This article was originally published by Tyler Durden at ZeroHedge.
It goes without saying that restaurants, bars, and the service industry have been hit hardest by the nation-wide coronavirus lockdown, but commercial real estate will be the next to feel the squeeze in the coming weeks.
Late Wednesday, it was revealed that The Cheesecake Factory notified landlords at locations across the country that it doesn’t plan to pay rent for the month of April after business came to a halt in the past weeks.
Via Fox Business/The Cheesecake Factory
CEO David Overton said the chain has been dealt a “tremendous financial blow” from the pandemic, and that neither the Cheesecake Factory nor any of its “affiliated restaurant concepts,” including RockSugar and North Italia, will be writing a check on April 1.
Overton said in a letter dated March 18 and obtained by the media this week that the chain’s locations will resume paying rent as soon as possible, Barron’s reports. This due to a “tremendous financial blow” from the pandemic, which also means its “affiliated restaurant concepts” including RockSugar and North Italia won’t be writing checks to landlords on April 1, Overton added.
“The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business,” the letter began. “Due to these extraordinary events, I am asking for your patience and, frankly, your help.’’
The letter said further:
In these unprecedented times, there are many factors that are changing on a daily basis given governmental regulations and landlord decisions to close properties. We have to take both into consideration in terms of understanding the nature of our rent obligations and with respect to managing our financial position. We have 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.
A spokeswoman for the company has since confirmed the major restaurant chain made the request and that the letter is authentic.
This after only 27 of its 294 North American restaurants have remained open amid the crisis, while all other locations were forced to shut dine-in and go to takeout and “off-premises” service only. The company went public with these numbers in a Monday meeting with investors.
The company’s shares are down 47% so far this month as would-be diners self-isolate in their homes amid ‘shelter in place’ and other emergency orders issued by states, counties, and cities.
No doubt more restaurants and major chains are already following suit, leading to more pressure for further federal bailouts across sectors:
Did you see that letter from Cheesecake Factory? They didn’t ask permission, they gave NOTICE!
— Just Chef Mack (@JustChefMack) March 26, 2020
Many Cheesecake Factory locations are inside or attached to malls — among the first locations to be shuttered as the crisis has grown in the past month.
Given that such a visible company has taken a stance in a public way, we fully expect others to follow suit, leading to the next domino effect of coronavirus potentially devastating retail and commercial real estate.
As we noted yesterday, even before the coronavirus pandemic ground the US economy to a halt, the US brick and mortar retail sector was already facing an apocalypse of epic proportions with dozens of retailers filing for bankruptcy in recent years as Amazon stole everyone’s market share.
Aware that one way (out of bankruptcy) or another (in bankruptcy), they will end up renegotiating their leases, retail chains are proactively calling for rent reductions through lease amendments and other measures starting in April.
“In the space of a week, the retail landscape has changed from being fairly normalized to being absolutely disrupted beyond what we’ve ever seen before outside of the Second World War,” Neil Saunders, managing director of GlobalData Retail, said this week.
883 pages of bailout. That’s a book. Run away! It’s a cook book! Courtesy of Twilight Zone.
“To Serve Man.” (name of the cookbook).
Talking about BANKRUPTSY. The 2.2 Trillion dollar bailout passed yesterday by a fiscally ignorant Congress and a poorly advised (by the Cabinet) President has assured the fixed income citizens of this country will be poorer. Poorer in the sense that U.S. currency will surely be devalued as a result of endless “quantitative easing”, regardless of the nom du jour. All Americans will be harmed but it might help us keep up with the INTEREST on the ridiculous DEBT held by our nation. Those that govern are happy to push the FINANCIAL DAY OF RECKONING onto some future population.
This could end up having a farther reaching effect on a few people other than just the landlords.
Overall, I don’t expect things to get all that serious, maybe a total collapse of the economy and the resulting necessary government efforts to keep things functioning smoothly will affect a certain percentage of the population but, most people will be happy with that.
It’s not something you can do anything about now anyway, maybe starting to looking for work outside of the restaurant and other low end service work industries might be a good thing to at least start doing some thinking about.
What if there is no virus?
What if this was all to hide a global bubble pop?
But, defective field ni666ers were given fake makework, to do, in the malls and airports.
There is this food chain of subsidies, reaching up to a global, fifth plank, in which every tranche believes that they have literally earned something.
Have you ever spoken frankly, fearlessly with one of these corporate welfare recipients or found them to be inordinately intelligent, in their personal lives?
Anonymous
” total collapse of the economy and the resulting necessary government efforts to keep things functioning smoothly will affect a certain percentage of the population but, most people will be happy with that.”
That “certain percentage” is 100% and it’s madness to think that anyone, once seeing the effect, (crime, supply chain disruptions, mass loss of jobs, loss of savings, bankrupt pensions…..just to name a few) would “be happy with that”. Collapse and the resulting chaos isn’t a movie.
Consider how those dominoes will work! Cheesecake Factories are large, meaning more square feet and substantial rent. That will be a blow to malls, many of which are only a feather’s blow from closing. Might as well bulldoze the ones already closed, as they certainly won’t come back now.
Penny got out of the service industry of the Cheesecake Factory by hooking up with Leonard. But I guess it is still a service like hooking.