Three Strikes: eCommerce, Supply Chain Disruptions and Coronavirus Batter Retail Real Estate

Retailers are experiencing unprecedented pressure on their operations in the United States and abroad as a result of the spread of the coronavirus. Mandatory physical store closures, supply chain disruptions, restricted credit markets, and dramatically curtailed retail shopping demand have put many brick and mortar retailers, who were already suffering from the accelerating shift to online commerce, in a difficult financial and operating position.

Arcturus is actively working with retail clients, strip center and mall owners, as well as first mortgage and structured lenders to help dimension problems, identify risks and think through strategies to help reduce the impact of these unprecedented pressures.

KEY RETAIL REAL ESTATE ISSUES TO CONSIDER

Property ownership issues include:

  • Owner business continuity planning (property management, leasing, financial accounting and leadership)
  • Business plan evaluation/reforecasting
  • Lease default/renegotiations
  • Eviction assessmets
  • Force majeure
  • Capital needs assessment
  • Investor and lender communication
  • Business interruption insurance claims
  • Possible loan defaults

Property operations issues include:

  • Operational continuity planning (security, engineering and cleaning staffing)
  • Closure plans – securing the property
  • Managing capital investment, repair and maintenance activities and construction delays
  • Employee and union contract issues
  • Remote system management planning
  • Cleaning protocols
  • Supply shortage planning (operations and capital projects)
  • Government authority-mandated closings and quarantine
  • Reporting requirements
  • Vendor default/replacement
  • Contract disputes

Tenant issues include:

  • Business continuity assessment (locations and corporate level)
  • Lease rights evaluations
  • Lease and corporate guarantee exposure
  • Lease restructuring, rent holdback alternatives
  • Bankruptcy and reorganization options
  • Inventory valuation
  • Financing and liquidity sources
  • Landlord defaults (access, capital improvements, go dark provisions)
  • Liquidation strategies
  • Premises security/access

Lender issues include:

  • Loan compliance (interest, debt service coverage, loan covenants, reporting, etc.)
  • Default evaluation/notice
  • Forbearance and enforcement alternatives (cash flow sweeps, guarantees, foreclosure, deed-in-lieu)
  • Loan restructuring assessment and procedures
  • OREO/asset management considerations (staffing, operating plan, tenant retention and recovery strategies)
  • Lender liability risk

Arcturus understands the critical issues facing retail tenants, owners of retail real estate, and lenders to the retail property sector caused by today’s unique environment. We have a strong team, with deep experience in helping clients get a clear understanding of their unique situation, outline alternatives and strategies to address problems, resolve conflicts, stabilize operations, restructure obligations and preserve/create value.

Please contact Arcturus so we can maximize the ability of your business to weather the storm during this challenging time and be positioned to maximize its future success.