Mall Owners And Retailers Clash Over Avalanche Of Online Returns

Mall owners, already squeezed by e-commerce and spending billions on property makeovers to draw shoppers, have a new headache: retailers deducting returns for items bought online from their sales figures. David Simon, chief executive officer of Simon Property Group Inc., says a “significant number” of tenants are underreporting sales and that the company, the largest U.S. mall owner, is negotiating with them to find a solution. For America’s beleaguered retail landlords, sales per square foot is a crucial metric, used by investors to gauge their financial health. In addition to the dollars lost themselves, a low number can damage a mall’s reputation on Wall Street. The issue Simon is flagging arises from rents that are based on how much a retailer sells in its physical store. It’s common for a tenant to pay a base amount and then give the landlord a cut of sales that exceed a set threshold. Occasionally a retailer has no base rent and is obligated to pay only a percentage of sales rung up at the property. Read more at Bloomberg.