Mall landlord Macerich posted a $26.7 million net income loss in the second quarter as the Santa Monica-based firm continues its struggle to collect rent across its portfolio.
The dismal quarter compared to Macerich’s profit of $13.9 million over the same period in 2019.
At its earnings call on Tuesday, the retail real estate investment trust reported revenue fell 22 percent to $178 million year over year.
All Macerich-owned malls shut down for a time during the pandemic, and some of its properties in California and New York have only been open a few days during the pandemic.
“Given that most of our centers were closed for April and May, rent collection was a challenge,” Macerich CEO Thomas O’Hern said during the call.
Macerich collected 40 percent of rent from tenants in April and May, O’Hern said, a vast improvement over the company’s initial reporting that it had collected just 26 percent of April rent. That lower figure was as of mid-May.
June rent collection rose to 58 percent, as malls began reopening throughout the country, then ticked up again to 66 percent in July.
O’Hern said that the company reached agreements with tenants on rent deferrals, for which rent will only be partly paid until 2021. He said the company could not reach a resolution about rent with “5 to 10 percent” of its tenants.
But he sounded an optimistic note. “We can clearly say that the third and fourth quarter will be much better than the second quarter,” O’Hern said.
While acknowledging the financial blow from the pandemic, the last few months haven’t prompted a shift in long-term thinking, officials said.
“Our leasing strategy hasn’t changed,” Macerich CFO Scott Kingsmore said during the call.
O’Hern led the cheer for physical retail, diminishing the impact of Amazon and other e-commerce competitors.
“E-commerce is an expensive business model due to high delivery costs, greater product returns, and high consumer-acquisition costs,” O’Hern asserted. “The crisis has shown the importance of brick and mortar locations.”
But like Macerich, most retailers across the country have struggled through the pandemic while Amazon recently reported $88.9 billion in second quarter sales, its best quarter ever.
Macerich’s indoor malls have been particularly hard hit. Those properties in California reopened then had to close back down on July 13 after a spike in Covid cases. O’Hern acknowledged that nine of Macerich’s 13 California malls were affected by the state order from Gov. Gavin Newsom.
The company has also been stung by the parade of retailers from J.C. Penney to Lord & Taylor that have filed for bankruptcy.
O’Hern said the Chapter 11 retail filings did not take him by surprise.
“Covid-19 accelerated bankruptcies that, frankly, were going to happen anyway,” the CEO said. He added that the troubled companies “were on our watch list for a number of years.”