Retail rent negotiations get messy with $20bn due

Bloomberg

Retailers and landlords are locked in an awkward dance as April rent comes due.
Major chains including Mattress Firm and Subway have told landlords they will postpone or slash payments in coming months. Mall operators say they expect to be paid. Best Buy, meanwhile, plans to pay rent, with the possible exception of locations it was forced to close.
The situation is messy, in large part because no one knows when it will end. Cash-strapped retailers are stuck with lease obligations, while landlords have to pay their lenders, who in turn are looking to the federal government for help. A lot’s at stake: US retail landlords collect more than $20 billion in rent in a typical month, according to data from CoStar Group Inc.
“It’s three-dimensional chess,” said Tom Mullaney, a managing director in restructuring at Jones Lang LaSalle Inc, said. “The battlefield is foggy.”
With stores shuttered around the US, struggling retail chains and small businesses are laying off tens of thousands of workers and trying to figure out if they can make rent as the coronavirus outbreak batters the economy. Landlords are expecting missed payments, while also trying to assess whether their tenants are actually in trouble or just using the crisis to get a deal on rent.
The federal stimulus bill is expected to provide some relief, both for tenants and owners, but it will take time to get the program up and running. Even then, it’s not clear the money will be enough to keep retailers afloat with their stores dark.
“All the money coming into the system from the stimulus will be good, but it won’t be enough,” said Eric Anton, an associated broker at Marcus & Millichap.
“There’s going to be real losers and pain. There’s already been a lot of pain and it’s only been two weeks. Six more weeks will only bring more pain, lots of hard negotiations.”
Anne Mahlum, founder and chief executive officer of the Washington-based fitness chain Solidcore, recently shut down 72 studios and laid off most of her staff. She sent letters to her landlords asking for rent abatement. So far, only a few have agreed. She owes more than $600,000 in rent for April.
“The majority of them are at least offering deferment, but some have said rent is still due, which is ludicrous,” Mahlum said. “Even deferment doesn’t help. We’re just kicking the financial can down the road.”
Landlords are getting flooded with requests from frantic tenants looking for rent relief.