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Struggling businesses that pay rent to the city and Port of San Diego are desperate for relief from their landlords as the coronavirus pandemic continues to force closures, furloughs and layoffs.
For now, the city and the Port – each beset with their own budget woes due to the pandemic – are giving some leaseholders the option to defer rent payments in an effort to try to maintain lease revenues crucial to funding their operations and property maintenance.
The Mission Bay Lessees Association and the San Diego Port Tenants Association separately fired off letters to the city and the Port late last month requesting they give their renters a 90-day reprieve from minimum amounts they are mandated to pay monthly as part of their leases.
At a special meeting on Wednesday, Port commissioners voted to offer three-month minimum rent deferrals for qualifying tenants, including those at Seaport Village. For now, businesses that rent from the Port will have until next July to pay the agency back.
But both the Port Tenants Association and multiple Port tenants have said they don’t think that will be enough to address their economic pain.
Meanwhile, city tenants are coming forward to request relief following the city’s request that they individually approach the city to discuss their challenges and potential solutions, a process some have criticized.
At least one city tenant – Evans Hotels, which owns Bahia Resort Hotel, Catamaran Resort Hotel and Spa and the Lodge at Torrey Pines – reports it has already been told it won’t receive requested relief.
Evans Hotels is among dozens of businesses – from SeaWorld San Diego to shop owners in Seaport Village – that rent their properties from the city or the Port. Per their agreements, tourism-tied businesses typically pay rents based on the revenues they generate and must pay a minimum amount each month even if business drops. Now, amid the coronavirus pandemic, companies are unlikely to hit their minimum requirements.
Like other governments across the nation facing their own financial calamities, the city and the Port count on money they pull in from leases.
Last fiscal year, rents from the city’s Mission Bay Park leases alone totaled more than $30 million that flowed to the city’s day-to-day fund.
This year, city officials expected to receive $80 million from its leaseholders citywide, a significant revenue source for the city.
And the Port district, which serves as the landlord of 34 miles along San Diego Bay spanning five cities, reports that almost two-thirds of its revenues come from its leases and related business.
Port spokeswoman Brianne Page noted in an email to Voice of San Diego that the Port is essentially self-funded and thus reliant on the revenues from waterfront business – which include restaurants, shipbuilders and more – to maintain amenities such as its parks and promenades and help fund the Harbor Police Department that patrols tidelands and the airport.
Port real estate officials have estimated the rent deferral program could translate into a nearly $6.2 million loss in the current fiscal year that could be recovered in the year that begins in July. That’s on top of a predicted $31 million drop in Port revenue.
Port officials decided that action was warranted to aid businesses that devastated by coronavirus closures.
“Ultimately, as partners, we’re not successful unless our tenants are financially successful as well,” Port Commissioner Dan Malcolm said.
But the Port Tenants Association has said – including in its March 20 letter to the Port – that rent deferrals are insufficient. It urged commissioners to offer breaks on rent to ensure businesses’ survival.
“The last thing we need is to have your tenants completely out of business, leaving many properties with empty buildings,” Tenants Association Chairman Frank Plant and President Sharon Cloward wrote in the letter.
Cloward said Tuesday that she appreciated the Port moving forward with the Wednesday discussion and considering options, but expects to approach commissioners and staff with other requests as the impacts of the coronavirus pandemic become more clear in coming weeks.
“It’s not over,” Cloward said. “We need more plans.”
Several Port tenants begged commissioners to consider waiving rent altogether during Wednesday’s meeting.
Dwight Colton, who owns The Fish Market restaurant on the Embarcadero, was among those who called for the Port not to expect business owners to commit to future payments at a time when they may still be struggling.
“The money lost due to these forced closures will never be recovered,” Colton said. “It is truly a loss.”
David Stewart, who owns Eclipse Eyewear and Seaport Village Shell Co. in Seaport Village, also told VOSD that he worried about the future of the center if Port officials don’t provide significant help. Seaport Village has essentially closed, and tourism that was crucial to drawing business there has ceased.
“We’d like to stay,” Stewart said. “We’ve loved our businesses there.”
Commissioners urged Port staff to keep tabs on the economic challenges facing its tenants and to create a protocol to evaluate those who may need more relief on a case-by-case basis. It was not immediately clear when Port officials might come back to commissioners with updates.
Hotelier Bill Evans of Evans Hotels, who is also president of the Mission Bay Lessees Association, has raised alarms similar to those raised by Port tenants.
SeaWorld and many hotels along Mission Bay have been forced to temporarily shut down.
As the city faces its own budget challenges tied to the coronavirus pandemic and grapples with those faced by business owners, it has asked SeaWorld and other businesses to come forward to speak with city officials rather than approve blanket relief.
Christina Chadwick, a spokeswoman for Mayor Kevin Faulconer, said city real estate managers have been in contact with dozens of city leaseholders following the March approval of city eviction and small business relief policies. She said the city is for now advocating that some of its commercial leaseholders negotiate rent deferral options, meaning those with minimum rents would be allowed to hold off on paying those amounts for six months, consistent with an eviction moratorium approved by the City Council in March.
“The city expects all landlords to work with their tenants to negotiate rent deferral options to help them through this difficult time. That’s why the mayor supported the eviction moratorium that included not just residential, but commercial properties, including city leaseholds,” Chadwick wrote in an email to VOSD. “That’s also why the mayor rolled out a small business relief package the defers various fees and penalties. As a landlord, the city is treating all San Diego leaseholders – including those in Mission Bay – equitably.”
Evans said his company, which is not a small business, was among the first to approach the city to ask for reprieve and was quickly told his hotels would need to stick to minimum rents.
He was frustrated by that answer and the prospect that individual businesses would need to make the case for city relief on their own.
“These businesses are closed for no fault of their own. There’s no revenue coming in,” Evans said this week. “How does the city expect those payments to be made?”
Joe Busalacchi, who owns bayside restaurant and fish market Sportsmen’s Seafood, has seen his business screech to a halt. He has also submitted a request to the city and is waiting to learn whether he will get relief.
For now, he has decided against paying the minimum rent laid out in his city lease so he can direct the cash he does have toward other priorities.
“I still have to pay my employees that have worked here for 20 years,” Busalacchi said.