interest, we would not hesitate to proceed.
Rob Stevenson
Okay. And then just lastly, has the board engaged an advisor to actively explore strategic alternatives at this point?
I know it's sort of danced around, but has there been an engagement at this point?
Thomas Nolan
No.
Rob Stevenson
Okay, thanks guys. Have a good evening.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Mr.
Nolan for any closing remarks.
Thomas Nolan
I want to thank everyone for their flexibility on the timing of this call. And I hope everyone has a good afternoon.
Operator
The conference has now concluded. Thank you for attending today's presentation.
You may now disconnect.