Businesses deemed non-essential by state and local authorities have been forced to close because of the COVID-19 pandemic. But once the pandemic is over, will those businesses be able to reopen?
That’s a question the West
The City of Los Angeles, Los Angeles County, and San Francisco already have put in place temporary moratoriums on eviction of local retailers and other businesses that can’t pay their rent because of the impact on their revenue of the COVID-19 pandemic shutdowns. (The L.A. City Council is expected to formalize the emergency declaration by Mayor Eric Garcetti today). City Councilmember John Duran has confirmed to WEHOville that there will be a similar measure on the Council’s agenda on April 6.
But while that will help local retailers, bars and restaurants, it might hurt landlords who have mortgages on the buildings occupied by those local businesses. How will they be able to make their loan payments?
Another issue local businesses are struggling with is the fact that insurers are refusing to cover the costs of the damages to their businesses because of the COVID-19 epidemic. That’s because many insurance policies include language that says insurers don’t have to cover losses because associated with viruses or pandemics. The New Jersey state legislature is contemplating a bill to override the virus/pandemic exemption, and that has been suggested to California legislators as well.
The Chamber of Commerce, which advocates for local businesses, also has expressed its concern that the recently passed federal relief bill doesn’t include help for organizations in its non-profit category, which is a 501 c6.
Brett Latteri, owner of the popular Den on Sunset tavern and chair of the Sunset Strip Business Improvement District, has felt the impact of insurers excluding coverage for virus or pandemic-related losses.
“My claim was denied, and I know many others in and out of the hospitality industry whose claims have been denied,” he said in an interview with WEHOville. “You buy an insurance policy and make your payments. Then you need it and it’s not there for you,” he said.
Latteri hopes the West Hollywood City Council will impose a 60-day moratorium on evictions of businesses unable to pay their rent because of the impact of COVID-19. But he also is concerned that the eviction moratorium bills aren’t going to provide enough help if they give a business only six months to repay the rent they owe.
“You’re going to come out of this thing laden with debt,” Latteri said. “The last thing you want is to come out of this in debt when you’re in a walk-in business like mine.”
Latteri said some people assume that local business owners are wealthy. The people in our community need to know that the owners aren’t wealthy,” he said. “They are fighting for their lives, just like their employees are fighting for their lives.”
Latteri said he completely closed the Den after realizing that takeout and delivery orders, the only options available after the declaration of a restaurant and bar shutdown, weren’t generating enough income to pay the bills. “You’ve got growing competition,” Latteri said, and you’ve got the delivery business taking 30% off the top.”
Latteri also noted that commercial rents are high on Sunset Boulevard, the Boystown nightlife district on Santa Monica Boulevard and parts of Melrose Avenue.
Jay Luchs, perhaps the best-known commercial real estate broker in West Hollywood, has clients on both side of the eviction moratorium issue. About half of those he represents are building owners, and the other commercial tenants.
“I am a mediator. I am a mediator of people,” Luchs said. “It’s not that I’m choosing a side. I’m very pro-tenant, but as I’m listening to the landlords, I’m feeling their struggle.”
“As April comes near, the right thing to do is that a tenant, if they can’t afford rent due in April, should reach out to the landlord. Some landlords are saying I’ll give you April free, and some are saying they will work out a deal.
“If I had my way with the tenants, it would be straight up several months free,” Luchs said. But he acknowledged that landlords who own their buildings outright are in a better place to do that than are landlords who have mortgages to pay.
“If the landlords are saying I have a loan, and the tenants are saying I have to stay alive, what is the bank doing?” Luchs said.
Los Angeles Mayor Eric Garcetti also referenced that issue in a recent interview with Business Insider.
“Without concomitant measures to help landlords not default on their mortgages and for banks not to run out of money, we need — you know, this is a series of dominoes. To tell people that nobody has to pay rent, and then to tell landlords, ‘Don’t worry, you don’t have to pay your mortgage,’ and then to tell banks, ‘Don’t worry, you’re going to be supported,’ that’s a pretty big undertaking. And I don’t see that in the $2 trillion [federal] package that was just put forward.”
The City of West Hollywood has taken some steps to help local businesses. Councilmember Duran said Arevalo is working on a recovery plan for the city’s commercial districts. Meanwhile an emergency executive order issued by City Manager Paul Arevalo on Wednesday loosens some regulations. It states that:
- Hotel restaurants may provide to-go meals to people who aren’t guests. Restaurants and retailers with an alcohol sales license now can sell and have delivered alcohol beverages by the bottle or can. And restaurants offering take-out or delivery can include beer, wine, and cocktails with the meals they sell.
- Any restaurant, grocery store or food-related business now may operate from 6 a.m. to 2 a.m., as may those selling alcohol.
- Parking requirements for restaurants are suspended to make it easier for customers to pick up to-go meals.
- Zoning regulations that restricted conversion of a restaurant to a grocery store or market have been suspended so that they can sell food and other essential goods.
- Medical cannabis dispensaries can remain open and provide curbside sales and delivery.
- The business tax certificate fee that a brick-and-mortar store must pay to start selling products online is waived.
- Business license tax payments to the city are deferred from May 1 to July 1.
- The February and March hotel room tax payments by hotels to the city are deferred for 30 days.
Genevieve Morrill, CEO of the Chamber of Commerce, said the chamber is working with City Hall on various initiatives and has been lobbying the state legislature. It also has joined the Coalition to Save Small Businesses, a national organization that is pushing for greater protection for small businesses during the COVID-19 epidemic.
Jay Luchs said he hopes the City of West Hollywood comes up with plans that are really innovative. “They usually have made decisions that are way ahead of others. They are bold. They are strong compared to other cities, “ he said. “Maybe they can set a precedent there as other cities look to West Hollywood.
One city that has taken innovative steps is San Francisco, which has created a relief fund for small businesses and launched a campaign to solicit tax deductible contributions to help it provide shelter, food and other assistance to individuals, families, small businesses, and nonprofits in San Francisco.
The business eviction moratorium is certain to be on the City Council’s April 6 agenda, at which time Council members and city staff are likely to discuss other options. Once the epidemic is over, getting the city’s bars, restaurants and nightclubs back into business is especially important Duran said.
“WeHo is so small. We are all interconnected. When the clubs, bars and restaurants reopen, the city will come back to life.” The “most important part — psychologically and for community confidence — is having the restaurants and bars open will all the familiar faces in all the familiar places.”