Call on landlords to offer greater rental relief until end of the year
INDEPENDENT retailers have called on landlords to offer a greater rental relief package until the end of the year to ensure that they can survive the Covid-19 pandemic, but major real estate bodies are against this.
The Mid-size Independent Retailer (MIR) Group, which represents 50 brands, said 2 500 stores and 23 000 jobs were at stake if landlords did not step in. It argued that negotiations with landlords were shaky. The group sought relief of a minimum of six months, which expected the pandemic to peak next month or in early August, but landlords had refused to budge.
MIR spokesperson Jonathan Kingsley-Hall said on Friday that the Covid19 crisis was the catalyst for South Africa’s retail apocalypse.
“We are on the doorstep of the apocalypse. Edcon has gone into business rescue. Massmart has closed its Dion Wired stores and has received rental reductions. At this rate, half of the independent stores will not survive the rest of the year,” said Kingsley-Hall.
MIR were predominantly family businesses that had been built up over decades. MIR members included Coricraft, Dial-a-Bed and Old Khaki.
Kingsley-Hall said MIR members were prepared to pay the greater of a percentage of turnover or a minimum guaranteed rental, so landlords could meet their fixed costs. He charged that the Property Industry (PI) Group had rejected the proposal outright.
He said a deal needed to be clinched immediately with landlords, as they were offering only some relief for May and wanted a percentage of rental for April, even though retailers have received zero income from March 27.
“Many are considering business rescue as the only mechanism to protect their business. This will not bode well for landlords, along with the fact that there are more than 700 MIR leases expiring in 2020. A deal needs to be clinched immediately and efficiently to avoid reckless trading and the collapse of the financial system that will make the sub-prime crisis appear insignificant,” said Kingsley-Hall.
The PI Group is a collective of South Africa’s major real estate bodies, including the SA Reit Association, SA Property Owners Association, SA Council of Shopping Centres and most landlords. PI Group spokesperson and Growthpoint Properties chief executive Estienne de Klerk said on Saturday that the PI Group had provided between R5 billion and R10bn in relief to retailers over the past three months.
“They (MIR) want to change the nature of their leases to turnover leases. We cannot do that. First, the nature of capital requires predictability of cash flows. Second, we have seen that turnover leases can be abused,” De Klerk said, adding the sector was in a difficult position because businesses were closed due to the lockdown.
“We have put in place measures to assist tenants, and you can argue that it is not enough. If anything, you can speak to small restaurant owners and hairdressers who are not paying rent due to the relief measures,” said De Klerk.
In April, the PI Group extended relief guidelines to include the hardest-hit small, medium and micro enterprise tenants. It also provided options for some retailers to extend benefits to two months from three months in April, May and June.
Kingsley-Hall said the MIR had begun engaging with the government and the banking sector.