Retailers, consumers and prices
How do shopping centers spell rent relief? N-O.
In an aggressive push to lower costs, many U.S. chain stores are asking their mall-owning landlords for a break on the rent. But they are rarely getting it – at least not from Developers Diversified Realty Trust, which owns more than 700 shopping centers, typically anchored by big box and discount department stores.
The real estate investment trust reported better-than-expected quarterly results on Friday, and said it executed leases for nearly 2 million square feet in the latest quarter.
On a conference call with analysts, its president and chief operating officer, Daniel Hurwitz, said when it comes to rent reduction or deferrals, some retailers may be selling a bill of goods.
“There is a disconnect between tenants and landlords regarding the number of requests that are actually granted,” he said.
To date, Developers Diversified has received 672 requests for rent relief, rent abatement and rent referrals, with 78 percent of those requests coming from local tenants and the remainder from national tenants.
“Many retailers and their advisers will tell you they are successful in renegotiating the lease terms; however to date, we have granted only 20 rent relief requests, or less than 3% of the total requests received,” Hurwitz said. “The typical concession is for a period of one year and it is generally in the form of a deferred payment.”
Still, despite the anemic retail environment, Hurwitz said his leasing team had a strong quarter in terms of deal volume and square footage, indicating that retailers continue to look at growth opportunities but only if the rent is right.
(Additional reporting by Ilaina Jonas)