Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/853369
A U G U S T 2 0 1 7 / S C T 37 Net-leased tenants usually sell nondiscretionary items or services and San Diego–based Realty Income Corp. derive about 90 percent of their annualized rental revenue from tenants in the service, nondiscretionary and low-price retail businesses — which are less susceptible to economic recession or to Internet retail competition, according to Chicago-based Zacks Investment Research. At the end of the first quarter, Realty Income's portfolio occupancy rate was 98.3 percent, about where the firm anticipates it will remain for the rest of this year, says CEO John Case. Spirit's rate is nearly 98 percent among 2,514 properties. National Retail, meanwhile, boasts an occupancy rate of 99 percent among its 2,600 properties, and the company has historically enjoyed a renewal rate of 85 percent. As with shopping center operators, and as with any real estate company, one major risk is the loss of a tenant. A big shopping center can generally withstand a few vacancies because there are so many other tenants to help offset the loss. But with single-tenant real estate, there is no such offset, and the loss of the tenant can be catastrophic. Single-tenant leases "involve specific and significant risks associated with tenant default," according to Zacks Investment Research. "In the case of financial failure of or default in payment by a single tenant, the company's rental revenue from the property, as well as the value of the property, suffers significantly." For Spirit, a big concern has been with Shopko, which has been closing stores over the past three years. National Retail owns properties leased to outdoors-gear specialist Gander