Amid the continued crisis of the COVID-19 (coronavirus) pandemic, shopping centres in Canada remain open – although some with reduced hours of operation.
However, the Retail Council of Canada (RCC), a not-for-profit, industry-funded association that represents small, medium, and large retail businesses in every community across the country, has been “pushing” landlords to look at some measures of rent relief for retailers during this challenging economic time.
“We are pushing landlords in various (sizes) to look at the long view and that the businesses they have that are currently cash flow squeezed are not viable and then they have no tenants,” said Karl Littler, Senior Vice President of Public Affairs for RCC.
“And if those tenants are not being replaced by new entities — and they may well not be – the long-term cost to them is going to be pretty significant and they may want to look very hard now at providing some sort of relief in order to have viable tenancies on a long-run basis.
“Some of them get that message and we do anticipate some outcomes from that and we’ve had some chats with them. Part of it is what does commercial law say in terms of your rental agreement. So there may be some outs. It depends on how those agreements are structured. But we are also pushing landlords to look at rent relief because ultimately it’s in their long-term financial interest.”
Ivanhoé Cambridge announced on Friday that it will be granting a deferral of the rent payable by those tenants of its retail properties in Quebec. “In these exceptional times, Ivanhoé Cambridge wants to contribute to the collective effort to support the Quebec economy, and will be deploying measures to alleviate the immediate financial pressure for its tenants in its Québec shopping centres,” the company said in a statement.
“We are implementing exceptional measures in order to respond to an exceptional situation. Each of us must do our part to support the well-being of our community and Ivanhoé Cambridge is united in solidarity with the difficult circumstances faced by many businesses, said Nathalie Palladitcheff, President and Chief Executive Officer, Ivanhoé Cambridge. ” Our decisions are made with caution in these circumstances. The mitigating measures proposed today aim to alleviate the liquidity problems of the tenants of our shopping centers in Quebec and to support the economy of the province.”
“If you’re a landlord you need tenants to survive. So you can be a jerk and say ‘hey we have an agreement, you owe us money, I don’t care what’s happening, pay’. You can do that. You might feel good in the short run but in the medium term to long term you’re going to end up shooting yourself in the foot because there won’t be any retailers left or considerably less,” said Winder. “It’s almost like when a company goes bankrupt. Lenders try to renegotiate terms with the company to help it get back on its feet so they can get their money back versus getting no money back.
“It’s the same thing with landlords. Landlords really should be re-negotiating or at least giving some time buffer to these retailers. Now having said that, who is going to give landlords relief too because basically it’s a value chain. So if landlords give relief to retailers which they should do who is going to give relief to landlords? Are the banks going to give relief to landlords? Maybe. Or their lenders? Everyone in the transactional chain has to sort of help each other and work together in the short term or else the whole thing is going to fall down and then everyone loses.”
Winder said shopping centres that have reduced their operating hours should definitely be giving rent relief to retailers.
“I think a lot of these malls should just close down right now unless you’re a grocery store or a drug store you really shouldn’t be open unless it’s something that is a very functional necessity for society right now. If you’re not a functional necessity, essential service, like food, or water or medicine, you really shouldn’t be open. It’s not a time where people are going to be shopping for discretionary goods. Why not just close and help flatten the curve as they say,” added Winder.
He said big retailers will survive this crisis because they have deep pockets but the small to medium size retailers are under-capitalized, they don’t have as many assets, and they probably have higher debt to equity ratios and now suddenly they have no cash flow.
“So there’s a high probability of those folks going bankrupt,” he said.
Michael Kehoe, a commercial real estate broker based in Calgary and the volunteer Lead Ambassador for the International Council of Shopping Centres in Canada, said the coronavirus for retail real estate landlords and retailers around the world is now a reality rather than a looming threat.
“In Canada, where one in seven jobs are in shopping centres, the retail sector and retail spending accounts for an estimated $737 billion of consumer activity generated by the retail, food-and-beverage, entertainment and consumer service industries that occurs within Canada’s shopping centres,” said Kehoe, owner and broker of Fairfield Commercial Real Estate. “The country’s 3,700 shopping centres and their retailers must face a new reality with the goal of preserving the retail sector over the mid to long-term and entice retail sales staff and customers back to the fold when this is over.
“Nearly 70 per cent of shopping centre tenants are small businesses that employ less than 10 people and Canadian shopping centres generate nearly $25.5 billion of sales taxes for governments across the country. Developments concerning the COVID‑19 pandemic have significantly accelerated and have the potential to jeopardize the entire industry causing long-term damage, rampant unemployment and irreparable harm to the retail sector and communities across our country. Retailers are the heart and soul of the country and when times are challenging, developers, shopping centre operators and all retail real estate landlords must find solutions to assist retailers with deferred rent arrangements until things return to a new normal whatever and whenever that will be.
“The situation progressively will return to a new normal over time, but retail tenants will need assistance from their landlords. Internationally many landlords have already issued a waiver of rent for all food service and retail tenants for the upcoming months, some mandated by their national governments.”
In a statement, Oxford Properties Group, which owns retail properties in Canada, said: “We continue to take our guidance from the Public Health Agency of Canada and local public health authorities. At this time, we have not been advised to close any of our properties or to reduce hours. We’re committed to supporting our retailers in this difficult time and have provided retailers the option to reduce store operating hours to 11am – 7pm effective from Monday, March 16 for an initial two weeks.
“Although some stores will choose to operate on reduced hours, our shopping centres will remain open to the public between 10am and 9pm. This allows for shoppers to access stores that wish to operate regular hours as well as vital services such as grocery stores and medical facilities that operate from our centres.
“Up-to-date operating hours for retailers will be listed on our shopping centre websites.”
When asked about rent relief for retailers, Oxford replied: “Our focus right now is on the health and safety of our people and our customers, and everyone is working around the clock to make that happen.”
In a statement on its website, Cadillac Fairview, operator of malls across the country, said: “At Cadillac Fairview our first priority is the health and safety of our guests, tenants/their employees and our employees across our portfolio. In light of many local governments taking actions to support our communities during this difficult time, Cadillac Fairview, as well as our industry peers will be limiting the hours of operation at our shopping malls.
“At this point, Public Health has not advised us to close our shopping malls; however, effective Monday, March 16 mall operating hours will be 11:00 a.m. – 7:00 p.m. every day (unless the regularly scheduled closing hour is earlier). These hours will remain in place for two weeks, at which point we will re-evaluate. Access to the property will remain unchanged, as we understand there are some services and tenants that may operate as per their usual hours of business, and we will continue to support them in their approach.”