The Property Industry Group has announced an industry-wide assistance and relief package for retail tenants that are hardest hit by complying with South Africa’s lockdown in the face of the COVID-19 pandemic. The initiative, which focuses principally on supporting affected SMMEs, also provides relief and assistance to all other retail tenants and will be rolled out by landlords nationally.
During the week of 23 March 2020, the major representative bodies for real estate in South Africa – the SA REIT Association (SA REIT), SA Property Owners Association (SAPOA) and SA Council of Shopping Centres (SACSC) – formed a collective, which has been coordinating its response to the COVID-19 pandemic, and specifically the economic effects of the 21-day lockdown. The newly formed Property Industry Group collectively speaks for the commercial real estate sector in SA, which includes the country’s large property owners.
The commercial property sector makes a significant contribution to SA’s society, economy, tax revenue and employment. It is responsible for more than 300,000 jobs directly and indirectly in other sectors such as security, cleaning, hygiene and technical services, and building and construction.
The group has announced an assistance and relief package for the retail sector to provide support to those that need assistance the most. Although it’s primary focus is on SMMEs across all sectors, the group has also included providing support to large retailers affected by the lockdown. The initiative targets preserving jobs – for retailers, their suppliers and service providers. To qualify for the relief benefits, retail tenants will need to undertake not to retrench staff during the relief period.
Significantly, the package stipulates that all tenants whose accounts were in good standing at 29 February 2020, can be assured that there will not be any evictions for the next two months.
In addition, retailers prevented from trading in compliance with South Africa’s government-mandated lockdown (non-essential services), and in good standing at the end of February 2020, are offered some form of assistance from landlords. The extent of that relief depends on the severity of impact (see tables below).
For April and May 2020, retail landlords will offer relief in the form of rental discounts where rental will be waived partially or fully and interest-free rental deferments where the deferred rental will be recovered later over six to nine months from 1 July 2020 onwards. Rental includes rent, operating costs and parking rental but excludes all rates and taxes recoveries and utility cost recoveries, as well as insurance, which all tenants will be required to pay in full for April and May 2020.
Of course, each landlord can use their discretion in the relief and assistance that they give a retail tenant, but the property industry package stipulates the minimum that qualifying retailers can expect.
Landlords will, on a case-by-case basis, also consider providing relief for office, industrial and hospitality tenants where the lockdown severely impacted the tenant and where it is justified. These tenants will negotiate relief terms directly with their landlords.
Shopping malls accommodate a wide range of retail tenants affected by the lockdown and, when putting together the package, the property industry engaged with various groups of retailers to get their buy-in.
“We’ve seen retailers reverting to legal positions, but we don’t believe that litigation provides either side with timeous solutions needed to get through this unprecedented time. We need to stand together and find workable solutions that will benefit the country, protect jobs, and sustain our businesses through this challenging time. We believe what we are offering is balanced and addresses some of the key issues on both sides. It is an equitable way to protect both industries and, very importantly, looks after the drivers of employment creation – the SMMEs,” says Estienne de Klerk, spokesperson for The Property Industry Group and Chairman of the SA REIT Association.
This assistance package comes at a massive cost to the property industry, which faces its own dire set of challenges. “But it is necessary for those that need assistance to get it, and for the small retailers that need it the most to get the support they need. Now is the time for bigger and stronger companies to step up and form a buffer to protect smaller retailers as a collective so that we can all come out of this stronger,” says de Klerk.
The package assumes that SA’s lockdown doesn’t extend beyond 21-days. “If this isn’t the case, it is critical for stimulus packages such as those provided by the Government, banking sector and Solidarity Fund to kick-in to weather this storm,” says de Klerk. The property industry package allocates less support to retailers that have insurance cover or receive relief from other sources in order to focus benefits on retail tenants that don’t qualify for other assistance.
Shopping centres play a huge societal role in the SA economy, providing goods, services and information to their communities. “Our shopping centres are strongly driven to be part of the solution, not only by giving people a safe and hygienic place to acquire essential goods and services but by protecting jobs and helping to get the country back on its feet as fast as possible after the lockdown. We have been overwhelmed by the goodwill of property owners, who have also offered over 400 sites to Government to use as possible temporary testing sites, hospitals or labs,” says de Klerk.
Overall, the property industry has over the last 25 years of South Africa’s democracy been at the heart of growth and development, making fixed direct investment in the form of world-class residential, retail, office and industrial properties. In the process, the industry attracted a diverse pool of local and international equity and bond investors. South Africa has recently seen a downgrade of its investment credit rating to junk status, which has been followed by a sell-off of local listed equity and bonds.
“It is important that business, labour, Government, banks and other investors take decisions that don’t jeopardise the country as an investment destination in the future when dealing with the COVID-19 pandemic. We believe our approach provides a level of certainty in the sector and protects an important part of the economy at a time when we most need that, and our options are quite limited,” says De Klerk
The payment for rental for the month of April and May 2020 should be done by no later than the 17th of April and the 7th of May respectively and apply to all discounts and deferrals.
The Property Industry Group
Estienne de Klerk, Spokesperson
Contacts: Nadine Kuzmanich cell: 082 888 0939 or Anne Lovell cell: 083 651 7777
Email: NKuzmanich@growthpoint.co.za or Anne@marketingconcepts.co.za