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How The Pandemic Has Changed Apartment Building Amenities

While slow to embrace major changes — some developers say they’re hopeful that pandemics will not be a concern when their projects finally open in 2023 — developers are making tweaks in the face of the COVID era.

They’re adding cabana-lined roof decks, repurposing lounges as outdoor schools and switching out built-in couches for more movable versions to facilitate social distancing, as well as adding ventilation systems that are deluxe even by the standards of luxury apartments.

“We haven’t had drastic changes,” said Whitney Kraus, the director of architecture and planning for Brown Harris Stevens Development Marketing, but added, “I don’t think amenities will ever go back to the way they were before.”

Some upgrades will likely appeal whether a disease is rampaging or not.

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How Covid-19 Is Changing Leasing Agreements For Businesses

Experts say changes are on the horizon to the decades-old language in retail and restaurant leases as a result of the Covid-19 pandemic.

New leases are being written with substantial changes, particularly in regard to provisions that provide relief for tenants that are unable to fulfill their contract obligations because of circumstances out of their control, such as a natural disaster or pandemic.

Steven Silverman, a shareholder at Miami-based Kluger, Kaplan, Silverman, Katzen & Levine PL, who deals in lease negotiations, said the language in these provisions is often broad, and landlords did not interpret them to apply to shutdowns caused by a pandemic.

As a result, many new leases signed over the last few months include more specific language, Jaime Sturgis of Fort Lauderdale-based Native Realty said.

“Moving forward, there’s going to be a little more clarity,” he said. “[The provision] is broad by design, so I think moving forward more clarity and more specific language addressing these types of situations.”

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Wary Of Another Shutdown, Retail Landlords Sweeten Pot For Tenants

Some retail landlords are offering additional concessions to tenants in case the government mandates another Covid-related shutdown.

Landlords are including language in new leases that allows retail tenants to defer part of their rent if the government requires store closures, according to the Wall Street Journal. Many insurance policies did not cover pandemic-related losses, leading landlords to find new ways to keep struggling tenants in place.

In one case, EastBanc, which owns and operates 25 retail properties in Washington, D.C.’s Georgetown neighborhood, has offered to cut tenants’ base rent to 50 percent if the city forces a shutdown, the Journal reported.

In Detroit, development company Bedrock — created by billionaire Dan Gilbert — is allowing tenants to forgo their base rents if they provide the company with 7 percent of gross sales.

Throughout the pandemic, retail landlords have largely offered deferrals to tenants whose businesses have been decimated who were unable to pay rent. But other landlords have sued and sought to evict some chain retailers over millions of dollars in unpaid rent. Meanwhile, landlords are seeking to exclude pandemics as being labeled force majeure events — act of God — which they argue would make it more difficult to get financing if that language is included.


Source:  The Real Deal

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Restaurants Can Reopen Dining Rooms In Miami-Dade Starting Next Week

Restaurant dining rooms in Miami-Dade County can reopen beginning on Monday, more than a month after restaurants were ordered to close indoor seating due to spiking coronavirus cases.

Miami-Dade Mayor Carlos Gimenez said restaurants will be able to operate at 50 percent capacity indoors, as long as tables are spaced at least six feet apart with a maximum of six people per table. He said the decision came after consulting with medical experts and the White House.

The countywide 10 p.m. curfew will remain in effect. Gimenez said that the county will revisit pushing the curfew to 11 p.m. after Labor Day weekend. He also added that he plans to keep the beaches open, though that can change.

Individual cities may be stricter with the reopening guidelines, but cannot be less restrictive than the county.

Gimenez called it the “first step” and said “we must keep our guard up.”

The announcement comes as the uptick in coronavirus cases begins to slow in Miami-Dade. The 14‐day average positivity rate in Miami-Dade is 10.29 percent as of Tuesday, according to the county’s New Normal dashboard.

To date, Miami-Dade has had 153,385 cases and 2,277 deaths. Statewide, 605,502 positive cases of Covid-19 have been reported, and nearly 11,000 deaths, according to the Florida Department of Health.

Gimenez said restaurants will be required to keep doors and windows open if possible, and keep the air conditioning running. Diners can only remove their masks once food and drinks are present on their tables, and must wear masks when they leave their tables.

Countywide, a number of restaurants have either closed permanently, been unable to offer outdoor dining, or have decided to close temporarily due to the effects of the pandemic on their businesses. Shortly after the mayor announced restrictions in July, restaurant owners protested that decision.

Casinos and bars will remain closed, though Gimenez hinted that casinos may be able to open sooner than bars.


Source:  The Real Deal

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Webinar: South Florida Retail Outlook: What is the Impact of COVID-19 on South Florida’s Retail Sector?

Last week, Shopping Center Business and Southeast Real Estate Business hosted “South Florida Retail Outlook: What is the Impact of COVID-19 on South Florida’s Retail Sector?

Listen as a panel of retail experts discusses their gameplans: how they are working with tenants and their employees as the industry seeks to adapt. Hear about attitudes towards loans, rent reductions, property value, next steps and more.

See a list of some topics covered and their timestamps below:

(07:00): How are restaurants and experiential tenants faring?

(09:29) Adapting for the challenges of COVID-19

(17:28) Retail rent trends over the next 180 days?

(24:32) What can owners do today to position themselves to succeed?

(36:00) When might we start to see real loan defaults and real distressed assets?

(42:55) Lessons learned from 2007-2008 financial crisis

(53:56) Decisions made in the pre-COVID-19 world that have carried over well into our current environment

Click here to access the complimentary webinar recording. Hear how South Florida retail professionals are approaching industry challenges and evolving to meet the needs of retailers.


Source:  Shopping Center Business

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How Retail Leases Will Change In A Post-COVID World

In the post-COVID world, retail leases will need to change and adapt. Several provisions will need to be changed and added to account for the possibility of a pandemic and the mandated shuttering of businesses. This includes adjustments to force majeure and insurance provisions as well as use of common areas, common area caps, alterations, and rules and regulations, all of which should be adjusted to reflect the new market.

“These modifications will likely put landlords in a better position to respond and react to the new normal that will exist until a vaccine is developed and widely distributed,” Dan Villalpando, a partner at Cox, Castle & Nicholson, tells

In regards to the common areas, most leases are currently too broad to account for usage and social distancing. This is one of the first areas that will need to be addressed in leases.

“Landlords should make sure that the language in the Control of Common Area provision found in most leases is broad enough for landlords to respond and adapt to pandemics and similar emergencies, such as by installing items to improve health and safety conditions and making other, perhaps currently unforeseeable, changes to the common area to comply with recommendations or requirements of the Center for Disease Control and Prevention, World Health Organization, or state or local authorities,” says Villalpando.

In some instances, common areas may need to be converted into dining and retail spaces to accommodate social distancing guidelines, and landlords will need to comply.

“As a result of physical distancing and store-capacity requirements, tenants may need the right to use portions of the common area (like sidewalks) for customers to form lines outside the stores,” says Villalpando. “A landlord should not decline a request by a tenant to use the common area for queuing. Nevertheless, a landlord can condition such use upon tenant fulfilling certain prerequisites, such as giving the landlord prior written notice of such intent and the expected duration, peak times, and specific area the tenant wants to use. Additionally, landlords may want to specifically require that the tenant cleans up the area used for queuing on a daily basis.”

In addition, these changes to common areas do not apply to increase caps, according to Villalpando.

“In leases where a landlord provides a tenant with a cap on increases in common area costs, such cap does not typically apply to uncontrollable costs,” he says. “Following COVID-19, landlords should consider expanding the list of “uncontrollable” costs. For example, costs associated with a pandemic and the related health or safety measures the landlord takes, for example the installation of hand sanitizing stations, upgrades to automatic doors, use of more personnel to administer cleaning and to make sure guests comply with social distancing requirements, should be deemed uncontrollable and not be subject to any cap.”

In addition, landlords should also take the into account the cost structure, particularly during a pandemic.

“If it turns out that the “base year” for setting the “floor” for common area costs occurs during a year when the common areas are used less because of a pandemic or related outbreak, the landlord should consider including a “gross up” concept to bring the “floor” up to a number that is more reflective of what common area costs would have been but for the pandemic,” says Villalpando.

Villalpando also suggests that landlords can modify the cap during the lowest period.

“Another alternative would be to modify the cumulative versus non-cumulative nature of the cap for any period during which common area costs are artificially low,” he says. “Basically, with a cumulative cap, when the common area costs for a particular year exceed the cap, the landlord can apply any unused portions of the cap from previous years to make up the difference.”


Source:  GlobeSt.

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Apartments With Ground Floor Retail Take A Hit On Rent Collections

COVID-19 precipitated shutdowns have crippled the retail sector and those troubles have been well-documented.

And the businesses that rent spaces on the ground floors of apartment buildings are generally not big stores or national chains and have had even more trouble meeting their obligations in recent months. As a result, multifamily owners have had to be forgiving in negotiating concessions with their retail tenants, even as rents from apartment tenants have generally held up better than expected.

“We know that small retail businesses have been hit very hard based on payroll figures,” says Kevin Cody, market analytics senior consultant for CoStar, based in Boston. “Their distress from the pandemic was likely amplified due to them having small cash buffers.”

The vast majority—over 80 percent—of the retail space located in apartment buildings can be found in urban areas, according to CoStar. In recent years, these areas were performing well due to strong demographic growth, employment growth, and high levels of tourism, says Cody.

That strong performance stopped with the spread of the coronavirus in early 2020.

“Retail assets in dense, urban areas have been heavily impacted by the current period,” says Cody. “People are working from home at a high rate and tourism has greatly diminished.”

Not surprisingly, the retail tenants that have held up the best for apartment owners in recent months are those that were deemed essential. Drugstores, convenience stores, restaurants equipped to do takeout business are among tenants that been able to continue operating amid the vary levels of shutdowns throughout the country.

From the landlord side, apartment owners have largely been willing to work with their retail tenants on an as-needed basis.

“We have heard that owners of retail space are offering rent deferrals or relief to some tenants that have been impacted by the virus,” says Cody.

“There [usually] isn’t a public balance sheet or strong capitalization,” adds Todd Siegel, senior vice president, CBRE, based in Chicago. “The solution to mutual success requires an individualized and bespoke approach.”

Fortunately, apartment properties generally don’t rely much on the income from  small retail tenants.

“On a pure, net operating income basis, it shouldn’t skew the balance sheet to warrant a default,” says Siegel. “Mixed-use retail in general doesn’t drive the overall value [of an apartment property].”

The managers of apartment properties are also not yet desperate to squeeze money where ever they can get it. That’s because the income from apartment rents has remained strong, so far.

“I would expect apartment owners to have a greater ability to offer rent deferral or relief for their retail tenants, due to the greater rate at which they have been able to collect rent from apartment renters,” says Cody.

As for down the line, while they will need to implement social distancing measures until a vaccine or reliable treatment becomes available, multifamily owners will continue to include ground-level tenants.

“Mixed-use was a strategy we really liked heading into the pandemic,” says Cody. “In the long-term we still believe in it… we expect urban areas to come back, but in the near to medium term, retail will experience reduced spending and foot traffic. We expect migration to slow; there has been a shift to working-from-home, which will sustain to some extent; and tourism has slowed, which will take time to recover.”


Source:  NREI

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Florida CRE Markets Poised for Rebound as Tenants, Landlords Navigate Lease Negotiations

Despite uncertainty brought on by the COVID-19 pandemic, Florida’s real estate industry may be primed to recover with a sharp rebound.

According to a JLL report, prior epidemics that affected Florida’s real estate market recovered quickly, with the market spiking about 30% in the year following the 2002 SARS pandemic, which caused 286 global deaths. A less sharp recovery followed the 1918 Spanish flu, which caused 675,000 deaths in the US, with the industry rebounding about 10% the following year. The pandemics triggered a “V-shaped recovery” in Florida’s real estate market.

In the last two decades, Florida’s downturns in the rental market have seen 7% average rent declines. The Florida market took almost 6 years to return to pre-recession levels. Hardest hit by the financial crisis were Orlando and South Florida, with Orlando a 13.4% decline, and South Florida with a 14.9% decline.

The state’s ability to bounce back from economic impact due to the COVID-19 epidemic may hinge on that 25% of Florida office leases were in industries less affected by co-working spaces. Co-working space companies have seen their stocks plummet—IWG stock dropped 66% and WeWork’s 7Y unsecured notes were trading at 63 cents on the dollar. The JLL report points out that the Florida economy was in a strong position before stay-at-home orders began, with unemployment at 2.8%.

However, individual landlords and tenants are navigating lease renegotiations under financial strain put forth by mandated closures. Tenants, particularly small business owners, face financial pressures of keeping businesses afloat while negotiating rent relief from landlords. Tenants have put leases on hold, often seeking legal advice on their obligation to pay contractual rents, or seeking rent relief from landlords.

Landlords have largely kept buildings open, which provides leverage when tenants seek rent relief. Generally, a landlord may ask a tenant to exhaust all federal aid options, such as the CARES Act, before resorting to rent relief. In cases where landlords agree to rent relief, the terms tend to be 30- to 120-day forbearances, with rent money amortized over the remainder of the lease once payments resume.


Source:  Globest.

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