Clearly the Prime Minister, Scott Morrison, read my State of the Nation address, which championed the lessons that we can learn from the humble squirrel. Without naming his economic sources, he now believes that businesses should go into “hibernation”, just like the trusty squirrel. Let’s hope Mr Morrison keeps reading my articles and following the lead of his counterpart in New Zealand.
Only last weekend I was reading the Weekend Australian in a café sipping my usual weekend cappuccino, that was a world where you could go for a coffee, a beer, or even visit the gym if you felt that way inclined. How life has changed in such a short time is both remarkable and frightening, anyway I digress.
For those of you who didn’t read it, the Australian had a feature on the top 250 richest people in Australia. I quickly scanned the list and once again I failed to get a mention. As you would expect it contained a splattering of mining moguls including Gina, Twiggy and Mark Creasy. I was pleased to see a couple of young tech entrepreneurs including Mike Cannon Brookes and Scott Farquhar from Atlassian. What really surprised me was the number of people who have made huge fortunes from property. Obvious in any such list you expect to see the usual offenders Frank Lowy and Harry Triguboff, but what amazed me was there was literally hundreds of them, well over 50% of the list had made their fortunes from property.
That got me thinking.
Is there an argument that these landlords have had it too good for too long?
Governments around the world are talking about us all sharing the economic pain that will inevitably occur. Workers are losing their jobs in the hundreds, governments are granting relief measures that surely they cannot accurately calculate, millions become billions and we can see in the US billions only scrape the surface, they need trillions, however many noughts that is?
If your business is like mine, next to wages, the next biggest cost is rent. So, in order to survive, we need to address how we can either reduce or defer rent in the short to medium term and we need to do it NOW.
As the list clearly demonstrates, most landlords are rich, with deep pockets, a contract, and a good lawyer. So little guys like us have, in my view, got a rough deal.
Help is at hand from an unlikely source
Solomon Lew, a man also featured in the top Richest Australians has been waging war on landlords well before the arrival of the Coronavirus. In Solomon’s view shopping centre landlords have done more harm to traditional retailers than “on-line shopping” ever has.
Clearly not a man to mess with, Lew has taken the law into his own hands and is refusing to pay rent on the 1,250 stores owned by his Premier Investments for a least month, in addition to standing down some 9,000 staff. By doing so, Lew has effectively removed two of his businesses largest fixed costs, staff and rent. This action will no-doubt limit losses and reduce cash burn, two essential elements of business survival.
Lew is not on his own, the burgers may well be better at Hungry Jacks, but burger baron Jack Cowin says, “we will pay the rent-just not now”. He believes the most important people to pay are his staff because they will be needed on the other side. Rockpools Mr Pash, who operates 85 restaurants says, “the economy will take a long time to recover from this, rental rates will need to be adjusted down to more reasonable and sustainable rates.”
So, what does the future look like?
I for one, cannot see the likes of Lew or Cowin backing down and taking one for the team. These guys understand how to run successful businesses and they are certainly not scared of a fight. My prediction is they will engage lawyers, obviously paid on a success fee only, bunker down, reserve cash and minimise losses wherever possible and maintain their standing on the “Rich List”.
The battles they are fighting are all our battles, just on a bigger scale. Hopefully landlords will come down off their pedestals and get the rude awakening that’s been coming their way well before the Coronavirus. In my view, the changes in the way that we, and our staff, have been forced to work as a result of the virus, will be a double whammy for Landlords. Businesses like mine and yours will reappear from the ashes and realise that working from home is a real option for many of our employees. We will look at the size of our office floor plans and wonder why we ever thought we needed so much space?
Uncertainty in yields and a downturn in demand, who would want to be in property? It makes you wonder why, after years in the business, Frank Lowy got out of the sector, not just a bit out, I mean 100% out. I think it’s safe to say, Frank will still appear in next year’s rich list, but I am not sure if many of his colleagues in property will.
From a very selfish perspective, I hope not.