The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Commercial property landlords are "walking a very delicate tightrope" through offers of 50 percent rental discounts/deferrals to ease the COVID-19 pain, a prominent Bahamian realtor said yesterday.

David Morley, Morley Real Estate's president, told Tribune Business that his company was advising retail, restaurant and office landlords that "tenant retention is the number one priority" amid the economic shutdown and uncertainty created by the coronavirus pandemic.

Warning that it will "take a lot longer" to find new tenants once the crisis ends, Mr Morley said landlords will find their income streams recover much more quickly by retaining existing clients even if it means giving "concessions" such as discounted or deferred rental payments.

Revealing that "we're all in this together" is the main message he is delivering to commercial property owner clients, the veteran realtor said they also have to be "fluid" and flexible in monitoring tenants and responding to the ever-evolving COVID-19 situation.

Urging landlords to deal with their tenants on a "case-by-case basis", dividing them into those who can still pay versus those who cannot, Mr Morley advised retail mall and office owners that it would take several months before the situation returned to some form of "normalcy" once the COVID-19 pandemic has eased.

With The Bahamas' major industry, tourism, likely to take some time to recover, he predicted that the economic tap "will not have the same pressure and volume of water coming out as before" due to high unemployment and reduced consumer spending.

These factors, Mr Morley said, were likely to impact tenants' business earnings, and their ability to make due rental/lease payments in full, for some time to come. Yet he told Tribune Business he was unaware of any commercial landlord refusing to work with tenants on compromise arrangements.

"Our number one advice to existing clients is that tenant retention is the number one priority, and therefore you have to work with existing tenants to do everything you can to keep them in there," said Mr Morley, whose firm is one of The Bahamas' major commercial property managers.

"Our view is simple. If you lose any tenants it's going to take a lot longer to replace them after this virus than to start back up with existing tenants even if you give concessions. It's a delicate tight rope to wall right now."

Unlike residential tenancy/lease agreements, Mr Morley said few of the commercial variety included so-called "force majeure" clauses dealing with unforeseen circumstances - such as a global pandemic - that prevent one or both parties from fulfilling their contractual obligations.

He added that he had been studying other countries to see how commercial property landlords are responding to the COVID-19 crisis, including the US, where most owners were only passing on the tax and mortgage loan concessions/deferrals they are receiving from governments and lenders.

"The number two thing I say to clients is that you have to monitor this very closely, whether on a weekly, bi-weekly or weekly basis, and you have to remain fluid," Mr Morley added. "You don't know when this is going to end, and what impact it is going to have on essential and non-essential tenants.

"It's very important to retain your tenants. If they go out of business during this time it's going to be even more difficult to find new ones to come in. This is almost a two-step process taking place. We have overnight shutdown."

Asked how commercial landlords were responding to their tenants' cries, Mr Morley said: "It depends on landlord to landlord. From most of the landlords we're hearing from, and tenants at properties we don't manage, it seems what's being discussed right now is 50 percent [rental] discounts altogether or asking tenants to pay 50 percent of the rent and deferring the rest for a nine-to-12 month period until business starts rebounding.

"I've heard of one landlord where they're not charging rent for three months, and deferring the CAM (common area maintenance) charge only for a six-month period after that. It really depends on the financial position of the landlord. All landlords are willing to compromise and trying to work with tenants. I've not come across one landlord who is not trying to work with tenants."

Mr Morley said that, based on how long China locked down the Wuhan province where COVID-19 is thought to have originated, The Bahamas could expect to see economic shutdowns and disruptions lasting for up to three months.

And, warning that economic activity will be extremely subdued once the lockdown ends, he told Tribune Business: "If we open up that tap we will not have the same pressure or volume of water coming out of that tap as before.

"Once everyone gets to come out of that shutdown period, the US and The Bahamas are going to have a lot of unemployed people. The primary thing that drives our economy is tourism, and our primary market is New York, New Jersey and Connecticut, the tri-state area that is being particularly hard-hit now.

"How long is it going to take to revive our tourism industry? I told our landlords you're probably looking at nine to 12 months before we get back to normal again. It could take a long 12 months before we start to get back into it. I'm hoping we get back into it quickly, but a lot of it is out of our control."

Mr Morley also suggested that, should The Bahamas contain and eliminate COVID-19 in this nation, it could be faced with the dilemma of when to open its borders to tourist and international traffic again. Doing so too soon, and before the US has fully recovered, could expose the country to a second wave of infections.

"It's really uncharted territory to say the least," he added, "but we have to deal with it. You [landlords] have to come up with a viable proposal and deal with tenants on a one-on-one basis. Some have the ability to pay in April based on their performance earlier in the year, and some live month-to-month on their business. May will be different than April.

"You have to stay in communication with tenants and work through this together. That's the message we're promoting to landlords and tenants. We're in this together. It's really trying times, and we have to work together to get through this together.

"It's taking it one week at a time because everything changes week-by-week depending on what the Government comes out with."