March 25, 2020 – 1:50 PM PST
To All Our Valued Clients:
At RiverRock Real Estate Group, we are closely monitoring the day-to-day impacts of the COVID-19 outbreak and the policies enacted by government leaders that influence our work in the commercial real estate community. We’ve also spent time reaching out to peers to best understand the challenges, opportunities and new best practices.
Following is a collection of information that should be of help to all of us:
Rent Relief Requests: This week saw a noticeable increase in relief requests and we expect it to continue as this crisis evolves. Many firms note that they are still finalizing rent relief plans and acknowledge this is a fluid situation and will most likely continue to be reevaluated.
Retail – One significant owner announced an optional rent deferral program that, as of April 1, will allow retail tenants to postpone rent for 90 days. That money can be paid back over 12 months, interest-free, starting January 1. Another prominent retail owner is offering 50% deferred rent relief.
Office/Industrial – Most of the office and industrial owners are referring tenants to their business interruption insurance and government programs, including the recent $2 trillion economic stimulus bill. The challenge is that nobody knows if business interruption will help as it all comes down to what the insurance commissioner does.
All – While most owners are willing to look at requests case by case, they want to see financials and understand what other measures employers are taking vs just looking to the landlord. While government relief and SBA are viable options, turnaround time is expected to be slow. Most owners are waiving late fees and interest at this point. With the court not processing 3-days and a stay on evictions, serving legal notices doesn’t seem to be a viable option at this point. Approximately 50% of the landlords have sent letters to tenants on relief and are hoping it doesn’t create a landslide of additional requests.
Building Operations: Everyone is keeping operations status quo for now.
Engineers have either been redeployed to address other issues within the portfolios/property and most have been placed on staggered shifts, one week on and one week off. All have continued to pay the engineers at this point.
Janitorial has been kept on with no adjustment yet. We all realize that as this drags out, we need to start considering the viability of cutting back hours or reducing labor. There’s only so much to clean in a vacant building. For properties that house “essential services,” we’re obligated contractually to provide service and to maintain the common areas as well. Since this is a new area and not addressed in service contracts, we’ll need to work with the providers when and if we want to reduce service levels. It’s worth noting that the labor unions have already reached out to owners/managers requesting that we keep hours and service in place which was expected.
Security is an “essential service” as well and one that most are keeping in place.
Utilities – Where possible we’re trying to reduce HVAC, if we know a floor in an office building is vacant and the system is capable, we’re reducing air. We’re also securing elevators to lock off vacant floors and allow access only by keycard. Most office building are on card access only, even when partially occupied and with a security guard. This is being done to safeguard the property as well as those few customers that remain in the building.
Most of the industry, RiverRock included, has moved to a remote work environment for corporate and regional offices. Onsite offices are being staffed with skeleton crews on a rotating basis.
Signage is being used at the entrances of properties asking anyone who shows signs of coronavirus not to enter. Elevator signage is being posted asking that only one person at a time utilize the elevator to assist in social distancing.
At RiverRock we are requiring weekly inspections of the properties to be made and documented. Properties in remote areas are inspected every other week. We’ve stressed the importance of maintaining vigilance on the properties when our customer population is absent and the property is exposed.
Similar to management teams, accountants have been equipped to work remotely and are in constant communication with the managers. All receivables and payables are being processed on schedule and there will be no delays in reporting deadlines.
As the situation continues to evolve and we maintain contact with our peer groups we’ll keep you updated on what we hear. In the meantime, should you have any questions please feel free to contact me at any time.