Business groups call on Government to protect commercial tenants hammered by lockdown

Property

Business groups warn of widespread failures and job losses if commercial tenants aren't given rent relief

24th Apr 20, 11:14am by Greg Ninness

Business organisations have joined forces to ask the Government to put protections in place for businesses that face being evicted form their premises because they can't afford to pay their full rent in the wake of the COVID-19 lockdown.

The eight organisations - Retail NZ, Business NZ, EMA (Employers and Manufacturers), Restaurant Association, Hospitality NZ, Franchise Association of NZ, Baking Industry Association of NZ and Auckland Business Chamber - have asked the Government to implement a two stage plan that would allow businesses to keep operating as they work to rebuild their cash flows after the lockdown.

Firstly, they want the Government to immediately prohibit landlords from cancelling leases and taking debt recovery action against tenants for up to six months against tenants who are eligible for the Wage Subsidy due to COVID-19.

Secondly they want a compulsory Code of Conduct created for commercial leasing that would require all landlords to provide a reduction in rent and outgoings based on the lockdown's effects on their tenants' turnover, and also delay any rent increases.

In a letter to Prime Minister Jacinda Ardern, the organisations involved said they applauded the Government's "decisive response" to COVID-19, but warned that many of their members were "at grave risk of failure," even if the country moves to Level 3 on April 28.

"One of the main drivers of this is the inability of many businesses to obtain meaningful rent and outgoings relief from their landlords," Retail NZ Chief Executive Greg Harford said on behalf of the group.

The letter to Ardern described the issues facing tenants as a "ticking time bomb" because many small businesses would not be able to survive seven weeks of Level 3 & 4 restrictions without some form of rent relief.

"Business that have no revenue but are forced to pay rents they cannot afford, face the very real prospect of closure," the letter said.

"Not only will this leave landlords with no tenants, but many high streets will be bereft of shops, restaurants, office tenants and the jobs that go with them.

"Many thousands of jobs are likely to be lost if Government does not introduce new rules to level the playing field for business and to allocate fairly the the impact of COVID-19 between tenants and landlords," the letter said.

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104 Comments

by Glitzy | 24th Apr 20, 11:24am 1587684298

Landlords need to give rent relief or they lose a tenant. That simple.

by nymad | 24th Apr 20, 11:42am 1587685321

Exactly. I'd like to see any commercial investor with big enough cajones to evict a tenant in the foreseeable future.
There should be riots if we even hint at subsidising commercial rents.

by bdesjeunes | 24th Apr 20, 1:51pm 1587693117

cojones* ;)

by theglc | 24th Apr 20, 12:03pm 1587686626

Thats it in a nutshell.

they need to compete to keep tennants, end of story

by gordon | 24th Apr 20, 12:28pm 1587688080

I think this proves a couple of things. Firstly that a lot of landlords are undercapitalised just like their tenants. When buying commercials many buyers are not putting in a lot of capital. Secondly some landlords are going to be very stingy even if they have lot of equity in their investments. Some people are kind, some just think about themselves. Human nature.

by Fritz | 24th Apr 20, 2:39pm 1587695971

Well said.

by CN | 25th Apr 20, 5:58pm 1587794308

The same commercial property purchase could be financed by property investors in two different ways with very different financial outcomes

1) 100% equity - conservatively financed
2) 35% equity, 65% debt - aggressively financed

The conservatively financed investor with a cash emergency fund, can sleep well at night with less financial pressure than the investor who chose to finance their investment more aggressively.

So if an investor has chosen to aggressively finance the purchase of their commercial property investment (some may have even borrowed against their home for their equity investment in commercial property, meaning the commercial property was 100% financed by debt), loses their main source of income and then does not have an emergency fund, they have put themselves in a potentially financially vulnerable position. By taking on high levels of debt, the aggressive investor has much less financial flexibilty than compared to the conservatively financed investor.

As Warren Buffett says, when the tide goes out, you find out who has been swimming naked.

by bw | 24th Apr 20, 11:25am 1587684337

Rent and Lease Payments of all kinds will 'halve' after this.
Tenants are going to be in the box seat, those of them that are left, and negotiating rentals on the huge number of vacant ".. high streets .. shops, restaurants, office(s) " will allow that.
High Streets etc were awash with "For Lease!" signs before Covid19, I shudder to think what they will look like from now on.

by Fritz | 24th Apr 20, 12:29pm 1587688147

Out of adversity comes opportunity.
Good existing and good new businesses will be able to negotiate sharp rents, to allow them to prosper as we recover.

by Quiet Desperation | 24th Apr 20, 2:07pm 1587694042

I know people who have received an email from their residential landlord, angry at being unable to currently raise the rent, notifying them that they will be issuing a notice to increase in a few months time to raise the rent on the very day the freeze ends. Apparently this is not uncommon, despite the situation many are facing. There are landlords still expecting to increase rents. It is horrible for so many hosts to be struggling - watching the parasites sicken and die off is one good thing that can come of it.

by streetwise | 24th Apr 20, 8:37pm 1587717436

Yes, I had an angry landlord, express his anger towards me verbally in the early 1980s when Muldoon imposed a general wage and rent freeze. He told me I was "getting away with murder" in no uncertain terms in his whining cockney accent. The freeze just so happened to be shortly before I was due a rent review. I don't think a landlord would be expressing his anger like this today. The tenant could just do a runner. Not much the landlord could do about that, cost of taking the tenant to court assuming you could find him, would be prohibitive. By the way, you must surely notice how our vaunted court system is clogged up today by the super-rich taking people to court out of petty malice and spite, and offended egos? Meanwhile, I know of cases where those from middle NZ just can't get a genuine case heard because the small claims court have guard dogs turning away citizens because they can't cope with the overload. If the citizen takes a case to the District Court it will cost him a fortune in lawyers fees as the case is adjourned time after time until a year later it is still unresolved.

by powerdownkiwi | 24th Apr 20, 11:25am 1587684320

Leave the market alone
Leave the market alone
Leave the market alone

Help, we bet on the last tulip and we need help.

Leave the ma..........

by Weld | 24th Apr 20, 11:37am 1587685076

Leave the market alone. It's up to the tenant to negotiate with the landlord.

by Ralph | 24th Apr 20, 12:06pm 1587686780

Too late. They shut down one end of the market.

by Step Up | 24th Apr 20, 12:04pm 1587686663

I think people are now figuring out how bad the consequences from this lockdown will be. It is all going to filter through to all corners of our economy and there will be a lot of suffering. Lives will be lost and that is why it was, and is, a false dichotomy to say it's "lives vs. the economy". It was always "lives vs. lives" - just different lives and different forms of suffering and death.

Unfortunately, we have a PM who is listening to only one side and just asserts she "disagrees" when anyone who has contrary evidence as per the head of the medical association earlier this week. As though her saying she disagrees is enough to end the debate. Of course the media won't complain - just got a massive subsidy with more to come I am sure.

I have said it before and I will say it again, the lockdown was an over-reaction but understandable 5 weeks ago. Now there is no real reason to continue. However, I don't think this government listens to anyone outside their small crew (Prof. Shaun Hendy) and doesn't actually know how the economy works (see Dr. Deborah Russell). The cure is far far worse than the disease.

by Fritz | 24th Apr 20, 12:32pm 1587688350

100% agree.
The right thing to do would be to announce, on Wednesdsy next week, that we will be moving to Level 2 on Monday 4 May.
That would provide a substantial morale boost.
Of course they won't. They will stick to their dear little plan.

by JimboJones | 24th Apr 20, 12:59pm 1587689967

As far as I’m aware we haven’t had community transmission for a long time. And we have all been in our bubbles. So doesn’t that mean the only people that now have the virus in NZ are either known or are in a bubble with someone known? Why not isolate all people that have it or are in their bubble (I mean proper isolation) and go to level 2?

by Fritz | 24th Apr 20, 1:53pm 1587693195

Agree.
As I say, if the government were politically clever they would announce a shift to Level 2 next week, starting 4 May.
Are they politically clever enough?

by The Lark | 24th Apr 20, 1:34pm 1587692051

I think people are figuring out how bad this might be, I'm not sure anyone yet has come close to figuring out what the consequences will be. At present I would say incalculable and unfathomable. Yet hoping or waiting for a return to normal is going to lead to serious disappointment. Any small business owner who is trying to get their heads around this are doing well.

by Camel's back | 24th Apr 20, 12:04pm 1587686670

First thing they should have done with this lockup BS is freeze all rents leases and mortgage payments and by freeze i mean cancel. Then at least business would not be going backwards.. Also canceling all power payments would have also helped.

by Clementé | 24th Apr 20, 12:31pm 1587688318

Was the lock up BS... honestly ?

by Camel's back | 24th Apr 20, 12:35pm 1587688529

Yes should have stopped it at the border back early Feb.

by RCD | 24th Apr 20, 12:57pm 1587689847

This i agree with and said so in this column at the time

by JimboJones | 24th Apr 20, 1:00pm 1587690057

What would we have done with the tens of thousands of NZers returning home?

by Camel's back | 24th Apr 20, 1:07pm 1587690466

Quarantine for a month or stay away.

by Ralph | 24th Apr 20, 12:05pm 1587686718

It's as if the economy is connected end to end.

by Nzdan | 24th Apr 20, 12:06pm 1587686785

No Force Majeure clauses? Even after what happened in Christchurch? I guess Commercial Landlords really do have a lot of power as they're not going to include these out of love....

¯\_(ツ)_/¯

by JimboJones | 24th Apr 20, 12:19pm 1587687563

Maybe I should invent a company that can lease some space off myself?

by BadRobot | 24th Apr 20, 12:24pm 1587687887

I like your thinking....

by Squishy | 24th Apr 20, 12:27pm 1587688023

Negotiating relief is only a very short term measure, the contracts need to be renegotiated to take account of the new economic environment. Existing businesses are not in competition anymore.

by BigDaddy | 24th Apr 20, 12:37pm 1587688642

Any landlord would be completely stupid to throw out a tenant who has been hit by Covid. At present I am negotiating with 30 of my commercial tenants. Luckily the vast majority are essential businesses because I have avoided retail and office as they are the most fragile. Nevertheless even essential businesses have been hit because most are part essential and part not essential. The general rule is a 50/50 deal reviewed monthly with Opex paid in full. Another that works well is to defer ( not rebate) a months rent in full with another full deferment 6 months later on the condition that the tenant signs up for a longer lease. There are variations on this but it keeps the wheels turning,

by Zachary Smith | 24th Apr 20, 12:45pm 1587689145

A good view of what is undoubtedly going on behind the scenes everywhere in this market. Commercial landlords and tenants should consider themselves as de facto business partners and act accordingly.

by rastus1 | 24th Apr 20, 12:46pm 1587689177

The oracle is back!

by murray86 | 24th Apr 20, 1:02pm 1587690177

This goes beyond landlords. It is also about Councils demanding rates and insurance companies their premiums and so on. the impacts run deep....

by GV 27 | 24th Apr 20, 1:03pm 1587690200

This was needed before 1 April. A lot of damage has already been done.

by B-practical_not_PC | 24th Apr 20, 1:04pm 1587690247

Sigh... this type of action benefits only one of the many dominoes about to fall.

Quick landlords, you better call the bank to ‘help’ you manage your dept Through more dept.

How will highly mortgages landlords cope is beyond me.

Where is auckland councils responsibility here. If landlords have to accept torn up lease agreements then council should be subjected to the same treatment. And then so should the banks!

by raumati | 25th Apr 20, 1:54pm 1587779677

Well said

by Chris-M | 24th Apr 20, 1:48pm 1587692892

If I were a commercial tenant I would close the business, declare bankruptcy and by what ever means possible preserve my personal wealth. This would leave the landlord with an empty property. If enough people did this, it would force a massive revaluation of the crazy commercial property values to the point where the landlord or new building owner would accept a much lower and more realistic rent. Only at that point I would consider re-entering a rental property, if I believed conventional bricks and mortar retail is where I want to be.

by IT GUY | 24th Apr 20, 1:15pm 1587690944

The old Acme 2020 Ltd trick, can see a lot of assets been sold, leaving liabilities behind, good business to be in will be storage king......

Grab your fixtures and fittings and store them before landlords lock your doors.

by bw | 24th Apr 20, 1:15pm 1587690919

Just the beginning...

The Warehouse has asked some staff to take a 10 to 20 per cent pay cut or face redundancy

by IT GUY | 24th Apr 20, 1:17pm 1587691025

The epicenter of collapse will be Queenstown.... remember the 1987 crash

by JimboJones | 24th Apr 20, 1:19pm 1587691190

Is that legal? How can they argue your position is redundant if they prepared to keep you on in same position for less?

by Andrewj | 24th Apr 20, 1:30pm 1587691802

Talked to a retailer this morning, he said landlord is not prepared to play the game ,determined to maintain lease at present level. He said he wants %50 reduction or he walks, trying online sales, he always had around %30 trying to get to %90.
Lucky he developed an online presence before it all blew up.

by Pietro | 24th Apr 20, 1:35pm 1587692105

Why would people kick out a tenant when they know full well that the property won’t be relet?

And just seen GR on TV addressing the wage subsidy shambles. $11 billion paid out to just about anybody who put there hand out.

This is the criteria:
“The business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year, and that decline is related to COVID-19“

Predicted!! Any one month!! It’s particularly mad for part time workers, who don’t even need to have earned the amount of the subsidy.

Why not have made the subsidy a long term interest free loan, possibly offset against payroll KPIs?

And just to hammer the point home: $11 billion dollars, more than $2000 for every man, woman and child in the country. In just over one month. You could be a high earning professional, on $500k a year, and still get it. And I do know of a few who have. And a cafe owner who claimed $350 for a part timer he paid $80 a week. Madness.

by Mark Hubbard 1965 | 24th Apr 20, 1:52pm 1587693137

All these groups can go to hell. So the evil big bad party is always the landlord?

Actually, most landlords are syndicates of mom and dad investors who were prudently trying to find yield after they were sacrificed to the speculators by RBNZ. So as our economies now seem only to work on this obscene Orwellian cash free for all from government, then have the taxpayer simply pay landlords the rent.

Then all your kids can pay it back over 1000 years out of their subsistence UBIs. Totally over this.

And by the way, there’s no community transmission; we should be out of all the levels so businesses can return to work and pay their rents from profits generated via the voluntary transactions of a free market.

by nymad | 24th Apr 20, 1:56pm 1587693388

Actually, most landlords are syndicates of mom and dad investors who were prudently trying to find yield after they were sacrificed to the speculators by RBNZ.

Yes. And now they are realizing the risk associated with seeking yields above a term deposit rate.
100% on them. They wanted the reward with no risk. Too bad.

by Mark Hubbard 1965 | 24th Apr 20, 2:12pm 1587694330

Yeah, greedy pricks. They deserve to lose everything. Too bad for them and their hard earned life savings, trying to get an extra 1%. They should’ve just put it in sharemarkets where there is no risk at all 20% returns thanks to RBNZ destroying yield and their retirement income.

Must be great knowing everything like you do?.

by nymad | 24th Apr 20, 2:15pm 1587694559

So you instead support people getting something for nothing?
Because that is what you are advocating here.

by Mark Hubbard 1965 | 24th Apr 20, 2:24pm 1587695080

Read my tweets a bit better. I’m being facetious, but also serious. So every other bugger gets bailed out but landlords?

by Mark Hubbard 1965 | 24th Apr 20, 2:28pm 1587695284

And don’t forget my main point: And by the way, there’s no community transmission; we should be out of all the levels so businesses can return to work and pay their rents from profits generated via the voluntary transactions of a free market.

by Andrewj | 24th Apr 20, 2:35pm 1587695717

Talked to a local this morning, his mate owns a motel that he has leased for 10k a month. Payments have stopped and stress levels are rising. You can hardly blame the guy for not paying as his business has been shut down , he probably cannot pay same as the cleaners etc.
I agree we need to get out of this lockdown fast or face serious economic problems that will take years to fix.

by Mark Hubbard 1965 | 24th Apr 20, 2:40pm 1587696007

I agree Andrew. Landlords and tenants need to realise they are tied at the hip. I just get sick of the socialist majority viewpoint here that equates landlords with evil out of an ideology that has murdered more humans thru history than any other.

by Independent_Observer | 24th Apr 20, 4:58pm 1587704309

I think you may have missed a general shift in sentiment across the whole society - and those views are just being represented here in that proportion.

Landlord'ism was the game to be in 2000 to now. From what we've been told on many occasions that its risk free and many people have made a lot of money from it. Often telling tenants who are struggling to get by how much money they've made, just after out bidding a young family at an auction to buy their 4th property.

Just ask Big Daddy, TM2 etc who all own 10+ properties. Their purchases will had added pressure to the demand side and done nothing to add to the supply side - as a result they moved equilibrium up - resulting in higher prices and more debt - and it is that debt that is now the big problem. So landlords are a significant part of the problem we have. And you can't both be the problem and the solution at the same time.

Why would anyone feel pity for landlords?

by Mark Hubbard 1965 | 24th Apr 20, 5:33pm 1587706386

Okay. Per below.

Say as a landlord, invested with others, I have costs of $50k. Say you’re my tenant with turnover falling from $5 million to $500k because of this crisis. I’ll agree through crisis to just cover my syndicates costs, no profit, a decimated capital valuation, and set your rent at 10% of turnover: $50K. Note I bought the property with 20 other very middle class elderly investors who put a good portion of their retirement savings in, so they have no income now through the crisis.

Quid pro quo, however, post crisis when your turnover returns to $5 million. You have to honour that 10%; lease is now $500K. You take our super profits in the downturn, so we take your super profit in the good times.

You signing the dotted line then?

by murray86 | 24th Apr 20, 6:30pm 1587709849

Mark to some of your earlier comments first, those mom and dad investors made a business decision, and must accept all the risks associated with that. And under the current scheme they perhaps should seek assistance from the Government. Perhaps to lean on the banks with respect to what they do about their mortgages that go into distress, and councils on rate demands and so on.

As to a call to the other way; that's not socialism it's just telling you that people are utterly sick of the rampant ravages of capitalism, and things need to go to a fairer position - the centre!

by CN | 25th Apr 20, 4:47pm 1587790059

People and businesses should always manage their finances so that they're able to handle any unexpected emergency. This is regardless of the source of their income:
1) employment
2) income from investments such as rental property (residential, commercial, etc)
3) income from investments such as dividends from listed shares,, interest income from time deposits, etc

That means maintaining a cash emergency fund of sufficient size to cover living costs for a period. Some people are now learning firsthand the pain of not having an adequate cash emergency fund.

by Independent_Observer | 24th Apr 20, 4:53pm 1587703992

Mark - I understand where you are coming from. But you can't both be the cause of a problem and the solution.

Instead of pumping more debt into the property market, those in their 50's and 60's should have been paying down debt, getting mortgage free and saving.

One of the many problems we have, which I watched at multiple auction rooms in Auckland in the 2015-17 period, was Mum and Dad investors using equity in their own properties to out bid their childrens generation out of home ownership. And as a result pushed private debt levels even higher - which resulted in the only option for RBNZ to drop rates so that the debt could be serviced. There was signficant Mum and Dad FOMO.

If you had Mum and Dad style FOMO, I'm not sure I can feel much pity for you.

Given the capital gains many older generation NZ'er have experienced in their properties, perhaps they should have been planning on using that capital to retire on (via reserve mortgage or similar) instead of being greedy and buying even more properties and making the problem even worse.

by Mark Hubbard 1965 | 24th Apr 20, 5:16pm 1587705417

Same question for you as above.

You signing the dotted line then?

by Independent_Observer | 24th Apr 20, 6:00pm 1587708049

As Buffet says don't invest in what you don't understand - and I don't understand what you're suggesting needs to be signed?

Do you have a bias that suggests property investment can't fail/lose money?

by Mark Hubbard 1965 | 24th Apr 20, 6:06pm 1587708416

Try reading the proposition then.

by Mark Hubbard 1965 | 24th Apr 20, 6:13pm 1587708836

My last comment on this: cross posting a landlord from comments elsewhere:

‘ As a landlord the correspondence being received from both national and international tenants in relation to their lease obligations is nothing short of appalling...simply put, a large proportion are following the Harvey Norman view that they will pay nothing..it might be time for some of these larger players to think about the largess of their dividend policies, the recourse they have to their shareholders and funding partners etc. for additional capital to meet their contractual arrangements rather than expecting Landlords who largely operate on modest yields to become their bankers..

by murray86 | 24th Apr 20, 6:34pm 1587710040

Where does the choice made by the investors as to how much they paid to get into this business get factored in Mark? Having once been a landlord, recent years have seen many paying excessive amounts to get into the market without considering any downside. They need to own the consequences of that.

by Mark Hubbard 1965 | 24th Apr 20, 6:43pm 1587710611

Where was their choice when government arbitrarily shut them and the entire economy down. Same as the damned tenant. But everyone here thinks bail out the tenant, screw the landlord who risked their capital. Well screw them.

But really the solution here is we don’t have community transmission, we should be at least going to level 1 and getting economy going. This is now economic devastation and it is unnecessary... we should be learning from Australia but the caring junta in power is beyond reason on this (and frankly this crisis is being used to get their pre-Covid political program through from this point.)

by Mark Hubbard 1965 | 24th Apr 20, 6:44pm 1587710651

And did you even read my above post from the landlord?

by CN | 25th Apr 20, 4:54pm 1587790457

"we don’t have community transmission"

Really?

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12325316…

by Quiet Desperation | 24th Apr 20, 6:47pm 1587710837

You have described the problem well, Independent_Observer. I wouldn't be able to sleep at night, if I knew my desire for a 'safe' investment was making it difficult/impossible for people to simply have a home of their own. I've seen too many that were very eager to use the free equity they gained from simply purchasing at the right time, to buy up rentals and charge tenants as much as they can.

I have lost friends for speaking against this mindset. Some will have a sponsor child on their fridge, but could not care less how they impact young families around them who are locked out of having the security of their own home, whilst they own more than three. It's easier to send off a little money each month, than to care about the people right in front of you. Mark claims to be sickened by the ideology he is pushing people towards.

by Mark Hubbard 1965 | 24th Apr 20, 7:03pm 1587711809

All those huge assumptions you’re making. Do you have any skin in the game to lose sleep over? You don’t think many landlords have mortgages too? And you think they’re all elderly? And, gosh, many no doubt sponsor a child too, plus the oldies are more than likely supporting their 30 year old children and guaranteeing their mortgages. If we have to go all ‘Kind’ about it and emote your way through life. Perhaps life is a bit more diverse and complicated than you think?

Jesus. Stone me.

by Independent_Observer | 24th Apr 20, 7:37pm 1587713824

Jesus did teach kindness and giving and we live in a (mostly) Christian society - heck we just had holidays for him. Outbidding young people at auction rooms when you already own a home (or 5) isn’t exactly kind.

by Mark Hubbard 1965 | 24th Apr 20, 7:44pm 1587714283

Oh just stick me upon a cross, mate, and crucify me.. There is not enough gin on the planet to deal with you lot :)

How do you survive life ... no don’t answer that. I’m out.

by Quiet Desperation | 24th Apr 20, 8:14pm 1587716073

One example given from experience does not make an assumption regarding the age of absolutely everyone. It's very possible to make choices that consider the impact on other people, and survive. No one is going to do this perfectly, but the outright greed and apathy that is so common and considered aspirational, already has many struggling and is going to cost everyone dearly in the long run. I doubt I'll find myself wishing on my deathbed that I'd been less kind or considerate, or 'emoted my way through life' less. We should not be proud or supportive of a system that locks out hard working people from the security of home ownership and risks the stability of everyone with unsustainable debt.

by Independent_Observer | 24th Apr 20, 9:25pm 1587720303

The landlord class in NZ generally (and I say generally as I know a few good ones as well) are focused on me and my capital gains. And saying that they are serving others are words whispered from a wolf in sheeps clothing. There's a sense of entitlement and that its zero risk with strong recency and confirmation bias issues.

by THE MAN 2 | 25th Apr 20, 10:54am 1587768860

IO, we have bought many properties at auction, all under true market value.
Most of the time we are not competing with first home buyers, as they don’t seem to like to buy at auction, they tend to enjoy paying more away from auction.
We don’t always buy what we bid on, if we do t think that it is a good enough buy for us, we stop!!!

by raumati | 24th Apr 20, 2:06pm 1587693985

It is very interesting that the Big banks aren't taking a hit for their Customers it's just deferral and it gets added to your debt and the Banks profit. Why is a tiny business (mostly) in comparison supposed to reach out with real rent relief (maybe compulsorily) when the Giant Banks hold on to their $Billion profits?

by Petey | 24th Apr 20, 2:36pm 1587695808

The call for landlords to become a business partner by sharing in a percentage of profits is ok when there are losses but what a squeal there would be in good times greedy landlords want a share of my enormous profits this year !! Also why should landlords be the only ones singled out for a social contract what about banks, councils ,(no word about rates holidays )insurance companies, lawyers,etc .

by BigDaddy | 24th Apr 20, 3:02pm 1587697329

Quite correct that many institutions are not playing the game. It’s all very well landlords and tenants cooperating to help each other during the down turn but what about costs over which they have no control? I’m yet to hear from our Socialist Auckland Mayor (who, by the way, has always been paid from the Public Purse) about a reduction of rates. Rates are a huge cost on business and how do landlord and tenant reduce costs with that impost. Likewise insurance, water charges, power charges, ACC levies, legal fees (don’t get me going), accounting fees, Council fees for obtaining simple CCC’s . The list goes on for ever. Not a squeak from any quarter about relief from these costs, even if only short term. Do all the road works have to be done right now? Does the bloated City Rail in Auckland have to be finished on time? What would happen if they were paused for a month or two to give a bit of relief to both tenant and landlord? The only people making money it seems, are those who supply orange cones. We are in the wrong business,

by B-practical_not_PC | 24th Apr 20, 7:47pm 1587714421

Not sure many with bath with you in sympathy when your quoting 30 commercial properties little daddy.
To those who attack - Attacking New Zealand citizen investors who have paid tax (to pay for welfare amoungst other there things) is wrong. You should be celebrating the individuals who have given a lot to advance both the economy and society!
Maybe the CCP virus infected our country a lot longer than 2 months ago. We have been afflicted with a speculative virus for a lot longer than 2 months. It’s probably going to be one of the most important elections this year we’ve had in decades. Here is what you have; the image focused leader with two faces or the CCP kettle cosy who’s affiliations guide our country!

by wirehunt | 24th Apr 20, 8:22pm 1587716544

The election will be a joke, worse than normal. It will be so fragmented because of all the parties nothing decisive will come of it, then some fool will get on stage afterwards and declare they have a mandate.
I really worry about this next election.

As for landlords and renters, once the work visas are able to get home Queenstown will collapse. Then the snowball will get going.

PS: End ALL rental subsidies tomorrow, then we will see what the rental market is really worth.

by Independent_Observer | 24th Apr 20, 9:21pm 1587720078

Could invest in shares BigD and no need to worry about insurance, water, power, ACC levies, legal fees, rates - or tenants.

by Mark Hubbard 1965 | 24th Apr 20, 3:07pm 1587697650

Thank god for you, and sanity, Petey. Nail on head, matey.

by Zachary Smith | 24th Apr 20, 4:07pm 1587701243

Maybe landlords should get contracts signed that give them a percentage of future profits for rent relief now?

I think I was the one who first mentioned "business partners" in this thread but I did write "de facto business partners" implying it was out of necessity rather than any moral obligation. It would make business sense.

by Mark Hubbard 1965 | 24th Apr 20, 4:11pm 1587701468

Great idea Zachery.

by Property Leader | 24th Apr 20, 3:54pm 1587700462

This government clearly does not have a clue about commercial leasing. When it was pointed out that landlords needed help to assist their tenants like happens in Australia they made things worse for us by changing the property law act from needing to issue a 10 day letter to a 30 day letter. They must have been thinking it was like residential tenancies. I and all the commercial landlords I know would not terminate a tenancy till it was many months in arrears. Goodness it always costs at least 6 months rent in fees fit outs and lost rent to change a tenancy.

by THE MAN 2 | 24th Apr 20, 6:42pm 1587710559

This government doesn’t have a clue about any sort of business!
There is no business acumen amongst any of them, as they have never run business except David Parker to a small degree.
The rest of the socialites are lightweight and that will continue to show once we are out of home D!
This lot are totally out of their depth, and the fact that Twyford is the minister for Economic Development really should give us a lot of confidence
Considering his success with KiwiFlop!

by Glitzy | 24th Apr 20, 7:56pm 1587715002

I think u mean socialists mate. A socialite is something quite different.

by THE MAN 2 | 25th Apr 20, 10:57am 1587769077

Was meant to be socialists!

by gordon | 24th Apr 20, 10:38pm 1587724702

I was thinking that when we have an election later this year that the country would turn on the Coalition and toss it out of office. So many business failures and record unemployment would drive people to look elsewhere. Now I am not so sure. Simon is never going to inspire enough people to get National over the line. By default Jacinta will creep back into office as currently there is no one in the opposition who could rattle her cage.

by gordon | 24th Apr 20, 10:37pm 1587724665

I was thinking that when we have an election later this year that the country would turn on the Coalition and toss it out of office. So many business failures and record unemployment would drive people to look elsewhere. Now I am not so sure. Simon is never going to inspire enough people to get National over the line. By default Jacinda will creep back into office as currently there is no one in the opposition Who could rattle her cage.

by streetwise | 24th Apr 20, 8:06pm 1587715611

Small retail landlords: Watch out, the malls, big sheds, and online will make these premises increasingly
difficult to rent at worthwhile return.

Restaurant landlords: Watch out, after Covid restaurants will not attract those large crowds dining out.
90% of restaurants only have a finite (shortish) life span anyway so can't be
guaranteed as long-term tenants. Also, many would-be patrons like myself have developed an intolerance to
cooking-oil so can't eat out because can only eat food cooked in butter.

Office landlords: Watch out, office workers are increasingly moving to work online from home. Less
demand for office space. And, of course, 5G is coming.

Warehouse landlords: Watch out, more online purchases will come direct from the manufacturer in China.
Products will be off-loaded to airport-owned warehouses and trucked or couriered
direct from there to buyer; no middleman. Chinese will have agent in NZ to oversee
this process and deal with any complaints; Several Chinese manufacturers will use
the same agent maybe. We can't stop this trend if we expect China to be the
biggest buyer of our exports.

So, if I was a landlord, I would be very accommodating towards the tenants, because they may not be around much longer.

by Glitzy | 24th Apr 20, 8:03pm 1587715406

China Inc is screwed ~ more so than anyone would believe. The world's factory is closed.

But here's the thing, they still need to eat. 1.45bn people. Our exports aren't optional to China, they are essential.

Our imports from China however are optional ~ widgets are made the world over.

And everyone has a choice how to spend the $ in their pocket.

by The Lark | 25th Apr 20, 3:51am 1587743485

Out of interest, have you ever been to China? Still a massive part of the population live off the land. Like so many right throughout Asia, they may not get unemployment benefit, yet a vast majority have families in villages, where they are in many ways self sufficient. Expensive kiwi imports are for the middle class in Shanghai, Beijing etc.

by Glitzy | 25th Apr 20, 9:31am 1587763883

Spent my entire career in Asia, lived in HK for 25 years, Beijing for a while. Travelled all over the country. China in 1980 was as you describe. Even in 1993 you would see horse drawn traps as you drove out to the great wall. No more. Have a read of these stats and you will get the picture. 800mm+ live in cities now. China is also the world's biggest food importer.

China cant feed itself unless everyone ate subsistence foodstuffs ~ and worked on the land.

https://www.statista.com/statistics/278566/urban-and-rural-population-o…

by The Lark | 26th Apr 20, 3:44am 1587829487

Nice reply Glitzy, so many nz'ers have not been to China, or other parts of Asia, so my question was in earnest. Yes, I see the stats, and I am under no illusion that China is largely middle class, yet it's not far from it's self sufficient roots. As opposed to West, which must be 3 generations, or more, from such a time.
As China is everybody's largest trading partner, I think it's importance to global economy cannot be understated, and I certainly understand your motivation in boycotting chinese made products. Since Trump trade war, many Chinese companies have moved plant to other countries, so it may no longer be made in China, yet in the long run, the outcome is close to similar, in terms of ownership and profits. So it may take some analysis product by product to determine if it should be boycotted or not.
With regards China needing our produce, I am not convinced. Most things we can provide, or rather they want/need, they started producing themselves. Not to mention they have that new king of agriculture, Russia, just next door.
My own feeling is that we are too distant, and too small to be anything but diplomatic with all our trading partners. And, ironically enough, we need to benefit from the experience of those in nz, like yourself, that have insight and understanding of places like China and Asia as a whole.

by wirehunt | 25th Apr 20, 12:16am 1587730615

A wee yarn for you.
Rung a dog food supplier today, made in NZ yada yada. It's bl00dy expensive, at $110 a bag when I go through 2 or 3 a week.
He was busy crying on my shoulder about his lease going up 36% not long ago so that's why he had to put the price up.
I said it's a different world now, go back to them and say you need a 56% reduction in rent. He laughed.
However if they don't come to that agreement soon I won't be buying his dog food, he won't be paying his rent...

You try and buy NZ made and get sh4t on. Take note.

by The Lark | 25th Apr 20, 3:57am 1587743828

That's just it, nz made is simply an ideal, not a realistic option, at present. Nz would seriously have to reengineer it's economy for the cost of production to make final sale cost competitive. I always thought it would have been better to market "buy nz owned and operated", as this is a lot more feasible.

by elliot a | 25th Apr 20, 8:16am 1587759385

I rent 350sqm on Ponsonby road, been there 8 years. Landlord has given us a month free rent. He offered it after a 2 minute phone call. Lucky is an understatement. I would have let all staff go and moved business to my garage otherwise. Instead I have kept everyone on, rebuilt our website, will launch it next week, slowly we will get back on top. Our business is 70% online sales. It will be 100% from the 28th April. So I’ll save you all some time. If you are landlord and your tenant is not an online business, they will never be able to pay you the same rent again if at all. If you are a traditional business and no online presence you need to reinvent/pivot yesterday. This trend was happening for at least 5 years before LD. Covid is just forcing the change.

by redcows1 | 25th Apr 20, 8:46am 1587761211

Unless you're in big media then you can slow down the change to snail pace and enjoy the $50m. Only saying that as some of those dinosaur should have shuffled years ago.

by Davo36 | 25th Apr 20, 11:47am 1587772067

Yeah I'm not sure I agree with this. For a start you're saying it was a choice between paying the rent that month or paying your staff? Surely the staff cost a lot more?

Secondly, there are many many businesses that need physical premises. People have been calling the demise of retail for 20 years. But actual stores do really well for many businesses. Now this covid situation will be a big kick in the guts for retail, and their landlords, no denying it, but things will get back to normal in a year or 2.

by Mark Hubbard 1965 | 25th Apr 20, 2:09pm 1587780582

Yes, I disagree with the paradigm change pieces that are being written ad nauseum now.

1. Factories have to factory, you can't move production to your staff home offices, that's why both Argosy and Kiwi Property are still revaluing industrial properties up, given the lower interest rate environment incorporated in capital valuation model (and lets face it, while RBNZ remains in control, we have a low interest rate environment for years, if not decades).

2. Both Argosy and Kiwi devalued their retail portfolio: I guess that's easy to see why, but there will always be a place, as you say Davo36 for quality retail and high traffic malls ... and that's for retail and hospo ... my wife and I live in a remote place but we've always eaten out once every 10 days at least in the wineries around Marlborough: we really miss it and will be doing a splurge of eating out with friends as soon as establishments can open again: eating a fine meal together, or with friends will always be one of life's necessities for us. We're not alone. And people will always want to shop. Even me, yes, I can look at all the new model panel TVs on line and order one: but I'm not going to - you need to see those screens operating in a shop. Same: I'm never going to buy shoes online, etc etc.

3. Office space is the one where I most disagree with the paradigm change to workers staying at home thesis. Noting again both Argosy and Kiwi revalued office space up, government department tenants will always need office space, as will private sector service (lawyers, accountants, etc). And I say that with my wife and I running our own professional practice from a home office for 30 years: we could do that because we've deliberately kept our client base smaller so we can have a lifestyle, thus there's not a lot of client travel to our office (otherwise we couldn't work from home as we couldn't pass council parking space regs). Also we don't have children. Twitter is full right now with newly ensconced office workers in their home offices proclaiming how they never want to go back to an office: however, their bosses will be getting them back as soon as they can, as productivity will be plummeting: looking at the pictures going up, the home offices are cramped and pretty hopeless, most of them contain dogs and children, and parents tapping away on a tablet trying to talk to their kid ... that's hopeless. The only business type it can work for is where you are using contractors paid on output: if you're paying by the hour, employees have to be where the bosses are if you want to keep or improve productivity; the alternative story is a fanciful dream, and management knows that. A Zoom meeting with kids yelling in the background and all the preoccupations of home is nothing like a physical round table for getting collaborative work done. And I can prove that: I lived in Chch through the EQCs and have more than my share of government workers in my family: yes they were working from home for a while, but for all the reasons I've listed, it didn't work, and management soon sourced new buildings to get them back into the same working space. IRD in Chch went through a range of buildings as the earthquakes kept taking out new buildings, but they figured out pretty quick they needed to have office space. Finally, the one advantage of home office workers is they save the commute: fine, but how much of that time have they just sat in bed with a cup of tea over the last month :)

This is not to say some landlords will lose out badly: it's a building by building scenario also, and high leverage right now is 'difficult'.

Disclaimer: We own units in Oyster Direct Property Fund (we deliberately went unlisted so as not to cop the NZX REIT's stimulunacy premium). We expect to take a capital knock over next two years, and that's obviously annoying, but we're only in for yield and went in with just a portion of our term deposits when bank rates went sub 3%. I think over next decade with their good quality portfolio (44% industrial, 30% office) we'll still do better yield than term deposits. If not, diversification and all that, it's not the end of the world.

I'll just put that there and leave other than for adult and serious debate: I have no desire to deal with all the anti-landlord, anti-capitalist ideological trolls in here. Totally over them.

by elliot a | 26th Apr 20, 7:20am 1587842432

Hey mark. I was only commenting about retail, yes manufacturing still has to continue in real space, was also just making a comment about online retail really. Have friends or threw in the towel on their physical and wish they did it years ago, biz is booming for them. I never eat out either, unless it’s fish and chips or a Thai occasionally, or if the parents are taking me out. Never been wealthy enough. Maybe one day. What’s a antibcapatilist idealogical troll, sorry I’m new here and not out to upset the locals .

by Mark Hubbard 1965 | 26th Apr 20, 7:54am 1587844491

Re trolls, Elliot, just look further up in the thread. They aren’t interested in discussing commercial property per se, as we have just done here, they simply believe, falsely, that capitalism is ‘unkind’ - eyeroll - landlords are always scum, and come the revolution, will be put to the wall :) on a discussion board they’re a waste of space.

by elliot a | 26th Apr 20, 7:11am 1587841873

Rent is about the same. Yes you need space, but far less than a physical store, I hope your right, we hope physical does come back. We often say “street family” , which is the local retailers and extended regular walkers by and local residential tenants. Sense of community is very high always helping each other out, that adds a real positive friendly feeling to the area. To loose that too is as hard mentally as loosing business.

by Mark Hubbard 1965 | 26th Apr 20, 7:59am 1587844775

Yes. I guess one of my points about why I think there’s always going to be need for office space, in addition to productivity losses from per-hour employees working from home offices with all the distractions that involves, is also because most of us are social animals. Like that community feel in your business district. If workers are stuck in their home office week on week they are going to come to feel isolated, with all the mental health issues, depression, etc, that entails. Same for retail.

by OllieT | 25th Apr 20, 1:21pm 1587777688

Folks happy to put their hand in another's pocket without the slightest thought to the consequence. Tenants often rent because they do not wish to lock their money in property, but use it productively or privately, perhaps to pay themselves a high salary or a holiday, or boat. To think that the landlord should pay the rates, insurances, maintenance yet not get rent, is no different to these businesses taking delivery of goods, then telling suppliers they won't pay freight, insurance, nor half the agreed price. And you know, maybe a labour govt will do it for them. Won't that be a success for private endeavour by people who didn't piss their income up against the wall for their 40 years in the workforce.

by elliot a | 26th Apr 20, 7:26am 1587842768

We stilll pay rates and insurance and opex etc. ( and all other bills) just 4 week rent break by a kind landlord, and halving my own already low salary.