A Beta Perspective 3.31.2020 - COVID-19

Our collective relationships with global, national, and local brands provide us with the insight and ability to assist by providing best practices on many business issues we are all facing. Many established brands find themselves in uncharted territory, never fathoming having to send their landlords letters indicating that sales would be impacted by as much as 50-100%. Mom & Pop operators are also fearful for their livelihoods and need more clarity in order to make informed, long term decisions. Most Landlords we are speaking with have explained that they are working on processing tenant requests. Many ‘Essential Retailers’ are reporting robust sales, but are facing logistical challenges while placing the greatest emphasis on keeping their employees and customers safe and healthy. In the restaurant category, franchisors are reportedly providing franchisees temporary waivers for royalty fees. Many restaurants with drive-thru windows are experiencing reduced sales while restaurants with delivery and pick up only options are being impacted even greater. On the flip side, we are seeing a few restaurants expressing interest in “prime  locations” even if it was not their strategy previously. Landlords are providing many different approaches to “rent relief” scenarios, but short term rent deferrals with tenants paying relief back over a short period of time with details varying on a case by case basis are currently the most common.  Regardless of the property or portfolio, there isn’t a formula approach on how landlords are responding to tenants. Responses are based on factors such as landlord debt, lease term, coupon vs market rent and so many other factors. In the lender community, debt is much harder to obtain. Rates have decreased while spreads have increased  and due diligence parameters have tightened. We are seeing examples of mortgage relief being provided from select lenders on an individual basis, as well as on a portfolio level. Several lenders are offering interest only payments for 30-90 days or even restructuring loans, in certain cases, which include life insurance companies and credit unions.While transaction volume has considerably decreased or delayed, we are still seeing leasing activity for select brands in the restaurant, fitness, financial, grocery, dollar store, health care, auto parts, education, footwear and convenience store categories. However, brands that continue to process leases are concerned about delays relating to governmental approvals, tenant improvements and travel restrictions. Surprisingly, construction is reportedly moving faster with a renewed sense of urgency and easier access in and around job sites that may have otherwise been more challenging to navigate prior to ”Social Distancing”.While much remains uncertain, one certainty is that this pandemic will pass and the consumer will emerge with a greater demand for socialization and connection. In the interim, we all need to work respectfully and intelligently to overcome short term challenges by implementing thoughtful long term and sustainable solutions.We are available to you as a resource today and always.

Respectfully, Beta