Requests for rent relief are primarily coming from retail tenants, however office and multifamily tenants are also asking for concessions as they deal with the impact of Covid-19 and shelter in place regulations.

According to a NAREIM member survey, 85 percent of real estate investment managers invested in retail assets had experienced rent relief requests. More than half of managers in the office sector had been asked for concessions, while 42% of multifamily managers were fielding abatement requests.

The survey was conducted between March 24 and 26, with managers revealing they were evaluating requests on a case by case basis, but where approved were typically providing between two to three months relief, recovering the costs by extending the lease term or amortizing the abated rent over a defined period of time.

With April 1 rent payments expected to provide more insight into the fallout from coronavirus, most managers have implemented a standard response protocol to deal with requests, followed by an analysis of financial and operational details and decisions made on a “case by case basis”.

Some managers are also applying security deposits to April and allowing shortfalls to remain on the account with no late fees.

The survey also revealed seven out of 10 investment managers were gearing up to use their dry powder for new investments, with some managers saying they expected to use 50% to all their dry powder for new deals in the next two years.

One manager cautioned the scale of dry powder in the market could lead a quicker rebound in pricing than many expect: “At this point, we are mostly sidelined however until there is more price discovery in the market. We expect to see a decent rebound later this year given the amount of dry powder available in the market.”

Other highlights from the survey, included:

• 71% of investment managers are planning to reduce leverage to manage risk or owing to reduce capacity in the market.
• Half of all participants said they were moving acquisition and transaction team members, particularly analysts, to other areas of the firm, notably asset and portfolio management.
• Buyers were largely pressing pause to deals given market uncertainty, with the majority not attempting to retrade the price, but some attempting to achieve a discount of up to 5%. One member noted they had modified their purchase and sale agreements to require access to a “a functioning County Recorder's office” to avoid the potential for prolonged delays in the sales, which could add risk and impact pricing.
• Development and construction projects have largely been impacted by municipal shutdowns, but one manager revealed they were increasing their construction project workflow thanks to largely empty buildings that were accessible during the day and night.

NAREIM members can access the full survey in the member portal.