Dive Brief:

• Mall operators have put numbers to the stresses of COVID-19 on the second quarter, with the ensuing mass closures, negotiations over rent and accelerating retail bankruptcies.
• Simon Property Group CEO David Simon said his company took a $215 million hit during the quarter from rent abatements and write-offs on bankrupt retailers, according to a Seeking Alpha transcript.
• For Q2 Taubman Centers logged $32.6 million in uncollectible rent it attributed to tenant bankruptcies and nonpayment during mall closures. Another mall landlord, Washington Prime Group, said that it collected just 44% of owed rent during the quarter while more than 25% of Q2 rent it deemed uncollectible because of bankruptcies or pandemic-related lease modifications.

Dive Insight:

Among the numbers reported by REITs this week, for perhaps the most tumultuous quarter the industry has experienced in modern memory, here's a stunner: 10,500. That's how many total shopping days Simon lost across its portfolio during Q2. 

And yet the company managed to post positive income (to the tune of $254.2 million) in Q2, which is more than a lot of the retailers forced to shut down during the COVID-19 closures can say. Nor did every REIT eek out a profit. Taubman reported a net loss of $41.8 million, down from positive net income of $16.9 million last year. Washington Prime, Macerich and PREIT all also either swung to a loss or expanded their loss in Q2 compared to last year. 

None of this comes as a surprise given the upheaval of the quarter. As Jefferies analysts put it in an emailed note, "Unpaid rents, abatements and retailer [bankruptcies] hurt 2Q earnings predictably." The analysts estimated that average base rent per square foot has dropped 5.9% while leased space has declined by 100 basis points to 93.8% as major retailers close hundreds of stores either or out of bankruptcy. 

As with retailers, the blow to mall landlords has hit the weaker players hardest. Mall operators, of course, have their own bills to pay, from facility staff to mortgage payments. CBL Properties teetered on the brink of bankruptcy this summer after missing debt payments on its bonds. However, the company ultimately made the payments and its CEO has said it's been having "constructive discussions with our lenders." 

Much of the trouble across the market stems directly from the spring store and mall closures. With the largest sales channel closed off to legacy retailers, they did everything they could to raise and preserve cash. Which means they spread the pain around — to their employees, vendors, investors and landlords. Many of the negotiations over rent took place behind closed doors, though some have been made public, in lawsuits and bankruptcy filings. 

Nor is the jockeying over rent over. "Well, as you might imagine we're in active negotiations with all of our retailers," Simon told analysts this week. He added that the company has amended more than 9,000 leases. 

The health of retailers is key to landlords performance going forward. To that end, Simon said that by June, sales volumes of its tenants had reached 80% of their volumes of the year-ago period, while the vast majority — 91% — of all of its tenants were currently open and operating. Taubman CEO Robert Taubman said rent collection has steadily improved as retailers have reopened their stores.