Struggling Retailers Owe $52 Billion in Overdue Rents
The comments below are an edited and abridged synopsis of an article by Tyler Durden
Covid-19, with its temporary and permanent store closures, social distancing requirements, e-commerce boom, and supply chain disruption, has fueled uncertainty among US retailers. Many find themselves in a $52-billion hole.
Restaurants, gyms and other businesses have accumulated huge rent payments that have been deferred for months. Landlords are demanding that outstanding balances be paid, and this could drive some retailers into bankruptcy.
The problem with overdue rents, totaling $52 billion as of November, is that retail sales growth in October slumped and is expected to wane into year-end.
Furthermore, Covid-19 cases are exponentially increasing in almost every US state. Local governments across the country are reimposing social distancing measures that will kill retail sales and increase the threat of a double-dip recession.
The rent collected from retailers rose from 54% at the end of April to 86% this month. Only 79% of rent due this month for malls was collected.
From Signet Jewelers Ltd. to Red Robin Gourmet Burgers Inc. to Bed Bath and Beyond, Bloomberg has tallied the retailers who have deferred rent payments. Their unpaid rents total in the tens of millions of dollars per company. With slumping retail sales and a virus pandemic that continues to rage, how will these retailers ever pay back past rents?
Even though collections are improving at high-quality malls, Simon Property Group Inc. only collected 85% of rents in the third quarter, up from 72% in the previous quarter. Brookfield Property Partners LP said it collected 75% of rents from mall tenants over the same quarter.
While the brick-and-mortar retail apocalypse was already a problem for the US economy ahead of the pandemic (thanks to Amazon and the e-commerce boom), Covid-19 continues to complicate the outlook for retailers that may extend the bankruptcy wave well into 2021.