Due to the “unprecedented” COVID-19 pandemic which is increasingly impacting businesses, struggling retailers and food and beverage (F&B) companies are asking for a temporary change in the way retail rents are calculated.
At the moment, most retail leases follow a minimum fixed charge known as the base rent which incorporates a small component based on a tenant’s total sales generated or gross turnover.
According to the statements released by industry associations recently, tenants are hoping that rent in the coming months can be pegged only to their gross turnover due to the drastic redecline in sales. This is the latest development in the ongoing ruckus for rental rebates between tenants and commercial landlords.
In February, as the pandemic started to keep locals and tourists away from public places and businesses wanting discount on rents, tenants began calling for rebates. Lately, as more public health measures were implemented, consumer spending has dampened, hence retailers and F&B operators feel more should be done.
Stricter safe distancing rules are as good as “lockdown”
The stricter safe distancing rules which had shopping malls implement crowd-limiting measures are similar to a “lockdown situation” which causes retailers to experience “zero sales”, according to the Singapore Retailers Association (SRA).
SRA said on Facebook, “And yet our fixed costs of rental, manpower (and) utilities are still payable – all resulting in even greater costs and losses for retailers.”
SRA also wants the base rent to be halved or leases to be no more than 15 per cent of a tenant’s gross turnover for six months, whichever of the two is lower. This is to prevent “massive permanent store closures and loss of jobs within the next three months”.
Landlords have been advised by the SRA to let companies “who cannot sustain anymore to exit” before their lease expires, without risk of legal action or losing their security deposits.
“SRA is calling out to landlords once again to help retailers overcome this unprecedented crisis with unprecedented rental relief measures,” and that its recommendations are “in the spirit of a fair symbiotic relationship” between tenants and mall owners, SRA stressed.
An informal group of retailers, called the SG Tenants United for Fairness (SGTUFF), has united in recent weeks to rally for help upon their agreement with these proposals.
SGTUFF noted that since the first reported confirmed COVID-19 case on 23 January, businesses have been in “severe crisis” with the situation becoming dire in the wake of “ever tightening” distancing precautions.
“We have worked out that the Government Budget measures announced so far, together wilth the small and the scattered mall owner measures, will only help cover for businesses losses incurred in February and March,” SGTUFF added as it pushed landlords to pass on the expanded property tax rebates introduced in the Resilience Budget to tenants “without delay and with no conditions attached”.
In the Resilience Budget unveiled last week, it is not needed for commercial properties that have been severely impacted by the pandemic to pay property tax this year. This is an improvement from the earlier 15 to 30 per cent property tax rebate introduced in Budget 2020 in February.
Landlords have been asked by the Restaurant Association of Singapore (RAS) to turn these expanded rebates into savings for tenants “with urgency”.
RAS stated that it will continue to communicate with landlords, and it has asked for rent to be commensurate with only gross turnover for the coming six months. Before this, it was a 50 per cent rental rebate for three months.
Additional rental rebates introduced: mall landlords
Frasers Property Retail (Frasers) replied when contacted that it is “cognisant” of the difficulties currently endured by its tenants as it will continue to support them to “overcome this trying period”.
On 27 March, Frasers have introduced additional rental rebates valuing at S$45 million for tenants in its 14 malls in the country. In addition to this, tenants will benefit from cash security deposits to offset a month’s worth of rental payments as well as receive full property tax rebates from the Resilience Budget.
Frasers spokesperson remarked that “while we ensure every one of our tenants is supported, these measures are prioritised by individual needs and circumstance.”
Additional rental rebates have also been announced by CapitaLand which will add to the support measures introduced in February. CapitaLand’s spokesperson explained in an email, “Effectively, tenants most affected by COVID-19, including those in the F&B and fashion trades, will have their rents waived for two months from April to May 2020.”
Tenants who have been ordered to shut down by the Ministry of Health (MOH) from 26 March to at least 30 April will have their rents suspended by CapitaLand, the company added.
In the same vein, City Development is “fully committed” to passing on the full enhanced property tax rebates to its retail tenants, according to its spokesperson. City Development is also “closely engaging” with tenants while assessing requests “on a case-by-case basis, over and above the support measures” that are already in place.
In an email response, APM Property Management’s Deputy Chairman Anthony Yip stated, “We understand that this is a very difficult time for our tenants…We are providing them with a second tranche of rental assistance and also pass through the full savings of the property tax rebates to all tenants as announced last Friday.”
Pertaining to the latest requests by retail and F&B tenants, Channel News Asia (CNA) has contacted other mall landlords such as the operator of Paya Lebar Square and Lendlease for comments.
ESG to continue coordinating meetings
Up until now, some meetings between SRA, RAS, landlords, and tenants have been coordinated with the help of Enterprise Singapore (ESG).
ESG told CNA on Wednesday (1 April) that it will continue such effort. “We continue to encourage landlords and tenants to engage each other constructively, to listen to and understand each other’s situation, and work together towards a win-win solution for both parties,” as assured by Ted Tan, the Deputy Chief Executive Officer of ESG.
Meanwhile, on Wednesday, Deputy Prime Minister Heng Swee Keat stressed that legislative action will be taken by the government, if needed, to ensure that the property tax rebates are passed on by landlords to their tenants during this pandemic.
“I want to urge the landlords to not only pass on these rebates but to take care of the tenants,” noted DPM Heng.
Businesses that cannot pay rent will also be protected under a new Bill due to be announced in Parliament next week as a temporary relief against their contractual obligation during the pandemic, as mentioned on Wednesday. This means that landlords cannot resort to eviction, repossession, or suing even if, say, a restaurant could not pay their rent in February and March.