We're planning for tough times: DREAM REIT CEO
Commercial landlords should prepare for hard days ahead as tenants face months of reduced business, according to the head of one of Canada’s largest real estate groups.
It will be 2022 before a “new normal” takes hold in the property market, said Michael Cooper, chief executive officer of Dream Office REIT and president of Dream Unlimited Corp.
“I’m planning for tough, tough times ahead, just because I think it’s prudent,” Cooper said on BNN Bloomberg TV. “People talk about what percent of rent they got in April. That was only two weeks” of the economic shutdown.
Companies still need to get through July and into winter. When they do open up it won’t be easy for them to “make enough money in their restaurants or elsewhere to cover their variable costs, let alone their rent,” he said.
Canada’s federal and provincial governments crafted a plan to help companies with rent for April, May and June. The program offers forgivable loans to commercial landlords, while business tenants pay no more than 25 per cent of their usual rent.
But only firms with less than $20 million in gross annual revenue can apply for the subsidy. And those who are eligible must show at least a 70% drop in revenue compared with pre-virus times.
Cooper said his companies would try to use the program. “But in the meantime, people have paid April’s rent, tomorrow’s May 1, so there’s a lot of confusion,” he said. “Hopefully it will work out over time, but it won’t be working out smoothly.”
Dream Office REIT holds a portfolio of office buildings with about 6 million square feet of space, the majority of it in downtown Toronto. His group also runs Dream Industrial REIT, which owns industrial property in Canada, the U.S. and Europe.
The commercial real estate market won’t return to normal for a couple of years, Cooper said.
“Really, 2022 is going to be a time frame where you can look at what the value of a building is and deal with it with confidence -- you know what the rental rates are, what the demand is,” he said.