Skip to main content

Ed Sonshine, the CEO of RioCan Real Estate Investment Trust, said 'a vast majority' of the REIT’s major national tenants paid the April rent.

Two big Canadian commercial landlords say the majority of their tenants have made April rent payments, providing the first glimpse into the health of the real estate market as scores of businesses are forced to close due to the coronavirus pandemic.

Eric Carlson of B.C.-based Anthem Properties, which owns $5-billion worth of commercial, industrial and residential real estate in North America, says about 70 per cent of the tenants in his 60 buildings were paid up.

Ed Sonshine, the CEO of RioCan Real Estate Investment Trust, said “a vast majority" of the REIT’s major national tenants paid the April rent. Meanwhile, two-thirds of his smaller, independent businesses took advantage of a 60-day, interest-free, rent deferral that he offered.

It’s been a frantic few weeks for dozens of commercial property owners. A number of major players, including Ivanhoe Cambridge, Cadillac Fairview, Oxford Properties and QuadReal, have said they will work with tenants who need rent relief on a one-on-one basis, and a number of retailers and small businesses have not been able to pay given shutdowns caused by the pandemic.

“This thing has been moving so fast, it makes my head spin,” said Mr. Sonshine, whose REIT is one of Canada’s largest property owners, with malls, shopping plazas, offices and apartments in Toronto and other major cities.

In Vancouver, Mr. Carlson spends his days in conversations with his team through three large-screen computers to cope with the rapidly changing economic landscape.

“In the big picture, the economy went to 50 per cent less overnight. We keep trying to compare it to the recession, but it’s not.”

Ivanhoe Cambridge and Oxford Properties declined to provide numbers on the share of tenants who made their April rent payments.

Mr. Sonshine said independent tenants – small businesses such as nail salons and restaurants, comprise about 15 per cent of RioCan’s commercial tenants.

“We have taken the position, right from the beginning of this crisis, almost a month ago, that anybody that asks for a 60-day deferral, we are giving it to them,” he said, and that they would reassess at the end of May. “You have to keep focusing on one thing, leases are a contract and they have to pay rent later or go into some form of bankruptcy. On the independent tenants, we don’t want them to have to make those kind of choices.”

He said about two-thirds of those tenants took advantage of the 60-day rent deferral.

“The other one-third, somewhat to my surprise, paid their rents. Maybe a lot of those restaurants are doing fine on takeout. They also realize that sooner or later that rent has to be paid and they did not want to get behind.”

Mr. Sonshine said 85 per cent of his commercial property tenants are what he calls national tenants, such as Best Buy and Loblaws. His portfolio also includes big names that have been forced to shut down, such as fitness chain Goodlife Fitness and fashion retailer H&M.

"There are some big companies that did not pay but very few and those quite frankly, we are reminding them that, ‘Guys, you have a contract. Unless you are planning to go broke, you got to pay this.' I frankly expect virtually all of them to pay.”

He said those who don’t pay could face legal action or eviction. “That will be done on a tenant-by-tenant basis, very thoughtfully,” he said.

At Anthem, Mr. Carlson said he noticed a range in attitudes among his tenants. Some told him they could not pay the rent at all. Mr. Carlson suspects they were already in financial trouble and the pandemic now gives them an excuse. Another tenant with a small operation promised Mr. Carlson that he’d collect pop bottles to pay his rent if he had to. Still another business, “owned by a high-net-worth family,” told him immediately they wouldn’t pay April rent.

“I do think there will be a day of reckoning. That arrogant tenant, we’re looking to replace them."

He’s trying to help those who he thinks really need it. “I have to be stern but friendly. I’m saying ‘What do you need to survive – but don’t take advantage.’ If the tenants do the best they can, we’ll all get through.”

Both executives are also assessing their own cash-flow situations. Although RioCan did not receive all rent that was due, the REIT says it has more than enough cash flow to meet its financial obligations. “We can ride out this storm,” Mr. Sonshine said. “It is a temporary cash-flow storm.”

Mr. Carlson said he is conserving and drumming up cash wherever he can. “We have to stretch out our liquidity, we have to be conservative with our cash, to keep everybody happy on the supply side.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.