Tenant Management Strategy | Northern Corridor Group

TENANT MANAGEMENT STRATEGY We are here to help you navigate COVID 19’s impact on you, your tenant and your portfolio

RAY WHITE COMMERCIAL NORTHERN CORRIDOR GROUP

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ANSWERS WHAT YOU NEED TO KNOW

As a property owner, the coming months will require you to make high pressure decisions with significant financial and legal consequences on timelines that are anything but reasonable.

Our role as your commercial property expert is to provide you with the information, strategy and processes necessary to navigate what has the potential to be a minefield for owners.

The following document will give you an insight into how to best protect your financial interests, meet your legal obligations and ensure your tenants do the same.

We achieve this by: • Understanding the current landscape • Assessing your specific situation and that of your tenant • Executing a transparent agreement strategy • Ensuring binding implementation through documentation

This resource has been designed to help all owners better handle the general challenges ahead of them, but every owner’s situation is different and must be assessed accordingly.

Rash decisions based in panic could have long term implications for you. Inserting a property manager or agent between you and the tenant allows for a slower, measured, more detail-centric process. It can also allow a different face to have the hard conversations and protect your relationship with the tenant.

If you are unsure of the best way forward for you and your property, contact our team today by clicking the link below.

Help and support is on a phone call away

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NORTHERN CORRIDOR GROUP

ANSWERS THE LANDSCAPE

Mandatory “Code of Conduct” for Commercial Leasing during COVID-19 While for weeks the message coming out of Canberra was for owners and tenants to “Sit down and work it out”, our initial opinion of the new Code of Conduct is it appears to have placed a higher priority on business protection than owners’ financial security.

This aligns with their Business Hibernation strategy on a national level, but exposes property owners in all brackets to some significant risk and financial pressure.

The key elements of the Code impacting OWNERS: • This Code comes into effect in all states and territories from a date following 3 April 2020 • There is a six month moratorium on evictions due to non-payment of rent • The “Code of Conduct” will apply to all tenancies that are suffering financial stress as defined by their eligibility for the Commonwealth Government’s JobKeeper program • Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals of up to 100% of the amount ordinarily payable • Mandated reductions must also incorporate a “reasonable recovery time” (as yet undefined) •R ental waivers must constitute no less than 50% of the total reduction in rent payable upon consideration of reduction in trade (eg. 30% reduction in trade = 15% deferral & 15% abatement of rent) unless this right is waived by tenant • Rental deferral amount to be a mortised over the balance of the lease term and for a period of not less than 24 months, regardless of remaining term of lease • Landlords must not draw on a tenant’s security (bond/guarantee) for the non-payment of rent during the period of the COVID-19 pandemic and/or a reasonable recovery period

The key elements of the Code impacting TENANTS:

•T enants must provide Sufficient and accurate information: this includes information generated from an accounting system, and information provided to and/or received from a financial institution • Tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under this Code. Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code.

This initial Code leaves many questions unanswered and we will be monitoring State legislature announcements for more clarification.

Complete the QUICK APPRAISAL on page 7 to discuss the implications for your particular property PREPARE | ACT | SURVIVE | THRIVE

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ANSWERS

7 STEPS TO HANDLING TENANTS

We appreciate that now more than ever is when you need professional guidance to navigate this changing property landscape. While we will need to work together with tenants for everyone’s benefit, protecting your interests through the crisis we currently face is our team’s primary priority.

Here are the 7 steps our management team follow to ensure you are protected:

Know where you stand There is a big difference between what you SHOULD do and what you MUST do, and this will largely be dictated by your tenant’s eligibility under the JobKeeper program. Every lease is different, so having a professional review your specific lease lets you negotiate from an informed position of strength. Secondly, review your mortgage obligations regarding repayments, loan to value ratios and consents necessary for lease amendments, as well as any loan repayment waivers you may be eligible for.

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Know your desired outcome 2

Every owner’s situation is different, so it is important we quickly establish the boundaries you can work within to not jeopardise your financial security or impact your medium term investment goals. The next three steps are designed to slow the process to ensure all parties are making rational, mutually beneficial requests and decisions grounded in facts.

Establish healthy communication with tenant

If a tenant is making a direct request for assistance, then it is highly likely they are in a vulnerable and fearful mindset. Quickly establishing a “We’re in this together” dialogue frames the situation as a shared problem to overcome, not a negotiation to win or lose The Code retains provision for good faith negotiations, so nominal gestures in these initial conversations can set the tone of cooperation for interactions moving forward.

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Have the tenant quantify the impact Before any decision is made, have the tenant prepare a position summary that provides specific evidence that their business is being directly impacted in line with the JobKeeper Program requirements.

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Beyond proving eligibility in line with the Code, quantifying the impact is a vital step for a number of reasons: • It helps remove some of the panic from tenants by presenting a true financial picture that may be more positive than initially feared • It removes the pressure from owners to provide an immediate response to an emotional request • It provides a framework for both parties to work within • It shows if tenants have explored alternative sources of relief, rather than relying solely on rent reduction

NORTHERN CORRIDOR GROUP

C VID-19 Structure assistance your way where possible While the Code provides the framework within which to work, there is also flexibility built into the Code to negotiate mutually agreed arrangements. This is why clarifying your position through steps 1 and 2 is so important. Opportunity may present itself through a mutually beneficial structure if desired outcomes are known and positive communication is established early. Alternatively, poorly structured agreements, no matter how well intentioned, may put you in breach of other legal or financial obligations.

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Document your agreement AND YOUR REASONING There are already heartwarming stories of owners and tenants coming together to overcome this adversity but make no mistake, the legal implications of “handshakes� made in the coming months can be expected to resonate for years to come.

It is unreasonable to expect verbal agreements of this magnitude to suffice, no matter

6 how well intentioned. Documenting your agreement is vital to protect the interests of all involved and avoid future heartache and expense.

Early feedback from government departments such as the ATO indicate they will be focusing on intent when assessing actions taken through this period, to ensure they aligned with the spirit of the legislation. With this in mind, it is advised that you record your reasoning, justification and/or research that led you to your decisions.

Review and repeat It is important to understand that this process is a moving target that will require constant research, revision and adjustment over the coming months to ensure you comply with your obligations in real time. Making your tenants aware of their ongoing obligations will also be necessary to protect your interests.

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We are here to help you through this contact us with your questions today!

MICHAEL SHADFORTH 0488 981 076

DIRECTOR - COMMERCIAL PRINCIPAL michael.shadforth@raywhite.com

CHRIS MASSIE 0412 490 840

DIRECTOR - COMMERCIAL PRINCIPAL chris.massie@raywhite.com

BROCKE HAMBRECHT 0466 599 724

SALES MANAGER & GROUP AUCTIONEER brocke.hambrecht@raywhite.com

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ANSWERS

HIRING A MANAGEMENT TEAM

Have Our Team Manage Your Property for You If you feel the risks of trying to navigate this process alone are too great, then you are not alone and we are here to help. But what steps are involved in having us take on the management of your property, what are the costs and what are the benefits?

Here are the answers to these often asked questions: What do I need to do?

• Simply contact one of our team to get the process started • We will need you help compiling the relevant information (leases, outgoings, tenant contacts) • Once we have this information we will contact your tenant and begin walking them through our process, keeping you informed at each step • You will receive the monthly rent you are entitled to and the peace of mind that comes from knowing your asset and tenant are in good hands

What are the costs?

• Our management fee is simply a percentage of annual gross rent, generally ranging from 5-8% depending on the size, complexity or simplicity of your portfolio • Note that management fees can be fully recouped as an outgoing on net leases • Some additional document preparation and third-party consultants fees may be required (eg. legal fees for documenting revised agreements), but not without your express consent • In spite of the additional work required over the coming months, no additional COVID-19 specific levies will be charged by our team during this time

What are the benefits?

• Protects your cash flow through accurate waiver and abatement calculations • Protects your legal interests by ensuring all Code compliance is in order • Protect your relationship with tenants by outsourcing “hard” conversations • Protect your future asset value through commercially minded structures

Our team is ready to start working for you today!

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NORTHERN CORRIDOR GROUP

SUPPORT ONLY ONE CLICK AWAY

Name

QUICK APPRAISAL QUESTIONS: Please complete the following details and click submit and one of our team will be in touch straight away to assist you:

Email Mobile No. of tenancies requiring assistance Which agents are you currently working with? Please select your agent Property Address/s

CLICK HERE TO SUBMIT

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JULIE RYAN MAJOR ASSET SALES 0447 445 453 julie.ryan@raywhite.com

MORETON BAY

MICHAEL SHADFORTH DIRECTOR - COMMERCIAL PRINCIPAL 0488 981 076 michael.shadforth@raywhite.com

CHRIS MASSIE DIRECTOR - COMMERCIAL PRINCIPAL 0412 490 840 Chris.massie@raywhite.com ASHLEY REES DIRECTOR - SENIOR ANALYST 0411 707 410 ashley.rees@raywhite.com

THOMAS BROWN NATIONAL RETAIL INVESTMENT SERVICES 0434 186 767 thomas.brown@raywhite.com

AARON CANAVAN SALES & LEASING EXECUTIVE 0447 744 948 aaron.canavan@raywhite.com

EMILY PENDLETON SALES & LEASING EXECUTIVE 0402 435 446 emily.pendleton@raywhite.com

BLAKE PRIMROSE SALES & LEASING ASSOCIATE 0423 555 043 Blake.primrose@raywhite.com

DAVID GOLDSWORTHY SALES & LEASING ASSOCIATE 0481 996 794 david.goldsworthy@raywhite.com

AIDAN MUDGE SALES & LEASING ASSOCIATE 0423 791 835 aidan.mudge@raywhite.com

SAMUEL HOY SALES & LEASING ASSOCIATE 0423 795 273 samuel.hoy@raywhite.com

MICHAELA WEBB PERSONAL ASSISTANT TO CHRIS MASSIE 0409 202 066 michaela.webb@raywhite.com

BROCKE HAMBRECHT SALES MANAGER & AUCTIONEER 0466 599 724 brocke.hambrecht@raywhite.com

PINE RIVERS

PINE RIVERS

SUNSHINE COAST

C VID-19

ROB DAWSON SALES & LEASING ASSOCIATE 0422 786 205 rob.dawson@raywhite.com

TREVOR NELSON-JONES SALES & LEASING EXECUTIVE 0407 736 521 trevor.nelson-jones@raywhite.com

SEAN SKEFFINGTON SALES & LEASING ASSOCIATE 0422 587 143 sean.skeffington@raywhite.com

CHRISTINE FRENEY SALES & LEASING EXECUTIVE 0432 170 380 christine.freney@raywhite.com

GUY UPCHURCH DIRECTOR OF ASSET MANAGEMENT 0410 614 240 guy.upchurch@raywhite.com

MORETON BAY 3/125 Morayfield Road Morayfield QLD 4506

SUNSHINE COAST 1/172 Brisbane Road Mooloolaba QLD 4557

PINE RIVERS Suite 13, 104 Gympie Road Strathpine QLD 4500

PROPERTY MANAGEMENT 9/113-137 Morayfield Road Morayfield QLD 4506