Alright everyone. April 1st is here and rent is starting to come in. I know everyone in our shop has been clinching their buttholes to see how what March collections look like. At the moment we're only reporting ~2% our portfolio asking for rent relief and the majority of tenants seem to be paying. March isn't our biggest fear but rather what April or even May collections will look like should this drag out until then.
Just for background, we're a CA based MF operator with majority class A/B assets and locations. We do have a handful of deals that contain some student populations but so far they haven't been terrible. In talking with folks from other shops who've bought more tertiary markets (Vegas/Phoenix) at aggressive cap rates they're super nervous and understandably so.
Anyone out there already seeing massive hits in collections or dealing with tenant strike issues? If so any early strategies to absorb the pain?
We have also - fingers crossed - not experienced many asks for relief. I spoke with an office developer/landlord today and he said asks have been under what they projected. I'm less worried about April than I am for May and June though. 10 million people applied for unemployment the last two weeks. If these people lost their jobs due to the crisis, chances are they were setting aside money for April 1 already. A month from now, or two months from now, things will look a lot different as debts continue to pile up and priorities shift to things like buying food.
Something we're battling now is stupidity and misinformation. My heart goes out to people who lost their jobs, and we would 100% work with these people, but we develop private student housing as well and there are university presidents telling kids and parents to not go back to their off-campus apartments and to ask to be let out of their leases. Simply absurd.
Our initial reports are actually pretty strong, inline with normal collections by the 3rd of the month. Today is payday for a lot of our tenants so we anticipate a lot coming through by end of day.
Dunkin Donuts has sent a boilerplate letter from their CFO to landlords saying they won't pay rent.
As did Subway. I guess they have a force majure clause I their contract or they are using it as justification for not paying.
I don't get Dunkin though because many are still operating, albeit drive-through only.
According to the feedback we're getting from the legal community Force Majoure is not going to hold up in this case. Still, its going to get a lot of attorneys paid in the next year.
Nearly all of our retail tenants have asked for relief and we have been accommodating. On the office side, there have been less requests than initially expected but there have been a number of tenants seeing "what is out there".
We only have class A, urban high rise towers for MF. All of these guys are working from home and paying rent. No exposure to "workforce" housing.
On industrial large portion of the portfolio is asking for relief, some need it, some dont but all are requesting. I had a national 3PL tenant say they weren't going to pay rent even though they had clients inventory filled to the brim in their warehouse. Said go F off and lo and behold they are now going to pay April.
This is my worry too. If you we have credit grade tenants asking for relief, just for sake of asking, it's going to create an absolute shit show. I'm starting to feel this will be similar to the GFC where lenders who weren't willing to work with groups were essentially blackballed when the tide turned a few years later. I know for a fact there's certain lenders my boss refuses to work with because of the '08-'09-'10 scars. Will be interesting to see what lenders, tenants & owners can create goodwill and which ones will be become the posterchilds for greed. Looks like Dunkin and few others are paving the way though.
We are giving our retail tenants couple of months of rent relief and then amortized those back for the remaining lease term, at a pretty solid interest rate for us. Will help with the cap rate upon exit.
I assume no one is just completely letting the rent go, yet.
Office and MF seems okay. Industrial all good. Retail on the other hand is all hands on deck. Depending on the asset anywhere from 10% relief/deferral to +50%. Lots of negotiations with Lenders at the moment.
I think everyone is trying to find a balance between being reasonable and covering their own ass, ourselves included
We have had discussions with over 50 borrowers in all asset classes except hotel and been told that the rent relief requests are a lot less than expected. We experience the same thing in our equity portfolio. However, asset managers have received a lot more requests for May and June payments relief so I think more pain will come. How is everyone's experience with mortgage payments?
Eviction moratorium in NYC may be an absolute killer for affordable housing. Many of these tenants are going to be out of work, and thus unable to pay (with which I sympathize), but many others will take it as an opportunity to not pay rent for three months and trust in notoriously tenant-friendly courts to protect them. Or just walk away from 3+ months of arrears once the eviction moratorium expires.
Guarantee you there is a ton of buying opportunity in NYC MF come the summertime. I know there are plenty of landlords out there who don't have the cash reserves to survive for 3+ months at 50% collections or whatever it shakes out to be. Some of them are small landlords and I feel bad for, but lots of them are slumlords who sweep the cash out of their buildings on a regular basis.
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