Mid-March for Gene Spiegelman (Vice Chairman and principal of Ripco Real Estate Realty), feels strangely familiar. Nonessential stores, which include fashion and luxury retailers, began closing in mass during the third week of March. This was due to coronavirus.
Spiegelman stated that for the first ten days, it was difficult to look at cash. “Brokers stopped coming to the office. We reviewed our financial obligations, the amount of cash in the bank and our credit access. A few residual deals were close. Deals in the late cycle have been closed. We still have deals in negotiations. Although there are still some deals, you cannot get into buildings to put people together. On-site work is not possible.
ripco realty is a boutique brokerage that specializes in leasing, consulting and property management. It lists Target, Starbucks and Shake Shack as clients. Spiegelman stated that none of its principals are paid and that the firm has about two-thirds staff. Spiegelman also noted that there are 100 employees, including 70 brokers and professionals. “None other than World War II has had such an impact on Ripco Real Estate.”
Spiegelman is also a principal at Sagamore Hill Partners, a Ripco Real Estate investment firm. He has an in-depth understanding of how property owners, retailers, and brands are responding to the pandemic. The landlords are assessing the requests from tenants and preparing a list. However, most of the time they don’t take any action. None of the tenants have agreed to waive rent. Retail chains are seeking rent abatements, and all landlords will discuss deferrals. What we don’t know about is who will still be there after all this ends and how much inventory will come onto the market.”
Spiegelman sees the coronavirus having an impact on the industry in the same way that the Great Recession did. He was vice chairman of Cushman & Wakefield at that time. “We were restructuring leases to help clients avoid closing down stores or going bankrupt. We were given 250-300 locations by a national coffee chain to address. To modify existing leases, we had to contact all landlords. The mandate was to reduce gross occupancy costs by 20%. We were quite successful.”
Spiegelman stated that there is a complete cycle in the current economic and health crisis. Everybody must understand the other side of the equation. Retailers Ripco Real Estate won’t pay rent as their revenue is declining; landlords won’t be in a position to pay principle and interest on mortgages; lenders won’t be able to pay the dues on loans; utilities companies won’t be paid and municipalities won’t be able collect taxes. Spiegelman stated that “the whole cash cycle will be frozen.”
Here are the views of some retail ripco realty veterans on how the coronavirus has affected the industry, as well as changes in the short-term and long-term.