The check is not in the mail. Which is what landlords of retail stores are now finding out. Shuttered stores do not register sales and e-commerce alone is not a sustainable business model for brick-and-mortar stores. It seems that the large merchant chains represent most of the delinquent tenants. According to retail landlord, DLC Management Corp, over 80% of the non-payers are the big national store brands. Meanwhile, Simon Property Group, the largest U.S. mall owner, is suing The Gap to the tune of $66 million in back rent. More states are unwinding the Covid-19 shutdown, but there are still challenges for merchants to overcome. Reopened stores have capacity restrictions plus stay-at-home consumers may not be rushing back to the mall. Many stores will never re-open as some legacy brands and mall anchors were in trouble even before the pandemic. Retail sales seemed to bottom out in April, giving merchants some hope of seeing a slow but steady pickup in shopper spending. Time will tell.
The following Chain Store Age article reports more on this topic which is excerpted below:
There are three types of bad actors among retail center tenants not paying rent, said DLC Management Corp. CEO Adam Ifshin. There are the ones that don’t communicate, the ones that don’t pay because they’re shut down, and the ones that are completely capable of paying and don’t want to.
The last group, he said, is entirely composed of national chains. “Eighty to ninety percent of tenants not paying rent were the national brands,” said Ifshin, whose company owns 85 mostly outdoor centers in 24 states. DLC collected 73% of total rents in April and 65% in May.
“The mom and pops, meanwhile, are trying their best to pay. They’ve borrowed, they’ve dug into their life savings, and we’ve given them a three-month deferral program and are doing everything we can to support them,” he said.
Supply chain software provider Datex reported last month that only 42% of May retail rents had been collected by May 8. Companies that had paid zero rent were mostly nationals, including 24 Hour Fitness, AMC Theaters, Bed Bath & Beyond, Dave & Busters, Five Below, Foot Locker, H&M, Old Navy, and The Gap.
Overview provided by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group.