Hartford Business Journal

www.HartfordBusiness.com • April 20, 2020 • Hartford Business Journal 19 Office landlords, tenants dispute rent payments amid COVID-19 shutdowns By Joe Cooper jcooper@hartfordbusiness.com R estricted access to office buildings during the CO- VID-19 pandemic has some Greater Hartford office, retail and other commercial tenants thinking they may be able to skip monthly rent payments. That isn't sitting well with landlords. "There's definitely a perception out there on the part of a lot of ten- ants that they sort of almost don't have to pay rent," said R. Michael Go- man, principal of East Hartford real estate advisory firm Goman+York Property Advisors LLC. "And that's wrong — it doesn't make a lot of sense," he added. "The small shops maybe can't pay it, but the big- ger firms can pay it and should pay it." Goman has been in talks with many of the bankers, design profes- sionals, restaurant and shopping center/retail operators his firm advises on how to negotiate rent re- payment plans and project how long it could take for their businesses to recover from the economic crisis caused by the coronavirus outbreak. Rent payments, he said, have been a hot-button issue in the real estate community since Gov. Ned Lamont ordered non-essential businesses to stay home until the public health emergency passes. The state judicial system has re- stricted commercial renter evictions until at least May 1, while Lamont has prohibited residential evictions until July 1. In addition, many banks and credit unions have signed on to a voluntary mortgage relief program for home- owners, and residential renters have been given a 60-day grace period for April and May monthly payments. Similar rent and mortgage relief has not been granted to businesses or property owners. As a result, some commercial land- lords are attempting to delay mortgage payments by negotiating repayment plans with lenders, Goman says. Goman says tenants should also inform building owners what they are able to pay, and negotiate rea- sonable terms. Some tenants have opted to either pay month-by-month, defer pay- ments over several months or add payments to the end of a lease. "Landlords are looking to at least get operating expenses because at the end of the day, they need to keep the doors open and keep everything running," he said. However, many restaurant, hotel and retail operators, and other indus- tries slammed by the pandemic, are unable to forecast a payment plan because of uncertain cash flows. Goman said he heard from one 450-store national retailer that's expecting the market to stabilize in 10 months. Another hotel operator managing dozens of hotels in and outside Connecticut says occupancy has fallen as low as 5% in some of the buildings it has kept open. The length of the public health emergency and the impact of the Small Business Administration's $350-billion Payment Protection Program will play a major role in determining whether independent operators can keep the lights long term, he says. But despite the economic hard- ships, tenants unable or refusing to pay rent will likely be summoned to court at some point. "I think there will be years of litigation for these kinds of issues," Goman said. "I think we can prevent a lot of that by landlords and tenants agreeing to talk things through. But that means everybody needs to come to the table with infor- mation, a plan and a reasonable approach." Landlords should not be rushing to boot commercial tenants that are struggling with rent payments because it's unlikely they would be able to fill those spaces any time soon, Goman said. About 85% to 90% of office moves that were being mulled before the pandemic are in limbo, he said. "[Business owners] aren't expecting to get back to a level of normalcy until next year, which is pretty remarkable," he said. "I thought I had seen pretty much everything, but no such luck." Market innovations The rapid spread of coronavirus will likely encourage landlords to implement new health-and-safety measures in office designs. Area design professionals expect some companies to move away from open floor plans to mitigate the poten- tial spread of infectious disease, Goman said. That means traditional cubicle- office formats could regain favor. "The ability to spread a virus diminishes when people are working in a specific office," Goman said. There will also be more access to personal protective equipment in the workplace. That may include the implementation of no-touch technolo- gy, such as devices that sense the pres- ence of a smartphone and automati- cally open and close doors, he said. Landlords have also been testing technology that deploys ultraviolet (UV) lighting geared toward filter- ing entryway air quality. "We will see a lot more develop- ment in those types of technologies," Goman said. "The no-touch devices have been around for a while." Deal Roundup An Ohio-based battery manufac- turer is relocating its Waterbury auto-parts store to a larger facility in Cromwell, brokers say Crown Battery Manufacturing recently leased a 14,000-square-foot industrial building at 50 Sebethe Dr., from landlord O & G Industries Inc., of Torrington. Crown Battery previously occupied space at 84 Progress Lane in Waterbury. Broker Sentry Commercial repre- sented the landlord in the deal, and realty broker-advisor CBRE repre- sented the tenant. • • • Hartford law firm Cowdery & Murphy LLC has moved into a new office at its longtime home in the 28-story Prudential Building on Trumbull Street. The firm has signed a lease to relocate into 4,382 square feet on the 22nd floor of 280 Trumbull St. Cowdery & Murphy has been a ten- ant at the building since 2008. Sentry represented Cowdery & Murphy and CBRE represented the landlord, Manhattan's Grunberg Realty, in the deal. Grunberg Realty acquired the Prudential Building in April 2004 for $65 million. Joe Cooper is HBJ's web editor and real estate writer. He pens "The Real Deal" column about commercial real estate. THE REAL DEAL R. Michael Goman, Principal, Goman+York Property Advisors LLC Downtown Hartford looks relatively deserted on a recent weekday thanks to orders keeping most workers home to limit the COVID-19 outbreak. HBJ PHOTO | JOE COOPER

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