Here to Help Series – Relating to Your Tenants Through Crisis

Photo By Victoria Comer

ULI Michigan Here to Help Webinar Series: Relating to Your Tenants Through Crisis

Thank you to all of our Speakers and Members who could join us for our Virtual Here to Help Webinar Series: Relating to Your Tenants Through Crisis on April 27th, 2020. The webinar was moderated by our own Senior Director, Shannon Sclafani. ULI Michigan was honored to have speakers from Schostak Brothers & Company, Friedman Real Estate and Miller Canfield: Tom Litzler, Executive Vice President and Chief Operating Officer at Schostak Brothers & Company; Scott Shefman, Executive Managing Director at Friedman Real Estate; and Brian Holt, Principal with Miller Canfield. Our discussions around the legalities of rent collection and tenant relations during times of crisis were extremely informative and eye-opening to the 48 registrants who attended this virtual event. As announced at the end of the webinar, ULI Michigan is going to be continuing the “Here to Help Webinar Series” every 3 weeks or so. Up next, “Local Governments + Local Deals” exploring how municipalities are looking to help move local deals and developments forward.

Four Takeaways From Part 1 of Our Webinar Series:

In case you missed the first part to our webinar series, check out these great takeaways and link for the full panel recording.

Click Here for the Full Recording

Visit Here for the Full Slidedeck

1. Rent Collection

During this unique and unprecedented time, all of our speakers unanimously agreed communication is the key to overcome our current crisis. According to Tom Litzler, Executive Vice President and Chief Operating Officer of Schostak Brothers & Company, tenants who have been proactively engaged in regard to rent fees have seen more flexibility by Schostak. This includes setting up a new payment schedule and deferring rents in exchange for extended lease agreements. Moving forward, as rent collection becomes more of a lift and tenants emergency funds become depleted Scott Shefman, Executive Managing Director of Friedman Real Estate, recommends taking a multi-faceted approach to collecting rent:

  1. One way to be considered for a rent deferment or abatement is the tenant should be in good financial standing
  2. Tenants should consider signing a PNA (Pre-Negotiated Agreement) – Ex. Landlord will grant a rent deferment if Tenant will extend the term of their lease
  3. Financial hardship should be demonstrated from the tenant by taking a questionnaire and/or providing some financials
  4. Tenant should show they have pursued funds from public stimulus programs, i.e. PPP or SBA loans

2. Tenant Resources

There are many ways programs currently available to assist small businesses and organizations, Brian Holt from Miller Canfield announced that they have developed an Emergency COVID-19 Resource Center to help facilitate available opportunities. The center has tutorials on how small businesses, nonprofits, and Foreign-Owned U.S. subsidiaries can apply for funding. In addition, Goldman Sachs has announced a new partnership with the City of Detroit committing $15M in loans to Detroit small businesses. And, if you utilize Facebook, they are currently offering $100M in cash grants and ad credits to small businesses during this challenging time. For requirements and application, Click Here.

3. Force Majeure

Simply stated, force majeure is defined as unforeseeable circumstances that prevents one party from fulfilling a contract. Unfortunately, mentioned by Scott Shefman of Friedman Real Estate, current lease agreements are lacking language that include pandemics. Under Force Majeure, remittance of rent is still expected. Of course, every case is different and what may be in one lease agreement may not be in another. Discussions are currently happening to improve Force Majeure language in leases moving forward that will cover wholesale shutdowns. What will the new standard look like? Brian Holt from Miller Canfield answered, “too early to say.”

4. Repopulation Plan

Getting ready for the new normal. Both Schostak Brothers & Company and Friedman Real Estate are preparing to repopulate their offices, as well as their managed facilities. In preparation for reopening they are planning to:

  1. Conduct high sanitization from professional groups
  2. Create new protocols for high touch areas utilizing the Clorox Total 360 Electrostatic Sprayer System
  3. Stock buildings with Personal Protective Equipment (PPE): Gloves, masks, hand sanitizer, etc.
  4. Increase the circulation of fresh air and replace air filters frequently
  5. Increase the use of janitorial staff throughout the day
  6. Design traffic patterns for common space areas to minimize cross traffic
  7. Limit seating in lobby’s and cafeterias, and reduce capacities in elevators and restrooms
  8. Encourage the reduction of visitors and vendors throughout the workday

Post opening of facilities, both companies are considering the recommendation from the World Health Organization and implementing the 3 T’s: Testing, Tracking, and Treatment. This will help keep buildings safe from the spreading of mass viruses. Tom Litzler notably mentioned, “Of course, there would be many HIPPA and Tenant regulations that would have to be identified first.” The New Normal has yet to be defined, but one thing is clear, the next six months are going to look unprecedently different compared to the last six months. We will get through it together with clear and open communication.

“Very helpful information! Thank you for putting this together ULI and thank you to our panelist.” –Kishon Harbert