Precinct Properties has provided $10 million worth of rental relief to its struggling retail and restaurant tenants, many at Commercial Bay on Auckland's waterfront.
Commercial Bay, the billion-dollar jewel in Precinct’s 15-building portfolio worth $3.3 billion, was opened last June. It is home to more than 100 retail and restaurant tenants.
Precinct chief executive Scott Pritchard said the latest delta level 3 restrictions have been the toughest for its retail tenants. That had seen abatements track at about $500,000 a week since mid-August.
For the listed firm, one of the largest owners of inner-city office and retail space in Auckland and Wellington, that translates to about 3% of its total rental income.
The majority of office tenants at the connected 41-level PwC Tower have continued to pay rent during the lockdowns.
Pritchard said most of the relief has been in the form of a 100% abatement to “thinly capitalised” fashion retailers at the inner-city mall.
The relief, combined with government resurgence and wage subsidy payments, hasn't been enough for some to stave off closure.
The first major victim at Commercial Bay was the international steakhouse Saxon + Parole, one of the centre’s biggest restaurants.
But Pritchard expects more closures.
“Businesses simply can’t survive with this level of uncertainty. These are businesses funded by New Zealanders and they’re not being prioritised. We try to support our tenants but rent is only one of the factors they’re up against.”
Pritchard said the extent to which more support is provided depends on how long lockdowns continue. "But realistically, if they don’t get to trade in the coming weeks then it’ll be tough for them to overcome.”
November is considered one of the most important trading months for restaurants and bars, as people get into a pre-holiday mood.
The New Zealand Property Council has reported that its 550 members have so far contributed a combined $650m in rental rebates since the beginning of the covid response last March.
Not a bank
Council chief executive Leonie Freeman said that made it "disappointing" to have the government rush through changes to the Property Law Act. The changes, announced in late September by justice minister Kris Faafoi, now includes a clause 'retroactively' inserted into all leases requiring landowners to forgo a proportion of rent under pandemic conditions.
Freeman said the clause is like taking a “sledgehammer” to a nuanced and complex lease environment, particularly as most landlords and tenants had been able to negotiate equitable adjustments to rent when necessary.
Pritchard said commercial rent abatements were being negotiated regardless of whether inaccessibility clauses are in place.
But while the firm wants to keep its occupiers in place and support them, it also needs to consider "commercial reality".
“We’re not a bank. There seems to be this idea that landlords have endless amounts of capital they can support people with. And government has chosen the industry to help support the occupier base.”
Despite the struggles of its tenants, the firm announced a first-quarter dividend of 1.675 cents, payable to shareholders on Dec 10.
Chair Craig Stobo told shareholders at its shareholder meeting on Thursday that the full dividend for the 2022 year is expected to be 6.7c a share.
This represents 3.1% year-on-year growth and is in line with a policy of paying out about 100% of adjusted funds from operations.
Pritchard said the firm's subsidiary, Generator, a short term office leasing solution, had tracked well pre-lockdown with occupancy and events bookings showing a rebound in demand for flexible workspace.
The firm currently offers 13,600sq m of space across several venues in the Auckland CBD and during the year it opened its first Wellington offering at 30 Waring Taylor St in Wellington.
