During the last three weeks, apart from the NHS, and the toilet roll barons; residential landlords and renters have been the main focal point of attention.
The closures of non-essential commercial premises like shops, pubs, restaurants and leisure facilities, has financially challenged landlords and tenants alike.
Burger King, Carluccio’s and Yo! Sushi is among many UK businesses, who plan to withhold rents.
Businesses need to hold on to the little cash they have, pay their staff, stay afloat and survive the coronavirus outbreak. Paying rent for some is a secondary consideration.
Richard Hodgson, chief executive of Yo! Sushi said that not paying rent was “not really a choice. It’s just a basic piece of economics”.
Businesses have protection against eviction
The Chancellor has confirmed, an extension of the residential moratorium is also applicable to, lease forfeiture and debt enforcement to commercial leases.
So, for the short term, the good news is, tenants who are unable to pay rent, over the next three months, are now protected from eviction.
The British Property Federation, in turn, are requesting the government to intervene, to help landlords, who themselves may end up with cash flow problems.
The government is aware of the plight, of landlords and have said: “As commercial tenants will still be liable for the rent after this period, the government is also actively monitoring the impact on commercial landlords’ cash flow and continues to be in dialogue with them.”
“We know many commercial landlords are already setting a great example by working closely with tenants and offering rent deferrals or holidays”.
The government is doing all it can, to help the fabric of our society, and its businesses. However, we have heard very little from our banks, what support they may offer, to businesses and landlords. After all, the banking sector received substantial government bailouts, during the Lehman Brothers financial crises. Companies in their hour of need will expect banks to be flexible.
Some, if not all our airlines may be financially challenged, they too hold leases to premises.
Today’s report: Virgin Atlantic has suggested the government offer UK carriers £7.5 billion in credit facilities, which is desperately needed.
It would seem, across all sectors, landlords may have a rocky road ahead of them.
Boost liquidity to ride the storms ahead
In the meanwhile, prudent landlords will need to conserve cash and boost liquidity to ride the storms ahead. Simply put, sell what you can, hold on to your cash.
Even before the coronavirus outbreak, landlords were struggling, due to the gradual decline of our high streets. Landlords with high financial gearing, may not survive unless they restructure their finances, for short to medium term.
Property valuation, not so easy at the moment
Restructuring, well that’s a story in itself; Loan to value (LTV) testing is likely to be deferred so that lenders can obtain an RICS compliant valuation. While the Coronavirus lingers, trying to get an RICS compliant valuation, is no easy fete.
In the shaking of the tree, the weak will fall
Mr Sajjad Ahmad, the CEO of the British Landlords Association, said: “In the shaking of the tree, the weak will fall. There will be financial casualties in the short term. However, equally, there will be great opportunities to buy. Right now, for investors, it is all about strategy and timing. I used to trade the FTSE 100 futures and one thing that taught me, is, if things are bad or good, either way, you make money. Investors should look at this as an opportunity” he said.
Lenders, landlords and tenants need to establish a good line of communication, with brotherly love for each other.
Some of us will have the means, to help others in their hour of need. We should not look to the government, and expect them to fix everything; they simply can’t.
Words of J F Kennedy come to mind “ask not what your country can do for you, ask what you can do for your country.”
Shame on the toilet roll and baked bean bandits
On a personal note, while I write this, my partner is at work in a hospital, in the cardiology department. This hospital has no proper protective equipment for its staff to protect themselves against the Coronavirus. The basic infection control stock has all been stolen and cleared out. 60% of the staff are sick and not at work. My partner still goes to work risking her life, while herself being an asthmatic, treating some heart patients who are also infected by Covid-19. On the other hand, we have crazy shoppers who have no consideration for others in our society.
The reason I have added my personal experience is to highlight, that we all need to come together, no matter who we are, we all have something we can do, or give, even if it’s just a smile.
Author: Marc Attwater
Date: 29th of March 2020