Coronavirus Tenant Relief Recommendations : How Beck-Reit is handling the Crisis
Coronavirus Tenant Relief Recommendations
By now it’s no secret that COVID-19 is necessitating lease amendments right and left. As both a property manager and owner in Austin, and with over 30 tenants in our portfolio, COVID-19 has ushered in an era of nonstop negotiation for Beck-Reit Asset Management. By now, we’ve seen a variety of rent abatement, rent deferral and lease amendment structures proposed, and a few agreements signed. In light of the last 2 month of negotiations, we present some recommendations for tenants seeking relief below.
First of all, we strongly recommend anyone who was previously unable to obtain an SBA PPP loan immediately contact their lender about re-applying in light of Congress’s recent refunding of the SBA EIDL and PPP loan programs. Up to 25% of PPP loan funding can be used to cover rent costs and still be completely forgiven.
Most Likely Request to be Granted: Ask your landlord to waive late fees.
If you’re waiting for your SBA loan to be funded or awaiting an approval decision, ask your landlord to waive late fees on June rent. As owners, we were able to defer our mortgage payments and associated late fees for 60-90 days, buying our tenant’s precious time to organize their finances ahead of rent payments.
Now, regarding deferral structures; Of all the negotiations we’ve seen over the past couple months, most boil down to one of two basic deferral structures.
Full deferral in exchange for extending the lease term by equal time.
Full or partial deferral for a period, paid back in monthly installments.
Our first successful negotiation looked like this –
Tenant pays ½ rent for May, June, and July.
Starting in August, tenant resumes full rent responsibility plus a monthly installment to cover deferred rent over the following 12 months.
Another successful agreement looked very similar, but the deferred rent repayment plan starts 3 months after the tenant resumes full rent.
From what we’ve seen on the ownership side, we recommend that tenants looking for relief come with their due diligence done.
Have proof of your PPP/EIDL loan application ready.
Have an explanation of how COVID-19 has impacted your business.
Have a plan – how will relief help guarantee you will fulfill the lease term after the shelter in place is lifted? Submit to Property Manager/ Landlord some sort of narrative description of the impacts of the COVID-19 situation on your business
Manage Expectations – a calculated approach open to compromise is far more likely to succeed than a blanket ask for 100% rent abatement.
Submit to your owner your request and following documentation and financials reports:
a summary of governmental assistance that the tenants have applied for or intend to apply for
PPP Loan documents submitted and proof of approval or denial
AND/OR
EIDL Loan documents submitted and proof of approval or denial
Plus
Financial statements and other financial information for 2019 and year-to-date 2020
Balance Sheet
P&L 2019
P&L YTD
Projections of financials through the end of 2020
A description of the tenant's plans and strategies for improving operations over the long term
A summary of the rent relief requested and a proposed repayment structure
Once an agreement has been reached, leases can be easily amended with one of the official Texas Realtors lease addendum documents released in light of COVID-19. Contact your broker to access these forms and determine which will best accommodate your agreement. Attorneys can draft amendments to your lease a well.
As the full scope of the economic effects of COVID-19 is beginning to be understood, the ability of landlords and tenants to work together to try and weather this storm will be one important factor in the ability of the economy to recover once the public emergency has abated.