No rent? No thanks!
As the founder of Lionheart Capital, a developer of swanky hotels in Florida and luxury ski lodges in Colorado, Ophir Sternberg has had a pretty successful run in commercial real estate.
So when COVID-19 shuttered most of the projects in his retail division, Out of the Box Ventures, he tried to leverage his financial acumen to help suffering tenants.
“This was a Black Swan event that no one could have anticipated. Looking at the marketplace, I saw strong stances being taken by landlords who demanded that rents be paid in full and national chain tenants saying they’re not going to pay,” Sternberg said. “I told our leadership, ‘Let’s come with a fair formula to help them get through the next few months.’”
The proposition OOTBV came up with: Pay your common area maintenance (CAM) charges and taxes, but pay no rent at all for April or May. Those rents are forgiven.
Few mall and shopping center landlords have wiped April and May rents off their books, so OOTBV’s offer appeared generous. National chain tenants, however, were not impressed.
“We got letters from their lawyers about what they wanted and what they intended to do, but not one of the national chains responded in any way to our offer of two months free rent. I guess it was because we were still asking them to pay something,” said Sternberg.
Independent retailers were more gleeful. “We’re getting a lot more nice letters and appreciation from the mom-and-pop businesses in our centers,” Sternberg said.
Sternberg and his team are keeping busy watching what develops through the crisis and setting out individual plans for properties. OOTBV’s basic premise is to buy existing properties and redevelop them to suit current consumer needs.
“This crisis is making changes in the retail environment happen faster than anyone would have thought,” Sternberg said. “We’re spending a lot of our time looking at master plans and designs and thinking about who our next tenants are going to be. We’re anticipating a lot of re-zoning.”