NEW YORK CITY- Landlords are closing tracking their rent losses in the current volatile market environment. Many will have to endure “short term pain, for long term gain” to help tenants out financially — whether that means delayed rent, free rent or rental adjustments, Greg Kraut, CEO and co-founder of KPG Funds, tells GlobeSt.com.
“We really try to look at our tenants as our partners and we will do what it takes to help them. The truth is, all of us will need to take a haircut in this unnerving time,” he said.
The priority for KPG is the overall health and wellbeing of the local and global communities in which they operate. To ease the burden the current pandemic has caused on its clients, KPG is working with tenants to decide what is the best respective plan-of-action to take so tenants are not burdened with rent costs. “Their main concern should be the health and well-being of their employees,” Kraut said.
KPG has maintained communicative relationships with tenants, making sure lease agreements were accessible, which has lessened its operational exposure in coordinating with tenants as of recent. In tenant conversations, Kraut is hearing that collaboration is a missed ideal among employers and staff.
As concerns mount about delinquent rent payments, market chit chatter has centered around whether tenants will rethink their capital commitments to real estate, which is not a concern for KPG, who is still bullish on Manhattan office investments. Also, the firm is plotting capital improvement programs to implement environmental, social and governance standards.
Prior to the coronavirus, KPG registered 446 Broadway, an office property dubbed the “L ’Atelier,” as a Well Certified building for its human health and wellness design, construction and management practices. This included making several new air and water filtration systems available and improved lighting design, according to Kraut.
Kraut is a firm believer the office market will bounce back with more growth than before. “We will have almost no interest rates, a significant stimulus for businesses and consumers, and hopefully a new spirit of camaraderie between the public and private sector to get everybody back on their feet,” he said.
As far as what the market will look like when the coronavirus pandemic is over, KPG expects to see in the short term higher cap rate sales in Manhattan, which will make it a great time to buy light value-add, cash-flowing assets, Kraut said. “After the projected short term market dislocation, we expect to see more opportunities specifically in vacant and value-add in the office market as the transitional loan market gradually opens up along with increased consumer confidence and pent up leasing demand,” he added.