To all Paredim Investors:
Since our last communication relating to coronavirus (COVID-19) pandemic, the situation and its impact on our country and world and of course our portfolio has evolved dramatically. Like many other businesses, we have experienced a dislocation in the operation of our leasing and management operations, but have been most negatively impacted by the closure or workforce reductions of the businesses that employ our residents.
We have taken multiple steps to protect the well-being of our properties, employees, residents and colleagues, while also ensuring that we will continue to meet our residents’ housing needs during this very challenging time. All of our offices remain open and operational, with alternating remote shifts and we are continuously working towards fulfilling the needs of our valued residents as they are nearly all required to work from home. We have also provided ample supplies of the necessary personal protective equipment (PPE) as well as training and guidelines to our employees to maintain good hygienic practices and social distancing while they provide only critical and necessary services and maintenance tasks. We have also reduced or eliminated any unnecessary expenses including third party vendors or service providers that our staff can perform for the time being. We have also secured an SBA Payroll Protection Loan under the CARES Act and will be using that to cover payroll expenses throughout the portfolio as per the guidelines of the Act. I am hopeful these measures will assist us in bridging any potential negative financial impacts on revenues from lower occupancy and collection rates from the pandemic.
We are in continuous contact with our residents to provide them with guidance and updates to assist them in navigating this event and assure them that we remain focused on providing them with the highest level of services possible. We are also incredibly focused on rental collections and emphasizing that residents remain obligated to pay their rent and then actively working with each specific circumstance to develop payment plans as necessary. This effort was made more difficult by the April 10th Executive Order by the Governor of Connecticut extending the grace period on rental payments from 9 days to 60 days in April for all residents and then again in May, but only if the request is made in writing that a resident was financially impacted by COVID-19.
I am pleased to report that in spite of these exceptionally challenging and historically unparalleled circumstances, we have achieved over 94% average rental collections as of April 28 , with some residents still making payments at the end of the month per payment agreements, so that figure may increase. We also achieved 91% rental collections in the small commercial portfolio with several tenants on payment agreements, which is also very positive given many of the businesses are closed or on extremely limited operations. I am proud of these results from the hard work of our entire management team, but remain concerned that May will be more difficult as the business closures throughout the State mount and people use the Governor’s executive order as an excuse to delay the payment of their rent. It goes without saying that we will continue to do everything in our power to address this and maximize collections going forward. Also, given the requirement that we close all public amenity spaces, we are assessing a temporary waiver of amenity fees at certain affected properties, which is consistent with our peers in the market and we feel appropriate at this juncture.
Regarding the market environment, we have seen a drop off in the demand for and velocity of new leasing as we enter the traditionally vibrant Spring leasing season due to the shelter in place orders, with a year over year decrease of 37% in rental activity. Conversely, we have also seen an overall increase of approximately 40% in retention at the expiration of leases in addition to receiving rescissions of prior notices-to-vacate. While the result of these effects has been an approximately 1% reduction in overall occupancies at most properties than we typically experience at this point in the year, occupancy remains stable. We are closely monitoring this and using every marketing and management tool at our disposal to drive leasing velocity and retention.
Our paramount concerns remain maximizing the portfolio operations as well as the health and safety of our staff and residents during this exceptionally challenging and uncertain time. We will be continuing to assess the financial performance of each property to determine the ability to make distributions from prior operations, while maintaining a significant availability of funds should the next several months prove more challenging than April and will provide further updates on a property specific basis as we gain more clarity. If you have any questions or concerns, please do not hesitate to contact us. We value the trust and confidence you continue to place in us.
David A. Parisier
Paredim Partners LLC