ROCKFORD – Shopping mall owners already scrambling to keep store spaces filled amid more online ordering now face rent and banking dilemmas caused by coronavirus shutdowns, local and national experts say.
The snowballing effect goes like this: Stores already on-site likely will ask for rent reductions if the mall they occupy isn’t as filled with stores – translation, foot traffic – as it was before the new coronavirus set in. Many governors closed non-essential retailers in March with the aim of preventing spread of the highly contagious COVID-19 disease caused by the virus, and Illinois’ is in effect through May.
Some stores may not survive the shutdowns. But if surviving stores get rent cuts under such “co-tenancy” agreements they negotiated when they set up shop, the mall owners whose income drops as a result of renegotiations and closings will turn to the banks who hold their deeds to try to cut costs.
“There will be negotiations between tenant and landlord and between the landlord and its mortgage holder,” said Andrew Shedlin, owner of The Andrew Shedlin Companies Inc., based in Kildeer.
Shedlin is an attorney and consultant with more than 40 years in the real estate business and specializes in leasing matters. Shedlin said he has close connections with national retailers and mall owners – including CBL Properties, which owns CherryVale Mall in Cherry Valley, with some 100 stores, as well as Simon Property Group, which operates Forest Plaza on State Street in Rockford with some two dozen stores. Calls placed to representatives of both companies were not returned Wednesday.
"Co-tenancy is increasingly important in recent years as retail has become more challenged,“ he said, referring to oversaturation and online ordering. And the situation is ”exacerbated by the pandemic,“ he said. ”It makes retail more difficult both for landlords and tenants."
Tim Savage, Machesney Park village administrator, said co-tenancy agreements are the norm at bigger malls. “It is not uncommon for a smaller store to have certain requirements that they will only continue with the lease if a big store is open and viable,” he said, noting that was the case with the long-closed, enclosed Machesney Park Mall.
"All of this will come down to negotiations," Shedlin said.
Georgette Braun: email@example.com; @GeorgetteBraun