The real estate investment trust swung to a large loss in its latest quarter amid rent deferrals resulting from COVID-19 lockdowns. The role of landlords has changed, executives said on a conference call with analysts, as the weak spots in the retail sector began to buckle.
"We went through it literally tenant by tenant. After conversations with the tenants, and in some cases thorough review of their financial statements, we assessed which ones would survive and which ones wouldn't," said
The company said that most tenants are now operating and have payment plans in place, and it expects rent collection to improve as businesses reopen, after collecting 85 per cent of rent in July. But some "bad debt" is stemming from the fashion sector, which was struggling before the pandemic and has now seen some businesses file for creditor protection, executives told analysts.
"Consumers are going out to shop and most of our tenants are gaining momentum," said Gitlin. "However, the reality is that COVID-19-related business closures will impact these numbers through the balance of 2020."
Chief executive
"This category of tenants is more resilient to changes in economic cycles," said Gitlin, predicting that fashion retailers would fall below eight per cent of its holdings going forward. "There have been a lot of CCAA filings since March. ... there are more restructurings and failures to come."
The company said it had participated in
"About half our space was forced to shut," said Sonshine. "Basically the entire company, including myself and Jonathan, we have turned into rent collectors. I think we have been successful in keeping the relationships."
Gitlin says that the company is hoping to benefit from long-term sustainability of businesses. But after dedicating more than two months and two dozen workers just to time-intensive CECRA applications,
"This has undoubtedly been the most unusual quarter in the 26 years I have been CEO of
"But it introduced a whole new issue into being a landlord: a time when some tenants feel they ought not be required to pay rent, as opposed to traditionally not being able to."
The company posted a net loss of
Funds from operations were slightly softer than analyst expectations. Per unit, funds from operations hit
Still,
"While the actual rent collection results are, I believe, quite satisfactory given the situation, we are certainly not satisfied with the (funds from operations) for this quarter," said Sonshine.
Despite soft quarterly results, the company also got a
"I would like to differ from all the pundits who currently predict not only the death of retail but the death of the office as we know it," said Sonshine.
"Part of what we are doing is being driven by retailers and existing technologies. We are not becoming a technology company — we are looking for partners in this — but we have the space and locations to make a difference in the logistical side of the e-commerce business, and that is going to be one of our many focuses in the next couple of years."
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