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Small business landlords feeling the rent pinch

This house on Garland Avenue in Rochester is among the rental properties in the High Falls Property Management portfolio. (Provided)

This house on Garland Avenue in Rochester is among the rental properties in the High Falls Property Management portfolio. (Provided)

Over the years Michelle and Alex Wheeler have purchased properties in and around the City of Rochester, spruced them up and added them to their rental portfolio at High Falls Property Management.

Now three months into their 11th year of operation, they manage right around 250 units.

Neither is sure what the fourth month of their 11th year of operation will look like, however.

With unemployment skyrocketing and much of the economy on pause because of the coronavirus pandemic, their rental income plunged significantly in April.

The Wheelers are well aware they’re not alone and that a multitude of small business owners are reeling.

What they don’t understand, however, is the approach taken by government leaders. Gov. Andrew Cuomo ruled on March 20 that no tenant could be evicted for 90 days for failure to pay rent.

“You don’t see Wegmans giving away food, you don’t see Walgreens or CVS giving away free medication and you don’t see RG&E giving away free power,” Michelle Wheeler said. “But private sector housing has to give away rent.”

The Wheelers don’t begrudge tenants that are encountering financial hardship. They just don’t understand why emergency edicts placed the burden solely on landlords.

Creating a rent-relief program as part of the CARES Act would have been an easy solution, Alex Wheeler said. Tenants whose income was impacted by the pandemic could file for help and, if they prove a hardship, then funding would be available from the rent relief program.

“The people effected could have filled out a one-page application; instead, they’ve kneecapped the landlord,” Alex Wheeler said. “I’m not sure why the government decided landlords can just absorb the loss. I will say the vast majority of tenants are trying to do the right thing. But to blanketly let everybody off the hook makes no sense.”

As a result of non-payments for April, High Falls Property Management laid off four of its 10 employees, Michelle Wheeler said.

Small Business loans were available through the Payroll Protection Program in the CARES Act, but the allocation of funding was insufficient. Congress was poised to approve another $310 billion in aid to small business this week.

“We were one of the first approved for the program, but they were already out of funding,” she said. “We’re hopeful for Phase 2, but so far the little guys have not seen any relief.”

The problems very likely will be compounded in May, and beyond.

“If I would lose, say, $35,000 in rent payments, that’s the difference of me paying my mortgage and putting food on my table, not to mention paying the mortgages on my properties,” Alex Wheeler said. “I’m very worried about what the potential damage could be for small housing providers.”

Forbearance is being offered by many lenders, but the Wheelers said most banks were only offering 90-day deferrals and interest would continue to accrue on payments pushed to the back of the loan.

“This has dramatically impacted how we conduct business,” Alex Wheeler said.

So far, so good for some property firms

DeGeorge Property Group manages about 650 units across the Rochester region. April rent payments were steady.

“We are lucky; we have a lot of good tenants,” said Ben DeGeorge, president of the firm. “We’ve given people who have needed it flexible payments, but part of what is helping is the unemployment program and stimulus checks. We’ll all get through this.”

Conifer Realty LLC is the largest owner of affordable housing in Rochester, with more than 2,000 units. Sandy Gorie, vice president of marketing and communications, said the firm’s portfolio didn’t see significant impact for April.

“If this goes much longer, we may have a different situation in May,” Gorie said.

Morgan Properties, the Pennsylvania-based real estate conglomerate that bought controlling interest in Robert Morgan’s empire, manages at least 60 apartment communities in Rochester and has the largest footprint of any residential management company. Morgan has properties from Spencerport to Victor and nearly every community in between, but declined to provide insight on any impact the pandemic has had on rent payments.

koklobzija@bridgetowermedia.com / (585) 653-4020

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