Spain’s Merlin forgoes rents for occupiers forced to close on coronavirus

Spanish listed property firm Merlin Properties has decided to suspend rent payments for all its retail and hotel occupiers which have been forced to close their doors due to the coronavirus pandemic.

Merlin, which owns roughly €12.7 bn of assets, is understood to have started to communicate the decision to tenants representing around 77% of its retail portfolio as well as to all its hotel occupiers. According to well-informed market sources, the rental waive runs from mid-March until July this year.

The REIT has suggested that it may experience an income drop of as much as 10% this year. Merlin’s retail assets generated around €127 mln in rents last year, out of total gross rents of €526 mln in 2019.

The company is believed to be the first European landlord to take such action at a time of confrontation between European property owners and occupiers as to who should foot the bill of the epidemic.

In the Netherlands, some of the largest retailers in the country including Zara, H&M, C&A and Action have already announced unilaterally to their landlords that they will not be paying rents while in the UK the government has announced that businesses struggling amid the coronavirus crisis can avoid paying rent for the next three months.

In Italy, the most hard-hit by the pandemic so far, the government has addressed the issue in the Cura Italia decree whereby a 60% tax credit was granted for the rental payment of the month of March to all shops and stores forced to close.

In France, the country’s  largest trade organizations announced on Wednesday that while they welcomed rental deferral measures, the retail industry needed landlords to do more.  ‘Postponing rents will not be enough,’ said Alliance du Commerce, Fédération du Commerce Coopératif and five other trade organisations. ‘It is not about a controversy between landlords and tenants but it’s about creating the conditions to allow trading to resume and save a maximum of stores and local jobs after a long period of store closings.’

When businesses are permitted to reopen, they will have to devote all their financial means to restarting production and distribution, they argued. ‘Postponing the payment of rents is not a sustainable solution: it would eat away at the financial means essential to the resumption of trade. To allow businesses to survive this exceptional crisis by restarting activities in the best possible conditions, it is imperative to apply the principle zero revenue, zero expense.’

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