‘Ripple effect’   | Local News

PEABODY — Bryan Gamby and her husband, Nicholas D’Andrea-Gamby, bought Lucky Dogs Daycare at 6 Bourbon St. on March 17, a week before Gov. Charlie Baker ordered most nonessential businesses closed to limit the spread of COVID-19. 

They’ve been able to stay open because pet boarding and grooming businesses have been deemed essential. However, the Methuen couple are only boarding dogs and giving baths because their groomers are at an increased risk for catching the disease.

And so far, their landlord is working with them so they haven’t had to worry about losing their space if they can’t make this month’s rent on time.

“Right now, the landlord is being helpful,” Gamby said. “He’s deferring payment.”

A small business’ ability or inability to pay rent is part of what’s called the “ripple effect” in commercial real estate. It’s something that may only become apparent the longer the economic shutdown from the pandemic lasts.

If mom and pop shops can’t pay rent, building owners can’t pay their mortgages or expenses like maintenance and taxes. Those close to the industry say the ripple effect will start to come into play over the next month or two.

Peabody, Danvers and Beverly are among communities that have put temporary brakes on eviction proceedings, with a bill to do this passed by the state Senate last week. 

The bill, which needs to be passed by the House and signed by Baker, is seen as a way to provide a safety net for renters, homeowners and small businesses. It would halt all stages of the eviction process for 120 days after the bill becomes law. Among other things, the bill prohibits landlords from charging late fees on those who get behind on their rent.

“If the landlord doesn’t have a tenant and they don’t have rent coming in, everyone is in the same boat,” said state Sen. Joan Lovely, D-Salem. The bill does not absolve anyone from paying rent, Lovely said; rather, it’s meant to give renters and landlords a pause during the pandemic.

Julie Daigle, the executive director of the Peabody Area Chamber of Commerce, said she found that small business owners were “tuning out” because of their frustration over getting federal help.

One program under the $2 trillion CARES Act — the Economic Injury Disaster Loan Emergency Advance — was thought to be a $10,000 forgivable grant, but businesses are finding out it is $1,000 per employee up to $10,000. Businesses thought the money would come within three days of the application, but are now hearing it would be three days after they are approved, Daigle said.

Restaurants have been especially hard hit with business confined to takeout or delivery. Some are closing not because they are busy, Daigle said, but because they are concerned about their employees.

Chef Anthony Marino and Victoria “Torie” Farnsworth, a Beverly couple, run the popular Marino’s Cafe at 100 Cummings Center in Beverly, and the relatively new Flip the Bird chicken sandwich and ribs joint at 407 Cabot St., also in Beverly. 

In an email, Marino said they have decided to close Marino’s until they are confident they can reopen. Flip the Bird, he said, is doing well, so they are talking to their advisers about the way forward.

A restaurant owner for more than 10 years, Marino said he understands the landlord/tenant dynamic. “I do, however, feel that in this time of crisis people need to understand that some of their favorite places will not reopen,” he said.

“This is going to be a huge ripple effect into more than just the restaurant industry,” he added. “The SBA loans are great, but still need to be paid back. And most small businesses work on such small profit margins that another bill that needs to be paid back just isn’t worth it.”

Steve Drohosky, the general manager of the sprawling Cummings Center, which has 2 million square feet in multiple buildings and 600 businesses, said a majority of clients are working from home. The buildings remain open and staff are maintaining and cleaning them as needed.

Pat Todisco, who owns several downtown Peabody buildings, including the prominent O’Shea Building at 1 Main St. in Peabody Square, said he is working with his tenants.

“We are not pushing anybody (or) giving anybody ultimatums,” Todisco said. It’s important for tenants to be honest about their situation, he said. It’s when people assume they don’t have to pay “that becomes an issue.” 

Ken Hecht, of Hecht Development, who owns properties on Main Street in Gloucester, said more will be known about how commercial real estate shakes out next month.

“I don’t know what’s going to happen,” said Hecht, whose portfolio also includes the Peabody Corporate Center, which consists of three buildings just off Route 1 totaling 136,000 square feet and approximately 50 tenants, most of them financial services firms whose employees are working from home.

Brian DApice, a principal of the commercial real estate firm The Mega Group of Danvers, said everyone is trying to figure out what to do next when it comes to emergency Small Business Administration loan programs. He said his firm expects its tenants to pay April rent, figuring these businesses base their expenses at least two months ahead.

What happens in May and June is another story. In general in the industry, DApice says loan modifications sought by landlords may be passed on to commercial tenants. He also said many landlords may defer rent.

No one, however, is talking about evictions, he said. “It’s not even a conversation.”

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