B+E Talks With Four Springs Capital Trust’s Cindy Daly On Tenants That Didn’t Pay Rent During the Pandemic

As the head of underwriting for Four Springs Capital Trust, a private REIT that invests in single tenant net lease properties, Cindy Daly has a hand in every phase of transactions. 

“I handle the property from when we win a deal through negotiating the purchase and sale agreement, the investigation and due diligence on the property, the closing and then the onboarding into our portfolio. So through my career I’ve handled really all aspects from beginning to end of a property life cycle and from sourcing the deals and closing them through owning and selling,” she says in the latest episode of a video interview series Women in Net Lease with B+E’s Camille Renshaw and Katherine Wadleigh-White. 

But she sees the core function of such a role as “to prevent slipping on banana peels”.

“In a very strong real estate market, time is important, you have to win your deals, you have to get them closed right away so you don’t have time to kind of sit around and muse on what could go wrong,” she says. “We have to find the problem and find the solution and get our seller to buy into it, so find something that works for everyone. The hard part is probably just managing all of those processes in a very busy market.”

Of course, in 2020 there were banana peels all over the place and a lot of slipping. 

Prior to the pandemic, the entire focus was on “Amazon-proofing” the portfolio, ie, guarding against the risk of Amazon putting other retailers out of business by focusing on providers of services that required in-person contact such as automotive repairs and medical appointments. But Covid-19 had other plans and shut down these activities while Amazon boomed. 

So the focus shifted again and the REIT ended up buying four Amazon distribution centers. The experience brought a new perspective, Daly says. 

“I live my life trying to figure out what the problems are going to be and solving them before they happen and that was sort of a life lesson that you can never predict everything. You can just do the best that you can and then there’s always going to be surprises no matter how long you’re doing this, you’re never going to be able to figure everything out and predict it,” she says.   

Another surprise, she recounts, was the varying reactions of tenants. 

“Some tenants handled things and some tenants didn’t. We got letters from people saying they’re not going to pay rent, and quite a few of those were from tenants who very well could afford to pay rent and in a lot of cases their businesses were permitted to stay up and running and they just saw the opportunity and decided that they didn’t want to pay,” she says. 

“Business is business but it’s also a character issue and that makes us really not want to do business with them in the future.” 

On the other side, there were tenants who really were struggling yet still kept paying rent. “Let’s just say we weren’t always sympathetic to people who sent those letters but we wound up with 100 rent collections, I’m happy to say,” Daly says. 

Although every crisis is different, lessons learned during the pandemic or from further in the past have their utility in navigating the current market challenges. Sometimes the lesson is, as Daly says, “just keep your eyes open because if you think you know what’s going to happen you don’t”.

Ultimately, she says, “None of us have crystal balls, but it is fascinating work to be able to try and make those predictions and invest accordingly.”

Also, please stay tuned for coverage that will be coming out of our annual Women of Influence conference being held July 24th through July 26th. For more information about that event please visit here.