As well as providing acquisition advice to clients on both a discretionary and advisory basis, the team at Sandaire Real Estate are frequently called upon to offer advice and support on a variety of problems relating to both residential and commercial property investments.
At the present time, a key issue for commercial property investors is the payment of rent much of which was due on the 25th March ‘quarter’ day.
The UK government’s emergency Coronavirus bill included provisions to remove the risk of forfeiture for non-payment of rent by commercial tenants for the current quarter and many companies have moved quickly to take advantage of this concession, particularly those in the retail sector.
Property Week recently reported that Intu, the shopping centre operator, had collected less than 30% of the March quarter rents and that major high street names such as WH Smith, New Look and Pret had all withheld rent payment.
Anecdotally, we have spoken to one property manager who received calls a few days before the quarter day from two FTSE 100 companies informing them that they would be withholding the March quarters rent only for their accounts department to efficiently make the rent payment on the quarter day as per normal!
We are currently involved in negotiations with two commercial property tenants at the present time and our advice on each matter has been, in one case, to accommodate a request for a deferral of the quarter’s rent and, in the other case, a request for the usual quarterly payment to be made in three equal monthly payments.
At this time of national crisis, retaining tenant goodwill is all important whilst we wait to see how this crisis plays out and the situation in which we find ourselves at the next quarter day. This is of course much easier to do when properties are owned outright or with only modest gearing and there are only limited mortgage payments to make. In the meantime, our minds are turning to the opportunities that these situations and impromptu negotiations may present – such as to settle that outstanding rent review, change the timing or basis of the next rent review or extend the term of the lease to name but a few.
At the moment much of our information is anecdotal but the speed with which well-rated ‘5A’ tenants have withheld rent underscores the importance of developing a strong Landlord/tenant relationship from the outset and helps explains the relief that many tenants express to us when learning that a family concern is to become their new Landlord with Sandaire’s approachable and hands-on property and asset management service.
Whilst we have always taken a robust approach to assessing a tenant’s financial covenant in the investment process as much as the other ‘fundamentals’ such as location and building quality, in the future we will also be mindful of how tenants reacted in this crisis to their obligations in existing leases such as that to pay rent.
We are likely still in the early stages of the crisis, but with over 60 years property experience between the two Directors of Sandaire Real Estate our clients take comfort from the fact that there are firm hands on the tiller.
Real Estate is deceptively easy in a rising market and it is at times like these when the value of experience and professionalism is most appreciated.