With A $28.6B Grant Fund, Restaurant Landlords Hope To Recoup Lost Rent
The strained marriage of restaurants and their landlords is getting another complication with the infusion of billions of dollars in government cash.
The Small Business Administration has administered more than $2B of the $28.6B Restaurant Revitalization Fund signed into law by President Joe Biden as part of the American Rescue Plan, doling out grants to 16,000 applicants, the SBA announced Monday. Restaurant owners, who can receive grants of up to $10M, can use the money to cover various expenses, including payroll, rent, mortgages and maintenance fees, through 2023.
Restaurateurs told Bisnow they plan to use some of the funds to pay rent, hoping to maintain their tenuous relationships with their landlords. Property managers who were flexible with their tenants in the past year are hoping this new money flows back into their pockets to pay their taxes and mortgages — which they are quick to point out have not been abated like their tenants' rents.
SBA New England Acting Regional Administrator Amy Bassett said RRF applicants are requesting funds for payroll and increased wages to address an industry-wide labor shortage. Bassett said she hasn’t heard of applicants requesting funds to cover significant rent debts.
“I’ve talked with people, what if you plan to cover your lease payments for a year or debt payments? They can set aside the funds or use them through 2023,” Bassett said. “They’ll do OK in the summer, but know they need to be prepared for the winter.”
Pondicheri, an Indian restaurant in Houston's River Oaks neighborhood, secured a rent abatement agreement from its landlord, owner Anita Jaisinghani said, and she is in the midst of applying for the RRF. Jaisinghani is waiting on information from the Paycheck Protection Program to complete her RRF application.
Pondicheri has a 10-year lease at its Houston shopping center with landlords FPA Multifamily and Trinity Property Consultants, Jaisinghani said.
“I think it is so hard to get landlords to drop the rent, I’m not even going to try that,” Jaisinghani said.
She praised her relationship with the landlords — they paid for and built a new patio to accommodate 40 more customers. She isn’t trying to renegotiate her rent relief agreement, believing the landlords will stand pat. Pondicheri’s landlords didn't respond to a request for comment.
“I guess I don’t know how the structure of leasing is changing,” she said. “I don’t see that changing for another year or two.”
Longtime Boston landlord Charles Talanian, who owns a large Newbury Street portfolio under his C. Talanian Realty company, said he’s negotiated an array of rent abatements, deferrals and other structured agreements with his numerous restaurant tenants. Talanian said RRF money will help his tenants, but he is not a fan of the program’s financial structure.
“This government money, it’s bullshit,” Talanian said. “It’s my own tax money going to these people, it’s just revolving cash. We haven’t gotten any abatements from the city of Boston on taxes.”
Talanian said he owns 175K SF of vacant space along the upscale Newbury Street retail corridor and has had tenants like popular bars The Pour House, Lir and Whiskey’s close permanently. Talanian said he’s locked in a legal battle with a former 5K SF tenant who signed a rent reduction agreement and subsequently vacated its space.
“You make a deal, today your word doesn’t mean anything,” he said. “My word is my word. Today’s people, their word is not their word.”
The SBA’s initiative promises restaurants up to $5M per location and $10M per total business within three weeks of applying, part of Biden’s American Rescue Plan. Unlike both rounds of PPP loans in the past year, RRF money comes debt-free. Awards, calculated by subtracting 2020 revenue and PPP loans from 2019 revenue, can be used to cover vendor payments, payroll, utilities and any restaurant-related debt incurred from February 2020 through March of this year.
The program is also prioritizing applications by women, veterans, minority and other socioeconomically disadvantaged restaurant owners.
Golden Gate Restaurant Association Executive Director Laurie Thomas said she submitted an application for two locations of the Cow Hollow restaurant brand she owns, and within minutes received a message indicating her loan would process quicker than others. She anticipates using the funds for rent, among other expenses.
“We can use these for vendor payments,” Thomas said. “This eases my stress over constantly having to raise prices to cover [them]. We’re already seeing product costs go way up, that’s another thing.”
Thomas said she “lost a lot of money” last year, and took out personal loans to cover costs. She only secured forgiveness for three months’ rent last spring for her Greek restaurant, Terzo. She declined to elaborate on her current rent agreement and the identity of her landlord, only noting it was a private family and not a large corporation.
Dallas-based Beck Ventures CEO Scott Beck said his firm negotiated rent deferrals with the four restaurant tenants at its Trophy Club mixed-use development. Beck Ventures didn’t lose a tenant through the coronavirus pandemic, and tenants’ PPP loans allowed them to keep the lights on and keep delivery operations, he said. Beck expects the federal grants to help restaurant owners and operators reach solvency. Still, the developer faces insurance, common area maintenance, property taxes and mortgage payments with no relief.
“In general, this certainly will help our tenants as well as many more,” Beck said. “Because irrespective of whether they’re in a deferred rent situation, most landlords are still trying to get some amount of rent. The landlords still have to pay our bills.”
Restaurant operators told Bisnow they fear the RRF will run out before their applications process. Congress’ December $292B injection of funds into the PPP ran out last week ahead of its scheduled May 31 end-run date, while $8B remains available for lenders focusing on women- and minority-owned businesses. The program distributed $780B in forgivable loans to 10.7 million applicants.
“We encourage anybody that is available to apply, or eligible to apply, that they should apply now,” the SBA's Bassett said. “Even if funds do run out, get in line, get your application in, because you never know what’s going to happen.”