June 25, 2020 – The steep and widespread economic downturn sparked by COVID-19 has simultaneously tested developer-tenant relations and fostered a new wave of collaboration between CRE companies and their tenants.
Immediately after the state-wide shutdown of businesses began, Klein Enterprises formed a rent relief team consisting of executives that oversee the company’s leasing, property management and financial divisions.
“We recognized the impact to our tenants would be significant and long-term and we wanted to be properly organized to respond to requests and formulate appropriate responses,” explained Daniel Klein, President of Klein Enterprises.
“We are obviously navigating uncharted waters like everyone else, but the goal was to implement protocols and systems that would enable us to communicate effectively and directly with our tenants,” Klein added. “The situations of no two tenants are alike and our response is dictated by specific circumstances, product category and geographic region. The common denominator that links these cases is that they are tenants in the Klein Enterprises portfolio. That makes them extremely important and we will do everything reasonably possible to ensure their ongoing success.”
The Klein Enterprises marketing team continues to provide promotional assistance to companies – primarily retailers and restaurants that were severely impacted by the shutdown. Services included disseminating messages about restaurants’ carry-out and delivery programs, as well as finding creative ways to maintain online consumer traffic to retailers.
“Several of our tenants stepped up with generous donations to support local healthcare workers and hospitals, and we naturally became involved and assisted with promotional activities,” Klein said. “We need our tenants and feel a strong obligation to help them.”
When the Paycheck Protection Program (PPP) was announced, several NAIOP Maryland member companies offered assistance in the application process. In some cases, property management and accounting staffs handled every aspect of the PPP paperwork on behalf of their clients.
“Certain companies did not have the manpower to respond and others needed overall guidance, and we helped them every step of the way,” one developer explained.
MCB Real Estate began working closely with tenants of all sizes and making provisions for rent deferrals and payback programs to meet differing needs.
“Tenants and landlords have always been connected with symbiotic relationships, and this has never felt more apparent than during the past several months as we navigate the pandemic,” explained P. David Bramble, Managing Partner. “The truth is that we need these guys as much as they [need] us, and our company feels a strong obligation to help them during this period of stress.”
MCB distributes information weekly to educate tenants on disaster recovery funds and other loan mechanisms that can provide a financial bridge. “We take a particular interest in our smaller, mom-and-pop-sized tenants because many don’t have the luxury of a strong network of resources behind them — like a franchisee might have — to provide guidance and support,” Bramble said.
As businesses have started to reopen, MCB has pivoted to helping tenants apply new health guidelines to their operations. The company is also assisting some retailers with marketing support.
“We don’t know what the future holds for our tenants. This is especially true for the restaurants and gyms because we are unsure how consumers will react and respond to the new environments they are sure to find. Our company is maintaining a posture of flexibility and vigilance to execute new ideas as challenges arise in the future. Altruism aside, it is a win-win situation when our tenants are able to successfully emerge and prosper moving forward,” Bramble said.
According to an article in National Real Estate Investor, retail shopping center landlords experienced a decline in rent collections of as much as 40% from March through May but, as restrictions begin to lift and venues open, this number is quickly subsiding. Kimco Realty indicated that 35% of its tenant base requested rent deferrals and the company provided “lifelines” to smaller, mom-and-pop shops.
Developer-tenant relationships are being tested like never before, with both sides mentioning “full transparency” as the most important aspect to maintaining open and honest dialogues. As suggested in a recent Globe St. article, developers continually fight “the inaccurate assumption that landlords are fundamentally large corporate entities with strong balance sheets that can absorb these losses … more easily.”