Major Public Retail Landlords Tout Strong Leasing Despite Across-The-Board Revenue Drops
Landlords for open-air retail shopping centers, many anchored by major grocery stores, announced strong leasing momentum and proceeded with rolling out new development plans despite ending the year with slimmer wallets. Four in particular — Simon Property Group, Kimco Realty Corp., Federal Realty Investment Trust and Regency Centers — recently posted Q4 2020 financial results indicating revenue slips across the board due to varying degrees of public health restrictions on retail and dining.
Simon Property’s total revenue in Q4 2020 came in at $1.1B, down from $1.5B in Q4 2019. Similar drops were recorded for the other retail landlords, with Federal Realty’s Q4 revenue dropping to $220M compared to $239M the prior year and Kimco ending December with $269M versus $296M the year before. Regency Centers’ revenue ticked down from $289M in the final quarter of 2019 to $258M in 2020.
Simon Property, which derives 79% of its portfolio net operating income from malls and premium outlet stores in the U.S., saw a 24% decline in NOI during Q4 compared to the prior year. The year-over-year decrease was 17%, which Simon attributed to lower rent collection primarily due to the coronavirus pandemic. Yet, the company opened two new international shopping centers and domestically completed three redevelopments and two expansions. Simon’s occupancy was at 91% on Dec. 31.
“Good news is leasing momentum is continuing,” Simon Property Group CEO David Simon said during a Feb. 8 earnings call. “We signed over 1,400 leases representing 6M SF and have a number of significant ... leases in our pipeline. And that's a testament to [the] quality of our real estate. And I do think we're starting to see our retailers get back to what they do best, and that is operate stores.”
The picture was different for Kimco, which increased NOI from $93M in Q4 2019 to $195M in 2020. In a Feb. 11 earnings call, a company representative said that 92% of Q4 base rents were collected, up from 90% the previous quarter. Kimco signed 92 new leases during Q4, which is 18% above leasing activity the prior year. The firm is planning an upcoming opening of Amazon Fresh at its Marketplace at Factoria in Bellevue, Washington.
“Thanks to Kimco’s dedicated associates and resilient portfolio, during the fourth quarter, our rent collections remained strong, our leasing volume reached pre-pandemic levels, and we continued our efforts to help tenants overcome the impact of COVID-19,” Kimco CEO Conor Flynn said in a press release. “With our predominately grocery-anchored portfolio focused on essential goods and services, we remain favorably positioned to outperform during the recovery and beyond.”
Federal Realty’s net income dropped considerably from $145M in Q4 2019 to $93M in 2020. Yet, the company’s portfolio was 92% leased at year’s end.
"While COVID certainly weighed on our quarterly and yearly results, the sheer volume of leasing and other transactions that we executed at the end of last year along with the continuing strong leasing demand for our real estate as evidenced by the many substantive discussions we're having with prospective tenants today set us up extremely well for a post COVID recovery as vaccinations are delivered to a large segment of the population,” Federal Realty CEO Don Wood said in a press release.
Recency Centers’ NOI decreased by 10.5% during Q4 and 11.6% year-over-year, attributed to reduced rent collection. However, the company signed 1.7M SF of new and renewal leases in Q4, totaling 5.9M SF of leases for 2020. It also embarked on $124M worth of development projects in 2020.
The bullishness of retailers to pursue both new development and redevelopment is supported by a report from CBRE that indicates some recovery took place for retail in Q4 2020, though the gains weren’t felt across the board. Nonstore retail, building supplies, grocery and sporting goods performed much better than restaurants and department stores. Nationally, a positive net absorption of 7.1M SF marked the first gain of the year since the pandemic’s onset. Holiday spending combined with vaccine approvals likely helped boost the sector overall.