BUSINESS OBSERVER: Q&A | LARRY SILVESTRI
Larry Silvestri was recently interviewed by the Business Observer about how COVID-19 is impacting the Tampa Bay commercial real estate market. Read an except from the Q&A below:Larry Silvestri has been practicing commercial real estate law for more than 35 years, representing clients such as a mall landlord, an electronics retailer, a real estate investment trust and a ground-up developer. In early 2015, the Michigan native left the Shops at Wiregrass developer Goodman Co., where he was senior vice president and general counsel, to open Silvestri Law. In the practice’s five-plus years, Silvestri has negotiated contracts, leases and other legal documents for numerous commercial real estate projects in the Tampa Bay area, with an emphasis on retail properties.
What are the biggest changes you’ve seen in commercial real estate as a result of the COVID-19 pandemic?
Retail has undergone some of the biggest changes. Today, you’re seeing tenants seeking lease renegotiations and rent deferrals from their landlords. A lot of restaurants, I’m afraid, will not survive this because they lack the working capital necessary to keep going and landlords are going to lose patience or the ability to defer further. Commercial real estate is essentially like a three-legged stool, with tenants, landlords and lenders all involved. I think the smart retailers are realizing they have to retool. For restaurants, that means more outdoor seating than ever, and for landlords, it likely means vacancies and backfilling space, unfortunately. What are you advising tenants and landlords to do to handle the effects of the pandemic?
Both tenants and landlords are going to have to make deals based on COVID-19. In retail leases, there’s typically a clause that addresses continuously being open for business without interruption, but in this case, the government said that retailers could not be open, so the question is then, are they in default? I think the biggest misconception many tenants have is that events like COVID-19 should excuse the payment of rent. It may get deferred for a time, but tenants should not be caught in the idea that they don’t have to pay. And that’s because tenants have the flexibility to come up with new sources of revenue, whether it’s omnichannel sales by apparel merchants or curbside pickup for restaurants. Most landlords can’t do that. The federal (Paycheck Protection Program) loans are a good example. PPP loans don’t help landlords that much because that money was intended to cover payrolls or rent.