Another month of the pandemic and another first of the month when retail lease payments are due. As the crisis enters its fourth month, counting March, two new earnings reports indicate that about 60 percent of retailers are paying their rent — with a few very notable exceptions.
Owner of 102 mall-based properties Retail Properties of America, Inc. (RPAI) reported its COVID-19 guidance on Monday (June 1) for April and May. It reported 52.4 percent of April rent collected as of April 30. However, retailers caught up by the end of the month to 60.3 percent in April rent as of May 28. Rent collection for May totaled 52.4 percent.
“With 79 percent of our portfolio square footage open as of May 29 and 53 percent of our properties operating in states that have lifted all retail restrictions, our team is engaged in supporting tenants as they reopen with efforts that include ongoing implementation of curbside pickup, as well as social media campaigns and onsite signage,” said Chief Executive Officer Steven Grimes. “As locality-specific limitations continue to lift, the quality of our assets will amplify the efforts of our team and our tenants as consumers begin resumption of shopping activities.”
RPAI has been focused on rent relief requests that have arisen from pandemic lockdowns and has started to sign lease amendments deferring due dates of “certain” rent payments. The company expects to resolve moist of its relief requests over the next several months.
The numbers were similar for Rockville, Maryland-based Federal Realty Trust, which owns and operates 104 mid-Atlantic retail properties. It reported 54 percent of total May rents have been collected to date, which it says is ahead of pace for April collections. Approximately 57 percent of total April rents have been collected and with 54 percent of its commercial tenants open.
“Openings are expected to continue over the next few weeks as many of our markets begin and continue phased re-openings in June,” the company said.
The numbers square with a slight improvement in industry-wide May rent payments. According to data from Datex Property Solutions, there was a slight percentage increase in rent payments during the first two weeks of May compared to April. Through May 15, only 51.35 percent of retail rent was collected, compared to 48.9 percent in April.
“As a frame of reference, since late fees kick in after the tenth in most leases, this is a pretty good indicator of overall monthly trends, which also explains why March 15th data showed 87.4 percent of total rents collected, and 91.6 percent collected for national tenants,” Mark Sigal, CEO of Datex Property Solutions, told GlobeSt.com. “By the time the stay at home orders kicked in in most of the country in mid-March, most retail rents had been paid.”
There are some high-profile laggards as another month comes due at retail. According to The Wall Street Journal, Deutsche Bank AG, one of Neiman Marcus’ lenders, says “the bankrupt retailer has breached the terms of a $760 million loan, raising concerns about the company’s ability to restructure its business.”
The chain reported that it overvalued inventory backing its asset-based loan by $159 million, Deutsche said in a court filing. “The overvaluation means Neiman is in default, Deutsche said. Deutsche Bank said it has “concerns” about allowing Neiman to continue to have access to its cash unless the luxury retailer replenishes a cash collateral reserve meant to protect the bank and other lenders against losses, according to the bank’s court filings.”