- Hertz declared bankruptcy on May 22, carrying $19 billion in debt .
- The iconic car rental company told its landlords days before that it would not pay them rent for the next six months, according to a letter reviewed by Business Insider.
- It's the latest example of a big-name corporation asking building owners, many of whom run small businesses, for "help."
- Visit Business Insider's homepage for more stories .
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Bankrupt Hertz just told all of its landlords it won't pay rent for six months in the latest slam to commercial real estate
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Property owners who lease to Hertz received unwelcome news on May 19: Don't expect rent from us for the next six months.
In a letter reviewed by Business Insider, Hertz wrote that "it will be deferring all Base Rent payments for six months." Additional rent and utilities payments will still be paid.
The notice came several days before Hertz, saddled with a debt of $19 billion, declared bankruptcy on May 22. The coronavirus pandemic drove Hertz to its end, but years of financial and strategic blunders put the 102-year-old company in a shoddy position years before travel collapsed.
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Hertz did not respond to a request for comment.
In the letter, Julie Drake, Hertz's vice president of real estate and immigration, framed the request as one of help that the landlords some of whom own just a few commercial properties can provide to Hertz, a company that brought in $9.8 billion of revenue in 2019 .
"The Hertz Corporation believes that your immediate action and partnership will help mitigate the significant losses that we are absorbing," Drake wrote. "Your assistance will help us maintain jobs, fleet, infrastructure, and our other operations at as high a level as possible and allow us to be in a position to be ready to return to full service once the crisis passes."
Helping the corporation?
For landlords, leasing to a big-name retail client like Hertz was once a sure stream of steady payments.
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Now, chain retailers and restaurants are staging mutiny. Victoria's Secret is pushing to tear up its lease for a 20,000-square-foot location in Manhattan. As Business Insider's Daniel Geiger reports , that would nix a $10 million yearly rent payment in peril for its landlord,SL Green.
Others, like Hertz, are playing nice when they withhold rent. The Cheesecake Factory, which said in late March that it would not pay rent in April, wrote to landlords, "Due to these extraordinary events, I am asking for your patience and, frankly, your help."
Still, the request is raising ire among some building owners.
When Starbucks asked for one year's worth of reduced rent, The Seattle Times reported that its landlords, especially ones who run small businesses, were unnerved.
"For a publicly-traded company with a $90 billion dollar market cap to ask us for help?" landlord George Bean, who owns a small strip mall in Fort Myers, Florida, told The Seattle Times. "I was astounded."
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The latest hit to commercial real estate
Landlords are hardly the most sympathetic group in America. But the cutoff of commercial rent could cause a domino effect that could threaten public services.
New York City is a key example of that. Building owners told The New York Times last week that anywhere from 50% to 80% of their tenants didn't pay rent in April and May.
These property owners have a city tax bill due next month, but the lack of normal rent payments means that many won't be able to pay it in full. New York City will likely be starved of its normal tax revenue, and then pressed to fund its public hospitals, fire stations, trash pickup, and a slew of other essentials.
State and city governments nationwide have demanded the federal government for up to $750 billion as tax revenue dries up . With nearly 3,000 locations across the US, Hertz's inability to pay, which will lead to landlords unable to pay property tax, is set to push these flailing governments down further.
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Are you a Hertz employee with an opinion to share on the bankruptcy? Email rpremack@businessinsider.com .
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See Also:
- Hertz doubled down on sedans when Americans demanded SUVs, and a new report reveals how that helped bankrupt the 102-year-old giant
- The more than 20 identical yellow 2019 Corvettes bankrupt Hertz was selling at a steep discount are already gone
- The CEO of Hertz will get a $700,000 payday as his 102-year-old company crumbles into bankruptcy
SEE ALSO: The CEO of Hertz will get a $700,000 payday as his 102-year-old company crumbles into bankruptcy
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