SoFla landlords, retailers brace for coronavirus impacts

Retailers are seeking rent breaks and federal, state and local aid to help survive closures

TRD MIAMI /
Mar.March 18, 2020 05:09 PM
From left: Scott Sherman, Scott Sandelin, Felix Bendersky and Niesen Kasdin

From left: Scott Sherman, Scott Sandelin, Felix Bendersky and Niesen Kasdin

Commercial landlord Scott Sherman is trying to get ahead of potential losses and hardship South Florida retail tenants are facing. His Miami-based Tricera Capital is giving them the ability to defer rent payments for the near future, as bars and restaurants are forced to close and the fallout from the coronavirus pandemic unfolds.

Across South Florida, from Miami-Dade County to Fort Lauderdale and Boca Raton, counties and cities enacted emergency measures this week to shut down restaurants, bars, nightclubs, movie theaters, gyms and other entertainment-type venues to help prevent the spread of the novel coronavirus.

“It’s a tough balancing act for a landlord,” Sherman said. “The tenant wants free rent and that’s great, but the landlord has to pay property taxes and the mortgage.”

Tricera Capital, which owns about 500,000 square feet of South Florida retail including in Miami’s Design District and Fort Lauderdale’s Flagler Village, is among many retail landlords dealing with the widespread impact on the real estate industry.

Local stores such as Books & Books in Miami as well as national retailers like Nordstrom, Macy’s, Bloomingdales, Saks Fifth Avenue, Neiman Marcus, Williams Sonoma and Pottery Barn have announced they are closing their stores during the pandemic.

As a result, retail and office tenants are expected to ask their landlords for rent breaks — if they haven’t already, brokers said. Miami-Dade County’s decision to halt evictions last week included evictions of commercial tenants, a spokesperson said.

The impacts of the shutdown on South Florida’s economy, which is heavily dependent on the hospitality industry, including hotels and cruise lines, could have a domino effect on all facets of residential and commercial real estate.

“This is going to be a huge blow to the industry and to those folks that don’t have a serious balance sheet with cash on it. Even if landlords help, it will be a huge problem,” said Scott Sandelin, a retail broker with Marcus & Millichap.

Sandelin and others expect many tenants won’t be able to pay their rent come April 1. “I just hope it’s not too long because most businesses do not have that much staying power in the absence of help from the government and from the landlords,” Sandelin said. “I certainly think it will catapult the businesses that cater to delivery and takeout.”

Miami restaurateur and chef Michelle Bernstein and other local chefs posted videos on social media directed at Florida Gov. Ron DeSantis and Miami-Dade Mayor Carlos Gimenez.

“We need help from the city and state to survive,” Bernstein wrote. “We need economic relief, an immediate response by you that would provide much-needed assistance to allow us to keep our sales tax and county tax, which is due on March 20. It would help us all stay afloat.”

Felix Bendersky, restaurant broker and owner of F+B Hospitality, called the emergency orders shutting down restaurants and bars “a real reality check” for restaurateurs.

In attempts to stay afloat, chefs are looking to rent their restaurant kitchens as ghost kitchens and commissaries as they pivot to delivery and takeout only. Pink Pie, a pie and coffee shop in Wynwood, posted on Instagram that it would be selling its pies out of Batch, The Cookie Company’s Fort Lauderdale location, as a “pop-up.” Remaining open for delivery in Wynwood “does not make financial sense for us,” Pink Pie said on the social media platform. It will be closing its Wynwood store temporarily.

 
View this post on Instagram
 

A post shared by PINK PIE Ⓡ (@trypinkpie) on

Bendersky and others said that if businesses can hang on past the 90-day mark, there will be opportunities. But a number of restaurants will be forced to close permanently. “You adapt or you die,” he said. So far, restaurants in demand for delivery and takeout are within the three-mile delivery zone of highly populated areas, he added.

Luis Gazitua, a partner at JAG Insurance Group, said a number of restaurant owners want to know if an interruption in business is covered by their insurance. His answer? Probably not.

Gazitua, whose family owns the chain of Sergio’s restaurants in Miami-Dade, said diseases and pandemics aren’t typically included in coverage.

“We’ve spoken to different attorneys. It will be interesting to see how they respond. The problem there is, [is] insurance companies have never really charged for that,” Gazitua said. “It’s going to be catastrophic.”

Attorney Neisen Kasdin, managing partner of Akerman’s Miami office and a former mayor of Miami Beach, said that lenders and the courts will likely be reluctant to foreclose on businesses. For landlords, kicking out tenants also makes little sense, Kasdin said.

“If you are a landlord and your tenant is a restaurant that has to close now, what are you going to do?” said Kasdin. “You are not going to be able to put another tenant in there.”

The Trump Administration is seeking to boost the economy through a stimulus package of between $850 billion to more than $1 trillion, according to media reports. The package could include $200 billion to $300 billion in direct relief to small businesses and $250 billion could be direct payments toward Americans, according to CNBC. The Federal Reserve also cut its benchmark interest rates to near zero to stimulate the economy, and plans to purchase at least $700 billion of assets.

In Florida, Gov. DeSantis is launching an emergency bridge loan program to support small businesses impacted by the virus. The program, managed by the Florida Department of Economic Opportunity, will start accepting applications on Thursday through May 8. It will offer short-term, interest-free loans totaling up to $50 million.

Yet, some wonder if these moves will be enough to help prevent an economic bloodbath.

“Our whole economy is pretty much service. I would say we may be more affected than in China, just because it’s all services,” said Scott Barnhart, a professor of finance at Florida Atlantic University. “It’s pretty dramatic.”


Related Articles

arrow_forward_ios
Map of priciest condo sales and Icon South Beach (Credit: Google Maps and Gzzz via Wikipedia)

Miami condo sales volume nosedives in mid-May

Miami condo sales volume nosedives in mid-May
110 Atlantic Avenue, Scott Schuster (Credit: Google Maps)

Healthcare entrepreneur sells Palm Beach home for $8M

Healthcare entrepreneur sells Palm Beach home for $8M
Miami Beach Votes To Reopen Pools (Credit: iStock)

Miami Beach votes to reopen pools in resi buildings, but needs the county to sign off

Miami Beach votes to reopen pools in resi buildings, but needs the county to sign off
(Credit: iStock)

Home sales dropped big time in South Florida in April

Home sales dropped big time in South Florida in April
Miami Beach Mayor Dan Gelber and City Manager Jimmy Morales (Credit: Nicholas Hunt/Getty Images, and Mike Coppola/Getty Images)

Miami-Dade targets June 1 opening date for hotels, beaches following Miami Beach vote

Miami-Dade targets June 1 opening date for hotels, beaches following Miami Beach vote
Seritage Growth Properties stopped construction at Esplanade at Aventura because of the pandemic, and now Mexican restaurant Carolo wants to break its lease.

Esplanade at Aventura work stoppage leads to lawsuit by Mexican restaurant

Esplanade at Aventura work stoppage leads to lawsuit by Mexican restaurant
(Credit: iStock)

Luxury condo prices drop in downtown Miami amid lockdown

Luxury condo prices drop in downtown Miami amid lockdown
Anabella Smith, Louis Archambault, Scott Goldstein

“There’s a lot of concern about going back to an office”: how companies are returning to work in South Florida

“There’s a lot of concern about going back to an office”: how companies are returning to work in South Florida
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...