Property managers and real estate companies are seeing an increase in their commercial and retail tenants’ ability to pay rent again after accessing funding through programs including the Paycheck Protection Program.
West Michigan real estate companies generally report more normalcy financially, but they say it will only continue with additional access to financial aid through state and federal programs.
Grand Rapids-based Edmark Development Co. owner Mark Finkelstein said he has been in negotiations with tenants over the past few months identifying their needs. If a tenant needs rent relief one month, they may negotiate extending the lease length, he explained.
Edmark itself was able to access PPP loans to pay employees, keeping them on the payroll as rent income declined, Finkelstein said. The real estate company also received loans through the Small Business Administration, which also helped make up for the short-term decline in rent income.
Finkelstein says he has been “pretty fortunate” since almost all of his properties — which are 90 percent commercial spaces — were leased out and occupied at the beginning of the pandemic. Most of his tenants are maintaining sales, and some are nearly back to where they were a year ago, he said.
The need for additional financial aid for businesses will depend on how quickly everything can reopen, Finkelstein said — which right now is uncertain given a spike in COVID-19 cases, including in Michigan.
“People have been cooped up in their houses but have started going out to retail stores and restaurants,” Finkelstein said. “It’s been helpful getting people into the stores again.”
Pure Real Estate Management experienced a similar wave of uncertainty shortly after the stay-home order was issued, said company spokesperson Jason Wheeler.
Rent was collected as normal on April 1, Wheeler said, but then the Grand Rapids-based real estate company revised its budget to reflect an expected dramatic decrease starting May 1. The company was prepared to collect only half of the rent from residential tenants and no rent from commercial tenants.
“We don’t have a backlog of unpaid renters currently, we did create payment plans with some of them,” Wheeler explained. “The last couple of months have been good because federal funding and some different financial support pieces like unemployment and PPP kicked in and helped people pay their rent.”
May was the worst month for cash flow with low rent collections, he said, but then commercial tenants started to recover and received federal and state financial aid. The company also received more than $150,000 in PPP loans, which went to payroll expenses, Wheeler said.
The need for additional federal aid — including for property management companies — is needed since they are an essential service, he said.
“If property managers would have to close without additional federal or state assistance, you would have unmanaged buildings, which would be unsafe,” Wheeler said.
Conversely, Catalyst Development Co. LLC did not receive a PPP loan, said Patti Owens, vice president and managing director of the Kalamazoo-based property management company. But some of her tenants used part of their own PPP loans to help pay rent when they were shut down, which could put them at a risk of not having their loan forgiven. Catalyst manages about 1.8 million square feet of space, mostly commercial use.
“We have several commercial tenants and retail operations that did apply for the first round of PPP and all were given some relief through the CARES Act funding, but that was a long time ago,” Owens said.
John Wheeler, CEO of Wheeler Development Group in Grand Rapids, said occupied commercial spaces are particularly important in mixed-use buildings.
“Unless you have a healthy first floor, you’re not getting a good cash flow,” Wheeler said. “From what we’re seeing in downtown Grand Rapids, there’s not a whole lot of office tenants back to work, which means there’s not a lot of retail activity. At some point that converts to them asking for rent relief.”
Wheeler said the company has been working with lenders to help with cash flow, and local banks and lenders have been good partners in the process.
While Owens said she is glad the Michigan Economic Development Corp. is now providing grants of up to $20,000 for small businesses and nonprofits through the Michigan Small Business Restart Program, more needs to be done on a federal level.
“It’s unfathomable to me that we don’t have a national strategic plan we can roll out to everyone with guidelines and financial aid,” Owens said.
News coverage in the real estate and development section of MiBiz is made possible by advertising support from Rockford Construction Co. Inc. Rockford is a nationally recognized construction, real estate development and property management provider, serving West Michigan and beyond for more than 30 years. This advertisement has no effect on editorial consideration in MiBiz.