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The Good, The Bad, The Ugly

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BY GABRIELA AMMENDOLA

In regular life, we talk about the good, the bad and the ugly when it comes to certain situations. But as we are all living through the COVID-19 pandemic, where everything has been turned on its head, let’s do things in reverse and save the good for last.

THE UGLY

The COVID-19 Omnibus Act severely impacts retail landlords, who are expected to provide rent relief following the Victorian government’s decision, with no access to any significant compensation. While it is abundantly clear that many tenancies and businesses have been affected, in much the same way landlords have also been hit hard, as they themselves are often small businesses. They rely heavily on receiving rental payments from tenants in order to service debt and/or as part of their livelihood.

As we’ve been advised that deferral of bank loans has stopped, landlords may be able to negotiate a further deferral on mortgage payments. If this can’t be done and cashflow constraints curtail payments, the bank might regard you as being in hardship and this may impact your credit rating.

THE BAD

With the state government assuming landlords can afford to take the shortfall, landlords are now undoubtedly required to provide generous waivers and deferrals for an extended period with little to no recourse. Never mind the continuously increasing council rates. If the insurance or owners’ corporation bills are not being paid on time, the property may not be insured. This compounds the challenge being endured by landlords, at a time when so many other impacted businesses are receiving government support. It’s a dire domino effect, with the costly load expected to be borne by landlords based on a misconception that every landlord can afford it. This unfortunately includes self-funded retirees who may use rental money as their only form of income.

Businesses want and need to trade; landlords want and need their rent; banks want their loans repaid; and authorities require that their bills be paid. Short of subsidising every business including landlords, the Victorian government has made the right decision to allow businesses to re-open in a COVID-safe way to avoid devastating economic damage.

THE GOOD

Despite current temporary state legislation, an existing retail lease is still on foot and both parties have the same obligations under the lease, excepting the changes stipulated in the COVID-19 Omnibus Act. The downsizing trend has begun with significant relocation activity. There will be further new opportunities including extending existing leases as businesses seek to take advantage of the current situation.

With the retail industry being severely affected, there’s a compelling opportunity for anyone that can prosper right now in this environment to pick up a great deal, by either negotiating a great lease, or for cashed up buyers to invest in distressed premises.

There’s high demand for premises that have secure leases in place with essential service tenancies. Given the current economic situation, we can expect to see a decline in these prices once the COVID-19 subsidies end.

 

Gabriela Ammendola is the managing director of GA Industrial & Commercial. She has over 20 years’ experience in all facets of real estate, from corporate positions to large agencies with a focus on industrial/commercial property sales, leasing, property management and project development. Award winner of the 2019 REIV Awards for Excellence as the Commercial Property Manager of the Year,  she is an expert in her   field and works around the clock for her clients. Gabriela can be contacted at [email protected] or 0423 630 170.

 

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