Retailers boost rent payments but Covid surge prompts caution
Chain stores paid 68% of June rent, though recent uptick in cases may mean bad news for landlords for July collections
The amount of rent Burger King paid in June compared to May was a whopper. The fast-food chain forked over 100 percent of what it owed landlords last month, compared to 63 percent the month before. The same went for Dave & Buster’s, where the new motto could be “Eat, Drink, Play…and Pay!” as landlords for the chain also collected all of June rent compared to 67 percent in May.
As states have reopened for business, national chain retailers have steadily paid a higher percentage of the rent they owe. But landlords may see collections fall in July, given that many areas across the country have experienced a recent spike in Covid cases.
In June, national chain retailers paid 68 percent of their rent, according to a report from Datex Property Solutions. That was up from the 58 percent that chains paid in May, according to Datex, which surveyed 141 of the largest retail chain stores across the country. Landlords can thank the widespread reopenings, the federal government’s Paycheck Protection Program loans and rent relief agreements that landlords worked out with their tenants, Datex CEO Mark Sigal noted. The report does indicate which chains have received relief.
The news was not all good. Landlords with clothing stores, gyms and theaters as tenants have seen rent collections remain low. Very low.
JCPenny, which paid 20 percent of rent in May after having declared bankruptcy, did not pay any rent at its stores last month. Justice, Lane Bryant and Century 21 also did not make any payments. It was at least the second month in a row that all three clothing companies failed to make rent payments at their locations, according to Datex.
Those were the only four of the 141 retailers in the Datex report whose landlords did not collect any rent at their locations. Last month, that nonpayment number was at 18.
Other chains continue to suffer. LA Fitness paid just 4 percent, while AMC Theaters paid only 5 percent. AMC has suffered billions of dollars in losses as all of its 600 movie theaters in the U.S. — and 1,000 worldwide — have been closed during the crisis. Early last month, the company said it hoped to reopen by July, but that won’t be the case for its New York locations, and it remains unclear elsewhere given the recent surge of Covid cases.
But one retailer whose rent payments surged in June was Hallmark. It went from paying 21 percent in May to about 74 percent last month.
Supermarkets and drugstores have been among the very few bright spots in retail amid the months-long pandemic, along with some fast-food chains and takeout restaurants.
Hair salons, which for the most part had been shuttered, are beginning to make a comeback as customers rush to tame their quarantine quaffs. Great Clips boosted its rent payments to 84 percent in June from 66 percent in May, while Sport Clips went from making 67 percent of rent to about 78 percent last month. But one of the best known chains, Supercuts, has remained mired in nonpayment, with rent payments having been trimmed down to about 20 percent.
“A lot of that is obviously market-dependent,” Datex CEO Mark Sigal said. “Hair is definitely ground zero of how aggressive a given market is in terms of opening up.”
In several cities reopenings have slowed, with the timeline for indoor dining pushed back — as was the case in New York City — or halted entirely, as with Miami and L.A. All of that could have a spillover effect on retail sales, experts say.
“The big sort of unknown, as you’ve already seen in some of these states that aggressively opened up, they’re now starting to dial back,” Sigal said. “So, it’ll be interesting to see if [retail] categories that saw some lift as more aggressive states were opening up see some challenges.”
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