Retail landlord alliance reveals Covid-19 relief package for tenants
South Africa’s retail landlords announced an industry-wide assistance and relief package on Tuesday for retail tenants hardest hit by the Covid-19 lockdown.
The relief package was revealed by a newly-formed alliance of retail property landlords in the country, known as the Property Industry Group.
It is offering relief in the form of rental discounts of between 15% and 100%, as well as interest-free rental deferrals for April and May to help mitigate the impact on retail businesses that are not allowed to operate during the lockdown.
The initiative is principally focused on supporting affected small, medium and micro enterprises (SMMEs), however, it also provides relief and assistance to all other retail tenants and is set to be rolled out by landlords nationally.
Read: Covid-19: Priority is to save smaller retailers, say landlords
Moneyweb first reported last week that retail property landlords held an urgent meeting in March to come up with a co-ordinated industry response to the Covid-19 economic fallout. The meeting involved SA’s three largest industry bodies in the commercial property sector – the South African Real Estate Investment Trust Association (SA Reit), the South African Property Owners Association (Sapoa) and South African Council of Shopping Centres (SACSC).
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It came in the wake of several major retail tenants, including the likes of TFG, Pepkor and KFC, saying they won’t be paying rentals due to the lockdown. Hundreds of smaller retail businesses have also told landlords they can’t afford to pay rentals, however, Moneyweb is aware of other major clothing and even food and general merchandise retailers now also opting not to pay rent.
“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,” Estienne de Klerk, spokesperson for the Property Industry Group and chairman of SA Reit said in a statement detailing the relief package on Tuesday.
Estienne de Klerk, spokesperson for the Property Industry Group and chairman of SA Reit. Image: Supplied
“We need to stand together and find workable solutions that will benefit the country, protect jobs, and sustain our businesses through this challenging time. 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 added.
The Property Industry Group pointed out in its statement that the commercial property sector makes a significant contribution to SA’s economy – it directly and indirectly employs more than 300 000 people.
The group noted that as part of its assistance and relief package for the retail sector, landlords would provide support to those that need assistance the most.
“Although its primary focus is on SMMEs across all sectors, the group has also included 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 will need to undertake not to retrench staff during the relief period,” it said.
“Significantly, the package stipulates that all tenants whose accounts were in good standing at February 29, 2020, can be assured that there will not be any evictions for the next two months,” it added.
“In addition, retailers prevented from trading in compliance with South Africa’s government-mandated lockdown (non-essential services), and in good standing at the end of February 2020, are offered some form of assistance from landlords. The extent of that relief depends on the severity of impact,” it noted.
The Property Industry Group’s relief packages are detailed below:
SMME retailers (annual turnover of up to R80 million)
| Category | Basic assistance and relief | Interest-free deferment recovery period |
| Level 1: Highly-impacted retailers (e.g. companies selling time and services such as restaurants, hairdressers, travel agents, take-aways, etc.) | April 2020
May 2020
|
Over six to nine months from July 1 2020 |
| Level 2: Medium-impacted retailers (e.g. companies selling product that doesn’t have a limited shelf-life, etc.) | April 2020:
May 2020:
|
Over six to nine months from July 1 2020 |
|
||
Non-essential goods and services
| Category | Basic assistance and relief | Deferment recovery period |
| SOE and government tenants | No relief offered – 100% of rent payable (excl. temporary testing, laboratories and healthcare services housed free) | N/A |
| All retailers with annual turnovers above R80 million (including local and international listed/publicly-traded retailers and large unlisted retailers) | April 2020:
May 2020: · 15% rental discount and 35% rental deferment |
Over six months from July 1 2020 |
Essential goods and services
| Category | Basic assistance and relief | Deferment recovery period |
| Retailers offering more than 75% essential services | No relief offered – 100% of rent payable | N/A |
| Retailers offering essential services but electing to close | No relief offered – 100% of rent payable | N/A |
| Retailers offering partial essential services, less than 75% | · Essential goods/services – 100% of rent payable · Non-essential goods/services – as per retailers with annual turnovers above R80 million Pro-rated by essential goods/services turnover vs non-essential good/services turnover (or gross lettable area if specifically agreed) |
For non-essential goods/services portion: over six months from July 1, 2020 |
According to the group, rental includes rent, operating costs and parking rental; however, it excludes all rates and taxes and utility cost recoveries, as well as insurance, which all tenants will be required to pay in full for April and May 2020.
“Of course, each landlord can use their discretion in the relief and assistance that they give a retail tenant, but the property industry package stipulates the minimum that qualifying retailers can expect,” the alliance noted.
“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 is justified. These tenants will negotiate relief terms directly with their landlords,” it added.
The group said that the property industry had engaged with “various groups of retailers to get their buy-in” when putting together the relief package.
“This assistance package comes at a massive cost to the property industry, which faces its own dire set of challenges… But it is necessary for those that need assistance to get it, and for the small retailers that need it the most to get the support they need,” says de Klerk.
Read: SA Reits wants tax relief from Covid-19 fallout
“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,” he stresses.
De Klerk points out that the industry-wide relief package “assumes” that SA’s lockdown does not 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 funds to kick-in to weather this storm,” he says.
“It is important that business, labour, government, banks and other investors take decisions that don’t jeopardise the country as an investment destination in the future when dealing with the Covid-19 pandemic. We believe our approach provides a level of certainty in the sector and protects an important part of the economy,” adds De Klerk
Source: moneyweb.co.za
