The financial stress of this year's economic lockdown first impacted retail consumers, followed by the retailers those consumers frequent and then the real estate owners leasing space to those retailers. With retail continuing to take the brunt of the COVID wallop, some REITS are managing to weather the storm while others are filing for bankruptcy protection.
In fact, two REITs declared bankruptcy on the same day last month for the first time in history: CBL Properties and Pennsylvania Real Estate Investment Trust. Moreover, more than three dozen publicly traded retailers filed for bankruptcy this year including JC Penney, Sears, Lord & Taylor and Forever 21.
There are six factors that certain REITs have in common with CBL and PREIT, according to S&P Global's December research brief. These are: 1) a high percentage of anchor tenants that have declared bankruptcy 2) a decline in building permit activity 3) a decline in foot traffic 4) a high degree of leverage 5) declining cash flow and 6) a high proportion of tenants that have filed for bankruptcy.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
