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I hope you and your families are all well.
Despite the challenges facing our industry, we experienced an excellent quarter of leasing activity and rent collections, in addition to making strong progress on several of our ESG initiatives and accomplishments.
Also, we continue to keep two eyes on the current business and a third eye on the future as we start to see opportunistic shifts in the retail real estate landscape.
While we will be disciplined with our capital, we are well positioned to be on the offensive.
We are pleased with the level of leasing demand that we are seeing so quickly after the economy reopened.
This quarter, we executed 106,000 square feet of total new leasing volume, the highest level since the first quarter of 2019.
As a result, our signed not open ABR of $3 million nearly doubled since last quarter.
As we look ahead, our leasing pipeline is very healthy.
Today, we have an additional $1.5 million of ABR that is currently in lease negotiations with significantly more in advanced LOI stages.
Much of this demand is coming from grocery, off-price, QSR and medical-use tenants.
We have also seen an acceleration of traditional mall tenants looking for space in open-air centers.
While this demand creates friction in the market and helps drive pricing, we are being highly selective in this area as we are not interested in turning our centers into outdoor malls with a heavy concentration of full price apparel.
Overall, visibility into our leasing pipeline and pending signed not open balance gives us comfort that incremental cash flows will provide some cushion from COVID-19 store closures.
Along with our solid leasing activity, we achieved double-digit growth in our releasing spreads, including a 43% increase on new leases, the highest level since the second quarter of 2018.
In fact, since mid-2018, after the new management team started, our new releasing spreads have averaged 30%, with an incremental return on capital of 12%, reflecting the mark-to-market opportunity embedded throughout the portfolio.
We look forward, we expect to continue to drive rent as we believe our Midwest and Southeast geographies have in-place rents that are more accessible to tenants.
Leasing highlights for the quarter were new deals with Nike, Sephora, Burlington and Bank of America, to name a few.
These credit tenants not only improve the quality of our cash flows, but are also providing a good return on capital in the mid-teens range.
During the quarter, we opened lululemon at our Woodbury Lake (sic) Woodbury Lakes property in Minneapolis, with initial sales significantly exceeding lulu's forecast.
Touching on our grocery initiative.
We continue to see tremendous opportunity for strongergrow and gain share, including Kroger, Sprouts and Publix.
Each reported impressive quarterly earnings and sales, while Aldi recently announced plans to open 70 new U.S. stores in 2020.
The demand is real, and we continue to see a unique opportunity to improve property values and strengthening the resiliency of our cash flows.
Our pipeline of deals includes the addition of grocers to nongrocery-anchored centers and then opportunities to enhance the existing grocer tenancy.
Negotiations are progressing well on several locations, and we hope to provide further updates in the coming weeks.
Our collection rates in the third quarter showed noticeable improvement, with 87% of base rent and recovery income collected as of October 30.
We have seen further improvements in October, with 90% collected thus far, which is ahead of the pace we experienced for September at the same point in time.
Our collection levels are rising quickly as deferral periods end and tenants resume payment in accordance with their deferred plans.
As a result, our second quarter collections have increased to 76%, up from 65% as reported last quarter.
We also continue to collect rent from our local mom-and-pop tenants at a very high rate of 94% in the third quarter.
Throughout this sector, these tenants have historically suffered the most in past downturns, and we believe our high collections are a reflection of the quality of our smaller tenants and our boots on the ground leasing and asset management approach.
We also believe our relatively lower exposure to this category of just about 10% should provide some shelter from potential future fallout.
With our percentage of open tenants by ABR at 94% and October collections sitting at 90%, absent any macro headwinds, we are cautiously optimistic that we will continue to drive collections higher.
While we are still in the throes of the pandemic, I think it's important to keep in mind that several of our top tenants are thriving today, including Whole Foods, Best Buy and Dick's.
We're also seeing a comeback with Bed Bath & Beyond, our fourth largest tenant.
They recently launched same-day delivery to complement their BOPIS and curbside pickup services that fueled an 89% increase in digital channel sales and the first positive comparable sales growth quarter in almost four years.
Gap recently announced its Power Plan 2023 strategy that will refocus the business on growing just the Old Navy and Athleta brands.
Today, 10 of our 13 Gap concepts are Old Navy and Athleta.
On the tenant risk front, about 3% of our ABR is currently in bankruptcy proceedings, and we expect to retain about half of this amount.
During the quarter, we recaptured eight of 15 ascena locations and we're actively working on backfills well before the bankruptcy filing.
We have already released one location and are in various stages of negotiations on the remaining 7.
We expect to vastly upgrade tenancy and experience positive mark-to-market opportunities for these locations.
In the fourth quarter, we expect to recapture two Stein Mart boxes, representing roughly 60,000 square feet.
We are in advanced negotiations on both with off-price concepts, providing us the opportunity to materially enhance credit and merchandising for both properties.
At just under $11.50 per square foot, we also see a sizable mark-to-market opportunity upon release of those spaces.
Given the recent headlines, I wanted to provide some color on our theater exposure.
In total, 4% of our ABR comes from theaters, 3% of which is with Regal, that recently announced that it would temporarily reclose due to a lack of studio releases.
While this news is disappointing, we believe that the theaters will remain a key source of distribution to the film studios and provide a difficult-to-replace form of entertainment to us, as consumers.
We are hopeful that the difficult steps taken will allow Regal to continue to weather the pandemic.
However, like every troubled tenant, we are not sitting idle and are proactively evaluating our alternatives at all four locations.
three of the four are stand-alone boxes that give us additional replacement options, including single-tenant replacements, box splits and potentially even some non-retail uses, including last-mile distribution.
The last location is at our Webster Place asset in Lincoln Park, Chicago, where we have been cultivating densification and mixed-use opportunities.
The highest and best use at this asset is residential.
We've been trying for quite some time to clear the site so that we can progress toward a JV with a residential partner.
Overall, we believe our exposure to the theater category is manageable, and we are taking the appropriate measures to minimize the impact on our business, including reserving a significant amount of our expanding theater uncollected rent.
I think it's worth noting that while many analysts have pointed to our somewhat higher exposure to the theater category as a reason for concern, our collection levels in the third quarter and in October are now at or above peer collection levels.
As you think about the risk profile of RPT, I would simply point to the convergence of our collection rates and our below-average, at-risk exposure to a broad range of groups versus narrowly focusing on individual tenants and categories that may be in the headlines today.
Turning to our strategic outlook.
Without the pressure to raise capital near term, we are in a position to play offense.
While we continue to manage our liquidity closely, we are actively scouring our target markets for acquisition opportunities.
We have roughly $95 million of excess cash on our balance sheet that we could strategically and accretively deploy as opportunities arise.
Though overall deal volumes in the open-air sector have been light, we are starting to see the first signs of activity, and I'm personally starting to get calls about stressed opportunities.
To date, these deals have not met our stringent underwriting criteria, but we believe more appropriate opportunities for RPT will emerge later in the year and in the early part of 2021.
At this point, the percentage of retail CMBS debt in special servicing is at an all-time high.
And stressed debt, which includes debt that is not yet in special servicing, is already above levels seen during the Great Recession.
We believe our excess cash and our strategic partnership with GIC will be a key advantage as deal flow materializes.
Also, while our current liquidity is strong, we are not resting on our laurels and are actively exploring additional options to generate even more capital at attractive pricing in order to be ready for further deployment opportunities that could be transformational for a company of our size.
Before turning the call over to Mike, I wanted to highlight the progress we made on our ESG initiatives.
I'm also proud to say that we filed our inaugural GRESB assessment as part of our commitment to sustainability, and launched our Diversity Inclusion Committee as we fulfill our corporate purpose of turning commercial ground into common ground.
Highlighting our efforts on the social front, we were recently recognized as the Top Place to Work by the Detroit Free Press, and were selected for the Crain's Detroit 2020 Cool Places to Work list.
And just yesterday, Commercial Property Executive announced that RPT won an award for one of 2019's Best Investment Transactions within the portfolio category for our joint venture with GIC.
Let's begin with a brief review of our third quarter results.
Third quarter same-property NOI and operating FFO were both up since last quarter, fueled by a smaller impact from rent not probable of collection, a direct result of improving collections as we move past the depths of a pandemic.
Our rent not probable of collection and abatements were roughly $4.5 million in the quarter, which included about $900,000 related to prior quarter billing, primarily our theaters.
The clean rent not probable of collection for the quarter was $3.6 million.
As detailed on page 33 of our supplemental, our third quarter rent, excluding prior period amounts, is down 7% or $3.7 million versus the pre-COVID first quarter level.
While this is a point-in-time number and not a run rate moving forward, it is a stark contrast to the decrease implied in our share price.
As we look forward, there are puts and takes to the trajectory of NOI.
The puts are items such as signed not open ABR backlog of $3 million, the $1.5 million of signed not open ABR associated with leases in negotiation and embedded annual contractual rent growth.
The takes are any reductions in rent or tenant fallout which is tough to speculate on, given the state of the pandemic.
Regarding third quarter uncollected rent, it's totaled about $6.4 million for the quarter, of which $3.6 million was reserved, as I noted earlier, and $2.6 million was deferred net of reserves, leaving about $200,000 unaddressed.
For reference, this is detailed in our supplemental on page 33.
Touching on our operating fundamentals.
During the third quarter, we signed 44 leases covering 279,000 square feet.
Blended rent spreads were 10.7% driven by our 43% new lease spread, our highest since mid-2018.
We ended the quarter with a leased rate of 93.3%, down 30 basis points sequentially as the effects of COVID-19 begin to impact our occupancy statistics.
Given our solid leasing activity during the quarter, our anchor leased rate was actually up 10 basis points from last quarter, fueled by our Nike and Burlington deals at Front Range Village in Fort Collins, Colorado, where we are seeing excellent leasing demand.
As Brian noted, our small shop leased rate was impacted this quarter as we recaptured eight ascena spaces, which unfavorably impacted our leased rate by 30 basis points.
Bolstered by our rising rent collections of nearly 90% and as a result of liquidity measures we took earlier in the year, we ended the quarter with a healthy cash balance of $220 million, including $125 million of revolver borrowings and $95 million of cash.
Our cash balance before debt repayments increased by about $20 million.
With our strong third quarter cash flow generation and incremental confidence in our business, we paid off another $50 million of our revolver during the quarter.
We expect to repay additional outstanding amounts on our revolver as stability in cash flow continues to improve and the economy overall returns to more steady state.
We will also continue to keep tight control over liquidity, capex and expenses.
This approach gives us the flexibility to strategically invest at the right time for the long term.
Regarding the dividend, we understand this is a very important piece of our total return to shareholders.
However, as I noted last quarter, we would not need to pay a common dividend for the balance of 2020 to meet our REIT taxable income payout requirement based on our current projections.
The timing of reinstatement remains a quarterly Board decision.
As previously noted, when we reinstate the common dividend, we will do so at a sustainable level that we can grow in conjunction with earnings.
We entered the third quarter with trailing 12-month net debt to pro forma adjusted EBITDA of 7.2 times, up slightly from 7.0 times last quarter as another COVID-impacted quarter entered the calculation.
We remain committed to bringing leverage into our long-term target range of 5.5 to 6.5 times as the impacts of the pandemic move behind us.
As I alluded to earlier, and as part of our continuing effort to improve transparency into our business, we have provided a granular breakdown of our first and third quarter recurring revenue and a bridge between reported base rent and recoveries to build an unaddressed rent on page 33 of our supplemental.
We hope you find this helpful as you evaluate the trajectory of NOI from COVID-19.
With respect to guidance, we will not be providing an update at this time, given the high degree of uncertainty surrounding the scale and duration of several macro factors, including the pandemic economic stimulus and the results of the election, to name a few.
We will continue to reassess the practicality of resuming guidance in future quarters.

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90% of october and 87% of q3 2020 rent and recovery income have been paid as of october 30, 2020.
94% of total tenants were open and operating, as of october 30, 2020, based on annualized base rent.

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