What's going on?
Private equity heavyweight Blackstone and British mall operator Intu are struggling to get their rental payments to come on time, and all this coronavirus-related stress isn’t helping.
What does this mean?
It’s not just Average Joes who are having trouble covering their bills: with coronavirus forcing the world into lockdown, companies have likewise been asking for more time to get their rent together.
Blackstone, the UK’s largest small business landlord, has agreed to defer payments for three months, but its tenants are at risk of being kicked to the curb if they can’t pay by then. Intu decided to reduce its service charge fees, but it didn’t seem to make much difference: the mall operator only received 30% of the rent it was owed this week. And given that Primark and Topshop (in the UK) and The Cheesecake Factory (in the US) have said they’ll continue to withhold rent payments, that doesn’t look like it’ll change any time soon – for Intu or others like it.
Why should I care?
For markets: Real estate gets real.
One popular way to invest in property is through real estate investment trusts (REITs) – many of which are listed on the stock market. Part of their popularity could be down to the fact they’re “asset-backed” – i.e. tied to something physical – which keeps their values more stable than your average stock. Just keep in mind that if a real estate company’s income stops flowing because, say, its tenants stop paying rent, investors could be hit with the double whammy of falling share prices and declining property values.
The bigger picture: House sales self-isolate.
Spring is typically a popular time to buy and sell property, but since people aren’t free to view properties like they normally would, real estate portal Zoopla estimates UK house sales will drop by 60% in the next three months. House prices won’t necessarily follow, mind you: they’re more influenced by the economic fallout from coronavirus, like unemployment.