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:
- 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.
- Tenants and landlords are encouraged to agree on rent relief or temporary amendments to leases.
- The reduction or waiver of rental payment for a defined period for impacted tenants.
- The ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress.
- 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.
- Landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements.
- 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.