‘We’re not all corporates’ says small-time investor landlord
Commercial landlords are in the spotlight with rows over rent relief but a small landlord says assumptions they all have deep pockets are wrong.
There were thousands just like him with a few properties – he had three small ones in Christchurch worth about $800,000 in total.
Mike, who does not want to use his full name, says his properties are in complexes of several units where the owners are small investors, or they are owneroccupiers, not corporate property owners.
‘‘As a result of the lockdown and some tenants either unable or unwilling to pay their rent, it does leave landlords exposed not just to not receiving the base rent, which covers mortgage payments, etc, but also absorbing 100 per cent of the outgoings, which can account for up to 30 per cent over and above the base rental.’’
He had already had a 40 per cent reduction in revenue. One of his tenants is paying and one is not and
another of the properties is vacant and for lease. ‘‘My position is that those conversations can be had at a later date.’’
He had personal guarantees from the tenants and deeds of lease ‘‘but given the circumstances, I would never enforce those’’.
‘‘Basically, if someone’s business is failing you don’t add to their problems by trying to pursue money that they don’t have. I don’t see the point.’’
He has not talked to the tenants yet and has chosen to wait and see what happens. April was not over so the tenant who has not paid so far might be just late.
‘‘I didn’t want to put the thought in their mind that they could actually not pay the rent. But they are both young businesses and I am suspecting there are difficulties.
‘‘Financially, we will be perfectly fine. Nothing serious is going to happen unless this thing drags on and I end up with $800,000 worth of commercial property that’s vacant and unleasable. I suppose it’s possible but I don’t see it as likely.
‘‘If I had my properties mortgaged I’d have serious problems but fortunately they are not.
‘‘It’s just the assumptions and the policies the Government is making regarding what they are suggesting people do and protecting the business owners from being evicted because they are not paying their rent.
‘‘There are these assumptions that all these landlords have this pocket full of money and can absorb all this without getting any support themselves.
‘‘The worst case scenario is that I’m left with these properties that are accruing costs and no return on them. My own personal financial position will be fine because I have other forms of income. So there’s no significant serious pressure on us but I was getting a bit tired of seeing all these comments and the assumption that all commercial landlords were Westfields and that they all owned shopping malls.
‘‘Commercial landlords like myself are not entitled to any assistance from the Government’s support packages.’’
He has had a meeting with members of a body corporate that he chairs and said the owners were taking a constructive approach with their tenants, with agreed 50 per cent reduction in rents and outgoings for an initial period of April and May.
‘‘While at this time we all need to do our bit, I do believe the Government’s actions will save many businesses but the financial cost of that may be carried by some more than others.’’
When he started investing in small commercial properties 20 years ago – and he had eight at the peak – there weren’t many ‘‘ma and pa investors’’ but that changed when investors switched from residential to small commercial properties because they were dissatisfied with the residential returns. In the past 15 years, the number of small investors had gone through the roof, he said.
‘‘If someone’s business is failing you don’t add to their problems by trying to pursue money that they don’t have.’’ Commercial landlord