PORTLAND, Ore — Editor's note: the video above is from March 25, 2020.
The Night Light Lounge shut its doors on March 17 after Gov. Kate Brown banned on-premise dining at restaurants and bars throughout Oregon in an effort to slow the spread of COVID-19. Best known for its drag queen brunch and happy hour, the Southeast Portland bar wasn’t in a position to pivot to takeout-only dining.
With no income coming in, owner Paul Stevens managed to negotiate a deal with his landlord, who used to own the lounge, to pay reduced rent in April. He is hoping to come to another agreement before next month’s bills come due May 1.
But he also knows that this arrangement might not be sustainable.
“The problem is with no income coming in, there’s no money to spend,” Stevens said. “We’re running down our reserves, we’re applying for loans, we’re doing all of that, but you just can’t get blood from a stone.”
Small business owners throughout Oregon are struggling amid the COVID-19 crisis. Those struggles are coming into sharp focus as many shuttered businesses prepare to pay their bills for the second month of the outbreak, with no path toward reopening.
Brown issued an executive order on April 1 prohibiting landlords from evicting commercial tenants for 90 days. But businesses are worried that if they don’t pay now, their bills will pile up and they will be unable to meet their obligations when the moratorium on evictions ends. Many said loan programs offered through the federal government, which could help them pay those bills, have been insufficient or inaccessible.
Instead, small business owners have been left to negotiate deals with their landlords in hopes of finding a path forward.
Tenants look for relief from landlords
Many small business owners have reached payment agreements with their landlords over the last month, but the relief varies. Some landlords have agreed to simply forgive a portion of the rent. Others have only deferred rent, so tenants must pay the balance over the remainder of the lease.
Joe Condon, general manager of Penrose Candles, said that deferring rent may not be an option for his business, which leases a studio in St. Johns. He said his property management company offered the business a six-month lease with a 50% discount in the first three months that obliges them to pay the discounted portion over the final three months.
Rather than accept the deal, Condon and his business partner are considering a smaller studio, or maybe moving the business back into their garage.
“While we certainly appreciate the willingness to work with us on that level, the revenue that’s been lost to us has been lost to us and it’s not something that we’re going to get back,” Condon said. “The economic effects from all of this will last at least a year, as far as we can tell. We aren’t expecting to bounce back to a point where we can pay more than our regular rent within a six-month period.”
Wei-En Tan, the owner of 45 North Wine Bar, said that her business had just celebrated its one-month anniversary when the outbreak hit Oregon. She and nine other businesses in her building on North Mississippi Avenue remain in negotiations with their landlord and have not paid rent since the eviction moratorium went into place. She said they are worried that they won’t be able to pay back rent when the moratorium ends, if they can’t reach a deal.
Commercial landlords are facing struggles as well in determining what types of deals they can afford.
Craig Sweitzer, a landlord with six buildings near downtown Portland, said he has tried to work with his tenants to offer rent abatement for the next few months with the expectation that they will pay off their balance over the next year. Given the arrangement, he said that he and his partners will be running a deficit.
While the federal government gave property owners some relief through the CARES Act by allowing those that had federally-backed mortgage loans to avoid foreclosures and enter into forbearance agreements with lenders, missed or reduced payments will still have to be made up in the future.
Seth Leavens, an independent commercial landlord with multifamily and commercial property in Portland, has tried to work individually with his tenants to come up with payment plans to provide relief to those most in need. Leavens, who also owns the Belmont Inn in Southeast Portland, said he barely broke even in April and could lose money in May.
“I’m very worried about my bar and my tenants,” Leavens said. “The unknown of how we’re going to go back to normal is very concerning.”
Uncertain futures
With limited options for financial relief and uncertain futures, some small businesses have already closed their doors permanently. Southeast Portland’s Hut Vintage announced last week that it had decided to close after realizing that paying even partial rent during the closure could be financially devastating.
Four percent of restaurants in Oregon have already been forced to permanently close as well, according to a national survey conducted by the National Restaurant Association. Another 6% are expected to permanently close within the next month.
Even some of Portland’s best-known restaurants are facing hardships.
Kurt Huffman, the owner of ChefStable, one of the city’s most prominent restaurant groups, said that the majority of his landlords have been willing to negotiate deals to help his restaurants stay afloat during this difficult time. But despite those stopgap measures, Huffman doesn’t see how his group’s restaurants can return to profitability within the next year, or even longer.
“It’s impossible to predict the long-term viability of restaurants,” said Huffman, who expects to operate very differently whenever restaurants begin to reopen. For example, he expects to reduce seating capacity to allow diners more social distance.
“We are praying that people will come into the restaurants when we reopen, but nobody should think that they’ll be making any money until there is a vaccine,” Huffman said. “We’ll have the same rent, we’ll have the same overhead, our cost of food and beverage will be the same, but we’re going to have half the seats.”
Huffman said that up to a third of the group’s restaurants could close permanently if they aren’t approved for loans through the Paycheck Protection Program, which provides small businesses with forgivable loans if they meet certain criteria. Congress approved an additional $310 billion in funding for the Paycheck Protection Program this week after the program ran out of money amid high demand.
But other small business owners say that the Paycheck Protection Program is not the lifeline they thought it would be.
Stevens, the owner of the Night Light Lounge, said he was approved for a loan through the federal program, but will end up returning the money unless authorities change the terms. Currently, the loans are only forgivable if businesses put at least 75% of the money toward payroll costs.
With on-premise dining currently banned, Stevens doesn’t have a need for his full staff. Even if he wanted to hire back his staff, he said many of his bartenders, who make a large portion of their income through tips, will earn more through unemployment insurance than they would at a bar that can’t provide in-person services.
Sen. Ron Wyden, D-Oregon, announced on a media call Friday that he will push for the next COVID-19 relief package to include cash payments for small businesses with gross receipts under $1 million and 50 or fewer employees. Under his proposal, those businesses could receive checks for 30% of the gross receipts reported in a previous year, up to $75,000.
But until relief comes, small businesses are left wondering how they will meet their financial obligations come May 1, and whether they have the resources and capital to weather the storm when they don’t know when the COVID-19 crisis will end.
“We were strong before this happened and I have every reason to believe that we can be strong when we get to the other side of this crisis,” Stevens said. “It’s just that the tools that we need to get us there aren’t available.”
-- Jamie Goldberg
Email at: jgoldberg@oregonian.com
Follow on Twitter: @jamiebgoldberg
This article was originally published by The Oregonian/OregonLive, one of more than a dozen news organizations throughout the state sharing their coverage of the novel coronavirus outbreak to help inform Oregonians about this evolving health issue.