Despite all the talk about the V-shaped economic recovery, which, as one would expect, always tends to the performance of the stock market, which behaves as if there has never been a crown crisis, and now it is completely disconnected from all the basic principles – few were ready to turn to the sobering fact that about 30% of Americans could not pay for housing in June,
However, the situation is even more difficult in the commercial real estate sector, where defaults are growing and where the latest data on remittances indicates that the June update of CMBS will be absolutely disastrous. One of the companies directly affected by the ongoing collapse in the CRE is the Canadian investment / real estate conglomerate Brookfield Asset Management, which as FT reportscurrently harassing small retailers who pay thousands of dollars to rent outlets that were forced to close during the coronavirus pandemic, However, even when a Canadian investment group skips mortgage payments and asks lenders for patience.
Now that the horror of widespread memories is disappearing, some store owners who rent kiosks and small shops in Brookfield malls have to pay rents for April and May, the period during which the facilities were mostly closed, according to the Financial Times. adding that “several tenants who apologized for the lease described the request for extensive financial information, including their personal tax returns for the past two years.”
Merchants who requested anonymity for fear of countering an influential landlord said Brookfield ultimately refused to cancel payments, although he offered to give them money by the end of 2021.
Separately, a group of half a dozen tenants signed a joint request for help and presented it to managers at a shopping center in the Canadian group, although they received a less warm welcome: “I will not touch on the substance of your“ petition ”“ A lawyer from Brookfield wrote, adding that the reservations The confidentiality recorded in the shopkeeper’s lease means that negotiating with each other about the contracts “can be considered a violation of your agreement with Brookfield.”
This answer is unlikely to provide the basis for a healthy, long-term relationship between the landlord and his clients. Indeed, three quarters of Brookfield tenants requested a change in their lease, and the group said it “actively interacts with everyone [of them] ,,, prioritiz[ing] small businesses, given their scale and immediate cash flow requirements. ”
“We are now focused on national tenants,” Brookfield added, saying he hoped to conclude the discussion by September. “We also have an active dialogue with our creditors, given the subsequent impact this situation has had on our cash flow.”
This means that a handful of tenants will be allowed to push the rent for a month, maybe two, a maximum, but everyone else will be forced to find the money. What for? Because Brookfield himself is now on the edge.
According to the message “According to reports sent out to credit market participants who bought the debt, “Brookfield demanded abstinence from lenders who owed payments on a dozen of its shopping centers.” In other cases, Brookfield malls were unable to repay the mortgages that were repaid.
At malls where loan repayments expire this year, “we were in front of all our lenders and just requested a 12-month extension,” Brookfield Properties CFO Brian Davis told an investor last month.
As of last week, creditors of four shopping centers have not decided whether to satisfy requests, the reports said.
Brookfield’s simultaneous discussions with his tenants — where he requires payment now — and with lenders — where he doesn’t need to pay endlessly — underline how the forced shutdown of most of the economy has plunged shopping mall operators and demonstrate how unreliable the ongoing deterioration in cash flows is. affects all players in the same chain.
Meanwhile, as we discussed earlier this monthAccording to executives of real estate companies, they sympathize with the plight of retailers, many of whom struggled even before government mandates closed their stores, while shopping center operators depend on rental payments to pay off loans.
Brookfield last week became the second major landlord to sue Gap clothing seller in an unpaid rent dispute shortly after Simon did the same, Among the major retailers who admitted to looking for rent from landlords are Bed Bath & Beyond, Levi Strauss and Urban Outfitters. Several networks are asking operators of shopping centers to refuse to rent for periods when their properties were closed. Ultimately, many retail stores will be forced to declare bankruptcy, which will lead to much greater pain for shopping centers and is the reason that, unlike stocks, various CMBSs saw only a modest rebound after March lows.