Smart landlords are doing more than offering rent abatement to tenants during this unprecedented time of upheaval. Instead, they are hiring small business consultants to help tenants navigate federal loan assistance programs because rent abatement may not be enough to salvage a tenancy.
The coronavirus has brought the economy to a halt, shuttering businesses in Rockland County and beyond for an unknown period of time. Wuhan, China, where the virus originated, closed its society for nearly two months. New York City and its suburbs, particularly Rockland, is now a raging epicenter for the virus, and it is unclear when business will return to normal. It could be quite some time.
Landlords who don’t work with tenants risk the loss of the tenancy, lost investments in unamortized tenant improvements, extended lost revenue due to vacancies, incursion of additional broker’s fees and legal fees. A prior buildout, for example, may have no value to a prospective tenant.
Many landlords are providing rent relief during this pandemic, either through abatement or deferral. While rent generally amounts to between 5% and 15% of a small business’s operating costs, payroll, insurance, benefits and utilities dwarf that amount. Landlords can and should do more to assist tenants, particularly small businesses without finance departments.
A Smart Investment Now Will Pay Off Later
A savvy landlord should make an immediate investment in a small business consultant (SBC) to assist tenants in navigating various federal government options aimed to keep small businesses afloat during the pandemic and in its aftermath. The SBC, at the landlord’s expense, would contact every tenant and offer assistance with the SBA’s Economic Injury Disaster Loan Assistance program, which offers loans up to $2,000,000 (including its immediate $10,000 forgivable grant). Interest rates are 3.75% for small businesses and 2.75% for nonprofits.
The newly rolled out Paycheck Protection Program offers forgivable loans geared toward may business’s payroll expenses. Forgiveness is dependent on the small business using the funds for payroll, rent, utilities and other eligible categories, provided 75% of the funds are used toward payroll. Interest rates are 1% and the term is for two years. Employees must be maintained for eight weeks.
SBA Express Bridge Loans are available up to $25,000 for businesses that already have a relationship with the SBA. And, the SBA is offering immediate debt relief on many existing loans, including principal, interest and fees.
In addition to navigating SBA options, the SBC can help negotiate with leasing companies and insurers to defer or abate payments. Most vehicle leasing companies are offering some sort of financial assistance during the pandemic. Insurers are less likely to negotiate but companies like Allstate and American Family are already offering rebates to their insureds. Utility companies, phone and internet providers may also offer relief to small businesses but it’s a daunting task to go it alone.
Rent relief can be conditioned on participation in the program and cooperation with the SBC. After all, what good is rent relief to the landlord if the business ultimately shutters its store? Goodwill earned by assisting tenants during this crisis will likely have a payback long after the pandemic passes.
Rick Tannenbaum sells commercial investment property with Houlihan Lawrence and runs a small business consulting practice Phone: 917-689-1799 firstname.lastname@example.org