Simon Property Group, the nation’s largest shopping center and mall landlord, said it will temporarily shut the lights off on all 175 properties it operates in the Unites States, a stunning step that underscores how the coronavirus outbreak is impacting every corner of the country while people stay put in their homes.
“After extensive discussions with federal, state and local officials and in recognition of the need to address the spread of COVID-19, Simon will close all of its retail properties, including malls, premium outlets and mills in the U.S.,” the company said in a statement.
The measure, which affects 191 million square feet of retail space, takes effect Wednesday and is slated to end March 29.
The action comes after state-mandated closures of some malls and shopping centers such as King of Prussia Mall in Pennsylvania and the Westfield Garden State Plaza in Paramus, New Jersey.
Megamalls such as Triple Five Group’s American Dream and Mall of America, in addition to thousands of independent stores and those tied to national chains, have been locking their doors with extraordinary speed as the White House tightens guidelines to help curb the spread of the coronavirus.
The shutdown also comes two days after Simon refinanced its revolving credit line to $6 billion from $4 billion, suggesting that the Indianapolis-based real estate investment trust is looking to the credit facility as a stopgap. Simon did not comment further.
This could further derail the retail industry that is still coping with instability driven by the sharp shifts in consumer shopping behaviors. Many retailers in trouble before this new virus surfaced are likely to tumble into the abyss that left a record 9,300 stores closed last year, many tied to bankruptcies.
It’s still unclear whether temporary closures of malls are considered a force majeure provision, otherwise known as an “act of God.”
"You're seeing states issue emergency declarations and order closures of facilities, which could be considered a force majeure event, depending on the contract language,” Steven Appelbaum, a contract litigation attorney with Washington, D.C.-based Saul Ewing Arnstein & Lehr told CoStar. “But it's all over the map, and it's very specific to the particular contract and industry."
As thousands of retail stores from Apple to Vineyard Vines have gone dark over the past few days, mall REIT stocks have plunged along with the rest of the stock market.
However, most REITs are expected to have enough liquidity to help cover a short-term loss of those dollars. Though Simon refinanced its credit facilities, it said that it had $7.1 billion in liquidity, much of it in cash, as of Dec. 31, according to a regulatory filing.
In an effort to retain capital and boost financial flexibility, Macerich slashed its dividend to 50 cents from 75 cents on Monday. It said it will pay only 20% in cash and the rest in stock, an arrangement not typically seen in dividend payments.
“Macerich's portfolio is well positioned with a highly diversified tenant base of the world's leading retailers,” the company said in the statement. The company owns 47 regional shopping centers accounting for 51 million square feet.
However, the Santa Monica, California-based REIT added it was rethinking its strategies, noting it “will be evaluating all capital uses including the size and pace of redevelopment investments.”
Macerich, like Jericho, New York-based Kimco Realty and Chicago’s Brookfield Properties, has limited hours at some malls but has not followed Simon’s decision to temporarily halt all operations. None returned requests for comment.