Advertisement
Advertisement

Canadian Landlords Need to Step Up and Work with Retailers to Avoid Catastrophe Amid COVID-19: Experts

Retail industry news delivered directly to you. Subscribe to Retail-Insider.

As the rapid advance of the COVID-19 (coronavirus) pandemic cuts deeply into the guts of retailers around the country, big retail landlords are increasingly being called upon to provide significant rent relief to tenants or face the prospect of losing many of them in the near future.

Many of the smaller to medium size retailers in shopping centres across the country are facing a crisis. Their businesses have been gutted. They are on the brink of extinction. And they’re waiting, hoping and pleading with landlords to give them a helping hand.

“I feel like the bigger the landlord the less they’re willing to do because it’s money over people,” said one tenant.

The Retail Council of Canada (RCC) on its website has a clear message when it comes to rent relief during these historic times.

“RCC is in ongoing discussions with organizations that represent major real estate landlords about the viability of their existing tenants. We have been clear – they must provide relief to retailers and that any communication to governments, or Retail Council of Canada, without first articulating what accommodations will be made to retailers regarding their rent, will not be well received by our community. We will continue to engage in this conversation and will provide updates on a regular basis,” said the note in a Q&A section on its website.

SCARBOROUGH TOWN CENTRE. PHOTO: OXFORD PROPERTIES

Diane J. Brisebois, President and CEO of the Retail Council of Canada, said in an interview that one of the challenges in Canada is bringing all the players together, big and small, regional and national, under one umbrella to move quickly, to get feedback, to provide advice and to speak as one voice.

“With the amount of emails and phone calls and questions on our video conferences and webinars we’re hearing ‘what are the malls doing, we aren’t hearing from them, they don’t seem to be stepping up to provide measures to help’,” said Brisebois.

“We have reached out to them, asked them to organize. We have taken their calls. We have asked them to step up. We have also told them that when we are speaking with the senior government officials we are talking about the entire community. But we expect more leadership. And some of it is not costing any money. Some of it is them saying ‘look, we have to bring everybody together’. 

COQUITLAM CENTRE
COQUITLAM CENTRE. PHOTO: MORGUARD

Karl Littler, Senior Vice President, Public Affairs at Retail Council of Canada, said, “If one tenant is in default, the tenant has a problem. If 50% of the tenants are in default, the landlord has a problem. Landlords need to think about more than their strict legal rights, they need to think about the economic survivability of their tenants – not only now but for the future.” 

Robert Luciano, partner with decisionSMART Retail Advisory, Inc., said he has been hearing from clients that they’re worried about how they are going to make payroll if they have to make rent. It’s the tradeoff now.

“In my experience, landlords want something in return for this. They’re not prepared to give out handouts unless there’s something in it for them. That’s unfortunately a function of various things,” said Luciano. “Their covenants that they have with their banks. If they’re a REIT they have distributions they have to pay out to investors. It’s a vicious cycle that everybody’s caught up in. It’s just who’s going to let their guard down first.”

Luciano said this will give major landlords a black eye in their public image if they don’t participate.

“Large institutional players are going to be seen in a negative way not very willing to help out or sympathetic to the needs of what’s going on in the economy,” he said.

CF CHINOOK CENTRE IN CALGARY. PHOTO: CADILLAC FAIRVIEW

David Finch, a marketing professor at the Bissett School of Business at Mount Royal University in Calgary, said the killer skill in marketing is empathy.

“If you can have empathy for your customers, you’re going to be a great marketer because you’re going to really feel what they feel,” said Finch.

“They’re going to sit there and do a calculation. The minute you start making exceptions you set the precedent,” which can create a domino effect and then a cash flow problem for them too because they have debt to service as well.

On March 19, Ivanhoé Cambridge announced that it will be granting a deferral of the rent payable by those tenants of its retail properties in Quebec, until a later date to be identified in the future, according to their respective situation, and for a period to be determined according to the evolution of the situation.

"We are implementing exceptional measures in order to respond to an exceptional situation. Each of us must do our part to support the well-being of our community and Ivanhoé Cambridge is united in solidarity with the difficult circumstances faced by many businesses,” said Nathalie Palladitcheff, President and Chief Executive Officer, Ivanhoé Cambridge, in a news release. "Our decisions are made with caution in these circumstances. The mitigating measures proposed today aim to alleviate the liquidity problems of the tenants of our shopping centres in Quebec and to support the economy of the province."

METROPOLIS AT METROTOWN. PHOTO: IVANHOÉ CAMBRIGE

A spokesperson said the property owner is evaluating similar scenarios in the different provinces of Canada in which Ivanhoé Cambridge operates.

A spokesperson for Cadillac Fairview said: “As a privately held company, we're not in the practice of discussing our lease agreements. That said, our retailers are our clients, and we will work with each of them on finding solutions through these challenging times.”

Oxford Properties said it is working on a rent relief program. "The health and sustainability of Canada’s retail ecosystem is important to the economy and employment levels. Oxford is committed to helping retail tenants navigate this challenging time and we are working quickly to provide a rent deferral program that will provide immediate relief to eligible occupants," said an Oxford spokesperson.

Michael Kehoe, Lead Ambassador in Canada for the New-York based ICSC and broker/owner of Fairfield Commercial Real Estate in Calgary, said the commercial real estate situation is very fluid right now as landlords and tenants alike grapple with the financial realities of COVID-19.

“Retailers and restaurants are the heart and soul of the country and when times are challenging, developers, shopping centre operators and all retail real estate landlords must find solutions to work with retailers and restaurants until things return to a ‘new normal’ whatever and whenever that will be,” he said.

“The situation progressively will return to that new normal over time, but retail and restaurant tenants will need cooperation from their landlords. Canadian consumer real estate landlords are assisting their tenants where possible but who is going to give relief to the landlords? Their costs do not stop due to the pandemic. Tenants and landlords need to keep one eye on the short term and one eye on the long term and be communicating with each other to ensure the industry survives the current challenges. Leases can be renegotiated but tenants need to understand that landlords have a process for this type of discussion. 

“In these uncertain and unprecedented times, the legal (enforcing a lease) may be different from the practical - keeping retailers in the fold to benefit from the eventual recovery. Everyone in the transactional chain should be assisting to help each other at this critical time. They must work together in the short term to avoid jeopardizing the entire consumer real estate industry causing long-term damage, rampant unemployment and irreparable harm to the retail sector. Consumers will be the judge of how retailers are treated in these challenging times and where their future spending loyalty will lie. I have always said that retail is a Darwinian struggle, survival of the fittest. Now it’s a life or death struggle.”

Article Author

Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He now works on his own as a freelance writer and consultant in communications and media relations/training.

More From The Author

Report Says Support from Local Communities were Vital for Small and...

A new report by Salesforce notes the challenges the pandemic brought to businesses and how many were saved with local financial support by consumers.

Foot Locker Expands ‘Behind Her Label’ Platform to Canada to Support...

The GM of Foot Locker Canada discusses the program and why it launched in this country.

RECENT RETAIL INSIDER VIDEOS

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

Latest Stories

Follow us

4,265FansLike
6,734FollowersFollow
10,862FollowersFollow

all-time Popular