MESSAGE
| DATE | 2021-01-20 |
| FROM | Ruben Safir
|
| SUBJECT | Re: [Hangout - NYLXS] Death of NYC businesses
|
“If you have a really good month, you pay more; a slower month, you pay
less,” he says. “You give up a little bit on the upside, but it protects
you on the downside.”
And while landlords have been leery of such deals for obvious reasons,
***new technology can provide a full accounting of a tenant’s
receipts.*** “They don’t trust each other, but we like to say we are
referees in the sandbox,” says Jay Norris, the CEO of Guesst, a
third-party sales verification platform.
Sometimes the lawyers have to get involved in a thorny lease
negotiation, of course. But William Mack, a Manhattan business attorney
with Davidoff Hutcher & Citron, says that in 90% of the cases, the
parties strike an agreement allowing mutual survival.
“Given where the commercial real-estate market is in New York City right
now, you’re better off making a deal, and there are a lot of creative
ways of doing that,” Mr. Mack says.
On 1/20/21 10:59 PM, Ruben Safir wrote:
>
> NYC Landlords and Retail Tenants Team Up to Survive
> Anne Kadet
> 7-8 minutes
>
> Kelly Wang’s new store almost didn’t survive the pandemic. Five weeks
> after opening Rue Saint Paul, her Brooklyn sustainable-fashion and
> beauty boutique, the lockdown forced her to close for three months.
> Because the store was new, it didn’t qualify for a federal PPP loan. “I
> was just panicking. It was my first commercial lease and I was nervous
> and timid about my options,” she says.
>
> Thank goodness her landlord—a retired woman who lives upstairs—said she
> didn’t have to pay rent until the spring lockdown ended. In July, when
> Ms. Wang asked about the back rent, the landlord said she’d only have to
> pay half, spread over the remainder of the lease.
>
> “We wanted to make sure Kelly had the opportunity to be successful in
> the space,” says Salvatore Licata, the landlord’s son. “And in turn, my
> mom hopefully would have a long-term tenant that she would benefit from
> as well.”
>
> Ms. Wang, meanwhile, decided against requesting additional discounts.
> Sales are strong and she’s able to pay the full $3,800 monthly rent on
> the 550-square-foot space, she says.
>
> For those of us concerned about our city’s mom-and-pop shops and retail
> strips, it’s heartening to hear about landlords and small-business
> tenants working in good faith to ensure each other’s survival. And it’s
> not as rare you might think.
>
> “Our strategy has been to go as far as we can to keep spaces occupied,”
> says Josh Goldberg, co-principal with his wife, Deborah Reich, and son
> Xan at the Goldberg Group, which owns several dozen storefront
> properties in Manhattan, Brooklyn and Queens.
>
> “The cost of replacing a retail tenant is very high and there is a lot
> of uncertainty as to how long the space will be empty,” says Mr. Goldberg.
>
> Given this reality, he’s offered many of his tenants—which include
> restaurants, drugstores, nail salons and dry cleaners—short-term rent
> reductions of 30%-100%.
>
> “I’d rather see a tenant open for business, paying nothing, than have an
> empty space,” he says.
>
> As a result, his vacancy rate is roughly 5% compared with rates topping
> 20% along many Manhattan retail strips.
>
> One option employed in some cases by the Goldberg Group that has become
> increasingly popular among city landlords during the pandemic:
> percentage of sales deals.
>
> These lease arrangements typically reduce the rent by 25%-100%. In
> exchange, the store or restaurant tenant pays the landlord a cut of its
> sales, often 5%-20%.
>
> Amish Tolia, co-CEO and co-founder of Leap, a business that rents
> storefronts that it then manages for various brands, is delighted with
> the percentage deals he’s negotiated with his Manhattan landlords.
>
> “If you have a really good month, you pay more; a slower month, you pay
> less,” he says. “You give up a little bit on the upside, but it protects
> you on the downside.”
>
> And while landlords have been leery of such deals for obvious reasons,
> new technology can provide a full accounting of a tenant’s receipts.
> “They don’t trust each other, but we like to say we are referees in the
> sandbox,” says Jay Norris, the CEO of Guesst, a third-party sales
> verification platform.
>
> Sometimes the lawyers have to get involved in a thorny lease
> negotiation, of course. But William Mack, a Manhattan business attorney
> with Davidoff Hutcher & Citron, says that in 90% of the cases, the
> parties strike an agreement allowing mutual survival.
>
> “Given where the commercial real-estate market is in New York City right
> now, you’re better off making a deal, and there are a lot of creative
> ways of doing that,” Mr. Mack says.
>
> In many cases, he says, landlords forgave the rent during the spring
> lockdown, or agreed to tack it on to the end of the lease.
>
> Many deals also include a renewable rent reduction for a specific
> duration—typically four to six months—or one tied to a government
> action, such as reopening indoor dining at full capacity.
>
> The Month Coronavirus Unraveled American Business - A WSJ Documentary
>
> 0:00 / 44:18
>
> 22:09
>
> The Month Coronavirus Unraveled American Business - A WSJ Documentary
>
> The Month Coronavirus Unraveled American Business - A WSJ Documentary
> When the coronavirus tore through industry, commerce and society in
> March 2020, the U.S. economy came to a screeching halt. Top executives
> relive the tough decisions they made as they scrambled to weather the
> storm. Photo Illustration: Adele Morgan/The Wall Street Journal
>
> The pacts typically create an agreement that both sides kind of don’t
> like, says Mr. Mack: “Everyone is sharing the pain.”
>
> On the bright side, the pandemic is creating opportunities for
> entrepreneurs looking to open new stores.
>
> While asking rents for storefronts across the metropolitan area fell by
> just 4.5% last year, according to information provider CoStar Group,
> that doesn’t reflect what’s happening behind the scenes.
>
> Commercial landlords don’t like to drop face rents on their properties,
> and some are prevented from doing so by mortgage agreements requiring a
> minimum rental income, says CoStar Associate Director of Market
> Analytics Rachel Johnson.
>
> So rather than dropping the rent 20%, for example, a landlord might
> offer a year’s free rent on a five-year lease, or fund a custom space
> renovation.
>
> Entrepreneurs scouting storefront spaces, meanwhile, tell me that many
> landlords are entertaining offers at a sharp discount to their asking price.
>
> Hemant Chavan, co-founder of Brik + Clik, a retailer offering
> merchandise typically available only online, says that in past years, he
> would have had a hard time nailing a first-class retail space in New
> York City, given his relatively unproven concept.
>
> But last fall, he landed a high-profile slot in an upscale Manhattan
> mall, and he is now closing in on a percentage-of-sales deal on a prime
> Midtown location.
>
> “They wouldn’t be talking to us before the pandemic,” Mr. Chavan says.
>
> He then offered a view that sounds nutty, but may very well prove
> prescient: “It’s a very good time to get into retail.”
>
> Write to Anne Kadet at Anne.Kadet-at-wsj.com
>
>
--
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