Given the significant ongoing economic disruption, we would like to update you on our April and May performance. We’re pleased so far with our tenants’ relative strength in the face of today’s headwinds.
Despite the negative shock, to date, we have only executed temporary rent modification agreements with two tenants, and received requests from fewer than five others (although no modification was ultimately granted). The amendments came in the form of short-term rent deferrals, with such deferred rent to be repaid by the end of 2021.
Based on the revised 2020 budget as adjusted for such lease amendments, we have collected 100% of contractual rent obligations due in April and May. Not including the rent deferrals, our collections equate to 86% of the base budget over such months, although we remain confident that the rent deferrals will be fully repaid per the amended terms.
Please be mindful that despite these positive results so far, we are in uncharted territory and precise forecasting of the continued economic impact is futile. Our belief has always been – and remains – that by using conservative financing and maintaining a creditworthy rent roll, we should have the financial flexibility and wherewithal to emerge on the other side should we incur economic turbulence. So far, we have avoided negative outcomes, but the road ahead remains uncertain.
Our focus today is on generating an acquisition pipeline that targets properties which may, conversely, be forced into a sale at more attractive pricing than we have seen in the recent past. It may take time for these opportunities to emerge, so patience is required as the commercial real estate market begins to thaw from its recent freeze.
The markets are facing unpredictable health outcomes and a murky economic recovery – investing with a margin of safety will be critical.
Mr. Karsh is CEO and Co-Founder of Streitwise and Tryperion Holdings.
Prior to forming Streitwise, Mr. Karsh was an Acquisitions Analyst for Canyon Capital Realty Advisors and the Canyon-Johnson Urban Funds, where he was responsible for underwriting, structuring and executing value-add and opportunistic transactions. He holds a Bachelor of Arts degree in Political Science from the University of Pennsylvania. Mr. Karsh is a member of ULI and is also a Real Estate & Construction member of the Jewish Federation of Greater Los Angeles.