Retail Landlords in Talks on Rent Relief Amid Canada Shutdown

(Bloomberg) -- Landlords to major retailers including the Loblaws grocery chain and Canadian Tire stores have begun discussions on rent amid the Covid-19 shutdowns.

Choice Properties Real Estate Investment Trust, whose principal tenant is the Loblaw Cos. Ltd, said Monday it is prepared to assist qualifying small businesses and independent tenants on a “case by case basis” with a temporary rent deferral for 60 days. Canadian Tire Corp. landlord CT Real Estate Investment Trust also said discussions had begun with tenants for whom paying rent would mean “a significant challenge to their ongoing viability.”

“Many of these small businesses are facing extraordinary drops in revenues and are rightfully focused on taking care of their families and their communities,” Galen G. Weston, chairman of Toronto-based Choice Properties, said in a statement. “We intend to continue working with our tenants on an individual basis to find solutions in the short term.” Weston is also the executive chairman of Loblaw.

Non-essential shopping has been closed through much of the country in an effort to stem the spread of the coronavirus and REITs have taken a heavy hit. CT REIT has lost 26% since the beginning of the year, though Choice Properties’ focus on grocery stores makes it the best-performing in the S&P/TSX Capped REIT Index with a 7% loss.

Well-Positioned

Choice, with owns 724 properties totaling 65.6 million square feet, primarily of stores, industrial, office and residential assets, said it was withdrawing its 2020 outlook. The REIT plans to release 2020 first quarter results on or about April 22, 2020.

The company said it’s well-positioned to weather the market volatility, having strengthened its balance sheet since the beginning of 2019, including refinancing its unsecured debt.

CT REIT, which owns 350 properties covering 28 million square feet, said tenants representing about 6.2% its annual base minimum rent are currently not open or operating and about 2.8% did not pay rent April 1. Another 33.5%, including 132 Canadian Tire stores in Ontario, are now operating on a limited basis, the REIT said in a statement.

“We came into this crisis with a strong balance sheet, a portfolio that was 99.1% occupied and a conservative 75% payout ratio,” CT REIT Chief Executive Officer Ken Silver said in the statement. “We are committed to working with those of our tenants who need our support during these challenging times.”

The company said it is in a strong liquidity position with a debt-to-gross book value of approximately 43% and approximately C$300 million of undrawn credit facilities and cash on hand as of Dec. 31. CT REIT’s assets, with an IFRS value of approximately C$6 billion, are 98% unencumbered.

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