Commercial landlords offering rent deferrals for businesses hit by pandemic

Major commercial landlords in Canada are offering rent deferrals to tenants as the COVID-19 pandemic has forced many businesses to close their stores.

RioCan, Choice Properties, and CT real estate investments trusts all said last week that they were working with tenants who need support because of the financial challenges brought on by the outbreak.

Loblaw landlord Choice Properties REIT said it would grant 60-day rent deferrals on a case-by-case basis for “qualifying'' small businesses and independent tenants.

“We understand and acknowledge the extraordinary financial pressures on parts of our tenant base, especially on independent and smaller businesses,'' said Choice chairman Galen Weston in a statement.

Choice REIT, which holds 6.1 million square metres (65.8 million square feet) of leasable space across 726 properties, says it has also withdrawn its 2020 outlook because of the uncertainty around the duration and impacts of the pandemic, but that it is well-positioned to weather the volatility because of its high proportion of necessity-based retailers.

RioCan, which has about 3.6 million square metres of leasable space over 220 properties, said it was offering an automatic 60-day interest-free rent deferral for independent commercial tenants who have asked for relief, to be paid back over a year.

“We are committed to supporting all of our stakeholders through this difficult time,'' the company said in a release.

Canadian Tire landlord CT REIT said it was “committed to working with those of our tenants who need our support,'' but did not give specifics on its relief plans.

The company said tenants representing about 6.2% of its annual base rent are currently not open or operating, and that tenants representing about 2.8% of annual base rent didn't pay their full rent on April 1.

CT REIT, which holds 2.5 million square metres over 350 properties, says that tenants representing a further 33.5% of its annual base rent are operating on a limited basis, including 132 Canadian Tire stores that are now only serving customers through curbside pickup or online.

The deferral options come after the retail segment of commercial real estate saw a huge drop in April payments after many stores and restaurants were forced to close.

Payments range significantly between real estate companies, but CBRE vice chairman Paul Morassutti said that anecdotally he's hearing from large mall owners that only about 15 to 30% of retail tenants paid rent for April.

“When you sell stuff, or when you sell food or cut hair or whatever, if nobody's allowed to go out, you know, it's devastating.''

He said the scale of the issue meant that almost all landlords had given some sort of rent deferral.

“I think every landlord in Canada, with the exception of maybe a bunch of small ones, are showing flexibility, because they have to, they have no choice.''

The rent issue on the commercial side was largely on the retail sector, with office, industrial and even multi-family holding up relatively well, he said.

Rent payments could be a bigger issue in May with a full month of business disruption on top of the half-month of March, but government programs should also have rolled out by then to give some cushion, said Morassutti.

Government programs could help soften the blow, but the key issue is how long the outbreak and the forced business closures to fight it drag on.

“I would think most restaurant owners would tell you they've got about a month or two of cash flow to get them through a crisis, many of them not even that much. So will there be enough government relief to save them all on a wide scale basis? I hate to say it but the answer is probably no.''

He said that if the virus is relatively short-lived and restrictions ease by summer then things could bounce back in a significant way, but it will be quite a different picture if it drags on.

“If our approach to containing the virus sputters, and if it really is prolonged, there will obviously be a significant impact on the real estate industry.''