It is unclear how long shelter-in-place restrictions will last, and the longer they are in place, apartment rent collections will be insecure. Apartment owners are running analysis to determine break-even and cash-flow trends to determine exactly where low rent collections go from being an annoyance to a problem.

For apartment owner Bainbridge, the break-even point is 90% rent collections. The figure accounts for new developments, which have struggled to lease during the pandemic. "We have a lot of new developments that are in the lease-up process, and they really didn't have full occupancy to support a global pandemic where we aren't leasing or occupying units at the rate that we projected," Dana Caudell, president of property management at Bainbridge, tells GlobeSt.com.

Bainbridge started running cash-flow analysis at the beginning of the pandemic, and expects to have strong cash flow through the summer, assuming collections stay at 90%. "If it dropped below that, we would have to reanalyze," adds Caudell. If rent collections fall, the apartment owner can do other things like expense savings.

Shelter-in-place orders will likely be lifted on a market-to-market basis, so Bainbridge is remaining flexible in working with tenants. It is also making plans to have rent collection challenges through the end of the year. "We know that there is not going to be a button that someone pushes and the whole economy opens," says Caudell. We run 20,000-plus units, and we don't know when each of the markets are going to open up."

The company has done most projections, however, through the end of summer. It expects May and June to be the worst months. "We did a rent deferral program to defer April rent and May rent, and we are really trying to catch up in the summer months," says Caudell. "We know that this will be very submarket and region specific based on when the economies are going to start opening up. We are going to be very flexible on working with residents."

In addition to rent deferrals, Bainbridge has also had to close onsite amenities, like fitness centers and communal areas. "Residents have been very understanding," says Caudell. "We were able to answer a lot of questions before they were asked, and most tenants understood that living without the amenities like the fitness center for 60 days is the lesser of two evils. The rent was really the big question."

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What Is the Break-Even Point for Apartment Owners?

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