How restaurants and landlords are handling rent amid the COVID-19 crisis

The novel coronavirus pandemic has tanked restaurant sales as much as 90%. Some establishments have closed altogether in an attempt to wait out the storm. Yet, the end of the month is near, and rent is due soon.

For restaurateurs, landlords and lenders, survival in the short term will require flexibility and creativity.

Restaurant landlords in Georgia, for the most part, recognize the unique and calamitous situation and are working with their tenants. Jamestown LP, owner of Ponce City Market, proactively reached out to business owners at the development and offered rent abatement for April. The company has set up an online portal to help its tenants find financial resources as the COVID-19 fallout continues.

Carter, which is developing a revitalized business district in Summerhill, has offered rent abatement for its tenants on Georgia Avenue next month. Chai Pani, the popular Decatur Indian restaurant, is seeing its April rent payment cut in half. Fuqua Development, which owns large mixed-use projects such as Madison Yards in Reynoldstown, has told tenants it will do what is needed to help them push through the crisis.

"I've heard from different folks that many landlords are doing that," Karen Bremer, chief executive officer of the Georgia Restaurant Association, told Atlanta Business Chronicle.

Rent abatement is not rent forgiveness. Those who do receive a break in April likely will have that payment spread out over monthly basis down the line.

Not all landlords have been keen to offer abatement. Hugh Acheson, owner of Empire State South, requested abatement in April for his Midtown restaurant. Hines, which manages the 999 Peachtree building that houses Empire State South, initially denied the request outright and has since told Acheson it will look into the issue.

Whatever Hines decides, Acheson does not plan to pay "until I get something out of them."

"There's no way they're evicting me right now," he told the Chronicle. "We've always paid our rent. We've made that building a ton of money."

Hines declined to comment.

For landlords who do offer abatement, the onus then falls upon them to figure out their mortgage payments in April. Like most property owners, lenders in Georgia realize it is unrealistic to expect business as usual in the immediate future.

"In general terms, if you're a borrower and in good shape and up to date on your loans going into this, the bank's going to do everything they can to help you out and work with you to get through this," David Oliver, senior vice president of member solutions for the Georgia Bankers Association, told the Chronicle.

Regulators have been encouraging banks to get ahead of the crisis and find creative solutions to prevent bigger problems. A number of tactics can be deployed to help borrowers in the short term, including fee waivers, payment deferrals, changes to terms, interest-only payments for a period of time, restructuring and extending loans. The situation varies bank by bank and borrower by borrower.

Everyone is counting on assistance from the government to keep small businesses afloat during these lean times. The United States Congress is working on an economic rescue package called the Coronavirus Aid, Relief and Economic Security Act that could provide $349 billion on 100% federally backed loans to small businesses.

As the legislation is currently written, the loans, administered through the Small Business Association, could be used payroll, medical coverage, retirement benefits, state or local taxes and paid time off, as well as rent and mortgage interest payments. Loans put toward these expenses would be eligible for forgiveness. Loans would not exceed the cost of two-and-a-half months' payroll.

Business owners also can apply for SBA Economic Injury Disaster Loans, a separate mechanism from the $2 trillion CARES Act. These loans offer up to $2 million in assistance at interest rates of 3.75% for small businesses and 2.75% for non-profits. Although, borrowers must put up collateral. The money comes from a $50 billion pool of federal funding.

As the pandemic quickly walloped Georgia's businesses in recent weeks, the state's 158 banks were sitting on twice as much capital and liquidity compared to the beginning of the 2008 financial crisis, according to Oliver. Should a wave of defaults hit, the industry is in a stronger position to withstand the blow.

All of the aforementioned flexibility is meant stave off an economic collapse in the short term as the United States works through a public health crisis. President Donald Trump recently said he wants the country "just opened up and raring to go by Easter," April 12. However, if COVID-19 is not in America's rearview in the next couple of months, and the pandemic continues to drag on the U.S. economy, the longterm outlook is murky. Private lenders are not ready to consider more drastic action such as loan forgiveness.

"Overall, this is a relatively unprecedented situation," Oliver said. "At the end of the day, banks, to remain viable as businesses themselves, have to be repaid for the loans.

"Any kind of loan forgiveness program, that would be a major step for anyone to take. I think it's really too early [to think about that]. I know that's on a lot of people's minds, but we just have to see how that evolves over time."