A leader in Australia’s commercial property sector has slammed requests by multi-national tenants asking for reductions or deferrals of rent during COVID-19, saying that such measures were intended for small and medium enterprises only and that such requests waste time as commercial landlords try to respond to those in genuine need.
Speaking at on online webinar hosted by the Property Council of Australia last week, Darren Steinberg, Chief Executive Officer and Executive Director at commercial property owner and management firm Dexus, expressed frustration about being asked for favourable rent treatment by multi-national corporate tenants.
Steinberg revealed that as of Thursday April 30 (the day before the webinar), Dexus had received 2,411 requests for rental assistance from tenants across its portfolio.
In addition to those in genuine need, he revealed that requests were coming in from ‘opportunistic’ parties including multi-national corporations such as Shell and Bank of Tokyo.
This, Steinberg says, is frustrating as Dexus attempts tries to assist smaller businesses who genuinely need help.
“I think there are some people being opportunistic,” Steinberg said.
“We had a letter from Shell – they were as of yesterday (April 29) the biggest UK listed company – lodging rent (reduction) requests from Dexus.
“Why should Dexus shareholders look after Shell? They should access their own equity and their own debt markets before Dexus shareholders should have to wear that impost.”
Steinberg’s comments come as commercial landlords and tenants throughout Australia work to devise mutually feasible arrangements for those whose tenants whose businesses have been impacted by COVID-19.
On April 7, State and Federal Governments agreed to implement a new mandatory code of conduct for commercial tenancies which will apply where the tenant has an annual turnover of $50 million or less and is eligible for the Commonwealth Government’s JobKeeper program (i.e. has experienced an annual decline in turnover of $30 million or less as a result of COVID-19).
Under this code, tenants are entitled to reductions in rent which are proportional to their decline in turnover during COVID-19 and any subsequent ‘reasonable recovery’ period.
The code also prohibits landlords from terminating leases on the basis of non-payment of rent during COVID-19 or any reasonable recovery period.
According to Steinberg, Dexus and other commercial landlords are working to assist small and medium sized tenants whose operations have been either shut down or been severely impacted by the crisis.
This includes small businesses such as cafes and restaurants.
Unlike large commercial tenants, Steinberg says these operators are not able to raise funds through debt or equity markets.
It was clients such as these whom Dexus was working with to ensure they can recommence operations after the crisis ends.
“I think the real challenge is working out the guys who are in genuine need of assistance,” he said.
“The ones that we want there at the end of the day like the coffee shops that Johnathan (Callaghan, CEO of Investa) was talking about and the restaurants that are mum and dad operators with five staff that have basically got no customers in their buildings.
“They are the guys want to make sure can come back to work as soon as possible. They are probably going to get rent free.
“When you have got big corporations like Shell and Bank of Tokyo and other organisations like this requesting abatements and deferral and everything else, quite frankly, it’s a waste of my team’s time.
“We’ve got lots of things going on. These big guys are big enough and ugly enough to look after themselves.
“It’s a joke, quite frankly.”
Jonathan Callaghan, Chief Executive Officer of Investa, agrees.
“Darren does raise a really good point -that is the amount of resources that this is taking up is impacting the ability of the businesses to get to the more legitimate requests,” Callaghan says.
“I think It’s a shame. It’s not the best example of how we should be behaving.”