If retail landlords didn't have enough problems already

David Goldsmith

All Powerful Moderator
Staff member
NYC Restaurants Struggle to Stay Open with Loans — and Time — Running Out
At The Nugget Spot on East 14th Street in Manhattan, business for all of June equaled one good Thursday before the pandemic.

In Long Island City, Corazon de Mexico’s take is running about 15% of what it once was, despite promotions to boost business.
Havana Central’s takeout and delivery business at its Times Square restaurant equaled about 3% of its former revenue. With outdoor dining, that number has crept up to 10%.
Despite Phase 4 of the city economy reopening starting Monday, thousands of loans from the federal government and expanding city efforts to help, many New York restaurants are within months — or even weeks — of running out of the resources needed to stay alive.
Outdoor dining has provided most with only a small boost, and the cost of renovations makes the economics of reduced capacity inside look foreboding.

For many restaurants in business districts, their customers simply won’t be returning anytime this year. And the money from the federal Paycheck Protection Program loans is running out.

“It’s a dire situation,” said Andrew Rigie, executive director of the New York Hospitality Alliance. “Fewer than 20% of restaurants paid their full rent in May.”
It’s the figure he uses to gauge how many restaurants are financially solvent.
A running tally by the food site Eater now lists almost 80 well-known restaurants that have closed permanently, and the full number of lost eateries is surely much higher.
A Key Barometer
Restaurants, always central to the identity of New York, have become a major way for people to assess the state of the city and its economy during the pandemic.
Some 28,000 restaurants across the five boroughs have city Health Department permits allowing them to operate. But the number of open restaurants may be lower since establishments do not have to notify the department when they go out of business, and annual renewals are not required until the pandemic ends.

Last week, the state Labor Department reported that jobs at all food service and drinking places had rebounded to 140,000 in June from a low of 91,000 in April. Full service restaurant employment reached 52,300 from only 22,900 in April.
However, full service restaurants employ only 30% of the staff a year ago. Some of the people reported as employed may have been on the books because they were being paid by PPP money and will be officially jobless again when the July numbers are reported.

Before the pandemic, business was thriving for many eateries.
Cynthia Shephard opened Corazon de Mexico three years ago. As head of a woman-owned business, she made a point of hiring women who had been victims of domestic abuse.

In addition to thriving on the growth of Long Island City, she had made inroads into Manhattan with catering. “Business was really good,” she recalled wistfully.

Jason Hairston’s The Nugget Spot on 14th Street did $1.6 million in business last year from a 1,000-square foot store, an exceptional number for such a small location. The shop, which specializes in chicken nuggets, also attracted 45,000 Instagram followers.
Hairston thrived on traffic from the six nearby college dorms, two local high schools and people flocking to the nighttime events on the Lower East Side.

“Sometimes we would have 50 people crowded into the place,” he said.
Like the vast majority of restaurants, both shut down in mid-March amid stay-at-home orders issued by the governor and mayor. While the city announced a couple of programs to help the industry, the key lifeline came from the federal government’s PPP loans.
A recently released database from the Small Business Administration shows that 1,500 New York City eateries received loans greater than $150,000. Thousands of others likely got smaller amounts.
The loans were forgiven if the money was used for rent — up to 25% of the loan — and payroll, which meant that some employees were paid even if they didn’t work.
Payroll Loans Running Out
The Ragtrader, on 36th Street in the Garment District, received a $690,000 PPP loan that footed the payroll and the rent. Owner Mark Fox also took about a $150,000 long-term SBA loan as the pandemic hit to cover taxes and payments to vendors.

The three-story eatery, which boasts a piano bar in the basement and a karaoke lounge upstairs, generated $8 million last year.
With outdoor dining, Fox is making up to 10% of last year’s revenue. But he’s still losing money and the PPP loan will be exhausted soon.
Business has been more disappointing for Hairston, who waited until June to reopen for takeout and delivery only, and is generating less than 5% of his previous revenue.
He doesn’t see much point in trying to set up sidewalk dining outside on 14th Street, and a bus lane means he can’t expand onto the asphalt. His $97,000 PPP loan runs out soon, and it is likely he will close again when that happens.

The problem isn’t just the lack of revenue. Adapting to new city regulations, outdoor dining requires money for planters, furniture and other barriers and will require additional changes if inside dining is allowed, said Jeremy Merrin, owner of Havana Central on 46th Street and several other eateries.

“We are all trying to get all kinds of shading — umbrella and canopies — so it is almost impossible to buy them online,” he said.
He has brought back only 15% of his pre-pandemic staff.
Hanging on means reaching a break-even point. Fox at The Ragtrader believes that is 20% of his former revenue. His plan for the rest of the July is a series of events, including a one-night piano bar session outside, to lure people from other parts of the city to 36th Street.
If that doesn’t work, he will close for August and reassess in September.
Rent Takes a Toll
The immediate challenge of boosting business doesn’t address the two biggest future problems restaurants must confront even if they get through the summer: the lack of people coming back to the business districts and the rent.

The Ragtrader’s clientele before the pandemic consisted of 70% commuters on their way home from their offices, 20% tourists and 10% shoppers. Almost none have returned to the area.
The New York Times, located just a few blocks north, has told its staff that with only a few exceptions they will not be able to return to the building until next year.
Hairston doesn’t know how many of the six dorms will be occupied in September. But he does know many high school students won’t be back and that other venues are unlikely to attract large crowds. “It’s really a bad situation,” he said. “Who knows what will happen.”

Restaurants can reduce their costs for food and staff, but they are stuck with the high rents they agreed to when business was better.
Some landlords are being accommodating. Havana Central is paying its landlord 10% of its revenues each month. Every Friday, when Shephard of Corazon de Mexico goes to the bank to deposit the week’s receipts, she puts aside a portion to send to her landlord.
A ‘Massive Stimulus’ Needed
Yet the Hospitality Alliance’s survey showed only 10% of landlords have been willing to renegotiate leases, even though their chances of replacing any tenants they evict are small.

Landlords, Rigie notes, have their own obligations — especially mortgages — and reducing rent could slash the value of their buildings. “Maybe they are waiting to see what the situation will be like in the future,” he said.
Like cities and states with massive budget deficits or unemployed workers receiving an extra $600 a week in jobless benefits that expire this month, restaurants are anxiously waiting for another aid bill from Washington.
“We need a massive stimulus package from the federal government to provide long- term economic support for restaurants and bars at the epicenter,” Rigie said. “And bring the banks, landlords and commercial tenants to the table to restructure leases and mortgages.”
 

David Goldsmith

All Powerful Moderator
Staff member
Nearly 3,000 small businesses in NYC closed due to Covid
Closures over the last 4 months include retailers that made it through multiple recessions, natural disasters

Mom-and-pop shops selling egg creams, vinyl records — and even firearms — lend New York City some of its irreplaceable history and charm.
But now, small, multi-generational businesses that withstood natural disasters and multiple economic downturns have fallen victim to the novel coronavirus. Nearly 3,000 small businesses have permanently closed in the last four months, according to the New York Times. Covid shutdowns sapped revenue, tourism and cash cushions, making rent an overwhelming burden.

Among some of the more famous small businesses to have shuttered are John Jovino Gun Shop in Little Italy, Coogan’s Irish pub in Washington Heights, Record Mart in the Times Square subway station and Gem Spa in East Village, according to the Times.

While financial support from the federal Paycheck Protection Program helped more than 275,000 businesses across the state, according to the Times, city comptroller Scott Stringer said about half the city’s businesses were left out of the program.

Aid offered directly by the city in the early days of the pandemic seems like a lifetime ago, and Gov. Andrew Cuomo insists closing bars and restaurants again remains an option.
Still, shopkeepers must contend with New York City’s pricey rents. Empire Coffee & Tea, which opened when Theodore Roosevelt was president, paid $9,000 less per month in rent in New Jersey this year than at its Hell’s Kitchen location, which it closed in April.
 

David Goldsmith

All Powerful Moderator
Staff member
"Few have managed to renegotiate leases or relief from their landlords. Seventy-one percent of landlords would not waive portions of rent, 61 percent would not defer rent payments and 90 percent would not formally renegotiate leases."
 

David Goldsmith

All Powerful Moderator
Staff member
Retailers rejecting leases amid bankruptcy could bring “tsunami” for landlords
Mall operators have increasingly missed payments on securitized debt as businesses have shuttered locations after filing Chapter 11

Retail bankruptcy filings have skyrocketed in recent months, with a key benefit being the ability to exit a pricey, multi-year lease.
But that perk, which some companies deploy to get out of dealing with individual landlords for each property, is putting a strain on landlords and the overall market, according to Bloomberg.

“If this becomes a tsunami of retailers rejecting their leases, it’s going to trigger another part of the sea-change — the mortgages held by the landlords,” attorney Melanie Cyganowski, a partner at Otterbourg PC told the outlet.

Among the list of major retailers that have filed for bankruptcy are Tailored Brands, Brooks Brothers, J. Crew and Neiman Marcus Group, which is closing its anchor store in Manhattan’s Hudson Yards.
Meanwhile, some retailers have tapped brokerages to sell off their leases. J.C. Penney recently hired Cushman & Wakefield and B. Riley Real Estate to sell its leases at 142 locations.

Nationwide, up to 25,000 retail stores could shut down this year, according to reports.
While bailing out on leases may be what’s best for retailers, landlords are feeling the pain. CBL & Associates Properties Inc., the owner of more than 100 shopping centers in the U.S., is preparing its own bankruptcy filing after rent collections cratered, according to Bloomberg.

Barry Sternlicht’s Starwood Capital Group missed payments on securitized debt linked to five shopping malls and Hudson’s Bay also skipped interest due on some CMBS.
Delinquencies on retail mortgages bundled into bonds reached 16 percent in July, up from 3.8 percent in January, according to Trepp.
 

David Goldsmith

All Powerful Moderator
Staff member
South Korean Bakery Paris Baguette Sued for $217K In Unpaid Rent
The chain’s Koreatown location hasn’t paid any rent in over five months, according to the lawsuit

Well-known South Korean bakery chain Paris Baguette is getting sued by one of its landlords over $217,000 in unpaid rent at its Manhattan Koreatown shop, Crain’s New York reports.

The bakery, which sells egg tarts, sweet and savory buns, and light, airy cakes, has not paid any rent in over five months at its location at 6 West 32nd Street, according to the lawsuit, and was only paying partial rent for months before that. Capstone Equities, the owner of the property, says that it is owed partial rent payments of about $7,600 per month for January through March, and full rent payments of $28,000 per month after that. Paris Baguette also owes 5 percent of the location’s property taxes, according to the lawsuit.
Eleven of Paris Baguette’s Manhattan locations had reopened for business by July, according to a press release from the company, including the Koreatown location at the center of Capstone’s lawsuit. However, the shop now appears to be closed. It isn’t accepting online orders and calls to the restaurant were unanswered. Eater has reached out to Paris Baguette for more information.

According to Crain’s, Paris Baguette was also sued in June over $170,000 in unpaid rent and interest at its shop at 1270 Lexington Avenue, on the Upper East Side. The chain — which has over 3,500 locations around the globe — has been rapidly trying to grow over the past year, adding six locations in Manhattan in 2019.
Other chains in the city are similarly getting sued over unpaid rent during the pandemic, Crain’s reports. Fast casual chain Dig was recently sued by one of its landlords for $87,000, and sweets shop LRoom Cafe, which subleased a Union Square space from Chicago-based chain Portillo’s, owes $122,000 in unpaid rent.

Many NYC restaurants and bars have been struggling to make rent payments during the pandemic. Outdoor dining, takeout, and delivery often don’t produce enough revenue to fully cover the business’ operational costs, restaurateurs say, and the situation has forced a number of permanent closures in the city already.
Commercial tenants have generally been protected from evictions since March, when the state first mandated a total pause on tossing out tenants over unpaid rent amid to the pandemic. However, the eviction moratorium for commercial tenants is currently set to expire on August 19, and the protections don’t stop landlords from suing over issues including unpaid rent during the pandemic.
 

David Goldsmith

All Powerful Moderator
Staff member
Fighting for survival, more Brooklyn small businesses pay rent
Survey finds 28% missed August rent, down from 44% in April

Brooklyn small businesses are increasingly paying rent and capitalizing on all the help that they can get as they miss out on some of the most profitable months of the year.
Twenty-eight percent of small businesses have failed to pay rent in August, according to a Brooklyn Chamber of Commerce survey of 234 owners. That’s the same as last month, but a marked improvement from 44 percent in April.

However, concessions from landlords have risen. Twenty-five percent of businesses said they received relief this month, up from 20 percent in July.

“Brooklyn’s business community is extremely resilient,” said Randy Peers, president and CEO of the Brooklyn Chamber of Commerce, in a press release. “The small businesses that make up our neighborhoods and sustain our communities are facing unprecedented economic challenges, requiring immediate support, grants and urgent rent relief if they are going to survive.”

But relief doesn’t mean these businesses aren’t in debt. Some 39 percent said they owe back rent.
Still, they ranked rent relief as the second most vital form of support, with 69 percent saying it is very important. The top ranked is grants, with 83 percent viewing them as very important.

The survey found Brooklyn’s small businesses are limping through the pandemic. Half said revenue has fallen more than 50 percent from 2019, and 53 percent said it would be a struggle to stay open over the next three months.
Rent isn’t the only hurdle businesses face. Enforcement of social distancing has resulted in 10 percent of businesses with a liquor license receiving fines or violations. A TRD analysis of social distancing complaints found that Brooklyn sees the most 311 calls of any borough, with 5,891 on commercial properties.

Nationally, 25 percent of mom-and-pop shops missed rent payments in July. National chains are doing better, with only 20 percent missing rent, according to a Datex Property Solutions report.
 

David Goldsmith

All Powerful Moderator
Staff member
Concessions stand: Wary of another shutdown, retail landlords sweeten pot for tenants
Many insurance policies don’t cover pandemic-related losses, leading landlords to find new ways to keep businesses in place

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.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Hmm interesting to see some paying and others slow to pay. "Landlords with clothing stores, gyms and theaters as tenants have seen rent collections remain low. "

Dave and busters, hmm, wondering if the stock is in PLAY as I have some shares around 12ish but it just wont budge :)) this makes me think time might be near?
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Concessions stand: Wary of another shutdown, retail landlords sweeten pot for tenants
Many insurance policies don’t cover pandemic-related losses, leading landlords to find new ways to keep businesses in place

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.
So what happens when banks ask landlords what new rent rolls look like? do those loan terms get reset or potentially called in?
 

David Goldsmith

All Powerful Moderator
Staff member
Retail rent payments inch back toward normal in August
Major chains paid 83% of rent, mom and pops clocked in at 76%

Retail landlords can celebrate as rent collections are slowly but surely returning to normal levels after months of lackluster payments.
Major chains paid 83 percent of August rent, a new record, and only 14 percent below the nearly 97 percent that they paid during the same time last year, according to the most recent report by Datex Property Solutions. That’s a slight increase from last month’s 80 percent.

Mom and pop shops are similarly increasing, hitting 76 percent last month.
“Some categories were doing fine and some are still struggling very hard, but more and more of the categories are figuring it out,” Datex Property Solutions CEO Mark Sigal said, pointing to social-distancing solutions retailers are experimenting with, like outdoor dining and curbside pick up.

The major chains included in the survey all have a minimum gross monthly rent of $250,000, or lease 10 or more locations.
Banks have already hit last year’s collection rates, paying 98 percent in August. The same trend holds true with office supplies, which paid a stunning 99 percent.

Some stores are even surpassing last year’s rent levels, either because of pressure from landlords or because the pandemic is driving demand.
Home improvement stores, for example, have surpassed last year’s rate of 87 percent, with a payment rate of 95 percent.

The Home Depot paid 96 percent of rents, up from 75 percent last year.
The retailer with the highest jump in payments was the United States Postal Service, which paid close to all of its rent. That was up from 60 percent last month and up 70 percent last year. Sigal attributes the increase in payments to the attention the USPS has received over funding issues.

While many chains made strides in payments this month, some fell.
Francesca’s, a women’s clothing chain, stopped paying rent completely last month. The hair care franchise Fantastic Sams also dropped 16 percent from July, paying about half of all collections.

Justice and Lane Bryant, both owned by bankrupt Ascena Retail Group, continued paying no rent, as they have for most of the pandemic.
That’s not surprising, however. Apparel and hair care categories performed poorly overall, with retailers only paying 63 percent of rent. Others doing poorly include fitness, with 61 percent, and movie theaters, with 37 percent.

Sigal said that movie theaters’ woes are understandable.
“All of the other categories, when I look at them, they all sort of have variations of strategies that are viable or viable-ish,” Sigal said. “That’s probably the one category I look at and just kind of, go, ‘it’s gonna be interesting.’”

The Datex Property Solutions report does not include rent relief negotiated between landlords and tenants.
 

David Goldsmith

All Powerful Moderator
Staff member
Vacancy Along Manhattan's Broadway Has Gone Up Nearly 80%

In yet another sign of the city’s retail woes, a survey of the stores along Broadway shows more than 300 of them are sitting empty. The survey was run by Manhattan Borough President Gale Brewer and her staff, The Wall Street Journal reports. In total, they recorded 335 street-level vacancies along the famed diagonal avenue late last month.

That figure represents a 78% increase from 2017, though it is not clear what the total vacancy rate is, because Brewer's office doesn't know how many stores are on the stretch. Almost a third of vacant stories are between 14th and 59th streets, while a total of 42 of the stores were boarded up.

“The rent is so high, particularly on Broadway in Manhattan, that it’s hard for the small shops to make a go of it,” Brewer told the WSJ. “At this point, with the gates down and sometimes plywood on the storefront, you don’t know whether it’s going to be rented.”

The coronavirus pandemic has caused major pain across New York City’s retail sector. While stores are now allowed to open their doors, scores of retailers and their landlords are locked in legal disputes over leases and rent obligations. Vornado is suing the U.S. Polo Association, claiming it owes more than $1.1M in unpaid rent for space at 1540 Broadway, for example.

Crown Acquisitions has said it is facing foreclosure at 170 Broadway because tenant the Gap has been skipping on rent. Retail vacancy had already jumped significantly before the crisis, too. Between 2007 and 2017 the amount of vacant retail space went from around 5.6M SF to over 11.8M SF, according to analysis from New York City Comptroller Scott Stringer's office last year. The report from Stringer, who announced his candidacy for mayor next year with a speech targeted at real estate, suggested the city offer tax credits for independent retailers and make it easier for retail space uses to be adapted.
 

David Goldsmith

All Powerful Moderator
Staff member

Yelp data shows 60% of business closures due to the coronavirus pandemic are now permanent

  • Yelp on Wednesday released its latest Economic Impact Report, revealing business closures across the U.S. are increasing as a result of the coronavirus.
  • As of Aug, 31, 163,735 businesses have indicated on Yelp that they have closed, a 23% increase since mid-July.
  • According to Yelp data, permanent closures have reached 97,966, representing 60% of closed businesses that won't be reopening.
Yelp on Wednesday released its latest Economic Impact Report, revealing business closures across the U.S. are increasing as a result of the coronavirus pandemic's economic toll.
As of Aug, 31, 163,735 businesses have indicated on Yelp that they have closed. That's down from the 180,000 that closed at the very beginning of the pandemic. However, it actually shows a 23% increase in the number of closures since mid-July.
In addition to monitoring closed businesses, Yelp also takes into account the businesses whose closures have become permanent. That number has steadily increased throughout the past six months, now reaching 97,966, representing 60% of closed businesses that won't be reopening.
"Overall, Yelp's data shows that business closures have continued to rise with a 34% increase in permanent closures since our last report in mid-July," Justin Norman, vice president of data science at Yelp, told CNBC.

Yelp's September report marks six months since March 1, the date that the company considers to be the beginning of the business crisis.
In order to gather closure data, Yelp monitors changes in business hours or descriptions on its app, offering an immediate, localized view of the impact the pandemic has had on small businesses.
"Despite the hard hit small businesses have certainly taken, we've seen that home, local, professional and automotive services have been able to withstand the effects of the pandemic better than other industries," Norman noted.

The data supports the trend that most consumers are choosing to stay home over patronizing establishments physically, as home and professional services such as landscapers, contractors and lawyers, see a much lower closure rate than clothing stores and even home decor businesses. Auto and towing services also reported a relatively low closure rate.
"Consumers still need these services," Norman said. "Through the rise of virtual consultations, and contactless or socially distanced services, these businesses have been particularly resilient during this time."
Throughout the past six months, restaurants, bars and nightlife venues have been hit the hardest by the restrictions brought by the pandemic: 32,109 restaurants have closed, as of Aug. 31. The number of restaurants forced to permanently close is slightly above Yelp's total average, at 61%.

Yelp has also noted that businesses already well suited for takeout, such as pizza places, coffee shops and delis, are treading water better than other restaurants. The types of restaurants with the highest closures include breakfast and brunch places, sandwich shops, and Mexican restaurants.
Norman noted that policy changes in the coming weeks and months could have an impact on whether these closures turn permanent. "The continued rollout of indoor dining, especially in metros like New York City, will be worth watching as it will be critical for businesses to maintain the right balance of practicing social distancing and other responsible safety measures to ensure they can stay open."
Bars and nightlife venues have also seen a large impact from the pandemic, as a business that can't adapt as easily to outdoor dining or takeout. Despite being a sector that is six times smaller than restaurants, 6,451 venues have closed. The rate of permanent closures has increased 10% since July, now sitting at 54%.
Retail saw a similar increase in permanent closures since July, rising 10% to a total of 58% indicated permanent. That's out of 30,374 closed retail businesses.
The report showed a surprising month-over-month rise in permanent closures for beauty businesses — since July, about 42% more businesses were indicated as permanently closed. Total closures for the beauty industry sit at 16,585, which is a 22% increase since July.
Different states are also facing varying degrees of closures, and perhaps unsurprisingly, Yelp sees a correlation between states with a high number of closures and states with a high unemployment rate. Looking at closures per 1,000 for each state, Hawaii has been hit the hardest, followed by California, Nevada, Arizona and Washington state. Hawaii's unemployment rate sat at 13% in July, and the state also relies heavily on tourism.
"Due to the pandemic, these states were greatly impacted by travel restrictions and also face high rates of unemployment," said Norman. "These states are also home to the hardest-hit metros including Las Vegas, Honolulu and several of the largest California urban areas like San Diego, San Francisco, San Jose and Los Angeles."

Yelp has also noted discrepancies between large cities, where closures are higher and businesses are not faring as well, and smaller areas, which have proved more forgiving to small business. Los Angeles and New York report the highest number of closures: Los Angeles has seen 15,000 closures, half of which are permanent, and New York has seen more than 11,000 closures, with the high rate of 63% reported as permanent.
"Meanwhile, we're actually seeing larger metros with fewer closures in the East, including Pittsburgh, Philadelphia, and Baltimore," Norman noted.
Ultimately, Yelp's data shows that Main Street is still feeling the economic impact of the pandemic, and many states and areas of business may not see a recovery soon.
"While it's hard to say when we can expect business closures to stabilize, we've continued to see businesses successfully adapt to these uncertain times over the last six months thanks to their own hard work, innovation and local policy changes," Norman said.
 

David Goldsmith

All Powerful Moderator
Staff member
https://finance.yahoo.com/news/700-million-cmbs-portfolio-brink-150101047.html?__s=arxunzfahpiz9dngj9cc&utm_source=drip&utm_medium=email&utm_campaign= Next Crash Due Much Sooner Than Later?&utm_content= Next Crash Due Much Sooner Than Later?
A $700 Million CMBS Portfolio Is On the Brink as Malls Collapse
Bond investors who wagered on a group of malls owned by Barry Sternlicht’s Starwood Capital Group are starting to take losses after the Covid-19 pandemic shuttered stores and wiped out emergency cash reserves that had been keeping interest payments flowing.
The commercial-property bond, known as Starwood Retail Property Trust 2014-STAR, is backed by an almost $700 million defaulted loan. It’s cutting interest payouts to investors for a second time, after a reserve account dried up in June and a sharply lower property valuation led to the servicer holding back some funds.
The bond’s performance shows how rapidly the pandemic is deepening losses in a sector that was already getting crushed by online shopping. Even the part of the bond deal that was once rated AAA -- meaning bond raters saw virtually no risk of taking losses just two months ago -- have now been cut deep into junk territory.
“The experience of the mall CMBS from Starwood is certainly symptomatic of the larger narrative,” said Christopher Sullivan, chief investment officer of United Nations Federal Credit Union. Weakening mall asset fundamentals and fewer willing investors “will present ongoing financing problems.”
A representative for Starwood declined to comment.
S&P Global Ratings in July downgraded the entire Starwood commercial mortgage-backed security to speculative grade after a reappraisal of the four regional malls backing the debt valued them 66% lower than when the bond was issued.
And while the servicer on the loan, Wells Fargo & Co., and borrower hope to restructure or modify the loan, the pandemic has put those plans on ice for now, according to a commentary by Wells.
Cutting Back
The servicer began slashing interest payments since June because the sharply lower appraisal triggered a CMBS protection mechanism known as an appraisal reduction amount. With the valuation so much lower, the ARA limits the amount of interest servicers have to advance on loans where the underlying collateral has declined in value.
The idea is that the servicer will hold onto funds longer to safeguard senior bondholders.
“Because of the appraisal reduction amount in place, the servicer is only advancing on a portion of the mortgage loan,” said Dennis Sim, a CMBS analyst at S&P.
The Starwood loan defaulted at maturity last November when the borrower was unable to refinance, but the servicer paid investors out of a dwindling reserve account until June. Wells Fargo is now advancing smaller stopgap payments out of its own pocket.
Total debt on the properties is $682 million. It’s tied to shopping malls anchored by struggling or bankrupt department chains including Nordstrom Inc. and J.C. Penney Co.
The bond included debt linked to regional malls including The Mall at Wellington Green in Wellington, Florida, The Mall at Partridge Creek in Clinton Township, Michigan, and MacArthur Center in Norfolk, Virginia. Struggling collateral anchor Nordstrom shuttered stores at all three locations, according to Trepp.
The slice of the CMBS originally rated AAA was last quoted at 69 cents on the dollar, according to Bloomberg data.
The percentage of overall CMBS loans assumed by special workout servicers is increasing, going from 9.49% in July to 10.04% in August, according to Trepp. About 17.3% of retail loans were in special servicing in August, up from 16% in July, Trepp data show.
 

David Goldsmith

All Powerful Moderator
Staff member
Madison Avenue retail buildings sell for record low price
Sale of 3 properties is lowest price recorded on Madison Avenue in a decade

Three retail buildings on Madison Avenue have sold for a combined $45 million, a price that represents a new low for the posh shopping district.
The luxury retailer Akris will buy three properties at 831, 835 and 837 Madison Avenue between East 69th and 70th Streets for $45 million, according to the Wall Street Journal. The deal includes three ground-floor retail spaces, along with 15 residential units.
The deal came out to $1,340 per square foot, a significant decline from 2014; at that point, retail properties on Madison Avenue were selling for about $7,589 per square foot, according to the Journal. It’s the lowest deal recorded on that street in a decade, according to Cushman & Wakefield.
Demand for high-end retail has dropped off significantly since the onset of the pandemic. A number of luxury shoppers pivoted to ordering online, and, as a result, some retailers are closing down their high-rent stores in Manhattan.
In Soho, a roughly 6,000-square-foot retail space at 106 Spring Street, which has sat largely empty for years, is heading to foreclosure.
And on Fifth Avenue, luxury fashion company Valentino SpA is suing its landlord to get out of its lease, according to the Journal.
 

David Goldsmith

All Powerful Moderator
Staff member
Manhattan retail asking rents fall to nine-year low
Year-over-year drop of almost 13% to $659 psf: CBRE

Manhattan retail asking rents fell to their lowest point in nearly a decade this summer as the pandemic compounded a downward trend in demand.
Asking rents across Manhattan’s 16 main shopping corridors fell to $659 per square foot during the third quarter, according to CBRE. That’s down 12.8 percent from the same time last year, and the lowest level since the back half of 2011.

Prince Street in Soho saw the largest drop in asking rents, with pricing falling to $405 per square foot in the third quarter from $705 at the same time last year.

CBRE noted some landlords on Prince Street put new spaces on the market with asking rents roughly half of what they were a year earlier, and spaces already on the market dropped their asks. Several storefronts that had been on the market for more than a year changed brokers.

Leasing volume for the 12 months ending in September totaled 2.67 million square feet, down by nearly a third from the 3.9 million square feet from the same time period a year ago.
Some activists, believing rents have not fallen enough to fill vacancies, have proposed measures to force landlords to reduce asking prices. But CBRE’s report noted that retail asking rents have dropped for 12 consecutive quarters.
 

David Goldsmith

All Powerful Moderator
Staff member
Starwood loses control of another mall in default
Last payment on $85M loan for Joliet Mall outside Chicago was in March

Starwood Retail Partners is giving up on one of its suburban Chicago malls, handing over the keys to its lender after first defaulting on a loan payment in the spring. The move comes two months after parent company Starwood Capital Group lost control of a seven-property regional mall portfolio.
The Chicago property is the nearly 1 million-square-foot Louis Joliet Mall. Starwood last made a payment on its $85 million CMBS loan in March, and is over 90 days past due. The loan went into special servicing in May.

According to the latest report from Trepp, Chicago-based Starwood Retail is in negotiations for a deed in lieu of foreclosure or a foreclosure sale.
It has been a rough couple of years for the Joliet Mall, which is about 40 miles southwest of Chicago. One of its anchors, Carson’s, closed in 2018 and a year later, the Sears there shut down. The 40-year-old mall’s surviving anchor retailers, JCPenney and Macy’s, are facing severe problems of their own.

The mall was last appraised at $131.8 million in 2012, when Starwood Retail acquired it and the Chicago Ridge Mall as part of a larger deal.
The Joliet Mall loan is part of CMBX 6, a mortgage derivative index that is heavily exposed to debt tied to retail and mall loans. It has become a popular way for investors such as Carl Icahn to short regional shopping malls.
Starwood declined to comment through a spokesperson.
As the pandemic has worn on more owners have sought to give up on struggling malls, especially those with CMBS debt that is tricky to restructure because of covenants the servicers have with bondholders. Brookfield Properties is seeking to hand over the keys on a $90 million CMBS loan on its mall in Florence, Kentucky, while Namdar Realty has requested a deed in lieu of foreclosure for a $33 million loan backing a mall in Saginaw Township, Michigan, according to Trepp.
 

David Goldsmith

All Powerful Moderator
Staff member
Four years vacant: Landlord offers dire outlook for Soho building
Tax bill exceeds income by six figures at 518 Broadway

Four years ago this month, a shoe shop left the prime retail space of 518 Broadway. It’s been vacant ever since. Some of the lofts on the four upper floors have sat empty as well.
The longtime owners of the Soho building, Jack and Rina Cywiak of Lakewood, New Jersey, say they have had offers for the unoccupied space, but at rents so low that they would still be losing money. Instead, they collect nothing.
Prospective tenants offered $250 per square foot for long-term leases for the ground-floor retail and $30 per square foot for the lofts, the owners claim in court documents. “Entering into long term leases at these low rents would make the building unsustainable for the future,” their petition says.

Soho is one of the city’s prime retail destinations, and the Cywiaks expect 518 Broadway’s ground floor to generate 80 percent of the building’s rental income. That is based on their having leased it to high-profile tenants such as Dune London, a U.K.-based shoe brand, which opened its first U.S. outpost at the location in 2014. Time Out magazine marked the opening with a writeup.

But since the shoe shop closed in October 2016, the property has generated nothing but grief for the couple.
Reached by phone, Jack Cywiak said he was too busy to discuss the building, which has been in his wife’s family since 1968 and under the couple’s direct control since the 1990s. But he did say, “We’re trying to find a tenant or sell it. One of the two.”
Meanwhile, they are challenging the city’s assessment in court in an effort to lower the property tax bill, which they say is too high for a mostly vacant building.
The five-story property’s gross income, which once was $715,000, has declined to $270,750, their petition states, noting that the building has been operating at a loss since 2018 even though Jack Cywiak has forgone his management fee.
Jack & Rina, the limited liability company through which the couple own the building, paid the city about $408,000 in property taxes in fiscal 2019 and $439,000 in fiscal 2020. The Cywiaks challenged 518 Broadway’s $3.63 million assessment before the city’s Tax Commission this year and won a reduction to $2.9 million, according to Property Shark. But they are looking for more in state court.
Their petition notes that the rent picture in Soho is not likely to improve, given the pandemic. That point will not likely help their case, though, as assessments are based on properties’ status as of Jan. 5, prior to the pandemic. The timing is a problem for property owners across the city this year.
But the retail sector’s troubles go back several years, in part because of a shift to online shopping. A CBRE report this month noted that the average asking rent in Manhattan’s prime retail corridors has declined for 12 consecutive quarters.
The Cywiaks will have a stronger argument for an assessment cut next year. In the Soho corridor that includes 518 Broadway, the average asking rent has declined by 20 percent from a year ago to $388 per square foot.
Still, it is unclear why offers for 518 Broadway, between Broome and Spring streets, have allegedly come in so much lower than that. The building was reportedly renovated in 2014, and Google photos from October 2019 show active storefronts in all the properties around it and dozens of pedestrians on the block. Berta NYC, a line of high-end evening wear and bridal gowns, maintains a showroom on the second floor.
Joseph Frank, an attorney and broker for the property, declined to comment.
 
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