Struggling Retailers Owe $52 Billion In Overdue Rents

 The virus pandemic - with its temporary and permanent store closures, strict social distancing requirements, e-commerce boom, and supply chain disruption - since March has fueled uncertainty among US retailers as many find themselves in a $52 billion hole.

Bloomberg, citing new data via CoStar Group Inc., outlines how restaurants, gyms, and other businesses have accumulated insurmountable rent payments that have been deferred for months. This has resulted in landlords demanding outstanding balances be immediately paid, could drive some retailers into bankruptcy.

"You're going to have big bubbles that are going to be hitting next year or even in the fourth quarter," said Andy Graiser, co-president of A&G Real Estate Partners, an advisory firm. "I'm not sure if they are going to be able to make those payments in addition to their existing rent."

The problem with overdue rents, totaling $52 billion as of November, is that retail sales growth in October slumped and is expected to wane into year-end. 

Furthermore, coronavirus cases are exponentially increasing in almost every US state. Local governments across the country are reimposing strict social distancing measures that will stymie retail sales and increase the threat of a double dip recession. 

CoStar reveals the amount of rent collected from retailers rose from 54% at the end of April to 86% this month. Only 79% of rent due this month for malls was collected.

"It's going to take a period of years, not months, to get through this," said Michael Hirschfeld, vice chairman at JLL, a real estate services firm.

From Signet Jewelers Ltd. to Red Robin Gourmet Burgers Inc. to Bed Bath and Beyond, Bloomberg lists the major retailers who have deferred rent payments. Their unpaid rents total in the tens of millions of dollars per company - the question, with slumping retail sales and a virus pandemic that continues to rage - how will these retailers ever pay back past rents?

Signet Jewelers Ltd., for one, deferred about $78 million of its rent payments, according to a September quarterly filing. In its most recent quarterly filing, Bed Bath & Beyond Inc. said it's held back $50.6 million in rent payments and is in negotiations with landlords, while Francesca's Holdings Corp. has said it owed $14.6 million in deferred rents and related costs as of Aug. 1. The women's clothing chain has since said it plans to shutter about 140 locations by the end of January and that it's in danger of financial collapse.

Red Robin Gourmet Burgers Inc., meanwhile, said that it's received default notices from some landlords after it stopped making full payments in April. Chief Financial Officer Lynn Schweinfurth told investors on a Nov. 5 call that the restaurant chain had negotiated amendments for about half of its leases by the end of its third quarter and continues in talks for the rest.

Many of these unpaid bills won't go away, but are instead being pushed into next year. Signet said it plans to pay back its overdue rent by the middle of next year, while Francesca's plans to repay the amount over the course of next year, it said in a quarterly filing in September, and is asking landlords for more concessions.

Representatives for Bed Bath and Beyond, Francesca's, and Red Robin didn't immediately respond to requests for comment. A representative for Signet didn't have a comment beyond recent filings. -Bloomberg 

Earlier this month, deferred rents and a tidal wave of tenants exiting leases helped two mall REITs, Pennsylvania Real Estate Investment Trust and CBL & Associates Properties file for Chapter 11 protection - together the two REITs account for 87 million square feet of real estate across the US. 

Even though collections are improving at high-quality malls - mall giant Simon Property Group Inc. only collected 85% of rents in the third quarter, up from 72% in the previous quarter. Brookfield Property Partners LP said it collected 75% of rents from mall tenants over the same quarter. 

Jay Indyke, a lawyer who chairs Cooley LLP's restructuring practice, said landlords and lenders are willing to make accommodations out of court to resolve overdue rent payments because of the recent news of a promising vaccine. 

There are certainly some players that are willing to at least convert some of their debt to equity," Indyk said.

While the brick and mortar retail "apocalypse" was already a problem for the US economy ahead of the virus pandemic thanks to the destructive forces of Amazon and the e-commerce boom, the pandemic continues to complicate the outlook for retailers that may extend the bankruptcy wave well into 2021. 

https://www.zerohedge.com/markets/struggling-retailers-owe-52-billion-overdue-rents

Existing home sales unexpectedly jump in Oct., wiping out spring losses

 

• October Existing Home Sales: +4.3% to 6.85M vs. 6.47M consensus, 6.57M previous (revised from 6.54M).
• That's up for a fifth straight month.
• Median existing-home price was $313K, almost 16% higher than October 2019.
• Total housing inventory shrank to 1.42M, enough to last 2.5  months, a record low, at the current sales pace.
• More than 7 in 10 homes sold in October were on the market for less than a month.
• NAR Chief Economist Lawrence Yun forecasts existing-home sales will rise by 10% in 2021.
• "The surge in sales in recent months has now offset the spring market losses," he said. "With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3% in 2021, I expect the market's growth to continue into 2021."
• https://seekingalpha.com/news/3637967-existing-home-sales-unexpectedly-jump-in-october-wiping-out-spring-losses

Developers await ruling on ‘too-tall’ Upper West Side NYC tower

200 Amsterdam Ave.

Robert Miller

A day of destiny is at hand for 200 Amsterdam Ave., the nearly completed, 52-story condo tower at West 71st Street which a judge ordered to be half torn-down. City developers are on pins and needles, because if an appeals court doesn’t reverse the ruling, it could stymie other buildings under construction — and even impact some famous existing ones.

On Wednesday, a four-judge panel of the state Appellate Division will take up the case by developers SJP Properties, Mitsui Fusodan and the city’s Law Department seeking to overturn Judge Franc Perry’s February decision that 20 floors be taken down because the tower supposedly violated zoning rules.

The Municipal Art Society and Upper West Side activists had sued to chop down the project, accusing the developers of using “deceptive practices” and “violating city regulations." 

But project proponents said that the court was improperly trying to retroactively reverse long-standing Department of Buildings rules.

The developers argued that they had valid permits for all 52 stories from the DOB and the Bureau of Standards and Appeals. City Hall joined in the appeal, saying the approvals were based on long-standing precedents. Some apartment-sale contracts were already signed but more were put on hold pending the legal outcome.

The approvals for the $700 million project (not including site-acquisition costs) were based on DOB interpretation of an arcane, 42-year-old zoning policy permitting “partial” and “whole” tax lots to be combined in order to create a larger footprint for new construction.

The DOB over decades approved dozens of other tax-lot “loopholes,” as critics call them — including for the MetLife (formerly Pan Am) tower on Park Avenue.

Perry said the city should yank 200 Amsterdam’s permits because the DOB nixed such tax-lot combinations in 2018. But the DOB and BSA gave the developers the green light a year prior to that. The agencies, moreover, said that forbidding such combinations was merely a proposal at the time and not yet signed into law.

A project spokesman said, “If a single judge can unilaterally cast aside expert agencies’ reading of a complex technical statute, it effectively renders city agencies powerless and creates uncertainty and risk for anyone trying to do business here.”

https://nypost.com/2020/11/15/developers-await-ruling-on-height-of-200-amsterdam-avenue-tower/

Airbnb's IPO filing reveals Q3 revenue drop, $219M profit

• Airbnb (AIRB) reveals its IPO prospectus with the expected Y/Y Q3 decline in revenue and a profit, despite the pandemic's pressures.
• The company plans to trade on the Nasdaq under the "ABNB" ticker. Airbnb says it is seeking up to $1B in the listing, which could be a placeholder figure. Share count and pricing will come in a later update.
• Revenue was up 32% Y/Y to $4.8B in 2019. For the first nine months of 2020, revenue dropped 32% to $2.5B. Net loss for 2019 was $674M and totaled $697M for the first nine months of this year.
• Last quarter, revenue totaled $1.34B (-19% Y/Y) with net income of $219M.
• Nights and experience bookings increased 31% in 2019 to 250.3M. In the nine months ending September 30, 2020, bookings 41% to 146.9M.
• Gross booking value (includes bookings, host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations) rose 29% in 2019 to nearly $38B. In the first nine months of 2020, GBV dropped 39% to nearly $18B.
• Adjusted EBITDA dropped from $170.6M in 2018 to a loss of $253.3M in 2019. For the nine month periods, Airbnb reports positive $23.1M in 2019 anda $230.2M loss this year.
• The listing includes Class A shares, but the company has four classes total. Class A shares have one vote each, Class B have 20, Class C carry zero votes, and Class H have no votes but can convert to Class A shares
• https://seekingalpha.com/news/3636847-airbnbs-ipo-filing-reveals-q3-revenue-drop-219m-profit
  

Walmart repurposing warehouses to ship online orders faster

Walmart is repurposing some of its massive distribution warehouses to help it deliver online orders faster ahead of the holiday shopping season.

The nation’s biggest retailer — which is gearing up for another battle against Amazon for holiday web sales — said it will set up “pop-up” e-commerce distribution centers within 42 of its regional warehouses, which usually ship large pallets of goods to Walmart stores.

The move will help the Arkansas-based chain send out packages more quickly without taking the time to build new warehouses during a holiday shopping season that’s expected to see increased demand for online shopping because of the coronavirus pandemic, according to Greg Smith, executive vice president of supply chain at Walmart US.

“The flexibility to pop-up [a distribution center] anytime our supply chain network experiences peak demand allows us to deliver for our customers when they need us the most,” Smith said in a Thursday news release.

The pop-up facilities will ship as much as 30 percent of Walmart’s online order volume during the holidays, according to The Wall Street Journal. They'll be staffed by existing workers at the regional warehouses along with some of the more than 20,000 seasonal workers Walmart is hiring for its dedicated e-commerce fulfillment centers, the paper reported.

Walmart has put a greater emphasis on online shopping for the holidays by spreading its Black Friday discounts throughout November and offering the deals on its website before they’re available in stores.

https://nypost.com/2020/11/13/walmart-repurposing-warehouses-to-ship-online-orders-faster/

 

SL Green Takes Over 5th Ave Properties From Jeff Sutton, Thor Equities

Google Maps

590 Fifth Ave.

SL Green has picked up two Fifth Avenue retail properties on which it served as a mezzanine lender as rents decline along the famous retail block. 

The real estate investment trust acquired the entity that owns 590 Fifth Ave. in Midtown from Thor Equities. It moved to foreclose on the property, which is valued at $84.5M, in August after Thor defaulted on its loan, The Real Deal reported at the time.

SL Green also acquired the leasehold on 85 Fifth Ave. in the Flatiron District from Brookfield Properties and Jeff Sutton’s Wharton Properties, according to property transfer tax filings. 

A source familiar with the 590 Fifth Ave. acquisition told Bisnow the REIT paid $110M for an equity stake in the property, $20M more than it was purchased for in 2013. Bisnow wasn't able to confirm the sale price. Spokespeople for SL Green and Thor Equities declined to comment.

Property records over the past few months show that SL Green gained control of the LLC of the debtor, Thor Equities LLC, and the lender — previously held by the Midland Life Insurance Co. It then assigned control of the mortgage, worth $83M, to Wells Fargo. 

Wells Fargo and SL Green agreed that the mortgage would secure a credit agreement made in November 2017, according to an agreement recorded Monday. 

SL Green also acquired the retail leasehold at 85 Fifth Ave. for $59M, according to property transfer tax filings. Wharton Properties and General Growth Properties (later acquired by Brookfield) purchased the same leasehold for $80M in 2015, property transfer tax filing records show.

PincusCo. Media first reported the transactions. Wharton Properties, Brookfield Properties and Wells Fargo didn't respond to requests for comment. 

Both Jeff Sutton and Thor Equities founder Joe Sitt were responsible for propelling Fifth Avenue retail rents to become the priciest in the city pre-pandemic. 

Retail rents along the strip dropped 5% year-over-year in June, and 25% since June of 2018 as foot traffic from tourist dwindles amid the pandemic. The area continued to see rent drops in Q3. 

The 19-story 590 Fifth Ave. contains 100K SF of office and retail space. AT&T is the retail tenant on the ground floor. Nearly 25K SF of the building is available to rent, according to Thor's website.

Coworking company Knotel also inked a 12K SF office lease at the location in May 2019. It was sued by another landlord for millions in alleged unpaid rent this summer, and it is reportedly looking to slash 60% of its real estate portfolio.

85 Fifth Ave., located in Union Square, is 13 stories. It is home to clothing store Anthropologie, whose parent company, Urban Outfitters, reported a 16.5% year-over-year decline in sales in Q3, according to The Wall Street Journal. 

https://www.bisnow.com/new-york/news/retail/sl-green-picks-up-two-fifth-avenue-retail-properties-from-jeff-sutton-thor-equities-106699