Commercial Landlords Pinched As Retailers, Theaters, Gyms Skip Rent Payments

As property executives report their quarterly earnings, some landlords are starting to put the squeeze on retailers that have skipped rent payments as a means to survive pandemic-triggered lockdowns.

Although most landlords claim to have worked with tenants amid COVID-19 lockdowns, they are starting to turn up the pressure on businesses that they believe are able to pay.

“We have tenants that pay in Texas and have not paid in New York,” Shane Garrison, chief operating officer of Retail Properties of America, told the Financial Times on Friday (Nov. 6). 

As lockdowns lifted, rent collection from chain stores started improving, but movie theaters and fitness facilities are struggling from a lack of foot traffic, according to financial filings from several retail real estate investment trusts (REITs).

Spirit Realty Capital told FT that it had collected just 12 percent of the rent owed by movie theaters last month. Although cinemas have reopened with limited capacity in most states, the bulk of seats remain empty, partially due to the lack of new releases. 

AMC, often seen as the bellwether for the industry, has deferred about $325 million of its rental payments, with some landlords giving the company over 10 years to catch up. On its recent earnings call, AMC reported a 90 percent drop in revenue, according to MovieWeb. The public company, which is headquartered in Kansas, has almost 400 theaters across the country, including some with full bars and dine-in options.

Weingarten Realty Investors said in October it had collected only 35 percent of rents from movie theaters and 44 percent from health clubs. On the flip side, some 98 percent of footwear retailers paid rent last month, and 96 percent of craft stores paid.

With 27 cinemas in its portfolio, mall owner CBL & Associates was forced into bankruptcy. Pre-pandemic, the company’s rent rolls were $22 million a year.

Over one-third of the malls in the U.S. have movie theaters, the article said.

Brookfield Property Partners, among the largest mall owners in the U.S., reported $135 million in losses on its quarterly earnings call on Friday (Nov. 6). The previous quarter saw losses totaling $1.5 billion, according to Women’s Wear Daily.

According to a recent PYMNTS report, retail lease defaults can have a huge impact on property owners, who have to cover overhead like insurance, maintenance and taxes. Some landlords have said they only have about one month of forgiveness left.