Property Managers Wait for Other Shoe to Drop

Since the economy bottomed out last spring, rent collections at malls and other retail centers in North Los Angeles have seen monthly incremental hikes as landlords and tenants engage in a delicate dance of payment agreements.

Now, those in the property management business worry that December’s recent lockdown, which Los Angeles County had aimed for three weeks through Christmas and New Year’s, may upend those gains heading into 2021. Concurrent with the shutdown, a possible virus surge post-holidays may further contribute to ongoing retail and restaurant closures.

“November is as good as we’re going to get,” said Mark Sigal, founder of the Woodland Hills-based retail statistical engine Datex.

“We’ve squeezed everything that we can out of the toothpaste (tube). Either the government will step in and provide additional relief, or we will see a very struggling first quarter.” Sigal’s brother Sandy Sigal is chief executive at NewMark Merrill Cos., No. 18 on the Business Journal’s list of Property Management Firms. With the most recent shutdown orders in December, “it went from a headache to a migraine,” Sandy Sigal said. “We all want to understand the rules and work within the rules. California keeps changing the rules.”

During the pandemic, NewMark Merrill has invested thousands of dollards at Janss Marketplace in Thousand Oaks to expand restaurant patios and refresh walls with murals.

Todd Nathanson of Illi Commercial, No. 2 on the Business Journal’s list, which manages many Valley shopping centers, is “cautiously optimistic” about 2021.

“Our collections over the last seven months have been hovering above 80 percent,” Nathanson said.

He added it has been a “very challenging” time for tenants. “They’re frustrated,” he continued. “We’re seeing a lot of public rebellion. A lot of people would rather pay the fines.” Sandy Sigal, whose company owns and runs retail centers in California, Colorado and Illinois, observed that grocery stores, home goods and hobby shops have best navigated 2020’s stop-and-go economic fits. Rent collections at his properties remained “pretty good” through the summer — overcoming 35 percent lows to 100 percent highs, which he chalks up to the CARES Act stimulus package and PPP money propping up businesses. “It gave them the oxygen they needed,” he said.

“In my 35 years, I have never seen anything like this,” Nathanson said of 2020.

Telling numbers

Across 2020, “every single month was higher than the last May was a little better, June a little bit better, July and each month the steps going up and up,” said Mark Sigal, citing his Datex data.

However, once governmental aid ran out by autumn, certain corridors started to struggle, particularly medium and smaller businesses from the neighborhood dentists to restaurants to karate studios, Sandy Sigal said. Datex statistics draw from a national pool of 20 million retail operators in several states. Based on those numbers, Mark Sigal said: “The Q1 results were not very different than a year before; Q2 was horrific; Q3, closer to normal.”

As confirmed by Datex’s data for the month of November, it was no surprise that rent collection among movie theaters has been low (26 percent). What is startling is how high rent collections nationwide climbed for non-fast food restaurants (90.9 percent) and hair salons (79.2 percent).

Inherently equipped for take-out, fast food, which has its own category, ranks high at 93.7 percent. Home improvement tops the list at 98.3 percent. Specialty restaurants — from the Asian buffet to Chuck E. Cheese, which filed for bankruptcy — has suffered, Mark Sigal noted. Total collections held at 85.3 percent by November’s end, down slightly from October’s 85.7 percent. With vaccine distribution ramping up, property management players view a light at the tunnel’s end. Property owners such as Sandy Sigal are trying to make the most of the situation for the coming months until vaccinations diminish the virus. He hopes that 2020 was a one-off year. “There have been peaks and valleys – this peak is a little deeper,” he said, and yet “the leasing for the last three months has been almost on par with last year. We’ve put a lot of hair salons, a massage parlor and a tattoo artist into business just last month.”’

The year 2020 has also showcased resilience. “I got to see some remarkable tenants at their very best,” he continued. “I find that reason prevails in times like this.”

From San Fernando Business Journal.

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