The COVID-19 pandemic continues to cause unprecedented uncertainty in all aspects of commercial real estate. CRE professionals are focused on not only managing their tenants and properties safely, but keeping their businesses open by harnessing a variety of available technologies. Appraisers are also facing extraordinary challenges in determining value in periods of significant market volatility.
On Thursday, NAIOP hosted an Advantage Series webinar, “COVID-19: Impacts on Appraisals and Building Management,” led by KC Conway, Director of Research & Corporate Engagement, Chief Economist, CCIM Institute, and experts Jim Amorin, CEO, Appraisal Institute; Barry Blanton, Senior Vice President, Blanton Turner; and Denise Froemming, CEO, IREM.
Conway started the discussion by asking the experts to share how their organizations have adapted to working remotely with the widespread shelter-in-place orders.
“The first shelter-in-place order began the beginning of last week in San Francisco,” said Blanton. “At that point, within our company and all companies we manage, we immediately established a tracking system for all cleaning supply inventory in all of our properties. That is updated in real-time each day.”
“Our entire system is cloud-based,” he added, “and in hindsight that’s turned out to be a really fortunate thing because we can do management, accounting, HR, marketing, virtual leasing all on the cloud. So everybody is still working – and working hard.”
Froemming agreed: “A lot of property management firms have been looking at where they need to be positioned in case of a disruption – not necessarily a pandemic, but maybe a cybersecurity threat. Either way, people are prepared and have the resources to work from home.”
“[Appraisers] are very well prepared to adhere to the shelter in place rules,” Amorin said. “If we have internet, and the ability to pick up the phone, and can view digital property files, it’s business as usual.”
Amorin pointed out a fact not everyone might know: Owners can have their properties appraised without physical inspection. There’s nothing in appraisers’ standards that requires them to physically inspect the site if there is enough information available for them to make an informed appraisal through a “virtual inspection” of the property.
Next, Conway asked the experts about what constitutes an “essential service.” In some states, that’s been clear – in others, more murky. Conway asked Froemming, “Are your property managers having to serve as an extension of the police department, making sure the appropriate people are accessing the building?”
“Thankfully not,” Froemming said, “Though we’re hearing that property management services in most areas are considered essential.”
“Property management has been considered an essential service in the areas we operate primarily because the buildings need to be sanitized and secured,” said Blanton. “We’re tasked with making sure there’s a clean and secure environment and someone to respond to emergencies.”
Blanton shared that his organization is also tracking the health of employees, tenants and residents (while adhering to HIPAA guidelines). “We want to know who is sick, and ask them to self-report,” he said. “We’re also making sure they have access to resources for financial assistance, for example.”
Next, Conway brought up the news circulating that Cheesecake Factory told its landlords it won’t pay April rent. “As a property manager, how do you react when you hear tenants say that they won’t pay their rent?” Conway asked Froemming.
“It’s really a case-by-case situation,” Froemming said. “There needs to be that analysis – you make sure you’re taking into consideration the owner/investor perspective, the tenant/resident situation, the contract – there are a number of variables to look at.”
“It’s really prudent for all property managers to develop a plan for what they might do when requests are made for rent abatement,” said Blanton. “Even if you live in an area where you have an option to evict for rent nonpayment, is that your best course of action right now? Or is it better to work with the tenant in place so you get back up and operational as soon as possible when the times comes?”
“I believe all requests for rent abatement, etc. should be in writing, include their reasoning for the request, and prove financial need,” he continued. “I wouldn’t forgive rent just yet. Think in terms of deferment, think in terms of short periods of time before you revisit things again. Things are moving quickly and changing by the hour – consider that when you make your arrangements.”
At the close of the discussion, Conway shared three final observations:
- “Look up and forward. If you don’t, you’ll never find the light at the end of the tunnel.”
- “Engage in ‘what-if’ thinking. The situation is changing so rapidly, we have to reevaluate each day what might happen and how we can be ready to address what’s coming next.”
- “Cross-pollinate. Look to the other organizations in our industry and build relationships in this critical time. I thank NAIOP for being a key part of making that happen.”
“Let’s exercise compassion,” Blanton added. “There are no villains in this. We can all work together.”
Visit the NAIOP Response: COVID-19 page for critical resources and knowledge to support you now.