Businesses struggle to pay rent

THE country’s first craft brewery, Tommy’s Brewing Company, was set to hit its second anniversary on a high come August.

But in March, sales at the 3,500-square-foot MovieTowne spot in Mucurapo plummeted as a result of the covid19 pandemic, propped up only by a few sporadic takeaway orders. Then, by virtue of the Government’s extended public health orders, the restaurant and bar shut down completely two weeks ago.

The loss of revenue has been so bad, owner John Tannous told Business Day April's rent is now past due, and even with the significant discount, his landlord is offering he won’t be able to make a payment.

He’s not alone.

Small businesses hit by a prolonged slowdown brought on by covid19 are struggling to pay rent, and going into the third week of the month, many owners say they are bracing for a worsening situation after either failing to negotiate deferrals or being offered concessions from their landlords which they view as inadequate.

“In March I would have paid my full rent and I am hoping to get a credit back,” said Tannous. “In April we seem to be getting a 75 per cent discount. Unfortunately, I don’t think that that is going to be sufficient. We are going to be requesting that we get 100 per cent, because we have not opened for April at all.”

Elizabeth Lee, who owns Dolce Vita Gourmet Cafe, said her business, which has been on the northern side of the shopping and entertainment complex for 16 years, has been closed since March 19.

“We are very grateful for that 75 per cent but considering everything it is still a great, great challenge to pay that 25 per cent and I cannot make it,” said Lee. “It’s tough. It’s really, really tough.”

The situation is not unique to MovieTowne.

At West Mall, Westmoorings, one store owner, speaking to Business Day on condition of anonymity, said mall management had offered tenants a reduced rent for April, but it would do him little good, with the business shuttered for the entire month.

“I imagine everyone is suffering. I believe the landlord should do more, but they also have their costs to cover, so it’s like a difficult situation. I think the Government should step in because a stern message from them could make a difference.”

The call for government intervention is not without merit.

The initial response to the crisis included requests by the Prime Minister and Minister of Finance for landlords to show forbearance.

But in the fast-evolving situation that is covid19 that message may have been lost, in part, because none of the measures in government’s stimulus package treated comprehensively with the issue of commercial rents.

Rather, the core of government messaging appeared to centre on banks extending grace to property owners saddled with mortgages, as well as a rent relief provision that offers up to $2,500 per month in assistance to residential tenants only.

Along those lines, almost all commercial banks responded with formal offers of deferrals on loans and mortgages.

But the problem is that even when property owners take advantage of these bank deferrals, they are not obligated to pass on the courtesy to their tenants.

Indeed, without legal or policy protections many commercial tenants are forced to haggle with landlords who could either take a conciliatory approach on contracts or demand their rent dues outright.

It’s already happening at Trincity Mall, Trincity, and Long Circular Mall, St James. A week ago, tenants at both malls reportedly received correspondence from mall management via e-mail which asked for payment of rent and common area fees despite the losses their businesses had sustained.

Business Day obtained a copy of the undated letter, in which the malls’ management, trading as Trinity Commercial Centre Ltd, part of the HCL Group of Companies, demanded that March rent be paid in full by all tenants.

For April, the landlord said it would offer tenants a waiver of the full basic rent charges but common area management fees plus VAT were due in full. According to the letter, kiosk operators at the malls were required to pay 25 per cent of their applicable April rent plus VAT.

Those terms did not sit well with business owners.

On April 8, the tenants' association for both malls issued a letter of their own calling the demand for payments “heartless” and “unconscionable” and copying the ministers of finance and trade.

“The Government has asked us all to make hard sacrifices in sharing the burden by working together in order to bring back an economy in distress of collapsing. It is, therefore, a serious departure from this type of thinking for the tenants of the HCL malls to be given correspondence that is diametrically opposed to the conciliatory position that is required during this time,” the tenants’ letter said.

Neither MovieTowne’s management nor a spokesman for HCL or West Mall could be reached for comment up to press time.

The situation facing small business owners who operate outside these massive shopping centres is hardly different.

One entrepreneur told us he plans to have the rent-deferral conversation with his landlord in the coming days.

“We have an advertising business with digital screens, and we’re in the red, not having enough business coming in to cover all our expenses.

"Rent-free is what most businesses are looking for. We can’t operate our business now. It should be rent-free.”

He is one of the many small business owners who insisted on privacy because of a real fear of backlash or a deterioration in the relationship with their landlords if they go public with their grouses.

This is especially true for small and micro companies who lack the leverage their larger counterparts have to negotiate steep concessions.

Still, other entrepreneurs are speaking out.

In a video posted on Facebook on April 11, Gary Aboud, CEO of Mode Alive, one of the more popular brands in the local textile industry, called on Government to go beyond mortgage deferrals and cancel rent payments altogether.

“If we were in war and bombs were being dropped on Diego Martin, Carenage, Chaguanas, La Brea, would we be collecting rent? Would landlords be collecting rent?”

Aboud was referring to statements by Health Minister Terrence Deyalsingh, who earlier this month described the covid19 pandemic as "worse than World War I, World War II and 9/11 put together."

President of the Greater San Fernando Chamber Kiran Singh has also called for support for the small-medium enterprise sector in the form of deferrals on rent and electricity payments.

Singh said at the beginning of April: “We also have to pay all our public utilities bills, internet bills. I have seen the TT Electricity Commission (T&TEC) saying they will not disconnect residential customers, but what about commercial and industrial customers?”

As far as official government policy goes, that question remains unanswered. As it stands, the businesses likely to survive covid19 are the ones that get as much support as possible over the coming weeks from landlords and other creditors.

Ophelia Baptiste, who operates the Unwined wine bar at a space on the Eastern Main Road in Arouca, for which she pays $7,000 a month, is hoping her small business is one of them.

She is one of the lucky ones, fortunate that her landlord has been understanding.

“My March bill was deferred and we are looking to see what’s happening by the end of April. But we have already spoken and he’s saying that will be deferred as well,” Baptiste said.

Beyond the rent concession, Baptiste told Business Day her landlord has even sought to help her find ways to repurpose the space to generate more business.

“We touch base at least once or twice for the week to see how I’m going, if I need any assistance – even what new business ventures could be done in the space when I reopen.”