Detroit landlord's small-business survival plan: Free rent until July

Rent represents a major expense for book shops, restaurants, gyms, retailers and more

Matt Cullen has been working on downtown Detroit's revival since the Carter administration. His real-estate career -- beginning with General Motors Co. in 1979 when that company dominated -- tracks Motown's long demise, and its recent resuscitation.

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In September, he became chief executive of Bedrock, a development company created by billionaire Dan Gilbert. As the coronavirus pandemic spreads, Mr. Mullen must bolster momentum Detroit has gained since its 2013 bankruptcy.

"We don't want to fall back," Mr. Cullen, 63, said in a phone interview from his home office in Grosse Pointe, Mich., on Sunday. "The irony is that it's long been said if the nation catches a cold, Detroit gets pneumonia."

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Because Detroit's recovery is nascent, "the idea of now standing back and hoping it comes out OK is not an option."

On Monday, Bedrock unveiled a rescue package his team spent 48 hours last week hammering out. Under the plan, Bedrock won't collect rent and fees from dozens of small businesses over the next three months. It will cost his firm "millions of dollars," Mr. Cullen said.

Since the coronavirus outbreak, small-business assistance funds have been established in certain parts of the U.S., and Amazon.com Inc. formed a $5 million fund to aid Seattle's local businesses. Rent forgiveness plans of this scale, however, are scarce.

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Rent represents a major expense for the book shops, restaurants, gyms, retailers, and other companies Mr. Cullen seeks to help. It can rival labor costs.

In many cities, an initiative by a single landlord would be ignored. Bedrock, however, owns about 50% of the leasable commercial real estate space in Detroit's 1.4-square-mile downtown business district. Bedrock estimates its program covers nearly 40% of downtown restaurants and retail.

Mr. Cullen in recent days used multiple telephones and computer screens to monitor several communication streams simultaneously. Coordinating the efforts of leasing agents, property managers, security personnel and project developers from home was like drinking from a fire hose. His three sons also recently returned from college.

Mr. Cullen usually manages via in-person meetings, where topics can be jotted on whiteboards. He visits many Bedrock sites during a typical workday.

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His lieutenants worked through the night calling several affected businesses, asking questions about their financial condition. "They were remarkably transparent in a situation where people could have been hesitant given the circumstances," he said.

Meanwhile, Mr. Cullen kept up on guidelines mandated by the state. As of Sunday, Michigan Gov. Gretchen Whitmer has ordered temporary closure of certain small businesses -- such as hair and nail salons -- but not a blanket lockdown for Michigan's citizens.

Complicating matters: Bedrock's founder Mr. Gilbert is recovering from a severe stroke he suffered in May. Mr. Gilbert is back to work but also spending hours each day in therapy. He owns mortgage lender Quicken Loans Inc., the Cleveland Cavaliers and other companies.

Mr. Cullen needs to be mindful of his boss's health and busy schedule, and meet Mr. Gilbert's demands. "If we didn't have something for him on this, he would have said 'what the hell? Are you guys paying attention?'"

Mr. Gilbert blessed the forgiveness scheme Friday. Bedrock will also extend a shorter forgiveness window to certain companies that aren't considered small businesses.

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Bedrock has ample liquidity, but it has sunk $5.6 billion into building purchases, redevelopment and new projects. Steady income is needed to pay office staff, sales force, security guards, maintenance crew and others. Therefore, Mr. Cullen was obligated to count the costs.

"What's the alternative?" he asked.

Out-of-work locals and empty storefronts will cripple Detroit, and Bedrock's bottom line. If forgiveness of rent payments prevents that, then everyone wins in the long run.

Mr. Cullen isn't solely focused on small businesses. One of his priorities is keeping construction of "Hudson's tower" on track. It is slated to be one of the city's tallest and among the first skyscrapers built inside Detroit city limits in decades. Bedrock sees it as a beacon of hope.

Construction continues on that project as of Monday.

Mr. Cullen wants to mobilize Detroit-area residents and his own employees to help small businesses in need. This could mean buying gift cards, or ordering takeout.

Bedrock also leases to various companies that offer barre fitness clinics, spin sessions or yoga classes. "We're asking ourselves 'can we do virtual yoga?'" he said. "I haven't done one yet."