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Landlords, Companies Clash Over Rent Payments During Coronavirus

April 14, 2020

Mall and shopping-center owners are compiling a blacklist of large, usually financially stable tenants that haven’t paid their April rent.

Big companies that have failed to pay all or some of this month’s rent include the fitness chain Equinox Holdings Inc., Dick’s Sporting Goods Inc. and discount fashion retailer Burlington Stores Inc.

Petco Animal Supplies Inc., French luxury conglomerate LVMH Moët Hennessy Louis Vuitton SE, lingerie maker Victoria’s Secret and office-supply chain Staples Inc. also fall into this category, according to landlords.

Many landlords said they are willing to work with smaller local businesses that have limited cash and have experienced collapsing revenue with customers sheltering in place.

But some property owners are taking a more confrontational approach with larger delinquent tenants that landlords believe have cash or access to capital but have failed to pay their rent anyway. Once tenants exceed the typically 10- to 15-day grace period for overdue rent, some property owners said they will declare the tenants in default.

“We think that it’s their duty to pay April rent,” said Conor Flynn, chief executive officer of Kimco Realty Corp., an open-air, grocery-anchored shopping center landlord. “The customer base is going to recognize who the bad actors are.” Mr. Flynn declined to name these tenants.

However, landlords with smaller portfolios could be hesitant to take action. Some say they have little stomach for a protracted legal fight. If the retailer is crucial to attracting mall traffic, the tenant may recognize it holds the upper hand and dare the landlord to take action.

In many states including Ohio, Wisconsin and California, governors have also issued orders making it harder for landlords to terminate a tenancy for failing to pay rent.

Mall landlords with a higher concentration of nonessential tenants have collected around 10% to 25% of rents, while centers with more essential tenants such as grocers and pharmacies have collected 50% to 60% of the rent, according to estimates from Marcus & Millichap, a commercial real estate services and consulting firm.

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