Boulder Valley Re/Con: Tenants, landlords, lenders lean on one another to weather COVID storm

BOULDER — The trio of tenants, landlords and lending institutions are locked in an intricate dance with one another as they give and take in an effort to withstand COVID-19.

Tenants are reliant on landlords to provide a space in which to do business; landlords rely on tenants for income and lenders for capital to purchase property; lenders need landlords to pay their mortgages in order to turn a profit. 

But what happens when one of the legs of this triangular table — in this case, the tenants who offer the goods and services that keep the economy and society functioning — is kicked out? We’re finding out now.

Local leaders from the real estate, legal and banking industries gathered virtually Tuesday during the “Workouts and Workarounds” panel of BizWest’s Boulder Valley Real Estate Conference to discuss ways the parties can work together to weather this storm.

The key, said Giovanni Ruscitti of Berg Hill Greenleaf Ruscitti LLP, is communication.

“What we’ve been advising everyone is: Make sure you’re talking to each other,” he said. “We’re all going through this at the same time.”

If presented with a compelling case, landlords are often willing to work with tenants to find a way to keep commercial spaces occupied, W.W. Reynolds Cos. president Jeff Wingert said.

“We’ve definitely given rent relief and in some cases talked about lease adjustments.”

The most common forms of concessions from landlords are rent deferrals and adjustments to lease terms to make them more flexible for tenants.

In some cases, landlords and tenants — especially those in restaurant and hospitality businesses — renegotiated multiple times as COVID-19 restrictions have tightened, loosened and tightened again, according to local developer and landlord Stephen Tebo.

Office tenants are pushing for shorter term lease renewals while the state of office work versus working from home remains in flux.

These shorter terms will allow companies to get into next spring and summer and “get a feel for what’s happening in their particular industry” before deciding to either renew a long-term lease or give up their office space, Tebo said.

Shorter-term leases are trickier for other types of users, particularly those who need to make changes or add finishes to a property, Dean Callan & Co. CEO Becky Gamble said. It doesn’t make much sense for a landlord to invest in tenant finishes if that tenant is going to move out in a year. 

On the lending side, banks may be willing to work with landlords in a similar way those landlords might work with tenants. 

Many banks deferred payments from landlords for three months early in the pandemic, First National Bank of Omaha community banking director Gretchen Wahl said, and “in most cases people have started paying again or we’ve gone to interest-only payments.”

Like Ruscitti, Wahl stressed the importance of communication and noted that it’s typically not in anyone’s interest to put landlords and their tenants out of business.

“It doesn’t do any of us any good to put the pressure on if you can’t get blood from a turnip,” she said. “What we all just need is time to get to next spring when hopefully the vaccine is out.”

© 2020 BizWest Media LLC

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