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@Crucial said in Coronavirus - New Zealand:
If I was a landlord of a successful restaurant I would first be looking to see how sustainable their model is going to be post Covid and working with them to adjust.
This is pretty critical. How the hell can you run a restaurant with social distancing, that is likley to be there for a few months at least? That's going to kill damn near everyone - the fixed costs aren't dropping much,b ut by god the revenue is
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Challenge for some commercial property owners if they do take a hard line is - will they be able to replace the retailer/restauranter in the short to mid term if they kick them out? I'm hearing some mixed messages around both landlord and retailer plans along those lines.
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@Donsteppa said in Coronavirus - New Zealand:
Challenge for some commercial property owners if they do take a hard line is - will they be able to replace the retailer/restauranter in the short to mid term if they kick them out? I'm hearing some mixed messages around both landlord and retailer plans along those lines.
Yeah, take a bet with the landlord by offering half rent (or whatever), and on a 1 month rolling lease. If you can find someone to replace me at full rent, go for it ... otherwise I'll keep operating and you cover your losses
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@nzzp said in Coronavirus - New Zealand:
@Crucial said in Coronavirus - New Zealand:
If I was a landlord of a successful restaurant I would first be looking to see how sustainable their model is going to be post Covid and working with them to adjust.
This is pretty critical. How the hell can you run a restaurant with social distancing, that is likley to be there for a few months at least? That's going to kill damn near everyone - the fixed costs aren't dropping much,b ut by god the revenue is
You are correct. You will definitely have to be able to show a plan to survive level 2 as well. That's the killer level for hospo. Costs come back in to varying extents but revenues are down.
Will certainly take some adjusted behaviours on all sides.
This is one of the reasons why NZ is going with a wipeout strategy. If we can go back down the levels quickly and safely without chance of going back up then we can get back to normal. No one will like a long Level 2. It is too much of a high cost/low income scenario.
Australia may have taken a lucky gamble on not going as hard but they run the risk of a longer exit plan and possible resurgence.
If their strategy works for them then that's great. They will have to decide whether to come out earlier than the plan they went into with (and the numbers could argue that is possible)
As for hospo in Oz, I'd rather be in the NZ situation (at the moment). It may look great that you can sell takeaway coffees but if people aren't going to workplaces then you have no idea what to gear for and you have no option (should your lease have a clause) of claiming that you are forbidden from operating your business so are entitled to rent relief. -
My favourite foodcourt down in Chinatown has remained open and I was asking the owner of my favourite Thai place whether it was worth him opening. He said he'd be better off shutting down and riding it out but he can't under the terms of the lease. When things kicked off all the leaseholders went to the owner to ask for reduced hour/rent relief and they were turned down straight. I'm eating a lot of Thai at the moment ...
Also, all the talk of KFC in this place in the last few days made me swing by one on my way from my walk ... the whole foodcourt it is has closed up completely, I think they were open a week or so ago.
It's quite funny seeing the mix of stuff cafes and restaurants are selling. One tourist restaurant in Darling Harbour is selling off all it's wine and fish and chips, but man there's lots of wine ... they must have a had a massive cellar or they're just selling it on behalf of the supplier and pretending it's their collection. My local cafe has turned into a small general store of every day things made to look hipster-ish. They had a four pack of toilet paper, reasonably priced, but it was hippy made from recycling stuff, but I bought some just to give them some more business and to see what it's like - fucking awful, worse than the one ply stuff you get in foodcourt toilets.
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If banks or other lenders are behind landlords not being able to offer some kind of flexibility or relief to their tenants then that's pretty shit. Surely there will landlords who are stretched (for a variety of reasons) and I could get that some might have far less leeway to negotiate terms they can pass on to their tenants.
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@Siam said in Coronavirus - New Zealand:
I don't see the Aussie "level 2" as a financial panacea, but the easier social interactions and ability to combat cabin fever have been evidently beneficial.
Surely, every country in the world is financially rooted as of right now?
It's the global economy mate. We're all in this together! đź’©đź’©đź’©
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@Siam said in Coronavirus - New Zealand:
I don't see the Aussie "level 2" as a financial panacea, but the easier social interactions and ability to combat cabin fever have been evidently beneficial.
Surely, every country in the world is financially rooted as of right now?
Yes every country is in a bad situation. Not all bad situations are equal though.
I think it's worthwhile considering who will do relatively better. The less human misery the better.
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@mariner4life said in Coronavirus - New Zealand:
@Crucial said in Coronavirus - New Zealand:
If I was a landlord of a successful restaurant I would first be looking to see how sustainable their model is going to be post Covid and working with them to adjust
and yest soooo many landlords are just "pay me the rent or get the fuck out"
I know of a few business who have already been forced out because they can't afford the rent the landlord refuses to negotiate.
I don't know much about commercial real estate and until recently thought that landlords who wouldn't budge were simply highly geared. But I went on a site inspection with a mate to offer advice about IT fit out and the landlord was happier to have it empty than move on price. I was astonished as the negotiation wasn't a low-ball joke gambit.
edit - wasn't -that should make more sense.
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@antipodean said in Coronavirus - New Zealand:
@mariner4life said in Coronavirus - New Zealand:
@Crucial said in Coronavirus - New Zealand:
If I was a landlord of a successful restaurant I would first be looking to see how sustainable their model is going to be post Covid and working with them to adjust
and yest soooo many landlords are just "pay me the rent or get the fuck out"
I know of a few business who have already been forced out because they can't afford the rent the landlord refuses to negotiate.
I don't know much about commercial real estate and until recently thought that landlords who wouldn't budge were simply highly geared. But I went on a site inspection with a mate to offer advice about IT fit out and the landlord was happier to have it empty than move on price. I was astonished as the negotiation was a low-ball joke gambit.
if you lower the rent, the building is worth less than if it is empty, or so i understand. Hypothetical rent is better than lower rent.
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So if a restaurant can open and chooses to do so knowing custom might be halved (for the sake of an easy figure) by default due to social distancing, doesn't this also affect the amount of staff required eg less wait staff and fewer chefs, meaning income is halved but so are costs excluding rent? Therefore if a tenant scaled down and had a reasonable landlord (who in turn might need a reasonable financer), wouldn't everything be peachy albeit on a reduced scale? With the potential also to be packed to the gunnels once dining out is permitted again?
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@shark said in Coronavirus - New Zealand:
So if a restaurant can open and chooses to do so knowing custom might be halved (for the sake of an easy figure) by default due to social distancing, doesn't this also affect the amount of staff required eg less wait staff and fewer chefs, meaning income is halved but so are costs excluding rent? Therefore if a tenant scaled down and had a reasonable landlord (who in turn might need a reasonable financer), wouldn't everything be peachy albeit on a reduced scale? With the potential also to be packed to the gunnels once dining out is permitted again?
Staff costs drop.
It's most everything else that doesn't - rent, insurance, power, water, rates, maintenance, etc.
Also, I think there's minimums for staffing that don't change much - with fewer people in the place, you still need a chef, waiter, etc.
I'm not a restauranteur, but the margins are horrific and I suspect will either mean much more expensive eating, or most of them going to the wall.
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@Crucial said in Coronavirus - New Zealand:
In NZ if you use the “standard” business lease agreement there is a clause that ensures that they can’t charge you full if you can’t operate your business due to pandemics and the like (eg earthquakes).
If you are talking about the Auckland District Law Society lease section 27.5, that is only in the 6th edition which was 2012. It was added after the Christchurch quake as you mention. A lot of commercial properties are under earlier leases, due to renewals and the standard duration being quite long.
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@antipodean said in Coronavirus - New Zealand:
@mariner4life said in Coronavirus - New Zealand:
@Crucial said in Coronavirus - New Zealand:
If I was a landlord of a successful restaurant I would first be looking to see how sustainable their model is going to be post Covid and working with them to adjust
and yest soooo many landlords are just "pay me the rent or get the fuck out"
I know of a few business who have already been forced out because they can't afford the rent the landlord refuses to negotiate.
I don't know much about commercial real estate and until recently thought that landlords who wouldn't budge were simply highly geared. But I went on a site inspection with a mate to offer advice about IT fit out and the landlord was happier to have it empty than move on price. I was astonished as the negotiation wasn't a low-ball joke gambit.
edit - wasn't -that should make more sense.
Yeah, most commercial owners won't be highly geared. LVR for commercial is difficult (much more so than residential) and a large sum is usually required to get into it without exorbitant interest which would make the investment untenable, so "most" commercial owners won't be in that position and would rather wait to get their price as the leases are generally very long . Accepting a lower rent over a long period adds up so better to wait for many landlords.
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Is this true?
https://www.thetimes.co.uk/edition/news/tycoons-bunker-down-in-virus-haven-bqkdmwbvc
Tycoons bunker down in the virus haven of New Zealand
Rich Americans are turning to New Zealand for sanctuary during the coronavirus pandemic, with Silicon Valley tycoons slipping into the country and others seeking visas and advice on how to buy virus-proof bunkers.
American companies that have already built huge shelters in New Zealand have seen a surge of inquiries from new customers, while several wealthy Americans have managed to enter the country before it closed its borders last month as the virus began to rip through the US.
Gary Lynch, general manager of the US bunker specialist Rising S Co, said that a customer from Silicon Valley called last month from New Zealand’s South Island seeking the entrance code for the bunker he had bought several years ago in anticipation of a global crisis.
“He went out to New Zealand to escape everything that’s happening,” Mr Lynch told Bloomberg, but declined to name his client. “And as far as I know, he’s still there. He was asking questions about the power and the hot water.”
The US survival shelter manufacturer, Vivos, which has previously built a 300-person bunker in the South Island near Christchurch, said it was getting a rush of inquiries from wealthy Americans who had identified New Zealand as the safest place on the planet.
New Zealand’s early decision to close its borders and lockdown its population from March 25 — among the toughest restrictions in the world — has succeeded in limiting coronavirus infections to 1,400 with only 12 deaths among the population of 4.9 million.
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@JC as that article alludes to, there was supposedly a surge of 'interest' in coming here in mid-March
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@Crucial said in Coronavirus - New Zealand:
@shark said in Coronavirus - New Zealand:
@Godder said in Coronavirus - New Zealand:
@voodoo said in Coronavirus - New Zealand:
@Godder said in Coronavirus - New Zealand:
I'd have stuck with this week, but 2 working days and avoiding a bunch of region breaches for the long weekend has some merit. Businesses being allowed to prepare from today for opening is obvious but at least it occurred to someone.
Seems a good reason to avoid yoyos between levels.
I absolutely fucking hated it when JA said "2 working days". What fucking decade is she living in??? Has she spoken to the Queenstown cafes and restaurants that do the vast majority of their trade on the weekend?
And what on earth are the criteria that we didn't meet to achieve 12pm on the 23rd, or that we must meet to hit 12pm on the 27th?
This is so stupid. If people's livelihoods weren't being destroyed, it would acrually be comical.
14 people in hospital. Less than 10 new cases per day. And we are killing the economy.
The Queenstown hospitality sector is going to be in ruins no matter what the government does. That's not to say that every business is going under, but when a region goes from 20,000 people + 3.9 million annual visitors to whatever the current numbers look like, there will be a lot businesses going under.
Likewise hospo in general - take away tourism and throw in a GDP hit, and a lot of the sector is finished. If the margins are so thin that week or two is unsurvivable, maybe the new economy was unsurvivable as well.
bolded textIt was interesting to me that Hospitality NZ thinks this is doom for everyone, while the Restaurant Association think takeaways and delivery should be enough for their members to get through this.
That's a weird one (last paragraph). The two associations aren't representative of exactly the same people as HANZ also represents accommodation providers, but if HANZ intended to speak on behalf of it's restauranteur members, then someone has this blatantly wrong, or grossly over-generalised.
Not necessarily.
The effects will be different for different restaurants depending on a number of factors.Thinking back to my days as a restauranteur and how this would have affected us, I’d say that we would have got through and not even bothered to try and do takeouts.
Your main costs are rent, wages and stock. If you aren’t operating then wages and stock costs are virtually nil. Rent on premises would be down to your lease and IIRC we had one of those section 28(?) clause that said that if we couldn’t access the premises for operating the business then the landlord had to decrease the rent accordingly. Basically we would have gone “on hold” and had to live off reserves but the business would survive.
Of course this is different if you don’t have a interruption clause in your lease (like malls don’t) and if you have salaried employees that you want to keep.
If you arent selling and serving food then two thirds of your costs are gone. It then comes down to if the landlord wants to come out of this with a bunch of empty premises.
There will certainly be businesses that go under but assuming that death awaits all is also not true.
If I was a landlord of a successful restaurant I would first be looking to see how sustainable their model is going to be post Covid and working with them to adjust.I suspect the harsh reality is that a fair number of [greedy] landlords will have overgeared, and won't be able to service their debt on what will be realistic rental levels going forward. Thus leading to a shitstorm.
In UK, over about 15 years business rates weren't properly increased, and greedy landlords ramped rents to take the slack. Then local aurthorities woke up, there was a massive hike in rates to cover ten years or more of inflation and, hey presto, the leasehold restaurant model didn't work.
Many chains were suffering BEFORE CV.
Coming out, rents will have to fall across the board, and I'd expect that many will also look to convert a slug of fixed rental to turnover based.
Don't think UK leases generally have an interruption clause, but seems entirely appropriate for hospitality operators.
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@Crucial said in Coronavirus - New Zealand:
@nzzp said in Coronavirus - New Zealand:
@Crucial said in Coronavirus - New Zealand:
If I was a landlord of a successful restaurant I would first be looking to see how sustainable their model is going to be post Covid and working with them to adjust.
This is pretty critical. How the hell can you run a restaurant with social distancing, that is likley to be there for a few months at least? That's going to kill damn near everyone - the fixed costs aren't dropping much,b ut by god the revenue is
You are correct. You will definitely have to be able to show a plan to survive level 2 as well. That's the killer level for hospo. Costs come back in to varying extents but revenues are down.
Will certainly take some adjusted behaviours on all sides.
This is one of the reasons why NZ is going with a wipeout strategy. If we can go back down the levels quickly and safely without chance of going back up then we can get back to normal. No one will like a long Level 2. It is too much of a high cost/low income scenario.
Australia may have taken a lucky gamble on not going as hard but they run the risk of a longer exit plan and possible resurgence.
If their strategy works for them then that's great. They will have to decide whether to come out earlier than the plan they went into with (and the numbers could argue that is possible)
As for hospo in Oz, I'd rather be in the NZ situation (at the moment). It may look great that you can sell takeaway coffees but if people aren't going to workplaces then you have no idea what to gear for and you have no option (should your lease have a clause) of claiming that you are forbidden from operating your business so are entitled to rent relief.There's a bit of that going on in UK. I think the logic is that if restaurant/cafe closed it can be argued that CV amounts to force majeure and rent shouldn't be due. The legal position seems to be that so long as the right of the lessee to occupy is unfettered than the fact he can't open for business is irrelevant. Alternative is to open for takeaways. Few examples of bog paper, etc. being sold at cafes!!
Where things seem to be headed is for landlords to ask for some rent now (usually paid quarterly) and for remainder to be deferred and paid back over time.
A bit like lowering a man forced to hang by his wrists two inches closer to the ground?
Coronavirus - New Zealand