FILE PHOTO: Shoppers queue at a grocery store during a nationwide 21 day lockdown in an attempt to contain the coronavirus disease (COVID-19) outbreak in Umlazi township near Durban
FILE PHOTO: Shoppers queue at a grocery store during a nationwide 21 day lockdown in an attempt to contain the coronavirus disease (COVID-19) outbreak in Umlazi township near Durban

Relief package for retail tenants hurt by lockdown measures

By Edward West Time of article published Apr 7, 2020

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CAPE TOWN -  The Property Industry Group, which comprises key commercial property landlords as members, has announced an industry-wide relief package for retail tenants hardest hit by complying with South Africa’s lockdown.

The initiative, which focuses on supporting affected SMMEs, also provides assistance to all other retail tenants, and will be rolled out by landlords nationally.

During the week of March 23, the major representative bodies for real estate in South Africa – SA REIT Association (SA REIT), SA Property Owners Association (SAPOA) and SA Council of Shopping Centres (SACSC) – formed a collective, the Property Industry Group, which has been coordinating its response to the COVID-19 pandemic, and specifically the economic effects of the 21-day lockdown. 

The commercial property sector makes a significant contribution to the economy, tax revenue and employment. It is responsible for more than 300 000 jobs directly and indirectly in other sectors such as security, cleaning, hygiene and technical services, and building and construction.

The assistance and relief package for the retail sector also includes providing support to large retailers affected by the lockdown. 

The initiative targets preserving jobs – for retailers, their suppliers and service providers. To qualify for the relief benefits, retail tenants would need to undertake not to retrench staff during the relief period.

Significantly, the package stipulates all tenants whose accounts were in good standing at  February 29, 2020, could be assured that there would not be any evictions for the next two months.

In addition, retailers prevented from trading in compliance with the lockdown (non-essential services), were offered some form of assistance from landlords. The extent of that relief would depend on the severity of impact.

For April and May 2020, retail landlords would offer relief in the form of rental discounts where rental will be waived partially or fully, and interest-free rental deferments where the deferred rental would be recovered later, over six to nine months from July 1, 2020 onwards. 

Rental includes rent, operating costs and parking rental, but excludes all rates and taxes recoveries and utility cost recoveries, as well as insurance, which all tenants would be required to pay in full for April and May 2020.

Each landlord could use their discretion in the relief and assistance that they gave a retail tenant, but the property industry package stipulates the minimum that qualifying retailers can expect.

Landlords will, on a case-by-case basis, also consider providing relief for office, industrial and hospitality tenants where the lockdown severely impacted the tenant and where it was justified. These tenants will negotiate relief terms directly with their landlords.

“We’ve seen retailers reverting to legal positions, but we don’t believe that litigation provides either side with timeous solutions needed to get through this unprecedented time. We need to stand together and find workable solutions that will benefit the country, protect jobs, and sustain our businesses through this challenging time, said The Property Industry Group spokesperson and SA Reit Association chairman Estienne de Klerk.

“We believe what we are offering is balanced and addresses some of the key issues on both sides. It is an equitable way to protect both industries and, very importantly, looks after the drivers of employment creation - the SMMEs,” he said.

The assistance package came at a massive cost to the property industry, which faces its own dire set of challenges. 

“Now is the time for bigger and stronger companies to step up and form a buffer to protect smaller retailers as a collective so that we can all come out of this stronger,” said De Klerk.

The package assumes that SA’s lockdown doesn’t extend beyond 21-days. 

“If this isn’t the case, it is critical for stimulus packages such as those provided by the government, banking sector and Solidarity Fund to kick-in to weather this storm,” said De Klerk. 

The property industry package allocates less support to retailers that have insurance cover or receive relief from other sources in order to focus benefits on retail tenants that don’t qualify for other assistance.

“We have been overwhelmed by the goodwill of property owners, who have also offered over 400 sites to government to use as possible temporary testing sites, hospitals or labs,” said De Klerk.

BUSINESS REPORT 

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