South Africa’s small businesses should be first in line for rent holidays and other relief measures amid the economic fallout from the global Covid-19 outbreak.
That was the key message from the country’s top landlords in an urgent conference call meeting led by the South African Real Estate Investment Trust (SA Reit) Association on Monday.
SA Reit joined forces with industry umbrella body the South African Property Owners Association (Sapoa) as well as the SA Council of Shopping Centres (SACSC) to host the call, bringing key players in the industry together to address issues around the impact of Covid-19 on the property sector, retailers and other tenants.
“The commercial property industry is acutely aware of the economic impact that Covid-19 and the lockdown [to try to curb the spread of the virus] is having on small business and employment in this country. That is why tenant relief should go to them,” Estienne de Klerk, chairperson of SA Reit said on the conference call, which included investors, listed property analysts and bankers.
“I cannot emphasise enough the sympathy we have for small retailers and even small landlords, who will be hardest hit financially by the Covid-19 situation,” he added.
De Klerk’s comments come as major national retailers such TFG and financially embattled Edcon have said they won’t pay rent due to the government-declared 21-day lockdown and Covid-19 state of disaster measures.
The lockdown is also having serious economic ramifications for many major retailers that are not allowed to trade, such as clothing and restaurant chains. Only essential services like medical facilities, grocery stores, pharmacies, fuel stations and banks can trade during the lockdown.
Edcon last week said that following President Cyril Ramaphosa’s Covid-19 address to the nation on March 15, together with the three-week lockdown, it will effectively lose R1.2 billion in forecast revenue alone. Mr Price Group also noted in a JSE Sens statement last week that its sales plunged 22.1% following Ramaphosa’s initial address.
Sapoa CEO Neil Gopal, however, has warned that large-scale non-payment of rentals could cause the collapse of shopping malls and severely impact property funds invested in retail property.
Speaking with Moneyweb at the weekend, Gopal said unilateral decisions by retailers to stop paying rent are unlawful.
Sharing similar sentiments to De Klerk, who is also the SA CEO of Growthpoint Properties, Gopal argued that any rental relief should go first to smaller retail tenants, such as line shops, restaurants and other small businesses.
“Most of the national retailer chains have shareholders and bankers that could provide assistance during this crisis, but this is likely not the same for small businesses, whom we believe are the first line of tenants we need to defend,” he pointed out.
De Klerk told property industry stakeholders on the conference call that SA Reit and Sapoa are liaising with both large national retailers and “the little ones” to ensure the retail property industry remains stable in the face of Covid-19 and the impact of the lockdown on all businesses.
“There is a lot of uncertainty around the impact of the Covid-19 virus and things are very fluid right now. The Reit sector is also under tremendous pressure and we all need to work together as the property and retail industries,” he said.
“Our focus on the plight of SMEs as an industry is deliberate and we are running with it, even if we may come into the crosshairs of bigger retail tenants. Smaller tenants need more in terms of relief right now,” he added.
Laurence Rapp, CEO of Vukile Property Fund and one of the other key SA Reit members to speak on the conference call on Monday, echoed De Klerk’s sentiments.
“We need to work for the good of South Africa here and put our interests aside for the moment … We have no idea which tenants will fail, and which tenants will survive and bounce back after this is over,” he said.
“The small tenants will be harder hit and we need to nurse them during this period. Bigger retailers should have the resources to get through this.”