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For a half-century, J.C. Penney Co.’s store count grew along with American malls, eventually earning the company the crown as the most ubiquitous retailer anchoring those centers. It now operates about a fifth of all the anchor stores in U.S. malls. But when the department-store chain filed for bankruptcy on May 15, it said it would close more than a quarter of its 846 stores, Bloomberg Businessweek reported. That retrenchment reflects a dire financial position: J.C. Penney’s $8 billion debt burden was simply too heavy to bear. But it also signals a growing realization among brick-and-mortar retailers that the relentless pursuit of growth in number of stores hasn’t served them particularly well for years. The amount of merchandise sold per available square foot of selling space in stores has fallen in recent years, while rents have continued upward. And the explosion in online shopping means fewer consumers trek to malls. Now Covid-19 could finally force a reckoning for overstored America. One result: As the lights come on after an almost total shutdown of national chains, many retailers are deciding some of their stores will stay dark forever. “I think for the first time, companies don’t have to decide which stores to close, they have to decide which stores to open,” says Simeon Siegel, retail analyst at BMO Capital Markets. “They will find that they have been forced to make decisions that they probably have been putting off.” It’s much more than a Penney problem. The U.S. is the leader in two categories: most retail selling space per capita of any country, but also lowest sales per square feet, according to commercial real estate company Cushman & Wakefield. It says the U.S. has 25 retailing square feet per capita that brings in about $500 in sales, compared with China, which has less than 5 square feet per capita that accounts for $1,000 in sales.

National restaurant chains and other stable businesses are prodding their landlords for rent relief as the economic picture sours, setting the stage for court battles and protracted clashes between big tenants and property owners, the Wall Street Journal reported. A number of blue-chip companies that made rent payments the past two months have indicated they reached their limit with June. Chipotle Mexican Grill Inc. and Shake Shack Inc. said they are lobbying property owners to renegotiate the leases or offer deferred rent payments. Starbucks Corp. sent a letter to landlords asking for a range of concessions, including changes to lease terms and base rent for at least 12 months, starting next month. Restaurant and cafe operators are starting to reopen outlets again as more states like Florida, Texas and South Carolina begin to relax lockdown orders. But many of these companies say that social-distancing guidelines restrict them to only about a quarter to half of their normal capacity, forcing them to modify operations and cut expenses to stay in business. Rents usually account for around 8 percent of sales at restaurants. Now, with the pandemic causing restaurants to shut outlets or cut capacity, it can represent as much as 20 percent of sales, according to Jeffrey McNeal, president of Fessel International, a restaurant and hospitality consulting firm. That has many firms leaning on their landlords for help with another rent payment due in less than two weeks, and mounting evidence that the U.S. economy could be under pressure for an extended period. The Congressional Budget Office said yesterday that an economic recovery would drag on through the end of next year, and that gross domestic product will likely be 5.6 percent smaller in the fourth quarter of 2020 than a year earlier.

J.C. Penney Co Inc plans to trim its store count by 29 percent to about 604, as the U.S. department store chain looks to focus on those more profitable, a regulatory filing showed yesterday, two days after it filed for bankruptcy protection, Reuters reported. The stores to stay open accounted for 82 percent of the company’s fiscal 2019 sales, J.C. Penney said. Reuters on Friday reported that the company was planning to shutter roughly 200 stores. J.C. Penney, which is looking to cut costs to remain afloat, plans to reorganize and emerge from bankruptcy proceedings after eliminating several billion dollars of debt. It will also explore a sale as part of the terms of its $900 million of debtor-in-possession financing.

Fannie Mae and Freddie Mac extended their suspensions on mortgage foreclosures through at least June as U.S. homeowners continue to be hit hard by lost jobs and income amid the coronavirus pandemic, Bloomberg News reported. The two mortgage giants, which backstop about $5 trillion of home loans, won’t push for forced sales of properties on which borrowers have stopped making payments. Fannie and Freddie initially announced the halts on foreclosures in March, though the relief was set to expire May 17. “During this national health emergency, no one should be forced from their home,” Federal Housing Finance Agency Director Mark Calabria, the company’s regulator, said in a Thursday statement. Providing aid to mortgage borrowers has been a central element of the U.S. government’s response to the coronavirus economic crisis. As part of the $2 trillion stimulus bill passed in March, Congress allowed homeowners suffering through pandemic-related hardships to delay their payments for as long as a year if their loan is backstopped by Fannie, Freddie or a federal agency.

While aggressive federal and state intervention and temporary corporate measures have prevented a surge in evictions and foreclosures, the housing and rental market has fallen into a severe crisis that threatens the ability of millions of Americans to stay in their homes even if the coronavirus pandemic eases in the coming months, the Washington Post reported. The speed and broad reach of the disruption are likely to pit landlords and mortgage companies against homeowners and renters, with each side claiming that it needs more assistance and fueling calls for billions in new aid for the housing sector. The tension could be evident this week as mortgage and rental payments come due for millions of Americans who have lost their jobs as the novel coronavirus has shuttered the U.S. economy. This is especially true in high-priced regions where stimulus payments of $1,200 per adult, for those making under $75,000 a year, are unlikely to cover more than a month of rent or mortgage payments, if that. Already, at least 3.8 million homeowners have sought mortgage relief and were not making their payments by the end of April, a 2,400 percent increase from early March, according to Black Knight, a mortgage technology and data provider. That number is likely to increase drastically this week as the country’s unemployment rate hits levels unseen since the Great Recession, lenders and housing advocates say. Read more. 

In related news, Fannie Mae said on Friday that first-quarter income dropped about 81 percent to $461 million, compared with the same period last year, as it booked $2.7 billion in credit expenses, the Wall Street Journal reported. It projects loan losses from economic disruption caused by the Covid-19 pandemic to total $4.1 billion. More than 1 million borrowers are already missing payments, representing about 7 percent of the single-family loans it guarantees, Fannie said. That figure is expected to double to 15 percent in the coming months as people lose jobs and incomes as a result of coronavirus-related lockdowns. Read more. (Subscription required.) 

May is shaping up as a clash between renters and landlords, as soaring unemployment could leave millions of tenants unable to pay, and some organizers of rent strikes urge even those with means to hold back, the Wall Street Journal reported. April rent payments turned out better than expected, landlord representatives said. With the economy still strong in the first half of March — before the worst hit from the coronavirus pandemic — about 9 in 10 renters in professionally managed apartments paid at least some of their April rent, according to the National Multifamily Housing Council, a landlord trade group. Now, rent for May is coming due after millions of Americans have been unemployed for weeks. Many more are worried about keeping their jobs, and housing activists in at least 15 cities, including New York and Chicago, are organizing rent strikes. They are calling on tenants to withhold May payments in hopes of provoking federal and state lawmakers to provide more financial support for renters.

CBL & Associates Properties Inc. hired Moelis & Co. and Weil Gotshal & Manges as it seeks advice on strategic and financing options including restructuring, Bloomberg News reported. The owner of shopping malls is exploring ways to recapitalize including an exchange offer, in which senior holders of unsecured debt swap their investments for secured debt. The Chattanooga, Tennessee-based company may also discuss a chapter 11 bankruptcy filing as a last resort. A group of CBL’s creditors has hired advisers including PJT Partners Inc. and Akin Gump Strauss Hauer & Feld. The real estate investment trust’s shares fell as much as 11 percent yesterday. They have dropped 68 percent this year, cutting the company’s market capitalization to $63 million. CBL operates more than 100 properties across 26 states, most of which are so-called Class B malls, and has been hurt in part by the closures of retailers including Forever 21. Its top tenants based on revenue at year-end included L Brands Inc., Signet Jewelers Ltd., Foot Locker Inc., a unit of American Eagle Outfitters Inc., Dick’s Sporting Goods Inc. and Ascena Retail Group Inc., filings show. CBL said this month that it was taking actions to offset the anticipated impacts of the COVID-19 pandemic on revenue and cash flow. Chairman Charles Lebovitz, Chief Executive Officer Stephen Lebovitz, President Michael Lebovitz and independent directors agreed to reduce their salaries and fees by 50 percent.