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Major companies across the country are citing “force majeure” clauses or simply waving the white flag in attempts to temporarily suspend or delay rent payments amid the new coronavirus outbreak, according to multiple reports.
Retailers nationwide have closed their doors, either because they were mandated to do so or because it was the better business option, as the COVID-19 outbreak weighs heavily on the U.S. economy.
The Cheesecake Factory restaurant in Las Vegas, NV (iStock) CLICK HERE FOR THE LATEST CORONAVIRUS COVERAGE
But as business comes to a halt, what happens to rent payments? The following companies have taken steps to curtail their monthly dues during the unprecedented crisis.
The restaurant chain notified landlords in a Mach 18 letter that it would likely not be able to make its April 1 rent payments, according to Eater LA.
Ticker Security Last Change Change % CAKE CHEESECAKE 17.00 +0.82 +5.10%
The company, which boasts more roughly 38,000 employees, has been forced to close at least 27 locations nationwide, and in others, limit their services to delivery and pick-up orders, the outlet reported.
A screenshot of Cheesecake Factory CEO’s letter to landlords, dated March 18. SMALL BUSINESSES SHUTTERED BY CORONAVIRUS CAN TURN TO THESE STATE-BY-STATE RESOURCES
“The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business,” wrote founder and CEO David Overton. “Unfortunately, I must let you know that The Cheesecake Factory and its affiliated restaurant concepts will not make any of their rent payments for the month of April 2020.”
Overton warned that they were unsure of the company’s ability to pay rent even beyond April as a result of the “extraordinary events.”
In a statement to FOX Business on Monday, Cheesecake Factory's CFO Matthew Clark said the company has "very strong, longstanding relationships with our landlords."
"We are certain that with their partnership, we will be able to work together to weather this storm in the appropriate manner.”
The Houston-based mattress company initially wrote in a letter sent to landlords last week that they would offer lease extensions instead of paying their upcoming rent, Yahoo Finance reported.
The retailer then sent a second memo to landlords invoking their force majeure clause, a provision often included in contracts that allows a party to withdraw from an agreement in the wake of an “extraordinary event,” according to a definition by Cornell Law School.
The clause “frees both parties from obligation if an extraordinary event prevents one or both parties from performing,” Cornell Law School’s Legal Information Institute states. “These events must be unforeseeable and unavoidable, and not the result of the defendant's actions, hence they are considered ‘an act of god.’”
Mattress Firm (Google Maps) WHAT IS A FORCE MAJEURE CLAUSE?
Mattress Firm’s Chief Real Estate Officer Randy Carlin said in a statement to the outlet that the responses had so far been "encouraging."
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“We will continue to do everything we can to maintain business continuity and to ensure there are jobs available for our people to return to when this crisis ends," Carlin said in a statement, according to the Yahoo report.
The company, which did not immediately respond to FOX Business' request for comment, has more than 2,500 locations nationwide.
Subway Restaurants, which boasts more than 20,000 locations across the country, has also warned landlords that it would cite the “force majeure” clause if necessary, TheRealDeal reported on March 20.
Subway location in Hickory, North Carolina, Feb. 2019 (iStock)
“In the event this pandemic compels the Subway restaurant owner to narrow the scope of its operation (e.g., take-out or drive-thru service only) or to close entirely,” the sandwich chain had the right to invoke “abatement or postponement of rental payments,” according to the letter, as reported by TheRealDeal.
A spokesperson did not immediately respond to FOX Business' request seeking comment.
Clothing retailer H&M said it is contacting landlords in areas where COVID-19 has affected sales, according to a Bloomberg report, which reported that the Swedish company had shuttered two-thirds of more than 5,000 stores worldwide.
"All activities in the company are now being carefully evaluated – including costs and risk perspective – to be able to mitigate the negative effects associated with the virus as far as possible," an H&M spokesperson told FOX Business.
Ticker Security Last Change Change % HNNMY HENNES & MAURITZ 2.3618 -0.08 -3.40%
While unable to go into detail, the spokesperson said they hope there is a "common understanding" between the company and its partners.
"[We] see it as a joint responsibility between us and our partners to ensure a financially stable and sustainable future for our businesses," the spokesperson added.
The German athletic-wear brand came under fire in its home country for announcing on Friday it would be withholding rent for stores that had been temporarily closed, according to the Financial Times.
Ticker Security Last Change Change % ADDYY ADIDAS AG 113.09 -1.64 -1.43%
"The important thing is that this is not about not paying the rent for April at all. It is only a matter of a deferral. In Germany, this deferral is provided for in the new federal government law," a spokesperson told FOX Business on Monday. "Private landlords are exempted from the deferral, and have received the April rent as usual."
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The spokesperson added that the company has been "severely affected by this and the deferral of rent is just one of many measures we have to take as a precaution to protect the company and its 60,000 employees."
MALL GIANT MANDATES RENT PAYMENTS
Taubman Centers, the 16th-largest in the country, recently told its tenants it expected rent to be paid despite the company's previous directive that its malls be closed, USA Today reported.
"Landlord's obligation to pay its lenders, utility companies, insurance companies and the like, to ensure the safety and security of the building and maintain the appropriate level of operations, remains," Taubman officials wrote in the letter, obtained by USA Today. "The rental income that we receive from Tenants is essential in order to meet these obligations. All Tenants will be expected to meet their Lease obligations."
Ticker Security Last Change Change % TCO TAUBMAN CNTR 46.03 -0.36 -0.78%
Taubman reportedly sent the memo to its tenants after receiving several inquiries about potential rent relief.
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In an email to FOX Business, a company spokesperson stood behind the decision, writing: "We are attempting to navigate through this situation in the best way we can, while being as flexible as we can with our tenants in light of our ongoing obligations. The tenant memo does not replace our willingness to talk to each tenant about their respective challenges and help them chart an appropriate course for the future."
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