Only 20 percent of the Related Group’s commercial tenants paid their rent in April, executive Jon Paul Pérez said during The Real Deal’s webinar on Friday.
“If you get 20 percent you’re sort of happy and jumping up and down,” he said. About 90 percent of Related’s multifamily tenants paid rent, which Pérez said is much higher than the 50 percent the company originally expected.
“If you are a major company, or you are a renter, and and you have the wherewithal to pay your rent, you have the obligation to pay your rent,” Pérez said, adding that Related is working with tenants on a one-on-one basis and working out deals, including coming up with payment plans.
Pérez, executive vice president at the Miami-based Related Group, said his primary concern is rising unemployment and the domino effect that will have on the local economy. He was joined on the webinar by Edgardo Defortuna, president and CEO of Miami-based Fortune International Group; Shahab Karmely, owner and CEO of New York-based KAR Properties; and moderator Amir Korangy, TRD’s founder, chairman and publisher.
“The longer the economy is shut down, there’s no commerce. South Florida is very dependent on the service and tourism industry, so that affects a lot of jobs,” Perez said.
Defortuna, Pérez and Karmely also expressed concerns about how long the shutdown could last.
“What concerns me is my agents. If this lasts for a very long period of time, what worries me the most is how those agents are going to survive,” said Defortuna, who hasn’t laid anyone off.
Karmely called a prolonged shutdown a mistake.
“On a macro level, the longer it takes, the more of the contagion for the economy is going to be,” he said. “If you allow a return to business, if you allow a return to prosperity, we will have the wealth and the resources and the ingenuity that is unique to this country to fight this or any other future pandemic that may come our way.”
Despite the current turmoil, the developers acknowledged that opportunities will arise from the pandemic.
Foreign buyers may want even more to put their money in a safe haven. Some of Fortune’s foreign clients who own condos that they have listed for rent have called and asked Fortune to pull the listings. “They are thinking they want to come back to Miami as soon as possible and as soon as they’re allowed,” Defortuna said.
Meanwhile, buyers aren’t backing out of contracts at the Ritz-Carlton Residences in Sunny Isles Beach, which was recently delivered, Defortuna said. Though closings have been slower, the developers have paid the $210 million construction loan down to about $50 million, he said.
Pérez expects there also will be pent-up demand from Northeasterners looking to invest in the Miami condo market.
The developers added that they’re not seeing any big “fire sales” for new development condos, but that there may be opportunities in the resale market and in hospitality.
Pérez said that Related has only seen mortgage note sales so far, but nothing has been priced right for Related – yet.
Karmely, who said he has a lot of his own money invested in his projects, believes that credit will be harder to come by and that there will be a “flight to quality” for lenders.
“They’re going to be more careful about who they’re working with, but there will be lending,” Karmely said. “There will be some winners, some losers. But that’s capitalism.”