Lockdown | Rent relief not guaranteed, Canal Walk tells tenants

CEO of Canal Walk, Gavin Wood, told the shopping centre’s tenants in a letter addressed to them on Tuesday that it could not provide them with wholesale rent relief during the 21-day lockdown period and that requests for relief would have to be negotiated.

In the letter, Wood said rental was a primary source of income for Canal Walk. He stressed that the Hyprop Investment-owned [JSE:HYP] shopping centre could only consider rent relief on a case-by-case basis. 

Hyprop Investments has seen its share price and shopper numbers fall significantly even before the coronavirus pandemic, and defaulting tenants at its largest centres would worsen its share price. On Wednesday morning the Hyprop share price dipped 1.98% to R16.83.

President Cyril Ramaphosa declared the national lockdown in March in a bid to curb the spread of the Covid-19 coronavirus, which has 1 749 confirmed cases in South Africa and has claimed 13 lives.

The Cape Town shopping centre, which has more than 400 stores, implemented a partial closure in line with the national lockdown, which has seen businesses that do not fall under essential services close their doors.

Qualifying criteria

While government and various businesses have announced measures to soften the blow for non-essential businesses which have to close during lockdown, Wood said Canal Walk received a number of requests for relief from the shopping centre’s tenants.

"In light of the Lockdown period, we have recently received a number of queries from tenants regarding whether rent relief will be provided by the landlord to our tenants.

"We will consider each and every request within the context of predetermined qualifying criteria, subject at all times to internal discussions, internal protocols and acting in our sole discretion," said Wood.

In the letter Wood said the current debt profile of each tenant as well as their standing within the Hyprop portfolio would be taken into account when considering each rent relief request.

"Without there being any obligation on our part to do so, we advise that we may, on a case-by-case basis, consider each and every request on its merits simultaneously taking into account the overall prejudice that is being and will continue to be suffered by the landlord during this period," Wood said.

Wood referred tenants to initiatives offered by government for businesses affected by the lockdown, including support from the Department of Small Business Development and the Solidarity Fund.

Analyst and founder of Just One Lap, Simon Brown, told Fin24 that the dilemma of whether to offer relief to tenants is common among large retail property owners, who might opt for negotiations in a preemptive bid to protect assets so that tenants are still paying and open after the lockdown.

"We have seen this across the large shopping centre owners. Real estate investors are not talking about rent holidays, because they are worried that tenants will say they simply won’t pay, so they will opt to negotiate instead," said Brown.

Canal Walk tenant businesses include Balucci Leather, Aldo, Asics, Cape Town Fish Market, Limnos Bakers, Carlton Hair and Absolute Pets.

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