Prologis hosted a business update call earlier this week, and they provided a pretty stunning statistic. As measured by gross rent, 24% of their tenants have asked for rent relief. Extroplating that to square footage - that is almost 250MM square feet of tenants.
My firm has experienced a higher than anticipated request for April rent relief from our tenants as well. What is strange is that in industrial it seems some tenants are extremely busy right now, while some have basically gone to zero.
See the link below for the recording of the business update call:
Not shocked. Why wouldn't you? All we see on the news is how this is a recession, this is awful... doesn't make sense not to ask for rent relief if you think it'll granted en masse
That Obama money baby
24% seems low. I'd honestly be happy with that.
I assume one factor of variability in rent relief could be diversification of tenants? I.e. cold storage (essential) vs manufacturing (potentially non-essential)
If you look at what their CEO just said on air though, you'll note that a lot of the tenants asking for it are opportunistic (i.e., Amazon). They don't actually need it. Most of the landlords are dealing with the requests on a case by case basis. The real statistic to track is not who asks for it but how much is actually granted, because if that is the case, then that means that the LL's agree that it is both i) needed and ii) worth it (i.e., the tenant is viewed as viable beyond the short term impact of the virus).
Otherwise, you have a bunch of smart in-house RE managers trying to save a buck and/or tenants that were already in bad shape trying to take advantage.
Right on.
On our portfolio we had ~20% request and sub-10% actually fill out the documentation needed to be granted relief. AKA they don't need it and there is no merit to their request.
Exactly. We had a tenant who has couple hundreds of millions of cash in their balance sheet ask for rent relief. We were nice enough to offer a deferral with a interest rate but not a straight relief.
Not to mention, their core clients lack much diversification. They're the largest owner of Amazon in the country (I think still, if not they're close) - they account for a huge chunk of their overall rent. I think they account for something like 5% of their tenant list. They own next to no manufacturing, so not a factor.
You need to understand Prologis rents to the who's-who, with BODIES in that RE department, they're trying to prove worth.
On live deals, I've got roughly 40ish tenants - they all paid rent in April - 100%. Mom and pop to big boys - all still pumping, even energy tenancy.
I'm sure this is earnings/lender politics.
I think they are halting new spec development across the globe along with fund redemption increase.
Industrial in my area has seen 4% cap rates, not sure how these deals don't blow up if 25% of tenants don't pay rent! Folks must have a lot of reserve cash or have great partners who will restructure positions across the capital stack.
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