As multi-unit operators around the world are scrambling to make business-critical decisions about their rent relief options, we’d like to share what we’re learning from our clients and colleagues around the country.
Those planning to pay rent as usual in April are definitely the exception. Many of our clients, especially those with dine-in and entertainment concepts, have advised their landlords that they are not in a position to pay April rent and have requested specific relief. The most common request is a 3-month abatement.
In addition to short-term abatements, operators are asking or plan to ask landlords to consider:
- Deferring 3 or more months of rent, to be paid back over time
- Paying only CAM and percentage rent now, with the base rent waived until business improves
- Exchanging a period of free rent now for an additional term at the end of the lease
While these are portfolio-wide strategies, clients also are looking at individual locations and taking steps to protect their best performing stores and most favorable leases. In addition, this is a great opportunity to restructure the terms or negotiate lease terminations on poorly performing locations.
When engagement is initiated by the tenant, we’re finding that the “mom and pop” landlords are far more agreeable to rent relief than the larger real estate owners. However, we have been encouraged by the number of landlords proactively sending letters to their tenants offering their own rent relief plans.
If you haven’t yet begun negotiations, there has never been a better time than now to partner with your landlords. Start by sending your initial request in writing. Many tenants are citing “force majeure” in their appeals, which is an unforeseeable circumstance preventing them from fulfilling the contract terms. Personal contact also is important, so plan to follow up by phone. In this uncertain economy, the last thing landlords want is to lose good tenants, so you may just have the upper hand.
Also remember to touch base with your insurance broker to see if you have business interruption insurance and be sure to ask about any exclusions.
COVID-19 is an unprecedented event, but rest assured that Property Works is here to help our multi-unit community through this situation and into recovery. If you have questions, please contact Karla Finnegan by phone (678.704.4516) or schedule a time to talk here.