- Many retailers and restaurant chains calling for rent waivers/reductions beginning in April due to COVID-19 business closures, restrictions and quarantines
- Some of the chains include big names such as Subway and Mattress Firm
The next phase of coronavirus fall-out may be imminent as large-scale retail and restaurant chains are calling for rent waivers (not deferments) and/or large rent reductions after closing their operations to slow the spread of COVID-19.
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Such rent waivers/rent reductions via lease amendments would start in April. If such lease amendments aren’t granted by landlords, some retailers are saying they’ll just withhold the rent altogether.
Stakes are high here, as in the billions of dollars, as landlords cannot afford to not collect rent for any period of time…many property owners have a ton of debt themselves.
The ripple effects could be enormous here as so far, coronavirus relief packages are not addressing large scale rent relief. The Federal Reserve MAY grant landlords mortgage payment deferrals. And the courts MAY grant retailers to declare a contract clause that covers highly unusual events (called a “force Majeure”, but if they do, would the courts then grant the landlords the same “courtesy” so they wouldn’t have to pay their insurers?
According to Vince Tibone with Green Street Advisors, “The court system is just going to get flooded with a million of these disputes between tenants and landlords. If the government doesn’t step in in any form or fashion, it could get ugly. They need to respond quickly.”
Retailers and landlords of all sizes are in ongoing negotiations with each other in areas already or soon to-be hit by the virus. From Mattress Firms’ some 2,400 store locations to Subway’s some 20,000 locations to Hennes & Mauritz AB’s some 5,000 store locations and to smaller retailers, there is much to be discussed concerning rent payments, deferrals, waivers, what have you as retailers and landlords may be forced into bankruptcy.
Thanks to Bloomberg’s Laurent Coleman-Lochner, Natalie Wong and Edward Ludlow.