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COVID-19 Response: A Landlord’s View

Time Equities Inc., a large operator of value centers across the country, feels the strain of retail tenants struggling amid the health crisis.

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By David Moin on April 13, 2020

“It’s taking a lot of manpower, a lot of discussion and a lot of thought,” said Ami Ziff, director of national retail for Time Equities Inc.

And no doubt creating a lot of stress, dealing with difficult tenant issues caused by the coronavirus and new demands being placed on Time Equities, the New York-based owner and operator of value centers as well as residential, office and industrial properties.

“My team is working overtime to examine every single issue with the tenants. I have personally reviewed every single situation,” Ziff said in a recent interview, noting that Time Equities has more than 1,000 retail tenants in its properties. “I’m on the phone all day with tenants. You’ve got to take one month at a time, but whenever there is chaos, there are people who try to capitalize on it.”

His tone suggests that the often adversarial relationships between property owners and their retail tenants have become exacerbated amid the pandemic. Retail tenants, with no revenues coming in, need to reduce their costs and are seeking mortgage forbearance or rent abatements in exchange for adjusting lease terms like co-tenancies or expiration dates. But that’s not true in all cases, according to Ziff.

“T.J. Maxx is living up to their lease obligations. They are fantastic tenant partners. They have paid all their rent in full, and that also goes for a number of different tenants,” Ziff said. “Ross met their lease obligations for this month,” referring to April. The rents came in despite TJX and Ross stores being temporarily closed. Ross closed its stores on March 20; TJX shut down on April 6.

Ziff declined to comment on to what extent April rents were collected from other retailers, or on the percentage of retailers open for business within Time Equities properties. Rents are due the first of the month.

In this pandemic-induced recession, Time Equities does seem better situated, in some respects, than other real estate developers and operators, considering its concentration of groceries, office and craft stores, which are considered “essential” businesses. Twenty percent of the portfolio is anchored by food retailers such as Southeast Grocer’s, AWG, Acme and Save A Lot. Other key tenants are Regal Cinemas, AMC Theaters, L.A. Fitness, Dick’s Sporting Goods, Dollar Tree, Five Below, Ulta, Hobby Lobby, Office Depot, Planet Fitness, Big Lots and Joann Fabrics, many of which are closed due to the pandemic. TJX, in terms of rent, is Time Equities’ largest tenant.

Additionally, of the 122 retail properties Time Equities operates, only the eight enclosed malls have temporarily closed. Other large shopping center owners and operators in the country, such as Simon Property Group, Taubman and Unibail-Rodamco-Westfield, have shut down most, if not all, of their shopping centers. “I believe we are well positioned since the vast majority of our retail is open-air, value-oriented centers and strip centers which cater to consumers seeking discounts. We don’t own class ‘A’ malls,” Ziff said.

Time Equities’ centers, which include strip and power centers, primarily operate in mid-sized markets like Zanesville, Ohio; Macon, Ga., and Knoxville, Tenn. where the populations are less dense than cities such as New York, Detroit and New Orleans, which are considered pandemic hotspots. Time Equities, founded in 1966, has a portfolio of about 31.1 million square feet,  including 9 million square feet of retail space. Open-air settings would be particularly appealing to consumers after periods of sheltering-in.

Stores take it upon themselves to stay open or temporarily close, except where states have ordered non-essential retailers to shut because of COVID-19. Asked what relief Time Equities is providing retailers as business evaporates amid the pandemic, Ziff replied, “It’s on a case-by-case basis. If a local restaurant has a state mandate to close due to the pandemic, we will try to work with them as best we can. With certain brands we have agreed to a deferred rent for a period of time in exchange for modifying lease clauses such as removing co-tenancy clauses, exclusive use provisions or sales termination rights. But basically, if I helped everyone, I would not be able to pay my debt service, and my investors and I would go out of the business. It really depends what the level of distress is, what the need is, and what’s warranted. The federal government needs to step in and implement some sort of forbearance for commercial mortgages as they have for residential mortgages. Short of that the whole retail world could blow up. Something has to give.

“We are very much in the weeds. You have to look at what the impact will be if a tenant closes. You don’t know for sure what the future will be. My team also is responsible for the acquisition of shopping centers. We’re not buying anything now but we are still busier than we have ever been,” concentrating on managing the assets, rather than shopping for new ones.

“Once this is over, meaning sheltering in place orders are lifted and the virus subsides, I do believe people will be so eager to get out and touch others and spend and shop and eat out, so long as they haven’t lost their jobs,” said Ziff. “There will be such pent up demand that things will recover relatively quickly. The recovery is not going to be equal in every sector, coming out of this, and it will be a gradual process to get back open and up and running…Retailers will take another hard look at online shopping and will view it as more of an essential channel, if they haven’t started viewing it that way already.”