Coronavirus leaves retailers struggling to pay rent
Mall operator Simon Property Group collected 85% of net billed rents
U.S. retailers are still struggling to pay rent in the wake of the COVID-19 pandemic, according to the country’s largest mall operator.
The Indianapolis-based Simon Property Group said its U.S. retail portfolio is showing continued signs of improvement with net billed rents collected during the third quarter through Nov. 6 totaling 85%. That’s up from 72% in the second quarter, or 78% including deferred amounts.
Lower lease income, including unpaid rents and concessions made to tenants, resulted in a $435 million, or $1.10-per-share, hit to third-quarter earnings.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SPG | SIMON PROPERTY GROUP INC. | 181.37 | -2.23 | -1.21% |
“While we've made significant progress in addressing collections, we still have some unresolved amounts with certain larger national tenants who unfortunately are refusing to pay their contractual rent even though they are open and operating,” said CEO David Simon.
Nonessential businesses, including retailers, in March were ordered to temporarily close their stores to help slow the spread of COVID-19.
Simon Property Group tenants, including Gap, skipped payments while their stores were closed. Gap had 412 stores, including Banana Republic and Old Navy locations, in Simon Property Group malls as of April. The two companies have filed countersuits amid the ongoing dispute.
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The mall operator has had to deal with a rash of store closings as bankruptcies have continued to sweep across the retail landscape. Simon Property Group has teamed up with other companies to rescue bankrupt retailers, including J.C. Penney and Brooks Brothers, in order to keep their locations filled.
Mall and premium outlet occupancy was 91.4% at the end of September, down 3.7 percentage points from last year.
Simon Property Group on Monday reported third-quarter profit totaled $145.9 million, down from $544.3 million from a year ago. Revenue fell 25% year-over-year to $1.06 billion.
“Despite COVID-19, we are encouraged by the increases we are seeing in shopper traffic, retailer sales and tenant rent collections across our portfolio,” Simon said.
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The company said base minimum rent per square foot increased by $1.58 to $56.13. Shopper traffic and total sales volume continued to show improvement, off 10% year-over-year.
Shares were down 47% this year through Monday, underperforming the S&P 500’s 9.9% gain.