- Retail landlords are sending out thousands of default notices to tenants, a situation that could tip already-shaky retailers into bankruptcy or collapse, Bloomberg News reports.
- Partly, the surge is a move for landlords to preserve their legal rights. In many cases, shopping center and mall REITs are working with their tenants to come to some kind of arrangement.
- CoStar Group estimates that $7.4B of April rent hasn't been paid, ~45% of what's owed. In some cases, tenants haven't turned in rent for as long as three months.
- Simon Property Group (SPG -3.3%) says it's in talks with its tenants to take into account their financial situation, market position, and depth of their relationship.
- But the landlords have bills and mortgages to pay, too.
- "The bottom line is, we do have a contract and we do expect to get paid," CEO David Simon said during the REIT's Q1 earnings call. SPG won't disclose the percentage of rent that isn't getting paid.
- On May 11, Tanger Factory Outlets (SKT -2.7%) said it had collected about 12% of its April rent receipts after offering all of its tenants the option to defer their April and May rents interest free.
- In early May, Washington Prime Group (WPG -0.7%) had collected ~30% of April rent and charges and expected its collection rate on Q2 rent and charges would be ~45%.
- Some landlords, though, have run out of patience and locked out tenants, including some retailers represented by Tom Mullaney, managing director of restructuring at real estate service firm Jones Lang LaSalle (JLL -5.0%).
- “The environment is getting pretty testy and emotional on both sides of the table,” he said. “The only thing worse than being a retailer right now is being a retail landlord.”
- Some retailer tickers: Dillard's DDS, J.C. Penney OTCPK:JCPNQ, Kohl's KSS, Nordstrom JWN.