Honolulu City Council members have approved a resolution aiming to provide rent relief to businesses through a grant program for landlords.
Honolulu’s commercial property owners would apply for the grants, but the funds would go to their tenants in the form of rent relief, according to Ryan Tanaka, president of Island Business Management LLC, who put together a coalition of businesses to iron out the terms.
“This would result in thousands of businesses being able to work with their landlords and ultimately survive,” he said. “It was critical before, but it’s even more critical now. With six months of piled-up back rent, if it continues to accumulate and it’s going to continue to accumulate, this can be a very important starting point to foster that positive dialogue between landlords and tenants.”
Grant amounts would be based on property taxes, which are based on square footage — and thus would be distributed according to a “rules-based policy,” said Tanaka. They should provide one to two months of rent relief.
Besides the grant program, the resolution — also known as the Hono- lulu Economic Recovery and Employment Support package — proposes supporting city projects that generate economic activity, and allowing outdoor dining and retail activities to take place in city lots, yards and landscape areas.
“I think we all recognize that businesses are hurting, from Hawaii Kai to Haleiwa, from Waikiki to Waimanalo,” said Councilman Tommy Waters, who introduced the resolution, “and we really need to something to help them.”
Waters said he would seek $100 million from federal coronavirus relief funds to establish the grant program. Releasing the funds for the resolution would be up to Mayor Kirk Caldwell.
Caldwell said he was open to any avenue that helps guarantee businesses and individuals receive funds and assistance necessary to navigate the pandemic.
“There are limitations on the use of CARES money, including the use to supplement city revenues,” he said. “We have designed our assistance to the business community with this in mind and have given out over $51 million to 5,700 applicants. However, we are always looking for ways to provide more assistance to our business community.”
While the city already offers a small-business relief and recovery fund, and Gov. David Ige recently announced a rent relief and housing assistance program for Hawaii residents, property owners remain saddled with taxes, repairs and other expenses, according to Tanaka.
The situation is only bound to get worse as unpaid rents pile up and more businesses close for good.
In a recent survey of 1,234 businesses, Tanaka found that 60% of businesses that are shuttered or partially shuttered due to the pandemic expect to miss their rent payments for the rest of the year.
One in 3 had not paid rent in full, and 1 in 10 had not paid their rent at all. The two industries that owed the most rent per month were in the food services and retail trades.
Many trade associations as well as small-business owners testified in support of the resolution Wednesday.
Sherry Menor-McNamara, president of the Chamber of Commerce Hawaii, lauded its adoption as a step in the right direction.
“We’ve surveyed our businesses a few times, and consistently the top need is financial relief to help with some of these fixed expenses such as rent,” she said.
Of businesses surveyed, 70% have had to cut jobs or implement other reductions, she said.
With the latest extension of the lockdown, many retailers are on the verge of closing down permanently without any assistance, according to Tina Yamaki, president of Retail Merchants of Hawaii, who also testified in support of the resolution.
“It’s a great win-win situation.,” said Yamaki, “It’s not just for retailers, but for the landlords as well. The tenants get relief, and the landlords get some money to pay their real property tax or mortgage as well.”
During the pandemic, Hawaii’s businesses still have an obligation to pay rent, testified Liberty Peralta, owner of the Popoki + Tea cat cafe in Kaimuki.
Although her business is considered essential and able to remain open, Peralta said revenue has still dropped 50% to 60%. Recently, she had to let go of some employees because it came down to having to choose between them or paying the rent, so any help would be appreciated.
Steve Sombrero, president of Cushman &Wakefield ChaneyBrooks, a commercial real estate firm, said all of its more than 1,000 tenants, from small mom-and-pops to global corporations, have been affected by coronavirus-related shutdowns.
“Today we are faced with tenant lease defaults in a magnitude and scale never seen before,” he said.
His firm has over the past five months provided more than $12 million in tenant rent concessions, he said, but there is a point where properties become insolvent. Without government assistance, many businesses will have to declare bankruptcy or shut down permanently, he said, resulting in the loss of many more jobs.
Greg Maples, chairman of the Hawaii Restaurant Association, testified in support of the resolution as well.
“We believe this program will serve as an essential catalyst for small businesses and landlords to work together as we head into the future of what will be our new normal,” he said.
Without additional assistance, at least 40% of all restaurants in the state could close by the end of the year.
“It really is the small mom-and-pop folks that are going to close, and it’s the essence of our culture and essence of who we are that’s going to be lost,” he said.