Retail Landlords Face New Challenges in Getting Tenant Sales Figures This Year

For landlords who have percentage rent leases with their tenants, the right sales numbers from the holiday shopping season are critically important.

But this year, getting the right numbers may be more challenging than ever. For one thing, the increase in buy online, pickup in store (BOPIS) and curbside pickup will complicate matters. For another, the pandemic restrictions will make it difficult to conduct onsite audits. 

These 2020-specific issues add to lingering problems with transparency, according to Kenneth S. Lamy, founder and CEO of Mandeville, La.-based The Lamy Group,

Lamy tells GlobeSt.com many big retailers will submit sales numbers in a “uniform, efficient way.” While this method may be efficient for them, they may not be submitting things in a way that the lease demands.

“Until you audit the records, you don’t really know what went into that particular number submitted,” Lamy says. “So, the lack of transparency exists and has existed for years and decades. The BOPIS-driven activity and the online and internet activity has another layer because now you don’t just have everything happening while the customer is in the store. Now we have things happening online where people could get something shipped to them and go pick it up in the store or at the curb.”

Further complicating transparency in 2020 is that landlords or their representatives may not be able to go onsite to audit sales figures because of restrictions around the pandemic.

“In the case of an independent mom and pop retailer, the records are going to be pretty much local to where the property and the store is,” Lamy says. “If it’s a chain, the records would be at the headquarters. Whether it is at a regional, local or even a national chain or an anchor store, we go to all of those [headquarters].”

Now, those audits need to be done remotely. “It still can be done,” Lamy says. “It just takes a little bit longer, and it’s not as efficient. Now you have to ask for things. They send what they think they need to send and then you get back and forth.”

Getting the right sales figures in a timely fashion is essential to landlords because they have critical long-term decisions to make in January. Many retail leases and lease modifications expire in January and February, according to Lamy.

Having accurate sales data is also necessary for rent relief discussions.

“If the sales have been understated, all the ratios and percentages that the landlord would utilize to guide them on what rent structure would financially work that retailer is flawed,” Lamy says. “So they make bad decisions and not completely informed decisions.”