Tesla's reputation as a really cool automotive industry disrupter might not be sitting so well with one set of key stakeholders amid CEO Elon Musk's vacillation over his bricks-and-mortar store and service location strategy.
Besides customers, employees, vendors and investors, you can add landlords to that list of stakeholders trying to figure out what Musk will do next.
Tesla last week closed 24 of its 129 U.S. retail locations in favor of online-only sales. But some of those stores are reopening this week in an about-face of Tesla's about-face from last week.
The automaker said in its latest annual report last month that it owes $1.63 billion in operating lease obligations — including $276 million in 2019 and $257 million in 2020.
These lease obligations don't just go away when a store is closed. They are contractual, bankable and enforceable debts to be paid. Unless it can renegotiate, the only way Tesla can break these contracts is by declaring bankruptcy.
Musk and Tesla might take pride in disruption, but commercial landlords typically don't. They like stability. They take a thoughtful long-term approach to their business before they invest billions of dollars on upscale real estate developments. These companies happily house Tesla stores and they expect to be paid.
One of them is longtime mall giant Taubman Centers Inc., based in suburban Detroit. Taubman, which specializes in high-end malls and shopping centers, houses seven full Tesla locations along with one temporary store.
CEO Robert Taubman, speaking at an industry event last week, said his company was already in negotiations with Tesla, presumably over new locations.
"So I'm not sure the [Tesla] staff knows exactly what to do, much less the rest of us," Taubman said, according to a transcript of the event in Hollywood, Fla.
Tesla leases prime "50 yard line" kind of locations in Taubman's malls with about 4,000 square feet. "It's a great tenant for our centers," he added. "It's a great destination. It's doing a lot of business."
But make no mistake: Taubman Centers will expect Tesla to fulfill its contractual commitments, particularly at a time when malls are struggling to keep viable retail tenants.
"They still have contracts and it's a company with a viable balance sheet," Taubman said. "We can argue that. But it's a company with a viable balance sheet that is going to owe a lot of landlords a lot of money."
So, given the absurdity of closing successful, high-visibility stores when you still have to pay prime rent, Musk changed his mind about some of the store closings over the weekend.
"A few stores in high visibility locations that were closed due to low throughput will be reopened, but with a smaller Tesla crew," Tesla said in a statement on Sunday. "In addition, there are another 20 percent of locations that are under review, and depending on their effectiveness over the next few months, some will be closed and some will remain open."
Taubman Centers reported Monday that two Tesla stores that closed last week — at the International Market Place in Honolulu and The Gardens on El Paseo in Palm Desert, Calif. — have reopened.