CHICAGO - Restaurants, their receipts less than a third of what they customarily would take in, are unable to pay rent. Landlords, with mortgages and property-tax bills due, can't survive without income.
Since the coronavirus pandemic hit, resulting in the forced closure six months ago of restaurants and bars across the country, restaurateurs and landlords have been forced into an uneasy dance, as both camps fight for economic survival.
It's a give-and-take struggle that will last months more, maybe into next summer.
Partners Allan Perales and David Goldberg, whose GoldStreet Partners brokerage matches landlords to restaurant tenants, from big brands such as P.F. Chang's to single-operator restaurants such as Tzuco and Galit, see the issue from both sides.
"We're seeing a lot of panic from the landlord and tenant perspectives," Perales said. "It's been a rough four-five months, and nobody's winning right now. The greatest fear a landlord has is that their restaurant tenants aren't able to pay rent. That could result in losing ownership of the building altogether, having it go back to the bank or to investors."
And so, often with little choice, landlords are willing to deal. But how?
"There definitely is no one blanket negotiation," Goldberg said. "It's case by case, tenant by tenant. When we try to negotiate, we hope for a win-win, but there are different economic constraints on both sides."
For restaurants, the constraints are obvious. The government shutdown kept them dark for months, after which they were permitted to serve only outdoors (though not all restaurants had that option), and later allowed to serve indoors at no more than 25% capacity. Income plummeted.
For landlords, the difficulty varies.
"The truth is that not all landlords are in the same position," Perales said. "Depending on the loan you have, some landlords are dealing with their lenders, and some lenders won't even speak to them. I've talked to some whose lenders won't give them any relief. In the next six months, we're going to see a lot of those landlords going into default."