Govt to announce commercial property sector support this week; Banks nearly ready to write taxpayer-backed business loans; Treasury says 'bespoke' support for big business could involve debt, equity or regulatory relief

Govt to announce commercial property sector support this week; Banks nearly ready to write taxpayer-backed business loans; Treasury says 'bespoke' support for big business could involve debt, equity or regulatory relief

Finance Minister Grant Robertson says help is on its way for both the commercial property sector and large businesses affected by COVID-19.

Appearing remotely before the Epidemic Response Committee, chaired by National leader Simon Bridges, Robertson said he will have “something to say” on a “package” supporting the commercial property sector in coming days.

Speaking at a press conference later in the day, Robertson said he was looking at ensuring relief was consistent with that provided to residential tenants. Landlords of residential property have been banned from increasing rents in the next six months and tenants can’t be evicted during the lock-down period.

Robertson said it was important commercial tenants that will remain in business after this crisis period to be supported.

“What we want to do is make sure there is nothing in the way of the good arrangements that are being made between landlords and tenants,” Robertson said.

“But where we’re seeing gaps, we want to be able to address that."

Robertson said he’d be talking to the Property Council, which represents a number of large commercial property investors and landlords, as well as others in the sector.

The Council last week voiced its concerns over some tenants not paying rent, which is putting pressure on landlords, particularly as they need to keep meeting their mortgage obligations.

It argued the Government's decision to allow building depreciation as a tax deductible expense didn’t go far enough to “bridge the gap in what is becoming a crisis of cash flow for many property owners".

ACT leader David Seymour told the Epidemic Response Committee: “Between the tenants, the landlords and the banks, the buck has to stop somewhere. There is all sorts of confusion out there…

“There are different people making totally different arrangements based on where the buck is stopping, and it would be terrible for the Government to come in with a major intervention in a week’s time that undercuts a lot of people who have done the right thing, such as cutting a 50-50 deal.

“You need to be really clear and do so early.”

Robertson responded: “Our first best response has to be people making pragmatic arrangements with one another… Where people have been able to make those arrangements, it’s important that they are supported. I agree with that.

“Having said that, not everybody is playing nice. So therefore, we’re very aware of the issues you’re raising.”

Support for big business could involve debt, equity, asset acquisitions, regulatory changes

In terms of specific support for large, complex businesses, Treasury Chief Executive and Secretary Caralee McLiesh told the committee a team of commercial experts is being established to provide “bespoke” assistance.

She said debt, equity, asset acquisitions, and policy and regulatory changes were the tools Treasury was considering using to support these businesses.

The type of support provided will “depend entirely on the individual circumstances of the business”, McLiesh said.

Wage subsidy payments to surpass $5 billion mark

Robertson noted large businesses are also eligible for the wage subsidy scheme, now that the $150,000 per firm cap has been lifted.

Bridges questioned whether the subsidy level could be increased to avoid firms laying off staff that get paid much more than the subsidy ($585.80/week for full-timers).

Robertson reiterated the scheme was subject to change, and said the level had been pegged to paid parental leave, which is likewise aimed at keeping people employed.

Robertson expected the amount of wage subsidies paid to surpass the $5 billion mark on Wednesday.

He couldn’t provide Bridges with detailed information around subsidy decline/acceptance rates and which types of the businesses the subsidy was going to.

Robertson also reiterated “design work” was underway around additional income support, noting that many more New Zealanders will need to use the welfare system. He acknowledged the precarious positions people were in as their situations changed with alert levels.

Banks nearly ready to implement Business Finance Guarantee Scheme

Robertson expected banks would this week be ready to start receiving inquiries from businesses seeking loans that could in-part be underwritten by taxpayers.

The Government has agreed to underwrite 80% of individual bank loans to eligible firms with turnovers of between $250,000 and $80 million per annum.

In the event of a loan default, 80% of the loss will be borne by the Government/taxpayers and 20% by the bank. The Government will only underwrite loans of up to $500,000. Loans will be written accordingly to banks’ lending criteria.

The aim of this $6.25 billion package is to encourage banks to keep lending.

Epidemic Response Committee (1 April 2020) | NZ Parliament from New Zealand Parliament on Vimeo.

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54 Comments

Buy the means of production! Adrian has the money, we have the will, and now we have the way.

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Can we just admit that we're a socialist state now and be done with pretending we're running a capitalist system? Its all getting far too confusing.

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I am getting a bad feeling about how much the government is throwing at the mounting problems. And the virus hasn't even got going really.
It's like watching a gambler double down every time they lose.....can they win it all back before they go broke trying?

Agree. It seems very scatter gun.
Concerning.

My gold is down 1.14% today. Surely the government can compensate?

Well no Capitalistim has only been stalled since 26 march. The flow of cash is busted and the size of the economy requires govt to kick start. These are good noises from govt but we are yet to see the details, let's hope that it is enough.

"The Government has agreed to underwrite 80% of individual bank loans to eligible firms with turnovers of between $250,000 and $80 million per annum."

This is phase 1. Mark my words, there will be a phase 2 (or 3 or 4 etc) whereby the same is done for the tens of thousands of home owners (but not evil landlords) who are under financial pressure and at the risk of losing their house via mortgagee sale.

If you're right, it will be done for existing landlords as well.
They only did what The System encouraged them to do, after all.
But that was then. For anyone who buys from now on it will be different. Give it a friendly name if you like - something like Grandfathering!

So by that logic, maybe the system should encourage them to jump off a cliff ?

Take your cash out and hide it somewhere then take out as much debt as possible and wait for the taxpayer to pay it, you reckon?

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Is the government going to pay for the losses on my share holdings because I wanted liquidity and wasn't silly enough to get into too much debt by buying a house in case an event like this happened to the residential housing and employment markets - which Taleb has described as not even a black swan, but a white swan?

Why don't we just have state housing for everyone - and completely remove the capitalist system, because that appears to be the dangerous path we are heading down right here with this (we appear to be a socialist state right now which is very confusing).

Guaranteeing someone's debt is not socialism. If you have kids you might step in as guarantor when they are teenagers to vouch for them and get them started in life. If you dont do that for them the alternative is they stay at home and never leave and never grow up.

Using tax income to bail out shoddy businesses that would otherwise fail is socialist. Capatalism would allow them to fail so better businesses can rise from their ashes.

Taking money from others and giving it to me is not socialism because it benefits me!

The PM urged us to be kind ... but the only freebie is kind words not kind donations.

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Bosses take all the profit in the good times but get fully supported in the bad times. Where is the risk?

You are serious ? You think owning a business is risk free ? I have owned a business for 9 years, the profits are all in it (growth is a very cash hungry proposition), and about to be consumed while I continue to pay staff and expect a huge drop in sales for the next however long... No risk to see here.

"expect a huge drop in sales for the next however long" - in that case you will be eligible for the subsidies. AKA, risk eliminated.
Also, reinvesting all your profits in the same business is rarely a good idea. Why doesn't your business have savings to be able to live through a few months of difficulties?

Savings, that's what he said, reinvested, or retained capital. Otherwise it's bring on more debt. Never ceases to amaze me how many experts here have all the answers, at the moment there is no subsidy for employers, it all goes to employees. The employer is being asked to pay up to 80% of the wages of their employees. If your a company that sells human labour that is the same as saying to countdown or pak & save you must sell all you stock for 20% of the cost. Ive seen this comment a few times, why didn't your company save for a rainy day, 1 - 3 or more months with zero revenue, that's not a rainy day. That's not economically feasible or sensible use of capital for any business of scale and by the looks of it uninsurable if my policies are anything to go by.

Subsidies - my staff I am paying at 100%, 12 weeks subsidy pays for 5 weeks wages.
We have cash, access to a large od, and we will survive.
Your comment oozes ignorance. Best keep quiet.

Hopefully your loyalty and integrity is rewarded.

What a disappointment.

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Jesus, what a mess.

The government can't support the entire economy and idea of underwriting 80% of business loans or providing help to commercial property owners is LUDICROUS. How about at the same time introducing capital gains tax on commercial property at the same time if you are going down this path ? Or an annual tax on commercial property ~ it has to be a two way street.

And if these loans are written on the same terms as the Air NZ 900m loan nobody will be able to repay as the interest rate is 9% is greater than a lot of businesses return, esp commercial property.

The government have to be pragmatic and accept Ue is going way higher and businesses are going to fail.

Either that or our kids and our grandkids are going to be picking up the bill of this ever increasing debt burden the government is planning to take on.

most big companies now have a no entry no pay clause and terminate after six months . so it landlords that will feel the pinch, but most big industrial landlords have plenty of room under there debt and credit they can draw down to see them through, they learnt from the christchurch earthquakes to prepare

I'm with Seymour, there's 500 ways from hell for this to go wrong. Probably all 500 of them.

The government is devaluing NZD by increasing its supply. This way banks will easily survive the downturn. The deposit holders will get their deposit in nominal value thus the bank is not defaulting. Even if property prices drop significantly, the government have supplied enough free money to commercial banks for them to repay all deposit holders in worthless paper money.

So you've finally worked who's driven us to the edge of the cliff, and what would you know the goverment is providing a safety net for those who have driven us there.

Dont remember learning anything about this in by business degree; probably because the same driver has captured the academics also.

Most of these drivers will head for the hills, never to be seen again. With any luck, lets hope a forest fire catches up with them.

Why don't commercial owners take a mortgage holiday too?

a lot are they have a clause and are not paying, Harvey norman, the warehouse etc

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This is priceless. I know more than a few commercially focussed developers and they hate government, hate regulation, avoid their taxes and wave the flag for free enterprise unshackled by the evil state. Now they have a taste of adversity their hands are shoulder deep in the pocket of the state and they all love Jacinda. Let them burn I say!

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Probably many of them were absolutely outraged by the $25 pw increase in benefits...

Especially knowing that some of their now ex-employees may be entitled to that extra $25 per week on the benefit.

And the minimum wage increase.

And the doubled 'winter energy payment' for the newly unemployed.

This will probably give the newly unemployed a bit of a mistaken view about how easy it is to live off a benefit.

I think the winter energy payment is only for super.

These bosses feel entitled. They are the boss so should have the top spec vehicle. They deserve respect. They are afterall just a little bit better than their employees. Everyone knows it. The government must know it also, now that they are bailing them out to keep them in that prime position. Its not right. What ever happened to take the rough with the smooth?

And in the end they're just more welfare queens.

Can someone please rope in Bill English. Ardern can do the teddy bear stuff, he can get the country back in business. Very able, under-appreciated politician with a real appreciation of the way the real world works. It’s time for a government of national unity, using the most able people available. Is anyone else terrified that Phil Twyford and Shane Jones seem to have been given the task of spearheading the recovery?
And let’s move on from ‘essential services’ to ‘low risk’. Why can’t a police officer be stationed outside of a butchers, fresh produce shop, hardware store to ensure people keep their distance? Why would it be any more dangerous than joining the massive, semi supervised queues at supermarkets. There is huge danger of the cure becoming worse than the illness.

They aren't low risk. That's the point. Supermarkets aren't low risk either. But they are essential.

Ok, let’s say equal risk. I went into a service station today, no 2m markers, people coming and going, lots of bread and milk, soft drinks etc. Oh, and those little spinning things were half price! Professional civil servants, career cops and very average politicians hold the nation’s economic future in their hands at the moment, and I’m far more scared about that than my slim chance of dying from Covid (yes, I’m high risk before you ask). Hey, we could save 350 lives a year by cutting the speed limit to 20km/h! Even more by banning cigarettes and alcohol outright.

We're a manufacturer. Our product is made, loaded onto flat deck trucks and delivered to site. There's no reason why we couldn't open our distribution network only allowing deliveries to sites. We already have exclusion zones in place for loading/unloading, so broaden those zones to other interactions. The only interaction between a driver and logistics really is a bit of small talk and handing over consignment notes. This can be removed by having a separate printer to spit out Con Notes in the dispatch area, the delivery driver collects them from this printer rather than the dispatch person. I don't know, maybe it's unrealistic?

Ok, so you deliver your goods to site. Then what happens to the goods?

They're unloaded by crane/excavator. Welded together and buried in the ground.

No can do. Most nz workforces are labour intensive instead of tech savvy so almost impossible to safely work with safe distance in mind. Just ask Sistema Plastics, their workforce stood down earlier in the week for the same reason. As for Bill English? You'd have to be joking, its about as sensible as putting a peadophile in charge of a boyscouts convention. Look at how well EQC and the rest of the economy did with his safe pair of hands....

Yes I am very terrified that Twyford and Jones are anywhere near key roles in this.
Both are awful for different reasons.

Bill English would be a poor choice given that he twice elected to increase the risk to taxpayers in order to enable banks to increase profits, firstly via covered bonds and secondly via refusing the Reserve Bank's request for a DTI tool to help enable them to stimulate the economy without further inflating the property bubble. So, he knowingly increased risk in NZ and the likelihood that savers and taxpayers now will have to bail out speculators.

Exactly what NZ does not need right now. Another person keen to have savers pay for speculators' losses when the failed to cover their own risk.

"Robertson said he will have “something to say” on a “package” supporting the commercial property sector in coming days."

A key part of managing a business is having sufficient cash in the bank for a rainy day. If commercial landlords chose to not have sufficient cash for a rainy day and used any spare cash to either pay as dividends to shareholders or buy another commercial property and take on more debt to boost their returns, should the government be providing financial assistance? After all, the government didn't benefit from the upside.

If the commercial landlord did not manage their business to handle a rainy day, then can someone explain why should the government help them out?

If the government does provide financial assistance to commercial landlords, then the government should be getting huge equity stakes and those should significantly dilute existing shareholders who mismanaged their commercial landlord business and failed to be prepared for a rainy day. The government could then look to sell their equity interests in the commercial landlord business by way of an IPO into the stock market when the economy has recovered. Depending upon the price paid by the government, that could likely generate a profit for the government in the future to offset budget deficits, or to help reduce the government debt.

global retail giant stops paying rent to global property companies in NZ,is that our problem,wouldnt it be covered by one of their global insurance cos.they are all structured to pay minimal tax to our govt.

Privatise the gains. Socialise the losses.

My solution is to offer big rewards to companies to research and come up with new products to meet the needs. Product research and development is a major hole in our economy

That's because we've encouraged all money into easy-money property investment instead.

Look at some of the Epidemic response committee, all dressed up with nowhere to go and working in their spare rooms or the dining room. This should not be an outcome of the crisis that people including pollies do remote working from home. For all we know they have just got out of bed or changed from their dressing gown and haven't showered etc. I expect pollies to go to parliament and be there in person after this is over. And let's not even think whether they might still be wearing pyjama pants like the young people who go down to the shops and cant be bothered to put on clothes.

The stories are always good, but the posts are priceless. Good job all.

Liked all those in the photos, couple used to just live in renting condition, now after cave in to the wealth creation gravy train, all got their personal properties sorted, but now rather look tense - watch out! their play, at any cost? - 'socialised' the losses, started from the too 'big to fail' organisation, large company, their commercial rental venue, Banks, ...next soon? the private property investors and landlords - remember? they're the lolly giver of 'essential services' in NZ - Where all those renters that lost the jobs to be housing? - answer: by kind hearted landlords off course. As we speak Grant & Adrian are rebuking the package deal to be announced soon.