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Retail Rent Collection Has Nearly Returned To Pre-Pandemic Levels

While national chains still face financial woes, there are some signs of recovery within the retail sector — particularly in categories such as gyms and clothing stores.

National retailers paid 86 percent of their September rent, according to the latest Datex Property Solutions report. That’s about 10 percent below what they paid in 2019, but slightly above last month’s 83 percent.

“Month by month, we’ve been digging ourselves out of this hole we found ourselves in in April,” Datex Property Solutions CEO Mark Sigal said.

The major chains included in the survey all have a minimum gross monthly rent of $250,000, or lease 10 or more locations. The report does not account for any rent relief provided to the retailers by their landlords.

Among the categories making a comeback are apparel, where retailers were able to pay 77 percent of rent, and fitness, where retailers paid 65 percent. Those categories have lagged behind in prior reports.

Gold’s Gym paid 53 percent of its September rent, which was a 137 percent increase over what it paid in August. Men’s Wearhouse paid 82 percent of its September rent, a 355 percent increase from what it was able to pay in August, when its parent company filed for bankruptcy.

While the majority of retailers increased rent payments, a few floundered. Regal Cinemas stopped paying rent completely after paying 37 percent of August rent. The chain recently announced that it would temporarily suspend its U.S. operations.

On the whole, movie theaters paid under 10 percent of their September rent, compared to 43 percent in August.

Pier One also dropped 27 percent, from 90 to 66 percent. The home furnishing and decor company announced in May that it would liquidate its assets.

The latest report also includes a breakdown of sales per square foot. Although many retailers have struggled to return to pre-pandemic levels, some are seeing sales surpass that of a normal year. HomeGoods, for example, surged 128 percent from $248 to $564 in that category. Sporting goods stores are also up 52 percent, from $167 to $255.

Additionally, the report includes occupancy costs for each category, nearly all of which have seen increases. Department stores in particular have suffered, with costs rising from nearly 4 percent in 2019 to 17 percent in September — a change of 375 percent.

“Rent ends up eating up your gross margins,” Sigal said. “And so when you bring in occupancy costs, [it] reveals real instances where operators are seeing fundamental changes in their business.”

Even though retailers have been doing better, the coming months will heavily impact rent collections, according to Sigal. The results will be dependent on a few factors: another federal stimulus package, rent relief expiration, potential lockdowns throughout the country and the seasonal impact on outdoor activities.

“We keep turning over the next card, the next card and so far, the cards have been generally better each month than the prior month,” Sigal said. “But there are multiple variables that introduce risk.”


Source:  The Real Deal

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These Big Retailers Stiffed Their Landlords In May

About 40 percent of national retail chains once again skimped on their rent in May, according to the latest monthly report on collection rates.

Among those are 24 Hour Fitness, AMC Theaters and Pier One, all of which have either announced potential bankruptcy or plans to liquidate assets.

Overall, national retailers paid 60.1 percent of rent, a small increase from April’s 56.7 percent collection rent, according to a report from the data firm Datex Property Solutions. Total collections – from both national and local retailers – checked in at 58.56 percent in May, up from 54 percent in April, according to the data.

However, an increase in collections may not be a silver lining. Many retailers have negotiated rent relief with their landlords, which could make the numbers seem higher than they actually are, according to Datex CEO Mark Sigal.

At the end of May 2019, national retail chains were able to pay 96 percent of their rent. Even just two months ago, that figure was at 94 percent.

The plummet in rent collections is largely a consequence of the coronavirus pandemic, which has shuttered stores, in some cases permanently.

Fifteen companies, out of the 131 companies included, have not paid a dime of rent last month. Bed Bath & Beyond, H & M, Century City, AMC Theaters, Regal Cinemas, The Gap and Party City are among those. Seven others have paid very little, including Barnes & Noble and DSW Shoe Warehouse. On Wednesday, The Real Deal first reported that Simon Property Group sued The Gap for $66 million for withholding rent in April, May and June.

“A lot of the growth has been around more lifestyle oriented retail, the kind of retail where there’s a goodness to being present,” Sigal said. “With social distancing, the retailers that most build around that, folks like gyms and yoga studios or movie theaters — the types of operators where people are in the same space and close quarters — are the ones that have been most existentially impacted.”

The report counts major chains as those that have a minimum gross monthly rent of $250,000 or lease 10 or more locations. It is based on verified collections from Datex’s portfolio of clients that report payment information from thousands of U.S. properties.

However, not all companies are on their landlord’s naughty list this month. Unsurprisingly, grocery stores like Giant and Aldi have paid almost all their rent.

Between competitors, companies’ collections differed greatly. PetSmart, according to Datex, paid 89 percent of its collective bill, while Petco paid 42 percent. Hobby Lobby similarly paid 99 percent, while Michael’s trailed behind at 39 percent, per the data.

In part, this may be due to different franchisees or unsuccessful expansions in different areas, according to Sigal.

“This is a tsunami that is unanticipated,” Sigal said. “Within that, you may have heard of this quote, ‘bad companies are destroyed by crises; good companies survive them; great companies are improved by them.’ Retail is that story”

The restaurant sector experienced similar contrasts. McDonalds and Taco Bell, for example, paid the majority of their bills, while Jamba Juice and Five Guys paid less than half of theirs.


Source:  The Real Deal

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