Caution: Zeus Living skipping rent and switching lease terms?

[Ryan Becker]

HI Bigger Pockets Community-

Are there other owners out there that received the mail from Zeus Living CEO Kulveer Taggar indicating they wanted to change contract terms with owners to revenue share, or cancel your (2 year lease) contract? I set up a call with one of their, associates as instructed, and found out during the call, they intended to skip April payments as well; she used the term due to 'rent abatement' (even though my unit doesn't need any repairs) and that Zeus was going to declare Force Majeure. Note Zeus currently has sublet it through August and have a paying tenant in my unit.

Note the phone call was the first time Zeus mentioned monthly rent was going to be skipped for April or that Zeus intended to invoke this part of the contract (Force Majeure). In other words, none of this was mentioned explicitly in their original mail. 

How are others responding to this (or how would you if in this situation)? Most discussions centered around tenants not paying vs large companies (such a Zeus backed by AirBnB). Have others had Zeus Living indicate they would skip out on their rent too during their phone appointments? 

Full mail is below from Kulveer (Zeus Living CEO):

As an important part of our community, I am reaching out to share the effects that COVID-19 has had on Zeus and to share options of how our partnership could evolve. The unprecedented impact of the pandemic is forcing us to review how we maintain the health of our business and our partnerships.
With corporate travel on pause, we’ve lost millions in canceled bookings. Additionally, with personal financial hardships on the rise, tenants are requesting temporary rent abatements. In response, we’re looking for new sources of demand and supporting displaced students, healthcare professionals, and early responders. We are assessing the situation on a real-time basis, but we know these will be financially trying months.
We understand this is an incredibly difficult time for everybody - including you. We want to be your partner for the long term. However, in today’s environment, we need to refine our current relationship terms. Each of our partners and properties offer unique opportunities, and we see two options that could work well:

• Convert our lease agreement to a revenue share contract where rent earned is passed to you, with a percentage retained by us. We would continue to do all the management including renting to business travelers, vetting potential tenants, leasing, and daily tenant relations.
• Cancel our lease agreement and return your property when the last resident checks out.

We recognize that this may be tough to hear. But historically speaking, travel is a resilient industry and business travel in particular rebounds first. Working remotely will continue to grow and more folks will live asset-light and unshackled by long-term leases. Zeus is uniquely positioned to earn that business and share the revenue with you.
Zeus prides itself on being a reliable partner. We are here to work with you and will provide information on the many federal and state resources as they become available.

[Kristina Cudworth]

I've worked in the Corporate Housing industry for many years and watched Zeus Living, and other companies with  similar models, start-up and rapidly expand.  Zeus is in a number of markets and at last count, I believe had over 350 units/locations  in the Seattle market.  I know from some of the multi-family buildings they lease in, they signed 2 year leases and demanded one month free rent.  Typically the standard multi-family type leases have a lease break of a few month's rent, pay back the concession and forfeiture of the deposit.  If Zeus Living plans on staying in business, they'll need the relationships to be good with the larger property management companies as that's where they get their depth of inventory, not only in Seattle but their other markets as well.  

Their revenue share model looks bad, if anyone considers it, try to only pay furniture rent & operations costs when the unit is occupied.  If Zeus is  "renting" the furniture (I think they rent from a new company called furnish or habitat), they may already have this scheme in place (getting furniture rent credits for vacant days).  If Zeus owns the furniture, then they should be willing to not charge you any furniture/houseware cost when the unit is vacant.  If they are inflexible and you still want to work with them, you may want to just purchase furniture, as that furniture is probably only about $3,500 cost for a one bedroom space, and if it's in place and you've had guests stay, it's already used. Also, you may want to find out from them how many properties they will end up with (the ones they have to pay rent on) as they will be pushing those to be filled first.  If they only have to pay you when it's full, and they are getting "operational costs" what's their incentive to fill your unit when they have obligations to pay full rent and other costs on the units they've leased direct...  Most multi-family property management companies won't do rev shares.

 If you are following Airbnb, you'll see that they have refunded the "guests",  leaving the property owners high and dry. Not sure if Airbnb is just an investor or if they have any oversight on Zeus.  No one knows how soon business for corporate housing / vacation rentals will pick back up.  If it were my property, I'd probably try to get it leased with a long term renter, at least for the next year or two.    Hope this is helpful.