As local businesses struggle to survive the coronavirus pandemic, one Palo Alto developer has stepped up to assist his tenants by waiving rent for the month of April. And he hopes others will follow suit.
John McNellis, whose Palo Alto-based company McNellis Partners is a major commercial property owner in Palo Alto, is leading the way with an effort that he calls the "Retail Marshall Plan." As part of the initiative, which McNellis announced Tuesday in his column in "The Registry," an industry publication, his company is forgiving rent and other charges for the month of April for all mom-and-pop tenants that have been forced to close, regardless of their business types or reopening dates.
Since he announced the initiative, other developers across the nation have reached out to him to ask him about the relief effort and indicate that they plan to do the same, McNellis told the Weekly.
"It's the right thing to do and I've been very pleased with the response," McNellis told the Weekly. "I've had any number of local developers write to me and say, 'Great idea. We're going to do it.'"
McNellis, whose properties include 428 University Ave. (the Lululemon building), 180 University Ave. (the West Elm building) and the Alma Village shopping center at Alma Street and East Meadow Drive, among others, said the economic shutdown has had a devastating — if uneven — impact on the retail industry. While some of the anchor tenants at his developments — most notably, supermarkets — are doing great, the small businesses are struggling.
"The news was so bleak starting a week ago, when it felt like suddenly America is taking this very seriously. And when they announced the shutdown, we said, 'Our tenants are screwed.' It's just trying to do the right thing."
The plan offers different types of relief to different types of businesses. All that are required to shut down will get a rent-free April, even if they reopen at the beginning of the month.
For franchisees of national companies such as Subway and 7-Eleven, the company is offering to match, on a dollar-for-dollar basis, the credits that franchise owners get from their parent companies. Thus, if a company gives a tenant a $2,000 franchise credit, McNellis would give it the same rent credit.
"Because our financial resources are a light-year from infinite, we will need the big guys to help us help their franchisees," McNellis wrote in "The Registry," describing the different approach to these businesses.
McNellis said that after April, his company will consider further relief on a case-by-case basis. In some cases, tenants that need more than one month's help will be asked for some concessions, which may include extending the lease term or agreeing to a downstream rent increase, his column noted.
McNellis said that since he wrote the column, he's heard from about a half dozen building owners and shopping center owners, asking for details about making the relief plan work. Some have indicated that they will implement similar measures.
"I've had a number of people say that they're going to do it, but talk is cheap and free rent costs money," McNellis said.
Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.