St. Anthony: A Twin Cities commercial landlord sweats the financial squeeze

Ann and Mike Roess, 25-year real estate veterans who own three Twin Cities commercial hubs, are feeling the same squeeze in this instant recession as their shuttered tenants.

"We estimate that April revenue will be down 70 percent to 80 percent," said Ann Roess. "We're working with our tenants. This is difficult for all of us. We're working all day long."

They are stressed.

"We're going through much the same things our tenants are going through," Mike Roess said.

Their company, called iMetroProperty, won't be able to fully cover its three mortgage payments in April, utilities, other business expenses or six-month property taxes this spring, they said.

Even so, the Roesses have offered to negotiate rent concessions to their mostly mom-and-pop owners of businesses in their properties. They are looking over income statements and plan to defer rent for up to 90 days, or until reopening, for many of these businesses.

The owner of Saigon Asian Food Market, a tenant in a building the couple owns in Burnsville, insisted on paying full rent for April. The small grocery is still open.

"We went through some of this during the 2008-09 recession with some of the same tenants, and our goal is to help them through to the other side," Mike Roess said. "We have pretty low leverage. We've got some cash. We will help our tenants."

The Roesses are working with them to apply for U.S. Small Business Administration-guaranteed credit through their bankers.

A tenant in the couple's building on S. Washington Avenue in downtown Minneapolis, Mike Mulrooney, was just turning the corner with his two-year-old Pog Mahone's bar and restaurant when business crashed around St. Patrick's Day. Mulrooney, who also owns Blarney Pub in Dinkytown, told Mike Roess last week that he plans to make full rent as soon as gets funds from an SBA loan.

The sentiment was different in a "Dear Landlord" form letter iMetro got from the chief financial officer of Caribou Coffee. Caribou, owned by Europe-based JAB Holding, a food and beverage conglomerate, operates hundreds of shops.

The Caribou letter announced that, for coffeehouses that remain open April 1, Caribou will pay rent only equal to 5% of 60% of February sales, with an end-of-month adjustment, in order to meet reduced demand.

Caribou did not respond to an e-mail inquiry about the situation.

IMetro got a similar letter from Denver-based CorePower Yoga, another multistate chain operation that's not paying rent.

The Roesses and thousands of other Minnesota small-business owners are focusing on salvation from the Small Business Administration.

The SBA, as part of the historic $2 trillion federal stimulus plan passed recently by Congress, gets about $350 billion to distribute through its local-lender networks to qualified applicants. Businesses of up to 500 workers may borrow up to $10 million at 0.5% interest to help pay employees, including recalled workers, for eight weeks through June 30.

It's hoped the economy is recovering by then from the instant shock of the coronovirus-induced recession.

Bankers, studying a program 10 times larger than normal SBA annual lending, will be paid a 5% origination fee on each loan of up to $300,000, 3% up to $2 million and 1% of loans up to $10 million, the maximum.

This is one high-pressure water cannon that has never been tested. There are anecdotal reports that the SBA electronic pipeline already is hemorrhaging, thanks to the volume of loan applications.

"The majority intent is to bring back employees … and there's no reason any small business should not take a look at this program, including nonprofits and self-employed people," said CEO Dave Reiling of Sunrise Banks, one of the Twin Cities' largest SBA lenders. "There is nothing more valid than the intent to get us through the next couple of months."

Reiling in late March speculated the bank would originate $100 million in loans in the program. Last week, he raised his prediction to $250 million.

"I've pivoted the organization to process these loans and get the money out the door efficiently and accurately," Reiling said. "We should be able to turn around applications in a day or two."