The latest market drawdown has hit the preferreds market like a ton of bricks. Lower short-term rates have hammered fixed-to-float securities, while cyclical sectors like banks and REITs, which are heavily represented in the population, took a heavy brunt of an oncoming recession. Investors who thought they held relatively diversified portfolios may have been surprised by sharp and broad-based losses. In this article, we take a look at a number of portfolio dimensions that investors may be overlooking when constructing their preferreds portfolios.

Our takeaway is that investors should look beyond merely increasing the number of securities in the portfolio, allocating to higher-quality stocks or picking across a number of different sectors. Other dimensions worthy of consideration are intra-sector, coupon type and duration diversification, as well as institutional vs. retail market exposure.

What do investors typically do in order to diversify their portfolios? The traditional approaches are selecting a sufficiently high number of securities, allocating across different sectors, and selecting higher-quality securities for at least a part of the portfolio.

We call these insufficient diversification approaches - pseudo or lazy-diversification. This is because they can give investors false comfort while setting them up for nasty surprises ahead. Let's go through them in order.

Some investors will often aim to diversify their portfolio holdings by increasing the number of securities they hold. The suggestion that appropriate diversification can be achieved by increasing the number of holdings has come from both the media and academia. Jim Cramer, on his Mad Money program, used to air a segment called "Am I Diversified?" where users called in with Jim's view of a 5-stock portfolio. Somewhat more seriously, in their 1970 paper, Lawrence Fisher and James H. Lorie found that a random portfolio of 32 stocks reduced the return volatility of the portfolio by 95%. This approach, while interesting, is not the same as diversification, however, and most investors are clearly well aware of this fact.

This is why investors also try to allocate across different sectors. However, apart from the CEF and utilities sectors which dropped by "just" 20%, all other sectors experienced very heavy drawdowns.

Source: Systematic Income Preferreds Tool

Tilting entire towards investment-grade securities is no guarantee of success either. The chart below plots total returns over the past month of investment-grade securities where drawdowns have ranged from low single-digits to over 60%.

Source: Systematic Income Preferreds Tool

In the sections below, we discuss additional dimensions of preferred securities that investors should consider in constructing their portfolios.

As we suggest above, allocating to securities from different sectors may not do the job, since a given sector can contain securities with very different characteristics. To take the mREIT sector as an example, the recent drawdowns within the sector have ranged between 40% and 95%. While 40% is a terrible result, it is surely miles better than 95%. In the case of this particular sector, the key differentiator lies in the underlying portfolio holdings of each company with companies focused on agencies performing better.

Source: Systematic Income Preferreds Tool

By definition, the individual institutional preferreds market is largely inaccessible to retail investors who are mostly limited to the $25-par market with a few exceptions. This doesn't mean that retail investors cannot hold institutional securities, however, with many preferreds funds allocating to the institutional space.

In the chart below, we plot the total returns over the last two months of the two markets. We proxy the two markets using two funds: the iShares Preferred and Income Securities ETF (NASDAQ:PFF) for the retail market and the First Trust Institutional Preferred Securities and Income ETF (NYSEARCA:FPEI) for the institutional market. This is not a perfect comparison, given the credit quality, regional, and industry differences, but the results are still telling. Initially, the two populations tracked each other relatively well, but then began to diverge sharply, with the retail population showing significantly more volatility. We suspect the lower liquidity of the retail space revealed more liquidity gaps in the trading and pushed the retail market nearly 10% below the institutional one at the lows. Although, in the end, the two sectors have again converged, the sharper drawdowns in the retail sector may have made it more difficult for investors to hang on to their holdings during the drawdown.

Source: ADS Analytics LLC, Tiingo

In the chart below, we plot the total returns of retail preferreds by dividend type: floating-rate, fixed-to-floating, and fixed. We exclude non-investment grade securities to control for credit quality. The chart shows that fixed-rate preferreds have held up the best, with fixed-to-floating suffering drawdowns similar to floating-rate securities but rallying harder since then.

Source: Systematic Income Preferreds Tool

This relationship makes sense for two reasons. First, fixed-rate preferreds have a higher duration, which is an asset in an environment of decreasing interest rates. And secondly, lower short-term rates due to sharp Fed cuts have lowered the distributions of floating-rate securities as well as reset yields of fixed-to-float securities in relation to fixed-rate preferreds. A steepening yield curve means that the prices of floating-rate and fixed-to-floating securities had to drop further in order for their stripped and reset yields to catch up to fixed-rate yields.

If we look at total returns of investment-grade fixed-rate securities by the amount of call protection, we see an interesting dynamic. Securities with the shortest amount of call protection have fallen the least, and vice-versa. This makes sense intuitively since the time to first call acts as a kind of conditional duration and securities with the least time to first call should have the lowest duration. And because the moves in credit spreads were much higher than moves in risk-free yields, the securities with the lowest duration were least impacted.

Source: Systematic Income Preferreds Tool

This only works up to a point, however, since the closer the company is to default, the more the prices of its pari passu securities will move towards the same price. You can see this dynamic in the corporate bond space when the yield curve will typically flatten and then invert at credit spreads of around 500-1000bps. This is because, when prices of bonds with different maturities move towards the same price i.e. recovery, the yields of shorter-term bonds will increase more sharply than the yields of longer-term bonds.

Let's take a look at a few fixed-rate preferreds issued by Bank of America (NYSE:BAC) to see if this dynamic is evident in preferreds as well. The Bank of America, 6.2% Series C (BAC.PA) has the least call protection with a call date in January 2021, and the Bank of America 5.0% Series LL (BAC.PN) has the greatest amount of call protection with a first call date in September 2024. As we would expect, the BAC.PA has moved much less than BAC.PN.

Source: Systematic Income Preferreds Tool

Let's see what happened in yield terms. The yields of the six stocks compressed through the drawdown and inverted during the worst episode and then normalized again. This jives well with the experience of the corporate bond market but also suggests that investors may be more willing to take a lower yield if they can lock in that yield for a longer period of time.

Source: Systematic Income Preferreds Tool

When constructing portfolios of preferred stocks, investors should look beyond the issuer count and sector representation. Taking into account such security dimensions as intra-sector quality, coupon-type and duration diversification, as well as institutional vs. retail representation should lead to more resilient portfolios that could potentially withstand a greater number of challenging market conditions.

Check out Systematic Income and explore the best of the fund, preferred stock and baby bond markets with our powerful interactive investor tools.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Beware Lazy Diversification In Preferreds - Seeking Alpha

Frog Pond West construction could be slowed, however, as developers adhere to social distancing

Though Gov. Kate Brown's recent executive orders to reduce the spread of COVID-19 have restricted schools, restaurants, retail facilities, the entertainment industry and other sectors, they did not specifically limit the construction industry.

This means that construction in Wilsonville's new Frog Pond West residential neighborhood, which is north of Boeckman Road and west of Advance Road, is continuing largely unimpeded. Currently, a 36-lot development (Morgan Farm) and a 44-lot development (Stafford Meadows) are under construction, while two more developments that will total at least 114 lots are on the horizon.

Ezra Hammer, the vice president of policy and government affairs for the Home Builders Association of Metro Portland, explained why he thinks keeping development going is important.

For one, he said construction activity can take place under social distancing requirements because work is done largely outdoors and in spacious environments. Stephanie Hosmar, marketing and sales manager for Stafford Meadows builder West Hills Homes NW, said the company is implementing social distancing and sanitation measures and the fact that there are only a few homes currently under construction makes it easier to abide by guidelines.

"There's naturally not many people on site at a time," Hosmar said.

However, she has heard of construction projects in more dense areas pausing due to the challenges of maintaining personal space.

Another benefit of keeping construction going, Hammer said, is the potential need for medical services and emergency housing infrastructure.

"Emergency homeless shelters, emergency triage spaces for patients and hospitals are going to be absolutely critical," Hammer said. "There's going to be physical structures done to build the spaces to defeat COVID-19."

Hammer, though, expected development activity to slow regionally with fewer workers on site and fewer available. He also surmised that a potential slowdown of the governmental approval processes caused by the cancellation or postponement of meetings and municipal staff shortages could stall construction.

City of Wilsonville Community Development Director Chris Neamtzu and Building Official Dan Carlson did not expect that to happen in Wilsonville.

Neamtzu said the City's Development Review Boards, which approve development applications, likely will continue to hold meetings remotely and Carson said the building department is continuing inspections at the same rate as it previously had. The city also is offering virtual inspections for sites city officials already have examined in person.

"It's not going to slow us down any. We have staffing capacity and have backup plans in place. Staff can work remotely if necessary and are able to conduct field inspection with iPads and using technology," Carlson said.

Carlson also said inspection loads have continued at a steady rate since coronavirus concerns and restrictions proliferated.

"Our goal is to keep development happening, to keep construction sites working and to not get in the way of that but to facilitate it," he said.

Like Hammer, Hosmar expected the pace of development to slow a bit, partially due to construction contractors being shorthanded.

"Part of that is we've seen a slight slowdown some shorthanded subcontractors pushing out work a couple weeks," she said.

Hosmar said just over 10 homes have been sold in Stafford Meadows, four are under construction, three are finished and still on the market, and construction of the remaining homes hasn't begun.

She said West Hills NW is still selling homes and that virtual tours make it easier for customers to move forward with the purchasing process without stepping foot in a home. However, she has heard some potential buyers express hesitation due to the plummeting stock market and said that required walk-throughs at the end of the process can be tricky due to social distancing.

"Things have stayed pretty stable. There's a lot of fear out there, but we want to maintain any sense of normalcy we can, and we know people still need homes and want homes," Hosmar said. "Everyone is experiencing economic impact one way or another."

Hammer said disruptions to the supply chain caused by trade restrictions also could hinder development efforts.

"A great deal of construction material comes from overseas and comes from countries that have been hit by COVID-19," he said.

Overall, though production of homes and buildings is continuing, Hammer expected the coronavirus and a related economic downturn to hit the development industry hard.

"A great number of folks in construction employ less than 50 people. Those businesses have less capacity to weather economic downturns," he said.

"We expect there to be significant hits across the board. As the economy takes a turn for the worse, we would anticipate our industry would be impacted as well."

You count on us to stay informed and we depend on you to fund our efforts.Quality local journalism takes time and money. Please support us to protect the future of community journalism.

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Infill on the way at Frog Pond West despite COVID-19 - Pamplin Media Group

Nir Shoshani, Ron Gottesmann and Terry Wellons, with a rendering of NR Investments proposed mixed-use project

NR Investments will get $14 million in property tax rebates and grant money in exchange for providing 252 units of affordable and workforce housing in a 29-story tower in the Omni area.

The Miami City Commission, acting as the Omni Community Redevelopment Agencys board of directors, unanimously allocated $5.5 million to the developer on Thursday, to help fund its $80 million mixed-use project at 70 Northeast 17th Street. Headed by Nir Shoshani, Ron Gottesmann, and Terry Wellons, NR Investments previously built Filling Station Lofts and Canvas Condominiums in the Omni area.

NR Investments latest project will include 41,288 square feet of offices, 4,413 square feet of retail space, as well as the rent-restricted apartments.

A property tax rebate equivalent to $8.5 million had been granted to NR Investments by the Omni CRA last October. The total subsidy amounts to $55,000 a unit, said Adam Old, the Omni CRAs director of policy and planning.

In its proposal, NR Investments said that the subsidy was needed to make up for an estimated $17.8 million in rent losses.

The apartments will be set aside for people making between 60 percent and 140 percent of Miami-Dade Countys median area income, which is currently $54,900 a year. The projects 188 studios will be rented for between $889 and $2,075 a month. The 60 one-bedroom units will have rents ranging from $953 and $2,224 a month. Four two-bedroom apartments, reserved for a household making 140 percent of Miami-Dades median household income, will rent for $2,670 a month.

The median rent in Omni is $2,146 a month, according to Niche.com. Prior to the Covid-19 pandemic, city of Miami planners predicted that Omni rents would climb higher. The development agreement with the Omni CRA freezes the rents for NR Investments project until 2047.

According to Florida International Universitys affordable housing master plan, commissioned by the city, Miamis median annual household income is $33,999. For renters, the median household income for the city is $28,650 a year. Due to rising rents and property values, 57 percent of Miamis households spend more than 30 percent of their income on housing.

Most of Omni, however, falls within Miamis waterfront adjacent District 2, where the median household income for renters is $61,850 a year, according to FIUs report. Nevertheless, half of District 2s renters are cost burdened, while 26 percent are severely-cost burdened, according to FIUs report.

In his letter to the Omni CRA, NR Investments lawyer, Javier Fernandez, stated that the project will provide needed housing inventory to critical employees within the Miami market such as hospitality service workers, teachers, police officers, firefighters, registered nurses, and recent college graduates.

NR Investments invested $4.8 million to buy 22,625 square feet of land for the proposed mixed-use project between September 2016 and April 2019.

The company aims to start construction in July, and complete the project in January 2023.

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NR Investments gets $14M subsidy to build workforce and affordable housing - The Real Deal

A new way of accessing Westminster Pier Park is expected to be in place this summer.

Construction of a new overpass into Westminster Pier Park from the Front Street Parkade at Sixth Street got underway last spring. The overpass will include stairs and an accessible ramp, allowing pedestrians and cyclists to get to and from Westminster Pier Park.

As part of its Pier West development on the west side of the park, Bosa Developments committed to building an overpass and an elevator. The city, however, preferred that a ramp be built because it wanted to increase accessibility options for those going to the park and to avoid some of the issues its had with the existing elevator access into the park at Fourth Street.

Work related to the pedestrian overpass and ramp continues, as does the planning/design and intended construction for the new plaza and play area to be constructed beneath the ramp, said Dean Gibson, the citys director of parks and recreation. Our best scheduling assessment at this timeindicates that the overpass and ramp will be complete in late June.

Construction of the plaza and play area around the base of the overpass is intended to start in July, with completion in the early fall of 2020.

As you might guess, there are many factors currently impacting the construction industry at this time, so all timelines are subject to change pending local market conditions, Gibson said in an email to the Record.The city continues to prioritize the completion of this project at this time.

Currently, visitors have two ways to access Westminster Pier Park; they can enter by an elevator at Fourth Street (at the Front Street parkade) or they can use a ground-level access on the west side of the site.

At the April 6 council meeting, city staff voiced concerns that the current connection between Fraser River Discovery Centre and Westminster Pier Park, which goes through the Bosa construction site, is a narrow corridor that has limited sight lines, which is posing constraints for physical distancing. Because of social distancing in response to COVID-19, staff has recommended the introduction of one-way travel through this corridor during times of peak use, the provision of an alternate return route to the waterfront via Columbia and Front streets and the provision of on-site traffic control personnel to manage people going to the park.

Once the new overpass is complete, people will be able to walk onto the parkade at Sixth Street and use the new pedestrian/cyclist overpass and ramp to get in and out of the park.

The overpass structure, which will extend over the rail tracks, will be assembled off-site and will be delivered as a complete unit to the site, where it will be installed over the rail tracks using a mobile crane.

During construction of the overpass, the childrens playground in Pier Park thats closest to River Market has been closed. The city will build a new playground at the same location.

Pier West, which is now under construction at 660 Quayside Dr. will include 53- and 43-storey residential towers, a three-storey commercial building with child-care and retail space, an extension to Westminster Pier Park, a public plaza, surface and underground parking and about two acres of park.

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Improved access to Westminster Pier Park coming this summer - The Record (New Westminster)

Despite the ongoing coronavirus pandemic bringing the country to a standstill, there is, in fact, a future ahead of us.

And across Mansfield and Ashfield that future looks very bright - with dozens of new housing, construction and retail developments on their way to change the face of the region.

Be it through new distribution centres, huge new retail parks, a hotel or a supermarket, the region has got a lot to look forward to in the coming years.

Nottinghamshire Live has put together this list of the five biggest developments arriving in our area over the coming months.

With them are the arrival of more than 3,000 jobs, new transport links and more opportunities for shoppers, workers and tourists to the area.

The Summit Park development is by far the biggest of the five major moves on this list, bringing with it up to 1,800 jobs, transport and bus links and a huge, international retailer.

The land at Summit Park had been set aside in 2014 to become a new state-of-the-art logistics and business park, with officials in Mansfield and Ashfield District Councils describing it as the beginning of a rise in skilled employment in the area.

However, no progress was ever made on finding developers to move onto the land and it has remained derelict since the initial plans were announced in July 2014.

Yet last year plans were approved for a huge distribution warehouse across a 162,781sqm facility, in what was described by council officials as "the biggest single private sector investment in the district".

Construction is expected to finish on the site by September 2020, with the major international retailer expected to reveal itself in the coming months.

Plans for the final phase of a massive 46 million retail and industrial scheme were approved in November 2019 - bringing more than 1,000 jobs.

Park 38, opposite the East Midlands Designer Outlet at South Normanton, will see a new retail park created on farmland, as well as industrial units.

The first phase of the scheme for 10 retail units and a 95-bedroom hotel was approved a few years ago, however phase two involves building a number of warehouse and distribution units, including a trade counter or gym.

Documents submitted by Q and A Planning, on behalf Limes Developments, said: There will be substantial economic benefits arising from the proposed development comprising new jobs, gross value added to the economy, additional business rates for the council and spin-off benefits for the construction and operational supply chains.

Construction work on the new 22,000 sq ft Lidl supermarket at its Leeming Lane development in Mansfield began in February, the developer behind the project confirmed.

The new store is expected to open in summer, bringing dozens of new jobs to the local area.

Property development and investment group Strawsons Property agreed a long-term lease with the retailer in 2018.

It has since worked alongside the popular supermarket brand to secure planning approval for the site, which was granted by Mansfield District Council at the end of last year.

Plans to convert the former Strand Cinema and bingo hall site into five retail units and office space were approved in October 2019 - bringing with it the potential for dozens of jobs.

The Strand Retail Centre, submitted by the ARBA Group, will bring the demolition of the historic site in Church Street, Warsop, making way for new development.

Frozen food retailer Heron Foods confirmed in May last year that it will be the first to take up one of five available retail spaces at development.

And the ARBA Group says the plan will "generate opportunities" for the parish.

Andrew Allen, ARBA director, said: This site has been derelict for some time, and it is clear that local people want to see something done with it that benefits the local community."

Despite the ongoing pandemic temporarily halting its construction, work is still progressing on the new 4 million Travelodge in Mansfield town centre.

The site, which brings with it up to 15 hotel jobs as well as in construction, will be the towns first national chain hotel and based on the old Gala Bingo hall, on the corner of Albert Street.

It will be the firms second hotel in the area, after Travelodge Mansfield, Mansfield Road, Sutton.

Shakila Ahmed, Travelodge spokeswoman, said: The local economy is growing at pace and, with increasing visitor numbers to the area, there is a shortage of good quality and great value accommodation to meet customer demand.

"Therefore, there is a need for a second Travelodge in the heart of Mansfield."

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5 major developments that will bring thousands of jobs to Mansfield and Ashfield - Nottinghamshire Live

NAIOP Southern Nevada presents FACTS! Amidst COVID-19, Lending, Development and Construction: What is Actually Happening & Not Happening in Southern Nevada.

At its free April virtual breakfast. Panel speakers includeKyle Nagy, CommCap Advisors; Guy Martin, Martin-Harris Construction, and Doug Roberts, Panattoni Development Company. Hayim Mizrachi, MDL Group, will moderate the discussion. These industry experts will discuss what is actually happening in the commercial real estate development community in Southern Nevada during the COVID-19 pandemic. Find out if the pipeline of new tenants leasing space in new developments has dried up and are lenders just waiting for the foreclosure stay to be lifted so they can repo commercial properties, plus much more.

The meeting is sponsored by Cox Business.

NAIOP Southern Nevada provides educational and informative programs during its monthly member meetings on topics relevant to the commercial real estate development industry. Year-round, NAIOP Southern Nevada hosts mixers and educational programs for its members and potential members. To register or for more information, call (702) 798-7194 or visit http://www.naiopnv.org.

When: Thursday, April 16, 2020

Participant Sign On 7:45 a.m.Webinar program 8:00 a.m. 9:00 a.m.

Where: The webinar is free and you can register athttps://zoom.us/webinar/register/WN_dtdcDPZWRt6zYLGKliY47g.Registrants will receive an email from Zoom with a login link to the webinar.

About NAIOP Southern Nevada

NAIOP Southern Nevada is a chapter of NAIOP, the Commercial Real Estate Development Association, and it comprises more than 600 members serving the Southern Nevada market. NAIOP is the leading organization for developers, owners and related professionals in office, industrial, retail and mixed-use real estate, with 20,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visitwww.naiopnv.org.For more information on NAIOP corporate, visitwww.naiop.org.

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NAIOP Southern Nevada presents FACTS! Amidst COVID-19, Lending, Development and Construction: What is Actually Happening and Not Happening in Southern...

By Gregory Call, Rebecca Suarez, Allyson McKinstry and Tracy Reichmuth April 7, 2020, 4:07 PM EDT

Few industries have been as impacted as much as brick-and-mortar retail. Shopping centers and retail stores (other than those providing essential services) have closed and retailers and landlords have been talking to their lawyers. It is certain that the advice retailers and retail landlords have been getting is we need to read the lease language, understand the specific facts, and see what law there might be that deals with similar situations.

Just a couple of weeks ago, there were questions about whether stores and shopping centers had to be closed, should be closed, and could be closed. But that has changed rapidly. Now stores and shopping centers have closed, and the decisions made by retailers and retail landlords to close are not being questioned.

Closing stores has had a dramatic impact on sales for many retailers. While many retailers have online businesses, the vast majority of their sales still come from in-store sales.

The only reason a retailer enters into a lease is to operate its business in the specified space meaning to sell its merchandise to customers in the store. With both stores and shopping centers now closed, the opportunity for those sales is gone and the lease provides the retailer no benefit.

For the past two weeks, retailers have faced questions regarding the payment of rent. For brick-and-mortal retailers, rent is a major expense across their portfolio of leased space. For many major retail chains, rent payments total tens, and in some cases hundreds, of millions of dollars a month. Alternatively, rent payments are the primary source of revenue for retail landlords.

So what do 100-page retail leases say about the circumstances retailers and landlords face in these times? There are few leases (we have seen none) that consider the impact of a pandemic. Retail leases are instead filled with language that recognizes the fundamental nature of the bargain the parties struck: The landlord will provide a space for the retailer to operate its business, and if the retailer has a space to operate its business then the retailer will pay monthly rent.

Retail leases also contain agreed-upon provisions regarding anticipated risks that could prevent retailers from operating their businesses. For example, leases frequently contain provisions addressing physical damage to the leased space that prevents the retailer from operating its business. Similar provisions deal with other contemplated risks, including condemnation and hazardous materials.

The construction provisions of most retail leases similarly reflect this concept, providing that the payment of rent begins only after the tenant can open its store and begin to operate its business. All of these provisions recognize the fundamental bargain struck between retailers and landlords: To the extent that the retailer cannot operate its business, rent will not be required for the time and extent that the business cannot be operated.

Co-tenancy provisions are currently not satisfied, providing tenants with additional arguments.

Given the widespread closure of stores, co-tenancy provisions provide retailers with additional support for not paying or abating rent under the lease. A key aspect of shopping centers is that they gather tenants together in one location so that each tenant can benefit from the customers that other tenants bring to the shopping center.

Retail landlords in many leases agree that rent will vary depending on which tenants, and how many tenants, occupy and operate in the shopping center. These clauses are called co-tenancy provisions and they provide that if certain specific tenants (often referred to as key or anchor tenants) are not open and operating in the center, or if the percentage of total space occupied by operating tenants who qualify under some agreed-upon definition falls below a certain level at the center, the rent the tenant owes will be lower.

The language of these clauses varies. In interpreting these clauses, courts have found the provisions are not promises by the landlord, but instead conditions that, if not, met allow tenant to pay alternate rent. For example, in Old Navy LLC v. Center Developments Oregon LLC,[1] the court found:

TheLease does not require [Landlord] to keep Key Stores at the Mall, and [Landlord] does not promise to keep Key Stores at the Mall ....If the conditions for operating the Old Navy store at the Mall are not met, Old Navy may choose to close its store and continue paying rent or it may choose to pay Alternate Rent-thus, invoking a tiered rent structure. In other words, Article 13.4 does not provide for damages if [Landlord] fails to keep certain tenants at the Mall. If [Landlord] leases to an entity that does not qualify as a Key Store, it is not in breach or default of the Lease and it does not owe Old Navy any damages. Rather, it must notify Old Navy of the Key Store closure, thereby triggering Old Navy's right to either pay Alternate Rent or close its store and pay Minimum Rent.

Landlords, in response, are arguing that retailers should pay full rent even though they are not able to operate their stores in the rented space, and are pointing primarily to a single paragraph in each lengthy lease: the act of God or force majeure provision. That paragraph often says something like this:

If either party is delayed, hindered, or prevented from the performance of an obligation because of strikes, lockouts, power failure, restrictive governmental laws or regulations, riots, insurrection, war, or another reason not the fault of the party delayed, but not including financial inability, the performance shall be excused for the period of delay. Tenant shall not be excused from the payment of rental, additional rental, or other payments.

Retailers can point to many problems with landlords force majeure argument.

First, tenants may point out that the provision has no application because the retail tenants right to not pay rent does not arise because of a force majeure event. Rather, the tenants right to not pay rent arises because the tenant no longer has a space to operate its business. The current situation is covered by numerous other provisions throughout the lease that provide that if tenant does not have a space to operate its business, it therefore does not have to pay rent.

Second, any reasonable reading of the force majeure provision in the context of the entire agreement makes clear that language specifying that the tenant is not excused from paying rent applies only in situations where the tenant cannot pay rent because of an unforeseen event (e.g. the tenants headquarters has been destroyed and it cant process rent checks). But such language has no application to the current situation, in which a tenant has no space to operate its business.

An interpretation of force majeure language that excuses landlord from its obligations but requires tenant to pay regular rent runs contrary to express language the parties agreed to elsewhere in the lease regarding known risks, such as fire and condemnation.

Third, courts have long held that force majeure provisions should be narrowly interpreted. That rule raises doubts that a force majeure provision that does not specifically include pandemics has any application to the current situation. The rule further weighs against any interpretation that creates a situation (contrary to other provisions in the lease) in which a tenant must pay rent even though it has no location to operate its business.

Landlords also contend that force majeure provisions negate the carefully negotiated co-tenancy provisions found in leases. Landlords contend that force majeure provisions excuse landlords performance in satisfying the co-tenancy occupancy levels. The obvious problem for landlords is that co-tenancy is a condition that determines what rent is paid not an obligation of the landlord.

Existing legal authority supports retailers argument that where the landlord fails to provide a space for the retailers operations, rent obligations are excused.

Beyond simply reading the lease, attorneys for retailers and retail tenants are looking for past decisions involving analogous situations. As just one example, there is interesting law from Prohibition-era cases examining the impact of Prohibition on leases for businesses that sold alcohol. In those cases, courts determined that if a contract was legal when it was made, and the performance of it is rendered illegal by a subsequent law, then both parties would be discharged from their obligations.[2]

There are also more recent decisions regarding frustration of purpose and impossibility that have application here. For example, in Saab v. Norton Family Inc.,[3] a retailer and a shopping center owner entered into a commercial lease that expressly provided that the retailer was to use the leased premises only for the purpose of running a restaurant and serving liquor.

After operating a restaurant for two years, the retailers restaurant and liquor licenses were revoked by the city and the retailer abandoned the leased premises. The shopping center responded by suing for unpaid rent.

Applying the doctrine of frustration of purpose, the court found that the retailer was clearly warranted in terminating its obligations under the lease. The court explained that it was physically possible for [the retailer] to remain in possession and continue to pay rent, but it would have received no value in return because it could not do the one and only thing for which it had leased the premises and which it was permitted to do under the Lease; namely, operate a restaurant.[4]

Conclusion

So what do we know?

First, retail tenants and landlords do not agree on what their leases provide regarding the obligation to pay rent in the current situation. Second, in situations in which the parties understood that a retail tenant would not be able to operate its business, the parties agreed that tenant would not pay rent. Third, in the past when courts have considered situations in which a tenant was unable to operate its business in the leased space, courts have concluded tenant should not pay rent.

Today, retail tenants are not able to operate their businesses in the spaces they leased. Despite that fact, landlords are pressuring the tenants that cannot operate their businesses to pay rent. We will see what happens over the virtual (for the time being) negotiating tables and in virtual courtrooms across America.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 2012 WL 2192284, at *11 (June 13, 2012, D. Or.).

[2] Heart v. East Tennessee Brewing Co. , 113 S.W. 364 (Tenn. 1908).

[3] 2000 Mass. App. Div. 200-02 (2000).

[4] Id. at 20102 (internal citation omitted).

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Anticipating The Pandemic's Impact On Retail Leases - Law360

Theres a new lighting collection coming to High Point Market next month KingsHaven and while the line may be new to the North Carolina home furnishings market, its founder/designer is not new to interior or product design. Over the past five years, Lauren Wylonis has immersed herself in the varied disciplines of interiors when it comes to creating beautiful home spaces designer, retailer, product designer and author. And thats after 15 years as a forensic psychiatrist.

When asked what inspired her transition to home design, Wylonis says, I really love art. Our homes are the art thats with us every way and every day. I feel lucky to be able to design spaces that influence peoples moods and positively affect how they live in their homes.

In her interior design career, and as outlined in her first book, At Home with KingsHaven, Wyloniss style incorporates both historic and contemporary design elements within the restoration and construction projects shes undertaken in and around Philadelphia including the Grantham Estate, which was designed by William Lightfoot Price in 1895; the Heydon Estate, which was designed by Bissell & Sinkler in 1929; and Agincourt, a new-construction home that was designed with the history of the area in mind. We got started in remodeling and designing historic homes first, she says.

In addition to the historic details, however, Wylonis is also considerate of her clients. I feel that mindfulness in design is really important. Designing with a sense of wellness is important for peoples mood and health every day, the former psychiatrist notes. We should be designing to reduce stress levels, not increase them. To ensure her customers love the homes she designs for them, Wylonis said she pays attention to whos going to live in the space and what their activities look like, and then tailors her design to create homes that allow her customers to be their happiest, healthiest, best selves in the space.

For Wylonis, good lighting goes a long way toward creating functional, comfortable spaces. Designing to a historic aesthetic but with modern conveniences, finding lighting proved challenging, so she began designing her own, mixing modern elements with tried-and-true materials and construction techniques.

I have a love of history and the craftsmen who have contributed to architecture and design for hundreds of years, Wylonis says. Appreciating the takeaways from years ago is important. I love the idea of stories in a home, particularly one of past lives. They contribute to a sense of depth and grounding for the people now living in that home.

While Wylonis will showcase her lighting in High Point this spring, her line of products extends into home decor as well, much of it focused on that blend of old and new. We do a number of products that are based on historic design lines, she notes. Well create a more transitional version of an antique fixture by streamlining it. You still get the distinctive lines of the architecture but maybe well use a warm LED bulb so its more energy efficient.

Where Wylonis and her product team dont improvise is in the quality of the craftsmanship and materials used in her home furnishings. The foundation of much of her product design revolves around iron and exotic woods, materials she says give the KingsHaven collection its texture. You really have a depth in those fixtures as part of the design of a room.

Wylonis says the company employs artisans from around the globe who are experts in their craft, be that basket weavers from the Darin Rainforest or blacksmiths from Ecuador. While the manufacture of KingsHaven designs are sourced in areas such as South America, finishing work is done in the United States, which gives Wylonis and her KingsHaven team the ability to customize based on customer requests. With 52 finishes and more than 70 different colors of glass that the company designs with, the possibilities for those interested in KingsHaven lighting are endless.

Currently, KingsHaven home furnishings are available through a few upscale retailers and the companys namesake retail/design emporium on the Philadelphia Main Line where Wylonis curates a selection of fine lighting, home accessories and furniture as well as on the companys website.

Coming this spring, KingsHaven will launch its lighting in theWoodbridge Furniture High Point showroom and is also opening a showroom in New York at the D&D building. Were trying to increase our visibility and accessibility to people who are interested in quality materials and workmanship, Wylonis says.

As for home design, that funnels through KingsHavens property companies, KingsHaven Properties and KingsHaven Design, as Wylonis concentrates on building the product side of the KingsHaven brand.

Original post:
Lauren Wylonis Shares the Inspiration Behind KingsHaven - Furniture Lighting & Decor

Glendale City Council is considering whether to annex an 865-acre property that would be the citys second-largest addition in 25 years, but several on Council have reservations about proposed plans for the property.

Glendale has already annexed 417 acres of property and if it continues plans with four properties going through the annexation process, that number will rise to 763 acres. But the 865-acre Allen Ranches property, which is west of Loop 303, bordered by Bethany Home Road to the north and Camelback Road to the south, would more than double that total to 1,628 acres or more than two and a half square miles.

Nearly all of the newly-annexed property or property under consideration for annexation is in Glendales New Frontier near the Loop 303. The 1,337-acre annexation added in 2017 for the Woolf Logistics Industrial Campus, east of Reems Road on either side of Olive Avenue, is the only property Glendales added since 1995 larger than the Allen Ranches property.

While City Council told staff to move forward with the annexation properties, as it did with all five properties it reviewed late last month, several on Council had reservations on adding Allen Ranches to the city.

Council members objections around the property were that it includes plans for a residential development, could have a higher density of homes than Council would like, and would create a city island community of residents surrounding mostly by county land, miles away from the city and from most city services.

Im just not sure that this is going to make long-run sense to the city, said Barrel District Councilman Bart Turner.

The Allen Ranches property plans to use 615 of its acres for industrial businesses and 250 acres for a housing development. City Council has largely prioritized businesses over homes in recent years when choosing which properties to annex because they bring in to the citys take revenue rather than drain it.

Also, much of the property in Glendales New Frontier are near Luke Air Force Base and therefore restricted by Luke Compatible Land Uses, an intergovernmental agreement between the county and cities near the base to determine what can and cant be near the base, namely due to noise from jets. Mostly, the Luke Compatible Land Uses restrict homes and high-traffic retail close to the base and prefer industrial warehouses where fewer people would be.

A noise contour line runs through the Allen Ranches property. This shows how much jet noise an area will receive and dictates which land uses can exist in an area. The land owner plans to use the entire area west of the 65-decibel designation line to build homes, because there are no land-use restrictions west of that line.

Under its current zoning, the land outside of that noise contour line is approved for 2.5 homes per acre, but some on Council thought that was too dense.

I think this is one case where being relatively close to Luke, they should stick with low density at 2.5 (units) to the acre, said Yucca District Councilwoman Joyce Clark.

Ms. Clark and some others on Council didnt like the idea of adding any homes to the city.

Councils goal is to encourage and promote job opportunities in our New Frontier. I am not pleased to see this applicant come in with a mix of industrial and residential, she said.

Ms. Clark asked staff to explore the option of adding only the industrial portion of the Allen Ranches property and excluding the residential portion.

Vice Mayor Ray Malnar of the Sahuaro District, said hes not opposed to their being residential property as part of the annexation but agreed with Ms. Clark that a lower density would be better for the area.

When land is annexed into Glendale, by law its zoning transfers to the Glendale zoning designation that most closely matches what its zoning was under the county. Cholla District Councilwoman Lauren Tolmachoff noted that Allen Ranches already has the authority to a 2.5-home-per-acre density under the county. The property is seeking a rezone to create a Planned Area Development, but would most likely not agree to change to a lower housing density, Ms. Tolmachoff said.

Mr. Turner noted that while the housing development would pay for all of its internal roads, when it was time for those roads to be maintained, that cost would fall on Glendale taxpayers.

Ms. Tolmachoff also said she was concerned about the annexation because she was not excited about taking in the residential property.

Were having enough of a difficult time with our pavement management without bringing in more responsibility where were essentially going to be getting one-time money out here with the industrial, Ms. Tolmachoff said, while calling into the March 24 meeting.

City Manager Kevin Phelps noted that this property does not need to be annexed into the city. The developer can build the planned warehouses and homes while remaining under county jurisdiction. Mr. Phelps noted that in this case, Council would lose any control over the housing development and it could theoretically get approval from the county to add density or to switch to land uses that Glendale wouldnt like.

Mr. Phelps also pointed to the things the property would add to the city that Council does prioritize a lot of industrial businesses.

When you have a situation like that, sometimes theres a little bit of you get to have 100% of what youre looking for, Mr. Phelps said. What Ill tell you is this: this is our single largest proposed density of industrial/manufactural/commercial space on the entire Loop 303. The developers have proposed 11 million square feet of commercial development and theyve also included a willingness to do a fair amount of construction before having tenants lined up. And thats somewhat unique as well.

Mr. Phelps also noted that the proposed housing development, on the Allen Ranches western edge, would create a buffer to the existing housing development on county land to the west.

Lastly, Mr. Turner and Ms. Tolmachoff raised concerns over creating a city island of homes. Glendale is rapidly annexing land in the area, but there has been no residential property.

Youre going to be generating 3,000 residents, probably at least, maybe more, that are completely detached from the city public safety and city services, Ms. Tolmachoff said. So, Im not excited about the residential either.

Mr. Malnar asked staff to study and report back on the positives and negatives that such a city island would create for those residents.

Does it really matter?, he asked. Does it just provide a different type of lifestyle for people to be away from the city a little bit further, and is it going to really cause any problems with the rest of the citizens in the city?

The next steps for Allen Ranches and all under properties under consideration is for a blank petition to come before City Council before it is sent out to property owners on the land up for annexation to sign. A 30-day waiting period must be observed before the signatures can be collected. Then City Council would vote on whether to annex the property.

Link:
Glendale Council unsure whether to annex 865-acre property - Your Valley

According to The Architectural Team's (TAT) experts, these five stories will play out through 2020 and will endure through the decade.

As we enter the new decade, our designers and clients alike see a growing emphasis on projects intended to keep neighbourhoods affordable, and an interest in both time-tested and new design solutions to address housing shortages. We also anticipate important milestones for major projects transforming urban cores, a renewed resurgence in smaller cities, and foward-thinking approaches to resilient waterfront developments.

In growing cities nationwide, the displacement of longtime residents has emerged as a majorconcern.

To keep neighborhoods affordable and accessible were working with developers, non-profits, and public officials to expand or redevelop existing affordable and workforce housing developments, adding more residential units while preserving affordability and dramatically enhancing livability.

As an example, Jay Szymanski, AIA, NCARB, LEED AP points to TAT's redevelopment of one of the country's oldest public housing communities, South Boston's The Anne M. LynchHomes at Old Colony. Work is now underway to add a further 301 apartments to the 285residences built since 2011, which replaced midcentury superblocks with a series of attractive mid-rise buildings and townhomes. In nearby Roxbury, the firms redevelopment of the 1950s-era Whittier Street Apartments created a new amenity rich, mixed-income, transit-oriented multifamily campus with 210 affordable units out of 386 total, and an emphasis on outdoor community space.

Other soon-to-open projects will serve specific populations that often struggle to find housingand support. TATs 102 unit Residences at Brighton Marine, for instance, is leasing witha dedicated focus on veterans and their families, and offers 86 affordable homes including anumber of apartments set aside for formerly homeless veterans.

Faced with a persistent shortage in housing supply across the US, architects and developers are responding with solutions that demonstrate the continued value of adaptive reuse, and the benefits of new approaches including prefabricated and modular construction.

Across the northeast, TAT is reactivating formerly vacant or underutilized structures as newhousing. In Attleboro, Massachusetts, the firm has converted a historic jewelry factory into 93 units of senior housing called Sterling Lofts, offering important rental options for the states rapidly growing over-60 population.

At Bostons Ropewalk, a previously vacant landmark rope factory will soon offer 97 rentalapartments, the sixth historic residential conversion by TAT within the Charlestown NavyYard redevelopment. In Boston's South End, 100 Shawmut maximizes the potential of its siteby adding a seven story contemporary addition to a historic warehouse, for a total of 138 new condominium units.

Integrating adaptive reuse and new construction is a great way to address housing shortages while respecting a neighborhoods character. Were able to create value for the community by preserving historic fabric and looking to the future at the same time.

Other cities are exploring highly efficient approaches to infill development, includingprefabricated construction. In Quincy, Massachusetts, TAT is transforming a parking lot into a15 story, 124 unit tower called Chestnut Place, where locally fabricated modules havedramatically increased speed to market for these much-needed homes.

With new air rights developments, hotel towers, and uniquely positioned residential properties, many urban cores are set for major transformations in 2020 as closely watched and long-awaited projects reach major milestones.

For example, one of Bostons biggest real estate stories in a generation, Fenway Center, willsoon cross a watershed moment with its first phase approaching completion and its secondphase on track to kick off this year. TATs design for this 1.3 million-square-foot air rightscomplex adds housing, commercial office space, and retail uses while decking over a majorhighway and reconnecting three neighborhoods with new green space, public art, andpedestrian and transit connections. The first phase, Bower, offers 312 apartments, 37,000ft of retail, and 12,000ft of public open space.

A hotel boom continues, too, with one of the northeast's most eagerly anticipated mixed usetowers, the Raffles Boston Back Bay Hotel & Residences, designed by TAT for theprestigious international hospitality group and developer Trinity Stuart LLC. After a fall 2018groundbreaking, the 33 story high-rise is now under construction, transforming a prime corner site into a regional destination as the first Raffles property in the United States.

Design teams are also unlocking new opportunities in dense, built-up areas where large sites are hard to find. In Bostons historic Beacon Hill neighborhood, TAT's Archer Residences reimagines two six story former university buildings as a single, 172,000ft residential property topped off with a pair of contemporary penthouse additions and a sweeping landscaped roof terrace.

Identified by commercial real estate services group Commercial Caf as one of thecountrys fastest-growing Rust Belt cities, Rochester, NY is on a path towards a new era ofsuccess. One of the linchpins of this recovery is Sibley Square, the TAT-designedconversion of a 1-million-square-foot former downtown department store into housing, acommunity marketplace, and high-tech workplace environments. A major indoor market is set to open within the phased, WinnDevelopment-led project this year.

Smaller gateway cities like Worcester, MA, are on the upswing too, thanks to projectslike Courthouse Lofts, TAT's conversion of the historic Worcester County Courthouse into117 units of housing. Nearing completion, the Trinity Financial-led property also holds a first-in-the-nation museum celebrating local icon and pioneering African-American cyclist Major Taylor.

Increasingly vulnerable, flood-prone urban waterfronts remain desirable sites for newresidential and mixed use development. Forward-thinking design teams are taking a holistic approach to these projects, employing hard and soft approaches to shoreline design, strategic landscaping, and elevated public use areas. The result? Properties that can absorb storm surges while enhancing the public realm and long-term viability.

TATs recently opened Clippership Wharf, a 12 acre, 478 unit mixed use complexdeveloped by Lendlease in East Boston, has garnered national attention for this approach,which also offers residents and community members access to a harborwalk, beachfront area and floating dock with a kayak launch.

Link:
The Architectural Team unveil the five main values coming in 2020 - World Architecture News