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September 09, 2020 4 min read

Nemco hopes that the drop in anchor tenants' abandonment will not turn into a flood, according to a US real estate company. Although these are key tenants Nemko estimates that their departure is not expected to have a significant effect on it Nemko ear B, provides a glimpse into the dismal state of the fashion chains and department stores that are among the tenants in the company's portfolio. In the first quarter reports published by Nemko about a week ago, there is an overview of chains that rent in the company's properties that are experiencing financial difficulties. In the vast majority of cases the corona crisis only intensified the hardships that began before its onset. Although in some cases these are anchor tenants, Nemco, which owns 78 properties in 28 US states, estimates that their abandonment is not expected to significantly affect its operations and results. Read more in Calcalist: The new collaboration between Gap and Kenya West could save the Coco Bluff chain: Home Fashion Chanel is looking for its way Crocodile-skin dinosaurs: the global collapse of the Nemco department stores was prepared for a challenge It is possible to understand how the abandonment of each anchor tenant individually is not likely to materially affect Nemco, however, it can also be estimated that the sequence of anchor tenant abandonments And if the big and old chains are having a hard time surviving, what will the small shops say that do not enjoy size advantages? Services ranged from 24% to 34% of total revenues.At the same time, exposure to companies in the department store industry fell from 18% in June 2017 to 10% at the end of 2019, and it seems that the difficulties experienced by the chains remaining in Nemco's assets will lead to a further decrease in the company's rent. Sear's Store s: Sear's store closed Photo: Shatterstock For example, the Sear's chain, which is defined as renting an anchor in six of Nemco's properties, filed for bankruptcy in 2018. That the rent from Sear's constitutes only 0.88% of Nemco's income. Two of Sear's stores are currently closed and there is uncertainty about the future of the other chain stores in Nemco's assets. In some of the leases there is a provision that closing certain stores of anchor tenants may give the other tenants in the same shopping center the right to a reduction in the rent or to terminate the lease early. According to Nemco, it is not expected to have significant exposure to the possible operation of this section as it is already negotiating with potential tenants to rent the areas of the Sear's chain and in some of the properties areas have already been rented to new tenants. Also in relation to the department stores Bon Ton and JC Penny, which is responsible for 1.54% of the revenue, Nemco rents, and the fashion store chain Forever 21, which submitted a request for protection from creditors, Nemko estimates that closing their stores is not likely to significantly affect its operations and results. Judging by Nemco's rating and bond yields, it is considered by investors to be one of the most stable of US real estate companies to cross the ocean to raise debt in Israel. At the end of July last year, S&P Maalot raised Nemco's credit rating to AA. Following the continued growth of the asset portfolio while maintaining strong coverage and leverage ratios. "Nemco's two bond series, which represent a debt of NIS 676 million, are traded at yields of 7.3%, compared with double-digit yields presented by most foreign debt collectors. One of the reasons for this is the fact that Nemco's cash balances stood at $ 148 million at the end of March and in addition Nemco has unencumbered assets worth $ 167 million. During the Corona Crisis the management of Nemco found creative use for its high liquidity balances, and took advantage of the sharp rate declines that characterized the markets at the beginning of the plague. In April, $ 20 million was invested in the tradable securities of 20 real estate corporations traded in the United States. 72% of the investment was made in shares and 28% in bonds. By the end of June, Nemco managed to post a 23% return on investment on paper, with the value of the shares soaring to $ 49 million. Spencer is also abandoning and the phenomenon that Nemco pointed out in the reports did not miss the American real estate company Spencer, which and the main tenant During the first quarter of 2020, Spencer signed two 15-year lease agreements with landlords for 53% of Albee Square's commercial space, in which it holds, in equal shares, with and all of the Albee Square. The annual rent resulting from the two leases - $ 1.2 million - will be updated to $ 1.34 million and $ 1.49 million in 5 years and in 10 years, respectively, while the main tenant of the commercial space in the property paid an annual payment of $ 2.7 million from June 2017 Due to the fact that the agreements signed during 2020 with the end tenants reflect lower rents than those stipulated in the agreement with the main tenant, Spencer and the main tenant decided to terminate the contract when the main tenant paid the property company $ 1 million, which is the balance until April 4, 2020. Between the actual rent and the high amount paid by the tenant Shai, the termination of the contract is not expected to result in a change in the value of the property. According to Spencer, the valuation of Albee made at the end of 2019 in the first place did not take into account the expected revenue from the main lease agreement. Bottom line, in light of the fact that Spencer leased areas that reflect about 60% of the rental income potential of the property, the annual rent to be sold under the actual signed leases with final tenants will be $ 1.3 million, compared to the $ 3.2 million rent recognized in the lease. The main.

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