Irvine, CA

|

Rent collections have been the focus for landlords, but it isn'tthe only lease provision that owners should be considering.Richard Rizika of Beta recommendsa blend-and-extend approach to create efficiencies in operationsthat will ultimately help landlords get through the pandemic.

|

"Rent is of primary value but it is not the only lease provisionthat creates economic value," Rizika, partner and co-founder ofBeta, tells GlobeSt.com. "A blend and extend as well as other leaseprovisions that will enable greater flexibility to operateproperties more efficiently long term should be evaluated. Nothingis off the table, credit enhancements, use restrictions, cotenancy, property redevelopment rights and many other provisionscan but, not always, offset the value of rent."

|

The first step is open communication with tenants, and landlordsshould be proactive in reaching out. "Transparency is essential tobuilding trust, especially in times of crisis," says Rizika. "Beingproactive builds trust and displays character. Employees, vendors,tenants, landlords, lenders and investors are all interconnected.Each has another holding them accountable. Providing real timeinformation enables stakeholders to make more informed decisionsand communicate with their internal and external teams."

|

In addition, landlords should loop both lenders and stakeholdersinto the discussion, particularly if reduced cash flow will resultin deferred mortgage payments. "Each tenant has uniquecircumstances that create economic impact to its business," addsRizika. "Most loan documents will require that any agreements,deferrals or amendments with tenants, in particular those thatmodify rent or lease term, are subject to lender's review, consentand approval. The lenders may need time to assess each propertylevel situation and obtain internal approvals for loanmodifications. Lenders are often requiring the tenant request foroffer when evaluating rent forbearance. Landlord's thatlisten to each tenant's entire story and are able respond toindividual requests will enhance its success rate."

|

Stakeholders have largely been understanding and flexible aswell. "The majority of the stakeholders have been reasonable underthese circumstances. While there are certainly disagreements in theinterpretation of prevailing property documents, the majority ofstakeholders are working with integrity to identify thoughtfulsolutions.  Each has a common goal," says Rizika. "Whenthe tenant succeeds, the landlord succeeds."

|

Overall, most landlords and tenants have worked together tocreate solutions. "We have witnessed tremendous creativity toenable win-win solutions to a horrific but unforeseen scenario. Inthis case, neither the tenant nor landlord is at fault and arealigned to fight a common enemy," says Rizika. "They are fightingthe impact of  COVID-19."

|

The impact of this crisis is still being realized, and while thegovernment has worked to provide financial assistance, more couldbe needed. "It is too early to gauge the level of federal financialsupport that will be required," says Rizika. "The focus on theimpact of the economy living under a shelter-in-place" ordinance isthe first part of the recovery effort. However, we need to learnmore about the economic impact of returning to "the new normal".Setting up supply chains and rebuilding consumer confidence whenreturning to social gatherings will not occur overnight. Economicstimulus will likely be required through the entire process."

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.