If retail landlords didn't have enough problems already

David Goldsmith

All Powerful Moderator
Staff member

Speaker Johnson Announces Dismissal of Lawsuit Challenging Commercial and Residential Protection Laws During COVID-19 Pandemic
December 2, 2020
U.S. District Court Judge Ronnie Abrams ruled that the legislation does not violate the constitutional rights of the plaintiffs
The City Council won a legal challenge to several bills designed to protect residential and commercial tenants during the pandemic. The lawsuit was brought by landlords who argued that the three bills, which were part of a COVID-19 relief package for New Yorkers, violated their constitutional rights.
The District Court for the Southern District of New York rejected the property owners’ claim by ruling that the actions taken by the Council to combat COVID-19 and help New Yorkers were reasonable to balance the infringement of contractual rights versus public interest needs in the middle of this pandemic.
Judge Ronnie Abrams stated that “the Court cannot conclude that these three challenged laws violate any of Plaintiffs’ constitutional rights.” She granted the Council’s motion to dismiss the claims and denied the plaintiffs’ motion for a preliminary injunction. The full ruling can be read here. Two of the laws, the “Residential Harassment Law” and the “Commercial Harassment Law,” prohibit landlords from threatening and harassing commercial or residential tenants affected by the COVID-19 pandemic. The third law, known as the “Guaranty Law,” prohibits enforcement of personal liability provisions in commercial leases and rental agreements involving certain COVID impacted tenants. The bills were passed on May 13, 2020.
“This is a major victory for small business owners who need protection from landlords during this unprecedented time. Restaurants and small businesses are the backbone of our economy, and they are struggling to keep afloat in this pandemic. They should not have to worry about harassment or the loss of their homes because of the economic hardships this virus has caused their businesses. It’s unfortunate that any landlord would try to fight our attempt to help small business owners, but we are thrilled that the court ruling allows us to continue to protect struggling New Yorkers during this difficult time,” said Council Speaker Corey Johnson.
“Judge Abrams’ decision today is a legal victory for the thousands of restaurants and small businesses across New York City that are on the verge of closure and can seek protection from further loss and damages because of my law temporarily suspending personal liability provisions in commercial leases. It’s clear that this decision shows the law advances a legitimate public interest during this time of grave national emergency, and I am not only confident that the law will hold up to any additional appeals if they occur, but that my law will help save countless other businesses while we beat back the COVID-19 pandemic,” said Council Member Carlina Rivera, lead sponsor of Local Law 55 of 2020.
“The legislation passed by the City Council represents the City’s dedication to the many small businesses, impacted by COVID-19, that are the backbone of New York City’s economy. Our businesses are hurting and these protections will allow them the opportunity to thrive in the future. I applaud the court’s ruling to uphold these vital laws,” said Council Member Adrienne Adams.
“Harassment and retaliation against COVID-19 impacted tenants pose an urgent risk, and tenants must be protected against unscrupulous landlords during these extremely difficult and uncertain times. That is why I sponsored Local Law 56 and I am happy that Judge Abrams upheld it,” said Council Member Ritchie Torres.
“We’re extremely pleased that the Federal Court recognized the legality of this critically important new law, as we argued it should. In successfully defending this first in the nation COVID-19 relief bill, the City of New York saved thousands of businesses, tens of thousands of jobs, and provided sensible protections for small business owners while helping save them from personal financial ruin. We commend the de Blasio Administration, Speaker Johnson and Council Member Rivera for enacting and vigorously defending this pandemic protection law successfully,”
 

David Goldsmith

All Powerful Moderator
Staff member

Some retailers are now bargain-hunting for new space​

Property prices have plummeted and some successful businesses look to take advantage

The pandemic has decimated much of the retail industry, but some businesses that have weathered the storm are now shopping for properties and new leases at deep discounts.
Property owners have been feeling the economic pressure, and are offloading space for a fraction of the pre-pandemic price and offering lease incentives, according to the Wall Street Journal.

Home furnishing company Safavieh recently paid $20 million for Taubman Centers’ Stamford Town Center. The Connecticut mall was appraised at $64 million last year — when it hit the market — but has lost some of its biggest tenants, including H&M and Apple.

Falling retail property prices are no surprise: Foot traffic in stores on Black Friday, typically the busiest retail day of the year, was about half of what it was last year.
But not all brick-and-mortar businesses are struggling. Brokers say owners of large groceries, furniture, and discount goods stores have fared well, and have become among the most active property shoppers.

Home Depot plans to relocate a basement store on Manhattan’s Upper East Side to a four-story location occupied by Bed Bath & Beyond, which won’t renew its lease as part of a wider downsizing.
Sever Garcia moved his accessories and travel items store from Downtown Brooklyn to Manhattan’s Tribeca neighborhood, the Journal reported. Usually among the priciest square footage in New York, his new landlord offered three months of free rent and other incentives, he said.

Garcia said he also received offers from landlords in SoHo and out in Long Island, who have offered as much as six months of rent based on a percentage of sales.
 

David Goldsmith

All Powerful Moderator
Staff member

Inside the plight of a small retail landlord​

Commercial tenant protections put mom-and-pop building owners in a bind

David Swerdloff is a far cry from what many picture a Manhattan commercial landlord to be.
The 75-year-old owns a single building, on Seventh Avenue in Chelsea. Soaring condos and offices dwarf the one-story structure, whose air rights he sold in 1997.

Swerdloff, who lives in the suburbs of Westchester County, didn’t set out to be a landlord. He inherited his building in the early 1980s, when it housed his family’s kitchen and bathroom showroom. After his father died, Swerdloff ran the 2,800-square-foot showroom for 25 more years.

“I remember growing up in his store,” his daughter, Lindsey Rosenthal, wrote in an emailed letter to The Real Deal. “The owners and workers in the neighboring stores would talk outside, feed the parking meters every hour and knew everything about each other’s family.”

Swerdloff retired in 2006, and Le Pain Quotidien signed a 15-year lease for the space, 124 7th Avenue. But when the Chelsea eatery started losing money last year, Le Pain stopped paying the rent — nearly $47,000 a month — and the $226,000 in annual real estate taxes, according to a default notice sent to the international bakery chain.
Swerdloff said he tried negotiating to lower the rent, hoping to get some, really any, amount of money. No dice. The company, which filed for bankruptcy in May, never resumed paying and eventually abandoned the location.

“There are a bunch of other [small landlords] suffering from this, and it’s tough.”
David Swerdloff, commercial landlord
The struggling landlord took Le Pain to landlord-tenant court in August 2019. Or tried to, at least. After Swerdloff waited six months for a hearing, the judge threw out the case on a technicality — one of the five addresses where the subpoena was served was incorrect. His options all but exhausted, Swerdloff turned to civil court.

Then the pandemic hit. The courts closed and a wave of tenant protections swept over the legal landscape.
Under a series of laws and executive orders signed by Gov. Andrew Cuomo and Mayor Bill de Blasio this spring, commercial landlords cannot evict tenants. Nor, in most cases, can they go after the personal assets of non-paying tenants even if a clause in the lease allows it.

“With the signing of my bill, any small business owner with a personal liability clause in their lease will see that provision temporarily suspended,” declared Council member Carlina Rivera in a statement at the time. “They will no longer have to fear their landlord going after their personal life savings and assets because of a disaster no one saw coming.”

It was a cruel irony for mom-and-pop landlords like Swerdloff — one that could become more prevalent in major markets like New York in the age of Covid.
Lawmakers went to great lengths to protect small business owners from big landlords, but made no effort to protect small landlords from big tenants. Untold numbers of property owners whose corporate tenants stopped paying have been scrambling to pay their mortgages and taxes, putting them at risk of losing their properties.

“Nobody said to the landlords, they don’t have to pay real estate taxes, they don’t have to pay mortgages, they don’t have to pay lenders,” said attorney Luise Barrack, a managing partner at Rosenberg & Estis and head of the firm’s litigation department. “It could be a corporation or an LLC, or it could be somebody who’s sunk their life savings — or their entire family’s life savings — into a building.”

The impact on smaller landlords could be long-term.
“You count on streams of cash being there, because of your streams of expenses,” said commercial real estate lawyer Joshua Stein. “If you start to screw around with that ecosystem, inevitably bad things are going to happen.”
The U.S. has 10 million to 11 million small-time landlords, managing an average of two units each, according to an analysis of IRS data by the Department of Housing and Urban Development’s Office of Policy Development and Research. Institutional landlords, meanwhile, number fewer than 1 million.

With stores shuttering and a recession taking hold, pandemic-wracked retail tenants checked with their attorneys and found no compelling rationale to keep paying their landlords.
“If you’re a retailer that doesn’t have an underlying ‘good guy’ guarantee, or a meaningful corporate guarantee, then you have every reason not to pay rent,” said Peter Braus, a managing partner and co-founder of the commercial brokerage Lee & Associates. “The recourse that a landlord has is quite minimal in this environment.”

The city did face some legal backlash from mom-and-pop landlords. Two, both first-generation immigrants, sued in July, arguing that Covid-19 protections for non-paying businesses deny landlords’ right to free speech and due process, and violate the Constitution’s contract clause.
“I think a lot of people in New York City, a lot of renters, paint a picture that landlords are evil,” plaintiff Marcia Melendez, who owns two properties in Brooklyn, said in an interview.
“There are a lot of small landlords that actually need the income from their properties to survive and to pay the bills for the property. You can’t lump everybody together.”

Her tenants include residents, one of whom she says is not paying rent, and a small local coffee shop, for which she has provided rent relief. But the case also cites the defaults of Gap, Old Navy and Victoria’s Secret.
“We’ve seen major corporations take advantage of this,” said Stephen Younger, of Patterson Belknap Webb & Tyler, the lead attorney for the plaintiffs. “There’s no income test that would take into account whether you’re truly suffering or not.”

But the case against the city was recently dismissed. The plaintiffs are deciding whether to appeal.
“These provisions are put in place to protect those in need,” said attorney Laura Brandt, who brands herself as “the Retail Lawyer.” She noted that some stores have lost millions, if not billions, of dollars in the pandemic.
“But now that this has dragged on, it’s not just the retailers — the landlords are starting to go into bankruptcy,” Brandt said. “So now they’re both underdogs.”

When Le Pain filed for Chapter 11, Swerdloff lost all hope.
“There are a bunch of other [small landlords] suffering from this, and it’s tough,” he said.

Hospitality investment firm Aurify bought Le Pain out of bankruptcy last month with plans to reopen some locations across the U.S. A spokesperson for Le Pain declined to comment.
Smaller landlords with just one property and very little capital often lack the resources to replace a tenant, Braus noted. “They can’t compete with the deep-pocketed landlords, who are able to go out and get really good tenants by spending the money that’s necessary,” he said.

Swerdloff paid $240,000, with interest, in 2019 property taxes and expects to owe $220,000 for this year. Eighteen months without a paying tenant makes the upcoming tax payment daunting, if not impossible. Swerdloff said he and his wife have already gone through their life savings.
Desperate, he and his wife sent a letter to the City Council in October, pleading for some kind of relief. “We cannot live another day like this,” they wrote. They never heard back.

Swerdloff sold his home of 44 years in an attempt to stay afloat, according to the letter. He is still looking for a tenant, or perhaps a buyer, for his 7th Avenue building.
“The city is not doing anything,” he argued. “They’re oblivious to the plight.”
 

David Goldsmith

All Powerful Moderator
Staff member

1 of every 7 chain stores closed NYC locations this year​

Chains shuttered 520 locations in Manhattan alone

It’s not just small businesses and mom-and-pops that are hurting in 2020: Chain stores are also shuttering at a rapid rate across New York City.
More than 1,000 chain stores across New York City — nearly one out of every seven that were open this time last year — have closed their doors over the past 12 months, according to a new report by the Center for an Urban Future, a think tank focused on economic growth in the five boroughs.

That marks the largest number of chain closures tracked by the think tank in 13 years of putting together the report. In comparison, there was just a 3.7 percent decline in chain stores across the city from 2018 to 2019.

According to CUF’s data, there were 7,948 chain stores across the five boroughs in 2019. Now, there are 6,891, a 13.3 percent decrease. The biggest losses were in Manhattan, which accounted for 520 out of 1,057 closures, or 49 percent of the citywide total. The larger figure includes 160 stores that have temporarily closed because of pandemic-driven restrictions.

Fitness chains like New York Sports Club and SoulCycle shut down locations after Gov. Andrew Cuomo’s executive order in March that required gyms to close. A large number of fast-casual sandwich and soup chains — including Subway, Pret a Manger and Hale & Hearty — also shuttered locations, perhaps because few workers have returned to offices.


Even major chains couldn’t avoid the closures. Dunkin’, which has more stores than any other retailer in the city, with 610 locations, lost 18 stores. Metro PCS, the second largest retailer, shuttered 134 stores over the past year.
Other stores that recorded losses include Duane Reade, which closed 70 stores; GNC, which shuttered 51 locations; Modell’s, which closed 43 stores after filing for bankruptcy earlier this year; and Baskin-Robbins, which shuttered 30 locations.

Only 40 retailers added store locations. Popeyes and T-Mobile grew the most, adding 11 stores each.
While the pandemic accelerated closures in 2020, CUF’s data suggests that the growth of chain stores throughout the city has flatlined in the past few years — in 2018, there was a 0.3 percent decline, and in 2019, a 3.7 percent decline.

To create the report, the think tank tallied the number of national retailer store locations throughout the city and recorded trends by retailer, borough and ZIP code.
 

David Goldsmith

All Powerful Moderator
Staff member

Manhattan retail rents hit new lows​

Pandemic accelerated trend of declining rents

The coronavirus pandemic has undoubtedly taken a huge toll on Manhattan’s retail sector, leading to stores closing and rents dropping along even the most posh shopping corridors. But those problems were in place well before the pandemic took hold, according to a new report from the Real Estate Board of New York.
In the fall of 2020, all 17 of the Manhattan retail corridors that REBNY tracks saw their average asking rents drop from the same time last year, with those decreases ranging from 1 to 25 percent. Eight of the retail regions tracked — Soho, Fifth Avenue and Madison Avenue among them — saw the lowest asking rents in at least a decade.

The strip of Broadway between Houston and Broome streets saw the biggest decline: Asking rents dropped to $367 per square foot, a whopping 25 percent decrease over the same period in 2019. That is the lowest the rent has been since 2006, according to the report.

On Fifth Avenue, the average asking rent hit $271 per square foot, a 22 percent year-over-year decline. And Madison Avenue saw asking rents drop to $784 per square foot, a 13 percent decline.

“Historic declines in rent across Manhattan’s most prominent retail corridors show just how much the market has adjusted amid the unprecedented impacts of the Covid-19 crisis,” REBNY president James Whelan said in a statement.

But while the pandemic accelerated the trend, rents have been falling progressively over the past five years, according to the report.
On Bleecker Street, the average asking rent has declined 46 percent since 2015, from $468 to $252. The drop was even more striking along 57th Street, where asking rents dropped 61 percent — from $1,600 in 2015 to just $633 in 2020.

Available retail space is also on the rise, with 11 corridors seeing increases in availability ranging from 6 to 67 percent.
Broadway between Battery Park and Chambers Street, for example, had 28 available spaces. Madison Avenue had 55. (The latter’s business improvement district recently developed a blueprint to transform those vacant storefronts into pop-ups.)

And it’s unlikely that chain stores will take over those vacant spaces. More than 1,000 chains across New York City — nearly one out of every seven that were open the same time last year — have closed their doors over the past 12 months, according to a recent report by the Center for an Urban Future.
But as rents fell and chain stores’ growth flatlined, the complaints diminished a bit, and long-running efforts to impose commercial rent control did not come to fruition.
 

John Walkup

Talking Manhattan on UrbanDigs.com
Will this eventually filter through to properly taxes, or will owners have to fight for every possible reduction as usual?
 

David Goldsmith

All Powerful Moderator
Staff member
Manhattan asking retail rents continue downward spiral
Year-over-year drop of nearly 10% to $652 per square foot


The holidays are typically a bright spot for retailers, but with little foot traffic returning to Manhattan, the fourth quarter of 2020 was instead filled with uncertainty and distress.
The average retail asking rent in Manhattan’s 16 retail corridors dropped nearly 10 percent year over year to $652 per square foot, according to a new report by CBRE. That’s a slight drop from Q3’s $659 per square foot, marking the lowest rents have been since 2011.

In some neighborhoods, rents were slashed nearly in half. On Prince Street in Soho, asking rents fell from $719 to $423 per square foot year-over-year.

But while the pandemic accelerated the trend, rents have been falling progressively over the past five years, according to a recent REBNY report. The CBRE report notes that Q4’s numbers represent the 13th quarterly decrease in average asking rents.


Additionally, for the sixth quarter in a row, leasing velocity has been spiraling. The number of available ground-floor storefronts jumped 3.9 percent, from 254 to 264 — which is a new high for availability in the borough, according to CBRE.
However, there were a few bright spots. Retail spending was up, with quarterly sales increasing 8.6 percent to $35.4 billion. The unemployment rate dropped roughly 4 basis points to 12.1 percent.

And several big leases were signed in the fourth quarter. Home Depot inked a 20-year lease to take over more than 100,000 square feet on the Upper East Side that was previously occupied by Bed Bath & Beyond. Target similarly secured a new 20-year, 55,000-square-foot lease at a space recently vacated by Barnes & Noble on East 86th Street.
 

John Walkup

Talking Manhattan on UrbanDigs.com
Some of thesee asking rents are mind boggling eye poppers. But when the asking rent goes from $719 to $423 in a year, that's a tip off that there exists some secret knowledge. Gnostic balance sheets and the like. If you don't know it, it knows you!
 
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