SINGAPORE: Struggling retailers and food and beverage (F&B) operators are calling for a temporary change in how retail rents are calculated, as an "unprecedented" COVID-19 outbreak takes an increasing toll on their businesses.
Currently, most retail leases are structured around a minimum fixed charge called base rent, with a small component based on a tenant’s gross turnover or total sales generated.
With sales having dropped drastically, tenants are hoping that rent for the next few months can be pegged solely to their gross turnover instead, according to statements issued by industry associations in recent days.
READ: Events postponed, restaurants ‘near empty’: F&B industry on the chopping block as COVID-19 measures bite
READ: Legislative action may be taken to make sure landlords pass on rebates to tenants, says DPM Heng
This marks the latest in the ongoing tussle for rental rebates between commercial landlords and their tenants.
Calls from tenants for a lifeline first emerged in February when COVID-19 started keeping tourists and locals away from public places, with businesses hoping for a cut in rents.
But in recent weeks as authorities ramped up public health measures, further chilling consumer spending, retailers and F&B operators say more needs to be done.
STRICTER SAFE DISTANCING RULES SIMILAR TO “LOCKDOWN”
The Singapore Retailers Association (SRA) likened the stricter safe distancing rules, which require shopping malls to put in place crowd-limiting measures, to a “lockdown situation” that will have a majority of retailers seeing “zero sales”.
“And yet our fixed costs of rental, manpower (and) utilities are still payable – all resulting in even greater costs and losses for retailers,” it added in a Facebook post.
To avoid “massive permanent store closures and loss of jobs within the next three months”, the industry group wants leases to be no more than 15 per cent of a tenant’s gross turnover for six months or for the base rent to be halved, whichever is lower.
SRA also suggested landlords to allow businesses “who cannot sustain anymore to exit” before their lease expires, without losing their security deposits or risk of legal action.
“SRA is calling out to landlords once again to help retailers overcome this unprecedented crisis with unprecedented rental relief measures,” it said, noting that its suggestions are “in the spirit of a fair symbiotic relationship” between mall owners and tenants.
These proposals were echoed by an informal group of retailers that have banded together in recent weeks to rally for help.
Called the SG Tenants United for Fairness, they said businesses have been in “severe crisis” since Singapore reported its first confirmed case on Jan 23, and the situation has become dire amid “ever-tightening” distancing measures.
“We have worked out that the Government Budget measures announced so far, together with the small and the scattered mall owner measures, will only help cover for businesses losses incurred in February and March,” the grouping said over the weekend, while urging landlords to pass on the expanded property tax rebates under the Resilience Budget to tenants “without delay and with no conditions attached”.
As part of the S$48 billion supplementary Budget announced last week, qualifying commercial properties that have been badly impacted by the novel coronavirus pandemic will pay no property tax this year – a major step-up from the initial 15 to 30 per cent property tax rebate announced in Budget 2020 last month.
The Restaurant Association of Singapore (RAS) urged landlords to translate these expanded rebates into savings for tenants “with urgency”.
It said it will continue talks with landlords and has requested for rent to be based on gross turnover alone for the next six months. Previously, RAS was calling for a 50 per cent rental rebate for three months.
ADDITIONAL RENTAL REBATES ROLLED OUT: MALL LANDLORDS
When contacted, Frasers Property Retail said it is “cognisant” of the challenges faced by its tenants and will continue working closely with them to “overcome this trying period”.
It said it has rolled out additional rental rebates amounting to S$45 million on Mar 27 for tenants across its 14 malls in Singapore. Tenants will also receive the full property tax rebates from the Resilience Budget, while cash security deposits will be released to offset one month’s worth of rental payments.
“While we ensure every one of our tenants is supported, these measures are prioritised by individual needs and circumstance,” said the spokesperson.
READ: 'If this goes on, I might quit': Mall tenants want rental rebates soon to counter COVID-19 hit
READ: Evictions, deposits for events including weddings to be protected under new Bill to stem COVID-19 fallout
CapitaLand also said that it has announced additional rental rebates, in addition to support measures announced last month.
“Effectively, tenants most affected by COVID-19, including those in the F&B and fashion trades, will have their rents waived for two months from April to May 2020,” said the spokesperson in an emailed reply.
CapitaLand, Singapore's largest mall operator, will also suspend the rents of tenants that have been ordered by the Ministry of Health to close from Mar 26 to at least Apr 30, it added.
A spokesperson from City Developments said the company is "fully committed" to passing on the enhanced property tax rebates in full to its retail tenants.
It has also been "closely engaging" tenants and is reviewing requests "on a case-by-case basis, over and above the support measures" that are already provided.
APM Property Management’s deputy chairman Anthony Yip said in an email: "We understand that this is a very difficult time for our tenants.
"We are providing them with a second tranche of rental assistance and also pass through the full savings of the property tax rebates to all tenants as announced last Friday.”
CNA has reached out to the other mall landlords, including Lendlease and the operator of Paya Lebar Square, for comment regarding the latest requests from retail and F&B tenants.
ESG TO CONTINUE FACILITATING MEETINGS
So far, Enterprise Singapore (ESG) has helped to facilitate some of the meetings between SRA, RAS, tenants and the landlords.
It told CNA on Wednesday that it will continue to do so.
“We continue to encourage landlords and tenants to engage each other constructively, to listen to and understand each other’s situation, and work together towards a win-win solution for both parties," said ESG's deputy chief executive officer Ted Tan.
Meanwhile, Deputy Prime Minister Heng Swee Keat said on Wednesday that the Government is prepared to take legislative action when necessary to ensure that the property tax rebates granted to commercial landlords are passed on to their tenants during the COVID-19 outbreak.
“I want to urge the landlords to not only pass on these rebates but to take care of the tenants,” he said.
It was also announced on Wednesday that businesses unable to pay rent will be protected under a new Bill, which will be introduced in Parliament next week to provide temporary relief against their contractual obligations amid the COVID-19 outbreak.
For example, even if a restaurant was unable to foot their rent in February and March, the landlord cannot evict them, repossess their premises, or sue them.