All posts by Bryan Kavanagh

I'm a real estate valuer who worked in the Australian Taxation Office (ATO) and Commonwealth Bank of Australia (CBA) before co-founding a private valuation practice, Westlink Consulting. I discovered that we leave too much publicly-generated land rent to be privately capitalised by banks and individuals into land price bubbles. This generates repetitive recessions and depressions. These need to be avoided by capturing more revenue from land values to free up wages and household debt.

LANDLORDS & TENANTS GETTING TOGETHER

The following article is cross-posted from today’s Australian Property Journal.

Australian Property Journal

Wednesday 1 April 2020

THE nation’s peak bodies representing shopping centre landlords and retailers have reached an agreement on how to handle leasing challenges during the coronavirus.

The National Retail Association (NRA), Australian Retailers Association (ARA), the Pharmacy Guild of Australia (PGA) and the Shopping Centre Council of Australia (SCCA) sat down for talks after Prime Minister Scott Morrison called on landlords and tenants to come together on Sunday night.

The representative bodies have reached a set of retail leasing principles and called for the implementation of a national Code of Conduct to assist both retailers and landlords during this period of unprecedented economic turmoil.

They said shopping centre owners and retailers have a mutual interest in business continuity and landlords are encouraging retailers to approach them to discuss relevant issues and work towards agreed outcomes and retailers have agreed they may need to provide accurate business records to landlords.

All leases will be dealt with on a case-by-case basis, considering factors such as whether the tenant has suffered financial hardship due to covid-19; whether the tenant is an SME; whether the tenant’s lease has expired or is soon to expire; and whether the lessee is in administration or receivership. Some leases have different structures and are at different stages: some leases are based on rent as a percentage of turnover; some lessees may already be in arrears; and some leases may already be expired and in “hold-over.”

The seven principles agreed:

  1. Short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to coronavirus.
  2. Tenants and landlords are encouraged to agree on rent relief or temporary amendments to leases.
  3. The reduction or waiver of rental payment for a defined period for impacted tenants.
  4. The ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress.
  5. Commercial property owners should ensure any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by COVID-19.
  6. Landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements.
  7. Cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance.

NRA CEO Dominique Lamb said: “We sat down immediately after the Prime Minister’s announcement to come together in good faith and continue our ongoing discussions to ensure landlords and tenants are working together.”

ARA CEO Russel Zimmerman added the industry has a track record of working together, including on challenging issues.

“This is about working together and assisting policy makers in the next phase given our group’s longstanding engagement on retail leasing issues,” he said.

PGA national president George Tambassis said pharmacies are under immense pressure as frontline health resources during this COVID-19 crisis, and they need the certainty and consistency that can be provided by this code.

SCCA executive director Angus Nardi said shopping centre owners and retailers have a mutual interest in business continuity.

“It’s positive to have a unanimous and timely approach to tackle the pressing challenges we all confront in the current environment in a way that is fair and balanced to everyone,” Nardi said.

Last week SCCA chairman Peter Allen asked landlords not to terminate leases after it was advised by the government some owners were not engaging with tenants.

“This is surprising, and if correct, very disappointing and frustrating to hear.” Allen said.

The SCCA represents the country’s largest retail landlords including AMP Capital, ISPT, Brookfield, Dexus, GPT, Charter Hall, JLL, Lendlease, Mirvac, Perron Group, QIC Global Real Estate, SCA Property Group, Stockland, Vicinity and Scentre.

SCCA members own or co-own approximately 510 shopping centres in Australia comprising approximately 13 million sqm of lettable floorspace, which represents around 68% of the total lettable floorspace of Australian shopping centres.

CAPTIVES?

It wasn’t surprising to see on Q and A last night that Jennifer Westacott, the CEO of the Business Council of Australia, was against the fairness and simplicity of a universal basic income (UBI), often called a citizen’s dividend by supporters of the ideas of Henry George.

A UBI would provide the freedom to do your own thing, of course, whilst big business needs a relatively compliant source of workers from which to draft its employees.

Nor was it really news that Matt Comyn, the CEO of the Commonwealth Bank of Australia, and Nicki Hutley from Deloitte Access Economics were comfortably against a UBI.

Michael Sukkar, the Assistant Federal Treasurer could also be expected to be in the brigade against the benefits of a universal basic income, because the Liberal Party are not supporter of that sort of freedom! A pool of captives works nicely for big business.

The Labor Party’s Linda Burney was also more in favour of the government’s grab-bag of selective handouts than a UBI. That’s probably because the Labor Party and unions are in something of a cleft stick on a UBI, no matter how fair it may be. A bit of the Protestant work ethic still prevails: can people be trusted to work if they’re receiving a UBI?

Of course they can! And they’d probably be self-employed in vastly superior productive areas than they have been.

Whilst I’m not sure where singer/songwriter Josh Pyke stood on the benefits of a UBI, Q and A clearly had a number of clear-sighted supporters who saw its benefits, not only through the period of the coronavirus but into the future. They’re not captive to the status quo.

Then, on 3AW news this morning, I heard this classic from an academic. He believed people should not be wearing face masks during the coronavirus. Their efficacy had not at all been proven. They’re in extremely short supply and should be left for the health professionals to use. Huh? A doctorate doesn’t seem to insulate against flawed logic, either!

Neil Mitchell was in good form, too: “Where’s the money to come from? Future generations are going to have to pay for this.”

(This bloody socialism!)

PANDEMICS AND LAND DUES

Pandemics and land dues

by Jeffery J Smith

Cross-posted from Progress

The first people to catch an animal virus are poor. Oftentimes they are hungry enough to eat a bat. Scrawny farmers without their own land have little choice but crash into wildlife habitat. The virus then spreads and pandemics are born. So if those unlucky people could afford food and work fallow land, there’d be far fewer encounters between bats, snakes, chimps, etc, and hungry humans.

Another factor could be overpopulation. Humanity is infecting every nook and cranny of the planet. Happily, prosperity slows growth and soon stabilizes populations, as now in Europe.

Fortunately, history shows how a few places did develop from poor to prosperous, the classic example being Taiwan. What the government of Chiang Kai-shek did was charge landowners for holding land. To avoid the charge, the big landowners, who had more than they could (or did) use, and so would pay their society the largest “land dues”, wisely sold off their excess and at prices the poor could afford.

In two decades, Taiwan went from knowing hunger to being one of the Asian Tigers. The other Tigers also used a similar form of Taiwan’s land prosperity reform. Furthermore, as a result, healthcare improved as well throughout these areas. There are valuable lessons to be taught here that would be beneficial for other countries to learn.

Of course, even after spreading prosperity, some humans might still catch an animal virus. What then?

* Then the victims to stimulate their immune systems, maybe with supplements, maybe with nano-medicine, to kill the invaders quickly.

* And so they don’t infect others, they’d do what everybody has heard a million times by now—wash the hands, self-isolate, and so on.

Not to downplay the things that the individual can do, but notice how you never hear over and over a million times what your society as a whole can do—legitimize supplements, invest in nano-medicine, and institute land dues to spur fair and efficient use of land everywhere.

Do that, and the animals will thank us, even if their viruses won’t.

© Text Copyright 2020 Jeffery J. Smith under a Creative Commons copyright. Some rights reserved.