Finances still rule discussions between open-air center landlords and tenants: Essential retailers are using their clout to win lease concessions, while nonessential retailers are digging themselves out of deferred-rent holes and anticipating pent-up demand from consumers once the country is fully vaccinated, executives said during a recent ICSC Connect Virtual Series two-part session on open-air centers. And yet, open-air center retailers and landlords are cooperating more closely than ever.

WATCH NOW: Open-Air Centers: Tenants’ Perspective

WATCH NOW: Open-Air Centers: Landlords’ Perspective

What lease discussions looked like to an essential retailer

Cash-rich essential retailers like Kroger took an opportunistic stance on real estate during the pandemic, extracting concessions from landlords in exchange for lease extensions. “We were really aggressive this past year,” said Kroger vice president of corporate real estate Nick Hodge. “We provided certainty and liquidity to a property’s value, so we said, ‘What can we do to benefit financially long-term from the transactions?’”

Kroger extended to 10-, 12- or 15-year terms many of the leases set to expire in a few years. That move helped landlords access liquidity and made the properties easier to finance. “In exchange for that, we said, ‘We want to benefit in 50 percent of the upside value.’ That could be rent. That could be [tenant improvement allowances]. That could be any myriad of things we need in the shopping center,” Hodge said. Landlords were eager to make deals. “At the end of the day, we restructured about 110 leases, or 10 percent of our lease portfolio, and generated about $100 million in present value benefits to us over the term of it.”

What lease discussions looked like to a nonessential retailer

Meanwhile, AMC had to close all 600 of its U.S. locations. It had little negotiating room and relied on landlords’ largesse while cash flow dried up, said senior vice president of development and international Daniel Ellis. “The whole landlord community was terrific and understanding,” he said. “We’re on target to achieve $700 million in rent concessions throughout this pandemic. Our landlords really stepped up. We did deferrals and abatement deals.” Major restructuring on rent is over for now, he added.

The landlord/tenant relationship

Many landlords have helped mom-and-pop tenants bridge the pandemic financially, said Brixmor president and CEO James Taylor. “When we put out tenant improvement dollars, we’re venturing capital on their behalf. It’s something each one of us does all the time.”

RELATED: What landlords give and get from tenant allowances

Strong retailers, meanwhile, have more cash than ever but still want landlords’ help, said DLC Management founder and CEO Adam Ifshin. “Retailers want landlords to be their off-balance sheet lender to fuel that store base strengthening.”

Retailers, for their part, are cooperating with landlords to coordinate curbside pickup and safety protocols. “Working closely with landlords is becoming even more important,” said Bed Bath & Beyond senior vice president of real estate and store development Wade Haddad. The company is spending $200 million to renovate 450 of its stores in line with a less-cluttered prototype.

Kroger even built an in-house team to respond quickly when landlords request accommodations like changes to lease restrictions. It’s also working with landlords to carve outparcels from Kroger properties, Hodge said. “We looked at ways collaboratively that we could work with landlords to create new [gross leasable area] in the shopping center for growing tenants and split upside benefits.”

Expanding tenant pool

A stream of new tenants is headed to open-air centers, too. “The pandemic has removed all the weakest operators from everybody’s rent roll, and now we have an opportunity to backfill those spaces with some of the most dynamic, forward-thinking tenants that will be pivotal to the success of the open-air shopping center,” said Kimco Realty CEO Conor Flynn.

Service tenants are relocating from office environments, according to Brixmor, and mall tenants are coming, too, according to DLC Management. “The thundering herd is the mall tenants coming out of the 300 to 700 B, C and D regional malls that were on the decline and have been pushed over that cliff,” Ifshin said. “There’s been a radical reordering. Every tenant that remains a viable chain is faced with figuring out: How do you get to the curb efficiently? That increasingly means going into open-air centers.”