Safety is the top concern at CBL malls as customers return, the REIT says

All but two of the 68 malls CBL Properties owns or manages have reopened, the company announced yesterday. Those 66 are subject to certain health and safety restrictions; a dozen offer just curbside or exterior-only service. “The goal right now is not to get back to 100 percent but to make people feel like the shopping experience is a safe one, a comfortable one and not something that is going to put them at risk,” CEO Stephen Lebovitz said on a recent CBRE Virtual Lunch & Learn Series virtual event called Retail Reopening.

The REIT owns many properties in the South and Midwest that reopened soon after government-mandated lockdowns lifted, but it also has four that never closed, in such states as North Dakota. Even so, “all properties are being treated the same” as far as safety protocols, Lebovitz said.

Rent collection

The majority of stores in the CBL portfolio closed starting in March due to lockdowns, resulting in a 45 percent decline in same-center sales per square foot for the month and in ongoing rent-collection issues. In April, CBL collected only 27 percent of its rent roll, but the company expects more tenants to pay as the year progresses and as new deals are made. “We estimate a collection rate for the month of May in the range of 25-30 percent, based on preliminary cash receipts and conversations with retailers,” he said on a first-quarter earnings call. “The majority of our tenants requested rent relief, either in the form of rent deferrals or abatements.”

Lebovitz said CBL has placed a number of tenants in default for nonpayment of rent. “We anticipate a significant portion of April and May rents will be collected later in 2020 and into 2021 under agreed-upon deferral plans,” he said. “However, negotiations are ongoing, and it is premature to estimate a recovery rate at this time.”

A look at CBL’s tenants

The pandemic has allowed locally owned retailers to shine as they serve their communities, Lebovitz said. “It has become more of a local business. The first stores to open were the small businesses, the locals, the regionals. They were there waiting, and they’ve had a great response.” Lebovitz envisions more local tenants and nontraditional retailers at CBL properties in the future. “The community role that we play is going to be more important than ever,” he said.

CBL works alongside local authorities to avoid liability claims from customers returning to each property.  “The most important thing for us is working closely with local government authorities,” he said.  “We’re not an enforcement agency. We’re not the police. We can’t go tell people what to do, so we have to rely on those guidelines.”

Lebovitz called out fast-food chain Chick-fil-A as a top performer in the CBL portfolio. He also said sporting goods and activewear-related retailers are performing well as more consumers exercise at home. Retailers with strong omni-channel operations also are grabbing market share, he added. “Retailers with ability to ship from store have preserved more business than they had expected to.”

Capital outlook

CBL has halted $60-$80 million in redevelopment investments for the remainder of the year in order to preserve cash. “While we have paused several major projects, we are pursuing capital-light solutions for backfilling our remaining available anchors, including joint-venture partnerships, favorable lease structures and third-party arrangements, all of which benefit our portfolio while preserving capital,” Lebovitz said. “Additionally, we were able to achieve debt service payment deferrals for a portion of our secured loans.” Lebovitz said the REIT’s securitized lenders have shown minimal flexibility in amending loan payments.