Page 39 - BusinessWest April 27, 2020

Real Estate
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this uncertainty, and they’re thinking, ‘let’s not do anything for a while.’”
As for existing tenants, while some are experiencing something approach- ing business as usual — Vincunas has a kidney-dialysis venture and an ambu- lance company in his portfolio of ten- ants, and they certainly fall into that category — many have been forced to close their doors because they’re not essential, and most others are hurting to some degree.
Therefore, property owners are working with these tenants, offering some deferrals on at least a portion of their rent, Plotkin explained, noting that there is what amounts to a ‘base rent’ amount in each lease, as well as an additional amount to cover operat- ing expenses, including security, clean- ing, utilities, and others.
“The base-rent amount can be deferred, not abated, for a period of time,” he explained. “But the amount for operating expenses can’t, because we still have to keep the lights on, and we still have to pay the bills.”
Extraordinary Times
This brings us back to ‘force majeure,’ a common clause in con- tracts that essentially frees both parties from liability and obligation when an extraordinary event or circumstance — such as a war, riot, hurricane, or flood — prevents one or both parties from fulfilling their obligations under the contract.
A pandemic certainly fits that description because some businesses have been forced to close by state decree, and almost all others have been negatively impacted in some way. It’s the force majeure clause that no doubt prompted those letters that Vincunas described earlier.
Dill said Colebrook is working with clients on a case-by-case basis, and
is working with tenants experiencing hardships. Like the others we spoke with, he referenced the trickle-up effect, or the ripple effect, that tenants not being able pay some or all of their rent will generate.
“When you go to the next circle
PPP
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larger, $480 billion relief package that also includes money for hospitals and expanded COVID-19 testing. Of the $310 billion, $60 billion will be set aside for smaller lending facilities, includ- ing community financial institutions; small, insured depository institutions; and credit unions with assets under $10 billion.
The Next Wave
Bankers hope for a smoother pro- cess getting the new funds approved.
“It got off to a rocky start and got
out ... if landlords have tenants who can’t operate and therefore don’t have the cash flow to pay rent and other changes, that immediately impacts landlords and their ability to meet their
sion of activity, just by the nature of a growing reluctance among people to leave the house.”
Conversely, this trend will negatively impact the retail side of the business,
kin. “In the case of office, we were see- ing some pretty good momentum right before COVID-19 — Springfield usually lags behind, but nationally, the office segment was doing very well. That has come to a complete standstill.
“And the fear amongst my col- leagues is that people are starting to realize that this home-work model works for them, and will this replace the need for office space?” he went on. “It remains to be seen how this is going to play out, but that’s a real fear out there; as leases renew, those tenants might be evaluating whether they need the amount of space they occupied. They may do a home/office model that would reduce the amount of space they need.”
Those we spoke with are certainly hoping that, while businesses get this ‘test run,’ as Plotkin described it, they decide there are advantages to having co-workers in one place.
“That collaborative model is impor- tant for innovation,” said Plotkin. “Hav- ing people together in close proximity offers the sharing of ideas and col- laboration in ways you can’t get with a Zoom meeting.”
Dill agreed. He said companies, and his is one of them, are experimenting with having workers dispersed and working from home, and some of the results are trickling in.
“It’s working pretty well,” he said. “But it’s not the same as having your people together, where they can meet casually, sit down in the same room, and solve a problem.”
Time and Place
Just what will come of the ongoing ‘test run’ of remote working remains to be seen.
What’s clear now, though, is that this pandemic is having a significant impact on the commercial real-estate market locally, and across the country.
The ‘trickle-up’ effect, as well as the trickle-down effect, are real, and as the crisis continues, the toll it is taking on this important sector continues to mount. u
George O’Brien can be reached at [email protected]
needs, and could use a lifeline, she told BusinessWest. “Without it, a lot of non- profits will go under.”
Sosik likes hearing that.
“I have to admit, it’s heartwarming to make a difference,” he said. “And I’ve heard some other good stories. There’s so much uncertainty — ‘I’ve put all my blood, sweat, and tears into my busi- ness; is it all over for me?’ To relieve that pressure has been a heartwarming experience for us.” u
Joseph Bednar can be reached at [email protected]
obligations, including debt service,” he explained.
While coping with the present, those we spoke with are also looking to the future, and they project that the pandemic will change the landscape in
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and it’s about trust. It’s about the free flow of information,
Work is a social enterprise — it’s about relationships,
a trend that’s already playing out on Main Streets and in malls across the country.
But it’s the office sector that has those looking down the road most con- cerned. Indeed, those we spoke with
and that’s a lot harder when people are disbursed.
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perhaps profound ways.
For starters, Vincunas believes that
the current trend toward more pur- chases being made online, with items — from groceries to books to sporting goods — being delivered to the home will continue, and it will drive need for additional warehouse space.
“So many things are drop-shipped,” he explained. “The warehouse and logistics business is due for a big infu-
a lot of bad press — I Googled and found maybe one story with a remotely positive angle to it,” Sosik said, before coming back to Riverside Industries. “This is a story about the good parts of humanity — the work Riverside does and our ability to play a small role in helping them stay alive. They do such incredible work, such necessary work.
“Riverside is a strong organization financially,” he went on. “It’s just that, when funding isn’t coming in, it doesn’t have a war chest to keep dipping into.”
As for Gentes, she’s hoping the loan helps her not only take care of employ- ees, but prepare them to return when
said it’s possible, and perhaps likely, that companies will learn from this pandemic that there are advantages to having some people working at home and fewer people at the office. And, eventually, this will lead to downsiz- ing and less overall demand for office space.
“The office market, and retail, are the two sectors of real estate that will be most impacted by this,” said Plot-
the governor says it’s OK to open the doors and restart person-to-person services.
“When we’re ready, we need our workforce to come back, and we need them to be ready to come back,”
she said, adding that the organiza- tion’s roughly 150 clients are called once a week, maybe twice, to make sure they’re OK. “We’re in the process of developing remote learning, and assessing what each client has avail- able to them in terms of technology to make this happen.”
Countless other small businesses and nonprofits have equally pressing
BusinessWest
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APRIL 27, 2020 39