How One Florida Landlord Made Forbearance Decisions

In March and April, Claudio Mekler, the owner of five retail centers in shopping centers in South Florida, was busy. As COVID was forcing his tenants to close their businesses, he was focused on working out forbearance deals with them.

“When making the decisions on forbearance, we analyzed each case and made one-on-one decisions based on real data,” Mekler says. “We negotiated agreements that benefited the tenant, our investors and our lenders.”

That strategy mitigated the current need for rent relief. Mekler took a personalized approach to each situation. If, for instance, a tenant paid six months in advance, he would reduce its rent by 50 percent. He let a tenant who was halfway through construction of a new store defer rent payments in April and May so they would only have to pay the Common Area Maintenance (CAM) fees during that time.

“Another tenant paid us 50 percent of the rent plus the CAM in April, May and June,” Mekler says. “In July, the business was to begin paying full rent again. Then in January, February and March 2021, that tenant will pay full rent plus installments of the deferred rent.”

As Mekler has worked through agreements with current tenants, he is still approached by companies interested in leasing space in the shopping centers that he owns, manages and leases in Miami-Dade, Broward and Palm Beach counties.

“Surprisingly, we are receiving inquiries from local and national retailers and current tenants who want to expand nonstop,” Mekler says. “Not all of these inquiries are converting into leases, but the amount of inquiries we are receiving has gone up significantly since June.”

If a new tenant signs a lease, Mekler will provide discounts, depending on the situation. “Each deal is different, but in recent weeks, we have agreed to reduce the rent in the first year. That strategy seems to be working well,” he says.

Some new tenants may think they can get unrealistic discounted rates due to uncertain market conditions. But the South Florida market doesn’t necessarily demand those rent breaks, according to Mekler.

“I don’t expect to see a lot of distress in South Florida when it comes to well-positioned shopping centers,” he says. “The retail market is pretty active, and when one tenant vacates a space, we have others waiting to move in.”

But that isn’t universal.

“When it comes to retail centers that were already struggling before the pandemic, we may see those properties hit the market later this year,” Mekler says. “Overall, I think the government intervention with PPP [Paycheck Protection Program] and other loans have prevented a lot of distress.”  

With all of the uncertainty, it’s hard to know what a shopping center is worth right now. “Collections of rent will need to stabilize so the value of their properties can be better determined,” Mekler says. “Right now, buyers base their offer on the rent being collected and, in many instances, rents have been temporarily reduced to give tenants some relief.”