HFA member Tony Vera closed his doors last week, let go of all his employees but family and is relying on website sales to keep Mega Furniture his store in North Miami Beach, Fla., open. But for how long?
As store traffic — and sales — dwindle, retailers like Vera are understandably eager to look for ways to cut even expenses. For many, the biggest expense after employees is the rent or mortgage on the store. In Vera’s case, the $20,000 rent on his 12,000 square foot showroom and 8,000 square foot warehouse is due next week. “We can go a few months but after that I don’t know,” says Vera. “After that we’re going to be in trouble.”
HFA members who may not be able to pay rent or cover the next mortgage due to the COVID-19 pandemic should start a conversation with their landlord or bank as soon as possible, one retail expert says.
David McMahon, a retail financial and operational professional, says retailers should not be afraid to discuss new terms.
“In most cases, (the terms are) just temporary and the landlords are going to want to work with you because, let’s face it, in this time of uncertainty there’s not going to be a lot of demand for commercial space,” says McMahon. “There’s probably nobody eager to come in behind you. This is a situation where both parties can win if they talk things out.”
McMahon, who conducts performance groups for many HFA members, says the key is communication. “This isn’t something you can ignore because it’s not going to go away. Talk to your landlord. They’ve probably already got a fairly good idea your business is hurting, but they may not know just how much. If you can show your business is down by whatever amount, that helps. It always helps if you’re honest.”
Feinblum counsels patience
Julius Feinblum agrees, but says retailers might be rushing things. Feinblum is head of Julius M. Feinblum Real Estate, a commercial real estate company that focuses on the furniture industry. He believes asking for relief could raise warning flags with your landlord or creditors when you might need their help later. He says retailers need to be patient in the coming days and weeks as state and federal lawmakers start rolling out economic relief packages.
“It’s too early to panic,” says Feinblum, “The relief is coming so pay attention to county, state and federal news. If you’re too busy running your store, then keep in touch with the HFA, your accountant or lawyer. Your association will be on top of this. Your accountant and lawyer should be, too. ”
Another factor in retailers’ favor: It’s not easy evicting tenants. Feinblum says courts aren’t interested in hearing all but the most important cases in times of nationwide financial stress. States such as New York and California—where forcing out tenants can be time-consuming, even in the best of circumstances — have placed a moratorium on evictions, says Feinblum. He expects Florida and other states to join that list in the coming days. But McMahon says public relief might take a while. What doesn’t take time is picking up the phone and calling your landlord.
“I’m having a hard time believing that any landlord would spend workdays on an eviction process given what we are going though, so talk things out,” McMahon says.