Summer 2020 • Issue 69, page 8

Rent Collections and Selling Property in the COVID-19 Environment

By Sackler, Eric*

I’ll never forget the moment. It was the early 90’s and I was struggling in my first couple years in real estate brokerage during the post-recession lackluster economy. I turned on Larry King to see him interview this big NY real estate developer, hoping he’d shed some positive light on the real estate market ahead. “Stay alive ‘till 95,” I remember him intoning. I panicked! I could not wait until 1995 to make money in this business. I had to change what I was doing. I started cold calling on banks and institutions, trying to get their REO business. After several months, hundreds of phone calls and a handful of meetings later, I got my first assignment from Pacific Business Bank. After selling that property I leveraged the relationship to get into Bank of America, East West Bank, AMRESCO, and Home Savings.

Cut to today and, just like the early 90’s and other economic downturns, this new COVID environment has caused me to change how I do business once again, and I’ve got a feeling this won’t be the last.

So how have I changed and what are the best strategies for selling property in today’s environment? PPP: Pricing, Positioning and Proactive marketing. And there is a bonus “P”: Payments (rent payments). You can have a great property, priced well, perfectly positioned in the marketplace and hit up all the best buyers, but if tenants stopped paying rent or if the buyer does not have confidence that the tenants will keep paying their rent post-closing, the property will not sell.

Pricing

Although demand for commercial and apartment properties has decreased, so has the supply. This leaves a window of opportunity for sellers who wish to sell in 2020, to get their properties on the market before others do, because once the emergency order is lifted, more properties will hit the market. I advise sellers to price listings right at what we would conservatively expect to sell it for today.

Positioning

Position it for what most buyers are looking for in today’s uncertain market – a safe, long-term investment that will see them through tough times that may be ahead, and/or one that has a lot of upside potential that they can reposition and eventually refi and/or flip.

Proactive Marketing

It is a must in this market where a large percentage of buyers are on the sidelines due to uncertainty. I have had to go to those sidelines and bring buyers into the game and, now more than ever, sell them on the reasons to invest. This includes direct mail, phone calls, Zoom calls, personal emails, texts, and social distance meetings.

Rent Payments

In order to get deals closed today, I have been helping my clients collect rents, negotiate rental abatements or deferrals and in some cases, helping renegotiate rental agreements. I listen carefully to tenants’ requests for rent reduction, deferral or abatement, knowing that some tenants use these challenging times to ask for a rent reduction when they don’t need it. Since the newly imposed tenant protection measures are weighted heavily in favor of tenants at the landlord’s expense, encouraging tenants to pay their rent if they are able (especially residential tenants) takes finesse, absent a landlord’s standard tools of inducement.

• Listen to tenants’ needs carefully and use your best judgment regarding what to offer, if anything.
• Respond to calls promptly. Call or FaceTime them or schedule a Zoom meeting with them if you cannot do an in-person social-distance meeting. If tenants – especially apartment tenants – feel you’re on their side, they will be more apt to be honest with you and do what’s right by paying their rent if they have the means.
• For retail and office tenants, work with them and help them navigate the PPP or EIDL programs. Get weekly updates and show an interest in their progress. Post notices on doors and/or send emails informing tenants of all the government programs available to help them.
• Conduct tenant outreach programs such as a monthly drawing whereby all apartment tenants who pay their rent are entered into a drawing, and the lucky winner receives a sizeable rent reduction for the following month’s rent.
• If you agree to a rent reduction or deferral, don’t make any long-term agreements or changes to leases. Let the tenant know that you will continue to work with them on a monthly basis as things change and evolve.

The success of rent collections and tenant retention is the tipping point that will make or break a deal once in escrow today. To attract offers, a marketing plan to match the current, everchanging environment is vital. If there is one thing we’ve learned from past downturns, this one will pass and the market will once again make a comeback; although, the way in which we do business may change forever, for the better. We all can do as well or better in this down market as we’ve done in the past several years. It’s not a matter of staying alive, but implementing the changes to help us thrive – now and in the future.

*Eric Sackler leads an elite team at Coldwell Banker Commercial. He has sold more than 1 billion dollars of commercial investment property in the past 30 years. His team also sells homes and condos in LA County. Eric has represented Receivers and Trustees for the past 10 years.