Landlords speak out after another commercial closure: “there are no bad guys here”

Michael Weaver 22 May 2020 46
For lease signage on the Treehouse in Civic.

For lease signage on the Treehouse Bar in Civic. Photo: Region Media.

The landlords of Capital Pancakes in Civic say they are not the bad guys after the iconic business flipped its final pancakes last week at its iconic location.

Instead, the landlords say the saga is symbolic of an increasingly difficult commercial climate in Canberra.

Landlords Socrates Kochinos and Kamy Saeedi said the closure could have been avoided if the two parties had come to an amicable agreement.

The demise of the business is the latest in a growing list of closures since the COVID-19 shutdown came into effect.

Region Media has reported on the closure of the Transit Bar in Civic, Home Timber and Hardware at Phillip, and Capitol Theatre at Manuka, but there have been others such as the Espresso Rooms at Woden and Tuggeranong, the Treehouse Bar in Civic and Leong’s Kitchen which operated at the Campbell shops for 26 years.

Mr Kochinos, who is the lessor of several restaurants in Canberra including Belluci’s at Manuka and Woden, and Mr Saeedi, who also owns a prominent law firm, said the meeting with Capital Pancakes owners ended on good terms after a mutual agreement on rent payments and a lease renewal couldn’t be reached.

Capital Pancakes co-owner and cook Philip Barton has stated publicly that their offer of paying a proportion of their gross turnover as rent was turned down. Mr Kochinos and Mr Saeedi said the offer was “simply untenable” even though they were open to helping the business stay afloat.

Region Media has been presented figures that show the lease for Capital Pancakes was in place until 2027 and their offer based on their current figures was just over 12 per cent of their annual rent payment for the next two years.

“They are nice people and we didn’t want to see them close as we don’t want vacant buildings,” Mr Saeedi said.

“There are no bad guys here, but the reality is that financially we can’t prop up businesses with money that we don’t have during a downturn.

“There is a perception in the community that landlords are rich. We owe money to banks like most other commercial lessors. We’re hurting just as much as businesses are at the moment.”

Mr Kochinos and his business partner also own a number of commercial properties in the heritage-listed Sydney Building on Northbourne Avenue that have become vacant. He said they don’t mind going into “a bit of debt” to deal with the upkeep of their properties and have recently spent several hundreds of thousands of dollars on repairs to roof tiles and air-conditioning.

However, they also fear the worst is yet to come when the full effects of the economic downturn from the COVID-19 pandemic take hold.

“We’re waiting to see how the market looks after this is over, but the government has been too slow to react with its concessions, while we still have to deal with the banks. The real landlords here are the banks and the government.

“Some people don’t realise we are also paying extravagant rates, we wear delayed rent payments, we wear the losses on the value of our buildings, and then we’ve got tenants who are moving out as well. I don’t think there has been that much relief from the government and I don’t think the burden has been shared proportionately,” Mr Kochinos said.

“We are the meat in the sandwich,” Mr Saeedi said. “We’re the shock absorber between the bank and the tenants and we just need some certainty from the government. If we had that, we would be able to pass that on, and more, to our tenants.”

The heritage-listed Sydney Building in Civic.

The heritage-listed Sydney Building in Civic. Photo: Region Media.

ACT Chief Minister Andrew Barr said his Government will provide an economic update to the Legislative Assembly on 18 June which will outline how the Government plans to work alongside industry and community sector partners to rebuild Canberra’s economy.

Mr Barr said commercial property owners in the city centre will benefit from a series of waivers and deferrals on their annual City Centre marketing and improvement levy for the upcoming financial year. The funds from the levy are used by the City Renewal Authority for events and activities in the CBD, as well as extra cleaning and maintenance.

“This levy reduction is in addition to the more than $350 million in economic support already announced by the ACT Government. This has included incentives for commercial property owners to reduce their rents, delayed commercial rate notices and payroll tax deferrals,” Mr Barr said.

Mr Saeedi said he understands the government’s limitations, but their support measures have been after the fact.

“We still don’t know how the federal government intends to deal with the banks,” he said. “We’re only at the beginning of this financial recession and the small operators like us are heavily tied in the with the banks. The side effects will be coming for quite some time yet.”


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46 Responses to Landlords speak out after another commercial closure: “there are no bad guys here”
Justin Watson Justin Watson 2:22 pm 21 May 20

yet it amazes me how many vacant commercial tenancies there are. You'd think the landlords would lower the asking rate just to get it leased out, but it doesn't seem to be the case.

    Jeff Smith Jeff Smith 4:43 pm 21 May 20

    I totally agree. There's been empty shops around Tuggeranong for years with 'available for lease' signs. Surely there's a point where the Landlord thinks he must have to drop the asking rent?????

    Christian Balachandran Kaliyougarajan Christian Balachandran Kaliyougarajan 5:37 pm 21 May 20

    Justin Watson and Jeff Smith - totally agree and it is the same for private rentals too. You would think that the landlords would be keen to negotiate but it is not the case.

    Brandon Primrose Brandon Primrose 8:54 pm 21 May 20

    Justin Watson Having it Empty suprisingly maintains commercial property valuation but once you drop the rent the valuation is affected. So if commercial landlords don’t need the cash flow and have used the value of the premises to borrow and invest in other things then reducing the rent will have a flow in effect to their borrowing capacity. If that makes senses.

    Similar to say a margin loan - lending on value of price of shares not how much income they produce.

    Justin Watson Justin Watson 11:05 pm 21 May 20

    Also vacant property are negatively geared, so not renting it out is a good tax deduction. But this is why businesses find it so hard. The rules are stacked against them and the system is broken.

    Brice Smith Brice Smith 3:50 am 22 May 20

    They write of the “loss”

    Justin Watson Justin Watson 1:56 pm 22 May 20

    Brice Smith Basically the free market isn't free, but skewed towards those who can get the laws made to suit them.

Rob Thomas Rob Thomas 2:26 pm 21 May 20

Golly if it's that hard you should sell the land.

Hehe..... Noooooooooot gunna happen.

    Anne O'Hara Anne O'Hara 6:29 pm 22 May 20

    they don't own the land, only the space ...

    Anne O'Hara Anne O'Hara 6:29 pm 22 May 20

    and, seriously, who would buy commercial property?!

Mal Briggs Mal Briggs 3:01 pm 21 May 20

Clearly, it makes more economic sense for a landlord to make a loss advertising an empty tenancy than accept a lower rent and risk devaluing their asset.

It's a broken system.

The landlord's claim they are suffering as the shock absorber, but clearly the tenants break before the landlord's bail out.

    Chris Baylis Chris Baylis 12:18 pm 22 May 20

    In reality their property IS worth significantly less in this climate.

Jason O'brien Jason O'brien 4:17 pm 21 May 20

Wonder if this is where transit bar will end up

    Stephen Page-Murray Stephen Page-Murray 4:41 pm 21 May 20

    Jason O'brien

    Good idea that!

    Jason O'brien Jason O'brien 4:48 pm 21 May 20

    Stephen Page-Murray they said when they closed they were moving to a new venue near by with a basement location. Maybe this has all been in the works for a while 🤔

    Jason O'brien Jason O'brien 5:44 pm 21 May 20

    I think the like on my last comment means I’m on to something.....

Tania Ezra Tania Ezra 4:19 pm 21 May 20

Yeah. Yeah they are this time. Give em a break.

Andrew Newnham Andrew Newnham 6:08 pm 21 May 20

So is there some sort of reduced rate that landlords get from banks and governments if they simply own an empty building, beyond just a loss that they can claim at tax time?

Because it would occur to me that with a completely vacant property, they are earning exactly $0 from it. In fact there may be additional costs around maintenance and security which the landlord now needs to also pay.

Now sure, if there was more businesses searching for retail space than space available, play hard ball. But right now there is so much vacant space that commercial landlords are going to have empty properties for a very long time, especially given the risk of setting up shop now, not to mention the costs of a commercial fit out.

Me thinks that the landlords who are kicking out long term commercial tenants who have fallen on hard times but are otherwise good are extremely short sighted, and are ultimately compounding their short term losses into something much worse in the long term.

    Ross MacPherson Ross MacPherson 8:34 pm 21 May 20

    Not sure that accepting only 12% rent of what they were previously getting for the next 7 years is feasible. Probably better off to let them go and hope another tenant that can afford to pay the going rate of rent will move in.

    Maybe landlord's insurance will cover Capital Pancakes lease break?

    Mal Briggs Mal Briggs 11:07 pm 21 May 20

    Ross MacPherson I haven't got my calculator handy, but I'm gonna take a stab that 12% is noticeably more than nothing plus "hope another tenant that afford to pay"

    Michael Tolhurst Michael Tolhurst 3:35 am 22 May 20

    Mal Briggs That doesn't take into consideration the Opportunity Cost of not being able to advertise the space and find a new tenant. Considering the prime location, I'd be very surprised if it took the landlord 7 years to find someone else to rent the space.

    Mal Briggs Mal Briggs 7:00 am 22 May 20

    Michael Tolhurst come fora walk through the city some time. I'll show you shop fronts that have been available for ten years.

    Julie Macklin Julie Macklin 1:35 pm 22 May 20

    I have known shops to be empty for many years (ten or more years), because they were looking for that tenant who would pay what they asked. Meanwhile these people bad at business are losing a lot of money they will never make up for. Imagine if they had only accepted $100 a week in rent, how far ahead they would be after ten years of no rent. $52,000 better off than $0. Same when I used to have a house for rental. When it didn't rent quickly at the initially asking price, I dropped the rent. It isn't just the extra say 20 or so dollars a week I would miss out on; it would have been the rest of the rent I would have missed out on while the property was vacant. It didn't take much thought to realise how many years it might take to catch up for me if I left the property vacant for a few months while I hoped someone would be willing to pay the initial price, to realise dropping the rent, was good business and would leave me in front.

Lukas Feelgreat Lukas Feelgreat 8:05 pm 21 May 20

could be a good spot for a club, fill Knightsbridge void

HiddenDragon HiddenDragon 8:22 pm 21 May 20

An issue across the nation –

https://www.abc.net.au/news/programs/the-business/2020-05-20/the-days-of-automatic-rent-rises-could-be-over/12269268?nw=0

The failure to reach agreement in this case sounds like a small, local echo of the battle brewing between Solomon Lew and shopping mall owners, with a significant gap between what has been offered and what is acceptable –

https://www.abc.net.au/news/programs/the-business/2020-05-20/extended-interview-with-mark-steinert/12269230?nw=0

Peta Stevenson Peta Stevenson 8:26 pm 21 May 20

So very sad to see them go. Started enjoying the original Pancake Parlour too many years ago to admit in public.

Rob Jackson Rob Jackson 8:32 pm 21 May 20

But we are all in this together!!!!!

John Hynes John Hynes 9:58 pm 21 May 20

If the advantage was taking less rather than empty, dont you think they would do it? Rather they will say 'I am better off with less rent, than empty, but bugger it, I wont lease it.' Of course it is an advantage or they wouldnt do it. Those who dont understand obviously dont know about commercial leasing

    Carl Eduard Carl Eduard 11:44 am 22 May 20

    Can you explain why they would rather no rent than some rent?

Jane Baines Jane Baines 10:02 pm 21 May 20

Noooooooo

Joey Pivac Joey Pivac 9:17 am 22 May 20

Sydney and Melbourne buildings should be knocked flat too.

    Joey Pivac Joey Pivac 11:08 am 22 May 20

    Julie Macklin rubbish dwellings, renew entire area and tribute small section to a small museum dedicated to both buildings past.

    A walking pedestrian bridge linking the two new buildings with proper green area better ie Northbourne far better idea.

    Ray Mcgee Ray Mcgee 11:23 am 22 May 20

    It’s herritage. We’re a fairly new city age wise, compared to other older cities in Aus with their historic buildings. I hear you, but we need to keep some of our history. But I’m sure that in no time we’ll see both building built on top of anyway whilst keeping their facade :(

    Joey Pivac Joey Pivac 11:26 am 22 May 20

    Ray Mcgee I also don’t mind say a developer guts the inside totally leaving that outside facade as a shell, get it re stripped and re painted and yea then build brand new internally and go higher (to our city limit - 7 stories?).

    Surely a Canberra architect can design something nice to do that etc

    Julie Macklin Julie Macklin 11:53 am 22 May 20

    Joey Pivac They have a character that is unique in Canberra and they picturesquely go either side of Northbourne Avenue. They could do with long overdue renovation, but knocking them down would be a great loss, and I see the suggestion as a flippant remark. Have you been into Verity Lane lately and seen what is going on before you commented? Renovation to bring more life to Sydney building at least has begun.

    Joey Pivac Joey Pivac 11:54 am 22 May 20

    Julie Macklin Yea I have, I work on Moore St so walk past every day and always have a think how better that area can be and I'm Canberra born and bred, I only want to see good things here, I aiin't moving anywhere...

    Julie Macklin Julie Macklin 1:52 pm 22 May 20

    Joey Pivac I can't compete on your "Canberra born and bred"; I have only lived here 46 years. A blow in. If you want to see good things, then don't argue to knock down the limited heritage we have to replace it with more of the same. The place needs renovating and to bring more life to it; not bulldozing. With that outlook I guess you couldn't see a future for New Action either without the bulldozers. Fortunately someone with vision could. Other cities value their heritage. Imagine Melbourne for instance, without the alleyways full of great art and cafes. Instead more of the same shiny, new builds. It wouldn't be the same. As that area won't be the same without those historic buildings. and the lovely big trees in the courtyards.

    Rob Chalmers Rob Chalmers 1:37 pm 23 May 20

    Your dreaming.

    Joey Pivac Joey Pivac 1:58 pm 23 May 20

    Rob Chalmers I know I am but do you agree or not Mate?

    Rob Chalmers Rob Chalmers 2:22 pm 23 May 20

    Joey Pivac No I don't. I like that they are older from a different era. What would replace them more of the same. Nothing from the last 15-20 years has any real wow factor...yeah another concrete and aluminum mirror ball. I'm Canberra born and bred, a while ago now and there is precious little of old Civic left. They are the original Civic. Maybe the govt needs to resume ownership and do something with them restoration wise.

    Joey Pivac Joey Pivac 2:35 pm 23 May 20

    Rob Chalmers restoration is fine but not a just coat of paint etc

    Hamish Lardi Hamish Lardi 5:00 pm 23 May 20

    Joey Pivac I have been saying the same things for years.

Philip Cristallo Philip Cristallo 11:30 am 22 May 20

given the pheonix got screwed over and the landlords for capital pancakes werent willing to budge it sends a clear message hell alot of the multiple owners cant even agree to repair the buildings exterior

Yuri Shukost Yuri Shukost 12:39 pm 22 May 20

They're relocating after the show of public support.

Kai Dreyfus-Ballesi Kai Dreyfus-Ballesi 7:30 am 23 May 20

Andrei Markhachov oh *sigh* no

rossau rossau 4:25 pm 30 May 20

Everyone owes money? Isn’t that the real problem?

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