Taubman Centers telling tenants they expect full payment of rent

[SamSpade]

... while many tenants have been forced to close either by the center management decision or local legal measures.
https://www.sltrib.com/news/2020/03/30/ ... -merchants

[SoleOwnerOfMyName]

So exactly what is Taubman going to do if tenants simply don't have the money to pay the rent and, therefore, don't pay it? Lock them out? Sell whatever fixtures and inventory the tenant hasn't removed prior to the lockout?

Somehow I have a feeling that there will soon be a massive glut of second-hand retail and restaurant fixtures, which means that Taubman won't get very much for them in an auction.

Stand in line at the bankruptcy court and hope for the best?

And then - after taking the above steps - Taubman will be left with an empty storefront.

Do they really think there's going to be much in the way of demand for retail space given the impact this will have had on the economy by the time it is safe for people to once again shop in stores?

If a significant percentage of storefronts in a given Taubman center are empty due to former tenants not reopening, thus resulting in a decline in customer traffic - how much of a value will a location in that center be for the surviving retailers who do manage to reopen?

If a surviving retailer needs to cut back or consolidate stores, how likely is it that a location in a center with significant vacancy rate will survive such a cut verses a location in a rival center that still has decent occupancy and traffic?

Seems to me that the best scenario for Taubman in the long-term would be for as many of its tenants to survive as possible and for those who failed to make monthly rent payments during the shut down to at least resume regular payments once they open back up.

If given a choice - what would you choose? Missing out on a few months rent but having that cash flow come back on an ongoing basis? Or pressuring a tenant for that rent, which they may or may not receive, and, once the tenant has gone out of business, be the proud owner of a storefront that is likely to be vacant for very, very long time, if not forever?

[storewanderer]

Taubman wants its tenants to go get money from business interruption insurance and still pay Taubman. I doubt Taumban is going to get a waiver on its property taxes, security costs, loans, etc.- they are still having to pay all that on dark malls. Sure, maintenance costs are lower without customers going in and out, but a lot of other costs are still there for the mall owner.

I think this is more of a tactic of Taubman seeing who pays and who doesn't. We already know Cheesecake Factory won't be paying, assuming they are a tenant anywhere.

Most small tenants (and evidently some larger ones like Cheesecake Factory) operate on such a tight rope they can't pay anything when they are not generating revenue.

I am guessing most of these leases call for payment of first and last month's rent so Taubman could just take that. Empty storefronts don't really help a mall... so I suspect in the end they will forgive rents to keep tenants there whenever the malls finally open back up again.

[SoleOwnerOfMyName]

Taubman wants its tenants to go get money from business interruption insurance and still pay Taubman. I doubt Taumban is going to get a waiver on its property taxes, security costs, loans, etc.- they are still having to pay all that on dark malls. Sure, maintenance costs are lower without customers going in and out, but a lot of other costs are still there for the mall owner.

I think this is more of a tactic of Taubman seeing who pays and who doesn't. We already know Cheesecake Factory won't be paying, assuming they are a tenant anywhere.

Most small tenants (and evidently some larger ones like Cheesecake Factory) operate on such a tight rope they can't pay anything when they are not generating revenue.

I am guessing most of these leases call for payment of first and last month's rent so Taubman could just take that. Empty storefronts don't really help a mall... so I suspect in the end they will forgive rents to keep tenants there whenever the malls finally open back up again.

Everything said here makes good sense.

But why on earth would they issue such a press release - especially given the point made in the last paragraph? In the end, you can't get from someone money that they don't have. In the end, Taubman is going to be forced to work with tenants if the alternative to doing so is even worse for Taubman.

It seems to me that this sort of press release increases the risk that some of the more marginal tenants who are considering their options might decide to simply throw in the towel rather than invest time, effort and capital into an upcoming struggle that will be unpleasant for everybody. If such a marginal tenant is able to open back up, resume making monthly rent payments and decide to close up shop a year from now rather than today - Taubman is better off in that there will at least be SOME rent payments and perhaps a vacancy down the road will be easier to fill than it will be when people are once again able to safely visit stores.

My thought is that the prudent thing for Taubman is to say nothing in public and simply communicate with each tenant privately on a case-by-case basis. Perhaps demand payment from those who do have business interruption insurance policies that clearly cover this (apparently many do not cover pandemics). With the rest - negotiate the best arrangement that they can.

If I were a company with financially struggling customer base at a time like this - they very first thing I would be doing in work-from-home isolation is proactively reaching out to them to at least preserve the relationship in the long-run.

As for Taubman getting a waiver from property taxes and loans - to the degree that the shut down of the economy lasts, that's probably going to happen in one form or another, orderly or otherwise.

If large numbers of tenants, residential or commercial, simply do not have the money to pay their rent, large numbers of landlords will simply not have enough money to pay their taxes or debt payments. And if large number of homeowners are not able to pay their mortgage payments - that too will implode property tax collection as most residential mortgage payments include escrowed taxes and insurance.

As things currently stand, if an escrowed homeowner fails to pay his mortgage payment, the mortgage servicing company is still on the hook for making the tax payments. If large numbers of homeowners stop paying their mortgage payments the loan servicing companies will quickly become bankrupt. If this lasts, local governments need to be prepared for property tax revenues to simply collapse. There will likely be a very high delinquency rate. Not only that, property taxes are based on the value of the property. If this lasts, real estates values will undoubtedly fall - so the tax bills of those who are able to continue paying will have to be adjusted downward as well. And, of course, this will be occurring right at a time when many local governments have increased expenses as a result of the threat to public safety.

Retailers and restaurants are merely on the front lines. If this continues, nobody is going to be exempt from what they are feeling right now. It will reverberate in countless ways across the entire economy. Local governments will be forced to make massive cuts because people will simply no longer be able to pay the property taxes they pay today and sales taxes will no longer generate the revenue that they do today.

In the short run - everybody's primary concern should be the health and safety of themselves and their loved ones. After that, I think we are all screwed in one respect or another and I don't see how we can avoid that. What we do have more control over is the long-run. And I think the best thing any business can do for the very long run if it is able to hang on long enough for there to be a long-run is do whatever one can to maintain positive relationships with one's customers. The tone of Taubman's public comments is NOT an example of that.