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DATE | 2021-01-20 |
FROM | Ruben Safir
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SUBJECT | Subject: [Hangout - NYLXS] Death of NYC businesses
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From hangout-bounces-at-nylxs.com Wed Jan 20 23:00:32 2021 Return-Path: X-Original-To: archive-at-mrbrklyn.com Delivered-To: archive-at-mrbrklyn.com Received: from www2.mrbrklyn.com (www2.mrbrklyn.com [96.57.23.82]) by mrbrklyn.com (Postfix) with ESMTP id 7D495163FCF; Wed, 20 Jan 2021 23:00:31 -0500 (EST) X-Original-To: hangout-at-nylxs.com Delivered-To: hangout-at-nylxs.com Received: from [10.0.0.62] (www.mrbrklyn.com [96.57.23.83]) by mrbrklyn.com (Postfix) with ESMTP id 59AA1163FCF; Wed, 20 Jan 2021 23:00:28 -0500 (EST) To: "Wuhan(COVID)-19 Discussion and Medical Professionals" , Hangout From: Ruben Safir Message-ID: <28d5ba11-a07e-dde2-4414-8bab6ee2e925-at-mrbrklyn.com> Date: Wed, 20 Jan 2021 22:59:29 -0500 User-Agent: Mozilla/5.0 (X11; Linux x86_64; rv:78.0) Gecko/20100101 Thunderbird/78.6.1 MIME-Version: 1.0 Content-Language: en-US Subject: [Hangout - NYLXS] Death of NYC businesses X-BeenThere: hangout-at-nylxs.com X-Mailman-Version: 2.1.30rc1 Precedence: list List-Id: NYLXS Tech Talk and Politics List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , Content-Type: text/plain; charset="windows-1252" Content-Transfer-Encoding: quoted-printable Errors-To: hangout-bounces-at-nylxs.com Sender: "Hangout"
NYC Landlords and Retail Tenants Team Up to Survive Anne Kadet 7-8 minutes
Kelly Wang=92s new store almost didn=92t survive the pandemic. Five weeks after opening Rue Saint Paul, her Brooklyn sustainable-fashion and beauty boutique, the lockdown forced her to close for three months. Because the store was new, it didn=92t qualify for a federal PPP loan. =93I was just panicking. It was my first commercial lease and I was nervous and timid about my options,=94 she says.
Thank goodness her landlord=97a retired woman who lives upstairs=97said she didn=92t have to pay rent until the spring lockdown ended. In July, when Ms. Wang asked about the back rent, the landlord said she=92d only have to pay half, spread over the remainder of the lease.
=93We wanted to make sure Kelly had the opportunity to be successful in the space,=94 says Salvatore Licata, the landlord=92s son. =93And in turn, = my mom hopefully would have a long-term tenant that she would benefit from as well.=94
Ms. Wang, meanwhile, decided against requesting additional discounts. Sales are strong and she=92s able to pay the full $3,800 monthly rent on the 550-square-foot space, she says.
For those of us concerned about our city=92s mom-and-pop shops and retail strips, it=92s heartening to hear about landlords and small-business tenants working in good faith to ensure each other=92s survival. And it=92s not as rare you might think.
=93Our strategy has been to go as far as we can to keep spaces occupied,=94 says Josh Goldberg, co-principal with his wife, Deborah Reich, and son Xan at the Goldberg Group, which owns several dozen storefront properties in Manhattan, Brooklyn and Queens.
=93The cost of replacing a retail tenant is very high and there is a lot of uncertainty as to how long the space will be empty,=94 says Mr. Goldberg.
Given this reality, he=92s offered many of his tenants=97which include restaurants, drugstores, nail salons and dry cleaners=97short-term rent reductions of 30%-100%.
=93I=92d rather see a tenant open for business, paying nothing, than have an empty space,=94 he says.
As a result, his vacancy rate is roughly 5% compared with rates topping 20% along many Manhattan retail strips.
One option employed in some cases by the Goldberg Group that has become increasingly popular among city landlords during the pandemic: percentage of sales deals.
These lease arrangements typically reduce the rent by 25%-100%. In exchange, the store or restaurant tenant pays the landlord a cut of its sales, often 5%-20%.
Amish Tolia, co-CEO and co-founder of Leap, a business that rents storefronts that it then manages for various brands, is delighted with the percentage deals he=92s negotiated with his Manhattan landlords.
=93If you have a really good month, you pay more; a slower month, you pay less,=94 he says. =93You give up a little bit on the upside, but it protects you on the downside.=94
And while landlords have been leery of such deals for obvious reasons, new technology can provide a full accounting of a tenant=92s receipts. =93They don=92t trust each other, but we like to say we are referees in the sandbox,=94 says Jay Norris, the CEO of Guesst, a third-party sales verification platform.
Sometimes the lawyers have to get involved in a thorny lease negotiation, of course. But William Mack, a Manhattan business attorney with Davidoff Hutcher & Citron, says that in 90% of the cases, the parties strike an agreement allowing mutual survival.
=93Given where the commercial real-estate market is in New York City right now, you=92re better off making a deal, and there are a lot of creative ways of doing that,=94 Mr. Mack says.
In many cases, he says, landlords forgave the rent during the spring lockdown, or agreed to tack it on to the end of the lease.
Many deals also include a renewable rent reduction for a specific duration=97typically four to six months=97or one tied to a government action, such as reopening indoor dining at full capacity.
The Month Coronavirus Unraveled American Business - A WSJ Documentary
0:00 / 44:18
22:09
The Month Coronavirus Unraveled American Business - A WSJ Documentary
The Month Coronavirus Unraveled American Business - A WSJ Documentary When the coronavirus tore through industry, commerce and society in March 2020, the U.S. economy came to a screeching halt. Top executives relive the tough decisions they made as they scrambled to weather the storm. Photo Illustration: Adele Morgan/The Wall Street Journal
The pacts typically create an agreement that both sides kind of don=92t like, says Mr. Mack: =93Everyone is sharing the pain.=94
On the bright side, the pandemic is creating opportunities for entrepreneurs looking to open new stores.
While asking rents for storefronts across the metropolitan area fell by just 4.5% last year, according to information provider CoStar Group, that doesn=92t reflect what=92s happening behind the scenes.
Commercial landlords don=92t like to drop face rents on their properties, and some are prevented from doing so by mortgage agreements requiring a minimum rental income, says CoStar Associate Director of Market Analytics Rachel Johnson.
So rather than dropping the rent 20%, for example, a landlord might offer a year=92s free rent on a five-year lease, or fund a custom space renovation.
Entrepreneurs scouting storefront spaces, meanwhile, tell me that many landlords are entertaining offers at a sharp discount to their asking price.
Hemant Chavan, co-founder of Brik + Clik, a retailer offering merchandise typically available only online, says that in past years, he would have had a hard time nailing a first-class retail space in New York City, given his relatively unproven concept.
But last fall, he landed a high-profile slot in an upscale Manhattan mall, and he is now closing in on a percentage-of-sales deal on a prime Midtown location.
=93They wouldn=92t be talking to us before the pandemic,=94 Mr. Chavan says.
He then offered a view that sounds nutty, but may very well prove prescient: =93It=92s a very good time to get into retail.=94
Write to Anne Kadet at Anne.Kadet-at-wsj.com
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So many immigrant groups have swept through our town that Brooklyn, like Atlantis, reaches mythological proportions in the mind of the world - RI Safir 1998 http://www.mrbrklyn.com DRM is THEFT - We are the STAKEHOLDERS - RI Safir 2002
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