Mall and building landlords are grappling with reduced or even no rent payments from beleaguered retailers whose stores are closed for the foreseeable future. For small businesses, defined as those with less than 500 employees, the recently passed $2 trillion pandemic stimulus law provides $350 billion in loans to small businesses.
But this spigot is running dry and Congress is said to be considering another tranche of funding. A key problem remains the uncertainty surrounding when the re-opening of retail stores may occur. No one knows how long this will last, making it difficult for merchant tenants and their landlords to agree on acceptable arrangements for current and future rent payments.
The following Retail Dive article, excerpted below, reports more on this topic:
Last week, Urban Outfitters said publicly what many retailers are discussing in private: that it won’t be paying rent. In the middle of a list of financial measures Urban said it was taking while its stores are closed, the apparel seller included the suspension of rent payments.
The retailer followed the Cheesecake Factory in doing so. The restaurant chain said in a regulatory filing that it would not be paying rent on its leases for the month of April. After that first shot, Urban Outfitters joined, followed by PVH (owner of Calvin Klein and Tommy Hilfiger) and bankrupt home goods seller Pier 1. More retailers, whether they announce it publicly or not, are almost certainly planning to skip rent as well.
Landlords, on the other hand, might not see rent as optional, even during a pandemic. In fact, one major retail landlord, Taubman, told tenants that it still expected rent payments, even with most of the operator’s malls closed.
There is no playbook for what is happening in retail right now, with retailers closing among them tens of thousands of stores as businesses and governments try to slow the spread of COVID-19. Without money coming in from store sales, of chief importance is cash and financial flexibility.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group
