Locally owned businesses do not enjoy the financial cushion of a Starbucks or a Walmart. And there is no clear timeline for a return to normal.
As an intermediary to retail tenants and their landlords, Aaron Gilbert is seeing negotiations over rent payments take place amid the coronavirus pandemic.
The state-mandated closure of non-essential businesses has forced many Central Ohio retailers to close their doors or find a makeshift revenue-generating activity, such as restaurants shifting to delivery operations. With April rent coming due, some tenants will face the prospect of permanent closure unless they come to a relief agreement with their landlord. Many insurance contracts do not cover pandemics, says Gilbert, managing principal of the Gilbert Group, a retail-focused commercial real estate firm operating in Columbus since 1977.Information is critical. Read our latest reporting on the coronavirus response here.
Not all the region's restaurants have been able to shift to carryout or delivery. Locally owned businesses do not enjoy the financial cushion of a Starbucks or a Walmart. And there is no clear timeline for a return to normal.
“They may not be able to afford one month’s rent without being open,” Gilbert said, adding, “we have to treat each individual case differently.
“Our job as a management company has been talking to each individual owner, and we relay that to the tenant,” Gilbert said. “My guess is a lot of these are going to turn into a negotiation.”
For tenants that inquire, Gilbert Group is sending a rent relief assessment to document their hardship and request, asking questions such as to what extent the pandemic has impacted their revenue. One approach has been to exchange rent forgiveness in April, May and June for a three-month extension on the back end of a lease. Gilbert says one property owner is offering rent relief of 50 percent, with the other half amortized over the course of 2021, “which is a lot more than other landlords are doing.”
Property owners are first talking to their lenders, knowing their financial health hangs in the balance if tenants are unable to pay for too long. Landlords cannot rely on the usual pipeline of prospects to backfill empty storefronts as business development meetings are postponed, retailers freeze expansion and construction projects are paused.
“During these times, pretty much every retailer that we’ve been working with is on a wait-and-see approach,” Gilbert said. “Everything’s been put on hold.”Stay up to date with the region’s business scene. Subscribe to Columbus CEO’s weekly newsletter.
The issues will trickle down through the system, including to property managers.
“If they (landlords) don’t have money to pay their mortgage, then they don’t have money to pay management fees,” Gilbert said. “From my perspective, I’m exploring… what type of government (relief) opportunities are available.”
Gilbert says a cooperative relationship between tenants, building owners and property managers will be important. He recalls being disappointed about adversarial relationships during the financial crisis of 2008.
“I hope we do a better job of this than during the downturn—a better job of communicating,” Gilbert said. “As long as everyone’s communicating and trying to bend where they can, I think we can get to some sort of solution.”
Evan Weese is a freelance writer for Columbus CEO.