With small businesses getting by on slim margins at the best of times, temporary closures as a result of COVID-19 will leave a lot of commercial landlords holding rubber rent cheques come April 1.
“There’s absolutely no revenue coming in and they’re all trying to be reasonable and negotiate with their landlords, but landlords have bills to pay as well,” said Greg Holmes, president of the Lower Lonsdale Business Improvement Association. “Many [businesses] are simply saying that they’re putting stop payments or they’re not going to pay because they don’t have the ability to pay and then they’ll deal with the fallout later.”
The federal government has launched a suite of policies to assist businesses through shutdowns including interest-free loans of up to $40,000 and a 75-per cent wage subsidy to keep people working, but so far nothing has addressed the “big boy rent cheques” said, Chris Harrison, owner of Two Lions CrossFit gyms.
Harrison and the landlord of his Welch Street location have been making progress on negotiations but last week, the property manager for his Crown Street gym has told him “we cannot formally agree to any deferral plan at this time.”
Harrison said he has “zero” ability to pay the rent due on Wednesday and, as of March 31, hadn’t heard back from his landlord on a proposal.
“Obviously with the business closed, the revenue is dramatically down or almost all gone,” he said. “I feel like small business owners are already doing their part in a huge way by closing down – even when they’ve not been mandated to do so. We’re taking a monster financial hit that’s going to take years to climb out of, and then we’re expected to bear the brunt of paying rent to make a landlord whole.”
Wayne Lee, vice-president of Gulf Pacific, which represents Harrison’s Crown Street landlord, said he’s already told Harrison he won’t attempt to process the April rent cheque and that the landlord hasn’t yet made a decision about a longer-term arrangement.
“I said we could work out the repayment afterwards,” Lee said. “I said we just have to just take it day by day. I said we want to work with you. We understand you are in a position that you didn’t create … I guess he’s assuming it’s a no.”
Commercial Realtor Ross Forman said he has been fielding dozens of calls.
“In talking to some of the property managers, there’s a lot of tenants that are not going to be able to pay rent,” he said.
Forman estimated three quarters of North Shore commercial properties are held by longtime family businesses, so mortgage defaults aren’t the biggest threat. But they have overhead that must be paid, he said, just like any other business.
“So it definitely puts the landlords in a bit of a predicament. As much as a tenant has their business and they’re struggling to make their payments, the landlord also has a business of renting out property, they still have expenses,” he said.
Harrison reasoned that if too many landlords play hardball, it’s going to result in a string of evictions at a time when there will be few new entrepreneurs willing to step in and lease commercial spaces.
“Any landlord that is not pigheaded understands that and they want revenue on their property,” he said.
Forman agreed demand for commercial units has fallen amid the pandemic, and he would advise most commercial tenants and landlords to negotiate together.
Melanie McCready, owner of Bowen Island Pizza in Lonsdale Quay, said her businesses is down about 70 per cent in recent weeks and she has taken herself off payroll so she can keep her staff working.
McCready and her landlords at the Quay have an agreement allowing her to defer April’s rent, and spread it out over several months in the future, assuming business returns to normal. But even if she is able make up the lost revenue, others won’t be so lucky, she said.
“It crushes me to think that all these small community businesses that people have put time and effort towards are going to be completely annihilated during this,” she said,
For those wondering how they can help in the meantime, Forman and Holmes offered the same two words of advice: “Shop local.”
