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Glen’s Garden Market owner Danielle Vogel is currently devoted to two things. She’s making sure her small, independent grocery store is stocked and sanitized so Dupont Circle neighbors can keep their refrigerators full as restrictions on public life ramp up to stop the spread of the novel coronavirus. At the same time, she’s doing what she can to keep her staff paid and sane. She’s started an emergency fund for her employees, sends them home with free groceries, and is offering online classes on budgeting.
In return, she’d like a little support from her landlord, Herman & Associates, Inc. While the D.C. Council passed emergency legislation Tuesday that prohibits commercial landlords from evicting their tenants during the public health emergency, there’s nothing compelling landlords to defer rent payments to a later date, slash rates by a certain percentage, or forgive rent payments altogether.
While restaurants and grocers typically have to pay for labor, food, insurance, waste removal, and many other issues that may arise, rent is their biggest fixed liability. With new restrictions choking their revenue earning potential, most operators report that rental assistance is the thing that could assure their survival. Some landlords are willing to budge, even if they’re small businesses themselves. But how much do they need to bend so small businesses don’t break?
Vogel first reached out to representatives from Herman & Associates on March 10, before the emergency legislation passed, to understand what would happen if she had to close her store. Her lease has a continuous operation clause, meaning her business could be in jeopardy if there are any disruptions. In emails obtained by City Paper, Scott Ogden replied that they could consider coronavirus a condition of force majeure (out of Glen’s control) “with the understanding that payment of rent would still be required.”
On March 16, Vogel reached out again with a plea. “During this period of truly unprecedented adversity, we need to work together to keep Glen’s open, so that we can continue to nourish the neighborhood,” she wrote. “Would you consider granting us a temporary suspension of rent, to help us through this terribly treacherous time? If you would be willing to suspend our rent until the bans on bars and restaurants is lifted, we could potentially pay you back for those months at the back-end of our lease term, by relinquishing to you the funds secured by the letter of credit that secures our lease. Would you be open to structuring a rent abatement period to help us stay in business?”
Vogel says her lease is secured against a $60,000 line of credit. “I said, ‘Look, I’ll release those assets to you at the end of the lease term. It’s in a bank waiting for you. I’m not going to not pay you, I just can’t pay you right now.”
Kerianne M. Brown, a representative for Herman & Associates, responded with a fix Vogel doesn’t feel goes far enough. Herman & Associates offered 90 days of half rent starting April 1, but after that period, Glen’s would have to pay full rent plus the repayment of the deferred monthly rent for 90 days.
“If I make it through this thing alive, I surely cannot afford to pay 1.5 times rent,” Vogel says. “We’re the only place people can eat right now in this neighborhood and you can’t be a mensch?”
Vogel wants her landlord and others to suspend rent for three months. “Outright rent abatement, meaning they don’t expect us to pay it back,” she says. “This is the way they can serve their communities so these businesses can feed our neighbors.”
Herman & Associates properties are primarily large buildings in downtown D.C. like the ones at 1120 Vermont Avenue NW and 1125 15th Street NW. Three representatives did not respond to City Paper’s request for comment on their decisions and how much of a financial hardship it would be to forgive Glen’s Garden Market’s rent for a couple of months.
Dan Koffman is a corporate attorney who works on real estate issues such as negotiating commercial leases. He thinks landlords who are in the position to do something should. “This is a point where landlords have to be amenable to waiving rent until such a point that this crisis is over,” he says. “Right now tenants are trying to decide between laying off employees and their other expenses. To the extent landlords can help them not make that choice, they’ll be doing a great service not only for the tenant but also themselves because long-term they’ll have a viable tenant moving forward.”
That’s exactly how Primrose‘s landlord feels. The District of Columbia Firefighters Association owns the building where the Brookland restaurant owned by Sebastian Zutant is located. The association occupies the basement and second floor. Association President Dabney Scott Hudson says he’ll do whatever he can ensure Primrose is still around after the public health crisis, even if that means forgiving rent “for three, four, or five months—whatever it takes.”
“We’re in a position that we can do that,” Hudson says. “We can offer him that. We want to keep them as a tenant. We want to keep them as part of the community. Everybody loves it. It’s starting to become a fixture. It would be bad for us to be that jerk and force something the community loves out.”
For Hudson it’s also about paying it forward. Primrose has been there for the association, offering them free food on multiple occasions for events like firefighter memorial day and a book-signing event for a widow of a firefighter who was killed in the line of duty. “He’s gone out of his way for us,” Hudson says of Zutant. “It’s the least we can do to partner with bars and restaurants and keep people employed.”
Thamee landlord Sam Chung has confirmed that he won’t collect rent in April or May, says the restaurant’s co-owner Simone Jacobson. She says that they’re in constant communication and notes that Chung has expressed that “they’re all family and will figure this out together.”
Chef Alex McCoy‘s landlords are also committed to doing whatever he can to ensure Lucky Buns makes it in Adams Morgan. Jim Ball bought the building when he was the former tenant. “What happens there on that corner in that neighborhood is a part of my life,” Ball says. He’s a small business owner himself and has been both a landlord and a tenant and says he knows what McCoy is up against.
“I’ve sent him a note saying, ‘Rest assured and be confident we will support you and work with you in any way we can to get you through this together,’” Ball says. “Adversity doesn’t build character, it exposes it. If you’re a decent person normally, amplify it more in this situation.”
Offering McCoy rent abatement, deferment, or forgiveness will come at a cost to Ball. That’s why he’s digging through business disruption insurance policies and exploring what loans are available. Some landlords, like Ball, are essentially small business owners themselves who will also be hit by the economic crisis. “I have a mortgage, I have health care, I use that money,” he says. “There’s property taxes, insurance, and operating expenses. If I lose the building, he loses the business.”
Landlords who also own their own bars and restaurants are in a unique position because they have empathy for both sides. Aung Myint, for example, operates several restaurants and pays rent to landlords. He’s also the landlord for Chaplin’s Restaurant in Shaw. “I’m relieving rent for Chaplin’s for the foreseeable future,” he says.
Another landlord with only a handful of restaurant tenants in D.C. spoke to City Paper on the condition of anonymity. We’ll call them Taylor. Consumers are starting to learn how thin profit margins are in the restaurant industry, and Taylor says small landlords stare down similar numbers. What they bring in on rent compared to what they pay out to banks in loan payments is not a lot of money. “If we say to our tenants we’re going to give you a break on rent and we don’t have the money to pay the loan, they’ll come and take the property,” Taylor says.
Taylor sees the city’s emergency legislation as a good start, but would like to see much more from the federal government, including moves to back up the banks and provide grants. “The aid needs to be in the form of grants, not loans,” Taylor says. “Loans won’t help much because most restaurants operate on a fairly tight budget and adding future loan payments to a restaurant’s normal expenses will swamp most restaurants.”
Some landlords say they support their tenants, but provided non-answers in terms of specific relief.
“These are unprecedented times and the hospitality business has been uniquely impacted,” adds Austin Flajser, the president and CEO of Carr Companies. “We’re working closely with our restaurant and bar tenants during this rapidly evolving situation to do what we can whether it be rent deferral or otherwise.”
Lanlord Lynn Yaudes, who has several properties in Petworth, is similarly vague. “The effect of this event is devastating across the board,” she tells City Paper in a statement. “Although the District government passed emergency legislation delaying tax payments for three months for some businesses and landlords, my partners and I are hoping that the recent plea by industry leaders to the federal government to create a recovery fund that would allow small businesses (like mine and my tenants’) to defer lease and loan obligations, does not fall on deaf ears.”
Later, she says she hopes her tenants will “persevere and prosper,” saying, “We all want to make it through this unprecedented hardship.” Asked if she would be deferring, abating, or forgiving April rent since Mayor Muriel Bowser just expanded the mandate outlawing on on-premise consumption at bars and restaurants until April 25, Yaudes did not respond.
While landlords who have a couple properties may not be in the position to help as much as they would like, restaurant and bar operators are wondering about some of the bigger commercial landlords and developers such as Douglas Development Corp., JBG SMITH Properties, and EDENS.
Asked what JBG SMITH is doing for its tenants, a representative sent the following statement: “At JBG SMITH, we understand that a dynamic retail environment is one of the main pillars of effective placemaking. We are communicating with our retail tenants to assure them that we are aware of the extreme difficulties they are currently facing. Given the rapid pace of developments related to the growing COVID-19 crisis, it is difficult to identify solutions at this time. That said, we are committed to working in lockstep with our retail partners to assess the best options for moving forward together.”
In an email obtained by City Paper, Douglas Development informed a hospitality industry tenant earlier this week that despite being in “uncharted territory,” tenants will continue to be on the hook for all of their rent obligations. The company urged the tenant to look into business interruption insurance, which City Paper has been reporting isn’t a likely source of relief because global pandemic is not covered.
“We would expect to see a reasonable split of the pain between landlord and tenant until the closure is rescinded,” says one Douglas Development tenant who asked for anonymity. “Our initial thought was 50/50, as a nod that some landlords are also small businesses. Douglas obviously can absorb more, but they are going to get hit from more angles too.”
“If outside grants become available, that may change the equation, but at the same time the last thing that seems appropriate is for a business to be forced to use that grant money to pay rent in full,” the tenant continues. “Also, doing any kind of rent delay, but owed later is just ridiculous. The landlords’ bottom line doesn’t change one bit while we’re in a crisis, and the tenants now have a wall of debt to overcome paired with months of lost revenue potential and other expenses to contend with. It’s offensive that is even a starting point for some landlords.”
Douglas Development leasing points of contact, Managing Principal Norman Jemaland Senior Vice President Matthew Jemal, have not returned City Paper’s request for comment.
Finally, City Paper has learned that EDENS offered at least five Union Market tenants two weeks of free rent. The market, like other hospitality businesses, is not operating at full capacity. It’s currently split into a grocery section and a pick-up and delivery area.
“Unfortunately we, along with most businesses inside the market, have completely shut down,” one tenant tells City Paper. “No pick-up or delivery sadly. It’s just not commercially feasible. Two weeks rent isn’t enough to survive, but better than nothing.”
Another tenant tells City Paper they haven’t received such an offer. City Paper reached out to EDENS for comment on whether all tenants inside Union Market will receive the same two-week reprieve and whether restaurant and bar tenants surrounding the market will be getting a break as well. Some of them include Masseria, Coconut Club, Stellina Pizzeria, St. Anselm, O-Ku, Shouk, and Blue Bottle Coffee.
City Paper will update this story if EDENS or Douglas Development responds.
“Both landlord and tenant have to have proactive discussions right now about what’s going on,” Koffman says. “Neither party in that relationship should put their head in the sand and hope the problem is going to go away. Now is the time for landlords to come up with solutions that will keep their tenants viable in the long term.”
Are you a commercial landlord who is offering your tenants a break? Contact LHayes@washingtoncitypaper.com.
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