Malls face catastrophic hit in Canada with unpaid rent surging

TORONTO (BLOOMBERG) – Canada’s malls are facing a wave of skipped rents and could see vacancy rates triple by year-end, with the coronavirus poised to leave its scars on a fragile retail sector long after the pandemic ends.

In the country’s enclosed regional malls – a category that includes Toronto’s Eaton Centre and Pacific Centre in Vancouver – only 20 per cent to 25 per cent of tenants paid rent in April, according to brokerage firm JLL Canada. Big box shopping centers and community strip malls took in only a little over half their expected rent.

“I’ve been in this business over 30 years and I have never seen anything as catastrophic or as impactful in a negative way in our business,” Tim Sanderson, who heads retail at JLL Canada, said in an interview. “It’s the mid-tier smaller-scale landlord that cannot make their mortgage payments to their lender that are going to be in trouble.”

Malls and main-street shops, bastions of community commerce, were already under pressure after two years of weak retail sales, rising property taxes and the shift to e-commerce. Nationwide shutdowns of all but essential stores during the pandemic have added further strain, with landlords facing lost rental income and tenant closures. Longer term, fear of new outbreaks may only accelerate the shift online – even for movies and restaurants, which had been touted as potential buffers for malls.

JLL Canada, which uses third-party data to monitor the market, sees the retail commercial vacancy rate rising into the 6 per cent to 8 per cent range in Canada by the end of the year. That’s up from 2.3 per cent at the beginning of this year – a level Mr Sanderson describes as “very tight”.

“Many retailers are in trouble,” Roelof van Dijk, director of Canadian market analytics at CoStar Group, a real estate research firm. “I think when we get to the other side of this, there’s a real reckoning to be had.”

Much will depend on how long the isolation period lasts and the effectiveness of federal government relief programs. Prime Minister Justin Trudeau unveiled a government programme on Friday that aims to reduce rents for the country’s small businesses by 75 per cent. Commercial property owners will be eligible for loans to cover 50 per cent of the rent over three months beginning in April. The property owner is expected to kick in 25 per cent of the rent, and the tenant the other 25 per cent. The loans will be forgiven if the landlord agrees to lower rent by at least 75 per cent and agrees to not evict a tenant while the programme is in place.

Reits including Choice Properties and Crombie have already offered rent deferrals to troubled tenants. RioCan, one of the country’s largest retail landlords, agreed to about C$15 million (S$14.34 million) of deferrals for April, or about 17 per cent of total gross rents.

REITS SLIDE

RioCan received two-thirds of its gross rents for April, while First Capital Reit and SmartCentres Reit each collected about 70 per cent and H&R Reit got 56 per cent of its rents from retail tenants, according to company disclosures.

The cloudy outlook has contributed to a 26 per cent plunge in the S&P/TSX Capped Reit Index this year, lagging the 15 per cent decline of Canada’s benchmark S&P/TSX Composite Index.

Big mall landlords, like pension funds and reits, are better able to weather the downturn with rent deferrals and can woo shoppers back with retail experiences that can’t be found online, according to Mr van Dijk. Smaller property owners may not even have tenants to reopen storefronts when this ends, he said.

That’s a view echoed by RioCan CEO Ed Sonshine.

“To be very blunt, some of these smaller tenants will probably not survive – I would guess that some of the ones that won’t survive maybe weren’t in such good shape when this started,” he said in an April 21 interview. “Where we think the tenant should be able to survive, we’re certainly open to discussing further help.”

Still he’s optimistic the vast majority of the retail industry will be fine.

“Once people feel safe and comfortable – and that may be a full year before we’re 100 per cent back to normal, maybe longer – I think people will go back to their basic habits,” Mr Sonshine said. “They want to be with other people, they want to be at concerts, they want to eat in restaurants, they want to see movies in the theater, they want to go to the gym – all of which nobody can do right now.”

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Coronavirus: Raab says ‘not responsible’ to reveal lockdown exit plan – and vaccine unlikely this year

The UK is in a “delicate and dangerous” stage of the coronavirus outbreak and will not get a vaccine until at least next year, stand-in prime minister Dominic Raab has said. 

On his final day filling in for Boris Johnson, the foreign secretary told Sky News it was “not responsible” to lay out how the lockdown could be eased.

But he hinted people arriving in the country could be forced into quarantine for two weeks – the maximum amount of time it takes before someone infected with the virus can start to show symptoms.

“As we move to a second phase… that is something we will be looking at,” he told Sophy Ridge on Sunday.

The government is coming under intense pressure from senior Tory donors to relax the strict social-distancing measures, amid concern at the damage they are doing to the economy.

And Labour’s new leader Sir Keir Starmer has called on ministers to publish an exit strategy and follow other countries’ lead in “having honest conversations with the public about what new arrangements might look like”.

Mr Raab dismissed the suggestion, saying: “We need to make sure that the next steps are sure-footed, which is why we are proceeding very cautiously.

“We are sticking to the scientific advice with the social-distancing measures at this time, whilst doing all the homework to make sure that we are prepared in due course for the next phase.”

He added that when the lockdown is eventually lifted, people “won’t just be going back – it will be a new normal”.

So far at least 20,319 hospital patients have died with coronavirus in the UK, with the true number expected to be higher including deaths in the community and care homes.

Liberal Democrats acting leader Sir Ed Davey said he suspected the real number of deaths is 40,000 and is calling for a public inquiry into the government’s response to the crisis so far, which he called a “national calamity”.

Mr Raab also tried to set expectations by announcing that a vaccine is “not likely to come to fruition this year” – after £41m was poured into two university research trials.

Professor Gina Radford, a former England chief medical officer, said the same, telling Sophy Ridge: “We haven’t got a hugely good track record with vaccines for this particular virus, coronavirus, the family of viruses…

“I think those who are very used to the process of developing vaccines are saying they are not anticipating it being available until well into next year.”

Coronavirus home testing kits for key workers have been booked up within hours through the government’s website.

As of 10am on Sunday they were listed as “unavailable” – two hours after booking slots reopened.

An update on Mr Johnson’s health was also given by Mr Raab on Sunday morning.

He said the prime minister is “raring to go” ahead of his expected arrival back at Downing Street after two weeks of recovery from COVID-19 at his countryside residence of Chequers.

“He’s taken the time and taken the doctors’ advice to rebuild his strength,” Mr Raab said.

“I’ve spoken to him every day this week – we’ve made sure he’s abreast of everything that’s been going on.”

One of Mr Johnson’s first major acts will have to be getting ready to make another announcement to the country before Thursday 7 May, when the current lockdown measures are due to last until.

This graphic shows the percentage of people who are opposed to various possible future actions

An exclusive poll for Sky News released on Thursday found Britons have become sadder and more anxious since the coronavirus crisis – but strongly support the lockdown remaining at least in the short term.

Over half the population would not support key parts of society and the economy being reopened in the next few weeks, including 51% wanting primary schools to stay shut, 53% wanting secondary schools to stay shut, 67% wanting to keep people working from home and 72% wanting to keep older people indoors.

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Spirit expects quarterly loss as coronavirus hits plane output

(Reuters) – Spirit AeroSystems Holdings Inc (SPR.N) said on Tuesday it would swing to a first-quarter loss and warned of a bigger blow in the current quarter, as customers Boeing Co (BA.N) and Airbus SE (AIR.PA) whittle down production due to the coronavirus pandemic.

Shares of the U.S. aircraft parts maker fell as much as 3% to $20 in the session, adding to the 72% fall in value this year.

Boeing, which accounts for nearly 80% of Spirit’s revenue, and Airbus have halted or cut production of their planes after the coronavirus crisis triggered aviation’s worst industrial crisis and drastically reduced deliveries to cash-starved airlines.

“Our expectation is that our business operations will not improve until our customers are willing to produce aircraft at sufficient levels,” Spirit said here in a statement.

“This may not occur until well after the broader global economy begins to improve.”

The company has already announced various cost-cutting measure this year, including the lay off of 2,800 workers at its marquee facility in Wichita, a 20% pay cut for all its U.S.-based executives and furloughing some workers involved in Boeing’s production.

The company said it expects to report first-quarter loss of $160 million compared with a profit of $163 million in the prior year.

Spirit estimates it delivered 324 shipsets – a complete set of parts for each aircraft – in the quarter ended April 2 down from 453 shipsets a year ago, with revenue expected to fall about 46% to $1.07 billion.

Spirit said the virus outbreak would impact its financial performance in the current quarter much more significantly than in the first quarter, as it expects a slow economic recovery after the pandemic.

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Frustrations continue for Saskatchewan nurses over lack of protective equipment

Registered nurses in Saskatchewan continue to be concerned over the lack of personal protective equipment (PPE) as the number of COVID-19 cases in the province continues to rise.

Considered the most effective protective wear by the Saskatchewan Union of Nurses, N95 masks are at a premium.

SUN president Tracy Zambory says it’s putting a strain on its workers.

“It’s not like COVID-19 was a surprise. We could have been doing this quite some time ago and unfortunately, it’s poor planning.”

Zambory said other than the lack of PPE, nurses in Saskatchewan are dealing with the situation in a positive manner.

“Registered nurses, we are there for people no matter what. We are very used to working in stressful conditions. We’re used to working with people who have infectious diseases,” Zambory said.

“This is not new to us. We are not nervous or concerned about that part of it.”

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Some nurses in Alberta have refused to work due to not having proper PPE, but Zambory says it’s not something SUN is looking to follow.

“We’re going to strive to not have that happen. Registered nurses are dedicated to their patients. The last thing we want to do is to halt work,” Zambory said.

“We are going to work with the health authority and ministry of health to make sure that doesn’t happen. At the end of the day, we need to make sure frontline workers aren’t getting sick.”

In regards to N95 masks, Saskatchewan Premier Scott Moe says there are many supply chains trying to meet the demand.

He is hopeful supply shortages won’t last much longer.

“It looks like supply will be ramping up. We are hopeful for that, not only for us here in Saskatchewan, but for all of North America,” Moe said.

Moe said he is grateful to all Saskatchewan businesses and industries who do have N95 masks on hand and have provided them to SHA.

When the COVID-19 pandemic passes, Zambory says SUN plans on sitting with the province’s ministry of health and Saskatchewan Health Authority to talk about how to better plan for future situations like COVID-19.

Questions about COVID-19? Here are some things you need to know:

Health officials caution against all international travel. All international travellers returning to Saskatchewan are required to self-isolate for 14 days in case they develop symptoms and to prevent spreading the virus to others.

Symptoms can include fever, cough and difficulty breathing — very similar to a cold or flu. Some people can develop a more severe illness. People most at risk of this include older adults and people with severe chronic medical conditions like heart, lung or kidney disease. If you develop symptoms, contact public health authorities.

To prevent the virus from spreading, experts recommend frequent handwashing and coughing into your sleeve. They also recommend minimizing contact with others, staying home as much as possible and maintaining a distance of two metres from other people if you go out.

For full COVID-19 coverage from Global News, click here.

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