Guidance for Our Real Estate Clients Amid the COVID-19 Pandemic
The entire human race is dealing with the impact of the COVID-19 pandemic and the real estate industry is being impacted in very unique ways. As the pandemic and “social distancing” continues to disrupt the real estate industry, our Real Estate Practice would like you to keep some key concepts in mind:
1. WE ARE IN THIS TOGETHER
The COVID-19 will impact all players in the real estate chain from tenant, landlord, lender, service provider, broker, appraiser, contractor, insurer, investor and all parties above, below and in between. Business is still about people and all of your business partners will long remember which people or businesses approached the pandemic in a spirit of compromise and negotiation and which parties tried to take advantage of the pandemic or not realistically adapt to the crisis. Be prepared to have candid conversations with all of your business partners and contacts regarding what your business needs to survive this disruption, including, performance extensions, abatements, considerations or concessions. By the same token, be prepared to give performance extensions, abatements, considerations or concessions wherever possible. Common sense and reasonable business solutions can help mitigate loss and solve most problems related to the pandemic. Being proactive, clearheaded and reasonable under the circumstances will be appreciated and remembered.
2. DUST OFF YOUR REAL ESTATE DOCUMENTATION
This is the time to locate and review your leases, loan documents, service provider contracts, franchise agreements, contractor agreements, insurance policies or any other documentation related to your real estate business. Pay attention to provisions such as Force Majeure, Interruption of Service, Operation Covenants, Business Interruption, Casualty, “Go Dark” or hours of operation provisions if a business is unable to continue operating, Anchor Tenant related co-tenancy provisions or contingent termination provisions if certain circumstances occur and lender approval provisions outlining what amendments, modifications or other workouts require lender approval. For loan documentation, what amendments, modifications or other workouts can be accomplished with servicers, syndicates or funds as not to trigger buy back, cash threshold or other default provisions to occur. For insurance information, what conditions are required in order for coverage to be provided.
3. KEEP UP TO DATE ON PUBLIC ANNOUNCEMENTS
States are issuing executive orders on a daily basis affecting how or when certain businesses may operate. Not only are these announcements vital to how you or your tenants may legally operate their businesses, but these announcements are objective standards for determining when there was a state of emergency for Force Majeure considerations or when a business had to shut its doors for Business Interruption purposes.
4. UPDATE YOUR EMPLOYMENT AND FINANCIAL RECORDS
Each level of government, as well as lenders and private investors, are currently discussing various stimulus plans, programs or procedures to deal with the pandemic. As these plans, programs or procedures solidify, it will be important for qualification purposes that you know (1) how many employees had to be terminated as a result of the pandemic; (2) how many employees were affected by the pandemic (i.e., indirect terminations) which may be under different programs; (3) what losses can be attributed to the pandemic and in what ways. With this information you will be able to quickly apply for private or public programs that can lessen the impact of the pandemic for your business and your employees.
As we all work through the pandemic, it is important for you to know that our Firm and the Real Estate Practice is here for you. As various public and private programs are announced, we will keep you updated on how these programs will affect your business. Our goal is to help you and your business successfully navigate this disruptive and historical event and its profound impacts on the real estate industry. Life will not be the same after the pandemic, but we are here to help you preserve what you have built and get your business safely to the other side.Congressional letter may prove a trend, and we encourage our clients and other carriers and brokers to stay abreast on these and other legislative attempts to expand business interruption insurance coverage.