REIT ASIAPAC MAGAZINE REITASIAPAC AUGUST 2020 ISSUE | Page 15

SURVEY
is
hospitality properties, for which usage fell by half or more
during the lockdowns.
The economic pain was acute, as many businesses saw
revenues and cashflows plunge to near zero
overnight. This led to calls for renegotiation
of rental contracts and rental boycotts.
Should the burden of economic pain fall on
tenants as is contracted or should landlords
demonstrate solidarity by bearing some of
the fallout?
amic and the
symbiotic.
Q
Should REITs be offering their tenants rental
rebates? How do you see rental renegotiations
playing out and what is the role of government
in this?
Responding to the crisis, the governments of many countries
have come to the rescue to assist tenants, particularly in
the retail and hospitality sectors. In the Asia Pacific region,
Singapore, Japan, Australia, and Hong Kong have implemented
varying measures to help businesses with their rents.
re subject to
arket forces
Respondents had mixed views on the
balance of power between landlords and
tenants depending on the lens taken.
For now, the days of landlords having the ability to employ
several measures against a defaulting tenant to maintain a
stable stream of income are temporarily gone.
know they
nants out of
hey’d have a
on their hands
erm,” said one
anager.
While landlords have more power on paper
because tenants are contractually locked
into long term leases, yet paper leverage
means nothing if tenants were to default,
and there is no occupant for the property.
Moreover, governments looking to save
jobs and salvage their economies sided with
tenants for most part.
“It’s pretty dynamic and the relationship
is symbiotic. Rental terms are subject to
competitive market forces and landlords
know they can’t drive tenants out of business
or they’d have a massive issue on their hands
in the longer term,” said one fund manager.
While some sectors suffered badly amid the pandemic, others
flourished. It is “sector specific – retail has lost most power,
industrial the least,” one fund manager commented.
With Japan having started its rental relief measures only in
May, one comment was “compare SG with JP – seems like
two different worlds.”
9. REITS SHOULD WORK
WITH TENANTS TO ACHIEVE
THE BEST OUTCOME.
GOOD TENANTS SHOULD
BE RETAINED
A number of participants in our survey agrees that rental
rebates must be provided by landlords to tenants.
According to Shinkawa, “Yes, landlords should help to provide
rental rebates to tenants. At the same time, the government
should also support landlords.”
“An empty building is worth less than one with tenants
on lower rent contracts. Everyone has to bear some pain
including landlords,” another Singapore-based investor
commented.
“The government should firstly support labour-intensive
sectors to control unemployment, then it can focus on
secondary needs like those of landlords. The measures taken
in Singapore are quite well-structured,” he added.
“Given the unprecedented nature and the wide economic
impact, some government regulation to manage near
term leases are necessary,” said another respondent from
Singapore.
However, government assistance isn’t free, one investor
said. “It often involves utilising tax payer monies,” but he
added that “it is far less helpful for governments to arbitrarily
change contractual terms without providing support.”
Maydew said, “Yes, you need to work with your tenants to
ensure long term success.”
While it is a good practice for REITs to offer rental rebates and
be open to rental re-negotiations for the welfare of tenants,
15