On March 25, ULI Charlotte hosted a virtual panel discussion to discuss the unprecedented COVID-19 outbreak and its potential short-term and long-term impacts on the real estate industry. ULI Charlotte’s panelists were David Hamilton of Batson-Cook Construction, Jeff Harris of multifamily developer LMC, Emily Reynolds of law firm Alexander Ricks and Patrick Ridinger of law firm Troutman Sanders. A few highlights:

Harris, Divisional President for the Carolinas for LMC, said all development deals for which the company has not yet acquired land have been paused for six months. In addition, the company’s architects, engineers and other consultants “have been instructed to put pencils down for the time being.”

“Cash conservation is key, and that means minimizing development and predevelopment spending,” he said.

No division has been affected more than LMC’s property management team, Harris said, as the company tries to balance resident needs with the safety of its employees. All in-person leasing tours have been postponed in lieu of online tours, and resident interaction is handled through email, FaceTime or telephone. Future residents are not allowed to move in if they have any COVID-19 symptoms, if they have been in contact with anyone who has tested positive or if they have traveled to a high-risk country in the last 14 days.

Hamilton, a Project Executive with Batson-Cook, said that in addition to strict sanitation protocols at its job sites, the company is preparing to roll out thermal scanning at two North Carolina projects in order to monitor the temperatures of its workforce as they arrive each day.

“If you have a high temperature, you’re automatically sent home,” he said, adding that if anyone tests positive for COVID-19 at a project, it will be shut down for a minimum of 48 hours and disinfected.

On the project pipeline, Hamilton said several clients are implementing a 30- or 60-day pause, while others continue to move forward.

On the legal front, Reynolds said that force majeure is a hot topic right now. A force majeure event is an event that is outside the reasonable control of a party and that prevents that party from performing its obligations under a contract. Most construction contracts and leases will include a force majeure provision, while a lot of purchase agreements won’t, she said.

“Check and see what you have and see what notice you have to provide and what formalities you need to go through,” she said, adding that most force majeure provisions will require five to 10 days’ notice after the occurrence of the event.

“It really does have to make the performance pretty much impossible,” added Ridinger of Troutman Sanders. “It can’t just be something that makes it more difficult or raises your cost.”

Many landlords are receiving calls and emails from tenants, particularly in the retail sector, about their inability to pay rent in the near term due to the impact of COVID-19 on their businesses.

“There’s going to be a lot to deal with in that setting over the next couple of months,” Ridinger said.

One potential solution might be for a landlord to tack a few extra months onto an existing lease term in exchange for a few months of free rent now, Reynolds said. Or a tenant with a robust online business could offer a percentage of its online sales to a landlord in lieu of rent for a short period.

“I think there are a lot of creative ways to work with it so that your business or your tenant’s business isn’t dark at the end of this,” she said.

“This will hopefully be a short-term situation,” Ridinger concluded. “I’ve heard the analogy multiple times that this feels more like a 9/11 and not 2008. I certainly hope that’s the case and that we move through this.”

Notes provided by Will Boye of Yellow Duck Marketing.  A recording of the webinar is available to members at https://knowledge.uli.org.