Commercial Lease Assistance Webinar Part 2 (7-02-2020)

Alright, well, welcome to SureFront's bi-monthly webinar series at 11 AM Pacific. I am your host, Dylan Lowe, the Director of Marketing at SureFront. And for those of you who are new to this webinar series and are not familiar with us, SureFront is an all-in-one app built for suppliers, showrooms, and sales reps with a patented collaboration technology which empowers users in a variety of ways, including giving suppliers and sales reps the ability to create virtual showrooms and showcase their product lines to retailers anywhere at any time. We're going to talk about it briefly towards the middle of this webinar as well to give you a little more insight into what we do in addition to that thing that I just mentioned. We hold these webinars every Thursday at 11 AM Pacific to provide valuable information to our retail community to help them get through this crazy time we're all experiencing and experiencing for a second wave now, unfortunately. So today we're discussing commercial lease assistance and rent Relief, which I know is applicable to many of the suppliers and sellers attending this webinar from various Market Centers around the country, including Minneapolis, Atlanta, Dallas, Las Vegas, Los Angeles, I believe also Denver now as well. So we'll also have a Q&A at the end, so please start asking any questions you have now in the Q&A icon at the bottom of your screen. We get a lot of them every time, so You know, try to ask them now, they'll get at the top of the list and I'll start going through them towards the middle of the webinar. So in addition to having these webinars to help our community during this trying time, we're also going to be providing a limited number of free seats to SureFront so you can have that virtual showroom on a first-come, first-served basis for all attendees after today. So about an hour after this webinar, you'll be getting an email about that sign-up link for the virtual showroom. So please click on that. We have a limited number of seats, so take advantage of it. We're trying to do everything we can to help our community during this time. So I'll explain in the middle of this webinar, we'll send out that link afterwards. Also, towards the end of today, we're going to send a follow-up email. It's going to have everything that we discussed in today's webinar, including the recording, a calculator that our panelist is going to be going over, and her presentation as well. And about that, due to overwhelming demand from last week's— or sorry, two weeks ago webinar, we're having our same panelist back. She's a commercial lease expert with over 25 years of experience in helping companies with commercial leases, and is an advisor for the Small Business Development Center, which is sponsored by the Small Business Administration. So if you follow up with her afterwards, All the help is free. It's paid for by the tax dollars, so no additional cost to you. So take advantage of that. We're very excited to have her here again. So without further ado, Miss Carrie Armstrong.

Thanks so much, Dylan. Um, let's see, let me go ahead and get going and share my screen. Um, if I could get you to stop sharing, Dylan, that would be great. Thank you. So as Dylan said, this is my second time back. So thanks, Dylan. It's really great to be back. I've been working with some of your Shorefront clients since the last time we talked and helping them negotiate their rent relief, or at least start a conversation with their landlords, right? So that's what we're going to talk about today. And as Dylan said, I am with the SBDC and the The way that we work with clients is always at no cost with no catch. SBDCs are all over the United States. So I happen to be out in Southern California, and if you're not, that's okay. You can Google your local SBDC. You can give them a call. You can sign up for services. We do everything from helping you start a business to looking for capital to growing your business, marketing, anything business-related for small businesses. And clearly right now in this time, We're working on all things pandemic, all things COVID, all things disaster, and all things recovery also, hoping to keep people's businesses afloat. So we're going to talk about that rent relief conversation. And I'm going to give you some practical tools in which you can start building the facts around that conversation that you need to have. So it's not such an emotionally charged conversation. It's really more of a factual one that you know that you can actually get behind and, and, and and fight for. So having difficult conversations is really— is difficult, right? So because everybody wants to avoid them, we just don't— we want to go away, want somebody to just bring us a great deal. And the fact of the matter is, you really are going to need to bring the deal to the landlord. So as Dylan said, I have 25 years working in— I was actually in shopping center management, big malls. And so I advocated for all rights of all landlords all the time. And I am earning my wings back to heaven by now advocating for small businesses' rights, being able to negotiate strong leases, having that landlord conversation, being able to get what you need in order to thrive in your business. I've been with the SBDC now 9 years, actually over 9 years, and I really enjoy what I do. I'm out of the Los Angeles group, and I'm also out of the Orange County group. So let's get right into this. So let's just be clear about what we're talking about. Okay, so the terms surrounding rent relief are that relief— the word relief is any kind of help. Right? It doesn't matter what it is, but some type of help where we're gonna, we're gonna deviate a little bit from what the lease says that we need to do. Abatement is when we take the rent and we completely abate it, we take it away, we throw it away, it's forgiven, it doesn't come back to haunt you, it's gone, right? So it's, it's not paid. Deferment, on the other hand, and that's one of the more common ones that we're seeing right now, is that you don't pay it now, but you do pay it later. So it's like the Wimpy School of Hamburgers. I'll gladly take a hamburger today and pay you on Monday, right? So we're going to go ahead and stay in our space but not pay rent and give us some runway in order to pay it later once we get back out on our feet. The other one we're going to talk about in the calculator is a percent rent in lieu of all charges. And that's a pretty normal one also, especially in the retail environment, where instead of paying your lease-stated rent for a while, while you're in crisis, you're paying a percentage of gross sales in order to get through the crazy period until you can get back to productivity that would equal to lease-stated rent. And then there's some varieties of that. So we're going to talk about that on the calculator. I'll show you how that gets calculated. For some of you guys in the showroom environment, that might not make sense. But you know, it's always great to have options. And there's not a single one-and-done for anybody. Sometimes there has to be hybrids as well. Especially as we're moving into this really crazy time where we've been in this now since mid-March. And we've been having conversations with landlords, they may or may not have been receptive, they may have even given you a deal that now needs to be amended. Because now here we are. Good Lord, we're in July, right. And for many of us, we're kind of going back into shutdown mode here in California, a lot of businesses are back you know, shutting down on the interiors. So we sometimes are going to have deals that we have to go back and revisit with our landlords. So make sure you're not signing anything that says that the one deal is the only deal and there's never going to be another deal. Some landlords are trying to do that. So let's talk about the landlord's point of view. So I have worn both hats, right? I was a retailer before I was a landlord. So I really have been on all sides of the table. So you have to remember that your landlord is a business owner. I have a lot of people that say, well, why can't they just forgive this? Just let it go. It's like, well, they're a business owner too. You, you are their revenue stream. So at some point, it has to come from somewhere. And at some point, we all probably have to bear the burden. But we're just going to try and bear the burden when we actually can, not when we're at our most vulnerable. Your landlord, their revenue stream is drying up. And you know, the landlord's not your bank, right? And they're not your first stop. And I always— I started doing these webinars saying that because we were so early in, and by now, you've probably gone you know, back and forth with all the things that you really need to be doing, want to be doing. So this is no longer your first stop. And then there's no landlord that's just going to give you a deal and say, don't pay rent, please. I mean, there might be one on the planet, but usually they don't do that. And, and the other thing too is just because the landlord doesn't mean they know any more about what's going on. And they don't know anything about your business, even though you're their tenant. Don't expect them to know anything else other than what you know, or what you tell them, especially about your business. And remember that the landlord wants their space to be leased. That's the number one critical thing a landlord or property owner needs to have their space leased. It's how they value their property. So remember that when you're negotiating, so you don't just let things go, because you are valuable to them. Now, as the tenant, right, your rent is one of your largest sources of income, especially some, some of you in showrooms don't have— in a regular retail store, you might have a big labor expense, right? But in your— in this case, maybe rent is one of your biggest expenses. Especially if you have your showroom and you have a warehouse as well. Without your space, you don't have a business. It's not like you're going to drag everything into your spare bedroom and then, you know, run it from there. Your business— as the business owner, your livelihood's at stake. And so that starts generating some fear in there. And then, you know, you just don't want to deplete everything, not your child's college account, not all of your savings, in order to pay for this little small piece of time when really what we're looking at is the big picture. And you all want to stay in business and you don't have all the answers either. So if we acknowledge where both sides are coming from, it starts the conversation off a little bit differently. I always talk to my teams, I talk to my clients about needs versus wants. In a regular world where there's no pandemic and there's no crazy going on, it's one thing to say, like, I want, I want, I want, and that's great. But right now we really need to focus on what we need because it's different. So when we have this conversation at the table, the friction comes from when everybody's trying to get only what they want and have not identified needs. Because the landlord wants to collect full rent, right? You all want to pay your rent, but you don't have it. So the landlord wants to have you, the tenant, figure out all the solutions, right? Because they just want to say, you just figure it out. You go get your funding, you go do your thing, you just pay me rent. And actually, the tenant really wants the landlord to come to them and say, it's okay, here, I've got a deal for you. Both of you want to have no conflict. And that's a basic human need. And so making sure that you're having these conversations with as little conflict as possible is a goal that everybody really kind of needs to keep in their head. Nobody, not you, not the landlord, wants to actually have the call to their landlord, their lender, their family saying, I can't do this, I'm going under, I need help, please modify it. You know, nobody likes that. And then both of you want to get what you want. And so that starts a little bit of the conflict. If we, we come back to evaluating and identifying needs, then, then we can start getting somewhere. So your landlord needs to maintain their occupancy, that, that's a critical, critical goal of theirs. You need to be an occupant, right? You— but you need to maintain your occupancy costs. And so that's where the rub starts. And so the landlord isn't paying attention to your occupancy costs, they don't so that they don't care, but maybe they don't care, or they just don't know, right? So it's up to you to really kind of help educate them. Now, the landlord needs to minimize that downtime, right? When they have a vacancy, and they have to spend money on the space in order to get it ready again, and they, they're down with zero rent for 6, 8, 12 months, that's a problem. So they need to minimize all of that. And then you all need to make sure that the landlord can help you with your solution, right? Both of you need to minimize conflict for your own sake, right? And then the landlord needs you to be transparent in the dealings, right? And you need the landlord to stop overreaching into your business. I have people that, you know, have landlords that are asking for 3 years of back taxes and all of their bank accounts and all of this stuff. And it's like, wow, I mean, you have to figure out whether or not you're really going to produce that. But why do we need 3 years backwards? What we need to do is focus on forwards because the forward, the now is the problem. It's not your behavior. It's what's going on. So that landlord needs to negotiate with their debt, their debt holder, their lender, and then a lot of them are not doing it right, because they really don't want to have that conversation. We need to help you guys keep your business open without it taking your entire world out at the knees. And then both of you really need to identify those needs and get what you need. If you have a deal where your needs aren't being met, then it's not a good deal, right? So right now, in tough negotiations, if everybody gets what they need, and nobody gets what they want, a lot of times that's the win-win. Right? So being clear on that, super important. Now, we've had a lot of conversation about disaster loans. If you guys are unsure of how to, how to, how to spend the PPP money that's out there, the PPP money is now closed for application. That closed at the end of June. The EIDL money, I'm not sure if the portal's still open. I didn't check it this morning. It was only open to agriculture and then it opened back up. Most people are either getting funded or being declined. If you've been declined on EIDL, let us help you. There's reconsideration a reconsideration process, and you can ask for reconsideration 3 times over the course of the year. Most people get denied either because their credit somehow tanked in the middle of all this, or the SBA couldn't figure out who you were. Maybe your names didn't match up on your social, or you mistyped something, or you put your cost of goods sold— your total expenses in your cost of goods sold. And God, so we do, we do webinars on all that. We're not going to get into a whole lot of that today, but, but make sure There are— there's, there's county, city, and state funding that's coming out because this is going on so long. So if you're not in California, make sure you're checking with your own city, state, county. And then here in California, a lot of the counties are coming out. So back to you, Dylan.

Great, thanks so much, Kerri. And then also, as a reminder, start asking questions in the Q&A button right there at the bottom of your screen. So any questions that you have, And then also, uh, curious, want to ask again on the PPP loans. I think it's important to always mention that, uh, you can use all of the loan for, for your rent. It's just about how much of the loan you're going to get forgiven. And that initial, uh, 8-week period has also been extended considerably as well.

Yeah, it's gone to 24 weeks, um, and it was changed. It was 75% needed to be payroll, 25% needed to be, um, rent to have it forgiven, and now it's a 60/40— 60% payroll, 40% to rent. Now, if you chose to use all of it for rent because you really needed it that way, the amount that you didn't get forgiven would be turned into a 1% loan over 5 years. Now, somebody put into the chat that they think that the PPP has been extended. It may very well have been, but I don't have a lender right now that's taking applications, so I can definitely check in on that if it's still open with some banks.

And that's an important distinction. You apply for the EIDL loan through SBA, you apply for PPP through your bank's portal, whether that be Bank of America, Chase, or Wells Fargo.

Yeah, there's small lenders out there. PayPal and Square are doing them too. So a lot of the big— a lot of the big banks don't have the capacity and they're not taking more applications. So you're better off looking for somebody that's— PayPal's doing them and they're doing them quickly, so If you have a relationship with one of your POS processors, they may be doing them.

Great. And so as we mentioned before at the beginning of this webinar, and we're gonna just take, you know, 3 minutes to talk about SureFront really quick because we're offering this for free for anybody that attends these webinars during COVID You know, the issue that a lot of you are experiencing, as you know even better than I do, that it's very hard to get people to the showrooms that are open right now, and a lot of the showrooms remain closed. I know California is closing everything down again. I think as of this weekend, so all restaurants are closing down. I believe that will affect the showrooms as well. So I think we can expect these waves to come and go, or, or at least the uncertainty to persist. And it's very important right now to, of course, keep your business open. That's why we're having these calls. But how do you sell your goods? How do you communicate to your buyers if your showrooms are not open and if you're not used to having a digital catalog or have no way of sharing your catalog with your buyers, that's what SureFront is for. Again, I am personally from SureFront. Keri is from an advisor from the Small Business Development Center. So for my side of things, I think SureFront is a terrific solution for this issue. If you can see my screen— can you see my screen, Keri?

Yes.

Great. So it comes with a lot of tools, but the tool that I want to talk to you about today is the ability to showcase your items and to digitize your entire catalog. This is not just apparel. I know I have apparel on screen and sometimes I get questions, is this just for apparel? No, it's for, for a lot of items here. If you are to digitize your whole catalog, that's the screen that we are on right now. I can also just go to all and you can see all the items I have at the bottom of the screen. You can see I have, you know, 30 different, 35 different products and it's going to pop up with a large amount of page numbers as well. So there's 20 different pages. So this is a very large thousands of items digital catalog that you can easily upload. Very easy to search through any of your items as well. So we have different tagging features. You can see all the tags at the top here. You saw me pull down that menu as well, so you can search by items here. You can also filter by items. So very easy to find any item in your catalog. I know a lot of the showroom owners that I have spoken to before are sending various PDFs over to people and saying, hey, you know, look at items 1 through 18 on page 43. You don't have to do that anymore here. This is how you send your digital catalog. And when you want to actually go ahead and click on an item and send those items to someone, let me go back to where I was before. That's women's casual wear, but let me go back to formal wear. When you want to actually send those items to your buyer, super easy, just click on those items after you've filtered for them and found them, and then you just go to this item, this button up here, sell, go to showcase. And once you click on that, this is going to give you an area to pick those buyers that you have. Say if I sell to all of these, I can enter in their email address Very easy. And then the email that they get on their side is going to look like this. This is just a preview email that says, hey, sending over these products that we spoke about. They're going to click on Discover Products, which I'm going to do incognito since I'm now on the retailer side. And this is what your buyer gets. So your buyer is getting a showcase of your items, a beautiful showcase of your items. He can click on any one of these and get product descriptions. Images of the items as well. And this allows your buyer to quickly see that showcase. They don't have to shuffle or sort through a litany of pages. This gets communication happening very fast. And once they actually want to get a quote on those items, they just click on that and they click on request for quote. Which is going to look like this. This is pretty amazing right here. So no other app or piece of software has this. So this is the page whether your buyer is signed up on SureFront or not. They don't have to sign up. It's as easy as the process I just went through for them to get to this page. This is where both you and your buyer are living and able to talk to one another, whether you're both on this app at the same time or both on it separately. You can have this chat icon at the bottom right and ask back and forth various questions, get this quote sorted out, and actually turn this into a PO in lightning speed. Uh, again, coming with beautiful images, product descriptions on everything, makes it very, very easy to have a virtual showroom, showcase your items, and get those quotes done I don't know how long this thing is going to last. No one knows how long this thing is going to last. This is a fantastic tool, uh, to not only use during this time but even afterwards. Even once you have the showrooms open, this is how you communicate to your buyers after that. So I'm going to send a follow-up email about an hour after we end this webinar. It's going to give you a sign-up link. It's a limited number of seats that we're able to give away. We just give them away to the webinar attendees because I know you all care. I know You're all taking your time out of your day to do this, so we want to make sure that we give you something in addition that is valuable as well. So sign up for that today if you can. If you have any questions, we have a live team on the other side. You know them all, they're all great people. They can help you. There's a chat icon on our, uh, website that you can go to once you're signed in. You can also email me personally if you have any questions. We can give you a personal demo if you like that as well. So a lot of options there. So So experiment with it, try it out, see how it works for you. Again, um, we're gonna do a Q&A section at the end of this call, so please start asking those questions now. And then I will send a follow-up email later today in addition to this one, uh, that will have all the details that Carrie has talked about today with her calculator, the presentation, and also the recording of this. So, uh, I'll hand it back over to you, Carrie. Really appreciate it.

Alrighty. You know, it's interesting, and like Dylan said, I don't have any affiliation with SureFront at all. Oops, almost left the meeting there. But watching your platform is interesting because we've had such huge conversations with our clients about making sure that they have a digital presence. Our clients that didn't have any kind of a digital platform or presence had a really hard time pivoting quickly. And so, you know, and we talked to them about the and, right? Whatever best practice, new best practice that you're developing now to reach customers can stay with you. And then you just layer back on what you were doing before. And now you have multiple revenue channels, or at least multiple ways to get to customers, which is great.

Yeah.

So, um, so back to, back to our conversation, you know, a lot of my clients I talked to when I first started talking to them, I'm like, okay, have you talked to your landlord? They're like, no, I've talked to all the tenants in the building though. And I'm like, okay. The other tenants aren't going to get you anywhere, right? Start talking to people that can actually solve the problem that you're facing. If you don't know what— where your cash position is, talk to your accountant. If you don't— if you don't know what's going on with your lease, talk to your attorney or talk to one of us as a consultant, like talk with me. If you need to ask a question, or you need something fixed, or you need to have a conversation about rent, you need to talk to your landlord, right? So make sure that you're going to the people that can actually solve the problem because It's not about how many times you talk about it, it's who you're talking about it with, right, that makes the difference. And then as you're getting this new information, as things are happening, you need to pivot quickly. We were— Dylan and I were talking about this before the program today. You know, we don't have the opportunity to just lollygag and ponder over things for 3 months. Things are happening now. We're shut back down now. So now what are you doing, right? So make sure that you're taking on this new information and moving on it. And thank you to the person who put in the Q&A, I guess the Senate extended the PPP, as there was an announcement last night that it happened. And I've been on client calls since really early this morning. So clearly, I'm not in the loop with what went on overnight.

So, you know, yeah, that's helpful.

Yeah, seriously, thank you guys. So we're going to calculate this. This is the calculator. Let me pull this back up. And show you how we do this. So the things that you need before you start is you need to know what your sales were, what your revenue streams were month over month, month by month for 2019. And we're going to just drop those in. So for all of you that get this, you have, you have instructions right here as to how to do it. It's Barney style. It's simple. It's easy. And if you get overwhelmed, you can come to me, or if you're out of state and you're already an SBDC client, you can go to your consultant. If they need help, they can contact me. I don't mind helping. Get another consultant up to speed. So we're going to drop this in. And let's say you did $38,000. We're just going to make this up, right? $38,000. I'm sure a lot of you are doing a lot more than that. But let's drag that out. That's your average monthly sales. We're going to drag that out. Okay, so then we're going to say, well, what was your— what was your rent? Now, not just rent, but rent, triple nets, all the stuff that you pay the landlord, not all your operating overhead, but just the stuff you're paying your landlord. So let's say here we were doing— it's $3,678. At some point, y'all have a rent increase. Make sure to capture that. So this is January through— and but for purposes of speed and just showing, this is what we're going to do. Because what we're looking for is we're looking to see what your occupancy cost to sales normally are and under normal circumstances, where can you get back to? Hopefully, maybe not this year, and hopefully next year. So these are your actual sales for 2020 by month. So you need to be able to pull those out. And let's get— a lot of people had a really strong first quarter. So let's say you did $42,000 here, and you did another $43,000 here. And then the airplane fell out of the sky here, and we did $28,000. Right? And then here is where we really started feeling the burn. What we're looking for here— now you've got May and June, because when I first built this calculator, you know, we were still in March, right? So we were doing projections. You have your actuals for these two months now. So go ahead and drop those in. So depending on what your world looked like, it may very well, um, look bad. Some people are at zero, right? And we get that. So when we look at it here, we're looking at this line 11, your cost of occupancy right here. If you are normally running— like, this tells us where you would normally run, at 8%, 7%. Some of you could be running at less than that if your sales are higher. Some of you could be running at 10%. Whatever that— maybe you're running at 20%, naturally, and that's what works for your business. But here you are, and we're going to look at historically where you are. So clearly, when you're at 73%, that's not great for you. This is where you're, this is where you're feeling the burn. If you're running at almost 40%, that's not okay. So this is where we start having to have that conversation with the landlord saying, hey, we have a problem here. And we're going to need to defer some rent or do something about that, right? What you're going to need to do on this calculator is you're going to need to— now you can see how your orders are starting to come in or not. You can see what your, what your retailers are doing or not. And you need to start not guessing, but looking at your units and saying, look, can I get enough units out? What does it look like? Am I going to be able to— am I going to have enough units out the door for fourth quarter? Or am I still stagnant? Like, what am I going to do? So we need to, we need to adjust these numbers in through here to what we're— what we think we're going to see. Now, people always want me to, you know, pull out my crystal ball. And I tell people that it's nothing more than a snow globe, I can't see anything in it. But you're going to have to guess. And I'm thinking that, you know, I'm planning a lot of my clients out at maybe 80% by year end. It just depends on your industry, and you need to do the math. We can help you with that as SBDC consultants. But for purposes of this, we're looking here, and we need to say, all right, we need to get to a point where we're gonna defer— we paid April, we need help deferring May because it was so high, we need help deferring June. Or maybe you paid these, so you can move it to any other month. Because maybe you're now just feeling the dip. So we're going to put in the amount we're deferring. Some of you might still need to defer half rent. There's a lot of half rent deals that are going on right now, because it's getting to the point where we're still, we're still looking like you might not come out of it. So we're going to look at this, we're gonna say, okay, if this is the case, we've got $11,000 being deferred here. And now this is the magic number for how many months will we pay this back? You know, the landlords early on were saying, look, we'll defer April, May, June, and you can start paying it back in August. And you can pay it back August, September, October on top of your regular rent. It's like, yeah, that's not happening. So let's say we're going to pay this back over 24 months because you have term on your lease to do that. That would give you a payback over here of $460 starting in January. You can even start at any time you and your landlord agree. But this will give you an opportunity to see whether or not— so if you're at 80% of sales, 2019 sales, for example. If you can hit 80% of those in January of 2021, your occupancy cost to sales on top of your regular rent and your payback is at 13%. Depending on where your margins are for cost of goods sold and labor and everything else, you'll know whether or not you can afford that, right? So down here, you can see like, under normal, here's food, retail, service, put in your cost of goods sold, put in your labor. And then we can see where that occupancy needs— because don't forget, you have to pay your insurance, your marketing, all these other things too. So you can start figuring out whether or not you're going to have anything left over. Let's be careful, because as your sales diminish, some of your, your ratios start going wonky, right? So we want to pay attention to that. So this is a simple deferment. And right now I'm seeing a lot of, like I said, where maybe the landlord automatically deferred here, But now we're still looking like it might be a little crazy. So maybe you're paying half rents through here to see what that looks like. What we don't want to do is add so much into your payback that you can't make it. I've got clients that when we look at a payback, because your landlord may say, look, you know, I only want it over 12 months or 6 months, you have to make up your mind whether or not you've got an extra $1,000 in your, in your back pocket in order to do this. Maybe you do, maybe you don't, right? Maybe you have idle money, maybe a PPP money, maybe you have But on the other hand, you don't want to dump everything into today and not have anything for tomorrow. So let's make sure we cash flow out that money that you just got so that you're not just dumping it into a bottomless pit that you can't get it back out and you can't survive into next year because that's the goal, right, is to get through this period of time. So we just need to modify this. Now we come down here, this is a percent rent in lieu. And for standard retail, a lot of times this helps. There were, there were many shopping center developers that went this direction also, especially if they were interior malls where they were closed, where the landlord was taking a percentage of the revenue coming in. In this case, it's 15% because my retailers, they can survive for a little while on that. But what we're looking at is at what point does your— does the percentage of revenue get you back above your lease stated rent. So in this this particular scenario, in November, that would— their 15% of revenue would get them above their lease-stated rent, and so we would revert back to lease-stated rent. So the amendment for this says, look, we're paying— we're paying percent rent in lieu of all charges until it becomes greater than the lease-stated rent and we revert back to lease-stated rent. You can— you can declare a date you know, the earlier of or the later of, that kind of thing. Or what I'm seeing now is some landlords don't want to get too crazy out there. And what they're saying is, let's do this amendment for now. And we will reevaluate in December. So just because you're not getting, you know, your next 3 years taken care of, don't— let's not throw out the baby with the bathwater. Let's get the best deal we can for now, and negotiate and go forward. Now the thing that happens also is, as long as you have not paid rent for some months, unless you have an amendment in place, you are technically in default. And that puts you in a different position for negotiation. So even if you have a rent moratorium, you're still technically in default, because as soon as that expires, now you don't have the negotiating power. I had somebody say, well, I'm sitting on this big chunk of money, and I'm going to dangle it in front of my landlord, and I'm not going to pay him until he gives me a deal. And I said, well, that's kind of like having a stick on fire and saying, I'm not going to put out this fire until you know, till you do what I want. And at some point, it may burn down the stick and burn you, right? So let's make sure that we're not, we're not negotiating so hard and heavy. If you have the money to pay your rent, you need to pay your rent, right? But that doesn't mean you have to drain everything in order to do so. Now, the last thing that I do with my clients is we come over here and we do a letter, because you have to package this up. Landlords, and even when you send them all this, they're not necessarily going to look at it. I've had to redirect it back a couple of times with some landlords. You're going to fill in your information.

We're sharing this with everybody too afterwards. I don't want anybody to get overwhelmed by that. We're going to share it too.

Yes, absolutely. And we're here and I'm here to help you to navigate that. So, so when we get here, you're going to go ahead and put in your own story, right? You're going to say what you are, you're going to talk about your decline in business. You're going to talk about here about everything you've tried to do that you're currently are doing. Maybe it's a story of what's going on with your vendors. And then all the funding that you've gotten, people say, well, I don't want to tell my landlord that I got funding. I said, but you need to, like, transparency is everything. Because a lot of the, like the EIDL loans, for example, they're capped at $150,000. That might not be enough, right? So you can do the math for them, they're gonna know anyway, whether you got it or not, or they're just gonna say, I'm not doing anything until you apply for that stuff. So just cut to the chase, let them know what you have. And tell them how you're spending it. If you're still waiting for stuff, say that. This body stays in, and then here's your recovery plan here. What are you doing? Like, I'm doing this, I'm doing that, I went online, I'm digital now, I'm making it happen. However, I sell into a market that is X, Y, and Z, or actually I'm moving product from these countries into our marketplaces and it's stopped. I can't get them. So I'm on hold right now. Like, what's your story? And what are you doing about it? And then if you already have a plan in place, or if they propose something that you can't make work for you, you're going to acknowledge it, you're going to thank them for, for thinking of you, and let them know why it's not working for you. And then we're gonna, we're gonna narrate whichever one of those— it may be one or both, right? Say, look, it's an either or, look, I can, I can pay you half rent through this period, or I can pay you a percentage rent, or I can defer this, or I could, or I could pay you percent rent. Now back to here on this percentage rent, there are some landlords that are saying I am fine with giving you percentage rent. However, the balance between what you're paying me in percentage rent and what your lease stated rent is, we are going to amass that and calculate that and track that. And we are going to ask you to pay that back at the end. Or we're doing some things with— or if you renew early, we'll forgive it if you get to that point, right? So there's, there's a couple of ways to look at that. So I know that this is like drinking from a fire hose, because this is a really short period of time to go through this. But, but these are the ways that we start that conversation. It usually takes 2 to 3 rounds. Nobody magically says, oh, what a great idea, although some people have. I have had some people have landlords come back with an even better deal because they look at it and they understand. Usually it takes some, some education. So what questions do we have, Dylan?

Great, really appreciate it. Um, yeah, and we'll share all this with everybody afterwards. Uh, you know, one question that came in, which is true, what about people that already have the PPP loan and they're paying rent right now? Is it hard to negotiate with your landlord, uh, while you're paying them rent from that loan? And, you know, you, you can choose on the PPP whether it covers 8 weeks or 24 weeks, right?

Yeah, um, absolutely. It was still your PPP, although you have a longer period to pay it back right, or to use it, it still was only calculated on the 2.5% times your payroll. So it's still that same number. And for some people, some of my clients, the 25% or the 40% isn't even enough to do like one month or two months, right? So, so yeah, we need to look at that. See if you're paying your rent right now. And that's fine. The conversation with the landlord is my dip is happening here. So maybe this part of it, right, this part of it is, is doesn't get deferred, it goes back up over here. But the problem, the challenge is that we're not, we don't have enough runway because of our sales. And this is where this sales percentage calculator, let's say that, that right now you're servicing a segment of the market that is dead in the water, that you, it's not going to happen and holiday is not happening. So if you can't get your orders out for holiday right now, or even for spring, What are you going to do? And if this, this here remains at the 40% of your total normal sales, right now we have the problem here. And this is where the help needs to happen because your PPP money may be running out as of August or July rent. So the conversation needs to be happening here of, hey, Mr. Landlord, can we either defer September, October, November right now because you offered me 3 months, I didn't need it. I need these 3 months instead. Or could we go August through December at half rent, and I can have enough runway to get where I need to go. So this is about the education process to the landlord, because they don't understand your sales cycle. Why would they? They're a landlord, they know their business. I know when I was a landlord, you know, I, I knew retail, but I didn't know everybody's model, right, their financial model. So this is where we need to tell the story. Just push it out into the future.

This is kind of a question and comment for our audience, but Bill Goose wrote in, have showrooms reported or seen market centers resolving rent relief? Atlanta High Point owners are looking at 20% making discounts to the end of 2020. So I guess 20% discount. Dallas has held individual reviews with simple payments proportionally added to future rents. Within the lease. So, anybody else, if you have, from any other showroom centers that you are around the country, you know, please put in the Q&A section, we're curious, you know, what you have experienced. I know also we talked about this before, Carrie, but probably trying to bargain with their landlords collectively would be a bad idea. Coming to them individually would be smarter. I mean, again, this is something where you're trying to have a human-human conversation, not an attack. Not a, you know, harsh negotiation. You're trying to sit down one-on-one with your landowner, or with your leaseholder. Sorry.

Yeah. So, so, Dylan, to your point, if you guys, if you're, if your elevator is broken, and they're not moving on it, that's when you all collectively go sit on their lap and say, hey, landlord, fix the elevator. Rent negotiations are one-on-one and very specific to you. And you may be losing out if you go collectively, because one, they're gonna go back on their heels, and, um, and two, you may not get the deal you need because a one-fits-all doesn't always necessarily mean a good deal for you. Right.

Uh, and then, yeah, someone said Seattle Mart tenants are receiving 37%, 37.5% rent abatement through September 2020. Do you think, you know, if they're being offered that already, should they go back and negotiate if they need more, to ask for more?

Well, 37.5% abatement means you're not paying it back. Wow. I would be— and that's, that's future looking— I would be on my bicycle pedaling so fast to get my sales up. That's a gift, right? An abatement is a gift. And that's a big gift. So if you— so and not knowing what these numbers are, right? So it's one thing if you have a $10,000 nut versus a $500 nut, right? It's, it's all relative, I suppose, and what your potential is. So you really need to look. I think that the thing is that take good deals that make sense, but evaluate them. And, and then leave it open to say to the landlord, thank you for this, and we'll be letting you know if this will be enough. You know, it's not— it doesn't have to be a one-and-done. Don't sign away your rights. There were some landlords that were trying to get them to sign. 37.5% is a big big discount. And it's abated, not a deferment. There are some landlords also that are saying, look, we will go ahead and abate these months. I kind of think car loan, but we're going to extend your lease by the amount of months you don't pay.

Sure.

Right. So instead of a payback, it's you. So if you don't pay for 3 months, your lease gets extended for 3 months on the back end. Yep.

So that's another webinar, said you had to contact your— not one of our webinars— lender to get the 24-week extension and that it is not automatic. Is this true? I think that's on the PPP loan. So I think you actually do have to contact them if you have already received a loan to switch from 8 weeks to 24 weeks. I know there was some confusion on that for everyone. Do you know anything on that?

Um, you know, I don't because I'm not the one that does those webinars, but the bottom line is your lender that you did the deal with has the criteria for the forgiveness and how to go back to them. Them. So, so make sure that you are contacting your lender saying, what are my requirements here? The other thing too is almost every, every SBDC out there is running forgiveness webinars right now. That's, that's a big thing. And all of our, our loan guys are doing that, our finance guys. I know out of LA we do Tuesday, Wednesday, and Thursday at 1 o'clock. You can go to smallbizla.org LA.org and, and sign up for them. And let me show you, right, oops, let's go back to the slideshow. Right here, if you go to SmallBizLA.org, you can sign up for the— they're free— the webinars on the forgiveness and how to, how to do all that. So make sure to talk to somebody. Again, like my slide, talk to the people that can answer your questions. I'm not the finance guy. I can, I I can get you so far, like I can package loans and do that kind of stuff, but I'm not the specialist with all this. I'm the specialist on the rent relief and the retail people and the restaurant people. So, um, you go to the source that can answer.

Got it. I saw someone, a couple people actually just raised their hands. Uh, instead of raising your hand, just go to the Q&A icon, just put in any questions you have right there. There was another question about PPP as well. Uh, he said it landed on June 5th, does that automatically slot it into 24 weeks? Again, Like Carrie said, I would contact the SBDC. I know that— I think you have to choose yourself whether you get 8 weeks or 24 weeks. That was my understanding, at least a few weeks ago. So that's really up to your application, but contact SBDC. I think as a reminder for everybody on this call, the SBDC is an affiliate of the SBA, which is funded by tax dollars. So if you contact your local SBDC, and there's, I think, over 1,400 SBDC centers and advisors and/or advisors around the country. It's my understanding.

It's better. Yeah, there's tons of advisors, right? And to be clear to you, Dylan, on the PPP, unless it changed in that whole thing that they just did overnight that I haven't seen yet, you had to— it was that up to the 24 weeks or the end of the year in order to do the forgiveness too. So, so keep your ears to the wheel, guys. Things change all the time. And it, like we just saw, it changes overnight. So make sure you go to the source.

And then also a question says the calculator is more for businesses not able to make it. What about a business that's just down 20% but not out yet?

Well, the calculator is for everybody, right?

You can use it.

You can, you can change those percentages and see what it's like. And the thing with the calculator too is that, that I'm a firm believer— so I do projections. Numbers. I think that they're really important. But when you start looking at things and say, okay, let's say you are making it right, and you're doing 110% of business and growing, you can just stick that in there and go and say, okay, I'm going to get— and you can start looking at cost of occupancy and see whether or not— and now you can look at that, put it in your other projections and say, hey, I'm going to have cash, my cash flow is looking okey-doke. And I'm going to be able to and I'm going to have cash in order to invest in another round of fill in the blank, right? So through the SBDC, we have projection worksheets and workshops, and with your— with some of the consultants can do that with you. And we've got cash flow projections, all kinds of stuff. So, so I like to model things financially, it takes the emotion out of it to see what, what we're going to do next.

Yeah.

It's knowing with your eyes wide open, because some people were telling me, Oh, I'm just in a crisis. I need help. I need help. I need help. We did this and they're like, oh, I don't need as much help as I thought. So I'm gonna be okay. Because it was so fear-based, right? So we just need to get away from the fear.

Great. And someone just wrote, he got another loan offer from SBA with a 3.75% interest. Not sure the loan that he got, if that was an EIDL loan.

That's an EIDL.

Yeah, yeah, most likely. And then what if you already know that your showroom rent will kill your business and just need to get out of the lease?

Okay, so if you need to get out of your lease, and some people do, some people need to say, look, I gotta go. You need one, you're going to need some legal assistance. You need to evaluate, first of all, how much term do you have on your lease? That makes a huge difference. Can you offer up, like, let's say you did get a loan, can you offer up an early exit amount? Have the landlord keep your deposit offer up 2 to 3 months, say, or make them whole for the time you've been there, and adiós. The thing about— and it's not true in every state, but in California, when you turn possession back over to the landlord, they are required by law to immediately start marketing that space for lease to mitigate the loss of rent. So they can't sit on it and say, well, you cost me 6 months worth of rent, because they didn't market it, right? They need to aggressively try to lease that space. There's some other things going on because of COVID where the government, I think, is going to weigh in. If you have to, if you really have to walk away, again, legal help is needed. Make sure— there's a difference of whether or not you, you personally guaranteed that lease, right? And how many assets do you have that they can come after? Got to look at that. If you didn't personally guarantee it, okay, maybe there's that. So You know, you just need to make sure you're not completely exposed. But the main thing would be to, you know, get it cleaned up, get your stuff out of there and hand the keys back with a notice of termination of possession. So that the clock starts ticking, they can still come back at you for rent. But what they can't do is sue you for possession and evict you. So that's a big difference, right? You don't want an eviction or a UD. And that's a $30,000 court case right there, um, at least in California. So move slowly, but, but there— people are walking away. Some people have to, and it is the right thing to do for them, but make sure you have guidance.

Got it. And a question I have for everybody, back to that abatement: if you have received abatement, you know, please, uh, if you can put right now in the Q&A, uh, where you've received it from— if you're in Vegas or Atlanta or Minneapolis or Seattle, as we saw that abatement happen. Super curious, and I'll put that in the email afterwards just so everybody knows what market centers have received abatement. So please, please let me know right now if you can in the Q&A section. Carrie, also for the federal and state bills, I mean, you work out of California for rent forgiveness. What do you know about that?

So there's a lot of conversation in California. There's conversation about about the ability for tenants to be able to walk away. That has not passed yet in any iteration. The last time I had looked in on it, the State Judiciary Committee actually had looked at it, made a strong recommendation that it was a violation of contract law. So there's, there's a long ways to go on that. Now, will there be something that requires a landlord and tenant to come to the table to really truly negotiate and see if there's, there's a happy place there, rather than a landlord just saying, no, you have to pay fully stated rent, and the tenant wanting to say, well, I'm out. You know, I hope that at some point, because, you know, the landlords are taking a huge hit too. Commercial landlords are taking big, big hits. And so, you know, where it's got to come from somewhere, and it can't always come off the back of the tenant. But then if if the landlords are without revenue also, then all of a sudden we've got a decline there. So I don't know what's going to happen there, but I know that there's big discussions at multiple levels on what that's going to look like. There has to be, right? If you are a part of an association or advocacy group and you have a strong feeling about that, then advocate with your— whether you're part of Main Street or whether you're part of you know, because there's a MainStreet.org, or whether you're part of a chamber or an association that, you know, you can— you have a say. You can write your congressional leaders.

How do you find your local SBDC center?

So the ASBDC, the American SBDC, I think it's.org, is a great place to start. Or just Google closest SBDC, Small Business Development Center, to me, and it'll come up. Sometimes they have a T in them also because they're technical centers as well. They're generally always housed out of out of a higher learning, whether a university or a college, sometimes out of economic development groups. So don't get thrown if all of a sudden it's looking like it's— like my Orange County group, we're out of Cal State Fullerton. Up in Long Beach, LA, we're out of Long Beach City College. So don't get thrown if you see a weird email like that. If you really just can't find one, let me know and I'll help Google that. There's my—

Great.

Information again.

Great. Now then, um, sorry, go ahead, Gary.

No, no, no, no, go ahead.

I was going to say this is probably— we'll save this for the final question, but, uh, the question was on, again, looks like walking away from a loan. Uh, she asked, if no personal guarantee and an S corp, can you just close the corporation and leave with no penalty? Um, I have my personal feelings about that, but, uh, probably going to get followed. But what do you think, Carrie?

Well, so first of all, just closing an S corp is a whole lot more than just closing an S corp. Like, there's a lot you have to do. You have to give notice, you have— there's 30 days, you have to notify your state. I mean, there's a lot you have to do to just close your S corp or bankrupt it or whatever. But if a landlord will come after you if they think that there's assets, and if you didn't try in good faith to negotiate something, what I would say to you guys is go to the mat with a negotiation as far as you can and document it on paper so that if you wind up in court over something, at least you can show you did everything possible. You know, when, when we had— during the recession, for example, I had tenants that really needed help. And I had tenants that had millions of dollars in their assets. And the one that walked away with millions of dollars of assets got nailed by the judge. And the one that really needed it, that was truly almost bankrupt, up, got a lot of consideration from the judge and didn't have to pay back rent. So, you know, it's up to the judges when you get that far along, but you just have to do everything you can, right? Because we've got our own moral compasses and I can't tell you there what to do, but, and make sure you talk to an attorney so you're not exposed.

Yeah, pretty, pretty dangerous. I'd say that as the very, very last resort. How about two more questions? Does the SBDC help with legal advice?

No.

So they asked— I hope— go ahead.

Oh, I'm sorry. No, I see the question there. So on the legal, no, we don't do legal and we don't do tax, but we will get you to a point where you're right up to the threshold and then hopefully either you have an attorney or we wind up, you know, maybe making a referral. Not all the time, But in terms of this guy, get in the middle of the night. I would— that's a, that's a legal issue, you need to take legal action against them. So go to your local legal aid if you don't have an attorney, or your local bar association, and reference a tenant-landlord specialist. That's what you need.

Got it. And how about this last question? So I've been at the same location for 7+ years, paying landlord over a million in rent in the past. How do I factor my past history to the rent abatement discussion?

I think your past history, all it does is give you some goodwill that you've been a longtime tenant. If you've paid over $1 million to the landlord, it was the— so this is going to sound flippant, and forgive me, I don't mean it to, but if that's what you've paid, then that's what the lease required, and that's what you entered into. And so, so that's, that's what the landlord's going to say. Look, look what you paid me in the past. Thank you. You. It was your obligation, you entered into it. With that said, I have a lot of expenses to run this, I have debt on this property too. And so future, it is what it is. Now, the goodwill that comes from that of a longtime tenant, right, I used to really value my longtime tenants that didn't pay late. And that, that did, that, that did give me some, some peace of mind that whatever I negotiated with this tenant, they weren't going to confirm me on it. And so I think that's where it comes in, but it's not, I paid you this, so you owe me that. No, that's like going and saying, look, I bought this Mercedes from you, so the next one should be free.

Sure.

Right? So.

But you would think it would be, goodwill should go a long way, but again, it is about fulfilling, you know, your past obligations, and we're talking about new ones going forward, I guess. So. Yeah. I guess it depends on the person. It depends on the landlord that you have.

It does. It does.

Well, Carrie, I really, really appreciate it. We're gonna share all of your information. I know that from the last webinar that we had, we had a lot of people reach out to you. I really appreciate you helping them afterwards. That's great. That's fantastic. Thank you. Your information is up here on the screen, but we'll also share this presentation afterwards in that follow-up email. Also send that follow-up email with the link to sign up for free for SureFront. As well. And really appreciate all your help. This calculator you put together is tremendous, such a huge help to everybody, and the letter as well. You've made it, you know, so easy to have such an uneasy conversation. So, you know, I really appreciate that, Carrie, and, you know, thank you, thank you very much.

If you guys reach out to me, be kind, be patient. There's a lot of you, and I have thousands of people I'm working with. I will get back to you as soon as quickly as I can, and I'll wind up sending you some links to get on my calendar. But just know that I don't take phone calls, and there's only one of me, and if I can help redirect you as quickly as I can, but I know everybody's having a crisis, and everybody else on my calendar is too, so I care about all of you, I love you all, but be gentle if you're gonna start hunting me down, okay?

Yes, we'd like to have Keri back in the future, guys, so Please be patient with her. Thank you so much, Carrie. Really appreciate it. Thank you, everybody, for attending, and stay safe out there.

Bye, everybody.