Simon Property Group to reopen 49 malls while some retailer ask for rent relief
Industries of all types have had very little luck escaping the negative impact that the COVID-19 pandemic has caused. It’s not just smaller businesses feeling the pinch either—top office landlords in New York City have fallen victim to rent defaults, according to The Wall Street Journal.
Empire State Realty Trust, the owner of the Empire State Building and 13 additional commercial properties throughout the New York region reported it collected only 73 percent of office rents and 46 percent of retail rents last month. Meanwhile, SL Green Realty Corp., New York’s largest office-building landlord in terms of office space owned, is looking to make up ground after its deal to sell the former New York Daily News headquarters for $815 million fell through in March. SL Green is considering selling its noncore properties and has put hundreds of millions of dollars worth of debt on the market at a reduced price.
SL Green and Empire State’s recent woes are the most recent indicator that COVID-19 has hurt the largest commercial office market in the U.S. While SL Green reported it collected 90 percent of April office rents, it received rent checks from less than 65 percent of its retail tenants. Meanwhile, SL Green’s shares have had the biggest drop since February 21, 46 percent, of any U.S. real estate investment trust, according to Green Street Advisors, The Wall Street Journal reports.
“There’s obviously a lot of uncertainty surrounding rental payments over the next few months,” SL Green President Andrew Mathias said.
Retailers seek pandemic relief
Perhaps it should not be too surprising that SL Green and Empire State have seen a drop off in retailer rent checks as many tenants want to rework their leases to include pandemic escape clauses, according to industry rumors. Not surprisingly, landlords have opposed these measures. Most retail leases don’t allow, or at least limit, a tenant’s ability to claim rent relief because their business suffered an interruption. Tenant lawyers are now asking such clauses are included in lease agreements going forward.
“If I’m representing a tenant, I’m going to ask for a clause that says the tenant doesn’t have to pay rent if the government orders a shutdown due to a health crisis,” Ross Yustein, chair of law firm Kleinberg Kaplan’s real estate group told The Wall Street Journal.
Landlords have said they cannot offer tenant relief because they are still obligated to pay their mortgage, tax obligations, property insurance as well as maintenance costs.
“I don’t think many landlords are sitting on frothy balance sheets to fund their tenants,” Mark Sigal, chief executive officer of Datex Property Solutions, a real-estate data firm that tracks rent collection on thousands of properties said recently.
Some commercial landlords have said they might be open to shorter-term rent deferrals if another shutdown happens, however. The potential compromise comes as more retailers may end up filing for bankruptcy protection—plus some tenants have already said they are not paying their rent this month.
“I am prepared to rewrite leases,” Eastbank Principal Philippe Lanier said. “I am prepared to grant rent relief, rent abatement, if that’s what’s needed, if that’s the only way forward. I will use every tool that I can to make sure the tenant reopens.”
Simon Property to reopen 49 malls
All is not lost for retailers during the COVID-19 pandemic—at least not for retailers in Simon Property Group malls. The U.S.’s largest shopping mall owner plans to reopen 49 malls and outlet centers in states that are reducing their stay-at-home orders, sources said. The malls will start with reduced hours and offer free masks to shoppers.
Simon malls and outlet centers in Georgia, Texas, Oklahoma, South Carolina, Tennessee and Indiana were scheduled to open up later this month. The company plans to increase sanitization methods, including high-efficiency particulate air (HEPA) filters that airplanes use and offer infrared temperature testing to customers. Meanwhile, Simone employees will wear masks, disinfect common areas regularly such as escalator handrails and doorknobs, and be checked for body temperature spikes every day, according to CBS News.
“Employees with a fever or cold and flu-like symptoms such as a cough, sore throat, runny nose or body aches are required to stay home,” a memo Simon sent to retailers said.