Ripco Realty's Gene Spiegelman

For Gene Spiegelman, vice chairman and a principal of Ripco Real Estate, mid-March feels disturbingly like it was just yesterday.

Beginning the third week of March, nonessential stores, including fashion and luxury retailers, which represent “a meaningful” part of Ripco’s business, started closing en masse due to coronavirus.

“For the first 10 days of this, we had to sit back and look at our cash,” Spiegelman said. “Brokers stopped coming into the office. We went through our [financial] obligations, how much cash we had in the bank, our access to credit. A few residual deals were close. Late cycle deals have closed. But we do have negotiations underway on deals. There are deals in a sense still proceeding, but you can’t get into buildings and put people together. You can’t do on-site work.”

At Ripco, a boutique retail brokerage which does leasing, consulting, property management and lists Target, Starbucks, Shake Shack, TD Bank, Best Buy, Foot Locker and TJX as clients, among others, “None of our principals are being paid and we furloughed about two-thirds of our staff,” Spiegelman said, noting the firm has 100 employees including 70 brokerage professionals. “Nothing short of World War II has impacted real estate in such a manner.”

Spiegelman, who is also a principal in the Sagamore Hill Partners real estate investment firm, has a handle on how retailers, brands and property owners are reacting to the pandemic. “There is an ask on the tenants side, and the landlords are cataloguing the asks, and for the most part, they end up not necessarily acting on anything. No one has agreed to waive any rent. Retail chains are looking for rent abatements and all landlords will talk about deferrals.…What we don’t know is who is going to still be here after this all ends, and how much more inventory is going to come into the market.”

Spiegelman does see the coronavirus in some respects impacting the industry similar to how the Great Recession impacted it. At that time, he was a vice chairman at Cushman & Wakefield. “We were restructuring leases, helping to keep clients from closing stores and from going bankrupt. One national coffee chain gave us 250 to 300 locations to address. We had to speak to all the landlords, to modify in-place leases. We were given a mandate to achieve an overall 20 percent reduction in gross occupancy costs. We wound up pretty successful.”

In the current health and economic crisis, Spiegelman said, “There is a full cycle here that has to be respected. Everyone has to understand everyone’s part of the equation.” Retailers don’t want to pay rent because their revenues are disappearing; landlords won’t be able to pay interest and principals on mortgages; lenders will have to provide relief from payments due on loans; utility companies won’t get paid, and municipalities won’t be able to collect tax revenues. “The whole cash cycle is going to be frozen,” Spiegelman said.
Below are some of the retail real estate veteran’s views on how an industry impacted by the coronavirus, changes in the near-term and the long-term.
• Retailers offer to extend their lease or take available locations, if rent abatements or deferrals are provided.
• Retailers seek to pay rents based on a percent of sales until the health crisis subsides and the economy stabilizes.
• Litigation arises over whether business interruption insurance covers losses during the pandemic. In the future, “Leases will be four more pages long covering pandemics.”
• The real estate industry continues to press the federal government for legislation providing economic relief to companies with more than 500 employees.
• Lenders provide some relief to retailers and landlords from debt obligations.
• Retailers and brands invest more in online operations so sales generated digitally represent a greater percentage of overall sales.
• Business bounces back. “I don’t know when it’s going to open up again but it will open in phases. International and national tourism is not going to recover as quickly.”
• Landlords accelerate transformations of retail square footage to experiential and entertainment formats; store closings accelerate.
• Retailers change how they use data, sanitize stores, and how people enter and exit their premises. “Just think about how 9/11 reshaped how we enter an office building and how we  transit through airports. It was never the same,” Spiegelman said. “This health crisis will engender behavior changes in all types of commercial spaces that will forever change how business is conducted.”
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