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Council Extends Rent Deferral for City Leaseholders

Bob Kronovetrealty
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By Jorge Casuso

March 24, 2021 -- The City Council on Tuesday unanimously voted to extend the eviction moratorium for businesses with City leases from March 31 to June 30 and gave them a year from that date to pay the rent they owe.

Businesses that are open must pay back 50 percent of the rent deferred during the moratorium, while those ordered to shut down by County Health can defer 100 percent of the rent.

Sixty of the City's tenants are currently participating in the Rent Deferment Program, City staff said in its report to the Council.

Noting that the Pier was rebuilt after collapsing in a major storm in 1983, Councilmember Kevin McKeown stressed the urgency of taking action and sending the message to businesses to "keep the faith."

Councilmember Phil Brock agreed. "We can't just kick the can down the road," he said. "All our businesses need a ray of hope now. Nobody is on their feet right now."

The Council also directed staff to look for ways to set aside more than $5 million in Federal relief funds to help small business crippled by the year-long coronavirus shutdown stay afloat and to help them find additional funding sources.

Councilmember Gleam Davis, who made the secondary motion, noted that even with the extension, some crippled businesses may not be in a position to pay the back rent they'll owe by June 30, 2022.

The City, she said, needs to "signal flexibility" and send the message that "we are open and even inclined to push back that date."

In total, the City has deferred some $5.3 million in rents -- $1.1 million from April to June of last fiscal year and $4.2 million from July through March of the current fiscal year.

The City owns and manages 750 properties, including commercial office units, galleries at Bergamt station, concessions on the Beach, restaurants and vending carts on the Pier, kiosks on the Promenade, ground-floor spaces in public parking structures and hangar spaces at the Airport.

Among the businesses on City properties at risk of shuttering permanently are a performing arts theater at the Airport, which remains closed due to a County Health order, and the Bergamot Station Arts Center that has lost nearly half of its 33 galleries during the shutdown.

The Council voted to allow the Center to defer its rent, although it subleases its buildings from the City's main leaseholder the Worthe Real Estate Group, which is up to date on its rent payments and would be compensated for the deferred rent.

Mayor Sue Himmelrich asked that some of the funding from the Federal American Rescue Plan be used to help struggling small businesses that are not City tenants, saying that restricting the funding "may be tying our hands."

The money could serve as "a springboard for the resurgence of small businesses" in the city, Himmelrich said.

According to City officials, Santa Monica has lost 130 small, locally owned businesses since the pandemic began, and a recent City business survey indicates that "many more are facing closure in the months to come."

It is unclear how long it will take for the Santa Monica's once-thriving business sector to recover from the effects of the shutdown.

The "sudden disappearance of the tourist consumer has devastated the City’s hospitality and retail sectors," staff wrote.

"The ability of businesses to recover and repay rents will largely depend on the rebound of tourism and the overall recovery in the economy."

On Tuesday, Fitch Ratings assigned an 'AA+' rating to bonds the City will issue, calling its rating outlook "stable."

"Revenue growth is expected to be weaker than in prior years in the short term with a gradual return of tourism-related revenues over several years," Fitch wrote.

Councilmember Oscar de la Torre recused himself, explaining that some of the galleries at Bergamot had hosted fundraising events for the youth center he headed.

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