Starbucks Asks for One Year of Rent Relief from Landlords
[Starbucks Asks for One Year of Rent Relief from Landlords](https://www.restaurantbusinessonline.com/financing/starbucks-asking-landlords-years-worth-rent-breaks)

Anyone who has had the displeasure of dealing with SB on the LL/Owner/Developer side should enjoy this - it's like a flashback to right after you *think* you've finalized lease negotiations. I can't even imagine how they would think this is possible since so many of their stores are freestanding NNN deals. I wonder if any LL's will acquiesce. 

Anyone seeing/hearing any concession requests on this scale yet?
[{"id": "fqo9ocp", "text": "They can ask for anything they want.", "replies": [], "depth": 1}, {"id": "fqo9vrc", "text": "Good luck Starbucks. I hope LL's push back on this one. \n\nWe haven't seen anything like this as we mostly own flex and office space, but we do have a national hair salon/barbershop training center and they've asked for some relief because \"75% of their retail shops have been closed\". With a larger corporation like that we've been less accommodating. Dissimilarly we have a locally owned but well regarded Irish Dance studio who has been a long time, on time tenant. It's their only location and they cannot host their classes, so they're out of business for all intents and purposes. We've provided them rent relief for a few months to see how things play out. \n\nOur philosophy is that the small guys need the help and the large corporations should have the ability to keep paying. Maybe that's the wrong approach, but we are a small business owner as well and probably sympathize with others like us.", "replies": [{"id": "fqofpua", "text": "You sound like an A+ landlord.", "replies": [], "depth": 2}, {"id": "fqosmmx", "text": "We are exactly like you (small biz LL) with mostly retail tenants in 100+ commercial properties. We\u2019re using the same system: negotiate relief for well-paying, local small biz tenants and not granting deferments or abatement to national-credit tenants.", "replies": [], "depth": 2}, {"id": "fqpfcz9", "text": "As the owner of a similar type of business to the dance studio, I appreciate landlords like you. So far, we've had enough support from our students that we haven't had to ask for rent relief, but I worry about the effect all of this will have on the future. Will people be too afraid to come back? Will new people be afraid to enroll? I hope my landlord is as reasonable if there are problems in the future.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fqoa2l1", "text": "Even if landlords want to, their lenders will not allow it. Source - I\u2019m a lender and I would not allow this.", "replies": [{"id": "fqoc1f5", "text": "Are you feeling any pressure to offer forbearance? Either from gov or LLs?", "replies": [{"id": "fqok6v7", "text": "I work at a lender as well and we have an avalanche of forbearance requests coming in. We are being very selective where we grant them, though. The property had to have been performing well prior to the crisis.", "replies": [], "depth": 3}, {"id": "fqooyd9", "text": "Yea. Some I tell to pound sand. Some I\u2019m working through it with. Govt isn\u2019t saying shit to us yet. They don\u2019t want to inherit it. You break it you buy it.", "replies": [], "depth": 3}], "depth": 2}, {"id": "fqojzxf", "text": "Lenders would not allow Landlords to do what exactly?  Not following.", "replies": [{"id": "fqooe3q", "text": "Lenders would not allow landlords to renegotiate existing leases for a credit tenant.  The leases are the basis for the lender's collateral.  A couple months' abatement, OK, maybe we'll come back to this in July.  But no way do they let them lower rents for a 12-month period.", "replies": [], "depth": 3}, {"id": "fqootnw", "text": "Modify the lease. Think of it this way- until you pay me off, it\u2019s my property, I just allow you to operate it", "replies": [{"id": "fqosta6", "text": "Obviously, we see it differently than you.", "replies": [{"id": "fqp2k6x", "text": "Well, it's not really a matter of opinion.  It's literal legal documents. Whose money bought the property? Your 25-50% of the purchase price? Lender can absolutely veto a bad lease amendment in most if not all mortgage docs. Lenders have been fairly willing to play ball with helping out mom and pop tenants with deferment or abatement plans, etc. though, from my experience so far. End of the day, the property doing well is in both the borrower and lender's best interest", "replies": [{"id": "fqpj89t", "text": "A lien does not \u201cliterally\u201d make the bank the owner. You\u2019d have to foreclose to \u201cliterally\u201d own the property.", "replies": [{"id": "fqqrg2u", "text": "True, but a commercial mortgage (often) does give the lender a say on changes to the leases on the property.  Literally.", "replies": [{"id": "fqqtdeu", "text": "A mortgage contract is a different document. A mortgage contract between a Mortgagor (the property owner) and a Mortgagee (the lender) is a contract that requires specific performance by both parties.  The mortgage contract can require the property owner to seek the lender\u2019s approval of certain lease terms between the property owner and it\u2019s tenants, and when the property owner violates that provision by not seeking the required approval, then the property owner is in default of the mortgage contract. But, that\u2019s an event of default in the mortgage contract. That does not mean the lender \u201cliterally\u201d owns the property as has been suggested. That just means the property owner is \u201cliterally\u201d in default of the contract.  If the lender wants to declare a default and sue the property owner for performance, then that\u2019s not \u201cliterally\u201d ownership either. The only way a lender can \u201cliterally own\u201d a property is to declare the default, institute foreclosure as its remedy, and perfect the foreclosure by obtaining a deed (depending on the state and it varies, but in general).  My point is this lender talk of \u201cI literally own the property\u201d is bullshit and hyperbole.", "replies": [{"id": "fqrf40i", "text": "True, but a commercial mortgage (often) does give the lender a say on changes to the leases on the property. Literally.", "replies": [{"id": "fqrgaq2", "text": "True. Mortgage contracts may include provisions that grant the lender approval rights over certain lease terms. However, that\u2019s not my point. \n\nMy point is that a mortgage contract does not make lenders \u201cliterally owners\u201d of a property.", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}, {"id": "fqpuwsj", "text": "In this unprecedented time, it's in the best interest of everyone to keep properties full and help tenants survive. Any lender taking the stance of not allowing a reasonable lease modification to a tenant who shows the need and that you can reasonably expect will do at least ok after this subsides is not a lender I would want anything to do with.", "replies": [{"id": "fqpwuyl", "text": "I agree with that. This chain was about SBUX though and if you look at their financials, which by the way is available to everyone, they don\u2019t need rent relief, and giving them a big relief package serves no one but the shareholders of SBUX", "replies": [{"id": "fqq2o4g", "text": "We agree.", "replies": [], "depth": 8}, {"id": "fqqtvqy", "text": "Absolutely agree with you.", "replies": [], "depth": 8}], "depth": 7}, {"id": "fqq01h9", "text": "SBUX is still open and serving customers. They\u2019re an IG credit. Tell me what\u2019s reasonable about providing a year of no rent. 1-2 months maybe.", "replies": [{"id": "fqq2oeq", "text": "See my previous post. I'm not advocating for making any concessions for SB and the like. If I got this letter from them I probably wouldn't even respond to them. I'm talking more broadly for tenants that do show a real need.", "replies": [{"id": "fqq48h0", "text": "Ok I agree with that.", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "fqpyso4", "text": "I\u2019m being facetious... but seriously I would definitely not approve 12-month rent forbearance for Starbucks. That\u2019s ridiculous. LL\u2019s can of course proceed... if they want to trigger a default, lose their property, and trigger the non recourse carveouts for damages.\n\nYou can do whatever you want in life, but that doesn\u2019t mean it\u2019s without consequences.", "replies": [{"id": "fqqvg52", "text": "I agree with you on SBUX. They\u2019re being grossly opportunistic.  I have not nor would I grant them a concession. And, I would not negotiate a lease mod with a national-credit tenant like SBUX in a single-tenant, investment-grade NNN lease without first talking to the lender.  That\u2019s an example of a problem with my lender that I don\u2019t want. However, there are leases with which I\u2019ve negotiated deferral agreements without going to the lender. For example, in grocery-anchored centers with 30-40 shadow retail spaces, I\u2019m not going to your lender on 1,200 SF leases. I agree with you that there are consequences, and if a lender had a problem with my second example, then that would inform our relationship going forward.  I\u2019m not trying to be cavalier.  I\u2019m just telling you how I see real world landlord/lender relationships.", "replies": [{"id": "fr87am4", "text": "u/Masera240 Could they be an opportunist first and then come back six month later with a super lowball cash offer to buy the property from the landlord?", "replies": [{"id": "fr8phed", "text": "I guess they could, but why would a LL accept a lowball offer?  In general, publicly-traded companies don\u2019t want to own RE, so they lease everything.", "replies": [{"id": "fr96bmq", "text": "u/Masera240 Many REITs may need liquidity and economic situation may force many REIT to sell some properties. If Starbucks is competent opportunist, they should gonna use their cash to lowball real estate.", "replies": [{"id": "fraegzj", "text": "Yes, property values will probably be depressed in general in the future, but Starbucks wouldn\u2019t buy real estate, and it seems like a convoluted strategy to intentionally reduce lease rates in order to depress prices. I think Starbucks is just asking for rent concessions to improve their quarterly earnings.", "replies": [{"id": "frajo0b", "text": "u/Masera240 OK, you do think they are not gonna buy any good locations?  This is just not their strategy or they do not want to carry any real estate?", "replies": [{"id": "frb0x0z", "text": "They\u2019re publicly traded. They don\u2019t want real estate on their balance sheet tying up $.", "replies": [{"id": "frb2hw1", "text": "Sure, but real estate play is a long term thing right? You bought during the lowest and then sell it at the highest. Since Starbucks is a A tenant, their NNN building cap rate will go lower than many tenants.", "replies": [], "depth": 13}], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}, {"id": "fqqwsyr", "text": "Maybe a better way for me to say it is that I\u2019m not stupid enough to pick a fight with my lender over modifying an investment-grade NNN lease like SBUX, and my lenders aren\u2019t stupid enough to pick a fight with me over my 1,200 SF tenant example where I temporarily went below the floor rental rate to keep a tenant in business.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fqosoxt", "text": "We granted relief anyway and then asked for forgiveness from our lenders.", "replies": [{"id": "fqp2xn4", "text": "I wouldn't advertise that lol.  You don't want that rep in the future. Plus even if your loan is non-recourse, there's some standard bad boy carveouts that could include something like that and they could actually go after your firm or even you.  If it was for smaller tenants anyway, the lenders probably would've allowed it anyway.  Just makes you and your firm look sloppy. Tough times are when relationships are forged and firms/people are judged in this industry", "replies": [{"id": "fqqtnhh", "text": "I agree with you about relationships are forged in tough times, and it works both ways. Property owners need lenders, and lenders need property owners. It\u2019s not a unilateral relationship as you suggest.", "replies": [{"id": "fqqwxyn", "text": "That's fair. FYI I work in the ownership/borrower side.  I think we agree on everything and there was just miscommunication in this whole thread about Starbucks relief.  Without a doubt the lender-borrower relationship is a two-way street, I was just thinking specifically of Starbucks being granted relief when they still clearly have the liquidity to pay rent. I don't think many lenders are stopping rent relief to most small businesses, especially the ones that had no trouble prior to the pandemic.  Also no one wants the negative PR or reputation of being inflexible. On the flip side, I think lenders are absolutely justified in vetoing relief for Starbucks, which was what the thread was about", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "fqpz866", "text": "That\u2019s called a non monetary default and likely a violation of your covenants. That\u2019s a quick way to piss off your lender, and if they\u2019re sharks, lose your property.", "replies": [{"id": "fqx45hs", "text": "Yep, especially if they are loan to own guys", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqoe4bv", "text": "Hahahahaha get fucked sbux I\u2019ve never had the displeasure of working with a worse group on both lease and franchise negotiations.", "replies": [{"id": "fqop736", "text": "Try Ross Dress for Less. They\u2019re the fucking worst", "replies": [{"id": "fqp9f1n", "text": "H&amp;M is just as bad.", "replies": [{"id": "fqpy88k", "text": "Agreed", "replies": [], "depth": 4}], "depth": 3}, {"id": "fqpehsq", "text": "Hahahahahahahah!!!!!   100% true!!!!", "replies": [], "depth": 3}, {"id": "fstpmfg", "text": "Which is why landlords are foaming at the bit to negotiate deferrals with them. Taking out all those ridiculous lease clauses", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqogzmt", "text": "so who would really win here?\n\n&amp;#x200B;\n\nor are they gonna just work something out?", "replies": [{"id": "fqqs0v7", "text": "A lease is a legal document.  Unless the tenants have a clause allowing them to renegotiate it, the lessor will win.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fqoi4k2", "text": "Interesting that they claim the value of commercial real estate has changed, when really the only thing they can be sure of is that the value of their own business has changed.\n\nWhat percent of their leases are with the same big landlords?  It seems like they think they have quite a lot of leverage... But do they?", "replies": [], "depth": 1}, {"id": "fqoj17i", "text": "Didn\u2019t Cheesecake Factory already do that like a month ago?\n\nEdit: it was a month.  Staples also.  I\u2019m sure more.", "replies": [], "depth": 1}, {"id": "fqom2kp", "text": "I have a SB in my portfolio and while they didn\u2019t send this letter to me, I have read it. I think there\u2019s some confusion on what it is the letter is saying. They\u2019re not asking for \u201cno rent\u201d. They are specifically asking for a base rent adjustment for 12 months starting June 1. The implication is we need reduced base rent (maybe 25-30% discount?) but will still pay CAM and taxes. It\u2019s not all that dissimilar to many other national retailers requests during the Covid crisis. What\u2019s odd is that they\u2019re making the request now as opposed to March or April. Maybe it has something to do with their quarterly reporting. And asking for 12 months of rent adjustment is pretty aggressive. As with anything in our business, this is a negotiating tactic and merely an initial \u201cask\u201d. Negotiations will happen, deals will be made.", "replies": [{"id": "fqot3wu", "text": "We\u2019ve found that almost all of our national-credit tenants are asking for concessions (deferment and even abatement), but many of them are caving when we push back.", "replies": [{"id": "fqpnx0j", "text": "Yep. I've been making deals with independents. Many nationals asked for these type of deals and after hard pushback, a lot of times I got no response and a rent check for full payment shortly after.", "replies": [], "depth": 3}], "depth": 2}, {"id": "fr1zdc9", "text": "This is the correct answer (and we have received the letter).  The headlines are clickbaity.  While it seems likely there will be fewer people lingering for half a day on their laptops, customers will still buy coffee.  SB is better capitalized and has greater capital access than many of its LLs, making it a hard sell to socialize the losses and privatize the gains.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fqoud5b", "text": "We are two months from completion on a ground up with Starbucks. They just started their TI's and boy did it come at the right time. Their PM said they have halted most deals and revisited anything else in the pipeline. They are focused on established locations and doing TI's during downtime. With their 'hold you by the balls' delivery penalities we have been hauling ass to deliver ahead of schedule. Fearful they will jump on any excuse to bail.", "replies": [], "depth": 1}, {"id": "fqowqps", "text": "Ha! How about they give the LL 50% of revenues for the next year then?", "replies": [], "depth": 1}, {"id": "fqp98bk", "text": "Is this a joke? What a ridiculous thing to even ask for (even as a negotiation tactic).", "replies": [], "depth": 1}, {"id": "fqpjsj8", "text": "To be clear, we mostly deal with local and regional regional banks, not national. Our experience is that they want our business and fall over themselves when we purchase or refinance a property. We\u2019re not highly leveraged (in the 40% LTV range across the portfolio, although, I guess it\u2019s probably higher now if you consider falling property values).  My point is that we don\u2019t see actual big-talking lenders in our market, at least not with us. We\u2019re not a shitty LL. So, they want our biz and defer to us - not the draconian lender that you imply.", "replies": [], "depth": 1}, {"id": "fqq4sxg", "text": "Man we are currently under contract to buy a Starbucks and scrambling to see if the location we are buying requested this.", "replies": [], "depth": 1}, {"id": "fqrb59v", "text": "I agree about Starbucks. They\u2019ve always been horrible to deal with, and this is just another example. Maybe we should be talking more about reputations of companies like Starbucks instead of ours.", "replies": [], "depth": 1}, {"id": "fqs4flr", "text": "How many instances did Starbucks offer to pay more when their LL was struggling? (Hint: zero}\n\nI'm not an equity partner with Starbucks. I don't make more when they're more profitable. Why should I make less when they're making less?", "replies": [], "depth": 1}, {"id": "fr20512", "text": "Landlords may want to consider asking, en masse, for SB to offset any base rent reduction with in-the-money options. :)", "replies": [], "depth": 1}]