How Covid Pushes a City Block to the Brink

are pivoting and runways are coming to an end. So let's get into it with Bloomberg News finance reporter no bu Hire who joins us from Seattle along with Liz Dunn. She is the founder of Doune in Hobbes and she's the subject of Noah's story, and she joins us on the phone from Seattle as well. Thank you so much both for being here. Noah, I want to kick it off with you. Tell me what you set out to do in your reporting and how you were led to Liz and why her story just resonated with you. Yeah,

thanks Carol, So listen. I actually started chatting several months ago, UM. I think it was in April or May of last year, UM, for a project that I'm doing for Business Week, UM, following small businesses in one neighborhood here in Seattle through the COVID crisis and um over the months. Uh In in several conversations with Liz, I was just struck by all of the sort of financial um and business bonds that she had created and um developing this really uh

several properties on this really cool block in Seattle. Just how how COVID was was really putting a lot of those relationships under strain. And what I wanted to do was tell a story about real estate and small business and all of these links between people and how they got through the first ten months of the pandemic and what it might take to get them through the next time. So Liz, come on in on this. First of all, how's your year been, Oh, Carol Um, It's it's been

pretty challenging. I've been doing small scale real estate for about twenty years, and I've survived through a couple of previous crises for nine eleven, and then you know the economic meldown that started in two thousand and eight. But boy, this just takes the cake for sure. Well, And to be fair, and what's interesting, and it's one of the things we've talked about a lot less is you know, companies big and small had to learn to pivot. Like I feel like I've used that word a million times

over the past twelve months. You did as well, and you had some things going for you in terms of, you know, where your real estate was located, what kind

of tenants you had. Tell us a little bit about that. Well, I kind of operate at a scale that UM really caters to locally owned small business and so I love to renovate old buildings and then cream a bunch of smaller users UM kind of into one project where UM it can create a real critical mass um of of UM you know, interested in terms of retail and restaurants for the for the customers. And we're in a really

great neighborhood called Capitol Hill. It's kind of the you know, the cool, funky alternative neighborhood in Seattle and and UM. But you know, the problem is that these small family owned businesses are UM super vulnerable. And as Noah and I discussed of my twenty some customer facing businesses on this one block, you know, they were all impacted in various ways by by shutdowns, UM or other aspects of the pandemic. So no as you were doing your reporting

and talking with Liz and and unfolding this story. What struck you, well, a couple of things. One is just how um, how much the businesses their tenants at list property were able to pivot and just sort of do what they could to keep revenue in the door. Another thing was just Liz's willingness to do whatever she could

to keep them floats. So what that meant a lot last year was Liz had to go out and negotiate with with her banks, the folks who have mortgages on her property, and get some sort of relief there so she could turn around and pass um basically give her tenants some wiggle room um and And I think that's like a hugely important and underappreciated aspect of what's been

going on here. And you know, from the outside of this crisis, uh, you know, I spoke with one of Liz's lenders, um, the CEO of Home Street Bank, which is a regional bank here in Seattle, and that they're willingness to work with Liz over the last couple of months has just been huge. But I think Liz and home Street also thought that this pandemic would be over by now. A lot of us did, and so really the point we're at in this crisis now everyone's having to come back to the table now and figure out

what makes sense for the next several months. What's interesting too, And there's a stat Noah that jumped out at me about the strain that we're seeing in terms of you know, us retail landlords. We've talked a lot about this on air, counting more than fifty billion dollars in miss rent payments last year according to estimates from co star um and some of those maybe will never get paid. But we've been watching so closely, Noah, the real estate market for

looking for signs of strain. And it's big players, smaller players, but we've been watching it very closely, especially as we increasingly see in our communities. We see in New York City a lot of retail restaurants they're not there anymore and they're just boarded up and they're empty places. Yeah, I mean, I think what's interesting about Lizzar's property, UM properties is the resilience. I mean, there's been a lot of work that has gone in to keep those businesses

afloat and um. You know, another thing that should be noted is that the block where these properties are was was just really steps from where a lot of the racial justice protests were um in Seattle, And um, there were periods over the last year where um, these businesses had to board up. But um, you know, I think Liz worked with her tenants. She could say more about this, I'm sure to just sort of make make it clear that you know, they were open and functioning to the

best of their ability. So was how crazy was it? Because it sounds like there were a lot of things that made survival possible. It was government programs, it was bank forbearance. Um, there's a lot of things. I mean, just what was it like, you know, in terms of finding the pieces to kind of keep it going? Well, I think you're right. It was a jigsaw puzzle and it continues to be a jigsaw puzzle. And you know, that's why I really appreciate Noah telling this story because

I think the plight of the mom and pop landlord. UM, I think that story is not really getting told as much as it should. But um, yeah, our our tenants, we helped all of our tenants connect with banks if they didn't have one, so they could apply for the p PP resources we are once again with this round, coaching them and and connecting them. UM, if they don't have those relationships. UM. The protest zone was half a block from us in that made the months of June

and July UM really difficult. And even today there was a swarm of bicycle cop that just um uh road around our block because our area has kind of become a flashpoint for UM protests on various issues, and so that that kind of continues. But you know, I'm so lucky to have relationships with local banks. And that was intentional after the last down turn, when I realized that these big national banks, uh, you know, they're they're they're paying no attention to the plight of one little landlord

in Seattle. UM. Now I only deal with local banks where I literally, if I needed to, could walk into the office. You know, that is such an important story. It's something actually my husband I were talking about the importance of like local community banks. UM. Nowhere we've talked about this, you know, the big banks, there's been a lot of pressure even since, of course the financial crisis,

to you know, work within the smaller business community. UM. Think about kind of neighborhoods, and there's been a lot of pressure on them, but we've realized how important it is these local community banks in terms of the relationships

and understanding their communities and the needs of them. Yeah, I think I think that's a good point and something that's very salient and and Liz's story is I mean, really what we're talking about is the difference between what what kind of what the city, what any city really

looks like. Um, after we're through this pandemic, it's, as Liz said, at it's been a jigsaw puzzle and putting together all the pieces in a way that the world resembles something like what it was before the pandemic just requires a lot of action from a lot of different people. And um, you know, community bankers tend to have their finger on the pulse of what's going on in their backyard.

And you know, uh, the loans that Liz has they probably you know, would be a complete rounding air for a large national bank, but they're not trivial for for a smaller bank. So, um, I just my reporting, you know, what I gathered was there was a lot more willingness to sort of look at the totality of the situation and try and imagine a way to get through this together. Were you you know and know you mentioned talking to

Mark Mason the city of Home Street. Are they you know here it is a local UM smaller bank, right financial institution. Are they feeling increased singly the strains the longer this goes on. I'm assuming yes, but I'm just curious what you might have heard. Uh. What's interesting about Mark is that he helped turn around Home Street after the last um uh recession. He came in I want to say, um, maybe twenty nine, two thousand nine and

another tough time. Yeah. What what he explained to me is that this this uh, this moment is fundamentally different, and and he sort of generally thinks that um, real estate values are going to hold up and uh that you know, he has some wiggle room um to to work with borrowers and and try to get to the other side. Now, obviously that's not going to be true for for all real estate. There are segments of the market that have really been impacted. It might take quite

some time to get back, UM. But I think it's an important difference that people should have in mind as they book and try and think through what's going to happen in the commercial real estate market in the US that that bankers are looking at um their loan books differently now than they were a decade or so ago. Liz, Um, from what you know, the headline of the story, my runway is over. Um, how much more runway do you have? Depending since we don't know quite how much longer this

pandemic will go on. Just got about thirty seconds here. Well, I mean, I think there's this liberal hope in this story as we've seen, but um, just because I'm lucky to have these local relationships. But I am going to need more help. You know. The pandemic is right now as bad as it's ever been. And um, and so it feels like it's going to take years. Like I'm now being realistic, it will be bad this year, but even two will be a recovery year. So um, We're

hanging in there, but we're going to need more help. Well, good luck and great reporting. No about you know Bohire, He's finance reporter at Bloomberg News, has done founder of done In Hobbs. Find that story in the current issue of Bloomberg Business Week magazine, also at Bloomberg Dot. Comment on the Bloomberg,