COVID-19 and Reopening, Racial Injustice
June 5, 2020
Industry Leaders Respond to Racial Injustice; Rental Concerns Amid COVID-19 Lockdowns Add to Uncertainty
Coronavirus
Real estate industry leaders this week responded to protests against racial injustice throughout the nation sparked by the May 25 death of George Floyd in Minneapolis.
Real Estate Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) on June 2 stated, “The buildup and expression of anger and frustration around racial injustice is real and it is justified. There are sadly far too many examples of systemic racism, bias and inequality in our society, and there are no fast or easy answers to dismantling hundreds of years of racism.”
She added, “We do not condone violence against people or property, which seems to be emanating principally from criminal and other elements, rather than from peaceful protesters who are demanding change. But We CAN stand together as allies, stand against racism when we see it, and take deliberate actions to encourage and promote diversity, equity and inclusion within and beyond our own homes, networks, and communities to ensure that everyone feels like they belong.” (Full Statement, Ventas, June 2)
Real Estate Roundtable President and CEO Jeffrey DeBoer on June 1 told BisNow, “Political, business and community leaders must come together and take concrete actions to significantly and measurably combat the long-standing abuse and unequal opportunities that continue to fall, particularly across race and gender.” (Bisnow article, June 1)
Roundtable Board Member and Related Companies CEO Jeff Blau also told Bisnow on Monday, “… this has been going on for a very, very long time, and I think [inequality] is probably one of the greatest risks to our country's future that I can imagine. And I think it's a topic that we all, as business leaders, need to focus on to try to make things better.”
Scott Rechler, chairman and CEO of RXR Realty and a Roundtable Member, tweeted a statement on May 31: “The rage currently being felt across our country reflects the widening inequality and systemic racism that has plagued our nation for far too long.” He urged demonstrators to channel their anger into change at the ballot box. (TRD, June 1, “Developers, brokerage heads express solidarity but urge non-violence”)
James Whelan, president of the Real Estate Board of New York, said Floyd’s killing underscores “systemic issues of race and class” that the city and country have failed to address. Whelan told The Real Deal that he condemned violence and pledged the industry would provide solutions, “not just lip service.” (TRD, June 2)
Economic Restart and Re-Entry Concerns
Working with its industry partners, The Roundtable is focused on identifying and addressing issues associated with building re-entry as people return to work in many regions.
The Real Estate Roundtable’s Building Re-Entry Working Group continues to meet weekly to address issues associated with the restarting of the economy. This week, the Working Group shared a report from fitwel on how to adapt building design projects to respond COVID 19.
Additionally, a June 4 article in Facility Executive, “NYC Real Estate Leaders Issue Guidelines For Reentering Office Buildings,” notes, “A coalition of business and real estate industry leaders have joined together to issue New York City’s most comprehensive guidelines to facilitate the safe and healthy reentry into commercial office buildings. These guidelines follow New York State’s issuance of commercial building safety practices and will help owners, managers, and building workers comply with state guidance.” (Best Practices for Reentering Commercial Buildings in Phase Two of New York Forward)
A recent Littler survey of more than 1,000 employers show concerns centered on when to bring employees back and how to do so safely; how to accommodate increasing remote-work requests; and liability concerns stemming from the rise in COVID-19-related employment claims and lawsuits. (View the survey infographic and the May publication).
The Centers for Disease Control and Prevention (CDC) has issued recommendations for American employers preparing to reopen their offices as states begin to lift their lock-down orders. [CDC, Interim Guidance for Businesses and Employers Responding to Coronavirus Disease 2019, (May 2020] CDC recommends various steps such as checking ventilation systems, increasing outdoor air circulation, ensuring employees maintain six feet of separation through physical barriers, staggered worker shifts, enhanced clean and disinfecting practices, and conducting employee health checks and screenings.
A multi-sector business coalition including real estate, tourism, technology, manufacturing, health care, and energy sector groups – led by the U.S. Chamber of Commerce – called upon Congress in a May 27 letter to enact temporary liability protections for businesses struggling to reopen and operate safely during the COVID-19 pandemic.
Among the more than 200 signatories to the letter are The Real Estate Roundtable, American Hotel & Lodging Association, International Council of Shopping Centers, National Apartment Association, National Association of REALTORS®, and the National Multifamily Housing Council.
In recent weeks, Roundtable members have shared their perspectives and experiences with a number of media platforms regarding workplace re-entry strategies and technologies. (Roundtable Weekly, May 15) Such questions are also complicated by an evolving patchwork of state-level laws and guidance. (New York Times Interactive Map, “See How All 50 States are Re-Opening” )
Commercial Rent Shortfalls; Bank Regulator Warns About Lock-Down Impact on CRE
The Washington Post on June 3 reported in “The next big problem for the economy: Businesses can’t pay their rent” that more than 40 percent of commercial retail rents were not paid in April and May, citing Datex Property Solutions. (Request Datex’ report on National Tenant Payment Trends.)
The Post story notes when businesses stop paying rent, it sets off an alarming chain reaction that could threaten the broader economy and put landlords at risk of bankruptcy. The article also mentions how an aggressive proposal in California would force landlords to renegotiate leases with tenants affected by the pandemic, posing a risk to the basis of contract law. John Worth, executive vice president for research at Nareit, is quoted, “It’s not appropriate policy to have blanket rent forgiveness. It could really create some chaos.”
The New York Times on June 5 reports in “Tenants’ Troubles Put Stress on Commercial Real Estate” that landlords have begun to fall behind on the loans used to acquire or build properties, citing hotel and retail property data from Trepp.
The Times article notes, “As landlords face rent shortfalls and renegotiation because of the pandemic, lenders are also exposed.” It continues, “Beyond the immediate impact of business closings on tenants’ revenue are larger questions, including the already-dire trends for malls and shopping centers, how office and consumer behavior might change after the pandemic, and the effects of recent looting and vandalism on retail corridors.”
The Roundtable has emphasized the vital need to restore the “rent obligation chain” during this economic crisis, which would benefit all stakeholders – business and residential tenants, owners, lenders, municipal and state budgets and retirement investments. (Bisnow video interview with Jeffrey DeBoer, April 30)
Separately, Acting Comptroller of the Currency Brian P. Brooks on June 1 urged the nation’s mayors and governors to consider the adverse impacts of long-term regional economic shutdowns on the nation's financial system and the commercial real estate sector. (Office of the Comptroller of the Currency news release, June 1)
In letters to the National League of Cities, the U.S. Conference of Mayors, and the National Association of Governors, Brooks warned that the lengthy duration and scope of continued lockdown orders “potentially threaten the stability and orderly functioning of the financial system the OCC is charged by law to protect.”
Brooks also warned about the negative potential consequences for CRE, stating, “Banks are a major source of commercial real estate finance in the United States. Cutting off utilities to commercial buildings can impair their condition, structural integrity, and value, thus impairing the collateral that secures real estate loans. Commercial real estate loan collateral is also put at risk by lengthy property vacancies that result from extended stay-at-home orders.”
“Apart from damage to the physical collateral, extended lockdown orders obviously impair the ability of businesses, particularly small businesses, to generate the revenue needed to pay their loan obligations,” Brooks stated. (OCC letter to U.S. Conference of Mayors)
The challenges of restarting the economy and re-entering commercial properties will be a central topic of The Roundtable’s June 11-12 Virtual Annual Meeting and concurrent policy advisory committees.
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