Tensions between landlords and their tenants are mounting over unpaid rent during the coronavirus pandemic, with Salta Properties managing director Sam Tarascio calling out Premier Investments for using government subsidies while also paying a large dividend.
The Solomon Lew-led Premier fashion empire lifted its performance during the COVID-19 pandemic, with an earnings update released last Thursday bolstered by the JobKeeper government wages subsidy package and not paying rent when stores were forced to close due to coronavirus lockdowns.
Premier is scheduled to deliver its full accounts on Friday.
Mr Tarascio, a scion of the Melbourne-based billionaire property development family, said on social media that “regrettably, in this COVID world, examples have emerged of businesses receiving government assistance and taking rent relief from landlords while improving their profits”.
He cited Premier’s receipt of JobKeeper and its refusal to pay rent on closed stores as driving a lift in earnings.
“This seems to suggest that savings generated from non-payment of rent, and the benefits afforded by the JobKeeper payments from the public purse, have meant that whilst Premier has benefited from the commercial environment during COVID-19, it seems to have done so in large part as a result of the largesse of the taxpayer and the hundreds of thousands of shareholders who are investors in listed landlords such as Vicinity, Scentre Group and GPT,” Mr Tarascio wrote.
The companies have written down the value of shopping centres by billions of dollars.
Landlords have taken a tougher line recently after giving small tenants more $1.6bn in rental relief.
The Shopping Centre Council of Australia has called for the Morrison government relief code to finish by the end of September.
The SCA Property Group, owner of small centres and supermarkets, last week said it would vigorously chase tenants for rents owed where the companies were able to pay.
Vicinity reports on Wednesday and is expected to take a hard line against national chains not paying rent.
The Salta chief said it was “surely not” the intention of the JobKeeper program or the Morrison government’s tenant code for businesses to profit from job and rent support schemes.
Mr Tarascio called out large retailers as influential in the design of both the JobKeeper program and the Morrison code, adding: “And why not — it has been a windfall for some of them!”
“It seems to me that in these times, we need to shine a light on businesses that are happily receiving assistance from government and landlords when they don’t require it,” he wrote.
“The obligation of each participant in the economy at this time is to do what you can to keep your business viable before you start relying on others (who are also trying to stay viable).”
Mr Tarascio called on the federal and state governments to force businesses that have increased their profits while receiving JobKeeper payments and rent relief from landlords to repay the support they have received to the government.
He questioned whether it was fair that the shareholders of the listed property trusts and other private investors should be supporting shareholders of large corporate tenants who have chosen not to pay their rent, even though they are still profitable.
Mr Tarascio said there was “an unacceptable and unfair transfer of economic value from one group of shareholders to another”.
He also added his voice to opposition to Premier’s suggestion of paying rent based only on a percentage of its sales — an idea that has already drawn the ire of Chadstone co-owner, billionaire John Gandel.
He argued this was unworkable as landlords had large up-front fixed costs as well as expenses and dealt with low margins.
The Salta boss also queried whether the idea was “hatched by a business that is not confident in its own ability to run its business, or alternatively is it designed to gouge the landlord”.
“It is self-interest of the first order for a tenant to suggest that a landlord should ‘take a risk’ on the tenant’s business by having a fully variable rent based on sales. It is safe to assume the retailer does not want to the landlord to have any say in how they run their business,” Mr Tarascio said.
Premier has allowed 70% of its leases to expire and is occupying under month to month arrangements as it seeks to pressure landlords.
Mr Tarascio questioned how the retailer would fare if its landlords asked it to vacate.
“It is time that we all weigh up how our own brand ethics should be reflected in how we run our businesses and decide if we want to support businesses which at the same time as they are making large profits are receiving JobKeeper and rent relief,” he wrote.
