With lockdowns and social distancing measures keeping people at home, tenants all across the US are having difficulty making their rent payments.

Their requests for rent relief are starting to affect equity investors, according to a new report from Bryan Reid, executive director of MSCI Research, and Niel Harmse, senior associate, Global Real Estate Research. Reid and Harmse analyzed fund- and asset-level data for 107 property funds in the UK, Europe, Australia and North America.

Not surprisingly, the pandemic hit retail and hotel rental incomes the hardest. From December to June, the NOI of retail assets declined by 21.4%, and hotel assets saw a 39.7% drop. NOI growth was flat in the office and residential sectors, while it grew 1.4% for the industrial sector, according to the MSCI Global Quarterly Property Fund Index. 

Reid and Harmse also evaluated distribution yields among the funds they tracked to see if they reveal

When a landlord is negotiating with a tenant, understanding its balance sheet, cash position and debt load and maturity schedule are key to a successful outcome. 

“If they have debt, has the tenant had any conversations with the lenders about potentially extending the period when they need to service it or move interest payments back on the calendar,” says Brad Tisdahl, Principal and CEO of Tenant Risk Assessment.

Getting answers to those questions can help a landlord understand the tenant’s balance sheet flexibility.

“We want to understand how flexible a company’s balance sheet is to ride out the pandemic and the surrounding uncertainty,” Tisdahl says. “When we’re thinking about that, we’re trying to assess whether we’re going to be granting relief to a tenant that may not survive the pandemic.” 

The lender’s relationship with the tenant is pivotal.

“We’re trying to understand whether a lender is going to be inflexible,