Thoughts From One Landlord On Doing Right By Retail Tenants
I used to joke that my healthy diet of caffeine and alcohol is based on my desire to support our neighborhood bars, cafes, and restaurants. Working at a Boston-based family real estate company, I’m fortunate to call some of these businesses our tenants. But this past weekend it became clear that squirreling away gift cards and ordering take out would not be enough.
Our lens at Hudson Group may be unique since our small, but meaningful portfolio includes a mix of properties across different life cycles: restaurants/cafes, office, retail, apartments, and an active development project. We have, for better or worse, put most of our eggs in the basket of downtown Boston, specifically Chinatown and the Leather District.
Though we like to talk about our latest development project, our bread and butter is the income based on a handful of commercial condos. My dad and I have been speaking and texting constantly this past week, our version of investment committee. As it became clear that we are not in a short term economic hiccup, we planned to stock up on coffee, buy restaurant gift cards, and push resident traffic, anticipating that our F&B tenants would suffer the most.
By midday Sunday we decided to reduce the rent of our food and beverage tenants for the next three months. I had questions: would the city/state impose a shutdown, could they collect insurance, could we ask them to use these funds to pay for their employees? Would our joint venture partners follow suit?
My dad, who has seen his share of wars and financial crises, reminded me that he hadn’t witnessed anything like this, and that my questions didn’t matter right now. We would find out in the days ahead what more can be done, but had to take immediate action. If nothing else, I thought, these business owners may get some relief for one Sunday evening.
I called our restaurant and café tenants. They were appreciative, and though I hadn’t expected a transformation, their worried tones persisted and made me wonder whether this would be enough.
I turned to Instagram and Twitter, and with the help of friends like Graffito the response was outsized as compared to our small social footprint. (As the head of development, asset management, accounting, etc. I haven’t prioritized building up our social media presence).
While I had spent Saturday watching the social stream pour in and convincing myself that we must eat out to support our community, Sunday’s tone had shifted. Chefs and other industry leaders were calling for a restaurant shutdown, the Governor was preparing another statement, soon private donation pools were launched for restaurant workers.
The small splash we made on social was not a catalyst but it was telling of the current moment: A Business Development Company advocated for commercial lenders and utility providers to step in. A friend asked if our rent forgiveness would be enough – I didn’t know, of course, but hoped that other stakeholders would take additional decisive action.
And so, I offer our peers in real estate and our entire community the same question:
What can you do right now? You may have questions about protocol or the actual impact of your action. What is clear is that we’re in a worldwide health crisis and specific, local actions must be taken now.
This community crisis demands a community response. And yes, if you have some coffee and wine stashed away, that may come in handy too.
What might be done?
• LANDLORDS: Suspend or forgive rent (ideally commit to forgiving a meaningful percentage immediately instead of kicking the can on payment).
• STATE GOVERNMENT: Commit to drastic actions such as suspending all payments to government including sales, meals and excise taxes, mortgage payments, etc. Suspending real estate taxes due on May 1 this year can have a meaningful trickle down from landlords to retailers and their workers.
• UTILITIES: It’s not too early for public and private utilities to start communicating their flexibility on payment schedules. This is a big monthly nut for retailers and should be one less thing to worry about right now.
• STATE / CITY / LOCAL BUSINESSES: Set up private and public funds to benefit hourly workers who are out of a job right now.
• WHAT ELSE? Keep thinking, talking, and asking questions. We’re going to get through this together.
– Noam Ron, Hudson Group