April 21, 2020

Majority of Brooklyn’s commercial tenants seek rent relief from their landlords

Debtwire

For more than a century the last words in fine dining in Brooklyn were Gage & Tollner.

But for the last 15 years, the Fulton Street storefront in downtown Brooklyn that once housed the gaslight-era restaurant instead housed costume jewelry, a tattoo artist and an Arby’s. For more than a  year it housed nothing, then a set of eager entrepreneurs restored it to its historic mission of serving up steaks and seafood to the likes of Diamond Jim Brady, Fiorello LaGuardia, members of the Brooklyn Dodgers and Muhammad Ali.

Then the coronavirus hit, and more than 2,000 reservations and projected initial revenue of more than USD 200,000 were lost.

Co-owner Ben Schneider found himself in the position of a lot of Brooklyn retailers, having poured his heart, his soul and his money into a business with nothing to show for it, and a staff of 40 to 50 that he had to let go. Now more than a month after the targeted opening date of 15 March,  Gage & Tollner waits for Governor Andrew Cuomo to lift restrictions on travel and non-essential gatherings, an easing still vaguely in the future. He has said his executive order lasts until 15 May, but hasn’t said what would happen after that.

He said they applied for the federal government’s paycheck protection program – commonly known as PPP – but found out that new businesses like his didn’t qualify.

“I literally said to myself if we could just get this place open,” he said. “The only thing that could prevent us from being a success was a global catastrophe. I literally said that to myself and here we are.”

Instead, Schneider finds himself negotiating with his landlord trying to defer his rent payments. IJS Management manages the property on behalf of the Jemal family which owns 372-374 Fulton St., part of the Fulton Street Mall, a shopping district for New York City’s most populous borough.

He declined to go into detail. He described his conversations with his landlord as “productive and good.’’ Calls and an email to the Jemal family were not returned.

Schneider is not alone. According to a survey by Terra CRG, a commercial real estate brokerage that specializes in Brooklyn, almost two-thirds of retail landlords have had more than three quarters of their tenants seek rent forgiveness. Almost half of those, 47.5%, want an indefinite stay of payments, and another 37.5% want a three-month rent break.

Almost two-thirds of landlords have either asked their mortgage lenders for more time in making payments, or have such a request in progress. More than 60% expressed doubt that the recovery will be V-shaped; that markets will snap back once the economy opens up.

“There are a bunch of local businesses just like Ben’s that represent a big chunk of Brooklyn,” said Ofer Cohen, Terra CRG president. “Ongoing dialogue (between tenants and landlords) is common: Let’s find a solution so we can stay in business.”

Seth Weissman sees it from both sides. As managing partner of Urban Standard Capital, the company has interests in about 30 buildings, a mix of retail and multi-family rentals, and is the lender on another group of properties, totaling about USD 200m. All are in Manhattan and Brooklyn.

“We really want to make sure our tenants are aware of the programs that are available to them,” he said, describing many of his tenants as “mom and pops.”

He credited New York Community Bank, a major lender to government rent-restricted apartment rentals, for “reaching out early,’’ and offering borrowers to pay interest-only for an indefinite amount of time. Other lenders have not reached out, but he said it was too early to say whether those might cause a problem.

“We haven’t asked for relief from them as yet, so we don’t know what their response will be,” Weissman said.

by David M. Levitt