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Some relief for landlords required to provide extra rental waivers for tenants
By Cecilia Chow & Goola Warden | June 4, 2020
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SINGAPORE (EDGEPROP) - The government has announced additional rental waiver for tenants who are small and medium sized enterprises (SMEs), particularly those who have seen revenue drop at least 35% in April and May. “The extra rental waiver is a much needed boost to tenants who have been severely affected by the extended circuit breaker, especially for retail and F&B tenants who are still unable to operate,” says Christine Li, Cushman & Wakefield (C&W) head of research for Singapore and Southeast Asia.

Landlords who face financial hardship or cash flow difficulties could apply for a reduction in rental waivers of up to one month for commercial properties and half a month for industrial and office properties (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Li also adds that many businesses are already struggling and downsizing even when their revenue drop may be less than 35%. “They could be the ones falling through the cracks,” she adds.

The additional rental waiver of two months for commercial properties and one month for industrial and office properties is to be borne by the landlords, according to the Ministry of Law in a release on June 3. This is on top of the mandatory two months’ rental waiver funded by the government in the form of cash grants and the 100% property tax rebate announced in the supplementary budget in March.



On June 3, the Ministry of Law introduced a package of measures to support landlords who may face cash flow constraints as a result of the rental relief measures. These measures will be tabled in Parliament under the Covid-19 (Temporary Measures) (Amendment) Bill on June 5.

They will also complement other measures announced by the Ministry of Finance (MOF), Monetary Authority of Singapore (MAS) and the financial industry in April.

Credit: Monetary Authority of Singapore

In this new package, landlords will be able to defer both principal and interest repayments on their mortgages up to Dec 31, 2020. This applies to those who are re- quired to provide rental waiver or rescheduling of rental payment under the Covid-19 Amendment Bill.

Under the temporary relief measures announced in April, SME landlords could aleady apply to defer principal repayments on their commercial and industrial proper- ty loans. Most of the applications received so far have been approved, said the MOF.

Landlords who face financial hardship or cash flow difficulties could apply for a reduction in rental waivers of up to one month for commercial properties and half a month for industrial and office properties. In such cases, interest will accrue only on the principal amount deferred, and no interest will be charged on the deferred interest payments on their mortgages.

To ease monthly instalment payments, individual landlords could opt to extend their loan tenure up to Dec 31, 2020, without having their credit scores impaired. How- ever, there will be additional interest costs which they have to take into consideration.

Read more: Small businesses whipsawed by Covid-19 crisis get some financial relief

Henry Mok (right), chairman of Bugis Cube says strata commercial landlords have not fully benefitted from government aid (Photo: Albert Chua/EdgeProp Singapore)

Those who need additional credit to meet their immediate cash flow needs can apply for a loan under the Enterprise Singapore (ESG) Temporary Bridging Loan programme, or Working Capital Loan Scheme through their banks and financial institutions.

Bugis Cube chairman Henry Mok, who represents the strata commercial landlords in the building, says that many of the strata landlords are either self-employed or retirees. Hence, they rely on the rental income for their livelihood. The additional rental waiver will put them “in dire straits”, he adds.

“Strata commercial landlords have not fully benefitted from government aid,” adds Mok. “The banks have not passed on the lower borrowing costs to the strata commercial landlords. There is no change in the banks’ board rates and contractual obligations still remain.”

Larger corporate landlords including Singapore-listed real estate investment trusts (REITs) could also approach their banks or finance companies to explore funding solutions to meet their cash flow needs. Some have already requested for payment deferrals or temporary loan covenant waivers, which banks have acceded to.

Larger corporate landlords including S-REITs could also approach their banks or finance companies to explore funding solutions to meet their cash flow needs (Photo: Albert Chua/EdgeProp Singapore)

Industrial REITs have mentioned that their proportion of SME tenants range from 20% to 55%, while retail and commercial REITs are examining their tenant lists to see who qualifies for rebates. Among the industrial REITs, Mapletree Industrial Trust has the largest proportion of SME tenants at around 55% of its portfolio. Ascendas REIT and Mapletree Logistics Trust’s SME tenants range from 20% to 25% of their portfolios. Credit Suisse estimates that the impact on distri- butions per unit from the new bill is likely to be modest, at less than 2% of DPU.

Banks have also given assurance that there will be “no automatic enforcement of loan covenant breaches” with landlords who are affected by the constraints imposed by the Bill.

“The relief measures will actually give all stakeholders including landlords, creditors or banks, and tenants a circuit breaker of up to end December this year to fulfil their obligations to each other,” notes C&W’s Li.

“Given that a V-shaped recovery is very unlikely at this juncture, the relief measures could do little to help the businesses — both landlords’ and tenants’ — beyond the short-term,” she adds. “It’s just kicking the problem down the road.”

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