WASHINGTON, D.C.– (By Dale King, Realty News Report) — The economic crisis wrought by the COVID-19 pandemic poses threats to commercial real estate and the tenants, including mom-and-pop businesses that are trying to stay afloat and struggling to pay rent.
Locating the “light at the end of the tunnel” can be challenging, according to property and finance experts at a webinar event organized by the Washington, D.C.-based Urban Land Institute. The horrific global health calamity has hurt all sectors – some more seriously than others.
Panelists shared insights on how to keep downtowns solvent— from rent deferral suggestions for small-scale landlords to how tenants and owners can benefit from the federal stimulus plan.
In most downtown shopping districts, the panel noted, 90 percent of retailers are small firms, not national chains. A downtown renewal expert, Cathy Sloss Jones, president of Sloss Real Estate and former leader of Birmingham, Ala.’s City Center Master Plan, said a new retail, entertainment, restaurant and theater center there, Pepper Place, has “some national businesses, but tenants are mostly local.” She said the home-grown companies “bring energy” to the plaza which fizzles when they are shut down.
“Pepper Place is a good model for Main Street” as opposed to Wall Street, she said. Picking up on her comments, Zachary Streit, senior vice president of George Smith Partners, offered this assessment: “Owners of hospitality businesses and owners of retail stores are the two hit hardest by the pandemic. Many are closed.”
Showing an interest in tenants and their predicament is important, said Sloss Jones. “We sent an email to them saying we know they are worried. We also have a committee looking into how we can position ourselves to come out of [this pandemic] in a very creative way.”
Christopher VanArsdale, managing partner at Heleos, based in the Washington, D.C./Maryland area, agreed. “We are reaching out to tenants to see if they have jobs and are OK, and put them in touch with help if they need it. We are working in real time, strategizing and brainstorming. There will be a big tsunami for our tenants.”
A “common thread” among all tenants is the need for information, said Glass. “It’s important [for property owners] to let all tenants know you are right on top of this and you are going to keep them informed. If there were ever a time to put up or shut up, now is it. You have to convey a sense of confidence.”
Panelists said tenants should also bring their woes to their landlords before they become overpowering. “Talk to the landlords face-to-face, or by phone. Tell them: Here is the situation, here is what I’m doing and here’s my plan. I want to send it to you.”
VanArsdale said his firm’s portfolio “includes moderate and low-income units, including some that are federally subsidized.” He expects no problems getting rent for the underwritten residences, but is concerned about collections from the market-rate tenants.
It’s “a little premature” to fret about what will happen with these properties, but he did say two-thirds of businesses in D.C. deal in the hospitality market which “has been utterly devastated.”
There was agreement among the panelists on one particular point: There is virtually no interest in renting property.
“Acquisition work has stopped,” said VanArsdale. “We can’t get anyone to visit our buildings for anything.”
Allan Glass, a distressed assets expert, partner at HATCHspaces, LLC and president and CEO of ASG Real Estate, said his firm has switched its primary focus from acquisitions to management. “The big question is, how long will this last?”