Pandemic Pricing

Michaels was one of two Salinas mall tenants sued by their landlord for failing to pay rent during the pandemic.

In March, as Gov. Gavin Newsom ordered people to stay home at the start of the Covid-19 pandemic in California, retailers and restaurants all over the state turned out the lights, locked the doors and waited for what came next.

For arts-and-craft supply chain store Michaels, and for mass-market seafood joint Red Lobster, what came next in Salinas is a pair of lawsuits, filed by Harden Ranch Plaza Associates LLC and Salinas Shopping Center Associates LLP, alleging both businesses stopped paying their rents during the shutdown.

The suits, filed on June 18 in Monterey County Superior Court, claim Red Lobster’s lease agreement, which runs through May 2022, requires them to pay total rent and maintenance charges of $16,330 a month, and that the restaurant chain has failed to pay rent due beginning on April 1. They were served with a notice of default on May 21 and now owe a total of $51,441.24.

Michaels, meanwhile, owes rent from April through June 17 in the amount of $68,999.54, the lawsuit states. And the amount due will continue to increase beginning July 1; in the event Michaels fails to pay rent by the first of every month going forward, they’ll be slapped with a 5-percent late fee on any amount past due.

Anne Secker, the attorney representing Harden Ranch Plaza and Salinas Shopping Center Associates, says her client isn’t trying to evict either business – they’re just looking for the rent legally owed.

“Of the 80-plus tenants they have, the landlord has reached agreements with everyone other than the ones these suits have been filed against,” she says. “The landlord recognizes the difficulty tenants are having at this point, but tenants also need to realize the difficulties landlords are having with their banks. If tenants don’t pay rent, the landlords can’t pay the mortgage.”

Representatives of Michaels and Red Lobster didn’t respond to requests for comment. On March 27, the credit rating company Moody’s downgraded Red Lobster’s ratings and gave it a “negative” outlook, owing not only to its debt load but to pre-pandemic business that had waned in the face of consumer appetites going elsewhere.

Michaels, meanwhile, has faced pandemic-related lawsuits in other parts of the country; in April, a Florida mall owner sued the chain for $30,000 in rent it failed to pay during the pandemic. One Florida lawyer, writing on a legal blog, stated that attorneys who specialize in commercial leasing are bracing for a slew of lawsuits against major retail tenants from commercial landlords.

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