COVID-19: How Should Landlords and Tenants Navigate the Next 90 days?
Updated: Jun 4
An unprecedented COVID-19 response has permeated virtually every industry, landing the global economy again in turbulent economic waters. Now that April rents are considered past due, landlords and tenants alike are experiencing extremely challenging conditions. Without a clear understanding from leaders in healthcare, local, and state government, tenants and landlords are struggling to overcome formidable drops in revenues and barriers to retention. Both tenants and landlords are seeing the same setting but from unique perspectives. When we will emerge from such mandates is anyone's guess, but it is likely safe to say that we will face a hard road ahead. As landlords and tenants meet to identify a way forward, what should each consider?
What’s not working today? What is your current cash position and runway? Perform a cash flow analysis and be prepared to articulate your past, present, and projected sales over the next 30/60/90 days in a manner that is appropriately revealing to each partner, lender, creditor, and vendor.
What are your minimum standards of viability? Only you know what your business requires to effectively operate and to retain key employees. Only you know what vital processes are required to see your company through the difficult road ahead. Be prepared to speak to those points to provide clarity for the basis of your decisions.
What’s working today? It is far easier to build upon your strengths than to reinvent the wheel if you don’t have to. Look for the opportunities – even though not ideal, buy yourself the necessary time to figure it out. Then look further. You need to be able to articulate a longer-term vision that clearly communicates forward momentum in order to motivate others to support your immediate needs.
Develop your 30/60/90-day plan. Only after you gain financial clarity should you devise your plan for the next 90 days. Your first conversations need to be with financial advisors, CPA’s, equity partners, and local lenders to evaluate the capital resources you should take against what capital is available to you. (Click here for a summary of resources to help you process Q&A with these professionals.) You’ll need to be able to articulate:
How and where can you generate revenue today?
What employees should be retained and why?
What are your forecasted revenues?
What cost-cutting measures are necessary, in what order, and by what timeline?
How can you change your business mechanics and/or model to meet demand today?
What is your revised timeline for success, including KPI’s P&L - *(% basis only)?
What is your plan to emerge successfully?
How can you work with your vendors, partners, landlord, and customers to minimize collateral damage?
Key Takeaways: Invest in the plan and resources that will have you emerge stronger tomorrow. Be prepared to communicate your plan with stakeholders and shareholders. You need to be able to articulate how investing in your company today (by working with you) is their best assurance of a more successful tomorrow. Now is NOT the time to ask for concessions when you don’t really need them. Landlords, tenants, vendors, creditors, and customers all need each other right now. Now IS the time to work together. Your best chance of success is to remain calm, listen with empathy, and seek alignment with stakeholders, shareholders, and partners. Of course, you'll need to:
Assume nothing. Avoid large missteps by asking questions to clarify and qualify before you proceed. Tactful and tactical negotiation depending on the relationship dynamic is best used to navigate the numbers. Generally, you should think 2-3 steps ahead. If you get stuck here, call for help.
Play the long game. The battles you avoid today may represent your strongest opportunities for partnerships tomorrow, regardless of whether you are the Landlord or the Tenant.