From that same article:
RETAIL REIT LANDLORDS
SIMON PROPERTY GROUP
In its Jan. 30 year-end conference call with analysts, Simon Property Group revealed how it's dealing with tenants working to renegotiate leases. CEO David Simon said the mall REIT's occupancy has been negatively impacted by "negotiated early store closings" as well as "temporary occupancy reductions" at several properties.
Simon said that "dealing with tenants" is a primary focus for the company right now. "where we have a tenant that we believe is in extreme financial distress, we’re trying to work with them to come up with a mutually acceptable basis for maintaining their occupancy in the portfolio." In terms of tenants working to negotiate square footage reductions, Simon said he is seeing "very little of that" in the company's best malls.
"In some instances we are doing short-term one year renewals because frankly we want to keep a tenant in occupancy," said president and COO, Rick Sokolov, adding that it's in the landlords favor to deal with renewals in another year because, "we believe we’re going to have a better pricing market in 2010 than in 2009. We do not want to tie in for longer term rent that we believe is not optimal for that space." <denial!>
Simon said that, being the country's largest mall REIT, Simon is in a position to "carve a win-win" with tenants when it comes to re-negotiation. "It's more important for their results then it is for ours. We produce a lot more sales and we’re a lot more important to their success then they are to ours. The best way to describe it is that generally the small shop retailer does about 20% of their sales in our portfolio," but the biggest tenant in Simon's portfolio only counts for 2% of it's total rental revenue, explained Simon.
CBL & ASSOCIATES
During CBL & Associates' Feb. 5th quarterly conference call, president Stephen Lebovitz said the company hasn't seen tenants that signed leases before the holiday season looking to renegotiate leases now. "We're talking to tenants when the leases come up for renewal, but if something is signed, it's signed. Everyone lives with that," he stated.
John Foy, vice chairman and CFO, said that tenants' re-negotiation moves are understandable in this environment, but explained that any relief granted to tenants has a trickle down effect. "Every tenant basically is trying to pressure and squeeze everything out of it so that they can hold their margins. Likewise, we in turn are doing the same thing with our vendors and our ability to cut back in those areas, not only with utility companies, but insurance premiums etcetera. So, I think everyone is on the table in this environment and everyone understands and everyone is cooperating and working together to try to make the best of a difficult situation. I do not think it is just the retailers pressing down on the landlords, I think it is the landlords pressing down on all of their vendors as well," Foy said.
Lebovitz also addressed issues arising from tenants invoking co-tenancy clauses. "The malls typically have cushion in terms of any anchor closings, and we are not facing anything there that concerns us at this point. In a couple of the associated centers we have, between Linens-N-Things and Circuit City, we have a couple of centers with bare anchors...we are dealing with co-tenancy issues there." Lebovitz explained that typically, if a mall has three anchors and two go dark "then that's a problem, but if it has five, and two go dark, then we are okay."
REGENCY CENTERS
Mary Lou Fiala, president and COO of Regency Centers, said in the company's Feb. 5th quarterly conference call, "Regency is receiving requests for rental assistance from a great number of tenants. There is a few people that we've made exceptions for." The decision is made tenant-by-tenant, explained Fiala, adding that Regency requests three years of sales information, income statements, and credit applications from tenants, as well as a recovery plan.
In the case that rent reduction is granted, Fiala said, "any reduced rent is deferred and not forgiven." She said that only 37 of Regency's 9,000 tenants had been granted such reductions in the last month, "and in 28 of these cases, we were able to extend term of the lease."
KIMCO REALTY CORPORATION
David Lukes, EVP at Kimco Realty Corp., said in the company's Feb. 5th quarterly conference call, "We are preparing for a continued difficult time for our tenants and are forecasting continued weakness and uncertainty. The ability of a tenant to prosper is partly due to their cost of occupying their real estate."
"We have a detailed concession request package that we've developed that's required…and are using occupancy costs, financial help and sales history to separate the tenants that truly need help from those that are merely following the saying, 'you don't get it if you don't ask," explained Lukes. To date, the number of requests Kimco has granted are "minimal" compared to the number of requests it has received, said Lukes
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