So I want to welcome people who
are sort of rolling in right now
for the power of with webinar
series where we're helping I 
uess each other through this c
isis. It was some of our my t
ammates idea to put something
together that brought in Som
 of our partners to answer th
 the real world questions and ha
e audience participation to hel
 each of us through this. And so
in some ways, I found over the
last couple days that has been
therapeutic for me. I even start
d crying yesterday as I started
thinking about the sacrifices t
at my teammates were making, t
e difficult moments that that 
e're facing in our personal lif
. And, and all this is we, we 
ot to keep the business goin
. And And so today, we're lu
ky to have people who know rea
 estate, whether we are a rent
r a tenant looking to for a s
ace or whether we are a landlor
, or maybe some of us are 
oth, right, so these, today we'r
 going to be answering question
 about what are we going to do 
ith these commitments that
we have to our tenants? W
at are we gonna do with the
e commitments that we have to ou
 landlords and is there a wa
 to Sort of navigate this w
thout burning bridges and
 you know, without, withou
 embarrassment. And so becaus
 i don't think i think in 
his at this time, none of us
have gone through anything
like this, I think if anything
was closest probably 2008 in m
ny ways in the real estate mar
et, a lot of residential. But 
his is way different becau
e it's so sudden. So today w
're bringing on Greg and Scott, 
here was capital reverse,
I forgot to turn it over to m
 main man, Rick, he's actu
lly the brains But well, he 
nd in our team are the brains b
hind this. I want to make sur
 Rick Spencer my right hand ma
 here at at biz has a chance to 
ort of talk a little bit about 
hat this means to us and what
this likely means to you all 
s well. Yeah, thanks, Mark. A
d welcome to all of our attende
s. We've been running our pow
r of with webinar series now for
a week, every day with some a
azing partners. And you know, w
've been posting all these re
sons hoardings on our YouTube
channel, as well as our podcast
channels, and the support from
our community for one another, h
s been overwhelming. And as we 
hought about community partn
rs that can help in this cri
is, we could think of none b
tter than capital reverse comm
rcial. So we're really excited t
 have them as community partne
s, Greg Gary, who's presiden
 with capillaries commercial,
and Scott Tucson, whose Genera
 Counsel, and they'll give you a
little bit about their backgroun
. In a minute. I think it
s great that Scott with the gene
al counsel is on, you know, 
he line today, especially
on this topic, right, because 
t's a financial question. I
's a legal question. It's rel
tionship question. And so we'v
 got two great experts t
day to help us navigate through
these challenges. As we go thr
ugh the webinar today, there i
 a q&a icon at the bottom of you
 screen, so feel free to submit 
uestions. We're usually great ab
ut getting to all questions fro
 can't answer them today in th
 webinar, we can follow up a
terwards. So without further ado
 I'd like to welcome again
 Greg and Scott with Capito
 rivers commercial.
Thank you for having us here.
And hopefully we can help some
folks kind of figure out what
their action plan is. It's it's
obviously a challenging times
right now. And there's a lot
going on and things are changing
on a daily basis. So we're just
grateful to be here and
participating, and hopefully we
can help some folks out. Yeah,
well, thank you. We appreciate
it. We're gonna have questions.
I know you have a presentation.
So what I was thinking, Greg and
Scott, let you sort of navigate
through your, your presentation
and I will sort of interrupt you
throughout with my own
questions. I'm a tenant and I am
a landlord and I have portfolio
companies that are brick and
mortar and I have others that
are in CO working space. And so
I have a variety of angles from
which I'm, I'm kind of taking a
perspective. So hopefully I can
do our audience a little bit of
justice as we go, but maybe I'll
let you start down the
presentation if that's okay.
Yeah. And we'll do our best to
answer all the questions. We did
prepare a tenant Survival Guide,
which there'll be a link at the
end of the presentation, and
folks can download that guide.
And we're also working on a
landlord Survival Guide. And
then following that we'll have
kind of an investor Survival
Guide. So a lot of the points
are an attendant guide also
applied to the landlord side and
vice versa. But, you know, if
there's a landlord question or
something that comes up on that
end, you know, encourage people
ask questions, and we'll address
those as well. So it's not just
specific to tenants. So much
will dive into and always share
my screen and go to See the
presentation here? One, one
second.
Okay, can everybody see it?
Yeah, looks good. Perfect.
All right, we'll just jump into
it.
So, you know, a big thing is
just having a plan. You know,
it's really hard to do anything
without a plan. So, and that
plan can change, but you got to
start somewhere. And so, you
know, we recommend, you know,
kind of starting out and just
taking, you know, a look at
where you're at right now. You
know, devise the preparedness
plan. So that's what we're going
to kind of go through is the
structure of how to create that.
And just going I'll just
interject just kind of clearly
set the framework. I mean, The
idea is you're, you're in a
situation where, you know, like,
you're a restaurant, you're a
retailer, what have you and
again, not to make this
exclusively focused attendance,
but the idea being that you're,
you're in the midst of this
crisis, you're probably they're
getting no traffic or you've
actually been required to shut
your doors. You've got no
income. But you've got a lease
and you've got lease
obligations, and you've got red
coming due. In this case, April
1, you got rent coming do what
are you going to do? It's kind
of it legitimately it's, it's a
little bit of a panic time. And
so that's, I just think I kind
of want to get set the
framework. I think we all know
that but I think it kind of
helps.
Yeah, good point.
And then obviously, cash is
king. You know, everyone's, for
the most part kind of preserve
capital right now. as best they
can, so, you know, big
expenditure is obviously rent
and operating expenses. So I'm
sure that's top of mind for
anyone that's got a brick and
mortar. And then, you know,
structuring the solution. So,
you know, everyone's solution is
going to be a little bit
different depending on their
situation. So, you know, we'll
walk through kind of what those
steps are and, and how to work
with your landlord to come up
with the appropriate solution.
And I'll just interject kind of
one of the one of the points
before you even dive into your
leases, maybe just take a look
at your, your cash flow
situation, maybe see where you
are compared to the prior year,
or maybe the prior couple years.
Just kind of look at your
financials and and look at them
as they as they start. And
currently kind of flush out are
you in a seasonal business where
you might be taking a dip due to
that as opposed to the crisis or
just make sure you know where
you stand. How much of this is
of your current situation is
driven by the virus just so you
have a complete picture of, of
your financials right now. And
one of the things I would add
on that is Haiti biz, we have an
accounting bookkeeping group,
outsourced CFO type services. If
somebody has a question about
that, you can hit Rick up after
or send them an email or text or
or message to here because it's
something where we're kind of
just going hands on right now
and we know that there's a need
so we can help you to sort of
look at your balance sheet look
at your p&l and, and help you
make some good decisions
and from a landlord perspective
too, you know, most of them are
going to ask the question, Well,
you know, what were your your
top line sales? What was your
bottom line? You know, on that
what was your average? And what
is it compared to now and
because that's gonna, you know,
play a role in the negotiations,
the discussions that you have
with l'amour because you know,
most landlords want to help out
but they also don't want to give
away free money, right? So it's
finding that balance that works
both parties
get like in a situation where
let's say you have a strong
enough balance sheet to I'm
thinking of one of one of the
entities that I'm working with.
They're going to have sales that
go to like almost nothing right?
They're going to get cut way
down. And at least for for this
year, it looks like and, okay,
they have enough money to pay
their rent, but they're their
revenues are are just, you know,
are going to take care huge hit.
So, you know, where does where
does rent stack up in this
thing, you know how to how to
rationalize that? Well, because
you look at the person's balance
sheet, it's like, that's good,
but, you know, you're expecting
a lot of revenue this year,
that's not gonna happen.
Well, cash on hand projections,
you know, managing cash flow
going into the, you know, the
near future, nobody knows what's
gonna happen. So obviously,
you're gonna have expenses, you
know, payroll expenses and other
expenses. And, you know, it's,
there's no right solution. I
think it's just really
understanding where you stand
today, where your financials
are, and then trying to project
out into, you know, the near
future as best you can, you
know, how much cash you're going
to need to keep on hand. You
know, obviously, you might need
to, you know, there might be
some priorities, right. So
you're gonna set priorities in
terms of how you spend that
cash. And, you know, maybe rent
isn't at the top of the list,
and And you need to have that
conversation with the landlord.
Don't help them understand your
business model.
Let me ask you a question. Let's
say you're preparing your plan.
You don't want to make a snap
decision on the plan. It's gonna
take you a few days, you got to
come talk to Haney biz or
somebody else to kind of maybe
sleep on it to some extent.
Should you reach out to your
landlord today? and let them
know that you're running into a
situation and and maybe start
asking them questions. How
should you be thinking about the
communication?
Yeah, absolutely. I mean, I
think the more communication the
better and being proactive, I
think is critical. And so that's
once you kind of run through our
three steps. You know, hopefully
that gives you the baseline to
be able to go and have a
conversation with your landlord
that's based on, you know, on
the facts of the situation and
your current position, rather,
you know, whether it's really,
really bad Like, I can't pay at
all or I'm preparing to make
sure that I survive, you know,
through this, but I, you know,
maybe still have some cash on
hand. So, um, you know, getting
into the was that
was a matter of fact I mean
that's kind of our our plan mark
is is kind of a three step
process and the third The third
step is approaching the landlord
after you've done your homework.
And I mean, frankly, you could
almost just say, Hey, I know
I'm, I'm kind of in trouble
here, landlord, I'm doing my
homework. Just give me a heads
up. I think that mute
communication, communication
communication as much as
possible, but you want a chance
to get your ducks in a row
probably before you have a
serious conversation. Okay.
So the things to kind of review
first before you have that
conversation with the landlord
about, you know what your
solution might be, is Obviously
looking at rent, what are you
paying that includes your, your
extra expenses and, um, you
know, triple nets, they're
called taxes, insurance common
area, you know, if you pay into
a Merchants Association or you
know, whatever, you're all in
gross rent number is and what
what's the makeup of that? You
know, when is your lease
expiring, you know you have a
year left if two years left you
have options. And that all
that'll come into play if you
enter into a rent deferral type
situation and, you know, agree
to amortize the deferral over
their remaining term might elect
to exercise an option. So the
payments not as high, you know,
understand reading your default
sections, you know, what does it
mean, if you're in default, you
know, what are the penalties,
you know, guarantees, you know,
did you sign the lease under,
you know, an LLC that maybe, you
know, doesn't really have, you
know, much in terms of assets,
you know, that could potentially
work to your advantage? Did you
personally guarantee the lease?
Do you have co guarantors? You
know, what does it mean for them
or for you on a personal level
if you default into your lease,
and don't make your meet your
obligations, you know, security
deposit and this is an easy one
if you your landlords holding on
to a security deposit, and you
know, you've been a good tenant
and you paid your rent and
you've done everything that you
said that you were going to do.
You know, one of the first
things you can do is say hey,
can you credit that security
deposit towards my rent and you
know, operating covenants and co
tenancy you know sometimes
leases are tied to you know
other tenants and anchor tenant
in the shopping center. So if
the grocery store or you know,
maybe that progress was probably
not the best example cuz they're
doing well now, but maybe Your
lease was your business feeds
off of the traffic of a gym. And
so in your lease, it says, you
know, you know, if the gym
closes, then you have a right to
go dark or you have a right to
terminate your lease. So
understanding those provisions
and, and how you might be able
to, you know, use those or how
they might impact you. It is
important, the idea of the right
to go dark or not operate your
business, you know, some leases
say that you have to stay open.
You know, just understanding
those provisions is really key
insurance. This is a big one,
you know, a lot of people are
talking about, you know, well,
does my business interruption
insurance cover anything or does
my property insurance cover
anything? And the answer is, it
depends. You know, and also
sometimes landlords, you know,
are carrying insurance on behalf
of the tenant and they're
charging you through, you know,
some of these extra expenses in
Gliese so 100 standing with the
landlords insurances is also
important. And we'll talk a
little bit more about insurance
next and then force majeure.
This is another big topic that
has been discussed as of
recently, which is, you know,
things that are out of your
control. You know, for example,
pandemic or hurricane or a fire.
You know, sometimes in
contracts, it allows for some
relief, or deferrals. And but
there's, you know, certain, you
really got to pay attention to
the language. You know, for
example, it might not let you
out of your obligation to pay
rent, you know, you'd probably
still have to pay your financial
obligations. So just reading
through that language and
understanding it as best you
can, is really important.
And just and just take out, take
out your lease and take out a
notepad and just go through all
those areas of the lease. That
Greg just outlined, and because
those are all the things that
are gonna have some sort of
interplay with, with your
conversation with your landlord,
at least potentially. So just
kind of, it's not fun. But just
kind of do the dirty work and go
through your lease, make notes,
make marginal notes, have a
separate Notepad, whatever. But
just to understand kind of the
ins and outs of your lease.
And if you don't understand the
provisions, you know, you can
give us a call or call your,
your attorney or call if you've
got some other advisor that that
understands those provisions.
You know, by all means, reach
out. I mean, yeah, I think Mark
would probably be the first one
to agree that the business
communities out there to help
right now and, you know, so I'm
not that was one of the reasons
we put this guy together is we
want, you know, whether they're
our existing client or not, you
know, reach out and we'll, we'll
help you To understand those
provisions and what they mean,
step two is going to continuance
of of step one and doing your
homework beyond just what's in
your lease. So, you know, review
your insurance policy. You know,
and probably more importantly,
since insurances is one of those
incredibly complex, confusing,
you know, topics is call your
insurance agent or provider and
say, Hey, here's the situation,
you know, am I covered or not?
You know, more than likely, if
you've got business interruption
insurance, unfortunately, a
pandemic probably not going to
be covered. It's an exclusion
unless you got an endorsement
and most people, you know, don't
think to go get a pandemic
endorsement. It's not something
that comes up in conversation.
Yes, it's actually back in oh
three with the SARS epidemic.
Apparently what happened as a
result of that the insurance
industry reacted by excluding
pandemics specifically from
business interruption insurance
coverage. So that's something we
learned as we as we dug into
this. So you're, you're probably
going to be out of luck. unless
you happen to have some unique
circumstance or maybe you can
get creative your insurance
agent might be able to get
creative. There's actually
something going on in the I
think, especially the restaurant
industry, which is obviously
kind of the prime prime victim
of this of this crisis is
they're trying to get is pretty
smart. They're trying to as a
way to provide relief to the
restaurant industry. The
restaurant industry is trying To
convince the federal government
to basically force the insurance
industry to cover this, this
pandemic, under the business
interruption coverage, and then
the idea being that they would
have to the, the industry would
probably go bankrupt if if they
were just simply forced to do it
without any backing from the
federal government. So the idea
would be the federal government
would, would require them to
include coverage for this
pandemic, but then they would
back the industry. And that
would be that was that is seen
as a really efficient way to
provide the financial support
that the restaurant industry and
probably other industries as
well really need rather than
doing handouts or tax credits or
something. That would be
incredibly cumbersome and
inefficient. So I've seen a
couple least a couple people
talking specifically on on that
point. So
yes, I saw
that on CNBC. And so I sort of
wondered, you know, these these
government programs are changing
right before our very eyes in
different parts of the, whether
it be HR or you know, the human
human side of things. But what,
how many people really have
business interruption insurance?
I mean, especially when you
start talking about small
business, is it really all that
common?
I think, I think it's pretty
common, and I think, but maybe
not small business, but maybe
the on the landlord side. So I
think, and again, this, this is
kind of why we say it's such an
esoteric topic, that you have to
be an expert to really
understand how it works, but I
think just kind of putting two
and two together i think i think
it is employed for in most
situations. And then maybe the
idea would be that the federal
government just says, Hey, even
if they don't have business
interruption coverage, put it in
place, you know, if they have
any policy if they have property
damage insurance if they have
liability coverage, and I you
know, I think that kind of
remains to be seen, but I don't
imagine if you're a small
business and you don't have
business interruption coverage,
I don't imagine you're gonna be
out of luck. Because as you say,
Mark, I don't think it's that
common for the for the mom and
pop tenants. Yeah.
Yeah, the other thing is to look
at, you know, government
programs. So, like we just
mentioned, you know, the federal
government passed a relief
stimulus the $2 relief stimulus,
we have no idea What kind of
just you know, in the framework
or the details of it yet, so,
and, you know, unfortunately, it
might be a little bit too late
for some folks, but, you know,
that's in the works. You know,
local city, Sacramento has an
ordinance that basically is
forbidding bigger pins, which,
which just applied to
residential, but now applies to
commercial as well. That just
passed last night. yesterday.
I saw that this the county of
Sacramento got voted down. Is
that correct?
Yeah.
Yeah. So if you're somebody
that's in the county right now,
in the city itself, it's
probably not going to be there
for you. But if you are in in
the city, you've got that well,
so what is that anyway? What How
does that work?
Yeah, we we it's It's like
everything devils in the
details. And so we honestly have
not had time yet to to digest it
because it just happened last
night and I just was able to
find the the actual ordinance by
digging around about an hour or
two ago. But I think I think
it's really, and don't quote me
on this, but I think the the
area where it's going to be the
most help to tenants is not the
fact that they that you can't be
evicted for the next couple
months. I think it's going to be
the fact that it looks again,
don't quote me, but it looks
like it's allowing for 120 day
deferral of your rent
obligation. So I think that's
where the actual value is going
to be for the tenants is it just
kind of gives them some
breathing room? Because I don't
I don't think landlords are
going to be rushing to the, to
the courthouse to evict anytime
soon, but they're going to want
their rent and I think there may
be forgiveness or or prohibition
on late fees, also. So you may
that may be and we'll we'll put
something on our website to
address this when I get a chance
to examine it, but I think it
may just be kind of a deferral,
some breathing room on the on
the rent obligation, okay.
leads to a lot of these if you
get our website as well,
okay, and whatever you guys
share, maybe tag me on social
media or something so that way,
maybe I can remember to share it
or it prompts me to do something
with it. That can help our
community as well because we're
sharing the community,
obviously,
for sure,
SBA is also providing some short
term bridge loans. And there's
some information on our website
about that as well.
You're going to help during this
this time.
You know, that might be
beneficial for some companies
and, you know, obviously taking
on debt is not ideal in these
times, but it might be, you
know, the only solution and if
it's cheap that then, you know,
it's, it might work well. If
you're a franchisee, you know, I
would strongly encourage you to
reach out to your franchise or,
you know, a lot of franchise
owners or, you know, providing
some relief. subway, you know,
really said that they're
reducing their royalties by 50%.
And I think they're, they're not
requiring contributions to their
marketing funds and things like
that. They know they're in for
their friends. You know, make
sure they were, you know, most
likely, well, you know,
landlords a little more
sophisticated, they might ask
you like, Hey, what's your
franchise or doing for you? You
know, how are they helping you?
So that's important.
And even then understand how
your landlord
I just say chime in. Yeah, even
if you're the answer from your
friend franchise art is no I'm
sorry, we're not going to help
you, at least that you can tell
your landlord that that shows
that you've done all your
homework you're not just coming
in for charity, you're doing
your you've gone through every
channel you can.
The other thing I've seen with
franchise ORS is they're
allowing you to put off capital
expenditure. Sometimes they
require you to put in a, an
upgraded something or other in
your business to stay to code or
whatever to the you know, that
what the franchisees need to do,
but they're able to say, hey,
you don't have to do that right
now. There
was a I don't remember this Taco
Bell or there's a handful. QSR
is theirs. They had a big
remodel program going on and
they said, Okay, we'll put that
on hold. We're not gonna
let a requirement Got point,
you know, and then and then
understanding, you know, who
your landlord is and how they
likely view you, you know, is
your landlord, you know, a local
small, you know, property owner,
this is the only, you know,
asset that they have, you know,
if you're in a script retail
center or shopping center, you
know, or are they a, you know, a
large landlord with millions of
square feet? Are they a real
estate investment trust, like
understanding who you're dealing
with, and and then likely how
they view you, you know, are you
a 1200 square foot tenant in a,
you know, 300,000 square foot
shopping center, and that
happens to be one of 40 shopping
centers that that landlord owns,
you know, you're probably not
going to get the top of their
list in terms of, you know,
getting their attention, they're
going to be focusing on you
know, your that your one, you
know, priority attendance, which
usually the attendance,
nationals and understanding that
and then just the reality.
Do you feel like sorry about
that? Maybe I asked one
question, sorry, interrupt a
landlord that has 6 million
square foot of property. Isn't
there some sort of requirement
that they sort of treat all of
the people in some kind of
systematic way so that they
don't, they can't pick out their
favorites?
I don't know.
Yeah, I don't believe so. Yeah,
that's a little different. The
residential side and you can use
a little bit more wild west and,
you know, kind of comes down to
the economics and and, you know,
the negotiation. I mean, I would
hope, you know, we've, we work
with some larger landlords, you
know, like, like Phillips Edison
is one and you know, the first
thing they did was reach out to
all of their attendance and just
say, Hey, we're here and they
put a task force together, you
know, they, they took it head
on, rather than just I'm going
to sit back and wait, you know,
for people to reach out to me.
You know, and they're because
they've got so much space, you
know, they had to create some
sort of system to prioritize and
deal with all their requests,
because they just got, you know,
inundated. So they're putting
that, you know, kind of system
into place to be able to get
back to everybody, but you're
just understanding the
landlord's position. You take it
one step further, right, which I
think most tenants need to
understand. But, you know, if
you're, if your landlord owns
the property free and clear, and
they might have a little bit
more flexibility, if they have
a, you know, credit union, you
know, that it's got the
mortgage, you know, that might
be a little bit different than
if they had cmbs loan, you know,
cmbs loans aren't going to
provide much relief for the
landlord. So they might be, you
know, less likely to be able to
assist you know, so, you know, I
don't think that you need to get
into that level of detail, but
just having a general
understanding
of who your landlord is, you
know, how big are they how small
one day is important to
understand?
Yeah, any, any. Any property
owner, any commercial property
owner will tell you, I mean,
they're their lender is just an
enormous part of their equation
of doing business as a landlord.
So if they happen to own the
property free and clear that
that will make them a lot more
able to be to provide
flexibility and conversely, if
they're like most landlords and
they've got a got a lender,
mortgage or mortgagee rather,
there They're probably their
hands really are probably going
to be tied to a certain degree
but you, you know, hopefully
they won't abuse that and just
say I can't my hands or tie
without them actually being
tied. And I think I think a lot
of lenders will will probably
try to be helpful but some, some
may not.
I had a conversation with Toro
Capital Advisors out of La so
they, they're one of our capital
advisory firms and I was just
gonna ask him then what they're
seeing things are changing day
by day. And, you know, the the
hard money lenders, you know,
really pulled back and are taken
up on us. And, but some of the
other, you know, credit
they're for
ski gear.
Your exterior payments. Yes.
Looks like you know, the
majority of lenders are actually
we got a bad connection with
you, Greg. I'm sorry. I'm only
catching every other word,
Scott. I can hear you. Loud and
clear. I'm I don't know if
there's anything we can do, Greg
with your connection you were
you've kind of gone in and out
throughout the whole
presentation. So
yeah, yeah. Why don't I maybe
try and pick up the maybe Greg
if you can work the slides, but
I'll kind of try and work the
presentation.
Yeah, perfect. I'm not sure why.
Yeah, that's that
that internet connection in your
neck of the woods.
So anyway, so.
So I think I kind of we at this
point, we kind of covered all of
the homeworks steps you've done.
You've done it, you've done your
least review. You've done all
your background work, contacting
your insurance agent about
government relief programs may
be available. If you're a
franchisee, talking to your
franchise or understanding your
landlord, he sort of put
together your, your need, in
light of everything that that's
going on putting together your
financial, financial, internal
Financial Review, looking at
your financials, kind of what do
you need to survive and in long
run, thrive for your business.
And now you talk now you
approach your landlord. And I
think that's the next next slide
if you want to go to that, Greg.
And so I think it's so you're
fully prepared to approach your
landlord you reached out to
them, tell them you'd like to To
me, you know, I guess this day
and age maybe that's maybe
that's a virtual meeting or a
phone call. But you, you just
say hey I'd like to talk and and
then you kind of get into the
the nuts and bolts you know be
willing to or just be proactive
sharing your, your financial
data, where you're at what's
been what's been impacted by the
how you've been impacted by the
virus. Get into it, show kind of
what your needs are financially.
You know, like in any
negotiation you you don't want
to be dishonest but you probably
want to show your kind of start
start high on what you kind of
need make the case as best as
you can for Hey, in order to
survive here, this is what I
need and And just kind of
stepping back just one more, one
more variable here, you know, I
guess we haven't actually said
it yet. And maybe it goes
without saying, but landlords
are very loath to lose tenants.
And, you know, aside from kind
of altruism and, and morality,
that's probably your, your best
leverage is that your landlord
just doesn't want to have to
replace you. And so just keep
that in mind. You've got just
just by the fact that they've
got you on the hook for, for a
rental obligation over a period
of time. And they don't have to
fill a vacancy with all the time
and, and cost and opportunity
cost that goes into that. You've
got you've got some, you've got
some leverage there.
Look at about that. Can I ask
you about that leverage? Because
I mean, none of us has a crystal
ball, but you can see you can
forecast probably more clearly
than the rest of us what's going
to happen? With the commercial
market, let's talk about
Sacramento. You know, we have
offices we've got retail
industrial industrials, been
pretty hot retail, I assume, and
brick and mortar is just sort of
softer. And as we think about
what this crisis is going to do
to restaurants and retail, even
even service businesses, if
people get afraid of the face to
face or you know, maybe over the
next 12 to 24 months before
society comes back, but it might
come back different so there's
that fear of a restaurant just
going away. God I got, I got an
endcap it's a restaurant. That
person doesn't make it. I might
be vacant for a couple years.
That's a very insightful point.
And that I think you're right it
it just puts the idea that they
don't want to lose, lose you on
steroids. So As smart, a smart
forward thinking landlord is
going to realize that there,
they've got a lot of incentive
not to lose you and to work with
you.
So I'm a landlord. Okay, so what
I'm trying to put myself in both
shoes a little bit. So like,
imagine what the Ask might be
okay, so we can't pay while
we're closed or we can only pay.
You know, we're doing takeout.
So our business is cut down to a
third. And which makes us not
profitable. We need to buy some
time. Is there any thought about
Hey, I'll sign a lease
extension? Knowing that rents in
the future might be depressed?
Can we Is it safe to say that
rents 24 months from now are
likely going to be less than
they are today? Is this a good
time just to renegotiate the
whole lease?
Not sure if you can, can you
hear me now or is it still?
Okay. Yeah, I think it's it's
situational, right? I mean, I
think that human nature we have
short term memory. So, you know,
I think in the short term,
everyone's still gonna continue
to remember, you know, this
epidemic and how it impacted and
you know, people are gonna be
washing their hands more and
staying, you know, further away
from each other. But, you know,
personally, and I, you know, I
think that people over time will
forget, and I'll move on to
whatever the next big thing is,
you know, so I wouldn't be quick
to say, you know, restaurants
are going away. I think people
are, you know, social by nature,
and I don't think that's going
to change and, you know, it
might just change for the short
term. Right. You know, and then
and then, in terms of what's
gonna happen in with the
commercial market, I mean, it's,
it's kind of hard to say, but I,
you know, I think that it might
provide some opportunity for
those that, you know, are in a
position right now. You know,
vacancy rates have been, you
know, incredibly low, so there's
not been, you know, a lot of
retail space. available. You
know, there hasn't been a lot of
office space available in
certain non industrial space.
You know, there's a lot of big
boxes available, but those have
started filling up as well. So
it might create an opportunity
for folks to get into some space
that maybe somebody else,
another business that wasn't as
healthy. You know, they weren't
able to make it. So and maybe
with any disease, you see an
opportunity might be to,
especially if you've got
somebody who owns a lot of
property to sort of downsize
your space but stay in with a
longer term lease or something
like that. So that so they keep
a tent, they keep the same
tenant, but you're just reducing
the monthly, you know, the
monthly spend.
Yeah, I mean, I think anything
at this point is on the table
for discussion. I would say that
probably most landlords are
going to be hesitant to do a
completely delete or you know,
completely you know, revise the
ranch track. for, you know, for
five or 10 years or something
like that, because we just don't
know what the future holds. So,
you know, I would say that, you
know, most landlords, maybe not
all, but would be more inclined
to do kind of a short term
solution until everything kind
of levels out, and you can
understand how it's going to
impact the market. You know,
otherwise, you might be having
the same conversation six months
from now, again. So, you know, I
think it kind of just depends,
but, you know, I'm pretty
optimistic. You know, I think
that, you know, in talking with
some of our clients, you know,
they still want to grow, they
still want to move forward. They
just pump the brakes a little
bit, but we're still looking for
sites. You know, they're just
being a little bit more careful
right there, you know, maybe
not, you know, taken on the
really high, high rent deals, or
they're prioritizing a purchase
versus a lease or, you know, I
mean, just retooling their
strategy, but
Yeah, I think it kind of all
just depends. Okay,
very helpful. So, just kind of
going back into the kind of the
point of making the ask and what
that looks like, you know, kind
of in specific specific terms, I
mean, the most likely most
attractive option for for a
tenant is just getting a rent
reduction. I mean, it's plain
and simple. And you know what,
be great if you could just get a
rent forgiveness, sort of an
absolute we're going to cut your
rent in half for the next three
months or the next six months or
give you two free months of rent
or whatever it's going to be I
mean, that's your best. Best
case scenario is something like
that, that that fits your your
financial profile. You realistic
You might be able to be only
able to get a deferral of your
rent. So your landlord, you may
need to talk to him about a, you
know, taking, taking your
current rent while your doors
are closed and saying, you know,
we're the we're going to take
three months, six months,
whatever, we're going to slice
your rent or forgive it and then
we're going to tack it on later
in your lease term when when
things we assume are going to be
better. And that could be you
know, typical thing would be
spreading that out, spreading
that out over the remainder of
the term, what you call
amortizing you know, you might
even take a give that an
interest component so it's
almost like your landlord just
kind of making you a short term
loan or financing your your
forgiveness. Are financing your
inability to pay rent in the in
the short term? And when you
look at it that way i mean
they're they're getting interest
and you're ultimately agreeing
to pay them back for all the all
the forgiven rent or the
deferred rent I mean yes,
they're they're taking the risk
that you're not gonna be able to
meet that obligation but you
know, aside from that you're
telling them we're going to be
good for everything we've agreed
to pay you We just need more
time to pay it.
So you may just end up going
that route.
The climate exists much right
now where you can say look, I'm
gonna move I'm restructuring my
entire business I'm, I know I'm
personally guaranteeing and so
on, but hey, how about if I give
you a cash, basically buyout,
your lease is that are we in a
climate where that that's
feasible?
Yeah, I mean, it's
Yeah, go ahead good
I definitely think it's on the
table. You know, some landlords
you know that maybe they want
this back because they've got a
tenant that you know
a little bit more bitter
I for what needed internet or I
guess
yeah, I would have to have my
job beat a little more
forcefully Scott.
Yeah no absolutely yeah. No I
mean I think the the short
answer is absolutely a buy outs
on the table. I mean, you never
know what i mean that's on our
survival guide that that's one
of the points we're gonna that's
available on our website. We're
gonna give you the link at the
end so you don't have to be
taken notes on all this but
you're right market. I mean, you
never know what your your
landlord's particular situation
is. They may just be interested
in getting getting the space
back. I know that goes kind of
contrary to some of the things
we've been saying. But they may
very well, you know, for the
right side, there's always a
price for everything. So there,
there is some price where you
could buy out your lease, you
know, in this scenario is
probably not not going to be a
high number that that the tenant
is going to want to pay or be
able to pay, but it's definitely
on the table. Happens all the
time.
Okay, so we might I is this
close to it, and we have about
five to eight minutes left and
we want to make sure we give our
Rick a chance to answer if you
ask a few questions, I have a
couple of more. So just kind of
getting a sense as to,
ya know, that we basically
covered everything and we have
like kind of a few more ideas
like maybe incentives, you can
provide your landlord to get
them to agree to some sort of
rent reductions and that's,
that's in the tenant Survival
Guide. So that's, that's really
mind sharing that a little bit
Like well like ideas like
something that maybe we wouldn't
have thought of, Oh, just like
what you mentioned already
committed committing to an
extended term that you didn't
you know, you're obligating
yourself to more more to your
landlord in the long run than
you currently obligated to maybe
providing a personal guarantee
if you didn't have one
previously. You could even offer
off your landlord to share your
business hmm just make them an
absolute partner with you give
them my you know, silent, silent
minority partners share your
business and just think of
everything that's we've covered
that
the yard both do the landscaping
forum,
whatever, you know, manicure,
manicure their toenails,
whatever.
Okay, very helpful. And then you
had a few more thoughts to
Scott Oh, no, I mean, that's
that's basically it. One more
is, you know, you've could find
it if if you just need to close
your doors, you know, you're
this has just destroyed your
business go out and try and help
them find a replacement for you
know that maybe that's your your
Hail Mary, you know, whatever,
whatever it takes and, and I
think we hit most most of the
the key critical ideas we had
percentage rent might be an
option to override. Yeah, yeah.
sales.
Right move to that sort of
model, especially as your
business starts coming back.
Yeah. There's a question
about a move to receipt based
rent and if
that is something that you
anticipate
assuming, meaning percentage
rent, yeah. So yeah, I mean, I
think that's on the table, you
know, in the landlord might
have, you know, say hey,
continue to pay your taxes,
insurance, maintenance and your
triple net expenses, but, you
know, pay me around today. On a
percentage of your sales, you
know, so, you know, and once we
get through this, if the sales
go up, you know, might be a
windfall for the landlord. So
you know that
you can keep paying base rent
and just include a percentage
rent component, right, that
allows you to be creative. If
you include that if you really
want to get creative, you know,
there's, you can set breakpoints
and there's a whole thing you
know, with percentage rent that,
you know, probably have to get
into with. If somebody had some
more specific questions, they
can give us a call, but yeah, I
mean, that's definitely an
option.
And maybe you could, we've spent
a lot of time talking from the
tenants perspective, from a
landlord's perspective or a
business or shoot me a their
base, they're entrepreneurs they
own they own buildings and so
on. They rent them out. Have you
heard about relief for them from
having to play their pay their
mortgage Jews are pay their, you
know, pay the banks, is there
anything on the on the horizon?
Really unfortunately
there may be some relief if you
have a government backed loan
I've seen you know, a program in
place for that but it's just a
deferral. But unfortunately I
think the way that our system is
set up is it's mostly for you
know, tenants so it's Yeah, I
mean, what I did I had which is
probably not gonna go anywhere
is you know, for landlords that
provide relief for their tenants
you know, maybe they get a tax
credit you know, a reduced you
know, property tax bill, but I'm
not a politician So, I don't see
that going anywhere, especially
in California. But yeah,
things are things are changing
rapidly. Okay, so we have co
working space here in Haney biz.
number of businesses have their
have their offices here. Do you
think there's going to be a
trend just putting on the
crystal ball, I think a trend to
more CO working or less CO
working is, as we think about
working out of our world get
used to working out of our
house. I mean, what, what trends
Do you see changing the real
estate market from co working to
just people being a little less
excited about, you know, I agree
restaurants are probably going
to make it maybe at a reduced
level. But what about the other
businesses where we're all used
to, you know, call centers and
things like that, are they? They
can
i can tell you I'm working from
home is not as easy as, as I you
know, I think most people are
experiencing right now you've
got the dog barking or the kid
coming in your office or the
internet cutting out. So I think
there's still going to be a need
for co working I think it's it
might be a slow recovery because
I think people are going to be
still you know, on edge being
around other people and trying
to You know, keep that six feet
or whatever, but
I think people
are, you know, naturally want to
socialize. And I like I said, I
think people have short term
memory loss. And, you know, I
think they'll go back to
socializing and being in a
social environment. I think it
might just take some time.
Okay, Rick, I want to make sure
you have a chance. Oh, go ahead.
Sorry. I just
want to say I agree. I agree. I
think in some ways, this is
gonna become a distant memory
faster than we expect. I hope
so.
Rick, do you have some thoughts
or questions that you want to? I
know you want to keep us on
track, but you might want to
help us close it out at some
level. Yeah, we're wrapping up
now. You asked my future looking
questions. They stole the great
question I had come over. But I
think Greg did a great job of
answering it. And that's, you
know, we're learning new
behaviors. But you know, we
still are eager for the CO
working environments in the
office. environments and the
stability of those places. So,
yeah, that's, I think, the best
that we know today. Right. So I
just want to thank Greg and
Scott and Kevin rovers
commercial for this great
webinar, especially putting all
the effort into this tenant
Survival Guide, and the other
guys that you're creating, you
know, it's it's amazing to see
how you're rallying around the
community and creating this
valuable content. So thank you
so much for being a community
partner with a biz and you know,
for your investment of time and
expertise. We're just really
appreciative to have you as
partners. This will be released
this recording again on our
YouTube channels, and our
podcast channels. So if you
heard something that was helpful
or you know someone that could
benefit from this, please share
it. Please visit cap rivers
commercial website so you can
download the guide yourself and
connect with Greg and Scott are
reached out to a biz and we'll
get you connected. But thank you
guys, this has been really
helpful and, you know, extremely
important information.
Yeah, thanks for having us. We
we appreciate it very much. And,
you know, we're here to help the
business community so you know,
anyone that has questions, you
know, we're not looking to get a
fee or you know, anything like
that we just want to help. So
one thing I want to add to
before we let you guys close out
so I think at this time, we want
to put the people in our life
that can help us make the big
decisions and so whether it be
in real estate or with personnel
or with the numbers you need, we
need to put people in our lives
so you guys came from the sleep
train so you guys have your own
business today. But you were key
in the in the enormous growth of
the sleep train. So your, your
background is a sort of part of
the entrepreneurial story of
Sacramento, and now you're doing
it again on your own. So I think
it's it's always good to To work
with people that know what
success looks like, and now
they're now they're helping
other people to find that
success as well. Thank you.
Yeah, we,
we learned a lot from Dale
Carlson, he's a he's a great
leader and, and mentor and you
know a lot of what we do and in
our business and our business
models as a result of the things
that he did, and, you know,
surrounding yourself with good
people and, you know, looking
out for each other, and you
know, that those are all, you
know, key things that that we
truly believe in, and we learn a
lot of that from Dale.
Thank you. Thank you guys. All
right.
Thank you, everyone, and to the
attendees. We hope to see you
again tomorrow. 2pm we have
Silver's HR talking about just a
few small changes in the HR
world and how important that
will be for employers and
entrepreneurs, small businesses,
etc. So keep following us. Keep
attending and thank you everyone
for your support. Goodbye.
Thanks, guys.
