By John Phair, Chairman & Chief Development Officer (South Bend, IN)

After almost 3 weeks of isolation, with mostly our families, we are all starting to develop new habits and processes. I hope much of it is good in the short term – and maybe even the long term. Many of us are adjusting to working from home – or at least not being very close to anyone else if they are in the office, maintenance areas or rental offices. (Anyone starting to like 100% home cooking or now thinking of becoming a teacher?)

Make no mistake, we are emerging into a new environment. I wanted to share some of the things Holladay has or is trying to do to get through the current economic setback, and then start to look ahead. I’ll be sharing my forecast for two to three months ahead, and then the next year or two.

A present of uncertainty

Survival is still at the top of the list. I am much more optimistic today than I was two weeks ago. When one of Holladay’s key lines of business (hospitality) goes from a strong performer to producing NO revenue, what happens? And when 10 million individuals get laid off in the country in two weeks, it affects all our businesses. Holladay is responsible for a few of those layoffs.

Will the rents at our roughly 1,000 apartments be paid on a timely basis? How about the hundreds of commercial, medical and industrial tenants we house? Many of these businesses are shut down or cutting back or working from home. Will they pay? Can they pay rent? How many may go out of business or want to downsize?

How Holladay is tackling the unknown

Holladay moved early on and fast (like 3 weeks ago) to cut expenses as quickly as we could. Much of that pain was shared across the company and included cutting hours and salaries. Lots of vendor contracts were cut back or eliminated. We negotiated our largest monthly cash outflow (our mortgage payments) to lower levels of cash going out the door, which provides a considerable short term savings and cash flow improvement.

We have applied for some of the stimulus funds coming from Washington DC and received word that Holladay will be granted a ”˜forgive-able’ loan.  We have also applied for similar stimulus loans on behalf of nearly all of our hotels, who are really suffering, but have not heard back on any of those forgive-able loans. Unfortunately, we laid off or furloughed over 300 people, about 95% of those layoffs associated with the hotels. I hope and believe they will all be collecting the special unemployment package put out by the government. They should start receiving those funds within another week or so.

We are holding a daily call to watch our balance sheet – key items like cash, account receivables, payables to vendors, capital purchases, construction draws etc. It is working! Holladay is in better shape to survive, make payroll, keep our bills current and still consider new projects. Our company is luckier than many.

What will the future bring two to three months from now?

What are we planning for?

In terms of society, we will continue to be very diligent with our cleaning, hand washing, germ fighting and mask wearing. I don’t think it will simply go away and will take a while for us to not see it everywhere. I believe that good hygiene, including regular hand washing, will be a positive long-term byproduct of the coronavirus pandemic.

With regards to Holladay, we hope some, maybe all, of our layoffs will be back, and our salary cuts reviewed. Our hotel employees are likely to have a much longer time getting everyone back to work. Travel and meeting events all require planning, transportation and an assumption of safety.

We were expecting to have a group of new Holladay developments starting in the second half of this year. We have paused the planning on several of them, resulting in a delayed starting date. Many will still begin in 2020, but a couple have been put off until 2021.

We hope to not miss a beat in Holladay’s property management business. People coming back to the office, warehouse or clinics will have some deferred maintenance items, almost like several hundred new tenants opening around the same time.

We will all have to get used to socializing again. Holladay is never going to be a work from home company, the demands of the commercial real estate business don’t allow for this to become a norm. However, our communications improve every day and I give our IT staff a lot of credit for helping everyone who has been working from home.

But I do believe everyone’s business model will be changing. Out of every crisis comes some radical change. What will it be here?

I am guessing, but our large retailers (Walmart and Amazon) are going to be even more dominant. Home or office deliveries and commercial distribution will be the norm, not something being done occasionally. Maybe this stay-at-home requirement will bring families closer together and the game playing, meals together, and changing habits in sports and other amusements will be a permanent change. I hope after a couple more months of this, we start to really have a ”˜new norm’, not like it was three weeks ago, but taking the best of that and combining it with some new habits.

And how about looking a little further?  A year, two or three?

What will Holladay look like? The hospitality side is the most difficult to predict, but it is not going away. Holladay is just starting to manage our own hotels in house. I predict that in this one to three-year time frame, we will be managing our own hotels and a good number of others who will want to tap into our management talent.

Our development business must take advantage of the new distribution channels. The ”˜last mile’ of delivery, high turnover warehousing and convenient locations. We still have a lot of prime land for industrial development and know the product well.

And at the end of three years, Holladay will be well on our way to doubling our current multifamily portfolio to nearly 2,000 units. We must take the lessons we’ve learned today and apply that to our future properties.

Maybe the biggest change could come in property management. We have proven, qualified teams in all areas (engineering, housekeeping, design, landscaping, maintenance, communications, and accounting) and first-class property management systems in place. We are primed to serve others.

Our construction abilities run the gamut from tenant finish, warehousing, apartments, land development, hotels including mid-rises, and other product types. We can and will continue to provide exceptional service, complete projects on time and budget, and build strong relationships.

Holladay will endure

There is nothing amiss in Holladay’s diversified model. We will continue to adjust to the changing demands of our clients and provide growth opportunities for the quality people we have everywhere. Hang in there.

After the last two serious crises (9/11 and the Great Recession (2007-10)), we emerged much stronger than we felt at the time. We took some lumps, cuts in pay, but came out better on the other side. We will here too.

I predict good things if we maintain our values of integrity, honesty and fairness combined with hard work.