So retailers just stop paying rent ...yep billions in profits but can't afford 1 months rent

[virtusa]

The reason why I brought it up is that one of my friends owns a Cici's Pizza Buffet Restaurant, and his landlord which is a big commercial real estate company, absolutely rejects that this situation is a force majeure situation since restaurants are allowed to operate via takeout orders. So there's the stand off.

It seems like a sensible solution would be to charge based upon a percentage of sales. So if the restaurant was doing $100k per month and paid $10k in rent before this mess, that's 10% of sales. So if they did $15k in sales this month from just takeout orders, they would only pay $1,500.

Will your friend also pay more rent if his sales are over $100K? Let's say 50% more if his business runs better than expected? Or does it only work in 1 direction?
Your friend could negociate a rent based on sales. I know a very big mall where all shops have to use a billingsystem provided by the mall owner. They pay rent based on their sales. The mall owner can see all the sales from each shop in the billing system.

 

[monee]

How about flipping the question around. Are the landlords so broke that they can't survive without one month of rent? And what does it say about a landlord who demands full payment knowing damn well the foot traffic in the tenant's store is non-existent because of factors outside anyone's control?

I guess a temporary rent adjustment could be done,but most likely the landlord will not get any break in his principal and interest payment or insurance or property taxes.
Doing this would be in the landlords best interest generally so hopefully when things return to somewhat normal the landlord won't lose too many tenants.
As far as crowded restaurants, I can't picture business ever getting back to normal,I wouldn't go.

 

[SunTrader]

I guess a temporary rent adjustment could be done,but most likely the landlord will not get any break in his principal and interest payment or insurance or property taxes....
.

Don't be so sure about that. Lenders adjust terms all the time.

 

[monee]

Don't be so sure about that. Lenders adjust terms all the time.

I have seen a lot of residential modifications,especially owner occupied.
Haven't seen any commercial property modifications,but maybe they aren't publicized.
Many banks offered interest rate modifications on commercial property mortgages when interest rates dropped so they wouldn't lose a cust in a refi.

 

[bone]

Oh we’re going to see all kinds of commercial modifications because most of these businesses are seeing zero cash flow for what - 4,5, maybe 6 months

Haven't seen any commercial property modifications,but maybe they aren't publicized.
Many banks offered interest rate modifications on commercial property mortgages when interest rates dropped so they wouldn't lose a cust in a refi.

 

[monee]

Oh we’re going to see all kinds of commercial modifications because most of these businesses are seeing zero cash flow for what - 4,5, maybe 6 months

Hopefully not as long as that.I think the restaurants with dining rooms are doomed.The takeout places that lease small spaces probably are not getting hit.

 

[SunTrader]

....I think the restaurants with dining rooms are doomed...

Are there any other kind?

Don't take this the wrong way but you seem either naive or ill informed.

 

[tiddlywinks]

Are there any other kind?

You've never heard of ghost kitchens?

 

[SunTrader]

You've never heard of ghost kitchens?

Yes I heard of ghost kitchens.

But not ghost restaurants.

 

[manonfire]

I think that SunTrader brought up an excellent point about “Force Majeur” lease provisions.

Does nothing to help us so far and we have a $500 a hour corporate attorney on retainer. Every landlord we are dealing with has made it very clear they intends to be paid. Most are deferring and clawing back down the road. We have two locations with Brixmor and our system has several. They requested an encyclopedia of information to consider modifications but have granted none and have sent default notices to anyone who did not pay April’s rent. Will be interesting to see if they get any bailout money. Even with partial deferrals I am paying over $50,000 a month in rents for spaces I can’t use. But we have been advised to avoid default at all costs. There has to be a backstop from the lenders on down. We have an extremely viable and successful business in normal times and I know there are groups in the franchise waiting to pounce and scoop up failed projects for nothing. This is going to get very ugly if this goes beyond May and there is no backstop. We can make it a few more months after that with a line of credit and capital calls but we need some seed corn as well. I will add that our franchise does not qualify for any ppp loans or other assistance.