I think Balance is on the right track here. Practicalities will trump legalities in many cases, I reckon.
(Apologies for using the T word!)
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I think Balance is on the right track here. Practicalities will trump legalities in many cases, I reckon.
(Apologies for using the T word!)
... and they would say that, wouldn't they?
But I think it doesn't really matter whether they can enforce ongoing rent payments or not. The option for landlords is to either bankrupt most of their tenants (which would be bad for landlords, because it means they lose their respective income streams forever unless you see plenty of companies queuing up for expensive mall space) or to temporarily forfeit some of their rents but keep the income stream long term.
The real question is - do we expect in a year from now most malls be empty, closed and in disrepair? If yes, than this is due to landlords demanding their rent now.
Being an optimist I hope for a pragmatic solution with business, landlords, government, insurance companies (business continuity insurance) and banks each coming to the table, which would be good for HLG as well.
Obviously - they all will carry some part of the burden, which means nothing good for tax payers and (in the short term) for shareholders of any of these.
Assuming their is no out-clause from a pragmatic point of view I think good tenants will find landlords are prepared to "do a deal". This might be part rent forgiveness and part rent deferral. At the end of the day this lockdown is hopefully only going to be a short term issue and if a landlord makes a tenant bankrupt there's every chance they're going to experience a longer period without rental income than if they work with their existing tenant.
Changes happening in ChCh.
Spotlight has left The Colombo.
KMart has left The Palms and there is talk Countdown will also leave.
New World has left City South.
Pak'n Save will move from Northlands to Foodstuffs Main North Road site.
Smiths City left Bush Inn.
Yeah I hear what you're saying, they are as tough as old boots. That said HLG have demonstrated a history of being quite nimble with the closure of unprofitable stores previously so one can only be left to speculate on the exact terms of their leases. I think they're big enough to take an assertive approach with landlords.
@BlackPeter Question I ask is when is enough rent relief enough after 1 or 2 months half rent for a year? or should businesses solve their own problems first by removing excesses like huge cuts to directors fees and managements wages. Will the banks write off loans or just defer payments.
If I was THE landlord be rather upset after giving rent relief and watching directors fees and managements wages increase after Covid-19 for doing such a wonderful job getting through crisis.
They are hard bastards to deal with - mainly because of the demise of strip shopping in favour of mall shopping. The malls could cling on a queue of prospective tenants wanting to lease space in the malls.
But that’s prior to the recession we are now experiencing and which is going to get worse before getting better.
Doubt there’s going to be the same queue of prospective tenants wanting in. More like many tenants looking to exit.
I do not know which would be worse,being a retailer or a Mall owner.
ps.
I remember office staff of one Mall owner, used to buy their lunch from the bakery over the road, as they were cheaper than the cafes in their Mall.[who were paying their high rentals]
Exactly the point. As long as each side can see the problems the other faces, then the solution of working together through this becomes obvious. Neither side will win with COVID-19. But going back into your respective silo will ensure that both sides will lose much more.
And the banks in the background will need to co-operate too!
SNOOPY
I have several commercial tenants (all solid ) and one deal I would be happy to do with all of them is trade 6-12 months rent in return for a 10 year lease extension.
I agree with yo dreamcatcher. There has been some good discussion on this thread about commercial leases. Both landlrods and tenants are i an awful postion imposed on them by Government action.
But you have a similar situation with residential rental property of which I have a little. The Government has been very bad in this regard and shown their inexperience in unduly raising tenants expectations ad painting landlords as enemies. The latest is making a law change saying landlords can't increase rents or terminate contracts but tenants can terminate. That's after going public saying they were giving "landlords" a mortgage holiday, which is no such thing at all. It simply means delaying payments while you clock up extra interest. Where is the fairness in this ? I think Labour has pushed their political agenda too far now and they will get a big backlash from mum dad residential "landlords" or investors. That is sad and what we need right now
Quite right percy. Another quote from the reference:
https://www.propertynz.co.nz/news/re...uring-lockdown
"There is a similar clause in the Property Council NZ Office and Property Council NZ Retail leases but it limits the rent suspension to what the landlord can claim under its loss of rent insurance. In these circumstances that probably means the tenant gets no rent suspension at all." (under a COVID-19 closedown).
Ouch!
SNOOPY
The big trouble I see is bullying.
Major anchor tenants,ie The Farmers,or Countdown will say to Landlords this is what we will pay.
Strong Landlords will say to weak tenants you must pay this.
The ongoing "fair" rent will not be adjusted quickly,or perhaps not at all.So although tenant/landlord may come to a temporary agreement,longer term retail will still be very difficult.[which means to me current rentals will not be sustainable].
Private landlords [mums and dads] I see a lot differently.Newly unemployed "should"/will receive a welfare rent payment to cover,or nearly cover their rent.A great number of mums and dads are in no position to offer rent holidays.[and should not be expected to].
I would imagine the ADLS standard lease will apply to small businesses in properties of small landlords. I would expect a company like KPG to have their own standard lease that all their tenants would be required to sign, with perhaps some alterations for anchor tenants. In my job I sometimes see leases signed by companies and for larger malls I've never seen any reference to the ADLS (assuming they have their name all over the agreement like they do on their residential purchase agreements).
Many mall tenants sign the lease they are given as they have no other option. Hopefully an outfit like HLG has more nous.
A big property guy(with some malls) once told me our real profit is in the leases we draw up ....inferring nearly everything is to their advantage.
Did he also tell you the tenant can be sued for going to the media complaining about his lease,or their landlords unfair actions.[yes written into leases].?
Next question.
I believe Tim Glasson is the landlord of HLG's ChCh City store.Will he waiver the rent for the lockout.?
Now there is an interesting philosophical dilemma! If Tim waives the rent for his own building that would be a foot-shot. But if Tim doesn't waive the rent, on consideration of all the HLG shares he holds, that would also be a foot-shot. Perhaps the answer is that Tim should buy a pair of crutches ;-P?
SNOOPY
Mr Tim got just over $2m rental from the company - on independent commecial terms of course
I think the NZSA weren't too impressed with the disclosures when the Chch premises came up.
Think stores in malls with the largest square footage having the largest CLOUT anyway probably locked in for next 10yrs plus where termination fees would be expensive.
vacant space in malls a NO deal would be better then a BAD deal which has the potential to lower standards and price