WEBVTT - How Covid Pushes a City Block to the Brink

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser from Bloomberg Radio.

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<v Speaker 1>So we're gonna slow it down a little bit, UM

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<v Speaker 1>and take you to a story that's in the current

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<v Speaker 1>issue of Bloomberg Business Week magazine. It's a disturbing story.

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<v Speaker 1>It's a very illustrative story of what's going on around

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<v Speaker 1>the country because of the pandemic, where for many options

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<v Speaker 1>are pivoting and runways are coming to an end. So

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<v Speaker 1>let's get into it with Bloomberg News finance reporter no

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<v Speaker 1>bu Hire who joins us from Seattle along with Liz Dunn.

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<v Speaker 1>She is the founder of Doune in Hobbes and she's

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<v Speaker 1>the subject of Noah's story, and she joins us on

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<v Speaker 1>the phone from Seattle as well. Thank you so much

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<v Speaker 1>both for being here. Noah, I want to kick it

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<v Speaker 1>off with you. Tell me what you set out to

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<v Speaker 1>do in your reporting and how you were led to

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<v Speaker 1>Liz and why her story just resonated with you. Yeah,

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<v Speaker 1>thanks Carol, So listen. I actually started chatting several months ago, UM.

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<v Speaker 1>I think it was in April or May of last year, UM,

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<v Speaker 1>for a project that I'm doing for Business Week, UM,

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<v Speaker 1>following small businesses in one neighborhood here in Seattle through

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<v Speaker 1>the COVID crisis and um over the months. Uh In

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<v Speaker 1>in several conversations with Liz, I was just struck by

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<v Speaker 1>all of the sort of financial um and business bonds

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<v Speaker 1>that she had created and um developing this really uh

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<v Speaker 1>several properties on this really cool block in Seattle. Just

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<v Speaker 1>how how COVID was was really putting a lot of

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<v Speaker 1>those relationships under strain. And what I wanted to do

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<v Speaker 1>was tell a story about real estate and small business

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<v Speaker 1>and all of these links between people and how they

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<v Speaker 1>got through the first ten months of the pandemic and

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<v Speaker 1>what it might take to get them through the next time.

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<v Speaker 1>So Liz, come on in on this. First of all,

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<v Speaker 1>how's your year been, Oh, Carol Um, It's it's been

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<v Speaker 1>pretty challenging. I've been doing small scale real estate for

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<v Speaker 1>about twenty years, and I've survived through a couple of

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<v Speaker 1>previous crises for nine eleven, and then you know the

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<v Speaker 1>economic meldown that started in two thousand and eight. But boy,

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<v Speaker 1>this just takes the cake for sure. Well, And to

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<v Speaker 1>be fair, and what's interesting, and it's one of the

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<v Speaker 1>things we've talked about a lot less is you know,

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<v Speaker 1>companies big and small had to learn to pivot. Like

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<v Speaker 1>I feel like I've used that word a million times

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<v Speaker 1>over the past twelve months. You did as well, and

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<v Speaker 1>you had some things going for you in terms of,

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<v Speaker 1>you know, where your real estate was located, what kind

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<v Speaker 1>of tenants you had. Tell us a little bit about that. Well,

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<v Speaker 1>I kind of operate at a scale that UM really

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<v Speaker 1>caters to locally owned small business and so I love

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<v Speaker 1>to renovate old buildings and then cream a bunch of

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<v Speaker 1>smaller users UM kind of into one project where UM

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<v Speaker 1>it can create a real critical mass um of of

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<v Speaker 1>UM you know, interested in terms of retail and restaurants

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<v Speaker 1>for the for the customers. And we're in a really

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<v Speaker 1>great neighborhood called Capitol Hill. It's kind of the you know,

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<v Speaker 1>the cool, funky alternative neighborhood in Seattle and and UM.

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<v Speaker 1>But you know, the problem is that these small family

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<v Speaker 1>owned businesses are UM super vulnerable. And as Noah and

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<v Speaker 1>I discussed of my twenty some customer facing businesses on

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<v Speaker 1>this one block, you know, they were all impacted in

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<v Speaker 1>various ways by by shutdowns, UM or other aspects of

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<v Speaker 1>the pandemic. So no as you were doing your reporting

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<v Speaker 1>and talking with Liz and and unfolding this story. What

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<v Speaker 1>struck you, well, a couple of things. One is just

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<v Speaker 1>how um, how much the businesses their tenants at list

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<v Speaker 1>property were able to pivot and just sort of do

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<v Speaker 1>what they could to keep revenue in the door. Another

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<v Speaker 1>thing was just Liz's willingness to do whatever she could

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<v Speaker 1>to keep them floats. So what that meant a lot

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<v Speaker 1>last year was Liz had to go out and negotiate

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<v Speaker 1>with with her banks, the folks who have mortgages on

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<v Speaker 1>her property, and get some sort of relief there so

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<v Speaker 1>she could turn around and pass um basically give her

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<v Speaker 1>tenants some wiggle room um and And I think that's

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<v Speaker 1>like a hugely important and underappreciated aspect of what's been

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<v Speaker 1>going on here. And you know, from the outside of

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<v Speaker 1>this crisis, uh, you know, I spoke with one of

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<v Speaker 1>Liz's lenders, um, the CEO of Home Street Bank, which

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<v Speaker 1>is a regional bank here in Seattle, and that they're

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<v Speaker 1>willingness to work with Liz over the last couple of

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<v Speaker 1>months has just been huge. But I think Liz and

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<v Speaker 1>home Street also thought that this pandemic would be over

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<v Speaker 1>by now. A lot of us did, and so really

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<v Speaker 1>the point we're at in this crisis now everyone's having

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<v Speaker 1>to come back to the table now and figure out

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<v Speaker 1>what makes sense for the next several months. What's interesting too,

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<v Speaker 1>And there's a stat Noah that jumped out at me

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<v Speaker 1>about the strain that we're seeing in terms of you know,

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<v Speaker 1>us retail landlords. We've talked a lot about this on air,

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<v Speaker 1>counting more than fifty billion dollars in miss rent payments

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<v Speaker 1>last year according to estimates from co star um and

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<v Speaker 1>some of those maybe will never get paid. But we've

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<v Speaker 1>been watching so closely, Noah, the real estate market for

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<v Speaker 1>looking for signs of strain. And it's big players, smaller players,

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<v Speaker 1>but we've been watching it very closely, especially as we

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<v Speaker 1>increasingly see in our communities. We see in New York

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<v Speaker 1>City a lot of retail restaurants they're not there anymore

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<v Speaker 1>and they're just boarded up and they're empty places. Yeah,

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<v Speaker 1>I mean, I think what's interesting about Lizzar's property, UM

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<v Speaker 1>properties is the resilience. I mean, there's been a lot

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<v Speaker 1>of work that has gone in to keep those businesses

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<v Speaker 1>afloat and um. You know, another thing that should be

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<v Speaker 1>noted is that the block where these properties are was

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<v Speaker 1>was just really steps from where a lot of the

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<v Speaker 1>racial justice protests were um in Seattle, And um, there

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<v Speaker 1>were periods over the last year where um, these businesses

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<v Speaker 1>had to board up. But um, you know, I think

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<v Speaker 1>Liz worked with her tenants. She could say more about this,

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<v Speaker 1>I'm sure to just sort of make make it clear

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<v Speaker 1>that you know, they were open and functioning to the

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<v Speaker 1>best of their ability. So was how crazy was it?

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<v Speaker 1>Because it sounds like there were a lot of things

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<v Speaker 1>that made survival possible. It was government programs, it was

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<v Speaker 1>bank forbearance. Um, there's a lot of things. I mean,

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<v Speaker 1>just what was it like, you know, in terms of

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<v Speaker 1>finding the pieces to kind of keep it going? Well,

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<v Speaker 1>I think you're right. It was a jigsaw puzzle and

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<v Speaker 1>it continues to be a jigsaw puzzle. And you know,

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<v Speaker 1>that's why I really appreciate Noah telling this story because

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<v Speaker 1>I think the plight of the mom and pop landlord. UM,

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<v Speaker 1>I think that story is not really getting told as

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<v Speaker 1>much as it should. But um, yeah, our our tenants,

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<v Speaker 1>we helped all of our tenants connect with banks if

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<v Speaker 1>they didn't have one, so they could apply for the

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<v Speaker 1>p PP resources we are once again with this round,

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<v Speaker 1>coaching them and and connecting them. UM, if they don't

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<v Speaker 1>have those relationships. UM. The protest zone was half a

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<v Speaker 1>block from us in that made the months of June

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<v Speaker 1>and July UM really difficult. And even today there was

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<v Speaker 1>a swarm of bicycle cop that just um uh road

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<v Speaker 1>around our block because our area has kind of become

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<v Speaker 1>a flashpoint for UM protests on various issues, and so

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<v Speaker 1>that that kind of continues. But you know, I'm so

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<v Speaker 1>lucky to have relationships with local banks. And that was

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<v Speaker 1>intentional after the last down turn, when I realized that

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<v Speaker 1>these big national banks, uh, you know, they're they're they're

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<v Speaker 1>paying no attention to the plight of one little landlord

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<v Speaker 1>in Seattle. UM. Now I only deal with local banks

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<v Speaker 1>where I literally, if I needed to, could walk into

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<v Speaker 1>the office. You know, that is such an important story.

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<v Speaker 1>It's something actually my husband I were talking about the

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<v Speaker 1>importance of like local community banks. UM. Nowhere we've talked

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<v Speaker 1>about this, you know, the big banks, there's been a

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<v Speaker 1>lot of pressure even since, of course the financial crisis,

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<v Speaker 1>to you know, work within the smaller business community. UM.

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<v Speaker 1>Think about kind of neighborhoods, and there's been a lot

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<v Speaker 1>of pressure on them, but we've realized how important it

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<v Speaker 1>is these local community banks in terms of the relationships

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<v Speaker 1>and understanding their communities and the needs of them. Yeah,

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<v Speaker 1>I think I think that's a good point and something

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<v Speaker 1>that's very salient and and Liz's story is I mean,

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<v Speaker 1>really what we're talking about is the difference between what

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<v Speaker 1>what kind of what the city, what any city really

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<v Speaker 1>looks like. Um, after we're through this pandemic, it's, as

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<v Speaker 1>Liz said, at it's been a jigsaw puzzle and putting

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<v Speaker 1>together all the pieces in a way that the world

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<v Speaker 1>resembles something like what it was before the pandemic just

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<v Speaker 1>requires a lot of action from a lot of different people.

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<v Speaker 1>And um, you know, community bankers tend to have their

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<v Speaker 1>finger on the pulse of what's going on in their backyard.

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<v Speaker 1>And you know, uh, the loans that Liz has they

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<v Speaker 1>probably you know, would be a complete rounding air for

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<v Speaker 1>a large national bank, but they're not trivial for for

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<v Speaker 1>a smaller bank. So, um, I just my reporting, you know,

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<v Speaker 1>what I gathered was there was a lot more willingness

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<v Speaker 1>to sort of look at the totality of the situation

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<v Speaker 1>and try and imagine a way to get through this together.

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<v Speaker 1>Were you you know and know you mentioned talking to

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<v Speaker 1>Mark Mason the city of Home Street. Are they you

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<v Speaker 1>know here it is a local UM smaller bank, right

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<v Speaker 1>financial institution. Are they feeling increased singly the strains the

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<v Speaker 1>longer this goes on. I'm assuming yes, but I'm just

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<v Speaker 1>curious what you might have heard. Uh. What's interesting about

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<v Speaker 1>Mark is that he helped turn around Home Street after

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<v Speaker 1>the last um uh recession. He came in I want

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<v Speaker 1>to say, um, maybe twenty nine, two thousand nine and

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<v Speaker 1>another tough time. Yeah. What what he explained to me

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<v Speaker 1>is that this this uh, this moment is fundamentally different,

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<v Speaker 1>and and he sort of generally thinks that um, real

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<v Speaker 1>estate values are going to hold up and uh that

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<v Speaker 1>you know, he has some wiggle room um to to

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<v Speaker 1>work with borrowers and and try to get to the

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<v Speaker 1>other side. Now, obviously that's not going to be true

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<v Speaker 1>for for all real estate. There are segments of the

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<v Speaker 1>market that have really been impacted. It might take quite

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<v Speaker 1>some time to get back, UM. But I think it's

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<v Speaker 1>an important difference that people should have in mind as

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<v Speaker 1>they book and try and think through what's going to

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<v Speaker 1>happen in the commercial real estate market in the US

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<v Speaker 1>that that bankers are looking at um their loan books

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<v Speaker 1>differently now than they were a decade or so ago. Liz, Um,

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<v Speaker 1>from what you know, the headline of the story, my

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<v Speaker 1>runway is over. Um, how much more runway do you have?

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<v Speaker 1>Depending since we don't know quite how much longer this

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<v Speaker 1>pandemic will go on. Just got about thirty seconds here. Well,

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<v Speaker 1>I mean, I think there's this liberal hope in this

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<v Speaker 1>story as we've seen, but um, just because I'm lucky

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<v Speaker 1>to have these local relationships. But I am going to

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<v Speaker 1>need more help. You know. The pandemic is right now

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<v Speaker 1>as bad as it's ever been. And um, and so

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<v Speaker 1>it feels like it's going to take years. Like I'm

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<v Speaker 1>now being realistic, it will be bad this year, but

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<v Speaker 1>even two will be a recovery year. So um, We're

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<v Speaker 1>hanging in there, but we're going to need more help. Well,

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<v Speaker 1>good luck and great reporting. No about you know Bohire,

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<v Speaker 1>He's finance reporter at Bloomberg News, has done founder of

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<v Speaker 1>done In Hobbs. Find that story in the current issue

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<v Speaker 1>of Bloomberg Business Week magazine, also at Bloomberg Dot. Comment

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<v Speaker 1>on the Bloomberg,