Problem solved: compensate for rents lost due to the pandemic

October 11, 2022

As part of our ongoing Problem Solved series, Habitat speak with Carl Cesaranodirector of the accounting firm Caesarano and Khan.

Reassess budget priorities. It is very difficult to navigate the landscape these days. In addition to the lingering pandemic, there is very high inflation and spending is more unpredictable. The assumptions and claims that were in the original budgets have changed, so it’s time to see what expenses can be cut. Consider whether it is possible to increase fees other than maintenance and assessments.

A sharp decline in commercial revenue. When you have a lot of business units, your entire budget is based on their revenue. We have a client whose annual business revenue – from stores and restaurants – exceeded $1 million. When the pandemic closed many stores, her income was cut in half and she had to find a way to make up the shortfall to balance her budget.

The act of balancing. We have done this in several ways. The underlying mortgage was refinanced before rates started to rise, and we were able to lower the interest rate and also put money into the reserve fund. We were also able to get a repayable loan from the Paycheck Protection Program. We had expected utility prices to rise and we have used various alternative suppliers to lock in our natural gas rate until 2023 and our electricity rate until mid-2022.

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Which flows again. Each commercial tenant has had different issues, and we’ve taken these into account to kick-start the revenue stream. Depending on the type of business, we have offered rent discounts and different lease models. We have restructured some of the leases to provide more flexible terms to make it easier for small businesses to stay in business. We basically did it tenant by tenant, and the good news is that everyone is back up and running. Our existing tenants are active again and we have again reached our million dollars in cash flow from rent.

More challenges ahead. Going forward, budgets will have to be a living, breathing thing. You will have to watch them all the time. As an accountant, my approach is to work as a consulting business partner. I want to help them look at things in real time and look at all the options available to us. And we’re going to have to keep tweaking and increasing where necessary.