As financial pain grows, Hawaii’s ‘nonessential’ retailers await OK to reopen
Hawaii government leaders have taken cautious baby steps allowing a few more kinds of businesses to reopen last week, but financial burdens continue to pile up for retailers and restaurants.
A broad glimpse of the impact on such businesses was presented Thursday by Hawaii’s second-largest retail property landlord.
Alexander & Baldwin Inc., which owns 22 shopping complexes statewide, said 57% of rent from its retail and restaurant tenants was paid in April.
This rent hole was tied to businesses that local government officials deemed nonessential and therefore shouldn’t have contact with the public as part of the effort to stamp out the spread of COVID-19.
Additionally, A&B said in the financial report for investors that tenants providing 39% of its retail property rent have requested rent relief, and that this figure was 66% for restaurants and 76% for retailers focused on “softline” goods such as apparel.
Photo Gallery: Hawaii retailers await reopening as financial pain intensifies
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If that picture isn’t distressing enough, consider that the Honolulu-based real estate company considers itself in far better shape than many other retail center owners in Hawaii.
A&B primarily owns community retail complexes that serve the local population and are anchored by grocery stores that have stayed open as essential businesses during the coronavirus pandemic.
So the situation likely is much worse for malls anchored by department stores surrounded by apparel retailers, and for shopping centers focused on tourists to a significant degree.
Lane Muraoka, president and owner of Big City Diner, said stress and pain are just getting worse with more uncertainty than relief in sight.
“It is not a good situation,” he said. “It’s very stressful for business owners. It is survival.”
Muraoka closed three of his five restaurants in March, and tried to ramp up takeout service at his Waipio and Kaimuki locations during reduced hours.
But he said paying bills, which include rent and $300 to $400 a day for just electricity and gas at a single restaurant, is daunting because sales have tanked 50% to 80% depending on the day.
In one small step forward this week, Muraoka reopened his Kailua restaurant for takeout orders April 27.
But he said there’s still a lot of uncertainty as to how many customers would come back when restaurants are allowed to reopen with restricted dine-in capacity limits.
If customers don’t come back quickly, it might not make financial sense to reopen Big City Diner for dine-in service when government leaders say that’s OK, which Muraoka hopes is in mid-May.
“This is a whole new ballgame,” he said.
For its part as a landlord, A&B said it’s making efforts to help tenants that have stayed open. These efforts include deferring rent for some and promoting curbside pickup, delivery and modified hours of operation.
Still, A&B recognizes that challenges could last for quite some time even if restrictions gradually start easing for nonessential retail this month as the company expects.
“Though Hawaii has so far been spared the harshest impacts of the COVID-19 pandemic, we are experiencing economic and social dislocations that are unprecedented and could be prolonged,” Chris Benjamin, A&B president and CEO, said in a conference call with stock analysts Thursday.
Lance Parker, A&B’s chief real estate officer, noted on the call that a crucial factor in long-term prospects for retailers is going to be how quickly tenants reopen — and that the ability for some to reopen diminishes the longer they are forced to stay closed.
”The most important thing again for us is to try to get them open, physically, but also make sure that they’re financially able to do so,” Parker said. “Obviously, the longer that they’re closed, it’s going to put more of a strain on their ability to make rent, and I have no doubt that some of them are going to have difficulties in reopening.”
A&B is considering rent deferrals on a case-by-case basis that assesses a tenant’s financial situation, and said that for April it deferred $1.1 million in rent.
The company has about 650 retail tenants at its properties, which include Manoa Marketplace, Kaneohe Bay Shopping Center, Waianae Mall, Pearl Highlands Center, Kunia Shopping Center, Waipio Shopping Center and most of the retail real estate in Kailua.
Some A&B properties mostly anchored by Foodland and Safeway have higher concentrations of small local restaurants that continue serving takeout. At others, such as Pearl Highlands, there are more stores that have been deemed nonessential and remain closed, including Guitar Center, Ross Dress for Less, Regal Theatres, ULTA Beauty, 24 Hour Fitness, Jeans Warehouse, Roger Dunn Golf and GameStop.
Only a couple of types of bricks-and-mortar retail businesses were allowed to reopen last week with customer limitations, including car dealerships and floral shops.
Benjamin anticipates that more will be added this month, but the scope of reopening is unclear.
“We expect a gradual return to a more normal state starting in May, enabling retailers to begin reopening,” he said. “But it will be phased, and there’s no certainty regarding how long it will take.”